Dismissing an employee - some other substantial reason

Every eligible employee has the right not to be unfairly dismissed by his employer: s94 Employment Rights Act 1996. Therefore, if an employee has the requisite length of continuous employment, the employer must show that they had a good reason to dismiss them and in doing so, acted fairly.

To be eligible, an employee who started work with the employer pre 6 April 2013, must have 1 year of continuous service. Any employees who have started work since 6 April 2013 must accrue 2 years of continuous service before obtaining protection.

If an employee does not have the requisite service, as long as the employer complies with the contract regarding notice, the employee can be dismissed relatively easily and with no remedy available to the employee. For those with the requisite service, the employer must tread more carefully when looking to dismiss an employee.

Potentially fair reasons for dismissing an employee
There are five potentially fair reasons for dismissing an employee:
  • Conduct
  • Capability
  • Redundancy
  • Breach of a statutory restriction
  • Some other substantial reason (SOSR).

This article looks at the last of those reasons in more detail.

What is some other substantial reason?
Almost any reason that does not fall within the other four potentially fair reasons for dismissal may amount to SOSR, if it is not an insignificant or frivolous reason that justifies the dismissal of an employee carrying out a particular role. Here are some common examples of SOSR when dismissing an employee:

Business re-organisation
  • If the business is undergoing a restructuring, but is not making any redundancies,
    SOSR may be relied on as a potentially fair reason for dismissal.
  • Business re-organisations often include making changes to employees’ terms
    and conditions. Dismissing an employee for their refusal to accept the proposed
    changes, (either within the context of a business re-organisation or not), can also
    amount to SOSR.

Refusal to accept changes to terms and conditions
  • An employment contract can only be varied in accordance with its terms or with
    the parties’ agreement. If an employee refuses to accept a change to their terms
    and conditions and the business dismisses them for that reason, the reason may
    constitute SOSR. However, these cases are unlikely to be straightforward
    because an employee is contractually entitled to resist unilateral changes to their
    terms. In some instances, where the change amounts to a breach of contract,
    the employee may be able to resign and claim unfair constructive dismissal.
  • For a unilateral change to amount to SOSR, the business must be able to
    demonstrate that the changes were not imposed arbitrarily but were for a “sound 
    business reason”. There is no need for to prove that the re-organisation was
    crucial to the survival of the business. However, the business must provide
    evidence to demonstrate its reasons for the change and show that they were
    not trivial. Where the overwhelming majority of employees accept the change,
    or where unions have been involved and have accepted the changes,
    individual employees may struggle to show that their dismissal for refusing to
    accept the change was unfair.

Conflicts of interest
The business may be able to dismiss an employee for SOSR if the employee is in a situation that creates a potential conflict with the business’s interests. The business must be able to provide evidence demonstrating that the employee posed a risk to its interests. The business will need to show that:
  • the employee had access to commercial information
  • the employee had close connections with a competitor, (or an employee of
    a competitor); and there was a genuine fear that the employee may leak
    confidential information.

To rely on SOSR, the business must be able to show that continuing to employ the employee would create a real commercial risk.

Personality clashes
Personality clashes or irreconcilable differences between colleagues can amount to SOSR. However, to do so, the conflict would have to be causing substantial disruption to the business. An employment tribunal will expect a business to take reasonable steps to solve the problem without resorting to dismissal, for example, by:
  • Re-deploying one of the workers
  • Changing work patterns.
  • Attempting to mediate.

Pressure from third parties
Where a third party, (for example, a customer or supplier) requires an employee’s dismissal, the dismissal can be regarded as fair for SOSR.
The business should consider the:
  • importance of the third party’s business to its own business; and
  • seriousness of the third party’s threat to leave.

For example, if a major client is adamant that it will never contract with the business again unless the business dismisses an employee, this is more likely to be regarded as fair than where a minor client simply requests removal of an employee, but does not threaten cessation of business.

Breakdown in trust and confidence
Businesses sometimes maintain that they must dismiss an employee because of a breakdown in trust and confidence. In some cases, SOSR can be relied on in these circumstances as a potentially fair reason for dismissal. Employers should note that even if they can establish that the reason for dismissal was a SOSR, the onus is then on the employer to show that they acted fairly, ie: their action was within a reasonable range of responses.

It is important that advice is sought when looking to dismiss employees to minimise the risk of unfair dismissal claims being made.

Please contact Katie Kearns on 02476 553181 or via email if you wish to discuss these issues.