Although a seemingly straightforward question of what precisely is a lawful termination of employment, the answer to it is not as simple as one might assume.
In today’s world, Human Resource departments often face challenges when it comes to understanding the appropriate procedures for termination of employment. This is evident from the fact that unfair dismissal ranked as the third most common complaint brought to the Workplace Relations Commissions in 2022, as stated in their annual report.
The complexity of this matter stems from the extensive body of case law and legislation surrounding it. Nevertheless, this article, presented by our team at Setanta Solicitors, aims to provide a concise overview of the legal landscape in this area and offer guidance on where to begin if you are considering dismissing an employee.
However, we must preface that it is highly recommended to seek legal assistance to ensure compliance before implementing any standard procedures in your business. Also, any uncertainties that arise during the dismissal process should also be directed to a legal expert.
What are Fair Grounds for a termination of employment?
The first hurdle that any Human Resource (HR) department must overcome to ensure a lawful termination of employment is to establish fair and legally compliant grounds for termination.
The importance of ensuring that the grounds are lawful cannot be overstated, because in the event of any legal proceedings initiated by the employee, the burden of proof falls on the employer to demonstrate that the dismissal was justified.
There are five common grounds for lawful termination of employment, which are as follows:
- An Employee has Broken the Law
- A Redundancy Situation
- Unqualified for the Job
- Lack of capability to do the Job.
- Lack of Competence to do the Job.
- Misconduct
I will expand on each of these below.
As an employer it is important to note that even if there are fair grounds for termination, following a fair procedure is equally essential. Fair procedure ensures that employees are given a reasonable opportunity to respond to allegations, present their case, and have their concerns heard. I will discuss these procedures below.
An Employee has Broken the Law
When it comes to situations involving legal breaches by employees, employers should exercise caution. They cannot solely terminate an employee based on their involvement in criminal or civil proceedings that are unrelated to their job. For instance, if an employee faces a charge that occurred outside of work hours and does not directly impact their ability to perform their job, terminating them solely based on the charge would not be a fair ground for dismissal.
This said, termination of an employee may be justified if an employee has violated the law in a manner that directly affects business operations, and continuing their employment would be unlawful. Employers should, however, still carefully consider alternatives to dismissal. It is essential to seek guidance from a professional lawyer and evaluate all relevant facts and circumstances. Viable alternatives may involve issuing warnings, providing training, or counselling, or adjusting the employee’s responsibilities or work arrangements. However, if these alternatives are not deemed appropriate, termination may become necessary.
To provide specific examples, I will outline two scenarios where an employer may be justified in dismissing an employee due to potential legal violations arising from their continued employment.
- In the context of a financial company, one of its employees, entrusted with the responsibility of handling sensitive client information, has been found to breach data protection laws by accessing and sharing confidential client data without authorization. In order to fulfil the company’s obligation to protect client privacy and security, it would be legally necessary to conduct an investigation and potentially dismiss the employee.
- Similarly, for a van driver to perform their job, possessing a valid driving license is a fundamental requirement. However, if the van driver has lost their license due to a drunk driving charge, their continued employment would be in violation of the law. Consequently, the company would have justifiable grounds to either assign the driver to a different role within the organization or, in certain cases, proceed with dismissal.
If I have fair grounds for dismissal due to an employee’s breach of law, what should I do next?
Even if continuing employment of a staff member would be a breach of law, it is still essential for the employer to follow fair procedures when terminating the employee. This may involve conducting an internal investigation to gather evidence, allow input from the employee, and ensure that the termination decision is based on objective findings and relevant policies. The employer also should document the entire process to demonstrate their compliance with legal and procedural requirements, should they need to justify the dismissal in the future.
A Redundancy Situation
Redundancy situations can often prove to be a complex legal challenge for employers. This is due to the fact that a business’s rights to conduct redundancies are not as robust as commonly believed.
What is a fair reason for redundancy?
One common misconception among Human Resource departments is viewing redundancy payments as a legally compliant means to eliminate underperforming employees, bypassing the disciplinary process. This is absolutely not the case. If a redundancy is put before a court of law the first question that will be asked is whether there is a ‘business case’ present. In other words, the court will scrutinize whether a valid business reason exists for the redundancy. This means that the court would look to see if the employer undertook a proper investigation and exhausted all other reasonable ways to cut non-labour costs.
In reality, there are only two primary scenarios in which redundancy is deemed a fair and justifiable business decision: major company reorganization or a change in ownership.
Common examples of fair redundancy situations
Ownership changes
- The business is taken over by another company: Another company has acquired the business you work for, and they may amend how things are run or decide to let go of some employees.
- The business has stopped operating: Either the entire business or a part of it has stopped functioning, usually because it cannot pay its debts or is going bankrupt.
- Your employer, who was the sole owner of the business, passes away: The person who owned the business, and who was your employer, has died. This event could lead to changes in the business, including potential closure or a change in ownership.
Re-organization
- Your skills are no longer needed: The company no longer requires the particular abilities or expertise that you have, so they simply don’t have a job for you anymore.
- The business is failing: The business is not doing well and may be on the verge of shutting down, so labour costs are being cut.
- Your work is being done by other people after a reorganization: The company has made changes to how it is organized, and as a result, your tasks or responsibilities are being handled by someone else.
- The business or your work is relocated: The company is moving its operations to a different place, and this might mean you need to move too. Alternatively, your specific job function may be transferred to another location.
Fair procedure for a Redundancy Situation
Even if your business falls into one of these categories, it is crucial to adhere to fair procedures to ensure genuine redundancy. The first essential step is conducting a meeting with company leaders to thoroughly assess all costs and determine if redundancy is the most appropriate decision to reduce costs effectively.
If it is determined that redundancy is indeed the appropriate course of action, the next crucial step is to check if there are any specific guidelines or procedures outlined by the associated trade union that must be followed for redundancy situations. If such guidelines exist, it is imperative to adhere to them diligently. If no specific guidelines or procedures are in place, the company has the freedom to adopt any fair redundancy selection procedure. Generally, there are three commonly used grounds for fair redundancy: offering voluntary redundancy, employing the “last in, first out” method, or implementing a selection process.
Voluntary redundancy
Voluntary redundancy refers to the employer offering employees the option to leave their job voluntarily in exchange for benefits and compensation. The decision to accept this offer rests with the employee, and the terms are mutually negotiated with the employer. Typically, voluntary redundancy is extended to specific groups of employees based on the organization’s requirements.
It is crucial for employers to ensure fairness by refraining from pressuring employees to opt for this option.
‘Last in First Out’
Another common method employed by employers is the “last in, first out” approach, where the newest employee is selected for redundancy first. This method is generally considered fair and acceptable in redundancy selection.
However, employers often find the “last in, first out” method less preferable due to its lack of alignment with business considerations. Length of service may not necessarily reflect the importance of an employee’s role within the organization. Consequently, a selection process is often viewed as a more strategic approach to decision-making during redundancies. It is crucial, however, that the selection process is carried out correctly and in a fair manner.
Selection Process
Prior to initiating a selection process, it is essential to conduct a comprehensive evaluation of each department. Once it is determined which department or departments are most at risk, an “at risk” letter and an initial meeting should be provided to all affected parties. During this meeting, notice should be given, and the parties should be given an opportunity to discuss potential internal solutions they can propose. These solutions may involve cost reduction plans, expanded roles, or strategies to generate additional revenue. While the option for voluntary redundancy should be presented, it should not be forced upon employees at this stage.
Following the initial meeting, a series of subsequent meetings should be held as the selection process progresses. These meetings will serve to keep the affected parties informed about the ongoing selection process and allow them to contribute their input.
To ensure transparency, it is crucial to document every step of the process in writing. Additionally, objective criteria should be established, which lead to a logical conclusion, thus maintaining fairness and objectivity throughout the selection process.
A Lack of Qualifications for the Job
If you are a member of HR, it is important that you are very careful around termination of employees for a lack of qualifications, as many employers unfairly dismiss their employees on these grounds.
Citing a lack of qualifications for the reason for dismissal is usually limited to two specific situations.
- Firstly, if you, as an employer, discover that you have been deceived as to the qualifications the employee has.
E.G., if an employee provided false information about their work experience or college degree during the interview process - If the employment is offered on the condition that further qualifications are gotten, and they are not.
E.G. Often accounting or legal firms provide “training contracts”, lasting 1-2 years, with continued employment contingent upon the employee passing the necessary professional exams within that time frame.However, it is important to note that in the latter situation, the employee must have been given a reasonable opportunity to obtain the required qualification, and their failure to do so should not be reasonably justified.
Secondly, it is advisable to document this condition in writing.
One common mistake made by HR departments is terminating an employee for being “unqualified” despite the employee disclosing their qualifications prior to being hired.
To illustrate this, consider the scenario of a restaurant hiring a server who is not trained in bartending, and does not claim to be. Later on, it becomes apparent that the server’s lack of bartending skills is not suitable for the restaurant’s busy operations, requiring bar assistance. In such a case, it would not be reasonable grounds for termination based on qualifications alone.
Incapability to do the job
Unlike competence, which relates to low job performance (discussed below), capability refers to an employee’s inability to carry out the essential functions of their job. This can be demonstrated when an employee consistently fails to complete a full working day despite warnings and reminders.
Some common examples are.
- Consistent lateness to work.
- Persistent absences (for non-protected grounds e.g., pregnancy or disability)
As an employer, it is essential to invest time and effort into making the employee aware of the issue and providing them with a reasonable opportunity to rectify the situation before considering any disciplinary action.
Fair procedure
Firstly, to establish grounds for capability concerns, it is important to gather evidence supporting the employee’s inability to carry out the essential functions of their job. This evidence may include various forms of documentation, such as correspondence where the employee requests absences without valid reasons or records of repeated instances of late clock-ins.
Once these concerns are identified, it is imperative to engage in open and clear communication with the employee. This involves notifying them of the issue, discussing the impact their behaviour has on their job performance and the overall functioning of the workplace, and outlining the expectations and standards for attendance and punctuality.
In order to give the employee a reasonable opportunity to address and rectify the situation, you can implement a performance improvement plan or provide guidance and support through training or counselling sessions. It is important to document these efforts and maintain a record of the steps taken to assist the employee in improving their capability.
Only after providing the employee with adequate support, guidance, and opportunities for improvement, and if there is no significant progress or change, should termination be considered as a last resort. Disciplinary measures should be implemented in accordance with relevant employment laws, company policies, and procedures, ensuring fairness and consistency.
Employee’s competence to do the job
Setting the Standard for Competence
- It is crucial to clearly outline the required standards an employee is expected to meet in their employment contract.
- More general performance standards should be clearly communicated in the employee handbook.
Dismissal due to Incompetence
Dismissal due to an employee’s incompetence to perform their job refers to the termination of employment based on the consistent inability of the employee to meet the required standards and expectations of their role, as set out in contract and the employee handbook.
As an employer of an incompetent employee your duty is to communicate to the employee the specific areas in which they are lacking and provide clear guidance on the reasonable adjustments they can make to enhance their performance. This may include offering additional training or support.
If the employee does not make reasonable adjustments and you have given them a fair amount of time, less severe disciplinary actions may be taken, such as written warnings.
To ensure a comprehensive and fair record, it is crucial to document all interventions. This includes maintaining a series of performance reviews that highlight instances where the employee consistently failed to meet deadlines or targets. These reviews should be accompanied by evidence demonstrating the support provided to the employee.
Scrutiny of the ‘Paper-trail’ of Incompetence
If a dismissal based on poor competence is to be considered fair in a court of law, there must be a genuine and well-documented issue with the employee’s competence that has been appropriately addressed. It is essential to establish a reliable “paper trail” without resorting to the creation of multiple negative performance reviews in a short period leading up to the dismissal. Engaging in such a practice could be seen as unfair during legal proceedings and may reflect unfavourably on the employer.
An illustrative example emphasizing the significance of adhering to fair procedures in cases involving an employee’s competence is the lawsuit brought by Ms. Julia Marciniak against her employer, The Ivy, in the Labour Court in 2021.
Troia (UK) Restaurants Limited, The Ivy – AND – Ms. Julia Marciniak[1],
This case cantered around the termination of Ms. Marciniak followed a disciplinary hearing which the employer attributed to incompetence. However, Ms. Marciniak alleged that the disciplinary procedure served as a cover for an unfair dismissal due to her involvement with a trade union.
Upon thorough examination of the evidence presented, the Labour Court determined that there was insufficient information to establish a direct correlation between the dismissal and Ms. Marciniak’s engagement from the union. However, they did find that the disciplinary procedure was not done genuinely as they felt the allegations against the employee were exaggerated.
Consequently, the court ruled in favour of Ms. Marciniak, highlighting that despite the existence of a disciplinary process, the dismissal appeared to be motivated by her trade union activities, under guise of the disciplinary dismissal. Hence, the court deemed the dismissal unfair, and Ms. Marciniak was ordered to be financially compensated.
[1] Decision No. ADJ-00022803 CA-00029521-001
Misconduct
There are two categories of conduct which may result in the termination of an employee.
- Continuous ‘ordinary’ misconduct incidents despite being given warning and opportunity to remedy it.
- A gross misconduct incident
It is essential for employers to properly distinguish between the two categories of misconduct in order to ensure fair and just termination procedures.
The first category involves continuous misconduct incidents, which suggests a pattern of behaviour that is detrimental to the company and its employees. In cases of ordinary misconduct, the employer must follow a disciplinary procedure. They are obligated to provide appropriate warnings to the employee regarding their conduct and give them an opportunity to improve. The employer must clearly communicate to the employee that if the misconduct continues, it may lead to dismissal.
On the other hand, the second category pertains to gross misconduct incidents. These incidents are severe and often involve actions that directly undermine the company’s values, policies, or reputation. Unlike continuous misconduct, a single instance of gross misconduct can be grounds for immediate termination without any notice period.
Some examples of gross misconduct include.
- Stealing from the workplace
- Assault
- Deliberate Fraud
- Accepting or offering bribes
- Possession of illicit drugs, or their supply or use
- Misuse of confidential information.
Etc.
It is crucial, however, for employers to thoroughly investigate the incident to gather all the facts before taking such drastic action.
The Legal Test for Gross Misconduct
According to Irish law, when determining if an employee’s dismissal based on gross misconduct is justified, the “band of reasonable responses” test is applied. This test was explained by Mr Justice Noonan in the High Court, in the case of ‘Bank of Ireland vs. Reilly’.[2]
Essentially the test asks the simple question of “whether the decision to dismiss is within the range of reasonable responses of a reasonable employer to the conduct concerned”. This test emphasizes objectivity and limits subjectivity of whether the action can be classified as gross misconduct from the perspective of a specific employer.
A recent Labour court case 2017[3] endorsed this precedent by emphasising that the legal interpretation in this jurisdiction adopts a narrow understanding of gross misconduct as grounds for summary dismissal.
[2] (2015) IEHC 241, in relation to Section 6 of the Unfair Dismissals Act 1977.
[3] DHL EXPRESS (IRELAND) LTD DHL – AND – MICHAEL COUGHLAN
Red Flags for Unfair Dismissal
While the law surrounding unfair dismissal can be just as complex as fair dismissal, it is certainly worth delving into for employers. This is because a successful unfair dismissal claim with the Workplace Relations Commission could potentially result in a compensation award of up to two years’ salary.
To begin your journey in understanding Unfair Dismissals law, a good starting point is to examine the Unfair Dismissals Act. Section 6 of the Unfair Dismissal Act provides a non-exhaustive list of examples of unfair dismissal, which are essentially ‘red flag’ reasons for dismissal.
The fact that these examples are explicitly stated in the legislation indicates that the law has little tolerance for these reasons. Therefore, it is essential for employers to familiarize themselves with these examples.
Some of the unfair reasons for dismissal provided in the legislation include:
- Membership or engagement in trade union activities
- Religious or political opinions.
- Making a protected disclosure. (a legal disclosure of serious wrongdoing within the workplace)
- Civil or criminal proceedings involving the employee or the employer.
- Exercising the right to leave rights (parental, adoptive, carers etc.)
- Due to a minority status
- Pregnancy-related reasons
- Redundancy without justification or fair procedure
- Due to statutory duty or restriction.
Conclusion
In conclusion, terminating an employee as an employer can be a complex process. However, by establishing and adhering to a fair procedure that follows standard practices, you can significantly reduce the risk of legal challenges and approach the employee termination process with greater confidence.
