Appeal No. UKEAT/0366/09/SM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 22 April 2010
Judgment handed down on 26 May 2010

Before
HIS HONOUR JUDGE PETER CLARK
MR P SMITH
MR T STANWORTH

ENABLE CARE & HOME SUPPORT LTD	APPELLANT

MRS J A PEARSON	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR ADAM OHRINGER
(of Counsel)
Instructed by:
Messrs Taylor & Emmet LLP Solicitors
20 Arundel Gate
Sheffield
S1 2PP	
For the Respondent	MR PHILIP GRUNDY
(of Counsel)
Instructed by:
Messrs Watson Esam Solicitors
18 Paradise Square
Sheffield
S1 1TY	

SUMMARY
UNFAIR DISMISSAL - Reasonableness of dismissal
CONTRACT OF EMPLOYMENT - Wrongful dismissal

Application of the range of reasonable responses test to the sanction (dismissal) imposed by the employer for his reason for dismissal, genuinely held on reasonable grounds following a reasonable investigation.

Employment Tribunal watered down employer’s reason (set of facts or beliefs held by him, causing him to dismiss) in assessing the sanction question and impermissibly substituted their view for that of the employer.

By a majority, finding of unfair dismissal set aside.  Finding of wrongful dismissal, raising a quite different question (was the employer in fact guilty of repudiatory conduct) could not be said to be perverse.  Consequently, the finding of wrongful dismissal stands.

HIS HONOUR JUDGE PETER CLARK 

1.	The parties in this matter before the Sheffield Employment Tribunal were Mrs Pearson, Claimant and Enable Care & Home Support Ltd, Respondent.  This is the Respondent’s appeal against the judgment of an Employment Tribunal chaired by Employment Judge Little promulgated on 6 May 2009, reasons for which were promulgated on 2 July, upholding the Claimant’s claims of both unfair dismissal and wrongful dismissal.  The Employment Tribunal also found, for the purposes of the unfair dismissal finding, that the Claimant had contributed to her dismissal to the extent of 50 per cent.  Neither party appeals that finding of contribution.

Background
2.	The Claimant commenced her employment with the Respondent on 17 October 1994.  She rose through the ranks to the position of Human Resources Adviser, the post which she held at the time of her summary dismissal by letter dated 12 May 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

3.	The context in which her dismissal took place was a degree of acrimony between the Chief Executive of the Respondent, Mrs King-Owen and the Claimant’s line manager, Miss Morton.  Miss Morton went off sick on 6 September 2007, never to return to work prior to her resignation effective on 21 February 2008.

4.	The four charges which the Respondent found proven against the Claimant, leading to her dismissal, may be summarised in this way:
(1)	Improperly changing the holiday record for Miss Morton and making a false entry;
(2)	Divulging confidential information to Miss Morton in respect of a grievance which she had raised;
(3)	Confirming attendance by Miss Morton at a training event when she was suspended in breach of the Respondent’s procedure;
(4)	Passing confidential information as to the identity of a solicitor instructed by the Respondent to Miss Morton whiles the latter was suspended pending an investigation into her alleged misconduct.

5.	The panel which took the decision to dismiss the Claimant took into account the following matters; the Claimant’s position in HR giving her access to confidential material; her taking Miss Morton’s side against the interests of her employer; her change of story between investigation and disciplinary meetings held with her by the Respondent and what was perceived to be a breach of trust in her role as HR Adviser.  The Employment Tribunal noted (para 6.25) that the panel considered a sanction short of dismissal but concluded that summary dismissal was the appropriate sanction.

6.	Against the dismissal the Claimant appealed internally on the basis that the sanction was too harsh.  Following an appeal hearing that appeal was dismissed, one of the appeal panel members, Miss Styring, noting that the Claimant had shown no remorse for her actions.

The Employment Tribunal decision on unfair dismissal
7.	In directing themselves as to the applicable law, based on s98 Employment Rights Act, the Employment Tribunal referred to the 3 fold-test formulated by Sir John Arnold in BHS v Burchell [1980] ICR 303.  At para 8.3 they say:
“In the leading case of British Home Stores Ltd v Burchell 1980 ICR 303, the Employment Appeal Tribunal set out a three part test to be considered when an employer seeks to show that a dismissal for a conduct reason is a fair reason.  First, the employer must show that he believed the employee was guilty of misconduct.  Second, that he had in his mind reasonable grounds upon which to sustain that belief, and thirdly, that at the stage which he formed that belief on those grounds he had carried out as much investigation into the matter was reasonable in the circumstances.”

8.	Although not material to our conclusions in this appeal we need to point out yet again that the law changed in 1980.  The Employment Act of that year removed the burden of proof on the employer to show that he had acted reasonably under what was then s57(3) EP(C)A 1978.  There has since been a neutral burden.  That applies to the reasonable investigation and reasonable grounds for belief, stages 2 and 3 of the Burchell test.  It remains for the employer to show his reason for dismissal, that is, that he genuinely believed that the Claimant was guilty of the misconduct alleged.  Burchell was decided on a dismissal which took place before the 1980 Act was passed.

9.	It matters not in this case because the Employment Tribunal was satisfied by the Respondent on all 3 limbs of the Burchell test.

10.	That left the final question, there being no unfairness found in the procedure adopted by the Respondent, did the sanction of dismissal fall within the range of reasonable responses open to the employer?  The question is not whether the Employment Tribunal would have dismissed the employee, substituting its judgment for that of the Respondent employer – see Foley v Post Office [2000] ICR 1283, per Mummery LJ 1287 E-G (statement of principle) and 1291 G-1292 B (application of the principle to the facts of Foley’s case).

11.	The Employment Tribunal set out their reasoning on the sanction question at para 9.3 reasons.  We draw attention to certain passages to which Mr Ohringer invites our attention and others besides to give a flavour of the Employment Tribunal’s reasoning, whilst of course looking at the reasons as a whole.

12.	Para 9.3 is headed: ‘Was dismissal an appropriate sanction?’  The Employment Tribunal continue:
“More precisely, was the decision to dismiss one which a reasonable employer could have come to in the circumstances – was dismissal within the reasonable band of decisions?”

We note, in passing, that neither here, nor in their self direction as to the law at para 8 do the Employment Tribunal expressly remind themselves of the requirement not to substitute their view for that of the employer as laid down by Browne-Wilkinson P in Iceland Frozen Foods Ltd v Jones [1983] ICR 17 and approved by Mummery LJ in Foley and more recently reiterated by his Lordship in LAS v Small [2009] IRLR 563.  Mr Grundy does not challenge that principle in this appeal; Mr Ohringer principally relies upon it in support of his appeal on unfair dismissal.

13.	In considering the charges found established by the Respondent against the Claimant, the Employment Tribunal provide the following insights into their assessment of the sanction question.
“A reasonable employer would have regarded the training day, or more precisely breakfast seminar, issue as relatively trivial.
[I]n relation to the holiday sheet, we find that a reasonable employer would have appreciated that its employee could hardly have had an intention of deceiving
[T]he reasonable employer would nevertheless have considered that this was a relatively minor “fiddle”.
In relation to the disclosure of confidential information…a reasonable employer would, we think, have taken a reasonably relaxed approach…’
However, over and above all this, we also consider that a reasonable employer would have taken into account significant mitigating factors.”

They then conclude:
“Taking all those matters into account, we are satisfied that no reasonable employer would have imposed the sanction of dismissal.  Instead it would have given a final written warning.  Accordingly our judgment is that this was an unfair dismissal.”

Unfair dismissal appeal
14.	On this issue the Tribunal is divided.  First, the majority judgment.  As to this part of the appeal Mr Ohringer’s submission, as we have indicated earlier, is that the Employment Tribunal has impermissibly substituted its view of the appropriate sanction for that of the Respondent.  They considered that a final written warning was the appropriate sanction.

15.	We return to the wording of s98(4) Employment Rights Act:
“(4)	In any other case 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.”

16.	As interpreted by the higher courts, it is for the Employment Tribunal to determine what was the employer’s reason for dismissal, that is the ‘set of facts known to the employer or it may be of beliefs held by him, which cause him to dismiss the employee’ (Abernethy v Mott, Hay and Anderson [1974] ICR 323; per Cairns LJ).  In determining the case in accordance with equity and its substantial merits it is for the Employment Tribunal to form its view (there being a neutral burden of proof), in the case of a conduct dismissal, as to whether the employer has carried out a reasonable investigation and has reasonable grounds for its belief in the misconduct relied on.  If that question is answered in the affirmative, as here, the final question for the Employment Tribunal is whether dismissal for the employer’s reason, as defined by Cairns LJ, falls within the range of reasonable responses open to him.  What that means is that if across the spectrum of reasonable employer’s sanctions some would dismiss and some would impose a sanction short of dismissal, then dismissal falls within the band and is fair.  The dismissal will only be unfair if dismissal is a sanction outside that spectrum; that no reasonable employer would have dismissed the employee for the employer’s reason.

17.	Applying that approach and having carefully considered Mr Grundy’s spirited defence of the Employment Tribunal’s reasoning, the majority are persuaded by Mr Ohringer that this Employment Tribunal did indeed fall into error.

18.	The effect of the particular findings by the Employment Tribunal at para 9.3 identified above was to dilute the employer’s reason for dismissal, which the Employment Tribunal found was genuinely held on reasonable grounds following a reasonable investigation.  It is not simply that the Employment Tribunal substituted their view of the degree of seriousness of the individual charges upheld by the Respondent; having done so they considered that watered down ‘set of facts or beliefs’ for those actually held by the Respondent.

19.	Whether or not the diluted ‘reason’ was one for which no reasonable employer would dismiss is nothing to the point.  The question under s98(4) is whether the Respondent’s reason was a sufficient reason for dismissal.

20.	Had the Employment Tribunal asked itself that, correct, question, the majority agree with Mr Ohringer that it was bound to conclude that dismissal fell within the range of reasonable responses.  This is not a case, like Small, where further fact finding as to the reasonableness of the employer’s belief was necessary so that a remission to a fresh Employment Tribunal is required.  The majority would allow this part of the appeal and substitute a finding that the Claimant was fairly dismissed.  

21.	In a phrase used by Mr Grundy, the general context for this minority opinion by Mr Smith arises out of the question posed when the court reconvened briefly to seek counsels’ submissions as to what weight, if any, should be placed on sub-section (b) of s98(4) of the Employment Rights Act 1996; and whether, for example - as a result of history or otherwise – that sub-section had any significance other than as a makeweight within the overall section.  It seemed to be agreed by all concerned that the case law had concentrated on the reasonable range arising most clearly out of s(4)(a).  The minority accepted Mr Grundy’s submissions, however, that the final decision must be based on the totality of s98(4) i.e. (a) and (b): the mere fact that Parliament consciously decided to adopt (b) as a separate section suggests that it should not be categorised as simply a makeweight which adds nothing to (a).

22.	It thus became a question of significance whether this particular Employment Tribunal decision was in accordance with equity and the substantial merits of the case in relation to the four charges leading to the Claimant’s dismissal as set out in para 4 above; that is to say was it possible for the Employment Tribunal, without substituting its own decision for that of the employer, to call into question the weight which the Respondent should have given to the four charges.  In other words, could the Employment Tribunal take account of such factors as whether the openness with which the Claimant laid out certain of her pencilled comments meant that these could not in reality amount to a major issue of the employer’s trust in her; whether the fact that the Claimant knew that Mrs Morton was aware that a solicitor had been instructed lessened the ‘fault’ in her divulging the solicitor’s identity; or whether it was reasonable for the Respondent, having earlier decided that any issue over a law seminar had been concluded, to resurrect the matter just for the Employment Tribunal proceedings?  The fourth and apparently crucial element in the Respondent’s decision to dismiss was the Claimant’s action as an HR professional in divulging details of a grievance meeting.

23.	The Employment Tribunal reconvened to take specific submissions on what the minority considered to be a delicately-balanced matter.  The question being posed was, on the one hand, whether the Employment Tribunal had substituted its views on the four charges for that of the employer, and/or whether – without ignoring the other three charges – that ‘breach of HR trust’ was sufficient for the Employment Appeal Tribunal now to conclude (thence substituting its own view on unfair dismissal for that of the Employment Tribunal) that the Respondent’s summary dismissal of the Claimant was in accordance with both the “reasonable range” and “equity and substantial merits”?  Alternatively, was the Employment Tribunal’s repeated use of the formulation “which a reasonable employer could have come to” (para 9.3) in practice no more than a reasonable shorthand while in the process of ‘exploring’ equity and substantial merit issues?

24.	Mr Ohringer submitted that the four charges should be viewed as a package even if, taken separately, they might not be sufficient grounds for dismissal; but that an HR officer taking sides with an employee during a dispute was sufficient to undermine any employer’s trust and confidence.  The essential test was s98(4)(a); and 4(b) essentially amounted to an instruction to examine the matter judicially on a case by case basis which added little of substance to 4(a).  The crucial issue was the ‘band of reasonable responses’: no cases had been decided specifically on 4(b); and the authorities were clear although there may be a tension between the Court of Appeal and the legislation.  Mr Grundy could not recall a precedent on 4(b) in isolation; but he submitted that ‘equity and substantial merits’ were principles which were to be considered specifically.

25.	More generally, two questions of potential substitution arise in relation to this appeal: first by the Employment Tribunal (in respect of the Respondent’s decision), and secondly by the Employment Appeal Tribunal (in respect of the Employment Tribunal’s decision).  The minority takes general note of Mr Grundy’s submission that “the Employment Tribunal did not substitute its own view for that of the reasonable employer”; and accepts that, in making its overall judgment on the range of reasonable responses, a Tribunal is required to take account of the equity and substantial merits of the case.  In para 8.2, this Employment Tribunal correctly quoted the whole of s98(4); and in the view of the minority its use of the phrase “a reasonable employer would have” was not demonstrably a case of this Employment Tribunal substituting its view for that of the employer, but might rather be typified as a shorthand device adopted to clarify the process of judging the equity and substantial merits of the Claimant’s evidence, for example as to possible deceit in relation to the holiday sheet or the relative triviality of the training day/breakfast seminar incident.  Most significantly and in relation to the crucial question of an HR professional divulging details of a grievance meeting, in the minority’s view reference by the Employment Tribunal to ‘mitigating factors’ (particularly the “dysfunctional workplace” with the Claimant in the middle of a conflict between her line manager and chief executive) is in effect this Employment Tribunal’s judgment without substitution on the equity and the substantial merits of the case under ERA 1996 s98(4) overall, but with specific reference to s(4)(b).  On that basis, the minority considers that the appeal against the unfair dismissal finding should fail.

26.	Account should finally also be taken of the judgment in Foley by Rix LJ (viz 1296 E – F) on the question of the Employment Appeal Tribunal substituting its own view for that of the Employment Tribunal: “it is only in a very exceptional case, where an Employment Tribunal can be said to have come to a perverse conclusion, that the Employment Appeal Tribunal can interfere in the Employment Tribunal’s determination as to the section 98(4) test, a determination which is essentially a question of fact”.  The minority’s conclusion is that it has not been demonstrated before the Employment Appeal Tribunal that the Employment Tribunal came to a perverse conclusion, and thus the appeal should be dismissed.  Putting the matter more positively, this was a case of an Employment Tribunal giving specific consideration to the principles of equity and substantial merits as part of its overall approach to 98(4)(a) and (b); and that was an approach which was open to them.

Wrongful dismissal
27.	The Employment Tribunal deal with this part of the case at para 9.6:
“9.6		Wrongful dismissal
Here we direct ourselves that we are making our own findings of fact as to whether gross misconduct occurred as opposed to the exercise we have been considering under the unfair dismissal claim – the position a reasonable employer would have taken.  Having regard to the evidence that we have heard and the relevant findings that we have made, we conclude that whilst the Claimant was guilty of misconduct, that was not of such a degree so as to justify a summary dismissal.  In other words it was not gross misconduct.  Accordingly we find that in dismissing the Claimant without notice or payment in lieu of notice the Respondent acted in breach of contract and the dismissal was wrongful.”

28.	Here the question is quite different.  The Employment Tribunal is not concerned with the reasonableness of the employer’s decision to dismiss, but the factual question, was the employee guilty of conduct so serious as to amount to a repudiatory breach of the contract of employment entitling the employer to summarily terminate the contract?  We conclude that the Employment Tribunal’s findings as to the lack of seriousness of the charges against the Claimant, which in the view of the majority infected their approach to the question of statutory unfair dismissal, may properly go to support their finding of wrongful dismissal at common law.

29.	Mr Ohringer accepts that his appeal on this aspect of the case is purely one of perversity, recognising the high hurdle which he faces.  

30.	Whether we should have reached the same conclusion on wrongful dismissal is immaterial.  Suffice it to say that we unanimously accept Mr Grundy’s submission that perversity is not made out; the Employment Tribunal’s conclusion that the Claimant was not guilty of gross misconduct such as to amount to a repudiatory breach of contract was a permissible one.  Consequently, this part of the appeal (ground 3) fails and is dismissed.

Disposal
31.	The majority view prevails.  The appeal is allowed to the extent that the Employment Tribunal’s finding of unfair dismissal is set aside and that part of the Claimant’s claim is dismissed.  The finding of wrongful dismissal stands.