Director's unfair dismissal claim successfully defended despite employer not following any procedure

In the recent case of Finegan v Ainsty Timber Marketing an Employment Tribunal considered an unfair dismissal claim brought by a director.

The Claimant was a statutory director, acting as the Finance Director. He was partly paid in salary and partly for services provided through a personal service company.

Tensions rose when the Claimant refused to sign a "letter of clarification" because it purported to rank a payment due to another director above a payment of £250k that the Claimant claimed was owed to him. The other directors had signed the letter.

Subsequently the Claimant sold his personal service company, which then wrote to the Company claiming £250k. The Claimant argued that there was no conflict of interest because he no longer had any interest in the payment due to the personal service company. However, the Claimant intervened in the dispute several times. He argued that the Company's internal lawyer should not deal with the dispute because of a disclosure made to the owner of the personal service company. The Respondent then took external legal advice, however the Claimant instructed the Finance Manager to not pay the invoice because it was advice to another director and not the Company. The other directors persuaded the Finance Manager to pay the invoice.

The Claimant then instructed the Finance Manager to engage his wife as an employee, pointing out that another director's wife was an employee. The Respondent refused to engage the Claimant's wife as an employee.

The other directors decided that the commercial dispute was leading the Claimant to act in his own interests rather than the Company's and that his actions were beginning to impact other members of staff during a business-critical period. As such the Respondent decided to summarily terminate the Claimant's employment without notice and without following any procedure.

The Tribunal decided that the reason for dismissal was "Some Other Substantial Reason" of a kind justifying dismissal. The Respondent argued that they had lost trust and confidence in the Claimant and that he was looking out for his own interests rather than the Company's interests. The Tribunal agreed that the Respondent had reasonable grounds to believe this and that it did justify the dismissal. The Tribunal decided that following a procedure would have been pointless as the dispute had become protracted and it was clear that a dismissal meeting would not by itself have resolved the issue.

Moreover, the Tribunal rejected the claim for notice pay on the grounds that the Claimant's had breached the implied term of trust and confidence repudiating the contract without the need for notice.

This case is a reminder that in exceptional circumstances it can be "fair" to terminate employment without following a procedure and where actions damage trust and confidence even if they do not amount to misconduct. However, it's important to note that the employee in this case was at a very senior level and had a more significant impact on the business. Tribunals would be less likely to find that not following a procedure is justified for a junior employee.

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