It is a common misconception that an employee can be dismissed without the need to provide a fair reason and follow a fair process, as long as they have not yet accrued two years’ continuous service with their employer. On the contrary, however, there are certain circumstances in which a dismissal may be classed as automatically unfair, for which there is no qualifying period of service.
As an employer, therefore, it is important to fully understand the ways in which you can lawfully dismiss an employee, and what will constitute an “automatically unfair dismissal” for which you could find yourself facing a costly tribunal claim.
Understanding the law relating to termination of employment is especially important during these difficult economic times, where employers may be looking to make various payroll cuts due to the financial impact from COVID-19, without running the risk of exposing their business to expensive litigation.
What is automatically unfair dismissal? An automatically unfair dismissal is a dismissal that is so inherently unfair that an employee is not usually required to prove two years’ continuous service. This is because employees are afforded specific proection by law if dismissed in circumstances where the dismissal violates their basic employment rights. The only exception is where the employee is dismissed because of a TUPE transfer.
Where an employee is able prove one of the reasons prohibited by law, there is also no need for them to show that their employer acted unreasonably or failed to follow a fair procedure, as is necessary to establish the basis of an ordinary unfair dismissal claim. The reason, in itself, will be considered automatically unfair, with no further consideration as to either the reasonableness of the decision to dismiss or the procedural fairness of the employer’s actions.
How does it differ from unfair dismissal? Unfair dismissal is a far more difficult type of claim for an aggrieved employee to bring when compared with automatically unfair dismissal, not least because this not only requires two year’s service, but also sufficient evidence to show that the employer is unable to satisfy the two-stage test for a fair dismissal.
If the employer can show that they had a potentially fair reason for dismissing the employee and they acted reasonably in treating that reason as sufficient for dismissal, following a fair process throughout – unless the employee can show that the reason advanced by the employer for the dismissal is wrong, and/or that the decision to dismiss was in any event unfair – the claim will fail.
There are five statutory fair reasons for dismissing an employee: capability; conduct; redundancy; illegality, where continued employment would result in a breach of a statutory restriction; or some other substantial reason (SOSR). SOSR is a ‘catch-all’ provision that allows an employer to fairly dismiss an employee where no other potentially fair reason applies, for example, where there has been a breakdown in the mutual trust and confidence between the parties.
These statutory reasons cover a wide range of scenarios that an employer can rely upon, especially capability and conduct, where an employer can point to various different types of misconduct or poor performance issues, as long as the employee was given fair warning where appropriate, and the decision to dismiss fell within a range of reasonable responses in all the circumstances.
In some cases, an employer may even be justified in summarily dismissing an employee, ie; without notice or pay in lieu of notice. This is usually where the employer has clear evidence of gross misconduct on the part of the employee, such as fraud, theft, physical violence at work, intoxication through either drink or drugs, serious breaches of health and safety, or serious insubordination.
Employee rights where automatically unfair dismissal applies Once an automatically unfair reason for dismissal has been established, the employer will no longer be able to justify or defend their decision to dismiss in any way, as they could in a claim for ordinary unfair dismissal. The tribunal will have no cause to consider whether or not the employer acted reasonably in reaching this decision. The dismissal will simply be classed as automatically unfair and the employee will succeed in their claim.
If the claim for automatically unfair dismissal is successful, the employee will have a right to damages, and even reinstatement or re-engagement in a different job. The award of damages will comprise a basic and compensatory award.
The basic award is a fixed sum calculated applying a statutory formula based on the employee’s age at the date of dismissal, their gross weekly salary and their length of service. This can be calculated as follows:
0.5 weeks’ pay for each complete year of employment where the employee was under the age of 22 1 week’s pay for each complete year of employment where the employee was aged between 22 and 40 1.5 weeks’ pay for each complete year of employment where the employee was aged 41 or over.
The weekly pay is capped at £544 per week for dismissals on or after 6 April 2021, or £538 for dismissals on or after 6 April 2020, up to a maximum of 20 years service. This means that the maximum basic award an employee can receive is £16,320.
The compensatory award will reflect any loss of earnings, in addition to a sum of money to compensate for the loss of their statutory rights, ie; that it will take them two years in a new job to get the general right to claim for ordinary unfair dismissal.
In most cases, the award will be capped at £88,519 (from 6th April 2021).
The maximum amount of compensation for unfair dismissal is the lower of either £89,493 or 52 weeks gross salary (for dismissals from 6 April 2021).
However, there are certain claims for automatically unfair dismissal where the award is uncapped and, consequently, the compensation could be much higher. This includes if you dismissed an individual for taking action on health and safety grounds or because they ‘blew the whistle‘ for wrongdoing in the workplace, as well as where the dismissal amounts to unlawful discrimination.
The law protects anyone from unfair dismissal. This article explains in brief exactly what unfair dismissal is and sets out the grounds for an unfair dismissal compensation claim to an employment tribunal. Unfair Dismissal