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Dismissing an employee: Employers beware


Barrister Charles Price explains how tribunal cases are up as lawyers blame Alan Sugar’s “you’re fired” mentality.

Last year, the original TV business guru Sir John Harvey-Jones launched a blistering attack on The Apprentice star Sir Alan Sugar.

In the ‘Western Mail’, Sir John accused Sir Alan of ‘exploiting’ his power on the show by humiliating contestants trying to win his approval.

The former chairman of ICI claimed Sir Alan has used ‘bullying’ tactics to whittle down the business reality-show contestants, who compete for a six-figure salary with the entrepreneur’s company, Amstrad.

“There are other compelling reasons to avoid dismissing employees, and the most important one is the vulnerability of the employer to unfair dismissal claims.”

Sir John bemoaned: “It’s easy [to do that]. My experience of life is that you get the best out of people by encouraging their self-belief. Sir Alan and TV gurus, such as celebrity chef Gordon Ramsay and The X Factor judge Simon Cowell, typify a growing trend of high-profile stars using aggressive management styles on TV.”

The thrust of Sir John’s argument was that it is better to encourage potential rather than fire on the spot. There are other compelling reasons to avoid dismissing employees, however, and the most important one is the vulnerability of the employer to unfair dismissal claims.

If an employer loses an unfair dismissal case they typically may have to pay out:

  • A statutory award of £250 or more

  • A basic award comprising of (on or after 10 February 2008) a maximum of £310
  • Half a week’s pay for each year worked before 22nd birthday
  • One week’s pay for each year worked between 22nd and 41st birthday
  • One and a half week’s pay for each year worked after 41st birthday
  • Compensation for salary lost.

From 1 October 2004, (Dispute Resolution) Regulations introduced a new statutory minimum procedures for regulating dismissal (and also disciplinary and grievance) procedures.

The rules also provide for sanctions if the specified minimum procedures are not followed – a dismissal will be automatically unfair if the employer did not adhere to, at least, the minimum specified procedures (assuming of course that the employee had sufficient continuous employment to qualify) and any compensatory award which a tribunal orders the employer to pay will be increased by between 10% and 50%.

The rules on procedure are so complicated that the employer must seek professional advice on how to deal with the procedural aspects of a disciplinary issue if he/she is not to fall foul of the law. The chances are that if advice at an early stage was not sought, the employer will have to pay something out to settle a claim.

Considering the above factors, an employer may well decide to settle any outstanding dispute rather than fight it. The government is keen to cut back on taxpayer expenditure on employment tribunals and for that reason has thrown money at conciliation.

“The government is keen to cut back on taxpayer expenditure on employment tribunals and for that reason has thrown money at conciliation.”

The secretary of state for business and enterprise John Hutton has announced that the government will be awarding up to £37 million to employment relations specialist Acas, in an attempt to prevent workplace disputes going to employment tribunals unnecessarily.

The extra funding, spread over three years, forms part of the process designed to simplify the dispute resolution system and it is thought that it will allow Acas to improve its helpline and advice services. Acas will also look to provide more services that encourage good employment relations and prevent disputes from happening at an early stage.

These changes coincide with provisions made in the Employment Bill, currently before parliament, which aims to cut red tape and deliver quicker decisions on more straightforward claims. Estimates show that this approach could save businesses more than £175 million a year.

In all fairness, the ACAS site could not offer more advice and tips for encouraging a settlement between parties. There is even a conciliation video to be watched. One word of warning, do not take legal advice from ACAS; excellent as they may be, they are not legal advisors.

It is also worth checking your company insurance policy as many contain free legal advice in the form of a call centre and often cover representation costs.

Instead of fighting a draining unfair dismissal claim, you can:

  • Take legal advice

  • Mediate with claimant

  • Offer a settlement if fair.

Think about taking some legal advice and cut your losses with an agreement – you can create an enforceable agreement by signing a compromise agreement or, if ACAS has been involved, a COT 3 form, which can legally bind the parties. It is important that a solicitor or barrister is consulted if these agreements are to be made watertight.

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