Klusova v London Borough of Hounslow

The Court of Appeal considered an unfair dismissal claim where the employee's right to work in the United Kingdom was contested. The tribunal had found that the claimant made an in-time application to the Home Office so that her limited leave to remain was extended pending determination, and that her employer’s summary dismissal was substantively and procedurally unfair. The Employment Appeal Tribunal (EAT) held that the tribunal's finding of an in-time application was perverse and substituted a finding that the claimant could not lawfully continue to work, but accepted the employer's alternative defence based on a genuine belief that employment was unlawful. The Court of Appeal held that the tribunal’s factual finding about a valid in-time application was supportable and that the EAT was wrong to treat that finding as perverse, but it agreed with the EAT that the employer genuinely believed the employee could not lawfully continue in employment. Because the employer relied on the wrong statutory ground (section 98(2)(d) ERA) and did not follow the statutory dismissal procedures applicable to dismissal for "some other substantial reason" under section 98(1)(b) ERA, the dismissal was procedurally unfair and the matter was remitted to the tribunal for a remedies hearing.

This is an appeal from the Employment Appeal Tribunal to the Court of Appeal concerning the fairness of the summary dismissal of Ms Elena Klusova by the London Borough of Hounslow. The claimant, a Russian national who had been granted limited leave to remain until 14 May 2004, had worked for the Council since 2000. The central dispute concerned whether she had made an in-time application to extend her leave prior to 14 May 2004 so that, by virtue of the immigration legislation, her right to remain and to work continued pending determination.

The Employment Tribunal accepted that (i) she had made a valid in-time application and so her leave (and right to work) was extended pending determination, (ii) the employer did not lawfully rely on section 98(2)(d) of the Employment Rights Act 1996 because there was no statutory bar in force, and (iii) the dismissal was substantively and procedurally unfair, the latter because the employer had not followed the statutory dismissal and disciplinary procedures. The EAT allowed the employer's appeal, finding that there was no evidential basis for the tribunal's finding of an in-time application and that the employer genuinely believed the employee was not entitled to work; the EAT therefore concluded the dismissal was not unfair.

On further appeal the Court of Appeal considered (i) whether the tribunal's factual finding that there had been an in-time application was perverse and (ii) whether the employer genuinely believed employment would contravene an enactment. The Court concluded that there was sufficient material, including Home Office correspondence adduced before the tribunal and the claimant's evidence, to support the tribunal’s factual finding and that the EAT should not have overturned it as perverse. The Court accepted, however, that the employer had a genuine belief based on information from Home Office officers that continued employment would be unlawful; this supported the alternative statutory head of dismissal under section 98(1)(b) ERA. Crucially, because dismissal for "some other substantial reason" (section 98(1)(b)) is subject to the statutory dismissal procedures, and the employer had not complied with those procedures, the dismissal was procedurally unfair. The Court therefore remitted the case to the tribunal to determine remedies.

Appeal allowed in part. The Court of Appeal held that the Employment Tribunal was entitled to find that the claimant had made a valid in-time application so that her leave and right to work continued pending determination, and the EAT was wrong to treat that finding as perverse. The Court agreed with the EAT that the employer genuinely believed continued employment would contravene an enactment, amounting to "some other substantial reason" under section 98(1)(b) ERA; however, because the employer failed to follow the statutory dismissal procedures applicable to that ground, the dismissal was procedurally unfair and the matter was remitted to the Employment Tribunal for a remedies hearing.

Employment Tribunal (claim presented 9 November 2005; ET decision 10 May 2005) found unfair dismissal. Employment Appeal Tribunal allowed the employer's appeal (EAT order 6 October 2006, UKEAT/0325/06DM), setting aside the ET order. Permission to appeal to the Court of Appeal was granted on 25 January 2007. Court of Appeal judgment [2007] EWCA Civ 1127 (7 November 2007): allowed the claimant's appeal in part and remitted the case to the ET for a remedies hearing.