Most employees have the right to be dismissed fairly. Allegations of unfairness can be directed against employers for a number of reasons, with the grounds for dismissal, the way the decision was reached and the procedure used to bring the contract to an end all being scrutinised in tribunal proceedings.
This means employers should approach employment terminations with caution, ensuring that the dismissal process is fair and lawful so as to avert the risk of unfair dismissal claims.
The following guide to unfair dismissal, including claims for automatically unfair dismissal, looks at the law around the employee’s right not to be unfairly dismissed, as well ways in which an employer can minimise the risks involved when reaching a decision to dismiss.
What is unfair dismissal?
Unfair dismissal refers to a scenario in which an employee is dismissed for an unfair reason, or because the decision or decision-making process was in some way unfair.
To dismiss an employee fairly, an employer must establish a fair reason for the dismissal. There are five potentially fair reasons under the Employment Rights Act 1996, including capability, conduct, redundancy, illegality or some other substantial reason (SOSR).
Illegality is where continued employment would result in a breach of a statutory restriction, such as a haulage driver being dismissed for losing their driving licence, while SOSR is a catch-all provision that enables an employer to fairly dismiss an employee where no other potentially fair reason applies. This could be where there has been a breakdown in the mutual trust and confidence between the employer and employee, or where an employee has been arrested for a serious offence and there is a reputational risk to the business.
However, even if the employer can establish a fair reason for dismissal, they must also show they acted reasonably in treating that reason as sufficient to dismiss on all the facts. This means that the employer must have followed a fair procedure and be able to demonstrate that the decision to dismiss fell within a range of reasonable responses. In cases where the employer is unable to establish a fair reason for the dismissal, and that they acted reasonably in all the circumstances, the decision to dismiss will be classed as unfair.
Who can claim unfair dismissal?
By law, all employees have the right not to be unfairly dismissed, although the general rule is that only individuals who have been employed continuously for at least 2 years can bring a claim for ordinary unfair dismissal. This is known as the qualifying service requirement, where employees with less than 2 years service will not usually be eligible to claim.
However, there are some important exceptions to the 2-year rule, where the law affords special protection to employees who are dismissed for certain statutory reasons classed as automatically unfair, and for which there is no qualifying service period. In broad terms, an automatic unfair dismissal will occur when the decision to dismiss violates one or more of an employee’s statutory rights. This could include, for example, asserting their rights under the National Minimum Wage or Working Time Regulations. It could also include acting as an employee or trade union representative, highlighting or reporting health and safety matters at work, or making any other protected disclosure, known as whistleblowing.
Additionally, it will be both automatically unfair and unlawful discrimination to dismiss an employee because of a protected characteristic, regardless of their length of service. This could include a reason relating to any one of the nine protected characteristics set out under the Equality Act 2010 including age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, sex, sexual orientation, race, religion or belief.
Implications of unfair dismissal claims
There are various adverse consequences that can arise as a result of a claim for unfair dismissal, even one which does not result in an award for damages and/or an order from the employment tribunal that the employee be reinstated. The time and cost involved in defending a tribunal claim can be significant. Allegations of unfairness at work, especially ones that result in litigation, can also have a negative impact on workforce morale.
When it comes to tribunal orders, where a finding of unfair dismissal has been made, the employer will almost always be required to pay the employee compensation. An order for compensation, officially referred to as an award of damages, will be made up of both a basic and a compensatory award. The basic award is a fixed sum calculated to a statutory formula, while a compensatory award is to compensate the employee for any financial losses arising out of their dismissal. This will include a claim for loss of earnings, but can also include compensation for loss of statutory rights. This is a sum of money to reflect the fact that it will take the employee 2 years in a new job to re-accrue full employment rights.
The statutory formula for a basic award in unfair dismissal claims will depend on the employee’s age, gross weekly pay and length of service, although the weekly pay is currently capped at £643 (from 6 April 2023), with a maximum length of service of 20 years. The formula is based on 0.5 week’s pay for each complete year of employment when below the age of 22, 1 week’s pay for each complete year of employment when aged between 22 and 40, and 1.5 week’s pay for each complete year of employment when aged 41 or over. This means a basic award for unfair dismissal could be as much as £19,290.
Even though there is also a cap on the compensatory award, set at the lower of 52 week’s pay or the statutory limit, this limit is still a sizeable £105,707 (from 6 April 2023) and, in certain cases of automatic unfair dismissal, the award of damages may be uncapped.
What will the employee need to show to claim unfair dismissal?
In a claim for unfair dismissal, the burden of proving that the dismissal was fair lies with the employer. This means that to successfully resist a claim, it is the employer that will have to show that the reason for the dismissal was fair and they acted reasonably in the way the dismissal was carried out. As such, the employer must invest a great deal of time and expense in defending any tribunal claim, even where the allegations are unsubstantiated.
Further, an employer faced with a claim for automatic unfair dismissal can be far more difficult to defend. This is because if an employee can prove they were dismissed for a reason prohibited by law, there will be no need to consider the reasonableness of the dismissal decision or the procedural fairness of the employer’s actions.
Once it has been established that an employee has been dismissed for an automatically unfair reason, the employer will lose the right to defend their reasons for terminating the employee’s contract. As such, the employer will no longer be able to escape liability by arguing that is was reasonable to dismiss the employee in all the circumstances.
How to defend a claim for unfair dismissal
When defending a claim for unfair dismissal, it is not only essential for the employer to establish a legitimate and lawful reason for letting an employee go, but also to show that they acted reasonably in all the circumstances. This includes being able to demonstrate that they followed a fair dismissal procedure and, at the conclusion of that procedure, their decision to dismiss fell within a range of reasonable responses available to them.
When it comes to what constitutes a fair dismissal procedure, this will primarily depend on the reason given for the dismissal. In the context of conduct and capability issues, employers should follow the Acas Code of Practice on disciplinary and grievance procedures setting out the basic requirements of fairness applicable in dismissal scenarios, including:
- Conducting a thorough investigation to establish the facts, without unreasonable delay
- Informing the employee in writing of the allegations against them, provided there is a case to answer, and inviting them to a hearing as soon as possible
- Providing the employee with enough evidence to allow them to prepare their case
- Notifying the employee of their right, on reasonable request, to be accompanied at the hearing by a colleague, or a trade union representative or a trade-union employed official
- Providing the employee, or any companion on their behalf, with the opportunity to state their case at the hearing, including any mitigating circumstances
- Taking into account previous disciplinary decisions made in similar circumstances
- Considering any reasonable alternatives to dismissal, like a first or final written warning
- Notifying the employee in writing of any decision to dismiss, including reasons and the effective date of termination, and informing them of their right to appeal.
In other dismissal scenarios, different procedures may need to be followed. For example, in a redundancy context, an employer should undertake a fair consultation process and apply a fair selection criteria. The employer must also consider any suitable alternatives to redundancy and, if making redundant 20 or more staff within a 90-day period, there are special collective consultation rules that must be followed by the employer.
It may not be practicable for each and every employer, having regard to the size of their business or available resources, to take the same detailed steps in dealing with a dismissal. However, as a matter of best practice, all employers should act fairly and consistently at all times. Where applicable, they should also comply with any guidance or statutory requirements when it comes to the way in which a dismissal decision is reached.
How to avoid claims for unfair dismissal
There are various ways in which a claim for unfair dismissal can be avoided by employers, although securing specialist advice tailored to the circumstances of the business, or any given dismissal scenario, is strongly advised. However, in broad terms, this can include:
- Understanding the reasons for dismissal and only dismissing for a fair reason: when dismissing an employee, the employer must have a genuine and fair reason to do so, otherwise the dismissal could be classed as unlawful. In some cases, depending on the principal reason for any decision to dismiss, the dismissal could also be treated as automatically unfair, or even as unlawful discrimination, by an employment tribunal.
- Following a full and fair disciplinary hearing: fairly dismissing an employee is not just about having a fair reason to bring their employment to an end. Even if the employer can establish a fair reason, and demonstrate that their decision to dismiss was reasonable in all the circumstances, if they failed to follow a fair procedure, the dismissal will still be unfair. Even if an employee is clearly guilty of gross misconduct, justifying a decision to summarily dismiss them without notice or pay in lieu of notice, they must still be given the chance to defend the allegations against them and put forward any mitigation.
- Acting consistently and proportionately at all times: referring back to previous decisions to dismiss in the same or similar circumstances can help to ensure that the employer acts consistently. Equally, a decision to dismiss must not be a disproportionate response to any disciplinary or capability issues involved, especially having regard to any mitigating factors, where the circumstances may favour a lesser sanction, such as a written warning. If the employee has not yet been given a first or written warning, it may be appropriate to provide them with the chance to improve their performance or change their behaviour.
- Carefully documenting the dismissal process: retaining a written record of the dismissal process, including the reasoning behind the employer’s decision-making, constitutes a key part of the process. In this way, the employer will have a documented account of what steps they have taken in the event of any claim for unfair dismissal, and will be able to refer back to this account to explain the basis on which their decision was reached. The tribunal may also look at any previous decision-making to decide whether the dismissal before them is consistent with decisions made in the same or similar circumstances.
Need assistance?
Contact DavidsonMorris for specialist advice on unfair dismissal matters, from how to reduce the risk of legal complaints to support with defending a tribunal claim.
Unfair dismissal FAQs
What qualifies as unfair dismissal?
Unfair dismissal is where an employer brings employment to an end without a fair reason to do so, although unfair dismissal can also be claimed if the employer had a fair reason but handled the dismissal using an unfair procedure.
What are the 5 fair reasons for dismissal?
To dismiss an employee fairly, an employer must establish a fair reason for the dismissal. There are five potentially fair reasons set out under the Employment Rights Act 1996, including capability, conduct, redundancy, illegality or some other substantial reason.
What is the payout for unfair dismissal in the UK in 2023?
The compensation payout for unfair dismissal claims can include both a basic award and a compensatory award for loss of earnings, etc. The basic award can be anything up to £19,290, while a compensatory award can be up to £105,707.
Is it hard to prove unfair dismissal?
In a claim for unfair dismissal, the burden of proving the dismissal was fair lies with the employer, where they must show that the reason for the dismissal was fair and they acted reasonably in reaching that decision.
Last updated: 23 August 2023
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
