If you breach an employee’s contract when dismissing them, you could be liable for wrongful dismissal. In this article, the MIA’s Business Support Helpline partner, Croner, explores wrongful dismissal in the UK, as well as how it differs from other types of unlawful dismissal.
You may also know it as wrongful termination or wrongful discharge.
When Does Wrongful Dismissal Occur?
It occurs when you dismiss an employee contrary to their contract of employment. Usually, this will mean by breaching the notice period terms in their contract.
An employee will likely have a claim for wrongful dismissal if you have dismissed them:
- Without any notice.
- By not following contractual procedure.
- Without giving them their statutory notice.
- Without letting them serve the full notice period in their contract.
To have grounds for wrongful dismissal when making a claim, your employee must prove that:
- You dismissed them in such a way that breached their contract.
- They suffered a loss because of the contract breach—e.g. a loss of pay.
Your employee must make their claim within three months—minus one day—of the dismissal.
Dismissal Without Notice
Examples of gross misconduct in the workplace can include offences like sexual harassment, violence, theft, fraud, and offering or accepting bribes.
This list of gross misconduct offences is by no means exhaustive.
Wrongful Dismissal During Probationary Period
Wrongful dismissals, as we’ve discussed, focus mainly on notice period breaches—and this applies to employees who are serving their probation, too.
Your staff have certain automatic legal protection from day one of their employment—including a minimum statutory notice period.
Statutory notice periods include:
- One week for staff whose length of service is between one month and two years.
- Two weeks for staff whose length of service is at least two years.
- One week for every year of service after the employee’s second year up to a maximum of twelve weeks.
And typical contractual notice periods are:
- One week for staff whose length of service is between one and six months.
- One month for staff who have completed their probation period.
Where statutory notice is longer than the notice in your employee’s contract, the statutory notice will override their contractual notice.
Remember that it’s in your best interests to keep up-to-date on the notice periods of your staff.
Other Unlawful Dismissals
The difference between wrongful and unfair dismissal is that for a dismissal to be wrongful, you must breach your employee’s contract.
For the dismissal to be unfair, you need to fire your employee for a reason that is not one of the fair reasons for dismissal, as set out in Section 98 of the Employment Rights Act 1996, or, you must dismiss them without a fair procedure.
While a wrongful dismissal claim requires no amount of service, an employee needs two years’ under their belt before they can claim for unfair dismissal, unless they’re claiming for automatically unfair dismissal—in which case, you’ll have violated your employee’s statutory rights in some way, such as dismissing them for being pregnant.
People often mix up wrongful and unfair dismissal—but now you’ll never need to.
Wrongful Dismissal Compensation Limit
If one of your employees makes a claim for wrongful dismissal and an employment tribunal finds you to be in breach, you must pay your employee damages for the net loss they suffered.
The limit for these damages is £25,000.
However, a wrongful dismissal payout doesn’t stop there. Your employee can also recover damages for any benefits they lost without their notice period. For example, pension payments, bonuses, any private healthcare, car allowance money, and any other benefits.
Consider “Pay in Lieu of Notice” (PILON)
If you plan to dismiss someone, you should do so in a fair way. By paying your employee in lieu of notice, you end their employment immediately but compensate them for the notice period.
By paying your employee in lieu of their notice, you’ll likely avoid a wrongful dismissal claim and save your business a lot of money.
MIA members benefit from FREE advice from Croner. Email firstname.lastname@example.org or call 01403 800500 for the exclusive Business Support Helpline scheme number.