The EAT has held in Handshake Ltd v Summers UKEAT/0216/12 that an employer could not rely on ‘some other substantial reason' (SOSR) to justify a dismissal in a situation where negotiations over pay and contractual terms had broken down.
Mr Summers was employed as a senior manager of Handshake Ltd. He was offered 30% of the company's issued share capital on joining in 2003. A dispute arose regarding the calculation of that 30% and about his employment terms more generally. The parties attempted to document Mr Summer's terms but could not reach an agreement. The dispute continued for a number of years and Handshake eventually dismissed Mr Summers, citing a breakdown in the working relationship. Mr Summers brought claims for unfair dismissal and unlawful deduction from wages. Handshake argued that there was a fair reason for his dismissal, being a breakdown in the working relationship which fell within the general category of SOSR dismissals.
The EAT upheld Mr Summers' claims. It said that, although a breakdown in relations can amount to SOSR, it did not in this case. It found that the real reason for dismissal was a power struggle between the two parties about the terms of Mr Summers' employment. There was nothing about the way in which the negotiations had been conducted which suggested that trust and confidence had broken down. The EAT did, however, reduce the compensatory award by 40% due to Mr Summers' contributory fault.
Employers should take note that Tribunals are taking a harder line on dismissals for a ‘breakdown in trust and confidence' due to concerns that this is being used as a convenient label where an employer cannot easily rely on one of the other fair reasons for dismissal under section 98 of the Employment Rights Act 1996. It will not usually be sufficient to say that trust and confidence has broken down; something more is required.