Pump Court Chambers

Reilly v Sandwell Metropolitan Borough Council [2018] UKSC 16

Blog 16th March 2018

The case of Reilly v Sandwell Metropolitan Borough Council [2018] UKSC 16 is – understandably – drawing a large amount of commentary, primarily because of the treatment of the familiar test in British Home Stores Ltd v Burchell [1980 ICR 303. This blogpost will focus on the Burchell issue.

Reilly v Sandwell

The Appellant, Ms Reilly, was the former headteacher at a school maintained by the Respondent, Sandwell. Before becoming headteacher, she had become close friends with a man called Ian Selwood. In early 2009, he was arrested on suspicion of downloading indecent images of children; he was convicted in early 2010. Ms Reilly failed to disclose this to the school’s governing body.

The local authority learned of the conviction and the close friendship, concluded that the failure amounted to a serious breach of an implied term of the contract of employment amounting to gross misconduct, and dismissed Ms Reilly summarily. Ms Reilly then brought a claim for unfair dismissal and sex discrimination. The dismissal was found to be within the range of reasonable responses – i.e. substantively fair. But the Tribunal at first instance found that the hearing of Ms Reilly’s appeal against dismissal (by the appeal panel) had been so unsatisfactory as to render her dismissal procedurally unfair.

Perhaps unsurprisingly, the Supreme Court considered that the dismissal was fair. There was a contractual obligation to help safeguard students, of which Ms Reilly was in breach. The employer had been entitled to conclude that she was no longer a suitable person to be in charge of the school.

Has the application of Burchell been doubted?

Of more potential interest are the comments which were made by the Supreme Court about the operation of s 98(4) Employment Rights Act 1996 and the test in Burchell. Lord Wilson commented at paragraph 19 of Reilly:

[19] The proper approach to the inquiry under what is now subsection (4) has long been regarded to have been set out in the judgment of the EAT (Arnold J presiding) in British Home Stores Ltd v Burchell (Note) [1980 ICR 303. In the present case Elias LJ described it as “the classic formulation of the employer’s obligations in misconduct cases…

[20] It is at once apparent that the three requirements identified by Arnold J do not well fit the inquiry mandated by what is now section 98(4). It is indeed clear that, on the contrary, they were directed to the first part of the inquiry under what is now section 98(1) to (3). Unlike in the present case, in which the conduct… is an agreed fact, the employee’s alleged conduct is often disputed…


[22] Nevertheless, so far as I can see albeit in the absence of full argument, no harm has been done by the extravagant view taken of the reach of the judgment of Arnold J in the British Home Stores case…”

Lady Hale puts the point even more strongly, suggesting that:

[32] The case might have presented an opportunity for this court to consider two points of law of general public importance which have not been raised at this level before…

[33] Nor have we heard any argument on whether the approach to be taken by a tribunal to an employer’s decisions, both to the facts under s 98(1) to (3) of the Employment Rights act 1996 and to whether the decision to dismiss was reasonable or unreasonable under section 98(4), first laid down by the Employment Appeal Tribunal in British Home Stores Ltd v Burchell… is correct… the three requirements set out in Burchell are directed to the first part of the inquiry… and do not fit well into the inquiry mandated by section 98(4). The meaning of section 98(4) was rightly described by Sedley LJ, in Orr v Milton Keynes Council [2011] ICR 704… as “both problematical and contentious.” (emphases added)

Both Lady Hale and Lord Wilson, however, make it clear that they are not deciding the point or expressing a view (per Lady Hale at [35]: “… the law remains as it has been for the last 40 years and I express no view about whether that is correct.”

Burchell, after all, was never intended to be applied universally or inflexibly: but how likely is it that Burchell will be overturned (either at the level of the Supreme Court or by Act of Parliament)?

What next for the Burchell test?

In support of the Burchell test, the Courts have consistently held that procedural defects and substantive defects interrelate. So, for instance, in Taylor v OCS Group Ltd [2006] IRLR 616, [2006] EWCA Civ 702 the Court of Appeal noted that it is:

“… trite law that s 98(4) requires the ET to approach their task broadly as an industrial jury. That means that they should consider the procedural issues together with the reason for the dismissal as they have found it to be. The two impact on each other and the ET’s task is to decide whether, in all the circumstances of the case, the employer acted reasonably in treating the reason they have found as a sufficient reason to dismiss.”

And as the EAT in Sharkey v Lloyds Bank plc UKEATS/0005/15 put it:

“… procedure does not sit in a vacuum to be assessed separately. It is an integral part of the question whether there has been a reasonable investigation that substance and procedure run together.”

And that supports the application of a test which runs together the questions of procedure and substance.

But the point in Reilly is that the Burchell test seems better aimed at the question of the reason for the dismissal (“has the employer demonstrated what the reason for the dismissal is? Has it shown that the reason is a potentially fair reason for dismissal?”) rather than the question of fairness (“was the dismissal fair?”)

Against Burchell, the Courts’ approval has not been without hesitation. So in Orr the Court noted that the shift from the “special jury” approach (i.e. simply “was the dismissal fair?”) to a “Wednesbury” rationality test was “controversial, not least because it seems to have originated in a note in the ICR of [the EAT decision, Burchell] in which the employer was represented by counsel of great distinction, the employee did not appear at all and was not represented, and the single authority cited by the court had to do with the standard of proof.”

The test is not (of course) Wednesbury rationality (Turner v East Midlands Trains Ltd [2012] EWCA Civ 1470), but that is by the by.

Sedley LJ, in Orr, has reservations about Burchell. At paragraph 11 he suggest that the decision of Morison J in Haddon v Van den Bergh Foods Ltd [1999] ICR 1150 is “cogently reasoned” – although the Court of Appeal (per Mummery LJ in Foley v Post Office [2000] ICR 1283) held that the approach taken in Haddon was unsustainable in the light of binding authority.

In Haddon the Court suggested that (at paragraphs 25 – 26)

“… The mantra “the band of reasonable responses” is not helpful because it has led tribunals into applying what amounts to a perversity test, which, as is clear from Iceland Frozen Foods Ltd v Jones [1983] ICR 17 itself, was not its purpose… [t]here is, in reality, no range or band to be considered… we respectfully suggest that tribunals now return to the task in hand which is to apply the section without embellishment, and without using mantras so favoured by lawyers in this field.”

The critical context is the first error of law which was alleged in Haddon – that Tribunals apply the Burchell test without regard to the words of s 98(4) ERA 1996, which required the tribunal to have regard to equity and the substantial merits of the case. In other words, the charge was that concentrating solely on the investigatory process, and its sufficiency, prevented the Tribunal from correctly applying the law.

Haddon has since been expressly disapproved. But there have already been substantive warning shots fired in relation to Burchell: in Foley Mummery LJ pointed out that:

“… the interpretation placed by the tribunals and courts, including [the Court of Appeal]. On the provisions of the Act of 1978 in Iceland Frozen Foods Ltd [1983] ICR 17 and British Home Stores Ltd v Burchell has not led Parliament to amend the relevant provisions, even though Parliament has from time to time made other amendments to the law of unfair dismissal since those authoritative rulings on interpretation were first made. So those rulings, which have been followed almost every day in almost every employment tribunal and on appeals for nearly 20 years, remain binding.”

And the conventional approach to Burchell does lead to some curiosities. For instance, the burden of proof in misconduct dismissals. The Burchell test involves three questions. In the first question – “did the employer have a genuine belief in the misconduct alleged?” – the burden of proof falls on the employer, because of s 98(1) ERA 1996. The second and third questions – reasonable grounds for the belief based on a reasonable investigation – go to s 98(4) ERA 1996 and so the burden is neutral: see Boys & Girls Welfare Society v McDonald [1996] IRLR 129.

On the other hand, the Burchell test gives results which sit well with common sense. If an employee is dismissed for misconduct, then they should have been afforded a fair disciplinary process; that must involve a reasonable investigation, and the employer’s belief in the misconduct complained of must be held on reasonable grounds. The Burchell test affords the employer a great deal of latitude, particularly since it benefits from the “range of reasonable responses” at all stages of the test. Because of that point – and because law on this point has not been altered for many years – I doubt that Parliament will see fit to make any amendments.

However, the Supreme Court has, in effect, invited the argument. Given that Burchell favours employers, there is doubtless the will to have the argument. And if the unions are minded to fund the argument, I anticipate that the issue will be ventilated before too long.

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