The EAT has decided that an employer who dismissed a senior employee following a dispute over a profit share and a failure to agree on the terms of employment could not rely on "some other substantial reason" (SOSR) to justify the dismissal. Although a breakdown in relations can amount to "some other substantial reason", it did not in this case.
An employer should not be permitted to rely on SOSR when dismissing an employee following a breakdown in negotiations or a failure to agree terms over pay. Otherwise, this would allow employers undue power in negotiations and could be a significant deterrent to employees to raising concerns.
The following highlights some common examples of SOSR in the context of dismissing an employee as well as the other potentially fair reasons for dismissing and employee.
Potentially fair reasons for dismissing an employee
There are five potentially fair reasons for dismissing an employee:
Breach of a statutory restriction.
Some other substantial reason (SOSR).
What is some other substantial reason?
Almost any reason that does not fall within the other four potentially fair reasons for dismissal may amount to SOSR, if it is not an insignificant or frivolous reason that justifies the dismissal of an employee carrying out a particular role. This business briefing highlights some common examples of SOSR when dismissing an employee.
If the business is undergoing a restructuring, but is not making any redundancies, SOSR may be relied on as a potentially fair reason for dismissal.
Business re-organisations often include making changes to employees’ terms and conditions. Dismissing an employee for their refusal to accept the proposed changes (either within the context of a business re-organisation or not) can also amount to SOSR.
Refusal to accept changes to terms and conditions
An employment contract can only be varied in accordance with its terms or with the parties’ agreement. If an employee refuses to accept a change to their terms and conditions and the business dismisses them for that reason, the reason may constitute SOSR.
However, these cases are unlikely to be straightforward because an employee is contractually entitled to resist unilateral changes to their terms. In some instances, where the change amounts to a breach of contract, the employee may be able to resign and claim unfair constructive dismissal.
For a unilateral change to amount to SOSR, the business must be able to demonstrate that the changes were not imposed arbitrarily but were for a “sound business reason”. There is no need for to prove that the re-organisation was crucial to the survival of the business. However, the business must provide evidence to demonstrate its reasons for the change and show that they were not trivial.
Where the overwhelming majority of employees accept the change, or where unions have been involved and have accepted the changes, individual employees may struggle to show that their dismissal for refusing to accept the change was unfair.
Conflicts of interest
The business may be able to dismiss an employee for SOSR if the employee is in a situation that creates a potential conflict with the business’s interests.
The business must be able to provide evidence demonstrating that the employee posed a risk to its interests. The business will need to show that:
the employee had access to commercial information;
the employee had close connections with a competitor (or an employee of a competitor); and
there was a genuine fear that the employee may leak confidentialinformation.
To rely on SOSR, the business must be able to show that continuing to employ the employee would create a real commercial risk.
Personality clashes or irreconcilable differences between colleagues can amount to SOSR. However, to do so, the conflict would have to be causing substantial disruption to the business. An employment tribunal will expect a business to take reasonable steps to solve the problem without resorting to dismissal, for example, by:
Re-deploying one of the workers.
Changing work patterns.
Attempting to mediate.
Pressure from third parties
Where a third party (for example, a customer or supplier) requires an employee’s dismissal, the dismissal can be regarded as fair for SOSR.
The business should consider the:
importance of the third party’s business to its own business; and
seriousness of the third party’s threat to leave.
For example, if a major client is adamant that it will never contract with the business again unless the business dismisses an employee, this is more likely to be regarded as fair than where a minor client simply requests removal of an employee, but does not threaten cessation of business.
Breakdown in trust and confidence
Businesses sometimes maintain that they must dismiss an employee because of a breakdown in trust and confidence. In some cases, SOSR can be relied on in these circumstances as a potentially fair reason for dismissal.