The Court of Appeal has ruled that where an employer suspects an employee of misconduct, they must either take steps to discipline the employee or "reserve their position" in respect of any future disciplinary proceedings being brought against the employee so as to not be taken to have accepted the employee's conduct and to have affirmed the contract following a breach.
A common problem for employers is the employee who, when faced with the prospect of being disciplined, becomes ill with stress and goes on sick leave.
This case confirms that in such situations, the employer must act as soon as they are aware of the alleged misconduct if they do not want to accept the employee's conduct and affirm the contract following a breach. Employers should commence an investigation into the alleged misconduct by the employee and start the disciplinary process without delay. If, however, the employee goes on sick leave either before the employer has had a chance to start the investigation or invite the employee to a disciplinary hearing - the employer should write to the employee to confirm that it "reserves its position" in respect of the alleged misconduct and that they will either continue the investigatory process not withstanding the fact the employee is off sick or continue any investigation or disciplinary process (or begin that process) upon the employee's return to work or them being fit to do so.
Although employers will need to ensure that such a letter is not written in a threatening manner or suggest that the outcome of the investigation or disciplinary hearing is a foregone conclusion.
In Cook v MSHK Limited ("Ministry") and Ministry of Sound Recordings Limited ("Recordings"), Mr Cook worked for Ministry and Recordings in their Artist and Repertoire (A and R) Team. When he tendered his resignation to take up a job with Warner Music UK Limited (Warner) he told Ministry and Recordings that his work would not be in competition with them.
However, during his notice period, Mr Cook's employers found out from Warner that his work for them would be in competition with their work and, accordingly, believed that Mr Cook had deliberately lied to them about his job at Warner. They also discovered that Mr Cook had attempted to secure a £100,000 loan from the company after he had tendered his resignation.
After a meeting at which Mr Cook was shouted at by Ministry's Managing Director, he went off sick with stress. During Mr Cook's sickness absence, Ministry wrote to him several times. On each occasion, Ministry stressed that they wanted Mr Cook to return to work and that any restriction on his duties upon his return were to protect their business interests given his impending move to Warner. Ministry did not warn Mr Cook that they intended to take any disciplinary action against him in respect of his alleged "lies" over his position at Warner, nor did they reserve their position in respect of this allegation. In contrast, they did refer to his application for a company loan as a "cause for concern" and expressly reserved its position regarding that.
When Mr Cook returned to work, he was disciplined and eventually dismissed for the alleged "lies" over his role at Warner and his application for a company loan. Unusually for an employment case, Ministry and Recordings then brought proceedings against Mr Cook in the High Court seeking a declaration of the lawfulness of his dismissal and damages from Mr Cook which resulted from the loss of his services following his dismissal. In order for Ministry and Recordings to recover damages from Mr Cook, his dismissal would have to be declared by the Courts as lawful.
The Court of Appeal held that Ministry and Recordings could not rely on their allegation that Mr Cook had lied about his new job at Warner as a reason for justifying his dismissal because they had not taken any action against Mr Cook when they found out about his alleged misconduct and had not reserved their position in respect of it either.
The allegation in respect of Mr Cook's loan application was allowed to proceed to a full trial to determine whether or not it could be relied upon as a reason justifying his dismissal because Ministry and Recordings had expressly reserved its position in that regard.
Although a High Court case, the Court of Appeal's ruling sheds light on how employers ought to conduct themselves whenever they suspect misconduct by an employee.