Employer’s Guidance to Unfair & Wrongful Dismissal
The termination of employment is arguably a normal part of the employee, employer relationship. However, it is important that employers get it right if they want to avoid being faced with successful claims of unfair and/or wrongful dismissal.
The termination of employment contracts are a normal part of business and are sometimes necessary. From time to time, an employer or employee (or both) may want to terminate the employment contract and part ways. As an employer, you have the discretion (within reason) to terminate the employment of a member of staff, however depending on the specific set of circumstances, a full dismissal procedure will need to be followed to ensure that the dismissal is fair and to reduce the risk of a potential successful unfair or wrongful dismissal claim.
So, what is unfair dismissal?
Unfair dismissal occurs when an employer terminates an employee’s employment without one of the prescribed fair reasons (which we explore in more detail in just moment). A dismissal could also amount to being unfair, even if there was a fair reason for dismissal, if the employer is seen to have acted unreasonably when carrying out the dismissal, such as for failing to follow a fair dismissal procedure.
To bring a claim for “ordinary” unfair dismissal, an employee (and not a worker) must have a minimum of two years’ continuous service. However, there are certain circumstances in which an employee can bring a claim for unfair dismissal (outside of “ordinary” unfair dismissal) regardless of their length of service, such as if the employee was dismissed for asserting a statutory right, raising a health and safety concern or in connection with any type of family leave or whistleblowing, for example.
What are the fair grounds for dismissal?
The potentially fair reasons for dismissal are:-
Conduct;
Capability or qualifications;
Redundancy;
Illegality; or
Some other substantial reason which justifies the dismissal.
If a dismissal is not connected with one of the above reasons, it may be unfair. Whilst your reasons for dismissing an employee may sit comfortably in one or more of the categories above, the employee may still call the fairness of the dismissal into doubt. An employee may have mitigating circumstances such as illness, stress, workplace bullying, discrimination, or mental health issues, all of which may turn a legitimately fair reason for dismissal into a wrongful or unfair dismissal claim.
What is wrongful dismissal?
Wrongful dismissal is where an employer terminates the employee (and possibly also on reasonable grounds), in breach of contract. Commonly this can occur when an employer fails to provide an employee their correct notice or notice pay. Unlike “ordinary” unfair dismissal, employees are not required to have a set period of continuous service of employment to bring a claim of unfair dismissal, effectively, it is a 'day one right'.
What does a fair procedure look like?
In order to dismiss an employee fairly, generally, as well as needing to have a fair reason for dismissal, you will need to follow a fair procedure, which generally and at a minimum follows the stages below:-
Step 1 – Investigation
Before any action is taken, employers should equip themselves with all of the relevant facts of the matter. This means that all necessary investigations of the potential disciplinary matters should be carried out without unreasonable delay to establish the facts of the case. This may require holding an investigatory meeting with the employee concerned before proceeding to any disciplinary hearing and / or collating all of the evidence for use at any disciplinary hearing. E.g. collating witness statements, relevant evidential documentation such as timesheets, email communications, memos, etc.
Step 2 – Inform the employee in writing
If an employer decides that for whatever reasons there is a case to answer, the employee should be notified of this decision in writing. This notification should contain adequate information about the alleged misconduct or poor performance, its possible consequences and the evidence which the employer is relying on to enable the employee to prepare to answer the case at a disciplinary hearing.
The employee should also be provided with the time, date and venue for the disciplinary meeting and include referenced to the employee’s right to be accompanied at the hearing.
Step 3 – Set up the hearing
The hearing should be held without unreasonable delay whilst still providing the employee with enough notice of the meeting. The hearing should provide both parties the opportunity to consider the gathered evidence, give the employee the chance to set out their case and provide their representations and response to the allegations. The employee should be provided with a fair opportunity to ask questions, present any of their own evidence, call relevant witnesses and to raise points about any information provided by the relevant witnesses. If the employer or employee intends to call relevant witnesses, advance notice should be provided. Employees should also be granted the opportunity to be accompanied by a companion (this is a statutory right).
Step 4 – Decision
After the hearing has been conducted, the employer must then decide whether any disciplinary sanction is justified, decide what action to take and inform the employee in writing. Should disciplinary action be taken (including the decision to dismiss), information on how the employee can appeal the decision must be included.
Step 5 – Appeal
If the employee chooses to appeal the decision, they should be given the opportunity to do so before another manager who is impartial and was not a part of the initial investigation process or disciplinary process.
The above procedure can apply to both disciplinary and capability issues. However, employers should be cautious if it appears that the issues are linked to an employee’s medical condition or disability. In those circumstances are tailored and careful approach must be adopted to ensure compliance with employment law and obtaining legal advice is advised.
What are the financial implications if we get it wrong?
If an employee is successful in bringing a wrongful dismissal claim, they will be entitled to damages to correct the breach / put them in the position they would have been if it was not for the breach. If an employee is successful in bringing an unfair dismissal claim, they could be entitled to a basic award (calculated in the same way as a statutory redundancy payment) and a compensatory unfair dismissal award, which as of April 2023 can be up to a maximum of £105,707. However, if it is found that the dismissal was for an automatically unfair reasons, namely health and safety reasons, whistleblowing or selection for redundancy, the statutory cap will not apply.
Getting the dismissal process wrong can be costly, effect wider company morale and potentially cause reputational and commercial damage to your business so it is important that you get it right and we can assist you should you ever need support.
This guide does not amount to legal advice. Should you require bespoke advice in respect of employee exits, wrongful or unfair dismissal claims, please contact our employment experts.