Way v Spectrum Property Care Ltd

Where a final warning is material to a later dismissal, a warning given in bad faith cannot be relied on to turn conduct warranting a lesser sanction into a sufficient reason for dismissal. Under the Employment Rights Act 1996, fairness is assessed according to equity and the substantial merits of the case. The warning’s formal appearance, the employee’s failure to appeal, and a later decision-maker’s rejection of the challenge do not cure bad faith. If an Employment Tribunal has failed to investigate a material bad-faith challenge, the Employment Appeal Tribunal must remit the case unless the error could not affect the result or only one outcome is possible on established or undisputed facts. It must not decide the merits itself.

Mr Way was dismissed for misconduct after sending inappropriate workplace emails. He was already subject to a final written warning arising from an earlier recruitment matter. The Employment Tribunal held that the dismissal was fair because the live warning made dismissal fall within the range of reasonable responses.

The Employment Appeal Tribunal accepted that Mr Way had raised a case that the earlier warning was given in bad faith, but assumed bad faith and held that the warning could still be taken into account. It dismissed the appeal in UKEAT/0181/13/MC. The Court of Appeal considered whether a bad-faith warning could be relied on and whether the EAT was entitled to determine the outcome without remitting the case.

1. Disposition. Lord Justice Christopher Clarke gave the judgment, with Lord Justice Patten and Lady Justice Hallett agreeing. The appeal was allowed unanimously and the claim was remitted to a differently constituted Employment Tribunal to determine whether Mr Way was unfairly dismissed.
2. Reliance on a final warning. Under the Employment Rights Act 1996, s 98(4), the question was whether Spectrum acted reasonably in treating the reason for dismissal as sufficient, assessed according to equity and the substantial merits of the case. The guidance in Davies v Sandwell Metropolitan Borough Council [2013] EWCA Civ 135 and Wincanton Group PLC v Stone [2013] IRLR 178 required consideration of whether the warning was given in good faith, had at least prima facie grounds, and was not manifestly inappropriate.
3. A final warning normally matters because it records prior misconduct and moves the employee further along the disciplinary path towards dismissal. In circumstances where the warning is material to the decision to dismiss, however, a warning given in bad faith cannot be relied on. Its validity on its face, the absence of an appeal, and a later appeal officer’s rejection of the challenge could not cure the bad faith. The EAT’s reasoning was therefore internally inconsistent and legally erroneous.
4. Role of the EAT. The principles in Jafri v Lincoln College [2014] ICR 920 required remittal where the error might affect the outcome or more than one outcome remained possible. The EAT was not entitled to decide for itself that dismissal was fair on an assumption that bad faith existed. The ET had to determine the fact and extent of any bad faith and its effect on the reasonableness of dismissal. The court made no further limitation on the matters to be determined.

• Court of Appeal (Civil Division) — allowed the appeal and remitted the unfair-dismissal question to a differently constituted Employment Tribunal.
• Employment Appeal Tribunal — in UKEAT/0181/13/MC, accepted that the bad-faith issue should have been investigated but held that the warning could still be relied on and dismissed the appeal.
• Employment Tribunal — held that the dismissal was fair and fell within the range of reasonable responses.