Elizabeth Chand v EE Limited

In a conduct dismissal, the tribunal must identify the employer’s actual reason, or principal reason, for dismissal. It must not substitute a reason which the decision-maker could have adopted.

Where the actual reason is composite, fairness under section 98 of the Employment Rights Act 1996 must be assessed by reference to the whole reason. A dismissal cannot be fair where a key element of that reason, including a belief that conduct was fraudulent, was not held on reasonable grounds. A serious policy breach may be capable of justifying dismissal, but that does not cure an unreasonable and material element of the reason actually relied upon.

The claimant, a senior customer adviser with long service, was summarily dismissed for gross misconduct after four customer-related incidents. The respondent’s decision-makers treated each incident as fraudulent.

The Employment Tribunal found that the employer lacked reasonable grounds to believe that any incident involved fraud. It nevertheless dismissed the unfair-dismissal complaint because the fourth incident was an egregious policy breach which could itself justify dismissal.

The claimant appealed against that conclusion. The respondent cross-appealed against the finding that its belief in fraud lacked reasonable grounds. The central issue was whether the Tribunal had assessed the employer’s actual composite reason for dismissal, rather than a reason which it could have adopted.

1. Appeal allowed; cross-appeal dismissed. The EAT substituted a finding that the claimant had been unfairly dismissed and remitted remedy to the same Employment Tribunal.

2. The Tribunal had permissibly concluded, after analysing the evidence available when dismissal was decided, that the respondent had no reasonable grounds to regard any of the four incidents as fraudulent. It was not required to analyse the incidents together or through the prism of the fourth incident. Its conclusion disclosed no error of law and was not challenged as perverse. The cross-appeal therefore failed.

3. Under section 98 of the Employment Rights Act 1996, the relevant reason is the employer’s actual reason for dismissal. Where that reason is composite, the Tribunal must assess the totality of it. As explained in Smith v Glasgow City District Council [1987] ICR 796 and Robinson v Combat Stress UKEAT/0310/14, a Tribunal must determine what the decision-maker actually decided, rather than what dismissal decision the evidence could have supported.

4. The Tribunal made no finding that the fourth incident was the principal reason in Mr Palmer’s mind. Its findings instead showed that Mr Palmer treated the allegations as a composite and considered that fewer proven allegations might have affected the result. It erred by treating the policy breach in the fourth incident as a sufficient hypothetical basis for dismissal.

5. Fraud was a key element of both the dismissal decision and the decision to reject the internal appeal. Since the employer’s belief in fraud was not held on reasonable grounds, the actual reason could not be treated as sufficient for dismissal. The only lawful conclusion on liability was unfair dismissal. Questions of contributory fault and any Polkey reduction were remitted for determination at the remedy hearing.

• Employment Appeal Tribunal: appeal allowed and cross-appeal dismissed; the EAT substituted a finding of unfair dismissal and remitted remedy to the Employment Tribunal: [2026] EAT 17.

• Employment Tribunal, Birmingham: Employment Judge Codd dismissed the unfair-dismissal complaint in reserved reasons dated 2 November 2023, holding that the fourth policy-breach allegation could itself justify dismissal.