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As an employer, making the difficult decision to dismiss an employee is never easy. However, there are 5 fair reasons that provide lawful grounds for termination under the Employment Rights Act 1996. Failing to understand and follow these fair dismissal reasons can expose your business to claims of unfair dismissal – an expensive and stressful scenario to navigate.
This blog post outlines the 5 fair reasons for dismissal, proper procedures, and the consequences of dismissing an employee unfairly.
We’ll also cover how an employment law solicitor can help protect your business throughout this process.
Looking to cut to the chase? If you need advice from an employment law solicitor, just call us on 0203 007 5500, or submit a contact form.
What counts as a dismissal?
Before exploring the fair reasons, it’s important to understand what constitutes a dismissal from a legal standpoint.
A dismissal is when an employer chooses to end the employment relationship (also known as being fired). This includes terminating an employee’s contract, making an employee redundant, or refusing to renew a temporary employee’s term.
Dismissals can be further categorised as actual dismissals or constructive dismissals. An actual dismissal is when the employer directly terminates the employment. A constructive dismissal is when the employer’s conduct causes the employee to resign.
Where an employee decides to end an employment relationship, this is known as resignation, and is different from the above.
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What are the 5 fair reasons for dismissal?
Under the Employment Rights Act 1996, five potentially fair reasons that can justify dismissing an employee:
1. Capability
Your employee can’t meet the requirements of their role, usually due to a lack of skills or qualifications to do the job.
Examples:
- An employee lacks the skills or competence to perform the job satisfactorily
- They don’t have the required qualifications or training for the role
Capability also refers to health, including both mental and physical health reasons. For example, with long-term sickness cases, where an employee is no longer fit to do the role they were hired for.
You can only consider dismissing a long-term sick employee if you have explored all other options and implemented reasonable adjustments. You can read our long-term sickness blog for more information about these cases.
2. Conduct
This is where an employee acts in an unacceptable manner for the workplace or behaves in a way that doesn’t align with policies or their contract. Companies typically call this misconduct, or ‘gross misconduct’.
Examples:
- Stealing from the employer
- Constantly arriving late or violating workplace policies
- Sexually harassing or acting violently toward colleagues
In conduct cases, your company should follow disciplinary procedures.
3. Redundancy
The role is no longer necessary for the business meaning the employer has to make redundancies.
Examples:
- Discontinuing the business or specific workplace
- Reducing the workforce because of low profits or demand
Redundancy can be just as tricky to navigate as dismissals. Ensuring you follow the correct procedures is important if you’re thinking about taking this route.
4. Illegality
This is when someone remaining in a role would be illegal or breach the law.
Examples:
- An employee doesn’t have the right to work in the UK as their visa has run out
- The employee was a HGV driver but they have now lost their license
5. ‘Some other substantial reason’
This is a catch-all that covers any other circumstances that may occur, but as specified, they must be substantial.
Examples:
- Breakdowns in working relations with other employees
- Dismissing someone to comply with legislative requirements
- Disagreements about the terms and conditions of employment
As this is quite a broad area, checking your reasons for dismissal first can help you clarify if you are acting within the criteria of ‘fair’. Speaking to an employment expert can help you avoid unfair dismissals.
Unacceptable reasons for dismissal
The 5 fair reasons for dismissal are a guideline to help employers conduct dismissals in a legal manner. If your reasons for dismissal don’t fall within any of those categories, it could mean you’re acting unfairly.
Unfair dismissal claims only apply to employees who have 2 years of service at the company. If an employee has less than 2 years of service with the employer, their claim may only be considered if the reason falls under automatically unfair dismissal, or the procedure falls under wrongful dismissal.
Here are some automatically unfair dismissal reasons:
- Discrimination towards protected characteristics like age, gender, religion or disability.
- Pregnancy or maternity leave.
- Asserting a statutory right, like requesting National Minimum Wage.
- Whistleblowing.
- Trade union membership.
- Flexible working requests.
- Taking part in industrial action.
- Jury service.
If you unfairly dismiss an employee, they could seek legal advice and you could end up at the Employment Tribunal.
What is the difference between unfair dismissal and wrongful dismissal?
Unfair dismissal is when the reason was not within the 5 fair reasons for dismissal, for example, discrimination.
Wrongful dismissal occurs when an employer does not follow proper procedures. This can include not providing notice, even if the termination is justified.
What is the correct procedure to dismiss someone?
Even if the dismissal falls under one of the 5 fair reasons for dismissal, employers still need to follow the proper procedure. This helps protect your company from unfair and wrongful dismissal claims and provides evidence of reasonable practices.
The key procedural steps include:
- Conducting a full investigation into the circumstances.
- Notifying the employee of concerns, allegations, evidence, and potential consequences in writing.
- Allowing the employee to respond and provide their defence.
- Holding a fair disciplinary hearing. In some circumstances, employees have a legal right to request someone else join them.
- Deciding the outcome and letting the employee know in writing, including reasons.
- Providing the employee with the option to appeal.
The procedure can differ depending on the circumstances. If you’re making someone redundant, there is a different set of guidelines to follow. If the employee raises a grievance during the disciplinary process, you may choose to pause or alter the steps to deal with the grievance.
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Consequences of unfair dismissal
If an employer cannot justify the dismissal under the 5 fair reasons outlined by the Employment Rights Act 1996, and they did not follow procedural requirements, the employee may have grounds for an unfair dismissal claim.
Consequences for employers can include:
- A court case at the Employment Tribunal.
- Having to pay compensation to the employee.
- Reputational damage.
- Further claims for discrimination, whistleblowing or other allegations.
- Loss of other employees.
Regardless of the company size, these consequences can hugely impact your business, profits, and staff retention. Some of them can also be long-lasting, affecting business years down the line.
What does an unfair dismissal case cost an employer?
The above consequences will cost the business money in some way or another, whether directly or indirectly. But one of the greatest costs a business can face is an Employment Tribunal case and paying settlements.
In a heavily reported case in 2022, P&O Cruises made approx 800 staff members redundant, only to replace them with non-UK workers who don’t fall under the National Minimum Wage rules. P&O Cruises claimed to pay out £36.5m, with some ex-employees receiving settlements of £100,000.
On a smaller scale, in 2021, Estate Agent Alice Thompson took her previous employer to the Tribunal over constructive dismissal due to the refusal of her flexible working request when she came back from maternity leave. The firm had to award her £185,000 on the grounds of indirect sex discrimination.
During these cases, lots of costs can amount to the compensation amount. This can include loss of earnings and pension contributions, injury to feelings, and in some extreme cases, the costs of the employee’s legal fees.
How can an employment solicitor help with unfair dismissals?
When considering a dismissal, businesses must ensure they are acting within the law, using the guidelines of the 5 fair reasons for dismissal, and following correct procedures.
Given the complexity of dismissal regulations and the stakes involved, employers should consult an experienced employment law solicitor. An employment solicitor can help avoid costly claims by:
- Reviewing dismissal reasons to ensure they are substantively fair and justifiable.
- Advising on properly following dismissal procedures.
- Representing employers if a claim for unfair or wrongful dismissal does occur.
- Negotiating potential settlements in a dismissal dispute.
- Keeping employers updated on changes to employment legislation.
The cost of obtaining legal advice is likely to be a fraction of what a tribunal case would cost.
By understanding dismissal regulations, following fair procedures thoroughly, and seeking legal guidance from an employment solicitor, employers can confidently navigate dismissal situations. Proactively educating yourself on these requirements safeguards your business while ensuring fair treatment of employees.
How can Britton and Time Solicitors help?
We know how stressful and costly employment disputes can be. That’s why our initial consultations with our boundary dispute solicitors offer you:
- Unlimited time to go through the details of your case and ask any questions
- An overview of your legal standpoint and your available options
- A precise time and fee estimate for your case
To arrange your initial consultation with one of our solicitors, simply call us on 0203 007 5500.
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