CIPD - Dismissal

Employment law

November 2007

This factsheet gives introductory guidance. It:

explains the key concepts behind wrongful, unfair and constructive dismissal
explores automatically unfair reasons for dismissal and the qualifying conditions for bringing an unfair dismissal claim
gives an overview of permissible reasons for fair dismissal and how fairness is judged
shows the different rules that apply to retirement dismissals.

Dismissal is a serious matter that needs careful handling. According to Acas¹, among the commonest reasons for dismissal are misconduct, inability to do the job and redundancy.

Dismissal of an employee occurs when:

the employer terminates the contract, either with or without giving notice
a fixed term contract ends and is not renewed
the employee leaves, with or without giving notice, in circumstances in which they are entitled to do so because of the employer’s conduct.

A dismissal will normally be ‘fair’ provided the employer has a good reason for the dismissal and has acted ‘reasonably’ in carrying it out. When somebody is dismissed, they often say they will claim 'unfair' or 'wrongful' dismissal. The terms are often used interchangeably, particularly in media reports, but in fact they arise from very different concepts.

Wrongful dismissal

Wrongful dismissal is a long-standing concept based on common law principles of contract law. All employment relationships are governed by the law of contract, although the freedom of parties to negotiate terms is now constrained by laws covering things such as the National Minimum Wage, working time, etc.

A wrongful dismissal claim is basically a claim for breach of contract. All employment contracts can be ended by either the employer or the employee giving notice. The period of notice is a matter for agreement between the parties, but is subject to minimum periods prescribed by law. These are:

After one month’s employment, an employee must give at least one week’s notice.
An employer must give one week’s notice to an employee who has been employed between one month and two years.
After two years’ service, an employer must give one week’s notice for each complete year of service of the employee, up to a maximum of 12 weeks’ notice after 12 years’ service.

The period of notice that the employer must give will always be the greater of that prescribed by law or stated in the employee’s contract of employment. Wrongful dismissal claims will generally be for the payment due for the notice period.

Wrongful dismissal claims are most likely to be brought by employees at either the bottom or the top end of the employment spectrum. For example, a claim might be brought by an employee who lacks the relevant length of service to bring an unfair dismissal claim, or by a highly-paid employee with a long notice period (for example, a director with a six month 'rolling contract') for whom the value of such a claim might be far in excess of the maximum claim that could be made under unfair dismissal law.

CIPD members can find out more about Wrongful dismissal in our Employment Law at Work FAQs.

Go to our Wrongful dismissal FAQs

Unfair dismissal

Over a relatively recent period, successive governments have given employees additional protection to that given by the law of contract. One of the earliest protections, dating from 1971, is the right of an employee not to be unfairly dismissed - it introduces a concept of 'fairness' into most dismissals. Understanding this important concept is key to understanding the difference between unfair dismissal and wrongful dismissal.

The law on unfair dismissal is principally contained in:

The Employment Rights Act 1996 (as amended).

Recent important amendments to the Employment Rights Act have been made as follows:

The Employment Act 2002 (introduced statutory disciplinary and dismissal procedures)
The Employment Equality (Age) Regulations 2006 (introduced procedures relating to employee retirement).

The basis of unfair dismissal law is that employees have the right not to be unfairly dismissed. All that the employee needs to prove at an employment tribunal is that they have been dismissed: the employer must then prove that the dismissal was fair.

The key points are:

Does the employee qualify to bring a claim?
Is the dismissal automatically unfair?
Was the dismissal for one of six 'potentially fair' reasons for dismissal?
Did the employer act fairly and reasonably in treating that reason as sufficient reason to dismiss the employee?
Did the employer follow the statutory disciplinary and dismissal procedure when dismissing the employee?

Does the employee qualify to bring an unfair dismissal claim?

To balance the interests of employers and employees, there is a short period at the start of employment when employees do not enjoy protection from unfair dismissal: this is known as the 'qualifying period' and it is currently one year.

However, as other legislation has progressively been introduced, employees who are dismissed for bringing particular claims are protected from unfair dismissal regardless of their length of service. The main exceptions to the requirement for one year’s service in order to bring a claim relate to dismissals for:

trade union membership or activities
pregnancy or childbirth
taking maternity, adoption, paternity or parental leave
asserting a statutory right
claiming the National Minimum Wage
asserting rights under the Working Time Regulations.

These are also automatically unfair reasons for dismissal.

Is the dismissal automatically unfair?

The next step is to check whether the employee’s dismissal was automatically unfair under the law. Examples of automatically unfair reasons for dismissal include those listed above. Two further reasons are automatically unfair reasons for dismissal, but are subject to a qualifying period of one year’s service:

Dismissal for a transfer-related reason under the Transfer of Undertakings (Protection of Employment) Regulations 2006
Dismissal for exercising the right to request flexible working.

The six potentially fair reasons for dismissal

The Employment Rights Act originally identified five potentially fair reasons for dismissal. An employer must firstly prove the dismissal falls into one of these reasons. In practice, the five reasons cover most possibilities. They are:

capability or qualifications
conduct
redundancy
illegality or contravention of a statutory duty
some other substantial reason.

A sixth potentially fair reason for dismissal was added by the Employment Equality (Age) Regulations 2006:

retirement – though this differs from the other potentially fair reasons for dismissal, regarding both the procedure and how 'fairness' is decided, and should be treated separately from the other five reasons.

'Fairness'

After showing that the dismissal was for one of the five potentially fair reasons outlined above, an employer must show that they acted fairly and reasonably in taking that reason as sufficient for dismissing the employee. This is more complex than it sounds, although it should always be borne in mind that an employment tribunal still has wide discretion on what it considers 'fair'.

Acas, the independent conciliation service, produces guidance in their Code of Practice² on dealing with disciplinary and dismissal matters. Although employment tribunals only need to have regard to the Acas Code, and it does not have the force of law, in practice, employers should follow the Code or they will have difficulty convincing a tribunal that they acted fairly.

In addition, an employer must follow any contractual or customary disciplinary process or procedure for a dismissal to be 'fair'.

Capability or qualifications dismissals

This category covers both the employee’s performance in the job or their physical or medical capability. In each case, for a dismissal on these grounds to be fair, some form of performance management procedure (in the case of poor performance) or medical examination and investigation (in the case of physical or medical capability) would need to be followed prior to a decision to dismiss being taken.

Conduct dismissals

A fair procedure for dismissal for misconduct would usually include a process involving a series of warnings (verbal, written, final written) prior to dismissal being considered.

A dismissal without previous warnings would be justified if the employee’s conduct amounted to gross misconduct. Ideally, matters constituting gross misconduct should be listed in an employer’s disciplinary rules, but generally matters involving dishonesty, physical violence, unlawful harassment or discrimination would fall into the category 'gross misconduct'.

Where an employee is dismissed for gross misconduct, they will also have breached their contract of employment in a fundamental way, so no notice or pay in lieu of notice would be due.

Redundancy dismissals

Redundancy is a potentially fair reason for dismissal – see our Redundancy factsheet for more information on this topic. CIPD members can see our Redundancy FAQs for more detail.

Dismissals for illegality or contravention of a statutory duty

Clearly, an employer must be allowed to dismiss an employee if it becomes illegal to employ them (for example, expiry of a work permit), or the employee cannot perform their duties without acting illegally (for example, a lorry driver who is banned from driving).

However, the situation must always be looked at in context in order to be fair, and, in the example of the lorry driver, it might not be fair to dismiss if the ban were for a short duration and the driver could be found duties in the warehouse during that period.

Dismissals for 'Some other substantial reason' ('SOSR')

Although this appears potentially a wide category, in practice employment tribunals regard it with suspicion and it should be avoided where possible.

A good example of a 'SOSR' dismissal would be the dismissal of a person recruited specifically to cover for an employee’s absence on maternity leave (although in practice such an employee may have less than one year’s service in any event – see above).

However, for such a dismissal to be fair, the position should have been made clear to the employee at the outset, and the employer should consider redeployment within the business as an alternative to dismissal.

The statutory disciplinary and dismissal procedures

In the process of dismissing an employee, an employer must follow the statutory procedures which were introduced in October 2004. See our factsheet on Discipline and grievances at work for more information on these procedures and their future. CIPD members can see our Discipline and grievance procedures FAQ for more detail.

The important point about the procedures is that if an employer fails to follow them, an employment tribunal will:

declare a dismissal automatically unfair
award the employee compensation (payable by the employer) of four weeks’ wages as a minimum
increase any compensation payable to the employee by between 10% and 50%.

The statutory procedures do not apply to dismissals for illegality or retirement.

Retirement dismissals

The Employment Equality (Age) Regulations 2006 introduced the concept of a 'planned retirement' into unfair dismissal law. Although the words 'planned retirement' do not appear in the final version of the legislation, it is a helpful concept in understanding how a dismissal for retirement can be considered 'fair'.

The Government has taken advantage of European law allowing for age-related retirement to take place without falling foul of age discrimination law. For more information, see our Age and employment factsheet. CIPD members can see more detail in our Age discrimination and retirement FAQ.

The law allows for an employee to be dismissed fairly by reason of retirement if:

the retirement takes place no earlier than the employee’s 65th birthday
the employer gives the employee written notice of retirement between 12 months and 6 months prior to the date it wishes the employee to retire
the employer tells the employee of their right to request not to retire
the employer considers any request made by the employee not to retire according to a prescribed procedure, including holding a meeting and giving the right of appeal.

The key point is that provided an employer follows the prescribed procedure and does not terminate the employment prior to the planned retirement date, an employee will not be able to claim unfair dismissal at all. Retirement will be taken to be the reason for the dismissal, and any concept of fairness (other than following the prescribed procedure) does not apply.

The flip side of the coin is that, if an employer fails to follow any part of the procedure, the dismissal will not be able to be classed as a retirement dismissal, and will in practice be automatically unfair. This is because the employer will not have evidence to show the dismissal fell within any other category of potentially fair dismissal, and will not have followed either the Acas Code or the statutory disciplinary and dismissal procedures.

Constructive dismissal

A 'constructive dismissal' occurs when an employee leaves a job of their own accord, but subsequently alleges that the employer’s behaviour forced them out.

Constructive dismissal would need to be brought as an unfair or wrongful dismissal claim. The employee needs to prove that the employer’s behaviour entitled them to end the contract of employment without notice.

Once an employee proves this, the employer will be guilty of wrongful dismissal. Compensation would usually be payment for the correct period of notice due. It will also in practice be very difficult for an employer to show that the 'forced' dismissal was fair, and so the employer would be guilty of unfair dismissal as well.

However, the statutory dispute resolution procedures now require an employee to raise a grievance either prior to leaving or at least prior to bringing a claim in the tribunal, and this should virtually eliminate 'constructive dismissal' claims coming without any warning from former employees.

Useful contacts

Acas

Business Link

Department for Business, Enterprise and Regulatory
Reform (BERR)

References

ACAS. (2006) Employing people: a handbook for small firms [online]. Available at: http://www.acas.org.uk/index.aspx?articleid=933
ACAS. (2004) Disciplinary and grievance procedures. Code of Practice 1. London: Acas. Available at: http://www.acas.org.uk/
index.aspx?articleid=516&detailid=539

Dismissal