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A case study on how unfair dismissal occurs is necessary for a flexible approach on how startups should handle such issues and the effect that it has on both employers and employees. In any business that is a startup, employees who are talented are important as they enable the company grow and dismissal of a staff affects all the other employees and has a negative impact on productivity and teamwork. Organizations that have not set up formal human resource policies and procedures are always worried about lawsuits being filed against them due to constant breach of policies. This is made worse by the fact that some of the Human Resource Managers hired by startups are not well trained and may make decisions that may affect the overall image of the company.

Informatics Corporation of America, is startup company which has operated for two years and has a total of 27 employees, 5 of whom are in managerial roles, including myself as the Director of Technology, had a situation where we had to make a decision on whether to fire a technical employee who was extremely talented, and was a US citizen of Vietnamese origin working on my team due to long absence and behavior which was irrational. The employee was absent from work, without any formal leave for ten days, and as management, we had concerns about her well-being as we had experienced & addressed some of her irrational behavior two weeks previously and disciplined her through oral reprimand.

Being one of the managers, I had requested the HR manager to take consideration of the absence in a serious manner and carry out an inquiry into disciplinary measures when the employee returned. However, once the employee came back to work, the HR manager dismissed her and issued a termination letter without getting consent or consulting with the supervisor or informing the leadership of Informatics. The HR Manager escorted the employee out of the organization’s premises. One hour later, the HR manager begun receiving phone calls, which were threatening and rest of the Informatics team have to know about the whole situation. By the end of the day, the police got involved in the employee dismissal case yet this should have been an understanding between the employee and the company.

The psychological contract is the relationship that an employer has with its employees and it deals with mutual expectations of inputs and outcomes. It is viewed from what employees feel especially on how they are treated by the employer and their input into their jobs (Guchait, Cho, & Meurs 2015). The theories and principles of the psychological contract can also be applied in our day-to-day lives. The contract is characterized by qualities like empathy, fairness and being objective.

The attitude of employees in an organization highly depends on a fair and balanced psychological contract. A psychological contract, which is regarded to be fair, leads to positive employee attitudes. The quality of the contract is determined by the employer (Festing  & Schäfer 2014). A single worker or a rebellious one can break the contract but workers mostly depend on the organization’s leadership for the quality of the contract. The feelings and attitudes of employees have a very strong influence on how they view themselves and the kind of relationship that they have with their employer. The attitudes and feelings are also influenced by how employees are treated by their employers at work.

Psychological Contract Theory and Application to Informatics Case

Figure 1.0 –The Psychological Contract

To manage the psychological contract, therefore, an organization has to focus on how to influence employees positively and make them feel motivated. At Informatics Limited, the psychological contract was not honored and this led to the unfair dismissal of an employee. The Human Resources manager did not consult as had been advised before making the decision to terminate the employee. From the situation, it seems that there was disengagement before the employee was fired as they had behaved irrationally two weeks earlier.

Disengagement mostly occurs when there is a breach of contract. In Informatics, this may have occurred due to reasons like violation of trust, lack of honesty or a leader may have drastically altered some deal (Dabos &Rousseau 2013). Disengagement, therefore, could have led to the Informatics employee to have a decline in productivity and workplace loyalty and this was instantly noticed by the leaders, as the employee was initially a high performing technical employee. Disengagement negatively affects employees. In this case, the employee displayed behaviors that were irrational and it even led to an oral reprimand. These behaviors eventually led to the employee missing work for ten days without any proper excuse and eventually resulted in dismissal by the Human Resources Manager and the situation eventually gets out of hand when the police are involved.

Informatics Limited loses a good employee who is experienced in the technical field but the dismissal is unfair to the employee. The employee ends up losing their job for an issue that would have been sorted within the company. Informatics is a start-up hence probably has no experience in dealing with such issues and does not have a solid psychological contract with its employees. The fact that the employee could not find at least one manager to open up to on the issues that they were facing means that they had already formed a negative perception about the company hence decided to act up to express their issues. The unfair dismissal is bad for the employee, as even if a court of law rules in their favor, they obviously will not be comfortable going back to work at Informatics as the psychological contract will not be met. The employer will feel that the employee was at fault and probably went too far by involving the police hence it will be difficult for them to honor a psychological contract.

 The Human Resource Manager seems not to have experience on psychological contracts and on the impact of their decisions to the organization. This shows that Informatics Corporation, being a startup does not put an emphasis on employment laws as any Human Resource Manager should be familiar with employment laws, especially those relating to hiring and firing. The Human Resources Manager would have made a rational decision if they were familiar with laws regarding employment. The company also seems not to have its own policies set up concerning employee dismissal. This made the manager act without reference.

Organizational justice is the way employees look at fairness in the workplace. The perceptions are divided into four separate categories. The first is distributive justice, which deals with how employees are concerned about the fairness outcomes, which they get (Blader & Tyler, 2013). Employees that feel there is a lack of fairness in the organizations that they work for usually have reduced productivity and very low morale. Organizations should ensure that there is distributive justice by training and communicating well to their employees and ensuring that there is fairness in the organization.

Organizational Justice Theory and Application to Informatics Case

Procedural justice is the second type of organizational justice. It is concerned with how employees look at the fairness process of how outcomes are decided by an organization. Employees may feel that some things are done without their consultation hence view this as unfair. Organizations should therefore, work on involving or informing employees on time before any decision is made (Colquitt et al 2013). Interactional justice is the third type of organizational justice. It looks at how an organization communicates explanations to its employees and how sensitive they are towards their employees. An organization should aim to always provide quality explanations for any outcomes. The final type of justice is interpersonal justice and it is a reflection of personal interactions and treatment within the organization. Employees want to be respected and treated fairly within the organization.

Employees base their fairness perceptions on information, which is most readily available. The regular appraisals of job satisfaction are influenced heavily by interpersonal and informational justice since the information is more current. Distributive and procedural justice either enhances or causes a constraint to the relationship that the other types of justice have with job satisfaction. When employees feel that resources are not distributed equitably in an organization, they will look at the kind of treatment they are receiving from their leaders to supplement the lack of material outcomes.

Figure 2.0 Types of Organizational Justice

In order for Informatics to provide its employees with organizational justice if they expect to reap the benefits of employees who are satisfied. The situation at Informatics shows the lack of organizational justice (Gelens et al 2013). The employee that had two weeks earlier behaved irrationally did not experience justice hence behaved the way they did. This reflected the kind of distributive and interpersonal justice at the organization. The employee probably felt that a certain outcome was not fair to them hence started to behave in an irrational manner. The employee was disciplined through an oral reprimand and probably felt that there should have been more justice. Due to this, the employee proceeded on ten days leave without notice hence aggravating the situation. This may also reflect that they was no interpersonal justice as the interpersonal relations were probably not good at informatics. The employee felt that they were not being treated fairly.

The Human Resource Manager goes ahead and fires without direction despite being advised by the Director of Technology to consult first. This shows that the manager is not a fair person and does not have good interpersonal relations with the employees. The employee was not satisfied at Informatics hence displayed this through various behaviors.

Employees should be treated with respect and dignity and the Human Resource Manager did not display this as they terminated and immediately escorted the employee out of the organization’s premises without even consulting the leaders. This shows that there may have been a rift between the manager and the employee as the manager seems to have taken advantage of the situation to quickly dismiss the employee. The situation was therefore unfair to the employee, as the organization’s human resource leadership did not carry out justice in any manner. The figure below shows how fairness has a positive effect on employees.

Figure 3.0-Fair Process Effect

The IT Director tried to exercise justice by asking that the employee is interviewed first on why they had been absent before any action was taken but the Human Resource Manager chose to ignore this. The employee did not get a chance to explain anything and this was unfair. This was a high performing technical employee; hence, Informatics should have dug deeper into why the behaviors of the employee had suddenly changed from being a good performer to someone who behaved irrationally as there must have been an underlying cause. The employee also experienced unfairness as they also did not also get a hearing previously when they behaved irrationally. No one questioned why they behaved they way they did, yet they always performed well on the job and it seems that the leadership further aggravated the situation and this led to the employee going on leave without a valid explanation as they must have felt violated in one way or another.

Informatics Corporation being a startup must be facing some challenges especially in setting out rules on employment. Many small businesses unintentionally violate employment laws, as they may not have studied them well (Susskind 2014).Organizations that have just started up sometimes classify all employees as exempt even if they are not. Unexempt employees are eligible for overtime and meal breaks (Thornthwaite 2013).  Startups do not also adhere to the set lunch breaks as required by law and this gets them into trouble when employees sue.

Organizations like Informatics frequently fail to provide harassment and discrimination training to its managers and supervisors hence leading to issues within the organization. They also terminate employees for taking leave of absence and fail to provide paychecks to employees who are yet to return the property of the company (Batten 2013). If an employee has a loan, they should be eligible to sign a promissory note to make regular payments to their employer. Loan payments should not be deducted from final pay slip.

Various laws in the United States deal with unfair termination of employees and lay out rules under which employees should not be dismissed. The Informatics case is unfair to the employee and not to the employer. This is because when an organization is setting up and employing people to work, they are expected to operate under certain policies and rules (Howe 2013). Organizations should refer to the employment policies of the country and state where they operate, and come up with a suitable human resource policy that will guide the company. An organization’s human resource department should not operate without any formal policies and procedures (Cabrelli 2016). It is also expected that during employment, whether permanent or temporary, a contract should be signed by both parties that lay out both employment and dismissal terms. Informatics seem not to have clear rules when it comes to employment and dismissal. They have also not trained their managers and supervisors on harassment and discrimination issues that could possibly fail the organization (Davidov & Eshet 2015). The Human Resource Manager at Informatics clearly lacks direction on how to handle employee issues and prefers to act without any consultation. This is a mistake on the part of the company as it shows that there is a lack of training and proper supervision when the employees are hired by the company. There are also no formal rules on discipline at Informatics. A company should lay out rules on how different disciplinary issues are handled rather than just handle them without proper direction as they come. It is also important that employees be trained on employment and dismissal procedures. Informatics has not done this (Freyens & Oslington 2013). When the employee is fired, they proceed to the police station yet this is a matter that should be reported to a lawyer. This shows that the employee has probably reported harassment directly against the Human Resources Manager.

This case is unfair to the employee, as no one has given a chance for an explanation on why a good performing employee has suddenly changed behavior without any valid explanation. The leaders should be more understanding and try to find out the exact reason why the employee has become irrational (Stewart 2013). This will help the leadership to tackle the problem from the root as the employee may even be having other personal problems that may be greatly affecting their work.

The dismissal is also unfair as when the employee goes absent without saying a word, none of the leaders call to find out if the employee is well and what has caused them to take leave without saying a word (Wright 2014). The managers have all made an assumption that since the employee was irrational, the leave of absence was purposely planned.

The employee is given no chance to talk or explain anything and is treated unfairly by the human resource manager as they are immediately terminated and escorted out of the building as if they have committed an extremely horrible crime (Southey 2014). This creates a bad picture even to fellow employees who are probably watching at the time. At the end of the day, the employee is so much affected and once again acts irrationally by going to the police instead of letting a lawyer handle the issue hence putting Informatics in an extremely negative light.


Unfair Dismissal is an issue that should be handled cautiously, especially by organizations that are just starting up. Employers should ensure that they are familiar with all laws that relate to dismissal as they may end up with a number of lawsuits. It is important that employers aim for positive relations with the people they employ and that they train all managers against harassment and discrimination. Unfair dismissal mostly results in a negative impact to the organization, more than the dismissed employee; hence, startups should be keen on establishing human resource departments with full policies and procedures.


Batten, D.A., 2013. Judgment in unfair dismissal case discriminates against other workers. BMJ, 346, p.f2728.

Blader, S.L. and Tyler, T.R., 2013. How Can Theories of Organizational justice Explain the E?’ects of Fairness? Handbook of organizational justice, p.329.

Cabrelli, D., 2016. Employment Law in Context. Oxford University Press.

Colquitt, J.A., Scott, B.A., Rodell, J.B., Long, D.M., Zapata, C.P., Conlon, D.E. and Wesson, M.J., 2013. Justice at the millennium, a decade later: A meta-analytic test of social exchange and affect-based perspectives.

Dabos, G.E. and Rousseau, D.M., 2013. Psychological contracts and informal networks in organizations: The effects of social status and local ties. Human Resource Management, 52(4), pp.485-510.

Davidov, G. and Eshet, E., 2015. Intermediate Approaches to Unfair Dismissal Protection. Industrial Law Journal, 44(2), pp.167-193.

Festing, M. and Schäfer, L., 2014. Generational challenges to talent management: A framework for talent retention based on the psychological-contract perspective. Journal of World Business, 49(2), pp.262-271.

Freyens, B.P. and Oslington, P., 2013. A first look at incidence and outcomes of unfair dismissal claims under Fair Work, WorkChoices and the Workplace Relations Act. Australian Journal of Labour Economics, 16(2), p.295.

Gelens, J., Dries, N., Hofmans, J. and Pepermans, R., 2013. The role of perceived organizational justice in shaping the outcomes of talent management: A research agenda. Human Resource Management Review, 23(4), pp.341-353.

Guchait, P., Cho, S. and Meurs, J.A., 2015. Psychological contracts, perceived organizational and supervisor support: Investigating the impact on intent to leave among hospitality employees in India. Journal of Human Resources in Hospitality & Tourism, 14(3), pp.290-315.

Howe, J., 2013. Poles Apart? The Contestation between the Ideas of No Fault Dismissal and Unfair

Southey, K., 2014. Contributory misconduct reductions in unfair dismissal remedies. Australian Bulletin of Labour, 40(1), p.24.

Stewart, A., 2013. Stewart's guide to employment law (Vol. 3). Sydney: Federation Press.

Susskind, A., 2013. Unfair dismissal benchbook. Law Society Journal: the official journal of the Law Society of New South Wales, 51(11), p.24.

Thornthwaite, L., 2013. Social media, unfair dismissal and the regulation of employees’ conduct outside work. Australian Journal of Labour Law, 26(2), pp.164-184.

Wright, J.M., 2014. Unfair Dismissal Law Fourth Edition. Lulu. com.

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