Maybe it’s the media. Maybe it’s people’s approach to the ever-burgeoning legislation in this area, but the undisputed perception among employers just now is that employment legislation is very much one-way traffic: all in favour of the employee and very much against the employer.
To be fair, the Government has demonstrated that – at the very least – it recognises there’s an issue with the amount of legislation aimed at dealing with employment rights and the problems facing employers.
By way of help, the coalition has introduced a ‘one in, one out’ policy such that any new employment legislation has to be met with the removal of another one of materially similar importance.
On top of that, it should be heartening to know that, despite the understandably often negative perceptions of employment legislation, there are many things employers can do to address disputes – and dismiss staff – without falling foul of the law.
In many cases the reason for a tribunal finding a dismissal to be unfair is that the employer hasn’t followed some relatively straightforward procedures which would have assisted greatly in defending any claim.
Of course there are situations where employers are rightly frustrated by unnecessary red tape in dealing with employee issues. However, in many cases, when ‘done properly’ it’s possible to deal with these situations with reasonable speed and to defend any claim successfully.
Unfair dismissal: the main points to note
Generally, all employees with a year or more of continuous service are protected against unfair dismissal.
The right not to be dismissed unfairly has two fronts. First, the employer must have a potentially fair reason for the dismissal. Second, the employer must have acted reasonably in applying that reason to justify the dismissal. In short, it must have gone through a fair process.
Some dismissals are ‘automatically unfair’. Just a few examples from the long list of automatically unfair dismissals include dismissal relating to an employee’s gender or age, dismissal on the grounds of pregnancy or maternity rights, dismissal relating to working time (eg paid leave and rest breaks) or dismissal relating to Trade Union membership.
If an employee is dismissed for one these reasons then they will be entitled to make a claim for unfair dismissal irrespective of whether or not they have worked for the employer for a year or more.
The burden of proving that the dismissal was for a fair reason will also switch to the employer, in turn making it more difficult to defend any claim.
Reason for dismissal must be ‘fair’
There are six potentially fair reasons for dismissing an employee. The word ‘potentially’ is important here because while such a reason is justifiable, it does not automatically follow that if you dismiss for one of these reasons it will be fair.
As an employer you must also follow a fair process.
This covers two issues: an employee’s qualifications and competences or his/her capability based on health.
In instances of poor health, employers should always look at alternatives before dismissing the employee and consider whether the employment itself is causing the illness (and whether or not it should be changed).
A reasonable amount of time should also be permitted to allow an employee space to recover.
Employers should always be mindful of employees with a disability (which may include a long term illness), and their obligation to try and find a way around the problem by making ‘reasonable adjustments’ to the employee’s working environment.
This may stem from either a single act of ‘serious misconduct’ or a series of acts that are less serious.
The conduct of the employee in either instance will usually amount to the employee breaking one or more of the Terms and Conditions of their employment. Examples may include theft or dishonesty, being drunk at work or disclosing confidential information.
It’s a good idea to have non-exhaustive examples of unacceptable misconduct as part of the employee’s contract and/or Employee Handbook so that employees are clear about the consequences of their conduct.
There’s a fairly technical definition of what constitutes a redundancy situation. It’s perhaps best summed up as a situation where an employer is either closing the business altogether, is closing one location within the business or where it needs fewer employees to carry out a particular kind of work at one or more of its locations.
Inability to comply with a legal requirement
A dismissal will be potentially fair if an employee’s continued employment would break the law.
Examples would include a foreign worker whose permit has expired, or a lorry driver losing their licence.
For retirement to be a fair reason for dismissal, a prescribed retirement procedure must be followed.
The employee must have at least six months notice of retirement, and if the employee wants to continue working past the stipulated retirement date the employer must consider their application.
If an employee’s employment has ended or will end before the retirement age set out in their employment contract, the dismissal cannot be classed as retirement.
There have been significant changes in the law in respect of retirement over the last few years, and this is set to change again later this year.
This reason always causes amusement for those who have not come across it before.
It could be described as a ‘sweeping up’ provision in the legislation. It effectively catches all other potentially fair dismissals that are not already caught by the other categories. The emphasis is on ‘substantial’.
Examples may include a situation where a business is being reorganised and an employee’s role is no longer required, albeit that there is no reduction in overall numbers of employees.
As a result, the dismissal may not meet the technical definition of redundancy but may fall under the ‘Some other substantial reason’ heading.
There are more interesting examples which have been tested at tribunals, such as the retailer who employed two people at a store. When said retailer discovered that money was being stolen from the store safe and that one of the employees had to be guilty, both members of staff were dismissed despite the fact that one employee was entirely innocent.
In that case, the employer decided it had no choice but to dismiss both employees as it was unaware of which employee was a thief.
In practice, it could not put one of the employees back in to the store knowing they may be dishonest.
The employer put that forward as ‘Some other substantial reason’. This was held to be a fair dismissal despite one innocent employee being sacked.
The law, then, is not always against the employer.
Fair dismissal procedures must be followed
In order to act reasonably, an employer must follow a fair procedure when dismissing an employee.
The procedure that should be adopted for dismissals based on ‘disciplinary situations’ (including misconduct and poor performance) is outlined in the ACAS Code.
Employers should always have recourse to their own procedures which may be contractual. Those procedures should always meet the minimum requirements of the aforementioned ACAS Code.
Before dismissing an employee for misconduct or poor performance an employer is required to:
The employee should also be given the right to appeal.
For a disciplinary hearing, the ACAS Code recommends that employers should, at the start of the meeting, explain the complaint against the employee and go through the evidence that has been gathered.
Employees should also be afforded a reasonable opportunity to ask questions, present evidence and call relevant witnesses.
In general, the more serious the nature of the misconduct or allegation against the employee, the more thorough the investigation against them should be.
The ACAS Code explicitly includes misconduct and poor performance dismissals only. This suggests that it does not need to be followed for dismissals for other reasons such as dismissal on ill health grounds or some other substantial reason.
However, it would be good practice (and is highly recommended) that employers follow a similar process in all cases to ensure that a reasonable procedure is followed.
In redundancy situations there are specific procedural fairness guidelines which have been established by case law, will still apply and must be met by the employer.
These revolve around reasonable consultation and on fair application of criteria where more than one employee is involved and a selection has to be made between employees.
There are also separate and more detailed rules relating to collective redundancies where 20 or more employees are affected.
Penalties for ‘getting it wrong’
If a tribunal finds that an employee has been unfairly dismissed, it can order that the employee is re-employed by the employer in the same or another suitable role, or it can award compensation to the employee.
Orders that an employee is re-employed are rare but, where they are made, if the employer refuses to comply then enhanced damages can be awarded to the employee.
In cases involving misconduct and poor performance, an unreasonable failure to follow the procedural requirements under the ACAS Code will give the tribunal scope to increase any compensation awards made by up to 25%.
The award of compensation has two elements: a basic award based on length of service and age and a compensatory award based on loss of earnings. The cap for each is GB pound 11,200 and GB pound 65,300 respectively, so damages of up to GB pound 76,500 in total can be awarded. That’s not to be sniffed at.
It’s also important to note that this is the general position under unfair dismissal legislation. However, there are special cases where the cap does not apply (for example in discrimination claims where the level of damages is uncapped and awards of several hundred thousand pounds can be, and are often made).
There are also specific rules where an employer is making collective redundancies involving more than 20 employees. Further awards of damages can be made for failing to follow those rules.
It’s not all bad news, then…
While the penalties can be high for ‘getting it wrong’, it’s not all bad news. With some due care and attention, many employee scenarios may be managed with little risk if the employer is willing to go through the correct procedures.
It’s imperative for the employer to have a genuine reason to dismiss, and that must be one of the fair reasons mentioned above.
Any failure to follow procedures alone is the reason why many unfair dismissal claims succeed. Take that as a pleasant warning.
Mike Cummins is a partner in the employment department of Freeth Cartwright LLP
