When owning a business, hiring and firing staff is all part of running a successful company. However, when choosing to end someone's employment - you must act legally.
Under no circumstances should you terminate an employee wrongfully, this is against employment law and could end in a tribunal.
In this guide, we'll discuss what wrongful dismissal is, its permutations if it happens, and the differences between wrongful and unfair dismissal.
What is wrongful dismissal?
Under UK employment law, wrongful dismissal is a breach of contract. Only the employer can be the cause of this type of dismissal.
When terminating someone's employment, you should always follow a fair and legal procedure. Wrongful dismissal occurs commonly when an employer doesn't follow termination legalities.
In order to ensure you avoid wrongfully dismissing an employee - it's important you familiarise yourself with common examples.
Examples of wrongful dismissal
The rules and regulations surrounding employee dismissal are outlined in the Employment Rights Act 1996. However the right to claim wrongful dismissal isn't included, it's a common law claim based on breach of an employment contract.
Below are examples of an employee being wrongfully dismissed which must be avoided by:
- Not following the legal procedure when making staff redundant.
- Failing to meet the basic contractual obligations for a temporary or fixed-term contract.
- Not following contractual disciplinary measures, such as treating a small performance issue as gross misconduct.
- Committing constructive dismissal against an employee.
- Dismissing an employee without fair or previous warning.
- Not providing the contractual notice period before termination (the minimum notice period the employees are entitled to can be between one week and 12 weeks).
Can an employer dismiss an employee without notice?
As an employer, it's important you're aware of when you can end someone's employment without providing notice.
There are two instances where a notice period isn't required for termination:
- If the employee has committed gross misconduct or a serious breach of contract. For example theft, bullying, or harassment. This is also known as a summary dismissal.
- If there's a payment in lieu of notice clause included in the employment contract. A payment in lieu of the notice clause is when both parties agree to a lump sum rather than service the required notice period.
Can you be taken to an employment tribunal for wrongful dismissal claims?
If a former employee feels they've been wrongfully dismissed, they may make a wrongful dismissal claim.
This leads to the business being taken to an employment tribunal or county court - which looks at all the circumstances, as well as the context surrounding the employer's breach before making a decision.
However, there's certain criteria which must be met for an employee to make such a claim for wrongful dismissal:
- If the claim is made following an employment standards breach.
- There’s no continuous period of employment required to make a claim.
- Employees must make a claim within three months from the effective date of employment being terminated.
The employee won't always win the case - especially if you can prove the particular circumstances surrounding the dismissal were legal.
It's crucial you understand the damages awarded for wrongful dismissal - that'll help you understand the severity of it and that it should be avoided.
How much compensation can be awarded for wrongful dismissal?
When claiming wrongful dismissal - an employee can be awarded compensation for what they would have received during their notice period.
This is usually made up of basic salary, other benefits, any bonuses or allowances (such as a company car, private health cover and pension entitlement) and contractual benefits. The employee may also put a claim for any other contractual benefits they feel they're owed.
However, the number of damages awarded can vary depending on the wording of the contract that was agreed by both parties prior to employment commencing.
In the UK, the amount of compensatory award for an employment tribunal is capped at £25,000 - anything higher must be pursued at a county court or high court.
How to avoid a wrongful dismissal claim
Wrongful dismissal claims can be expensive for employers, especially if you have to pay damages.
By taking the following steps, you can avoid a breach of contract claim and an employment tribunal:
- Create effective documentation and ensure the contract of employment clearly states a fair procedure for termination.
- Follow the terms of the employment contract.
- Provide training for all managers on how to discipline correctly, avoiding any harsh terminations.
- Ensure you provide your staff with sufficient notice at the end of their employment.
Differences between wrongful and unfair dismissal
It's important you understand the differences between wrongful and unfair dismissal in order to manage them correctly.
Wrongful dismissal is a breach of the contract of employment by the employer. An unfair dismissal claim can be made if the dismissal isn’t for potentially fair reasons under the Employment Rights Act 1996.
Examples of being unfairly dismissed
- Being sacked for joining a trade union
- Being sacked for taking time for jury service.
- Being sacked after asking for flexible working.
- Being sacked after requesting maternity or paternity leave.
Can an employee claim wrongful dismissal and unfair dismissal at the same time?
An employee is well within their rights to claim for being both wrongfully and unfairly dismissed. However, they cannot receive double compensation – but both elements of the claim would be factored into the compensation payment.
For example, if the damages awarded for unfair dismissal are higher than wrongful dismissal - the money received will cancel out the same amount received for the other claim.
Get expert advice from Peninsula on wrongful dismissal
As an employer, you have a responsibility to ensure you act legally when terminating someone's employment.
It's against the law to end employment without following the legal procedure - failure to do so will lead to an employment tribunal claim being made against you.
Make sure you fully understand the rules and regulations surrounding all types of dismissal, and how much money you may need to pay in damages if you get it wrong.