Sometimes, things go wrong: The concept of unfair dismissal
With the best will in the world, sometimes things do not work out as hoped. In this article, John Muir discusses unfair dismissal and employment tribunals
The concept of unfair dismissal
The concept of unfair dismissal goes back to the late 1960s and the Industrial Relations Act 1971. The report of the Royal Commission on Trade Unions and Employers’ Associations had found that a common trigger for wildcat strikes was union membership support for sacked employees. The point to bear in mind here is that dismissal could have been for a totally unjustified reason yet the only requirement on the employer was that the dismissal had to be with notice unless the situation was for gross misconduct. Who was to challenge the employer over his actions? The workforce took it up by walking off the job.
The remedy was set out in the Industrial Relations Act 1971 with the introduction of the concept of unfair dismissal and the provision of a legal right on the part of the dismissed employee to put a complaint to an industrial tribunal, latterly renamed an employment tribunal. The arrangements have remained substantially unaltered to the present day.
The legal route to a tribunal decision, whether the dismissal was fair or unfair, did not include an automatic right to have one’s job back. Provision was, however, made for reinstatement or re-engagement if the employee wished to take this course and the tribunal and the employer agreed. If the employer unreasonably refused to accept the tribunal award then extra compensation was payable to the dismissed individual. In practice and over the whole period, employees have gone for money, an outcome which runs counter to the initial hopes for the system.
The law lays down that there are five potentially fair reasons for dismissal. In practical terms this means that if an employer intends to proceed against an employee to the point of dismissal then the reason must be related to:
(a) The capability or qualifications of the employee for performing work of the kind which he or she was employed by the employer to do
(b) The conduct of the employee
(c) The fact that the employee was redundant
(d) The fact that the employee could not continue to work in the position which he or she held without contravention either on the part of the employer or employee of a duty or restriction imposed by or under an enactment
(e) “Some other substantial reason” of a kind such as to justify the dismissal of an employee holding the position which that employee held
The majority of unfair dismissal complaints centre on (a) and (b) but how do the other points fit in? A dismissal for redundancy can be made an unfair one if, for example, there is another reason and the need for redundancy has been used to sweep up someone regarded as unreliable, if the procedure used is itself unfair in that employee’s case, or if there has been inadequate or no consultation with the employee concerned.
The loss of a driving licence is the main cause of statutory ban dismissals but before moving to this point the employer at a tribunal will need to show that the following matters have been fully considered:
- Was driving an essential part of the job or can the duties be satisfactorily carried out without a driving licence ?
- Can the employee be retained and to what extent would this cause dislocation and inconvenience ?
- Is redeployment feasible ?
- Has the individual been given a chance to express views and have his or her suggestions been reasonably considered ?
In the absence of satisfactory responses the dismissal will likely be found to be unfair.
When the law says that capability is a reason for dismissal, what is properly to be considered is incapability. But care has to be exercised in using this label. What is really being examined is an employee’s inability to do the job even though he is doing his best. It is important to note that if the slack performance is due to a lack of enthusiasm, indifference or a downright slipshod approach, then the situation is a conduct issue and should principally be treated as such.
Capability is also coupled with two other considerations. One is the reference to qualifications. If the job has moved on and requires the post holder to have higher qualifications to do it then a dismissal will be potentially fair, but before reaching this point the employer has to discuss the situation with the employee with a view to reaching a solution which may encompass training or redeployment.
The other matter is to do with ill health. If the job cannot be accomplished because of long-term or frequent short-term absences then that is an expression of capability. Special care has to be exercised before moving to dismissal. First there has to be full medical information about the condition giving rise to the absence. Detailed consultation with the employee follows to see if some solution can be found, for example, lighter duties or another job in the company that takes account of the medical circumstances.
Regarding conduct as a reason for dismissal, much is to be taken as an implied term in the contract of employment that the employee will act loyally and behave himself. How-ever, most employers in the disciplinary procedure, so as to make matters clear, will give examples of misconduct, eg, theft, drunkenness, fighting at work, refusal to accept a lawful order which could lead straightaway, subject to a hearing, to instant dismissal.
A variety of situations can be brought to a tribunal which do not neatly fit the “capability” or “conduct” reasons for dismissal. Examples would be where an employee is by arrangement working in the location of third party or a salesman being rude and offensive to an important customer. If the third party complains and the employer is not able to mollify that party or make alternative arrangements to redeploy the employee then the reason for dismissal might well come under “some other substantial reason’’.
There are yet other circumstances of dismissal outside the scope of this article, for example, dismissal related to trade union membership and activities, employer action in contravention of discrimination legislation, or activities related to health and safety matters. The case would be heard in the normal way at a tribunal but the ability to bring a case would not depend as described below on the basis of a year’s service or not beyond normal retirement age. Cases can proceed forthwith. There is no service requirement.
For a dismissed employee to be able to bring a claim to a tribunal, he has to satisfy certain criteria. These are:
Service The employee must achieved one year’s service with the employer or be able to link earlier service with another employer — for example, through the operation of the Transfer of Undertakings Regulations. Any employment should therefore have a documented start date. The commencement date also assumes vital importance in the context, among other things, of certain rights to maternity pay and a redundancy payment.
Employee, not self-employed The dismissed individual must have been an employee. With the considerable growth in the numbers of self-employed and independent contractors, many could and indeed, when work dries up, do claim employee status for the purposes of employee protection legislation including unfair dismissal. Whether a person is in the net or out will be determined by the tribunal, which will look behind the ostensible relationship to establish what the situation actually is in the context of, for example, control of the individual, whether he receives a fixed “wage”, whether there is a mutuality of obligation or whether, on the contrary, the individual can walk away from any offer of work and the other party can decide not to proceed. This could apply to pharmacy locums.
Dismissal There must have been a dismissal. For the most part the situation is straightforward, unless the employer uses ambiguous words. For example, he may say after some minor incident “I don’t want to see your face again”. The employee may treat it as a joke and nevertheless turn up for work next day. On the other hand, the employee might take it seriously and not report for work any more. The next thing the employer knows is that a copy of the employee’s complaint to a tribunal alleging unfair dismissal lands on his desk. The question arises: has there been a dismissal? The tribunal applies an objective test in considering the issue of dismissal or resignation. It considers all the surrounding circumstances and, if the words still appear ambiguous, tribunal members will put the question to themselves to discover how a reasonable employer or employee might have understood the words in the circumstances specified.
Another important point is when did the dismissal take place. What is the effective date of dismissal? Unless this is clear, a dispute may arise at the tribunal whether the employee has or has not the required service to go ahead. The date on which the contract of employment ends is also of vital importance in that any complaint to a tribunal has to be received within three months of that happening.
Retirement age The employee must not be beyond normal retirement age (NRA), but there is nothing to stop an employer from having an NRA at, say, 70 years or higher. Usually, however, employees are normally excluded from the ability to complain to a tribunal about unfair dismissal when they have reached the NRA for employees holding their position or, if there is no NRA or if there is a different NRA for men and women, when they have reached the age of 65 years.
Problems often arise in employment on the basis that the employee does not know what actually is required of him or her. The gap between what the employer expects — and this is particularly the case as regards performance — and what the employee is delivering can be wide. So suddenly the employer invokes the disciplinary procedure. It is incumbent on employers, in order to avoid this situation inadvertently arising, to set out the policies, rules, processes and the standards required. This way if a gap arises then the employee concerned knows where he stands and what has to be answered in response to the employer’s complaint.
For dealing with a failure to reach the standards required, most employers have a disciplinary procedure. The first aim of a procedure is to provide a basis on which performance or conduct can be brought up to the level required through a system of warning and time for improvement. Only in the last resort should a dismissal take place. Reference has, however, already been made to the exceptional circumstances of gross misconduct where a warning about future conduct may not be appropriate. It is also to be noted that such a situation may on rare occasions emerge where the lack of performance, not misconduct, is so serious that grave danger is created or life may be at risk. Subject to a hearing, dismissal may be appropriate.
Dismissal is usually in the employer’s hands because the employee has broken the rules — effectively the contract of employment. What happens if the employer fails to honour the contract? Perhaps the employer unilaterally reduces or withdraws an expressed benefit in the contract. There are for both parties implied terms in the contract. So suppose that the employer by his conduct takes action to demean an employee, to reduce his status and act unreasonably. Such situations may give rise to the employee resigning and claiming constructive dismissal. There has to be a fundamental breach of the contract on the employer’s side for such action to succeed and the employee must not delay. If he suffers from the employer’s breach in silence for any length of time he will be assumed to have accepted the breach and his claim will therefore fail at a tribunal. Showing that the employer has breached the contract is only the first part. The task of showing that the action is unfair is likely to prove more difficult.
The work of employment tribunals
Employment tribunals were set up in 1964 but their work was limited to cases arising under the Industrial Training Act 1967. They really got under way with the introduction of unfair dismissal provisions in 1971. Currently, tribunals can hear complaints under 83 categories of statutory provisions. There are additionally other categories of business. The case load in 2000?01 was 130,000 complaints received of which over 46,000 related to unfair dismissal. Other major subjects are breach of contract claims and the Wages Act. Not all the claims proceed to a hearing since, as will be seen, binding agreements can be made between the employer and dismissed employee which, once concluded, finalise the case.
Tribunals in England and Wales are organised on a regional basis. There are 11 centres. Parallel, but more limited, arrangements exist in Scotland. Hearings at tribunals are open to the public but there are powers to hold certain categories of case in camera. Tribunals are chaired by a barrister or solicitor of at least seven years’ standing.There are two lay members drawn from either side of industry. They bring to bear their experience and industrial judgement and together with the chairman, who advises on the law, reach a decision on whether a dismissal was fair or unfair. These decisions are usually unanimous but can be by a majority.
The process by which a complaint of unfair dismissal gets into the system starts with the employee securing form IT1 — usually from the Advisory, Conciliation and Arbitration Service (ACAS). It is then sent to the tribunal in the employee’s area.
The form asks for details of the job, start date of employment, earnings, age, whether reinstatement or re-engagement is sought and invites the applicant to set out his or her account of the circumstances of the dismissal. In practice, the account has usually proved to be pretty sketchy but projected amendments to the law will insist that this section is fully used.
On receipt, the form is date stamped — an action crucial to determining whether it was received within the stipulated three months from the effective date of dismissal. It is then copied and sent to ACAS and the employer. A period of 21 days is allowed for a reply (on form IT3). The employer can check the dates, which may lead, for instance, to a submission that the employee’s service is insufficient to support the application, that the date of dismissal is wrong and therefore the application itself is out of time, that the earnings figure is inaccurate, etc. The form also calls on the employer to set out his case.
A consideration which may be in mind is that the other party has a weak case. This view, which is taken more frequently by the employer than the employee, may lead to a submission to the tribunal that there should be a “pre-hearing review”.The objective of such a review is to dissuade the other party from proceeding after a hearing at which submissions only would be made (but at which no witnesses would appear). If the tribunal came to this view then a costs warning would be given to the “weak” party. This informs them that if they go forward to a full hearing and lose then the other side would be in a position to ask for costs. Furthermore the “weak” party would be required to put up some stake money — usually a modest sum — before the case would be admitted to the hearing schedule. In the event these provisions are lightly used with tribunals taking the view that no proper assessment could be made about a case until the evidence has been heard.
Pre-hearing review business aside, the exchange of forms between the parties, copied to ACAS, now leaves a time for action to resolve the issue. A conciliation officer from ACAS will get in touch with the parties and explain that a statutory duty now falls to ACAS to offer assistance with a view to a settlement. It is at this point that there may be a willingness to talk. On the employer’s side there may be second thoughts about whether their actions and decision will stand up in court or perhaps the employer just wants to avoid all the hassle and get the business out of the way. With the introduction fairly recently of a greatly increased maximum that a tribunal is able to award, an employer has to think carefully about the equation between a settlement with the avoidance of hassle and the chances of success at a hearing. The increased compensation ceiling was, of course, designed to encourage employers to deal properly with employees who broke the rules, before moving to dismissal. On the employee’s side the chance to get an offer of cash rather than risk losing at the tribunal is often a spur to agreement.
In exploring the settlement route the employer, the respondent, will put an offer to the applicant, through the conciliation officer. The officer is able to explain the law to the parties, outline general observations on the respective cases and comment about the outcome of broadly similar cases. Offering advice on whether to settle or not is not part of the business. Cash improvements and the wording of a reference are the usual elements in a settlement. If all is agreed and signed (on form COT3) then the employer is bound to pay the money and write any agreed reference, the applicant agrees that the outcome is in full and final settlement of all claims that might arise out of the contract. The agreement stops the applicant from going forward to a tribunal hearing.
Another way to a settlement is through a compromise agreement. Many dismissed employees engage a solicitor to assist them and in the course of that business an agreement with the employer might be worked out. Rather than seek to transfer the matter to ACAS there is the facility through the compromise agreement to finalise matters. Business through the conciliation officer is at public expense whereas otherwise it is private expense. There are requirements to be met in using the compromise route. The agreement must:
- Be in writing
- Relate to the particular complaint in question (note that under the proposed provisions set out in the Employment Bill [November 2001] the settlement will be of all claims arising out of the contract of employment as in the ACAS model)
- Only be made where the employee has received independent advice from a lawyer or some other independent person (there has to be insurance against the risk of loss arising in consequence of the advice and the employee must be told about the effect of the agreement and its stop to tribunal proceedings)
- Identify the adviser
- State that the conditions regulating compromise agreements have been satisfied
If there is no agreement to settle then the case goes to a tribunal hearing. At the start it was hoped that the business would be characterised by informality and that the parties would represent themselves. Nevertheless, provision was made for a representative to be whomsoever the party wished. It was also to be the case that each party carried its own costs — a major departure from the normal arrangement of costs following the award. As regards representation, things did not work out as envisaged. From a lack of experience, knowledge of the law and procedure, employers engaged their legal advisers. Unless the employee had union support, access to a Citizens’ Advice Bureau, a free representation unit, a community law centre etc, he or she was on their own. Currently most parties at a hearing are represented, which certainly reflects the complexity of the law and the need to know how the system works.
Tribunals are adversarial. The first stage is the preparation of the documents about the dismissal, eg, copies of warnings, minutes of meetings, reasons for dismissal, a copy of the disciplinary procedure. The objective is an agreed bundle of papers. Instead of there being an examination-in-chief, witnesses come with prepared statements which they read to the tribunal. Apart from constructive dismissal, when the employee goes first, the employer opens and puts up his witnesses. After each one the other side is able to cross examine. Then the employee and his witnesses read their statements and are subject to cross examination. The tribunal asks questions at any time.
Tribunals are bound by precedents. When it comes to summing up, a representative plays an important part in showing how the law bears on the issues, what guidelines might have been determined and, in particular, what decisions might act as binding precedent. This aspect of the business coupled with the ability to cross examine witnesses, more than anything else points applicants and respondents towards the engagement of skilled representatives.
In dismissal business the law is concerned with fairness and reasonableness as well as the strength of the reason for the dismissal. In particular the question of how the matter was handled will figure to a great extent. Did the disciplinary procedure take fully into account the principles set out in the ACAS code of practice and were they in fact followed in the instant case? What might otherwise be a strong employer case might be vitiated by absence of procedure.
If the result of the case is unfair dismissal, and assuming that there is no reinstatement or re-engagement, then the next step is concerned with money. Tribunals normally leave it to the parties to settle but if no agreement is forthcoming then a compensation hearing date is set.
The maximum compensatory award has recently been greatly increased. There is a basic award on a par with a redundancy payment — maximum £7,500 — but the other maximum (the compensatory element) is now £52,600. It is to be noted that if dismissal is for some inadmissible reason, eg, trade union membership, then awards can be much higher. However, before any successful applicant can run away with the idea that the money is there for the taking, a number of points have to taken into account.
Compensation is in respect of the actual loss resulting from the dismissal. If there is notice pay then that is offset. The individual is also required to mitigate his or her loss and look for work. So if a job comes along quickly then the loss is that much smaller. If at the time of the hearing there is still no job then the tribunal will make an assessment about the probable length of unemployment. Tribunals also have power to reduce an award if the employee has made a contribution to his own downfall. In some instances compensation has been reduced to nil.
A scheme of arbitration has now been introduced as an alternative to the tribunal. The parties have to agree to this course under the auspices of ACAS but once this step has been taken an independent arbitrator takes over. The business is private; likewise the outcome. It is informal and the case is looked at against fairness criteria. There is no reliance on representatives as they would pursue their role at the tribunal. Awards would be bound by the ceiling figures outlined above. The conduct of business is in the hands of the arbitrator but once he or she has made an award that finishes the business. There is no appeal except in the rarest of circumstances.
An appeal can, however, be made from a tribunal award. It must be on point of law to the Employment Appeal Tribunal (chaired by a high court judge with two lay members) and thereafter to the Court of Appeal and the House of Lords. A not insubstantial number of cases have been referred to Europe for decision.
There are amendments scheduled under the Employment Bill (November 2001) designed to speed up tribunal proceedings and to put much greater emphasis on attempting to resolve matters and use procedures at the place of work before a complaint gets into the tribunal system. The general framework of business will remain the same but failure to exhaust internal procedures first will result in financial penalties for the employee or employer as appropriate.
John Muir is managing director of Corporate Employee Relations and author of ‘Industrial relations procedures and agreements’, Gower Publishing. He is also executive editor of and a major contributor to ‘Employee and industrial relations handbook’, Gee Publishing
Citation: The Pharmaceutical Journal URI: 20006378
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