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Understanding Dismissal Types: An Employer’s Guide

16th September 2024 by Alana Penkethman

Categories: What's New?
Tags: dismissal, employer, redundancy, unfair

It is always disappointing when an employee does not perform as anticipated, or when the relationship has turned sour, and you wish to part ways. It is important to take legal advice on any move towards dismissal, as employees enjoy various legal protections depending on the type of dismissal, their length of service, and several other factors.

It’s easy to get it wrong when it comes to dismissing an employee, leading some employers to mistakenly believe they can terminate someone who hasn’t been with the company long without the risk of an employment tribunal claim. However, employees can be protected from dismissal starting from their first day, and there are potential pitfalls, such as inadvertently releasing an employee from contractual restrictions by dismissing them without proper notice.

This guide explores the various types of employee dismissal, outlines the service requirements, and highlights risks to employers. It also provides tips to avoid these risks and addresses the concept of constructive dismissal.

Wrongful dismissal

Wrongful dismissal occurs when an employee is dismissed without sufficient notice, in breach of their contract of employment. The only lawful situation justifying dismissal without sufficient notice (or a payment in lieu of notice), is when the employee is dismissed for serious misconduct. This is called a ‘summary dismissal’, and we recommend speaking to us first to make sure that you are on safe ground.

Risks and tips

Wrongful dismissal can result in the employee bringing a claim, either in the employment tribunal or the county court, for the shortfall in notice pay and loss of benefits they would have received during the notice period. Whilst litigation can be difficult, there are other risks of breaching the contract.

An employee’s contract may contain restrictive covenants that restrict their actions after their employment ended, for example preventing them from poaching your staff. Therefore, if their contract is breached by a wrongful dismissal, they will be released from these restrictions.

Similarly, making a payment in lieu of notice without the contractual right to do so would also release the employee from restrictive covenants.

If you want to end the employee’s employment quickly and ensure restrictive covenants are still binding, we can review the contract and advise on other options that could achieve this.

Carefully check the most up-to-date version of the employee’s contract to ensure that you give the correct notice, and that the notice is at least as long as the statutory minimum.

Unfair dismissal

This is distinct from wrongful dismissal. If an employee has two years’ service, they can have the right to bring a standard unfair dismissal claim. A tribunal may treat a dismissal as unfair unless the employer has followed a fair process, and unless the employee has been dismissed for one of the five statutory fair reasons:

• redundancy;
• capability or qualifications;
• conduct;
• illegality; or
• some other substantial reason.

Risks and tips

If an employee brings a claim for unfair dismissal which is successful at the tribunal, they are entitled to a basic award (based on their age, service, and earnings), as well as compensation for loss of earnings (up to a statutory cap). Damages can be increased by up to 25% for failure to follow the Acas Code of Practice on disciplinary and grievance procedures.

Employers should ensure that one of the statutory reasons for dismissal applies, and should then follow the correct procedure applicable to that reason. Having up-to-date and well-drafted policies will put you in a good position.

For employees who have been with your business for less than two years, take caution before assuming that you can dismiss without a fair reason or process. Employees may actually have longer service, for example, if they transferred to your business or they had breaks from work that could be deemed to count towards their continuous service. Do not be tempted to give less than the statutory minimum notice to squeeze in a dismissal date before they reach two years’ service, as this will not work. 

Even if a fair reason for dismissal applies, be alert to any factors that could make the dismissal discriminatory, or any other factor that may give the employee protection, regardless of service. For example, where the dismissal decision is influenced by unconscious bias against an employee with a protected characteristic such as race, or where the employee argues that they are being selected for redundancy because they raised concerns about health and safety, the dismissal may be automatically unfair.

Protection from dismissal from day one

There are many exceptions to the two-year service requirement to bring a claim for unfair dismissal, where the employee is protected from dismissal from their first day. Examples include dismissals related to:

• discrimination related to the employee’s protected characteristic, such as their gender or nationality;
• exercising or trying to exercise employment rights, such as making a request to work flexibly or claim the national living wage;
• pregnancy or taking family-friendly leave; and
• health and safety reasons or whistleblowing.

Risks and tips

In addition to not needing a minimum period of service for some of these reasons, like whistleblowing or discrimination, there is no statutory cap on the compensation that the employee can recover, unlike a straightforward unfair dismissal. Before dismissing, it is worth taking a step back, particularly if the employee raises concerns, to check that there are no factors that may inappropriately influence the dismissal decision.

Constructive dismissal

Constructive dismissal is not a consequence of the employer actually dismissing the employee; instead, the employer’s treatment of the employee is such that the employee is entitled to resign and consider themselves to be dismissed.

Examples of conduct that is sufficiently serious for this include:

• changing significant contractual terms without the right to do so, or without the employee’s consent; and
• acting in a way that destroys trust and confidence between the employer and employee, including subjecting the employee to discrimination.

For purposes of bringing claims, the law treats a constructive dismissal the same as an active dismissal by the employer.

How we can help

We can provide you with clear, practical procedures that support managers in dismissing staff and encourage consistent treatment across the business. We can advise on all stages of the process and give pragmatic advice on mitigating risks.

For further information, please contact one of our Employment experts.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.