Unfair dismissal - Case Round-Up: April 2018

In this month's round-up, Mark Shulman, consultant solicitor with Keystone Law, looks at a round-up of recent unfair dismissal cases on employment status, interim relief and conduct.

Mark Shulman, Consultant Solicitor at Keystone Law

Employment status
*In [Nayak v Lucent Advisors (UK) Ltd (Debarred) & Anor ]()*UKEAT/0154/17/LA, the question arose as to whether or not Mr N had worked as an employee and therefore whether he could claim unfair dismissal.

Mr N worked for Lucent Advisors Limited from November 2013 until August 2014 and after that for Lucent Advisors (UK) Limited until those arrangement were terminated in January 2016. Throughout the period from November 2013 to January 2016 Mr N raised invoices for his services. He became VAT registered and accounted to HMRC for VAT. Advised by his accountant, he submitted annual tax returns as a self-employed person under Schedule D. The work he did for the Respondents was in fact always done by himself and there were no circumstances where he could arrange for someone else to undertake work on his behalf. He was under the direct control of a Mr Flynn (described by Mr N as being a "control freak") and was throughout the period answerable to Mr Flynn in respect of all of the services which he provided. Mr N was provided with a mobile phone and laptop computer, which remained the property of Lucent Advisors. On his invoices, Mr N reclaimed the cost of accommodation and travelling. He also had the benefit of private healthcare for himself and his family, the cost of which was borne by Lucent Advisors Limited.

When the relationship with Lucent Advisors deteriorated, Mr N was removed from his position and he claimed unfair dismissal.

"Classic" analysis of employment contract
When considering Mr N's claim at preliminary hearing on employment status, the EJ considered the cases of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 and [Autoclenz Ltd v Belcher ]()[2011] UKSC 41 which provide "the classic description of a contract of employment". The EJ summarised the position:

"Firstly, there must be a contract between the employer and the employee.

Secondly, that contract must contain mutual obligations which are related to work.

Thirdly, the employee must be subject to the control of the employer, at least insofar as there is room for such control. It may need to be emphasised that it is the power to control which is essential - the demonstrated exercise of that control is not.

Fourthly, the employee must be obliged to perform the work personally to the employer.

Finally and fifthly, the contract must not contain terms which are inconsistent with it being a contract of employment. There will of course be contracts under which work or services are performed by one party to the contract for the benefit of the other, which do not create a relationship either of employee or of worker."

On the crucial issues of control, the EJ considered that Mr N was subject to control of Mr Flynn in terms of which work was to be performed and where and when. However, there was no control over Mr N as to how he would perform his duties. The provision of a computer and mobile phone could not in the EJ's view be said to be Lucent providing Mr N the tools necessary for him to perform his duties. The EJ concluded that "…the claimant's employment status was not regulated to the extent that he could fairly and properly be described as an employee of either the first or second respondent".

Element of control
Had the EJ correctly analysed the position regarding control? No, said the EAT. The EJ had demonstrated various errors of approach:

* in reaching his conclusions on the issue of control, the EJ had not ultimately focused on and determined whether there was any contractual right to control Mr N; had the EJ been aware of the EAT decision in White v Troutbeck SA [2013] IRLR 286, the absence of control over "how" Mr Nayak would perform his duties was a factor which was likely to have had less importance. In White* it had been made clear that it is no longer the case that for a contract of employment to exist, the employer must be empowered to direct not only what is to be done, but also the manner in which it is to be done (for example, surgeons, captains and footballers can all be employees who exercise their own judgment as to how their work should be done); * the EJ should have identified all of the contractual terms between Mr N and Lucent (whether express or implied terms) and then considered whether or not they were inconsistent with the status of an employee; the EJ should also have taken account of the fact that the label applied by the parties to the relationship was not conclusive (see Massey v Crown Life Insurance Company* [1978] ICR 590 when it was said by Lord Denning MR that "if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it". The EJ may have given undue weight to Mr N's agreement to provide his services on a self-employed basis.

In the light of these errors, the EAT concluded that the EJ's decision on the preliminary issue should be set aside and remitted to be reheard afresh.

**Although it was unnecessary for the EAT to deal with the point, it mentioned that had the issue of qualifying service and Mr N's continuity of service arisen, there was a presumption in section 210(5) of ERA 1996 that "A person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous".

And whilst the continuous employment qualification is not a precondition to an ET having jurisdiction to consider a UD claim, it is required before an ET can make a finding of UD (Leicester University Students' Union v Mahomed [1995] ICR 270).

Interim relief
The Claimant made a claim of unfair dismissal before the ET, alleging that the principal reason for her dismissal was that she made protected disclosures. Pending the determination of her substantive complaint, the Claimant applied for interim relief. What is the correct test to be applied by an ET when considering whether to grant interim relief in an unfair dismissal case? The recent decision in [His Highness Sheikh Khalid Bin Saqr Al Qasimi v Robinson]() UKEAT/0283/17/JOJ provides the answer.

Statutory provisions
Under section 129 ERA 1996, where "it appears to the tribunal that it is likely" that on determining the unfair dismissal complaint, the tribunal will find that the reason (or if more than one the principal reason) for dismissal is for making a protected disclosure (or for various other specified reasons), it can grant interim relief (i.e. order the employer to continue the employee's employment until their unfair dismissal claim has been heard).

In granting interim relief, the ET had reminded itself that it had to be satisfied that the Claimant had made a qualifying disclosure and that, in her reasonable belief, it was made in the public interest and tended to show that the employer had failed, or was likely to fail, to comply with a legal obligation to which he was subject.

The ET concluded that the Claimant stood a pretty good chance of success in showing that the reason for her dismissal was because she had made a protected disclosure and was therefore entitled to interim relief.

Had the ET been right to grant interim relief? No, said the EAT (allowing the appeal in part because the ET had failed to properly address the likelihood of the Claimant succeeding on the matter of public interest in making her disclosures). Whilst it was accepted that the application for interim relief had to be determined by an ET expeditiously and on a summary and impressionistic basis, the ET had not demonstrated engagement with the question as to whether the Claimant held the relevant "public interest" belief at the relevant time. It could be that the problem was simply one of the ET's lack of explanation, or it might be the case that the ET asked itself the wrong question. Either way, their decision was rendered unsafe.

Whilst the EJ had to be careful to avoid making findings that might tie the hands of the ET ultimately charged with the final determinations in the case, he still had to give the essential gist of his reasoning which was sufficient to let the parties know why the interim relief application succeeded or failed.

For interim relief purposes, the word "likely" (when considering the prospects of success) has been held to mean that it must be shown that the Claimant has a pretty good chance of succeeding, not merely that he or she could possibly win (see Taplin v C Shippam Ltd. Therefore, in terms of establishing the public interest test, the ET had to be satisfied that the Claimant had "a pretty good chance of/was likely to succeed" in showing she had believed, at the time she made her disclosures, that these were in the public interest and that her belief was likely to be shown to be reasonable. Stepping back and considering the reasoning taken as a whole, the EAT remained unable to see that the ET had clearly addressed the question of the Claimant's belief at the relevant time and so this ground of appeal was therefore allowed.

Was the summary dismissal of a Head Teacher unfair when she had failed to notify her school of a close relationship with a man who had been convicted of making indecent images of children? No, said the Supreme Court ("SC") in [Reilly v Sandwell Metropolitan Borough Council]() [2018] UKSC 16.

Ms Reilly was a primary school head teacher who was in a close relationship with a man (Mr S). It was not a sexual relationship and Ms Reilly and Mr S did not live together. Mr S was convicted of making indecent images of children. He was made the subject of a three-year community order and of a sexual offences prevention order, which included a prohibition on his having unsupervised access to minors.

Ms Reilly failed to inform the school's governing body about the conviction. When her employer became aware of Mr S's conviction, Ms Reilly was subject to a disciplinary hearing on the basis that she had committed a serious breach of an implied term of her contract of employment amounting to gross misconduct. In light of Ms Reilly's continuing refusal to accept that her relationship with Mr S might pose a risk to pupils at the school and that her failure to disclose it had been wrong, it decided that she should be summarily dismissed.

Was the school's disciplinary panel correct to conclude that Ms Reilly was under a duty to disclose her relationship with Mr S? The answer was in the affirmative: although an employee's "conduct" within the meaning of section 98(2)(b) of the ERA 1996 can result in a fair dismissal even if it did not constitute a breach of the contract of employment (see Redbridge London Borough Council v Fishman [1978] ICR 569 and Weston Recovery Services v Fisher , the school alleged that the non-disclosure amounted to an actual breach by Ms Reilly of her employment contract. That was because Ms Reilly's contract included a requirement for her to "be accountable to the Governing Body for the maintenance of … the … safety of all … pupils".

The Panel of school governors had ruled that the case required disclosure by Ms Reilly. Mr S was the subject of a serious, recent conviction. The basis of his sentence was that he represented a danger to children. His relationship with the Head Teacher created, "to put it at its lowest", a potential risk to the children. The risk required assessment. But it was not for Ms Reilly to conduct the assessment; that was a function of the governors. Had she disclosed her relationship to them, it is highly unlikely that she would have been dismissed.

In the leading judgment, Lord Wilson held that the ET was entitled to conclude that it was a reasonable response for the school's panel to have concluded that Ms Reilly's non-disclosure not only amounted to a breach of duty, but also merited her dismissal. Lady Hale agreed, stating that reporting the connection with Mr S would have enabled a serious discussion to take place about how the risks to pupils at the school might have been avoided. But it was the absence of that full and frank disclosure and discussion which was the cause for serious concern. And the absence of any acknowledgement by the Head Teacher of what she should have done, itself made the decision to dismiss her reasonable.

*Potential new points of law
*Lady Hale went on to say that the case might have presented an opportunity for the SC to consider new points of law of general public importance. The first was around the question of whether a dismissal based on an employee's "conduct" can ever be fair if that conduct is not in breach of the employee's contract of employment. And could non-contractual misconduct justify a dismissal for SOSR?

Secondly, is the classic formulation set out in the case of British Homes Stores Ltd v Burchell *[1980] ICR 303 (and as endorsed by the Court of Appeal in Foley v Post Office , correct? Arguably, the Burchell test really only addresses the first part of the inquiry under what is now section 98(1) to (3) ERA 1996 i.e. the reason for the dismissal. In the subsequent case of Foley v Post Office [2000] ICR 1283 Mummery LJ explained that the Burchell* formula governed not only the reason for a dismissal, but also its reasonableness or unreasonableness. Since then the Court of Appeal has consistently adopted the same view.

But, said Lady Hale, the meaning of section 98(4) ERA 1996 was rightly described by Sedley LJ, in [Orr v Milton Keynes Council ]()[2011] ICR 704, as "both problematical and contentious"; he had referred to the "cogently reasoned" decision of the EAT in Haddon v Van den Burgh Foods [1999] ICR 1150 which explained what is required by ETs by section 98(4) of the ERA 1996. Lady Hale referred to the judgment of Lord Wilson in the present case when he had indicated that the Burchell requirements do not fit well into the inquiry as to the fairness of a dismissal as mandated by section 98(4). Lady Hale thought that even in relation to the first part of the inquiry (i.e. as to the reason for the dismissal), the Burchell approach could lead to dismissals which are in fact fair being treated as unfair and dismissals which are in fact unfair being treated as fair.

However, Lady Hale made very clear that the law remains as it has been for the last 40 years and she was not expressing any view about whether it was correct. She gave various examples of very good reasons that could explain why no-one has so far challenged the Burchell test.

But these issues are all for another day!

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.

Published: 09/04/2018 16:56

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