Unfair Dismissal

Entitlement to claim

To be able to present a claim of unfair dismissal to an Employment Tribunal it is necessary that :-

• The person bringing the complaint is "an employee" meaning an individual who has entered into or works under a contract of employment.
• The employee has one or more years continuous employment with the same or an associated employer unless the dismissal is for a reason related to the employees Trade Union membership/activities, is connected with pregnancy or maternity, is for a health and safety reason or is because the employee has brought a statutory claim against the employer (such as a claim for unlawful deduction of wages).
• The employee is under normal retirement age at the date of his or her dismissal.
• The claim has been presented to an Employment Tribunal in time i.e. within a period of three months beginning with the effective date of termination of the contract of employment.

CONSTRUCTIVE DISMISSAL

A constructive dismissal arises where the employee terminates the contract of employment, with or without notice, in circumstances where he or she is entitled to terminate by reason of the employer's conduct.   To establish a constructive dismissal it is necessary for the employee to prove that :

• There was a serious breach of contract by the employer
• The employee resigned in response to that breach
• The employee did not waive the breach by delaying too long before resigning.

Common examples of situations which could give rise to a claim for constructive dismissal include where an employer unilaterally reduces an employee's pay, where an employer unilaterally changes the job content and status of the employee and where an employer, without reasonable and proper cause, conducts itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between the employer and employee. 

CIRCUMSTANCES IN WHICH THERE IS NO DISMISSAL

Certain circumstances exist in which the Employee will not have been dismissed :

Agreement :

Where the contract of employment has terminated by agreement between the employer and employee;

Frustration :

Where, through no fault of either employer or employee, there is a change in circumstances which means either that the contract becomes impossible to perform or that its performance would produce a radically different result from that originally envisaged.    Frustration can arise through death or imprisonment and potentially where an employee is absent because of sickness for an indefinite period.   This is an area of the law requiring specialist expertise and knowledge.

Operation of Law:

Employment can terminate by operation of law where, for example, a Court Receiver is appointed of the employer or an employer company is compulsorily wound up.   

Performance :

A contract of employment may terminate upon conclusion of a particular project or task and not amount to a dismissal where an employee has been engaged to carry out that project or task.       

Resignation:

An employee will not have been dismissed where he or she terminates the employment by words or conduct which are unambiguous and there is no constructive dismissal or the employer has not given earlier notice.    Ambiguous words or conduct may not be held to be a resignation and an Employment Tribunal will look at the surrounding circumstances in order to determine whether a resignation actually occurred.    

POTENTIALLY FAIR DISMISSALS

In order to successfully defend a claim for unfair dismissal an employer will need to show not only that a fair reason for the dismissal existed but also that it followed a fair procedure before reaching the decision to dismiss.      The Employment Rights Act 1996 provides that there are five potentially fair reasons for dismissal :-

• Misconduct ;
• Poor Performance (assessed by reference to skill, aptitude, health or any other physical or mental quality);
• Redundancy;
• Because it would contravene some duty or restriction imposed by law (e.g. loss of a driving licence);

Some other substantial reason of a kind so as to justify the dismissal of the employee (e.g. where an employee refuses to accept a business re-organization even if the employer is in breach of contract, provided the employer acted reasonably)

REMEDIES

When an Employment Tribunal finds a dismissal to have been unfair it must then consider which remedy is the appropriate one for the dismissed employee.     The three remedies available are :-

• An Order for reinstatement in the employee's old position.
• An Order for re-engagement in a comparable position
• An Order for compensation

An order for reinstatement or re-engagement also requires the employer to pay to the employee loss of earnings between the date of dismissal and the date when the order is complied with.  Such orders are only made when the dismissed employee requests the Tribunal to make such an order and where it is practicable for the employer to comply with such an order.     Failure by an employer to comply with an order for re-instatement or re-engagement may attract an additional award of compensation.      

If a Tribunal awards compensation it is calculated as follows:-

Basic Award - 

This is calculated in the same way as a statutory redundancy payment and based  upon the employee's age, pay (subject to a maximum of £290.00 per week with effect from 1st February 2006) and length of service.        The current statutory maximum (with effect from 1st February 2006) is £8,700.00;

Compensatory Award -

This is such amount as will compensate the employee for the loss actually suffered as a result of the dismissal.       The Tribunal considers the net pay that the employee actually received whilst he was employed.       It is calculated to represent the employee's loss of earnings (and loss of any other benefits) arising out of the dismissal.     An employee is under an obligation to seek alternative employment and minimize the compensatory award.      If the employee finds a less well paid job the Tribunal will calculate the compensatory award by estimating how long it will take the employee to earn a similar wage.      The award is not intended to represent the Tribunal's disapproval of the way in which the employer has behaved or to take account of the manner of the dismissal but is intended to represent compensation purely for financial loss.        The current maximum compensatory award that can be made for unfair dismissal cases is £58,400.00 (with effect from 1st February 2006).     The maximum amount is reviewed each year by reference to the Retail Prices Index.   

Loss of  Statutory Rights -

An award of approximately £250.00 is currently made in respect of this loss.     

Interest  -

Interest begins to accrue 42 days after the announcement of the award by the Tribunal.

RECOUPMENT

Where State Benefits have been paid to an employee between the date of the dismissal and the date of the Tribunal hearing certain benefits may be recovered by the State mainly from the loss of wages for the period before the conclusion of the Tribunal proceedings.    This ensures that the employee does not get double compensation and that the State recovers some of the benefit from the payment which the employer has to make.   

DEDUCTIONS FROM COMPENSATION

If the Tribunal considers that the conduct of the employee has led or partially led to the dismissal it may reduce for basic and compensatory awards by such proportion as the Tribunal considers "just and equitable".    In appropriate circumstances it is possible that the deduction can be as much as 100%.       Further, if a dismissal is found to be unfair because the employer failed to follow a proper procedure but that had such a procedure been followed a fair dismissal could have occurred the Tribunal may reduce the compensation to reflect this fact.    Only the compensatory award will be reduced in such circumstances.

A FAIR PROCEDURE

A dismissal will be automatically unfair if an employer does not follow a minimum disciplinary and dismissal procedure and in such an event an increased award of compensation will be made against the Employer if the dismissed employee complains to an Employment Tribunal.   The statutory procedure provides, as a minimum, that a three step process must be followed :-

Step One

• the employer must inform the employee in writing of the alleged misconduct or unsatisfactory performance which has caused the employer to contemplate dismissing or taking disciplinary action against the employee;
• the employer should invite the employee to a meeting to discuss the matter and inform him/her of the right to be accompanied.

Step Two

• the meeting should take place before any disciplinary action is taken except where an employee is suspended pending a disciplinary hearing;
• the meeting should not take place unless:-
• the employer has informed the employee what the basis was for including in the written statement under Step One the ground or grounds given in it, and
• the employee has had a reasonable opportunity to consider his/her response to that information;
• the employee should take all reasonable steps to attend the meeting;
• following the meeting the employer should inform the employee of his decision and notify the employee of the right to appeal against that decision  if he/she is dissatisfied with it.

Step Three

• an employee who does not wish to appeal the decision should inform the employer of that fact;
• if an employee does appeal the decision the employer should invite the employee to attend a further appeal meeting;
• the employee should take all reasonable steps to attend the appeal meeting;
• the appeal meeting need not take place before the disciplinary action or dismissal has taken effect;
• the employee should be notified of the right to be accompanied at the appeal meeting;
• following the appeal meeting the employer should inform the employee or the final decision.

If an employer fails to comply with the three step procedure the dismissal of an employee will be automatically unfair and a Tribunal must (save where there are exceptional circumstances) increase any award of compensation given to the employee by 10% minimum and may increase it by up to 50% maximum. 

Consideration should be given to the ACAS Code of Practice on Disciplinary Procedures.  ACAS identify the following as "core principals of reasonable behaviour" for use in disciplinary procedures :-

• procedures should be used primarily to help and encourage employees to improve rather than merely to impose punishment;
• employees should be informed of any complaint against them and provided with an opportunity to state their case before decisions are reached;
• employees should be accompanied at all disciplinary meetings;
• disciplinary action should not be taken until the facts have been established and a decision made that the proposed action is reasonable in the circumstances;
• an employee should not be dismissed for a first disciplinary offence unless it is one of gross misconduct;
• an employee should be given a written explanation for any disciplinary action taken and notified of any improvement expected;
• an opportunity to appeal any disciplinary decision should always be given;
• issues should be dealt with thoroughly and promptly;
• disciplinary action should be consistent.

An employee who has less than one years continuous service cannot bring a claim for unfair dismissal (save in certain specified circumstances) but may still be able to pursue a claim for damages for breach of contract and possibly other claims including discrimination.   

Handling a Disciplinary matter

Before any disciplinary hearing takes place :-

• A full investigation should be carried out and all relevant facts considered.   This should be done promptly and should include taking statements from witnesses and the collection of relevant documents.   
• In serious cases a short period of suspension with pay whilst an investigation is being conducted should be considered.
• When the investigation is concluded consideration should be given as to whether a formal disciplinary action is needed and, if so, a disciplinary interview should be arranged.
• Give the employee written notice of the disciplinary hearing specifying the nature of the complaint
• Notify the employee of the right to be accompanied at the disciplinary hearing.

Holding a Disciplinary meeting

• A disciplinary interview should be conducted only following careful preparation and should follow a broad outline as follows :-
• An introduction of those present and an explanation as to their role
• An explanation that it is a disciplinary hearing
• A reminder that the employee is aware of his or her right to be accompanied
• Outline to the employee the precise complaint made
• Outline the case against the employee by explaining the evidence that has been gathered and allowing the employee and his or her representative to see any statements made by witnesses or be told very clearly what they contain.
• The identity of witnesses should not be concealed unless there is a genuine need for their protection.
• Establish whether the employee is prepared to accept that he or she has done something wrong.
• Give the employee an opportunity to state his or her case, ask questions, present evidence and call witnesses.
• Encourage discussion with a view to establishing all the facts.     Clarify all relevant issues and check that what has been said is understood.
• Summarize the main points concerning the complaint, the main points raised by the employee and ensure that nothing has been missed.
• It is generally good practice to adjourn before a decision is taken to allow proper consideration.  Further checking may be necessary particularly of matters raised by the employee.      Where facts are disputed decide which version is the most probable.        If new facts emerge consider whether the disciplinary interview needs to be reconvened at a later date.
• Notification of the disciplinary decision.
• An employee should be informed orally of the decision in all cases.
• If further investigations have been carried out the employee should be notified of the result of those investigations before the decision is announced.
• The employee should be given the reasons for the decision and left in no doubt as to what action is being taken.
• If a warning is given, state the nature of improvement that is required and the timescale allowed.
• Dismissal should be with notice unless gross misconduct has been established.   An employer may prefer to pay in lieu of notice.
• The period of time that any warning will remain in force should be explained e.g. six months for a first warning and twelve months for a final written warning.

KEEPING OF RECORDS

Written records should be kept detailing the nature of the breach of disciplinary rules, the action taken and the reasons for it, the date action was taken, whether an appeal was lodged and, if so, its outcome and any subsequent developments.    The Data Protection Act 1998 requires the release of certain data to individuals on request.      

Appeals

An appeals procedure should :-

• Specify any time limit within which an appeal should be lodged. 
• Provide for appeals to be dealt with speedily particularly where involving suspension without pay or dismissal.
• Where possible, provide for the appeal to be heard by somebody more senior than the individual taking the disciplinary action.
• Clarify the action which may be taken by those hearing the appeal.
•  Allow the employee or his or her representative an opportunity to comment upon any new evidence arising during the appeal before a decision is taken.

In a small business the original disciplinary action may have been taken by the owner and it may have to be the same individual who hears the appeal.      In such circumstances, the opportunity should be taken to review the original decision in as objective and impartial a manner as possible.     

If defects occurred in the original disciplinary procedure the appeal can be used to correct those defects.      In such an event the appeal hearing should reconsider all the evidence.     

EMPLOYMENT TRIBUNAL TIME LIMITS

A complaint of unfair dismissal to an Employment Tribunal must normally be received by the Tribunal within three months of the employee's last day of work.

Exceptionally, an internal appeal procedure may not have concluded within three months. In such cases an employee should consider whether to present a complaint of unfair dismissal to the Employment Tribunal and request that the case is not listed for hearing until the outcome of the appeal procedure is known.  A complaint of unfair dismissal received by an Employment Tribunal after three months is likely to be rejected.    

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