In cases of gross misconduct, employers have to carry out a reasonable investigation to show they have reasonable grounds for their belief. In Shrestha and Genesis Housing Association Ltd, the Court of Appeal held that it was not necessary for employers to investigate each line of an employee’s defence when carrying out their investigation.

Basic facts

Mr Shrestha, who had to travel by car to see clients, was entitled to claim expenses to cover his mileage. He completed a claim form every month, giving the reading from his car's milometer at the start and end of each journey.

However, when the association carried out an audit, it discovered that the mileages were consistently higher than the AA route-finder information relating to journey distances. Mr Shrestha said that the increased mileage was due to difficulty in parking, one-way road systems, and road works causing closures or diversions.

At a disciplinary hearing in September 2011, the panel did not go through every single trip he had claimed for, but focused instead on two specific journeys. It also carried out an analysis of the claims he had submitted in June and July 2011 compared to the same journeys in November and December 2010 and found that all the later journeys claimed higher mileage than the earlier ones and all were greater than the AA figures. Mr Shrestha was dismissed with immediate effect in October 2011 for gross misconduct.

He claimed unfair dismissal on the basis that the investigation carried out by the association was inadequate.

Tribunal and EAT decisions

Relying on the decision in British Home Stores v Burchell, the tribunal judge noted that for an employer to demonstrate they have reasonable grounds for a belief they have to have conducted a reasonable investigation.

However, she also added that the degree of investigation very much depended on the strength of the case against the employee and the seriousness of the allegations. In this case, it was unreasonable to expect the housing association to recreate all the journeys he had made, nor was it even possible for it to have done so. The fact that it did not take any further steps to validate the appropriate journey time did not mean that the employer’s investigation was unreasonable.

The EAT upheld this decision.

Decision of Court of Appeal

The Court of Appeal dismissed Mr Shrestha’s appeal, holding that the tribunal had applied the correct test. It had considered the employer’s investigation and why it did not go further. It did not accept that the panel should have investigated each line of his defence unless it was obviously false. This was far too narrow an approach and added an “unwarranted gloss” to the Burchell test that was wholly unnecessary. Obviously employers have to consider the defences put forward by an employee but the extent to which they should carry out a specific inquiry into them will depend on the circumstances as a whole.

In any event, it was misleading in cases such as this where Mr Shrestha had over-claimed mileage expenses to talk in terms of distinct lines of defence. His explanations as to why the mileage claims were so high had to be assessed as an integral part of the determination of that issue. The investigation itself had to be looked at as a whole when assessing the question of reasonableness.