Rachael Lloyd
Posted on 2 Sep 2020

The Employment Appeal Tribunal has held that an employer's loss of trust and confidence in an employee is relevant when considering whether re-engagement is practicable following an unfair dismissal by reason of capability.

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The Employment Appeal Tribunal (EAT) has held that an employer's lack of trust and confidence in an employee's capability is a relevant factor for a Tribunal to consider when assessing whether re-engagement is a practicable remedy following a finding of unfair dismissal. However, the Tribunal's role was limited to testing that the employer's view was genuine and rational, as opposed to imposing its own view on whether the situation should or should not have breached trust and confidence. It was further held that requiring the employer to put someone into a post for which they did not meet one of the essential requirements falls on the wrong side of the line between what is practicable and what is possible.

Kelly v PGA European Tour EAT/0285/18

Facts of the Case

The Claimant was employed as the group marketing director for PGA European Tour (PGA). In 2015, following a strategic review, PGA appointed a new Chief Executive Officer (CEO) of the Group. The CEO had concerns over the Claimant's performance and his willingness to "buy in" to the CEO's new ideas. As a result, within two months of commencing his role, the CEO took the decision to dismiss the Claimant.

The Claimant brought proceedings against the company, including a claim for unfair dismissal. PGA conceded that it had not followed the correct disciplinary procedure and the dismissal was therefore unfair. When the Employment Tribunal (ET) came to considering remedy, the Claimant sought reinstatement. PGA argued that this was impracticable and that no such order should be made.

Unfair Dismissal Remedies

Where an ET has made a finding of unfair dismissal, the most common remedies considered are compensation, reinstatement and re-engagement.

Where compensation is awarded, the ET will calculate a basic award in accordance with the statutory provisions. Such calculation involves multiplying the relevant factors of length of continuous service, age and a week's pay. Having addressed the basic award, an ET must go on to consider whether it is appropriate to make a compensatory award. This will be (albeit subject to a maximum) equivalent to such amount as the ET considers just and equitable in all the circumstances, having regard to the loss sustained by the claimant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer. Compensation is the most common remedy ordered by an ET, but in some circumstances, a claimant may not regard it as appropriate.  

Before an ET considers compensation, it is obliged to invite the claimant to confirm whether they are seeking reinstatement or re-engagement. These orders are very rare and are an alternative to a basic or compensatory award.  Where an employer fails to comply with an order of reinstatement or re-engagement, the ET will usually revert to considering a basic and compensatory award, together with an additional award to compensate for the breach.

To summarise, an order of reinstatement requires the employer to treat the employee in all respects as if they had never been dismissed. They therefore return to work in the same job on the same terms of employment, with no loss of pay, and with the benefit of any improvement of terms which they would have enjoyed in the event that they were never dismissed. Alternatively, re-engagement provides that the employee returns to comparable, but not identical, employment, on such terms as the ET decides.

When deciding whether or not to make an order for reinstatement or reengagement, the ET should consider various factors, including (i) the wishes of the employee; (ii) whether it is practicable for the employer to comply with the order; and (iii) whether the employee contributed to the dismissal.

What did the ET decide in Kelly v PGA European Tour?  

In the first instance, the ET declined to make an order to reinstate the Claimant. However, despite PGA's argument that re-engagement was also not practicable due to the lack of trust and confidence in the Claimant, the ET held that these concerns were not so significant as to prevent re-engagement. The Claimant was not given the opportunity to prove himself under the CEO's new ideas and the concerns about trust and confidence could be overcome if reasonable professional behaviour was maintained.

It was subsequently ordered that the Claimant be re-engaged as a commercial director in China, despite an essential requirement of the role being the ability to speak Mandarin, which the Claimant could not do. Despite this, the ET considered that his willingness to learn and his proficiency in foreign languages meant that it was practicable.

PGA appealed to the Employment Appeal Tribunal (EAT) on the ground that the ET had wrongly considered for itself whether trust and confidence had been damaged, instead of listening to the employer's rationale.

What did the EAT decide?

The EAT permitted PGA's appeal. It is a well-established principle that a genuine loss of trust and confidence could lead to a conclusion that re-engagement would be impracticable. There was no reason to suggest that this principle should be limited to instances where a dismissal was for conduct, and not for capability.

The question of whether there had been such a loss should be considered by evaluating whether PGA had a genuine view which was founded on a rational basis. If this was the case, then there was a genuine loss of trust and confidence.

On this basis, the EAT found that the ET had erred in its application of these principles by imposing its own view as to whether the concerns regarding the Claimant's capability and conduct were rational and genuinely held so as to undermine trust and confidence. It had also erred in substituting its own view as to whether the ability to speak Mandarin was an essential requirement for the role it designated for the Claimant's re-engagement. This decision was held to fall on the wrong side of the line between what is practicable and what is possible. As such, the EAT considered it clear that re-engagement should have been refused, and substituted an order to that effect.

What can employers take from this?

Whilst the application of this judgment is fairly limited to those employers involved with unfair dismissal proceedings, it does highlight the need for all employers to follow the correct disciplinary procedure, especially where dismissal is a potential outcome. 

In the event that a finding of unfair dismissal is made and the question of reinstatement or re-engagement arises, employers should be aware that, if they seek to argue that these remedies are impracticable because trust and confidence has broken down, it may not be taken at face value by the ET. It is therefore important to keep a written record of such concerns, including the reasons behind them, and to ensure that any assertion is genuine and rational.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd to discuss any issues you are facing.