Unfair Dismissal

The right not to be unfairly dismissed is a statutory right which is set down by s.94 Employment Rights Act 1996 (“ERA 1996”).

Firstly, the Employment Tribunal must determine whether there has been a dismissal. Secondly the Tribunal must determine whether the reason for dismissal is a potentially fair reason. Thirdly, if the reason for the dismissal is one of the five potentially fair reasons, the Tribunal must determine whether the dismissal was fair or unfair; for example, was the appropriate procedure followed.

There are five potentially fair reasons set out in s.98 ERA 1996:

• Capability or qualifications
• Conduct
• Redundancy
• Contravention of a statute
• Some other substantial reason justifying dismissal.

If the dismissal is for a reason other than those listed above, it will be unfair.

Who Can Bring a Claim for Unfair Dismissal?
For a person to be able to bring a claim of unfair dismissal it is essential that he or she is or was an employee. Usually an employee has to have two years of service in order to bring a claim.  There are exceptions such as those relating to automatic unfair dismissal – i.e.) pregnancy related dismissal.

Where to Bring a Claim
A claim for unfair dismissal must be brought in an Employment Tribunal. The ordinary courts have no jurisdiction to hear unfair dismissal cases. A claim must be brought within three months of the Effective Date of Termination. On rare occasions, a Tribunal may extend time if it was not reasonably practicable for the complaint to be presented within that time limit.

Compensation for Unfair Dismissal
If an employee is successful in their claim for unfair dismissal, they may be awarded compensation. The compensatory award is intended to compensate the employee for financial loss suffered as a result of the unfair dismissal. It is therefore frequently the largest of the awards for unfair dismissal.

A compensatory award is an amount that the Tribunal considers just and equitable in all the circumstances, having regard to the loss sustained by the employee as a consequence of the dismissal in so far as that loss is attributable to action taken by the employer. It is intended to compensate the employee, not to punish the employer.

The Tribunal makes an assessment by looking at what losses the employee has actually suffered as a consequence of being unfairly dismissed. These losses must flow from the dismissal. The burden is on the employee to prove his or her losses and the employee must mitigate these losses.

The compensatory award is subject to a statutory maximum of £78,335 or a year’s gross pay, whichever is lower.

Heads of Loss
A Tribunal has a duty to show how the figures are reached. Under the compensatory award the following are common heads of loss:

• past loss of earnings;
• future loss of earnings;
• expenses incurred as a consequence of the dismissal;
• loss of statutory employment rights.

Past Loss of Earnings
Past loss of earnings are measured from the date of the dismissal to the date of the hearing. Where an employee is dismissed without being given notice, or pay in lieu of notice, the employee is entitled to include this in his or her claim for past losses.

Future Loss of Earnings
Future loss of earnings are awarded from the date of the hearing. If an employee is unemployed at the time of the hearing, or in employment which is less well paid, he or she will be awarded a sum for future loss of earnings. The size of the award will be based on the employee’s net loss of earnings for such a period as the tribunal thinks it reasonable.

Expenses
An assessment of an employee’s loss shall include an expenses reasonably incurred by the employee as a consequence of the dismissal. For example:

• sums spent looking for a new job, such as postage of job applications, the cost of telephone calls and attending interviews;
• the cost of setting up a new business.

Loss of Statutory Rights
If an employee is unfairly dismissed and they are not reinstated or re-engaged, the tribunal will commonly make an award for the loss of an employee’s employment rights. This is a nominal figure to reflect that fact an employee has loss his or her qualification for the right to bring an unfair dismissal claim and for the loss of the accrued right to the statutory minimum period of notice. This award is frequently in the region of £250 - £350. 

Discount for Accelerated Receipt

Where a Tribunal gives an award for future loss, a discount rate is usually applied to reflect the fact that the employee has the benefit of receiving the money early and has the opportunity to invest it.

Adjustments and Deductions to the Compensatory Award
The compensatory award may be subject to adjustments and deductions in the following circumstances:

• where the employee fails to take reasonable steps to mitigate his or her loss
• where the tribunal considers it just and equitable to award a lesser amount than would otherwise be appropriate
• where the employee has caused or contributed to his or her dismissal
• where an employee or employer fails  to comply with the provisions of the Acas Code of Practice on Disciplinary and Grievance Procedures
• where the employer has failed to provide full and accurate written particulars of employment and the employment tribunal makes a finding to this effect in the course of proceedings for unfair dismissal.

Disclaimer: This article does not contain a full statement of the law and it does not constitute legal advice. Please contact the Employment Law Team on 020 3743 0600 if you have any questions about the information set out above.