The Supreme Court’s decision in Reilly v Sandwell is an interesting exploration of when an employee’s failure to disclose material information to their employers will warrant dismissal.

It is also significant for the comments made by Lady Hale and Lord Wilson regarding the correctness of the test in British Home Stores Ltd v Burchell [1980] ICR 303 (the Burchell Test), which affords employers significant latitude in a misconduct dismissal (Reilly v Sandwell Metropolitan Borough Council, SC).

Facts

Ms Reilly was a Head Teacher who had a close friendship with Mr Selwood. They had bought a property together, where he lived, and had a joint bank account. Ms Reilly would stay overnight at the property from time to time. On 24 February 2009, the police arrived to search the property and arrested Mr Selwood on suspicion of downloading indecent images of children.

One month prior to his arrest, Ms Reilly had applied for a position as a Head Teacher. She did not disclose the fact of Mr Selwood’s arrest to the school, even though there came a time at which she realised his guilt. She was appointed to her role as Head Teacher on 1 September 2009.

On 1 February 2010 Mr Selwood was convicted of downloading indecent images of children and received a three year community order and a sexual offences prevention order. He was prohibited from having unsupervised access to children and required to participate in a sex offender programme.

Ms Reilly did not disclose Mr Selwood's conviction and remained close friends with him. They went on holiday together in April 2010 and she was named on his driving licence. In June 2010 her employers became aware of the conviction and the relationship between them. Ms Reilly was summarily dismissed for her failure to disclose the relationship and her refusal to accept that the relationship between them might present a risk given her position as Head Teacher.

Appeal to the Supreme Court

The Employment Tribunal found that there was a fair reason for dismissal. Her employers had acted within the range of reasonable responses in concluding that the non-disclosure (and failure to recognise that the non-disclosure was wrong) amounted to gross misconduct. There were procedural defects in the process which rendered the dismissal unfair but there was a 90% chance that Ms Reilly would still have been dismissed had those defects been rectified. Further, she had made a 100% contribution to her dismissal. This decision was upheld by the Employment Appeal Tribunal and Court of Appeal. Ms Reilly appealed to the Supreme Court in respect of the decision that her employer had acted fairly in treating the non-disclosure as grounds for summary dismissal.

The Supreme Court examined each aspect of the unfair dismissal test: (i) whether there was a fair reason for dismissal relating to the employee’s conduct or similarly justifiable; and (ii) whether the employer acted reasonably in treating that reason as sufficient grounds for dismissal having regard to equity and the substantial merits of the case. It acknowledged that the proper approach to the inquiry was the Burchell Test.

Applying the Burchell Test

The Burchell Test has three elements:

• Does the employer have a belief that the employee is guilty of the misconduct in question?
• Are there reasonable grounds to sustain that belief?
• Prior to forming that belief, did the employer carry out a reasonable investigation?

The Burchell Test is applied to both aspects of the unfair dismissal test but, as the Supreme Court recognised, fits better with the inquiry as to the substantive fairness of the dismissal, with its focus on the belief held by the employer.

The Burchell Test is generous to employers. As Lord Wilson stated, “[i]n effect it has been considered only to require the tribunal to inquire whether the dismissal was within a range of reasonable responses to the reason shown for it and whether it had been preceded by a reasonable amount of investigation.”

Applying that test, the Supreme Court upheld the Tribunal’s decision that it was open to the employer to conclude that Ms Reilly should have disclosed her relationship with Mr Selwood and that her non-disclosure (and refusal to accept that she should have made a disclosure) justified her summary dismissal. It noted that the governors of the school had safeguarding obligations under the Education Act 2002 and that Ms Reilly was the “eyes and ears” of the school.

Ms Reilly’s role as Head Teacher meant that she had knowledge of her pupils including their home circumstances, personalities and whereabouts. She also had knowledge of school routines and could authorise access to the school by non-school members. The fact that Ms Reilly had carried out extensive enquiries about whether she should disclose her relationship indicated that she recognised that there was an issue. There was a dispute as to the advice that she had received from two probation officers but a third probation officer had written to Ms Reilly after the arrest suggesting that it would be wise to make a disclosure.

Had Ms Reilly disclosed the relationship, the school governors could have formed an assessment and solutions found. The failure to make full and frank disclosure and her failure to acknowledge that she should have made a disclosure meant that the dismissal was within the range of reasonable responses.

Implications for employers

Non-disclosure by employees

Although the facts of this case engaged school safeguarding obligations, employers who operate in other regulated environments will draw comfort from the outcome of this case. In financial services, for example, employees may be required to disclose matters which could impact on an assessment of fitness and propriety or which may cause reputational damage to their employer. However, as Lady Hale noted, the case did not examine whether a dismissal for conduct that does not constitute contractual misconduct could be fair as “some other substantial reason.” In order to avoid any ambiguity on this subject, employers should be clear in their contracts and disciplinary polices where there is a reporting obligation and the consequences of failure to give full and frank disclosure in such a situation.

Burchell Test – future challenge?

Employers should also take note that the Supreme Court made some interesting comments about the Burchell Test which has been applied for 40 years. Lord Wilson (in the leading judgment) and Lady Hale referred to the fact that the Burchell Test does not fit well within the second limb of the unfair dismissal test (section 98(4) of the Employment Rights Act 1996) which deals with procedure. While substantive and procedural defects are often intertwined, the Burchell Test sits better with the first limb of the unfair dismissal test (sections 98(1) to (3), i.e. the reason for dismissal). The Supreme Court was not invited to hear arguments on this issue, so the comments are not binding, but they might inspire challenges to the Burchell Test which has proved helpful to employers over a lengthy period.

Reilly v Sandwell Metropolitan Borough Council