What is unfair dismissal?
Unfair dismissal is when an employer terminates an employee's employment contract without a fair reason or following a fair procedure.
A dismissal can be legally challenged on two main grounds:
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the reason for dismissal wasn't fair - the employer must be able to prove that the dismissal was for one of the five potentially fair reasons recognised by law
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a fair procedure wasn't followed - even with a valid reason, an employer must follow a fair and reasonable process before making the decision to dismiss. This involves investigations, meetings, and allowing the employee to state their case
It’s important not to confuse unfair dismissal with wrongful dismissal. Wrongful dismissal concerns a breach of contract (like not giving proper notice), whereas unfair dismissal is a statutory claim about the fundamental fairness of the dismissal.
Who can claim unfair dismissal?
Under the Employment Rights Act 1996, not everyone who works for a business is protected from unfair dismissal. To be eligible to make a claim, a person must generally be an employee, as opposed to a worker or a self-employed contractor.
In addition, the employee usually needs to have worked for the employer continuously for at least two years. If an employee started their job before 6 April 2012, only one year of continuous service is needed.
However, this two-year service requirement doesn't apply in certain high-risk situations. Many of these reasons are the same as those that make a dismissal automatically unfair.
What is automatic unfair dismissal?
Certain reasons for dismissal are automatically unfair. This means an employee can make a claim regardless of how long they've worked for an employer (ie the two-year rule doesn't apply).
Dismissing an employee for any of the following reasons will be automatically unfair:
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anything related to pregnancy, maternity, paternity, parental, or adoption leave
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requesting and asserting their legal rights (eg asking for minimum wage or flexible working)
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acting as an employee representative or trade union member
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raising a health and safety issue
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taking part in official (‘lawful’) industrial action
These situations carry a high risk. If an Employment Tribunal finds a dismissal to be automatically unfair, the employer will not be able to defend the claim, and the employee will automatically succeed. Ask a lawyer if you are worried that a dismissal may fall into one of these categories.
If the reason for dismissing an employee was one or more of these reasons, then (subject to occasional exceptions and additional criteria) the dismissal will be considered automatically unfair.
What happens when dismissal is automatically unfair?
If an Employment Tribunal finds a dismissal to be automatically unfair, the employer will not be able to defend the claim, and the employee automatically succeeds in arguing that their dismissal was unfair.
What if dismissal isn’t automatically unfair?
If a dismissal isn’t based on one of the reasons that would make it automatically unfair, and the employer gives a reason why they believe the dismissal was fair, the courts will take into account relevant circumstances and decide whether the dismissal can reasonably be considered fair or not.
Carrying out a fair dismissal
An employer must have a valid reason and follow a fair procedure to dismiss an employee. Failing to do either can result in unfair dismissal.
Consider an informal chat first
For minor issues related to conduct or performance, an informal chat can often resolve the problem without starting a formal disciplinary process. This can help maintain a positive working relationship. Make a note of the conversation and what was agreed, and set a date to review progress.
Comply with the employment contract and HR policies
Even if you have a fair reason for dismissal, you must still comply with the employee's contract and all applicable HR policies. This means providing the correct notice period or making a payment in lieu of notice (PILON) if their contract allows for it. Failing to do so could lead to a separate claim for wrongful dismissal in addition to any unfair dismissal claim.
Establish a fair reason and follow a fair procedure
A dismissal will normally only be considered fair if it's for one of five reasons:
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the employee’s misconduct
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the employee’s lack of capability or qualifications
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a genuine redundancy
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a statutory restriction (eg if an employee’s role requires them to drive but they’ve had their driving licence revoked)
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some other substantial reason (SOSR), like the employee unreasonably refuses to accept changes to their terms of employment
If the reason for dismissal doesn’t fall under one of the above categories, the dismissal could potentially be considered unfair.
The procedure followed must also be fair and reasonable. It generally involves investigating the issue, holding a formal meeting, and offering a right of appeal. Note that only gross misconduct (conduct so serious that it destroys the employment relationship) is a fair reason to dismiss an employee who is protected from unfair dismissal without notice.
For a detailed breakdown of the five fair reasons and the correct dismissal process, read Dismissal.
What are the consequences of unfair dismissal?
If an Employment Tribunal finds that a dismissal was unfair, it can order a remedy. This can have significant financial and operational consequences for an employer. The main remedies are:
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re-instatement- the employee gets their old job back as if they were never dismissed, including back pay and benefits. This is rare
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re-engagement - the employee is given a different, but comparable, job within the business. This is also uncommon
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compensation - this is the most common outcome. An award for unfair dismissal is made up of a basic award (a fixed sum based on age, service, and pay, similar to a redundancy payment) and a compensatory award to cover the financial losses the employee suffered. The compensatory award is capped at the lower of 52 weeks' pay or a statutory maximum, which changes each year
Tribunals can also adjust awards, for example, by increasing them by up to 25% if the employer failed to follow the Acas Code of Practice on disciplinary and grievance procedures, or reducing them if the employee's conduct contributed to the dismissal.
Key considerations for employers
To minimise the risk of an unfair dismissal claim, employers should focus on fairness and consistency.
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have clear policies - implement clear, written policies for discipline and dismissal, and ensure all managers and staff are aware of them. A comprehensive Employee handbook is vital
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document everything - keep detailed written records of all incidents, investigations, meetings, warnings, and decisions. This documentation is crucial evidence if a claim is made
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act consistently - apply rules and procedures consistently to all employees to avoid accusations of favouritism or discrimination
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consider alternatives - before moving to dismissal, always consider if an alternative, such as a formal warning or additional training, would be more appropriate
What happens if an employee makes an unfair dismissal claim?
An employee who believes they have been unfairly dismissed can make a legal claim for unfair dismissal against their employer. They usually need to bring their complaint to an Employment Tribunal within three months of the date of termination of their employment (ie the date they were dismissed).
As a first step, the employee must contact Acas to start early conciliation. The employer will be contacted by an Acas conciliator who will try to help both parties resolve the dispute without it going to an Employment Tribunal.
If conciliation fails, the employee may proceed to make a formal claim to the Employment Tribunal. The employer will receive a copy of the claim form (known as an 'ET1') and will have 28 days to submit a formal response (on an 'ET3' form).
It’s vital that the employer takes the claim seriously from the outset. They should:
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gather all relevant documentation, including the employee's contract, disciplinary records, and meeting notes
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stick to the strict deadlines for responding
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consider whether a Settlement agreement could be an option to resolve the claim early
To ensure the correct procedures are followed, employers can make key documents like a Disciplinary procedure or relevant Dismissal letters. If you have any questions about a potential or active claim, do not hesitate to Ask a lawyer.
