Remedies for Unfair Dismissal and Redundancy

Workers are protected under the Employment Rights Act 1996 from being sacked or chosen unfairly for redundancy. All employees can bring a claim of unfair dismissal after one year of continuous service and a claim for redundancy pay after two years’ service. Unfair dismissal is a statutory right giving employees with one year’s service the right to complain to a Tribunal that they have not been treated fairly or reasonably by their employer .Certain dismissals are “automatically unfair” in which case the employee just has to show that the dismissal was for one of the following reasons:

• Membership (or non membership) of a trade union or for trade union activities
• Something to do with health and safety
• Bringing proceedings against the employer for breaking certain statutory employment rights
• Unlawful discrimination on grounds of race, sex, disability, religion or belief, sexual orientation or age
• Pregnancy or any other reason connected with the pregnancy
• When the employee’s work is transferred to another employer, under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE)
• Refusing to forego a right under the Working Time Regulations
• Seeking to enforce rights under the National Minimum Wage Act
• Making a protected disclosure under the whistle blowing legislation
• Trying to obtain (or prevent) recognition of an independent trade union
• Seeking to exercise the right to be accompanied at a grievance or disciplinary hearing
• Taking part in lawful industrial action
• In connection with the employee’s rights with regard to parental, paternity or adoption leave, time off for looking after dependants, maternity leave or the right to ask to work flexibly
• Taking action in connection with part-time workers’ or fixed-term workers’ rights
• Refusal by a shop worker to work on Sunday
• Connected with an employee’s function as a pension fund trustee
• In breach of the Information and Consultation Regulations 2004
• In connection with retirement when the employer has not informed the employee of their right to request to continue working; or while the “duty to consider” procedure is ongoing

If the dismissal was not for one of the automatically unfair reasons, the employer must show that the dismissal was for one of six categories which the law recognises as being potentially fair. They reasons are:

· Conduct – the conduct of the employee, for instance where the employer considers the employee has been dishonest.

· Capacity – whether the employee is capable of doing the job properly,

· Redundancy,

· Retirement

· Legal restriction – for instance, the employee not having a right to work in this country.

· Some other substantial reason – there may be circumstances where the employer has a substantial reason for dismissing the employer which will be considered fair even where it does not fall within one of the five categories above. However, even if the employer convinces a Tribunal that they dismissed their employee for one of those reasons, they still have to show that they followed a reasonable procedure as set out in the ACAS (Advisory, Conciliation and Arbitration Service) code of conduct. They must also show that the decision to dismiss fell within the range of reasonable responses open to an employer

Redundancy

Redundancy is only a reason for dismissal, however it is treated separately because the employer has to take certain steps to make sure that the redundancy is carried out fairly. If the redundancy is not carried out fairly this could lead to a claim for any of the following:

1. Wrongful Dismissal

2. Unfair Dismissal

3. Redundancy payment, either based upon the legal minimum or based upon the employee’s employment contract. The law says there is a genuine redundancy situation if an employee is dismissed because the business as a whole, or the particular workplace where the employee worked, has closed down. Likewise, if there has been a reduction in the size of the workforce needed to do work of a particular kind. If the employee can show that their dismissal fell into one of these categories, they may be entitled to a statutory redundancy payment, or possibly a contractual one. Employees are eligible for statutory redundancy payments if:

• They have two or more years continuous service since the age of 18

• they are below “normal” retirement age (which depends on the employer’s normal practice on retirement)

Employees can lose their right to a redundancy payment if:

• They are offered their old job back or a suitable alternative and they unreasonably refuse

• They are dismissed for gross misconduct during the redundancy notice

• They resign before the end of the notice period

Remedies for Unfair Dismissal and Redundancy.

Under statute, if a Tribunal finds an employee has been unfairly dismissed there are three options open to it (ERA 1996 s.112 and TULRCA 1992 s.157(1)), as follows:

Option 1 is to make an order for reinstatement.

Option 2 is to make an order for re-engagement.

Option 3 is to make an order for compensation.

Reinstatement, being the re-employment of the employee back into the role he was unfairly dismissed from (as though the dismissal had never occurred), is one possible remedy in the UK for unfair dismissal. In the high-profile case Chagger v Abbey National plc & Hopkins (2009), the Employment Tribunal found that Mr Chagger had been unfairly dismissed, and that both Santander Abbey National (the Spanish-owned UK bank due to be re-branded as Santander, and being part of the Banco Santander Group) and Mr Hopkins had discriminated against Mr Chagger on the grounds of race in respect of his dismissal. The Employment Tribunal took the rare step of ordering Abbey Santander to reinstate Mr Chagger in order to remedy its wrongdoing. Santander Abbey National, however, refused to comply with the Employment Tribunal’s reinstatement order. Following Abbey Santander’s refusal and failure to comply with the reinstatement order, the Employment Tribunal subsequently ordered Abbey Santander to pay Mr Chagger the record breaking £2.8 million compensation for his loss on the basis that he had not been reinstated. Santander Abbey National had terminated Balbinder Chagger’s employment in 2006, giving redundancy as the reason. He was employed as a Trading Risk Controller, earned about £100,000 per year, reported into Nigel Hopkins and was of Indian origin. The Chagger v Santander Abbey case did not end at the Employment Tribunal stage. In 2008, Santander Abbey and Mr Hopkins appealed to the Employment Appeal Tribunal (EAT) against the original Employment Tribunal’s ruling of race discrimination and against the order of £2.8 million award. The EAT upheld the Employment Tribunal’s ruling that both Abbey Santander and Mr Hopkins had racially discriminated against Mr Chagger in respect of his dismissal. However, the EAT did accept Abbey Santander’s appeal on the £2.8 million compensation award and sent it back to the original Employment Tribunal for reconsideration. The case was appealed to the Court of Appeal (the second highest court in the UK) this year. According to the Court of Appeal’s List of Hearings, the appeal was heard on 7 and 8 July 2009. The Court ruled that if an Employment Tribunal were to find that an employee who had been discriminated against could have been lawfully dismissed in any event, then any damage to his employment prospects from the stigma of suing his former employer would be his only recoverable future loss.

UK law views reinstatement of the unfairly dismissed employee as the primary remedy for unfair dismissal; reinstatement of the employee permits him to continue to enjoy the economic benefits of the role in the future and also restores the mental satisfaction that he enjoyed from his role. If reinstatement of the employee is not practicable, UK law then usually views reengagement as the next best remedy. Reengagement is re-employment of the employee into a different role to the one he was unfairly dismissed from (on terms and conditions as close as is reasonably practicable to those he was unfairly dismissed from).After an Employment Tribunal makes a finding of unfair dismissal, it must ask the unfairly dismissed employee whether or not he wishes to be reinstated or reengaged. If the employee wishes to be reinstated or reengaged, then the Employment Tribunal has complete discretion as to whether or not to issue a reinstatement order or reengagement order. The Employment Tribunal will consider whether it is practicable for the unfairly dismissed employee to return to work for the employer and, where the unfairly dismissed employee was partly to blame for the dismissal, whether or not it would be just and equitable to issue such a reinstatement order or reengagement order. Although they are the primary remedies, Employment Tribunals rarely ever order reinstatement or reengagement though. That’s because the reality of the process of litigation is that its vexatious nature often leaves the relationship between the employer and the unfairly dismissed employee beyond repair such that it is no longer possible for them to work together anymore; only in rare cases do Employment Tribunals decide that the relationship remains workable. When an Employment Tribunal orders reinstatement or reengagement, then it is open for the employer to refuse to re-employ the unfairly dismissed employee. Unless the employer satisfies the Employment Tribunal that it was not practicable to comply with the reinstatement order or reengagement order, then the employer’s refusal to comply with the Tribunal’s wishes will give rise to increased compensation for the unfairly dismissed employee. If the Tribunal is dissatisfied with the employer’s reasons for refusing to comply with its wishes, then the employer will have failed to comply with what the law views as the best solution to rectify the wrong committed; then the Employment Tribunal will proceed to consider and award compensation as the next best remedy to address the employer’s wrongdoing. Requesting reinstatement and/or reengagement may prove to be tactically useful for an unfairly dismissed employee because the employer’s failure to comply entitles him to be compensated in full for all his loss of earnings from the date of the unfair dismissal to the date of the reinstatement/reengagement order; the statutory limit (or cap) on the compensation amount does not apply. So, if the unfairly dismissed employee’s losses to the date of the hearing exceed the statutory limit, then reinstatement/reengagement should be seriously considered. Furthermore, employers generally dislike re-employing an unfairly dismissed employee so much that a credible application for re-employment could lead to higher offers of settlement from the employer. If the employer complies with the order of reinstatement/reengagement, then the employee will be expected to comply too.

If the employer fails to comply with the terms of an order for reinstatement or re-engagement the tribunal, on being notified of the failure, will make an award of compensation calculated in the ordinary manner provided for in the legislation. Also the tribunal will make an additional award of compensation to be paid by the employer, unless the employer satisfies the tribunal that it was not practicable to comply with the order for reinstatement or re engagement as the case may be. This award compensates the employee for the loss suffered as a result of the dismissal insofar as the employer is responsible for this loss. As well as covering loss of earnings between the dismissal and the hearing and an estimate of future loss, the tribunal will also consider matters such as loss of pension and other rights and any reasonable expenses incurred by the employee as a result of the dismissal. The compensatory award is an amount the tribunal considers just and equitable in the circumstances, but there is a maximum compensatory award in cases of unfair dismissal. The tribunal will reduce the award if it finds that the employee was partly to blame for the dismissal or the employee did not mitigate his or her loss: for example, by failing to make a reasonable effort to obtain another job. Certain payments made by the employer to the employee, for example wages in lieu of notice or an ex gratia payment, will normally result in a reduced compensatory award. The compensatory award will also be reduced by the amount of the employee’s earnings from any other employment between the dismissal and the tribunal hearing. Tribunals have the power to reduce the compensatory award where employees have not made use of an internal appeals procedure whose existence they were informed of at or shortly after the time of dismissal. Similarly the tribunal can make a supplementary award where employers have not allowed the employee to use an appeal procedure provided by them. The reduction or supplementary award can be subject to a maximum of two weeks’ pay. Compensation awards in unfair dismissal cases where the reason for the dismissal is that the dismissed employee made a protected disclosure under the Public Interest Disclosure Act 1998, or took action relating to health and safety are not subject to a maximum.

In addition to the remedies, employee should also get a payment equivalent to a redundancy payment that is called a basic award. In some cases, employee may be able to get compensation for distress, humiliation, damage to his reputation or to his family life or similar matters caused by his dismissal. Such compensation is unusual and is unlikely to be awarded unless the employer had behaved particularly badly in dismissing the employee, for example if the employer dismissed the employee on the basis of unfounded and very serious allegations which have severely damaged his reputation, or if the way the employee were dismissed was particularly humiliating, or if the employee were subjected to particularly abusive harassment by his employer which caused the employee to resign and claim constructive unfair dismissal. In principle, however, such losses are recoverable.

The question of whether there has been a loss of trust and confidence between the parties to a contract of employment has long been a concern of the courts in deciding whether the balance of convenience justifies the granting of equitable remedies in employment cases. In most cases the employment relationship is capable of withstanding some friction and doubts. Trust and confidence are concepts of degree. It is rare for any human being to have total trust in another. What is important in the employment relationship is that there be sufficient trust to make the relationship viable and productive. Whether that standard is reached in any particular case must depend upon the circumstances of the particular case. There may be loss of trust and confidence, for example, where the discretion of an employee who is required to handle highly confidential information is in doubt, or where the life of the employer or others depends on the dismissed employee’s reliability, and the employer has reasonable doubts about that reliability. These are relatively uncommon situations and any claim by the employer that he or she has lost confidence in the employee will be carefully scrutinised, and will only be a relevant consideration if the loss of confidence ‘is soundly and rationally based. An employer who has dismissed an employee will often be reluctant to take that employee back, even after a determination that the employee had been dismissed in circumstances that were harsh, unjust or unreasonable. Such reluctance on the employer’s part will not of itself destroy the relationship of trust and confidence between the parties. In Perkins v Grace Worldwide Pty Ltd (1997) 72 IR 186 , Perkins was summarily dismissed for supplying marijuana to fellow employees. The trial judge found the dismissal was harsh, unjust or unreasonable because there was no clear evidence that Perkins had supplied the drugs. The trial judge nevertheless declined to reinstate him on the grounds that his employer’s continued belief that the accusations were true was ‘reasonably held’ and his consequent loss of confidence in Perkins made reinstatement impracticable. On appeal, the Full Court overturned the decision. The court rejected the approach that an employer’s reluctance to take back an employee he had accused of wrongdoing necessarily destroyed the relationship of trust and confidence between them, thereby making reinstatement impracticable. To adopt such an attitude, said the court, would deny access by unfairly dismissed employees to the primary remedy provided by the legislation. Whilst it may be difficult, embarrassing or inconvenient for an employer to re-employ a person he or she believes guilty of wrongdoing, the problems ‘will be of the employer’s own making’. In any case, if the employer is of even average fair-mindedness, such problems are likely to prove short-lived and do not necessarily indicate such a loss of confidence as to make reinstatement inappropriate. These matters ‘remain relevant to the question of whether reinstatement is appropriate in a particular case’. One important issue is whether the working relationship has irretrievably broken down. In Maluk v Sutton Tools Pty Ltd, Ross VP held that reinstatement of an employee of more than 13 years’ standing was inappropriate, even though the employee’s prospects of obtaining alternative employment were limited. The main reason was the damage caused to the working relationship by the employee’s refusal to perform work as directed over a substantial period of time. The refusal was prompted in part by a work injury, the effect of which was disputed. It was unlikely that a good working relationship could be re-established. The Commission treats the issue similarly to the issue of a loss of trust and confidence by the employer in the employee. The mere assertion that the working relationship has broken down irretrievably will not justify a refusal of reinstatement – there must be clear evidence. The Commission will take into account the capacity of both employee and employer to overcome previous difficulties, and is inclined to take a positive attitude to the capacity of an initially unwilling employer to re-establish the working relationship satisfactorily.

In redundancy situations, the employer may need to consider whether or not the employee, if reinstated, would be surplus to the employer’s requirements, or whether reinstatement of the applicant employee may require the employer to dismiss another employee.. In Salenga v Newtronics Pty Ltd, the Full Bench said that reinstatement may not be appropriate if it would perpetuate existing problems with the staffing of a particular shift. On rehearing the case, Harrison C considered both the employer’s changed operational requirements and the employee’s changed availability for shift work and reinstated Salenga to the position of process worker on the afternoon shift. The fact that it was 12 months since Salenga’s dismissal was not a barrier to his re-employment. The availability of reinstatement as the remedy to be considered first when an employee’s dismissal is found to be harsh, unjust or unreasonable is a particularly important development for employees. Statistics show that relatively few orders for reinstatement, in spite of the fact that reinstatement must be considered first. Compensation is by far the order most often made in cases of unfair dismissal.

The Government has announced a fall in Retail Price Index (RPI) linked compensation limits. The maximum compensatory award for unfair dismissal will decrease from £66,200 to £65,300 for effective dates on or after 1 February 2010. The decrease also affects other payments as follows:

The minimum amount of compensation where an individual is unlawfully excluded or expelled from a union and not admitted or re-admitted by the date of a tribunal application will fall from £7,300 to £7,200. The maximum guarantee payment payable to an employee will fall from £21.50 to £21.20. The revisions will take effect when the event giving rise to the entitlement to compensation or other payment occurs on or after 1 February 2010. The amount of “weekly pay” for the purposes of calculating statutory redundancy pay and the basic award in unfair dismissal cases, as well as other compensation payments increased from £350 to £380 following a “one off” increase in October 2009. There will be no additional increase to this in February. So the limit on weekly pay for redundancy pay and other purposes remains at £380 until February 2011.

CONCLUSIONS

There is little doubt that the availability of statutory remedies for unfair dismissal represents a major gain for those employees who have access to them. In particular, employees who are dismissed unfairly from their employment may be reinstated to their former positions or may be awarded compensation extending beyond payment for the notice period. In reality people build much of their lives around their jobs. Their income and prospects for the future are inevitably founded in the expectation that their jobs will continue. For workers in many situations dismissal is a disaster. For some workers it may make inevitable the breaking up of a community and the uprooting of homes and families. Others, and particularly older workers, may be faced with the greatest difficulty in getting work at all. The reinstatement of the employee is rarely provided as a remedy, where there is any evidence that the employment relationship has been fractured. In practice most employees are still awarded compensation rather than being put back on the job. Remedies for Dismissal are almost exclusively sought through the Employment Tribunals, and also where a Redundancy situation is disputed it is treated as an Unfair Dismissal complaint.