ignorance is not bliss!

Under the Employment Act 2002 (“the Act”), where an employer fails to follow the statutory dismissal procedures that dismissal will be automatically unfair and any award will be subject to an increase of a minimum of 10 percent and a maxiumum of 50 per cent.

In Cex Lts v Lewis the EAT upheld a tribunal decision that it was appropriate to take into account the employer’s ignorance of the statutory dismissal procedures when imposing the minimum 10 per cent uplift to the award.

L had been employed by C Ltd in a senior management position. As part of a restructuring process C Ltd decided that L's position was no longer needed and L was encouraged to apply for a restructured post. L applied for the new role but was unsuccessful and was dismissed on the grounds of redundancy.

The Employment Tribunal found that C Ltd were unaware of the statutory dispute resolution procedures set out in the Act and that L's dismissal was therefore automatically unfair. The tribunal increased the compensatory award payable to L by the minimum 10 per cent.

L appealed on the basis that an increase by 10 per cent did not fully take into account C Ltd’s complete failure to follow the statutory dismissal procedures.

The EAT held that the tribunal had a broad discretion to decide to make an increase of 10 per cent up to a maximum of 50 per cent, on the basis of what they regarded as just and equitable in the circumstances. It was open to the tribunal to regard the culpability of the party who had failed to comply with required procedural steps as of relevance.

Protecting your business – how this affects you.

Even though the EAT refused to lay down general guidelines as to when awards will be increased by 10%, 50% or somewhere in between, this case demonstrates that an employer who is unaware of the statutory dismissal procedures will not escape by consequence of its ignorance. The dismissal will be automatically unfair and will be subject to an increase of at least 10 per cent.

It is worth noting that the government intends to abolish the current dismissal procedures. Given the inconsistency in tribunal decisions and the lack of any formal guidelines in respect of awards, this decision by the government should be welcomed by all employers.  However, until the government acts on its intentions, you need to ensure that you adopt and implement a satisfactory dismissal procedure that complies with the statutory requirements as an absolute minimum.