Legal Analysis: No fail-safe option when dismissing staff

Earlier this month, Martin Higginson hit the headlines for being dismissed by Monstermob, the mobile phone ringtones company.

However, this was no ordinary dismissal. Higginson, who was the company’s founder and chief executive, was dismissed by e-mail on a Sunday afternoon. According to Higginson, this came completely out of the blue.

Follow the procedure

Since coming into force in October 2004, hundreds of articles have been written about the statutory dismissal procedures, and most HR professionals are aware of the necessity to follow this procedure when dismissing an employee. Failure to do so can lead to a finding of automatic unfair dismissal and an uplift to the employee’s compensation of between 10% and 50%.

So, why would an employer decide to forgo the statutory procedure?

Put simply, following the procedure is time consuming and requires patience. In essence, the procedure requires employers to:

  • write to the employee, setting out the nature of their conduct, capability or other circumstances that lead the employer to contemplate dismissing them

  • invite the employee to a meeting to discuss the issue

  • tell the employee of the employer’s decision and offer the right of appeal.

If the employee appeals, the employer must then invite them to a meeting to discuss the appeal and communicate the final decision to them after the meeting.

Many managers see the procedure as a frustrating distraction from their ‘real work’, particularly if the employee is being dismissed by reason of misconduct. Also, they can feel slightly odd dismissing a senior executive in this, rather perfunctory, way.

Further, following the procedure does not, in and of itself, protect the employer from an unfair dismissal claim. Therefore, managers often seek another way to dismiss employees – a quicker, easier way.

Take a risk

An employer can choose to dismiss an employee immediately and accept the consequences. Now that the maximum unfair dismissal compensatory award is £58,400, this can be an expensive and stressful option. However, if the employee is a high earner, such an award may be a relatively small price to pay for a speedy dismissal, provided there are no other issues to consider – for example, potential discrimination or whistleblowing claims.

Do a deal

An employer can also choose to ‘do a deal’ with the employee. In many cases, this option is more attractive – it can be cost effective for the employer and can leave the employee feeling less aggrieved.

Doing a deal usually involves entering into a compromise agreement, under which the employee waives their claims against the employer.

In this agreement, it is also possible to protect the employer’s confidential information, prevent disclosure by the employee of the circumstances surrounding the employee’s departure, and prevent the employee making derogatory statements about the employer – for example, to the press.

Given that Monstermob’s share price has plummeted following the news of Higginson’s departure, negative press can be a serious consideration.

That said, a deal done badly can land an employer in all sorts of difficulties. For example, failure to give the employee a genuine option and suggesting they must take the offer or be sacked could lead to a claim of constructive unfair dismissal. Even worse, the employee might decide they do not want to negotiate.

With this in mind, some employers take the view that it is better to dismiss immediately, and then introduce the idea of settlement, rather than try the more amicable approach of attempting to reach a deal prior to dismissal.

In short, there is no easy, fail-safe option. The key is to know the options and the pros and cons of each one.

In Monstermob’s case, it believed the best route was to dismiss Higginson immediately and accept the consequences later. Only time will tell if this was the right route to take.

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