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Unfair Dismissal

Who can claim unfair dismissal?

Employees with two years less one week of continuous service are protected by the Employment Rights Act 1996 (ERA) against being unfairly dismissed. These employees also have the right to a written statement from their employer setting out the reasons for their dismissal.Unfair dismissal and wrongful dismissal are two different things, so it's good to know the difference between the two and where you stand on both criteria.

Employees do not need any length of service to claim unfair dismissal in certain circumstances where the dismissal will be considered “automatically unfair”; for example, the dismissal is connected with discrimination, whistle blowing, trade union membership or asserting a statutory right.

Individuals cannot claim unfair dismissal if they fall into the legal category of being a “worker” rather than an employee, or if they are self-employed. Identifying an individual’s employment status can be complex and you should take specialist legal advice if you are in doubt. Certain categories of employees are also excluded from making unfair dismissal claims, such as members of the armed services or, in most cases, those working outside the UK.

Potentially fair reasons for dismissal

A dismissal is unfair if:

  • There is no potentially fair reason to dismiss.
  • It is not fair in all of the circumstances of the case to dismiss which includes taking into account the size and administrative resources of the employer.

The five potentially fair reasons for dismissal under Section 98 of the Employment Rights Act are:

  • Conduct, which may be a serious one-off instance of misconduct or a series of less serious acts
  • Capability, which covers both performance and ill health.
  • Redundancy.
  • Contravention of a statutory restriction; e.g. a bus driver loses his driving licence.
  • Some other substantial reason (SOSR).

There is no statutory definition of what constitutes a ‘substantial other reason’ but it is a catch all for circumstances not covered by the other four categories. It is sometimes used by employers when dismissing for reasons of business re-organisation or when a client objects to the employee working on their premises or on their account.

Examples of Unfair Dismissal

The question of fairness is usually divided into two elements: whether the dismissal was procedurally unfair and whether it was substantively unfair. The Acas Code of Practice on Disciplinary and Grievance Procedures will be relevant in considering both procedural and substantive fairness in conduct and capability dismissals.

In assessing whether the dismissal was substantively unfair an Employment Tribunal will consider whether the dismissal falls into the range of responses open to the reasonable employer.

What constitutes fairness will depend on the type of dismissal. For example, as a general rule employees should not be dismissed for the first act of misconduct unless it is very serious indeed. Before dismissing on the grounds of capability for ill health the employer would usually be expected to ask for medical reports or send the employee for an occupational health assessment. For sick employees whose illness amounts to a disability, the employer has a duty to see if it can make reasonable adjustments to the employee’s role, workplace or their policies and procedures before dismissing. The employer may be liable for unlawful disability discrimination if they fail to make adjustments that a tribunal would consider reasonable.

Before dismissing for capability on grounds of poor performance the employer must give the employee warnings and the chance to improve with extra training being given if appropriate. Performance improvement plans (PIPS) lasting three to six months are common place. For conduct dismissals the employer must (in virtually all cases) carry out an investigation and hold an investigation hearing before holding a disciplinary hearing. The two hearings should not be conjoined or the dismissal will be unfair. In redundancy dismissals the employer will need to conduct a fair redundancy consultation process.

Employee’s right to be accompanied at a formal hearings

All employees have the right to be accompanied at a formal hearing by a trade union representative or a work place companion of their choice. These hearings may be called disciplinary, capability or redundancy consultation hearings. Employees also have the right to appeal their dismissal, be offered an appeal hearing, and again accompanied by their work place companion or TU representative at the appeal hearing. Employees have no right to be accompanied at an investigation hearing into allegations of misconduct unless that is provided for by their employment contract.

“Polkey” reductions to compensation in cases of procedural unfairness

In cases where the dismissal was procedurally unfair (for example the employee was not given the opportunity to attend an investigation or dismissal hearing or to appeal the dismissal) the Tribunal will make a finding of unfair dismissal but may also adjust the employee’s unfair dismissal compensation under the so called “Polkey” rule. Where a dismissal would have been fair if the employer had carried out a fair procedure, the employee’s compensation may be reduced down to the amount of time it would have taken the employer to have carried out that fair procedure. This can be as little as two weeks in some cases. 


The three remedies are:

  • Reinstatement where the employee is given their job back.
  • Re-engagement where the employee is offered a different role with the employer.
  • Compensation.

In reality re-engagement and reinstatement are not common as the relationship between employee and employer has often broken down irretrievably by the time Tribunal proceedings have been brought.

There is no compensation in unfair dismissal cases for stress or ill health caused by the employer’s actions. Where the unfair dismissal claim is combined with a discrimination claim the employee may be awarded compensation for “injury to feelings” or “injury to health”.

How unfair dismissal compensation is calculated

There are two elements to unfair dismissal compensation: the basic award and the compensatory award. The basic award is calculated on a statutory formula based on the employee’s average gross weekly wage, their age and length of service subject to a statutory cap which is adjusted by the government, usually every October. The compensatory award is to compensate the employee for their actual loss of earnings and other benefits, such as pension, subject to them seeking to mitigate their loss by claiming the appropriate benefits and looking for new work.

The basic award for unfair dismissal is the same as the statutory redundancy pay. Where an employee succeeds in an unfair dismissal claim because he has been unfairly selected for redundancy but has already been paid his statutory redundancy he will not receive his basic award. He may be still be entitled to a compensatory award if the unfair dismissal has lead to a loss of future earnings. 
In addition to the Polkey reduction mentioned above Tribunals can also reduce both the basic award and the compensatory award if it finds that the employee’s conduct contributed to their dismissal. The Tribunal can also increase or reduce the compensation award by up to 25% for a party’s failure to comply with the Acas Code of Practice mentioned above.

Timescales to bring an unfair dismissal claim

An unfair dismissal claim must be submitted to the Employment Tribunal within three months less one day of the date of dismissal. This time limit can be extended by up to one month, or is some cases 6 weeks, under the compulsory Acas Early Conciliation procedure.

To view our fact sheet on bringing claims against your employer, click here

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