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How to protect yourself as an employer against unfair dismissal

You have to be very careful when firing staff. We look at the risks.

For many years most employees have had the right not to be sacked unfairly, and to receive compensation from the employer who has dismissed them. During the course of 1999, employees’ rights were strengthened, with the qualifying period of employment for complaints to an employment tribunal halved, and the maximum amount of compensation payable quadrupled.

Fair or unfair?The test for whether a dismissal is fair or unfair has two parts, both of which must be satisfied. A dismissal will be fair only if the employer:

  • Has a valid reason for sacking the employee; and
  • Acts reasonably in deciding to dismiss the employee – rather than, for example, taking some other action.

Legislation list five specific valid reasons for dismissal:

  • Conduct – an employee’s conduct is unacceptable (for example, persistent serious bad time keeping);
  • Capability – the employee is not able (incapable) or not qualified to do the job;
  • Redundancy – the employee is properly made redundant;
  • A statutory requirement – for example if a lorry driver loses his or her license necessary to drive a commercial vehicle;
  • “Some other substantial reason” – the above four reasons cover the great majority of fair dismissals, but a “catch all” category is occasionally used for other circumstances.

Notice periods

In dismissing an employee the minimum length of notice an employer must give varies with the length of time the employee has been continuously employed. The minimum time periods are:

  • One week – after one month’s employment and under two years’;
  • One week per year of employment – two years to 12 years’;
  • 12 weeks – more than 12 years.

If the employee’s contract of employment stipulates a longer period of notice, this takes precedence.

Normally dismissed employees must be allowed to work out their notice, or receive pay in lieu of notice, unless they have been dismissed because of gross misconduct which makes employment untenable, such as theft or violence.

ACAS code

Conduct is the main reason for most dismissals. In these circumstances, an employer will have to be sure, as for other reasons, that he or she acted reasonably in dismissing the employee. For example, would a final warning have been the reasonable course of action rather than dismissal?

The accepted guidance in these circumstances is contained in the Code of Practice on Disciplinary Practice and Procedures in Employment issued by the Advisory, Conciliation and Arbitration Service (ACAS). The Code of Practice is not legally binding, but employment tribunals take into account any provisions of the code which appears to them to be relevant in determining the fairness of a dismissal: although tribunals do not expect all employers – particularly small ones – to follow the code to the letter.

Automatically unfair reasons

Certain reasons for dismissals are automatically unfair. It is automatically unfair to dismiss an employee, or select for redundancy, if the reason or main reason is for:

  • Being (or not being) a trade union member;
  • Taking part in trade union activities;
  • Acting as an employee representative;
  • Being pregnant or taking maternity leave;
  • Taking certain types of action on health and safety grounds;
  • Trying, in good faith, to enforce another statutory employment right (for example, time off for public duties);
  • Refusing, in specified circumstances, to do shop or betting work on a Sunday.
  • Reasons connected with the transfer of an undertaking (except in the case of selection for redundancy), unless there are “economic, technical or organisational” reasons for the dismissal
  • Acting as a trustee of an occupational pension scheme;
  • Reasons relating to the national minimum wage, or Working Time Regulations 1998;
  • Making a “protected disclosure” under the Public Interest Disclosure Act 1998; or
  • Being entitled to, or becoming entitled to, working families’ tax credit or disabled person’s tax credit.

Employees entitled to complain

Most employees have the right to complain to an employment tribunal of unfair dismissal. An employee cannot complain to a tribunal, however, if he or she:

  • Has not completed one year’s continuous employment (down from two years’ from 1 June 1999); or
  • Has reached normal retirement age for their employment (or age 65 if there is no normal retirement age); or
  • Is employed on a fixed term contract where the dismissal is the expiry of the contract and the employee has previously agreed in writing to waive his or her right to complain of unfair dismissal (although from 25 October 1999 employees lost the option to waive their rights under new contracts); or
  • Has reached a settlement with the employer – for example through conciliation at ACAS or with the benefit of independent advice – under which he or she has waived the right to complain.

Where the complaint of unfair dismissal is one of the reasons which is specified as automatically unfair – as above – the age and length of service conditions do not apply (except for reasons connected with the transfer of an undertaking). That is, an employee of any age may complain to an employment tribunal from day one of employment.

Written reasons

An employer need not give an employee a written reason for dismissal. However, an employee can request a written reason and – if he or she has been employed continuously for at least a year – the employer must provide one. This written statement must be given to the employer within 14 days of the request.

If a pregnant woman, or one who is on statutory maternity leave, is dismissed for any reason, she must receive a written statement automatically, without having to request it and regardless of her length of employment.

Unfair dismissal: remedies

Industrial action

Employment tribunals will not normally consider a complaint of unfair dismissal from an employee who is engaged in unofficial industrial action.

Similarly, tribunals cannot normally consider a complaint of unfair dismissal from an employee taking part in official industrial action provided the employer:

  • Has sacked all those taking part in the action at the same establishment at the same time; and
  • Has not offered re-employed to any of them within three months of the date of dismissal, without making a similar offer to him or her.

Tribunals are able to consider complaints of unfair dismissal, however, in many of the circumstances where the dismissal would be automatically unfair – for example on the grounds of pregnancy.

Special situations

Complaints of unfair dismissal, except in the most straightforward of cases, often give rise to complex considerations. For example, a sacked employee who has made a complaint of sex, race or disability discrimination may also make a complaint of unfair dismissal. Employees who resign may complain of “constructive” unfair dismissal, in that they argue that it has been necessary for them to resign because of some action of the employer.

In particular, the law makes many special provisions where dismissal is alleged to be automatically unfair.

Complaints

Employees may complain of unfair dismissal to an employment tribunal provided they satisfy any relevant eligibility condition, such as length of employment. It is also possible, of course – but rare – for employees to apply to a civil court for damages for breach of contract.

For a tribunal to consider a complaint, it should normally be made by the employee within three months of the effective date of termination of employment. Generally, tribunals expect that the employee should have attempted to resolve the dispute by mutual agreement with the employer – for instance through any grievance or disciplinary appeals process.

Tribunals may reduce any compensation for unfair dismissal if the employee has not tried to resolve the dispute in this way.

The employee and employer can also seek informal advice from a conciliation officer of ACAS. The deadline for application to a tribunal is not extended because of these attempts to resolve the dispute – the deadline remains three months from the date of termination of employment not, for example, three months from breakdown of attempts to resolve the dispute.

Procedures

Applications to a employment tribunal are made as usual, by the employee completing an 1T1 form. In the normal way, a conciliation officer from ACAS will always contact one or both the parties to find out whether they wish to try to reach a voluntary settlement without a tribunal hearing.

If the employee or the employer indicates that they want to reach a settlement or, if in the absence of such an indication, the conciliation officer considers there is a reasonable chance of success, conciliation will be attempted. At this stage, the parties can apply to the tribunal to postpone the hearing on the unfair dismissal complaint.

Remedies

The three remedies which an employee can seek for unfair dismissal, and which he or she would usually have indicated a preference for on the IT1, are:

  • Reinstatement to the same job;
  • Re-engagement to a different job; or
  • Compensation

Tribunal awards

If the complaint is heard by a tribunal and it finds that the dismissal is unfair then it will make an order for reinstatement or re-engagement, or for the employer to pay compensation.

In deciding whether to make an order for reinstatement or re-engagement, the tribunal will consider:

  • The employee’s wishes;
  • Whether it is practicable for the employee to return to work; and
  • Whether it would be just for the employer to re-employ the employee, in cases where the employee was partly to blame for the dismissal.

Compensation

The system of awards of compensation for unfair dismissal have recently been simplified and the maximum compensatory award increased.

Basic award

The basic award compensates the employee for loss of job security. The level of this award depends on the employee’s age and length of employment with the employer, and the rate of pay.

The maximum basic award is 30 weeks’ pay, with a limit on the amount of pay which counts. At the time of writing (07/2007) the limit is £310 a week, which is revised each year.

It certain cases (for example, dismissals relating to trade union membership) there is a minimum award, which at the time of writing (07/2007) is £4,200.

Compensatory award

The compensatory award is based on the tribunal’s estimate employee’s loss of earnings since the dismissal and the likely future loss of earnings and employment benefits, including pension loss, up to a maximum figure. For dismissals taking effect on or after 01 February 2007, this maximum is £60,600. There is no limit, however, on compensation awarded for unfair dismissals relating to health and safety and public interest disclosure reasons.

Additional award

If a tribunal makes a reinstatement or re-engagement order, and the employer refuses to comply, the tribunal may make an additional award (on top of the basic and compensatory awards). In most unfair dismissal cases, this additional award will be between 26 and 56 weeks’ pay, subject to the £310 per week limit.

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