There are only five potentially fair reasons for dismissal. Not only must there be a fair reason for the termination of employment but the employer must also act reasonably in the dismissal process followed.
Broadly speaking this means affording the employee the opportunity understand the case against them, put forward any evidence which supports their case or corrects any incorrect information the employer has, and affords them the right to appeal a decision to dismiss them.
Reason for dismissal
In most circumstances when an employee has two years continuous service with an employer, in order to discuss the employee fairly under the Employment Rights Act 1996 (“ERA”) the employer must do so for one of five potentially fair reasons. Under Section 98(1) ERA potentially fair reasons for dismissal are:
- Capability or qualifications – for example that the employee does not have the requisite skill, aptitude or health in order to adequately perform the role;
- In continuing to work for an employer an employee would be in breach of a statutory restriction. For example, where an employee loses the right to work in the UK they would breach the immigration rules if they continued to do so;
- Some other substantial reason – this is intended as a catchall for other fair reasons which do not fall into the above categories. This can include a breakdown of trust and confidence in the employee or because of reputational risk.
If the reason for dismissal does not fall into one of the above categories it is very likely that an Employment Tribunal would find that there was not a fair reason for the dismissal and award compensation to the employee for this breach. For more information on the calculation of compensation please see our Costs and Compensation page.
Under Section 98(4) ERA, in determining the fairness of a dismissal an Employment Tribunal will consider whether an employer acted reasonably in treating the reason they gave an employee as the reason for dismissal.
This is determined by considering two factors: Was the procedure followed fair and was the employer reasonable in treating the reason for dismissal as a sufficient reason?
Reasonableness for the purposes of a dismissal includes the requirement that a fair procedure is followed. In circumstances where the dismissal is for misconduct or performance related issues the ACAS Code of Practice on Disciplinary and Grievance Procedures must be followed. Generally speaking the allegations against an employee should be investigated, they should have an opportunity to submit evidence which supports their case and usually given the right to appeal the decision to dismiss them.
If the Employment Tribunal finds that a fair procedure has not been followed, under the principle established in the case of Polkey v AE Dayton Servces Ltd  IRLR 503 the Tribunal can reduce the level of compensatory award (by up to 100%) if it finds that, despite the procedural failings, that the decision to dismiss would have been taken in any event.
Fairness of the reason in the circumstances
The Employment Tribunal will consider whether dismissing the employee fell within the range of reasonable responses open to an employer in those circumstances. An Employment Judge is not able to substitute his or her own view but must consider this having regard to the circumstances at the time the decision was taken.
The majority of employees who claim unfair dismissal seek financial compensation for the loss they have suffered. For more information on how financial compensation is calculated please see our Costs and Compensation page.
In some circumstances, employees may request that they be reinstated (meaning the employee is treated as though they had never been dismissed) or re-engaged (engaged on terms comparable to the job the employee was dismissed from). Such orders are exception rather than the rule and are only made in limited circumstances.