The Court of Appeal has recently held that, where an individual brings a claim of unfair dismissal against a former employer, it is the actual knowledge of the dismissing manager which is relevant, even if other employees are aware of facts which may exonerate or partially exonerate the employee.

In the case of Orr v Milton Keynes Council, the Court of Appeal was asked to consider the question of whether Milton Keynes Council, when considering Mr Orr’s dismissal for misconduct, should be taken to have known exculpatory facts which were known to Mr Orr’s manager but were withheld from the dismissing manager.

Mr Orr, a youth worker of Jamaican origin, was dismissed for two separate acts of gross misconduct, both of which the dismissing manager felt were sufficient to warrant summary dismissal. The first was that, contrary to express instructions from his line manager Mr Madden, Mr Orr had discussed allegations of a recent sexual assault with young people at the community centre where he worked. The second act related to a subsequent altercation with Mr Madden about working hours where Mr Orr had lost his temper and behaved in an offensive and insubordinate manner. These allegations were investigated and a disciplinary hearing was conducted by a manager not involved in the investigation process. Mr Orr refused to attend the disciplinary hearing. The dismissing manager upheld both allegations and dismissed Mr Orr on the basis of both acts.

The second incident, namely the altercation between Mr Orr and Mr Madden, had arisen as a result of an attempt by Mr Madden to reduce Mr Orr's working hours without his agreement. Mr Orr, being upset by this, had begun to speak in Jamaican patois and Mr Madden had then made the comment, "You lot are always mumbling … I can't understand a word you are saying." This had then provoked Mr Orr's offensive behaviour. However, Mr Madden had concealed this behaviour during the investigation into Mr Orr’s misconduct and also during the disciplinary hearing, which Mr Madden had attended as a witness.

Mr Orr brought complaints of race discrimination and unfair dismissal. The Employment Tribunal found (and the Council accepted) that Mr Madden’s comment amounted to direct race discrimination but that the dismissal itself was fair, as it was a reasonable response to what was known by the dismissing manager at the time, the dismissing manager being unaware of the background to the incident.

Mr Orr appealed against this finding to the Employment Appeal Tribunal (EAT). The EAT held that the Tribunal's finding of direct race discrimination could not be imported back into the disciplinary proceedings so as to render them or the subsequent dismissal unfair.

The issue was then referred to the Court of Appeal. The basis for Mr Orr’s appeal was that the Council as a matter of law knew, through Mr Madden himself, that Mr Orr's behaviour in the second incident had been provoked by Mr Madden's own underhand conduct. That the Council's disciplining manager did not in fact know this, thanks to Mr Madden's concealment of it, did not matter.

The Court of Appeal focussed on the wording of section 98(4) of the Employment Rights Act 1996, which states:

"...the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)-

(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case."

Case law over the years has held that this requires, in misconduct cases, an employer to have a genuine belief in the employee’s guilt which is based on reasonable grounds as a result of a reasonable investigation, and for the decision to dismiss the employee to be within the range of reasonable responses open to the employer to make.

The Court of Appeal specifically considered whether the knowledge of one employee, namely the knowledge of Mr Madden regarding the background to his dispute with Mr Orr, should be considered to be the knowledge of the employer as a whole and so be imputed to the dismissing manager. By a majority, the Court of Appeal found that this would require the dismissing manager to be in possession of all of the relevant information within the organisation's possession, which was neither realistic nor intended by section 98(4).

The Court of Appeal confirmed that section 98(4) requires tribunals to focus their attention on the fairness of the conduct of the employer at the time of the investigation and dismissal (or any appeal process), and not on whether in fact the employee has suffered an injustice.

The Court of Appeal stated that the obligation on the employer is to take all reasonable steps to inform itself of the facts, and where such an investigation has been carried out and supports a reasonable belief of the misconduct, any subsequent dismissal is likely to be fair provided dismissal is a reasonable response to the misconduct in question, regardless of whether a piece of information has fallen through the net somewhere along the way.