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Under common or contractual law an employer can dismiss an employee at any time, although a period of notice must normally be given (save in cases of gross misconduct) or a payment in lieu of notice is made. However, employees with sufficient continuity of service, have the right not to be unfairly dismissed. In such cases a dismissal will only be lawful if it is for a fair reason and the employer has acted reasonably in all the circumstances which usually involves following certain statutorily laid down procedures.
The following examines the levels of notice which must be given and the reasons for dismissal which are legally considered to be fair.
What notice must an employer give?
The minimum levels of notice which an employer must normally give to an employee are laid down in the Employment Rights Act 1996 and depend upon the length of time the employee has been continuously employed, as follows:
Less than 4 weeks continuous employment - 24 hours' notice.
4 weeks to 2 years continuous employment - 1 week's notice.
2 years to 12 years continuous employment - 1 week's notice for each complete year of continuous employment.
More than 12 years continuous employment - 12 week's notice.
If the employee's contract provides for a longer period of notice than the above statutory minimum periods of notice, the longer contractual period of notice will apply. The contract may also provide that a payment may be made to the employee in lieu of notice.
However, if an employee is guilty of serious or gross misconduct the employer may be justified in instantly dismissing the employee without any period of notice at all.
What payment is an employee entitled to during their notice period?
An employee is entitled to be paid at their normal rate of pay. They are also entitled to receive any contractual benefits (express or implied) which they ordinarily enjoy such as use of a company car, mobile phone, etc. This applies regardless of whether the employee is away from work on sick leave, holiday or maternity leave during the notice period, or if they are willing to work but no work is provided. If a proportion of their pay is made up of commission then issues will arise if they are not permitted to work during their notice period (see bonus and commission section).
When will a dismissal be fair?
A fair dismissal involves two criteria both of which must be satisfied:
Firstly, the dismissal must be for one of the following reasons:
-the employee is unable or unqualified to do the job in hand (e.g. long term sickness absence)
the employee's conduct is unsatisfactory (e.g. poor attendance);
the employee is legally prevented from continuing to carry out their job (e.g. a van driver who loses their licence);
redundancy (e.g. due to closure of premises)
some other substantial reason (e.g. a refusal to agree to a necessary and reasonable change in terms and conditions of employment).
Secondly, the employer must act reasonably in all the circumstances in deciding to dismiss the employee. There are now certain statutory procedures governing disciplinary matters and redundancy which must be followed or the dismissal will be automatically unfair and will result in higher awards of compensation. All dismissals usually involves following certain procedures and may involve consideration by the employer of alternatives to dismissal (e.g. transfer to a different job or different duties in cases of poor performance or redundancy). Each case will depend on its own facts although matters such as the size and resources of the employer will be taken into account.
Can a dismissal be automatically unfair?
It is automatically unfair to dismiss an employee, regardless of their length of service, for any of the following reasons:
being a member of a trade union or taking part in trade union activities;
pregnancy or taking maternity leave;
certain types of action on health and safety grounds;
to enforce another statutory employment right (e.g. asking for a written statement of employment rights).
A dismissal will also be automatically unfair in the case of an employee who has sufficent continuous employment if the employer has failed to follow the statutory procedures for disciplinary matters or redundancy situations. In such cases the normal award of compensation to the employee by a Tribunal can be increased by as much as 50%.
What are the penalties involved for an unfair dismissal?
If an Employment Tribunal decides that a dismissal is unfair it may order the employer to re-employ the employee or, more usually, to pay the employee compensation. The amount of compensation consists of a basic award calculated in a similar manner to a redundancy payment, and a compensatory award based on the employee's loss, which can be well in excess of £50,000.
Employers should always take advice prior to dismissing an employee as the procedures involved are complex, even where the reasons for the dismissal e.g. redundancy or misconduct, appear clear cut. Failure to do so may not only mean that the dismissal is unfair, but may result in a higher award of compensation against them.
Equally, employees should always seek advice when dismissed as there may be matters relating to the procedure followed by the employer in relation to that dismissal which would make it unfair. This is especially so in cases of dismissals for redundancy, even where the employer has gone into administration.