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In this blog, we explore the differences between unfair dismissal and wrongful dismissal and explain how you can avoid falling foul of either.

The intricacies of employment law often trip business owners up. And one of the most common hazards is dismissing someone in line with the letter of the law. There are two kinds of dismissal that sound similar but mean very different things and you need to avoid getting either of them wrong.

Isn’t Unfair the Same as Wrongful?

Not quite. In fact, in legal terms, they are entirely different concepts, as we explain.

Wrongful Dismissal

This happens when you breach an individual’s contract in the process of dismissing them. The most common breach is failing to give an employee the correct length of contractual or statutory notice.

When are employees protected?

Employees have this right from day one so you need to be vigilant from the outset of a new employment contract. If you cannot settle the issue via conciliation with HR support, you could be looking at a tribunal or court case.

Claims for £25,000 or less would be settled in an employment tribunal whereas those over £25,000, would require a county or high court action.

How much could it cost?

 Damages are not fixed. The figure will be set in reference to the individual’s pay and benefits for the period of their notice had they received it. This can include items like a company car, bonus, health cover and pension payments.

The more senior the employee, the longer their notice period is likely to be and therefore the more costly their claim. It’s also worth noting that it’s unlikely you will be able to recover your court costs.

On the plus side, employees are required to look for a new job as soon as possible. If they secure one and work during what would have been their notice period, their new pay and benefits will be taken into consideration. This could reduce the amount of any monies owed.

What can you do to avoid it?

 If you want to dismiss an employee, ensure you give them notice in line with their contract or statutory minimums. If you want the individual out of the business immediately, you could pay them in lieu of notice. This means paying them all their usual pay and benefits as if they had still been working up until the end of their notice period.

This is a very common practice and in many cases will be cheaper than paying court, salary and benefit costs. You’ll also save time and effort into the bargain.

What else do you need to know?

What constitutes wrongful dismissal is defined by referring to case law. This means that the most recent judgement on the topic sets a precedent by which wrongful dismissal is assessed.

As such, it can change form time to time so you need to keep abreast of any changes. Or work with someone who does that as their day job.

Unfair Dismissal

 Employees are protected by law from being unfairly dismissed. It’s a statutory right and is based on the employer’s reason for dismissal. For you to defend an employee’s claim you must show that:

  • the reason for dismissal is one of the potentially fair reasons listed in the Employment Rights Act 1996 including:
    • capability
    • conduct
    • redundancy
    • statutory illegality
    • some other substantial reason
  • your conduct was fair and reasonable in the circumstances, taking into consideration the size and resources of your organisation. This means:

Both these tests must be passed: if you dismiss for a fair reason but carry out the dismissal unfairly, you will still be deemed to have acted unfairly. The only good news in this scenario is that the amount of compensation might be reduced.

When are employees protected?

Except in specific circumstances, employees must have a minimum of two years’ continuous service to qualify for the right to bring an unfair dismissal claim. And it can only be pursued in an employment tribunal.

How much could it cost?

 Compensation is made up of a basic award (calculated on the basis of age, length of service and salary) and a compensatory award limited to one year’s gross pay or £80,541, whichever is lowest. This takes into account future loss of earnings and loss of statutory rights.

What can you do to avoid it?

If you have an employee who you want to dismiss, you need to tread carefully. The Acas Discipline and Grievance Guide provides step-by-step advice on dealing with challenging situations including capability and conduct.

If you find you have dismissed someone unfairly and you do not have a case to defend, you could reinstate or re-engage your employee.

What else do you need to know about unfair dismissal?

 Sometimes an employee will pursue tandem claims. While this will mean a more complicated case it doesn’t necessarily mean more compensation as an employee would not be entitled to double recovery for the same loss.

What’s the key takeaway from all this? Bring in an HR specialist early on if you’re thinking of dismissing someone. It might cost you a few hours of their time but it’s likely to be a lot cheaper and quicker than getting it wrong and having to pay compensation and undergo a lengthy legal process.

If you need further advice or information on unfair dismissals or wrongful dismissals, then please contact us.