In this article, we’re going to explore the different ways small businesses can avoid unfair dismissal claims in order to protect themselves from costly fall-out and reputational damage…

While having your own small business can come with lots of perks, such as more independence and flexibility, they can also be more susceptible to harm. For instance, a small business may not have access to the same resources or knowledge that a big corporation might on important things such as employment law.

Without these same advantages, a small business may accidentally slip up with settlement agreements and unfairly dismiss an employee. If a subsequent claim is made, it could cost a smaller business a lot more, as well as potentially cause long-lasting damage to their reputation than a bigger corporation.

So, to be sure this sort of thing doesn’t happen, we’re going to be providing some ways that a smaller business can protect itself against unfair dismissal claims.

What is Unfair Dismissal?

In employment law, unfair dismissal is an act of employment termination made without a fair reason to do so, or without following a fair dismissal procedure. For an employee to make a claim, they must’ve worked for you for 2 years. In the UK, the average unfair dismissal award was £6,646.

However, it is important to bear in mind that these figures do not include the legal costs and reputational damage associated with a claim. The highest Employment Tribunal award for an unfair dismissal claim was £118,842 in March 2020.

How to Protect Your Business from Unfair Dismissal Claims

Create a Comprehensive Employment Contract

Having a well-executed employment contract, which includes a set of company policies, can help ensure the employee is well aware of how to perform at work, and what is expected from them.

Having policies that also outline the procedures that should follow if the standards are breached will help reduce the risk of a dismissal being considered “unfair”.

In preparation, it is good to have copies of all your employees’ employment contracts and company policies. This is so that you have proof all your standards and procedures have been communicated to staff and are accessible to staff.

Implement Equality and Diversity Training

Both your business and your employees can benefit from implementing equality and diversity training into the workforce. Having this type of training in place can teach employees how to treat people equally and with respect, as well as knowing how to report discriminatory or offensive behavior.

Another plus is that a more inclusive workplace can increase morale and therefore improve staff retention rates. This ultimately reduces the risk of your company having to go to a tribunal.

Additionally, having the knowledge from an equality and diversity training course means that, if you have to conduct a dismissal in the future, you’ll know how to do so fairly and legally. What’s more, if, your employees also received the training, they’ll be able to better judge whether a dismissal was non-discriminative and lawful, therefore lowering the chances of a claim being made.

Familiarise Yourself with Fair Reasons for Dismissal

Before getting started with a dismissal, it’s important to know on what grounds you can fairly let someone go. Under the Employment Rights Act 1996, there are five fair reasons for dismissal:

  • Conduct or misconduct
  • Statutory illegality or breach of a statutory restriction
  • Performance
  • Some other substantial reasons
  • Redundancy

Familiarise Yourself with Reasons for Unfair Dismissal

It’s also crucial to familiarise yourself with some reasons for dismissal which are automatically classed as unfair if they fall within specific areas:

  • Family, including parental leave, paternity leave, adoption leave or time off for dependants
  • Whistleblowing
  • Pregnancy, including all reasons relating to maternity
  • Acting as an employee representative
  • Acting as a trade union representative
  • Compulsory retirement on the grounds of age is unlawful unfair dismissal
  • Acting as an occupational pension scheme trustee
  • Joining or not joining a trade union
  • Being a part-time or fixed-term employee
  • Follow a fair disciplinary procedure
  • Pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage

Use a Fair Disciplinary Procedure

To avoid unlawfully dismissing an employee, it is important to follow a fair disciplinary procedure. This should include certain approaches, such as listening carefully to the employee, documenting everything that is relevant, speaking to witnesses, but also maintaining confidentiality where possible.

Additionally, you should be aware of any mitigating circumstances that may have affected their performance or “breach” of contract, as well as provide them with the right to appeal the decision. These procedures should comply with employment laws, as well as your company policy documents.

For more help in ensuring this procedure is followed fairly and lawfully, we recommend familiarising yourself with the ACAS guidelines and speaking to an employment law solicitor.

Keep Records

It is crucial to keep written records of the employee’s termination, disciplinary process, and employment contract in detail. Failure to do so while defending a claim of unfair dismissal could mean you’re found guilty if you don’t have sufficient evidence.

All notes need to be as accurate and crystal clear as possible to demonstrate the fairness and reasoning behind terminating an employee’s contract.

Small Businesses and Unfair Dismissal Claims

Ultimately, the goal of a small business and employee dismissals is to prepare in advance and have a fair and lawful disciplinary system in place. Familiarising yourself with the law, having everything relevant documented, and having consistent communication with your staff will help you in reducing the risk of an unfair dismissal claim.

On top of this, we do strongly recommend speaking to an employment law solicitor and trying to use informal resolution methods, such as mediation or negotiation, first. Following steps like this first, will help your small business cut costs and valuable time, whilst also remaining law-abiding.

Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained employment law professional. Be sure to consult an employment law professional if you’re seeking advice about unfair dismissal. We are not liable for risks or issues associated with using or acting upon the information on this site.

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