The Employment Appeal Tribunal (EAT) has ruled that the fact a financial arrangement might be regarded as a misuse of public funds did amount to ‘some other substantial reason’ justifying dismissal.

In the recent case of Anderson –v- Chesterfield High School the claimant had been employed by Sefton Metropolitan Borough Council at Chesterfield High School prior to his election as Major of Liverpool, a neighbouring local authority.

Once elected as Mayor, the claimant had ceased to work at the school. The claimant and Sefton Council agreed that he should continue as an employee and be paid the maximum paid leave allowed to perform councillor duties. This arrangement continued until the school converted to an academy and the claimant’s employment TUPE transferred to the respondent, which, as a result of the academy conversion, was independent of Sefton Council.

The respondent was concerned about the arrangement being ‘inequitable’, primarily because it was paying the claimant £4,500 per annum but the pupils at the academy were receiving no benefit. As a result of this, the respondent terminated the agreement and the claimant claimed, inter alia, unfair dismissal.

The Employment Tribunal found that the claimant had been dismissed for ‘some other substantial reason’ (SOSR) - a potentially fair reason-  but that the dismissal procedure itself was unfair. Whilst the unfair dismissal claim was therefore upheld, the claimant was entitled to a basic award only, and the Employment Tribunal made a 100% Polkey reduction on the basis that the facts amounted to ‘some other substantial reason’, justifying the dismissal and a 25% deduction for contributory fault. The claimant subsequently appealed. The EAT upheld the Employment Tribunal’s decision that the deductions were justified on the facts and found that the respondent had acted reasonably in forming its view on the continuation of the arrangement with the claimant.

In his judgment, Honour Judge Serota QC made it clear that: “…the continuation whereby the claimant, an elected official of a neighbouring local authority, was paid (albeit a modest amount) by a publicly funded school without having to provide any services for an indefinite period was considered to be of no value to the respondent and might lead to significant criticism if the arrangement became public. The respondent was reasonably entitled to regard the arrangement as inequitable and unsustainable… What most people would consider the respondent’s desire to extricate itself from the arrangement, which could have been a public relations disaster for the school, would seem to me to be a clear example of SOSR for ending the employment relationship with the claimant”.

For these reasons the EAT ruled that the Employment Tribunal’s finding was one it was entitled to make and the appeal was accordingly dismissed.