Reason For Dismissal – Changing Horses?

Where an employee is dismissed the employer must show the reason for the dismissal. There are five potentially fair reasons for dismissal, including conduct and capability. They are not always easy to distinguish. In the case of Screene v Seatwave Ltd, the employer stated that misconduct was the reason for dismissal when it terminated an employee’s contract, but later changed this to capability.

Seatwave Ltd sold tickets to sporting and other entertainment events. Mr Screene was its financial controller. In June and July 2008, there was a series of fraudulent transactions and the company lost around €1.7m from its German bank account.

It had been Mr Screene’s responsibility to monitor the account, but he did not detect or report the fraud until August 2008. Mr Screene was summarily dismissed for misconduct after a disciplinary hearing. The company stated that he had been negligent in his duties by failing to complete non-UK bank reconciliations, which had led to significant financial losses.

The letter also referred to ‘serious negligence’ on his part, justifying summary dismissal. Mr Screene was given the right to appeal against his dismissal, but he did not complete it. He submitted a claim for unfair dismissal to the employment tribunal. His claim form referred to the fact that he had been dismissed for gross misconduct. The company argued that Mr Screene had been negligent and stated that his failure had been so fundamental and serious that it warranted summary dismissal.

It also stated that the reason for the dismissal was capability, rather than misconduct. The employment tribunal rejected the claim and Mr Screene appealed to the employment appeal tribunal. The basis for the appeal was that the employment tribunal should not have concluded that the dismissal was fair on the ground of misconduct because the company had stated in its response to the ET1 that the reason for dismissal was capability.

He also argued that because the company had cited capability as the reason for dismissal, but had not followed a capability procedure in the lead-up to dismissal, the dismissal was unfair. The EAT considered the authorities, noting that cases where an employee has not come up to standard through his own carelessness, negligence or perhaps idleness, are much more appropriately dealt with as cases of misconduct, not capability.

It found that at all times Seatwave’s decision to dismiss had been based on the same facts; i.e. Mr Screene’s failure to monitor the German bank account, which had resulted in significant fraud and losses going undetected. It had also been made clear to him, in the letter terminating his employment, that misconduct was the reason for his dismissal.

The EAT was satisfied that the employment tribunal hearing had been conducted by both parties on the basis that Mr Screene had been dismissed for misconduct, notwithstanding the company’s reference to capability in its response. Any suggestion that Mr Screene might have been prejudiced by the fact that the disciplinary proceedings were not conducted under a capability label was dispelled by the tribunal’s finding that he had accepted in his evidence to the employment tribunal that he did clearly know of the company’s misconduct case against him and its possible consequences. The tribunal was entitled to find that the principal reason for dismissal in this case was misconduct. Mr Screene’s actions could rightly be classified as misconduct, as opposed to a failure owing to a lack of capability.

The case suggests that if an employment tribunal is proposing to adopt a different reason for dismissal to that cited by the employer, it must consider two potential forms of prejudice. The first may arise when adopting a different reason for dismissal leads to a fundamental change in the substance of the case against the employee. If the tribunal in Seatwave had found that Mr Screene was fairly dismissed for theft, as opposed to negligence, this would also have amounted to a significant change in the facts or substance of the case. Such a change in tack would have caused the claimant prejudice because he would not have had an opportunity to defend himself accordingly.

Secondly, there may be situations where changing the reason for dismissal amounts to a ‘mere relabeling’ because the facts and/or substance of the case have remained the same throughout. However, an employee may still be prejudiced in such cases. Here, the charge against Mr Screene was always that he had been seriously negligent. However, if he had been able to demonstrate that he had genuinely and reasonably believed that the potentially fair reason of conduct was not in issue during the tribunal hearing, meaning that all his evidence was geared towards capability, he might have been able to persuade the tribunal and/or the EAT that he had been put at a procedural or evidential disadvantage.

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