An employee has a right not to be unfairly dismissed provided he has worked for an employer for more than two years. Therefore, in seeking to justify a dismissal, an employer will seek to rely upon one of the grounds set out in Section 98 of the Employment Rights Act 1996, which include redundancy and misconduct. However, the employer can also seek to justify the dismissal on the grounds that it was for “some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held”. This is a ground often cited by employers, particularly in situations in which there is an argument that the relationship of trust and confidence between the employer and employee has broken down.
However, in the case of Handshake Limited -v- Summers, the EAT upheld a decision made by an employment judge to the effect that the Claimant had been unfairly dismissed, despite an assertion by the employer that the dismissal was rendered fair because it was for some other substantial reason.
The Claimant was employed in a small company and was part of an even smaller senior management team. In 2003, he was offered 30% of the issued share capital of the company on a staged basis. However, there was confusion about the precise terms of this offer, as a result of which it was never implemented. The parties fell into dispute about the terms of that arrangement and about the nature and effect of subsequent discussions. Several attempts were made to try to resolve the differences. Eventually, the Claimant instructed solicitors, who wrote a letter which included the phrase “our client is losing all trust and confidence in respect of his employment with the company” and made reference to a potential constructive dismissal claim. Fruitless efforts were made to settle the differences between the parties and the company eventually dismissed the Claimant, referring to the fact that the breakdown in the relationship was reflected in the company’s view that the Claimant was not as committed to the business as he had been before.
However, the Tribunal found that the real reason for the dismissal, in the mind of the managing director of the company, was not a loss of trust and confidence, but a power struggle over the terms of the contract between the parties dealing with the shares. They distinguished this issue from that of trust and confidence, because the evidence from the managing director was that if the Claimant had signed up to the terms proposed by the company, then he would most likely have stayed.
The lesson here is that if an employer is considering reliance upon “some other substantial reason” as a ground for dismissal, it is important to make a careful review of the circumstances. The case is a warning to employers that it will not be sufficient simply to make an assertion that the relationship of trust and confidence has broken down. Employers will also need to provide evidence to support this assertion, even, it seems, when the employee himself is saying that he believes the relationship is at risk.