30 August 2024

It is always disappointing when an employee does not perform as anticipated or the relationship has turned sour and you wish to part ways. However, it is important to take legal advice on any prospective dismissal, since employees enjoy various legal protections depending on the type of dismissal, their length of service and a number of other factors.

It is easy to get dismissals wrong. Some employers falsely believe that they can dismiss short-serving employees without legal risk. Employees are protected from some types of dismissal from their first day, and there are a number of other traps for the unwary, such as releasing an employee from contractual restrictions by dismissing without the correct notice.

In this article, we look at the different types of dismissal, the service requirements for accruing protection, and various risks to employers.

Wrongful dismissal

Wrongful dismissal occurs when an employee is dismissed without receiving the notice to which they are entitled under their contract of employment.

It is sometimes possible to dismiss an employee for serious misconduct without giving notice (usually called a ‘summary dismissal’)'; we would recommend taking legal advice before dismissing summarily to make sure you are on safe ground.

Risks and tips

Wrongful dismissal can result in the employee bringing a claim, either in the employment tribunal or the county court, for the loss of pay and benefits they would have received during their contractual notice period.

An employee’s contract may contain restrictive covenants that restrict their actions after their employment ends, for example, by preventing them from poaching key staff or setting up in competition. If they are wrongfully dismissed, the employer is in breach of contract and the employee will therefore be released from these restrictions.

Making a payment in lieu of notice without the contractual right to do so will likewise place the employer in breach and release the employee from restrictive covenants. If you want to end the employee’s employment quickly and ensure restrictive covenants are still binding, we can review the contract and advise on options that could achieve this.

Carefully check the most up-to-date version of the employee’s contract to ensure that you give the correct notice and that the contractual notice is at least as long as the statutory minimum. If there is nothing agreed in writing, it is best to take legal advice, since the law may imply a notice period that is longer than the statutory minimum, particularly for senior staff.

Unfair dismissal and the two-year service requirement

Unfair dismissal is distinct from wrongful dismissal. Currently, if an employee has two years’ service, they have the right to bring an ordinary unfair dismissal claim. A tribunal may treat a dismissal as unfair unless it is reasonable, a fair process was followed, and it is based on one of the five statutory reasons:

• redundancy;

• capability or qualifications;

• conduct;

• illegality; or

• some other substantial reason.

It is important to note that the new Labour Government made an election manifesto commitment to remove the two-year qualifying period for unfair dismissal claims. This might give employees the right to bring claims from day one, although Labour have stated that they will still allow employers to operate probationary periods, suggesting that employees’ rights may be limited until they have passed probation. Details are likely to become clearer when the first draft of the forthcoming Employment Rights Bill is published in October.

Risks and tips

If an employee brings a claim for unfair dismissal which is successful at the tribunal, they are entitled to a basic award based on their age, service, and earnings (currently capped at a maximum of £21,000), as well as compensation for loss of earnings up to a statutory cap (currently £115,115). Damages can be increased by up to 25% for failure to follow the Acas code of practice on disciplinary and grievance procedures.

Employers should ensure that one of the statutory reasons for dismissal actually applies and follow a fair procedure applicable to that reason. Having up-to-date and well-drafted policies will put you in a good position.

In determining whether an employee will have the requisite two years’ service to bring an unfair dismissal claim against your business, it is important to calculate carefully. Employees may have longer service than the date of their contract suggests if, for example, they transferred to your business under the TUPE regulations or had breaks from work that could be deemed to count towards continuous service. It is also important to allow for the time it will take to dismiss. This can vary based on the type of dismissal. Do not be tempted to give less than the statutory minimum notice in an attempt to schedule a dismissal date before two years’ service: in this instance, a court will deem the termination date based on the statutory notice, allowing the employee to bring a claim. 

Even if there is a fair reason for the dismissal, be alert to any factors that could make the dismissal discriminatory or which give the employee protection regardless of length of service (see below). Examples include where the dismissal decision might be influenced by unconscious bias against an employee of a particular race, or where the employee could argue that they are being selected for redundancy because they raised concerns about health and safety.

‘Day-one’ protections from dismissal

There are a number of exceptions to the current two-year service requirement for bringing unfair dismissal claims. From the commencement of their contract, employees are protected against unfair dismissals related to:

• discrimination related to the employee’s protected characteristics, such as their gender or nationality;

• exercising or trying to exercise employment rights, such as making a request to work flexibly or claim the national living wage;

• pregnancy or taking family-friendly leave;

• health and safety reasons; and

• whistleblowing.

Risks and tips

In some types of dismissal, including those related to whistleblowing or discrimination, there is no statutory cap on the compensation that the employee can recover, unlike in an ordinary unfair dismissal. Before dismissing, it is therefore worth carefully scrutinizing the decision, particularly if the employee raises concerns, and making relatively certain that there are no factors that may have inappropriately influenced the dismissal decision.

Constructive dismissal

Constructive dismissal is not a consequence of the employer actually dismissing the employee; instead the employer’s treatment of the employee is such that the employee is entitled to resign and consider themselves to be dismissed.

Examples of conduct sufficiently serious to give rise to constructive dismissal include:

• changing significant contractual terms without the right to do so, or without the employee’s consent; and

• acting in a way that destroys trust and confidence between the employer and employee.

For the purposes of bringing a claim, the law treats a constructive dismissal in the same way as an active dismissal by the employer.

How we can help

We can provide you with clear procedures that support managers in dismissing staff and encourage consistent treatment across the business. We can advise on all stages of the process and give pragmatic advice on mitigating risks.

For further information, please contact the team at Synchrony Law.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.