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 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 -i.e. any reason that does not fall within the above reasons- but this does not necessarily mean it is easy for an employer to raise this. Some examples are personality clashes with your employer, where a client expresses a wish that you are not required in managing their account any more, or where you unreasonably refuse to accept changes to terms and conditions. Each case will be determined on its own facts.
Unless an employer can prove one (or more) of the above fair reasons for dismissal, then your termination of employment will be deemed to have been unfair.
Even if an employer does prove that the dismissal comes under one of the above categories, 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 that employer.” In other words, an employer will have the onus of showing that they have acted reasonably in treating that reason as a sufficient reason for dismissing you.
Your employer, for example, may have had grounds for dismissing you because of your performance or conduct, but that does not mean they had to take this step. If a tribunal believes that no reasonable employer would have dismissed an employee 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.
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. You should note, however, that your compensation can be reduced even if you win an unfair dismissal case. For this to apply, your employer must show that had they followed a correct process, the decision to dismiss would still have been the same. This is known as a Polkey reduction of damages.
Another example is where your employer has not carried out a proper investigation following a gross misconduct dismissal. The Tribunal will also take into account whether or not the employer followed the recommended ACAS Code of Practice on disciplinary procedures as failure to do so could also render the dismissal unfair.
What is the qualifying period of employment necessary to make a claim for unfair dismissal?
You are protected from being unfairly dismissed, providing you have been employed with the same employer for at least 23 months and 3 weeks, and not already been served with notice which expires before 2 years employment.
There are some limited exceptions where the qualifying period does not apply, so that you can bring a claim for unfair dismissal without having worked for any minimum time at all. This is known as “automatic unfair dismissal” (see below). There is also no minimum time period required where your claim relates to discrimination.
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 the following exceptional circumstances:-
- 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);
- 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).
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 (up to a maximum of 20 years), your age and a week’s pay (as at the effective date of termination) as follows:
- 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 redundancy payment will usually be your normal weekly gross pay at the time you were dismissed up to the maximum limit which is £479 as from 6th April 2016. A week’s pay does not usually include overtime pay. The maximum basic award payment you can receive is £14,370.
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 often, more larger compensatory award will then be considered.
The Employment Right Act provides that this 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”.
Accordingly, the losses need to have arisen as a consequence of the unfair dismissal, as a result of your employer’s action 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, and will depend on whether you have managed to mitigate your loss and found another job before the hearing date, at what point, 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.
The maximum amount that you can be awarded as compensation for Unfair Dismissal is presently the statutory cap of £78,962, 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 £14,370. These figures are correct as at 2016.
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.
Under the “Norton Tool” principle, where you have been summarily or unfairly dismissed without notice or without payment in lieu of notice, tribunals would not reduce the compensation to reflect any monies received by you from another employer during the notice period. However, this is not the position if your claim is for constructive dismissal, where earnings from alternative employment during the notice period should be taken into account.
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 £78k 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 an employee’s conduct contributed to the situation, or where an employer can show that even if they had followed a correct process, the decision to dismiss would still have been the same (this is known as a Polkey reduction of damages).
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.