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SOSR dismissal: A managerial prerogative?

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19th Oct 2005
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Alison Wallace, head of employment practice at Steptoe & Johnson solicitors looks at recent case law which sheds some light on the grey area of dismissal for ‘some other substantial’ reason.

Section 98 of the Employment Rights Act 1996 requires an employer to prove the reason for dismissal being either proscribed reasons or for “some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held”.

The proscribed reasons in 98(2) are capability, conduct, redundancy or the employee’s inability to carry out the role without contravening an enactment.

At an early stage in the history of unfair dismissal law, it was established that “some other substantial reason” was to provide a general residual category of reasons for the dismissal and was not to be restricted to reasons of like category specified in what is now S.98.

There has been a trickle of reported cases in the 1970’s and 1980’s which have provided wide ranging examples of the dismissals which come within the “some substantial reason” heading including:

  • irreconcilable differences
  • conflict of personalities
  • the termination of short term employment
  • the refusal to agree to a change of terms and conditions of employment
  • retraction of notice by employee
  • a prison sentence
  • being bumped to allow the owner’s son to join the Company and
  • quasi reorganisations

The flood gates have certainly not been opened to allow employers to dismiss on a whim as a managerial prerogative.

However, in recent months there have been a number of different cases in which “some other substantial reason” for dismissal has been considered which are set out below.

In Pay v Lancashire Probation Service, Mr Pay, a probation officer was dismissed after his employers discovered he was involved in activities including the merchandising of products connected with bondage and that he performed shows in specialist clubs.

His employers took the view that these activities were incompatible with his role and responsibilities as a probation officer and were particularly inappropriate having regard to his work with [***] offenders.

Mr Pay complained that his dismissal was unfair in that it entailed an infringement of the Human Rights Act which gave him right to respect for his privacy and home life.

Although his employers had advanced misconduct as the reason for his dismissal, the Tribunal held that it was for some other substantial reason and that the dismissal fell within the range of responses of a reasonable employer. On appeal, the Tribunal’s decision was upheld. His dismissal because of his participation outside work in other activities was fair and did not amount to an infringement of his rights under the Human Rights Act.

In the case of Huggins v Micrel Semiconductor (UK) Limited an Employment Tribunal decided that where an employee’s conduct leads to a breakdown of trust and confidence leading to dismissal then this can constitute some other substantial reason.

Mr Huggins was employed as a design engineer until he was dismissed in October 2002. His relation with his manager had deteriorated. His health was a key focus of a meeting and he was asked to produce medical reports which he refused to do. It was clear to the company that there had been a breakdown in the relationship of mutual trust between himself and the company and they could not see anyway of repairing the damage and moving forward. The case is of interest as it applies the last straw doctrine normally seen in constructive dismissal cases, that is whether by an accumulation of conduct over time, the employee can breach the implied term of mutual trust and confidence.

In Chandlers (Farm Equipment) Limited v Rainthorpe the employers failed to successfully defend a claim for unfair dismissal brought by Mrs Rainthorpe. She had worked for them for 22 years and was summarily dismissed on the grounds that her husband who was a former employee of Chandlers was planning to join a competitor who had recently acquired a franchise that Chandlers was about to lose.

The company argued that it had dismissed Mrs Rainthorpe because she might obtain confidential information in the course of her duties and then accidentally pass it to her husband and thus it could be used by the competitor.

This dismissal was therefore for some other substantial reason and fair. The Tribunal held that fear of passing on commercially sensitive information by an employee is a substantial reason of a kind such as potentially to justify a dismissal but there was nothing in her conduct or in her husband’s conduct that such a disclosure intentional or unintentional would occur.

The dismissal was deemed to be outside the range of reasonable responses. Chandlers appealed but the Employment Appeal Tribunal upheld the decision. They agreed that the potentially fair reason was some other substantial reason, namely the potential disclosure of confidential information but the employers had not acted reasonably in dismissing her.

In the Scottish case of, Scott & Co v Richardson the Employment Appeal Tribunal drew attention to the low threshold for deciding whether an employer has some other substantial reason for dismissing an employee. Scott & Co was a firm of debt collectors. They wanted to re-organise their employees’ contracts to introduce a shift system.

This meant that employees could be required to knock at debtors doors in the evenings (rather than during the day which is less effective). Mr Richardson refused to agree to the change in his contract. He was willing to work evenings but previously he wanted to be paid at overtime rather than normal rates.

After seven months of trying to persuade him, he challenged Scott & Co to dismiss him or stop insisting on the changes. Scott & Co dismissed him. The Tribunal held that the company had not demonstrated “some other substantial reason” for the dismissal as they had not demonstrated that the change in shift patterns had discernable advantages to it but the Appeal Tribunal held that this was the wrong approach.

The correct approach is whether the employer reasonably believed or concluded that the change to contract terms had advantages. It was not necessary to go a step further and prove that it did have those advantages. Provided the reason was not whimsical, unworthy or trivial then the employer will establish some other substantial reason.
The Employment Appeal Tribunal looked at the history of the authorities on the issue of what could amount to a substantial other reason.

It would seem that an employer cannot claim that its reason for the dismissal is substantial if it is a capricious reason which no person of ordinary sense would entertain. If the employer can show that he had a fair reason in his mind at the time when he decided on dismissal and he genuinely believed it to be fair then this would bring the case within the category of another substantial reason.

Where the belief is one which is genuinely held and particularly is one which most employers would be expected to adopt it may be a substantial reason even where modern sophisticated opinion suggests that it has no scientific foundation.

This is designed to deter employers from dismissing employees for some trivial or unworthy reason. If they do so, the dismissal will be deemed unfair without the need to look further into its merits.

Finally, and most recently in Forshaw v Archcraft Limited the Employment Appeal Tribunal had to consider whether the dismissal of employees for failing to agree a new contract containing a restraint of trade clause was for some other substantial reason and fair.

Archcraft was a small company which manufactured plastic products for windows and conservatories. Two of their senior employees had left to set up a rival business and Archcraft feared that they might poach their employees. Archcraft therefore requested their employees to sign a new contract of employment containing a restraint of trade clause imposing a nationwide ban on their working in a competing business for a period of 12 months following a termination of their employment.

The employees were dismissed when they refused to sign. The Tribunal held that their refusal to sign new contracts was some other substantial reason and that in the circumstances their dismissals were fair but the Employment Appeal Tribunal allowed their appeal substituting a finding of unfair dismissal.

The Appeal Tribunal accepted that in the circumstances faced by Archcraft, it was reasonable for it to invite the employees to sign contracts containing a reasonable restraint clause. The problem was that the Tribunal’s finding was that the proposed restraint was wider than was necessary for the company’s protection. The restraint had it been imposed would have been void and unenforceable as an illegal restraint of trade. A refusal in those circumstances could not amount to a potentially fair reason.

As this provision stands free of the other potentially fair reasons and is open ended it provides an extremely flexible tool for employers to dismiss where the conduct of an employee does not fall all square within one of the other reasons. This is particularly the case where there is a business re-organisation and the situation is not strictly a redundancy or where there is a transfer of an undertaking and there is an ETO reason.

Imposing new terms and conditions is a frequent situation faced by employers. The mere refusal of an employee to accept new terms will not in itself justify a dismissal. Something more is needed to make any subsequent dismissal fair.

However the reason for the dismissal must still be a meritorious one if it is to be some other subsequent reason and be a sound business decision. With the new statutory dismissal scheme now in place an employer will have to be prepared to justify their decision to dismiss the employee in the dismissal meeting.

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