Termination of employment: best practice
- Alex Kleanthous
- Updated: Sat, 21st Jan 2017
For termination of employment, we are specialist employment lawyers acting for employers. Businesses of all sizes use us as a sounding board to avoid mistakes before implementing ideas.
Our services for dealing with termination of employment by the employer include:
Termination of employment contracts
By planning together, we reduce your risks when terminating an employment contract. This includes
- Required processes;
- Nature and extent of any investigations;
- Employee’s appeals;
- Termination requirements.
Experience of difficult cases
Typical “difficult” cases include:
- Director: Terminating a director’s service agreement, especially if the director is a shareholder, requires skill & care.
- Employee: prolonged sickness or absence:
We defend claims cost-effectively. Usually we find a way to settle that minimises disruption and cost.
Terminate employment and mitigate employment claims
We mitigate the risks by analysing the following:
Ascertain reason for employment termination
The reason determines the employer’s procedure, and the employee’s compensation and damages. Broadly reasons are:
Gross misconduct dismissals can be instant, potential reasons could include e.g.
- Drink or drug related offences;
- Offensive behaviour;
- Breach of restrictive covenants;
- Misuse of confidential information
Employers must have evidence they followed a fair procedure. Typically, this includes an investigation and disciplinary hearing. Employers should plan on employees appealing the disciplinary hearing outcome.
In practice, poor performance is unlikely to constitute gross misconduct. Employers must go through a capability procedure. To avoid claims, this procedure must be correctly executed.
In practice, employers often compromise the employee out of the business, and offer a settlement agreement. We often advise on the amount to offer in the settlement agreement.
We structure redundancies to avoid unfair dismissal claims. Employers can swiftly act and complete the redundancy process within a week.
However, the paperwork and evidence of fair selection must be prepared and applied. For clients, we prepare appropriate paperwork and scripts.
Note, employees have no right to appeal a redundancy decision, unless the employment documentation includes this right.
We prevent employment law claims. However, it is inevitable that employees will claim or threaten to claim against employers.
- Some claims have merit: we tell you how to respond.
- Many claims lack merit: we dispose of such claims effectively and efficiently.
- Picking up the pieces: sometimes employers make mistakes. We quickly pick up the pieces and place the employer back in the driving seat.
An employee faced with dismissal may claim discrimination. Most employees know that if their discrimination claim succeeds, their compensation is potentially uncapped. In addition, they may gain an award for injury to feelings.
Some claims are genuine. Many employees claim once they know their employment is terminated.
Review evidence supporting discrimination claim
First we review the evidence. Then we tell you the employee’s likelihood of success.
Often employees allege discrimination to increase their settlement payment. Usually, a robust defence quickly ends the claim. If the employee persists then the law around the burden of proof, if applied tactically, often helps employers.
An employee might claim their employment was terminated as a result of a protected disclosure, i.e. a whistle-blowing claim.
Whistleblowing allegations are common in financial services and the public sector. Even if the claim is not genuine, employers must respond.
An employee who has not yet been dismissed may resign and claim constructive dismissal. The employee claims that the employer’s conduct was tantamount to a breach of the employment contract.
The employer’s response depends on the facts and when the employee informed the employer. We quickly determine if you can eliminate the claim. At other times, the rules of contributory fault can reduce potential compensation.
Settlement agreement and payment
Most employers avoid devoting the management time to fighting the case in the Employment Tribunal. A sensible settlement depends on what an Employment Tribunal or Court would award the employee. We use the following factors to formulate an offer:
Could you have followed a correct procedure and dismissed fairly?
A dismissal that was inevitable, substantially reduces any unfair dismissal claim.
Does the employee have legal expenses insurance?
An insured employee is usually more willing to litigate.
How long will the employee take to find another job?
The employee’s age, skill set, and industry experience are factors. Settlement agreement cover loss of earnings, although employees have a duty to mitigate their losses.
Has the employee already found another job?
We often make settlement payments conditional upon employees warranting they have not received a job offer.
Does the employee have on-going losses?
The maximum award for on-going losses usually covers 24 months.
Can the employee easily pay Employment Tribunal fees?
Now that employees must pay fees to the Employment Tribunal when commencing a claim, the number of claims has dramatically reduced.
Are you making an example of the employee?
Usually this is so other employees drop their unfair dismissal claim. You could refuse to settle and call the employee’s bluff. This is known as the floodgates principle.
Is the employee needed for a hand over?
Clearly we consider practicalities.
Does the employee have two years continuous service?
If not, then the employer’s exposure may only be the notice period.
What is the best timing for entering into a settlement agreement?
Usually, employees must bring their claim within three months of termination of employment. You don’t need to offer a settlement, until you’ve received a claim.
Often employees threaten to bring claims when their employment is terminated. However, they move on, and don’t bring the claim. Hence waiting can save you money.
Does the employee hold company shares?
Termination of the employment contract might trigger a compulsory sale of shares. Then, termination requires planning. For instance, consider who will purchase the shares, at what price.
Termination of employment legislation
A quick summary of current legislation regarding employment termination comprises:
Compensatory award limits
The limit to the compensatory award in unfair dismissal claims is the lower of the statutory cap or 12 month’s salary.
This deters claims from low paid employees. e.g earning under £20,000 per year. The costs outweigh the benefits. Terminating low paid employees is now less costly.
Employment tribunal fees
Employment tribunals require payment of fees from the employee to commence a claim or appeal.
The deterrent has massively reduced the number of claims brought to the Employment Tribunal. Fees for discrimination claims are higher than those for unfair dismissal. For many, the fees are punitive.
The two year qualifying period for unfair dismissal claims will not apply if the alleged reason for the dismissal relates to an employee’s political opinions or affiliations.
However, claims for political opinions or affiliations are often difficult for employees to substantiate.
Whistleblowing laws require qualifying disclosures to be in the public interest. There is no longer a requirement for the whistleblower to be acting in good faith.
However, “public interest” is not defined. Ultimately, the Employment Tribunal or Employment Appeals Tribunal defines the term.
Protected conversations or pre-termination negotiations, in general, are no longer admissible as evidence in unfair dismissal cases.
We applaud anything that resolves disputes before they reach the Employment Tribunal. The dismissal process for employers is now much easier and quicker in practice.
Assist employers terminate employment track record
Recent cases include:
Drafted settlement agreements that account for the
- Type of business;
- Leaving employee’s seniority,
- Settlement amount;
- Payment conditions;
The employer can thus enforce restrictive covenants, and protect their business.
Negotiated on behalf of a client who was facing a claim for unfair dismissal due to whistle-blowing and unfounded allegations of deal fixing. The employee was dismissed due to gross misconduct and alleged deal fixing unless a substantial settlement was forward. The allegation was unfounded, however the client had to investigate.
How you go about terminating an employment contract will vary depending upon the employee or director in question. The starting point is to review the employment contract and other employment documentation. We then move onto how we can work an exercise which is least likely to leave you with an employment law claim.