Employment tribunals regularly deal with claims of unfair dismissal (22% of all claims lodged), and one issue that often arises is whether an employer’s failure to follow a contractual procedure renders the dismissal unfair. For SMEs, understanding how tribunals approach this question is important, particularly where internal procedures are set out in employment contracts or handbooks that may or may not be contractual in nature.
Under the Employment Rights Act 1996, a dismissal will be unfair unless the employer can show a fair reason for dismissal and that it acted reasonably in treating that reason as sufficient to dismiss. Conduct and capability are common examples but there are other potentially fair reasons i.e., redundancy, some other substantial reason and illegality.
Even where the reason is valid, the procedure followed must also be fair. This includes both statutory considerations, such as the ACAS Code of Practice on disciplinary and grievance procedures, the requirements of any internal policy, and the general standards of fairness which have been developed by case law over the years.
Tribunals distinguish between procedures that are contractual and those that are merely good practice. If a disciplinary or grievance procedure is incorporated into the employment contract, failure to follow it may not only be procedurally unfair but also a breach of contract (which may be a separate claim due to jurisdictional limitations on pursuing them in an employment tribunal context).
In East Lancashire Masonic Hall Co Ltd v Buckley [2015] UKEAT, the Employment Appeal Tribunal found that the employer’s failure to follow its own redundancy procedure contributed to the unfairness of the dismissal. The procedure fell within the range of reasonable procedures, and the employer had not followed its key steps.
Similarly, in Michael Steven Delawar Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2009] EWHC, the employer skipped stages of its disciplinary process. The Court of Appeal confirmed that a failure to follow express contractual disciplinary procedures may give rise to breach of contract damages and that the statutory framework for assessing unfair dismissal compensation does not limit such contract claims.
These cases highlight that where procedures are contractual, employers must adhere to them. Failure to do so can result in both unfair dismissal and breach of contract claims.
A recent tribunal decision reported by The Guardian in September 2025 illustrates how tribunals are increasingly focused on context and proportionality when assessing dismissals. In that case, an employee was dismissed for calling their manager a “dickhead” during a heated exchange. The tribunal found the dismissal to be unfair, noting that the employer had failed to consider the context of the remark and had not followed a fair disciplinary process.
While the language used was clearly inappropriate, the tribunal emphasised that the employer’s response was disproportionate and procedurally flawed. According to the Guardian, the “terms of the contract” permitted dismissal for “insulting or abusive language” but only after a warning. “Threatening and intimidating” language would justify dismissal for a first offence, but that did not arise here. The decision reinforces the principle that employers must not only have a valid reason for dismissal but must also follow a fair and reasonable process before reaching that decision, taking account of their own policies, especially if contractual in nature.
For SMEs, this case serves as a reminder that tribunals will look beyond the surface of misconduct and examine whether the employer acted fairly in all the circumstances, including whether it followed its own procedures.
Not every failure to follow a procedure will result in a finding of unfair dismissal. In London Ambulance Service NHS Trust v Small [2009] EWCA, the Court of Appeal held that minor procedural errors did not necessarily render the dismissal unfair.
In Westminster City Council v Cabaj 1996 ICR 960 the Court of Appeal (overturning the ET and EAT) concluded that a dismissal was not necessarily unfair when an appeal panel was not correctly constituted in line with the contract. The failure was a relevant factor but not a conclusive one.
The principle from Polkey v AE Dayton Services Ltd [1987] UKHL 8 also remains relevant. A dismissal may be unfair solely because of procedural failings, even if the outcome would have been the same. However, tribunals will consider whether the procedural breach caused any real prejudice to the employee, when assessing compensation.
Employers should be cautious about how procedures are worded in contracts and handbooks. The language used matters. Words like “will” or “must” may create binding obligations, whereas “may” or “normally” allow for discretion.
If procedures are intended to be guidance only, this should be made clear. Otherwise, tribunals may interpret them as contractual and expect strict compliance.
For SMEs, the implications of these cases are clear. Employers should:
Following the ACAS Code of Practice is also strongly advisable, even where procedures are not contractual. Failure to follow the Code can lead to an uplift in compensation of up to 25%.
Tribunals take procedural fairness seriously. Where an employer has committed to a process especially in writing, it must follow it or face the risk of expensive litigation, particularly where that process has contractual effect. While minor deviations may not always result in a finding of unfair dismissal, significant breaches of contractual procedures often will.
The recent tribunal decision involving inappropriate language in the workplace shows that context matters. Employers must avoid knee-jerk reactions and ensure that any disciplinary action is proportionate and procedurally sound.
For SMEs, the key is clarity and consistency. If procedures are contractual, they must be followed. If they are intended to be discretionary, this should be reflected in the wording. Taking time to review and understand your internal processes can help avoid costly tribunal claims.
If you are unsure whether your procedures are fit for purpose, or you are considering a dismissal, it is worth seeking advice early. A short conversation with an employment solicitor can help you avoid common pitfalls and ensure your business remains compliant.
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