The right way to terminate an employment relationship
To dismiss an employee that has been working for your for more than 2 years, you need (to comply with UK law) (1) a good reason, and (2) to follow a fair procedure.
This guide provides an overview of what you must do (to comply with your legal obligations), and what we think you should do (to maintain your/your company's reputation) when you find yourself in the position of having to let an employee go.
We will then touch briefly on what we think should be your focus for: (1) employees that have less than 24 months’ service; and (2) those that commit gross misconduct.
(1) Employees with more than 2 years’ service
Follow your disciplinary procedure
Your company's disciplinary policy should set out a clear process that any disciplinary action should follow.
If you don't have a disciplinary policy in place then we can help you prepare one!
One of the purposes of an established and repeatable process is to give the employee plenty of warnings about their performance, and an opportunity to improve on this. Employment tribunals do not look kindly on dismissals that come out of nowhere and which are pushed through quickly.
Create a Paper Trail
Giving plenty of warnings is of limited use if you end up in a tribunal, if there is no formal record of these warnings being delivered.
It is essential that you take notes and maintain accurate records so that if you do end up in a position where you have to terminate an individual’s employment, there is a clear paper trail showing that a fair process was followed.
Have a fair and valid reason
There are five statutory "fair reasons" for dismissing someone under the relevant UK legislation (Employment Rights Act 1996)
1. capability
2. conduct
3. redundancy
4. breach of a statutory restriction
5. some other substantial reason (SOSR)
§ SOSR is a ‘catch-all’ provision that can permit an employer to fairly dismiss an employee where no other potentially fair reason applies.
The UK Government has useful guidance (from the perspective of employees) here.
Impact of anti-discrimination law
When making the decision to dismiss someone, you must make sure that you are not doing so in such a way that would constitute discrimation based on a protected characteristic, such as age, religion, sexual orientation, disability etc.
It’s important to always bear in mind that if someone’s performance is suffering as a result of a disability, it is your company's responsibility to first make “reasonable adjustments” to help improve their performance. It is important to remember that disabilities are not always visible: mental health problems such as depression and anxiety can amount to a disability.
If your reason for dismissing someone is discriminatory, it will be considered ‘automatically unfair’. An individual can challenge a dismissal of this sort, even if they have worked for you for less than two years (see below for more commentary on the 2 year point).
Set up a disciplinary meeting
If you have a valid reason for dismissal, you can invite the employee to a disciplinary meeting. In writing, inform them that the meeting could result in their dismissal and that they have the right to be accompanied by a representative.
During the meeting (which should be held in private, except for a representative if the employee wishes), present the employee with the Paper Trail we discussed above and explain to them how they've failed to comply their terms of employment / given you a valid reason to let them go. It is important to remain calm, allow them to comment on any evidence or allegations against them and to ensure that somebody is present to take notes of this meeting and act as a witness.
They are likely to want to speak in defence of their actions and you should listen attentively and respectfully. It is important that you consider what they have to say fairly and with an open mind, and it would be helpful for both sides to take a break while you deliberate. Afterwards, if you still want to dismiss them, explain why you're making the decision.
Reconvene and communicate the outcome
Reconvene the meeting and formally deliver the outcome. Repeat the reasons for dismissal, and set it out in writing if you feel that would be helpful.
Inform the employee of their right to appeal
A fair dismissal procedure requires that the employee being dismissed has the right to appeal. You must remind the employee of this right and let them know any relevant deadlines.
Following the meeting, prepare and send the employee a summary of what has happened in writing. You can take this opportunity to confirm that the company has decided to terminate the employee's contract and explain why the team made this decision.
This is also where you can inform the employee of their remaining rights, such as their outstanding pay, the need to return any company property and any remaining annual leave. Doing so in writing allows you to prove that you've followed the correct procedure and have treated the employee fairly.
Your other employees
Your fellow employees are likely to ask questions about what has happened, particularly if you are a small team. When providing more information, it is essential that you maintain your professionalism. Without making comments of a personal nature or revealing more information than is necessary, you can explain that the dismissal was the result of concerns about the specific individual.
Consistency
Failure to maintain a consistent approach leaves you open to a claim that you discriminated against a former employee. Make sure you have a playbook that you stick to!
(2) Employees with less than 2 years service
Employees only gain statutory protection against unfair dismissal after accruing two years’ continuous service with the same employer.
By law therefore, you can usually dismiss an employee with less than 2 years service without the need to demonstrate a fair reason for the dismissal, and with no positive obligation to go through a fair disciplinary or dismissal procedure.
However, we would urge you to still follow a cautious approach so that you can avoid potential banana skins.
Notice period & pay
Employees without 2 years' service could still be eligible to claim wrongful dismissal.
Wrongful dismissal is essentially a breach of contract claim, usually founded on the basis that the employee has been dismissed without notice or pay in lieu of notice. Make sure you provide all departing employees with any contractual or statutory notice period to which they are legally entitled!
Automatically unfair dismissal
The law affords special protection to employees when they are dismissed for reasons that violate their basic employment rights.
Examples of reasons that will be automatically unfair (there are about 60) include any reasons relating to pregnancy, raising health & safety concerns, whistleblowing etc.
Unlawful discrimation
We discussed this above.
Breach of contract
A fair process should still be followed in cases where there is a contractually binding disciplinary policy or dismissal procedure set out under the employee’s contract of employment.
Any failure to follow these procedures, for example, failing to undergo an investigation into any misconduct or capability issues, or failing to provide a written warning prior to terminating someone’s employment, may constitute a breach of contract for which the employee could claim damages against you.
(3) Gross misconduct
If an individual has committed a very serious act of misconduct (e.g. criminal behaviour) then there may be grounds for dismissing them immediately.
However, in our view in the vast majority of cases it is prudent to follow a more cautious approach, similar to that which we have set out here.
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