avoiding unfair dismissal

Establishing a dismissal

It is up to the employee who is alleging unfair dismissal to prove that he or she has been dismissed. Unfair dismissal law views an employee as having been dismissed if any of the following things has happened:

• The company has terminated the employee's contract in order to offer him or her new terms.
• The company has imposed a fundamental change in the employee's terms that goes to the root of the employment relationship or shows that the company does not intend to be bound by one or more of the essential terms of the contract. This is termed a 'constructive dismissal'. So where the company has imposed change rather than expressly terminated the employee's contract, the employee must be able to show that the change was sufficiently important to amount to a constructive dismissal. By way of example, any reduction in the amount that the employee gets paid is likely to be a fundamental breach of contract by the company. Putting back the start and finish times of an employee's working day by 10 minutes may not be.
• The company has decided not to renew the contract of an employee working under a limited-term contract, or the company has renewed the employee's fixed-term contract but on radically different terms.

Reason for dismissal

If an unfair dismissal claim is made, it is up to the company to prove the reason for the dismissal. This must fall within one of the categories that the unfair dismissal legislation recognises as potentially fair reasons for dismissal (potentially fair reasons for dismissal ).

If the change that the company has made relates to the particular kind of work that the employee does, then the reason for the dismissal may be redundancy. Redundancy law, including the definitions of redundancy is dealt with elsewhere in this Guide (defining redundancy). However, it is worth noting here that although an employee who is dismissed for redundancy is usually entitled to a redundancy payment, the employee loses the right to a payment if he or she unreasonably refuses an offer of suitable alternative employment (unreasonably refusing alternative work ) . Therefore, if the new terms that the company intends to introduce change the nature of the work that the employee does, but still amount to suitable alternative employment, the employee will not be entitled to a redundancy payment if he or she unreasonably refuses the offer of employment on the new terms.

If the change is not related to the kind of work that the employee does, then the reason for dismissal is likely to fall into the category of 'some other substantial reason' for dismissal. It is important to note that, in order to fall within this category, the reason for the change must be 'substantial'. In other words, the company must be able to show a real business reason for the change, such as pressing financial considerations.

Minimum dismissal procedure

Provided the company can establish a potentially fair reason for the employee's dismissal, the question is then whether it has met the minimum procedural requirements in the Employment Act 2002 and has acted reasonably in all the circumstances.

As explained elsewhere in the Guide, the 2002 Act lays down some minimum procedural requirements that an employer must follow when it is contemplating dismissing an employee. In broad summary, these require the employer to put the grounds for considering dismissal in writing to the employee, hold a meeting to discuss it and allow the employee the right to appeal.

These requirements do not apply, however, if the employer is proposing to dismiss all the employees of a particular description or category and offer them new contracts before or on the termination of their old ones. Nor do the requirements apply if the employer is planning to dismiss 20 or more employees at one establishment within a period of 90 days, in order to introduce contractual change.

Effectuvely, this means that an employer that is introducing new contract terms for particular groups or substantial numbers of employees need not be concerned about meeting the specific details of the minimum procedural requirements. It must, however, ensure that it acts reasonably.

Reasonableness

The unfair dismissal legislation does not give any detail on what is involved in acting reasonably, beyond saying that the issue must be decided in accordance with general principles of fairness and the merits of the particular employee's case. It also states that the employment tribunal must take into account the size and administrative resources of the employer. Unfair dismissal law acknowledges that there are several approaches that a company might take to introducing change, and the dismissal of an employee will be unfair only if it falls outside this range of possible reasonable approaches.

Demonstrating reasonableness

Although the legislation defines the test of whether a dismissal is fair in very general terms, some idea of what is expected of employers in managing dismissals arising from contractual change can be gleaned from the previous decisions of the employment tribunals and appeal courts. In order to be able to demonstrate that it has acted reasonably and met the minimum procedural requirements mentioned above, a company should ensure that:

• It can show a real business need for the change.
• It has explained to the employee the nature of the change and the business need for it.
• It has consulted with the employee about the change, in order to obtain the employee's views on the change in general and its potential impact on the employee in particular.
• If the company recognises a trade union or has employee representatives, it has also consulted with those representatives about the change. (If 20 or more dismissals are involved, the company will have a specific legal duty to consult with the representatives (collective consultation).)
• It has seriously considered any points that the employee has raised about the change and, if it has rejected them, it has sound reasons for doing so and has explained them to the employee.
• It has attempted to secure the employee's agreement to the change. (A company that has imposed change without any attempt to obtain the employee's agreement is likely to find that the employee's dismissal is found unfair for this reason.)
• If the employee did not agree, the company has explained that it may terminate the employee's contract and offer a new one on the changed terms if he or she does not agree to the change.
• If it proves necessary to terminate the employee's contract and the minimum procedural requirements apply, the employer has at some point put the grounds for considering dismissal in writing and held a meeting with the employee to discuss it, and allowed the employee the right to appeal.
• It has introduced the change with a reasonable amount of warning, to enable the employee to make any practical preparations he or she may need to make to comply with it.
• It has offered the employee a new contract on terms that reflect the change required. (It would be unwise for the company to muddy the waters by using this opportunity to introduce other terms that it might ideally want included in the contract.) Compensation for unfair dismissal can be reduced if the employee has not taken reasonable steps to minimise the financial loss he or she has suffered as a result of the dismissal (reductions to basic award ). It would therefore be advisable for the company to repeat its offer of a new contract on the revised terms after the original contract has ended. If the dismissal is then found unfair, the employment tribunal will take into account when assessing compensation whether the employee was acting reasonably in refusing the new contract.

Individual versus company need

Although the company may be introducing change that affects the whole or a major part of the workforce, unfair dismissal law concentrates on the case of the individual employee. So it may be reasonable for a company to take into account the impact that the change will have on the circumstances of a particular employee and decide not to push through the change in relation to that individual. On the other hand, the individual employee's circumstances are only one factor to be taken into account and need to be weighed against the company's need for change. If a large majority of employees had already accepted the change, that may support the argument that it was reasonable for the company to implement the change in relation to this particular employee.