Dismissing employees with less than two years’ service

As we all know, an employee can only bring a claim for ordinary unfair dismissal if they have at least two years’ continuous service. Does that mean that employers can completely bypass any formal dismissal process for those employees with less than two years’ service? Provided there is no contractual obligation to follow a procedure then, in short, the answer is yes; but this may not be risk free. I set out below a reminder of some of the issues involved:

Claims with no qualifying period

In most claims for automatically unfair dismissal, an employee does not need a qualifying period of employment. These include dismissals for reasons connected to pregnancy or childbirth, health and safety activities or whistleblowing. Similarly, there is no qualifying period needed to bring a claim for discrimination. Whilst there is no statutory legal requirement to follow a formal dismissal process for an employee with less than two years’ service, employers may want to think carefully about whether it might be sensible to follow one anyway, especially where they believe there is a risk of a claim for which no qualifying period applies. In particular, employers looking to get staff back into the workplace this Autumn, should remember that dismissing an employee who refuses to return to work due to concerns around COVID-19 may be automatically unfair and should avoid making any hasty decisions in those circumstances. See Kathleen Heycock’s FAQs on returning to work for more information on employer’s health and safety obligations and creating safe workplaces.

Following a formal dismissal process can be helpful as a way of exploring any issues and trying to resolve them. It can also help to flush out whether there are any other factors at play. For example, is the employee’s poor performance related to an underlying disability? It is also helpful from an evidential point of view to go through a proper process in order to be able to show that the reason being relied on for dismissal is the real one. For example, if an employer dismisses an employee for redundancy without there being any paper trail for that being the real reason, they may find it difficult to defend a subsequent claim that the real reason was that the employee had previously raised a grievance.

Wrongful dismissal and post-termination restrictions

Dismissing without giving the required period of notice (or dismissing before the expiry of a fixed term where there is no provision for earlier notice) is likely to lead to a wrongful dismissal claim. Damages would reflect the value of pay and benefits in respect of the notice period or, in the case of a fixed term contract, the remainder of the term, which could potentially be very costly. Where there is a contractual obligation to follow a formal dismissal procedure (for example, a disciplinary or redundancy procedure) and the employer fails to follow it, the employee may also have a wrongful dismissal claim, this time based on loss of wages for the amount of time the procedure would have lasted if it had been followed.

A wrongful dismissal will free the employee from any further performance of their obligations under the contract, including any restrictive covenants. They may also be released from their obligations of confidentiality (although the position on this is not entirely clear). So, an employer should give careful consideration to the notice requirements in an employee’s contract (including terms relating to PILON and garden leave) when looking to dismiss.

Calculating two years’ continuous service

When calculating whether someone has the requisite service to claim ordinary unfair dismissal (two years’ service), an employer must count both the first and last day of employment. So, if someone starts employment on 8 April and notice of dismissal expires on 7 April two years later, they will qualify for unfair dismissal protection.

The “corresponding date” rule will apply when calculating when notice of a month or months will expire, so that notice will end on the corresponding date in the relevant month (or if none, the last day of that month).

Section 97 Employment Rights Act 1996 will extend an employee’s effective date of termination where insufficient statutory notice has been given. For employees with under two years’ service this effectively means that an additional week will be added onto their termination date, unless an employer can show that it was entitled to dismiss the employee summarily. This rule should be taken into account when calculating whether someone qualifies for unfair dismissal protection.

Conclusion

Given current economic pressures, a lot of employers will be thinking about ways to reduce costs quickly and may be tempted to cut corners by fast tracking dismissals for those employees with less than two years’ service. However, for the reasons explained in this blog, they should be mindful that this approach is not entirely risk free.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, September 2020