Last updated on October 9th, 2020 at 09:50 am
Your rights: Unfair and constructive dismissal
As the dust of the first and hopefully last wave of COVID-19 begins to settle and furlough schemes come to end, the damage to the job market is evidently palpable. The disparity between those looking for jobs and jobs available has been well documented. As more employees face redundancies and dismissal, knowing what rights you have as an employee will be paramount for navigating through this mess.
Within UK employment law there are multiple types of dismissals: fair, unfair, constructive and wrongful, to name a few. One could write a fully-fledged article on each type but this article will address the two most commonly seen by our employment law team.
Per s.94(1) of the Employment Rights Act 1996, an employee has the right not to be unfairly dismissed. In essence unfair dismissal occurs when your contract of employment is terminated by the employer without a legitimate reason.
There are five main legitimate reasons for dismissal, these are:
- the dismissal relates to the capability or qualifications of the employee;
- assessed by reference to skill (and/or lack of qualifications and incompetence), aptitude, health, or any other physical or mental quality;
- the dismissal relates to the employee’s conduct, this can be in the form of one event of gross misconduct or multiple minor instances of misconduct;
- the dismissal was on the grounds that the employee was redundant;
- i.e. the business ceased to operate, the place of work closed down, need for employees to do work of a particular kind ceased/diminished;
- the dismissal helped avoid the contravention of law;
- e.g. expiry of a work permit or someone not suitable to work with children; and
- the dismissal was fair, due to some other substantial reason;
- i.e. where it is impossible for employment relationship to continue but grounds cannot be specifically cited.
The claim must be brought within three months of the effective date of termination. In accordance with s.111(2) ERA 1996, this time limit can be extended, if the tribunal are satisfied that it was not reasonably practicable for the complaint to be presented before the end of the period.
To bring a claim for unfair dismissal the individual must be an employee, this is an individual who works or worked under a contract of employment. If you are a worker or self-employed contractor, you cannot claim for unfair dismissal, though you could be entitled to an alternative claim; such as an unlawful detriment claim due to the termination of a contract.
A further general requirement to claim unfair dismissal, is that the employee must have completed their qualifying period. This is a period of continuous employment up to the effective date of termination, usually this is two years. However, in some exceptional cases, such as those dismissed on medical grounds, political opinions or those granted automatic unfair dismissal, the qualifying period may not be required.
You must be working within Great Britain at the time of the dismissal, only in very exceptional cases will employees based abroad be entitled to a claim of unfair dismissal.
You may be excluded from the right to claim for unfair dismissal if you were employed illegally, whether in the performance of your duties or the manner of your employment, such as an immigrant without the appropriate working consents. If you have accepted a settlement of some description this will preclude your right to bring a claim. Or conversely, if you have already brought a claim and it was dismissed, you will not be permitted to bring a claim on the same basis. If you participate in industrial actions, you may lose your right to an unfair dismissal claim, the nature and legality of the actions will influence how much of your protection you may lose.
Once an employee establishes that they have been dismissed, the burden of proof will shift to the employer. The employer must state the reason for the dismissal and that said reasons falls within one of the five potentially fair reasons, listed above. The employer must have an honest belief (at the time of dismissal) based on reasonable grounds only known to him at the time of dismissal (retrospective knowledge is irrelevant).
If the employer establishes the potentially fair reason, the tribunal will then examine the facts and deduce whether or not the employer acted reasonably when dismissing the employee. The test for reasonableness is provided for in section 98(4), essentially the test is examines whether the employer followed fair procedure and upon using that procedure, whether the employer acted reasonably in response (aka the “range of reasonable responses” test).
- Had any previous warnings been given or previous action taken?
- Is it consistent with employer’s past practices?
- Would an alternative option be better e.g. retraining, a further warning, suspension with/without pay, etc.?
- Was there an option to appeal?
The common remedies for unfair dismissal are a basic award, a compensatory award or in some cases a reinstatement or re-engagement order.
The basic award
The basic award is calculated with a formula that takes into account, the age of the employee, their length of service and their weekly pay. The tribunal may award a minimum amount or reduce the basic award at their discretion, if they deem it to be just and equitable to do so. This would likely occur when the employee’s conduct falls below the required standard or if they unreasonably refuse an offer of reinstatement.
The compensatory award
The compensatory award, is awarded at the tribunal’s discretion as it considers just and equitable to do so, having regard to the financial loss sustained by the employee. Financial loss includes salary, pensions, bonuses, expenses, commission and other benefits.
The calculation for employee’s loss for the compensatory award will begin with an assessment of the loss between the effective date of termination and the date of tribunal/remedies hearing. If the employee receives pay instead of having to serve their notice period aka pay in lieu of notice, then this will be taken into account in the calculation of the award for the benefit of the employer. Additionally, if the employee obtains alternative employment during the period between their original effective termination date and the date of the tribunal, then that too will be accounted for in the calculation.
As with the basic award, the compensatory award can be reduced, the scope for reductions is wider than the basic award. A key reduction is known as the Polkey deduction, this occurs when an employer fails to follow the correct procedure and unfairly dismisses the employee. The tribunal may determine that the employee would have been dismissed in any event, whether procedure was adhered to or not. If this is found then the tribunal will award an amount on a just and equitable basis. Other reductions can relate to if the employee’s conduct contributed to the dismissal or if the employee failed to mitigate loss post-dismissal i.e. by failing to look for new work/employment after dismissal.
Reinstatement or re-engagement order
A reinstatement order would require the employer to re-employ the employee with the same contractual provisions that the employee would have had, had they not been dismissed. With a re-engagement order the tribunal will prescribe terms that must be adopted by the employer. These prescribed terms must be comparable to the job in which the employee was dismissed from. Note, that reinstatement or re-engagements orders are a rare occurrence.
This relates specifically to the conduct of the employer directly causing the employee to terminate their contract of employment without notice. To establish constructive dismissal, the employee must show four key elements have been satisfied, these are:
- The employee must resign i.e. be the one who terminates the contract.
- The employer must commit a repudiatory (fundamental) breach, be that express or implied.
- The resignation must be in response to the breach.
- The employee must not unreasonably delay the resignation.
Though the above seems fairly straightforward, it is recommended you should seek professional legal advice, before resigning. The same periods and time limits that apply to unfair dismissal, apply to constructive.
Examples of fundamental breaches towards the employee include:
- being required to act unlawfully or conversely the employer acts unlawfully;
- pay cuts without reason;
- if the employer’s behaviour is out right intolerable; and
- failing to make reasonable adjustments for your disability.
It is possible to bring a claim against a co-worker for constructive dismissal, even when said co-worker does not have actual authority to dismiss. When presenting this claim, we enter the realm of vicarious liability, which is beyond the scope of this article. But in essence an employer can still be responsible for the actions of co-worker or in very exceptional cases, a third party.
The nature of constructive dismissals and the necessity for a fundamental breach can have the effect of releasing the employee from any restrictive covenant clauses stipulated in the employment contract. If an employer is in breach of the contract, they cannot then in the future, seek to rely on the terms within it.
This greatly favours an employee it means that they would not be subject to non-compete clauses, freeing the employer to work for a competitor. The employee will also be entitled to contact old clients, without fear of reproach. It is likely though that the employer would take steps pre-tribunal to prevent the above occurrences.
How we can help
Here at the Jonathan Lea Network, we handle varying forms of dismissal within our dedicated employment team. Please do get in touch and we will provide you with a competitive quote.