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Unfair dismissal and constructive dismissal

A common essay question in employment law is to discuss the difference between unfair dismissal and wrongful dismissal.

Differences Between Unfair Dismissal and Wrongful Dismissal Claims: By contrast, a claim for unfair dismissal is altogether significantly different to a claim for wrongful dismissal. The key differences are summarised below:

An employee must be continuously employed for a period of two years in order to be eligible to bring a claim of ordinary unfair dismissal (where the employment began on or after 6 April 2012, otherwise they must have one year's continuous service). As stated above, there are no particular eligibility rules governing wrongful dismissal claims generally, other than what is provided for in the contract.
Even where the employer terminates the employment relationship in accordance with the terms of the contract and honours the employee's right to notice (or makes a payment in lieu of them working notice), this will not preclude a claim for unfair dismissal (but will mean that the employee has no wrongful dismissal claim because they have already received their full contractual notice entitlement).

Where an employee has therefore received their full entitlement to notice, their dismissal cannot (save for exceptional circumstances concerning contractual disciplinary procedures) be wrongful. It can however still be unfair.

At common law, provided that the employer gives due notice, the employment relationship can be terminated for any reason, generally speaking it does not need to be a meaningful reason, or even a valid reason in fact (although dismissal for an arbitrary reason could give rise to a claim for breach of the implied term of trust and confidence). Conversely, for the purposes of a claim for unfair dismissal, the employer must establish that the dismissal fell within one of the five prescribed reasons for dismissal as contained within s.98(1)(b) or (2) ERA 1996. If the employer cannot establish the real reason for dismissal, the dismissal is automatically unfair.

Once the reason for dismissal has been ascertained, the mere fact of compliance with the notice provisions in the contract does not mean that the dismissal is fair. A considerable body of case law has now emerged setting out guidance as to what an employer is expected to do in order to dismiss fairly depending upon the statutory reason for dismissal (this is summarised in the Unfair dismissal chapter). An employment tribunal is required to determine whether or not the dismissal was in all of the circumstances fair or unfair, taking into account the employer's size and administrative resources, as well as the equity and substantial merits of the case.

In a wrongful dismissal claim, the question of whether or not dismissal should have been without notice is an objective one for the judge to decide on the facts at the hearing. For example, where an employer dismisses summarily on grounds of gross misconduct, the Court will have to consider whether the charge was made out on the balance of probabilities. Conversely, in respect of certain types of dismissal (for instance those relating to conduct), in an unfair dismissal claim, an employment tribunal is not permitted to substitute its view for that of the employer. It has to consider whether the dismissal fell within the range of reasonable responses, and whether the employer had sufficient grounds to dismiss on the evidence in its possession (even if the tribunal would not necessarily have reached the same conclusion if it had to decide the matter itself).

Unlike the position at common law, an employment tribunal can find that the dismissal was unfair, or that it otherwise did not fall within the band of reasonable responses. Irrespective of the contractual position, this entitles a tribunal to find that the employee should not have been dismissed at all.
Where an employee succeeds in a claim for unfair dismissal they will be entitled to recover a basic award (for the fact of being dismissed) which is calculated on the same basis as a statutory right to a redundancy payment (see Redundancy payments chapter). Additionally, they will be compensated for any lost earnings or benefits arising since the termination of their employment, less any income or benefits received from alternative employment (known as a compensatory award). Compensation is not limited to the notice period as it typically is in a wrongful dismissal claim. Credit will also have to be given for any pay received from the former employer in lieu of working out any period of notice. The maximum compensatory award is currently £76,574 (increasing to £78,335 from 6 April 2015). However, the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013/1949 introduced an overarching limit of one year's salary which serves to reduce the cap on the compensatory award for unfair dismissal to the lower of either £76,574 (increasing to £78,335 from 6 April 2015) or alternatively 52 weeks' pay for the employee in question. For these purposes a week's pay falls to be calculated in accordance with Ch.2 of Pt 14 of the Employment Rights Act 1996.
Only employment tribunals have jurisdiction to consider unfair dismissal claims.

Conversely, wrongful dismissal claims can be brought in the High Court or County Court (depending upon the value) or in the employment tribunal. However, the maximum that an employment tribunal can award in respect of a claim for wrongful dismissal is £25,000: Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994/1623. If a claimant elects to pursue their wrongful dismissal claim in an employment tribunal in circumstances where their losses exceed £25,000, they cannot recover the balance by instituting proceedings in another forum as this would amount to an abuse of process. A litigant must make an election as to which forum they wish to pursue their claim for wrongful dismissal.
In a claim for unfair dismissal, an employment tribunal has to consider what was in the employer's mind as at the date of termination (or at the internal appeal stage). If subsequent to dismissal facts are unearthed which, had they been known about at the time, would have warranted summary dismissal, this cannot be taken into consideration in deciding the issue of whether the dismissal is fair. The employment tribunal can take subsequent matters into account in deciding the appropriate level of remedy. Conversely, no such temporal restriction on knowledge applies to a claim for wrongful dismissal. If information comes to light post-termination that the employee has committed acts of gross misconduct from which they would have been dismissed, even though this was not known at the time, the employer can rely upon evidence of breach retrospectively so as to argue that the employee is not entitled to any notice.
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Article published 25/05/2017

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