The Court of Appeal has held that an internal appeal will not necessarily prevent a finding of unfair dismissal where significant procedural and investigative failings infected the original dismissal decision.
Facts
Mr Argence-Lafon worked for Ark Syndicate Management Limited (Ark) as a senior underwriter. In 2019, he raised concerns about an insurance claim that he considered to be fraudulent. Ark investigated, but found no evidence of fraud. However, Mr Argence-Lafon continued to express concerns about the claim.
In late 2020, Ark raised concerns about Mr Argence-Lafon's performance. When he failed to show sufficient improvement, Ark told him in April 2021 that it was initiating a formal performance improvement process (PIP). Mr Argence-Lafon repeatedly contended that three of the objectives included in the PIP were not realistic or achievable.
Ark then offered Mr Argence-Lafon a negotiated exit from the business. In response, he raised a grievance, contending that the concerns he had raised about the potentially fraudulent insurance claim were protected disclosures, and that the PIP and threat of dismissal amounted to whistleblowing detriments.
Having rejected Mr Argence-Lafon's grievance, Ark invited him to a disciplinary hearing to consider allegations that he had failed to engage with the PIP. The letter warned him that he might be dismissed. Mr Argence-Lafon was dismissed with a payment in lieu of notice on 9 August 2021. The dismissal letter set out Ark's view that Mr Argence-Lafon had failed to engage with the PIP, but also that there had been a complete breakdown of trust and confidence due to his continued allegations of fraud. His internal appeal was unsuccessful.
An employment tribunal dismissed Mr Argence-Lafon's claim that his dismissal was due to his protected disclosures and therefore automatically unfair. However, it upheld his claim of ordinary unfair dismissal. The EAT allowed Ark's appeal, holding that the tribunal had failed to take into account the effect of the internal appeal on the fairness of the dismissal. Mr Argence-Lafon appealed.
Court of Appeal decision
The Court of Appeal allowed the appeal and restored the employment tribunal's decision that the dismissal was unfair.
The Court emphasised that when considering the fairness of a dismissal, the employment tribunal must look at the dismissal process as a whole, including any internal appeal. It considered that the tribunal in this case had made detailed findings about the appeal process, and the EAT had been wrong to conclude otherwise.
The tribunal had found that there were two reasons for Mr Argence-Lafon's dismissal, namely Ark's beliefs that:
- He had failed to engage with the PIP
- His continued allegations of fraud had caused a fundamental breakdown in trust and confidence
Ark had not included this second allegation in the letter inviting Mr Argence-Lafon to the disciplinary hearing, in breach of its own disciplinary policy. However, by the time of the appeal, that allegation was no longer a surprise to him. The Court therefore considered that the appeal might potentially have addressed the "glaring" unreasonableness of the decision to dismiss Mr Argence-Lafon for a reason which was sprung on him at the disciplinary hearing without advance notice.
However, that was only one aspect of the dismissal. The tribunal had also identified substantial deficiencies relating to the PIP, including that there had been no reasonable investigation into whether the disputed objectives were appropriate, despite Mr Argence-Lafon's long service; the absence of previous individual targets; the lack of regular appraisals; and the significant increase in performance demanded by the objectives. The Tribunal concluded that a proper investigation might have produced a different outcome.
The Court held that the appeal did not address, and could not realistically have cured, these investigative shortcomings because no further investigation was undertaken during the appeal process. The tribunal had therefore been entitled to conclude that Ark had acted unreasonably and the dismissal was unfair.
What does this mean for employers?
The decision in this case is a useful reminder that, while internal appeals form part of the overall assessment of fairness, employers cannot assume that they will remedy serious deficiencies in the investigation, reasoning, or procedure leading to dismissal.
Employers should therefore seek to avoid defects in their dismissal processes by:
- Ensuring that performance concerns are properly investigated and documented
- Clearly communicating performance objectives and expectations, in both informal management and formal PIPs
- Taking care to comply with their own internal policies, as failure to do so may contribute to a finding that a dismissal was procedurally unfair
- Ensuring that all allegations that form part of the reason(s) for dismissal are set out in advance of the dismissal hearing
