Shaw v B&W Group Ltd

In a wrongful-dismissal claim, an employer seeking to justify summary dismissal must prove that the employee actually committed a repudiatory breach of contract. A genuine or reasonable belief that the employee was guilty is not determinative. That belief may be evidentially relevant, but it does not establish contractual due cause.

A contractual right to dismiss without notice or compensation for due cause is construed as requiring conduct capable of justifying premature termination, namely serious misconduct amounting to repudiatory breach. The unfair-dismissal inquiry under Employment Rights Act 1996 section 98 does not replace the conventional contractual test.

The claimant was employed for a fixed three-year term. His contract permitted summary termination for specified serious matters and provided for salary payments if the company dismissed him without due cause. Following concerns about his management style and alleged inappropriate conduct towards female staff, he was required to resign or face summary dismissal.

The Employment Tribunal held that he had been dismissed, but dismissed his contractual claim. It treated the employer's genuine belief, formed after investigation, that there were reasonable grounds for dismissal as sufficient due cause. The claimant appealed. The central issue was whether contractual due cause required proof of actual gross misconduct or merely a genuine and reasonable employer belief in it.

1. Appeal allowed. The Employment Tribunal misdirected itself by importing into a wrongful-dismissal claim the approach applicable to unfair dismissal.
2. The decisive question was whether the claimant had actually committed conduct amounting to a repudiatory breach of his employment contract. The employer's reasonable belief in serious misconduct was not determinative, although it could be relevant evidence when deciding what had occurred.
3. Construed in its contractual setting, dismissal for due cause meant dismissal for conduct capable of justifying immediate termination of the fixed-term contract. That required a serious contractual breach, described in shorthand as gross misconduct. It was insufficient for the employer merely to identify a reason in which it reasonably believed.
4. The contractual provision was intended to protect an employee against premature termination without adequate compensation. The separate three-month notice provision did not alter the meaning of the express entitlement to six months' salary where dismissal was without due cause. Any three months' salary already received could, however, require credit in calculating loss.
5. The Tribunal had made no finding that the claimant had actually committed gross misconduct or another repudiatory breach. Its conclusion that the employer had a genuine belief therefore could not dispose of the claim. The case was remitted to the same Tribunal, if practicable, to determine whether there was due cause on the correct basis and, if not, the claimant's entitlement and loss.

• Employment Appeal Tribunal: appeal allowed and the contractual claim remitted for rehearing.
• Employment Tribunal at Brighton: dismissed the claimant's breach-of-contract claim in a decision sent to the parties on 26 July 2011, holding that the employer's genuine belief in serious misconduct amounted to due cause.