Employment relationships often come to an end, and employers as well as employees need to understand the proper protocols and potential legal implications of termination. This guide covers key aspects of employment termination, including notice periods, different types of dismissal, and the claims employees can potentially bring. Read on for an overview of employment termination best practices.
Specifying Notice Terms in Employment Contracts
Many disputes between employers and employees crop up around termination of the working relationship. For this reason, it’s prudent for employment contracts to spell out the situations where the employer can terminate without notice – for instance, as a result of gross misconduct or negligence.
Additionally, contracts may allow the employer to make a payment in lieu of notice, and/or place the employee on “garden leave” during the notice period. Under garden leave clauses, the employee stays at home on call during the notice period rather than coming into work. This keeps a soon-to-be-former employee away from competitors while still employed.
Providing Proper Notice of Termination
When ending employment by proper notice and not for cause, there is no breach of contract unless the contents of the notice itself are unlawful. For valid employment termination by notice, these guidelines must be followed:
- The notice period can’t be less than the legal minimum under Section 86 of the Employment Rights Act. This sets notice periods based on length of employment.
- Notice generally doesn’t require a reason for termination, unless the contract states specific termination circumstances.
- If the contract limits reasons for notice, it typically can’t be given for other causes.
Understanding Dismissal and Potential Employee Claims
Dismissal can lead employees to bring several legal claims, mainly:
- Wrongful dismissal: When the employer terminates without proper contractual or statutory notice or pay in lieu of notice.
- Unfair dismissal: When the dismissal is deemed unjustifiable.
- Redundancy payments: When dismissal is due to position elimination.
- Failure to provide written reasons for dismissal.
- Discrimination: When dismissal is connected to protected characteristics like gender, race, orientation, disability, religion, or age.
Employees who resign usually lose rights to redundancy or other termination payments. Only dismissed employees can claim unfair dismissal. However, “constructive dismissal” is an exception, as explained next.
Constructive Dismissal: Effective Forced Resignation
If employees resign due to the employer committing a fundamental contract breach, the law often treats this as dismissal. This is called constructive dismissal, and allows resignation to still qualify for various employee protections and claims.
To establish constructive dismissal, employees must show:
- The employer seriously breached the employment contract.
- They resigned specifically because of said breach.
- They didn’t delay too long in resigning after the breach happened.
Common employer actions that constructively dismiss employees include:
- Salary reductions
- Complete job duty changes
- Failure to follow disciplinary procedures
- Failure to provide a suitable workplace
See Western Excavating Ltd v Sharp for a notable constructive dismissal case example.
Wrongful Dismissal Distinguished from Unfair Dismissal
Wrongful dismissal suits claim the employer terminated employment in breach of contract, without proper notice or pay instead of notice. By contrast, unfair dismissal involves firing lacking sufficient justification, regardless of notice protocol.
More specifically, wrongful dismissal applies when:
- Notice periods or termination provisions are violated.
- Employment is ended before a fixed-term contract expires.
If the contract doesn’t specify notice entitlements, courts typically find an implied minimum notice period in line with legal statutory minimums. However, longer notice may be implied for senior staff.
As wrongful dismissal stems from a contract breach, damages usually equal the pay amount covering implied reasonable notice period. Employees must mitigate losses by seeking other work.
The only employer defenses against wrongful dismissal are:
- Proper contractual or statutory notice was provided.
- Circumstances allowed dismissal without notice, often gross misconduct/negligence.
Conclusion and Key Takeaways
In review, you should now grasp several key employment termination issues:
- Contracts should detail situations allowing no-notice dismissal, like gross misconduct. Garden leave clauses also help manage active notice periods.
- Following proper notice procedures is essential to avoid breach of contract and potential dismissal claims.
- Dismissal can trigger wrongful dismissal, unfair dismissal, redundancy payments, or other claims.
- With constructive dismissal, employers’ contract breaches force employee resignations, allowing claims.
- Wrongful dismissal involves insufficient contractual notice, while unfair dismissal means insufficient justification for firing.
Carefully managing contract termination processes with these concepts in mind will help avoid unnecessary disputes or legal exposures. Understanding dismissal pitfalls and employee protections also aids in safer navigation of this often contentious area of employment law