Moore v Phoenix Product Development Limited (EAT)

Facts

Mr Moore was the CEO and founder of Phoenix Product Development Limited (Phoenix). He had invented an eco-friendly, water-saving toilet which was sold by Phoenix. Mr Moore was replaced as CEO in September 2017 due to performance issues and the toilet's lack of commercial success.

Mr Moore then engaged in a pattern of unprofessional behaviour towards his replacement, Mr Jones, undermining him to Board members and investors. He continued to refer to Phoenix as "my company", despite the fact his shareholding had reduced to 5%; he presented himself as "founder/director" to third parties, and generally struggled to let go of control. Mr Moore also described investors as "leeches" (with added expletives!).

After multiple attempts to find a way forward, the Board held a meeting with Mr Moore in May 2018, to consider his behaviour. After consideration of Mr Moore's submissions and discussion over 3.5 hours, the Board were unanimous in their recent decision to dismiss Mr Moore immediately. He was not offered a right of appeal. Mr Moore subsequently made a claim for unfair dismissal.

Decision

An Employment Tribunal found that Mr Moore's dismissal for some other substantial reason (SOSR) was not unfair. In the alternative any compensation would have been reduced by 100% to reflect his contributory conduct. The Tribunal found an appeal would not have made a difference.

Mr Moore appealed unsuccessfully to the Employment Appeal Tribunal (EAT). The EAT held that whilst an appeal would normally be part of a fair procedure, it will not invariably be so. The reasonableness of an employer's decision to dismiss had to be judged taking into account all the circumstances. In this case, the circumstances included:

  • Mr Moore was a board level director and employee;
  • Phoenix was a relatively small organisation with no higher level of management to hear an appeal; Mr Moore brought about an "irreparable breakdown" in trust and confidence; he was "destructive, destabilising and a drag-factor" for Phoenix, unrepentant and combative.

The EAT also found the Employment Tribunal had carefully considered whether an appeal would have served any purpose and had correctly concluded it would not have done in these circumstances.

Why the case matters

This case is a useful reminder that s.98(4) of the Employment Rights Act 1996 does not mandate that a specific procedure must be followed for a dismissal to be fair, but the employer must act reasonably in all the circumstances. While the Acas Code of Practice recommends offering employees a right of appeal, it should be noted that the Code does not apply to SOSR dismissals. Having said that, a right of appeal will be necessary in most cases to demonstrate the employer's reasonableness. For smaller organisations, or for companies dismissing board members or senior executives in a 'breakdown of relationship' scenario, this case may provide some flexibility for employers.

Lack of appeal does not necessarily make a redundancy dismissal unfair

The recent Court of Appeal case of Gwynedd Council v Barratt and another also featured the effect of a lack of the right to appeal. In this case, claimant teachers brought unfair dismissal claims following redundancy. One of the bases for challenging the fairness of their dismissals was they had not been given a right of appeal.

The employment tribunal judge held that it was substantively and procedurally unfair to deny the claimants a right of appeal, stating that it requires ‘truly exceptional circumstances’ to refuse an employee the right to appeal a dismissal. However the Court of Appeal clarified that the absence of an appeal does not of itself make a redundancy dismissal unfair. A tribunal has to consider all the relevant circumstances, including individuals being fairly selected, and given the opportunity to appeal or make a grievance about the process. On the facts of this particular case, the Council’s decision to deny the claimants an appeal fell outside the band of reasonable responses by an employer but was one of many factors in determining fairness.

Thanks to associate Alex Davidson for his contribution to this article.