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Termination

Termination of Employment

A contract of employment may be terminated in several ways. The distinction between the different methods of termination may be important in working out whether the employee can bring a claim for unfair dismissal, wrongful dismissal, or redundancy.

Unfair Dismissal

If an employee with more than one year's continuous service is dismissed without good reason or without following a fair procedure (see below), the employer may find themselves on the wrong end of a claim for unfair dismissal. When such a claim is brought, the employer has to establish the reason for the dismissal. If the dismissal is held to be unfair, the employer can be ordered to re-engage, reinstate or to pay compensation to the ex-employee.

In addition, an employee who is dismissed for an "automatically unfair" reason does not need a qualifying period of continuous service in order to claim unfair dismissal. The "automatically unfair" reasons include dismissal on the grounds of pregnancy, maternity, trade union recognition, for taking action on health and safety grounds and reasons relating to the national minimum wage.

In any unfair dismissal case the dismissed employee requires to bring a claim before the Employment Tribunal within 3 months of dismissal unless they are able to persuade the tribunal to extend this limit or the dispute resolution provisions below apply.

Statutory Dispute Resolution Provisions

The new Disciplinary and Dismissal Procedure and the new Grievance Procedure involve a 3-step procedure: the issues of concern should be set out in writing, a meeting should be held to discuss the issue, and the employee should be given an opportunity to appeal any decision taken. In certain limited circumstances a modified 2-step procedure can be used.

Failing to follow these procedures could have potentially serious consequences for both employers and employees. In particular, where an employer has failed to go through certain steps and meet certain requirements before dismissing an employee, the dismissal will be deemed automatically unfair. On the flip side, an employee who has not first tried to resolve the dispute directly with his or her employer by raising a grievance will not be entitled to lodge an employment tribunal claim.

In certain circumstances the normal time limit for bringing a tribunal claim can be extended by 3 months.

Awards of Compensation

Successful claimants are entitled to a basic award, calculated on the employee's age, length of service and gross wage up to a maximum of £9,300 (from 1 February 2007), a compensatory award up to a maximum of £60,600 (from 1 February 2007), and an additional award where an employer has failed to comply with a reinstatement or re-engagement order. This additional award can amount to a maximum of £16,120 (from 1 February 2007).

Wrongful Dismissal

If an employer dismisses an employee in breach of their contractual or statutory obligations to give notice, it will be liable to pay damages for wrongful dismissal. This right comes from the common law relating to contract and is quite distinct from the employee's statutory employment protection rights (e.g. to claim compensation for unfair dismissal). In order to bring such a claim the ex-employee must establish that he or she was dismissed in breach of contract or with less than the statutory minimum period of notice, and that he or she has suffered loss as a result.

Despite the provisions of a fixed term contract or of a contract terminable on giving notice, an employer may dismiss an employee summarily, without having to pay him damages for wrongful dismissal, if the employee has been guilty of gross misconduct. In addition an employee may be summarily dismissed if he or she is grossly incompetent in the performance of his or her contractual duties. What constitutes misconduct or incompetence is a matter of interpretation and proper procedures must be followed, so taking advice before doing anything drastic is always sensible.