UK: re-engagement ordered following unfair dismissal, notwithstanding contributory fault

The recent tribunal case of Fotheringhame v Barclays Services Ltd highlights the risk of an employee obtaining a re-engagement order following a successful unfair dismissal claim, even where there has been some contributory fault on the part of the employee.  It also serves as a reminder that, where a re-engagement order is made, the financial compensation ordered could greatly exceed the usual cap on unfair dismissal compensation, as it will require payment of the original remuneration package from dismissal until the date of ordered re-engagement.

In this case, Barclays’ former head of automated FX flow trading was dismissed following an investigation by the New York State Department of Financial Services (DFS) into a trading practice called “Last Look”.  The DFS had concluded that the practice had been over-used as a general filter to improve profits rather than limited to “toxic” flow, that there had been insufficient systems and controls, and a lack of transparency.  A Consent Order agreed between DFS and Barclays provided that Barclays would pay a $150m civil penalty and “take all steps necessary to dismiss” the claimant in light of his role in the misconduct identified; if termination was not permissible under local law, the claimant would nevertheless not be allowed to carry out any role involving US or US dollar operations.

Dismissal procedurally and substantively unfair

The tribunal rejected the claimant’s contention that Barclays had simply dismissed him because of the DFS Order rather than because they believed he was guilty of misconduct.  It found on the facts that the decision-makers had made their own decisions on the evidence available to them at the time and believed the claimant to be guilty of misconduct, relying on several grounds.

However, one of the grounds, encouraging a lack of transparency, had been established to be a mistaken approach as to where to draw the line on confidentiality and so was not a dismissable offence.  The other grounds were not supported by the evidence and/or based on incomplete evidence. The claimant had made requests for specific documents but been denied.  The decision-makers accepted that they might have reached a different outcome had those documents (which were disclosed as part of the tribunal proceedings) been available.  Further, the fact that the claimant’s performance review gave him the objective of making more money out of Last Look, and that his managers were clearly aware and approved of this, meant that it was not clear to the claimant that this would be misconduct, let alone a dismissable offence.  The tribunal concluded that the dismissal was both procedurally and substantively unfair.

The tribunal found that the claimant was culpable and blameworthy to a limited extent in relation to only one of the allegations, in that he did not have accurate oversight of the way in which his team was using Last Look, for which he was ultimately responsible.  In light of his seniority and the significant civil penalty, it was appropriate to reduce his basic and compensatory awards by 20% for contributory fault.

Remedy

The compensatory award in the vast majority of unfair dismissal cases is subject to a statutory upper limit (at the time just under £80,000) or 52 weeks’ actual gross pay if lower.  Alternatively, a claimant can seek reinstatement or re-engagement. In deciding whether to order this the tribunal must consider the wishes of the employee, whether it is reasonably practicable for the employer to comply with the order, and whether the employee contributed to the dismissal.  Orders for re-instatement or re-engagement are rarely sought and are made in less than 1% of successful unfair dismissal cases.

A re-instatement order was not possible in this case as the claimant’s job had ceased to exist, its responsibilities having been divided up between other roles.  The tribunal ruled that it could not order ‘re-instatement’ to the role into which the claimant would have been reorganised had he not been dismissed.

In relation to re-engagement, the claimant sought a general order on the basis that most senior jobs at the Bank developed organically and were not advertised as vacancies, but the tribunal ruled that it could only order re-engagement into a specific identified vacant role.

The practicability of ordering re-engagement of the claimant into the specific vacant roles identified depended on (i) whether trust and confidence could be said still to exist, (ii) whether the claimant’s appointment was feasible from a regulatory perspective, and (iii) whether re-engagement would be just, taking into account the claimant’s contributory conduct.

Trust and confidence:  The Bank contended that re-engagement was impracticable because it had lost trust and confidence in the claimant and the claimant had also displayed a lack of confidence in, or distrust of, the Bank as evidenced by numerous criticisms he made of the disciplinary investigation.  The tribunal rejected this: two senior managers had given evidence that they had not lost trust and confidence in him and that he could potentially still be employed, and the Bank could not rely on the unreasonable beliefs of the decision-makers at the time of the disciplinary given they had been based on an unreasonable investigation and incomplete evidence.  It did accept that the Bank had lost trust and confidence in the claimant carrying out an FX role, but this did not make it impracticable to re-engage in another role.  Similarly, the claimant’s criticisms did not evidence a lack of trust and confidence in the Bank generally, only specific individuals, in particular a US lawyer whom he was unlikely to have to deal with again, and the original decision-maker who had left the Bank.

Regulatory concerns: The tribunal decided that it was impracticable to order re-engagement into any role that would have involved a breach of the DFS Order, rejecting the claimant’s argument that the Bank should have sought to renegotiate the terms of the DFS Order as there was no evidence this would necessarily be successful.

Some of the roles would also have required the claimant to be assessed as “fit and proper” for FCA purposes.  The Bank’s Global Head of Employee Compliance contended that the Bank would not be able to certify the claimant as fit and proper for any role requiring certification.  The Tribunal rejected this, finding that it would be the decision of the individual hiring manager based on a specific role.  It could not be said that the DFS Order and misconduct findings, when considered with the ET judgment on unfair dismissal, would necessarily prevent certification for every single certified role.  This had to be considered on a role by role basis.

Justice: The Bank argued that re-engagement would not be just given the size of the civil penalty for which the claimant was partly to blame.  The tribunal considered that these factors were relevant to whether it was just to re-engage, but that it should also take into account the fact that the contribution was assessed at only 20% and that the dismissal was substantively unfair and would not have occurred had the Bank acted fairly.  Whether it was just should be assessed in relation to each specific role;  on the facts it was not just to re-engage the claimant in FX roles given that the claimant had failed to discharge his previous responsibilities in a more than minor way.

The above factors meant that most of the identified vacant roles, being FX roles, were impracticable;  others were roles for which the claimant did not have the appropriate skills.  This left one, that of Director Data Commercialisation, which was a more junior role than the claimant’s previous position and paid substantially less.  The tribunal accepted that the claimant nevertheless wished to apply for it, would have been happy to work at that level, and had the necessary skills.  Although recruitment for the role had started, the role had not yet been filled.  The role did not involve interaction with the DFS, did not come within the prohibition in the Consent Order and did not require certification as fit and proper.  There was no precise parallel between the new role’s requirement to abide by existing data protection controls and the claimant’s failures to properly implement and supervise controls regarding Last Look.  Re-engagement to this role would also be just given the demotion in effect took account of the claimant’s contributory conduct.  A re-engagement order was therefore made to this role at a salary in the middle of the specified range for the job (£150,000), along with an order to pay the claimant his contractual remuneration package for his pre-dismissal role for the period from dismissal to the date of re-engagement.  In the event, the Bank chose not to comply with the re-engagement order and agreed to pay just under £1m compensation pursuant to the order and the failure to re-engage.  A subsequent tribunal decision ruled that it did not have power to award interest on the payment in respect of remuneration from the date of dismissal to ordered re-engagement.

The case highlights the risks for financial services employers who dismiss a claimant from a certified role for misconduct:  although the misconduct may be sufficient to withdraw ‘fit and proper’ certification, it may not be sufficiently serious to dismiss fairly if there are other suitable alternative roles not requiring certification.  That may also not be a bar to re-engaging the employee in another role.  If the employer goes ahead with dismissal and the employee can persuade a tribunal that they are genuinely interested in being re-engaged to a lower level non-certified role, then the employer could be liable to pay compensation much larger than the usual unfair dismissal award, covering contractual remuneration for the pre-dismissal role from the date of dismissal to the date of ordered re-engagement.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819
Christine Young
Christine Young
Partner, London
+44 20 7466 2845

UK: Increases to statutory rates and new workers’ right to payslips from April 2019

  • Final regulations were approved on 28th March increasing the penalty for aggravated breaches of employment rights from £5,000 to £20,000, with effect from 6 April 2019.  These regulations also provide for two other changes to come into force from 6 April 2020: the extension of the right to a written statement to ‘workers’, and the reduction in the threshold for requesting an information and consultation procedure to 2% of total employees.  Additional regulations have also been made bringing into force from 6 April 2020 the removal of the Swedish derogation for agency workers (meaning that all agency workers will have a right to pay parity after 12 weeks) and the requirement for agencies to give agency workers a key information document.
  • From 6 April 2019, the cap on the unfair dismissal compensatory award increased from £83,682 to £86,444 and the cap on weekly pay (used to calculate the unfair dismissal basic award and statutory redundancy pay) increased from £508 to £525. This gives a maximum unfair dismissal award of £102,194 (subject to the additional cap on the compensatory award of 12 months’ pay).  The Vento guidelines for injury to feelings awards have also been updated: with effect from 6 April 2019 the bands will be £900- £8,800 for less serious cases, £8,800 to £26,300 for middle band cases, and £26,300 to £44,000 for the most serious cases.
  • From 6 April 2019 the weekly rate of statutory sick pay increased to £94.25 per week (from £92.05) and from 7 April 2019 the weekly flat rate of statutory maternity, paternity, adoption and shared parental pay increased to £148.68 per week (from £145.18).
  • The national minimum wage rates increased from 1 April 2019. Workers of 25 years and older will be entitled to be paid a minimum national living wage of £8.21 per hour (increased from £7.83), the rate for workers aged 21-24 will be £7.70 per hour and the rate for those aged 18-20 will be £6.15 per hour.
  • From 6 April 2019, itemised payslips have to be given to ‘workers’ as well as employees, and include hours details for the hourly paid. BEIS has published guidance here.
Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: ‘reasonable and proper cause’ needed to justify suspension pending disciplinary investigation

The Court of Appeal has ruled that suspension pending a disciplinary investigation does not breach an employer’s implied duty of trust and confidence, provided the employer has ‘reasonable and proper cause’. An employer does not need to establish that it is ‘necessary’ to suspend and it will not be determinative whether the act of suspension has been described as a neutral act (indeed the Court considered it was neither helpful nor relevant to consider the question of whether or not suspension can be described as a neutral act). Whether there is reasonable and proper cause will be highly-fact specific; it may be easier to establish this where the employee works with young or vulnerable individuals and there is a serious allegation supported by witness evidence to investigate (as in this case). The wider context beyond the fact and manner of suspension, including the events preceding the suspension and the extent to which a suspension is a ‘knee-jerk’ reaction, will be relevant. (London Borough of Lambeth v Agoreyo)

The case highlights the importance of considering whether there is sufficient justification for suspension; relevant factors will include the seriousness of the alleged misconduct and whether the investigation might be prejudiced (eg by interference with witnesses or destruction of documents) if the employee remains at work. An employer should also consider whether other options, such as working from home, would be feasible and appropriate, and document this consideration. Suspension should be for as short a period as possible, the decision to suspend should be reviewed regularly, and suspension should be paid unless there is an express contractual right to suspend without pay. Although not determinative of whether suspension is justified on the facts, it is also prudent to make clear to the employee that suspension is ‘neutral’ and not considered a disciplinary action. Care should also be taken when communicating with staff and clients about the reason for the employee’s absence, including to ensure this does not betray any assumption of guilt prior to conclusion of the disciplinary process.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: dismissal for personal reason on occasion of TUPE transfer automatically unfair

Employers should resist the temptation to use the occasion of a TUPE transfer to dismiss employees (with two years’ service and so eligible to claim unfair dismissal) with whom there is an ongoing performance or misconduct issue, as this is likely to be automatically unfair. The Court of Appeal has confirmed that an employee may be automatically unfairly dismissed by reason of a TUPE transfer even if the employer has some other, personal reason to dismiss but has chosen to act on it because of the transfer.

In Hare Wines v Kaur, the claimant had for some time had a poor working relationship with a colleague who was set to become a director of the transferee following a TUPE transfer, but no action had been taken to address that prior to the transfer. She was dismissed on the day of the transfer and it was the transfer that made the continuance of her employment and the poor working relationship intolerable. In these circumstances the tribunal had been entitled to rule that the transfer was the reason for dismissal.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: dismissal automatically unfair where employer used TUPE transfer as opportunity to dismiss for pre-existing concerns

The Court of Appeal has confirmed that an employee may be automatically unfairly dismissed by reason of a TUPE transfer even if the employer has some other, personal reason to dismiss but has chosen to act on it because of the transfer.

In Hare Wines v Kaur, the claimant had for some time had a poor working relationship with a colleague who was set to become a director of the transferee following a TUPE transfer, but no action had been taken to address that prior to the transfer.  She was dismissed on the day of the transfer and it was the transfer that made the continuance of her employment and the poor working relationship intolerable.  In these circumstances the tribunal had been entitled to rule that the transfer was the reason for dismissal.

Employers should resist the temptation to use the occasion of a TUPE transfer to dismiss employees (with two years’ service and so eligible to claim unfair dismissal) with whom there is an ongoing performance or misconduct issue, as this is likely to be automatically unfair.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: Employers may need to go further than strict compliance with the statutory right to a companion to ensure fairness

Employees have a statutory right to be accompanied to a disciplinary or grievance hearing by their chosen companion and, if that companion is unavailable on the date set, to have the hearing postponed by 5 working days. A failure to comply with this right is likely to render a dismissal procedurally unfair in most cases, but the corollary is not true. In Talon Engineering Ltd v Smith, a dismissal was found to be procedurally unfair where the employer refused to postpone the hearing by 10 days to allow the chosen companion to attend. The tribunal had not erred in concluding that the employer had acted unreasonably in refusing the request for a short postponement based on genuine unavailability, particularly given the employees’ 21 years’ unblemished service.

UK: poor communication of successful appeal could itself amount to constructive dismissal

The Court of Appeal in Patel v Folkestone Nursing Home Ltd has confirmed that where an employee’s internal appeal against dismissal is successful, the effect will be to reinstate the employee with retrospective effect. The earlier dismissal will ‘vanish’ without any need for the employee to ‘accept’ this, preventing the employee from claiming unfair dismissal based on the earlier dismissal.

However, in this case the dismissal had been based on two charges of gross misconduct, the second of which would have resulted in a reference to the Disclosure and Barring Service. The employee’s appeal was successful on both counts, but the letter confirming the decision only addressed the first charge. The Court considered that the failure to communicate the decision on the second charge and to confirm that no reference would be made to the DBS was arguably a breach of trust and confidence which might amount to constructive dismissal (an issue remitted to the tribunal). The decision serves as a reminder to employers to ensure that appeal decisions are properly communicated.

UK: Care needed over dismissal timing when employee approaching two years’ service

The EAT has confirmed for the first time that an employee dismissed for gross misconduct in the week prior to accruing two years’ service will not gain unfair dismissal protection provided that the tribunal agrees that they have indeed committed gross misconduct. However, if the tribunal disagrees, the statutory minimum notice period will be added to the actual service in calculating eligibility to claim unfair dismissal. Earlier caselaw establishes that the termination date is also extended by statutory notice if the employer dismisses by making a payment in lieu of notice, so it is prudent to consider carefully the timing of dismissals of employees approaching their two year anniversary. (Lancaster & Duke v Wileman)

 

UK: dismissal of trade union representative for misuse of confidential information automatically unfair

The Court of Appeal has ruled that the protection against unfair dismissal for taking part in trade union activities should be interpreted broadly and will not necessarily fall away where the activity involves misconduct. In Morris v Metrolink a trade union representative unlawfully retained confidential information that had been obtained without consent and sent to him anonymously, and then shared it with HR on the basis that it contained detrimental information about union members involved in a restructuring exercise. The Court of Appeal concluded that the wrongfulness of his conduct was not sufficient departure from good industrial relations practice to take it outside of protected trade union activity and therefore his dismissal for that conduct was automatically unfair. Employers should consider carefully all the circumstances of any misconduct connected with trade union activity before determining whether to discipline or dismiss, bearing in mind the wide scope of the special protection.