Dismissal

Key Points

  • A termination of an employment contract must fall within the definition of a dismissal in order for the employee to bring a claim of unfair dismissal or for a redundancy payment.
  • The simplest form of dismissal is termination of the contract by the employer.
  • Expiry of a fixed term contract without renewal may also amount to a dismissal.
  • In some circumstances, a resignation may also amount to a dismissal. This is called “constructive dismissal”.

Dismissal

The three situations which count as dismissal are:

  1. termination of the employee's contract by the employer, with or without notice;
  2. expiry of a fixed term contract without renewal;
  3. constructive dismissal .

Importance of dismissal

ERA 1996 s.95 defines "dismissal" for unfair dismissal legislation. If an employee has not been dismissed, he will not be able to bring a claim for unfair dismissal.

ERA 1996 s.136 uses a very similar definition for statutory redundancy pay purposes. If an employee has not been dismissed, he will not be able to claim a redundancy payment.

Trade Union and Labour Relations (Consolidation) Act 1992 s.298 uses a very similar definition for the purposes of that Act.

Who can be dismissed?

The definition of dismissal only applies to employees.

A worker’s employment contract may obviously be terminated by either the worker or the employer. However, a worker is not entitled to any protection for unfair dismissal or to a redundancy payment.

Situation 1: Termination by the employer

The most straightforward form of dismissal occurs where the employer terminates the employee’s employment contract. It does not matter whether the contract is terminated with or without notice.

Sometimes there may be an issue as to whether the employer has terminated the contract. If so, the following principles from Mitie Security (London) Ltd v Ibrahim, EAT on 6th May 2010 may be helpful:

  1. "A contract of employment is only terminated by an employer if there is a specified or ascertainable date on which the contract is to cease (Haseltine Lake & Co v Dowler [1981] ICR 222).
  2. Dismissal to be effective must be communicated to the employee (Hindle Gears Ltd v McGinty [1985] ICR 111).

A warning that dismissal is likely or even that dismissal is inevitable by a certain date will not amount to a dismissal. Notice to terminate a contract of employment must either state the date of termination or contain material from which the date can be positively ascertained (Rai v Somerfield Stores Ltd UKEAT 0557/02/1205)."

Identifying the precise date of dismissal is also important in order to ensure that claims for unfair dismissal are brought within the appropriate time limits.

Situation 2: Expiry of a fixed term contract

Fixed term contracts are, by definition, contracts of employment which are intended to terminate on a specified date, or at the conclusion or a specified task. Often the contract will include a term which states when the contract is intended to terminate.

If an employer terminates a fixed term contract before the time specified by the contract, this will amount to a dismissal in the same way as termination of any contract of employment described above.

If an employee terminates a fixed term contract early, this may amount to a constructive dismissal if the circumstances described below are satisfied.

If a fixed term contract terminates on the date which is agreed between the parties, and is not renewed, section 95(1)(b) states that this expiry amounts to a dismissal. This is the case even if the fixed term contract has terminated exactly in the way envisaged by the parties at the outset of the contract.

Situation 3: When a resignation can be a dismissal (constructive dismissal)

Termination of the employment contract by an employee is referred to as a resignation.

A resignation by an employee can only amount to a dismissal if the employee was entitled to terminate the contract by the conduct of the employer.

Conduct must be so serious as to amount to a repudiatory breach of a term of the employment contract. The most term which is most commonly relied upon is the mutual term of trust and confidence.

However, it is not enough for the employer’s conduct to amount to a repudiatory breach of the contract. The employee’s resignation must be caused by the breach.

Finally, the employee must not have affirmed or waived any breach. This means that the employee must not wait an unreasonable period of time after the breach before resigning.

Assuming the employee is entitled to resign by the employer’s conduct, the same rule applies as a matter of ordinary contract law to a notice to terminate given by an employee. Therefore if a date for resignation is not specified or ascertainable in a resignation letter sent by an employee to his employer the "resignation" may not in law be resignation at all. The result can be that a subsequent refusal by the employer to allow the employee to return to work will count as dismissal under situation 1 (above) (see Reality (White Arrow Express Ltd v O'Hara UKEAT/0447/03)

Complicated cases

Forced resignation – termination by employee or employer?

If a resignation is "forced", a tribunal may find that in fact it was the employer who terminated the contract.  

"Where an employee uses clear words of resignation it will generally be found that he, not the employer, has terminated the contract of employment ... But this is not an invariable rule. If, for example, an employee’s resignation is what is sometimes termed a "forced resignation", the employer will still be held to have terminated the contract" (Beevor v Humberside Fire Brigade UKEAT/0630/03 (paragraph 21))

Whether the employee was forced or voluntarily agreed to resign is not always clear. If in dispute, it will be a question of fact to be determined by the tribunal having assessed the available evidence. The guiding principle is to look for the cause of the resignation.

"At one end of the scale is the blatant instance of a resignation preceded by the employer’s ultimatum: "retire on my terms or be fired" - where it would not be surprising to find the industrial tribunal drawing the inference that what had occurred was a dismissal. At the other extreme is the instance of the long-serving employee who is attracted to early retirement by benevolent terms of severance offered by grateful employers as a reward for loyalty - where one would expect the industrial tribunal to draw the contrary inference of termination by mutual agreement. Between these two extremes there are bound to lie much more debateable cases to which, according to their particular circumstances, the industrial tribunals are required to apply their expertise in determining whether the borderline has been crossed between a resignation that is truly voluntary and a retirement unwillingly made in response to a threat". (Jones v Mid-Glamorgan County Council (No. 2) [1997] ICR 815)

Variation of employment law contracts

Employers who wish to change the terms and conditions contained with employment contracts often attempt to impose upon employees the new terms and conditions.

Even if such terms are accepted by the employee, employees should be wary that this course of action may entitle employees to bring a claim of unfair dismissal in respect of the termination of the old contract, if there is significant variation between the new terms and the old terms. This is the case even if the employee continues to work for the employer.

In Hogg v Dover College [1990] ICR 39 the EAT stated:

“It is suggested, on behalf of the employers, that there was a variation, it seems to us quite elementary, that you can vary by consent terms of a contract, but you simply cannot hold a pistol to somebody’s head and say henceforth ‘you are to be employed on wholly different terms which are, in fact, less than 50% of your previous contract’. We come unhesitatingly to the conclusion that there was a dismissal”

Dismissal and re-engagement

As a result of the difficulties in obtaining consent to vary employment contracts, employers often decided to dismiss and re-engage employees on a different (often less favourable) employment contract. Again, the fact that the employees are provided with new employment contracts does not prevent the termination of the old employment contracts from amounting to a dismissal.

This is the case even where the employees accept and work under on new employment contracts. Those employees will still be able to bring claims of unfair dismissal in respect of the termination of the old employment contracts. (GMB v Man Truck & Bus UK Ltd [2000] ICR 1101).

However, the compensation available will be limited to the difference between their old contracts and their new contracts.

Cases where there is no dismissal

Frustration

Frustration of a contract of employment under common law rules is not dismissal. Thus if an employee becomes seriously ill his contract may come to an end by reason of frustration but it does not follow that this would be "dismissal".

This could in theory defeat any claim for unfair dismissal compensation or for statutory redundancy pay since it is a precondition of both claims that the employee was dismissed (ERA 1996 s.94 and ERA 1996 s.135 and Notcutt v Universal Equipment Co (London) Ltd [1986] EWCA Civ 3).

However, employers should be cautious about relying on the doctrine of frustration, particularly where the employee is unable to work because of ill health. An employee in that situation will most likely be covered by the Equality Act 2010. In Warner v Armfield Retail & Leisure Ltd UKEAT/0376/12 the EAT said:

‘When considering whether a disabled employee's contract has been frustrated, in addition to those factors already identified by the previous case law, tribunals must consider whether the employer was in breach of the duty to make reasonable adjustments.

If there was something which it was reasonable to expect the employer to do in order to keep the employee in employment, the doctrine of frustration will not apply’.

Termination by agreement

Consensual agreement between an employer and employee that the latter's employment is to end and setting out any agreed terms is not "dismissal" (for an example see Miller v Governing Body of Ridings High School UKEAT/0204/08).

However this presupposes that there has been complete agreement on all material terms. If the employer and employee come to a provisional agreement subject to settling material details and before the details are agreed the employee seeks to come to work but is not allowed to do so, the employer's refusal to allow him to come to work will be "dismissal". For example, if the employer insists that the agreement must be in the form of a compromise agreement, the fact that the various conditions applicable to compromise agreements have not been satisfied (such as that the agreement must be in writing) can be good evidence that there has been no complete agreement (Asamoah-Boakye v Walter Rodney Housing Association Ltd [2001] EWCA Civ 85).

It is established law that "where there is a mutual consent established and freely reached between the parties, this is inconsistent with the word 'dismissal' as defined ... and indeed in its ordinary usage" (Birch v University of Liverpool [1985] EWCA Civ 8).

"Freely reached" is an important element (see Forced resignation above). In Sandhu v Jan De Rijk Transport Ltd [2007] EWCA Civ 430 the employee was dismissed at the start of a meeting with his employer and then negotiated what purported to be mutually agreed terms of severance. Both an Employment Tribunal and the EAT held that he had resigned by mutual consent and therefore could not bring an unfair dismissal claim. The Court of Appeal overturned this decision. It held that the fact that he remained in the meeting to negotiate terms did not undo the fact of the dismissal and that any suggestion that terms of severance indicated mutual agreement must be discounted as clearly they had not been reached in an atmosphere of free and unpressurised negotiation. In law the employee had therefore not resigned but had been dismissed and so was able to bring his unfair dismissal claim

Letter to employee warning of dismissal

A letter telling an absent employee that he will be dismissed if he fails to turn up to work on such and such a date does not count as dismissal or even as a notice of dismissal as it is up to the employee to decide whether to come back to work. It therefore follows that an employment tribunal will have no jurisdiction if the claimant files an unfair dismissal application before the deadline date (Rai v Somerfield Stores Ltd UKEAT 0557/02/1205).

Effect of a successful internal appeal

Where a contractual disciplinary procedure includes demotion as an alternative sanction to dismissal on appeal, an employee who succeeds in appealing against dismissal will be treated as if he had never been dismissed (Roberts v West Coast Trains Ltd [2004] EWCA Civ 900).

Main Sources: 
  • ERA 1996, section 95(1)
  • ERA 1996, section 136