Dismissal claims are among the most frequent claims heard by employment tribunals.

Not every termination of employment results in a dismissal. However, where dismissal occurs it does so in one of three ways:

  • employment is terminated by the employer,
  • a limited-term contract comes to an end, or
  • employment is terminated by the employee in response to the employer’s conduct.

There are five potentially fair reasons for dismissal under the Employment Rights Act 1996 – conduct, capability, redundancy, statutory restriction and some other substantial reason. Providing the employer can show that the reason or principle reason for dismissal is one of the five potentially fair reasons, they will be on their way to carrying out a fair dismissal.

The second requirement for a fair dismissal involves the reasonableness of the decision to dismiss – the employer must act reasonably in dismissing the employee for the reason given in all the circumstances.

Whether the employer acted reasonably is an objective test – the tribunal has to decide whether the employer's decision to dismiss fell within the range of reasonable responses that a reasonable employer in similar circumstances and in the same business might have taken. This will involve considering whether the dismissal was fair based on the facts and whether the employer followed a fair procedure.

In conduct and capability dismissal cases, when considering procedural fairness the tribunal will take into account whether the employer complied with the ACAS Code of Practice (see our Contracts and Policies section for more information or follow this link).

Different factors will influence the question of reasonableness, depending on the employer’s reason for dismissal. In certain circumstances dismissals may be automatically fair, such as where an employee is on strike, or automatically unfair, such as where an employee is dismissed for making a protected disclosure (commonly referred to as whistleblowing).

An employee with at least two years’ continuous service has three months from their effective date of termination (EDT) to bring an unfair dismissal claim (unless the dismissal is automatically unfair in which case there is no qualifying period). The time limit may be extended where an employee has correctly notified ACAS of their intention to bring a claim and is awaiting an Early Conciliation certificate (see our Early Conciliation section or this link for the ACAS advice leaflet on Early Conciliation).

Where an employee is unfairly dismissed the employment tribunal has the power to order that the employee be reinstated in their old job, re-engaged in a comparable job, and/or awarded compensation.

Compensation for unfair dismissal is made up of a basic award and, if the tribunal finds it just and equitable, a compensatory award. The basic award is calculated similarly to a statutory redundancy payment (see our Redundancies and Restructuring section for more information or follow this link). At present, the compensatory award is capped in dismissals which are not automatically unfair at the lower of £74,200 or one year’s gross pay.

Constructive (unfair) dismissal

A constructive dismissal may occur where an employee resigns and can show that they were entitled to do so because of the employer's conduct.

The employer's conduct in such cases must amount to a fundamental breach – also described as a repudiatory breach – of the contract of employment. The employee must then accept the breach as bringing the contract to an end and resign in response to it. If the employee delays in accepting the breach they may be taken to have affirmed the breach or waived their right to treat employment as having terminated. There is therefore a risk of affirmation where an employee alleges a breach but continues working under protest, or resigns with notice.

Because there has been a breach of contract, a constructive dismissal will always be a wrongful dismissal (although there may be no damages where the employee has resigned with notice or paid in lieu of notice). Where the employee has qualifying service it may also be an unfair dismissal – a constructive unfair dismissal. This will be so in almost all cases where there is qualifying service as conduct found to constitute a repudiatory breach will more often than not be unreasonable.

Wrongful dismissal

Wrongful dismissal is dismissal in breach of contract. Where in the course of a dismissal terms of the contract, express or implied, have been breached, the employee will have a claim in damages if they have suffered a loss. A wrongful dismissal claim may therefore arise out of an unfair or constructive dismissal. Alternatively, the fairness of the dismissal may not be in dispute and wrongful dismissal simply arise as a result of the employer not paying the employee what they were contractually entitled to.

A claim for wrongful dismissal may be brought in the civil courts or in the employment tribunal. Damages are limited to the notice period and/or the period of time it would have taken to complete a relevant contractual procedure, however, in the employment tribunal these are capped at £25,000.