Understanding unfair dismissal in the UK

In labour relations, employers often hold greater power due to employee reliance on wages as primary income and their high replaceability. Globally, legislation on unilateral termination of employment by employers typically addresses four areas: dismissal grounds, procedures, liabilities and remedies.

The UK employment law distinguishes between “wrongful dismissal” and “unfair dismissal” with specific regulations on the dismissal procedures and justifications. This article focuses on unfair dismissal.

Prerequisite

The UK Employment Rights Act stipulates that employees are entitled to protection against unfair dismissal. This right applies if an employment relationship exists and the requirement on the employee’s continuous service period is met. However, no service period is required if the dismissal falls under categories automatically deemed unfair.

Possibly fair

As with Chinese law, the UK labour law outlines possibly fair dismissal grounds and cases automatically deemed unfair through an inclusive and exclusive approach. The Employment Rights Act identifies the following as possibly fair reasons for dismissal.

In relation to the employee’s capability or qualifications relevant to the position held. The Employment Rights Act mandates that capability refers to an employee’s capability assessed by reference to skill, aptitude, health or any other physical or mental quality.

Employers dismissing an employee for incompetence are typically required to provide evidence of having offered training to enhance the employee’s performance.

Qualifications refer to the degree, diploma or other academic, technical or professional qualification of an employee relevant to the position held.

It is important to note that such qualifications must be essential for the role. Employers cannot claim fair dismissal based on qualifications irrelevant to the position or the business.

In relation to the employee’s misconduct. Employees’ misconduct can justify dismissal, but employers must follow disciplinary procedures. Serious violations of workplace rules are a common lawful basis for termination.

As in Chinese practice, employers bear the burden of proof, and such misconduct must be clearly outlined in the company’s disciplinary code, approved through legal procedures and publicly disclosed.

Misconduct covers both on-duty and off-duty behaviour. For off-duty misconduct, the relevance to the role and its impact would be assessed by the court.

Other substantial reasons. A limited enumeration of fair dismissal grounds often sparks disputes in judicial practice, as legislators cannot comprehensively list all valid reasons for contract termination.

As a result, dismissals citing “other substantial reasons” may be considered justified. In practice, economic, technical or organisational factors of the employer commonly fall under this category.

UK adjudicating bodies assess dismissal fairness not only based on legally defined grounds, but also by considering other factors such as reasons for termination, and whether the employer observed proper procedures beforehand.

Automatically unfair

The UK has outlined a list of dismissals automatically deemed unfair.

Employers are legally liable for wrongful dismissal if they infringe on employee’s rights, such as: (1) protection against unlawful wage deductions; (2) entitlement to maternity, paternity, adoption or parental leave; and (3) freedom from discrimination based on gender, race, disability, religion, belief, sexual orientation or age.

Guided by legislation and precedents, UK courts continue to expand the scope of dismissals classified as automatically unfair.

Liabilities

Under UK employment legislation, adjudicating bodies may provide remedies for unfair dismissal through reinstatement, re-engagement or compensation, depending on the circumstances.

While reinstatement requires the employer to restore the employee to their original position, re-engagement involves establishing a new employment relationship.

Regardless of the remedy chosen, adjudicators must ensure continuity of the employee’s service period. Employers are also obliged to cover all wages and benefits the employee would have received between the dismissal date and re-employment date.

In judicial practice, compensation is more commonly awarded for unfair dismissal than reinstatement or re-engagement.

Under UK employment law, compensation includes a basic award – calculated based on the employee’s length of service – and a compensatory award, determined by the court, based on the employee’s losses resulting from the dismissal.

Zhu Tao is a senior partner and Zheng Ziliang is an associate at ETR Law Firm.