Unlike wrongful dismissal, which is an old common law concept, unfair dismissal is entirely a statutory creation. A person is unfairly dismissed if, and only if, the situation is precisely covered by the precise words of a statute law. It is therefore technically possible for there to be unfair dismissal when it seems that there has been neither dismissal nor unfairness.
For example, most people would think that the expiry of an agreed fixed term of employment is not dismissal. However, it is exactly that for employment law purposes. Even if the employee specifically agrees from the outset that the fixed term will not be renewed, he or she can still claim unfair dismissal at the end of the term if he or she has been employed for the minimum qualifying period and the contract is not renewed.
Additionally, a dismissal could be in breach of contract, totally unjustified and contrary to all good industrial practice and yet not be unfair. For example, a dismissal taking effect after 11 months of employment could not normally be classed as unfair because in most cases a prerequisite for claiming unfair dismissal is completion of at least one year's continuous employment with the same or an associated employer by the effective date of termination (the 'EDT').
For a person to be able to bring a claim of unfair dismissal it is essential that he or she is (or was) an employee within the meaning of Employment Rights Act 1996 (ERA 1996).
Employees who have been unfairly dismissed are able to seek compensation and/or a remedy by complaining to an employment tribunal. Employment tribunals are independent judicial bodies.
Time limits
Time-limits for presenting complaints are strictly enforced.
The general rule is that the time limit for issuing a claim in an employment tribunal for unfair dismissal is 3 months less one day from the termination date of your employment. In other words, you have to issue the claim within a 3 month period.
The prerequisite before issuing a tribunal claim is to register the claim with ACAS under their mandatory 'early conciliation scheme'. This must be done within the time period of 3 months, but then the time period in which to make a tribunal claim is extended by the number of days until the conciliation is completed and an Early Conciliation Certificate is received.
Short extensions are normally granted if the delay resulted from unforeseeable postal delay, because the Tribunal office was closed or if the delay was deliberately engineered by the applicant's opponent.
There are three time-limits which Tribunals do not have power to extend:
The six month period for claims under the Equal Pay Act 1970
The six week period for an appeal against a non-discrimination notice under the Sex Discrimination Act 1975 or the Race Relations Act 1976
The seven day period for an application for 'interim relief' when an employee alleges unfair dismissal on grounds related to trade union membership or activities contrary to Trade Union and Labour Relations (Consolidation) Act
If you issue a claim in the civil courts for breach of contract, the usual time limit of 6 years from the cause of action accruing applies.
Fair or unfair
In unfair dismissal cases, the burden of proof is on the employer to show the reason, or if more than one, the principal reason, for dismissing the employee. If the employer fails to prove the reason is one of the four set out in ERA 1996 or 'some other substantial reason', the dismissal is deemed to be unfair.
If the employer does prove that the reason for the dismissal was one of those referred to above, the employment tribunal must then decide 'in accordance with equity and the substantial merits of the case' whether the dismissal was fair or unfair.
There is no onus of proof on the employer or employee for this purpose - the employment tribunal must simply take into account all the circumstances, including the size and administrative resources of the employer's undertaking.
In coming to its decision on fairness an employment tribunal is likely to pay particular regard to whether or not the employer had issued formal policies or rules, for example in a staff handbook or policy document, covering the particular situation (and whether the employee was or ought to have been aware of the relevant policy). It is for this reason that a prudent employer will ensure he has in place formal staff policies covering such day to day matters as internet or telephone use and abuse.
A tribunal will take into account whether or not the employer followed proper procedures (e.g. the process of consultation, warning and discussion) before deciding to dismiss the employee. Failure to do so can turn a potentially 'fair' dismissal into an unfair one.
The implied terms in the employment contract can also be of great significance when deciding whether a dismissal is fair or unfair.
Agreements not to go to a tribunal
There is no room for contracting out of any of the provisions of the ERA 1996, subject to important exceptions specified in the Act.
For example, an employer cannot include a term in the employment contract that forbids the employee from going to a tribunal.
Of course, if the worker concerned is not technically an employee he will not have unfair dismissal rights in the first place.
Compensation
Compensation for unfair dismissal is normally built up from two component parts:
Basic award
Compensatory award
The basic award part is not related to loss suffered. It is simply a multiple of a week's pay (as defined) according to a formula which takes into account years of service and age of the claimant. The practical application of the formula is:
1/2 a week's pay for each year worked between 18th and 22nd birthday
1 week's pay for each year worked between 22nd and 41st birthday
1 1/2 week's pay for each year worked after 41st birthday
The most recent 20 years (only) are taken into account for the purposes of this calculation if a long service employee is being dismissed.
Except in respect of service before age 16 or after age 65 the basic award formula is identical to that used for calculating statutory redundancy pay.
Many awards, including the basic award, are now linked to inflation.
Tribunals can reduce the basic award, even to nil, if the employee's conduct merits a reduction. However, once he has been dismissed an employee is not obliged to mitigate his loss so far as basic award is concerned, which is different from the compensatory award position.
Compensation limits
There has been a huge increase in the award limit since the introduction of the ERA 1999. The maximum award has been increased from £12,000 to over £70,000 now.
In addition to compensatory award a successful claimant in an unfair dismissal case is also entitled to a basic award calculated by reference to a fixed formula.
Mitigation of loss
When assessing a compensatory award in an unfair dismissal case, the courts and tribunals apply the normal common law rules requiring a person who is seeking damages to 'mitigate their loss'.
An employee has no obligation to mitigate loss if the employment contract itself provides for the amount to which the employee will be entitled in the circumstances which have arisen.
However, the amount must not be so unreasonable as to count as a penalty as in that case it would be simply invalid under general common law principles.
Remedies
All remedies are provided by statute alone. Under law, if a tribunal finds that an employee has been unfairly dismissed there are three options open to it. It can make an order for reinstatement, re-engagement, or compensation.
Reinstatement means giving the same job back to the employee with the same employer.
Re-engagement means giving the employee a new job with the same employer.
There is no power for a tribunal to order both reinstatement (and reengagement) and compensation.
There are special rules that ensure that the statutory limit on a compensatory award can be exceeded in cases where an employer refuses to comply with a reinstatement or reengagement order. If there were no such rules it could be cheaper for an employer to ignore the order than to comply with it.
Dismissal on grounds of redundancy
Redundancy in itself is a valid reason for dismissal. But an employee dismissed for this reason may nevertheless be found to have been unfairly dismissed. This will arise where the employee was unfairly selected for redundancy:
by reason of his or her trade union membership or activities; or non-membership of a union; or
for taking action on health and safety grounds or for asserting a statutory employment right; or
on maternity-related grounds; or
by reason of his or her refusal or proposal to refuse to do shop work or betting shop work on Sundays; or
for performing or proposing to perform, any duties relevant to his or her role as an employee occupational pension scheme trustee; or
for performing; or proposing to perform, any duties relevant to his or her role as an employee representative or as a candidate to be a representative of this kind; or
for reasons relating to the national minimum wage; or
for reasons relating to the Working Time Regulations 1998; or
for making a protected disclosure within the meaning of the Public Interest Disclosure Act 1998; or
because he or she took or sought to take parental leave, time off for dependants, ordinary maternity leave or additional maternity leave; or
for taking lawfully organised official industrial action lasting eight weeks or less (or more than eight weeks, in certain circumstances), where the action started on or after 24 April 2000; or
for exercising or seeking to exercise rights relating to trade union recognition procedures; or
for performing or proposing to perform any duties relating to an employee's role as a workforce representative or as a candidate to be such a representative for the purposes of the Translational Information and Consultation of Employees Regulations 1999; or for taking certain actions in connection with these regulations; or for proposing to take or failing to take such actions; or
for reasons relating to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (see Dismissal relating to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000); or
for reasons relating to the right to be accompanied at disciplinary and grievance hearings; or
for reasons relating to the Tax Credits Act 2002; or
for reasons relating to the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002.
In addition, as in respect of any other reason for dismissal, the tribunal needs to be satisfied that the employer acted reasonably in treating the redundancy as a sufficient reason for the dismissal.
Accordingly, here also, the tribunal will look to see that the dismissal of that particular employee or the manner of the dismissal was fair; examples of unfair redundancy dismissals could occur where the employer failed to give adequate warning of redundancy or failed to consider alternative employment for the employee.
Dismissal on grounds of industrial action
It is automatically unfair to dismiss workers for taking lawfully organised official industrial action lasting eight weeks or less (where they started taking the action on or after 24 April 2000).
It is also unfair to dismiss them where they have taken action for more than eight weeks if the employer has not first taken such procedural steps as are reasonable to resolve the dispute.
It will be for the employment tribunals to determine whether an employer has taken all reasonable steps, and in doing so, they will have regard to the behaviour of both the employer and the union.
An employment tribunal has no power to determine a complaint of unfair dismissal from an employee dismissed while participating in official industrial action provided his or her employer, except in the following circumstances:
where the employer has dismissed all who were taking part in the action at the same establishment as the complainant at the date of his or her dismissal, and;
where the employer has not offered re-engagement to any of them within three months of their date of dismissal without making him a similar offer.
Similarly, an employment tribunal has no jurisdiction to determine a complaint of unfair dismissal from an employee dismissed while participating in unofficial industrial action.
There are exceptions to this general rule. These apply where the main reason for the dismissal was:
the taking by the employee of certain specified types of action on health and safety grounds;
in respect of the taking by the employee of certain specified types of action as an employee representative or as a candidate to become an employee representative or as a participant in the election of such a representative (see Dismissal relating to activities as an employee representative); or
because the employee exercised rights under the Working Time Regulations 1998, or;
because the employee exercised rights prescribed in the Maternity and Parental Leave etc Regulations 1999, or;
because the employee asserted the right to time off for dependants.
Dismissal in connection with criminal offences
In a case in which the employee is suspected of a criminal offence, the real issue is whether the employer genuinely believed on reasonable grounds that the applicant was guilty of the offence in question and not, as in a criminal court, whether it is established beyond all reasonable doubt that the employee is guilty of the particular matter with which charged.
Belief on reasonable grounds in this context will normally involve proper inquiries into the matter on the part of the employer. If the employer conducts such inquiries and gives the employee an opportunity to explain what has happened and then has reasonable grounds for coming to the conclusion that the employee can no longer be retained, the tribunal will usually find that the employer acted reasonably even if the employee is subsequently acquitted by a criminal court of the offence in question. On the other hand, if the employer dismisses the employee without making proper inquiries or giving the employee an opportunity to explain, the tribunal may well find that the employer acted unreasonably and that the dismissal was unfair.
Further, whether or an employee’s criminal offence justifies dismissal depends (amongst other things) on the nature of the offence and the type of work for which he or she is employed.
Whether the offence was committed at work or out of working hours is often a relevant factor.
Related documents
As an employer, you will want to make sure you have employment contracts for all staff in place, plus appropriate employment policies for your business.