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Dismissing an Employee Fairly

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Dismissing an employee is sometimes unavoidable, either because an individual is behaving badly or underperforming at work, or the business simply cannot afford to maintain its current levels of staff. As an employer, even where you have a clear and legitimate reason for letting someone go, it remains important that you approach any dismissal in a fair and lawful way.

The following practical guide looks at what the law says about dismissing an employee, including their rights and your responsibilities on dismissal, as well as how to follow a fair process and the consequences of getting this wrong.

 

Dismissing an employee: what employers need to know about firing someone fairly

By law, an employee has the right not to be unfairly dismissed. This means, as an employer, you must be able to show that you have a genuine and valid reason for dismissing an employee. The Employment Rights Act 1996 sets out the following five different ways in which you can legally justify a dismissal:

By reason of redundancy
There are various reasons why a business may legitimately need to reduce its number of staff, for example, where there has been a reduction in workload, or a change in the type of work that is available, or a change of location or where operations in an area are closing down.

By reason of capability
This refers to an employee’s ability to perform their job role to the required standard. If an employee fails to meet targets or pass any training, or where they are no longer able to do their job due to long-term ill health or injury, this could justify dismissal.

By reason of conduct
If an employee is guilty of some form of misconduct, for example, persistent lateness or unauthorised absences from work, this can provide a lawful basis on which to dismiss them.

For a legal reason
This can be used to dismiss an employee if continuing to employ them would mean you are both breaking the law, for example, where an HGV driver loses their driving licence.

For some other substantial reason (SOSR)
This is a statutory ‘catch-all’ provision that allows an employer to fairly dismiss an employee where no other potentially fair reasons apply, for example, where a business has recently undergone a restructure, but this doesn’t give rise to a redundancy situation because there is no reduction in the work to be undertaken.

 

Employee rights on dismissal

An employee’s rights on dismissal will very much depend on how long they have worked for you. An employee can only usually claim unfair dismissal if they have worked for you continuously for a qualifying period of two years.

This means that, at least in theory, you can dismiss an employee with less than two years’ service without having to justify your decision. That said, where there are written disciplinary and dismissal procedures in place, these must still be followed, otherwise risk a breach of contract claim for wrongful dismissal.

There is no qualifying service requirement for an employee to claim wrongful dismissal. There are also certain circumstances in which an employee will be entitled to claim unfair dismissal from day one of their employment. This is known as automatically unfair dismissal.

Typically, an automatically unfair dismissal occurs when the dismissal violates an employee’s statutory employment rights. Dismissing an employee will, for example, be classed as automatically unfair if the reason for the dismissal is connected with any of the following:

  • Pregnancy and all grounds relating to maternity
  • Family reasons, including parental, paternity, adoption and dependants’ leave
  • Assuming the role of an employee or trade union representative
  • Joining or not joining a trade union
  • Being a part-time or fixed-term employee
  • Pay and working hours, including minimum wage and annual leave
  • Whistleblowing, ie; reporting wrongdoing in the workplace

 

What are an employer’s responsibilities when firing an employee?

When dismissing an employee, even where you have a genuine and valid reason for so doing, you must still show that you acted reasonably and followed a full and fair procedure. Any failure to do so can make the dismissal unfair, regardless of being able to prove one of the five fair reasons as set out under the 1996 Act.

There is no statutory definition of what is ‘reasonable’, although there are various factors that can influence whether or not a dismissal is fair. These can include whether the reason you gave for the dismissal was the real one; if you acted reasonably in treating that reason as sufficient for dismissal; if the decision to dismiss fell within a range of reasonable responses; and whether you carried out proper investigations and followed the relevant procedures.

For automatically unfair dismissal, however, all an employee needs to prove is that the cause for their dismissal was for one of the reasons prohibited by law. No further consideration will be needed as to the reasonableness of the decision to dismiss or the procedural fairness of your actions.

In all cases, you must also ensure that you provide the employee with the correct notice period, or pay in lieu of notice where their employment contract permits this. Any failure to provide the correct statutory or contractual notice will again result in a potential claim for wrongful dismissal.

The statutory minimum period is one week’s notice if the employee has worked for you for between one month but less than two years, with one additional week for each complete year of employment up to a maximum of twelve weeks, for example, 12 weeks’ notice for 12 years’ service.

The only exception to this rule is where you can justify summary dismissal for gross misconduct. This can include things like theft, fraud, the use of physical violence or threats of violence, intoxication at work through drink or drugs, breaches of health and safety, or serious insubordination in the workplace.

Where there is clear evidence to support your finding of gross misconduct, dismissing an employee without notice, or pay in lieu of notice, can be lawful, as long as you undertake a full investigation and follow a fair disciplinary process.

 

How to follow a fair process when dismissing an employee

The process that you follow when dismissing an employee will depend on the reason for the dismissal. In all cases, however, the process must be full and fair.

When selecting people for redundancy, for example, a fair selection process must always be followed. This could be based on criteria such as an employee’s skills qualifications or standard of work, or their disciplinary and attendance records.

You cannot, however, select an employee for redundancy in any way that would discriminate against them by reason of a protected characteristic. This could include things like age, sex or disability. This means that when applying certain selection criteria, such as attendance, you would need to discount, for example, any maternity-related absences to avoid discriminating against female staff.

Prior to embarking on any redundancies you must also follow a fair consultation process so that you can respond to any representations made by employees or their representatives, and to consider any reasonable alternatives to dismissal. If you are making 20 or more employees redundant within any 90-day period, there are specific collective consultation rules that must be followed.

In the context of capability or conduct dismissals, even in the absence of any contractual disciplinary procedure, you should always refer to the guidance set out under the ACAS Code of Practice on Disciplinary and Grievance Procedures.

The code sets out a number of steps that should be taken prior to dismissal, including the provision of written warnings and suitable training, where appropriate, giving the employee an opportunity to improve their performance or change their behaviour. You will also need to inform the employee of their right to be accompanied at any hearing and give them the chance to appeal.

Any failure to follow the ACAS code will not automatically make any dismissal unfair. However, a tribunal can increase an award of damages made against you by up to 25% for any unreasonable failure to follow this guidance.

 

Dismissing an employee with a disability

It is important to recognise that employees with disabilities are afforded special legal protection at work, where caution should always be exercised when dismissing an employee suffering from a long-term physical or mental health condition.

Although it is possible to fairly dismiss an employee who is no longer capable of carrying out their job role because of injury or illness, you must always explore ways to remove or minimise any disadvantage an employee may be experiencing because of any disability. Dismissal should only be used as a last resort.

Under the Equality Act 2010, you are under a positive duty to make any reasonable adjustments, either in terms of workplace adaptations or changes to working arrangements, to assist a disabled employee. This could include measures such as a phased return to work following long-term sick leave, amended duties and altered hours, or the provision of specialised equipment and support.

Dismissal on the grounds of a disability, especially where insufficient steps have been taken to make reasonable adjustments, may be deemed to be both unlawful discrimination and automatically unfair.

A dismissal will only be fair, or non-discriminatory, where an employee is unable to do their job in the absence of any reasonable adjustments that can be made, and the person not being able to perform their duties is having a significant impact on your business.

 

Legal risks of getting dismissals wrong

It is important to understand the law when dismissing an employee to avoid making any costly mistakes through exposure to a claim before the employment tribunal. A claim for unfair dismissal could result in an order for you to reinstate or re-engage your former employee. You could also be ordered to pay damages.

An award of damages is generally made up of a basic and compensatory award. The basic award is a fixed sum that is calculated to a statutory formula, whilst a compensatory award is used to compensate the employee for the actual money they have lost as a result of being dismissed, such as any loss of earnings.

In ordinary unfair dismissal claims these sums are capped, but can still run into tens of thousands of pounds. The awards following successful claims for certain automatically unfair dismissal claims, or unlawful discrimination, are uncapped.

You may also have to pay an award of damages in any claim for wrongful dismissal. In some cases, an employee may even opt to bring a claim for wrongful rather than unfair dismissal. By suing their employer under contractual provisions, an employee earning a high salary with a lengthy contractual notice period stands to gain more from damages for the losses flowing from any breach, potentially representing the whole of the notice period that they should have been given.

 

Need assistance?

Our HR and employment law specialists advise and guide employers on how to approach dismissals, including those concerning complex issues such as redundancies and disciplinaries. To minimise legal risks while protecting your business’ commercial interests, speak to our experts today.

 

Dismissing an employee FAQs

What are the 5 fair reasons for dismissal?

Under the Employment Rights Act 1996 there are five fair reasons for dismissal. These include redundancy, capability; conduct; illegality, where continued employment would contravene the law; or some other substantial reason of a kind that justifies the dismissal.

What does it mean to terminate employment?

To terminate an employee means to bring their contract of employment to an end. An employment contract can be lawfully terminated where the employer is able to show a genuine and valid reason, for example, poor performance or misconduct, and they follow a full and fair process.

How do you dismiss someone?

When dismissing someone, you must be able to show a genuine and valid reason for so doing, for example, redundancy, poor performance or misconduct. You must also act reasonably in treating that reason as sufficient for dismissal and follow a full and fair procedure.

What do you say when sacking an employee?

When sacking an employee you must tell them why they've been dismissed; when their employment contract will end; what their notice period is, if there is one; and their right to appeal your decision. You should also put these matters in writing, so that you can provide a paper trail of your decision-making process.

Last updated: 27 August 2020

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