JP Morgan Securities Plc v Ktorza

For a conduct dismissal under Employment Rights Act 1996, section 98(1) and (2) require the employer to establish its actual reason for dismissal and that it relates to conduct. They do not require the employer to prove that the conduct was culpable, reprehensible, or undertaken with subjective awareness of possible disapproval.

Under section 98(4), the tribunal must objectively assess whether the employer reasonably treated that reason as sufficient. It must begin with the employer’s reasons and assess the investigation, fact-finding, procedure and sanction as a whole. It must not substitute its own factual conclusions or view of culpability for the employer’s reasonable view.

The claimant, an executive director on the appellant bank’s foreign-exchange sales desk, was dismissed following an attempt to short-fill a client order after Project January training. He maintained that he did not know that short-filling was reserved to traders. His dismissal and internal appeal were upheld after investigations in which he was not given an opportunity to respond to information obtained from other managers.

An Employment Tribunal upheld his unfair-dismissal claim in a judgment dated 9 August 2016. It held that conduct under section 98(2)(b) of the Employment Rights Act 1996 had to be culpable and found that the claimant’s lack of awareness meant that his conduct should not reasonably have been treated as culpable.

The employer appealed. The central issues were whether the Tribunal had confused the statutory stages under section 98 and whether it had substituted its own assessment for the employer’s assessment of the dismissal.

1. Appeal allowed. The Employment Tribunal had erred in law and the case was remitted to a freshly constituted Tribunal.

2. At the first stage of section 98 of the Employment Rights Act 1996, the employer had to show the reason operating in the mind of the dismissing officer and that it was a potentially fair reason. On the assumed honesty of the dismissing officer, the reason related to the claimant’s conduct in short-filling an order, his asserted obligation to know that the practice belonged to trading, and the associated risk. The Tribunal made no clear finding on that issue.

3. The Tribunal wrongly required the employer to establish that the conduct was culpable and that the claimant had subjective awareness that it might be disapproved of. Section 98(1) and (2) impose no such requirement. The error elided the question of the employer’s reason with the distinct section 98(4) question whether dismissal for that reason was reasonable. The approach in Royal Bank of Scotland v Donaghay was applicable: conduct need not be reprehensible before it can found a potentially fair reason.

4. In applying section 98(4), the Tribunal had to begin with the employer’s reasons and objectively assess whether the investigation, fact-finding, procedure and sanction, viewed as a whole, fell within the range of reasonable responses. It instead made and started from its own conclusions on whether short-filling involved risk, whether the claimant was careful despite a live warning, and what culpability required. That was an impermissible substitutionary approach.

5. Some criticisms of the employer’s process had considerable force, including the lack of an early proper investigation, the failure to let the claimant answer further material obtained from managers, and the failure to interview other sales staff who attended the training. However, the section 98 assessment was holistic. The EAT could not conclude without making its own factual assessment that the errors could not have affected the result. Rehearing before a new Tribunal was therefore required.

• Employment Appeal Tribunal: Allowed the employer’s appeal and remitted the unfair-dismissal claim for rehearing before a freshly constituted Employment Tribunal: [2017] UKEAT 0311_16_1105.
• Employment Tribunal, East London: Employment Judge Prichard upheld the claimant’s unfair-dismissal claim in a reserved judgment dated 9 August 2016. No citation was stated.