How to dismiss an employee legally?
Dismissal is the legal term for sacking an employee. Unfortunately there may be times, where for a variety of reasons, you may wish to dismiss an employee.
Below is an overview of the steps a business should consider when thinking about dismissing an employee. Dismissals can be a tricky and risky area and it is important to seek legal advice – here we have included a checklist of how to dismiss an employee without risking claims for unfair dismissal. we advise you take legal advice before taking steps to dismiss an employee as each situation is different and the risk of an unfair dismissal claim will turn on the facts.
We recommend that the right policies are in place, our team of employment law solicitors can help you through this process, including contracts, handbooks and policies that may assist with future employment disputes. documentation is in place with all employees including comprehensive contracts, handbooks and policies which may assist with the dealing of any dispute in the future.
What is unfair dismissal?
Unfair dismissal refers to an employee dismissal which is found to be ‘unfair’ by an Employment Tribunal. Unfairness can arise from the conduct of the employer (the procedure) or from the reason for dismissal itself.
It may also be unfair to dismiss an employee because they were exercising their rights under employment law, such as taking a sick leave or complaining about discrimination and harassment at work.
Unfair dismissal is not the same as being made redundant or dismissed for poor performance.
To learn more about unfair dismissal and how to avoid it, Contact our experts on employment law for legal advice.
How to dismiss an employee without risking claims
Unfortunately, you cannot completely eliminate the risk of an employee making a claim for unfair dismissal but steps can be taken to avoid such claim and to put the company in the best possible position for defending any claim for unfair dismissal.
Firstly, it is worth noting that ordinarily the employee must have 2 years’ service to be able to bring a claim for unfair dismissal. Please note that the 2-year rule does not apply in all circumstances, certain dismissals are deemed to be automatically unfair and an employee is protected as soon as they start work. These include dismissals connected with:
- Parental leave
- Requests for flexible working
- TUPE transfers
It is worth taking legal advice to see whether the 2-year qualifying period applies.
Dismissing an employee for a reason other than a fair reason as set out by law, without following the correct procedure or giving adequate notice, may lead to a claim for unfair or wrongful dismissal against the business. It is important to dismiss an employee for a lawful and fair reason with enough notice. Failure to do so may lead to a claim for unfair/wrongful dismissal against the business. Whilst compensation for a successful claim may be substantial, regardless of whether a claim succeeds, the costs of defending it, in terms of management time and legal costs, may be significant and are not usually recoverable.
Therefore, it is important to follow a fair process and dismiss for a fair reason.
Contact our employment team for more information
Before dismissing an employee for poor performance, misconduct, or other reasons, you must do the following to be considered legally right:
1. Establish whether there are grounds for dismissal
What are the 5 fair reasons for dismissal?
There are 5 potentially fair reasons for dismissal as defined in the Employment Rights Act 1996:
- Capability or qualifications - An employee’s inability to carry out their job because they lack the necessary skills required (for example, a sales manager has consistently failed to meet reasonable sales targets despite receiving additional support and training) or long-term sickness absence.
- Conduct - For example, they have filed fraudulent expenses claim or persistent lateness without good reason. Visit our disciplinary procedures and grievances section for further information.
- Redundancy - It must be a genuine redundancy for example the need for an employee to carry out the work of a particular kind has ceased or diminished. See our redundancy section for more details.
- Breach of Statutory duty or restriction - For example, the business has discovered the employee’s immigration status does not permit work.
- Some other Substantial reason (SOSR) - This is a catch all provision but must still be considered carefully, this might cover things such as personality clashes, but we strongly encourage taking legal advice before dismissing under this section.
Dismissing staff for any reason other than those listed above can be considered unfair.
Looking to dismiss an employee? Contact our employment law solicitor for legal advice to avoid claims.
2. Follow the correct employee dismissal procedure
Even if a business has established a potentially fair reason for dismissing an employee, it must still follow the correct procedure. Failure to do so could still lead to a claim for unfair dismissal.
The correct procedure depends on the reason for dismissal. For example, a dismissal for conduct should be dealt with as a disciplinary matter and follow a fair disciplinary procedure. If the dismissal is for reasons of capability, for example long term sickness absence, then the capability procedure should be followed and may include you obtaining medical reports and prognosis.
As above, whilst ACAS issues guidance it is best practice to have such policies in place at the outset before an issue arises. We can draft individual polices through to full staff handbooks, please contact us for a quote and advice.
However, certain dismissals are deemed to be automatically unfair, and an employee is protected as soon as they start work. These include dismissals connected with:
- Parental leave
- Requests for flexible working
- A TUPE transfer
3. Check the employee’s contract
It is possible to dismiss an employee fairly but still be in breach of the employment contract if the business has not given them the correct notice under their contract. A business does not want to take any action that could breach an employee’s contract because:
- It may lose valuable protections in the contract such as post-employment restrictions (for example, stopping an employee going to work for a competitor).
- The employee may have a claim for wrongful dismissal in breach of contract (for example, if the business fails to give them their contractual notice period or pay a contractual bonus).
Need help deciphering an employee contract? Contact our employment law solicitors today.
4. Utilise the PILON clause
What is a Pilon Clause?
A payment in lieu of notice (PILON) clause is a contractual right that enables a business to pay an employee a lump sum rather than require them to work out their statutory or contractual notice period.
Before terminating employment and making a PILON, the business should ensure the following:
- That the contract of employment of the employee to be dismissed allows for termination in this way. If the contract does not allow for a PILON to be made, then it will probably be a breach of the contract to do so.
- If a business decides to make a PILON, it must notify the employee that a PILON is being made to them in the exercise of the employer's contractual right to terminate the employment with immediate effect. Simply making the PILON will not be sufficient to bring the contract to an end.
For more information on how to dismiss an employee without risking claims, please contact Neil Largan.
5. Settlement Agreements
It may be worth entering into a Settlement Agreement with employees you wish to dismiss, see how we can help you with Settlement Agreements here.
Please see our Settlement Agreement section for further details but it may well be worth considering entering into a Settlement Agreement with employees which you wish to dismiss. Essentially, you agree to enter into an agreement to bring the employment to an end on agreed terms usually the employer will pay compensation to the employee and in return they agree not to bring any claims against the business for the dismissal.
Any conversations relating to a Settlement Agreement will be without prejudice or protected and they limit the risk to your business for future claims.
For more information on how to dismiss an employee without risking claims, please contact our Employment Team.