Employment Update: Record Award Of €1.25 Million By The Employment Appeals Tribunal To Chief Executive

A recent landmark decision of the Employment Appeals Tribunal ("EAT") is significant not only for the size of the award in favour of Mr. Philip Smith, former Chief Executive of Royal Sun Alliance ("RSA") but also because Mr. Smith had resigned and was therefore claiming constructive dismissal which imposes a very high burden of proof on a claimant.

Background

In November 2013, Mr. Smith was suspended (with pay) as part of an investigation by RSA into financial concerns relating to the large insurance claims process and motor claims in RSA. During the investigation process, Mr. Smith resigned from his role as Chief Executive, and subsequently claimed he was constructively dismissed in breach of the Unfair Dismissals Acts 1977-2007 (the "UD Acts").

In summary, Mr. Smith's claim was based on:

The public way in which he was suspended; The content of a draft report sent by RSA to the Central Bank; and The adding of difficulties with motor claims with separate issues relating to large insurance claims reserves as part of the investigation. Constructive Dismissal - "Very High" Burden of Proof

Under the UD Acts, where an employee is dismissed by his employer, the onus is on the employer to demonstrate that the dismissal was fair. In a constructive dismissal claim however, the burden of proof is on the employee to demonstrate that his resignation was not voluntary but due to the employee's position becoming untenable and as the EAT noted, this burden "is a very high one".

The EAT confirmed that the test for a constructive dismissal claim is an "and / or test" as follows:

Did the employer's conduct amount to a significant breach of the employee's contract of employment going to the root of the contract; and / or Taking into account all of the circumstances, was it reasonable for the employee to terminate his/her contract of employment. Investigation - Procedurally Flawed

The EAT accepted that procedures relating to an investigation or a disciplinary matter do "not have to be perfect". However, it considered whether any failings in the process could lead an employee to believe that he would be prejudiced if he engaged with the process or alternatively that the employer was merely "paying lip service to the process in order to disguise its predetermined result, ie dismissal."

Confirming that Mr. Smith was entitled to the principles of natural justice at an investigation stage, the EAT held that he was entitled to know the precise nature of the...