Fair Reasons for Dismissal
There are five Fair Reasons for Dismissal: misconduct, capability, redundancy, a statutory restriction and some other substantial reason. Dismissal which does not meet one of those criteria would be unfair.
A Fair Reason Alone Does Not Make a Dismissal Fair
Many SMEs assume that if they have a good reason for dismissing an employee, the dismissal will automatically be fair. In practice, Employment Tribunals will also consider whether the employer followed a fair and reasonable process, carried out appropriate investigations, acted consistently and gave the employee an opportunity to respond.
Poor documentation, rushed decisions and informal processes can significantly weaken an employer’s position, even where there may have been a potentially fair reason for dismissal.
Misconduct
This is no doubt the one reason you are most familiar with. Dismissal for misconduct will be the end result of a disciplinary process for inappropriate conduct or behaviour by one of your employee’s. Dismissal will be an appropriate outcome in a disciplinary situation where the employee fails to correct their conduct or behaviour following previous formal disciplinary warnings or where their conduct or behaviour is so serious it warrants instant dismissal (gross misconduct).
Misconduct is one of the five fair reasons for dismissing an employee. Read my tips to achieving a fair misconduct dismissal and avoid an unfair dismissal claim: Fair Misconduct Dismissal.
Capability or Ability To Do The Job
Capability relates to an employee’s ability to carry out their role to the required standard. This may involve concerns around performance, competence, aptitude, qualifications, attendance or ill health affecting an employee’s ability to undertake their duties effectively.
Many SMEs find capability issues particularly difficult to manage because concerns often develop gradually over time. Managers may initially deal with problems informally or avoid difficult conversations altogether, particularly within smaller teams where working relationships are close. However, delaying performance discussions or failing to document concerns can make capability situations significantly harder to manage later.
Where performance concerns arise, employers should usually ensure that:
- Expectations are clearly communicated,
- Concerns are discussed with the employee,
- Reasonable support or training is considered,
- Appropriate review periods are provided, and
- Performance discussions are documented properly.
In cases involving sickness absence or ill health, employers should also consider whether medical advice, workplace adjustments or further consultation may be appropriate before making decisions about ongoing employment.
Capability dismissals should be approached carefully and fairly. Employment Tribunals will often look not only at the reason for dismissal itself, but also at whether the employer followed a reasonable process, investigated concerns appropriately and gave the employee a fair opportunity to improve where appropriate.
Poor documentation, inconsistent management approaches or rushed decisions can weaken an employer’s position significantly, even where genuine capability concerns exist. SMEs are therefore often best protected by ensuring performance and attendance concerns are managed consistently, supported by clear documentation and fair procedures throughout.
Redundancy
There is a strict statutory framework which must be followed when a redundancy situation applies.
I am often asked ‘can’t I just make him redundant?’ and my answer is always ‘No!’. Redundancy should never be viewed as an easy option to dismiss an employ who is not performing for one reason or another.
To begin with the employees concerned must be redundant within the definition of the term in the Employment Rights Act 1996:-
- The employer has ceased, or intends to cease, to carry on the business for the purpose of which the employee was so employed.
- The employer has ceased, or intends to cease, to carry on the business in the place where the employee was employed to work.
- The requirements of the business for the employee to carry out work of a particular kind or for employees to carry out work of a particular king in the place where the employee was employed by the employer have ceased or diminished, or are expected to cease or diminish.
The test usually used by Tribunals is:-
- Do any of the definitions set out above exist?
- If so, is the dismissal wholly or mainly attributable to that state of affairs?
In addition to the above reasons, the dismissals must be reasonable.
The reason(s) for a redundancy situation can occur through any number of factors, such as economic viability of the business, technical change or organisational re-structuring of the business.
A Statutory Restriction
Dismissal can take place if continuing to employ would break the law i.e. a lorry driver loses their driving license.
Some Other Substantial Reason
The emphasis here is on ‘substantial’ and applies to a situation where you have an overwhelming reason why you must dismiss the employee. This should always be a last resort so you need to be able to demonstrate that all other alternatives were considered before choosing to dismiss. Reasons that have previously fallen into this category include:
- imprisonment
- an irresolvable personality clash between the employee and a co-worker
- if the business moves to another location, or if it’s taken over, and it isn’t possible to employ the person because of economic, technical or organisational reasons
- unreasonably refusing to accept a company reorganisation that changes the employment terms
Unfair Dismissal
Up to 31 December 2026 an employee who wants to claim unfair dismissal, must have worked for their employer for a minimum of two consecutive years. From 1 January 2027 the qualifying period for claiming unfair dismissal will reduce from two years to six months. Meaning SMEs are likely to face increased scrutiny around dismissal decisions and processes in the coming years. Clear documentation, fair procedures and properly managed probation processes are becoming increasingly important for employers of all sizes.
Should an employee wish to lodge a case for unfair dismissal, the case will be taken to an employment tribunal. The tribunal will examine the case and assess whether the employer has behaved “reasonably in all circumstances”. Procedure should be followed as closely as possible from the outset of a claim, though some cases may be littered with complications and mitigating factors that may impede this.
In order to assess the reasonable behaviour of an employer within a case, the tribunal will examine whether:
- Reasonable procedure was followed.
- The decision of dismissal was made as a reasonable response from the employer.
- The dismissal was fair given the facts known at the time.
In a case of an unfair dismissal claim, the employer is usually required to prove that their treatment of the employee was fair and their dismissal was justified. It is not usually the employee’s responsibility to prove that they were treated and dismissed unfairly, with the exception of an employee resigning and claiming that their employer made it impossible to remain in their job role (constructive dismissal).
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