Employers are entitled to take “live” warnings into account when considering whether to dismiss an employee. However, the Court of Appeal has made clear in Way v Spectrum Property Care Ltd that they cannot take into account warnings given in bad faith when deciding whether there is sufficient reason for dismissing an employee.

Basic facts

Mr Way sent an e-mail to his line manager in July 2010 which was said to be inappropriate. Later in 2010 he was given a stage 3 final written warning for appointing an individual in breach of the company’s policy on fair recruitment. He was told that this would stay on his record for 12 months from December 2010.

In mid 2011, Spectrum started a general investigation into other instances of inappropriate e-mails being sent both internally and externally by employees. This uncovered the e-mail sent by Mr Way in July 2010. He also sent further inappropriate e-mails prior to a disciplinary hearing in September 2011 at which it was decided to ignore the first e-mail. However, as the additional e-mails were sufficiently serious he was dismissed with effect from 14 December 2011 and his subsequent appeal was unsuccessful.

Mr Way claimed unfair dismissal on the basis that the final written warning had been given in bad faith. Not only had his line manager been aware of the breach of the company’s fair recruitment policy at the time, he had sanctioned it and had started the disciplinary process in order to cover up his own part in the appointment.

Tribunal and EAT decision

Dismissing his claim, the tribunal held that the company had undertaken a reasonable investigation and been consistent in its approach. It was within the band of reasonable responses for the panel to decide, in the light of the "live" final written warning, that Mr Way should be dismissed. However, it refused to hear evidence from Mr Way relating to his argument that the warning had been given in bad faith.

Although the EAT agreed with Mr Way that he had provided enough information to raise a case that the warning had been given in bad faith, it decided that the company was “entitled to have regard to the warning even if it had resulted from [the manager’s] bad faith”. On that basis the EAT concluded that “dismissal almost inevitably followed and its fairness could not be doubted”.

Court of Appeal

However, the Court of Appeal disagreed, holding instead that a warning given in bad faith cannot be taken into account when deciding whether there was sufficient reason for dismissing an employee. Employers would not be acting reasonably in those circumstances, not least because it would be against equity and the substantial merits of the case to do so.

It therefore allowed the appeal and remitted the case to a differently constituted tribunal to decide whether or not Mr Way was unfairly dismissed and whether the warning was given in bad faith.

The Court also commented that this was yet another case where “an understandable wish” by the tribunal to limit the investigation to what was thought to be strictly relevant and by the EAT to avoid the remission of the case, resulted in “inappropriate short cuts” which ultimately lengthened the process of adjudicating on Mr Way's claim. Had the question of bad faith been addressed by the tribunal, much time and cost would have been saved.