Way v Spectrum Property Care Ltd

The Court of Appeal held that an employer may not properly rely on a disciplinary warning that was given in bad faith when deciding whether there was sufficient reason to dismiss an employee. The court applied the statutory reasonableness test under the Employment Rights Act 1996, section 98(4), and concluded that reliance on a bad faith final written warning would be inconsistent with the requirement to act reasonably and in accordance with equity and the substantial merits of the case. The court found that the Employment Appeal Tribunal erred in law by treating an allegedly bad faith warning as available to justify dismissal and by deciding the fairness of dismissal without allowing the Employment Tribunal to determine whether the earlier warning was given in bad faith. The appeal was allowed and the matter was remitted to a differently constituted Employment Tribunal to determine whether the warning had been given in bad faith and, if so, whether dismissal was fair in the absence of a valid warning.

Background and procedural posture

The claimant, Mr Way, was employed by Spectrum and dismissed for misconduct in December 2011 after an internal investigation that uncovered a series of inappropriate emails. Spectrum had previously given Mr Way a stage 3 final written warning in December 2010 for an unrelated recruitment irregularity. The Employment Tribunal found that the employer had acted reasonably in dismissing Mr Way, in part because of the live final written warning. The Employment Appeal Tribunal (Judge Shanks) considered whether the ET had wrongly excluded evidence that the December 2010 warning had been given in bad faith; the EAT allowed the appeal in part but concluded that even assuming bad faith the employer could nonetheless have regard to the warning and that dismissal was fair. Mr Way appealed to the Court of Appeal.

Nature of the claim

• The claim was for unfair dismissal and involved an argument that the earlier final written warning had been issued in bad faith and therefore could not be relied on as a reason to dismiss the claimant for subsequent misconduct.

Issues framed by the court

• Whether a warning given in bad faith can be relied on by an employer when assessing sufficiency of reason to dismiss under s 98(4) ERA 1996.
• Whether the Employment Tribunal and the Employment Appeal Tribunal erred in law in their treatment of the bad faith allegation and in their assessment of fairness of dismissal.

Court’s reasoning and disposition

The Court of Appeal concluded that a warning given in bad faith is not a proper factor for an employer to rely on when deciding whether there is sufficient reason to dismiss. The court explained that the disciplinary warning operated to put the employee further along the disciplinary path to dismissal; if that step to final warning was effected by bad faith, it would be inequitable and unreasonable to allow the employer to rely on it to justify a later dismissal for different misconduct. The court found the EAT’s approach illogical and inconsistent with authorities establishing that a prior warning is valid only if issued in good faith, on prima facie grounds and not manifestly inappropriate. The court therefore allowed the appeal and remitted the case to a differently constituted Employment Tribunal to determine whether the 2010 final written warning was given in bad faith and, in light of that finding, whether dismissal in December 2011 was fair.

Appeal allowed. The Court of Appeal held that an employer may not rely on a disciplinary warning that was given in bad faith when assessing whether there was sufficient reason to dismiss under section 98(4) of the Employment Rights Act 1996. The Employment Appeal Tribunal erred in treating an allegedly bad faith warning as available to justify dismissal and in effectively resolving factual issues that should first be determined by an Employment Tribunal. The matter was remitted to a differently constituted Employment Tribunal to decide whether the December 2010 final written warning was given in bad faith and, if so, to determine whether the subsequent dismissal was fair.

Appeal to the Court of Appeal from the Employment Appeal Tribunal (Judge Shanks) UKEAT/0181/13/MC following an earlier decision of an Employment Tribunal which had found the dismissal fair.