All questions

Discontinuing employment

i Dismissal

A termination will be lawful if it is in accordance with both an employee's contract of employment and statutory provisions protecting employees against dismissal.

As to contractual provisions, most contracts provide that an employer is entitled to dismiss an employee for any reason provided that an employer provides an employee with the notice of termination stipulated by the contract, or, where expressly permitted by the contract, the employer makes a payment in lieu of that period of notice.

As to statute, employees have a statutory right not to be 'unfairly' dismissed. The essence of the right is: (1) a dismissal has to be reasonable (the test being it cannot be something that a reasonable employer would not do); (2) it has to be for one of five potentially fair reasons (which are conduct, capability, redundancy, breach of a statutory restriction and the catch-all 'some other substantial reason'); and (3) it must be carried out using fair procedures.

Where a dismissal is unfair, an employee is entitled to compensation based on: (1) a compensatory award (essentially damages for loss of earnings flowing from the unfair dismissal) that is capped at the greater of £83,682 or one year's salary; (2) plus a basic award based on years of service, which is capped at £15,240. The cap on compensatory awards does not apply in certain circumstances, including where a dismissal is because of whistle-blowing, discrimination, raising health and safety issues or trade union membership or activities. Employees have no rights to be rehired (save in the case of redundancy – see subsection ii, below), and although reinstatement or re-engagement is a theoretical alternative remedy to damages, in reality, employees never seek this, nor is such remedy ordered by employment tribunals.

There are no obligations to notify any governmental or employee representative bodies about dismissals, except in the case of collective redundancies (see subsection ii, below).

It is common for employees and employers to enter into settlement agreements in connection with a dismissal under which an employer agrees to make a payment to an employee in return for an employee waiving their rights against the employer. Such agreements must meet certain conditions in order for an employee's claim to be waived, including a requirement for an employee to have obtained independent legal advice as to the effect of the settlement agreement on their statutory employment rights.

ii Redundancies

Redundancy is a potentially fair reason for a termination. There is a redundancy situation where an employer has ceased (or intends to cease) to carry on the business for which the employee was employed, or if the requirements of the business for the employee to do work of a particular kind or in a particular place have ceased or diminished (or will cease or diminish).

For a redundancy to be fair an employer must identify an appropriate pool for selection, consult with the individuals in that pool, apply objective selection criteria to those in the pool and consider suitable alternative employment where appropriate.

When 20 or more redundancies are proposed within the same establishment within a period of 90 days, additional obligations exist.

An employer is required to consult with employee representatives 'in good time' before the first dismissal takes place (which must be a minimum of 30 days where there are fewer than 100 redundancies and 45 days where there are 100 or more redundancies). The obligation requires employers to provide specific information to employee representatives and consult with them in good faith with a view to reaching agreement.

In addition, employers must notify the Secretary of State about the redundancies. Notification must be received by the Secretary of State at least 45 days before the first dismissal, where the employer proposes to dismiss 100 or more employees within a 90-day period. Where fewer than 100 redundancies are proposed, the notification period is 30 days.