Sources of regulation
The United Kingdom law governing
contracts of employment derives from three main sources: common law, statute
and law of the European Community. The main statutes governing termination
of employment is the Employment Rights Act 1996 (ERA),[1] the Trade Union and Labour Relations (Consolidation)
Act, 1992 (TULRCA), the Employment Act 2002, the Employment Relations Act
2004, and the Transfer of Undertakings (Protection of Employment) Regulations
2006. Legislation enacted to prevent discrimination includes the Disability
Discrimination Act, 1995, the Sex Discrimination Act, 1975, the Race Relations
Act, 1976, the Equal Pay Act, 1970, and the Fixed-term Employees (Prevention
of Less Favourable Treatment) Regulations 2002.
Special provisions under collective agreements may achieve legal effect
if they are incorporated into individual contracts of employment. Incorporation
is not automatic. This is in sharp contrast to many other countries, where
the clauses of collective agreements apply to employment contracts if the
provisions are more favourable to the employee.
Scope of legislation
Each act only offers coverage after employees spend differing qualifying
periods in employment. Protection against unfair dismissal, for example,
requires that one be employed for at least one year (sec. 108, ERA). Everyone,
however, is protected against dismissal based on the exercise of statutory
and workplace rights, personal reasons, union membership, civic duty, sex
and racial discrimination.[2]
Protection under the ERA also does not extend to:
- individuals
whose employment lasts for less than one month (sec 198, ERA);
- employees
of normal retirement age for the particular job or, if there is no such
age, the age of 65 (sec. 98, ERA);
- police
officers (sec. 200, ERA);
- share fishermen (sec. 199, ERA);
- members of
the naval, military and air forces of the Crown (sec. 192, ERA).
Protection under the Race Relations Act, Employment Equality (Religion or
Belief) Regulations, Employment Equality (Sexual Orientation) Regulations
2003, and Sex Discrimination Act applies to all employment under a contract
of service or apprenticeship. However, the Race Relations Act does not cover
employment in private households, unless the discrimination is by way of
victimization.
Contracts of employment
A contract of employment refers to a contract of service or apprenticeship. It
can be express or implied, and if it is express, it can be oral or in writing
(sec. 230(2), ERA). In addition to contracts of indefinite duration,
there are fixed, short-term, and probationary, and apprenticeship contracts.
The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, established that individuals with fixed-term contracts
that have previously been renewed are to be treated as permanent employees
(sec. 8(2)).
Temporary workers are defined as those whose services are supplied by an
intermediary (employment agent or business) for the benefit of a third party
(hirer) for a limited period of time.
There is no separate legal category for casual workers or home workers.
They must establish both a contract of service and necessary continuity of
service to qualify for protection.
Termination of employment
Employment relationship may be terminated by mutual agreement of the parties
concerned. Contracts of employment may also be frustrated by an event external
to the parties that renders the further performance of the contract impossible,
as well as by operation of law, or by the death of the employee or employer.
The employee is entitled to terminate an employment contract at will (by
the provision of due notice), unless otherwise agreed in the contract. The
employee must typically give one weeks notice if he or she chooses to terminate
the contract (sec. 86(2), ERA). Under common law, if the employer
breaks a fundamental term of the contract, the employee is not required to
give any notice.
Dismissal
According to the common law, any contract may be terminated by either party
with due
notice. However, the common law has been restricted
by legislation aimed at curbing unfair dismissal. The ERA provides that employees
have the right not to be dismissed unfairly (sec. 94(1), ERA). A dismissal
may be fair if the employer shows that the dismissal (Sec. 98(2), ERA,
as amended ):
- relates
to the employee’s ability or qualifications to do the work;
- relates
to the employee’s conduct;
- is
the retirement of the employee;
- was
because the employee was redundant; or
- was necessary
because continued employment would have necessitated a contravention by
either party of a prior or legal duty.
The employee has the initial evidentiary burden of proving a “dismissal”
has taken place, then the burden of showing cause shifts to the employer.
Where the employer has fulfilled this requirement, it rests with the employment
tribunal to decide whether in all circumstances the employer acted as a reasonable
employer in dismissing the employee (sec. 98(4), ERA).
Even if the dismissal is considered unfair according to sec. 98(2) of
the ERA, the employer may terminate the employee if the termination is because:
- the
employee was taking part in an illegal industrial action, provided all
employees who took part in that action were dismissed without discrimination
and not
re-engaged within three months, unless the employee ceased his participation
in the action before the dismissal, or the employer took steps to resolve
the dispute before the dismissal (sec. 238, TULRCA, as amended; or
- the employer
has some other substantial reason to justify the dismissal of an employee
(sec. 98(1)(b), ERA).
A dismissal is automatically unfair, when
the principal reason for dismissal involves:
- trade
union membership, elected representatives of the employees, representatives
of a recognized trade union, or trade union activities (if the employee
was or proposed to become a member of an independent trade union or if
the employee
had taken, or proposed to take, part in activities of an independent trade
union) (sec. 152(1)(a) and (b), TULRCA; and sec. 103, ERA for employee
representatives);
- refusal
to belong to a trade union (if the employee was not a member of any trade
union, or of a particular trade union, or had refused, or proposed to refuse,
to become or remain a member) (sec. 152(1)(c), TULRCA);
- unfair
selection for redundancy (in breach of an agreed procedure or customary
arrangement or if the employee made redundant has been chosen because of
his or her union
membership/union activities) (sec. 153, TULRCA; and sec. 105, ERA);
- racial
and sexual discrimination (sec. 4(2), Race Relations Act, 1976, and sec.
6(2), Sex Discrimination Act, 1975) or (subject to defences) discrimination
on the grounds of disability (Disability Discrimination Act);
- raising
health and safety concerns (if the concerns are raised by safety representatives
and others acknowledged by their employer as performing a health and safety
function) (sec. 100, ERA);
- seeking
to enforce a statutory employment protection right (sec. 104, ERA);
- transfer
of an undertaking (sec. 7(1), Transfer of Undertakings (Protection of Employment)
Regulations, 2006), unless it falls within the scope of sec. 7(2) of those
regulations (i.e. unless the dismissal is justified by an economic, technical
or organizational reason entailing a change in the workforce);
- conviction
of an offence or failure to disclose such a conviction when the conviction
is “spent” within the meaning of the Rehabilitation of Offenders Act 1974
(sec. 4(3)(b));
- industrial
pressure exercised on the employer (e.g. if employees threaten to start
industrial action unless a certain employee is not dismissed) (sec. 107,
ERA);
- shop
workers and betting workers who refuse Sunday work (sec. 101, ERA); and
- trustees of
occupational pension schemes (sec. 102, ERA).
There is no reference to the term “collective dismissal”
in the statutes. However, certain obligations (consultation
and notification in due time) for the employer arise in circumstances where
a certain number of employees are affected by dismissal caused by redundancy.
Redundancy is when the employee’s dismissal is attributable wholly or mainly
to the fact that:
- the
employer has ceased or intends to cease to carry on that business in the
place where the employee was so employed; or
- the requirements
of that business for employees to carry out work of a particular kind in
the place where the person affected was so employed have ceased or diminished
or are expected to cease or diminish (sec. 139(1), ERA).
Notice and prior procedural safeguards
If the employee has been continuously employed for at least one month, an
employer is required to give notice before termination. The length of notice
relates to the length of continuous uninterrupted service, according to the
provisions of sec. 86 of the ERA. The minimum periods of notice are
(sec. 86, ERA):
- one
week, if continuously employed for less than two years;
- one
week for each year of continuous employment if the period is between two
and 12 years; and
- 12
weeks if the period of continuous employment is 12 years or more.
If the employer does not observe the period of notice, the employment tribunal
may grant payment in lieu of the period that should have been observed.
If the employee has been continuously employed for at least one year, or
the employee is party to a limited-term contract which is not being renewed,
the employer is required upon request to hand over a written statement, explaining
the reasons for the dismissal (sec. 92, ERA).
While there are no further statutory requirements for procedures, the courts
expect employers to follow their own guidelines for termination. These procedural
guidelines must bear a minimum of fairness. Under common law, failure to
follow fair procedures alone may render a dismissal unfair, even though,
had the procedure been abided by, it might have been fair to dismiss the
employee.
As regards dismissals on disciplinary grounds, since 2004 employers have
been required to follow a three-step disciplinary procedure. The employer
has to send the employee a written statement alleging conduct or circumstances
which lead the employer to contemplate a disciplinary action or dismissal.
Furthermore, the employer must invite the employee to attend a meeting to
discuss the matter. The employer is required to inform the employee of his/her
decision and of the right to appeal against it. The third step is the meeting
between the employer and employee in case if the latter wished to appeal. [3]
If more than 10 employees are terminated because of a redundancy, the employer
must notify the Secretary of State in writing (sec. 193, TULRCA).
Failure to do so may result in a fine (sec. 194, TULRCA). A copy of
this notification must be sent to each workers’ representative,
who is to be consulted on the redundancy. Furthermore, the employer must
contact the employee representatives (sec. 188, TULRCA), who are to
be representatives of an independent trade union or, in the case of the absence
of a recognized trade union in the workplace, representatives specially elected
for consultation on redundancy (sec. 188(1), TULRCA). These representatives
are to receive specific information on the redundancies from the employer
prior to the consultation (sec. 188(4), TULRCA). The consultation
must begin “at the earliest opportunity” and, when the employer is proposing
to dismiss 100 or more employees within 90 days, the consultation must begin
at least 90 days before the first of the dismissals takes effect (sec.
188(2)(a), TULRCA). If 10 to 99 employees are
to be dismissed for redundancy reasons within 30 days, the consultation must
start 30 days before the date expected for dismissals. The consultation is
a place to discuss ways to avoid or reduce the dismissals, and ways to mitigate
their consequences (sec. 188(7), TULRCA).
If the obligation to consult is not observed, a complaint may be presented
to the employment tribunal, which may make a protective award that keeps
employees on the payroll for a period of time (sec. 189, TULRCA).
The tribunal determines a length that will be just and equitable in all circumstances,
with regards to the seriousness of the employer’s default (sec. 189(4),
TULRCA).
Severance pay
No severance payment is offered if an employee was terminated because of
misconduct or personal attributes.[4]
However, an employee whose contract has been terminated on the grounds of
redundancy is entitled to receive a redundancy payment in accordance with sec.
135 of the ERA. The amount of the payment is calculated according to
the length of uninterrupted employment. The employee is to receive (sec.
162 (2), ERA):
- one-and-a-half
week’s pay for each year of employment in which the employee was not below
the age of 41;
- one
week’s pay for each year of employment in which the employee was not below
the age of 22; and
- one half-week’s
pay for each year of employment for each year not falling within the above.
The maximum week’s pay cannot exceed £310.[5]. Moreover, wherever an employee has been dismissed
for redundancy reasons but the dismissal has been unfair, the redundancy
compensation received will be subtracted from the compensation payable to
the employee for the unfair dismissal (secs. 122(4) and 123, ERA).[6]
Employers and employees have to contribute to the National Insurance Fund,
out of which redundancy payments are financed in case the employer is financially
unable to do so (secs. 167, ERA).
Avenues for redress
Only after a minimum period of one year of uninterrupted service is an employee
entitled to claim unfair dismissal (sec. 108, ERA). However, there
is no such period for employees claiming to have been dismissed on grounds
of union activities, health and safety activities, maternity, jury duty,
family obligations, race or sex. A claimant can launch a claim through
the employment tribunal or civil courts.
Employees who believe
their rights have been infringed (i.e. that they have been dismissed unfairly)
may make a complaint to the employment tribunal (sec. 111(1), ERA)
within three months of the date of termination. If the tribunal is satisfied
that the complaint could not be reasonably presented within three months,
the complaint may be presented later (sec. 111(2), ERA).
The employee may appoint a representative at the hearing, while the tribunal
decides if the employee’s complaints are well founded. The employer must
establish that the principal reason for the termination is capable of justifying
the termination.
If the tribunal is not satisfied that the reasons for termination were justified,
then the tribunal will require the employer to either reinstate or re-engage
the employee. If the employer is required to reinstate, the tribunal will
order the employer to offer back-pay and restore certain rights and privileges
by a certain date (sec. 114, ERA). If the tribunal orders the employer
to re-engage the employee, the tribunal will specify the terms of the re-engagement,
including an amount the employer must pay, and rights and privileges that
the employee must regain (sec. 115). If the employer refuses to comply
with a reinstatement or reengagement order, the tribunal can award an additional
26-52 weeks’ pay (to a maximum of £280 per week).[7]
While reinstatement or re-engagement should be the
primary remedies (secs. 112 and 113, ERA), the courts are reluctant
to make reinstatement and reengagement orders. Often, the tribunal will
order employee compensation – up to a £8,400 basic award and at £56,800 compensatory
reward. If the employer has failed to follow the applicable dismissal procedure,
the compensatory reward may be up to 50% higher.[8]
Employees may sue employers for breach of contract in the civil courts.
In addition, employees may choose to seek a temporary, interim injunction.
Under certain (very limited) circumstances, they may also seek a permanent
injunction against their dismissal in the civil courts by claiming a breach
of contract under common law. In general, courts will grant an injunction
only if damages are inadequate and complete confidence in the relationship
remains. Also, an injunction can only be granted if the contract still exists.
For example, an injunction cannot be granted when the employee accepts his
employer’s repudiation of the contract.
If a dismissal is because of union membership or activities, or for failure
to be a member of a union, and the employee has not completed the one-year
service period set forth in sec. 108 of the ERA, then the burden of
proof rests with the employee to show that the dismissal has been for the
prohibited reasons.[9]
An employee may claim compensation for job loss, if a qualifying period
of one year of uninterrupted service is fulfilled. When the worker does qualify,
the amount depends on the length of uninterrupted service between the age
of 20 and 65. For unjustified dismissal, there is a basic award (which is
calculated similarly to a redundancy payment to a maximum of £6,150) on the
basis of age and years of service, and a compensatory award (sec. 118,
ERA). The compensatory award (sec. 123, ERA) compensates the employee
for the loss (of earnings, pension rights, injury to feelings and other non-pecuniary
loss) he or she has sustained because of employer action. The maximum compensatory
award is £58,400, but in cases of termination because of heath and safety
reasons, certain union activity, and redundancy, there is no limit on the
amount of the compensatory award. There is a minimum award in cases where:
- dismissal
is unfair due to reasons of redundancy but no redundancy payment is paid
because the employee accepted or unreasonably refused alternative employment
(minimum award of two weeks’ pay must be ordered (sec. 121, ERA));
- dismissal
is unfair on the grounds of health and safety activities in accordance with
sec. 100 of the ERA (compensation shall not be less than £4,000 (sec.
120(1), ERA)); or
- the employee
is dismissed for union membership, union-related activities or for not being
a member of a union (minimum basic award is £2,770 (sec. 156(1),
TULRCA)).
If the dismissed employee seeks but does not obtain an order for re-employment/reengagement,
he or she shall be paid an additional special award not exceeding £27,500
(secs. 157/158, TULRCA).
Damages may be sought in the civil courts, as well as in the employment
tribunal. Damages may be awarded for loss of opportunity provided by the
contract or for mental distress, anxiety and illness caused by the loss.
Under the aegis of the employment tribunal, those who claim that they have
been dismissed for trade union membership/activities, for health and safety
reasons, for working time reasons, for whisteblowing, or for refusal to join
a union qualify for interim relief, which allows the tribunal to order reinstatement,
re-engagement or, if the employer refuses the above, suspension on full pay
until final determination. Such relief might be awarded if there is a likelihood
of the employee succeeding in the final hearing (sec. 128, ERA).
Further information
[1] Which consolidated the Employment Protection
(Consolidation) Act, 1978, as amended.
[2] European
Commission.“Termination of employment
relationships: Legal situation in the Member States of the European Union”. April
2006, p.12 (see the Web-link in “Further information”).
[3] European
Commission, op.cit., p. 64.
[4] European
Commission, op.cit., p. 131
[5] Employment Rights (Increase of Limits) Order 2006, SI 2006/3045,
cited in http://www.emplaw.co.uk/searchfree.aspx?searchtext=maximum+week%27s+pay
[6] http://www.emplaw.co.uk/researchfree-redirector.aspx?StartPage=data%2f021010.htm
[7] European
Commission, op.cit., p. 40.
[8] European
Commission, op.cit., p. 61.
[9] Smith v. Hayle Town Council [1978] IRLR 413, [1978] ICR
996 (CA).
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