No smoke without fire – can we dismiss an employee to avoid reputational damage?

In the internet age, businesses of all sizes are aware of the reputational fallout which they can suffer because of their employee’s actions.  There is no shortage of stories in the press about those who are fired for acts of wrongdoing (both online and “in real life”) which create a PR storm. 

More vigilant employers might be tempted to consider dismissing an employee even on a mere unproven suspicion of wrongdoing.       

However, the Employment Appeal Tribunal has recently re-emphasized the need for sufficient evidence of wrongdoing for a fair dismissal in in K v L (UKEATS/0014/18/JW), a case decided last year.

In this article we cover:

1. The decision in K v L
2. Relevant factors in dismissals for reputational concerns
3. Key points for HR

1.    The decision in K v L

The claimant was employed as a schoolteacher in Scotland.  He had a long and unblemished record during his time in the profession.

However, in late 2016 he was subject to an investigation after his personal computer was seized on a charge of possession of indecent images of children.  The police had searched his home after receiving intelligence that indecent images had been downloaded to an IP address associated with the claimant’s home, where he lived with his son.  Following a brief investigation, the Crown Office (the public prosecutions authority in Scotland) decided not to prosecute the claimant due to insufficient evidence. It nevertheless sent a letter to the claimant reserving the right to bring a prosecution in the future.

The respondent school, which employed the claimant, received a limited summary of the evidence against the claimant from the Crown. The summary gave no view on whether the claimant was a risk to children.

The claimant was invited to a disciplinary hearing. There was no mention of reputational damage in the letter as a potential reason for his dismissal and, though it was referred to in the disciplinary hearing, it was not discussed in any depth.  During that hearing, the claimant said he could not explain how the images came to be on his computer, but it could have been that his son’s friends, who had had access to the computer, were responsible.

After the hearing, the school decided to dismiss the claimant. Although it admitted that there was not enough evidence to conclude that the claimant had in fact downloaded the indecent images, it stated that it could not rule out the possibility.  Since the school was responsible for child protection, it explained that it could suffer “serious reputational damage” if it continued to employ the claimant.

The claimant brought proceedings in the employment tribunal but was unsuccessful.  He appealed the decision to the EAT.    

The EAT found that the claimant had been unfairly dismissed. This was largely due to the following factors:

1. The respondent tried to rely on “reputational damage” as a ground for dismissal. However, the EAT found that this prospect had been absent from the letter inviting the claimant to the disciplinary hearing and only mentioned in passing in the hearing itself.  The employee had therefore not been given sufficient notice that the employer would rely on this ground.
2. The school could not conclude, on the balance of probabilities, that the employee was guilty of the offence in question and therefore could not dismiss fairly on the ground of misconduct.
3. Even if the school had been able to rely on potential reputational damage as a ground for dismissal, the evidence in the case was insufficient and the school had not analysed it in deciding to dismiss.

The key lesson for employers is that they need to properly weigh the evidence against the employee and, if they cannot prove the alleged wrongdoing on the employee’s part, they must make it clear from the outset of the disciplinary process that reputational concerns will be an important factor to be discussed and considered.  Only then can the employee have a fair opportunity to make his or her own case for why a dismissal would be disproportionate.   

The courts have long recognised that misconduct outside of work can justify a lawful dismissal where it gives rise to reputational risk for the employer, even where that misconduct is disputed by the employee.  This was the case in Leach v The Office of Communications.  In Leach the claimant was deemed to have been fairly dismissed by the Office of Communications after allegations of child sex offences were made against him. Though the allegations were not proven at the time of the dismissal, the risk of reputational loss in Leach was considered by the Court of Appeal to be a fair “substantial reason” for dismissal.

The EAT’s decision in K v L shows that there is a limit to an employer’s “no smoke without fire” approach, even in sectors such as education where child safety concerns may justify such an approach.  Here, however, that end did not justify the means. 

2.    Relevant factors in dismissals for reputational concerns

These two cases demonstrate that there is a very difficult balancing act for employers (and tribunals hearing these cases).  The issue was succinctly put by the High Court in the Leach case, later approved in the Court of Appeal:

It sticks in the throat that an employee may lose his job, or perhaps in practice any chance of obtaining further employment, on the basis of allegations which he has had no opportunity to challenge in any court of law – or may indeed have successfully challenged.

On the other hand, it has to be recognised that there are cases where it is necessary for employers to be warned of facts which indicate that an employee (or potential employee) is a risk to children, even in the absence of any conviction.

How should employers balance the needs of the business and its customers (or, in the case of schools, its pupils) with the rights of the accused but acquitted employee?

The EAT compared the circumstances in K v L with those in Leach to explain the factors that will be relevant in a dismissal based on potential reputational damage.  These include:

• The evidence of misconduct

The amount of information and evidence that an employer has about alleged misconduct will be highly relevant. In Leach the police had given Ofcom detailed information about the alleged behaviour, whereas in K v L the respondent school had very little evidence to go on, and there were innocent explanations for how the images could have appeared on the employee’s computer.

In fact, in K v L the employer had itself admitted on dismissing the employee that there was insufficient material on which to make any conclusion that the employee had been culpable for the possession of the indecent images (as had the prosecuting authorities in Scotland when they decided not to charge the employee).  The employer also said, however, that it could also not exclude the possibility that the employee was responsible for the images.  The EAT recognised the difficulty the employee had in seeking to prove a negative.

• The actual risk of reputational loss

The EAT placed weight on the fact that there was no existing press interest in the K v L case and no indication that there would be a prosecution.

On the other hand, in Leach there was already press interest in the story. The risk of adverse coverage had been considered by the PR team and deemed to be a real one.

Employers cannot rely on merely fanciful prospects of reputational fallout: they would need to show that the continued employment of the employee would create a real risk to the business. 

• The conduct of the employee

Outside of the alleged offences, the employee in Leach had concealed the court case from his employer, misled the press and used his work email to protest proceedings against him in Cambodia. This was significant; it indicated a breach of trust and confidence that was not present in K v L.  These will of course be relevant factors for a tribunal considering whether the dismissal was fair, either on the grounds of conduct or “some other substantial reason”. 

3.    Key points for HR

When considering dismissal based on potential reputational damage, an employer should ask itself the following questions:

• Is there reliable and sufficient evidence available? Where an offence is not proven, evidence should not be blindly accepted without question, even where it is provided in police reports.

• Is there a genuine risk of reputational damage? You cannot presume that the press or public will discover the information and/or react in a certain way. Consider the press interest and the likelihood that the story will reach the press or social media.

• Have we given sufficient notice to the employee of all the potential grounds for dismissal, including dismissals justified in the interests of the business’s reputation? Tribunals will not look favourably if this prospect is brought up at the last minute when all other allegations of misconduct are found to be untenable.  The risks to reputation, if the allegations are unproven but turn out to be true, should be cited as a relevant consideration from the outset, and referenced in the letter inviting the employee to a disciplinary hearing, in the hearing itself and in the notice for dismissal.

• Can we rely on other misconduct which is not based on disputed facts? Where the employee has sought to conceal important evidence or is otherwise not sufficiently cooperative with a disciplinary process, this may add justification to the dismissal.  However, adding these to the conduct relied upon could open up employers to allegations that they are shifting the goalposts or seeking to justify a pre-ordained decision, so care should be taken to rely on substantial breaches only.