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Settlement Agreements and workplace behaviour

In a recent Employment Appeal Tribunal (EAT) case issues surrounding the use of Human Resources Consultants in disciplinary matters were investigated. By way of background, the Managing Director (MD) of a small company of 9 employees had witnessed the Claimant, a senior manager, engaging in sexual activity with a junior member of staff at the employer’s office but outside office hours. The MD subsequently discovered a dictation machine that had caught the amorous couple making disparaging comments about the MD. Due to his potential involvement as a witness, the MD decided to engage an independent HR consultant to deal with the matter. The consultant investigated and held a disciplinary hearing with the Claimant. The consultant decided that the Claimant should be dismissed and was authorised to do so by the MD. The Claimant appealed this decision, which was handled by a second consultant, but the appeal was not upheld and, again with the MD’s authority, the appeal was dismissed by the second consultant.

At first instance, the Tribunal decided that the Claimant’s dismissal was unfair. The Tribunal ruled that the principal reason for the dismissal was the MD’s views regarding sexual activity in the workplace but that this was not a case of gross misconduct and therefore the dismissal fell outside the band of reasonable responses. The employer appealed this decision. The EAT allowed the appeal. It cited three key errors made by the Tribunal:

Having accepted that the two consultants had followed a proper process considering that the employer was a small business, it was not right for the Tribunal to decide that the MD had different reasons for dismissing the Claimant just because he had the last word on the matter. The EAT therefore ruled that the decisions to dismiss the Claimant and reject his appeal belonged to the consultants, not to the MD;
The Tribunal tried to apply the ‘principal reason’ test in this case. The Tribunal had suggested that the principal reason for the dismissal was the sexual activity with the derogatory comments being a secondary reason. This was wrong. The principal reason test applies where two of the five potentially fair reasons for dismissal apply, for example, conduct and capability. Here, both the issues related to the reason of conduct. Also the EAT ruled that the Tribunal should not have focussed on the sexual activity instead of the recorded comments as it was the conduct as a whole which lead to the decision to dismiss.
Lastly, the EAT stated that, in deciding that it was not within the band of reasonable responses to dismiss an employee for engaging in sexual activity in the workplace, the Tribunal had made the mistake of substituting their own views for the views of the employer.

This case highlights that, even if a Claimant believes that they have won a Tribunal claim, the decision could still be overturned on appeal. Factors such as this are always worth considering if offered a Settlement Agreement.

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