Unfair Dismissal

Unfair Dismissal

Section 94(1) ERA gives qualifying employees the right not to be unfairly dismissed: “An employee has the right not to be unfairly dismissed by his employer.” To be successful in establishing unfair dismissal the following criteria must be met:

1. There must have been a dismissal; and

2. The employee must qualify for the right to claim; and

3. The employer must not have a fair reason for the dismissal; and /or

4. The dismissal must not be fair in all the circumstances.

Dismissal

In order to succeed in an unfair dismissal claim, there must have been a statutory dismissal.  Section 95(1) ERA sets out the three types of statutory dismissal:

“(a) the contract under which he is employed is terminated (whether with or without notice);

(b) he is employed under a limited-term contract and that contract terminates by virtue of the limiting event without being renewed under the same contract; or

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct.”

Qualifying employee

Once a dismissal has been established, the individual must show the following in order to be eligible to claim for unfair dismissal:

• that he/she is an employee;

• that he/she has the requisite continuous employment;

• that he/she is not in an excluded category; and

• that he/she brings the claim within three months of the effective date of termination (the ‘EDT’), subject to the ACAS early conciliation procedure.

Requisite continuous employment

Section 108(1) ERA states that an employee must have at least two years’ continuous employment ending with the EDT (where the employment started on or after 6 April 2012). 

Provided the employee remains with the same employer, it does not matter that the employee has changed jobs; moved to a different branch or been absent on authorised leave, for example annual leave or maternity leave; continuity is preserved.  Continuity is also preserved in the event of a transfer of undertakings covered by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’). 

There are special rules for certain types of breaks, for example strikes and employment abroad. If the employee has been dismissed for one of the automatically unfair reasons, he/she does not need to show any period of continuous service (with two exceptions, namely a dismissal on the transfer of an undertaking under TUPE where that dismissal is not for an economic, technical or organisational reason entailing a change in the workforce; and a dismissal for a spent conviction or failure to disclose one).

Three month time limit

The employee must bring the claim to the tribunal within three months from the effective date of termination (the ‘EDT’).  Section 97 ERA provides that the EDT is the date on which:

• the employee’s notice of dismissal expires if he/she is dismissed with notice;

• the dismissal takes effect if he/she is dismissed without notice; or

• a fixed term contract expires without being renewed.

Time period for bringing a claim

Claims must be presented to the Tribunal within three months of the EDT. This three month time limit may be extended if the Tribunal exercises its general discretion to extend time because it is satisfied that it was not reasonably practicable to present the claim within three months (s.111(2) ERA 1996).

Potentially fair reasons (the first limb)

Provided the employee has established eligibility and a dismissal, it is then for the employer to show:

1. what the reason for the dismissal was; and

2. that this reason was an acceptable or potentially fair reason for the dismissal as defined by s.98(1) ERA 1996.

Section 98 ERA 1996 provides five potentially fair reasons, which are as follows:

1. Capability.

2. Conduct.

3. Redundancy.

4. Contravention of an enactment.

5. Some other substantial reason (“SOSR”) of a kind such as to justify the dismissal of an employee holding a position which that employee held.

If the employer cannot show that the reason for dismissal was one of the five potentially fair reasons, the dismissal will be unfair. 

Fairness in all the circumstances (the second limb)

Even where the employer has established that the reason for the dismissal is potentially fair, the tribunal must then decide if the employer acted fairly in all the circumstances. Section 98(4) ERA states that “the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer):

“(a) depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

 (b) shall be determined in accordance with equity and the substantial merits of the case.”

 The question of fairness is usually divided into the following two parts:

1. Did the employer act reasonably in treating the reason as a sufficient reason for dismissal? (Substantive fairness).

2. Did the employer follow a fair procedure? (Procedural fairness).

Substantive fairness

The test as to whether the employer acted reasonably in s.98(4) ERA is objective. The tribunal has to decide whether the employer's decision to dismiss the employee fell within the band of reasonable responses that a reasonable employer in those circumstances and in that business might have adopted (Iceland Frozen Foods Ltd v Jones [1982] IRLR 439).

For the purposes of this test, it is irrelevant whether or not the tribunal would have dismissed the employee if it had been in the employer's shoes – it must not substitute its own view for that of the employer. In Foley v Post Office; Midland Bank plc v Madden [2000] IRLR 82 the  this case the Court of Appeal re-established that the test should be to ask whether the decision to dismiss was within the range of reasonable responses (RORR) open to the employer. The RORR test is therefore subjective.

The test applies both to the decision to dismiss and to the investigation and procedure which led to that decision.  This means that the issue for the tribunal is not whether it would have investigated things differently or carried out a more extensive procedure, but whether the investigation and procedure was within the range of investigations and procedure that a reasonable employer would have carried out.

The tribunal may only take into account facts known to the employer at the time of the dismissal.  These are the facts known to the decision-maker at the time of reaching the decision to dismiss.  It is important that the tribunal does not focus on the employee's guilt or innocence, but instead should confine itself to reviewing the reasonableness of the employer's actions in the circumstances.

The tribunal will also take into account any other relevant factors, including:

• Consistency of treatment

• Size and administrative resources of employer

• Employee’s circumstances

Procedural fairness

The dismissal may be found to have been unfair where the employer has failed to follow a fair procedure. The landmark case of Polkey v AE Dayton Services Ltd [1987] IRLR 503 established the following principles:

• Where a dismissal is procedurally unfair, the employer cannot invoke a "no difference rule" to establish that the dismissal should be regarded as fair, because following procedure would have made no difference to the outcome. This means that procedurally unfair dismissals will be unfair, even for a serious reason which appears to be gross misconduct.

• Having found that the dismissal was unfair on procedural grounds, the tribunal should reduce the amount of compensation if it is satisfied that the employee would have been dismissed anyway, even if proper procedures had been followed (known as a ‘Polkey reduction’).

Although the details of the procedure to be followed will depend on the reason why the employer is considering dismissal, there are some principles of procedural fairness that would apply to most cases. The employee should know that they are at risk of dismissal, and why, and should be allowed to make representations (usually at a meeting or hearing).  Not all procedural failings will render a dismissal unfair – the tribunal will consider the fairness of the process as a whole.

It is important to find out if the employer has its own procedure for the type of dismissal in question – very often it will be contained in the employee handbook. For poor performance and conduct dismissals, the procedure includes following the ACAS Code of Practice on Discipline and Grievance (the ‘ACAS Code’).  Note that the ACAS Code does not apply to redundancies, ill-health dismissals or the expiry of a fixed-term contract.

The role of procedure

When considering whether the decision to dismiss was fair in all the circumstances of the particular case, it is important to consider if the employer followed a fair procedure.

ACAS Code

Although failure to follow the ACAS Code will not in itself render a dismissal unfair, the ACAS Code does set out standards of good industrial practice and the tribunal must take it into account.  The ACAS Code sets out six ‘keys’ to handling disciplinary issues in the workplace, namely:

• Establish the facts of each case

• Inform the employee of the problem

• Hold a meeting with the employee to discuss the problem

• Allow the employee to be accompanied at the meeting

• Decide on appropriate action

• Provide the employee with an opportunity to appeal

The ACAS Code is supplemented by a non-statutory guide, Discipline and grievances at work: The ACAS guide, which gives further guidance on best practice. The tribunal does not have to take this guide into account but it does contain some useful guidance developed from unfair dismissal case law, and therefore employers should always consider it.

As well as affecting the fairness of the dismissal, the ACAS Code can affect the amount of compensation due as the tribunal has the power to increase or decrease a compensatory award by up to 25% for a party's unreasonable failure to comply with the ACAS Code where relevant (poor performance and conduct).