Unfair dismissal - Case Round-Up: November 2016

In this month's round-up, Mark Shulman, consultant solicitor with Keystone Law, looks at recent novel issues in unfair dismissal cases.

Mark Shulman, Consultant Solicitor at Keystone Law

Communication of dismissal**
Does a dismissal have to be communicated? Yes, said the EAT in [Sandle v Adecco UK Ltd ]()UKEAT/0028/16/JOJ, but this does not necessarily mean a direct dismissal – it can be by the employer's conduct. This novel case was said to be of importance to employment agencies and agency workers because it raised the point as to whether a dismissal can be implied by the inaction of an employment agency to find work for its employee.

The Claimant was employed by a recruitment agency (the Respondent). When an assignment as an agency worker with one of the agency's clients came to an end, both the Claimant and the Respondent failed to communicate with each other regarding the possibility of a further assignment. A P45 was generated but was never sent to the Claimant.

The Claimant claimed unfair dismissal. The ET proceeded on the basis that the Claimant had the burden of proving that she had been dismissed.

What was the status of the employment relationship at the time the Claimant's claim was lodged? The ET held that the Claimant had remained an employee of the Respondent. She had not resigned (and so there could be no constructive dismissal) and there had been no direct dismissal of the Claimant by the Respondent: dismissal must be communicated to the employee and the Respondent had done nothing to communicate a dismissal to the Claimant. She had therefore remained employed (albeit in limbo) at the time she presented her unfair dismissal claim which therefore failed.

Novel point
On appeal to the EAT the Claimant contended that the ET's decision was at odds with the law that permits a dismissal to be implied by conduct. Further she relied on section 95(1)(a) of the Employment Rights Act 1996 ("ERA") on the basis that those statutory provisions do not require communication of such termination. Section 95(1)(a) ERA provides (insofar as relevant) that:-

"(1) For the purposes of this Part an employee is dismissed by his employer if… -

(a) the contract under which he is employed is terminated by the employer (whether with or without notice)…"

Therefore, the Claimant argued, termination by an employer under section 95(1)(a) ERA should be read as covering a situation where, at the end of an assignment, an employment agency employer does nothing to find the employee any further work and subsequently issues a P45 confirming the last date of employment to be the end of that particular assignment.

Who really terminated the contract?
The EAT held that the issues under section 95(1)(a) would require consideration of "who really terminated the contract of employment". Reference was made to *[Adecco Group UK & Ireland v Gregory and Anor*]() UKEATS/0024/14/SM and UKEATS/0026/14/SM (another case on agency workers). The EAT found that case helpful because it asked:

"If the question arises…when precisely the relationship ended, the difficulties of analysis are plain. If the question arises who ended it, again the difficulties may exist. Where it is the worker who simply drifts away, loses touch and makes no use of services which remain available, then she is in no position to prove, as prove she must if she is to make a claim in respect of her dismissal, that she has been dismissed because the circumstances are at least equally consistent with her having ceased to be an employee from her own wish. There is no formal resignation in such a case, but there can be no doubt to any objective observer that the relationship has ended.

These are all issues for a tribunal…to determine …"

Therefore, if the agency had simply withdrawn work that it might otherwise have been expected to provide, it might be permissible to conclude that this constituted a dismissal, allowing for communication of dismissal to be implied (applying an objective test and taking into account all of the circumstances from an employer's conduct). It all depended on the context.

Gateway to dismissal
Section 95 of ERA had provided a gateway to unfair dismissal and afforded the Claimant the option of herself making clear that she was treating the Respondent's conduct as amounting to a constructive dismissal. Although she had chosen not to utilise that route, that was not fatal to a claim of direct dismissal. That was because the ET had still gone on to consider whether the Respondent had done anything to communicate that it was itself dismissing the Claimant.

Although a dismissal can be by word or by deed, the case law showed that an employer's termination of a contract of employment need not take the form of a direct express communication. It may be implied for example by the failure to pay the employee, by the issuing of a P45 or by the ending of the employee's present job and offer of a new position. In each of those types of cases, there was a form of communication and the employee was made aware of the conduct in question - conduct that was inconsistent with the continuation of the employment contract and in circumstances where there were no other contraindications.

The legal test is how the employer would be understood by the objective observer in the relevant context - had the employer communicated its unequivocal intention to terminate the contract? In the present case, the answer to that question was in the negative. Whilst in other circumstances a failure to provide work could constitute the employer's communication of dismissal, agency workers may well experience gaps between assignments that will not fit the standard direct employment model; the context was crucial.

Accordingly, the Claimant had not demonstrated that anything had been done by the Respondent to communicate it had dismissed her. The Claimant had not treated herself as constructively dismissed; nor had anything been communicated to her by the Respondent that the ET concluded amounted to a dismissal. The employment relationship remained "in stasis". The appeal therefore failed.

As the EAT itself indicated, ultimately the insurmountable difficulty for the Claimant was that she had to prove that she had been dismissed. Whilst it was potentially possible to imply communication of dismissal by conduct, she was on the facts unable to demonstrate that she had actually been dismissed. The position might have been different had the Claimant chosen to claim constructive dismissal or had there been other factors tending to show a direct dismissal.*

Disputed warnings and dismissal
Had an EJ been right to consider a disputed final written warning when deciding whether the Claimant was unfairly dismissed? Yes, said the EAT in [Appiah v Compass Group UK & Ireland Ltd]() UKEAT/0129/16/DM.

The Claimant was given a final written warning after it was found that she had committed a serious act of insubordination by refusing to comply with a management request to do work at another site. This warning was to remain on her record for 12 months. She did not appeal against the warning.

Within the 12-month period the Claimant was charged with a further disciplinary offence and a disciplinary hearing was convened. At no stage during the disciplinary hearing (at which the Claimant was represented by her union) did she suggest that the final warning had been wrongly imposed. That previous final written warning was taken into account and the Claimant was dismissed.

The Claimant then instructed solicitors to assist her with an internal appeal against dismissal. At that stage, the original final warning was challenged, although she did not allege that it was issued in bad faith. The employer's letter dismissing her appeal included a statement by the manager hearing the appeal that "…the level 3 warning that you had on file for misconduct was duly considered".

*Bad faith
*At the beginning of the ET hearing considering the Claimant's claim of unfair dismissal, the Claimant's representative sought to introduce a new issue - whether the final written warning had been imposed in bad faith so that the EJ had jurisdiction to get behind it and investigate whether it should have been disregarded.

But the EJ did not allow this issue to be added (it is legitimate for an employer to rely on a final warning, provided that it was issued in good faith, that there were at least prima facie grounds for imposing it and that it must not have been manifestly inappropriate to issue it: Davies v Sandwell Metropolitan Borough Council. The ET found that the Claimant had been fairly dismissed by reason of her conduct.

The Claimant appealed to the EAT, arguing perversity in the EJ's finding that the Respondent's manager at the appeal had investigated the earlier warning. The argument was that even if the EJ was not required to reopen and reconsider whether the final written warning was to be disregarded as being in bad faith, nevertheless the EJ was still required by section 98(4) of ERA to ask whether the Respondent had acted reasonably in addressing the Claimant's grounds put forward for the internal appeal.

Overall dismissal process
The EAT confirmed that it has long been established that it is part of an EJ's task under section 98(4) of ERA to consider the substance of what happened throughout the dismissal process including the appeal and to consider whether the process overall was fair by the standards of section 98(4) (see West Midlands Co-operative Society Ltd v Tipton [1986] ICR 192 HL at 202, and Taylor v OCS Group Ltd .

It was plain from the EJ's Reasons that she considered it to be part of her task to consider the appeal stage and the way in which the manager hearing the internal appeal dealt with the points put forward at the appeal. Both in her findings of fact and in her conclusions, she had taken into account the process as a whole including what happened at the appeal stage. The key point was that there are limits to the extent to which an employer can be expected to revisit what took place at an earlier stage of the process. Whilst it was not reasonable to expect the appeal hearing manager to reinvestigate witnesses relating to the earlier disciplinary process, it was reasonable to expect him to look at the file to see whether there was anything which rendered it inappropriate to rely on a final written warning. This had been the EJ's approach and the EAT could see nothing wrong in that approach.

The EJ had stated that the appeal hearing manager "...did consider the earlier warning as it was raised in the appeal documentation sent to him. He investigated it and confirmed that it had been correctly imposed". In this context, the EAT thought that the word "investigate" did not mean interviewing witnesses and reaching fresh conclusions, but was used to refer to the manager taking time to consider the documentary material he had. It was true that the ET had not heard evidence from that manager (as he had left the Respondent's employment), but the EJ did have minutes of the appeal hearing and the appeal hearing manager's letter dismissing the Claimant's internal appeal.

Therefore, a perversity challenge was not made out and the EJ had approached the matter correctly in law. It followed that the appeal was dismissed.

Reasonableness of dismissal
Was it reasonable to dismiss an employee without a hearing when that employee had unilaterally terminated a secondment to a third party? Yes, said the EAT in the factually unusual case of [Dye v Royal Free London NHS Foundation Trust ]()UKEAT/0350/15/DA.

The Health Trust had an arrangement with a third party (RAFT) whereby the Trust would employ such people as RAFT required. The individuals in question would be employed and paid by the Trust although RAFT would reimburse their salary costs and they would be seconded to work under the supervision of RAFT. The Claimant, a research scientist with particular expertise in biochemistry, cell biology and angiogenesis, was one of these individuals.

Following a period of suspension by RAFT following allegations of misconduct, the Claimant himself terminated his secondment with them, but maintained he still remained employed by the Trust and he submitted a grievance about his position.

The Trust maintained that he was employed by RAFT and asserted that in any event, the Claimant's decision to terminate his secondment also terminated any contractual relationship he had with the Trust (either because the termination with RAFT constituted termination of employment with the Trust, or alternatively because there was a fundamental breach of contract in terminating the secondment or frustration of the purpose of that contract). The Trust went on to say in correspondence with the Claimant's solicitors that "For the avoidance of doubt, in case his contract was not already terminated, we confirm that our letter of 6 November and/or this letter should be taken as having the effect of terminating that contract for these reasons".

The Claimant lodged claims of unfair and wrongful dismissal. The Trust's defence at the ET was primarily that the Trust was not the employer, but various other arguments were advanced including that if there had been a dismissal, it was either fair as a dismissal for SOSR (that the sole purpose of his employment was to work at RAFT and that was no longer possible and there was no alternative employment available), or for a reason related to the Claimant's conduct (the Claimant having committed an act of gross misconduct by unilaterally terminating his work at RAFT and thus refusing to perform the work for which he had been employed).

The ET found that the Trust was the employer and had dismissed the Claimant for a reason related to the Claimant's conduct (i.e. his termination of the secondment with RAFT without prior consultation with the Trust).

Whilst having regard to the ACAS Code, the ET considered that its provisions were concerned with disciplinary situations and grievances, the Claimant's situation was unique and there was no procedure for the Trust to follow in those circumstances. No investigation was required and whilst the Trust might have held a meeting, it would inevitably have decided to dismiss the Claimant. Having regard to all of the circumstances, dismissal was a reasonable sanction.

Neither, it concluded, was this a wrongful dismissal. The Claimant's action in relation to the secondment amounted to a rejection of his contract with the Trust, its purpose having been so that he could work for RAFT. Having rejected the fundamental purpose of the contract, the Claimant himself had committed a fundamental breach and the Trust had been entitled to dismiss him summarily.

Claimant's appeal
The Claimant appealed on three main grounds:

(1) the ET had substituted its own view rather than finding what had led the Trust to take the decision it did. It was suggested that the ET had constructed its own reason when the EJ stated  "… My view is that the reason [for dismissal] was …";

(2) there was no evidence that the reason found by the ET had been the Trust's reason for dismissal. The Trust's primary contention at the ET was that it had not been the Claimant's employer. However, the Trust's interim Assistant Director of Workforce had stated in evidence to the ET that in the unusual circumstances that neither she nor anyone else at the Trust had taken any decision to dismiss the Claimant. She went on to say in evidence that hypothetically:

"The Royal Free would have been forced to invite [the Claimant] to a hearing and dismiss him... Realistically, I suspect it would have taken 3 weeks to convene a hearing, although given that [the Claimant] was refusing to work, his pay would probably have been stopped in the interim anyway".

That suggested that the Trust would in fact have followed some kind of procedure even if ultimately the decision would have been that his employment had to be terminated before making a decision on dismissal. As it did not hold such a meeting, it could not have made a reasoned decision;

(3) the ET's findings in respect of unfair and wrongful dismissal were perverse.

Unusual factual matrix
The EAT acknowledged that the ET was faced in this case "with an unusual factual matrix". Given that the Trust was an organisation and not a single individual, it was common ground that the ET needed first to determine who the relevant decision taker was. It would then need to assess the subjective reason operative upon the mind of that individual that caused the Trust to dismiss the Claimant.

So far as the unfair dismissal case was concerned, it was not for the ET to decide what might have led it (that is, the ET itself) to dismiss. However, it was clear from the evidence and the ET's Reasons that the Trust's interim Assistant Director of Workforce had made the decision to dismiss. Her correspondence with the Claimant's solicitors had stated that insofar as there had been no earlier termination, "…we confirm that our letter of 6 November and/or this letter should be taken as having the effect of terminating that contract for these reasons". Therefore, there was no error of substitution by the ET.

As to the reason for dismissal, it was for the ET to make a finding as to the real reason for the dismissal and the EAT was satisfied that it had done so: that was the Claimant's conduct in terminating the secondment with RAFT without consultation with the Trust.

Range of reasonable responses
Was the Trust's decision to dismiss within the range of reasonable responses? No, said the EAT. It was true that the Claimant had acted in a way that removed the very purpose for his employment and had failed to forewarn the Trust before doing so. But as acknowledged by the Trust's interim Assistant Director of Workforce, the procedural steps that the Trust itself had envisaged would have required some form of hearing. Therefore, the Trust had not concluded that all procedural steps would be futile. Secondly, on the ET's own findings, the reason the Trust had not proceeded with the hearing was because it would have conflicted with its primary stance that the Claimant was not its employee.

Furthermore, although the ET had rejected the relevance of the ACAS Code on the basis that it dealt only with discipline and grievance cases, the EAT considered the Code would also be relevant to a conduct dismissal as in the present case (this was not a dismissal for SOSR).

Accordingly, the EAT was not persuaded that the ET's reasoning on the question of reasonableness was safe and given the evidence of the Trust's interim Assistant Director of Workforce about what the Trust would have done, it was "almost certainly wrong". The perversity appeal on the unfair dismissal claim was therefore allowed and the case remitted to the same EJ for consideration of remedy (which was likely to be concerned with Polkey issues and contributory fault).

Wrongful dismissal
The ET had concluded that it was the Claimant who had been in repudiatory breach of contract by terminating the secondment with RAFT. He had ended the secondment for which he was employed and had done so without first notifying the Trust or seeking its agreement. The EAT was in those circumstances unable to say that the Claimant could establish perversity in that conclusion of the ET.

This case highlights that a hearing of some kind will normally be required in order to have a fair dismissal. The ACAS Code (paragraph 12) requires that the employer should hold a meeting to "explain the complaint against the employee and go through the evidence that has been gathered".  Even in the most serious cases warranting a summary dismissal, employers must follow a fair and reasonable procedure before the dismissal. Tribunals can adjust any compensation awards made in relevant cases by up to 25 per cent for unreasonable failure to comply with any provision of the Code.*

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: 07/11/2016 11:41

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