Punch Pub Company Ltd v O'Neill

Where section 98A(2) of the Employment Rights Act 1996 applies, an employer can avoid a finding of unfair dismissal by proving, on the balance of probabilities, that it would have dismissed the employee had a fair procedure been followed. The tribunal must address that question even if the parties do not raise it. The statutory dismissal procedures prescribed only a minimum standard. Compliance with them does not prevent a dismissal from being procedurally unfair under the ordinary test. The section 98A(2) inquiry and any Polkey compensation assessment run in parallel but must not be conflated. A tribunal must assess what would have happened, rather than what could have happened, and give adequate reasons for its conclusion.

The claimant, a pub manager, was summarily dismissed for gross misconduct after an audit identified missing banking records, an unreconciled deficit of approximately £7,916.68 and other procedural failures. The Employment Tribunal found the dismissal unfair because the investigation, disciplinary hearing and appeal were procedurally defective. It reduced compensation by 50% for contributory conduct and by a further 25% on Polkey grounds.

The employer appealed against the finding of unfair dismissal and the reductions. The claimant cross-appealed, arguing that the dismissal was automatically unfair because the statutory dismissal procedure had not been completed. The central issues were the effect of section 98A, the distinction between automatic and ordinary procedural unfairness, and the proper relationship between section 98A(2), Polkey and contribution.

By a majority, the appeal was allowed and the dismissal was held to be fair. The claimant’s cross-appeal was dismissed.

1. The Employment Tribunal was required to consider section 98A of the Employment Rights Act 1996, including section 98A(2), whether or not the point had been raised by the parties. Parties should nevertheless address the issue and adduce relevant evidence.
2. The requirements in Part 3 of Schedule 2 to the Employment Act 2002 were modest and had been satisfied. The first two steps were met because the claimant was sufficiently informed of the proposed disciplinary grounds and the information could be supplied orally or in writing. The appeal completed the procedure for the purposes of section 98A. Earlier procedural defects therefore did not make the dismissal automatically unfair.
3. Compliance with the statutory procedure did not determine ordinary fairness. A dismissal could satisfy Schedule 2 while remaining procedurally unfair under section 98(4) of the Employment Rights Act 1996.
4. The Employment Tribunal had failed to apply section 98A(2) and had asked whether the claimant could have been dismissed, rather than whether he would have been dismissed after a fair procedure. Its reasoning also failed to apply the distinction between section 98A(2), contribution and Polkey.
5. On the Tribunal’s factual findings, the claimant had committed serious misconduct involving a position of trust, substantial missing funds, failures in banking and cash-checking procedures, and alleged forged paying-in slips. He had no satisfactory explanation and the procedural defects would not have improved his position on the substance. The majority concluded that a fair procedure would inevitably have resulted in dismissal. Section 98A(2) was therefore engaged, and remission was unnecessary.
6. The majority further observed that the Tribunal had given inadequate reasons for its contribution and 25% Polkey findings. Had unfairness remained the outcome, those issues would have been remitted.

Mr Peter Smith dissented. He considered that the Tribunal was entitled to find that the chance of a fair dismissal was below 50%, particularly in view of the inadequate investigation, joint hearing, missing documentation, secret appeal discussion and the claimant’s employment record. He would have dismissed the employer’s appeal.

• Employment Appeal Tribunal: allowed the employer’s appeal and held that the dismissal was fair under section 98A(2) of the Employment Rights Act 1996; dismissed the claimant’s cross-appeal.
• Employment Tribunal: found the dismissal unfair, assessed 50% contribution and made a further 25% Polkey reduction. The decision was sent to the parties on 4 March 2009.