Weekly Employment Update - 9th November 2011

Tribunal has discretion to find a different reason for a dismissal

Welcome to Ashfords' Weekly Employment Update, where each week we consider recent developments in Employment and HR issues. This week, we consider whether a tribunal can find that an employee has been fairly dismissed for a different statutory reason to that relied on by his or her employer.

Late last month, a leaked Government report raised the possibility that, in future, an employer's failure to provide a fair reason for dismissing one of its employees will not make that dismissal unfair. 

However, unless and until these controversial reforms are implemented, unfair dismissal cases will continue to hinge on an employer's ability to show that it acted reasonably in dismissing its employee for one of the fair reasons set out in statute. One of the many difficulties this can create for employers is determining the "correct" reason for dismissing an employee.

This problem is illustrated by the recent case of Screene v Seatwave Ltd.  This involved an employee who was responsible for overseeing the company's German bank account.  This account was subject to fraud, resulting in a loss of €1.7 million.  As a result of this incident, the employee was dismissed.

In its defence to the employee's claim of unfair dismissal, the company stated that it had dismissed him on the grounds of incapability.  This contradicted the reason given in the employee's dismissal letter, which referred to misconduct.  Furthermore, it would, the Employment Appeal Tribunal (EAT) noted, be more usual to regard cases of negligence, such as this, as examples of misconduct, rather than incapability.

Fortunately for the employer, the EAT concluded that tribunals are entitled to find a dismissal fair on the basis of a different reason from that relied on by the employer, on the condition that this does not prejudice the employee.  An employer's error in labelling the reason for a dismissal will not, therefore, automatically result in the defence failing.

However, this decision does not remove the need for employers to approach any dismissal with care, and to think about the real reasons why it wishes to dismiss an employee.  This must be done before any decision to dismiss is taken.  If, for example, it is a true case of incapability, the requirement to act fairly will usually demand that the employer warns the employee and gives him or her opportunities to improve.  An employer that fails to recognise incapability, as opposed to an incident of misconduct, may well neglect to follow such a procedure, and will thus risk a finding of unfair dismissal.

It is also important to note that, while an employer will not necessarily be bound by an incorrect label for a dismissal, it is unlikely that the tribunal will allow it to change the factual justification for the dismissal.  If the employer raises different facts after the dismissal and does not give the employee an opportunity to respond to these, this will generally be considered prejudicial to the employee.  This highlights the significance of carrying out a proper investigation before dismissing an employee.

Screene v Seatwave Ltd UKEAT/0020/11

Ashfords LLP is Authorised and Regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.