Jo Seery looks at the definition of capability in terms of employees’ performance at work, the obligation on employers to act reasonably when dismissing on that basis and the specific considerations that they have to take into account when dismissing older workers.
In the current climate of austerity and mass redundancies in both the public and private sectors, employers will often look for reasons other than redundancy to dismiss employees to avoid paying a redundancy payment.
This approach can, however, lead to claims of discrimination if vulnerable employees are selected for redundancy based purely on their performance.
Definition of capability
Capability is defined in the Employment Rights Act 1996 by reference to the skill, aptitude, health or any other physical or mental quality of the employee.
Employees can be dismissed if they cannot do the job they were employed to do. The fact that they can still do some of their duties does not necessarily mean that a tribunal will find their dismissal unfair.
Even if the employee is good at their job, employers can still dismiss them on grounds of capability if they are uncooperative to the extent that they are unable to get along with clients (Dunning and Sons (Shopfitters) Ltd -v- Jacomb).
Capability is also usually the reason for dismissal when an employee is dismissed for ill health, perhaps because of lengthy or persistent sickness absence (see article by Catherine Scrivens).
Establishing capability as the reason for dismissal
In some cases, it may not be clear whether capability was the reason for dismissal, for example, when the employee has been dismissed for not being able to do their job. If this is because of carelessness, negligence or idleness this will usually be dealt with as misconduct rather than capability.
In other cases, the employer may not have made clear in the dismissal letter that capability was the reason for dismissal.
For example, they may argue that it was for “some other substantial reason”. However, the Court of Appeal warned in the case of Leach -v- OFCOM  that employers should not use “some other substantial reason” as a convenient label for dismissing employees.
Employers who dismiss an employee for breach of trust and confidence to avoid following a fair procedure (see below) may still therefore be liable for a claim of unfair dismissal.
Dismissal because of qualifications
Qualifications are defined in the Act as: “any degree, diploma or other academic technical or professional qualification relevant to the position.”
Dismissals in these circumstances usually come about when the employee either fails to obtain the necessary qualifications to do their job or loses a qualification during their employment.
However, employers will need to ensure that they do not discriminate against an employee if they insist on some of them having a particular qualification. In the case of Chief Constable of West Yorkshire Police -v- Homer (weekly LELR 273) the Supreme Court held that a requirement to have a law degree put people in the 60-65 age group at a particular disadvantage compared to younger employees.
Identifying the reason for dismissal
The burden of proof is on the employer to establish that capability was the reason for the dismissal. They do not have to prove that the employee was incapable of doing their job, just that they honestly believed they could not do it and had reasonable grounds for that belief.
To discharge the burden of proof, employers need evidence both of the standards that apply to the employee and of the employee’s failure to meet them.
In many cases, employers have appraisal or performance management systems in place that can be used to initiate capability proceedings when an employee is accused of not meeting certain standards.
Equally, employees can rely on recent appraisals as evidence that their performance is not below standard if, for example, they have been awarded a pay increase or bonus.
Employers also need to ensure that capability and not some other reason such as disability (see article by Catherine Scrivens) or age, is the reason for dismissal.
Following the abolition of the default retirement age, older workers have been concerned that they could be dismissed for capability or selected for redundancy because of stereotypical assumptions about their capability.
However, a dismissal in these circumstances is likely to be discriminatory unless the employer can show that the discrimination was justified on the ground that it was a proportionate means of achieving a legitimate aim.
In the case of Seldon -v- Clarkson Wright and Jakes (weekly LELR 273), the Supreme Court held that a legitimate aim in a claim of direct age discrimination must have a social policy aim to do with employment policy, labour market or vocational training.
Legitimate aims related to a particular employer’s situation, such as cost reduction or improving competitiveness are not social policy aims. So dismissing an older worker simply because they cost too much is unlikely to amount to a justification defence.
Legitimate aims in cases of direct age discrimination generally fall into two categories – inter generational fairness and preserving dignity.
Employers can therefore argue that dismissing an older worker on grounds of capability is for the legitimate aim of encouraging younger workers, sharing limited opportunities between generations and promoting diversity between younger and older workers.
However, the employer must show that the aim is legitimate in the particular circumstances. So, for example, improving the recruitment of young people in order to achieve a balanced and diverse workforce is in principle a legitimate aim.
But if, in fact, there is no problem recruiting younger workers and the real issue is retaining older and more experienced workers, then it may not be a legitimate aim.
The duty to act reasonably
Having identified capability as the reason for dismissal, employers then have to show that they acted reasonably.
The duty to do so is two-fold in that tribunals will look to see not only what steps the employer took once they realised the employee was not up to doing the job, but also what they did to ensure they could do the job in the first place.
As a result, employers cannot usually defend a claim of unfair dismissal if they fail to provide proper instructions or support for their employees at the outset, or set unrealistic targets or too short a period in which to improve.
If an employee has been provided with training and support but still cannot meet the employer’s standards, dismissal on the grounds of capability is likely to be fair. This is because employers do not have to find alternative work for an employee who’s struggling to get on top of their job.
So, for example, an employee who fails to make the grade following a promotion but does not have a contractual right to return to their previous post, could be at risk of being fairly dismissed for capability.
Equally, employers do not have to consider demoting an employee as opposed to dismissing them on the grounds of capability, unless this is specifically provided for in the contract of employment or a collective agreement incorporated into the contract.
The duty to follow a fair procedure
The duty to act reasonably also includes the duty to follow a fair procedure before dismissing someone on the ground of capability.
Employers have to show that they:
- carried out an investigation / assessment of the employee’s performance
- warned the employee what was likely to happen if they failed to improve, and
- gave the employee a reasonable chance to improve.
The ACAS code sets out the minimum procedure that employers should follow when disciplining an employee, to:
- establish the facts of the case
- inform the employee of the problem
- hold a meeting with the employee to discuss the problem
- allow the employee to be accompanied at the meeting
- decide on appropriate action
- provide the employee with an opportunity to appeal.
Generally, issues to do with capability develop over time. Tribunals therefore expect employers to provide a structured improvement programme the employee is expected to complete over a set period. They should also make clear the consequences if they fail to improve, including dismissal. If the employee’s performance does improve during the requisite period but the employer dismisses them, the dismissal is likely to be unfair.
Having said that, it may be reasonable for an employer to dismiss an employee without warning if the consequences of a single act undermine their confidence in the ability of the employee to do their job.
For example, in Taylor -v- Alidair Ltd, a pilot was held to have been fairly dismissed after he landed an aircraft negligently and put the lives of passengers at risk.
It is not necessarily unfair for employers to take an expired warning into account when dismissing on grounds of capability (Airbus UK Ltd -v- Webb – weekly LELR 55), but the issue of whether it was reasonable for the employer to do so will depend on the particular circumstances of the case.
It is important that unions are vigilant when determining the reason for dismissal.
The law makes clear, when an employee is vulnerable to dismissal because of capability, that the employer is obliged to follow a comprehensive procedure before making the decision to dismiss.