Claims You Can Face As An Employer

Unfair Dismissal Claims

To bring an unfair dismissal against you the Claimant must have been working under a contract of employment. This means that s/he must have agreed to work under your direction and control normally in return for payment. It does not matter whether the agreement was put into writing, although you are required by law to give the employee a summary of the terms of the employment.

Broadly speaking if the Claimant was running his or her own business and doing work for a number of different people s/he probably won’t be employed by you. It is not however decisive that there is an agreement that the person you taking on is to be self-employed. The Tribunal will look at the reality of the situation, not just whether the words ‘self-employed’ have been used in the contract. On the other hand, Agency Workers may look and behave like employees but they will not hold to be your employees or have the rights which employees have.

Employers may wish to arrange their businesses so that those who work for them are not employees, for example by having large number of contractors (perhaps engaging them via their own service companies). However you should aware that the Courts are on the look out for sham legal arrangements designed to deprive employees of their legal rights. Therefore you may wish to take on staff through an agency. Agency
Workers may look and behave like employees but they will not hold to be your employees or have all of the rights which employees have.

Normally the employee must have two years continuous service in order to bring a claim for unfair dismissal. The period is one year if s/he started work before 6th April 2012. You may wish to make use of this (as you are entitled to do) in order to get rid of the employee before s/he acquires protection against unfair dismissal.

However there are some special types of unfair dismissal (“automatic unfair dismissal”) to which this does not apply. One example is dismissal because the employee has “blown the whistle” on alleged unlawful behaviour by you. Also if s/he is claiming that your dismissal was connected with discrimination, the one/two rule year does not apply. It is therefore dangerous to dismiss an employee on the assumption that there will be no claim because there is less than two years’ service. This rule may be evaded by the employee formulating her claim as a whistle blowing or discrimination claim or some other claim to which the one/two year rule does not apply.

To establish unfair dismissal, the employee must prove that she was dismissed. This is normally fairly straightforward and not in dispute. However it is common for an employee to allege that s/he resigned because of the way s/he was treated.  This type of claim is known as constructive dismissal. In theory the employee must show that the employer was in breach of “the implied term of trust and confidence” but in reality this is done by showing the employer acted totally unreasonably.  The employee may rely on a single unreasonable act by the employer, or upon a course of conduct extending over time. Examples would be an employer’s failure to address an employee’s grievance, or bullying behaviour by a manger. This makes it essential for you to respond promptly to any grievances filed by the employee. You should be especially careful if you start to receive correspondence which was or may have been written by a solicitor. If the correspondence refers to the distress which the alleged delay is causing to the employee, it may be that you are being set up for a constructive dismissal claim.

When the alleged dismissal is not constructive, it will be an “actual dismissal” which involves you giving notice of dismissal. In such a case, the fact of dismissal will hardly ever be in dispute. If the case comes to Tribunal you will have to establish that the reason for the dismissal was one of the potentially fair reasons listed in S.98 (1) and (2) of the Employment Rights Act. These are:

  1. Capability
  2. Conduct
  3. Redundancy
  4. Contravention of enactment.
  5. Some other substantial reason.

The first three of these are fairly straightforward. The fourth refers to rules which make it unlawful for you to continue to employee the employee. An example would be where the employee has lost his/her right to continue to work in the UK. The last is a miscellany of reasons which the law has recognized, such as the need to reorganize a business.

If you do not establish that the reason for dismissal was one of these reasons, you will lose your case – but this does not often happen.

Most unfair dismissal cases turn on the application of S.98 (4) which requires the Tribunal to consider whether you acted reasonably in dismissing the Claimant.  In many cases this will be a matter of considering whether you followed a fair procedure. Tribunals are not allowed to substitute their own view for that of the employer and the reasonableness test can operate very harshly on employees, making it difficult for them to win. However, Employment Tribunal claims are expensive and the costs are usually irrecoverable, so you may want to consider an early settlement.

If the employee wins, s/he will be entitled to compensation provided s/he has made reasonable efforts to find a new job following her dismissal (“mitigated the loss”).  For this reason, an important defence tactic is to research on the internet all the jobs for which the Claimant might have applied during his/her period of unemployment.  Subject to that the Tribunal will award his/her the net income s/he has lost for the whole of the period from the dismissal, to the time when s/he did/should have/will find a new job. However a Tribunal can reduce his/her compensation if it thinks s/he was partly to blame or if it thinks s/he would have been dismissed anyway if the correct procedure had been followed.

Compensation is normally limited to £72,000 and the employee will pay tax on compensation in so far as it exceeds £30,000. However the Tribunal should allow for this in calculating his/her compensation so that s/he has enough money to pay the tax man.  There are some kinds of unfair dismiss claims, such as whistle blowing claims, which are not subject to this limit and discrimination claims are not subject to this limit at all.

The employee cannot get any compensation for the distress and anguish caused by dismissal unless the dismissal was also an act of discrimination.

 

Breach of Contract Claims:

Until 1994, an employee could not bring a claim in the Employment Tribunal for breach of his/her contract of employment as opposed to, say, unfair dismissal or discrimination. A breach of contract claim had to be brought in the County Court.

This changed in 1994. Employment Tribunals have since then had power to hear breach of contract claims provided the contract of employment has come to an end. The Tribunal’s power it limited to £25,000 so if his/her claim if for more than this, s/he may bring it in the County Court or the High Court.

An example of the sort of claim which might be brought in the Employment Tribunal would be a claim for failure to pay notice pay or a failure to pay commission. One advantage of bringing a breach of contract claim is that any sums awarded don’t count against the limit for unfair dismissal claims, thus boosting the overall size of the claim.

As an employer, you can bring a claim of your own (“a counter-claim” ) in response to a claim for breach of contract. You may wish to bring a claim that the employee has damaged the business by his/her carelessness, though your claim will also be subject to the £25K limit.

Equality Act Claims:

Many would regard unfair dismissal claims as the legal equivalent of catching a cold. Unpleasant at the time but quickly passing. Discrimination claims are much more serious. This is partly because in our society discrimination is regarded as a serious moral wrong. But in addition, such claims are easy to make and very costly to defend. Even very weak cases can be pursued all the way to a very costly trial without being struck out. Finally, individual officers and employees of the company can be personally liable.

Broadly speaking, the Equality Act protects against mistreatment on any of the following grounds, namely:

  1. Age
  2. Disability
  3. Gender Reassignment
  4. Marriage and Civil Partnership
  5. Pregnancy and maternity
  6. Religion or belief
  7. Sexual Orientation

These things are known as “protected characteristics”. The Claimant does not have to have a contract of employment – s/he will probably be covered if s/he is a contractor and s/he will be protected if s/he is an agency worker. Nor does s/he need to be employed for a year before bringing a claim. And even agency Workers are protected against discrimination.

The act protects against four different kinds of discrimination. Firstly there is direct discrimination. For example, it is unlawful to dismiss someone because of their sexual orientation, though there are exceptions for various religious groups.

Secondly there is indirect discrimination, which is where an employer has a rule which applies to everyone but which disproportionately impacts upon the employee as a person with a protected characteristic. This arises if you have a rule requiring all staff to work full time, which will probably disproportionately impact women as they are most likely to want to work part-time for child care reasons. It is open to you to try to justify this conduct (i.e. show that full time working is necessary) but if you fails to do so then it will be an act of indirect discrimination to maintain the practice.

Thirdly, there is harassment. It is unlawful to treat someone, on the grounds of a protected characteristic, in a way which has the purpose or effect of violating their dignity. Finally there is victimization: it is unlawful to penalize someone for making a discrimination complaint or for assisting someone who has done so. It is important to realize that you can be liable for doing this even after the employee has left your employment – e.g. by giving him/her an unjustifiably bad reference.

In addition to all this, further provisions of the Equality Act entitle women to claim to be paid at the same rate as men, provided they are doing the same work, work which has been rated as equivalent on a job evaluation scheme or work which is of equal value. Employers have a defence if they can show that the difference is due to a material factor which is not connected with gender. In practice, equal pay claims are largely confined to the public sector.

Discrimination complaints include dismissal but also cover any detriment to which a person is subjected by an act of discrimination. Thus it is possible to complain about discrimination in the recruitment process and also during employment. A Claimant can claim that s/he has been denied promotion on the grounds of his/her race even if s/he remains in employment (it is in precisely in such circumstances that victimization claims are most likely to arise).

Discrimination can be difficult to prove since very few people will admit that what they did was connected to a protected characteristic.  Claims are likely to be assisted by skillful use of the Questionnaire Procedure, which permits Claimants to seek from the employer, before any claim is filed, all sorts of useful information and documentation, for example statistics about the racial/gender profile of the senior management in a company. This information can be used to support an argument that this is the sort of company where the mistreatment of which the Claimant complains was likely to be on the grounds of race/gender etc. If the employer refuses to answer the questionnaire, the Tribunal may infer that it had something to hide. The government intends to abolish the Questionnaire Procedure through the Enterprise and Regulatory Reform Act, but it is likely that Claimants will seek to achieve the same end through other procedural means.

In addition, the Equality Act provides that under certain circumstances the burden of proof will pass to the employer: that is the employer will have to prove that what happened was in no way connected with a protected characteristic.  This would be the case if there were two equally well qualified candidates for a job, one black and one white, and the white one was appointed. In such a case the Tribunal would be required to find discrimination unless the employer proved that race had nothing to do with it. In such case the employer will lose unless s/he has kept good records of the selection process. The employer will be in equal difficult if the decision maker is not available to be a witness because s/he has died or fallen out with the employer and left. Finally the Tribunal will in many cases be keen to look at “the whole picture”, that is to consider the general character of this employing institution to see whether it is the sort of institution where discrimination is likely to have occurred. Thus in a sexual harassment case the Tribunal may be interested in what happened at a Christmas party even if the Claimant was not there, since it provides insight into the workplace culture.

Discrimination claims are to some extent won and lost before the claim is filed. For example, those hearing disciplinaries are almost always asked when they last received any equality training.  If the answer is unimpressive it will indicate that yours is the sort of company which doesn’t take equality seriously and thus incline the Tribunal against you. But it is too late to do anything about it when the claim is filed.

Though there are similarities between the different types of discrimination, there are also many differences. Thus you can seek to justify direct age discrimination by saying e.g. we retired him because we needed a better balance of ages within the work force. By contrast, the other types of direct discrimination have much more limited exceptions. For example there is a “Genuine Occupational Qualifications” defence which makes it lawful to recruit a girl to play Juliet in Romeo and Juliet.  The age discrimination defence is much broader, making it lawful to subject older people to compulsory retirement in order to avoid the indignity involved in confronting them with their waning powers.

Disability Discrimination operates slightly differently from the other strands of discrimination law. In particular, once an employee is held to be disabled, the employer owes them a duty to make reasonable adjustments of any workplace practices which put the employee at a substantial disadvantage as a disabled person. For example, if due to a physical disability the employee finds it difficult to travel during rush hour, you may be under a duty to change his/her working hours to allow him/her to travel off peak. If the employee is dyslexic, you may have to provide him/her with voice recognition software. In fact as the first of these examples shows, you may be required to treat him/her ‘better’ than his/her non-disabled colleagues. However financial assistance, for example with the purchase of software to assist a dyslexic employee, can often be obtained from Access to Work.

Remedies for discrimination are not subject to any financial cap. Any financial compensation above £30,000 will be “grossed up” or increased to ensure you pay the employee what  s/he will owe the tax man. Moreover, the Tribunal can also award damages for injury to feelings and/or personal injury.

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