Legal Implications of Employment Termination - Case Study Example

Employment Law Introduction Employment Rights Act 1996 (ERA is the law that governs the rights and liabilities of both the employer and employees.The facts of the three instant cases relate to the manner in which the employer has handled the termination of their respective employees under different circumstances. The following analysis will show the course of action the employer and employees have to take for each case. 1) Abe v Keep Fit & Well Co Ltd. The employer Keep Fit & Well Co ltd having adopted the ACAS model of disciplinary and grievance procedures should before dismissing an employee follow the statutory dismissal and disciplinary procedures. Accordingly, the first step is to notify the employee of the allegations against him in writing and invite him for a meeting to discuss the matter. The employee has the right to be accompanied at the meeting and then employer shall notify the employee of the decision. If the employee wants to appeal, employer must hold an appeal meeting at which the employee has the right to be accompanied and then communicate the final decision to the employee. Failure to follow this procedure entitles the employee who is otherwise qualified to make a claim for unfair dismissal and the employment tribunal is competent to find it as an automatically unfair dismissal in which case compensation can be from 10 to 50 per cent depending on the severity of the treatment meted out to the employee.2. Qualifications for making an unfair dismissal claim is that the employee must have been in 2 years’ or 1 year’s continuous employment depending on the cut-off date of 6th April years requirement came into force. This is subject to certain exceptions. They are3 Further the ACAS Code 35 states that even if the employer wants to make a summary dismissal of the employee for gross misconduct, he will do well to establish facts before taking any action and it would be desirable to place the employee under short period of suspension. Code 46 states that an internal appeal preferred by the employee should be heard by a more senior manager not involved with the case. If no senior manager is available in small organizations, another manager or any other impartial person overseeing the case should be asked to hear the appeal. 4 Again, the dismissed employee must make an appeal within three months from the date of dismissal. In the instant case, subsequent police investigation reveals that Abe is innocent and his colleague Bruce alone is guilty. There is no indication whether the employer has revoked the dismissal upon the new discovery. Therefore, Abe is entitled to compensation for unfair dismissal since in the internal appeal, Cathy who initiated disciplinary proceedings heard the internal appeal herself instead of by a senior manager contrary to the ACAS code and new evidence has proved his innocence. Abe is also entitled for reinstatement. In fact, he can claim wrongful dismissal. But the law would allow him to claim either under unfair or wrongful dismissal. 2) Donald and Esme v Keep Fit & Well Co Ltd Donald has joined the company on 7th April 2012 and Esme one month later. They are both asked to leave the company with contractual notice of 4 weeks. The qualifying period being years of continuous employment, the employer has made sure that Donald is asked to leave just 10 weeks before the qualifying period obviously to avoid any claim from them. The employer plans to discharge them at the fag end of their qualifying period as stipulated under section 155 of the Employees Rights Act 19965. Further an employee who has worked for one month or more but less than two years of continuous employment should be given at least one week’s notice as per section 86 (1) (a) of the ERA 1996.6 Further, an employee with one year’s continuous employment is entitled to a written statement of reasons for dismissal. This applies only when the employee demands in which case the employer must submit statement within 14 days of employee’s request. 7 In the instant case, Donald who is almost completing the two years of continuous employment has been deliberately terminated from employment to avoid redundancy claims from him. Employment Tribunal will recognize this and extend the period of employment accordingly to enable his claim for unfair dismissal maintainable. As regards Esme’s termination just one month and few weeks before completion of two years of continuous employment, it is obvious that employer has terminated for his being an active trade union member. Section 103 of the ERA 1996 states that an employee who is dismissed shall be treated as unfairly dismissed if the reason for dismissal is for being an employee representative for the purposes of Chapter II of Part IV of the Trade Union and Labour Relations Act 1992.8 In view of the said legal provisions, both Donald and Esme have been unfairly dismissed and after obtaining the statement of reasons for dismissals, they can seek remedy in the Employment Tribunal by filing their claims within three months from the effective date of termination of employment. Especially, Esme is entitled to automatically unfair dismissal claim without any qualifying period by virtue of being a trade union member and for participation in trade union activities. The Employment Tribunal can order reinstatement, reengagement or compensation. Currently maximum compensatory award is £ 72,300 which Tribunals rarely entertain. Advice to both employers and employees of any claims or liabilities in relation to the transfer and closure of Keep Fit & Well Co ltd. The employer has announced his plans to make 35 out of 50 employees redundant following their plans to transfer two of its centres to FitnessFreaks at Segensworth. In this connection, employer and employees must take note of the following rights and obligations and act accordingly. Redundancies are effectively termination of employment and hence are subject to scrutiny whether they are fair dismissals, unfair dismissals, automatically unfair dismissals or wrong full dismissals. In the first place, employees must be qualified for protection against unfair dismissal under the ERA 1996 under Section 94(1)9. However an employer can rightfully terminate employment on specified grounds that include redundancy condition10 considered as a fair reason. However, each such ground except retirement needs to satisfy the reasonableness test as stipulated under section 98 (4) of the said Act.11. The scrutiny is on the employer’s conduct as opposed to justice of the individual case. 12 The reasonableness test relates to the decision to dismiss as held in Iceland Frozen Food v Jones 13 and the procedure by which the decision is taken as held in Sainsbury’s Supermarkets Ltd v Hitt 14 . For automatically unfair grounds of dismissals, there is no qualifying period. These automatically unfair grounds would apply to redundancy if the employees selected for dismissals are because of these automatically unfair reasons15. Dealing specifically with termination for economic reasons, section 98 recognizes the employer’s need to justify a substantial reason. The condition “some other substantial reason “(SOSR) can be relied on by the employer in situations like the need to introduce new terms and conditions in the contract of employment. If an employee resigns in protect against such changes in terms, the tribunal has to examine the reasonableness on the part of the employer to make such changes. Redundancy is defined under section 17 of the Act 16 according to which the employer must show that there is an impending cessation of business or diminishing staff requirements which may be temporary or permanent. Economic reasons for termination can also arise as a result of a transfer of the firm under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) enacted pursuant to the EC Directive17. Under the TUPE Act 2006, termination of employment can be effected only for economic, technical or organizational reason (ETOR) as envisaged under section 7 (1) (b) of TUPE. Employees rendered redundant are entitled to receive redundancy payment which currently is £ 430 for dismissals effected on or after February 1, 2012. The employer must be aware of the following in connection with termination of the contract on the basis of economic grounds. It is the duty of the employer to involve social actors like Trade Union representative of the employees in the decision making process for termination. If there is no trade union, Works Councils as a result of Information and Consultation of Employees Regulations 2004 (‘ICER’) should be taken into confidence. 18. The employer must also notify the Department of Business Innovation and Skills (BIS) 19 thirty days prior to terminations if there are minimum 20 employees and ninety days if there are 100 employees or more. The idea behind the notification is to encourage Government to bring forth counter proposals. 20 Procedural requirements The ERA 1996, TULR © A 1992 and EC Collective Redundancies Directive 98/59/EC impose procedural obligations which are both individual and collective. Before effecting termination for redundancy reason, employer must show that there has been fair and objective selection for dismissal and hence there is a duty on the part of the employer to hold consultations with employee representatives. In Williams and Others v Compare Maxam 21 and Polkey v AE Dayton Services Ltd22, the following principles have been laid down for the employers to follow: a) The employer must give as much warning as possible about the proposed redundancies so that the union and the employees can confer among themselves as to who are all likely to be affected. b) The employer has to speak to the union for arriving at the best way to achieve the management objective without the slightest hardship to the employees. The employer has to agree with the union on the formula for the selection of employees to be made redundant. c) Regardless of any disagreement with the union, the employer must establish the criteria for selection. d) The employer must make the selection fair enough and also consider any representation of the union in this regard. e) The employer must also explore ways of offering alternative employment instead of making redundancy dismissal as held in Grieig v Sir Alfred McAlpine & Son.23 The Employment Appeals Tribunal has held that employers can deviate from the above principles only if there is a justifiable reason for doing so. In Grieig v Sir Alfred McAlpine & Son Northern, the EAT has ruled that employer’s particular difficulties could not be an excuse to deviate from these principles. As such, failure to follow these principles can make a case for unfair dismissal claim. In John Brown Engineering v Brown. 24 it has been insisted that employer must be able to demonstrate having followed a fair selection if challenged. The fair selection must rule out discrimination based race, sex, disability, religion or belief, sexual orientation and age. Employees affected by a failure on the part of the employer to consult which is a statutory obligation can present their complaints to the Employment Tribunal which can make a protective award. This award will enable the employees to receive their normal wages for 90 days which is the usual period of award. In Susie Radin Ltd v GMB and Others,25 it has been stated that the protective award will ensure due diligence on the part of the employers. In Murray v Foyle Meats Ltd26 , the House of Lords echoed the observation in Safeway Stores Plc v Burrell27 that it should be ensured whether redundancy situation had arrived and whether employee had lost his job. In view of what has been analyzed above, the employer’s situation of having lost business as result of trouble originating from the episode at South Sea Centre resulting in spreading of the bad publicity to other centres ultimately forcing redundancies of 35 employees out of 50 employers appears genuine and well established. Hence the employer must suitably make out a case by conferring with the union before actually terminating the redundant employees. The employees must ensure that the selection is not on the basis of any discrimination mentioned in the ERA such as race, gender, disability, sexual orientation, ethnicity etc. Bibliography Cases Grieig v Sir Alfred McAlpine & Son Northern. 43 [1982] ICR 156. 44 [1987] IRLR 503. 45 [1982] ICR 159  Iceland Frozen Food v Jones [1983] ICR 17 (EAT) John Brown Engineering Ltd v Brown and others [1997] IRLR 90 EAT. In Deakin & Morris, p 495, 5.184, 2009 Murray v Foyle Meats Ltd [1998] ICR 423 Polkey v AE Dayton Services Ltd [1987] IRLR 503 Safeway Stores Plc v Burrell [1997] ICR 523. Sainsbury’s Supermarkets Ltd v Hitt [2003] IRLR 23 (CA). Susie Radin Ltd v GMB and Others [2004] EWCA Civ 180, [2004] 2 All E.R. 279, [2004] I.C.R. 893, [2004] I.R.L.R. 400, (2004) 101(11) L.S.G. 34, (2004) 148 S.J.L.B. 266, [2004] 2 All ER 279, [2004] EWCA Civ 180, [2004] ICR 893, [2004] IRLR 400 Williams and Others v Compare Maxam [1982] ICR 156 Statutes and Statutory Instruments ACAS Code of Practice: Disciplinary and grievance procedures code 26 and 28 ACAS Rights At Work: Discipline, grievances and dismissals. Council Directive 2001/23/EC Council Directive 2002/14/EC of the European Parliament and of the Council of the 11th March 2002 Employment Rights Act 1996, 1996 C 18 Read More