Don’t get caught out when disciplining for theft. Sue Nickson looks at the correct procedures to follow to ensure a
Breach of contract
Sarah has worked at the hotel as a cleaner for the past six months.
During this time some money has gone missing but no disciplinary action has
been taken against her. She has now been told she has not passed the
probationary period because of these incidents. She has claimed that the hotel
should have followed procedure set out in the disciplinary policy.
Sue Nickson comments: If there is a contractual disciplinary
procedure then the employee will be able to claim that a failure to follow it
is a breach of contract. Many employers will be able to avoid the potential for
this type of claim by expressly providing in the contract that the disciplinary
procedures are excluded during the probationary period.
However, the employer’s right to exclude such provisions will be affected by
draft legislation that is going through Parliament. When the provisions of the
Employment Bill 2002 are implemented all employers will be required to have a
contractual disciplinary procedure. This will mean that at the very least the
employer will have to put the allegations in writing to the employee, hold a
disciplinary hearing at which the employee will be able to make representations
and provide for a right of appeal.
A recent decision of the Court of Session in the case of King v University
of St Andrews, 2002, IRLR 252 has confirmed the fact that during an
investigation and disciplinary process the implied term of mutual trust and
confidence still applies. It is only later when a decision to dismiss has
actually been made that the term will not be implied in the contract of
This is likely to widen the scope for employees to be able to bring a claim
for breach of contract should the employer fail to comply with the spirit of
the contractual disciplinary procedures.
Bill has worked as the manager at the Bates Hotel Hi Class Restaurant
for the past 18 months. A recent audit has revealed a number of discrepancies
in relation to the stock and cash records. Bill is called into a meeting and
admits that he paid sale proceeds into his own bank account. However, he had
always intended to purchase replacement stock with this money. He is summarily
SN comments: The reaction of most employers would be that the
employee who admits taking company funds and paying them into his private bank
account could be summarily dismissed. However, take care to consider whether a
full and fair process has been followed. Here the employer does not appear to
have carried out an investigation beyond establishing that the monies were paid
into the employee’s bank account.
In the recent case of OHR v Possante, the Employment Appeal Tribunal found
there had been a failure to investigate adequately in very similar
circumstances. Possante had been a restaurant manager and in charge of wine
stocks. A stock check found 45 bottles of wine were missing. His explanation
was that the bottles had been sold and the proceeds placed into his own bank
account ready for him to buy replacements. He was summarily dismissed despite
his explanation and the fact that the hotel manager confirmed this practice had
been followed for the previous 18 months. The dismissal was ruled to be unfair
because of the employer’s failure to investigate further. There may have been
records to substantiate the fact he had purchased replacement bottles over a
period of time or grounds to support his claim that there were security issues
in the hotel.
In 1988 the House of Lords ruled in the case of Polkey v AE Dayton Services,
1988, ICR 142, that the dismissal of an employee without following a proper
procedure was unfair. Before this decision, a tribunal may have found a
dismissal in such circumstances fair if satisfied that the employee would have
been dismissed even if a full procedure had been followed. The judgement allowed
for only the limited exception that dismissal procedures could reasonably be
dispensed with where the offence is so heinous that a reasonable employer
following good employment practice could conclude that no explanation or
mitigation would possibly make any difference to the decision to dismiss.
However, a partial reversal of this rule could result from the provisions of
the Employment Bill 2002 when it comes into force. An employee will not
necessarily be dismissed unfairly even when the employer has not followed the
full contractual disciplinary procedure. While the employer will still have to
follow the statutory procedure the tribunal may find that it made no difference
to the end result and the dismissal may be found to be fair.
Andrew was recently employed as a security guard at the hotel. He had
placed a large sum of money that had been left in one of the rooms in the hotel
safe. He told the head of security who told him that he would sort it out. A
week later Andrew found that the money was missing and he contacted the general
manager about its disappearance. He was then dismissed on the grounds that he
was making trouble about the missing money.
SN comments: Generally an employee needs to have one year’s service
to bring a claim for unfair dismissal. Here no procedures have been followed
before the dismissal and there do not appear to be any fair grounds for the
dismissal. It appears to be an unfair dismissal but as Andrew has less than one
year’s service he will not be able to bring a claim.
However, Andrew may be able to take advantage of one of the exceptions to
the qualifying service requirement.
Most of the exceptions relate to instances where an employee has been
dismissed for a reason connected with asserting a statutory right. But the Public
Interest Disclosure Act 1998, as implemented by section 47 of the Employment
Rights Act 1996, gives protection to employees who have made a protected
The fact that Andrew reported to his employer that monies had gone missing
would appear to amount to a protected disclosure as it concerned what he
believed was a criminal offence – theft.
Under the whistleblowing provisions, the employee is not required to have a
year’s service in order to bring a claim of unfair dismissal. Probably of even
more concern to the employer is the fact that any compensation for unfair
dismissal will not be subject to the usual cap, which at present stands at
£52,600. This could prove financially disastrous for a company as was
illustrated in a recent case where the employment tribunal found that the
dismissed employee was nearing retirement age and was, therefore, unlikely to
find suitable employment again; on this basis it awarded the employee £293,000
as compensation to take into account losses up to the date of retirement.
Even if Andrew’s case was not a whistleblowing case, the employer might be
in breach of contract by failing to follow the disciplinary procedures if these
are contractual (see Sarah’s case above).
Jim has worked in the hotel as a receptionist for several years. A
new head receptionist has complained to the general manager that some of the
room bills are not being processed in the correct way. Jim has already had a
warning about the bills procedures and at a subsequent disciplinary hearing, after
admitting that he was still following the old procedures, the head receptionist
SN comments: Is the employer at risk of a claim? The allegations have
been put to Jim and he has admitted the conduct complained of by the head
To be fair the decision to dismiss must be within the range of reasonable
responses and as Jim has a previous warning for the same conduct it would
appear to be so.
However, in the case of Whitbread (t/a Whitbread Medway Inns) v Hall, 2001,
ICR 699, a hotel manager was dismissed after admitting that he had guessed
figures for a stock control audit. He had previously had warnings about dealing
with stock control and was dismissed by his immediate manager.
The EAT found the dismissal was within the range of reasonable responses,
but the employer’s disciplinary process was so flawed that it rendered the
dismissal unfair. A fair dismissal procedure was essential even where the
employee admitted misconduct.
Here, the procedure followed before Jim’s dismissal appears to be flawed.
The head receptionist not only conducts the disciplinary hearing as the
employee’s immediate supervisor but is also the person who initiated the investigation.
This could be criticised on the grounds that he acted as both judge and jury
in the complaint. Unless the firm can show it had such limited resources it
could only deal with the complaint in this way, the resulting dismissal will be
found to be unfair.
Sue Nickson is partner and national head of employment law at Hammond