Shaw v B&W Group Ltd
Mr Shaw lived in Hong Kong and worked for the B&W Group as a general procurement manager under a three-year fixed-term contract from 2007.
Under the contract, Mr Shaw was bound by restrictive covenants for six months following the termination of his employment if “dismissed with cause as defined in the Employment Rights Act 1996”. The contract could be terminated by the employer summarily before the expiry of the fixed term in the case of serious breach of contract and serious misconduct. Mr Shaw was required to give three months’ notice if he wished to resign. In the case of dismissal “without cause”, Mr Shaw would receive six months’ salary.
During the course of Mr Shaw’s employment, there were allegations about his management style. In 2008, the managing director of B&W Group told Mr Shaw that his employment was being terminated. Mr Shaw was told that he could either resign, in which case he would be paid three months’ salary, or there would be a summary dismissal with no pay and an announcement about the termination of his employment. On 11 April 2008, Mr Shaw resigned by email.
Mr Shaw brought proceedings for breach of contract.
The employment tribunal held that Mr Shaw had been dismissed. This was a case of “resign or be dismissed”, which amounts to a dismissal. The question was whether or not he had been dismissed for “due cause”. The employment tribunal held that, in this context, “due cause” meant a reason referred to in s.98 of the Employment Rights Act 1996, namely conduct or capability.
The tribunal considered that Mr Shaw was dismissed because of concerns about his management style, a belief that he was not a team player and concerns over alleged inappropriate behaviour to female staff. The tribunal held that B&W Group had a genuine belief in these concerns and that this belief constituted “due cause”.
Mr Shaw appealed to the Employment Appeal Tribunal (EAT).
The EAT held that the tribunal had conflated unfair dismissal and wrongful dismissal. A reasonable belief that there has been serious misconduct may make a dismissal fair in an unfair dismissal claim, but breach of contract by the employee must be proved to defeat a wrongful dismissal claim.
The EAT said that the test for determining repudiatory breach of contract by an employee such that the employer is entitled to dismiss is not whether or not the employer reasonably believes there has been a breach, but whether or not there is proof that there has been such a breach. The essential question was whether or not Mr Shaw was actually in breach of contract to such an extent that his conduct might be regarded as repudiatory. “Due cause” must be something that would justify the premature termination of the contract.
The EAT remitted the case to the employment tribunal.
The tribunal in this case misunderstood one of the fundamental differences between a wrongful dismissal claim and an unfair dismissal claim. In a wrongful dismissal claim, the tribunal or court is not concerned with the reasonableness of the dismissal, whereas in an unfair dismissal claim, the function of the tribunal is to consider the fairness of the dismissal.
This is the latest instalment of a long-running saga in this case, which has already been up to the EAT and back on another preliminary issue relating to the now-defunct statutory dismissal procedure.
Gurpreet Duhra, partner, DLA Piper