Dismissal & Termination

When an employment relationship comes to an end both the employer and the employee have certain legal rights. Sometimes an agreement is reached between the employer and employee as to the terms of settlement.  We explain how to ensure that this accords with employment rights.

If an employee resigns and alleges that this is because of the way they have been treated,  it may be possible for the employee to bring claims for constructive unfair dismissal and constructive wrongful dismissal.

Constructive dismissal means that you have “torn up your employee’s contract of employment”.  You will not issue a letter of notice or immediate dismissal, but the effect is the same.

For an employee to succeed with a claim for constructive dismissal, they need to prove to an employment tribunal that:

• you are responsible for a fundamental (very serious) breach of contract
• the employee resigned because of this
• the employee has not done or said anything which shows that they have accepted the breach of contract.

Examples of a fundamental breach of a contract of employment could include:

• bullying by management 
• certain imposed changes of job
• a pay cut without agreement
• unjustified disciplinary action
• discrimination on the grounds of disability, sex, race or for other unlawful reasons

There may be one fundamental breach or sometimes there is a series of less serious breaches with the last being the ‘final straw’. 

It is very often advisable to try to sort out your employee’s problems beforehand to try to prevent a constructive dismissal claim in an employment tribunal.  This can be done by using your grievance procedure.  If that is unsuccessful, the employee will need to make a decision as to whether to carry on in their job or to leave.  

Constructive dismissal claims

Constructive dismissal is a breach of contract claim. If the employee was entitled to resign, you will be deemed to have failed to give them notice.  This is constructive wrongful dismissal.

If the employee has sufficient qualifying service, at least 2 years, they may also be able to bring an unfair dismissal claim. This is constructive unfair dismissal.  In some cases they may be able to bring a claim of this kind without a period of qualifying service.

Legal advice in connection with constructive dismissal needs to be taken without delay to prevent a potentially valuable claim.  You may be able to counterclaim, arguing that the employee is in breach of contract by resigning without giving notice. 

Our solicitors can advise your company about all aspects of the dismissal and termination process.

When an employment relationship comes to an end both parties have certain legal rights.  This includes the right to require an employee to work their notice in accordance with their contract of employment.

Your obligation to give notice

Apart from in cases of very short employment, the law requires that you must give details of the entitlement to notice in writing to all employees. This must include the notice which the employee must give to you when they decide to leave.  These periods do not have to be the same, although they often are.  Some employees have quite long notice periods and these rights can be very valuable. The law provides for the minimum notice that you are obliged to give. This is their statutory notice entitlement.

The notice period has important legal consequences. 

During this period, the employee remains bound by the terms of the contract of employment.  This means that they are entitled to be paid and to receive their employment benefits in the normal way.  If their employment is terminated without full notice, they will have a claim for lost pay and benefits during the notice period.   This is known as a claim for wrongful dismissal.

However there are alternatives to allowing the employee to remain at work. 

• You may be able to pay them in lieu of notice.  This is a payment which takes into account the entitlement to pay and benefits for the notice period or the remainder of it.
• You may be able to put them on garden leave. This is a requirement that the employee must remain away from work but they are paid in your normal way until their notice expires. This is normally used when you want to keep the employee away from customers or clients.

Sometimes you may exercise one of these options without a right to do so in the contract of employment.  This may be a breach of contract which may release the employee from their legal obligations including restrictive covenants. 

Your entitlement to receive notice

During the notice period, the employee remains bound by the terms of their contract of employment. This includes their duty of loyalty to the company.  So they must be careful not to do anything that conflicts with that duty by doing something that might help them in their new job or you may be entitled to obtain an injunction to restrain their conduct.  Failing to give notice will not release the employee from their legal duties to you and you may sue for compensation if they leave early.

Our solicitors can advise your company about all aspects of the dismissal and termination process.

The established procedures and practices of redundancy law are designed to try to ensure that, even in difficult economic times, decisions to terminate an employment are fair and reasonable. Our solicitors can advise you on the right procedures to follow and how to implement them.

An employee may only be made redundant if:  

• your business or the place where they work shuts down
• less employees are needed

There are a number of reasons why less staff may be required. It may be because there is less work to do as a result of less business coming in or because there have been changes to the way work is done.  Sometimes, an employee may be described as redundant when that is not the case.

The procedures you are required to follow in relation to redundancy include giving sufficient warning of the risk of redundancy, consulting with those affected, identifying the jobs at risk and using a fair procedure to select from the employees in those positions. Appropriate efforts must be made to try to find alternative positions for redundant staff. 

If the employee is not actually redundant or if fair procedures have not been followed, the employee may be able to bring an unfair dismissal claim provided that they have been employed with the company for at least 2 years.  An unfair dismissal claim must be brought within 3 months of the last day of employment.

If 20 or more people are made redundant within a given period, you must formally consult with a trade union or elected representatives with a view to a reaching agreement on ways of reducing the impact of the redundancies.

Redundancy Compensation

Redundant employees who have been employed with the company for at least 2 years will be entitled to a statutory redundancy payment which is calculated in accordance with their age, length of service and a week’s wage which is a capped amount set by the government each year.  The employee is also entitled to work their notice although often a payment in lieu of notice is made or the employee is required to serve garden leave.  

If the redundancy is unfair, compensation in an employment tribunal is partly calculated in the same way as a redundancy payment but there will be additional compensation for loss of earnings and benefits. Claims for loss of earnings can be brought up to £105,707 or 52 weeks’ pay, whichever is lower. There are a number of factors which the employment tribunal will consider when coming to a decision on the right amount of unfair dismissal compensation.  The employment tribunal can, in some cases, order the employer to take the unfairly dismissed employee back into employment – and additional unfair dismissal compensation may be awarded if the order is not complied with.

Where formal consultation is required, if this is not carried out properly, additional compensation may be payable.

When an employment comes to an end both parties have certain employment rights.  This includes the right to require an employee to work their notice in accordance with their statutory entitlement.

Minimum notice periods

The law provides for the minimum notice that you are entitled to receive and obliged to give.  This is the statutory notice entitlement.  If the contract of employment gives either party less notice, it’s the statutory notice entitlement that counts. If the contract of employment gives either party more notice, it’s the notice in the contract of employment that counts.

What are the minimum notice periods? 

After the employee has been employed with the company for 4 weeks, they are entitled to a minimum of one week’s notice.  This minimum notice entitlement then increases after 2 years of completed service to 2 weeks notice and it goes on increasing by 1 week for each completed year up to 12 years’ service. Remember, this is a minimum employment right. Under the contract of employment, they may be entitled to more notice.

After the employee has been employed with the company for 4 weeks, the minimum notice which the employee is obliged to give you is 1 week, no matter how long their service. Remember, this is a minimum obligation. Your contract of employment may require the employee to give more notice.

Failure to give minimum notice

During your minimum notice period, each party remains bound by the terms of the contract of employment. This means that the employee is entitled to be paid and receive their employment benefits in the normal way.  If you terminate the employee’s employment without minimum notice, they will have a claim for loss of pay and benefits during the notice period.   This is known as a claim for wrongful dismissal.

During this period, the employee also remains bound by the terms of the contract of employment. If they leave without giving notice, unless you are in breach of contract, the employee could be sued for damages.

Our solicitors can advise your company about all aspects of the dismissal and termination process.

If an employee is dismissed, they may have a claim for unfair dismissal compensation.

To bring an unfair dismissal claim an employee usually has to have been employed with the company for at least 2 years.  In some cases however an unfair dismissal claim may be brought with no qualifying service period at all.

An employee can only be dismissed fairly:

• because of their misconduct
• because of their lack of capability
• because they are redundant
• because of retirement
• because it would be illegal to continue the employment
• or for some other substantial reason

If the employee is dismissed for a reason which is on this list, you must show that you followed a fair procedure when dismissing them.

• did you investigate the situation properly?
• did you invite the employee to a meeting to consider the case?
• did you provide the employee with information in advance of the meeting so that they could prepare for the hearing?
• did the employee have the right to be accompanied by a trade union representative or official or by a work colleague?
• was the employee allowed a right of appeal?

If there was a legally permitted reason and appropriate procedures have been followed, fairness will normally depend on whether a reasonable employer might have dismissed an employee in these circumstances. This may entail considering the employee’s length of service and disciplinary record and looking to see how other employees have been treated in similar circumstances.  There may be a number of other considerations to be weighed up.

A claim for unfair dismissal is brought in the employment tribunal. There are strict time limits to bring a claim for unfair dismissal.  Usually a claim must be brought within 3 months of dismissal or the employee will lose the right to bring the case.

Unfair dismissal compensation

What might an unfair dismissal claim cost in terms of compensation?

Unfair dismissal compensation in an employment tribunal is partly calculated in the same way as a redundancy payment but there is normally additional compensation for loss of earnings and benefits. Claims for loss of earnings can be brought up to £105,707 or 52 weeks’ pay, whichever is lower. There are a number of factors which the employment tribunal will consider when coming to a decision on the right amount of unfair dismissal compensation.  The employment tribunal can, in some cases, order the employer to take the unfairly dismissed employee back into employment and additional unfair dismissal compensation may be awarded if the order is not complied with.

Our solicitors can advise your company about all aspects of the dismissal and termination process.

Wrongful dismissal is the failure to give proper notice to terminate the contract of employment. A claim for wrongful dismissal is a claim for the loss of pay and benefits during the notice period.

An employee is entitled to statutory notice and, if it is longer, to additional contractual notice. If you do not allow an employee to serve this notice or do not make a payment in lieu under the contract of employment, the employee is entitled to damages for breach of contract.

A claim of this kind will also arise if an employee resigns and they are entitled to do so because of the way you are in breach of contract. This is constructive dismissal.

The employee is obliged to give you notice under the contract of employment and if they leave without giving notice or they give you short notice, they remain employed under the contract of employment for the time being.  You could apply for an injunction to prevent them from working for a competing company during this period. You may also bring a claim for any expenses you have incurred during the notice period as a result of a breach of contract by an employee.

A claim for wrongful dismissal or wrongful constructive dismissal may be brought in the employment tribunal if the claim is for less than £25,000 or in the civil courts (High Court and County Court) for any amount.  A claim to the employment tribunal must be brought within 3 months of the date when the claim arose. Claims to the civil courts must be brought within 6 years. An employer may counterclaim for breach of contract by an employee.

Wrongful dismissal compensation

How will a claim for wrongful dismissal be calculated?

The claim is for loss of pay and benefits for the notice period or that part of it which the employee was not permitted to serve.  It therefore includes the net salary and employment benefits for that period.

Employment benefits may include:

• pension contributions
• loss of use of company car for private purposes
• loss of insurances including private medical insurance

It is important however to appreciate that an employee has a legal duty to mitigate their loss.  This normally means that they must act reasonably in looking for another job. If they fail to do this, the compensation could be reduced. 

Our solicitors can advise your company about all aspects of the dismissal and termination process.

If you are faced with a claim for alleged breach of employment rights, it is most likely that the case will be brought to the employment tribunal.  Although the employment tribunals do not have all the formalities of the civil courts, they have to apply complex legal rules and procedures. Expert legal assistance can be the key to the right outcome for your business.