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Unfair dismissal

Unfair dismissal is a complex area of employment law, but one every employer should understand. If you fail to follow the rules set out when dismissing an employee, you risk being taken to an Employment Tribunal and having to pay compensation.
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An employee is protected from unfair dismissal after two years of continuous service. If the employee started their job prior to 6 April 2012 then only one years’ of continuous service is needed.

An employee who believes they have been unfairly dismissed will need to bring their complaint to the Employment Tribunal within 3 months minus one day from the date of termination of their employment (ie the date they were dismissed). 

Note that in certain circumstances, a dismissal will automatically be considered unfair.

Usually, a dismissal occurs when an employer terminates the employee's contract of employment. A dismissal will normally be considered fair if the employer can show that it is related to:

  • an employee’s misconduct (eg theft, poor attendance or violence)
  • the employee’s lack of capability (ie poor performance) or qualification
  • a genuine redundancy
  • a statutory requirement (eg an employee needed to drive but has had their driving licence revoked)
  • some other substantial reason (eg 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. There are some situations where dismissing an employee is automatically unfair.

Automatic unfair dismissal is a term used to describe certain situations where an employee was dismissed for a specific reason which is protected by legislation. Some examples of automatically unfair dismissals are dismissals relating to:

If the reason for dismissing an employee was for one or more of these (non-exhaustive) reasons, then the dismissal will be considered automatically unfair. The difference between unfair dismissal and an automatic unfair dismissal is that the latter is available to all employees regardless of length of service. If you’re unsure about the above grounds, Ask a lawyer.

The consequences of an automatic unfair dismissal

If an Employment Tribunal finds a dismissal to be automatically unfair then the employer will not be able to defend the claim and the employee automatically succeeds in their unfair dismissal claim. The employer may also have to reinstate the employee (ie give them their job back) or re-engage the employee (ie re-employ them in a different job) and pay compensation.

Only gross misconduct is a fair reason to dismiss an employee who is protected from unfair dismissal without notice. For less serious misconduct, you need to give at least two formal warnings.

To follow a fair process, which is more likely to be accepted by Employment Tribunals, use the ACAS Code of Practice on Disciplinary and Grievance Procedures. Even if the employer can justify a fair reason to dismiss an employee, the dismissal may still be considered unfair if the correct and fair procedure hasn't been followed. If the employment tribunal finds that you have unreasonably failed to comply with the ACAS code, the amount of compensation awarded to a successful claimant against you can be increased by 25%. Always be aware of the procedure you have to follow when you discipline an employee even if it doesn't involve dismissal, as you may need to rely on this to justify a later dismissal.

When you take disciplinary action against an employee, check their Employment contract and your HR policies and procedures. You have to comply with these.

Remember to follow any data protection policies and notices you have. You should tell employees the types of data you might collect about them and what you do with it in a Data protection and data security policy (which sets out the policies and procedures you comply with when dealing with personal information and personal data) and/or Employee privacy notice (which describes how you collect, use, retain and disclose personal information). For further information, read Data protection and employees.

A contract is a two-way thing. An employee has to respect all its terms, but it's also supposed to stop an employer from destroying or seriously damaging the relationship of trust and confidence with an employee. When the duty of trust and confidence is broken, an employee can resign. If that happens, they can claim constructive dismissal.

Before taking any action, think about having a quick private chat, to explain what the problem is and what formal action you’ll take if the employee doesn’t respond in the right way.

An informal chat may be suitable if the misconduct isn't serious or deliberate.

In some cases, it may be appropriate to explore the possibility of departure on agreed terms with an employee under legal rules allowing 'protected conversations'.

However, never tell an employee that you are going to dismiss them if they don't improve or agree to leave unless you have first followed a formal process, as this may be constructive dismissal which can lead to unfair or wrongful dismissal claims.

After the conversation, always put a note on the employee’s HR file or send them an email confirming your chat.

If the misconduct happens again, you can still take formal action later, but you can’t normally reopen an incident you’ve already dealt with informally.

If an Employment Tribunal says you’ve unfairly dismissed someone, that person can claim compensation against you.

The maximum amount they can claim for unfair dismissal changes every year.

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