Unfortunately, it is sometimes necessary for an employer to dismiss one or more employees. There are a variety of reasons why this situation may arise. Dismissing an employee can be a costly exercise, particularly where an employer does not have a fair reason for the dismissal or fails to follow a proper procedure. Several other issues may also arise from dismissals, such as their effect on the morale of the remaining employees or damage to the reputation of the business.
Where an employer dismisses an employee without giving the required period of notice, the employee may be able to make a claim for wrongful dismissal. Where an employer dismisses an employee for a reason other than one allowed by law or without following a fair procedure, the employee may be able to make a claim for unfair dismissal. Irrespective of whether a claim succeeds, the management time and legal costs spent in defending it may be significant. Often, they are not recoverable.
It is important for employers to consider fully whether there are any alternatives to dismissal. The existence and availability of alternatives will, inevitably, depend on the individual circumstances of the case.
What is a dismissal?
A dismissal occurs in the following 3 scenarios:
(a) Termination by employer – Where the employer terminates the employee's contract of employment with or without notice;
(b) Resignation of employee – Where the employee resigns with or without notice and can establish that he or she was constructively dismissed; or
(c) Expiry of contract – Where the employer does not renew a fixed-term contract of employment on the expiry of the employee’s fixed term contract.
What is wrongful dismissal?
Claims for wrongful dismissal are based on contract law. Typically, they arise in connection with the period of notice given to an employee in relation to the termination of the employee’s contract of employment.
The period of notice to be given by an employer to an employee is usually stated in the employee’s employment contract. However, save in certain circumstances, the notice period must not be shorter than the statutory minimum notice period. The statutory minimum notice period is one week for each complete year of employment up to a maximum of 12 weeks.
Sometimes a contract of employment includes a payment in lieu of notice (PILON) clause. In such cases, an employer may pay a sum of money to the employee instead of the employee working during the notice period.
Wrongful dismissal claims will generally be for the salary and benefits due to the employee in relation to the notice period.
There is no minimum length of service requirement for an individual to claim wrongful dismissal.
What is unfair dismissal?
In general terms, the dismissal of an employee will be unfair unless it has been made for one of the following 5 reasons.
(a) Conduct - This could be a single act of misconduct by an employee or a series of less serious acts;
(b) Capability or qualifications - This includes matters such as poor performance, ill-health and the formal qualifications of an employee;
(c) Redundancy - This includes matters such as workplace closure, business closure, or reduced need for employees;
(d) Illegality - This includes matters such as where continuing to employ the employee in the position they hold would contravene a statutory restriction (for example, because of their immigration status); or
(e) "Some other substantial reason" (SOSR) - This is a catch-all category of potentially fair reasons that do not fall under the other categories.
Where one of these 5 reasons for dismissal applies, the dismissal will be potentially fair. However, even where there is a potentially fair reason for dismissing an employee, an employer must still follow an appropriate fair procedure before deciding whether to dismiss an employee.
Even if there is a potentially fair reason for the dismissal and the employer has followed a fair procedure, the employer must also act reasonably in treating that reason as a sufficient reason for dismissal. Accordingly, an employer is likely to have to consider and take into account different factors, depending on the reason for dismissing an employee (for example, it may be that an employer will have to give the employee a chance to improve before dismissing an employee on the grounds of capability. All the circumstances of the case will be relevant when determining whether an employer acted reasonably, including matters such as the size and resources of the employer.
Generally, employees must have two years' continuous employment before they can bring a claim for unfair dismissal. However, in certain circumstances a dismissal is deemed to be automatically unfair (for example, where the dismissal was for reasons connected to pregnancy or childbirth, whistleblowing or asserting a statutory right) and in most of those cases, employees do not need a qualifying period of two years' continuous employment.
There are special rules applying to dismissals in various circumstances, for example, during a strike or other industrial action.
If you would like more information about dismissing an employee or would like to discuss a potential or existing dismissal, please email us at email@example.com, complete an Enquiry Form or call us.