Part and parcel of running a business – whether it’s as a sole trader, as a partnership or as a company – is hiring and firing people that work for the business. Certain regulations apply when people are hired (i.e. it’s unlawful to discriminate against potential recruits because of their protected characteristics) and, equally, when they’re fired. We’re going to take a brief look in this post at the obligations that employers have when they’re looking to fire employees and – specifically – what employees can lawfully be dismissed for. This will involve a look at:

  1. How do you know if an employee has been dismissed?
  2. What are the potentially fair reasons for dismissal?
  3. What happens if none of the potentially fair reasons apply?
  4. Who can claim unfair dismissal?

How do you know if an employee has been dismissed?

This is normally fairly obvious – the employer will communicate in some method (whether verbally or in writing) that the employee’s contract of employment has been terminated. A dismissal can either be with or without notice.

What are the potentially fair reasons for dismissal?

If an employer dismisses an employee then it must show that there is a potentially fair reason for the dismissal under the Employment Rights Act 1996. The six potentially fair reasons are:

  1. Conduct
  2. Capacity / competence
  3. Illegality
  4. Redundancy
  5. Retirement
  6. Some Other Substantial Reason

Conduct

There is no statutory definition of “misconduct” (unlike redundancy, for example, or capacity) but it generally encompasses situations where an employee undertakes (or fails to undertake) an action which – in some form – detriments his employer. Common situations include theft from the employer, violence inside or outside the workplace, sexual harassment, gross negligence or discrimination.

Capacity / competence

If an employer is attempting to dismiss an employee because it believes they are underperforming, the employer must be able to demonstrate that it has reasonable grounds for believing that the employee was incompetent and, further, that a fair procedure has been followed in dismissing the employee for their lack of capacity.

Illegality

Illegality is one of the less common reasons for dismissal and generally occurs if, for example, an employee has a requisite licence revoked (such as a driving licence or a licence to use specific equipment) or if it is subsequently discovered that the employee is not allowed to work in the United Kingdom. Again, the employer must be able to demonstrate that it had reasonable grounds for believing that the employee could not (or is not allowed to) carry out their job, resulting in the necessity of their dismissal.

Redundancy

Redundancy is one of the three most common reasons for dismissing an employee (the other two being “conduct” and “capacity”). The employer must be able to give a reason for the redundancy (i.e.  a reduced requirement for staff in a particular location or that the business itself is going into administration) but the Employment Tribunal generally gives a great deal of scope for employers to make redunancies. However, any redundancy must be carried out in a fair manner – for example, a fair pool of employees for redundancy must be constructed, fair selection criteria must be created and applied, there must be the appropriate amount of consultation, and the decision to make the employee redundant must have been in the reasonable range of decisions open in the circumstances (among other things).

Retirement

An employer must follow a fair procedure in dismissing an employee for the reason of “retirement” and must make a reasonable decision that the employee cannot undertake their job any longer because of their age. Employers must be careful in dismissing an employee for this reason as they could also open themselves up to a claim for discrimination and, potentially, automatic unfair dismissal.

Some Other Substantial Reason

Some Other Substantial Reason (or “SOSR”) applies to reasons for dismissal which do not encompass the three normal “potentially fair reasons” above (redundancy, competence and conduct). The most common SOSR dismissals are for reasons of reorganisation, including the variation of the contract of employment or where two employees are antagonising each other at work.

What happens if none of the potentially fair reasons apply?

If none of the potentially fair reasons apply in the circumstances – or an employer has dismissed the employee without reason – then the employee’s claim for unfair dismissal will automatically succeed.

Who can claim unfair dismissal?

Employees (persons with a contract of employment with their employer) with more than one year’s continuous service (or two years if they’re employed on or after 6 April 2012) with their employer can make a claim for unfair dismissal in the Employment Tribunal.

Redmans Solicitors are employment law solicitors and settlement agreement solicitors based in London.

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About Redmans Employment Team

Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees

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