Has there been a dismissal?
Usually it is obvious whether a dismissal has taken place. The employer will have told the employee he/she is dismissed, and will usually have confirmed it in writing.
Sometimes, it is more complicated – for example if an employer says something unclear which the employee takes as a dismissal but which the employer did not mean as one.
If an employer acts in a way which undermines the relationship between employer and employee, or commits a breach of contract (such as not paying wages), the employee is entitled to resign and claim ‘constructive dismissal’. This is a phrase meaning the resignation is deemed to be a dismissal, because of the way the employer has acted, and is addressed in more detail below. Note that just because an employee has been constructively dismissed, it does not necessarily mean he/she has been unfairly constructively dismissed (or, if he/she has less than one year’s employment, that he/she can claim unfair dismissal).
What is unfair dismissal?
Unfair dismissal is where an employee claims against an employer that the decision to dismiss was unfair.
To qualify to bring an unfair dismissal claim in the Employment Tribunal a person must meet a number of criteria:
- He/she must be an employee (rather than self-employed or, in most cases, working through an agency)
- He/she must normally have at least one year’s continuous employment
- He/she is aged 65 or below (or the normal retirement age for your occupation)
- He/she must be in employment in Great Britain
- He/she is within the 3 month time limit for bringing a claim to the Employment Tribunal
Is the dismissal fair?
If an employee is sacked, the burden of proof is on the employer to show that the principal reason for the dismissal was a potentially fair one. There are five potentially fair reasons under the Law
- Legal obligation to end employment (for example, where a driver loses his driving licence)
- Some other substantial reason (SOSR), such a clash of personalities, business reorganisation
The Tribunal then decides whether the employer acted reasonably in treating the chosen potentially fair reason as a sufficient reason for dismissing the employee, having regard to the size and administrative resources of the employer and the substantial merits of the case.
This introduces what is called the “band of reasonable responses” test, meaning, did the response of the employer fall within a band of reasonable responses of a reasonable employer having carried out a reasonable investigation. If the Tribunal thinks that no reasonable employer would have dismissed for the offence, the dismissal will be unfair. However, if the area is a grey one, where some employers might have dismissed but others might not, the dismissal will be fair even if the particular Tribunal hearing the case would not have dismissed in those circumstances.
Compensation for Unfair Dismissal
If successful a claim for unfair dismissal will lead to damages being awarded by the Employment Tribunal.
The damages are made up of two elements, namely
- The basic award
- The compensatory award
Basic Unfair Dismissal Award
There are two main elements in the calculation of the basic unfair dismissal award. These are the employee’s length of service at the effective date of termination and the employee’s age at the time of dismissal.
For the purposes of calculation a maximum of £450 per week gross is allowed (effective 1 February 2013), and up to a maximum of 20 years’ service (maximum of £13,500 (effective 1 February 2013)). The calculation depends on the age of the employee and uses a multiplier:
- half a week’s pay for each year of employment in which the employee is under the age of 22
- one week’s pay for each year of employment in which the employee is below the age of 41 but not below the age of 22
- one and a half week’s pay for each year of employment in which the employee was not below the age of 41
If the employee is aged between 64 to 65, then the basic award is reduced by one twelfth every month up to the 65th birthday when it becomes nil.
The Basic Award can be reduced if the employee refuses an offer of reinstatement (and it is held to have been unreasonably refused), if the employee is held to have contributed to his/her own dismissal by his/her conduct, and by any payments already made to the employee, for example, money in lieu of notice or redundancy payments.
Unfair Dismissal – Compensatory Award
For dismissals where the effective date of termination falls after 29 July 13, the compensatory award is capped at £74,200 or 52 weeks’ pay, whichever is the lower. If the EDT is before 29 July 13, the award is capped at £74,200.
The elements that make up the award are:
Loss of wages up to the date of the Tribunal hearing
This covers the period from the end of the notice period (or dismissal) to the date of the Tribunal hearing,less any earnings from new employment, or to the start date of a new job if higher paid.
Future Loss of Wages
As estimated by the Tribunal. If a new job has been found then this element is not included unless theemployee’s new employment pays less, in which case the Tribunal estimates this future loss. MostTribunals will award between 6 and 12 months’ future loss, although in some cases Tribunals canaward significantly more.
Loss of Associated Benefits
Loss of car, health benefits, share options, pension loss, etc.
Loss of Employment Protection
Usually £250 to £350
Loss of pension rights /contributions Expenses in seeking work
Case law has now established that there is no compensation payable for stress or injury to feelings in unfair dismissal claims.
Unfair Dismissal – Reduction in the Compensatory Award
The employee is under a duty to take reasonable steps to reduce his/her loss by gaining alternative employment as soon as possible. This is called “mitigation”. Any failure to mitigate will limit loss of earnings awarded.
Any conduct on the part of the employee before the dismissal, which contributed to that dismissal, may lead to the compensation being reduced.
In any circumstances where the Tribunal considers it just and equitable to reduce the Compensatory Award, it may do so. This may sometimes be seen where the employer discovers after the dismissal that the employee was guilty of some serious misconduct other than that which he/she was dismissed for.
If the dismissal is held to be procedurally unfair, the Tribunal will ask itself the question whether this failure would ultimately have made any difference to the outcome. If not, then compensation will be limited to the period it would have taken for a proper procedure to take place before a fair dismissal could have occurred. This is commonly known as a “Polkey” reduction.
An additional award is made if the employer fails to comply with an order made by the Tribunal for reinstatement or re-engagement unless the employer satisfies the Tribunal that it was not practicable to comply.
If the Tribunal orders the employee be reinstated and the employer fails to carry out this Order, an additional award of between 26 and 52 weeks’ pay can be made at a maximum of £450 per week (effective 1 February 2013).