Employees with at least two years’ service are protected against unfair dismissal and can bring a claim to the employment tribunal.
Therefore, it is important that you understand how to dismiss employees fairly to protect your business from the risk of costly claims.
Who can bring an unfair dismissal claim?
Only employees with at least two years’ service can bring a claim of unfair dismissal.
However, there is an exception in cases of automatic unfair dismissal, where the length of service requirement does not apply so any employee can bring this specific type of claim.
The employee must bring the claim within three months of the effective date of termination, or if that is not reasonably practicable within a reasonable timeframe.
A dismissal will be fair if:
- You can show it was due to one of the five potentially fair reasons for dismissal outlined below; and
- You acted reasonably in dismissing the employee in the circumstances.
It is not normally challenging to demonstrate that dismissal was for one of the potentially fair reasons.
You just need to set out the facts of the case and the beliefs you relied upon to dismiss the employee and show that these relate to one of the potentially fair reasons.
For example, if you dismiss an employee for misconduct, you do not need to prove that the employee committed the misconduct in question, you just need to show that you dismissed them because you genuinely and reasonably believed they did.
If multiple issues led to the dismissal, you must show that the actual reason for dismissal was fair, you cannot rely on other justifiable reasons which may have occurred.
If you are unable to satisfy the tribunal that the reason for dismissal fell under one of the potentially fair reasons for dismissal, the employee’s unfair dismissal claim will succeed.
1) Capability and qualifications
A dismissal may be fair if it relates to the capability or qualifications required to perform the employee’s work.
Generally, capability can be split into two main categories of poor performance and ill-health capability.
You can dismiss an employee whose performance falls below the required standard provided that a fair procedure is followed.
The basic principles of fairness set out in the Acas code of practice on disciplinary and grievance procedures also apply to capability.
Firstly, you should carry out an investigation to identify the reason for the employee’s poor performance.
You should then inform the employee of their poor performance and warn them of the potential consequences if their performance does not improve.
The employee should be given a reasonable opportunity to work on their performance and you should offer any suitable assistance.
There is no set procedure or timeframe on how many warnings an employee must be given before dismissal is considered, as this will largely depend upon the employee’s role and the nature of their work.
For example, a senior employee may be expected to understand the requirements of their job role and may be treated differently to less experienced employees.
Sometimes it will be justifiable to dismiss an employee as a first response, for example where the performance is so poor that no improvement will be achievable, and it poses a serious risk to the operations of the business.
Even if this is the case, a fair dismissal procedure should still be followed.
If an employee has an excessive record of short-term absences, you should arrange a meeting to discuss the reasons for the employee’s absence.
If there are no medical issues, you should provide the employee with a warning that if their attendance does not improve, dismissal may be necessary.
You can dismiss an employee on the ground of long-term ill-health capability provided you have followed a fair capability procedure.
You should arrange a meeting with the employee to discuss their medical condition and resulting absence, allowing them to voice their opinion.
You should carefully review all the available medical evidence to assess the nature of the employee’s condition, the expected period of absence and their ability to return work in the future.
If it is clear from the medical evidence, that the employee will not be able to return to work at any point in the near future and there are no suitable alternative roles or reasonable adjustments, dismissal will be reasonable.
This type of dismissal is rare, but you can dismiss an employee if they no longer hold a qualification which is essential to their job and a condition of their employment.
A ‘qualification’ is any degree, diploma or other academic, technical or professional qualification relevant to the job role.
Generally, this type of dismissal occurs when an employee who is employed as a driver is disqualified from driving.
You can fairly dismiss an employee for reasons relating to their conduct.
Generally, dismissal will be appropriate for repeated instances of misconduct where previous warnings have been given or a single incident which amounts to gross misconduct.
We recommend that you have a disciplinary procedure in the employee handbook which contains a non-exhaustive list of examples of misconduct and gross misconduct and the potential resulting disciplinary action.
You must follow a fair disciplinary procedure before dismissal:
- Investigation – You should conduct a reasonable investigation into the alleged misconduct so that any resulting dismissal will be based on a genuine and reasonable belief. The extent of any investigation will depend upon the circumstances, particularly the severity of the alleged misconduct.
- Disciplinary hearing – The employee should be informed of the allegations against them and invited to a disciplinary hearing. They should be able to make their case and they have the right to be accompanied by either a colleague or trade union official.
- Dismissal – You must consider all the facts of the case, including the employee’s general record, length of service and any outstanding warnings when assessing whether dismissal is appropriate.
- Appeal – The employee must be given the right to appeal against dismissal to a more senior manager.
Employers must comply with the Acas code of practice on disciplinary and grievance procedures when taking disciplinary action.
If you fail to follow a fair disciplinary procedure in line with the code of practice, the tribunal may increase the employee’s compensation by up to 25% if their unfair dismissal claim succeeds.
Redundancy is a potentially fair reason for dismissal where the dismissal is attributable to a business closure, a workplace closure or a reduced requirement of that type of work.
A fair redundancy procedure should be followed, whereby:
- You provide as much warning possible to the affected employees and their representatives.
- You consult with the employees and their representatives throughout the process.
- You select the redundancy pool fairly.
- You adopt and apply fair and objective selection criteria.
- You consider alternative employment.
Inadmissible reasons for redundancy
A redundancy will be automatically unfair if it is based on an ‘inadmissible reason’ which include:
- Health and safety reasons
- Asserting a statutory right
- Working time reasons
- Taking family-related leave
4) Contravention of a statutory duty/restriction
Dismissing an employee who would breach a statutory duty or restriction if they continued working is potentially fair.
This type of dismissal is fairly rare, but it applies if an employee employed to drive is disqualified from holding a driving licence or an employee loses their right to work in the UK.
The employee must actually contravene a statutory duty or restriction for this reason to apply, if an employer reasonably suspects that an employee is breaching a duty or restriction this will be dismissal for ‘some other substantial reason’.
A fair dismissal procedure must be followed, which involves consideration of whether the employee’s duties can be reallocated so that their employment can continue without breaching the relevant duty or restriction.
For example, if an employee is sometimes required to drive as part of their role but they lose their licence, another suitable employee could be required to fulfil the driving duties instead.
5) Some other substantial reason
This covers all other fair reasons which justify an employee’s dismissal which do not fall within the categories above.
Common examples of ‘some other substantial reason’ include:
- Essential business restructure
- Expiry of a fixed-term contract
- Third-party pressure
- Breakdown of working relations
- Reputational risk
- Employer-justified compulsory retirement
Before dismissing an employee for some other substantial reason, you should assess whether the employment relationship is irreparable, and the employee cannot be successfully reintegrated into the workforce.
Reasonableness of the dismissal in the circumstances
A dismissal will not automatically be fair just because it is based on one of the reasons listed above.
The dismissal must be fair and reasonable in the circumstances and tribunals assess this objectively by considering whether dismissal was within the ‘range of reasonable responses’.
A dismissal will be within the range of reasonable responses if a reasonable employer in your position would also see dismissal as an appropriate option.
The tribunal must not provide its own opinion on whether you made the right decision in dismissing the employee, it just needs to be satisfied that dismissal was one of several reasonable options available to take in the circumstances.
The tribunal will also consider whether you followed a fair dismissal procedure, as failure to follow an appropriate process can render a dismissal unfair.
The Acas code of practice applies to misconduct and poor performance dismissals, therefore you must ensure that you informed the employee of the allegations, gave them the chance to defend them and granted the right to an appeal.
If you have your own procedure, e.g. a company disciplinary procedure, you should follow it carefully, especially if this forms part of the employee’s employment contract.
Automatic unfair dismissal
The legislation lists many reasons which will automatically render a dismiss unfair, which include:
- Pregnancy or maternity-related reasons
- Health and safety reasons
- Exercising the statutory rights to time off (e.g. family-related leave)
- Asserting a statutory right
There is no qualifying period which means all employees are protected against automatic unfair dismissal from day one of employment.
If a tribunal upholds an employee’s claim of unfair dismissal, they may make an order that the employee be reinstated or re-engaged, and they will almost always grant an award of compensation.
Reinstatement or re-engagement
Before issuing an order of reinstatement or re-engagement, a tribunal will consider:
- Whether the employee wants to continue their employment
- Whether such an order is practicable in the circumstances
- Whether such an order is just and equitable
The tribunal will not make an order if it would cause severe disruption to your business or a need for redundancy.
If a reinstatement order is made, the employee will return to their original position and receive back pay and benefits from the date of termination as if they were not dismissed.
If a re-engagement order is made, the employee will be placed in a similar role in either the same company or an associated company.
In practice, employees rarely wish to be reinstated or re-engaged by their employer as the employment relationship has usually completely broken down.
Therefore, tribunals hardly ever make these orders and will normally just award compensation.
For most successful unfair dismissal claims, the tribunal will order you to pay the employee a basic and compensatory award:
- Basic award – This will usually match the statutory redundancy payment. It is calculated using a week’s gross pay (subject to an annual statutory cap which is currently £538), taking into account the employee’s age and length of service. The maximum basic award is currently £16,140.
- Compensatory award – This is calculated with regard to loss suffered by the employee (e.g. loss of wages, future loss of earnings, loss of benefits). An employee cannot claim compensation for injury to feelings caused by the dismissal. The maximum amount that can be claimed is the lower of the statutory minimum (which is currently £88,519) and the total of 52 weeks’ pay.
If an employee is dismissed for specified automatically unfair reasons, such as health and safety reasons or being an employee representative, they will be entitled to a minimum basic award (currently £6,562).
The statutory cap on the compensatory award does not apply where the employee was dismissed for carrying out health and safety activities, whistleblowing or made redundant for an automatically unfair reason.
If an employee is dismissed for poor performance or misconduct and you have unreasonably failed to follow the Acas code of practice, the tribunal may increase the compensation by up to 25%.
The tribunal may reduce an employee’s compensation in certain circumstances, such as:
- Where the employee failed to mitigate their loss (e.g. they have not made a reasonable effort to find another job).
- To take account of payments the employer has already made (e.g. pay in lieu of notice and an ex-gratia payment).
- Where the dismissal was procedurally unfair but the employee would have been dismissed even if a fair process was applied.
- When the employee has contributed to their dismissal.
A dismissal will only be fair if it is based on one of the following reasons:
- Capability or qualifications
- Contravention of a statutory duty or restriction
- Some other substantial reason
For the dismissal to be fair it must also be reasonable in the circumstances and a fair dismissal procedure must be followed.
If an employee successfully brings a claim of unfair dismissal, the tribunal will normally order you to pay a basic and compensatory award which can be a considerable cost to your business.