The Employment Rights Act 1996 consolidates the key statutory rights of employees, and governs the way in which all kinds of employment issues should be handled by employers, from protection of wages to terminating employment.
In this guide, we look closely at the unfair dismissal provisions under Part X, section 98 Employment Rights Act.
What does section 98 Employment Rights Act say?
The Employment Rights Act 1996 consolidates various different rights and rules under one umbrella, although the section 98 Employment Rights Act provisions are some of the most commonly used parts of this comprehensive piece of legislation. This is because section 98 sets out the five reasons that an employer can rely on to be able to establish a fair dismissal.
If an employer wants to dismiss an employee, they will need a fair reason to do so, otherwise risk being forced to defend a claim for unfair dismissal in cases where the employee meets the qualifying two year service requirement. This essentially means that before consideration can be given to the reasonableness of any decision to dismiss, or the fairness of the procedure followed by the employer, the dismissal must be because of one of the five potentially fair reasons as set out under the section 98 Employment Rights Act provisions.
Where an employee is dismissed because of an ‘automatically unfair’ reason, or by reason of having, being perceived to have or being associated with someone who has, a protected characteristic, such as being pregnant or on maternity leave, this will always be classed as unfair. It can also amount to unlawful discrimination. There are around sixty grounds which could amount to an automatically unfair dismissal, primarily designed to protect an employee’s basic statutory rights, such as being dismissed for asserting their right to the national minimum wage or refusing to opt out of the maximum weekly working hours.
What do the section 98 Employment Rights Act provisions say?
The five potentially fair reasons for dismissal as set out under section 98 are:
Conduct: where the employee has done something unacceptable or inappropriate, and this behaviour is so serious that it fundamentally undermines the implied duty of mutual trust and confidence, irreparably damaging the employment relationship.
Capability: when the employee is not able to do the job that they were employed to do, even if they cannot do their job or are performing badly for a reason that is not their fault.
Redundancy: where the employee’s role no longer exists within the business, or where the work they are employed to do is no longer required.
Illegality or breach of a statutory restriction: where the employee can no longer do their job legally, for example, where someone who drives for a living loses their licence, or where continuing to employ someone would be breaking the law in some other way.
For some other substantial reason: often abbreviated SOSR, there are various different scenarios in which an employee could be fairly dismissed for some other substantial reason. This could be, for example, where a restructure does not give rise to redundancy because there has been no reduction in the number of roles or work undertaken, or where a conflict of interest has arisen with the employer’s legitimate business interests, such as where an employee is in a relationship with a competitor that could give rise to a commercial risk.
How do the section 98 Employment Rights Act provisions work in practice?
In practice, the employment tribunal will look to the employer to show the reason for the dismissal and that the reason — or if there was more than one, the principal reason — falls within one of the five potentially fair reasons as set out under section 98. This essentially means that the employer will bear the burden of proof to show a valid and genuine reason.
Most dismissals will be covered by one of the first four reasons of the section 98 Employment Rights Act provisions. However, ‘some other substantial reason’ is a statutory catch-all provision where none of the other four potentially fair reasons apply. However, even though the SOSR provision can cover a wide range of circumstances, there are limits on when and how it can be used. Whether or not the reason for dismissal falls within its scope will all depend on the facts of each case. Needless to say, it cannot be used to justify dismissal for something frivolous or insignificant, rather it must only be used for something ‘substantial’.
What stages do the section 98 Employment Rights Act provisions include?
To establish a lawful dismissal, the employer must not only show that they have a fair reason as set out under the section 98 Employment Rights Act provisions, but the tribunal must also be satisfied that the employer acted reasonably in treating that reason as a sufficient basis on which to dismiss the employee. This is because section 98 additionally provides that determination of the question as to whether the decision to dismiss is fair or unfair, having regard to the reason shown by the employer, will depend on whether the employer acted reasonably or unreasonably in treating this as a sufficient basis for dismissal.
For a dismissal to be deemed fair, even if based on one of the five statutory reasons for dismissal (stage one), the section 98 fairness provisions means that it must also have been reasonable in all the circumstances (stage two). Under section 98, the reasonableness of the employer’s decision will be determined in accordance with equity, and with the substantial merits of the case, although it does not go on to define ‘reasonableness’. However, in broad terms, in determining whether or not an employer has acted reasonably in all the circumstances, this can be broken down into the following two limbs:
- whether any dismissal decision fell within a band of reasonable responses available to the employer including, for example, any previous decision-making
- whether the employer followed a fair procedure in the context of the reason for dismissal.
The band of reasonable responses
In determining what is ‘reasonable’, rather than substitute its own view of reasonableness, the employment tribunal must accept that there is a range of reasonable responses, where one employer might take one view and another may take a different view.
Each case will turn on its own facts, where there is no hard and fast rule, where various factors may need to be taken into account. This could include the size and administrative resources of the employer’s business, as well as any previous decisions made in similar circumstances in relation to other employees, ensuring a consistent approach. This means that if the employer fails to make a decision that is balanced, consistent and as fair as possible, an employee could make a claim for unfair dismissal, even if the reason for dismissing them was valid.
Importantly, if an employee is able to establish an automatically unfair reason for their dismissal, the employer will no longer be able to justify their decision to dismiss, as they could in a claim for ordinary unfair dismissal. In these cases, the employment tribunal will not go on to consider whether or not the employer acted reasonably in reaching their decision. The dismissal will be classed as automatically unfair and the employee will succeed in their claim.
A fair and suitable procedure
What constitutes a fair and suitable procedure will depend on the reason for the dismissal. For example, in the context of misconduct cases, the employer must follow a fair disciplinary procedure that meets the minimum standards of fairness as set out in the ACAS Code of Practice on disciplinary and grievance procedures. Even in cases where the conduct complained of is so serious that it justifies summary dismissal, the employer must still fully investigate the allegations and provide the employee with the opportunity to respond.
Equally, when dismissing someone on grounds of capability, the employer must follow a fair capability and performance procedure, or with redundancy, a fair consultation and selection process. In short, regardless of the reason being relied upon by the employer to justify the decision to dismiss, the employee must be given the chance to make representations. This could include exploring any suitable alternative to dismissal, such as in a redundancy scenario, or advancing any explanation that could mitigate any findings of poor performance.
What is a common section 98 Employment Rights Act scenario?
Dismissal is commonplace for all sorts of reasons, although perhaps one of the most common section 98 Employment Rights Act scenarios is dismissal for misconduct. This is where the employee’s behaviour is so unacceptable that it fundamentally undermines the implied duty of mutual trust and confidence, where the employment relationship can no longer continue.
In cases of relatively minor misconduct, such as occasional lateness or a one-off unauthorised absence, this is unlikely to justify a decision to dismiss. However, where that conduct persists, despite the employee being warned of the consequences, this may be sufficiently serious so as to justify bringing the employment relationship to an end. In cases of gross misconduct, for example, theft or physical violence, this can justify dismissal for a first offence. It can also justify summary dismissal, without notice or pay in lieu of notice.
Below we set out an illustrative example of how any decision to dismiss in a misconduct context should be made, including the principals of fairness to be followed.
Misconduct dismissal – an example
First and foremost, regardless of the nature or seriousness of the matter, any allegations of misconduct must be fully investigated by the employer to establish the facts and to see if there is a case to answer. This could include interviewing the employee, as well as any witnesses to the matter complained of, and reviewing any documentary evidence. The employee must also be given the chance to state their case and defend their conduct as part of a fair disciplinary procedure, one which follows the best practice guidance provided by ACAS, including:
- Dealing with the misconduct matter without unreasonable delay
- Informing the employee in writing of the allegations and evidence against them
- Giving the employee a chance to respond before any disciplinary decision is made
- Allowing the employee to be accompanied at a disciplinary hearing
- Acting consistently with any previous disciplinary decisions in similar circumstances
- Informing the employee in writing of the dismissal decision and effective date of termination
- Allowing the employee to appeal against any decision to terminate their employment, and again allowing that individual to be accompanied at an appeal hearing.
A failure to follow the ACAS Code of Practice will not, by itself, make the employer liable to tribunal proceedings, nor does it automatically make any dismissal unfair, although an employment tribunal will take into account any breaches of the Code. A breach of the Code could also result in an increase in any award of compensation by up to 25%.
In relatively minor cases, the misconduct may only warrant a written warning. Equally, if the employee has already been given a written warning for the same or similar misconduct, a further written warning may still be necessary. In other cases, the misconduct may be serious enough to justify moving straight to a final written warning or even dismissal. Where a written warning is given to the employee before any decision to dismiss is made, these warnings must clearly set out what improvements are expected of the employee and over what period. The employer must also clearly explain in writing the consequences of not complying with this warning within the timeframe specified, including the possibility of dismissal.
Where the employer has formed the view that there is no alternative but to dismiss the employee — either for persistent misconduct following a series of written warnings or for a serious single incident — the employer should carefully document why the misconduct was treated by them as sufficient reason to justify dismissal in all the circumstances. By keeping an accurate record of how a dismissal decision was reached, including the reasons for rejecting any alternative course of disciplinary action, the employer will be able to better defend their decision-making in the event of any tribunal claim for unfair dismissal.
DavidsonMorris’ employment law specialists advise employers on how to approach dismissals, including those concerning complex issues such as redundancy and disciplinary action. Through our fixed-fee employment law service, Triple A, employers gain unlimited access to our legal expertise for a monthly fee. For more information about Triple A, or if you have a specific query about lawful dismissals, speak to our experts today.
Section 98 Employment Rights Act FAQs
What is the Employment Rights Act 1998?
The Employment Rights Act 1998 — or using its full title, the Employment Rights (Dispute Resolution) Act 1998 — is an Act of Parliament which made various amendments to the rules concerning tribunal procedure, and also provision for the ACAS arbitration scheme.
What is section 94 of the Employment Rights Act 1996?
Section 94 of the Employment Rights Act 1996 enshrines the right of an employee not to be unfairly dismissed by the employer, including where an employee feels forced to resign by reason of the employer’s conduct.
What are the main features of the Employment Rights Act 1996?
The Employment Rights Act 1996 sets out the rights of employees in various contexts, including the right not to be unfairly dismissed, the right to a minimum period of notice on termination of employment, and the right to redundancy pay.
What are the fair reasons for dismissal?
There are five fair reasons for dismissal, including on grounds of conduct and capability, by reason of redundancy, when continuing to employ someone would be breaking the law, and for some other substantial reason, like a significant conflict of interest.
Last updated: 15 July 2022