insufficient investigation made dismissal unfair

Posted on February 27, 2013 by Martin Malone

Employers should take care to investigate allegations of dishonesty involving breach of trust particularly carefully, suggests the Employment Appeal Tribunal in Stuart v London City Airport.

Mr Stuart was one of 430 ground services employees at London City Airport who was dismissed for gross misconduct. It was alleged that he had gone to a duty free shop in the airport and taken goods without paying for them. His version of events was that a friend had beckoned him over for a chat while he was in the queue to pay for items, and he had not been aware of crossing the threshold of the shop, whereas one witness suggested that he had in fact tried to conceal the goods in his jacket. That witness was not present at any disciplinary hearing or appeal hearing, so her evidence could not be challenged, and the employer did not obtain evidence from other sources suggested by the other employee such as available CCTV, or likely witnesses including the friend or shop assistant manning the till, which could have confirmed or disproved the truth of the allegation of an attempt to hide items.

Since the conduct and scope of disciplinary proceedings is a common concern for many employers, it is worth spending a little time in considering the views of the EAT about what did happen and, more significantly, what should have happened. The facts are outlined in the decision as follows:

On the evening of 21 December 2009 the the Claimant entered Nuance, the duty free shop, to buy some Christmas presents. He chose some items which he stated that he held at all times in his hands; he accepted that he did not use a basket. He first went to pay for them at an un-manned till point, where he queued with another customer before a member of staff told him to go and pay at another till point because that one was closed. He moved over to a different till and began to queue again. During the whole of this period he stated that the items he had chosen were clearly visible in his hands.

What then happened was that he was beckoned over to a seating area immediately outside the shop by another Nuance staff member called Lynette, where she had a conversation with him about the snowy conditions at the airport that day. The Claimant then realised that he was due back from his break shortly and he moved to a refrigerated counter nearby to buy a drink. He still held in his hands the items for which he intended to pay. However, while he was selecting a drink, a police officer came to speak to him, on the basis that he was suspected of dishonestly removing goods from Nuance without paying for them.

The Respondents were informed and the Claimant was suspended on full pay, with effect from 21 December, pending an investigation into alleged gross misconduct involving breach of trust.

The matter was then investigated by the Respondents, as his employers. Statements were taken from Mr Gilani, the Nuance store manager, and from a Nuance staff member, Ms Adenike Adenekan. Strangely, in view of the significance of her evidence, which was very much in dispute, Ms Adenekan did not give evidence, either at the disciplinary hearing or before the Tribunal. Mr Gilani did, on both occasions, and the Tribunal also had his statement which had been made at the time. Mr Gilani’s evidence was that Ms Adenekan had reported concerns that an airport employee inside the shop, later accepted to be the Claimant, was secreting items from the purchasing section under his jacket. The Claimant vigorously denied that. As a result of Ms Adenekan’s report Mr Gilani went on to the shop floor, where he stayed for between 10 and 15 minutes. During that time he saw that there were no other customers in the shop and no queues. He stated that baskets were available for customers but that the Claimant was not carrying a basket.

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can an employment contract be ended without notice?

Posted on December 20, 2012 by Martin Malone

It may seem a straightforward question since people are dismissed every working day for what is commonly referred to as “gross misconduct”, i.e. conduct which is so serious that it goes to the root of the contract and renders its continuation undesirable if not impossible.

However, what of the “innocent” employee? In my discussion about decision of the Court of Appeal in Société Générale London Branch v Geys in April 2011 I pointed out that, according to the Court of Appeal, Mr Geys’ employment was terminated on 18 December 2007 when Société Générale made a payment in lieu of notice to him, rather than 4 January 2008 when Société Générale confirmed in writing its intention to do so. The date was very important for Mr Geys because, relying on the earlier date, Société Générale did not have to pay significant bonuses which would have accrued prior to the later termination date.

I commented: Continue reading →

News of the World: stigma damages and TUPE protection?

Posted on July 25, 2011 by Martin Malone

An interesting discussion has emerged on the web about employment issues arising from the sudden closure by News International of the News of the World.

It is a central tenet of employment law that contract terms can be both express (i.e. written in to a contract) and implied. Some key duties, such as a duty of faithful service, are implied into all contracts of employment, whether or not a written contact exists. Continue reading →

termination payments: a trap for employers

Posted on July 25, 2011 by Martin Malone

A Ms. O’Farrell worked for Publicis Consultants UK Ltd. Her contract provided for three months’ notice. She was made redundant in May 2009 and was provided with statutory redundancy pay and holiday pay. Her dismissal letter also said that she would receive an ex-gratia payment equivalent to three months’ salary (£20,625) free of Tax and NI deductions. Continue reading →

Tax on termination payments

Posted on April 17, 2011 by Martin Malone

Amendments to the PAYE Regulations in effect from 6 April 2011 mean that the perfectly legal “trick” of deducting only basic rate PAYE from termination payments made to departing (or more accurately recently departed) employees who are higher rate tax payers will no longer work.

Currently where a payment to an employee is deferred until after he or she has left the employment in which they were employed, the employer has to deduct tax at the basic rate only, using PAYE code BR. This is because the payment will not be included on the individual’s P45. The result is that higher-paid employees may not pay enough. Of course they have to pay in due course but not until after their tax return for the year has become due. This can give a substantial cash-flow advantage to higher paid ex-employees who can thus have interest free use of the postponed tax, sometimes for many months.

From April 2011 the employer has to operate code 0T instead of code BR, so that affected ex-employees will pay tax upfront at the basic, higher and additional rate as appropriate. Tax code 0T is a “worst case” code: it does not allow for any personal allowances and requires deduction of tax on a non-cumulative (Week 1/Month 1) basis.

In some cases it may well be that this will result in more tax being deducted than eventually turns out to be appropriate. In that case the employee will have to reclaim the overpaid tax later.

It is worth stressing that this is “merely” a change in PAYE coding, effectively meaning that the change is a cash flow change rather than a change of substance. In particular the exemption from tax for the first £30,000 of compensation paid on termination of employment which can apply in many cases is not changed.

It is also worth noting that the effect of the new rules can be mitigated if the termination payment is made under contractual terms which provide for payment by monthly instalments. This is because in that case each instalment will be taxed separately. Depending on the amounts involved, it may be possible to work out a system where only basic rate tax is payable under Code 0T on each monthly instalment even though the cumulative total of the instalments will mean that the ex-employee is a higher rate taxpayer.

Termination of employment status, or termination of employment contract, or both? A conundrum.

Posted on April 17, 2011 by Martin Malone

Strange as it might sound, it is possible for one’s status as an employee to end in circumstances that do not terminate one’s contract of employment. This was the thorny issue in Société Générale London Branch v Geys, decided by the Court of Appeal on 30 March 2011.

In that case, it was crucial to establish upon which of three potential dates Mr Geys’s contract ended, because it was only if it lasted until the latest possible date in January 2008 that a contractual entitlement to a huge bonus (the substance of his claim) could arise.

Société Générale had terminated his employment at a meeting on 29 November 2007, but Mr Geys had written back indicating that he was affirming his contract. Nonetheless, Société Générale made a payment in lieu of notice (in line with his contract) on 18 December 2007, and formally notified him of this by letter on 6 January 2008. The Court of Appeal overturned a previous ruling by the High Court and found that Mr Geys’s contract of employment ended on 18th December – thus he had no entitlement to the extra bonuses.

From Mr Geys’s point of view that, no doubt, was the most interesting (if disappointing) part of the judgment. However, of more general interest is what happened on 29 November 2007, because it highlights the conflict between “pure contract law” and statutory concepts of dismissal which underlie other claims such as unfair dismissal.

There was doubtless a repudiatory breach of contract by Société Générale – they made clear that Mr Geys’s no longer had a job. Yet such a unilateral breach cannot terminate a contract if – as happened here – the other party refuses to accept it. Hence the contract must continue, until ended in accordance with its provisions. However, Mr Geys’s status as an employee was clearly ended on that date – so for statutory purposes, it would be the Effective Date of Termination (EDT).

At first glance this is hard to get one’s head around – how can a contract of employment exist when (arguably) the essential mutuality of obligation has gone and one party is no longer an “employee”? Understandably, perhaps, the Court of Appeal wants the Supreme Court to consider whether an unaccepted repudiatory breach should, in fact, be able to terminate the contract.

However, what if the Supreme Court follows this route? The whole doctrine of constructive dismissal (which is a contractual concept which can be the basis for statutory unfair dismissal) relies on an employee promptly resigning in acceptance of a fundamental breach of contract by an employer. Where does it leave the employer’s defence that the employee affirmed the contract if the contract can be terminated by that unilateral breach alone? Will the EDT (so important for strict time limits) be at the date of resignation (as now) or the date of the breach?

The current situation is the product of conflicting legal concepts – but removing that conflict could generate just as many problems. In a case in which the date of dismissal, constructive or actual, is an important consideration proper resolution of the point could be vital, thus underlining the need for expert legal advice in any such situation.