Honda of the UK Manufacturing Ltd v Gobby

In an unfair dismissal claim, the Employment Tribunal must first determine the employer’s reason, or principal reason, for dismissal under section 98(1) of the Employment Rights Act 1996. The assessment of fairness under section 98(4) must then address whether the employer acted reasonably in treating that identified reason as sufficient for dismissal. A tribunal must give reasons which enable the parties and any appellate tribunal to identify the essential reasoning. Where the tribunal’s reasons leave the reason for dismissal unclear, the defect is fundamental and the decision cannot stand.

The Employment Tribunal found that Honda had unfairly dismissed Mr Gobby, awarded a basic award of £3,630 and made no compensatory award. Mr Gobby had been summarily dismissed after using a company credit card for personal purposes and giving differing explanations about the expenditure. Honda appealed, alleging errors including failure to identify the principal reason for dismissal and substitution of the tribunal’s view for that of the employer. Mr Gobby cross-appealed against the refusal of a compensatory award. The central issue was whether the Employment Tribunal had adequately identified the reason for dismissal and applied the statutory fairness test.

1. Appeal allowed. The Employment Tribunal’s decision was set aside and the claim was remitted for rehearing to a differently constituted Employment Tribunal. The cross-appeal was academic.
2. Under section 98(1) of the Employment Rights Act 1996, the first step is to determine the reason, or principal reason, for dismissal. That reason is fundamental to the assessment of fairness.
3. Under section 98(4), the question is whether, having regard to the reason shown by the employer, the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissal, having regard to the circumstances and the substantial merits of the case.
4. The Employment Tribunal had not clearly determined whether the dismissal was for fraud, providing false information, misuse of the company card, or breach of company rules. Its reasons were internally inconsistent. It was therefore impossible to identify the legal basis on which the finding of unfair dismissal had been reached.
5. Tribunal decisions should state the applicable legal principles and explain how those principles were applied to the relevant facts. The requirement identified in English v Emery Reimbold & Strick Ltd [2003] IRLR 710 was not satisfied because the reasoning essential to the decision could not readily be analysed.
6. The Employment Appeal Tribunal noted that other grounds might have had force, including possible substitution of the tribunal’s view on fraud for the statutory reasonableness assessment and consideration of a reduction under section 122 of the Employment Rights Act 1996. Those issues were left for the rehearing.

• Employment Appeal Tribunal: Allowed Honda’s appeal, set aside the Employment Tribunal’s decision and remitted the claim for rehearing to a differently constituted tribunal.
• Employment Tribunal: Found the dismissal unfair, awarded a basic award of £3,630 and made no compensatory award.