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A number of key employment law rights arise when a ‘dismissal’ takes place.
Dismissal is an act of the employer that occasions a termination of the employment relationship.
For a dismissal to be lawful, an employer must have a reason allowed by law, follow the correct procedure and, if necessary, give adequate notice. If this is not done, it is likely to lead to a claim for unfair and/or wrongful dismissal.
A resignation – although an act of the employee, not the employer – can also constitute a ‘constructive dismissal’ where it is in response to a fundamental breach of contract by the employer.
Dismissal can also include the expiry and non-renewal of a fixed-term contract.
Employees have the right to be provided with a written statement setting out the reasons for their dismissal under Section 92(1) of the Employment Rights Act 1996 (ERA), and this document may be used in evidence in any subsequent Tribunal proceedings.
Dismissal by an employer can be with or without notice. The amount of notice required will usually be set out in the employment contract. A contract of employment can be for a fixed term or for an indefinite period. If the contract is for an indefinite period, the contract should also contain provisions relating to the period of notice to be given by the employer or the employee. If the contract of employment is silent about the notice period, ‘reasonable’ notice must be given, the length of which will vary depending on the employee’s circumstances and industry norms.
In any event, the following statutory minimum notice must be given by an employer:
These minima will override any agreement to a shorter notice period. However, the parties may agree to notice periods longer than the statutory minimum.
Generally, once notice has been given it cannot be withdrawn, save by mutual consent.
The employer may make a payment in lieu of notice if it wishes to do so and if the contract provides for it. Payment in lieu of notice clauses (commonly referred to as ‘PILON’ clauses) are attractive for employers as they provide for a swift termination of the employment relationship, given that the employer will often not wish to have the employee serve out a notice period for reasons related to the protection of goodwill. PILON clauses work on the principle that an employee will be content to agree to early termination, provided that the employee receives the remuneration to which the employee would otherwise be entitled.
Failure by an employer to give notice in accordance with the terms of the contract will leave the employer liable to pay damages for wrongful dismissal to the employee in respect of salary and other benefits that would have fallen due in the notice period. If there is a PILON clause in the employee’s contract, there will be no breach of contract if notice money is paid instead of the employee working out his notice.
Serious or gross misconduct can justify summary dismissal of an employee, i.e. immediate dismissal of an employee without notice. What constitutes gross misconduct may vary according to the particular circumstances of the employer and the work the employee is carrying out. Most employers will include examples of unacceptable misconduct in their employment contracts, disciplinary policies or staff handbooks. In doing so they should ensure that they make it clear that any such examples are not exhaustive.
For a dismissal to be lawful an employer must have a reason allowed by law, follow the correct procedure and, if necessary, give adequate notice. If this is not done, it is likely to lead to a claim for unfair or wrongful dismissal.
Employees can only bring a claim for ordinary unfair dismissal if they have the necessary period of continuous employment (at the date the dismissal takes effect). Those employees whose employment commenced before 6 April 2012 must have at least one year's service to bring a claim for ordinary unfair dismissal. For those whose employment commenced on or after that date, the period of continuous service required is two years. A fair dismissal has two elements:
Having determined that a potentially fair reason exists for the dismissal, the employer must be able to show that it has acted reasonably in all the circumstances in dismissing the employee for that reason. Has the employer followed a fair and proper procedure? This involves taking into consideration different factors depending on the reason for the dismissal (see below).
Tribunals will take account of the size and administrative resources of the employer when determining whether the employer acted reasonably. The question of fairness is closely linked to disciplinary procedures and the need to follow a fair procedure in disciplining and dismissing the employee.
What is appropriate in terms of procedure will vary, depending on the reason for the dismissal. The employer must follow a fair and reasonable procedure and the Tribunal will look at whether the decision to dismiss the employee and the procedures followed fell within the band of reasonable responses expected of reasonable employers.
Some key procedural points that workplace managers should follow for the most common dismissals are as follows.
Although a potentially fair reason for dismissal, redundancy can give rise to unfair dismissals where there is a failure to follow a fair procedure. Fair and proper procedures are based on:
For collective redundancies see ‘Redundancy’.
Employees have three months after the date of dismissal in which to bring a claim before an Employment Tribunal.
Alternatively, employers and employees can decide to place the dispute before an ACAS-appointed arbitrator under the ACAS Arbitration Scheme. The scheme is devised to provide a quicker, cheaper and, where possible, more amicable resolution to this type of dispute.
Remedies available to both the Tribunal and an ACAS arbitrator include re-engagement or reinstatement, both of which are imposed only rarely. More usually, compensation is awarded.
This falls under two heads:
Detailed provisions exist for unfair claims that do not require one year’s continuous service and where dismissal for that reason will be automatically unfair.
The most important of these are dismissals for:
Dismissal for the following reasons will be automatically unfair but the employee will still need one year’s service to bring the claim:
A wrongful dismissal occurs where the dismissal is not implemented in accordance with the terms of the contract (typically, a failure to comply with the notice period).
A court will not generally order an employer to reinstate an employee or to take an employee back once wrongfully dismissed. In any event, such a remedy is rarely practicable. However, in rare cases an employee acting swiftly may be able to persuade a court to issue an injunction requiring the employer to perform the contract in accordance with its terms (although the employer may subsequently dismiss the employee lawfully in accordance with the terms of the contract).
A wrongful dismissal is therefore effective, though the employer will be required to compensate the employee for loss caused, applying the principles that govern compensation for breach of contract. These seek to put the employee in the position he or she would have been in had the dismissal not been wrongful. The simple measure of compensation is notice pay plus value of benefits less remuneration earned from alternative employment during what would otherwise have been the notice period.