ABE Principles of Business Law 2008-1
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Employment Law 2: Termination of the Contract, Discrimination and Tribunals 325
A. NOTICE
If a contract of employment is for a specified period, the employment ceases at the end of that period without notice. If the contract is not for a definite period then, if either party wishes to end it, they must give the period of notice specified in the contract. If no period of notice is expressly stated, the period of notice required is that which is customary in the trade or reasonable in the circumstances. A court will decide the latter point in view of such factors as the nature of the work and the intervals at which wages are paid.
If a contract is terminated without notice, the injured party may sue the other party to the contract for whatever damages he/she has suffered. In practice, this is most likely to occur when an employer dismisses an employee without giving the required notice. It is most unusual (but not completely unknown) for an employer to sue an employee under these circumstances.
Summary Dismissal
There is one exception to the requirement to give the specified notice. This is when one party has committed a breach of a vital term of the contract. Again, in practice, this usually relates to what is called summary dismissal by an employer. There is no simple answer as to what justifies summary dismissal; it will depend on the particular circumstances of each case. Relevant considerations are the status of the employee and whether or not he/she has a history of misconduct. Many disciplinary procedures specify or give examples of "gross industrial misconduct" which may lead to summary dismissal. A single act of negligence or disobedience is unlikely to justify such action.
Wrongful and Unfair Dismissal
An employee who is summarily dismissed without proper cause can bring an action for wrongful dismissal in the court (not before an employment tribunal).
Do not confuse "wrongful dismissal" with "unfair dismissal". Wrongful dismissal need not be "unfair", as when an employee's misconduct justifies dismissal but not dismissal without notice. If an employee's action for wrongful dismissal is successful, he/she will be awarded damages but cannot obtain an order of "specific performance" i.e. an order compelling the employer to reinstate him/her.
Minimum Periods of Notice
The period of notice specified in the contract cannot be less than the statutory minimum period of notice laid down in the Employment Rights Act 1996.
Under this Act, the notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for one month or more is:
Not less than one week's notice if the period of continuous employment is less than one month.
Not less than one week's notice for each year of continuous employment if the period of continuous employment is two years or more but less than 12 years.
Not less than 12 weeks' notice if the period of continuous employment is 12 years or more.
The notice required to be given by an employee who has been continuously employed for one month or more to terminate the contract of employment is not less than one week.
Either party may waive the right to notice on any occasion and can accept payment in lieu of notice.
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The above notice periods do not apply to a contract made in contemplation of the performance of a specific task which is not expected to last for more than three months, unless the employee has been continuously employed for a period of more than three months.
The above notice provisions do not affect any right of either party to a contract of employment to treat the contract as terminable without notice by reason of the conduct of the other party.
If the contract provides for a longer notice period, then the employee may rely on this. In other words, the employee gets whichever is more advantageous, statutory or contractual notice.
B. WRITTEN STATEMENT OF REASONS FOR DISMISSAL
Under the Employment Rights Act 1996 an employee is entitled to be provided by his/her employer with a written statement giving particulars of the reasons for the employee's dismissal:
If the employee is given by the employer notice of termination of his/her contract of employment.
If the employee's contract of employment is terminated by the employer without notice.
If the employee is employed under a contract for a fixed term and that term expires without being renewed under the same contract.
In the following cases, an employee is entitled to a written statement without having to request it and irrespective of whether she has been continuously employed for any period:
If dismissal occurs at any time while she is pregnant.
After childbirth in circumstances in which her maternity leave period ends by reason of the dismissal.
In all other cases:
an employee is entitled to a written statement only if he/she makes a request for one; and
an employee is not entitled to a written statement unless on the effective day of termination he/she has been, or will have been, continuously employed for a period of not less than two years ending with that date.
A complaint may be presented to an employment tribunal by an employee on the ground that the employer unreasonably refused to provide a written statement when required to do so or the particulars of the reasons given are inadequate or untrue. The tribunal has power to make a declaration as to what the reasons were and to make an award of two weeks' pay to the claimant.
The object of this provision is to assist employees in any claim for unfair dismissal or redundancy pay which they may contemplate making. The statement is admissible in evidence in any proceedings.
C. CONSTRUCTIVE DISMISSAL
Constructive dismissal occurs when an employee leaves an employment, with or without notice, "in circumstances such that he is entitled to terminate it without notice by reason of the employer's conduct". In other words, although the employee has taken the initiative in leaving the employment, he is regarded as having been dismissed and can, for example,
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claim for unfair dismissal. However, for a constructive dismissal to occur, the employer's conduct must involve a significant breach of the terms of the contract; unreasonable or unfair behaviour is not enough. In Western Excavating (ECC) Ltd v. Sharp (1978) the Court of Appeal stated that the essential question was whether the employer was guilty of conduct which was a significant breach going to the root of the contract, or which showed that he no longer intended to be bound by one or more of its essential terms. If this was so, the employee was entitled to treat himself as discharged.
Examples of conduct which have been held to amount to constructive dismissal are:
Unilateral reduction in basic rate of pay
Unilateral change in job duties
Handing an employee over to the police on suspicion of theft without any discussion
Breach of implied terms of mutual trust and confidence (see Omilaju v. Waltham Forest LBC (2004)).
Note that the employee must react promptly to the employer's conduct. If the employee delays too long before leaving, he/she may be regarded as having accepted the change in the terms of the contract.
D. REDUNDANCY
Firstly, do not confuse redundancy in this context with voluntary redundancy. Voluntary redundancy is where the employee agrees to be dismissed and therefore the rules relating to selection, consultation, etc. do not apply. It is not even necessary for the employer to prove that the job of the applicant for voluntary redundancy has gone.
What follows therefore only applies to compulsory redundancy.
Definition of Redundancy
Under the Employment Rights Act 1996, redundancy is deemed to arise where the employer dismisses an employee because:
The employer has ceased or intends to cease to carry on the business for the purposes of which the employee was employed; or
The employer has ceased or intends to cease to carry on that business in the place where the employee was employed; or
The needs of the business for employees to carry out work of a particular kind in the place where the employee was employed have ceased or diminished, or are expected to do so.
Thus, basically, redundancy occurs in two situations. First, where the employer ceases to exist, and secondly where the job ceases to exist. Two cases provide examples of these situations.
O'Brien v. Associated Fire Alarms (1968)
O'Brien was employed at the Liverpool office of Associated Fire Alarms. This was the regional office for the north and west of England. Work of the type which he was doing diminished in the Liverpool area and Associated Fire Alarms required him to work in Barrow- in-Furness. O'Brien refused to do this because the distance to Barrow-in-Furness from his home was so great that he could not commute on a daily basis. It was held by the Court of Appeal that his dismissal was for reasons of redundancy.
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Bromby and Hoare Ltd v. Evans (1972)
Evans, a bricklayer, was dismissed when his employers decided that work previously done by employee bricklayers should henceforth be done by independent contractors. It was held that Evans had been made redundant because the business no longer needed to employ bricklayers. The work could be done more economically by self-employed independent contractors.
Entitlement to Redundancy Payment
A person dismissed for reason of redundancy, and who has at least two years' continuous service is entitled to claim a lump sum redundancy payment from the employer.
The amount of redundancy pay is based on:
The claimant's age;
The number of years of continuous employment with the employer (up to a maximum of 20); and
The claimant's weekly wage (up to a specified maximum).
Working backwards from the date of termination, the claimant is entitled to:
1½ weeks' pay for each year during the whole of which the employee was aged 41 or more;
1 week's pay for each year during which the employee was aged 22 or more;
½ week's pay for years when the employee was below 22, (as amended by the
Employment Equality (Age) Regulations 2006).
Rules for Redundancies
(a)Consultation
The Trade Union and Labour Relations (Consolidation) Act 1992 (as amended by The Collective Redundancies (Amendment) Regulations 2006) places a duty on any employer who is contemplating redundancies among the workforce to consult at the earliest opportunity with any trade union which is recognised as representing the workers affected. New regulations implementing the European Court of Justice ruling in Commission v. United Kingdom (1995) extend the right to consultation to elected employee representatives when there is no recognised trade union in the workplace. Consultation must be "meaningful consultation with a view to avoiding redundancies".
If 20 or more employees are to be dismissed within a period of 90 days or less, then the employer must consult with the employee representatives at least 30 days before the proposed date of dismissal; for 100 or more employees, the period is 90 days.
Failure to consult can lead a tribunal to make what is known as a "protective award" against the employer. This, in effect, requires the employer to pay compensation, in addition to redundancy money, to the employees affected.
Recent case law has clearly established that there is a need for an employer to consult individually with those likely to be selected for redundancy, in addition to any collective consultation with representatives.
(b)Selection Criteria
If candidates for redundancy have to be selected from a larger number of employees, then the selection must be "fair"; otherwise, those selected may be able to claim unfair dismissal, the compensation for which is usually higher than the redundancy payment. In any proceedings, the tribunal will consider such factors as:
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The criteria used for selection
The amount of individual consultation which took place
The efforts made to find alternative employment within the company.
Unreasonable refusal to accept a suitable alternative job can disqualify a person from receiving redundancy pay.
E. UNFAIR DISMISSAL
Prior to 1971, apart from compensation for redundancy which was introduced in 1965, a dismissed employee had no claim against the employer, provided that the latter had given the correct length of notice as required by the contract of employment. The employer did not have to give a reason for dismissal and, in practice, the employee had only the threat of industrial action by fellow workers to support any request for redress.
This situation was significantly changed in 1971 when the concept of "unfair dismissal" was introduced into British law, originally in the Industrial Relations Act 1971. Claims for unfair dismissal now make up the majority of cases with which employment tribunals have to deal. The law on this is now contained almost exclusively in the Employment Rights Act 1996.
Scope of the Legislation
Certain special classes of employment are excluded from the right to claim. Apart from these, the more important limitations are as follows:
The provisions do not apply where the employee "ordinarily works outside Great Britain".
Apart from certain exceptions, 52 weeks’ continuous service in required.
In the case of certain fixed term contracts, the employee may agree to forgo his/her unfair dismissal rights (normally, such contracting out is not possible).
The right not to be unfairly dismissed is subject to the provisions of the Trade Union and Labour Relations (Consolidation) Act 1992 (in particular, Sections 237–239 which deal with loss of unfair dismissal protection for employees engaged in unofficial and other forms of industrial action).
Circumstances in which an Employee is Dismissed
An employee must actually be dismissed and this occurs only if:
The contract under which an employee is employed is terminated by the employer, whether with or without notice.
The employee is employed under a contract for a fixed term and that term expires without being renewed under the same contract.
The employee terminates the contract under which he/she is employed (with or without notice) in circumstances in which he/she is entitled to terminate it without notice by reason of the employer's conduct.
Failure to permit return to work after childbirth is specifically treated as dismissal.
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Effective Date of Termination
In general, the effective date of termination:
In relation to an employee whose contract of employment is terminated by notice, whether given by the employer or by the employee, means the date on which the notice expires.
In relation to an employee whose contract of employment is terminated without notice, means the date on which the termination takes effect.
In relation to an employee who is employed under a contract for a fixed term which expires without being renewed under the same contract, means the date on which the term expires.
Automatically Fair and Unfair Dismissals
Certain cases of dismissal are defined by the Employment Rights Act 1996 as automatically fair or unfair and a tribunal has no power in these cases to enquire into the reasonableness of the employer.
(a)Reasons which are automatically fair include:
National security.
Mass dismissal of all employees who are engaged in official (i.e. supported by a lawful ballot and otherwise lawful) industrial action, or selective dismissal of those involved in unofficial industrial action.
(b)Reasons which are automatically unfair include:
Membership or non-membership of a trade union, or engaging in trade union activities (but not industrial action – see above).
Pregnancy and maternity-related issues including sickness, and failure to allow a woman to return after maternity leave.
Under the Transfer of Undertakings (Protection of Employment) Regulations 1981, if a business or part of a business is transferred to new management or ownership, and an employee is dismissed on account of this.
Discriminatory dismissal under the Sex Discrimination Act 1975, the Race Relations Act 1976 and the Disability Discrimination Act 1995.
In relation to a spent offence under the Rehabilitation of Offenders Act 1974.
In relation to a health and safety risk and the refusal to undertake such a risk under the Employment Rights Act 1996.
Permissible Reasons
For a dismissal to be found to be fair, it must be for one of the following permissible reasons (or for one of the automatically fair reasons listed above).
(a)Capability
This relates to an employee's skill or qualifications. It would cover, for example, the dismissal of a sales representative for failure to meet sales targets.
It also relates to the capacity of the employee to do his/her job because of health problems, physical or mental, and entitles the employer, in appropriate cases, to dismiss a person who is incapacitated or on long-term sick leave.
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(b)Conduct
This covers such areas as theft, persistent absenteeism, habitual drunkenness, assaulting fellow workers, and falsification of claims for expenses. Misconduct of other kinds including personal behaviour outside work may also occasion dismissal, and an employer may make specific issues the subject of instant dismissal when appropriate, (e.g. smoking at an oil refinery, or being over the alcohol limit set by the employer as in the case of the former British Rail where the limit was zero). Less serious misconduct can lead to warnings under the discipline code, and repeated less serious misconduct can therefore cumulate to result in dismissal.
(c)Redundancy
This has already been discussed.
(d)Statutory Restriction
This applies when an employee is unable to continue working because to do so would contravene some legal enactment. A common example is where a transport driver has lost his/her driving licence.
(e)Some other Substantial Reason
This is obviously a very wide provision. It has been used to justify dismissals due to business reorganisation, pressure from customers, and in order to deal with difficult working relationships.
Complaints to an Employment Tribunal
A complaint may be presented to an employment tribunal against an employer by any person that he/she was unfairly dismissed by the employer.
Where a dismissal is with notice, an employment tribunal shall consider a complaint if presented after the notice is given but before its effective date of termination, but, subject thereto, an employment tribunal shall not consider a complaint unless it is presented to the tribunal:
before the end of the period of three months beginning with the effective date of termination, or
within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months.
Tribunal Decision
In coming to a decision as to whether a dismissal was fair or unfair, a tribunal will have to consider the following points:
Did a dismissal take place?
Was it for a permissible reason?
Did the employer act reasonably, having regard to the circumstances and to the size of his/her business and administrative resources?
The burden of proof is on the employer to show the reason for dismissal, and to show that he/she acted reasonably. The question of reasonableness is the one which usually causes the most difficulty. One point is clear: the tribunal must not consider whether it would have taken the same decision, but must determine whether the employer's action fell within the "band of reasonableness" which might be expected from employers generally. In determining this, the tribunal will consider such factors as:
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The Employment Appeal Tribunal
The Employment Appeal Tribunal (EAT) consists of:
such number of judges as may be nominated from time to time from the judges of the High Court and the Court of Appeal;
at least one judge of the Court of Session nominated from time to time by the Lord President of the Court of Session; and
such number of other members as may be appointed from time to time by Her Majesty on the joint recommendation of the Lord Chancellor and the Secretary of State.
The EAT has a central office in London but may sit at any time and in any place in Great Britain.
Jurisdiction of the EAT
An appeal lies to the EAT on any question of law arising from any decision of, or arising in any proceedings before, an employment tribunal under or by virtue of:
The Equal Pay Act 1970, the Sex Discrimination Act 1975, or the Race Relations Act 1976.
The Trade Union and Labour Relations (Consolidation) Act 1992, the Disability Discrimination Act 1995, or the Employment Rights Act 1996.
Procedure before the EAT
A person may appear before the EAT in person or be represented by:
counsel or a solicitor;
a representative of a trade union or an employers' association; or
any other person whom he/she desires to represent him/her.
The EAT has in relation to the attendance and examination of witnesses, the production and inspection of documents and all other matters incidental to its jurisdiction, the same powers, rights, privileges and authority as the High Court (in England and Wales) and the Court of Session (in Scotland).
For the purpose of disposing of an appeal, the EAT may:
exercise any of the powers of the body or officer from whom the appeal was brought; or
remit the case to that body or officer.
Enforcement of Decisions
Any sum payable in England and Wales in pursuance of an award of the EAT is, if a county court so orders, recoverable by execution issued from the county court or otherwise as if it were payable under an order of that court.
Appeals from the EAT
An appeal on any question of law lies from any decision or order of the EAT to the relevant appeal court, with the leave of the EAT or of the relevant appeal court. The "relevant appeal court" means:
In the case of proceedings in England and Wales, the Court of Appeal.
In the case of proceedings in Scotland, the Court of Session.
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