3 Things You Need to Know About Dismissing an Employee for Some Other Substantial Reason

  • Posted

What does some other substantial reason mean?

Under section 98(2) of the Employment Rights Act 1996, an employer can fairly dismiss an employee if it has one of the 5 competent reasons for doing so: (1) conduct; (2) capability; (3) redundancy; (4) breach of a statutory restriction; and (5) some other substantial reason of a kind as to justify the dismissal (SOSR).

There is no statutory definition or statutory guidance relating to SOSR.  However, the relevant authorities make it clear that the reason must be substantial and not wholly frivolous or insignificant. This is a subjective test and will depend on the facts and the type of case. The SOSR must be able to justify dismissal (rather than any lesser sanction) of an employee holding the role the employee actually held.

Is the test for fairness of an SOSR dismissal the same as other competent reasons?

The statutory test for unfair dismissal has 2 separate stages (which for an SOSR dismissal) will be:

  1. the employer has the burden of proof in showing that SOSR is the sole or principal reason for the dismissal. Here the employer only needs to establish that SOSR could justify the dismissal of an employee holding the role in question rather than necessarily showing that it actually did justify the dismissal (Willow Oak Developments Ltd v Silverwood).  A tribunal must not consider the justification, reasonableness or fairness of dismissing for SOSR at stage 1; and
  2. the employer must then show that the decision to dismiss for SOSR was reasonable in all the circumstances (including the size and administrative resources of the employer’s undertaking). This will be determined in accordance with equity and the substantial merits of the case. Here the burden of proof is neutral. Therefore, a tribunal will need to investigate the reasonableness of the dismissal, but the onus is neither on the employer to prove it was fair, nor on the employee to prove that it was not (Boys and Girls Welfare Society v McDonald).

In assessing whether the dismissal was reasonable, a tribunal will normally consider whether the employer followed a fair procedure. The Acas Code of Practice on Disciplinary and Grievance Procedures applies to disciplinary dismissals but is does not apply to SOSR dismissals unless they could be said to be “disciplinary” in nature.  Procedural fairness is still important in SOSR dismissals as in all other types of dismissal, as it goes to the reasonableness of the employer’s decision to dismiss and without discussion, explanation or consultation could be considered unfair.  However, this must be put in context and in some cases this may be considered pointless where senior employees are involved or the relationship has irretrievable broken down between employer and employee and to follow a procedure would simply be a meaningless charade.

What circumstances have tribunals found to be an SOSR dismissal?

There have been a wide range of reasons that have found to be a fair SOSR dismissal.  These are (among others):

  • business reorganisation (that does not fall within the statutory definition of redundancy);
  • refusal to accept a change in terms and conditions of employment (these are generally complex);
  • conflict of interest with an employer’s legitimate business interests;
  • personality clashes or irreconcilable difference between employees (where an employer has taken steps to resolve the problem);
  • pressure from third parties (e.g. from a customer, client or supplier);
  • reputational risk;
  • employed couples (under a joint employment contract);
  •  a breakdown in trust and confidence; and
  • expiry of a fixed term contract (provided this is the real reason).