United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR CHRIS QUINN (of Counsel) Instructed by: Simons Muirhead & Burton 8-9 Frith Street London W1D 3JB
For the Respondent	MR DANIEL BARNETT (of Counsel) Instructed by: Gregsons Solicitors St Christopher's House Tabor grove Wimbledon London SW19 4EX


 


SUMMARY

UNFAIR DISMISSAL – Reason for dismissal including substantial other reason

JURISDICTIONAL POINTS – 2002 Act and pre-action requirements

On remission of this unfair dismissal case, a second Tribunal found the reason for dismissal was loss of £3000 in cash. But the evidence from the manager who dismissed the Claimant was that she believed she had stolen it. This dishonesty was never put to the Claimant and the finding of fair dismissal was set aside, applying Strouthos v LUL.

Since the Step 1 letter did not mention theft, it did not comply with the 2002 Act regime.

At the parties' invitation the EAT found the reason for dismissal was theft and it was unfair for the above reasons. Remitted to the same Employment Tribunal to decide remedy ie Polkey and contribution.


 


HIS HONOUR JUDGE McMULLEN QC

1. This case is about the fairness of a procedure adopted for the dismissal of an employee. We will refer to the parties as the Claimant and the Respondent. It is the judgment of the court, to which all members appointed by statute for their diverse specialist experience have contributed as specifically invited by both counsel so to apply it.

Introduction

2. It is an appeal by the Claimant in those proceedings against a judgment of an Employment Tribunal sitting over three days under the chairmanship of Employment Judge Spencer at London (South) registered with reasons on 13 July 2009. The Claimant represented herself; the Respondent was represented by its Employee Relations Director, effectively the parties were in person. Today they are represented by Mr Chris Quinn and Mr Daniel Barnett of counsel.
3. The Claimant made a number of claims but relevant to the appeal is only her claim for unfair dismissal. The Respondent contended it dismissed her fairly having followed a correct procedure.

The issues

4. The issues in this case have been refined on a number of occasions. The outcome of the claim was the dismissal of the Claimant's unfair dismissal claim. She appeals. The judgment itself is the product of a successful appeal by the Respondent at a hearing before His Honour Judge Ansell and members (UKEAT/0152/08). At that hearing the finding in favour of the Claimant was set aside and the case remitted in full to a freshly constituted Employment Tribunal. The procedure following the second hearing was first the consideration by Underhill P on the paper sift, whose view was that the case should go to a preliminary hearing because of the issues involved, the President noting that ostensibly it was unsatisfactory for the Claimant to be dismissed on a basis which was not the basis for dismissal.
5. At the preliminary HHJ Peter Clark and members decided that the grounds which had been produced by Mr Quinn then appearing under the aegis of the ELAA Scheme should go forward. Drafted amended grounds of appeal were settled under his guidance but in the name of the Claimant and that division of the EAT recognised the points which would have a reasonable prospect of success before a full hearing. Today he and Simons Muirhead & Burton instructing him appear pro bono.
6. I had stayed the appeal pending a review of the second judgment. There was no review, it being rejected as having no reasonable prospect of success by EJ Spencer. Prior to today the Claimant's case now has been considered seven times judicially.

The legislation

7. The legislation is not in dispute, nor is the Tribunal's brief summary of it. The relevant provisions which apply are the Employment Rights Act 1996 section 98(1)(a)(b) and 98(2)(b) and section 98(4):

"(1) In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show—

(a) the reason (or, if more than one, the principal reason) for the dismissal, and.

(b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.

(2) A reason falls within this subsection if it—

(b) relates to the conduct of the employee.

(4) Where the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)—

(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and.

(b) shall be determined in accordance with equity and the substantial merits of the case."

8. In addition, under the now repealed 2002 Employment Act regime under the heading of procedural fairness, section 98A requires the steps set out in 2004 Dispute Resolution Regulations, to be complied with and in particular, so far as a dismissal is concerned for a step 1 letter to be sent. Step 1 is a reference to Schedule 2 of the Employment Act 2002 and reads as follows:

"1 (1) The employer must set out in writing the employee's alleged conduct or characteristics, or other circumstances, which lead him to contemplate dismissing or taking disciplinary action against the employee.

(2) The employer must send the statement or a copy of it to the employee and invite the employee to attend a meeting to discuss the matter."

9. The next stage is a step 2 meeting but prior to that the material set out in paragraph 2 must be sent and this is the following:

"(1) The meeting must take place before action is taken, except in the case where the disciplinary action consists of suspension.

(2) The meeting must not take place unless—

(a) the employer has informed the employee what the basis was for including in the statement under paragraph 1(1) the ground or grounds given in it, and.

(b) the employee has had a reasonable opportunity to consider his response to that information."

10. The consequences of a failure by the employer to carry out a relevant step is that the dismissal is automatically unfair. There may be consequences for purposes of unfair dismissal compensation.

The facts

11. The Respondent provides catering services at educational facilities. It employs 7,000 people. It is paid a fee for the services. Takings from the pupils and staff belong to the client, that is the school. The Claimant was employed on 25 July 2005 as Chef Manager at Merton Sixth Form College, at one of two sites of that establishment in southwest London. She had been employed at a rate of £1539 a month.
12. Early on in her career the Claimant had noted that there were discrepancies in reporting of stock, as a result of which her previous manager, on investigation, was criticised and the loss of £5,400 was discovered. He resigned. That is part of the background indicating that the Claimant knew about the procedures for accounting for stock and cash. She had been on relevant training.
13. On 14 November 2006, according to Claimant's claim form, she had collected £3,400 in cash, £3,000 of which was in £20 notes which she had counted and placed in a bag to go to the bank. She had handed this bag to the courier for the bank, Securitas, and she had placed the relevant signed slips in the bag. It contained a signature of Miss Haynes. The Tribunal found, contrary to the Claimant's case that Miss Haynes had neither seen the money nor it being counted nor placed in the bag. Miss Haynes was given a final written warning in disciplinary proceedings for that failure.
14. The bank reported that £400 and not £3,400 had been received. There was an investigation. She was sent a letter on 16 November 2006, the first of many pieces of correspondence from the Respondent, which the Tribunal held to be inadequate and lazy, as to which there is no challenge.
15. The first that the Claimant knew formally about the Respondent's concern, following a telephone call, was what was set out in a letter of suspension on 16 November 2006, from Anthony Gaston, her general manager. The investigation was to be conducted into "serious allegations: Loss of £3,000 cash banking/inaccuracy in banking". The letter went on:

"Following consideration of alternatives to suspension, we have concluded that this is the most appropriate action at this time, subject to on-going reviews. It does not mean that you have been, or will be found guilty of any particular offence or act of misconduct."

16. On 28 November 2006, the investigation had been concluded and Amy Smith the operational manager wrote this:

"Having considered the matter fully I can confirm you are required to attend a disciplinary hearing for the following reasons:

Incorrect reporting of stock figures

Following of financial procedures

Discrepancies in banking."

She was told this could lead to her dismissal and the meeting was to allow her to put forward her version of events and supporting information.

17. This is relied on by the Respondent as its step 1 letter under the 2002 Act regime. The meeting could not take place because of a number of personal difficulties, which were accepted but the Respondent. On 16 January 2007, plainly anxious that her hearing take place quickly, she said this having outlined the medical difficulties which she faced:

"I would thereafter see no reason why I would unable to attend the hearing as the whole matter itself is very distressing as basically it appears that I am being accused of theft of £3000."

18. The hearing was eventually set up for 4 April 2007. A further letter was sent on 30 March 2007 and the same allegations were put. At the meeting a number of issues were discussed. A decision was not made by Miss Smith but further enquiries were made, so that there was a further hearing on 30 April 2007. This was said to be a hearing of the Claimant's grievance. The Tribunal again criticised the Respondent about its paperwork and held that this was clearly part of the disciplinary process and should have been so determined.
19. Miss Smith decided to dismiss the Claimant. The Tribunal said this:

"33. Following the hearing Ms Smith decided to dismiss the Claimant. The crucial issue was the loss of the £3,000. It was her view that either the money was stolen or it was never in the bag (because it had been taken over the period before). She considered if it had been stolen and concluded that it could not have been taken by Securitas or the bank as the seal was unbroken when it arrived at the bank and it had been opened by the bank in front of another employee. If it had been stolen it had been taken by the Claimant. However, she concluded that the money was never in the bag and had been taken by the Claimant previously. The Claimant had written the banking slip, put the money in the bag and handed the bag over. Ms Haynes had not seen any money being put into the bag in breach of procedures. Ms Smith gave evidence that she considered it was highly improbable that such a high % of the takings from a student population could have been in £20 notes. She did not accept the Claimant's account that the missing paperwork had been at the site when she was suspended. As for the discrepancies in stock, she considered that even if the Claimant had not entered the figures for the three disputed weeks she had not denied that she had entered the wrong figures on two of the weekly trading summaries.

34. Despite the deficiencies in the letter of dismissal (see below), which might go to credibility, we are satisfied that Ms Smith properly considered all relevant issues in deciding to dismiss the Claimant. We would add that the documentation in this case has fallen well below the standards that we would expect of a good employer. (The notes of the hearings are brief to the point of minimal and the correspondence relies too much on pro forma and is insufficiently tailored to the individual case.)"

20. The reflection of Miss Smith as to the reason for dismissal was given in her witness statement, but her contemporary account is given in the dismissal letter of 2 May 2007, reporting that she had dismissed the Claimant under the company's disciplinary procedure for "Incorrect reporting of stock figures. Failure to follow the company financial procedures. Discrepancy in banking during September and October 2006." An account was given of the points made by the Claimant. She was given a final date of 3 May 2007 and a payment pursuant to her contract of employment of 4 weeks in lieu of notice. She had a right of appeal and no issue arises about that.
21. The Tribunal addressed itself to the statutory provisions relating to the reason for dismissal and came to this conclusion:

"51. We are satisfied that the reason for dismissal was the Respondent's genuine belief that the Claimant had been guilty of misconduct, specifically that the Claimant was responsible for the loss of £3,000."

It then considered section 98(4), fairness, and said this:

"53. Turning to section 98(4) we considered whether the Respondent had arrived at its belief in the Claimant's misconduct on reasonable grounds and after reasonable investigation. If the only charge against the Claimant had been that the stock had been incorrectly inputted into the computer, then we would have found that the dismissal was unfair. Ms Smith failed to carry out sufficient investigation into who closed the books on those dates. The Claimant had said one thing and Mr Gaston had said another. It was open to the Respondent to do significantly more to establish if the Claimant had come in during sickness or holiday to close the books. It should have been possible to check with IT and who had logged on to the system or to press Mr Gaston for fuller information.

54. However the primary charge against the Claimant was that £3,000 had gone missing. Given the evidence from the bank, the Claimant's own evidence that she had been in control of the money until the time it was handed over to Securitas, and Ms Haynes evidence that she did not see the money before it was put into the bag it seems to us that there were sufficient grounds to dismiss the Claimant. The checks about stock figures were undertaken to see if there could be another explanation. They did not provide that explanation."

22. As to the allegation of theft, the Tribunal found this:

"57. It was not unreasonable not to tell her that she was being investigated for theft. The charge was 'missing banking'. If there had been a good explanation then it was clearly better not to have charged the Claimant with theft. In any event the Claimant understood the seriousness of the charge as set out in her letter of 16th January."

There was then a reflection under section 98A(2), the Tribunal held that the step 1 letter complied with the statutory regime. The Respondent showed on the balance of probabilities that given the fact of the missing cash, in respect of which no explanation had been presented, the Claimant would have been dismissed if a fuller appeal had been allowed.

The Claimant's case

23. Mr Quinn says that it raises a fundamentally important proposition, which is that it is unfair to dismiss an individual for theft without first telling her that that is the charge against her.
24. The grounds of appeal could not be simpler. The first is that the Tribunal substituted its own reason for the dismissal for that of the dismissing officer. Secondly, since theft was the reason for the dismissal, the Tribunal was bound to find the dismissal unfair because it had not been put. Similarly for the purposes of section 98A, the dismissal was automatically unfair and so the dismissal could not come within the band of reasonable responses.
25. The basis of the assertion as to the reason for dismissal is contained, says Mr Quinn, in the evidence in-chief of Miss Smith. On six occasions she asserts the reason for dismissal as being her belief that the Claimant had stolen £3,000. Although there were issues relating to the Claimant's report of stock and there were discrepancies about that, they paled into insignificance compared with the theft of £3,000. Put in its most direct state she says this:

"I formed the reasonable belief that the Claimant had stolen the £3,000."

26. Mr Quinn contends since that was the reason, the Tribunal should not have found the more neutral reason, that is that there were losses of £3,000, which the Tribunal decided was the reason for dismissal. Similarly since that was the reason for which the Claimant was dismissed and was to be disciplined, that should have been foreshadowed explicitly in the step 1 letter and without it the dismissal is automatically unfair.
27. He contends that the Claimant did not know that that was the specific charge put against her. Seeking to pre-empt the argument of Mr Barnett that the Tribunal found the Claimant was well aware that she was facing allegations of theft, Mr Quinn contends that when the Claimant wrote her letter, cited above, the Respondent's approach was not to clarify the situation. It did not say: indeed we are accusing you of theft, or seek to allay the Claimant's fear, which it could have done.

The Respondent's case

28. Mr Barnett contends on the basis of that finding that the absence of the clear charge of theft made no difference. He contends that the reason for dismissal was the neutrally worded loss of the money: he eschews any suggestion that the Claimant was dismissed for theft. He relies on the Respondent's answer in the Employment Tribunal and the letters indicating words other than theft, that is loss of £3,000 cash. That is what the Tribunal decided, which it was entitled to do.
29. Further, evidence as to the reasoning of the employer that this was not a theft matter comes from the payment by the Claimant of her money in lieu of notice.
30. Mr Barnett accepts that if the step 1 letter should have included a reference to theft, the dismissal would be automatically unfair and there is no need to consider whether the step 2 procedure was carried out.

The legal principles

31. The legal principles in this case emerge primarily from Strouthos v London Underground [2004] IRLR 636 CA, where Pill LJ, giving the main judgment said this:

"12. It is a basic proposition, whether in criminal or disciplinary proceedings, that the charge against the defendant or the employee facing dismissal should be precisely framed...

38. However, it does appear to me to be basic to legal procedures, whether criminal or disciplinary, that a defendant or employee should be found guilty, if he is found guilty at all, only of a charge which is put to him. What has been considered in the cases is the general approach required in proceedings such as these. It is to be emphasised that it is wished to keep proceedings as informal as possible, but that does not, in my judgment, destroy the basic proposition that a defendant should only be found guilty of the offence with which he has been charged.

39. Counsel referred to Spink v Express Foods Limited [1990] IRLR 320, the Employment Appeal Tribunal (Wood J (President) presiding) said:

"It is a fundamental part of a fair disciplinary procedure that an employee know the case against him. Fairness requires that someone accused should know the case to be met; should hear or be told the important parts of the evidence in support of that case; should have an opportunity to criticise or dispute that evidence and to adduce his own evidence and argue his case."

40. In Fuller v Lloyds Bank PLC [1991] IRLR 336, the Employment Appeal Tribunal (Knox J presiding) made a statement to a similar effect. In Bentley Engineering Company Limited v Mistry [1978] IRLR 436 (Slynn J presiding), it was stated that 'there is no particular form of procedure that is to be followed. In any and every case, it is all a question of degree'."

32. Strouthos was a case where a specific allegation of dishonesty was not put to the employee and the dismissal was held to be unfair. These were general principles. As to situations where the employee knows the allegation, but it is not put squarely to him, the EAT has decided three cases broadly indicating that provided the employee knows the substance of the charges against him or her, the procedure will be fair (see Spink and Fuller cited above in Strouthos, and Clarke v Trimico [1993] IRLR 148).
33. As to the 2002 Act regime, the judgment of Elias P in Alexander v Bridgen Enterprises [2006] IRLR 422, contains the appropriate approach. As he said:

"38. We agree with Mr Barnett that at step one the employee simply needs to be told that he is at risk of dismissal and why. In a conduct case this will be identifying the nature of the misconduct in issue, such as fighting, insubordination or dishonesty."

34. There was a further reflection on the importance of these provisions in Elias P's judgment Silman v ICTS (UK) Ltd EAT/063/05, where he said this:

"22. … The purpose of these procedures is to ensure that there is a proper and fair opportunity for the parties to seek to address any disciplinary issues and other matters which may lead to dismissal prior to the matter ending up in litigation before the Employment Tribunal. It is not to create unnecessary technical hurdles for either employer or employee. It will frequently happen in the course of a disciplinary hearing that the evidence emerging will identify potentially disciplinary conduct which, although closely related to the original alleged misconduct, is a variation of it. That, it seems to us, is precisely the position here. There is very little difference between the original complaint, which was unauthorised absence, and misuse of company time which stemmed from the Appellant sitting in his car and not effectively carrying out work for the benefit of the company. In both cases, the essence of the complaint is that no work is being done for the company. Whether that is because the employee is at home or sitting in his car is of no real materiality, so it seems to us. Shifts in the focus of the case will not lead to an obligation for the employer to write fresh missives on each occasion. Of course, there will be cases where the employer wishes to deal with a quite distinct act of misconduct which has emerged at some stage as a result of the disciplinary or investigative process for earlier alleged acts of misconduct. In those circumstances, it would be necessary to comply with the procedures, so that the employee knows in advance precisely what case he has to meet, to send a fresh statement in writing.

23. Mr O'Dair suggests that in this case the employee was not able to consider in advance how he should respond to the case of misuse of company time. We think that is, with respect, fanciful. He had the witness statements and he knew that what was under consideration was his behaviour during the course of the two days, 10 and 11 October. When he indicated, in respect of another matter that was raised with respect to his conduct on 1 October, that he had not had a proper opportunity to deal with that, the employers did not pursue it further."

Discussion and conclusions

35. Applying those authorities to the present case, we mainly uphold the submissions made by Mr Quinn. The first issue is to decide the reason for dismissal. Employment Rights Act 1996 s98 requires the employer to show a reason.
36. We do not consider it apt to criticise the Tribunal for substituting its judgment as to the reason for dismissal. That is the language generally used in dealing with errors found on appeal of the Tribunal's judgment under section 98(4). By section 98(1) and (2), the Tribunal must find what the reason was. In this case a number of reasons were put forward by the Claimant: one which is not live now is that she had made a protected disclosure. Nevertheless, the reason shown by the employer was in two forms here. The ET3 contended for what we call the neutral position, the loss of £3,000, for which it held the Claimant responsible. However, the Tribunal heard from Amy Smith, the manager who dismissed the Claimant. As we have indicated, her evidence was unequivocal. She believed the Claimant was guilty of theft. But she did not say this to her.
37. The Tribunal in its findings on many occasions uses the neutral phraseology "the missing £3,000". This is an error. The Tribunal should have accepted the sole live evidence as to the reason for dismissal emanating from the decision maker, Miss Smith, and decided that the reason was a genuine belief by her that the Claimant had committed theft of £3,000. That being so, the Tribunal was not entitled to adopt the softer neutral approach, which had been set out in the letters and in the ET3.
38. The Respondent may not rely on the protest by the Claimant, cited above, that she thought she was being accused of theft. This was the opportunity for the Respondent to make clear what it was being alleged against the Claimant. As is plain from Strouthos, it is a fundamental right that someone who is being accused of dishonesty should have that point made to them. We indicated to Mr Barnett, in response to his submission that what Pill LJ had said in Strouthos was not binding, that we would apply it. Pill LJ was giving elementary guidance as to fairness in all proceedings, including internal discipline in the workplace.
39. We do not accept Mr Barnett's simple distinction between theft and non-culpability. Money can go missing for a range of reasons, some culpable some not, and on the other hand, through dishonesty. Money can be lost through inefficiency, mistake, the crimes of others or the crime by a particular employee. An employer approaches the loss of money in different ways according to what the results of its investigation are. There are bound to be different responses from an employee accused of negligence, inefficiency and dishonesty. It was not spelled out to her that what was put against her was the last. Thus the clear finding which ought to have been made on the evidence of Amy Smith was that the Respondent believed, on reasonable grounds, that she was guilty of theft. This ground succeeds.
40. That takes us to the second ground which is that if it was theft, the dismissal was bound to be unfair. We agree with that. During the course of argument we canvassed with counsel what the likely disposition of this case would be if our view were to support the appeal. The approach we take is that the reason for dismissal being theft, the dismissal was procedurally unfair. So an elementary step in the procedure relating to section 98(4) was not complied with, that is alerting the Claimant to the charge of dishonesty which she faced which the manager had in mind.
41. Faced with the prospect of a further remission a third time to an Employment Tribunal, the parties seem to be content for the decision to be made by us. It is the logical conclusion of a failure to put the allegation of theft to the Claimant that the dismissal is unfair under section 98(4). The finding that it was fair cannot stand.
42. The third ground of appeal relates to automatic unfair dismissal. As a matter of logic the analysis we have given above ought to yield the result, that the dismissal was automatically unfair. We do not take such a mechanistic approach and look at this ground separately but we reach the same conclusion. The steps to be taken in step 1 are rudimentary as has made clear from the citations we have given from Silman and from Alexander.
43. But this is not a case, where something emerges from a disciplinary hearing, it changes the character of the hearing where there is a charge of theft of £3,000. Just to take the passage we have cited from paragraph 38 of Alexander, it is plain that the delineation of conduct into issues such as fighting, insubordination or dishonesty is important. In this case loss of £3,000 is not equated with dishonesty. So, it follows the basic requirement of a step 1 letter was missing, that is to tell the employee she is at risk of dismissal for theft. So our decision is this is an automatic unfair dismissal.
44. We have considered whether section 98A(2) might avail the employer but, of course, this would not apply where there has been a failure to follow a step 1 letter. So section 98A(2) is not available to it to turn what would otherwise have been an unfair dismissal into a fair dismissal.
45. The next issue is whether or not the decision to dismiss fell within the band of reasonable responses. The Tribunal makes its finding against the Claimant on this. But this cannot stand in the light of our findings above. The procedural defect affects the decision and the simple issue therefore is that the dismissal was unfair on ordinary terms under section 98(4) and unfair under section 98A.
46. The consequence of that, as both parties acknowledge, is application of Polkey v AE Dayton Services Ltd [1988] ICR 142 HL and contributory conduct. The Employment Tribunal reflected upon those matters. It may already have had argument upon it. Mr Barnett's stance is that these grounds are now to be fully argued. They have some force. The Claimant is now in possession of a finding of unfair dismissal on the ground of theft, which was unfair because of the procedure adopted by the employer. It is now open for a decision to be made on Polkey which might wipe out the whole of any compensatory award, and contributory conduct, which might do the same.

Disposal

47. The appeal is allowed and the dismissal is held to be unfair. Having heard submissions, the case is remitted to the same Employment Tribunal to decide remedy.