What Constitutes Wrongful Dismissal?

Not all of your employees will be the right fit for your business. On rare occasions, you may even have to dismiss them - which is why you should ensure that you act lawfully.

This includes following a proper dismissal process. And understanding the terms of an employment contract.

Otherwise, your staff members might make a wrongful dismissal claim to an employment tribunal. As a result, your business could face legal troubles, financial loss, and even reputational damage.

In this guide, we'll discuss wrongful dismissal claims, how to avoid a breach of contract, and what the law says.

What is wrongful dismissal?

Put simply, wrongful dismissal is when a staff member is dismissed in a way that breaches their employment contract. It occurs when an employer breaches the terms relating to dismissal.

The Employment Rights Act 1996 outlines the rules surrounding employee dismissal. But this doesn't include the right to claim wrongful dismissal. The common law surrounding wrongful dismissal is based on a serious breach of contract.

Examples of wrongful dismissal

It’s important you understand examples of wrongful dismissal, so you are aware of how you could breach an employment contract.  

Wrongful dismissal occurs when an employer:

• Dismisses an employee instantly without proper notice or pay in lieu of notice. This is known as summary dismissal, except in cases of gross misconduct.
• Dismisses an employee on a probation period without letting them work their statutory notice period, without notice pay, or pay in lieu.
• Dismisses an employee before they've worked their contractual notice period.

The statutory notice period is one week for employees who have served less than two years in a business. Then one week per year up to a maximum 12 weeks after 12 years' service.

In contrast, employees who have only worked in the company for a month can give zero notice as a statutory minimum.

The difference between wrongful dismissal and unfair dismissal

The main difference between a wrongful dismissal and an unfair dismissal claim is that one is a statutory right, and the other is a contractual claim.

Unlike unfair dismissal (unless it is automatically unfair), an employee's wrongful dismissal claim can be made from day one. Meaning there is no qualifying period of service an employee has to perform to make this type of claim.

However, company owners must not confuse this with employees that claim automatically unfair dismissal. As they have no qualifying period of service either.

The consequences of wrongful dismissal

If your employee is wrongfully dismissed under any of the circumstances mentioned, your business could face serious consequences.

These include:

Compensation award

If a tribunal finds that an employer has breached a contract, the business will have to pay the damages awarded to your employee. Such payment can have a severe impact on your business, especially if you run a small operation.

High staff turnover

If an employer breaks a contract of employment by dismissing an employee - and loses the claim for wrongful dismissal - it could result in high staff turnover.

This is because team members might not trust their employer to treat them fairly. And may look for alternative employment.

Reputational damage

If an employee finds an employer has treated them wrongfully - their employment tribunal claim could result in reputational damage to your company.

For example, if you lose an employment tribunal claim, your customers and clients might find out. As a result, they may stop doing business with you - or stop purchasing your products and services.

What is the maximum awarded for wrongful dismissal?

The cap for damages recoverable in a wrongful dismissal claim at an employment tribunal is £25,000. Such a payment is largely governed by the employee's loss of earnings during the notice period.

But, if an employee thinks they are entitled to other contractual benefits they might have missed because of the dismissal, they can make a claim for this too.

Other benefits include:

• Pension entitlement.
• Private health cover.
• Car allowance.
• Company car.

The difference between wrongful dismissal and constructive dismissal

Constructive dismissal is when an employer's working conditions or treatment forces a staff member to quit their job.

Whilst both are the result of a breach in contract, constructive dismissal involves the employee resigning in response to the breach.

How to avoid wrongful dismissal claims

In order to avoid wrongful dismissal claims, there are a few steps you need to take. These are:

Train staff on HR policies

You need to ensure your senior staff members are aware of your HR procedures. This includes training them on your gross misconduct and disciplinary policies. And making sure they dismiss staff properly – without breaching the terms in an employment contract.

Take notes during employee meetings

It's also important to take notes during meetings with your employees. And share any meeting notes with the employee afterwards. This ensures that you are both on the same page about actions you need to take - or tasks your employee needs to perform.

It also supports you in case you have a dispute with an employee. Because you can rely on your notes to verify your side and establish the facts.

Payment in lieu of notice

Another option you could take is to provide an employee with payment in lieu of notice. This allows an employee to be dismissed immediately, without them needing to work their notice period.

But, this must be a clause in their employment contract. And you must still follow a fair procedure if you do dismiss them.

It can be the best option for employers who want to dismiss staff with lengthy notice periods. As it minimises the risk of the employee damaging the company or its reputation.

Get advice on wrongful dismissal from Peninsula

You should ensure you lawfully dismiss employees. This means following contractual obligations and contractual disciplinary procedures. As well as enforcing a fair gross misconduct procedure.

Without one, an employee of yours could be wrongfully dismissed. Which could lead to your business facing a claim for wrongful dismissal.

Consequently, your company might experience financial loss from employment tribunal and civil claims. As well as reputational damage and high staff turnover.

Peninsula offers you expert 24/7 HR advice and support, to help you avoid wrongful dismissal claims. As well as providing further advice on your disciplinary procedure. Contact us today on 0800 0282 420.