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Navigating Unfair Dismissal: Understanding Misconduct, Capability and Exceptions

Calendar September 18, 2023

Navigating Unfair Dismissal: Understanding Misconduct, Capability and Exceptions

Employee dismissals are a sensitive and complex matter for employers. To ensure fairness and compliance with employment laws, it’s crucial to have a solid grasp of the legal principles governing different reasons for dismissal. In this blog, we’ll delve into some key aspects of dismissals, particularly dealing with fair reasons for dismissals from misconduct and capability to understanding any exceptions and pitfalls that may be present if dismissals are handled poorly. By gaining insights into these areas, you can navigate the dismissal process more effectively, creating a harmonious work environment while safeguarding your organization from potential legal challenges.

What is misconduct?
Misconduct refers to any inappropriate behaviour or actions by an employee that violate the company’s policies, rules, or standards of conduct. However, it’s essential to note that misconduct does not have to be explicitly reprehensible or intentionally harmful. In CJD v Royal Bank of Scotland [2013], the Court confirmed that the conduct in question need not be “reprehensible,” and the EAT in JP Morgan Securities Plc v Ktorza UKEAT/0311/16 clarified that it does not need to be “culpable” either.

According to the Employment Rights Act 1996 (ERA 1996), misconduct is one of the five potentially fair reasons for dismissing an employee. However, for a dismissal to be considered fair, employers must show that the reason for dismissal was genuinely related to misconduct.

The “band of reasonable responses” test:

The band of reasonable responses test plays a crucial role in determining the fairness of a misconduct-related dismissal. Employers must prove that they acted reasonably in treating the identified misconduct as a sufficient reason for dismissal. The Acas Code of Practice on Disciplinary and Grievance Procedures provides valuable guidance in this regard.

The statutory test:

The statutory test for determining the fairness of a misconduct dismissal is set out in section 98(4) of ERA 1996. It requires the employment tribunal to consider whether the employer acted reasonably or unreasonably in treating the misconduct as a sufficient reason for dismissal, taking into account the circumstances and resources of the employer’s undertaking.

What is meant by capability?
Capability relates to an employee’s ability to perform their job effectively. It encompasses issues beyond an employee’s control that results in underperformance, such as health-related challenges or lack of necessary skills.

Poor performance can manifest as a failure to meet specific objectives, targets, or goals. Employers must engage in regular performance monitoring and discussions with employees, providing ongoing feedback and support to identify and address issues proactively.

How to deal with capability issues?
Effectively dealing with capability issues requires a well-defined approach. Employers should initiate open discussions with the employee to understand the reasons behind their underperformance. It is crucial to differentiate capability issues from misconduct to ensure the correct resolution process is followed. In cases of capability issues, providing additional training or support may be appropriate.

Fair Capability Dismissal:
Capability dismissal should be viewed as a measure of last resort. Before considering dismissal, employers must make reasonable attempts to understand, manage, and improve employee capability issues. If informal methods and performance management procedures fail to yield results, the next step would involve formally notifying the employee of their subjectivity to a performance improvement plan (PIP).

The importance of following a fair procedure:
Dismissals on capability grounds must follow a fair procedure, even if the employee has less than two years of service. It is crucial to adhere to the standards set out in the ACAS code of practice, as failure to do so can result in potential claims for unfair dismissal. A fair procedure includes clear communication, setting realistic performance targets, and providing adequate support and guidance during the process.

Alternatives to capability dismissal:
Before resorting to capability dismissal, employers should consider alternatives, such as:

  • Offering an alternative role that better matches the employee’s capabilities and skills.
  • Making reasonable adjustments, especially when the employee’s underperformance is related to a disability or health issue.
  • Evaluating the possibility of a settlement agreement, which allows the employment contract to end on mutually beneficial, negotiated terms.
  • Potential Exceptions and Pitfalls:

  • Dismissing an employee with less than 2 years of service:
    Employees with less than two years of continuous service do not automatically qualify for standard unfair dismissal protection. As a result, employers can lawfully dismiss such employees without demonstrating a fair reason or following a formal procedure.

    When looking to dismiss an employee with less than 2 years’ service, it can be tempting to shorten or even wholly circumvent any disciplinary, capability or redundancy procedures. However, you should always be mindful of the type of claims beyond ordinary unfair dismissal that you could be exposed to.

  • The main potential pitfalls that an employer should be aware of when dismissing an employee with less than 2 years’ service include:
    -Automatically unfair dismissal
    -Unlawful discrimination
    -Breach of contract

  • Automatically unfair dismissal:
    Certain circumstances may lead to an automatically unfair dismissal, regardless of the length of service. These circumstances include dismissal due to pregnancy and maternity, asserting statutory rights, making protected disclosures, and more.
  • Unlawful discrimination:
    Dismissing an employee based on a protected characteristic under the Equality Act 2010 is both automatically unfair and amounts to unlawful discrimination. Protected characteristics include age, disability, gender reassignment, race, religion or belief, sex, and sexual orientation.
  • Breach of contract:
    Although employees with less than two years of service do not necessarily require a fair reason for dismissal, a breach of contract can still occur if there are contractual dismissal procedures. Failure to follow these procedures may lead to a potential claim for damages against the employer.
  • Conclusion:
    Navigating the complexities of employee dismissals requires careful consideration and adherence to legal requirements. By understanding fair reasons for dismissals such as misconduct and capability, as well as understanding potential exceptions, employers can make well-informed decisions, protect their reputation, and maintain positive employee relations. Always prioritize fairness and follow proper procedures to mitigate legal risks and foster a harmonious work environment. Treating employees with respect and addressing performance issues proactively can lead to better outcomes and stronger employer-employee relationships.

    By Suraj Purohit.
    Employment Paralegal at Kalra Legal Group


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