Was firing an over-reaction?

Constructive dismissal is likewise illegal where I am. It's not common, but it happens often enough that most people will have heard of someone. The employee is entitled to cease work immediately AND receive compensation at tribunal for being illegally terminated. Media reporting of these incidents is usually hugely negative, enough to make avoiding them a priority if your company's reputation is of any importance.

Obviously if both the employer and employee are no longer happy it will usually be possible to agree some mutually acceptable way to end the relationship, and the courts won't interfere with that.

I think it's an important point.

I've worked in countries/companies with very different Labour Laws and found that the difference between theory (= law) and practice can be huge. The culture also comes into play: in some places you are safer even when the law is less protective.

That's for firing ONE person though. When trying to lay off MANY people in tough economic times then Labour Laws do matter (for good or bad - not my point here).