Legal and financial news: You’re fired so sue me!
PUBLISHED: 11:49 22 June 2017 | UPDATED: 11:49 22 June 2017
Donald Trump and Alan Sugar are famous for it. In America, it’s just a fact of life, but business owners may have more power than they realise when it comes to ridding themselves of an unwanted employee. Darren Sherborne, an authority on Employment Law based in Cheltenham separates the fact from the fake news
“I hear an awful lot of misinformation and scaremongering when it comes to employment law. The fact is that some businesses have no contracts of employment and sack employees at will, without ever spending a day in tribunal. Others cross every ‘T’, dot every ‘I’, and still end up paying lots for tribunals or settlement sums. As an employment lawyer at Sherbornes, I am often baffled by this.
The hard fact is, in spite of political rhetoric from both sides of the Westminster fence, it’s surprisingly easy for an employer to rid themselves of an unwanted employee without picking up a large liability, and without having to get involved in protracted positioning as employees cry foul, get signed off with stress, and raise grievances as a form of counter attack.
It’s a hard business environment out there and when faced with the need for a possible dismissal, the first thing many business owners look at (or are advised to look at) is the legality of the dismissal. What some smarter employers ask first is what is the cost if they get it wrong, or just do it regardless of the law? The hard truth is that it is often cheaper, and considerably less time-consuming, to simply dismiss an employee and accept that it will be unfair. This is particularly true with senior employees (and it will always depend on the circumstances).
The reason for this is the way that compensation for unfair dismissal is calculated. Few realise that compensation for unfair dismissal is based on an employees’ “net” earnings, not gross. This already presents a saving when working out compensation of anything between 25 per cent and 40 per cent. The tribunal looks at the earnings actually lost by the employee and then award that net loss for the period of time that the employee is likely to remain unemployed. This is often between three and nine months, but can vary. Because unemployment is very low at present, likely periods of unemployment are also considered to be low and this keeps a lid on compensation.
The tribunal then deducts an amount according to the extent that an employee has contributed by his own actions to the dismissal. In the case of an employee who steals for example, this could be a 100% reduction. The tribunal will also reduce the award if they think an employee would have been dismissed anyway, if the employer had followed the right process. This is often a 100 per cent reduction and called a “Polkey reduction” which comes from an old and well-established case (Polkey v Dayton) which set out the legal idea that if an employee would have been sacked anyway, then they should not be awarded any compensation.
I am not advocating for one minute that employers simply disregard the law at will, but it has got to be good business sense to assess the risk before embarking on time consuming and expensive games of cat and mouse with employees (and let’s face it, that is often exactly what happens). I have certainly noticed a change in attitudes of employers when realisation dawns that it might be quicker and cheaper to simply sack an errant employee, than it is to start inviting them to meetings with protracted processes. For the sake of balance, I should say that it is almost always possible to dismiss for a genuine reason without paying compensation if the employer is happy to jump through the right hoops, but that’s another story.
Employers should remember that employment dismissals can be viewed as a see saw. On one side is money, on the other is time. As one side goes up, the other can go down. When evaluating a possibly difficult dismissal, the employer should decide which side he wants to reduce and which can be tolerated at a higher level and then handle the dismissal accordingly. The employer should always make sure that all of the circumstances of the case are understood.
To my mind, it seems the cards in respect of unfair dismissal are already stacked in favour of the employer, and good business (if not good employee relations) will often dictate that the cheapest phrase in some situations is ‘You’re fired, sue me’.”