In an interesting husband to wife disclosure case, the EAT has recently decided in favour of the former employees. The Employment Appeal Tribunal (“EAT”) held in the recent case of Chandlers (Farm Equipment) Limited v. Rainthorpe, that the dismissal of an employee on the basis of a concern that she would disclose confidential information regarding the employer’s business, did not, in the circumstances, constitute dismissal for “some other substantial reason” and was also procedurally unfair.

Mrs Rainthorpe, an employer of Chandlers for 22 years, was dismissed with immediate effect on the sole ground that her husband, a former and long standing employee of Chandlers, was proposing to go and work for a trade competitor who had recently acquired a franchise that Chandlers had been told they were losing. Chandlers believed that Mrs Rainthorpe’s job as Administration Supervisor, involving typing and processing invoices, orders and demonstration appointments, gave her full access to confidential information about the business. Chandlers consequently felt that there was a significant risk of domestic disclosure of confidential information by Mrs Rainthorpe to her husband, an agricultural engineer, which he could then use with his new employer to the effect of Chandlers losing potential business. Chandlers’ argument was that the risk of disclosure constituted “some other substantial reason” – a potentially fair reason for dismissal. Chandlers further denied that it was a disciplinary matter.

The EAT considered both the reason for the dismissal, and the process which Chandlers had followed.

Fear of disclosure of confidential, commercially sensitive information by an employee can qualify as a substantial reason of a kind potentially to justify dismissal, but there was nothing in Mr or Mrs Rainthorpe’s conduct reasonably to conclude that any such disclosure, whether or not intentional, would occur – particularly considering their good records and reputations and positions within Chandlers (neither having managerial roles). For Chandlers’ concerns to have come to fruition, there would have had to have been a chain of causation, beginning with Mrs Rainthorpe becoming aware of certain information which she subsequently and unintentionally or intentionally passed to her husband. Mr Rainthorpe would himself have had to perceive the significance of the information for his new employers, which he would have then had to communicate to them. It was therefore not a reasonably held strong fear for Chandlers, particularly as any disclosure made by Mrs Rainthorpe would have been a breach of her employment contract’s confidentiality clause.

Contrary to Chandlers’ arguments, the EAT decided that Mrs Rainthorpe’s dismissal did constitute a dismissal for disciplinary reasons. As a result, the provisions of any disciplinary code and the usual standards of the ACAS code should have been taken into consideration. Procedural unfairness thereby arose by Chandlers failing to put their concerns in writing to Mrs Rainthorpe, making their minds up prior to discussions with Mr and Mrs Rainthorpe and not allowing any opportunity for appeal by Mrs Rainthorpe. The Tribunal did not agree with Chandlers’ view that Mrs Rainthorpe’s dismissal had not been procedurally unfair because “any amount of process would have been for practical purposes futile”.

Lessons for Employers:

  • 1. Although the risk of disclosure of confidential information is a potentially fair reason for dismissal, it is essential to follow a fair procedure in reaching the decision to dismiss on this basis. Informing the employee of the concerns in writing, organising meetings to discuss the situation and allowing a chance to appeal are all good starting points to achieve procedural fairness.
  • 2. Dismissing on this basis must be within the band of reasonable responses in the particular situation. Employers can assess this by looking to:
  • the position held by the employee;
  • whether the employee has access to confidential information and the importance of that information;
  • past conduct of the employee;
  • the possibility of altering the job of the individual to remove access to the information and
  • whether the employee is already obliged or willing to undertake not to disclose confidential information.

Following a fair procedure, fully investigating and discussing the circumstances of potential disclosure not only reduces the risk of moving to dismiss in the first place, but also, if a dismissal is deemed necessary, increases the chances of it being justifiable in all the circumstances.

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