UNFAIR DISMISSAL – Risk of Reputational Damage

7 October 2020

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A DISMISSAL DUE TO THE RISK OF FUTURE DAMAGE TO THE REPUTATION OF AN EMPLOYEE’S EMPLOYER WAS UNFAIR

In K v L (UKEATS/0014/18) the Scottish Employment Appeals Tribunal (EAT) held that a dismissal due to the risk of future damage to the reputation of the employee’s employer was unfair.

The facts and employment tribunal decision

K was employed in a school and had over 20 years’ service when his house was raided by police. They confiscated three computers from his house due to intelligence that an IP address associated with K had been used for the download of indecent images of children. Shortly after this, K informed the school what had happened but denied that he was responsible. He was suspended and an investigation was carried out.

K was charged by the police who referred the matter to the Procurator Fiscal. Based on the information provided, the Procurator decided not to prosecute. In the letter that confirmed this decision, K was informed that there was an obligation on the prosecutor to keep cases under review and they reserved the right to prosecute the case at a future date.

As part of the investigation, the school contacted the Crown Office and Procurator Fiscal Service (COPFS) and explained the difficulty they had in trying to make an informed decision as to whether or not it was appropriate for K to continue to work with children. They asked the Crown to share the evidence they had against K. The Crown sent a redacted copy of the summary of evidence to the school’s HR Advisor for the purpose of the investigation, with the stipulation that it was not used or disclosed for any other purpose. The COPFS said it could not give a view as to whether K was a risk to children. It stated that he had not been reported to COPFS on any analogous matter. The HR Advisor did not share the letter with anyone else, including the other investigating officer or the Head of Service who chaired the disciplinary hearing.

At the investigatory meeting, K informed the school that his solicitor had advised him that the Procurator Fiscal’s letter was “bog standard” and was issued to anyone against whom it had been decided not to take proceedings. The reason why the right to prosecute was reserved in such situations was in case evidence of further offending behaviour came to light, in which case the Procurator Fiscal could prosecute both offences as they could potentially corroborate one another.

An investigatory report was drawn up. It concluded that the charges were of a serious nature and, if it became publicly known, may bring the school into disrepute. K was invited to attend a disciplinary hearing by a letter which stated that the reason for the hearing was due to him being involved in a police investigation into illegal material of indecent child images on a computer found in his home and the relevance of this to his employment as a teacher. No mention was made of the risk that, if it became known that he had child images on a computer in his home, this might lead the school to suffer reputational damage.

At the hearing, K accepted that the Police had found indecent images on the computer. He said he did not know how they got there. He denied downloading them. He pointed out that he was not the only person with access to the computer as he shared the house with his son, and his son and his son’s friends had access to the computer. K’s solicitor gave evidence about the reasons why the Procurator Fiscal may choose not to prosecute, which include insufficient evidence of a crime or the identity of perpetrator, or the fact that the offence had been downgraded warranting it too minor to merit prosecution.

Although the issue of reputational loss was referred to by the HR Advisor during the hearing, there was not a great deal of discussion on the issue.

The Head of Service conducting the hearing concluded that there was insufficient material to hold that K was responsible for downloading the images. She decided however that K should be dismissed.

In her decision letter, she referred to the charges and the right the Procurator Fiscal had reserved to prosecute in the future. She stated that she was unable from the evidence before her to exclude the possibility of K having been responsible for the indecent images of children which he had admitted to having been found on a computer in his home. She went on to state that ‘As a consequence of the set of circumstances which have arisen, risk assessments have concluded that it would present an unacceptable risk to children for you to return to your teaching post or any current vacancy within the Council’. She referred to the statutory responsibility that the Council had for child protection and continued ‘If in the future, either by criminal prosecution or otherwise it was shown that you had committed an offence involving indecent images of children it would cause the Council serious reputational damage if we continued to employ you in any post in circumstances whereby it became public knowledge that we were aware of the allegations against you yet continued to employ you.’ She concluded that the set of circumstances had resulted in an irretrievable breakdown of trust and confidence between K and the Council and an unacceptable level of risk to the Council of serious reputational damage.

K brought a claim of unfair dismissal. The employment tribunal dismissed his claim. K appealed to the EAT.

The EAT

The EAT upheld his appeal on a number of grounds:

  • the lack of notice that he was at risk of being dismissed on the grounds of reputational damage;
  • the use of an incorrect burden of proof in relation to misconduct and reasonableness of dismissal; and
  • the unreasonableness of dismissing due to risk of reputational damage.

Notice of dismissal for reputational damage

The letter inviting K to the disciplinary hearing did not mention the fact that there was a possibility that he might be dismissed on the grounds of potential reputational damage. Only the investigatory report had mentioned reputational loss.

The principles of natural justice require that an employee should know the nature of the complaint they face. The employee should know what issues they should be ready to address by way of suitable evidence and supporting submissions.

The EAT was unwilling to accept that an employee can be dismissed on the basis of a matter which is not set out in the complaint that is made against them, but is referred to in the investigatory report. An investigatory report may be used to interpret the letter of complaint, but it cannot be used to supply a wholly separate basis for dismissal.

The employment tribunal had found that reputational loss was mentioned in passing in the disciplinary meeting. This supported the proposition that it was not under active consideration at the meeting. The ground had not been addressed by K. The EAT held that it would be entirely unjust if this ground was a basis for dismissal. The dismissal was therefore unfair.

Burden of proof

K argued that he could not be dismissed on the basis that he might have committed the offence. He argued that the employer must be satisfied that on the balance of probabilities he had committed the offence.

The EAT agreed. The Head of Service had concluded that there was insufficient evidence that K had been responsible for downloading the images and that he was guilty of gross misconduct. However, she went on to say that she was unable to exclude the possibility that he was responsible. The approach she took was that unless she could exclude the possibility that he was guilty of the misconduct she was entitled to take it into account.

The EAT held that the obligation on an employer to act reasonably in the context of a dismissal requires them to apply the balance of probabilities burden of proof. If it is necessary to find facts established, then those facts must be proved to this standard. The fact that the matters in this case were extraordinarily serious for both K and the school did not alter the standard of proof. It was unreasonable to apply a test that in effect entitled the employer to dismiss unless all doubt as to the employee’s guilt had been excluded.

The Burchell guidelines require the employer to have a ‘reasonable suspicion amounting to a belief’ that the employee is guilty of the conduct in question. The balance of probabilities standard was endorsed in Burchell where it was held that “…a conclusion on the balance of probabilities will in any surmisable circumstances be a reasonable conclusion”. Clearly, in concluding that there was insufficient evidence to show that K was guilty of misconduct the Head of Service could not have had the requisite belief.

Reputational damage

Recognising that the above two decisions may be challenged on appeal, the EAT went on to consider the fairness of the decision to dismiss on grounds of reputational damage.

The EAT compared the circumstances of this case with those of the case of Leach v Office of Communications [2012] IRLR 839. That case concerned dismissal for reputational damage and its interrelationship with misconduct allegations. However, the circumstances of that case were very different to that of the present case.

In Leach, the employer had been warned by the Metropolitan Police Child Abuse Investigation Command (CAIC) that they had intelligence that indicated that their employee had engaged in paedophile activity in Cambodia and warned that he was a risk to children. At the disciplinary hearing, the employer expressed concern that if the allegations turned out to be true and became public knowledge they would suffer reputational loss if they continued to employ him. They were also concerned that the employee had not disclosed potentially damaging information to them before the hearing. It decided to dismiss on the grounds of breach of trust and confidence. The Court of Appeal ultimately upheld a finding of fair dismissal.

The circumstances in the case of Leach were quite different to those in the current case. K had admitted that indecent images had been found on a computer in his home, but denied responsibility for them and there were other credible explanations. There was no press interest at the time. There was no prosecution and no indication that this would change.

The case of Leach demonstrates that dismissals based on reputational damage may be fair even though the conduct in question is disputed and the employer has not concluded that the employee was in fact guilty of the misconduct alleged. However, the circumstances in this case were far narrower than those in Leach. Other than the fact that K had admitted that indecent images had been found on a computer in his home, the employer had no further evidence to assist it. It was possible to infer from the charge that evidence existed, however, due to the Procurator Fiscal’s unwillingness to prosecute it was difficult to infer the nature of that evidence. The EAT concluded that the evidence in this case was insufficient to support a dismissal based on reputational damage.

The employment tribunal had appeared to use the decision in Leach as a basis for holding that, where an employee works with children, dismissal on the basis that they posed a risk would generally be justified. However, the EAT held that it was unable to read the judgment in this way. Furthermore, the legal regime for those dismissed because of suspected child sex offences is the same for employees who face other grounds of dismissal. There are not two regimes, although what is reasonable will vary according to the nature of the case. The EAT did conclude however, that, although the comments made in Leach did not support the proposition that an employee can be dismissed because of mere risk, it did raise the question of whether some response short of dismissal is appropriate where there is doubt but no proof that the relevant conduct occurred. However, it noted that the comments made were expressed in cautious terms.

Finally, in relation to reputational damage, the extent of risk to reputation had to be proved based on the knowledge available at the time. It was not reasonable to hypothesise as to future prosecutions and convictions.

The Procurator’s letter could not be taken to mean that the Crown intended to prosecute at some later stage. The proper inference was that unless there was a change in circumstances K was not going to be prosecuted. The Head of Service was not entitled to assess matters on the basis of unknown risk but on the basis of the evidence known to her. The employment tribunal had erred in accepting that her approach was reasonable.

Comments

Any case of this nature clearly gives rise to very difficult decisions for an employer. Obviously, at the forefront of their minds will be the safety of the children for which they are responsible. However, this case demonstrates that an employer must still keep sight of the rights that employees have to not be unfairly dismissed and that those rights are not diminished due to the circumstances of their employment. The employer must act reasonably in dismissing for the reason that they do. The circumstances that apply will be taken into account in this balancing act. However, in this case, the balance had not tipped in favour of dismissal. According to the Scottish EAT, the employer had been unable to demonstrate a reasonable belief that the employee was responsible for the images on his computer and there was insufficient justification for a dismissal on the grounds of reputational damage.

Those involved in the safeguarding of children will be familiar with the Childcare Act 2006 and the Childcare Disqualification Regulations 2009, which can result in the disqualification of a teacher if they live with someone who has committed a relevant offence. This case is one step removed from those circumstances. It appears that an offence may have been committed in K’s house, but no proceedings were taken, possibly due to the fact that the police were unable to find enough evidence as to the perpetrator, although this is not clear.

The case of Reilly v Sandwell Metropolitan Borough Council is also of interest. In this case, a headteacher was fairly dismissed for failing to disclose her relationship with a person who had been convicted of possessing indecent images of children. Although the EAT in this case overturned the employment tribunal’s finding of a fair dismissal, it should act as a reminder to those in positions of trust that they should take extra care about the activities that those in their household, including visitors, undertake while in their house.