The statutory minimum notice due, on dismissal, to an employee with at least one month’s continuous service is:
◉ one week’s notice if he or she has been employed for less than two years
◉ one week’s notice for each year of continuous employment between two years and 11 years
◉ 12 weeks’ notice for 12 or more years’ continuous employment.
The statutory minimum notice due from an employee (on resignation) is one week.
If the contractual notice is greater than the applicable statutory minimum, the contractual notice prevails.
Common misconception (2)
‘….an employee’s notice of resignation can be refused’
It cannot, just as an employee cannot reject the employer’s notice of dismissal. Of course, you can try to persuade employees to stay. Alternatively, you can relieve them of the obligation to work out their notice and pay them off. Or, if your concern is about their joining a competitor, you can rely on any enforceable contractual provisions restraining post-termination activity or about ‘garden leave’.
If an employee gives notice of resignation while facing a charge of serious misconduct, an employer is fully entitled to continue with the disciplinary process during the period of notice – only a resignation with instant effect can stop that.
If notice is worked, the employee is entitled to all contractual payments and benefits (unless the contract itself expressly withdraws them during a notice period). And if the contractual notice required from the employer does not exceed the applicable statutory minimum by more than six days, the employee has the statutory right to full pay for any day in the period of notice when he or she is absent through sickness, pregnancy, maternity/paternity/adoption leave or a lack of work and would not otherwise be entitled to full pay (for example, if sick, when the employee’s entitlement to sick pay has expired).
Exactly when is ‘notice’ of termination given?
Regardless of the required contractual or statutory length, ‘notice’ is a very particular, if often basic, thing. It contains a specific date, or the information necessary to calculate the specific date, on which the contract of employment will terminate.
A mere intimation of possible dismissal or confirmation of a decision to dismiss at some unspecified time in the future, even if the broad period during which the dismissal will probably occur is stated, will not amount to the giving of proper ‘notice’ (although, depending on their manner or tone, such actions could be repudiatory and be the basis of a ‘constructive’ dismissal, and could also be prejudicial to the fairness of any ultimate dismissal). This has implications for an employer’s liability to provide pay in lieu of notice when the contract is later terminated.
Common misconception (3)
‘….notice that has been given can be cancelled’
The cancellation of notice is only legally possible if the party to whom the notice was given agrees to it being annulled. Otherwise, the notice stands and the termination will take effect.
Of course, there may be various practical or economic considerations that persuade the party receiving notice to agree quite readily to its cancellation. And there may be disadvantages imposed by legislation on someone who declines to stay in employment. But the contractual principle remains – agreement is essential.
Wrongful dismissal is a dismissal that is simply in breach of the terms of the contract (so, it is not a subject that is really covered by employment legislation).
Dismissal without any notice (summary dismissal) or without full notice is wrongful, unless the employee’s conduct amounts to repudiation (for example, gross misconduct/negligence), or if the contract permits it (through a pay in lieu of notice, PILON, clause) as an alternative to working notice.
If the dismissal is 'wrongful', the employer can pay in lieu of all or part of the employee’s notice entitlement (in effect, damages for breach of contract), but:
◉ the employer will be unable to enforce provisions restraining the ex-employee’s post-termination activity; and
◉ the dismissal can still be 'unfair' under legislation (for this separate concept, see below).
The employee’s remedy for wrongful dismissal is an action to recover financial loss (through an award of damages), either in the employment tribunal (maximum award £25,000) or the civil courts (no limit).
A dismissal with notice is not normally a breach of contract (but the dismissal can still be unfair – see below).
A pay in lieu of notice (PILON) clause: key features, questions and consequences
◉ It is exercisable at the employer’s discretion.
◉ Is pay for the whole or a part of the period of notice due to the employee?
◉ Does ‘pay’ mean just salary or does it also include the value of any benefits?
◉ Because it makes termination without full notice lawful, the employer can still rely on post-termination restrictions on the employee.
◉ A portion of such payments equivalent to the 'basic pay' (which is a defined term in legislation for this purpose) the employee would have received had the employee served his or her notice in full is now generally taxable as earnings. This is referred to as post-employment notice pay (PENP).
A dismissed employee with two years’ service can request a written statement of the reasons for dismissal to be supplied by the employer within 14 days of the request. This is admissible before an employment tribunal.
An employee dismissed while pregnant or after childbirth, so that her maternity leave period ends, must be provided with written reasons, regardless of her length of service and without request.
The employment tribunal will award two weeks’ pay (no statutory maximum on a week’s pay – see below – is applied here) for an unreasonable refusal to supply a statement, or if an inadequate statement is supplied, and may make a declaration of the true reason(s) for dismissal.
Qualification for protection
Unless a dismissal is found to be for an ‘automatically unfair reason’ (see below), an employee must have been ‘continuously employed’ for two years at the ‘date of dismissal’ in order to have protection.
Avoiding the service requirement for unfair dismissal: dos and don’ts
There are good reasons for giving all employees the same standard of treatment regardless of their length of service. And rushing to beat the two-year 'deadline' has its risks. Equally, however, there is little point in an employer allowing a situation to arise which will cost time and money unnecessarily. So, where applicable:
◉ make a date of termination fall at least one week before the second anniversary of commencement
◉ provided that the dismissal is not for gross misconduct, terminate immediately with pay in lieu of notice (rather than terminating with actual, working notice)
◉ phrase letters carefully. For example, make sure that the date of termination is not stated, or represented as, the date on which notice would have expired if it had been given
◉ ensure that no right of appeal against dismissal is described in a way that preserves, or might preserve, employment until the appeal is determined.
Dismissal occurs if:
◉ the employer terminates the contract, with or without notice; or
◉ a limited-term contract (one whose duration is set by reference to a period of time, the completion of a task or the occurrence or non-occurrence of an event) terminates without renewal; or
◉ the employer engages in conduct which is a significant breach or repudiation of the employment contract, giving the employee the right to resign without notice, and the employee, whether with or without notice, does resign in response (‘constructive’ dismissal).
To establish ‘constructive’ dismissal, does the employee have to resign without notice?
No. The vital thing is that the employee must, because of the employer’s act or omission, have the right to resign without giving notice. If that condition is satisfied, the employee may, in principle, give full notice of resignation and remain working until the specified termination date.
Of course, in many situations of this type, that approach is not a practical one and not in the interests of either party.
Also, if an employee did give notice and remain at work through the period of notice, the (ex-) employer may well be able, in any subsequent tribunal proceedings, to draw inferences from the employee’s behaviour. Is it an indication that the conduct stated to have caused the resignation did not occur? Or was it in fact not serious enough to give the employee the right to resign immediately and so to be the basis of a ‘constructive’ dismissal?
Frustration can be frustrating
A contract of employment can be ‘frustrated’ when an unforeseen event makes the performance of the contract impossible or very different from what had originally been intended. When frustration occurs, the contract ends automatically, without a dismissal. A prison sentence will not necessarily frustrate the contract. A significant factor is the length of the sentence. Where the contract provides for long-term sickness absence, a prison sentence of equivalent length may not be regarded as amounting to frustration. The difficulty is knowing when the point of frustration has been reached. If it has not, but the employer acts as if it has, a dismissal will result. And, it will often be unfair. So, generally, frustration is best left as a legal argument to be deployed in litigation.
Common misconception (4)
‘…a constructive dismissal will always be unfair’
Not so. Strictly, establishing a ‘constructive’ dismissal does no more than confirm that there has been a dismissal – its fairness is a separate matter.
So, while almost all constructive dismissals based on interpersonal behaviour or attitude will end up as unfair, some derived from the breach of express contractual terms can be found to be fair.
For example, an imposed significant reduction of an employee’s pay will be a breach of contract that entitles the employee to resign without notice. But, if the employer had a good business reason for the change and conducted appropriate consultation first, then the resultant constructive dismissal could well be fair.
Fairness of a dismissal
If an ex-employee complains of unfair dismissal, the employer must first show that there was, at the time of the decision to dismiss, a (principal) reason for it. To be admissible, that principal reason must be one of the following:
◉ capability, which can be about performance/skill, health, or qualifications
◉ continued employment in that capacity being illegal
◉ some other substantial reason justifying dismissal.
Then, the employment tribunal must decide whether, in view of the employer’s size and administrative resources, the dismissal was reasonable in all the circumstances. This involves consideration of:
◉ the quality of the pre-decision procedure (including notification of, and formal dialogue with, the employee and sharing of information relevant to the situation). This is necessary unless the employer can safely conclude that the circumstances make such formalities ‘utterly useless’
◉ the factual situation or findings. At the conclusion of the above procedure, were there, given the evidence available, at least reasonable grounds for continuing to consider the employee for dismissal?; and
◉ the ultimate choice of the sanction or outcome of dismissal. Were the factual situation or findings capable of justifying termination, even if some reasonable employers might not have dismissed? Were any reasonable alternatives to dismissal properly considered?
The ‘band of reasonableness’
Different employers may adopt different approaches but each may nevertheless act fairly. In all cases ‘there is a band of reasonableness within which one employer might reasonably take one view: another quite reasonably take a different view’ (Lord Denning in British Leyland v Swift). If a dismissal falls within the band, and a proper procedure has been followed, the employer will have acted reasonably and the dismissal will be fair.
The tests for assessing whether an employer has acted reasonably in dismissing an employee were set out in Iceland Frozen Foods Limited v Jones:
◉ the starting point is the statutory provision that the employer must have acted reasonably in dismissing the employee
◉ in applying this statutory provision, the tribunal must consider the reasonableness of the employer’s conduct, not simply whether they (the members of the tribunal) consider the dismissal to be fair
◉ in many (though not all) cases there is a band of reasonable responses to the employee’s conduct within which one employer might reasonably take one view and another quite reasonably take a different view
◉ the function of the tribunal, as an industrial jury, is to determine whether in the particular circumstances of each case the decision to dismiss the employee fell within the band of reasonable responses which a reasonable employer might have adopted. If the dismissal falls within the band, the dismissal is fair: if the dismissal falls outside the band, it is unfair.
How will the tribunal assess the fairness of the reason for dismissal?
Depending on the reason for dismissal, the principal relevant factors that the employment tribunal will consider under ‘reasonableness’ are:
◉ on grounds of performance/skill:
○ targets for improvement
○ alternative employment
○ being accompanied (at least, if the management of performance has a disciplinary aspect)
◉ on grounds of health:
○ consultation with the employee
○ medical report/information
○ reasonable adjustments/alternative employment
For Conduct (disciplinary matters)
◉ quality of the investigation
◉ gravity of the situation (previous warnings or gross misconduct)
◉ notice of charges and provision of evidence to the employee
◉ Acas code of practice
◉ existence and handling of hearing and appeal (including being accompanied)
◉ the employee’s previous disciplinary record
◉ precedents set in dealing with other employees
Employment tribunals apply a three-stage test in the case of most misconduct dismissals. The employer must show that:
◉ he believed the employee was guilty of misconduct
◉ he had in his mind reasonable grounds upon which to sustain that belief
◉ at the stage at which he formed that belief on those grounds, he had carried out as much investigation into the matter as was reasonable in the circumstances.
This test (the so-called Burchell test) arose from a case of dishonesty. But the principles laid down have become the established test for determining whether the reason for an employer’s decision to dismiss was sufficient in all types of conduct case when the employer has no direct proof of the employee’s misconduct, but only a strong suspicion.
◉ adequacy of consultation
◉ approach to selection
◉ consideration and availability of alternative employment.
In cases of redundancy, if selection from a group of employees is necessary, the selection criteria must be largely objective. That is, they should not simply reflect the personal opinion of the selector, but should be capable of at least some objective assessment and, preferably, supported by data such as attendance and performance records. Imprecise criteria that can be challenged, such as employees ‘best suited for the needs of the business under the new operating conditions’ and ‘attitude to work’, will be risky – unless they are then broken down and defined in more detail.
Possible reasons include disqualification from driving, expiry or lack of a work permit, and breach of health and safety legislation. (Note: there must be definite illegality involved, not just a reasonable belief in it.)
◉ discussion with the employee
◉ consideration of alternative employment that would not be illegal
For some other substantial reason
For example, the end of a limited-term contract, a change in the contract of employment or pressure to dismiss from a customer, regulatory body or another employee
◉ discussion/consultation with the employee
◉ exploration of compromises or alternative opportunities for employment
Dismissals of replacements
A person taken on as a temporary replacement for an employee on maternity leave, adoption leave or additional paternity leave who is dismissed to make way for the employee’s return will be regarded as having been dismissed for ‘some other substantial reason’ provided he or she was informed on engagement that the employment would terminate on the return of the other employee from leave. However, at least if the replacement has accrued the requisite continuous service (see above), the fairness of the dismissal is still subject to the test of ‘reasonableness’ (see above), particularly on alternative employment.
Dismissals connected with a TUPE transfer
It is automatically unfair to dismiss an employee for the reason of a TUPE transfer itself.
◉ a dismissal is for a reason ‘connected with’ a TUPE transfer, whether before or after it; and
◉ that reason is an economic, technical or organisational one entailing changes in the workforce (this requires a change in location amounting to ‘redundancy’ or a reduction in numbers or alterations to job content frequently equating to redundancy)
The dismissal will only be unfair if it is not handled reasonably.
Liability for a pre-transfer dismissal that does not satisfy these requirements and is, therefore, unfair will often pass to the new employer (the transferee).
It is normally unfair to dismiss for a ‘spent’ conviction, although the employee must have the requisite continuous service to bring a claim.
The following reasons for dismissal are not subject to the normal requirement for a period of continuous employment.
It is automatically unfair to dismiss an employee:
◉ for being involved in proceedings to do with the enforcement of the National Minimum Wage
◉ for refusing to work more than 48 hours a week or during a rest break
◉ for signing a workforce agreement or opt out agreement; or for being an ‘appropriate representative’ or candidate in a workforce agreement on Working Time
◉ for the following reasons, covered in Chapter 6, to do with a trade union:
○ being a member, or participating in the activities or using the services (at an appropriate time) of an independent trade union, or
○ not being a member of a trade union, or
○ being involved in the recognition or derecognition of a trade union, or
○ refusing an employer’s offer of inducement
◉ for the following reasons to do with maternity:
○ giving birth
○ taking ordinary or additional maternity leave or receiving benefits during ordinary maternity leave
○ being subject to a requirement or recommendation to suspend work on grounds of health and safety
◉ for reasons to do with taking, or seeking to take, paternity leave, adoption leave, or paternity leave on adoption
◉ for reasons to do with taking or seeking to take shared parental leave
◉ for exercising, or seeking to exercise, the right to request flexible working, or for accompanying, or seeking to accompany, an employee who wishes to exercise this right
◉ for the following reasons, to do with parental leave:
○ taking or seeking to take parental leave
○ declining to sign a workforce agreement on parental leave
○ being an appropriate representative or candidate in a workforce agreement on parental leave
◉ for seeking to take or taking time off to care for dependants
◉ for exercising rights conferred on part-time workers
◉ for exercising rights conferred on fixed-term employees
◉ for exercising or seeking to exercise the right to be accompanied at a hearing, to have a meeting rescheduled, or to be accompanied by or to seek to accompany another worker
◉ for exercising rights concerned with health and safety
◉ who is an employee representative or candidate, for performing, or proposing to perform, relevant functions as such
◉ who is a trustee of an occupational pension scheme, for performing, or proposing to perform, relevant functions or activities as such
◉ who is a protected or opted-out shop worker or betting worker, for refusing or threatening to refuse to work on a Sunday or any shop worker for opting-out or proposing to do so
◉ for being summoned or being absent to attend jury service unless:
○ the absence was likely to cause substantial injury to the employer’s undertaking; and
○ being aware of that, the employee unreasonably failed to apply to be excused from jury service
◉ for making a protected disclosure (‘whistle-blowing’) in the public interest
◉ for asserting (to an employment tribunal or employer) an employment protection right available under legislation. It is irrelevant that the employee is not, in fact, qualified for that right or that the right has not been infringed, provided that the claim is made in good faith
◉ on grounds to do with a ‘protected characteristic’, because that is an unlawful act under separate rules
◉ for taking, or having taken, part in official and lawful industrial action in certain circumstances.
◉ as a ZHW, for breaching an exclusivity clause in a ZHC or ZHA.
Legislation allows an employer to initiate and hold discussions with an employee and to make offers to an employee about terminating employment on agreed terms which, if agreement is not ultimately reached, will not be admissible as evidence in any subsequent tribunal proceedings for general/ordinary unfair dismissal.
However, this statutory protection will not apply where claims about ‘automatically unfair’ dismissals (see above) or discrimination are involved (a traditional, ‘without prejudice’ conversation does cover such claims, but first requires a dispute to exist between employer and employee).
Range and sequence of remedies
On a finding of unfair dismissal, an employment tribunal must consider reinstatement (same employment) and re-engagement (comparable or suitable employment) and must first ask whether the ex-employee wants one of these solutions. Practicability is relevant, but the engagement of a ‘permanent’ replacement does not make re-employment impracticable, unless this was the only sensible way of getting work done.
Unless it is not practicable for the employer to comply, punitive compensation (known as an ‘additional award’) can be awarded for the employer’s refusal to comply with a reinstatement/re-engagement order. This compensation will be between 26 and 52 weeks’ pay (maximum of £525 per week with effect from April 2019).
Also, in all cases, the tribunal will award standard unfair dismissal compensation.
Standard compensation for unfair dismissal
This normally takes the form of a two-part award:
This is calculated in the same way as a statutory redundancy payment and, therefore, has a maximum of £15,750 from April 2019. However:
◉ From April 2019, £6,408 is the minimum basic award for dismissal for:
○ non-membership of a union
○ union membership or activities
○ undertaking activities in connection with reducing risks to health and safety, having been designated by the employer to undertake such activities
○ performing functions as a designated safety representative or member of a safety committee
○ activities to do with being an ‘employee representative’ or ‘pension trustee’
○ a reason related to rights on working time.
This seeks to look at the employee’s true financial loss, including pensions and estimated future loss. However, in most cases, it is subject to a maximum of:
◉ 12 months’ pay for the claimant; or, if lower
◉ the absolute ‘cap’ (from April 2019, £86,444).
The award is unlimited in dismissals for health and safety, public interest disclosure and ‘protected characteristic’ reasons.
A tribunal may order a discretionary increase of up to 25% for the failure by an employer to follow the guidance set out in the Acas Code of Practice 1 on disciplinary and grievance procedures, although the cap on the compensatory award still applies for unfair dismissal.
A tribunal may also order a discretionary reduction of up to 25% for the failure by an employee to follow the Acas guidance. The limits on the awards are normally reviewed annually, for implementation from February.
The compensatory award can also be reduced by the tribunal if:
◉ the ex-employee has unreasonably failed to seek or take up work elsewhere (breach of the duty to mitigate loss) and/or has been guilty of conduct contributing to the dismissal (this also applies to the basic award); and/or
◉ the ex-employee could have been fairly dismissed for something discovered soon after dismissal (and before the tribunal hearing); and/or
◉ the tribunal believes the dismissal would still have occurred if required procedures had been observed and, in those circumstances, the dismissal would have been fair (often called a 'Polkey reduction').
A reduction on any of these grounds is considered from the starting point of an employee’s full, calculated loss before the statutory cap mentioned above is applied.
This is an order by the tribunal for the contract of employment to continue until a decision on the complaint of unfair dismissal has been reached. Ex-employees can apply for this relief if they claim they have been unfairly dismissed for:
◉ non-membership of a union
◉ union membership or activities
◉ undertaking activities in connection with reducing risks to health and safety, having been designated by the employer to undertake such activities
◉ performing functions as a designated safety representative or member of a safety committee
◉ ‘employee representative’ or ‘pension trustee’ reasons.