Why Lord Sugar needs to sweeten his behaviour
Tuesday, May 5, 2015
Someone is not performing to an acceptable standard. They are for the chop and it’s down to you to administer the coup de grâce. Is this your Lord Sugar moment? Do you point the finger of doom with a theatrical flourish and, without compunction, utter the famous words, “you’re fired”?
Of course not. Taking this sort of action isn’t something any of us relish. The very idea may fill you with dread and in your anxiety to move on to more positive matters you may find yourself eager to get the sacking out the way as fast as you can. But in grasping the nettle it’s important not to be overly rash. This is an area where treading carefully matters a lot.
“With an uncomfortable task like this it is tempting to get it over with as quickly as possible,” says BPIF Legal solicitor Anne Copley. “But that can mean a failure to properly conduct investigations and consultations, which will mean that the individual is almost bound to have a case for unfair dismissal.
“The law in this area is all about reasonableness, and you might start by considering how you would like one of your close family to be treated in these circumstances. Then follow a proper procedure that will make sure you’ve covered all the bases.”
That’s undoubtedly sound advice. The BPIF has a well-earned reputation for delivering first-rate employment law assistance to members confronted by tricky situations. And from an employer’s perspective, there are plenty of compelling reasons for making sure dismissals are handled correctly.
Media headlines concerning unfair dismissals can make for terrifying reading. Take this one from the Daily Mail in 2014: ‘Former head of social services at Baby P council Sharon Shoesmith wins £679,000 pay-out for unfair dismissal’. In a cold sweat yet?
Thankfully, such extreme outcomes are rare. And while there is no limit to what employees can be awarded when pursuing a discrimination claim, changes to the statutory unfair dismissal compensation provision came into effect in 2013. Awards were capped at either the equivalent of 52 weeks’ gross pay for the claimant, or £74,200, whichever was the smaller amount.
What this means in essence is that in the majority of unfair dismissal cases, maximum tribunal compensation is capped at one year’s salary. In practice, pay-outs are seldom that generous. Analysis of employment tribunal data stretching back to 2010 indicates that less than 5% of successful tribunal claimants were awarded compensation equating to 12 months’ salary or more.
To be avoided
Nevertheless, even if the awards are seldom swingeing, employers will want to avoid tribunals if at all possible.
Like many firms, Aquatint BSC has had to make some staff redundant in recent years, but, according to founder Roger Severn, dismissals have been “thankfully few”.
“I have certainly found that when there is a need to dismiss underperforming staff, it can be a positive thing for the working environment. In a small company the team know who the underperformers are and by not acting you create a poor atmosphere as workload tends to fall on the shoulders of the good performers,” he says.
Severn says that as far as he is concerned, the most important thing is to follow a recognised procedure and to treat people equally regardless of how good (or otherwise) their record is. If staff understand what is expected of them and are regularly reviewed, the underperformers know what is coming if they are unable or unwilling to achieve required levels, he believes.
As he has been caught out in the past, these days Severn makes sure he is aware of the basics of statutory procedures and tends to “run everything now through the HR guys at the BPIF” whose advice he has found to be very good. The one time he didn’t do so, he ended up in a tribunal.
“That was when I caught one of my guys running private work who then denied it and tried to lose any evidence of it. To me that was an absolute breach of faith and therefore instant dismissal. While we won the overall tribunal, we were fined for not following procedure. It seems I should have suspended him first, while I further investigated, and given him the right of appeal. You live and learn!
“It seems to me honesty is best. If you talk to staff, make it clear where they need to improve and confirm in writing; life becomes a lot easier. They either know what is coming or improve. There can be a temptation to try and turn what should be a redundancy situation into a dismissal and this just has disaster written all over it.”
Until a staff member has been employed for two years, he or she usually has no legal right to claim unfair dismissal. However, after two years of service, a dismissal for poor performance could result in unfair dismissal proceedings being launched. The best way for an employer to protect itself is by ensuring the employee had received previous warnings about their performance, been given specific information as to how they must improve and given a fair opportunity to improve.
Generally speaking, at least two formal warnings must have been given and after each of those, the individual concerned also must have been given an opportunity to appeal the formal warning decision. In most cases, a formal underperformance procedure can take anything between three and 12 months. For that reason, employers should try to make a decision as to an individual’s suitability during the initial two-year probationary period.
If the worst comes to the worst and a member of staff who has been with the business for two years or more needs to be dismissed, it’s vital to have boned up on the right way of going about things.
“Employers should pay close attention to the procedures set out in the relevant Acas Code of Practice,” says Jim Lister, head of business employment law at solicitors Slater & Gordon. “This is readily available on the internet and employment tribunals expect that employers will be familiar with the procedures set out in those codes. Failure to follow these procedures where the individual concerned has more than two years’ service will usually result in any dismissal being unfair. So the most important advice for employers is to review and follow closely the Acas Code of Practice on procedure before considering a dismissal.”
Of course, although the Code is incredibly useful and employers should always abide by the procedures outlined in it, some dismissal cases are inevitably far more complicated than others. In certain circumstances in may be prudent to seek professional legal advice.
Always remember that an employer is expected to have acted reasonably, by carrying out a careful investigation before reaching conclusions on disputed facts. This gives an employee a full opportunity to consider any evidence against them before a hearing and affords them a reasonable opportunity to put across their own point of view.
Bosses should take the opportunity to address a situation causing concern as early as possible. Potentially even at a first disciplinary meeting, the team member should be informed that repeated failure to meet the required standards will ultimately lead to dismissal.
By drawing attention to the worst possible scenario, the team member should be in no doubt as to the repercussions of repeatedly failing to carry out their duties. In this way, employers are covering themselves against accusations from dismissed employees that they did not understand the potential severity of their actions.
Minutes should be made of all meetings and a follow-up letter given to the team member. This should not only outline the discussion but also offer the employee the opportunity to clarify any points they do not understand or challenge anything with which they disagree.
It is critical to have this documentation and to refer to it in the event of the further discussions being necessary. If you get to the point that you need to dismiss someone who has received verbal and written warnings then your discussion can refer to the previous incidents. In this way you are building a strong case for dismissal that usually means there cannot be any complaints about the outcome as not only have you discussed the problem previously but you have also provided some time for an employee to change behaviour.
“In the case of the need to dismiss someone immediately for a serious offence I would recommend it is not done in the heat of the moment,” says one print boss who wishes to remain anonymous. “Instead, if you come across such a situation, you suspend the individual and tell them that you are doing this to allow evidence to be collected and that they will be called into a disciplinary meeting to allow them to present their own evidence.
“At this time, verbally, and in the correspondence asking them to attend the meeting you highlight that one of the possible outcomes is instant dismissal. My last point – and this for me is vital – is that at all times during any of these discussions/meetings you must remain cool and calm, as once emotions run high you run the risk of acting inappropriately. By appearing in control and presenting the facts clearly while listening to the offender’s version of events, you should be able to create an environment that leads to an appreciation that the final decision was inevitable and unavoidable... and therefore avoid confrontation.”
Which, as most of us do not have a face sporting the bring-it-on glower and craggy battle-lines of Lord Sugar, is surely the most desirable outcome.
Dismissals: Best practice guidelines
- Dismissing employees should be the last resort and employers should carry out necessary investigations without unreasonable delay to establish the facts.
- Employers should use a fair and consistent procedure when dismissing an employee.
- It’s always best to try to resolve any issues informally first; often a quiet word is all it takes to sort out problems.
- Employees have the right not to be unfairly dismissed.
- Follow the Acas Code of Practice 1 - Disciplinary and Grievance Procedures and Discipline and grievances at work: The Acas guide.
- Set out in writing your rules and procedures for handling disciplinary procedures.
- Make sure employees and managers understand the rules and procedures for disciplinary issues.
- A dismissal occurs when an employer terminates the employee’s contract. Just as formal disciplinary action should only be necessary if informal methods have failed to resolve the problem, so dismissal should be the last resort in terms of sanctions.
- Although employees need to have completed two years’ service before they can claim unfair dismissal, bear in mind that dismissals for discriminatory reasons do not require any minimum length of service.
- The point of employment legislation with regards to dismissal is to ensure that everything is properly aired and discussed before a decision is taken, hence the requirement for procedures. Lack of procedure will always lead to a finding of unfair dismissal.
Steps you must get right
- The reason for dismissal must fall into one of the five legal categories for ‘fair’ dismissal (see below).
- Ensure that a reasonable procedure has been followed.
- Dismissal cannot be for a discriminatory reason (eg because the employee is disabled).
- Employees must be informed in writing of the allegations against him/her at the start of the procedure.
- The decision to dismiss must, in all the circumstances, be a reasonable response.
The five fair categories
There are essentially five reasons for which an employee can in normal circumstances be fairly dismissed:
- Reasons relating to the capability or qualifications of the employee to perform work of the kind he or she was employed to do.
- The conduct of the employee.
- Some legal restriction or reason which means that continued employment is illegal or impossible.
- “Some other substantial reason” (usually known as SOSR) which justifies the dismissal.
Examples of SOSR
- Expiry of a fixed term contract.
- Reorganisation of the business, or perhaps a department within the business, especially where the employee does not co-operate with the reorganisation, or rejects new technology or new methods.
- Dismissal of an employee in order to protect the employer’s business interests, by, for example, preventing an employee from setting up a business in competition with the employer.
- Pressure by a third party, such as a major customer, to dismiss the employee for what appears to be a valid reason.
Automatic unfair dismissals
Some dismissals are automatically unfair, and the normal two-year qualifying period for bringing a claim does not apply:
- Being (or not being) a trade union member.
- Taking part in trade union activities.
- Being pregnant or taking maternity leave.
- Taking certain types of action on health and safety grounds (eg raising a concern with a health and safety representative).
- Seeking in good faith to enforce another statutory employment right (eg asking for a written statement of employment terms).
- Reasons connected with the transfer of an undertaking from one employer to another, unless there are economic, technical or organisational reasons making changes in the workforce necessary.
- Acting as a representative for consultation about redundancy or business transfer, or as a candidate to be a representative of this kind.
- Performing, or proposing to perform, any duties relevant to an employee’s role as a trustee of an employee occupational pension scheme.
- Reasons relating to the National Minimum Wage.
- Making a protected disclosure within the meaning of the Public Interest Disclosure Act 1998 (‘whistle blowing’).
- Reasons relating to the Working Time Regulations.
- Dismissal for a political belief.
There can be a dismissal by the employer, even if the employee actually resigns. The circumstances are that the employer has behaved so badly towards the employee that it has committed a fundamental breach of the contract entitling the employee to resign.
For a constructive dismissal claim to be successful, the employee must show that there was a fundamental breach of contract by the employer, that this breach caused them to resign, and that he or she did not delay unnecessarily before resigning. Some examples of potential “fundamental breaches” are:
- Pay cut.
- Increase in hours.
- Failure to act on a legitimate grievance.
- Bullying and harassment.
- Discriminatory acts.
Wrongful dismissal is different to unfair dismissal in that it relates to any dismissal that is technically in breach of contract. It usually relates to non-payment of notice. Types of wrongful dismissal include:
- Non-payment of notice.
- Termination of a fixed-term contract before it expires (if there is no provision for notice contained in the contract).
- Failure to follow procedural steps if they are contractual.