Generally, an employer can lawfully terminate an employee’s contract of employment provided that they:

  • have a fair reason for dismissal, follow a fair procedure and act reasonably (to avoid unfair dismissal)
  • comply with the terms of the employment contract e.g. notice period (to avoid wrongful dismissal)
  • do not discriminate unlawfully (to avoid a discrimination claim).

There are potentially five fair reasons for dismissal:

  1. Conduct – this could be a single act of misconduct or a series of less serious acts
  2. Capability – this could relate to poor performance, ill-health, or qualifications
  3. Redundancy – this includes job, workplace and business closure
  4. Illegality – where continuing employment is prohibited by a statutory restriction e.g. immigration status
  5. Some Other Substantial Reason – another reason which justifies the dismissal e.g. failure to agree to a change in terms and conditions.

Generally, employees must have two years’ qualifying service in order to bring a claim for unfair dismissal. However, dismissal for some reason, such as those connected to pregnancy, is automatically unfair.

Employers sometimes want to terminate an employee’s contract of employment on mutually agreed terms. They may, therefore, propose their exit with an agreed settlement package rather than go through a disciplinary, capability or redundancy process and risk the employee bringing a claim against them.

If an agreement can be reached, the employer would usually ask the employee to sign a settlement agreement in order to protect itself against any future claims.

Further advice

Our Employment lawyers can advise on such protected conversations and help employers to prepare settlement agreements. One condition of a settlement agreement is that the employee has had independent legal advice.

Our Employment Lawyers can advise an employee on the terms and effect of a settlement agreement in the event that they are presented with one.

Our specialist employment lawyers can advise on all aspects of termination and unfair dismissal. For a free, no obligation fact finding meeting, complete our online enquiry form or call 0800 915 6037.


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