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Forums For Adjudicating Employment Disputes

The Employment Tribunal (“ET”) has exclusive jurisdiction for most claims, but contractual claims can be brought either in the civil court (High Court or County Court) or, up to certain limits, in the Employment Tribunal, at the choice of the claimant. There are different rules which apply depending on the jurisdiction chosen. Although court fees exist for claims brought in the civil court, there are no fees for bringing claims in the ET.

The Main Sources Of Employment Law

The UK is a common law jurisdiction. All employment arrangements are governed by general common law principles of contract law, but there are various national legislative requirements which over-ride those general principles in some instances. Individual contracts (whether written or oral), collective bargaining agreements and common practice all form part of the contractual relationship. The main sources of legislation include the Employment Rights Act 1996 and the Equality Act 2010, which brings together previous discrimination legislation including the Sex Discrimination Act 1975, the Disability Discrimination Act 1995 and the Equal Pay Act 1970. A significant amount of regulation is introduced by secondary legislation. Non-binding Codes of Practice are taken into consideration by the ET when judging best practice; European legislation and ECJ court decisions which pre-date Brexit remain relevant (these are referred to as “retained EU law”) but appellate courts now have the ability to depart from retained EU law; ECJ decisions which post-date Brexit are not binding, but may be considered “persuasive” in appropriate circumstances, and taken into account.

National Law And Employees Working For Foreign Companies

The statutory rights under national law will apply to all individuals physically working in the UK, regardless of their nationality, and regardless of the law governing their contract of employment. National contractual law may also apply in appropriate cases.

National Law And Employees Of National Companies Working In Another Jurisdiction

The statutory rights under national law will usually apply only when the employee is physically working within the jurisdiction of the ET. However, contractual law may still apply in appropriate cases.

Data privacy

The UK’s data protection legislation derives from the EU’s General Data Protection Regulation of 2016 (now referred to as the “EU GDPR”). In light of Brexit, the EU GDPR was converted into retained EU law, and then amended – the revised version is now known as the “UK GDPR”. The main national legislation, the Data Protection Act 2018, was also amended to refer to the UK GDPR rather than the EU GDPR. By creating a separate version of the GDPR in this way, the UK has created a structure under which the UK GDPR will not necessarily automatically incorporate any changes made to the EU GDPR in the future.

In February 2021, the European Commission published its draft UK adequacy decisions. If adopted these decisions will allow for continued free flow of personal data from the EU into the UK. The adequacy decisions are now with the European Data Protection Board (EDPB) who will deliver an opinion to the European Commission and representatives from the EU member states. During this process, UK businesses and public authorities will continue to be able to receive data from the EU under the adequacy bridge agreed in the 2020 trade and cooperation agreement.

Legal Requirements As To The Form Of Agreement

There is no legal requirement for a contract to be in writing. However, every employer is required to provide each employee or worker with a written statement of particulars of certain terms of the agreement (for further details, see “compulsory terms”, below). For those who commence work on or after 6 April 2020, the statement must be provided on or before the start date.

Mandatory Requirements
  • Trial Period
  • There is no legal obligation to provide trial periods, otherwise known as ‘probationary periods’, when engaging new employees, but it is common in practice to do so. If there is no probationary period, the written statement of particulars must include a statement to this effect.

  • Hours Of Work
  • Subject to certain exceptions, there is a requirement that unless an employee opts out, he/she may only work 48 hours per week (averaged out over a 17 week period). The opt-out must comply with certain statutory requirements. The written statement of particulars must identify normal working hours/days, and must specify whether those hours or days may be variable, and if so, how.

  • Special Rules For Part-time Work
  • There are no special rules for part-time work, but national legislation protects part-time workers from being treated less favourably than full-time workers where it cannot be objectively justified. In practice, this generally means that part-time workers receive the same pay and benefits, but reduced pro rata according to the proportion of work done.

    There are some specific limitations on the types of provision which can be incorporated into a zero hours’ contract.

  • Earnings
  • There is a restriction prohibiting employees from earning below a minimum hourly wage (which is reviewed annually and takes effect from 1 April each year). As at April 2021, the current National Living Wage (for those aged 23+) is £8.91; younger employees are entitled to the national Minimum Wage, which varies between £4.62 and £8.36 depending on age..

  • Holidays/Rest Periods
  • There is a requirement that employees must have a right to take a minimum of 5.6 weeks paid holiday per year (pro rata for part-time employees). There are also various compulsory daily and weekly rest periods and breaks which have to be observed.

  • Minimum/Maximum Age
  • There is a normal minimum age of 14 (which can be varied in certain cases), below which employees cannot work. Different rules (e.g. on working time) apply to children or young workers. There are no maximum age limits.

  • Illness/Disability
  • There are no mandatory requirements relating to illness and disability (except for the provision of social security payments – in the form of Statutory Sick Pay – to eligible employees when they are absent due to illness/incapacity. However see ‘Harassment/Disability/Equal Pay’ below.

  • Location Of Work/Mobility
  • The employee’s normal place of work must be specified by the employer in writing. Mobility clauses can be included in the contract of employment, but they cannot be operated unreasonably. Where the job requires travel to other temporary locations, it is normal for the employer to reimburse all reasonable travel expenses. Where there is to be a continuous period of work outside the UK lasting more than one month, additional information has to be provided in writing to the employee; where this does not apply, it is a requirement that the written particulars include a statement confirming that work outside the UK will not be for a continuous period of that length.

  • Pension Plans
  • Employers are required to provide employees with information relating to pensions and pension schemes. Since October 2012, UK employers are required to automatically enrol certain eligible workers, “jobholders”, into a qualifying pension scheme and to pay a minimum level of contributions to the scheme. Part of that minimum contribution must be paid by the employer; the remainder is usually paid by way of deductions from the employee, but can alternatively be paid as additional employer contribution. .

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • A range of “family-friendly” rights exist, including maternity leave and pay, paternity leave and pay, adoption leave and pay, shared parental leave parental leave and pay, parental bereavement leave and pay, time off for dependants and part-time working. Employees who can satisfy the appropriate qualifying conditions for the right in question can enjoy, or can apply for, their statutory rights in this regard. Different rules apply to different rights, and it is not possible to summarise all the details (most of which are set out in various Regulations) within this note.

  • Compulsory Terms
  • The terms that must be provided to the employee or worker on or before commencement of employment include the following: the names of the parties; the date when employment begins and when continuous employment began; the scales and intervals of pay; the hours of work; holiday entitlement; any other paid leave (even if only statutory); provisions relating to sickness or injury; provisions relating to pension and pension schemes; provisions relating to any other benefits provided to the employee (even if not contractual); provisions relating to training (to include identification of training for which the employee will have to bear the cost); place of work; length of notice or anticipated fixed term; job title/job description; details of any probationary period; any collective agreements which apply; certain information regarding grievance and disciplinary procedures.

    Where there are no relevant provisions in relation to some of the categories above, it is a requirement for a statement to that effect to be expressly included.

    For employees posted abroad for a continuous period of more than one month, additional information is required (the currency in which remuneration is to be paid, any additional remuneration or benefits during that time, the period for which they are to work outside the UK, to be provided and the terms and conditions relating to return to the UK).

  • Non-Compulsory Terms
  • The employer and the employee are free to agree any other terms in addition to the compulsory provisions, provided that these terms are no less favourable than certain statutory rights.

Types Of Agreement

All employment relationships are contractual in nature, whether or not the terms have ever been reduced to writing. Contracts of employment (whether express or implied) exist in several different forms: fixed term, variable, full-time or part-time. The compulsory terms apply regardless of the type of contract contemplated. There are discrimination laws which prevent employees from being treated less favourably than other employees because of working part-time or working on a fixed term contract. There are also specific provisions relating to zero-hours contracts, to protect workers by outlawing exclusivity of employment clauses.


There are rules relating to secrecy and confidentiality that are implied into the employment relationship. During the employment relationship an employee is under an implied duty to respect the confidentiality of the employer’s commercial and business information. Therefore, information that an employee is expressly told is confidential, and obviously is confidential, is protected (without express covenant) during employment. After employment, however, only trade secrets are protected by the implied duty of confidentiality. Trade secrets include information which is of a sufficiently high degree of confidentiality to remain confidential after employment. For this reason, in addition to the implied duties, employers will often include in the employment contract an express term specifying the type of information that is a trade secret, and therefore protected, to prevent future disclosure. They may also include restrictive covenants as a means of protecting future confidentiality (see below).

Ownership of Inventions/Other Intellectual Property (IP) Rights

In the absence of any contractual terms, there are statutory provisions which will apply to determine ownership of IP rights.

Pre-Employment Considerations

In the main, there are no mandatory provisions which expressly prohibit any type of question or requirement during the recruitment process, but in order to avoid potential discrimination claims, it is important to proceed cautiously, and to avoid asking inappropriate or unnecessary questions. Even some forms of automation/algorithmic processing could be perceived as giving rise to potential issues. Employers also need to bear in mind data privacy issues in relation to the information that is sought and/or retained about candidates before, during and after a recruitment exercise.

Special rules exist in relation to medical reports and questionnaires: with limited exceptions, it is not permissible to ask questions about the health of an applicant before offering employment.

Hiring Non-Nationals

Employers are obliged to ensure that all employees are entitled to work in the UK. Verification of eligibility must be carried out and established before the employee commences employment, and evidence that the relevant checks have been carried must be retained by the employer. An employer will be liable to a civil penalty if it negligently employs someone who is not entitled to work in the UK, and will commit a criminal offence if it knowingly employs such a person. The retention of records is critical in order to protect the employer from such claims.

Employers will often include a warranty in the employee’s employment contract that the employee is entitled to work in the UK. Although the warranty will not protect the employer from liability, it will put some of the burden on to the employees, as the employees will be in breach of contract if they are not entitled to work in the UK.

Different visa requirements apply depending on the nationality/status of the individual concerned. The requirements have undergone significant changes as a result of Brexit, which removed the previous automatic entitlement to work in the UK for EEA nationals. Details as to the various forms of entitlement and different entry routes are beyond the scope of this note.

Hiring Specified Categories Of Individuals

There are restrictions on who can be employed to carry out certain hazardous activities and restrictions on the types of work that vulnerable groups (e.g. children or pregnant women) can be required to undertake.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

There are specific rules relating to outsourcing, insourcing and where there is a change of outsourced service provider. All of these scenarios are regulated by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”), which have been amended from time to time.

In situations where TUPE applies, employees carrying out the work in question automatically transfer with the work and thereby become employees of the new entity carrying out the work. The employees must generally remain on exactly the same terms of employment as they enjoyed prior to the transfer (with the exception of pension arrangements, where there are special rules which apply depending on the nature of the previous pension provisions). The two exceptions are (1) where the sole or principal reason is either the new employer can demonstrate that there are economic, technical or organisational reasons which require changes to the workforce to be made or (2) there is a reason unconnected with the transfer. There are obligations imposed on both the old and the new employers to consult with the affected employees through elected representatives, or a recognised Trade Union, prior to the transfer taking place (and financial penalties for failure to do so). The rules allow micro-businesses to inform and consult with employees directly. Any dismissal by reason of the transfer is automatically unfair and may be potentially unfair if there is an economical, technical or organisational reason for the dismissal.

Changes To The Contract

In accordance with common law contractual principles, an employer may not change any terms of the employee’s contract without the employee’s consent. Such consent may be express (by the employee agreeing to the change) or implied (by the employee continuing to work for the employer without protest for an appropriate period of time after being made aware of the change). Any change of terms to which the employee does not consent will amount to a breach of contract. If the change is a significant one which goes to the root of the contract, the employee is entitled to resign and treat the contract as at an end. In so doing, the employee may also claim that he has been constructively dismissed (and seek damages accordingly). However, depending on the change in question, the wording of the contract, the reasons for the change and the degree of consultation carried out before the change, the employer may have a defence to a breach of contract or constructive dismissal claim.

Although there has been some discussion at governmental level about potentially outlawing the practice of “firing and re-hiring” (ie terminating the employee’s existing contract of employment and offering new employment on new terms, to commence immediately after the expiry of the old contract), the practice remains permissible at the present time.

Change In Ownership Of The Business

When there is a change in ownership of a business (except a change merely in the shareholding ownership), under the TUPE rules (see above) all employees are automatically transferred to the new employer on the same terms and conditions. These rules apply also where only a specific part of a business changes ownership. There are obligations imposed on both the old and the new employers to consult with the affected employees though elected representatives, or a recognised Trade Union, prior to the transfer taking place (and financial penalties for failure to do so). Employees are allowed to refuse to transfer to the new employer. However, if they do they will be deemed to have resigned and will not be entitled to any compensation (unless the refusal relates to a failure to maintain the same terms and conditions after the transfer).

Social Security Contributions

Employers and employees are required to make social security contributions (rates are determined annually). Employers are also required to contribute towards allowances payable to employees during their employment. These allowances include sick pay, maternity pay and paternity pay.

Accidents At Work

Employers have a common law duty to have regard to the safety of their employees. Employers are also responsible under common law for accidents caused by the acts of their employees where the employees were acting in the course of their employment. It is compulsory for the employer to take out insurance to cover potential claims by employees in this regard.

In addition to common law duties, a number of obligations are imposed on employers through legislation (most significantly the Health and Safety at Work Act 1974). The employer also owes specific statutory duties to members of the public who are affected by the activities of the employer, and other people’s employees working on their premises. In some instances, a breach of the employer’s statutory duties may give rise to criminal and civil liability.

Discipline And Grievance

In 2004 a statutory discipline and grievance procedure was introduced, but faced universal criticism, and it was repealed wholesale with effect from April 2009. In its place there is now a “voluntary” code of practice, known as the ACAS Discipline and Grievance Code of Practice. Although employers are not obliged to follow its guidelines when dealing with disciplinary or grievance matters, a failure on the part of either party to follow the Code of Practice can affect the level of compensation awarded (in respect of a number of claims the Employment Tribunal is given a power to vary the award, at its discretion, by up to 25%). The Code of Practice requires the employer to properly investigate the matter, to notify in writing the findings to the employee, to hold a disciplinary hearing or meeting, to notify in writing the decision of the employer following that hearing to the employee, and to give the employee a right of appeal against the decision.

Harassment/Discrimination/Equal pay

Under the Equality Act 2010, employees are protected from discrimination because of sex, age, sexual orientation, pregnancy and maternity, marital status, race, religion or belief, disability and gender reassignment (the “protected characteristics”). Employees are also protected by other legislation from discrimination on grounds of part-time status and fixed-term status.

Discrimination may occur before the employment relationship commences (for example in advertising the job), during the employment (for example in failing to promote), on termination or even after the employment has ended (for example in writing the reference). In the case of discrimination because of a protected characteristic, the discrimination may be direct (for example refusing to employ a man or woman), perceived (for example where an employee is wrongly perceived to have a protected characteristic and suffers discrimination), associative (for example where an employee receives less favourable treatment because of an employee’s association with someone who has a protected characteristic) or indirect (for example by imposing a condition which puts a particular group at a particular disadvantage and which cannot be justified). However, in the case of discrimination because of pregnancy or maternity there are still no provisions for dealing with indirect discrimination. Whilst the Equality Act 2010 sought to introduce a new concept of combined discrimination, which is still part of the statute, no Government has, as yet, brought these provisions into force, and there is no sign of any intention to do so at the current time..

There is no qualifying period of employment for protection from discrimination. Discrimination can lead to a claim in the Employment Tribunal and there is no limit to the damages which can be awarded. Damages are calculated so as to put the claimant in the position they would have been in if the unlawful discrimination had not taken place, plus an element for injury to feelings which currently ranges from £900 to just under £46,000 depending on the severity of the impact of the discriminatory behaviour on the individual. The level of compensation is increased annually (by official guidance issued by the President of the Employment Tribunal) to take account of inflation. Compensation may be awarded for personal injury if the employee can show that the discrimination caused the harm.

The tribunal will not normally award punitive damages, but in rare cases, aggravated damages may be awarded to an employee if a tribunal finds that the respondent was malicious, insulting or particularly heavy-handed.

Harassment is a separate type of claim, but is linked with discrimination. It involves unwanted conduct that has the purpose or effect of violating a person’s dignity or creating an offensive, intimidating or hostile environment. It is unlawful if it is related to any of the protected characteristics listed above.

Victimisation is also a form of discrimination that involves treating a person less favourably because that person has complained (or intend to complain) about discrimination, or because that person has given evidence in relation to another person’s complaint. An employee must not be disciplined or dismissed, or suffer reprisals from colleagues, for complaining about discrimination or harassment at work.

The concept of equal pay, previously set out in the Equal Pay Act 1970, has been incorporated into the Equality Act 2010. It provides that a woman employed at an establishment in Great Britain is entitled to enjoy contractual terms that are as favourable as those of a male comparator in the same employment, provided the woman and the man are employed on equal work.

Compulsory Training Obligations

There are no compulsory training obligations for employees generally, but obviously some trades/professions will impose their own standards/expectations. However, employees working for employers with 250 or more employees are entitled to request time off work to undertake study or training.

Since April 2020, the written particulars of employment must include details of all compulsory training which the employee is required to undertake, and must state whether the costs of that training will be covered by the employer or the employee.

Offsetting Earnings

It is possible for employers to offset earnings against employee’s debts. However, the employer may only make a deduction from the employee’s wages if it is required or permitted by a statutory or contractual provision; or the employee has given his prior written consent to the deduction.

Payments For Maternity And Disability Leave

Employees will benefit from certain payments subject to satisfying the relevant necessary requirements. To trigger statutory maternity pay entitlement, a woman must have earned a minimum amount (reviewed annually) prior to going on maternity leave, must have accrued at least 26 weeks’ continuous employment as at the end of the “qualifying week” (the 15th week before the expected week of childbirth) and must still be employed during that week.

With regard to disability leave/sickness absence, an employee will be entitled to receive statutory sick pay (the amount of which is determined by statute, and reviewed annually) from the fourth day of consecutive absence, subject to earning a minimum amount on average beforehand. The maximum entitlement is 28 weeks. If payments are made in this regard, the employer can, subject to certain conditions, deduct these from the social security contributions that they are otherwise due to pay. On 1 December 2014, the Shared Parental Leave Regulations 2014 came into force. They allow parents to share the 50 weeks of maternity leave usually only granted to the mother (maternity leave is 52 weeks in total, however the mother has to take 2 weeks as compulsory maternity leave), subject to certain procedural requirements.

Compulsory Insurance

Most employers are required to maintain insurance under an approved policy with an authorised insurer, against liability for bodily injury or disease sustained by employees during, and arising out of, their employment. The employer must not be insured for less than £5 million in respect of any one occurrence. Employers must ensure that they display copies of the insurance certificate at every place where they carry on business so that it can be easily seen and read by employees.

Absence For Military Or Public Service Duties

Employees are entitled to take leave for military or public service duties, but there is no right to be paid during such leave.

Works Councils or Trade Unions

An employer may voluntarily agree to recognise a Trade Union. By virtue of the Trade Union and Labour Relations (Consolidation Act) 1992 a Trade Union can demand recognition if a sufficient proportion of the workforce desire it. To do so, a Trade Union must firstly make a written request to the employer and if not successful, may make an application to the Central Arbitration Committee. It is important to note that irrespective of the outcome, no further applications may be made by that Trade Union or a substantially similar unit for a period of three years.

An employee who is a member of a Trade Union has certain rights in relation to his employer. For example: dismissal for membership of, or for taking part in the activities of, an independent Trade Union is automatically unfair for the purposes of unfair dismissal and higher awards of compensation may, in some circumstances, be made; action short of dismissal against an employee or subjecting an employee to a detriment for membership of, or for taking part in the activities of, an independent Trade Union gives the employee the right to complain to a tribunal which may award him or her compensation; a Trade Union member has the right to time off work without pay to take part in Trade Union activities. In addition, a Trade Union official has the right to take time off with pay for Trade Union duties.

Under the Trade Union and Labour Relations (Consolidation) Act 1992 an employer has a duty to consult with appropriate representatives of any employees who may be affected where the employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.

Employees’ Right To Strike

There is no general right for employees to strike. However, certain immunities will be granted in respect of industrial action if there is a Trade Union involved, provided the action is conducted strictly in accordance with statutory requirements (e.g. conducting a ballot beforehand).

Employees On Strike

Employers can still dismiss employees on strike if the strike was not properly authorised. Even if the strike was validly authorised, after a certain period the employer can dismiss employees. Other courses of action may also be open to the employer depending on the circumstances (e.g. withholding pay, seeking an injunction, claiming damages for financial loss).

Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for the acts of their employees, except where the employee was acting wholly outside the course of his employment.

Procedures For Terminating the Agreement

In all cases the termination of an employment contract must comply with the terms of the contract, ie must normally give the notice required under the contract (or, if permitted under the employee’s contract, a payment in lieu of notice (PILON)).

If the employee has 24 months continuous service of employment, or is dismissed summarily without notice being given after 1 year and 51 weeks or more, (s)he has statutory unfair dismissal protection. . In most cases, there are certain minimum steps which must be followed before termination to avoid the termination amounting to an unfair dismissal. An employer must be able to demonstrate a “potentially fair” reason for dismissal. Whether a dismissal for the reason(s) identified is nevertheless unfair depends on the tribunal’s view as to the reasonableness of the employers’ actions. It is important to note that compliance with the ACAS Code of Practice (see Discipline and Grievance above) of itself is not sufficient to guarantee fairness.

However, whilst the employee may have a claim for unfair dismissal, the termination of the employment itself will almost always be valid if the employer has given effective notice of termination (even if not for the proper notice period) and even if the employer has not followed the minimum unfair dismissal steps. An employee has the right to be re-engaged or re-instated only in rare cases.

Instant Dismissal

The employer can terminate an employment contract by instant dismissal i.e without notice, if the employee is guilty of gross misconduct or gross incompetence and/or has committed a fundamental breach of contract, but even in this instance the employer must still follow the minimum steps for dismissal (see Discipline and Grievance above above) and must still be able to satisfy the statutory test of fairness to avoid liability for unfair dismissal.

Employee's Resignation

The agreement can generally always be terminated by the employee’s resignation. Normally the contract will stipulate the notice period required. If not, statutory minimum notice of one week must be given provided the employee has worked longer than one month.

Termination On Notice

The parties can terminate the employment contract on notice, but there may still be liability for unfair dismissal. There are statutory minimum periods of notice which will override the contractual notice period where they are in excess of the contractual notice period. The statutory minimum period of notice is dependent on the period of continuous employment. Under the Employment Rights Act 1996, if the period of continuous employment is less than two years, not less than 1 weeks’ notice of termination should be given. If the employee’s period of continuous employment is more than two years but less than twelve years, the notice should be not less than one week for each year of continuous employment. If the employee’s period of continuous employment is twelve years or more, the notice period should not be less than twelve weeks.

Termination By Reason Of The Employee's Age

Any dismissal based on a person’s age amounts to unlawful direct age discrimination under the Equality Act 2010, unless the employer can objectively justify it or can establish that being below that age is an “occupational requirement”.

Automatic Termination In Cases Of Force Majeure

The contract will be deemed “frustrated” where intervening events make its continued performance impossible, although instances are rare. Death of the employee or complete destruction of the workplace are examples.

Collective Dismissals

Where an employer proposes to make large scale redundancies of 20 or more employees at one establishment within a period of 90 days or less, it must consult on its proposal with representatives of the affected employees and also notify the Department for Business, Energy and Industrial Strategy using the form ‘HR1’. The obligation to consult is triggered at the stage where the employer is ‘proposing’ to dismiss and there has been wide debate and case law around the interpretation of this obligation and at what stage it arises.

Employers must fulfil their obligations to inform and consult under the Trade Union and Labour Relations (Consolidation) Act 1992 as failure to do so could give rise to a claim for a protective award up to a maximum of 90 days’ gross actual pay for each affected employee.

Termination By Parties’ Agreement

The parties are entirely free to agree termination on any grounds they desire. Where the parties agree to terminate the employment, they are not required to obtain the courts’ or any regulatory body’s approval before the termination is effective, but any termination agreement between the parties in which the employee purports to give up certain statutory legal rights will only be binding if it complies with certain requirements.

By virtue of the Employment Rights Act 1996, the agreement will be void (with regard to the giving up of statutory rights, if not for the termination of employment) unless it is in writing, relates to identified claims, and records that the employee has received independent legal advice from a suitably qualified person on the nature and effect of the agreement. The agreement (which is known as a “settlement agreement”) must identify the employee’s adviser by name and state that the conditions regulating settlement agreements under the relevant statutory provisions (which should be identified) have been satisfied.

Additionally, an employment contract will only be found to have terminated by agreement (rather than by a dismissal) where there is true, free agreement between the parties and not where the termination date is agreed from the start of the employment contract (unless it is a fixed term contract), or where the employee has been put under any pressure to agree to their employment contract coming to an end. If the employee has no real choice, then the termination will be a dismissal. The question is who really terminated the contract. In considering that question a tribunal will look at the substance of the transaction rather than the form.

Directors Or Other Senior Officers

There are no special rules which relate to the termination of a director’s or other senior officer’s employment, but in the case of a statutory director (or other company officer), termination of employment does not automatically bring to an end the directorship. Separate steps will be required to bring the directorship to an end (pursuant to the company’s articles of association).

In addition to the same statutory protections afforded to an employee, a director may also have a claim for any fees arising from his or her loss of office.

Special Rules For Categories Of Employee

There are no categories of employee to whom special rules apply, but certain categories (e.g. pregnant women) benefit from more generous rules for protection from unfair dismissal. Apprentices under common law and under certain statutes have additional protections against redundancy and dismissal.

Specific Rules For Companies in Financial Difficulties

There are special rules which apply if a company is in financial difficulty. If a company goes into liquidation, all employees are automatically dismissed. Any claims by the employees against the company are as unsecured creditors - though the debts are viewed as “preferential” up to certain limits. By contrast, if a company goes into administration, the administrator has 14 days to decide whether or not to “adopt” the employees’ employment contracts. If the employee works for longer than 14 days, the administrator loses the right to terminate the employment contract. A further factor to consider is when the assets (including employees) of a company in administration are packaged up and are sold to another company. In this situation, the employees will normally be transferred in accordance with the TUPE rules, as described above.

Restricting Future Activities

Generally clauses that attempt to restrict the future activities of an employee are contrary to public policy and therefore unenforceable, but the courts will uphold restrictions if they are drafted sufficiently narrowly. Essentially such restrictions must be designed to protect a “legitimate business interest” and they should be no wider than is reasonably necessary to protect those interests. Further they must be clear and reasonable in time and area. Typical clauses include those designed to restrict an employee from joining a competitor (or setting up in competition), from soliciting business from/dealing with certain customers or from enticing other employees to leave. Each case is considered on its own facts, so what might be considered appropriate for one individual in a particular industry may be held by a court to be unreasonable for another – even if the individuals work for the same employer.

Whistleblower Laws

Where an employee or worker has made a protected disclosure, they are protected under the Public Interest Disclosure Act 1998 (“PIDA”). To qualify for protection, the whistleblower needs to satisfy certain criteria relating to the disclosure of information and its nature which must also be in the public interest. The whistleblower is also required to have reasonable belief that the information disclosed tends to show one or more of the relevant failures.

The dismissal of an employee will be automatically unfair if the reason, or principal reason, for their dismissal is that they have made a protected disclosure. PIDA also protects workers (including employees) from being subjected to any detriment on the ground that they have made a protected disclosure.

Unlike ordinary unfair dismissal claims, there is no financial cap on the compensation in whistleblowing claims and no requirement for a minimum period of service.

Special Rules For Garden Leave

An employee’s employment contract may contain an express term enabling the employer to put the employee on garden leave for all or part of their notice period. During garden leave the employee remains on normal salary and bound by their contract of employment but is requested not to attend the office or contact clients or customers.

Employers often use garden leave during an employee's notice period to prevent the employee from having further access to customers, clients and staff and to prevent the employee from working for a competitor.

Severance Payments

Payments made in connection with the termination of an employee’s employment will depend on the circumstances in which the employee is terminated. As a minimum, the employee will be entitled to their notice pay if they have not worked their notice, any accrued but untaken holiday and any statutory payments. For example, redundancy pay. The employee’s contract may also provide for additional payments on or following termination and must be checked prior to giving the employee notice. In addition to any contractual and/or statutory payments, an ex gratia compensation payment can also be agreed with the employee. The amount will vary on a case by case basis and will be determined by the merits of any claim, the circumstances in which the employment ended and any commercial considerations for the employer.

Special Tax Provisions And Severance Payments

Upon termination of employment a number of tax issues may arise in relation to the treatment of payments (and the provision of other benefits) made in connection with the termination of employment. Tax treatment in this context means the income tax and National Insurance contributions (NICs) treatment for the employee or director, as well as the PAYE and NICs obligations for the employer. There may of course be other tax considerations for the employer.

Generally speaking, contractual payments will always be taxable in full, but ex gratia compensatory sums where they are paid as genuine payments for loss of employment and/or loss of office can be paid tax free under a specific statutory exemption which provides for the first £30,000 of any compensatory sum not to be treated as employment income and, therefore, exempt from tax. Where compensation payments exceed this amount, income tax and employer’s NICs will be payable on the amount in excess of the £30,000 exemption. Payments which relate to fresh contractual agreements (eg new confidentiality provisions, or new post-termination restrictions) are treated as contractual payments, and will therefore be taxable in full.

Allowances Payable To Employees After Termination

Where there is a redundancy situation, employees with at least 2 years’ service as at the date of termination are entitled to be paid a lump sum statutory redundancy payment, the amount of which is calculated with reference to the employee’s age, length of service and salary (subject to certain caps which are increased annually). There are no special allowances payable by the employer to an employee after termination in any other situations. Unemployment benefit and other social security payments are payable by the state

Time Limits For Claims Following Termination

Following termination of employment, the employee will have a set amount of time to bring a claim in an employment tribunal (unless the claim is contractual and worth more than £25,000 in which case the claim will need to be brought in the civil courts). Most statutory employment claims have a time limit of three months less one day from the date of the relevant event, whether that is the act of discrimination complained of or the termination date. However, contractual claims commenced in the civil courts are subject to a 6 year limitation period.

Failure to bring a claim within the relevant time limit puts the claim outside the jurisdiction of the tribunal but the tribunal does have discretion to allow a claim beyond the limitation date in limited circumstances.

An employee or former employee who is considering submitting a claim is first required to initiate the Acas early conciliation, unless an exemption applies. Where early conciliation is initiated, the time limit by which the claim must be submitted will be extended although the length of any extension is dependent on when the Acas early conciliation is commenced.

Specific Matters Which Are Important Or Unique To This Jurisdiction


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Contact a Contributing Author:
Jon Heuvel
Shakespeare Martineau LLP
UK – England and Wales

Andrew Haywood
Penningtons Manches Cooper LLP
UK – England and Wales


© 2021, Shakespeare Martineau LLP and Penningtons Manches Cooper LLP. All rights reserved by Shakespeare Martineau LLP and Penningtons Manches Cooper LLP as authors and the owners of the copyright in this chapter. Shakespeare Martineau LLP and Penningtons Manches Cooper LLP have granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021