Unfair and Constructive Dismissal Advice for Employers

The Employment Rights Act 1996 sets out five potentially fair grounds on which an employee can be dismissed:

• Conduct
• Redundancy
• Capability or qualifications related to the work the employee was employed to do
• Where continuing employment may breach a statutory enactment or law (for example if the person did not have the legal right to work in the UK), or
• For ‘some other substantial reason’ (SOSR)

Before you can dismiss one of your employees you firstly have to establish if one of the above grounds exist. In many cases it will be clear cut, such as if there is a redundancy situation or clear misconduct. In other cases it may be more difficult – for example where there is a breakdown in working relations. SOSR is often looked at as a ‘catch-all’ reason for those situations not covered by one of the other grounds, but it can be difficult to prove so you should always take advice before going ahead with dismissal because of SOSR.

It is not enough that one of the stated grounds for dismissal exists for a dismissal to be fair.  If you end up facing an unfair dismissal claim at an Employment Tribunal, the tribunal will look at what happened and make a decision taking into account the size and resources of you, as the employer, and asking whether you acted reasonably or unreasonably in deciding to dismiss the individual. This involves looking at the procedure you followed as well as whether it considers that the decision to dismiss was one which a reasonable employer would arrive at.

An Employment Tribunal will look closely at any investigation you carried out or in capability cases whether you followed a performance management process, as well as any meetings you had with the employee.  Following a fair process will help minimise the risk that the dismissal is found to be procedurally unfair.

An employee usually has to have two years’ service to be able to bring an unfair dismissal claim, except in cases of automatic unfair dismissal.

In most dismissal situations an employee has to have two years’ service to bring a claim for unfair dismissal, but with automatic unfair dismissal cases there is no such requirement. Automatic unfair dismissal can occur where the principal reason for dismissal includes one of the following:

• Jury service
• Leave for family reasons
• Health & safety
• Any rights under the Working Time Regulations
• Any rights under the National Minimum Wage legislation
• They are a trustee of an occupational pension scheme
• Discrimination under the Equality Act 2010
• They have sought to assert a statutory right
• Flexible working requests
• Certain trade union activities
• Whistleblowing

As an employer, you should take particular care if any of these could apply to an employee you are thinking of dismissing. In some automatic unfair dismissal cases there is also a minimum amount of compensation which an Employment Tribunal can award.

An Employment Tribunal can award up to one year’s salary capped at a maximum of £89,493 (correct as at April 2021) as a compensatory award in a successful unfair dismissal claim, together with a basic award which is based on a person’s age and length of service (capped at a maximum of £16,320 as at April 2021).

Constructive dismissal is a form of unfair dismissal but rather than the employer dismissing an employee the employee resigns because the employer has done something to materially breach the contract of employment.

Sometimes this can be a one-off event, such as a supervisor verbally and physically abusing an employee in front of colleagues. It can also be a result of a number of smaller incidents which when taken together amount to a material breach of the employment relationship by the employer, for example an employee alleging ongoing harassment or bullying. 

For an employee to successfully bring a claim for constructive dismissal certain conditions have to be met:

• The employer must be in fundamental breach of contract
• The employee must have resigned in response to the employer’s breach, and
• The employee must not have delayed too long between learning of the employer’s breach and them resigning (although they can still resign giving notice)

The employment relationship is usually formed on the basis of a contract of employment (whether written or unwritten) in which there are a combination of:

• Express terms – for example hours of work and rate of pay
• Implied terms – for example the mutual duty of trust and confidence, and confidentiality
• Terms which may be incorporated from elsewhere – for example where a union negotiates on behalf of its members

Situations can arise where either an employer or an employee may breach one of those employment terms and this means the other party can bring a claim for breach of contract.

An employee can only bring a claim for breach of contract in an Employment Tribunal if their employment has terminated and the breach of contract, for example their employer refusing to pay money due to them, happened before or on termination of employment. 

If the breach of contract claim does not arise or is not outstanding on the date of employment termination, then the employee can still bring a claim but they would have to raise it either in the Sheriff Court in Scotland or in the County Court in England and Wales.

As an employer, you can only bring a claim for breach of contract against an employee in an Employment Tribunal if the employee has already brought a claim against you. For example, if they have raised unfair dismissal proceedings then you could lodge a counterclaim for breach of contract depending on the circumstances.

The amount of compensation an Employment Tribunal can award for breach of contract is limited to £25,000.