Key issues in involuntary dismissals

Unfair Dismissal and Wrongful Dismissal

It is extremely important to appreciate the difference between these types of dismissal. They give rise to significantly different remedies and legal processes. Learn the difference and be careful how these phrases are used.

Wrongful Dismissal is where an employer has acted in breach of the employment contract agreed with the employee.

Unfair Dismissal is where the employer has dismissed the employee in breach of a statutory duty to treat employee fairly.

For example, the written contract may require the employer to give three months notice of termination. If the employer decides to get rid of the employee he can just dismiss the employee without giving any reason at all. Provided three months notice is given, the employer has not acted in breach of the employment contract. Therefore there will be no claim for Wrongful Dismissal.

However, statute law requires that all qualifying employees must be treated fairly and for a good reason. This is discussed further below. Accordingly, even though there is no breach of contract there will be a claim for Unfair Dismissal.

There are very important differences between these claims.

In particular, for claims under Pounds 50,000 Unfair Dismissal actions are much more attractive for employees. The do not involve a court hearing ? only before a less intimidating tribunal. They are substantially cheaper, easier to bring and employers often find it easier to offer the employee some damages rather than to fight the case.

For this reason we will look at Unfair Dismissal cases first.

1. Unfair Dismissal
To win an Unfair Dismissal claim the employee must:

  • have been employed at the time of dismissal (ie independent contractors etc are not covered.)
  • have been employed for at least 12 months (unless making a claim for unfair dismissal relating to sex or race discrimination and a few minority cases.)
  • be under 65 (or the ‘normal retirement age’ for that particular job.)
  • ordinarily work in the UK.
  • make a claim within three months of dismissal.

    There are a few other exceptions where the act will not apply. This covers employees on fixed term contracts of no more than two years who agree from the outset to waive such rights (NB only applies to fixed term contracts) and certain categories of civil servants, the police and the armed forces.

    Assuming the above test is satisfied we then need to look at the reason for the dismissal. Dismissal will be either Automatically Unfair or Potentially FairAutomatically Unfair Dismissals.

    If the dismissal is ‘Automatically Unfair’ then the employee has an automatic right to compensation. There is a big surge in the number of claims under this heading so let’s examine this in a bit more detail.

    The employee is classed as automatically dismissed unfairly if the reason is based on sex or race or disability discrimination or because of pregnancy or related to pregnancy. There are other reasons that are automatically unfair, but these are by far the most important.

    As you will see, an employee can easily and cheaply claim dismissal on grounds of sex or race discrimination. This is a very dangerous minefield for employers and if the tribunal finds in the employee’s favour there is an automatic right to compensation. It is hardly surprising that there has been a big growth in the number of claims being made here. See the separate section on discrimination. Sex and Race discrimination cases have a very broad application. That is why lawyers spend a lot of time looking at all facts to see if they can build a case under this heading.

    If in any disciplinary matter an employee uses the words ‘discrimination’ or ‘pregnancy’ then shut up! Take a detailed note of what the employee is saying, read back the comments to check for accuracy, suspend the meeting and take advice from the HR department or professional advisers. Don’t agree with anything said by the employee; just take a careful note for later meetings. Careless talk can very easily backfire and costs money.Remember ? a dismissal for sex or race discrimination or pregnancy is automatically unfair with an automatic right to compensation.

    Potentially Fair Dismissals
    Dismissals that are not ‘automatically unfair’ are in most cases labelled ‘Potentially Fair’. The onus is on the employer to show that the reason for dismissal was one of five Potentially Fair reasons, namely that the dismissal was due to:

  • Lack of capability or qualifications
  • Conduct
  • Redundancy
  • Statutory illegality or
  • Some other substantial reason

    ‘Conduct’ is by far the most popular reason.

    Assuming that an employer can show the dismissal was for a ‘Potentially Fair Reason’ the tribunal will then examine whether dismissal was a reasonable step to take. It is not for the tribunal to decide what it would have done in those circumstances, merely to identify whether the decision to dismiss was a reasonable one.

    Having determined that the decision was a reasonable response, the tribunal will then look at whether the disciplinary process was fairly administered.This is where the fun starts!

    An employer should be extremely careful in handling any disciplinary action. Even if there are good reasons for dismissal an employee may still win compensation if he can show that any procedures were unfair.

    Sharon Murphy was dismissed for misuse of a confidential database. The particular system in question was used to check if a customer is entitled to Income Support. ‘Out of boredom’ she claims to have queried her own National Insurance details on the system and was subsequently dismissed for gross misconduct. Did the employer overreact? Would this be a case of unlawful or unfair dismissal if there were no clearly-stated rules on breach of trust in her contract?

    In practical terms an employer must:

  • Conduct a thorough investigation
  • Hold a fair disciplinary hearing
  • Allow the employee the right of appeal against any decision
  • Make proper use of warnings (ideally verbal, first written, second written etc)
  • Be consistent with past practices
  • Treat joint offenders equally
  • Consider alternative action eg demotion, retraining
  • Consider employees length of service.

    At any hearing the employer must:

  • Explain the purpose of the meeting
  • Introduce everyone present
  • Inform the employee of allegations
  • Allow him to be represented
  • Give the employee a substantial opportunity to defend himself.

    Any employer that fails to adopt the above will almost certainly lose before a tribunal.

    A Bus Driver loses his driving licence whilst drink-driving off duty and is dismissed
    Potentially Fair Reason to dismiss? Yes ? illegality. Cannot drive a bus without a licence.
    Fair process? Depends on circumstances. In particular was any effort made to find alternative non-driving work? If a fair process is, genuinely, followed the dismissal should be fair.

    Dismissal for emailing pornography to colleagues?
    Potentially Fair Reason? Yes ? conduct
    Fair process? Nightmare!
    Has the company made expressly clear that this is a serious offence, ideally setting out consequences?
    Were sufficient warnings given?
    Were ALL employees treated the same in these circumstances?
    Is action consistent with past actions for similar offences?
    Treating a ‘star’ employee leniently or turning a blind eye can therefore have disastrous consequences if other employees are subsequently dismissed for the same offence.

    Employee refuses to learn how to use the web, preferring other tools. Potentially fair reason? Yes, conduct? Capability?
    Fair Process? Need to show that seriousness was made clear to employee.Training resources were allocated.
    Time given to learn and practice skills.
    In these circumstances the dismissal should be fair.

    2. Remedies
    There are 3 potential remedies the tribunal may order;

  • Re-instatement (into the same job)
  • Re-engagement (into a similar job)
  • Compensation

    Compensation is by far the most common. There are two elements to the amount of compensation;

  • Basic Award
  • Compensatory Award

    Basic award
    You will not get rich quick!
    The Basic Award is calculated by a specific formula: Age by Completed Years of Service by Week’s Pay

  • Age
  • a. Multiplier of 0.5 for any service where employee is under 22 years of age
  • b. Multiplier of 1.0 for any service where employee is between 22 and 41 years of age
  • c. Multiplier of 1.5 for any service where employee is over 41 years of age
  • Completed Years of Service ? to maximum of 20
  • Weeks Pay TO MAXIMUM OF Pounds 230 per week.
    Therefore maximum award is 1.5 x 20 x 230 = Pounds 6,900.

    3. Constructive Dismissal
    This is a contentious area of law but one that arises in many employment disputes. It is a major trap for the unwary.

    Constructive Dismissal is not a formal dismissal as such. It arises when the employee feels he is forced to resign because of the conduct of his employer. The employer then treats that resignation as if it was a dismissal, with rights to compensation and other remedies.

    A throw away line by a frustrated manager can be used to enable an employee to leave immediately. This is why it is very important to be extremely careful. Constructive Dismissal arises where an employee shows that the actions of the employer have made the position intolerable. Obviously this depends on the circumstances of any case but in essence the employee must show:

  • That the employer’s actions are a serious breach of contract
  • That the employee acted quickly

    This has covered:

  • Harassment
  • Bullying
  • Abuse (physical and verbal)
  • Unilateral changes to employee’s status
  • False accusations of misconduct or incapability

    In one of the leading cases a manager shouted to an employee ‘You can’t do your bloody job anyway’, within earshot of other employees. This was held to have so seriously undermined the implied duty of mutual trust that the employee was entitled to claim constructive dismissal.

    The employee must act very quickly if he or she wants to claim constructive dismissal. He or she must walk out. This requires a lot of brinkmanship by the employee. It requires b nerves as much as a b legal position.


  • Learn and understand the implied terms of the employment contract
  • Don’t get into heated arguments, or if you do, be extremely careful about what you say
  • If you are the employee, you must have the confidence to take the decision to leave

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