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Over a period of about 3 years, the employer tried to formalise the terms of the individual’s employment and various draft agreements were prepared. In the event no agreement was reached. The situation became somewhat strained when a dispute arose over the calculation of the profit share and a solicitor wrote to the employer on behalf of the individual, referring to a possible constructive dismissal claim. Some 6 weeks later the individual was dismissed. The dismissal letter referred to a breakdown in the working relationship and alleged that the individual was not as committed as he had been. The individual claimed that the dismissal was unfair. The employer argued that the alleged breakdown in the working relationship amounted to some other substantial reason and was sufficient to make the dismissal fair.

The EAT agreed that the dismissal was unfair. They accepted that neither side had behaved as though the working relationship had broken down. The fact that a debate had been opened up about the terms of the individual’s employment did not destroy trust and confidence and neither did the manner in which the debate was conducted. The case is a useful reminder that an alleged breakdown in trust and confidence is not just a convenient label to be used as the reason for a dismissal which cannot otherwise be justified. A breakdown in negotiations or failure to agree terms about pay is not by itself a basis for saying that the entire working relationship has broken down and will not normally justify dismissal.

The resulting dismissals were found to be unfair. The assessment method involved a written test, an interview and a group exercise in the form of an observed discussion of a hypothetical scenario. No reference was made to past appraisals of performance. Sickness absence and disciplinary records were taken into account but had less significance in the scoring process because of the weighting given to the three-part assessment.

The employer accepted that its procedure had produced some very surprising results and that some good workers were selected for redundancy as a result. Nonetheless the employer stood by the outcome in every case, regarding it as having been reached by objective and robust means and therefore valid. The EAT regarded the procedure as very unusual. The employer was criticised for adhering to its blind faith in its process, despite its surprising results, and thus losing touch with common sense and fairness. The case serves as a useful reminder of the dangers of artificiality in the selection process and the value and importance of traditional selection methods, including input from managers who actually know and work with the affected employees. 

In such a situation most employees will probably not have anything to gain by asserting that the contract remains in being and has not been effectively terminated. If the employer offers to pay a sum in lieu of notice within a short period after termination, the employee is likely to be attracted by the idea of receiving a sum equivalent to his salary for his notice period without having to work for it. However, there could be cases where it will suit an employee to argue that the contract remains in existence, for example to preserve the employee’s entitlement to a bonus or share option rights which will crystallise during the period of notice which ought to have been given.

Employers who propose to dismiss without giving the required notice should therefore consider whether there are possible reasons that an employee might have for wishing to keep the employment contract alive for the duration of the notice period. In some cases the better course may be to give the required notice of dismissal, to put the employee on garden leave and then to negotiate agreed terms for an early departure. This is more likely to produce an outcome in which arguments are avoided about whether the employment contract has been effectively brought to an end and possible claims arising from the dismissal are settled.

The case involved an employee at an airport who was dismissed for allegedly attempting to steal items from a duty-free shop in the terminal buildings. He had an impeccable conduct record. While in the queue to pay for the items, a colleague beckoned him over to a seating area outside the shop. He went over to speak to her, still holding the items. At that point he was approached by a police officer and accused of stealing the items.

The dismissing manager took oral statements from the shop manager and the employee. The shop manager did not personally see the employee acting suspiciously but had been told that at the time of the alleged theft the employee was hiding the items under his coat. The dismissing manager visited the shop premises but did not view relevant CCTV footage or take statements from other employees who may have witnessed the incident. He dismissed the employee for dishonesty.

The EAT ruled that this was unfair. The crucial evidence related to the alleged concealing of the items under the employee’s coat. In giving evidence about this the shop manager was only reporting what he had been told by another employee. There was no direct evidence from her. She was not interviewed by the dismissing manager even though her statement was completely contrary to the evidence of the employee. The employer’s investigation was therefore seriously inadequate. The EAT ruled that the employer could not show that it had formed a reasonable belief as a result of a reasonable investigation.

In many cases of misconduct there will be conflicting accounts of what took place and the outcome will hinge on what was seen or heard by a fellow employee and the reliability of that person’s evidence. Unless the decision maker personally interviews that fellow employee, the employer is unlikely to be able to show that it has reached a reasonable conclusion, particularly in cases of alleged dishonesty where the reputation of an employee with a previously unblemished record is at stake.