Ignorance or a Mistaken View of the Law may Render a Dismissal Fair

In Docherty and another v S W Global Resourcing Ltd [2013] CSIH 72 the Inner House of the Court of Session ruled that a dismissal may be fair where an employer takes action against an employee which amounts to a dismissal and does so without having considered the legal consequences, or on a mistaken view of what those consequences would be. However, that the action was taken in such circumstances will not automatically render the dismissal fair.

The employer’s ignorance of the law is only one element to be considered when determining fairness and it is for a tribunal to assess whether the employer’s mistaken or incomplete view of the law is excusable. Ultimately, whether the dismissal is held to be fair will depend on a consideration of all the facts and circumstances and having regard to the equity and the substantial merits of the particular case.

The Facts

Following a downturn in business, the respondent gave its employees 12 weeks’ notice that their guaranteed weekly salary would be abolished and that they were to be engaged on zero-hours contracts instead. Under the new arrangement there was also provision that the respondent would give employees their P45s if there was no work for two months. The claimants, who had been employed by the respondent from 1997, claimed unfair constructive dismissal.

The employment tribunal found that the respondent had failed to show the dismissals were for “some other substantial reason” under section 98(1)(b) of the Employment Rights Act 1996. The tribunal added that even if it were wrong about this, the dismissals would still have been unfair, as there was no consultation on the zero-hours contracts which changed employment status from employee to worker. The employees would not therefore have appreciated that they would lose their accrued statutory rights, such as the right to a redundancy payment, and no reasonable employer would have dismissed the claimants for refusing to agree to such a variation.

The EAT substituted the view that the claimants had been dismissed for some other substantial reason, finding that there had been “good, sound business reasons” for the changes and that the respondent had not appreciated the effect of the changes on employment status. The claimants then appealed to the Court of Session, challenging the finding that their dismissals had been fair.

The Decision

The Inner House of the Court of Session allowed the appeal. The court stated that there had been a failure to consider whether the respondent’s ignorance of the law was excusable and, if it was, whether that was a decisive consideration or one that was outweighed by other factors. It said generally that the defensibility of an employer’s ignorance of the legal implications of its actions would partly depend on whether professional advice should have been taken and that that might depend on factors such as the size and administrative resources of the employer, or whether the radical nature of the proposed changes should have put the employer on notice of the possibility of there being a legal problem.

The substantive fairness of the changes implemented by the respondent was also relevant in the instant case. The actual destructive effect of the change to the employee’s statutory rights concerned the court. However, the court also disliked that even if the respondent had been right in thinking that employee status would have been retained, the employees would still have faced the possibility of having to make themselves available for work for up to two months without receiving work or pay and then being dismissed as result of the radical change.

The case was therefore remitted to the tribunal to consider whether the dismissals were fair in all the circumstances.

Considerations for Employers

Although the decision confirms that employers may rely on their ignorance or mistaken understanding of the effect of the law when defending an unfair dismissal claim, it is not automatically the case that a dismissal will thereby be made fair. Fairness will be assessed on the particular facts and circumstances and having regard to the equity and the substantial merits of the case.

It is therefore advisable for employers seeking to any implement changes to their contracts of employment to seek professional advice as to the legal effects of those proposals.