Seismic news for UK employers to contemplate in February, with the UK government confirming in the last few days that the cap on unfair dismissal compensation will be removed from 1 January 2027, paving the way for unlimited unfair dismissal awards for the first time in UK employment law history. Our February 2026 edition provides an overview of these developments as well as other Employment Rights Act 2025 reforms taking effect from April, and the latest set of consultations. We also provide the usual round-up of recent interesting case law, including cases on collective redundancy consultation, the importance of a proper investigation and a fair dismissal procedure, and the pitfalls of relying on a “some other substantial reason” for dismissal.
Case law update
Redundancy – collective consultation: The duty to collectively consult is triggered in the UK when an employer proposes to dismiss as redundant 20 or more employees at one establishment within 90 days. In this important case, the Employment Appeal Tribunal (EAT) confirms that when looking at whether the duty has been triggered, it is only necessary to look at redundancies within the same employing entity (not across the corporate group). The EAT also concluded that the obligation to consult centred on a forward-looking analysis of whether, at any particular moment in time, the employer ever proposed to dismiss 20 or more employees within a 90-day period. Prior proposals to make redundancies can be disregarded, provided that at the time of each proposal there was never any intention by the employer to make 20 or more employees redundant over 90 days (even if, in fact, this is what happens – for example, due to changes in business circumstances, meaning further headcount reductions are needed). This is helpful clarification for UK employers in a highly complex area of law, where there are punitive sanctions for non-compliance. The EAT warned employers against artificial staging of dismissals to try to avoid collective consultation obligations. (Micro Focus Limited v. Mildenhall)
Breach of trust and confidence: A recent Employment Tribunal (ET) case highlights the challenges of relying on a breakdown of trust and confidence as the reason to dismiss, reiterating that it is not a catch-all reason to be used whenever an employer cannot easily rely on another fair reason to dismiss. In this case, the claimant was dismissed after her wife, who also worked for the same employer, was convicted of the attempted murder of their supervisor. The claimant was dismissed due to concerns about reputational damage, but the ET noted that although the claimant had initially been arrested, she was released without charge, and there was no suggestion of her being complicit in her wife’s actions. These circumstances and the mere fact of the claimant’s arrest were not sufficient to justify dismissal – any reputational damage was caused by the claimant’s wife rather than the claimant, and it was their reputation (not the employer’s) at risk. (Smith v. North West Ambulance Service Trust)
Race discrimination: A claimant must establish a prima facie case of discrimination (i.e., that there is sufficient evidence to infer that discrimination has occurred) for a claim to proceed, although it is important that only relevant factors are considered. In this case, the claimant, a Black employee, was unsuccessful in an application for promotion, whereas four white applicants were successful. Despite asking for feedback, verbal comments were sparse and written feedback (which took two months to be given) lacked detail. Whereas the ET found this sufficient to infer a prima facie case of discrimination, the EAT disagreed and concluded that there was no logical reason that the delay and lack of feedback were related to the claimant’s race. (London Ambulance Service NHS Trust v. Sodola (debarred))
Race discrimination: A claimant who was accused of falling asleep at work and who subsequently resigned, has succeeded with a claim of race discrimination after the ET was critical of her employer’s investigation and the failure to consider that the complaint was racially motivated. The claimant, a Black African nurse, was accused of falling asleep on a night shift by three of her white colleagues, but the investigator failed to challenge their evidence or interview others on duty (all of whom were Black) on the relevant date, even after the claimant raised concerns at her disciplinary hearing about the allegations being racially motivated. Although a non-binding ET decision, the case highlights the importance of a thorough and probing investigation, and the need to revisit issues (such as discrimination) if they are raised during the process. (Mbonda v. Quarryfields Health Care Ltd)
Disability discrimination: A claimant with dyspraxia has successfully claimed indirect disability discrimination and discrimination arising from disability following action taken against her for repeatedly using incorrect pronouns of a colleague. The claimant’s dyspraxia affected her ability to process information, and when initially corrected by her colleague on which pronouns should be used, she apologised for this and any future incidences of misgendering, explaining that it might happen again. An investigation concluded that the claimant had unlawfully harassed her colleague by repeatedly misgendering them, and that she was in breach of the dignity at work policy. She was moved away from her colleagues and stood down from part of her role, although never subjected to disciplinary proceedings. The ET criticised the investigation report for being biased against the claimant and accepted that the claimant’s condition meant that it took her longer than a neurotypical person to adopt the correct pronouns. The claimant’s line manager and the lead investigator were found to be personally liable for the discrimination. (Sylvester v. Phillpson and others)
Age discrimination: An employer’s ill health severance scheme with an age cap of 65 has successfully been objectively justified, confirming that four claimants (who were aged 65 or over) were not discriminated against when a payout under the scheme was denied because of their age. The employer was able to identify several legitimate aims for the policy (including fair and equitable allocation of funds for ill health across all age groups; providing financial support for ill health in a responsible manner; and cushioning the financial blow to younger workers who have to stop or reduce work due to ill health), and the ET was satisfied on the evidence and statistics around retirement and access to ill health and pension benefits that the age cap was a proportionate way to meet the desired aims, with 65 a deliberately chosen age for the cap tied into (now defunct) compulsory retirement. (Campbell and others v. LNER)
Employment status: The Court of Appeal (CA) has found a volunteer coastguard to be a “worker” while taking part in activities entitling them to remuneration. Although documentation denied them worker status, the reality of the situation was that when they chose to attend work, they had to obey reasonable instructions, and there was a right to be paid for doing certain activities. Although there was no overarching relationship between callouts, time spent on individual activities was sufficient to meet the worker test, and the fact that the coastguards were free to accept or decline an opportunity for work was not a bar to this. (Maritime and Coastguard Agency v. Groom)
Sex and gender reassignment harassment and discrimination: In a case attracting a lot of media attention, the ET has found in favour of a group of nurses who alleged harassment and discrimination against their employer for allowing a trans woman to use the female changing rooms and for failing to address their objections when they raised concerns. In a non-binding decision, the ET adopted the biological approach to sex, as determined by the recent Supreme Court decision, and found that the nurses were entitled to object to sharing a single-gender changing room with a biologically male employee. (Hutchinson and others v. County Durham and Darlington NHS Foundation Trust)