What Constitutes Unfair Dismissal in UK Law

The legal test for unfair dismissal

In UK law, a dismissal is not automatically unfair just because you disagree with it. The Employment Rights Act 1996 sets out a two-stage test. First, the employer must show that the real reason for dismissal was one of the potentially fair reasons set out in the legislation. Second, the employment tribunal must decide whether the employer acted reasonably in treating that reason as sufficient for dismissal. That question is answered by looking at what a reasonable employer in the same circumstances would have done. The tribunal does not ask whether the dismissal was harsh or whether it would have made the same decision. It asks whether the employer’s decision fell within a band of reasonable responses. This is an objective test, but the tribunal will consider the size and administrative resources of the business, which matters for small employers.

Who is eligible to claim?

Most employees need two years’ continuous service before they can bring an ordinary unfair dismissal claim. Continuous service usually runs from the first day of employment to the effective date of termination. There are important exceptions. If the dismissal is for an automatically unfair reason, no qualifying period applies. This includes dismissals related to pregnancy, maternity, whistleblowing, trade union membership or activities, health and safety, asserting statutory rights, jury service, and making a flexible working request. Some groups, such as agency workers and self-employed contractors, generally cannot claim unfair dismissal because they are not employees. If you are unsure whether you are an employee, look at the reality of the working relationship, not just the label in the contract.

The potentially fair reasons for dismissal

There are five potentially fair reasons under the Act:

• Capability or qualifications – for example, where an employee cannot do the job because of performance, skill, or health.
• Conduct – including misconduct and gross misconduct, such as theft, violence, or serious breach of policy.
• Redundancy – where the job genuinely no longer exists and a fair selection process is followed.
• Statutory illegality – where continuing to employ someone would break the law, such as a driver who loses their licence.
• Some other substantial reason (SOSR) – a catch-all for other genuine business reasons, such as a necessary reorganisation or pressure from a major client.

Even if one of these reasons exists, the dismissal can still be unfair if the employer’s procedure or decision-making was flawed. For small businesses, it is easy to assume that informal dismissal is acceptable. It is not. A fair reason must still be handled fairly.

Fair procedure and the ACAS Code

Procedure is often where unfair dismissal claims are won or lost. The ACAS Code of Practice on Disciplinary and Grievance Procedures sets out the minimum steps for most conduct and performance dismissals. A fair process usually includes:

• A proper investigation before any decision is made.
• Written notice of the allegations and a meeting to discuss them.
• Allowing the employee to be accompanied at the meeting.
• Giving the employee a chance to respond and to see any evidence.
• A clear decision, with reasons, and a right of appeal.

If an employer unreasonably fails to follow the Code, a tribunal can increase any compensation awarded to the employee by up to 25%. It can also make the dismissal unfair on its own. Small employers are not exempt from following a fair procedure, although the tribunal will consider the business’s size and resources when judging reasonableness. A short, honest process is far better than no process at all.

Automatically unfair dismissals

Some dismissals are unfair from the outset, regardless of procedure or length of service. These are called automatically unfair dismissals. They include dismissal because an employee:

• Blows the whistle on wrongdoing (protected disclosure).
• Is pregnant, on maternity leave, or taking family leave.
• Is a trade union member or takes part in union activities.
• Asserted a statutory right, such as minimum wage or working time.
• Raised a health and safety concern.
• Was summoned for jury service.
• Made a request for flexible working.

In these cases, the employer’s reason is not just potentially fair; it is unlawful. The employee does not need two years’ service. If you think you have been dismissed for one of these reasons, seek advice quickly because the same strict time limits apply.

Time limits and ACAS early conciliation

For almost all unfair dismissal claims, you must start the claim within three months less one day from the effective date of termination (EDT). For a constructive dismissal, the EDT is usually the last day of your employment, not the date you resigned. Before lodging a claim with an employment tribunal, you must contact ACAS Early Conciliation. This is a free, confidential service that tries to settle the dispute without a tribunal hearing. The early conciliation process must be started within the three-month time limit. It pauses the clock, and you will receive an early conciliation certificate. You then have at least one month from the date on the certificate to present your claim, or the remainder of the original time limit if that is longer. If you miss the deadline, the tribunal will usually reject your claim, so do not delay. Remedies can include reinstatement, re-engagement, or compensation. Compensation has a basic award and a compensatory award, and the latter is capped. The exact figures change each year, so check the current limits or take advice.