Unfair Dismissal

What is the legal test for unfair dismissal?

An employer cannot simply dismiss an employee just because it feels like it.  There must be a genuine reason.

Under section 98 of the Employment Rights Act 1996, there are 5 potentially fair reasons for dismissal, which are:

  • conduct
  • capability (eg skill or health) or qualifications (eg technical or professional)
  • redundancy
  • that an employee could not continue to work in the position which s/he held without contravention (either on his/her part or on that of the employer) of a duty or restriction imposed by or under an enactment
  • some other substantial reason (SOSR) of a kind such as to justify the dismissal of an employee holding the position which the employee held.

In deciding whether the dismissal was fair or unfair (having regard to the reason shown by the employer) an employment tribunal will consider:

  • whether an employer acted reasonably or unreasonably having regard to the size and administrative resources of the employer and
  • equity and the substantial merits of the case.

The legal test is whether the employer has acted within a band or range of reasonable responses. That range may include the employer who is quite lenient but also the employer who takes a harsh view on the same facts.

The employer has the burden of proving the dismissal was fair.

In short, challenging an employer’s decision to dismiss on the basis that objectively no reasonable employer would have dismissed, is difficult. 

However, there is a second aspect to fair dismissals, which may assist employees. The employer must also have acted in a procedurally fair way. If the employer fails to do so, the employee may succeed with an unfair dismissal claim, even if the dismissal may have been otherwise fair.

Misconduct dismissals

In misconduct dismissals, the case of British Home Stores Ltd v Burchell sets out the test by which employment tribunals decide whether employers have acted reasonably.

In terms of misconduct, the Burchell case can be reduced down to a 3 step test:

  1. Did the employer genuinely believe the employee was guilty of the alleged misconduct?
  2. Did the employer have genuine grounds to suspect that the employee was guilty of misconduct?
  3. Did the employer carry out a reasonable investigation before making a final decision about the employees’ guilt?

It does not matter whether an employee was in fact guilty of misconduct but whether it was reasonable of the employer to decide that they were guilty and then dismiss them.  In other words, did the employer come to a reasonable decision after a reasonable investigation?

Examples of what might make a decision to dismiss appear unreasonable include:

  • not conducting an investigation or conducting an inadequate investigation
  • not giving sufficient weight to the evidence that points towards an employee’s innocence
  • not taking an employee’s previous long-standing good conduct and integrity into consideration when considering the truth of any statement made by them
  • choosing to dismiss an employee for gross misconduct for a trivial conduct matter.

Dismissals for SOSR

Employment tribunals have found a dismissal to be fair for SOSR, in the situations as follows:

  • business reorganisation (that does not fall within the statutory definition of redundancy)
  • refusal to accept a change in terms and conditions of employment
  • conflict of interest with an employer’s legitimate business interests
  • personality clashes or irreconcilable difference between employees (where an employer has taken steps to resolve the problem)
  • pressure from third parties (eg from a customer, client or supplier)
  • reputational risk
  • employed couples (under a joint employment contract)
  • a breakdown in trust and confidence
  • expiry of a fixed term contract (provided this is the real reason).

Can a dismissal for a potentially fair reason still be unfair if the correct procedure has not been followed?

Dismissals occur for many reasons, which can include work performance issues or long-term sickness absence, conduct (eg failing to follow a reasonable management instruction), breaching company rules and theft (to name but a few) but it also includes redundancy. 

When it comes to redundancy, many employers, however well-intentioned, make errors in the consultation and/or in the selection process. 

Claims for redundancy-based unfair dismissal are just as legitimate as for any other reason for dismissal.

Please see the web page Redundancy.

Are there limitations on bringing a claim for unfair dismissal?

An employee must have at least 2 years continuous service with an employer in order to be able to bring an employment tribunal claim for unfair dismissal.   

A worker who is employed under a contract for services cannot bring a claim for unfair dismissal.

Are there any exceptions to the 2-year rule for claiming unfair dismissal?

Yes, if the dismissal is automatically unfair. In such cases, there is no minimum qualifying period of service to bring a claim.

A dismissal will be automatically unfair is the reason (or principal reason) as follows:

  • for a health and safety reason
  • for reasons connected with pregnancy, childbirth, statutory maternity leave, statutory paternity leave, statutory adoption leave, parental leave, shared parental leave, time off for attending antenatal and adoption appointments or time off for dependants
  • for a shop or betting worker for refusing to work on a Sunday
  • for a reason connected with rights under the Working Time Regulations 1998
  • for performing functions as an occupational pensions trustee
  • for performing functions as an employee representative on a TUPE transfer or collective redundancy
  • for making a protected disclosure (ie whistleblowing)
  • for asserting a statutory right
  • in connection with an application for flexible working
  • relating to the national minimum wage
  • for enforcing rights in relation to working tax credit
  • in connection with a prohibited list under the Employment Relations Act 1999
  • in connection with time off for study and training request rights
  • in connection with carrying out jury service
  • in connection with carrying out the functions of or exercising the rights of an employee representative under the Information and Consultation of Employees Regulations 2004
  • in connection with European works council activities
  • relating to status as a part-time worker
  • relating to status as a fixed-term employee
  • in connection with trade union recognition
  • for trade union membership or non-membership, or participation in trade union activities
  • in connection with exercising the right to be accompanied to a disciplinary or grievance hearing
  • for taking part in protected industrial action
  • In connection with exercising prescribed rights as an agency worker
  • in connection with pensions auto-enrolment
  • following selection for redundancy on any of the grounds listed above.

In the following cases, there will still be an automatic unfair dismissal, but an employee will need the qualifying period of service (ie 23 months and 3 weeks) in which to make a claim:

  • dismissal because of a spent conviction
  • dismissal where the sole or principal reason for the dismissal is a TUPE transfer itself unless it is an economic, technical or organisational reason (ETO) reason entailing changes in the workforce
  • dismissal by reason of retirement.

What compensation can an employment tribunal award for unfair dismissal?

If an ex-employee is successful at the final hearing, an employment tribunal can make financial awards (dependent on the complaint) as follows:

  • a basic award (section 119 of the Employment Rights Act 1996)
  • a compensatory award: loss of wages after dismissal, including pension contributions and/or unpaid wages and/or failure to pay notice money (section 123 of the Employment Rights Act 1996).

An employment tribunal will also make a basic award (based on the ex-employee’s age and length of service), equivalent to a statutory redundancy payment, which is a maximum of £21,000* (and changes annually). *figures for 2024-2025

There is a statutory maximum amount on compensatory awards for unfair dismissal, which is the lower of 12 months’ pay or £115,115*(and changes annually). This is based on the ex-employee’s losses after the deduction of income tax and National Insurance contributions to the date of the hearing and future losses (based on the length of time the employment tribunal decides it would take for the ex-employee to be in the same financial position that they were in before the dismissal. *figures for 2024-2025

In a successful claim of unfair dismissal, in addition to compensation, the ex-employee can request that the employment tribunal order reinstatement or re-engagement (ie the same job or similar job with the employer). If the employer fails to comply with such an order, an employment tribunal may make an additional award of between 26 and 52 weeks’ pay.

The employment tribunal will expect the ex-employee to have mitigated their loss. This means reducing the ex-employee’s financial loss (ie the steps taken to find alternative employment). This does not necessarily mean the same type of employment. At first, it may be reasonable for the ex-employee to look for jobs on a similar salary and in a similar area to their old job. However, as time goes by, the ex-employee will be expected to consider work, which may be less well paid, part-time or in a different area to the previous job.

The ex-employee must show that they have mitigated their loss and will be expected to provide the employment tribunal with evidence that they have claimed state benefits and kept all paperwork in support of finding new work (eg online adverts, copies of any applications for jobs and rejection letters).

An employment tribunal can reduce awards for unfair dismissal if:

  • it considers the ex-employee failed to mitigate their loss
  • it considers that the ex-employee contributed towards the dismissal by their conduct. This reduction can be up to 100%
  • it finds the dismissal to procedurally unfair but concludes that if the employer had followed a fair procedure the ex-employee would have been dismissed in any event.

The material contained in this web page is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

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