Facts
The claimant was employed by the respondent as a Senior Customer Advisor within branches of the respondent's high street stores. Her employment began on 21st August 2007. She was dismissed on 14th November 2022 for the stated reason of gross misconduct. She had not previously been the subject of any disciplinary sanction and had what the Tribunal described as "16 years of good service" (ET § 4).
During late 2021, the claimant's parents each separately became unwell. This resulted in the claimant having to take periods of emergency leave to care for them. It was the claimant's position – which the tribunal accepted – that these caring responsibilities placed her under significant stress and that this impacted upon her work performance. She submitted that this was a factor in leading to her making a number of poor decisions at work during 2022.
In particular, the respondent became aware of four separate incidents between June and October of 2022 each of which involved the claimant's interaction with customers (ET § 6). It took the view that these were potentially disciplinary issues of fraud.
Following an investigation, a disciplinary hearing took place before the respondent's manager, Mr Palmer who ultimately considered that each of the incidents amounted to fraud. As the Tribunal put it: at ET § 29:
The Tribunal recorded, however, that Mr Palmer was unable in his evidence to distinguish between a customer attempting to commit a fraud and the claimant herself committing a fraud:
The claimant, for her part, accepted that, in each of the four instances, she had been negligent. She denied, however, any attempt to defraud or manipulate the respondent's systems.
Having concluded that the claimant had been guilty of four instances of fraud, Mr. Palmer considered that trust and confidence had been broken (ET § 85). He decided that she should be summarily dismissed for gross misconduct.
The claimant appealed. The appeal was conducted by another of the respondent's managers, Mr Matthewman. In the course of the appeal process, Mr Palmer told Mr. Matthewman that if had there been fewer incidents, the length of the claimant's good service may have made a difference to the outcome (ET § 85).
Whilst the Tribunal's findings of fact about the appeal process could have been more clearly expressed, it appears that Mr Matthewman agreed with Mr Palmer's decision that all four incidents of misconduct had been established and that they amounted to fraud. He refused the appeal and upheld the decision to dismiss.
The Tribunal's decision
In relation to three of the four incidents, the Tribunal concluded that Mr Palmer was unreasonable in coming to the view that the claimant had acted fraudulently and also that the conclusion that the incidents amounted gross misconduct was outside the range of reasonable responses (ET § 47, 53 and 63).
The Tribunal's conclusions about to the fourth incident are not expressed with the same level of clarity. At ET§ 29 to 36, the Tribunal set out its analysis of the evidence that was before Mr Palmer. Counsel in this appeal were agreed that when ET § 29 to 36 are read with ET § 47, 53 and 63 and 81 the correct interpretation of the Tribunal's reasons is that it concluded that there was no reasonable basis for a belief by the respondent in the existence of fraud in relation to any of the four allegations.
In relation specifically to the fourth allegation, however, the Tribunal stated (at ET § 81):
The Tribunal drew its conclusions together at ET § 87 to 96:
The claimant has appealed against the decision that her dismissal was fair. She does not challenge the dismissal of her complaint of wrongful dismissal. The respondent has cross appealed against the Tribunal's conclusion that, the respondent's belief that the claimant had acted fraudulently was not reasonable.
Law
So far as relevant to this appeal, section 98(1) of the Employment Rights Act, 1996 (" ERA ") states:
In Smith v. Glasgow City District Council [1987] ICR 796, the Judicial Committee of the House of Lords considered how the predecessor to section 98 ERA should be applied where the employer had relied upon more than one incident of misconduct. Mr Smith had been dismissed for unsatisfactory performance of his duties. Three incidents were relied upon by the employer, one of which the Tribunal found not to be established on reasonable grounds. It nevertheless found the dismissal to be fair. The Employment Appeal Tribunal sustained that conclusion. On a further appeal by the employee, however, the Inner House of the Court of Session allowed his appeal. The employer then appealed to the House of Lords.
In the leading speech, with which all other members of the Judicial Committee agreed, Lord Mackay of Clashfern made the following observations (between pages 803B and 804D):
The council having failed to prove that the principal reason for dismissal excluded the matter which it had failed to establish on reasonable grounds, the appeal failed and the decision of the Inner House was upheld.
In Robinson v. Combat Stress UKEAT/0310/14, Langstaff P noted that the "reason" for a dismissal is a set of facts or beliefs, which the employer actually had for making the decision to dismiss at the time when the dismissal occurred. Section 98 ERA requires identification of that reason, and not whether there might have been a good reason for the dismissal which in fact occurred or which the employer might have had, albeit that the same broad label could be applied to it. He continued (at paras. 18, 20 and 21):
Submissions
Claimant – appeal
Senior counsel for the claimant submitted that the Tribunal had not made any finding that the single matter it found to be capable of justifying summary dismissal was the respondent's sole or principal reason for doing so in terms of section 98(1)(a) ERA . Rather, on the Tribunal's findings, Mr Palmer had "failed to view [the] allegations separately" (ET § 89) and had also expressed the view that if there had been fewer proven allegations, "the length of good service may have made a difference to the outcome" (ET § 85).
On the Tribunal's findings, the principal reason for dismissal was a composite one made up of four allegations, each of which was of fraudulent conduct. In these circumstances, the Tribunal should have applied the ratio of Smith . Had it done so, it would inevitably have concluded that the dismissal was unfair. It had found that the part of the composite reason that consisted of a conclusion that the claimant was guilty of fraud was not one that was reasonably open to the employer. That conclusion was fatal to the employer's contention that the dismissal was fair (ground 1).
In the alternative, a conclusion that dismissal for the single non-fraudulent incident of breach of a policy – however egregious – justified summary dismissal was perverse. The Tribunal appeared to have considered mitigation only in relation to the incident, but not in relation to its conclusion at ET § 4 that she had "16 years of good service" (ground 2).
In the second alternative, although the Tribunal had been bound to follow Foley v. Post Office [2000] ICR 1283 , that the test of fairness was the "band of reasonable responses", Foley was wrongly decided and should be reviewed by the Supreme Court. The requirements for certification of section 37ZA(1) and (4)(b) of the Employment Tribunals Act, 1996 were met and permission should be given for a "leapfrog" appeal.
Respondent – ground 1 and cross appeal
The Tribunal found that the single allegation which justified dismissal was "the main allegation in these proceedings" (ET § 64). It had concluded that the single allegation was, in itself, sufficient to find gross misconduct to have been established. This was, therefore, a situation akin to that described by Langstaff J in Robinson v. Combat Stress where a single episode of misconduct was capable of justifying a summary dismissal even though the employer had unreasonably concluded that other incidents had also happened (ground 1).
In relation to the cross-appeal, all four incidents were admitted. The only question for the Tribunal was whether it was reasonable for the respondent to view them as acts of gross misconduct. Before rejecting the respondent's conclusions as unreasonable, the Tribunal should have looked at the four allegations carefully in their context. Instead, the Tribunal had analysed each allegation separately. Had it examined them together, it would have recognised that the issue that it found to be established cast a different light on the other three incidents.
If the cross appeal was refused and the principal appeal led to a finding of unfair dismissal being substituted, the EAT should also find a 100% Polkey reduction to be inevitable given that the allegation which the Tribunal found to be established could reasonably be categorised as an act of gross misconduct.
Respondent – grounds 2 and 3
The high test of perversity (per Piggott Brothers & Company Limited v. Jackson [1991] IRLR 309; Stewart v. Cleveland Guest (Engineering) Ltd [1994] IRLR 440 and DPP Law Limited v. Greenberg [2021] EWCA Civ 672 and Oxford Said Business School v. Heslop UKEAT/0110/21 was not met (ground 2).
The Tribunal was bound by and properly applied Foley . The EAT is similarly bound.
Claimant – cross appeal
The three allegations that were found not to be gross misconduct were of no relevance to the fourth allegation and vice versa . For reasons that were not perverse, the Tribunal had made a clear finding that none of the incidents involved fraud.
Analysis and decision
The cross appeal
Logically, it is appropriate to deal first with the cross appeal. Parties were agreed that the combined effect of ET § 29 to 36, 44 to 63 and 81 was that the Tribunal had concluded that the respondent's belief in the existence of fraud was not held on reasonable grounds in relation to any of the four allegations.
The Tribunal reached that conclusion as a result of a full analysis of the evidence that was before the respondent at the time when the decision to dismissal was taken. Whilst it could have done so, there was no obligation upon the Tribunal, as a matter of law, to consider all of the incidents together or to examine the first three incidents through the prism of the fourth. How it analysed the evidence was a matter for it as the primary fact finder. Viewed as a whole, the Tribunal's reasons indicate that it correctly applied BHS v Burchell [1980] ICR 303 and Post Office v. Foley [2000] ICR 1283 . It concluded, on the evidence, that the respondent did not have reasonable grounds to view any of the incidents as fraudulent and thus as instances of gross misconduct. Its conclusions in that regard are not said to be perverse, and require to be respected by this Tribunal. I do not consider, therefore, that the cross-appeal has any merit. It does not identify any error of law and is therefore dismissed.
The claimant's appeal
Robinson v. Combat Stress is entirely consistent with Smith . The point made in Robinson is simply that a dismissal for misconduct will not necessarily be unfair if the employer proves what was, in fact, the principal reason amongst a series of reasons and also that he acted reasonably in treating that principal reason as a basis for dismissal. As Robinson also makes clear, in any case of dismissal for conduct it is necessary for the Tribunal to consider the subjective question of what, in fact, was the principal reason for the dismissal. That is not an exercise in deciding what the decision-maker could have decided. Rather, it is an analysis of what the decision-maker did in fact decide.
The Tribunal in this case seems to have lost sight of that important principle. It did not make any finding that the fourth incident was Mr Palmer's principal reason for dismissal. The respondent invites that inference and relies heavily upon the Tribunal's observation (at ET § 64) that the fourth incident was the "main allegation in these proceedings". That, however, was not the relevant question. Rather, the first issue for the Tribunal was whether the fourth incident was, in the mind of Mr Palmer, the principal reason for the dismissal.
Such a conclusion is impossible to reconcile with the Tribunal's findings that Mr Palmer "failed to view [the] allegations separately" (ET § 89) and expressed the view to Mr Matthewman that, if there had been fewer proven allegations, "the length of good service may have made a difference to the outcome" (ET § 85). Those latter findings clearly demonstrate, at least in the mind of Mr Palmer, a composite reason for dismissal in terms of Smith .
The Tribunal's analysis at ET § 81 fell into the error of attaching relevance to what Mr Palmer could have concluded on the evidence before him rather than looking at the relevant question of what he actually concluded. The former issue may yet be relevant to remedy, but was irrelevant to the question of liability. A consequence of its error was that the Tribunal failed to recognise that, on its own findings, a key part of Mr Palmer's reasoning – that all four incidents were fraudulent – had not been held by him on reasonable grounds.
Turning to the internal appeal process, the Tribunal again required to consider what was Mr Matthewman's reason for refusing the appeal. Here, the respondent seeks to attach significance to the final sentence of ET § 86 in the Tribunal's conclusion that:
It is not clear from the Tribunal's reasons whether that sentence is a finding about Mr Matthewman's actual thought processes or merely, once again, a conclusion about what he could have been entitled to conclude. In any event, the fundamental problem with the analysis is that that the Tribunal made no finding that Mr Matthewman's conclusions about the fourth allegation were any different to those of Mr Palmer. The fourth allegation comprised two elements. The first was that there was a material breach of the respondent's procedure. The second was that the breach was fraudulent. Even if the final sentence of ET § 86 is given the generous interpretation contended for by the respondent, it is still the case that the respondent failed to prove that any belief in fraud was held on reasonable grounds. The ratio of Smith applies, in my view, with equal force to a situation where an employer relies upon several separate incidents of alleged misconduct as it does to a situation where a single incident of alleged misconduct comprises more than one key element. In each case, the "reason" relied upon for dismissal cannot have been sufficient in terms of section 98 ERA if a key part of it was not found to have been established on reasonable grounds.
On the Tribunal's findings, neither Mr Palmer nor Mr Matthewman had any reasonable basis to conclude that the claimant had acted fraudulently. Fraud was, however, a key part of both the decision to dismiss and the decision to refuse the appeal. I, therefore, accept the submission for the appellant, in terms of the first ground of appeal, that the Tribunal erred in law in its conclusion that the dismissal was fair in terms of section 98 ERA . Once the Tribunal had found that there were no reasonable grounds for a belief in fraud, the only conclusion open to the Tribunal was that the dismissal was unfair. I will, therefore, set aside paragraph 1 of the Tribunal's judgment and substitute a finding that the complaint of unfair dismissal succeeds.
In these circumstances, it is not necessary for me to determine ground 2, or to consider the appellant's application for a leapfrog appeal to the Supreme Court.
The issue of remedy has never been determined by the Tribunal, and it would not be appropriate for this Tribunal to do so in this appeal. Any reduction of compensation either for contributory fault or in terms of Polkey are matters to be determined by the Employment Tribunal. I will therefore remit the case to the same Tribunal for a remedy hearing in the unfair dismissal complaint.