Screene v Seatwave Ltd

For unfair-dismissal purposes, the reason for dismissal is the set of facts known to, or beliefs held by, the employer which caused the dismissal. The employer is not necessarily bound by the label attached to those facts in its pleadings. A tribunal may identify the true reason, including a reason different from the pleaded label, provided the employee has a full opportunity to meet the case and suffers no prejudice. Failures caused by carelessness or negligence may properly be treated as conduct or misconduct rather than capability. Where the underlying facts and case have remained clear, a change between the labels of capability and misconduct will not necessarily invalidate the tribunal’s decision.

The claimant, a financial controller, was summarily dismissed after failing to monitor a German bank account, allowing fraudulent transactions and substantial losses to remain undetected. The dismissal letter relied on gross misconduct and serious negligence. The employer’s response to the unfair-dismissal claim referred to capability under section 98(2)(a) of the Employment Rights Act 1996.

The Employment Tribunal found that the dismissal was principally for conduct, although capability was also engaged, and dismissed the claims for unfair dismissal and notice pay. The claimant appealed, arguing that the tribunal had substituted misconduct for the capability reason pleaded by the employer and that the procedures were unsuitable for a capability case. The central issue was whether the difference in labels was legally significant or merely a relabelling of the same underlying facts.

1. Appeal dismissed. The Employment Tribunal was entitled to find that the principal reason for dismissal was misconduct under section 98(2)(b) of the Employment Rights Act 1996.

2. Under section 98(1), the employer must show the reason, or principal reason, for dismissal. Consistently with Abernethy v Mott, Hay and Anderson [1974] ICR 323, the relevant reason is the set of facts known to, or beliefs held by, the employer which caused the dismissal. The legal characterisation is not determined solely by the label used.

3. The distinction between capability and conduct is not absolute. The principle stated in Sutton & Gates (Luton) Ltd v Boxall [1978] ICR 67 supports treating shortcomings arising from carelessness, negligence or idleness as conduct or misconduct rather than capability.

4. Hotson v Wisbech Conservative Club [1984] ICR 859 establishes that an employer is not necessarily tied to its chosen label, but fairness requires the employee to have the fullest opportunity to address any material change in the case. Hannan v TNT-IPEC (UK) Ltd [1986] IRLR 165 illustrates that relabelling may cause no error where the substance of the case remains unchanged and no prejudice is shown.

5. Here, the same factual allegation remained central throughout: failure to monitor the German account, allowing fraud and substantial loss to continue. The claimant knew the allegation and its possible consequences, and the hearing was conducted on the basis of misconduct. There was therefore no material prejudice and no error of law in the Tribunal’s conclusion.

6. The remaining grounds, concerning the suitability of the procedures and alleged substitution of reasons, could not succeed once the principal ground failed. The Tribunal made sufficient findings of fact and gave no material misdirection.

• Employment Appeal Tribunal: appeal from the Employment Tribunal’s decision promulgated on 1 October 2009, with full Reasons furnished on 26 November 2009. The appeal was dismissed.
• Employment Tribunal: dismissed complaints of unfair dismissal and failure to pay notice pay, finding that the principal reason for dismissal was conduct, with capability also engaged.