KRD Property Maintenance Ltd v O'Donnell

At the first stage of the misconduct test, the tribunal must decide whether the employer genuinely believed that the employee was guilty. It must not assess the quality of the material relied on when determining that question. A tribunal must also put a significant, unforeshadowed factual issue clearly to the relevant witness and alert the parties to it. Credibility cannot reasonably be assessed by assumptions based on age or length of employment. Conduct involving personal work during the employer’s time may amount to misconduct even where the competing business is conducted through a separate company. A finding of perversity requires an irrational or plainly unsustainable conclusion.

The Employment Tribunal found that the respondent had unfairly dismissed the claimant for misconduct. It concluded that the employer lacked a genuine belief in the misconduct, that the claimant’s conduct was blameworthy but not misconduct, and that there were procedural defects. It reduced compensation by 15% and concluded that a Polkey deduction was inappropriate because dismissal for the admitted conduct would itself have been unfair.

The employer appealed, alleging errors in the application of [1978] IRLR 379, unreasonable procedural findings, and perversity. The central issues were whether the tribunal’s reasoning was legally and logically sustainable and whether the case should be remitted.

1. Appeal allowed. The Employment Tribunal’s judgment was perverse and could not stand. The case was remitted to a freshly constituted Employment Tribunal.
2. Under the first stage of the guidance in British Home Stores v Burchell, the tribunal had to decide whether the employer genuinely believed that the claimant was guilty of the alleged misconduct. It was not entitled, at that stage, to assess the quality of the material on which the belief was based. That issue arose later in the statutory assessment of reasonableness.
3. The tribunal’s reasoning contained a fundamental conflict. It found that two employees had reported the claimant’s conduct to the managing director, but then relied on a refusal to accept that evidence when deciding that the managing director did not genuinely believe the allegations.
4. The tribunal also adopted an inappropriate approach to credibility by treating a young employee as inherently less credible than an older employee with a longer employment record. No such assumption could properly be made from age or length of service alone.
5. Where a significant factual issue arises in the tribunal’s mind and has not been raised by either party, fairness requires the tribunal to alert the parties and put the issue clearly and plainly to the relevant witness. The finding that the witness statements were unauthentic amounted to a serious allegation of fabrication or lack of good faith, but it had not been put to the managing director.
6. The tribunal had no proper basis for treating a 48-hour interval between suspension and disciplinary hearing as necessarily insufficient where the interval included a weekend. It had made no finding that the timing caused the claimant practical difficulty. Its treatment of the witness statements and notice of the allegations was also inadequately reasoned.
7. The distinction between blameworthy conduct and misconduct was not meaningful on the tribunal’s findings. The claimant admitted carrying out personal work during working hours and distributing business cards for his own business during the employer’s time. Those matters could not properly be characterised as anything other than misconduct. The fact that the relevant competing business was a separate company did not justify a contrary conclusion, given the respondent’s support for that business.
8. The conclusion on any Polkey deduction necessarily fell with the unsustainable conclusion that there had been no misconduct.

• Employment Tribunal, Edinburgh: judgment registered on 2 March 2010. The tribunal found the claimant unfairly dismissed, reduced compensation by 15%, and made findings concerning procedural unfairness and a Polkey deduction.
• Employment Appeal Tribunal: appeal allowed. The judgment was set aside and the case remitted for rehearing before a freshly constituted tribunal.