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Discrimination claims are not subject to a statutory cap on the amount that can be awarded


Before looking at what constitutes an unfair dismissal, let’s take a step back and look at fair dismissals.

What is a fair dismissal and an unfair one?

Employers have the right to dismiss an employee, the law requires however that they do so fairly. What then is fair? Broadly, it’s about having a fair reason for the dismissal, acting reasonably during the dismissal and following the correct procedure.


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You can dismiss an employee, the law requires however that you do so fairly

In terms of a good reason, these are capability or qualifications, conduct, redundancy, where continued employment would result in contravention of the law (very rare) and the lawyers favourite catch all provision of ‘some other substantial reason’.

Note that even if you have a fair reason to dismiss, you must act reasonably throughout the process – otherwise the dismissal could still be deemed unfair. And finally, you must follow the proper procedure.

It follows from this that an unfair dismissal arises when an employee is dismissed without a good reason, the employer has been unreasonable and/or a proper procedure not being followed.

In these cases, that employee may be able to bring a claim against the employer for unfair dismissal.

Generally, an employee has to have in excess of 2 years’ continuous service to bring a claim for unfair dismissal. However, employers should exercise caution on two grounds – first, an employee can add on their statutory minimum notice of one week to take them over two years if need be and second, there are numerous exceptions to the two year rule where an employee will be protected irrespective of length of their service. The exceptions include dismissal for raising a health and safety at work complaint –  something that has been particularly relevant during Covid 19 !

A claim for unfair dismissal has to be made to an Employment Tribunal within 3 months of the date of dismissal.

Before a claim is issued, an employee must register their claim with ACAS within the three month time period. ACAS will then consider, in conjunction with the parties, whether it is possible for the claim to be settled by conciliation. Contacting ACAS stops the clock running and the time limit for issuing proceedings is suspended until ACAS provide a certificate confirming that the conciliation period is at an end. Some employers will use the opportunity to negotiate a settlement through ACAS. Some will simply wait and see if the employee actually issues proceedings and then take a view on whether to settle or defend.

Costs & compensation

Compensation is divided into two – a Basic Award and a Compensatory Award. The former is calculated in the same way as a redundancy payment, the latter takes into account an employee’s actual loss (such as loss of wages) from the date of dismissal to the date of the Employment Tribunal hearing and is subject to a statutory cap of one years’ gross pay or an amount prescribed by the government (reviewed annually) whichever is the lowest.  A Basic Award will not be awarded where an employee has already received a statutory redundancy payment.

Employers should be aware that lawyers acting for employees will often try and look for exceptions to the ‘2 year rule’ and may also threaten, or add, other types of claim – such as sex discrimination – to put pressure on an employer to settle. Discrimination claims are not subject to a statutory cap on the amount that can be awarded. Solicitors may also seek the disclosure of documents – normally in the guise of their client submitting a data protection request. If the request is valid, the data must generally be disclosed within a calendar month. If an employer is in doubt as to what may or may not be legitimately disclosed, legal advice will need to be taken.

A quick word on tactical considerations, the provision of a reference is often a key factor. Very often a settlement will involve the payment of money and an agreed reference.

The law on references is outside the scope of this article. As a general rule however, with a few exceptions, an employee has no legal right to a reference. However, problems can arise when a reference is provided which is incorrect (and, for example, the employee is declined a job because of it) or, in the context of a discrimination claim, the failure to provide one is alleged to amount to discrimination/harassment.

Employers should also factor in the fact that legal costs are not generally recoverable at an Employment Tribunal – even if their defence is successful!


It is not all ‘doom and gloom’. Employers can still make commercial decisions and negotiate a settlement with an employee who would otherwise be dismissed. This will involve a ‘protected conversation’ with the employee (a form of an ‘off the record’ meeting) and then putting a settlement agreement to the employee. The latter involves the payment of money in return for the employee agreeing to accept payment in full and final settlement of all claims and not pursuing legal action. Employers need to take great care with both – in the worst case, a meeting may not be ‘protected’ with the consequence that anything said is admissible in legal proceedings and an employee may reject a settlement and, instead, bring a claim for unfair dismissal.

If you’ve any questions on this subject, we’d be delighted to assist.

Jonathan Waters Author image

Written by Jonathan Waters
Principal & Employment and Dispute Resolution Specialist at My Inhouse Lawyer

One of our values (Growth) is, in many ways, all about cultivating a growth mindset. We are passionate about learning, improving and evolving. We learn from each other, use the best know-how tools in the market and constantly look for ways to simplify. Lawskool is our way of sharing with you. It isn’t intended to be legal advice, rather to enlighten you to make smart business decisions day to day with the benefit of some of our insight. We hope you enjoy the experience. There are some really good ideas and tips coming from some of the best inhouse lawyers. Easy to read and practical. If there’s something you’d like us to write about or some feedback you wish to share, feel free to drop us a note. Equally, if it’s legal advice you’re after, then just give us a call on 0207 939 3959.

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