Unfair Dismissal and Wrongful Dismissal Claims - Assignment Example

 Unfair Dismissal and Wrongful Dismissal Claims of Janice and Kelsey & Termination of Steven’s Employment This memorandum of advice sets out the recommended course of action for the Company to take in respect of Janice and Kelsey’s submitted claims for Unfair Dismissal and Wrongful Dismissal along with the priority action points to address in ensuring that the Company lawfully terminates Steven’s employment. In addressing these issues, I shall consider Janice and Kelsey’s claims in section 1, followed by a discussion of Steven’s legal position in Section 2. Scenario 1: Janice & Kelsey 1.1 Introduction As the HR manager for the Company, it is imperative to highlight from the outset that the central problem with regard to Janice and Kelsey’s claims is the method in which their employment was terminated (Pitt, 2007). Additionally, I have concerns about the management structure for addressing employee grievances and policies in place to deal with disciplinary issues (Pitt, 2007). The implementation of appropriate policies and consistent application of these within the internal corporate hierarchy is vital and Tribunals view failures to comply with proper disciplinary procedures seriously. Therefore, the manner in which the Company handled the termination of Janice and Kelsey’s employment will strengthen their claims. Accordingly, I shall evaluate my findings with a consideration of Janice’s legal position first, followed by a consideration of Kelsey’s claim. 1.2. Findings: Janice The first requirement for a valid claim for unfair and wrongful dismissal is that Janice was an employee of the Company. if we firstly consider statutory law, section 230 of the Employment Rights Act 1996 (ERA) defines an employee as “an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment”. The section 230 definition has been criticised for being ambiguous (Honeyball & Bowers. 2006) and it is also necessary to refer to the common law test for defining the status of employee, which I shall consider in context of Janice’s legal position. The starting point for determining whether an individual is an employee is the “control” test (Honeyball & Bowers. 2006). This was established in Yewens v Noakes (1880 6 Q.B.D. 530), where Bramwell LJ asserted that “A servant is a person subject to the command of his master as to the manner in which he shall do his work” (at p.532-533). However, socio-economic developments in the labour market have changed the shape of employment status, thereby undermining the suitability of the control test as a sole determinant of employment status (Pitt, G. 2007). Whilst the test for determining employee status has continued to evolve, in the current scenario there doesn’t appear to be any contention that Janice was an employee of the Company both under the ERA and common law definition. Therefore, as an employee, Section 98 of the ERA provides that all employees have the right not to be unfairly dismissed. However, Janice must establish that she has sufficient continuity of employment to bring an unfair dismissal claim. In order to qualify for this right, section 108(1) of the ERA provides that an employee must have “been continuously employed for a period of not less than two years ending with the effective date of termination”. Janice has worked for the Company for two years and therefore qualifies for the right to bring an unfair dismissal claim. In order to succeed in a claim for unfair dismissal, the reason for dismissal must not fall within the potentially fair reasons listed in section 98(1) of the ERA. In this case, the Company is likely to rely on section 98(2) (b) that the dismissal was fair as a result of “reasons relating to gross misconduct”. In judging misconduct cases, courts and tribunals must refer to the ACAS Code of Practice on Disciplinary Practices and Procedures in Employment, although its guidance does not have the force of law. As such, any failure to follow the ACAS codes will count against the Company in determining the reasonableness of the dismissal but will not necessarily lead to determination that the dismissal was unfair (Pitt, G. 2007). The ACAS Code recommends that disciplinary rules must be stated clearly in writing with a copy given to every employee. Additionally, the ACAS Code provides that all employers must establish a procedure for dealing with disciplinary matters, which is recommended to be in writing, indicate to whom they apply, provide for prompt disposal of issues, indicate the range of possible sanctions and who may impose them and ensure that no decision is made before matters are properly investigated. Moreover, the Code provides that employees should have sufficient notice of any charges, the right to state their side of the story and the right to be represented by a trade union official or fellow employee, and that they should be given a reason for the decision. Moreover, there should be a right of appeal against any disciplinary action. The Code sets out a three stage procedure and apart from gross misconduct, recommends that no-one should be dismissed for a first breach of discipline. The three stage procedure provides for an oral warning for minor misconduct, or a first written warning for serious misconduct, a final written warning in the event of a further offence and finally disciplinary action (which could be dismissal or suspension without pay). If we apply this to the current scenario, Janice’s dismissal clearly relates to gross misconduct and therefore whilst it is her first breach of discipline, the Company may nevertheless have a defence for her unfair dismissal claim. However, the problem is the Company does not have actual proof that Janice stole the hard drive and was immediately suspended with a hearing being held two days’ later. She was not advised that she was entitled to representation and her appeal was rejected. Therefore, arguably Janice has strong grounds for arguing that the Company was in breach of the following Code recommendations: 1) No-one should be dismissed for a first breach of discipline unless there is proof of misconduct; 2) Janice does not appear to have been made aware of the disciplinary procedures; 3) It is questionable whether the investigation undertaken by Biggins was investigated properly; 4) Janice was not given a proper chance to state her side of the story in the disciplinary meeting or told she had the right to representation; and 5) The Company’s disciplinary procedure is out of date with no formal training to address disciplinary issues which fails to comply with the recommendations of the ACAS Code of Practice. The main defence for the Company would be to establish that Janice did in fact commit gross misconduct. In determining whether the employee has committed gross misconduct, the relevant legal test is that an employer can dismiss an employee summarily if the employee has committed an act of gross misconduct (Selwyn, 2006). The test is whether the employee has disregarded a fundamental term of the contract as highlighted in the case of Laws v London Chronicle (1959). In general terms, conduct such as dishonesty and violence will constitute gross misconduct (Pitt, G. 2007). For example, in Denco Limited v Joinson ([1992] 1 All ER 463) the EAT held that an employee who deliberately gained unauthorised access to the company’s computer system is guilty of gross misconduct, although it was asserted that employers should make their rules abundantly clear to employees. However, if a warning is part of the disciplinary procedure this must be communicated to the employee. In order to justify dismissal on grounds of misconduct, it is not necessary to establish that the employee was guilty of the offence but to demonstrate an honestly held belief that the employee was guilty at the time the decision was taken to dismiss (Selwyn, 2006). However, in the case of BHS v. Burchell ([1980] ICR 303) it was held that the reasonably held belief must be rooted in a third element; namely that the employer had “carried out as much investigation into the matter as was reasonable in all the circumstances of the case” (per Arnold J. in BHS v Burchell at 304). However in the case of Boys and Girls Welfare Society v. McDonald ([1996] IRLR 129), the EAT asserted that the burden of proof was not on the employer to establish reasonable grounds through reasonable investigation even where the facts were not in dispute. Additionally, in the case of Weddel v Tepper ([1980] ICR 286) it was held that the unfairness was rooted in the fact that the employer had dismissed without hearing whether the employee had an explanation for the misconduct. With regard to the current scenario, it hasn’t actually been established that Janice committed the act of gross misconduct and there were three other people with access to the locker. Whilst Janice was initially interviewed she was not able to provide any explanation at the disciplinary hearing. As such, the Company have arguably failed to undertake proper investigation as recommended by the ACAS Codes particularly as Janice advised that she had seen the bag but thought it was Kelsey’s. Additionally, in failing to give Janice the right to appeal particularly in light of her good record clearly prejudices the ability of the Company to rely on gross misconduct as a defence to her unfair dismissal claim. Moreover, the Company’s failure to adhere to proper procedure in Janice’s dismissal will trigger section 98A of the ERA, which provides that procedural fairness must be complied with and “an employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if……. One of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002…..has not been completed, and is attributable to failure by the employer to comply with its requirements.” With regard to failure to follow procedure, in Polkey v Dayton Services ([1988] ICR 142) Lord Bridge asserted that “in the case of misconduct, the employer will normally not act reasonably unless he investigates the complaint of misconduct fully and fairly and hears whatever the employee wishes to say in his defence or in explanation or mitigation” (at p. 162). Additionally, as Janice was not given notice of termination and payment until the time of her suspension, if she can successfully argue that her dismissal was in breach of contract, this will also expose the company to a claim for wrongful dismissal. 1.3. Kelsey In light of the employee test, there is no contention that Kelsey was an employee of the Company however, as she worked for the Company for less than 12 months, she will not have sufficient continuity of employment to bring an unfair dismissal claim under the ERA. Kelsey’s claim would be limited to a claim for wrongful dismissal if she can establish that the Company was in breach of contract by terminating her employment contract. Pitt comments that “at common law it is still true that if reasonable notice to terminate is given, then the contract is terminated lawfully, and it follows that the employee has no claim for wrongful dismissal. It does not matter that the employer has terminated for a bad or arbitrary reason, or indeed no reason at all” (Pitt, 2007). In the current scenario, Kelsey was not given notice and was only given pay up to the date of her suspension. Section 1(4) of the ERA expressly requires employees to be given a written statement of the notice they are to receive under the employment contract for termination. Moreover, section 86 of the ERA sets out requisite minimum periods of notice that employers must give and employees with between one month and two year’s continuous employment must be given at least one week’s notice, which was not given to Kelsey. Accordingly, the Company is prima facie in breach of contract and liable to Kelsey for wrongful dismissal. Alternatively, Kelsey’s claim may be negated by justified summary dismissal. As highlighted above with regard to Janice, in Laws v London Chronicle ([1959] 1 W.L.R. 698) it was held that an employer is entitled to dismiss an employee summarily if the employee had been committed an act of gross misconduct. In the Laws decision, it was held that the relevant test was whether the employee had disregarded a fundamental term of the contract. Additionally, in Sinclair v Neighbour ([1967] 2 QB 279), it was held that summary dismissal for employee theft was justified and thereby negated any claim for wrongful dismissal. Accordingly, if the Company can prove that Kelsey did in fact steal from the Company, her dismissal is likely to be lawful. 2. Conclusions In summary, with regard to Janice, her grounds for an unfair dismissal claim are strong in light of the Company’s failure to comply with the ACAS Codes and a proper procedure in dismissing her. The Company will only be able to negate a claim if they can establish gross misconduct. Additionally, in light of the fact that Janice’s employment was terminated without notice, she will most likely have grounds for a claim in wrongful dismissal. With regard to remedies for unfair dismissal, section 113 of the ERA provides two options; namely reinstatement or re-engagement or compensation for unfair dismissal. The reinstatement or re-engagement option is discretionary and often rare due to the nature of the employee relationship (Chandler et al, 2003). There are three heads of compensation available for unfair dismissal: 1) Basic Award; 2) Compensatory Award; and 3) Additional award. The basic award is calculated in the same way as a redundancy payment based on age and length of service (which in Janice’s case is two years) and is subject to a maximum sum of £11400 (www.emplaw.co.uk). The compensatory award will vary but will depend on the actual financial loss suffered by Janice, which Janice will have the onus of proving. This will include loss of what Janice would have earned during her notice period and what Janice earned in respect of any contributions she may have made to the Company pension scheme (Pitt, 2007). The loss will be calculated from the date of her termination to the date of the hearing and may include future loss if the job market is difficult (Chandler et al, 2003). Any such compensatory award will be reduced by any contributory conduct by Janice (Pitt, 2007). With regard to Kelsey, her term of employment precludes her from making an unfair dismissal claim, but she will most likely have strong grounds for a wrongful dismissal claim unless the Company can establish that it was entitled to terminate her employment on grounds of gross misconduct. With regard to remedies, specific performance will not be available due to the special nature of employment contracts inherently dependent on the implied term of mutual trust and confidence (Honeyball & Bowers, 2006). This is further enshrined in section 236 of the Trade Union and Labour Relations (Consolidation) Act 1992, which provides that no court shall grant an order for specific performance of an employment contract. With regard to damages, the general common law position as highlighted in Addis v Gramophone Company Limited is that damages will be limited to the notice period Kelsey would have received if the Company had complied with the notice period. Alternatively, if Kelsey can establish that the Company in terminating the contract was also in breach of the implied duty of mutual trust and confidence, she may be entitled to further damages in line with the decisions in Goygay v Hertfordshire County Council ([2000] IRLR 703) and Johnson v Unisys ([2001] ICR 480). 3. Recommendations Consideration of the legal position clearly points in both Janice and Kelsey’s favour in respect of their tribunal claims. As both employees have had good records with the Company, the Company may wish to re-investigate the theft issue and consider reinstatement of both employees. This may however be difficult due to the implied term of mutual trust and confidence in employment contracts being broken. Additionally, reinstatement would require the Company to employ both Janice and Kelsey on exactly the same terms. Alternatively, with regard to Kelsey it may be preferable for the Company to negotiate an out of court settlement and agree to pay her notice period, which would be one week’s pay. This is what she will be entitled to if she succeeds in her wrongful dismissal claim at the Tribunal and it will save the Company the legal costs of defending the claim at trial and avoid a further damages claim for the implied term of breach of trust and confidence (Goygay v Hertfordshire County Council ([2000] IRLR 703). With regard to Janice, it is highly likely that she will succeed at Tribunal and therefore it is recommended that the Company seek to negotiate with Janice either for reinstatement in light of her good record or alternatively a financial lump sum settlement to avoid the cost and possible reputational damage in going to Tribunal. Going forward, the manner in which Janice and Kelsey’s termination was handled clearly presses the need to review and update all pre-existing policies and implement HR training initiatives to ensure that the ACAS Code of Practice recommendations are applied in future disciplinary issues and that employees are made aware of the applicable policies. Scenario 2: Steven 1.1. Introduction In order to avoid the pitfalls of the Company’s position vis-à-vis Janice and Kelsey with Steven, it is imperative that the Company bring its policies up to date and comply with recommended codes of procedure to lawfully terminate Stephen’s contract of employment (Painter & Holmes, 2006). 2. Findings Firstly, in order to prevent a claim for wrongful dismissal the Company should give Steven written notice of termination for the appropriate notice term in accordance with the ERA 1996. This will not however necessarily prevent Steven from bringing an unfair dismissal claim within three months of the effective date of termination under the ERA 1996. In order for Steven to succeed in a claim for unfair dismissal, he would have to demonstrate that the dismissal did not fall under the potentially fair reasons under section 98(1) of the ERA. The reason likely to be cited by the Company is the section 98(2) (a) ground under the ERA that dismissal was for a reason “relating to the employee’s capability or qualification for the job” on grounds of his consistent history of poor performance. Section 98(3) elucidates the definition of “capability” as being “assessed by reference to skill, aptitude, health or any other physical or mental quality”. Once a section 98 reason has been put forward as justification for dismissal, the Tribunal will consider how fair the reason is under two central headings. The first is whether the actions of the employer “fell within the band of reasonable responses which a reasonable employer might have adopted”, which will be imperative to ensure the Company’s dismissal of Steven is done lawfully. The relevant consideration for the Tribunal under this heading is whether the response from the employer was reasonably foreseeable (Pitt 2007). if so, the dismissal is likely to be fair (Pitt, 2007; ERA 1996). Additionally, in the EAT decision in Egg Stores v Leibovici ([1977] ICR 260) the EAT held that the relevant question was “has the time arrived when the employer can no longer reasonably be expected to keep the employee’s post open for him”. The relevant considerations taken into account will be the nature of the job, the nature of previous employment, the nature, length and effect of the disabling event, the need for a replacement to cover the work, whether wages were continued to be paid, and the acts and statements of the employer (Honeyball & Bowers, 2006). The difficulty for the Company is that whilst Steven’s performance has been regularly below par, nothing has been done about this by the previous marketing line manager and Steven has only just been made aware of performance issues. This may therefore make it difficult to terminate his employment immediately and avoid an unfair dismissal claim Nevertheless, in determining whether the Company is reasonable in dismissing on grounds of capability or qualification, a relevant issue will be whether appropriate training was given as highlighted in the case of Davidson v Kent Meters ([1975 IRLR 145). To this end, Steven’s length of service will be relevant and the fact that Company has spent £1500 on a training course and given a recent appraisal to Steven will undoubtedly operate in the Company’s favour. On the other hand, Steven has been working for the Company for a long time and therefore it may be reasonable to for the Company to find some other work for Steven first and consider redeployment into another department (Pitt, 2007). Another relevant factor in protecting against a claim for unfair dismissal will be whether Steven is warned that his performance was not satisfactory and ultimately this will depend on the position. For example, in Winterhalter Gastronom v Webb ([1973] ITR 313) Lord Donaldson highlighted that “many do not know they are capable of jumping the five barred gate until the bull is close behind them”. Alternatively, in Dunning v Jacomb (1973] ICR 445) a contracts manager was dismissed without warning because of his inability to get on with clients many of whom complained about him. He was expected to be aware of this in light of his position and the dismissal was therefore fair. Additionally, in order to avoid claims for unfair dismissal in addition to giving Steven an adequate chance to improve, the second heading requires that procedural fairness must be complied with and section 98A of the ERA provides that “an employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if……. One of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002…..has not been completed, [and is] attributable to failure by the employer to comply with its requirements”. As a minimum, the Company will be required to “follow a three-step procedure which involves…… a statement in writing of what it is the employee is alleged to have done; …… a meeting to discuss the situation, and; ….. the right of appeal” ( ACAS, Rights at work, Discipline, Grievance and Dismissals, p.3) . In fact, failure to follow the minimum procedure may result in a determination that the dismissal was automatically unfair. Additionally, as highlighted above with regard to Janice and Kesley, adherence to the ACAS Code of Practice on Disciplinary Practices and Procedures in Employment will be important notwithstanding the fact that its guidance does not have the force of law. Whilst failure to follow the ACAS codes will not necessarily lead to determination that the dismissal was unfair, it will nevertheless be an important consideration in determining reasonableness of the dismissal (Pitt 2007). 3. Conclusions It appears that Steven has been working for the Company for a long time and even though the new marketing manager has picked up on a history of poor performance and has recently sent him on a training course to improve, Steven does not seem to be aware of the performance problems. Therefore, a period of two months for Steven to improve may not be considered reasonable to avoid a claim for unfair dismissal even if the correct notice period is given to avoid a claim for wrongful dismissal. Additionally, a termination at this point may risk falling foul of the procedural fairness requirement in termination as recommended by the ACAS Codes and should be complied with to maximise the Company’s protection from an unfair dismissal claim. 4. Recommendations In order to address the situation with Steven’s under performance, I would recommend consideration of transferring Steven into another department following a consultation with him to put him on notice as to the performance issues. Upon transfer, Steven should be given a probationary period within a new department to achieve a clear set of performance objectives. If a transfer is not viable, at least Steven can be put on notice with regard to the performance issues. Additionally, he should be given notice of the Company’s disciplinary procedure and policy and if the performance does not improve within the period specified and notified to Steven, the Company should go through the Code’s recommended three stage procedure to ensure that any termination of employment is lawful. BIBLIOGRAPHY ACAS, Rights at work, Discipline, Grievance and Dismissals available at www.acas.org.uk ACAS Code of Practice on Disciplinary Practices and Procedures in Employment at www.acas.org.uk Chandler, P., & Waud, C. (2003). Waud’s Employment Law: The Practical Guide for Human Resource Managers. Kogan Page Honeyball & Bowers (2006). Textbook on Labour Law. 9th Edition Oxford University Press. Painter and Holmes (2006). Cases and Materials on Employment Law. 6th Edition Oxford University Press. Gwyneth Pitt (2007). Employment Law. 6th Edition Sweet & Maxwell Selwyn’s Law of Employment (2006). 14th Edition Oxford University Publishing. Legislation Trade Union and Labour Relations (Consolidation) Act 1992 Employment Rights Act 1996 Employment Act 2002 Available at www.opsi.gov.uk Read More