Foley v Post Office (HSBC Bank Plc (formerly Midland Bank Plc) v Madden)

In determining fairness under Employment Rights Act 1996, an Employment Tribunal must apply objective standards of the hypothetical reasonable employer. It must not decide what it would itself have done.

In misconduct cases, the tribunal must assess whether the employer had reasonable grounds for its belief and made a reasonable investigation. It must then decide whether dismissal fell within the range of reasonable responses. That approach is not a perversity test, but it permits reasonable employers to reach different conclusions in cases between the extremes.

A full rehearing on an internal appeal may remedy defects in the original disciplinary hearing where it forms part of the overall dismissal process.

These conjoined appeals concerned two employees dismissed for alleged misconduct. In Foley v Post Office, the Employment Tribunal dismissed the unfair-dismissal complaint, but the Employment Appeal Tribunal allowed the employee's appeal and remitted the case for remedies. The Post Office appealed.

In HSBC Bank Plc v Madden, the Employment Tribunal held that the employee had been unfairly dismissed because the Bank's investigation and grounds for dismissal were inadequate. The Employment Appeal Tribunal dismissed the Bank's appeal: [2000] IRLR 288.

The common issue was the correct application of section 98 of the Employment Rights Act 1996, particularly the range of reasonable responses and the proper limits of tribunal review of an employer's misconduct decision.

1. Both appeals were allowed unanimously. Lord Justice Mummery gave the leading judgment, with which Lord Justice Nourse agreed. Both unfair-dismissal complaints were dismissed.

2. The court held that the established interpretation of section 98(1), (2) and (4) of the Employment Rights Act 1996 remained binding. An Employment Tribunal must decide objectively whether the employer acted reasonably in treating the established reason as sufficient for dismissal. The tribunal must not substitute its own view of what it would have done for that of the employer.

3. The range of reasonable responses approach in Iceland Frozen Foods Ltd v Jones [1983] ICR 17 remained authoritative. It does not impose a perversity threshold. It recognises that, between clear cases where dismissal is the only reasonable response and clear cases where it is unreasonable, reasonable employers may differ on whether dismissal is appropriate.

4. For a conduct dismissal, the tribunal must apply the Burchell approach. It must ask whether the employer had reasonable grounds for its belief in misconduct and whether it carried out a reasonable investigation. The tribunal does not decide whether it is itself satisfied of the employee's guilt, nor conduct a rehearing of the employer's disciplinary decision.

5. In Foley's case, the internal appeal was a full rehearing and was properly treated as part of the overall dismissal process. Its careful investigation cured deficiencies in the original disciplinary hearing. The tribunal was entitled to find that dismissal fell within the range of reasonable responses.

6. In Madden's case, the tribunal erred by reassessing the quality and weight of the evidence as though it were the employer. No reasonable tribunal applying the correct approach could have found either that the Bank's investigation was unreasonable or that dismissal was outside the range of reasonable responses.

7. Lord Justice Rix agreed, adding that an Employment Appeal Tribunal may intervene only on a question of law; it cannot substitute its own conclusion on section 98(4) merely because it would have reached a different view.

• Court of Appeal: Allowed both employers' appeals and dismissed both complaints of unfair dismissal.

• Employment Appeal Tribunal: In the Foley appeal, allowed the employee's appeal on 30 March 1999 and remitted the matter for remedies. In the Madden appeal, dismissed the Bank's appeal: [2000] IRLR 288.

• Employment Tribunals: The Foley tribunal had dismissed the complaint. The Madden tribunal had upheld the complaint, finding the dismissal unfair.