Ask any employment lawyer about the tests to be applied to decide whether the dismissal of an employee will be judged fair in the eyes of the employment tribunal and they will refer you to a three-part test. The first part is section 98 of the Employment Rights Act 1996, and the second and third parts can be traced to precedent from the 1970s and 80s.
Section 98 states that the question of fairness depends on the circumstances and whether the employer acted reasonably or unreasonably in treating the reason as sufficient to warrant the dismissal of an employee. The reasonableness of that decision will be determined in accordance with equity and the substantial merits of the case. On the face of it, this looks like an objective test to be applied, which understands that circumstances vary between employers depending on the nature of the reason given for the dismissal.
However, two cases created what some consider to be an overlay on section 98, giving meaning to elements of the section. The meanings given have become as quoted by employment lawyers in tribunals as the Employment Rights Act itself. The two cases – British Home Stores (BHS) v Burchell and Iceland Frozen Foods v Jones – added the following:
- That the employer holds a genuine belief that the reason given for the dismissal was in fact the reason. You would be surprised how often this is not the case – think about dismissals of poorly performing employees dressed up as a redundancy (BHS).
- Whether such reason was reasonably founded, based on a reasonable investigation (BHS).
- Whether a reasonable employer would have dismissed the employee for that misconduct (BHS was a conduct case).
In determining what is ‘reasonable’, the employment tribunal must not substitute its own view of reasonableness but rather accept that there is a ‘band of reasonable responses’, where one employer might take one view and another may take another view (Iceland).
In practice, this means employees have to show that the employer’s decision to dismiss was in fact unreasonable. Some – including members of the Supreme Court, in opinions expressed in a 2018 case – feel that the embellishments of section 98 have taken things too far in favour of employers and have been doing so for 40 years. Such doubts about ‘embellishments’ might be seen as consistent with the rationale for first establishing employment tribunals (then industrial tribunals) with an ‘industrial jury’ made up of one lawyer (the judge) and two lay members representing employer and employee interests respectively. Who better to judge the ‘reasonableness’ of another employer’s decision?
Why is this important? Because there is in effect a subtle yet crucial shift in the burden of proof in favour of the employer. If legislation states that an employer should act reasonably, that is not the same as stating that an employer should not act unreasonably. If the employer can show the reason given for the dismissal is in fact the reason and it took reasonable steps to investigate any issues surrounding the matter, it becomes very difficult for an employee to show that no reasonable employer would have dismissed in those circumstances. It is of little surprise that once an unfair dismissal claim reaches a contested hearing, the odds of the employee succeeding are relatively low.
If the Employment Rights Act is further reviewed or a case reaches the Supreme Court and the points of principle raised above are argued, there is more than a chance that the ‘employer friendly’ test will be challenged. Employment lawyers may need to re-evaluate the risk of a successful claim against employers should the law follow the hint from the Supreme Court.
In practice, employers should apply to themselves an objective test of reasonableness in evaluating the risk that surrounds any claim and not rely on the ‘margin for error’ contained in the law as presently cast.
David Bradley is chairman and head of employment at Ramsdens Solicitors