What Constitutes Unfair Dismissal in the Workplace?

As an employer, you might have to terminate an employee's contract at some point or another. Whilst not a pleasant experience, you must dismiss staff lawfully. This means following a fair procedure, and ensuring you have a valid reason for termination.

If an employee feels you have unfairly dismissed them, they might raise an unfair dismissal claim to an employment tribunal. As a result, you may face paying compensation, as well as reputational damages.

In this guide, we'll discuss unfair dismissals, your requirements under employment law, and how to avoid employees making unfair dismissal claims.

What is unfair dismissal?

Unfair dismissal is when you terminate an employment contract without a potentially fair reason, or without following a fair procedure.

Under UK law, all employees have a statutory right to be fairly dismissed. Meaning, you must follow the correct process when terminating a staff member's contract. Remember, in some cases, dismissal might be considered automatically unfair.

What is an automatically unfair reason for dismissal?

Automatically unfair dismissal happens when an employer dismisses an employee in such a way that it breaches their statutory rights.

Here are some automatically unfair reasons for an employee's dismissal:

• Being part of a trade union, acting as a trade union representative, or engaging in trade union activities).
• Acting as an occupational pension scheme trustee, or an employee representative during times of redundancy.
• Being part of legal proceedings with their employer (such as whistleblowing, or making a protected disclosure).
• Being pregnant, or other birth-related factors.
• Disregarding protective leave rights (such as adoption leave, maternity leave, parental leave).
• Qualifying for the National Minimum Wage.
• Taking part in legal industrial action for 12 weeks or less.
• Taking part in jury service.
• Being entitled to working tax credits.
• Firing an employee for not coming to work because they believe there's a Health & Safety issue and they're in imminent danger.

Similar to a wrongful dismissal claim, there is no qualifying period or length of service an employee must have to submit an automatic unfair dismissal claim.

What is an unfair dismissal claim?

If an employee believes their employer's conduct has been unfair when dismissing them, they could raise a claim to an employment tribunal.

Here, both parties will submit evidence to support their argument. The tribunal will then consider whether the employer acted fairly and within the range of 'reasonable responses'. If the employer loses the claim, it could result in financial damages.

What are the consequences of losing an unfair dismissal claim?

If you lose an unfair dismissal claim, there could be serious consequences for your business. For example, you might be required to pay compensation. The amount awarded is based on:

• A fixed sum calculated to a set formula in the same way as statutory redundancy pay. This is known as a 'basic award'.
• Compensation for the money lost as a result of the employee losing their job. This is known as a compensatory award.

Such payments will vary depending on the case, but the compensatory award is capped at a year's salary (52 week’s pay), or £105,707, whichever is lower. However, the tribunal can increase this by up to 25%, if you didn't follow the ACAS Code of Practice on disciplinary and grievance procedures.

Who can make a claim for unfair dismissal?

Unfair dismissal claims can be made by anyone who has 'employee employment status'. To be classed as an employee, they must be required to work regularly unless they’re on leave, and be at their employer's disposal during working hours. Compared to a worker, it also means they have more:

• Employment rights.
• Obligations to their employer.

But, like a constructive dismissal claim, they have to be continuously employed for two years before making a claim. There are also strict time limits when making an unfair dismissal claim. Employees must submit the claim within three months (minus one day) of their termination date.

What are the potentially fair reasons for dismissal?

There are five potentially fair reasons for dismissal. Let's explore them in more detail so you understand what makes a termination lawful.

The reasons are:

Conduct

One fair reason for dismissal is poor employee conduct. Poor or gross misconduct can vary, so let's take a look at some examples. Poor conduct looks like:

• Poor performance at work. For example, refusing to complete tasks and meet deadlines.
• Poor attendance at work. For example, regularly failing to show up to the office.
• Disclosing private company information. For example, sharing trade secrets with competitors.

Typically, to dismiss someone for poor conduct, there has to be a pattern of behaviour that can be evidenced. However, some acts of misconduct are so severe, they can justify immediate dismissal. For example, if the employee is violent and abusive to other staff members.

Capability

Another reason for dismissal is if an employee is not capable of doing their job. Put simply, they fail to have the required:

• Skills.
• Qualifications.
• Abilities.

To be able to dismiss someone for capability reasons, you must be able to explain why they are incapable of performing their role, and what steps have been taken by the company to help them. Ensure you've done everything you reasonably can to help them before dismissing them.

Redundancy

You are also able to dismiss an employee if their role becomes redundant. For example, if a department is being closed, or you need to cut costs. To be able to make someone redundant, you must be able to demonstrate why this is necessary.

For example, you'll need to show that you've considered alternatives to redundancy, like switching their role. To avoid discrimination claims to a tribunal, determine a clear process that focuses on criteria not related to personal or protected characteristics. Consider their abilities, skills and experience.

Statutory restriction

Statutory restrictions are another fair reason to dismiss an employee. A statutory restriction is limits in place on certain activities via legislation, such as not being able to drive without a license. To dismiss someone for this reason, means they are not able to work without breaking a statutory restriction.

For example, if you hire someone to drive a HGV, but they lose their HGV license. Essentially, you're dismissing them because employing them would break the law. But, ensure you try and find other suitable work before dismissal is considered.

Some other substantial reason

Some other substantial reason is also a reason for fair dismissal. This is purposefully vague to encompass reasons for dismissal that doesn't fit into the other four categories. But, there must be evidence to support that the employee cannot continue working.

For example, the reason you might have for dismissing someone is because their continued employment would result in your organisation losing business. This often occurs in instances where an employee has caused reputational damage to a company.

How to avoid unfairly dismissing an employee

To avoid unfairly dismissing an employee, there are several reasonable steps you can take. For example, you can use mediation to see if issues can be resolved internally. Other steps you should take include:

Follow your disciplinary procedure

Following your disciplinary procedure (also known as a statutory minimum dismissal procedure in Northern Ireland) will help you avoid unfairly dismissing an employee. Disciplinary procedures help staff to be aware of what's expected of them, relating to conduct and performance.

What is considered to be a fair procedure will depend on the size and administrative resources available to your business. But, you should:

• Conduct a formal investigation.
• Write a letter setting out the issue.
• Organise a meeting to discuss the issue.
• Confirm the disciplinary decision in writing.
• Allow the employee a chance to appeal this decision.

Following a fair disciplinary process will help to avoid the risk of an unfair dismissal claim. But, it also ensures your legal compliance when it comes to disciplinaries. Ensure you allow your employee to bring a representative from a trade union during the disciplinary meeting.

Provide training to managers

To avoid unfair dismissal, ensure your managers and senior members of staff are trained on your disciplinary procedure, and understand how to deal with internal issues regarding performance and conduct.

Having your disciplinary procedure at their disposal will make it easier to avoid problems escalating unnecessarily, and thus help to avoid dismissal occurring at all.

Not to mention, it might help build better relationships between your managers and junior staff members. This is because they can resolve issues in a calm, professional manner - and have the tools to resolve their conflict.

Treat employees equally

Another way to avoid unfair dismissal is to ensure you treat every member of staff equally. This is especially the case if you fail to follow your grievance and disciplinary processes - as this can make you liable for unfair dismissal.

For example, you fail to follow your disciplinary procedure when approaching an issue with an employee, and ultimately dismiss them. But, with other employees, you followed a fair, proper procedure.

In this instance, an employee could make an unfair dismissal claim, because you have not taken the appropriate steps when dismissing them.

Get expert advice on unfair dismissal from Peninsula

As an employer, you'll have to deal with dismissing staff at one point or another. Without following the correct procedure, you could face tribunal claims – which could result in financial and reputational damages.

Peninsula offers expert advice on unfair dismissal. Our teams provide 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.