At the end of last year, following a protracted dispute, a Paris employment court rejected John Galliano's £10 million claim against his employers at Christian Dior SA and his own eponymous label, John Galliano SA, for his dismissal in 2011.

The claim followed Galliano's anti-Semitic tirade which initiated his infamous fall from grace. Having been at the helm of Dior for 15 years, Galliano was hailed as one of the most talented and influential designers of his generation. However, when his incendiary outburst came to light, Dior acted swiftly, suspending Galliano and declaring that it would terminate his contract if the allegations were upheld. The Paris criminal court found Galliano guilty of proffering anti-Semitic insults in public (an offence under French law) and Dior made good its threat and dismissed the designer.

The news sent reverberations throughout the fashion industry, but it also pricked the ears of employment lawyers. The incident highlighted a complex area of employment law as Galliano's actions had not taken place at work or even involved people with whom he worked, yet they were the catalyst that brought a highly successful career at both labels to a swift end.

Almost any employer can empathise with the issues facing Dior; the actions of its employee had brought the company into disrepute, potentially causing irreparable damage to its reputation and significant financial loss, but what rights did it have to hold an employee accountable for his behaviour outside of work?

An employer would invariably want to take action in such a situation, but it must take precautions to limit its exposure to potential claims by the affected employee. Compensation awarded for successful claims can be significant and, even if a claim is not successful, the time and legal costs soon accumulate and may not be recoverable. So what can an employer do to protect itself?

Policy

As is often the case, prevention is better than cure and it is best to have measures in place to deter employees from behaving inappropriately in the first place or at least put them on notice of the consequences of such behaviour. One way an employer can do this is to ensure that it has a policy on behaviour outside the workplace. Although dismissal claims are fact sensitive and decided on a case-by-case basis, a clear and comprehensive policy on what is considered unacceptable conduct outside of work can play a pivotal role in an employer's defence.

In drafting its policy, employers would be advised to define both "misconduct" and "gross misconduct" and to include examples of both. However, it should be made clear that these examples are not exhaustive so employers are not precluded from treating behaviour that is not listed as misconduct. The policy should also expressly state that gross misconduct is grounds for summary dismissal. For example, an employer can emphasise the importance of protecting its reputation and stipulate that an employee can be summarily dismissed if their actions bring the organisation's name into disrepute.

This is an area that is constantly evolving so employers need to regularly update policy documents, particularly to keep up with the latest trends in social media. Handbooks, disciplinary policies, employment contracts and IT and social media policies should be regularly reviewed and updated and employers should ensure that employees are aware of this policy and any updates.

Procedure

If an employer is in a situation where it deems it necessary to dismiss an employee for their conduct outside of work, there are certain procedural measures that may offer some protection against potential claims for unfair and wrongful dismissal.

An employee can bring a claim for wrongful dismissal if their employer dismisses them summarily without any notice or payment in lieu of notice. Employers may only dismiss an employee without notice if their contract contains a PILON clause or if they have committed gross misconduct. It is, therefore, important that policy documents are carefully considered in determining whether an act amounts to misconduct or gross misconduct. However, while policy documents can be very helpful, they are not definitive and an Employment Tribunal will consider all the circumstances of the case, so it is always advisable for an employer to think carefully and take legal advice before summarily dismissing an employee. If an employee succeeds in their claim for wrongful dismissal, the employer will not only have to pay damages in relation to the notice period, but the employee may also be released from ongoing contractual obligations such as non-compete clauses.

In addition to a claim for wrongful dismissal, an employee with two years' service may also claim unfair dismissal. Employers must, therefore, ensure that they have a fair reason for the dismissal, that they follow a fair procedure, and that they act fairly and reasonably. Again, the court will assess the dismissal in context, so employers should consider all of the circumstances and any mitigating factors before deciding whether to dismiss the employee.

There are two potentially "fair" reasons for dismissing an employee for their behaviour outside of work. It could be a dismissal for misconduct, or it could fall within the catch-all category of a dismissal for "some other substantial reason". Where the reason for the dismissal is conduct outside of the workplace, it is more likely to be deemed fair if the employer can clearly demonstrate that the conduct has damaged its reputation or caused financial loss, or that it has caused a breakdown of the relationship of trust and confidence with the employee.

In some situations, it may be more practical and commercially prudent to negotiate an agreed termination with the employee. If terms can be agreed, the employee should be required to sign a settlement agreement. As well as protecting the employer from future employment claims, this agreement can include ongoing obligations in relation to confidentiality and derogatory comments which can help the employer prevent further damage to its reputation.

Conclusion

Dismissing an employee for their misconduct outside of the workplace can be a legal minefield in which there are relatively few certainties. Where the employer's reputation has been jeopardised by the employee's behaviour, it can be damaged further if the employee subsequently brings a claim. Employers should, therefore, seek our specialist legal advice to devise a series of measures that will enable them to act while providing a protective shield to both deter and defeat dismissal claims.