A helpful case for employers, but one that should be treated with caution, deals with the issue of whether a dismissal which is purportedly for misconduct can be found to be fair even if the tribunal holds it is for capability and conduct (both potentially fair reasons for dismissal under section 98(2) Employment Rights Act 1996).
It is a common problem for employers whether, faced with an employee’s incompetence or negligence, they should opt for a capability or conduct procedure and/or dismissal. Often, the behaviour in question overlaps both conduct and behaviour. The soundest advice is to cover both bases although, of course, in the case of a capability dismissal it is expected that a different kind of procedure with different expectations and support will be followed. An early EAT decision in Hotson v Wisbech Conservative Club made clear that an employer is not tied to the label he happens to put on particular facts, nor is he prevented from running the two as alternatives. However, it is clearly wise to ensure that both capability and conduct are considered at an early stage to ensure that no argument can be progressed that prejudice has been caused to an employee.
In Screene v Seatwave Ltd, Seatwave was the victim of a large scale fraud and Mr Screene was the unfortunate financial controller who failed to detect the fraudulent transactions. Mr Screene was called to a disciplinary hearing to consider three allegations, the central one being that he "failed to identify or address large amounts of cash leaving the German bank account totalling to roughly 1.7m euros within several weeks". The next day Seatwave wrote to Mr Screene "to confirm the decision to summarily dismiss you on the grounds of Gross Misconduct". The letter continued: "you have been negligent in the completion of your duties as follows…an absolute failure to complete non UK bank reconciliations leading to significant financial losses for the company". It concluded: "your serious negligence in the performance of your duties…clearly justifies Summary Dismissal".
Mr Screene brought unfair dismissal proceedings. In its ET3 Seatwave contended that Mr Screene "was dismissed fairly in accordance with section 92(a) Employment Rights Act 1996 on the grounds of capability". The tribunal found that there had been a fair dismissal and that "the dismissal was due to both capability and conduct". Mr Screene appealed, contending that given that Seatwave had asserted that the reason for dismissal was "capability", the tribunal should not have found the dismissal to be fair on the basis of misconduct. In effect, the tribunal was substituting its own reason.
The EAT, relying on Hotson and also Sutton & Gates (Luton) Ltd v Boxall, found that the decision to dismiss, whether it was for conduct or capability, was grounded on the same set of facts, namely failure by Mr Screene to monitor the German bank account, with the result that a substantial fraud went undetected. There had been some shifting in the label but Seatwave had made clear, in its dismissal letter to Mr Screene, that it was relying on his misconduct. He had suffered no prejudice. Indeed, the tribunal had said: "[Mr Screene] did know clearly of the case against him in respect of the main allegation and the possible consequences and accepted this in evidence".
Of course, this case turns on its facts and the employer did make clear in its letter calling Mr Screene to a hearing, and in its dismissal letter, the precise charge against him. It would have been hard for him to argue that he had been prejudiced by being constrained to answer the wrong charge. Other cases may not be quite so clear cut, however, and it remains good advice to ensure that both capability and conduct are covered where the behaviour in question straddles the two.