Aug 24
It is always disappointing when an employee does not perform as anticipated or the relationship has turned sour and you wish to part ways. It is important to take legal advice on any move towards dismissal as employees enjoy various legal protections depending on their length of service and a number of other factors.
It is easy to get it wrong, and some employers may have a false sense of security in believing that they can dismiss an employee who has not been with them long, without worrying about the risk of an employment tribunal claim. However, employees can be protected from dismissal from their first day, and there are other traps for the unwary, such as releasing the employee from restriction covenants if the employer breaches the employment contract, which would include dismissing an employee without the right notice.
Liz Pollock, a Senior Associate in the employment team with Raworths based in Harrogate looks at the different types of employee dismissal, the potential claims, the service requirements, and the risks to employers. She offers tips to avoid those risks, and also touches on constructive unfair dismissal.
Wrongful dismissal occurs when an employee is dismissed by the employer in breach of their contract of employment. This includes failing to give the employee the notice to which they are entitled under their contract of employment. It may be possible to dismiss an employee for gross misconduct without giving notice. This is called a ‘summary dismissal’ and we recommend speaking to us first to make sure that you are on safe ground.
Wrongful dismissal can result in the employee bringing a claim, either in the employment tribunal or the county court, for the shortfall in notice pay and loss of benefits they would have received during the notice period. An employee’s contract may contain restrictive covenants that restrict their actions after their employment ended, for example preventing them from poaching your staff. If they are wrongfully dismissed, they will be released from these restrictions.
Making a payment in lieu of notice without the contractual right to do so could also release the employee from restrictive covenants. If you want to end the employee’s employment quickly and ensure restrictive covenants are still binding, we can review the contract and advise on other options that could achieve this.
Carefully check the most up-to-date version of the employee’s contract to ensure that you give the right notice and that the notice is at least as long as the statutory minimum. If there is nothing agreed in writing, please speak to us as the common provides that ‘reasonable’ notice should be given, and this may be longer than the statutory minimum, particularly for senior staff.
This is distinct from wrongful dismissal. If an employee has two years’ service, they have the right to bring a standard unfair dismissal claim. A tribunal may treat a dismissal as unfair unless it is reasonable, a fair process was followed, and it is based on one of the five statutory fair reasons:
If an employee brings a claim for unfair dismissal which is successful at the tribunal, they are entitled to a basic award based on their age, service, and earnings, as well as compensation for loss of earnings up to a statutory cap. Compensation can be increased by up to 25% for failure to follow the Acas Code of Practice on disciplinary and grievance procedures.
Employers should ensure that one of the statutory reasons for dismissal actually applies and then follow the correct procedure applicable to that reason. Having up-to-date and well-drafted policies will put you in a good position.
For employees who have been with your business for less than two years, a word of caution before assuming that you can dismiss without a fair reason or process. Employees may actually have longer service, for example, if they transferred to your business or they had breaks from work that could be deemed to count towards their continuous service. Do not be tempted to give less than the statutory minimum notice to squeeze in a dismissal date before they reach two years’ service, as this will not work.
Even if a fair reason applies, be alert to any factors that could make the dismissal discriminatory or for a reason that gives the employee protection, regardless of service. For example, where the dismissal decision is influenced by unconscious bias against an employee with a protected characteristic such as race, or where the employee argues that they are being selected for redundancy because they raised concerns about health and safety.
There are many exceptions to the two-year service requirement to bring a claim for unfair dismissal, where the employee is protected from dismissal from their first day. Examples include dismissals related to:
In addition to not needing a minimum period of service for some of these reasons, like whistleblowing or discrimination, there is no statutory cap on the compensation that the employee can recover, unlike a standard unfair dismissal. Before dismissing, it is worth taking a step back, particularly if the employee raises concerns, to check that there are no factors that may inappropriately influence the dismissal decision.
Constructive dismissal is not a consequence of the employer actually dismissing the employee; instead the employer’s treatment of the employee is such that the employee is entitled to resign and consider themselves to be dismissed.
Examples of conduct that is sufficiently serious for this include:
For purposes of bringing claims, the law treats a constructive dismissal the same as an active dismissal by the employer.
Raworths’ employment team can provide you with clear, practical procedures that support managers in dismissing staff and encourage consistent treatment across the business. We can advise on all stages of the process and give pragmatic advice on mitigating risks.
For further information, please contact Liz Pollock in the employment team at Raworths on 01423 566666 or email liz.pollock@raworths.co.uk
Raworths is based in Harrogate, North Yorkshire.
Published on 9 August 2024
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Nov 24
On 10 October 2024, the government introduced the Employment Rights Bill into Parliament. The Bill sets out the biggest change to employment rights in decades. Whilst the majority of the...
Nov 24
If you are a minority shareholder and you suspect that either a director or a majority shareholder is misusing company assets, there are legal remedies that can help you to...
