Unfair Dismissal Compensation Claims
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Unfair Dismissal Claims and Compensation
Employees have rights when it comes to how their employment can be legally ended – including the right not to be unfairly dismissed. And, if they are sacked without a valid and just reason, their dismissal may be considered ‘unfair’. Unfair dismissal claims help employees get compensation and justice when their employers have fired them unjustly.
Brought via an employment tribunal, unfair dismissal claims are relatively common in employment law. The right to claim unfair dismissal falls under Section 94 of the Employment Rights Act 1996.
According to government records, in 2021/22:
- 630 claimants received compensation for unfair dismissal
- The average award in unfair dismissal cases was £13,541
- The median award was £7,650
- The maximum award given for unfair dismissal was £165,000.
Whether you are an employee looking to make an unfair dismissal claim, or an employer seeking to defend against such an action, professional legal advice is essential to protect your best interests.
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What is unfair dismissal?
Unfair dismissal occurs when an employer terminates an employee’s contract without a just reason for doing so. In the UK, there are only five legally accepted ‘just’ reasons.
A dismissal claim may also arise if an employer does not follow fair employment procedures when ending the employment contract. In most cases, individuals must have been continuously employed for at least two years to be eligible to make an unfair dismissal claim.
Examples of ‘fair’ dismissal include:
Examples of ‘unfair’ dismissal include:
- Employee conduct.
For example, persistent lateness, missing work, unwillingness to do their job properly, substance abuse, health & safety breaches, behaviour towards others, or misconduct.
- Discrimination.
Where an employee is let go because of a protected characteristic (age, sex, sexual orientation, disability, gender reassignment, race, religion, etc.).
- Employee capability.
Where the employee can not properly perform their job. However, if someone is incapable of doing their job due to health reasons, employers should try to help them before dismissing them.
- Following a request by the employee.
For example, if an employee asked for flexible working, or if they applied for maternity, paternity, or adoption leave.
- Redundancy.
In such cases, employers must be able to demonstrate that the job will no longer exist.
- An employee’s refusal to give up their rights.
For example, where an employee refuses to work more hours than they are legally allowed, or won’t give up the maternity, paternity or adoption leave they are entitled to.
- Illegality.
If something prevents an employee from legally being able to do their job. For example, if a driver has lost their driving licence or the employee’s right to work in the UK has expired.
- Legal reasons.
For example, if the employee needs time off for jury service. - Compulsory retirement.
Unless the employer can justify this.
- Other substantial reasons.
Such reasons might include where clients insist they will take their business elsewhere unless an employee is dismissed. Legal advice is strongly advised before firing employees in such circumstances.
- Constructive dismissal.
Where an employer mistreats an employee until they believe they have no choice but to resign.
Examples of ‘fair’ dismissal include:
- Employee conduct.
For example, persistent lateness, missing work, unwillingness to do their job properly, substance abuse, health & safety breaches, behaviour towards others, or misconduct.
- Employee capability.
Where the employee can not properly perform their job. However, if someone is incapable of doing their job due to health reasons, employers should try to help them before dismissing them.
- Redundancy.
In such cases, employers must be able to demonstrate that the job will no longer exist.
- Illegality.
If something prevents an employee from legally being able to do their job. For example, if a driver has lost their driving licence or the employee’s right to work in the UK has expired.
- Other substantial reasons.
Such reasons might include where clients insist they will take their business elsewhere unless an employee is dismissed. Legal advice is strongly advised before firing employees in such circumstances.
Examples of ‘unfair’ dismissal include:
- Discrimination.
Where an employee is let go because of a protected characteristic (age, sex, sexual orientation, disability, gender reassignment, race, religion, etc.).
- Following a request by the employee.
For example, if an employee asked for flexible working, or if they applied for maternity, paternity, or adoption leave.
- An employee’s refusal to give up their rights.
For example, where an employee refuses to work more hours than they are legally allowed, or won’t give up the maternity, paternity or adoption leave they are entitled to.
- Legal reasons.
For example, if the employee needs time off for jury service.
- Compulsory retirement.
Unless the employer can justify this.
- Constructive dismissal.
Where an employer mistreats an employee until they believe they have no choice but to resign.
Even if a dismissal is for one of the above fair reasons, the employer must still be able to show that they acted reasonably and had a sufficient reason for the dismissal.
Indeed, employers must act reasonably throughout the dismissal (and disciplinary) process. This includes genuinely believing that the reason for dismissal was fair and following all relevant procedures. If an employee thinks they have been dismissed unfairly, constructively, or wrongfully, the matter could end up at an employment tribunal.
Who can make an unfair dismissal claim?
In most cases, employees can only claim unfair dismissal if they have worked continuously for an employer for at least two years. However, there are exceptions to this rule and automatic unfair dismissal from day one does apply in some cases.
In addition, to be eligible to make a claim, individuals must have been an employee of the organisation before being dismissed. The following cannot make an unfair dismissal claim against their employer:
- Independent contractors
- Self-employed people
- Agency workers
- Members of the armed forces
- Employees who have settled with their employer through Acas
- Employees who have signed a settlement agreement (as long as they took legal advice before signing)
- Employees employed under an illegal contract
- Employees covered by a dismissal procedure agreement that is legally exempted from the unfair dismissal rules
- Employees taking part in unofficial industrial action (unless the dismissal is for an automatically unfair reason)
- Police officers (unless the dismissal relates to health and safety or whistleblowing)
- Those working on a fishing vessel and paid a share in the profits or gross earnings of the vessel.
Where an employment status is in dispute, the employment tribunal will decide whether the person being dismissed was an employee or not.
In addition, and while it sounds obvious, they must have been dismissed by their employer before an employee can claim unfair dismissal. So an employee cannot claim if they resigned.
Exceptions include where an employer pressured the employee into leaving or where constructive dismissal occurred. Being dismissed includes where an employer:
- Ended a contract of employment, with or without notice
- Refused to renew a fixed-term contract
- Made an employee redundant, including voluntary redundancy
- Dismissed an employee for going on strike
- Stopped an employee from coming back to work after maternity leave.
The different types of dismissals
When it comes to workplace dismissals, it is essential for both employers and employees to be aware of the three distinct types: constructive dismissal, wrongful dismissal, and unfair dismissal.
Constructive dismissa
Constructive dismissal happens when an employer treats an employee so badly that they believe they must resign. Examples include where an employer:
- Does not pay an employee
- Demotes them for no reason
- Forces them to accept unreasonable changes to how they work
- Allows other employees to harass or bully them.
Constructive dismissal can be classed as unfair, even though the employee ended the contract by resigning. Just proving that an employee was the victim of constructive dismissal does not mean they are entitled to unfair dismissal compensation. Legal advice from experienced unfair dismissal lawyers is strongly recommended in such cases
A wrongful dismissal claim is different to an unfair dismissal claim. Wrongful dismissal happens when an employer breaks the provisions of an employment contract when dismissing an employee, for example, by failing to give the proper notice or not following the established procedures. A firing can sometimes result in independent claims for wrongful and unfair dismissal.
If the employer had grounds to dismiss the employee immediately and without notice (e.g. due to gross misconduct), then a claim is unlikely to be successful.
How much unfair dismissal compensation could I secure?
An award for unfair dismissal could include compensation for the loss of the employee’s job and other losses suffered due to being unjustly fired. Sometimes, employers may even be ordered to reinstate the employee or re-employ them in a different position.
Basic award
The basic award is linked to the employee’s salary. Typically, employees could expect to receive around a week’s pay for each year of continuous employment, up to a maximum of 20 years. As of 6 April 2023, the maximum basic award for an unfair dismissal claim stands at £19,290. The amount awarded will depend on the employee’s age, gross weekly pay, and their length of service.
The employment tribunal could decide that the employer needs to pay the employee an additional compensatory award. Typically they will set an amount that they deem fair based on the circumstances of the claim.
Factors the tribunal will likely consider when setting an amount include loss of wages, future wages, statutory rights, and pension. The maximum ‘compensatory’ award for unfair dismissal is one year’s salary, or £105,707, whichever is lower (as of 6 April 2023).
Some types of unfair dismissal claims have no limit to the compensation which could be awarded at a tribunal. In 2021, a man won £2.5 million for unfair dismissal, harassment and unfavourable treatment after his employer fired him while undergoing cancer treatment.
Basic award
The basic award is linked to the employee’s salary. Typically, employees could expect to receive around a week’s pay for each year of continuous employment, up to a maximum of 20 years. As of 6 April 2023, the maximum basic award for an unfair dismissal claim stands at £19,290. The amount awarded will depend on the employee’s age, gross weekly pay, and their length of service.
How to make an unfair dismissal claim?
Before starting an unfair dismissal claim, employees should take expert legal advice from a specialist employment solicitor. While there is no legal requirement to do so, an employment solicitor will review the circumstances of the case and advise on the likely success of any claim. Likewise, as soon as an employer is aware that a claim/potential claim is being made, they should seek legal advice.
In some cases, a settlement agreement might be offered to end the dispute without going to court. Settlement agreements are legally binding contracts between employees and employers. They are used to resolve or avoid workplace disputes and can help to avoid costly and time-consuming legal battles.
Acas Early Conciliation
Employees must first lodge their case with The Advisory, Conciliation and Arbitration Service (ACAS) when claiming unfair dismissal compensation. Acas is an independent body that helps employers and employees reach amicable solutions to their employment disputes through free legal advice.
Acas offers a free, early conciliation service to help resolve employment disputes. When Acas considers a case, a conciliation officer will listen to both sides of the argument and try to get both parties to reach an agreement.
Employees are legally required to go through Acas before they can claim at an employment tribunal. In many cases, Acas’ early conciliation service will stop claims from being escalated, thus saving time, money, and stress for everyone involved. If the matter is not resolved, Acas will issue a certificate allowing the case to progress
Employment tribunals deal with employment law cases, including unfair dismissal claims. An employment tribunal is chaired by a judge, with a panel of non-legal specialists hearing the issues at hand.
In an unfair dismissal case, the tribunal would consider the merits of the claim, including the circumstances leading up to the dismissal, the reasons for the firing, and how the dismissal took place (e.g. did the employer follow the correct steps when dismissing the employee).
To keep on the right side of the tribunal, employers must follow all the latest disciplinary and grievance procedures best practices. In particular, they must keep written records of all employment decisions and ensure that all conversations and meetings are correctly recorded.
Decisions made at an employment tribunal are sometimes appealed to an Employment Appeal Tribunal (EAT). Further avenues of appeal include the Court of Appeal and the Supreme Court.
Unfair Dismissal Compensation – FAQs
- In 2021/22, the average award in unfair dismissal cases was £13,541 (an increase from the previous year). The median award, not distorted by single large payments, was £7,650.
- As of 6 April 2023, the maximum basic award for an unfair dismissal claim stands at £19,290. An additional ‘compensatory’ award for unfair dismissal may also be awarded. As of 6 April 2023, this is one year’s salary, or £105,707, whichever is lower.
Yes, you have an automatic right to make an unfair dismissal claim in some cases.
These include being dismissed due to the following:
- Pregnancy, including all reasons relating to maternity
- Family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants
- Acting as an employee representative
- Acting as a trade union representative
- For taking part in lawful industrial action
- Acting as an occupational pension scheme trustee
- Joining or not joining a trade union
- Being a part-time or fixed-term employee
- Pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage
- Reporting certain types of wrongdoing (whistleblowing)
- As they are not ‘employees’, most agency workers are not eligible to claim unfair dismissal.
- As they are not ‘employees’, most contractors are not eligible to claim unfair dismissal.
- From day one, staff are entitled to all contractual rights. In most cases, employees can only claim unfair dismissal if they have worked continuously for an employer for at least two years.
- However, there are automatic unfair reasons for dismissal, and an employee might be able to claim if they believed they were dismissed on these grounds, even within the probationary period. Employers can wrongfully dismiss an employee while on probation.
- An employee cannot be dismissed before a TUPE transfer because the new employer requests this.
- After a TUPE transfer, the new employer cannot dismiss an employee because of TUPE unless there is a genuine redundancy situation and the need to make changes to the workforce for economic, technical, or organisational (ETO) reasons.
- If the reason for making redundancies is not related to TUPE, the employer must follow the normal redundancy process.
- Yes. If an employee pays tax, they must pay tax on the money awarded. However, if they agree to a settlement agreement (rather than going to an employment tribunal), the first £30,000 is usually free of tax or national insurance contributions.
If you think your employer has treated you unlawfully, you might be able to make an unfair claim to an employment tribunal if you:
- Worked continuously for that employer for at least two years
- Were an employee for this period
- Were dismissed by the employer.
You may be able to claim unfair dismissal in other cases (e.g. where you were forced to resign or were employed for less than two years), but legal advice is recommended before you proceed.
To start a claim at a tribunal, employees must submit the correct form (ET1), which can be accessed here. Before proceeding to an employment tribunal, employees must first lodge their case with Acas.
- There is no set timeframe in an unfair dismissal case. Some claims will be resolved during Acas’s early conciliation, while others might go to an employment tribunal and appeal.
- Things that might affect the time needed for a case include the complexity of the claim and the willingness of those involved to negotiate. As a rough guide, an unfair dismissal case could take anything from a couple of weeks to a couple of years to conclude.
- To save you time, stress, and money, wherever possible, our experienced unfair dismissal lawyers seek to settle any dismissal disagreements early – before the dispute escalates.
Unfair dismissal claims under two years
Because employees are only granted statutory protection against unfair dismissal after two years of service, employers can usually dismiss an employee who has worked for less than two years without a legally established ‘fair’ reason without worrying about an unfair dismissal claim.
Nevertheless, there are things employers should watch out for when dismissing an employee with less than two years of service.
- If the correct processes are not followed, an employee could still claim wrongful dismissal, even if they have yet to accumulate two years of service.
- An employee could claim breach of contract for the employer’s failure to follow the disciplinary or dismissal processes set out in their employment contract.
- In some circumstances, a dismissal may be classed as automatically unfair without a qualifying period of service. These tend to be circumstances where a dismissal has violated an employee’s fundamental employment rights.
- If an employer dismisses an employee because of a protected characteristic, they could face claims for unlawful discrimination and unfair dismissal (automatic), regardless of how long the employee has worked at the organisation. This is because there is no qualifying period for an employee to claim unlawful discrimination.
Legal advice is recommended to mitigate the risk of legal action and to stop disputes from escalating when dismissing an employee with less than two years of service.
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Contact our unfair dismissal solicitors today
Our specialist employment lawyers are proficient in all types of dismissal claims – including unfair dismissal, wrongful dismissal, and constructive dismissal cases. On hand to help resolve your employment dispute or answer your dismissal queries, no matter how complex the issues are, please do not hesitate to get in touch.
Having acted for hundreds of businesses across most industry sectors, we have helped all types of employers, from small start-ups to large corporates. So whatever your employment law dispute, we have the experience, skills, and aptitude to support you.
With strict time limits to enter into Acas early conciliation, if you want to start an unfair dismissal claim, you should do so today. Get in touch with our unfair dismissal solicitors on 020 7467 3980 or complete our website enquiry form today.
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