British Labour Law - Job Security - Unfair Dismissal

Unfair Dismissal

In contrast to "wrongful" dismissal, which is an action for unjustified breach of the terms of an employment contract, "unfair" dismissal is a claim based in the Employment Rights Act 1996 sections 94 to 134A that governs the reasons for which a contract is terminated. The Industrial Relations Act 1971, following the Donovan Report 1968, set up its structure. Under ERA 1996 section 94 any employee who is employed for over one year may claim for an Employment Tribunal (composed of a judge, an employer and an employee representative) to review the decision of their dismissal, and get a remedy if the dismissal was not "fair" within the meaning of the Act. An employee is only "dismissed" if the employer has decided to end the work relationship, or if they have constructively dismissed the employee through a serious breach of mutual trust and confidence. In Kwik-Fit (GB) Ltd v Lineham Mr Lineham used the toilet at work after drinking at the pub, and in response to the manager rebuking him in front of other staff, he threw down his keys and drove off. He claimed he was dismissed, and the Tribunal agreed that at no time had Mr Lineham resigned. By contrast in Western Excavating (ECC) Ltd v Sharp Mr Sharp walked off because the company welfare officer refused to let him collect holiday pay immediately. Although Mr Sharp was in financial difficulty, this was due to his absences, and so he was not justified in leaving, and not constructively dismissed. An employee is also not dismissed if the relationship is frustrated. In Notcutt v Universal Equipment Co (London) Ltd a man's heart attack meant he could no longer work. The employer paid no wages during the ordinary notice period, but was successful in arguing that the contract was impossible to perform and therefore void. This doctrine, applicable as a default rule in general contract law, is controversial since unlike commercial parties it will be rare that an employee has the foresight or ability to contract around the rule.

Once it is established that a dismissal took place, the employer must show that their reason for dismissing the employee was "fair". Dismissal on grounds of union membership, or any protected characteristic in the Equality Act 2010, will be automatically unfair. Otherwise the employer has the opportunity to show the dismissal is fair if it falls within five main categories listed in ERA 1996 section 98. The dismissal must have been because of the employee's capability or qualifications, conduct, because the employee was redundant, because continued employment would contravene a law, or "some other substantial reason". If the employer has an argument based on one of these categories, then the tribunal evaluates whether the employer's actual decision fell within a "reasonable range of responses", i.e. that a reasonable employer could have acted the same way. Thus the review standard lies in between an outright perversity, or "Wednesbury unreasonableness" test and a forthright reasonable person test. It gives employers considerable latitude in the way they manage their workforce, as the Tribunal's job is not to substitute what it believes would have been fair, but only to intervene if a decision was arbitrary, harsh or contrary to acceptable business practice. There is also considerable room for Tribunals to assess the facts and come to their own conclusions, which can only be appealed on legal grounds, and not on their judgment of good workplace relations. For example, in a conduct case, HSBC Bank plc v Madden, the Court of Appeal held that it was acceptable for a Tribunal to have decided that dismissing an employee for potential involvement in theft of credit cards was fair, even though an actual police investigation turned up no evidence. By contrast, in Bowater v Northwest London Hospitals NHS Trust, an employer argued a nurse who, while physically restraining a naked patient, said "It's been a few months since I have been in this position with a man underneath me" was lewd and deserved dismissal for her misconduct. The Tribunal said the dismissal was unfair and the Court of Appeal held the Tribunal had competently exercised its discretion in granting the unfair dismissal claim.

Partly because the courts take a deferential approach to the employer's substantive reasons for dismissal, they emphasise the importance of employers having a fair process. The Advisory, Conciliation and Arbitration Service Code of Practice (2009) explains that good industry practice for disciplinaries requires, among other things, written warnings, a fair hearing by people who have no reason to side against the employee, or with any manager involved in the dispute, and the opportunity for union representation. Often a company handbook will include its own system, which if not followed will likely mean the dismissal was unfair. Nevertheless, in Polkey v AE Dayton Services Ltd the House of Lords held that, in a case where a van driver was told he was redundant on the spot, if an employer can show the dismissal would be made regardless of whether a procedure was followed, damages can be reduced to zero. In the Employment Act 2002, Parliament made an abortive attempt to instil some kind of mandatory minimum procedure for everybody, but after complaints from unions and employers alike that it was merely encouraging a "tick-box" culture, it was repealed in the Employment Act 2008. Now if the ACAS Code is not followed, and this is unreasonable, an unfair dismissal award can be increased by 25 per cent. Generally, under ERA 1996 sections 119 and 227, the principle for a "basic" unfair dismissal award is that, with a cap of £350 per week and a maximum of 20 weeks, an employee should receive one week's pay for each year employed if aged between 22 and 40, 1½ weeks if over 40 and ½ a week if under 22. By ERA 1996 section 123, the employee may also be entitled to a discretionary "compensatory" award, which should take into account the actual losses of the employee as just and equitable, based on loss of immediate and future wages, the manner of the dismissal and loss of future unfair dismissal protection and redundancy rights. This is capped, but usually increased in line with RPI inflation, and in 2010 stood at £63,500. Much lower, the median award for unfair dismissal, without any element of discrimination, was £4903 in 2009–2010.