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Acas Code Does Not Apply To Dismissals Due To Breakdown In Working Relationship

In the recent case of Phoenix House Ltd v Stockman and another, the Employment Appeal Tribunal (EAT) found that a dismissal for “some other substantial reason” was unfair, where the grounds for the dismissal were an alleged incurable breakdown in the working relationship between employer and employee. The EAT confirmed that the Acas Code of Practice on Disciplinary and Grievance Procedures (Acas Code) does not apply to dismissals for this reason. 

In order for the termination of an employee’s contract to be fair (in legal terms), the reason for the termination must fall under one of the potentially fair reasons set out in the Employment Rights Act 1996. Such potentially fair reasons for dismissal include redundancy, expiry of a fixed-term contract, or issues with the employee’s conduct. Alternatively, an employer may (potentially fairly) dismiss an employee for “some other substantial reason” (SOSR).

The statutory Acas Code sets out principles which employers and employees should follow in respect of, for example, grievance and misconduct-related disciplinary proceedings. Where a tribunal makes a finding of unfair dismissal and finds that the employer unreasonably failed to comply with the Acas Code, the claimant may be entitled to an uplift of up to 25% on any monetary award.

Ms Stockman, a Financial Accountant at Phoenix House, considered she had been treated unfairly when, following a re-structure in which her post was removed, she was offered an alternative post at a more junior level. Ms Stockman raised a grievance against Mr Lambis, the Financial Director. Ms Stockman was also subjected to a disciplinary procedure for misconduct after having confronted Mr Lambis while he was engaged in another meeting.  

The grievance and disciplinary hearings were held in Ms Stockman’s absence while she was on sick leave. The grievance was dismissed and Ms Stockman received a 12-month written warning regarding the confrontation with Mr Lambis. Ms Stockman appealed against both findings, without success. 

Following this, Ms Stockman was invited to a formal meeting to establish whether the working relationship had irrevocably broken down. Finding that it had, Phoenix House dismissed Ms Stockman for “some other substantial reason”. This decision was made regardless of the fact that Ms Stockman clearly expressed a desire to return to work.

An Employment Tribunal (ET) found that the dismissal was unfair by reference to the fact that:

•    Ms Stockman was not given the opportunity to effectively challenge the accusations made against her (as she was on sick leave)
•    The employer had started from the position that the relationship had broken down and put the burden on Ms Stockman to prove otherwise
•    The employer’s decision that the working relationship had broken down beyond repair was, in the circumstances, unreasonable
•    The employer had not complied with the Acas Code

The employer appealed and the EAT upheld the finding of unfair dismissal. However, the EAT would not allow an uplift to the claimant’s award because it found that the Acas Code does not apply to SOSR dismissals where the basis for the dismissal is an irretrievable breakdown in the working relationship.

It is difficult to “fairly” dismiss an employee for “some other substantial reason”, especially where the reason for the dismissal is an alleged breakdown in the working relationship. Tribunals will want to see that an employer has considered whether the relationship has broken down to such an extent that the employee cannot be integrated back into the work environment before considering dismissal for “some other substantial reason”. 

This bulletin is for general guidance purposes only and should not be used for any other purpose.

Brabners is a Limited Liability Partnership