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Court of Appeal guidance on misconduct dismissals: how far does an employer's investigation have to go?

26 February 2015 #Employment

When dealing with misconduct allegations, do you find that employees sometimes seek to provide explanations that are so hard to disprove or could require many weeks of investigation, that you feel like you have to give up on the matter, rather than risk a tribunal claim? Some recent guidance from the Court of Appeal provides some clarity and makes clear that an employer is not required to investigate every detailed aspect of defence put forward by an employee (Shrestha v Genesis Housing Association Limited [2015] EWCA Civ 94). The investigation has to be reasonable in the circumstances, but how far do you have to go, as an employer?

The case in question concerned some unusually high expenses, a matter that often comes up in misconduct cases. Mr Shrestha was employed by Genesis Housing Association Limited (“Genesis”) as a floating support worker. As part of his role he was required to visit a number of clients at their homes and he used his own car for this purpose. Genesis provided an “essential car user allowance” of £1,000 per year for employees who travelled at least 2500 miles per year.  Employees were also entitled to expenses for the mileage travelled.

In order to claim his mileage expenses, Mr Shrestha was required to complete an online form identifying the reading from his car’s mileometer at the start and end of each journey. The online form would then produce a total monthly mileage travelled in order to calculate Mr Shrestha’s expenses claim.

Genesis became suspicious when in 2011 when Mr Shrestha claimed the essential car user allowance of £1,000. Mr Shrestha had not previously reached the 2500 miles in order to qualify for the allowance and so Genesis commenced an audit into Mr Shrestha’s mileage claims for the period May to July 2011. Genesis’ audit found that the mileages claimed by Mr Shrestha were consistently much higher than the AA figures for the same journeys. For example, Mr Shrestha’s claim for July 2011 totalled 197 miles whereas the AA figures for the same routes amounted to 99 miles. Suspicious that Mr Shrestha had been over-claiming mileage expenses fraudulently, Genesis commenced a disciplinary procedure.

At the disciplinary hearing, Mr Shrestha explained that his mileage claims were higher than the AA and RAC figures for a number of reasons, including difficulty in parking, one-way road systems, road works and diversions. Genesis did not challenge Mr Shrestha on each specific journey because the audit revealed that each mileage claim was above the AA suggested mileage. Genesis was satisfied that gross misconduct had occurred and subsequently dismissed Mr Shrestha.

Mr Shrestha claimed unfair dismissal, which was dismissed by the employment tribunal. This decision was upheld on appeal by both the Employment Appeal Tribunal and Court of Appeal. In reaching this decision, the Court of Appeal emphasised that the obligation on an employer when faced with a potential conduct dismissal is to carry out as much investigation as is reasonable in the circumstances.

In this case, the Court of Appeal was content that the employer’s investigation based on AA and RAC figures was sufficient and the employer had had a reasonable belief that the employee’s explanation for all his mileage claims being higher than those figures was just not plausible. Hence the employer did not, in the circumstances, need to call various local authorities to enquire about difficulties with local parking facilities, for example.

Importantly, the Court of Appeal said, “To say that each line of defence must be investigated unless it is manifestly false or unarguable is to adopt too narrow an approach and to add an unwarranted gloss to the Burchell test. The investigation should be looked at as a whole when assessing the question of reasonableness. As part of the process of investigation, the employer must of course consider any defences advanced by the employee, but whether and to what extent it is necessary to carry out specific inquiry into them in order to meet the Burchell test will depend on the circumstances as a whole.”

This case confirms that provided the employer has a good explanation as to why it limited its investigation in the manner it did, that should be sufficient. Note however, this case will not assist employers who leave loose ends in their investigations and who are unable to give a proper explanation as to why certain questions were not asked or followed through. It is important to note that both the employer’s decision to dismiss and its investigation will continue to be subject to the “band of reasonable responses” test.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
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