Unfair dismissals for ‘some other substantial reason’

In the third in a series of articles on unfair dismissal, Matt Bradbury looks at fairness in dismissals for ‘some other substantial reason’. A fourth article will look at redundancy dismissals and fairness.

Dismissals where the employer relies on ‘some other substantial reason’ as the potentially fair reason for dismissal are less common than for redundancy, capability and conduct, but they are not infrequent. This article looks at how an unfair dismissal can arise from this potentially fair reason and how to focus on the key issues for evidence and argument.

Preliminaries

Michael Reed’s article on conduct dismissals in Adviser 173 sets out the preliminary points an adviser must consider in any unfair dismissal claim -these are equally relevant in a ‘some other substantial reason’ dismissal.

The law

S98 of the Employment Rights Act (ERA) 1996 requires the employer to show the potentially fair reason for a dismissal; these are:
• capability
• conduct
• redundancy
• because continuing to employ the employee would contravene ‘a duty or restriction imposed by or under an enactment’ or
• if the reason for the dismissal does not into fall within any of those categories, ‘some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held’.

‘Some other substantial reason’ (‘SOSR’) can be viewed as a kind of ‘catch all’ category of reason for dismissal, but it does not give an employer freedom to dismiss for an irrelevant or trivial reason. Once the employer establishes that there was SOSR it is for the tribunal to determine whether it was reasonable to dismiss the employee for that reason in all of the circumstances of the particular case, having regard to the facts, and to equity and merits.

Remember that a tribunal cannot substitute its own view for the view of an employer. Provided that the reason is genuine, substantial and of a kind to justify the employee’s dismissal, there is nothing to be gained in arguing that the employer could have taken a different view as to its reason.

What types of reasons does SOSR ‘catch’?

The ERA 1996 does not define or give examples of what might be SOSR but a number of cases have established typical circumstances in which an employer can put it forward as the potentially fair reason. Remember that a potentially fair reason does not equal a fair dismissal and the employer’s argument that the reason is capable of justifying dismissal does not mean that it does justify the particular dismissal or that a fair procedure should not be followed.

Business reorganisation which does not create a redundancy situation

A redundancy situation arises where an employer’s requirement for employees to do work of a particular kind ceases or diminishes. A worker who is dismissed as the result of a redundancy situation has been dismissed by reason of redundancy even if ‘their’ post is not redundant, so long as their dismissal is ‘attributable to’ the background redundancy exercise. They will be entitled to a redundancy payment and may have a claim for unfair redundancy dismissal. However sometimes an employer restructures its workforce but the amount of work, and the number of employees required to do the work, are not diminished overall. An employee may be dismissed because they do not fit into the new structure and an employer may cite this as a SOSR dismissal - in which case no redundancy payment is owed. In reality this happens rarely. It is a ‘no fault’ dismissal and the employer pays a redundancy payment both as a discretionary gesture and because, on a practical level, it is less likely to get sued, having compensated the employee to some extent for the loss of their job.

Because a restructure is akin to a redundancy situation, you would expect to see something like a redundancy procedure applied in order for a SOSR dismissal to be fair, with individual consultations and offers of suitable alternative work where feasible. Where it is proposed that 20 or more people may lose their jobs - even with offers of reengagement to different posts - the collective redundancy provisions will apply. S195 of the Trade Union & Labour Relations (Consolidation) Act (TULRCA) 1992 will apply, which classes a dismissal as by reason of redundancy for consultation purposes where a dismissal ‘is for a reason not related to the individual concerned’.

The availability of SOSR as a potentially fair reason in such circumstances highlights the danger of running an unfair dismissal claim simply on the basis that; ‘I was dismissed by reason of redundancy but that was unfair because, technically, there was no redundancy situation.’ The employer will often argue in tribunal that this was a redundancy but that, if there wasn’t, in the alternative it was a potentially fair SOSR dismissal by reason of restructure.

A tribunal cannot substitute its own view for that of the employer so as to find unfairness because the employer made the ‘wrong’ decision, but the employer must be able to show that there was a ‘sound, good business reason’ for restructuring, so that the reason is ‘substantial’ and not minor or trivial.

Refusal to accept a variation of contract

Where an employer wants to vary the terms and conditions of an employee or group of employees, and they or some of them refuse to accept that variation, an employer may decide to dismiss, and often, but not always, offer reinstatement under a new contract containing the varied term.

A dismissal in these circumstances will be SOSR, and the employer’s decision to take this step will not in and of itself render the SOSR dismissal unfair. However, as in a restructure SOSR, reasonableness requires the employer to consult and to consider alternatives. Again, where more than 20 employees are affected, the collective consultation rules will come into play under s195 of TULRCA 1992.

Risk of reputational damage

This may relate to criminal behaviour, charges or convictions the commission of which did not amount to misconduct in the context of the employment relationship, or to non-criminal activities outside of working hours, which would harm the employer’s reputation. It extends beyond behaviour, criminal or otherwise, which the employer thinks renders the employee unsuitable to remain in post, to cover behaviour that the employer might not find unacceptable but its clients, customers or the general public would. It may cover unconfirmed rumours, circumstances where criminal charges have been dropped, or situations where an employee has gained negative notoriety in the media.

Third party pressure or instruction to dismiss

This is a common SOSR scenario where an employee, provided by its employer, A, to perform work for another company, B, is rejected by B. The reason for that rejection is largely immaterial — it could be capability or conduct related, or because B simply does not like the employee. A has no choice but to stop supplying the employee to B, and the employee may lose their job as a result. The reason for the dismissal is not B’s reason but A’s reason; ‘Our client/customer does not want you back’, and therefore the dismissal is for SOSR not capability or conduct etc. which is B’s reason for rejecting the employee.

B does not have to be certain that the employee was ‘guilty’ in order for the dismissal to be fair, and may even know that they are not.

Reasonableness requires A to do what it can to mitigate the injustice to the employer of B’s rejection. If it is possible to make the case for retaining the employee without damaging the relationship between the two companies, it might be unreasonable not to do so; but the tribunals tend to adopt a ‘the customer is always right’ approach here. A might reasonably offer alternative work to the employee at another site, if it is available, but sometimes it simply is not and a dismissal would be likely to be found fair.

Personality clashes

An employer may dismiss for SOSR where an employee’s personality is causing issues at work but their behaviour does not fall into the realms of misconduct; two employees have reached a stage where they cannot work together any longer and their behaviour is undermining their productivity and the harmonious running of the business. There is no misconduct per se, no bullying, no underperformance etc. But someone has to go. This may cover circumstances where a relationship between two employees has come to an end and the fallout seeps into the workplace. However, the employer is still required to rely on facts as opposed to vague generalisations, and to have looked at alternatives to dismissal, for example giving the person an opportunity to address their behaviour, using workplace mediation to restore harmony or redeploying one of the warring parties.

Ending of fixed term contract

The ending and non-renewal of a fixed term contract is ‘a dismissal’ and, like all dismissals, it can be unfair if it is not for a potentially fair reason; it might be variously because of redundancy, performance or misconduct. It has also been held that the simple fact that the fixed term contract has ended can amount to SOSR. Of course the fixed-term employee is required to have two years’ service before they can claim unfair dismissal, unless the reason for the ending and non-renewal of the contract is for an automatically unfair reason such as pregnancy or asserting a statutory right, and so these cases are rarer since the qualifying period to claim unfair dismissal has risen from one to two years - fewer fixed term employees qualify and can be dismissed with impunity. It’s clear that SOSR in these circumstances is risky for an employer, particularly because, if the funding or requirement for a post ends, it’s capable of amounting to a redundancy dismissal and the employee could at least be entitled to a redundancy payment. But in the right circumstances it’s capable of falling into SOSR.

Breakdown of trust and confidence

There has been a trend in recent years for employers to rely on ‘breach of trust and confidence’ as SOSR. ‘We dismissed employee A because he behaved in a manner that destroyed or seriously damaged the trust and confidence we had in him.’ Tribunals are alert to the fact that this may be an attempt to dress up a misconduct or performance dismissal as something else and, if the loss of trust arose from issues relating to the conduct or capability of the employee, a tribunal may look into the background and expect the employer to prove those underlying facts in order to establish fairness. If a ‘breakdown of trust and confidence dismissal’ is found to be, in reality, a conduct dismissal, a tribunal can apply an uplift to compensation of up to 25% where there was a failure to follow the Acas Code of Practice on Disciplinary and Grievance Procedures.

Temporary cover comes to an end

Where someone has been employed to cover for an absent employee, dismissal when that employee returns is likely to be for SOSR. In the case of maternity cover there is a specific provision in s106 of ERA 1996 that states the dismissal of the replacement will be for SOSR where they were informed in writing at the start of employment that this would be the case. This precludes entitlement to a redundancy payment and, in any case, in most cases maternity cover will not last the required two year period to qualify for a redundancy payment. However, where an employee of longstanding is moved into maternity cover and then dismissed on the return of the other person from maternity leave, the facts could well support an argument for a redundancy payment, or unfair dismissal for an unreasonable failure to move them back into suitable alternative work elsewhere in the business.

Reasonableness

The ‘range of reasonable responses’ principle is applicable here as it is in other categories of dismissal. It applies both to the decision to dismiss rather than to find some other solution to the presenting problem, and to the way in which the employer arrives at that decision. Because SOSR catches so many types of reasons, what is reasonable will depend on the circumstances of the case; you are looking for things like a reasonable investigation, transparency, basing decisions on facts it is reasonable to believe are true, consultation and an openness to considering alternatives to dismissal. Where the SOSR really does not involve any fault on the part of the employee, it might be reasonable to give longer notice for them to find alternative employment. Because the Acas Code does not technically apply to SOSR dismissals, such rights as the right to be accompanied to meetings are not present; however general principles of reasonableness would allow such failures to be raised in argument, and, as noted above, an SOSR dismissal may be a conduct or capability dismissal in disguise.

Comment

As in other areas of unfair dismissal law, it is key to bear in mind that you must present the case in a way that does not invite the tribunal to find the dismissal unfair by substituting its own view for the employer’s view. There may be scope in arguing that the reason for the dismissal is ‘trivial or capricious’ rather than ‘substantial’ or that it was ‘not of a kind such as to justify the dismissal of an employee holding the position which the employee held’. But care is required here because it is the employer’s view of the reason that is important, and so this argument should be used only where it is immediately striking to any reasonable person that the reason is not SOSR. And the argument should always be run in conjunction with other arguments such as procedural failures and the existence of such a straightforward alternative to dismissal that the dismissal falls outside the range of reasonable responses.

You will need to consider value as well as merit when advising a client, bearing in mind that a successful claim for unfair dismissal based on procedural failings will only have real value where you can show that proper procedure would not have led inexorably to dismissal. Bear in mind ‘contributory fault’ arguments may be introduced by employers, which can lead to a 100% reduction in compensation.

Discrimination is outside the scope of this article but as with other reasons for dismissal, a protected characteristic of the employee might have some direct or indirect bearing on the employer’s process or decision to dismiss for SOSR, for example, in a case involving a soured personal relationship, a decision to dismiss the woman and not the man without a non-gender based reason.

Matt Bradbury is an employment law expert in the Expert Advice Team at Citizens Advice.

This article first appeared in Issue 174 of Adviser magazine (March/April 2016)

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