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Supreme Court on Unfair Dismissal

Is British Home Stores v Burchell under challenge?

Broadly speaking, it is true to say that employment law is a statutory subject. Certainly, when it comes to unfair dismissal, the crucial consideration is the wording of s 98 of the Employment Rights Act 1996. In deciding whether a dismissal is fair, it is better to concentrate upon the statutory test than the case law. The appellate cases are largely important in so far as they help in the interpretation of the statute.

But occasionally, a particular case assumes weight, with the result that it is quoted with great frequency. In the realm of unfair dismissal, the case which stands out as “most quotable” is British Home Stores v Burchell [1980] ICR 303 (EAT). The claimant was accused of dishonesty, and dismissed. The EAT laid down a test for determining fairness in connection with a dismissal for misconduct. The matters which the employment tribunal must consider were:

  1.  did the employer believe in the misconduct in question?
  2.  did the employer have in its mind reasonable grounds upon which to sustain that belief?
  3.  had the employer carried out as much investigation into the matter as was reasonable in all the circumstances?

Lawyers love a numbered list, and certainly the above list is quoted in virtually every case in which the employer puts forward the reason for dismissal as one “related to conduct” as the statute puts it. It is generally used as the yardstick to determine whether such a dismissal is fair, together with an additional criterion:

(4) was the sanction of dismissal imposed by the employer a reasonable one?

In the case of Sainsbury Supermarkets Ltd v Hitt [2003] IRLR 23, the Court of Appeal made it clear that in determining each of these matters, the tribunal should consider whether the actions of the employer were within “the band of reasonable responses”. Taken together, these propositions are generally referred to as ‘the Burchell test” and have acquired classic status.

In the recent case of Reilly v Sandwell Metropolitan Borough Council [2018] UKSC 18, however, the Supreme Court caused a flutter in the employment law dovecote by doubting the extent to which Burchell  assisted in determining whether a dismissal was fair. Lord Wilson, who delivered the lead judgment, summarised the facts in Reilly with admirable succinctness as follows:

“ Ms Reilly, the head teacher of a primary school, is in a close relationship with Mr Selwood but it is not sexual and they do not live together. Mr Selwood is convicted of making indecent images of children. Ms Reilly has previously been unaware of his criminal activities. She fails to inform the school’s governing body of his conviction with the result that, when it learns of it, her employer summarily dismisses her. The Employment Tribunal (“the tribunal”) decides that, save in an irrelevant procedural respect, her dismissal has not been unfair. Should the tribunal’s decision stand?”

The Supreme Court found that the EAT and the Court of Appeal had been right in deciding that the decision of the employment tribunal should stand.

The conviction of Mr Selwood, when taken with his relationship to the head and the information to which she would have had access, meant that he posed a potential danger to children. The governors needed to know about the situation in order to assess the risk, and Ms Reilly was under a duty to disclose it to them, so that they could make that assessment. She had failed to comply with that duty. It followed that the tribunal was entitled to conclude that the employer had acted reasonably in dismissing her.

What of the famous test in Burchell? Lord Wilson took the view that it related to the question posed in s 98(1) to (3) of ERA 1996, which deals with whether the employer has established a potentially fair reason for the dismissal. He accepted that it had subsequently been held to apply to the question posed in s 98(4) of that Act: did the employer act reasonably or unreasonably in deciding to dismiss for that reason? But he did not think it was apt to apply it to the question of reasonableness. However, the matter did not arise for decision in this case, as the tribunal had been entitled both to find that the employer had a potentially fair reason to dismiss, and had acted reasonably in deciding to do so. 

Lady Hale agreed with the conclusion to which Lord Wilson and the other members of the court had come, but made an interesting comment on the role of Burchell, . She echoed Lord Wilson’s analysis that the requirements in Burchell  were directed to the “potentially fair reason” enquiry, rather than the reasonableness issue dealt with in s 98(4) of the 1996 Act. She went on to say:

“The meaning of section 98(4) was rightly described by Sedley LJ, in Orr v Milton Keynes Council [2011] ICR 704, at para 11, as “both problematical and contentious”. He referred to the “cogently reasoned” decision of the Employment Appeal Tribunal (Morison J presiding) in Haddon v Van den Burgh Foods [1999] ICR 1150, which was overruled by the Court of Appeal… Even in relation to the first part of the inquiry, as to the reason for the dismissal, the Burchell approach can lead to dismissals which were in fact fair being treated as unfair and dismissals which were in fact unfair being treated as fair. Once again, it is not difficult to think of arguments on either side of this question but we have not heard them.”

In sum ,then, she regretted the fact that the Supreme Court had not had the opportunity to examine the Burchell test and (possibly) reject it.  She went on to say that the test had become so entrenched that “destabilising the position without a very good reason would be irresponsible”. She also stated that Parliament had had the opportunity to rectify the Burchell approach and had not done so. Finally, experienced employment lawyers might consider the approach was correct and did not lead to injustice in practice. She concluded:

“It follows that the law remains as it has been for the last 40 years and I express no view about whether that is correct.”

What are we to make of all this? 

First, is the Burchell test really about a potentially fair reason, or about reasonableness? Point (1) of the test is clearly about “reason”. Point (2) would seem on the face of it to be about “reasonableness”. An employer could have in its mind that it was going to dismiss for gross misconduct (so that would be its reason). But its decision could be formed upon totally inadequate evidence (hence unreasonable). Point (3) is even more clearly about reasonableness, and in practice is often looked at in conjunction with issues of fair procedure, in line with the ACAS Code of Practice and principles of natural justice. The argument usually takes in an additional point (4) (not expressed in the Burchell decision but implied in it): was the sanction of dismissal within the band of reasonable responses? This point is again about reasonableness.

It therefore seems that the Burchell test is at least in part about reasonableness. It seems certain to survive (as Lady Hale accepts) as the test to be applied in conduct dismissals, encompassing as it does both the need to examine the genuineness of the reason, and the reasonableness of the decision to dismiss.

The citation by Lady Hale of Sedley LJ’s remarks in Orr, with its favourable view of the EAT decision in Haddon is potentially significant, however. To unpick that comment, one needs to know that in Haddon the EAT took the view that the “range of reasonable responses” standard was not good law. Morison J in Haddon  disapproved of that test as amounting to a test of perversity, and preventing members of the employment from applying their own judgement as to what was reasonable. The Court of Appeal in Post Office v Foley [2000] ICR 1283, however, rejected Morison J’s reasoning and made it clear that members of the employment tribunal must not substitute their own view as to what was the right course of action for the employer to adopt. Their function was rather to decide whether the employer’s decision fell within the range of reasonable responses.

Once one unpicks Lady Hale’s comments, then, it seems that she sees some merit in re-examining the concept of the band of reasonable responses (sometimes called “the employer’s friend” or “the get out of jail free card”). If that is the case, there might be in prospect a radical change in the law of unfair dismissal, tilting the balance in favour of the dismissed employee. 

Will such a change take place? Intriguing though the prospect is, my view is that it is rather unlikely. The reasons which Lady Hale gives for the persistence of the current test are powerful ones, even if a case could be found in which the Supreme Court could pronounce upon its correctness. 

So it seems as though the reign of  Burchell  over misconduct dismissals is set to continue for some time to come.

John Sprack, April 2018

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