Mark Shulman, Consultant Solicitor at Keystone Law

**UNFAIR DISMSISAL

Johnson exclusion zone**
Two House of Lords cases (Johnson v Unisys Ltd [2001] IRLR 279 and Eastwood v Magnox Electric plc and another have decided that an employee cannot seek damages for breach of the implied term of trust and confidence based on the manner in which they were expressly or constructively dismissed. To allow otherwise would duplicate the employee's statutory right to claim compensation for unfair dismissal under the Employment Rights Act 1996. This is known as the "Johnson exclusion zone". Neither Johnson nor Eastwood were claims in constructive dismissal cases. Therefore, does the "Johnson exclusion zone" apply to a breach of contract claim which is for constructive dismissal? No, said the EAT in [Gebremariam v Ethiopian Airlines Enterprise T/A Ethiopian Airlines ]()UKEAT/0439/12/GE.

*Background
*The Claimant was told that she was to be made redundant by Ethiopian Airlines ("EA"). She successfully appealed internally arguing that the redundancy process was flawed. EA agreed to re-start the redundancy consultation process. However the Claimant then resigned claiming constructive dismissal on the grounds that the flawed redundancy process constituted a breach of the implied term of trust and confidence in her employment contract.

She lost her claim of constructive unfair dismissal (and various other claims) at the ET. The ET found that there had been no breach of contract by EA prior to the redundancy notice. Although the redundancy process itself had amounted to a fundamental breach of the claimant's employment contract, EA's aborting of the redundancy process meant that there was no longer any breach of contract which entitled the Claimant to bring the employment to an end and claim constructive dismissal.

The Claimant appealed, arguing that the ET was wrong in concluding that by withdrawing the dismissal notice, EA had cured a breach of the implied term of trust and confidence.

EA resisted the appeal and also cross-appealed on the basis that:

* although there had been breaches of the implied term of trust and confidence, such contractual breaches could not be relied on if they occurred in relation to the redundancy dismissal process by EA – i.e. they fell within the "Johnson exclusion zone"; and * if the ET did not find that the Claimant had affirmed any breach of the implied term of trust and confidence (thus disentitling her to claim constructive dismissal), the ET ought so to have stated.

Did the Johnson exclusion zone apply?
Logically this question needed to be dealt with first because if the Johnson exclusion zone applied, it was irrelevant whether or not there was any affirmation of the contract.

In reviewing the case authorities, the EAT referred to what Lord Nicholls had said in Eastwood v Magnox [2005] 1 AC 503:

"Identifying the boundary of the 'Johnson exclusion area', as it has been called, is comparatively straightforward. The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly. An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal."

When the Claimant complained about the decision to dismiss her without a fair redundancy process, the Claimant had not actually been dismissed. Whilst EA had given her notice of dismissal, the dismissal would not have taken effect until that notice expired. As a result of the Claimant's internal appeal, the notice of dismissal was withdrawn before it had expired.

The EAT doubted whether the Johnson exclusion zone could apply to acts of the employer which related to a decision to dismiss which was not carried through and did not result in a dismissal. So, in the present case, if the Claimant could establish that the relevant acts amounted to a breach of contract antecedent to the redundancy dismissal which was not in fact pursued by the employer, a constructive dismissal claim could still be brought.

Further, the Johnson exclusion zone applied to common law claims for damages which conflict with the statutory jurisdiction as to unfair dismissal. The Claimant in the present case was not seeking to make any common law claim. She was seeking to rely on the breaches of contract by EA in relation to the redundancy process and the letter of dismissal in order to support her statutory constructive dismissal claim. So, the Johnson exclusion zone did not apply as an answer to her unfair dismissal claim.

Could any breach of contract be "cured"?
As to whether withdrawal of the dismissal notice and reconsideration of the redundancy process could "cure" any breach of contract, the EAT stated the law was clear: once a fundamental breach of contract had been committed by the employer, the employee had an unfettered choice whether to treat the breach as terminal and to accept the repudiation and bring the contract of employment to an end, or alternatively to affirm the contract (Buckland v Bournemouth University. The ET had therefore been wrong to apparently decide that by accepting the Claimant's appeal and aborting the redundancy process, EA had cured the breach of contract which arose from the redundancy process.

Was there an affirmation?
But there remained the issue as to whether the Claimant had affirmed the contract by appealing against her dismissal. The EAT considered that it did not automatically follow that an employee who appealed against an alleged fundamental breach of contract by their employer was affirming any such breach (by in effect saying that they want the employment to continue rather than simply resigning at that stage). Therefore, it was open to an ET to find that by appealing such a decision, the employee was not affirming the contract, but seeing if they could persuade the employer to withdraw from their previous position or "to make amends". Whether that was so in a particular case must depend on the evidence.

The EAT pointed out that the ET had made no finding as to whether, by appealing or otherwise, the Claimant was intending to affirm her employment contract. Therefore, the issue of constructive unfair dismissal had to be remitted to the ET in order that the question of affirmation could be considered and decided upon.

**Internal appeals
*Can an employer still fairly dismiss, even where it rejects an appeal committee's decision to uphold the employee's appeal against dismissal? Yes, said the EAT in [Kisoka v Ratnpinoytip T/A Rydevale Day Nursery]()* UKEAT/0311/13/LA.

*Background
*The Claimant was dismissed for gross misconduct following an investigation when it was alleged that she had tried to start a fire in the nursery office where she worked. The nursery organised an independent appeal panel to hear an internal appeal. The appeal panel overturned the decision to dismiss but the nursery was unhappy with this and asked them to reconsider in the light of further information becoming available. The appeal panel refused and the nursery subsequently decided not to implement the appeal panel's decision and proceeded with the dismissal.

An ET found the investigation to have been reasonable and that the nursery had reasonable grounds for finding that the Claimant had committed misconduct. In the circumstances, the Claimant had been fairly dismissed. The principal issue in the case before the ET was whether or not, having set up an appeal with the independent panel, the nursery was bound to follow their decision. The EJ had stated:

"The test remains whether the Respondent's conduct was reasonable in all the circumstances."

The Claimant appealed to the EAT on two grounds:

* that the ET erred in concluding that the nursery was not bound by the decision of the appeal panel. As a matter of principle, a reasonable employer would not depart from an appeal panel decision without "a very good reason" amounting to an exceptional circumstance; and * that if the employer was entitled to depart from the decision of the appeal panel, the ET's decision was nevertheless wrong in law because the Claimant had not been given an effective appeal hearing (as the same manager had in effect ended up dealing with both the original dismissal hearing and the appeal hearing) .

*Appeal panel decision
*The EAT disagreed. Having regard to the test of fairness in section 98 of the Employment Rights Act 1998, to accept the Claimant's first and main ground in the appeal would be to put a gloss onto the statutory language. The EAT preferred to leave it to the "good sense of employment tribunals" to reach their judgments applying the statutory test to the individual facts of the case before them. All the circumstances have to be considered. There might be cases where on the undisputed facts, the dismissal was inevitable, as for example where a trusted employee pleads guilty to a serious offence of dishonesty committed in the course of his employment. In such a case, the employer could reasonably refuse to entertain an appeal on the ground that it would not affect the outcome of dismissal (see West Midland Cooperative Society Ltd v Tipton [1986] ICR 192).

Further, as stated in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91:

"The only test of the fairness of a dismissal is the reasonableness of the employer's decision to dismiss judged at the time at which the dismissal takes effect. An Industrial Tribunal is not bound to hold that any procedural failure by the employer renders the dismissal unfair. It is one of the factors to be weighed by the Industrial Tribunal in deciding whether or not the dismissal was reasonable..."

Accordingly, the EJ was entitled to take the view that overall the procedure was not unfair and that the decision of the employer was not unreasonable - the nursery was responsible for the welfare of children and their concern was not to re-employ a member of staff in circumstances where there were reasonable grounds to consider that the employee had tried to start a fire.

Was there an effective appeal?
It followed that in essence the second ground of appeal boiled down to whether there had been a fair procedure  overall, even though the nursery had not followed the appeal panel's recommendations.

The EAT thought that the EJ could not be criticised for reaching the conclusion that there was no overall unfairness. There was no fixed or inflexible rule which applied and so the question was essentially one of fact. The EJ was perfectly entitled to take into account the advice given in the ACAS Code of Practice, including the size and resources of an employer. The Code recognised that it may not always be practicable for all employers to take all of the steps recommended. The nursery had attempted in good faith to involve an independent appeal panel.

The EAT considered that the employer was not required as a matter of law "to do more or something different" from what it did in the circumstances of the present case. As there was no error of law in the ET's approach, the appeal was dismissed.

**Compensation adjustments
*Was an ET entitled to make a compensation deduction for contributory conduct, but refuse a Polkey adjustment when an employer had taken into account material not put to the employee in support of a misconduct dismissal? Yes, said the EAT in [Swanston New Golf Club Ltd v Gallagher ]()*UKEATS/0033/13/BI.

*Background
*The Claimant was employed by a golf club ("SNGC") as a course manager and head green keeper. A complaint was raised against him by one of the members and on further investigation the club discovered that the Claimant had been involved in an incident at another golf club (where his son was playing in a tournament) leading to allegations that he had threatened the family members of another golfer in that tournament.

The club instituted disciplinary proceedings for gross misconduct and found the Claimant guilty of dishonesty (in not disclosing the real reason for his request for time off work) and intimidatory conduct (at the golf course where his son was playing).  At some time after the disciplinary hearing and before the decision to dismiss was taken, SNGC made further inquiries and relied on information which contained a number of assertions not previously known to SNGC and which had not been put to the Claimant in the disciplinary process.
The Claimant was dismissed after an appeal.

The ET found that the Claimant had been unfairly dismissed as the decision had been influenced by allegations that had never been formally investigated. It was the ET's view that SNGC had sought to bolster their finding of guilt in relation to the two charges of gross misconduct by adding-in matters which were unrelated to the issues previously considered.

A Polkey reduction was rejected by the ET on the grounds that the failings by SNGC which it had identified were not only procedural, but substantive because "considerable information" was not put to the Claimant during the disciplinary process and so it could not make a finding to the effect that the Claimant would have been dismissed, had a fair procedure been followed. There was considerable information which was not put to the Claimant during the disciplinary process and a fair procedure would have allowed the Claimant's explanations to be fully taken into account. The ET considered it "too speculative" to suggest that dismissal would have taken place had a fair procedure been followed.

However, the ET did make a finding of contributory conduct and reduced the Claimant's compensation by 33%. The ET considered that he had been guilty of culpable and blameworthy conduct when he had gone with a "strongly built" friend to the golf course where his son had been playing. He had interrupted a professional round of tournament golf in a way which he knew was unacceptable.

Was a Polkey deduction appropriate?
At the EAT, SNGC argued that a Polkey reduction should have been made. But the Claimant made reference to the case of [Steen v ASP Packaging Ltd]() UKEAT/0023/13/LA where it had been stated by the EAT that: –

"… Polkey deductions and deductions for contributory fault are approached on different bases. They do not directly overlap. That is because the focus on a Polkey deduction is predictive: it is not historical as is the focus on establishing past contributory fault as a matter of fact. Second, Polkey focuses upon what the employer would do if acting fairly. Contributory fault is not concerned with the action of the employer but with the past actions of the employee."

In the case of SNGC, the ET had found that the dismissal had been handled unfairly and that material which was used in the disciplinary process was not given to the Claimant. Further it found that other matters were used to bolster the case against the Claimant. The EAT considered that in all of those circumstances, it was difficult to assess the chances of dismissal if matters were handled fairly. While a Polkey reduction may be applicable in all types of unfair dismissal cases, the EAT thought that it may be that those that are concerned with misconduct or capability dismissal will involve more speculation than some other cases. In the present case, the EAT would not interfere as the ET had had the benefit of hearing the evidence and had come to the view that the degree of speculation was too great.

*Assessing contributory conduct deductions
*SNGC also contended that the deduction in respect of contribution was too low. It was argued that although the ET had found that the Claimant was guilty of conduct which had caused or contributed to the Claimant's  dismissal, it had failed to explain why he was not "wholly or largely" to blame for his own dismissal and the deduction should have been in the region of 50-100%.

However, the EAT disagreed. In respect of the percentage deduction for contributory conduct, although the ET's reasoning was "sparse", it was always a matter of impression and judgement. The EAT accepted that if the contributory conduct of the Claimant had been "wholly or largely" the cause of his dismissal, then a figure of 50% or more would be reasonable. But the ET had decided that this was not such a case given the allegations made which were not proved, the "extraordinary" way in which SNGC's investigation was conducted on a piecemeal basis and the bolstering of allegations by the addition of other events which were never put to proof. All of these matters were considered to be part of the reasons for the dismissal and accordingly, the ET could fix on a figure of less than 50%. They had done so and the EAT was not prepared to interfere with that decision.

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator.