What are the valid reasons for terminating employment?
We often find that employers can feel that it is almost impossible to dismiss an employee.
Whilst we would advise that employers always seek advice before terminating an employee’s employment (or starting any process towards this), with the right advice and guidance, this can be a straight forward process.
By law, to lawfully dismiss an employee with more than 2 years’ service, you must show that you have a valid reason that you can justify and that you acted reasonably in all the circumstances.
Fair reasons for dismissal
Under section 98 of the Employment Rights Act 1996 (the 1996 Act) there are various valid reasons for terminating employment. These include:
- Breach of a statutory restriction
- For some other substantial reason
Dismissal due to redundancy
In this changing economic climate, many companies have had to restructure themselves to keep their competitive edge, to improve or simply to survive.
In short, redundancy occurs when an employer needs to reduce the size of the workforce. There are many reasons why this might be the case, including:
- The introduction of new technology that makes certain jobs unnecessary
- The job a person was hired to do no longer exists
- The business is closing down or a change in location
- There is a need to cut costs and staff numbers might therefore be reduced
Redundancy as a form of dismissal can be considered fair as long as there is a genuine reason for the redundancy, a lawful process has been followed and a fair selection criteria has been applied.
Our specialist employment team can help guide you through any potential redundancy process to seek to ensure that you follow the processes which you are required to, so as to minimise potential liabilities and follow best practice.
Termination due to misconduct
Misconduct issues could include things like persistent lateness or unauthorised absences from work, while performance issues could include an inability to keep up with important changes to their job or to get along with work colleagues.
That said, unless any misconduct or performance issues are especially serious, you will need to give an employee the opportunity to change their behaviour or the chance to improve their performance prior to making any decision to dismiss. You may also need to provide suitable training.
In some cases, however, the misconduct may be so serious so as to justify summary dismissal. This is known as gross misconduct, where terminating employment without notice, or pay in lieu of notice, can be lawful, as long as you follow a fair process and there is clear evidence to support your finding.
Termination due to capability
Capability dismissal should follow prior reasonable attempts by the employer to understand, manage and improve employee capability issues.
Performance reviews and discussions with employees should be ongoing. When performance is monitored and reviewed regularly, there are more opportunities for feedback and for identifying and resolving problems. The goal should be to establish why the employee’s performance is lacking, provide support and then work towards a legally compliant dismissal if necessary.
Throughout the capability management procedure, it will be crucial to have evidence to demonstrate how the employee is falling short of the standards required and as proof of performance management measures taken by the employer.
Illness will also fall under this sub-heading
It is possible to fairly dismiss an employee by reason of a longstanding illness or prolonged absence through sickness where this has affected their ability to do their job or has made it impossible for them to do their job at all.
However, where a capability issue is linked to someone’s long-term disability of physical or mental health, dismissal should be used as a last resort after exploring ways in which you can help the employee to do their job. This could include arranging an occupational health assessment to determine what, if any, reasonable adjustments can be made to assist them, such as a phased return to work, amended duties, altered hours or workplace adaptations.
Dismissal due to a breach of a statutory restriction
This reason is rarely used when terminating employment but can be necessary where continuing to employ someone would mean that you are breaking the law.
Examples of statutory restriction dismissals could include:
- If an employee’s immigration status prevents them from working, such as their work visa expiring, it would be illegal to carry on employing them.
- If an employee is required to drive as a substantial part of their role and has lost their licence, and there is no alternative work they can do
- If someone fails to earn or maintain a qualification that is required for them to perform their job.
If you suspect or become aware of a change in an employee’s working status, you should arrange an initial discussion with them to discuss their situation. The employment contract should include provision for dismissal without notice if the employee is found to have lost the right to work, as this would constitute a breach of contract.
Termination due to some other substantial reason (SOSR)
The concept of “some other substantial reason” (SOSR) is a statutory catch-all provision that allows an employer to fairly dismiss an employee in circumstances where no other potentially fair reasons apply.
The SOSR depends on the facts and circumstances of each case and there is no helpful statutory definition of the term ‘substantial’, but it cannot be anything frivolous or insignificant.
Case law has provided some examples where the courts have found that an employee was fairly dismissed for SOSR. These include:
- Third party pressure;
- The employee refuses to accept new terms of employment;
- Personality clash between two or more employees;
- Conflict of interest;
- Expiry of a fixed term contract;
- Reputational risk; and
- Business reorganisation that doesn’t fall under the statutory definition of redundancy.
Employers must also act reasonably and follow an appropriate procedure before dismissing the employee. Alternatives to dismissal, such as moving the employee to a different location or department, should always be considered before moving to dismissal. However, whether this can be achieved tends to pivot on the resources and size of the organisation in question.
If you have any issues with regard to termination of employment please contact Nina Francis on 0203 831 2664 or email Nina on firstname.lastname@example.org