Month: January 2021

Redundancy is one of the five potentially fair reasons for dismissal and is defined in the ERA 1996. To summarise, the definition envisages 3 possible circumstances in which a genuine redundancy situation can arise, as follows:

• the business is shut down altogether;
• the place of business where the employee works is shut down; or
• there is a reduction in the need for employees.

This last situation is perhaps the most common example of redundancy. If there is a genuine redundancy situation, employees will be entitled to a statutory redundancy payment (in addition to their proper notice entitlement) provided they have been continuously employed for at least two years. The redundancy payment is calculated in the same way as the basic award for an unfair dismissal claim.

If there was a genuine redundancy situation, then the employee will have no claim against the employer, provided:

1. the correct redundancy payment was made (including any notice payment); and
2. a proper procedure was followed and the employer acted reasonably in carrying it out.

In deciding on the second element (whether or not a proper procedure was followed and the employer acted reasonably in carrying it out), the Tribunal will consider a number of factors:

1. The employer’s reason for redundancy. However an employer’s reasons for wishing to reduce staff levels will generally not be closely scrutinised by the Tribunal unless it is claimed that the redundancy is a sham.
2. Consultation. The Tribunal will consider whether the employer consulted with the employees about the redundancy situation and how the selection process would work. Individual consultation is always required. There are additional requirements for collective consultation where 20 or more redundancies at one establishment are to be made within a 90 day period.
3. The selection process. The Tribunal will look closely at the selection process in deciding which individuals were to be made redundant. It will look at the pool (the precise area(s) of the business where the redundancies are likely to take place) used from which to select individuals for redundancy. It will also look at how the employer selected from that pool. An employer seeking to reduce the headcount must use objective criteria, e.g. qualifications, skills, attendance and experience in selecting employees for redundancy. The Tribunal will also consider whether employees were properly assessed in accordance with those criteria.
4. The employer must consider the possibility of offering the redundant employees suitable alternative employment if there are vacancies in other departments.
5. Whether the employer allowed employees to appeal the selection for redundancy decision.

The right to claim unfair dismissal is available to employees only. It is not available to workers or independent contractors.

The ERA 1996 states that an employee has a right not to be unfairly dismissed by his employer.

Where the claim will be heard

A claim of unfair dismissal must be made to an Employment Tribunal with appeal to the Employment Appeals Tribunal and then to the Court of Appeal and, very occasionally, the Supreme Court. Appeals are permitted on questions of law only.

Who can make a claim?

In order to bring a claim of unfair dismissal, the employee must show:

• that he was dismissed;
• that he was employed for the qualifying period of service; and
• that he was not in an excluded category (e.g. police, armed forces).

Once the employee has satisfied these criteria, the employer has the burden of showing:

• that it had a fair reason for the dismissal; and
• that the dismissal was fair in all the circumstances.

Was the employee dismissed?

This should be fairly easy to establish. An employee will have been dismissed if he was given notice of termination by the employer, simply told to leave, sacked or where the employer used language which would amount to dismissal.

Dismissal includes ‘constructive dismissal’. This occurs where it is the employee who leaves the job but he is compelled to do so by the conduct of the employer. The employer’s conduct must amount to a fundamental breach of the employment contract to which the employee must have resigned in response. The employee must not have waived the breach. If the employee can show these elements, he is then deemed to have been dismissed by the employer.

Does the employee have the required qualifying period of service?

In most cases, the employee must show that he has one or two years’ continuous employment with the employer in question. For employees whose employment began before 6 April 2012 the qualifying period of service is one year. For employees whose employment began on or after 6 April 2012 the qualifying period of service is two years.

However, in certain limited cases, the employee is not required to have the qualifying period of service, for example: dismissals connected with pregnancy, maternity or paternity leave; dismissals for health and safety reasons; dismissals relating to the enforcement of the Working Time Regulations and dismissals for having made a protected disclosure.

Did the employer have a fair reason for the dismissal?

There are five potentially fair reasons for dismissal:

1. Capability – an employee can be dismissed for incompetence or incapability if he or she is unable to do the job properly.
2. Conduct – includes disobedience to orders; abusive language; theft; drunkenness at work; persistent lateness.
3. Redundancy
4. Statutory illegality – on those rare occasions where it may become illegal to continue employing someone, for example, if their work permit expires.
5. Some other substantial reason – this is really a catch-all category – it is there to allow an employer to put forward another substantial reason for justifying the dismissal (e.g. where there is a clash of personalities or where there is an economic, technical or organisational reason (‘ETO reason’) for dismissal on a TUPE transfer).

The onus of showing that there was a fair reason lies with the employer. If the employer did not have a fair reason for the dismissal, or gave the employee the wrong reason, the dismissal will be unfair.

Was the dismissal fair in all the circumstances?

Proving that the reason for the dismissal was fair does not make the dismissal fair. In order for the dismissal not to be declared unfair, the procedures followed in carrying out the dismissal must also be fair in all the circumstances. This is where employers frequently get caught out. No matter how good the reason for the dismissal is, if the handling of the dismissal procedure is unfair, then the dismissal is more than likely also going to be held to be unfair.

The question of whether fair procedures were followed before dismissing an employee will very much depend on the facts and the reason for the dismissal. In cases where the fair reason relied upon is capability or conduct, the Tribunal will consider whether both the employer’s disciplinary procedure and the ACAS Code of Practice 1 – Disciplinary and Grievance Procedures (the ‘ACAS Code’) have been followed. If the Tribunal considers that there has been an unreasonable failure by the employer to comply with the ACAS Code, it may increase the compensatory award by up to 25%.

As a minimum, the ACAS Code requires employers to:

• establish the facts of the case (i.e. investigate);
• inform the employee of the problem;
• hold a meeting with the employee to discuss the problem, allowing the employee to be accompanied;
• decide on appropriate action; and
• provide an opportunity to appeal.

In addition, a Tribunal will look at a number of other factors to determine whether or not the dismissal was fair in all the circumstances, for example:

• Consistency – whether the employer’s actions were consistent with past practice.
• Equitability – whether equal treatment was given to employees in the same position.
• Warning procedures – whether the employer made proper use of warnings. Was the employee given an oral or written warning before the dismissal?
• Offers of training or re-training – whether the employer considered retraining the employee for another position if he is not capable of doing his own job.
• Fair hearings – in cases where an employee is dismissed for misconduct or incapability the employee should be given a fair hearing so he is given the chance to state his case by producing evidence or calling witnesses if necessary.
• Appeals procedures – the employee should also be given an opportunity to appeal against the employer’s decision and so the question of whether the employer had an appeals procedure in place is also important.

Limitation period

A claim for unfair dismissal must be presented to the Tribunal within 3 months of the effective date of termination, subject to the early conciliation procedure
as described.

Remedies for unfair dismissal

There are 3 remedies available to the unfairly dismissed employee, namely reinstatement, re-engagement and compensation.

Re-instatement involves returning the employee to the same job. Re-engagement involves placing the employee in a similar job with the same, or an associated, employer.

While re-instatement and re-engagement are obviously important remedies, they are granted in fewer than 2% of cases.

Compensation is by far the most common remedy. There are two elements to this remedy – the basic award and the compensatory award.

Basic award

The basic award is based solely on past service and the amount awarded will depend on the length of service of the dismissed employee, their age and weekly pay.

The basic award is calculated using the fixed statutory formula set out below: [AGE FACTOR] x [SERVICE] x [WEEK’S PAY]

The employee’s age factor is as follows:

For each complete year of employment below the age of 22	½ a week’s pay
For each complete year of employment between the ages of 22 – 41 (N.B. There will be a year during which the employee turns 41 which will count as 1 week’s pay as the year does not count as a complete year during which the employee was 41 or over.)	1 week’s pay
For each complete year of employment when the employee is 41 or over until retirement	1½ weeks’ pay

 

The number of years’ service is subject to a maximum of 20 years.

The employee’s weekly salary is subject to a statutory maximum, which is revised annually.

Compensatory award

The compensatory award is the second element to the remedy of compensation. It is intended to cover the employee for the actual loss suffered. The compensatory award is also subject to a statutory maximum which is revised annually.

The Tribunal will look at the immediate loss of wages between the date of termination and the date of the hearing. In addition to wages, the Tribunal will also take into account loss of other fringe benefits including bonus payments, company car, pension rights etc. The employee should always attempt to mitigate his loss during this period by looking for another job. Any wages and benefits received by an employee from his new job will be taken into account by the Tribunal when granting an award. If the employee makes no attempt to mitigate his loss by finding another job, the Tribunal can reduce the amount awarded.

If the employee has still not found work by the time of the hearing, the Tribunal may also award an amount for future loss of wages and benefits. This involves a degree of guesswork and the Tribunal will need to establish how long the claimant is likely to remain unemployed taking into account the employee’s skills and the current market for such skills.

Where the Tribunal finds that the employer has not complied with the ACAS Code, it can increase the compensatory award by up to 25%. Equally if it is the employee that has failed to follow the ACAS Code, the Tribunal can decrease the compensatory award by up to 25%.

What is wrongful dismissal?

A claim for wrongful dismissal arises where the employer has dismissed the employee in breach of the terms of the employment contract by, for example, failing to give the employee any or sufficient notice.

In actions for wrongful dismissal, the court/Employment Tribunal’s only concern is whether the correct contractual requirements have been complied with.

The amount of notice which is required to be given to an employee will be determined by the terms of the employee’s contract but this is subject to a statutory minimum. Under the ERA 1996, employees are essentially entitled to one week’s notice if employed for more than one month but less than two years. Employees employed for two years or more are entitled to one week’s notice for every completed year of service up to a maximum of 12 years (i.e. 12 weeks’ notice).

Therefore, if the contract of employment gives less than what is required by statute, the statutory notice entitlements apply.

The only situation in which an employer is not required to give notice is where the employee is in very serious breach of contract, e.g. the employee has been caught red-handed stealing from the employer or has assaulted another member of staff. Dismissals without notice are referred to as ‘summary dismissals’.

Where the claim will be heard

A claim of wrongful dismissal may be made in the County Court or the High Court, or in an Employment Tribunal. Damages awarded for wrongful dismissal claims taken to the Employment Tribunal are subject to a limit of £25,000.

Since claims for wrongful dismissal are claims for breach of contract, the normal limitation periods apply and claims in the ordinary courts must be brought within six years of the date of the dismissal. Claims made in the Employment Tribunal must be brought within three months of the dismissal, subject to a mandatory early conciliation procedure. This is a period of conciliation using the Advisory, Conciliation and Arbitration Service (‘ACAS’) of up to one month before the claim is presented at the Employment Tribunal with the aim of encouraging parties to settle the claim. The clock on the time limit is stopped during this period and starts again if conciliation is not successful.

Remedy for wrongful dismissal

The remedy for wrongful dismissal is damages for breach of contract. The exemployee is therefore under a duty to mitigate his or her loss by seeking new employment. If the ex-employee finds a new job, this must be taken into account and damages reduced accordingly. If the ex-employee makes no attempt to mitigate his or her loss by trying to find another job the amount of damages awarded can be reduced.

Relationship between damages for wrongful dismissal and compensation for unfair dismissal

It is possible for an employee to have a claim for wrongful dismissal and unfair dismissal at the same time if, for example, he or she has been unfairly dismissed and was also not given the proper notice before his or her contract was terminated. In such cases, the compensatory element of the unfair dismissal award will be reduced by the payment received for wrongful dismissal, so that the employee does not benefit from double recovery.

Payment in lieu of notice clauses

A payment in lieu of notice clause (‘PILON’) allows the employer to pay the employee rather than require the employee to work during their notice period.

An employment contract often allows the employer the discretion to give the employee a PILON. If the employment contract contains a PILON clause and the employer dismisses the employee and pays him/her in accordance with the PILON clause – instead of employing him/her until the end of his/her notice period – there will be no breach of contract and no claim for wrongful dismissal. The main reason for having a PILON clause is to preserve any restrictive covenants that would otherwise be unenforceable because the employment would have been terminated in breach of contract.

Payments made under PILON provisions are usually taxable as earnings for income tax purposes.