Employment law – Unfair dismissal
What is unfair dismissal?
Every employee who has the qualifying period of service has the right not to be subject to an unfair dismissal. If there is to be a dismissal, an employer must show that the reason (or if more than one, then the principal reason), falls into one of the categories set out in the Employment Rights Act 1996.
These 5 categories are as follows:
- The employee lacked capability or qualification (in relation to the work you were employed to do);
- The dismissal was a result of the conduct of the employee (such as dishonesty, poor attendance, failure to follow instructions, and which can amount to gross misconduct);
- There was a genuine redundancy;
- The continuation of employment would contravene a statute, for example you need to drive in your employment, but you have been banned due to speeding;
- Some other substantial reason (“SOSR”). This would be a dismissal which does not fall within any of the above reasons. Some examples are where you have a personality clash with your employer, or where there is a non-renewal of your fixed-term contract as a maternity leave cover, . There could also be a dismissal under, or where you have unreasonably refused to accept new changes to your terms and conditions. Each case will be determined on its own facts.
Unless your employer can prove one (or more) of the above 5 fair reasons for dismissal, then your termination of employment will be deemed to have been unfair.
Is it that simple, if my employer can show a “fair reason” for dismissal?
No, it isn’t. Even if your employer does prove that the dismissal is for one of the above fair reasons, it is still up to the Employment Tribunal to decide “in accordance with equity and the substantial merits of the case” whether the dismissal was fair or unfair. The tribunal will need to decide whether the dismissal was within the “range of reasonable responses” of your employer.” In other words, your employer will have the onus of showing that they have acted reasonably in treating that reason as a sufficient one for dismissing you.
For example, your employer may have had grounds for dismissing you because of your performance or conduct. This doesn’t mean, however, that it was reasonable to take this step, rather than first giving you a warning or discussing the matter more informally. If a tribunal believes that no reasonable employer would have dismissed you in the same circumstances, then the dismissal will still be unfair. In making its decision, the tribunal will take into account the size and administrative resources of your employer.
What is the difference between constructive and unfair dismissal?
An unfair dismissal is where you have been sacked in a way that is unlawful. This is usually because either one of the 5 fair reasons for dismissals do not apply, or there has been a failure of process, or it is not reasonable for you to have been dismissed.
A constructive dismissal, on the other hand, is where you are forced to resign in response to your employer’s conduct, which has made your position untenable. Although it’s referred to as a “dismissal” in law, it is in practical terms a resignation.
Can my employer rely on any new matter to justify my dismissal after my employment has been terminated?
No. The correct test is whether the dismissal was fair on the basis of what your employer knew at the time. An argument cannot be raised that your employer would have dismissed you in any event, because of something new they had discovered after you had been dismissed.
How important is it for my employer to follow a correct process?
It is very important. Even if there is a justified reason to dismiss you, the dismissal will still be unfair if your employer has not followed a correct process. This could be, for instance, where your employer has not followed a proper consultation or selection process in a redundancy situation. Alternatively, your employer may not have followed the ACAS code of Practice guidelines in a dismissal based on misconduct, or performance, The Code includes provisions that there should be sufficient investigations, evidence, warnings (in most cases) and the right to be accompanied at meetings.
What is the qualifying period of employment necessary to make a claim for unfair dismissal?
You usually need to have been continuously employed with the same employer for at least 23 months and 3 weeks without a break and not already been served with notice expiring before your 2 years employment. Any unofficial work is unlikely to count towards a period of continuous employment.
When calculating when notice starts to run (which is relevant to when the notice expires), it is usually from the day after notice was given. This is regardless of whether the notice was given verbally or in writing. For example, if you are given 3 month’s notice on 5th September, time starts to run from 4th November, and which will expire on 5th December. This would be the effective date of your termination. In some cases, your employment contract may state that notice is run immediately upon receipt, in which case you start counting from that day and not the day afterwards.
It is irrelevant for the purposes of when your notice expires if you are requested to not actually work during the notice period.
In some cases, you can still claim continuous employment if there has been a break. Please click here for a list of when you can do this.
There are also some limited exceptions where the continuous period does not apply at all, so that you can bring a claim for unfair dismissal without having worked for any minimum time. This is known as “automatic unfair dismissal” (see below).
Automatic unfair dismissal (where in most cases there is no qualifying period)
A dismissal will be ‘automatically unfair’ with no qualifying period of service necessary in exceptional circumstances which include:-
- if the dismissal was connected with a health and safety reason that you became aware of;
- where you have asserted a statutory employment right, such as maternity or paternity leave or written particulars of employment (see further FAQ below);
- whistleblowing ;
- participating in trade union activities;
- where you are dismissed by reason of a business transfer, (as you are protected under the TUPE regulations,( but you still need a qualifying period of service for TUPE claims).
How does an automatic unfair dismissal claim based on asserting a statutory right work?
You can claim unfair dismissal if the reason or principal reason for dismissal is that you either brought proceedings in relation to a “relevant statutory right” or that or you alleged that your employer had infringed such a statutory right.
The law here is aimed at preventing a dismissal in retaliation for bringing proceedings to enforce employment rights or asserting employment rights”.
This protection covers the specific statutory rights where the remedy for breach is provided by the employment tribunal. This includes the right to receive statutory maternity pay, the right to receive holiday pay, the right not to suffer unlawful deduction of wages, and the right to be accompanied at a disciplinary.
The Tribunal would consider the following factors:
- did you assert infringements of a statutory right (like unlawful deduction from wages) to your employer before your dismissal? (the assertion needs to be made before the dismissal)
- if so was the assertion made in good faith? If yes;
- was the reason/principle reason for the decision to dismiss the employee, the fact that he had asserted a statutory right to the employer? (the reason for the dismissal is the key)
Importantly, the protection applies whether or not you actually have the statutory right in question or whether that right has been infringed. This means a claim can be brought where a complaint is made by you about a relevant statutory right, even if the complaint itself is unfounded.
A complaint that you may make of discrimination are not covered by the automatic unfair dismissal rules, because you can make a separate victimisation claim under the Equality Act 2010 if subjected to a detriment or dismissed because of a discrimination by reason of your race, sex, disability etc.
If I don’t qualify to make a claim for unfair dismissal, what other claims could I have?
You could make a claim for discrimination where there is no qualifying period of service. You can also make a claim for wrongful dismissal, which is essentially a breach of contract claim (where you would be claiming your notice period and other contractual losses flowing from your employer’s early termination of your contract).
If you have less than 2 years service with your present employer, but you are in the last week of that 2 years (i.e. 23 months and 3 weeks), and you are dismissed for gross misconduct, then you may be able to make an initial claim for wrongful dismissal (which is a breach of contract claim), and if successful in this claim, the tribunal would allow you to then proceed with an unfair dismissal claim. This would only apply where you are 1 week or less short of 2 years service.
Who can’t claim unfair dismissal?
This is made up of a basic award and compensatory award.
The basic award is a statutory award that involves multiplying the relevant factors of the length of continuous service with your employer (up to a maximum of 20 years), your age and a week’s pay (as at the date of termination of your employment). The award is made up of:
- One and a half weeks’ pay for each year of employment after age 41;
- One week’s pay for each year of employment between ages 22 and 40;
- Half a week’s pay for each year of employment under the age of 22.
The weekly pay which will be used to work out the basic award payment will usually be your normal weekly gross pay at the time you were dismissed up to the maximum limit which is £643 (correct from 6th April 2023). A week’s pay does not usually include overtime pay. The maximum basic award payment you can receive is £19,290.
A tribunal may reduce the basic award if it finds that your conduct before dismissal (or before notice of dismissal), was such that it would be just and equitable to reduce it- even if your conduct had not contributed to the dismissal.
If you have been dismissed by reason of redundancy, the tribunal will reduce the basic award by the amount of any redundancy payment you have received or awarded by the tribunal as part of the compensation. If, however, your employer fails to satisfy the tribunal that the principal reason for dismissal was in fact redundancy, then no such reduction to the basic award will be made.
After addressing the basic award, the compensatory award will then be considered. This is often the larger of the 2 elements of the awards.
The Employment Rights Act provides that the compensatory award will be “such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer”.
This means the losses need to have arisen as a consequence of the unfair dismissal, as a result of your employer’s actions, and that it is just and equitable to make an award.
The main heads of losses that you can claim are as follows:
- loss of wages;
- loss of future wages;
- loss of statutory rights (it takes 2 years before you have unfair dismissal protection, or you can qualify for a redundancy payment);
- loss of pension.
In terms of wages, this includes contractual benefits, such as a company car, private medical or health insurance. It can also include non- contractual benefits, provided you have a reasonable expectation of the same. You can also include a claim for your loss of bonus or commission if you reasonably expected to receive this, even if such payments were discretionary.
Assessing future loss is always going to be a speculative process for the tribunal. This will depend on whether you have managed to mitigate your loss and found another job before the hearing date, the date this happened, and the amount of your new salary. The tribunal will need to identify an appropriate cut-off point for compensation if you have not secured any new employment as at the hearing date.
Is there a maximum amount of compensatory award?
The maximum amount that you can be awarded as compensation for Unfair Dismissal from 6th April 2023, is the statutory cap of £105,707 or 52 weeks gross salary- whichever is the lower. This is in addition to the basic award which can be ordered by the Tribunal of up to a maximum of £19,290.
In calculating a year’s salary, you do not take into account benefits in kind, pension contributions or discretionary bonuses.
Assuming you win your case, the tribunal will assess your total loss, and you will have to give credit for sums already received from your employer, such as pay in lieu of notice or enhanced redundancy payments.
How will the tribunal deal with tax on any loss of earnings award?
When calculating loss of earnings following an unfair dismissal, the calculation will be based on net earnings – that is, earnings after tax. To avoid you being disadvantaged by then having to pay tax on this sum, the Tribunal will ‘gross up’ any award it makes over £30,000 (because up to £30k can be paid without deductions). This essentially requires adding the sum that is deductible for tax back on to the award, thus cancelling out the tax burden.
The tribunal needs to gross up the figure before it applies the £105k statutory cap mentioned above. It is not the case that you reach the cap on the net figures and then gross up the sum afterwards to allow for tax (thus exceeding the cap).
What else do I need to know about the compensatory award?
Under the “Norton Tool” principle, where you have been summarily or unfairly dismissed without notice or without payment in lieu of notice, you can still claim the notice you should have received even though you may have started a new role without too much of a gap, so incurred limited losses. However, this is not the position if your claim is for constructive dismissal, where earnings from the new employment in what would have been within the notice period from your old employer where such income will be taken into account. You would not therefore be able to make a “double recovery” as far as the notice payment is concerned in constructive dismissal claims.
If you have already received a fairly large severance sum already, you will need to carefully consider if it is worth making an unfair dismissal claim (because of the £105K statutory cap). This does not, however, mean that a settlement by way of negotiation above this figure cannot still be achieved (which we have achieved many times).
In some cases, there is no cap on the compensation that can be awarded. These include cases where as well as unfair dismissal, there is a claim for discrimination, whistleblowing, a breach of a health and safety issue or where you are dismissed after trying to assert a statutory right.
As mentioned above, in making an award for compensation in these cases, an Employment Tribunal has the power to reduce both the basic award and the compensatory award. This can happen if a tribunal finds your conduct was a contributory factor. A reduction can also occur where your employer can show that even if they had followed a correct process, the decision to dismiss you would still have been the same outcome (this is known as a Polkey reduction of damages).
A negotiated settlement?
In many cases where someone is facing an unfair dismissal situation, a negotiated settlement is possible as this by far the best outcome if it can be achieved. This is almost exclusively what we do and we have very high success rates. Please feel free to contact us.
Unfair Dismissal is a vast area and each case is determined on its facts. You should obtain professional advice as soon as possible if you think you have a claim. At Landau Law, we have advised thousands of employees and senior executives in relation to unfair dismissal claims, with very high success rates (most through negotiated settlements). We will consider a no win- no fee funding arrangement.