Employers must understand their legal obligations when dismissing employees to avoid claims of unfair dismissal. Under UK law, employees have the right to not be dismissed unfairly, and failure to meet these obligations can lead to tribunal claims, compensation payouts, and reputational damage.
Below, we provide a comprehensive guide for employers on what constitutes unfair dismissal, how to ensure a dismissal is fair, and the potential consequences of failing to comply.
What counts as unfair dismissal?
Dismissal is where an employer brings someone’s employment to an end. This could be for various reasons, from being forced to make financial cutbacks to misconduct or performance issue at work.
However, by law, employees in many cases have a right not to be unfairly dismissed by their employer. This means that if the reason given for the decision to dismiss is not a fair reason, or the employer has failed to act reasonably in all the circumstances, this may give rise to an unfair dismissal claim.
Under the Employment Rights Act 1996, there are five potentially fair reasons for dismissal:
- Conduct: where there are relatively minor but ongoing issues of misconduct, such as lateness or unauthorised absences, or more serious misconduct, like theft or violence.
- Capability: where there are issues over performance, including an employee’s ability to do their job due to long-term ill health.
- Redundancy: where there’s a reduction or cessation in the requirement for work undertaken by an employee, for example, the business is being restructured.
- A statutory restriction: where continued employment would break the law, for example, a bus driver loses their licence or a migrant worker loses the right to work in the UK.
- Some other substantial reason: this is a statutory catch-all provision permitting an employer to dismiss an employee in cases where no other potentially fair reasons apply. This could include where the business has recently undergone a restructure, but this doesn’t give rise to an actual redundancy situation.
Even if the employer is able to establish a fair reason for your dismissal, the tribunal will still consider whether they acted reasonably or unreasonably in all the circumstances in treating it as a sufficient reason for dismissal.
When assessing “reasonableness” a tribunal will look at two main considerations: whether a fair procedure has been followed and, if so, whether the decision to dismiss fell within a band of reasonable responses available to the employer. As such, in order for a dismissal to be fair, it needs to be both procedurally and substantively fair.
What constitutes a fair procedure will depend on the reason for the dismissal. In the context of conduct and capability issues, employers should follow the code of practice on disciplinary and grievance procedures provided by ACAS. This sets out the basic requirements of fairness when dealing with a disciplinary.
Failure to follow the code will not, in itself, make an employer liable to proceedings, nor does it automatically make a dismissal unfair, although a tribunal will take this into account when considering relevant unfair dismissal claims.
The tribunal may also look at any previous decision-making, and whether the dismissal decision is consistent with decisions made about other employees in the same or similar circumstances. In some cases, a decision to dismiss may be a wholly disproportionate response to the disciplinary issue involved, especially having regard to any mitigating factors. The circumstances may instead favour a lesser disciplinary sanction, such as a written warning, providing the worker with a chance to improve performance or change behaviour.
Even in cases where the conduct complained of by the employer is so serious that it arguably justifies a decision to dismiss someone without notice or pay in lieu, otherwise known as summary dismissal, the employer must still investigate the circumstances and provide the individual with the opportunity to defend any allegations of gross misconduct.
Who can bring an unfair dismissal claim?
To be eligible to bring an unfair dismissal claim, the individual must be able to show that they have been dismissed. Suspension does not qualify as a dismissal. Similarly, resignation is not considered a dismissal unless the individual can show they were forced to resign due to undue pressure or because their employer acted in a way that constituted a serious breach of contract. In such situations, the resignation may be treated as an unfair dismissal, a scenario referred to as constructive dismissal.
To bring an unfair dismissal claim, the individual must be classified as an ‘employee’ and meet the required length of service. For those who started their employment on or after 6 April 2012, the minimum continuous service period is two years. For employment that began before this date, the requirement is one year. The service requirement does not apply if the dismissal is for an automatically unfair reason.
An automatically unfair dismissal is one that is so inherently unfair that an employee is not usually required to prove any qualifying period of employment. This is because special protection is afforded to employees where the dismissal violates their basic employment rights. It is generally automatically unfair if someone is dismissed because they:
- Are pregnant or on maternity leave
- Have asked for their legal rights at work, for example, to be paid minimum wage
- Took action about a health and safety issue in the workplace
- Are a trade union member and participated in trade union activities, including official industrial action or were acting as an employee representative
- Have reported their employer for wrongdoing, ie; whistleblowing.
This list is not exhaustive.
When an automatically unfair reason for dismissal is established, the employer cannot justify or defend their decision. In such cases, a tribunal does not examine the reasonableness of the employer’s actions or whether proper procedures were followed, as it would in an ordinary unfair dismissal claim. The reason itself is sufficient for the dismissal to be deemed automatically unfair.
Dismissals connected to any of the protected characteristics under the Equality Act 2010 may also give rise to claims of unlawful discrimination. For example, selecting an individual for redundancy due to nearing retirement age constitutes unlawful age discrimination. Similarly, dismissing an employee due to ill health could amount to unlawful disability discrimination, unless reasonable adjustments were made to address disadvantages caused by the employee’s condition but were ultimately ineffective.
Requirements for an unfair dismissal claim
To pursue an unfair dismissal claim, the individual must demonstrate that a dismissal has occurred. Evidence of dismissal might include a formal termination letter, emails, or text messages from the employer. If the reason for dismissal is unclear, the individual, provided they meet the required service period (two years for employment starting on or after 6 April 2012, or one year for employment beginning before that date), can request a written explanation from the employer. The employer is legally required to provide this explanation within 14 days.
Claims for unfair dismissal must be submitted to an employment tribunal within three months less one day from the dismissal date or the end of the notice period. Before proceeding to a tribunal, the parties are invited to engage in early conciliation through Acas to attempt an amicable resolution. If conciliation fails, the claim will proceed to a tribunal hearing.
It is the employer’s responsibility to demonstrate that the dismissal was fair and reasonable in the circumstances. In cases of alleged automatic unfair dismissal, the employer must show that the asserted reason was not the true reason. Claimants should provide detailed evidence, including witness statements and supporting documents, to substantiate their claim. Seeking legal advice early can help ensure a strong and well-prepared case.
How much is compensation in an unfair dismissal claim?
If your unfair dismissal claim is successful, an order may be made by the tribunal for your employer to reinstate you in your old job or re-employ you in a different role. You may also be entitled to an award of damages. This will comprise a basic and compensatory award.
The basic award is a fixed sum to be calculated on the basis of your age, gross weekly pay and length of service. The statutory formula for calculating a basic award is:
- 0.5 weeks’ pay for each full year where you were under 22
- 1 week’s pay for each full year where you were 22 to 40
- 1.5 weeks’ pay for each full year where you were 41 or over.
The pay is capped at £700 per week (as from 6th April 2024), up to a maximum of 20 years service. This means that the sum of £21,000 is the maximum basic award you can receive.
The compensatory award will reflect any loss of earnings, plus a sum of money to compensate you for the loss of your statutory rights accrued through continued service with your former employer. In the context of conduct and capability dismissals, this award could be increased by up to 25% for any unreasonable failure on the part of your employer to follow the ACAS code of practice. If, however, your claim only succeeds on the grounds of procedural unfairness, where you would have been dismissed in any event, the tribunal may limit any compensatory award to reflect the fact that following a fair procedure would not have altered the outcome.
In most cases, any compensatory award will be capped at £115,115 (from 6th April 2024). This will also be the lower of the maximum statutory limit or a year’s salary, although there are certain cases where the award will be uncapped, for example, where you’re been dismissed for whistleblowing or taking action about a health and safety issue at work.
Need assistance?
DavidsonMorris’ team of employment law specialists offer support and advice to employers dealing with disciplinaries and dismissals, including negotiating settlement packages.
Contact our employment lawyers for advice and guidance on any aspect of unfair dismissal claims.
Unfair dismissal claim FAQs
What is unfair dismissal?
Unfair dismissal occurs when an employee is terminated without a valid reason or where the employer fails to follow a fair process in making the decision.
What are the valid reasons for dismissal?
Under UK law, valid reasons for dismissal include misconduct, capability, redundancy, statutory restrictions, or another substantial reason, provided the decision is fair and procedurally sound.
What is automatic unfair dismissal?
Automatic unfair dismissal arises when an employee is dismissed for reasons such as whistleblowing, pregnancy, health and safety concerns, or trade union activities. These cases do not require the usual two years of continuous service.
Who can make an unfair dismissal claim?
Only employees can make a claim, and in most cases, they must have at least two years of continuous service, unless the dismissal is for an automatically unfair reason.
What evidence is needed to support a claim?
Evidence could include termination letters, emails, text messages, or witness statements that support the claim of unfair dismissal.
How long does an employee have to make a claim?
An unfair dismissal claim must be submitted to an employment tribunal within three months less one day of the dismissal or the end of the notice period.
What is the role of early conciliation?
Before a tribunal claim is heard, both parties are invited to participate in early conciliation through Acas to try to resolve the matter without the need for a formal hearing.
What compensation might an employer face?
If the tribunal finds the dismissal unfair, the employer may be ordered to reinstate the employee or pay compensation, including a basic award and a compensatory award for loss of earnings.
What happens in cases of procedural unfairness?
Even if the dismissal reason is valid, failure to follow a fair process could lead to a finding of unfair dismissal. Compensation may be reduced if the tribunal believes the outcome would have been the same with a fair procedure.
Can a dismissal also be discriminatory?
Yes, if the dismissal is linked to protected characteristics under the Equality Act 2010, such as age, gender, disability, or race, it may also be considered unlawful discrimination.
Glossary
| Term | Definition |
|---|---|
| Unfair Dismissal | Termination of employment that is deemed invalid due to lack of a fair reason or failure to follow a fair process. |
| Automatic Unfair Dismissal | Dismissal for reasons that are inherently unlawful, such as whistleblowing, pregnancy, or health and safety concerns. |
| Employment Tribunal | A legal body that resolves disputes between employers and employees, including claims of unfair dismissal. |
| Early Conciliation | A process facilitated by Acas to help employers and employees resolve disputes amicably before proceeding to a tribunal. |
| Acas Code of Practice | Guidance on disciplinary and grievance procedures that employers should follow to ensure fairness in the workplace. |
| Protected Characteristics | Traits safeguarded under the Equality Act 2010, including age, gender, race, disability, and religion, which protect individuals from discrimination. |
| Basic Award | A fixed sum of compensation awarded in unfair dismissal cases, calculated based on the employee’s age, length of service, and weekly pay. |
| Compensatory Award | Additional compensation awarded to reflect loss of earnings and other financial impacts resulting from an unfair dismissal. |
| Constructive Dismissal | When an employee resigns due to their employer’s actions amounting to a serious breach of contract, effectively forcing them to leave. |
| Reasonable Responses | A standard used by tribunals to assess whether the employer’s decision to dismiss fell within the range of actions a reasonable employer might take. |
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
