Case round up

Our resident experts at Pinsent Curtis Biddle bring you a comprehensive
update on all the latest decisions that could affect your organisation, and
advice on what to do about them

Flatley v The Society of MotorManufacturers and Traders, EAT
An illustration of the very different tests for establishing unfair and
wrongful dismissals

* * * Flatley was summarily dismissed following the discovery of
discrepancies in his expense claims. The employer considered his conduct to be
serious misconduct, rather than gross misconduct. However, the terms of their
disciplinary procedure allowed for summary dismissal as a possible penalty for
serious misconduct.

The employment tribunal rejected Flatley’s claim of unfair dismissal. The
employer had carried out a reasonable investigation and there was sufficient
material to enable the employer to properly conclude that Flatley was guilty of
a very irresponsible, negligent and unhelpful approach towards expenses and
that he had been unco-operative during the disciplinary investigation. They
also considered that dismissal was a reasonable sanction, given that Flatley
was responsible for large budgets and as a senior employee would have known that
he was behaving in an unacceptable way.

The tribunal however concluded that the dismissal was wrongful. There was no
evidence of deliberate deception or dishonesty, despite Flatley’s evasiveness
and his unsatisfactory explanation. They considered that by dismissing him
without notice, the employer was guilty of a breach of contract. This decision
was upheld on appeal.

Key points

It is important to remember that the tests for unfair dismissal and wrongful
dismissal are completely separate and, as this case shows, it is possible for a
fair dismissal to nevertheless be a wrongful dismissal. Misconduct dismissals
will be fair where the employer has carried out as full an investigation as is
reasonable, conducts a proper disciplinary hearing and, on reasonable evidence,
forms a genuinely held belief in the employee’s guilt. Dismissal must also be
within the band of reasonable responses.

For wrongful dismissal, it will have to be established on the balance of
probabilities that the employer had committed a fundamental breach of contract.
This case does not set out any specific point of principle, but the tribunal
felt that on these facts, there could be no gross misconduct unless there was
some element of dishonesty or deception.

What you should do

When dismissing for misconduct offences:

– Ensure that the misconduct in question has been fully investigated. Don’t
leave loose ends

– Ensure there are reasonable grounds for concluding that the employee is

– Don’t automatically assume that dismissal is the appropriate sanction –
what are the alternatives? Why is dismissal justified?

– Consider the impact of any contractual disciplinary procedures – these may
affect the sanctions that can be awarded

– Why is dismissal reasonable? How does this sanction compare with the
treatment of employees in similar cases?

– Remember that to defend a summary dismissal against a wrongful dismissal
claim, you need to be able to establish on the balance of probabilities that
the misconduct took place. If in doubt, consider dismissing with a payment in
lieu of notice

Hashimoto Ltd v McIntosh, EAT
An illustration of the dangers in taking up inflexible positions

* * * McIntosh claimed unfair constructive dismissal and disability
discrimination. He resigned after a lengthy period of sick leave due to
"depression and anxiety". His sick pay had been suspended while he
was off work and he had been subjected to a disciplinary investigation. This
arose after he was seen allegedly drinking alcohol at a leaving party for another
employee 10 days into his sick leave.  The
employer advised McIntosh his sick pay would only be reinstated after further
investigation when he returned to work, taking issue with him being at the
party while absent on the sick. McIntosh protested, but the employer refused to
move and ultimately McIntosh resigned.

The EAT agreed with the tribunal’s conclusion that there had been less
favourable treatment for a reason relating to McIntosh’s disability and that
the employer could not justify that treatment. The employment contract provided
for disqualification from sick pay only if the employer was satisfied there had
been abuse or misrepresentation – it did not allow the right to sick pay to be

The employer could not have been in a position to disallow McIntosh’s sick
pay entitlement until they had held the disciplinary hearing. They knew they
were causing him serious financial hardship, yet maintained their stance for
several months during which McIntosh’s GP certified him as unfit for work.

They could have investigated earlier without McIntosh returning to work.
Even though there were reasonable grounds for suspicion, no reasonable tribunal
could have regarded the employer’s reason as carrying substantial weight for withholding
sick pay for a sustained period of many months and in breach of contract.

What you should do

– Always check your contracts and procedures. Do they allow the action you
propose to take?

– Remember that the employee does not have to return to work before a
disciplinary incident can be investigated – is the employee fit to appear at a
disciplinary hearing during his sick leave?

– Always ask yourself whether you are being reasonable. If you are taking up
entrenched positions, is there a compromise or a means to break the deadlock?

– Leaving disputes to fester for months risks triggering litigation

The Scotts Company (UK) Ltd v Budd, EAT
EAT considers the paradoxical results of the interplay between
contractual notice periods and rights during statutory minimum notice

* * * Budd was dismissed after long-term sickness absence of two years. He
had long exhausted his right to contractual sick pay. His contract provided for
termination on giving 13 weeks’ notice. In the event, he received 12 weeks and
two days’ notice and was not paid during his notice period. He claimed the
company had failed to pay him a statutory minimum notice payment. The EAT
overturned the tribunal’s decision that Budd was entitled to this payment.

Key points

The issue in this case was the rather curious effect of the statutory
minimum notice provisions in the Employment Rights Act 1996. Budd’s entitlement
to statutory minimum notice was 12 weeks. The Act also provides that during the
statutory minimum period of notice, an employee who is incapable of work
because of illness or injury is still entitled to be paid their normal pay.
This rule applies even if under the contract itself, an employee would not be
entitled to any sick pay for that period. However, section 87(4) ERA disapplies
this rule where the notice given by the employer to terminate the contract is
at least one week more than the statutory minimum period of notice.

Here, Budd’s contractual notice period was one week in excess of the
statutory minimum. If Budd had not received at least 12 weeks’ notice, his
claim to be paid during the notice period would have succeeded. He argued that
although the contract required at least one week’s notice more than the
statutory minimum, he had in fact received just over 12 weeks and therefore the
company should not be able to rely on the length of a contractual notice period
which he had not received. However, the EAT rejected this argument – Budd had
received at least the statutory minimum, the contractual notice period exceeded
the statutory minimum by a week and therefore Budd lost the right to be paid
during his notice period.

What you should do

– If an employee is off sick during the notice period, remember that they
may have the right to be paid even if contractual sick pay is exhausted

– The key to determining whether payment is required is whether the
contractual notice period is a week or more longer than the statutory minimum

– Remember to calculate the entitlement to statutory minimum notice at the
projected date of termination, not the date on which notice is given

– Consider adopting notice periods which are longer than the statutory
minimum – this case shows that even a minimal increase on the statutory minimum
may save substantial cost

Case of the month, by Christopher Mordue

HSBC Bank plc v Clarkson, EAT
An important decision on ‘past disability’ under the DDA

* * * * * Clarkson was employed by HSBC for 20 years until he took
ill-health retirement in 1999. He had suffered depression in 1997 following
promotion and reverted to a lower grade post. In 1999 he had difficulties
concentrating and his relationship with colleagues deteriorated. His doctor
suggested he was suffering from post-traumatic stress disorder relating to a
road accident in 1966. After suffering blackouts, Clarkson was signed off work
until his ill-health retirement. He complained of disability discrimination
saying the bank had made insufficient efforts to relocate him.

At the employment tribunal, the preliminary issue was whether he was
‘disabled’. A medical expert reported that when examined in 2000, Clarkson was
suffering post-traumatic stress disorder but this had developed after
retirement and was not considered to have a long-term substantial adverse
effect on his ability to carry out normal day-to-day activities. He could not
be considered as disabled solely on the basis of this condition.

The next issue was whether he qualified as a ‘disabled person’ on the
grounds of ‘a past disability’. His previous episode of depression in 1997 had
not lasted for 12 months, suggesting that on its own, it was insufficient to
amount to a disability. The position was unclear as the medical expert had
described the depression as "transient" in the periods 1988-1990 and

Because there were two episodes, the tribunal considered the condition had
recurred. The first episode was to be regarded as having a continuing effect so
consequently, Clarkson was disabled. The EAT reversed this decision ruling that
the tribunal’s approach was flawed.

Key points

In any case of disability discrimination, it is necessary for the applicant
to show a physical or mental impairment which has a long-term substantial
adverse effect on the ability to carry out normal day-to-day activities. The
most straightforward definition of ‘long term’ is where the adverse effects
last for at least 12 months. In this case, neither episode of depression was,
on the face of it, of sufficient length. However, the DDA also provides where
an impairment ceases to have a substantial adverse effect it is to be treated
as continuing to have that effect if it recurs.

The tribunal’s error was automatically to regard two instances of the same
problem to be linked, each causing a substantial adverse effect. The EAT
stressed that in any case of past disability, that disability must itself have
a substantial and long-term adverse effect. It was necessary to consider
whether the first period of depression had recurred, or whether the second
incident was entirely separate. The tribunal should also have considered what
the expert meant by the word "transient" – whether this meant the
depression was transient within each period of depression, for example, or
whether he was saying there was a constant underlying state of depression with
two islands of symptoms.

What you should do

This case illustrates the complexity of the definition of disability under
the DDA, and difficulty of placing depressive episodes within that framework.
It illustrates the importance of dealing properly with employees claiming to
suffer stress-related illnesses.

– In any disability discrimination claim, unless disabled status is obvious,
a medical report is necessary to understand properly the nature and effects of
the physical or mental impairment in question

– In a case where the disability is alleged to be shown by two separate occurrences
of the same problem, and the effects of neither condition have lasted for 12
months, it is necessary to consider whether these are truly separate conditions
or whether some link between them means the first condition can be said to have
recurred. It is important to obtain medical expert opinion

– In many disability discrimination cases, the issue of disability is
secondary to the question of whether the employer can justify the alleged
discriminatory treatments

– The key questions are: do you have a good reason for the action you
propose to take and have you considered all the alternatives?

– Always consult the disabled employee – ask how the medical condition might
be relevant to their treatment and what alternative courses of action they can

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