Capability and qualifications

Capability and qualifications

As we have already noted, dismissal for incapability is one of the potentially fair reasons for dismissal, and is described in s.98(2)(a) of the ERA as a reason that "relates to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do".

The definition of "capability" is given in s.98(3) of the ERA as " ... capability assessed by reference to skill, aptitude, health or any other physical or mental quality". "Qualifications" means "any degree, diploma or other academic, technical or professional qualification relevant to the position which he held".

Note: Incapability on the grounds of ill-health was the subject of our Guidance note on Sickness absence in IRLB 530, and so will not be dealt with here. Employers should also be aware of the potential relevance of the provisions of the DDA (see Disability discrimination update ) when dealing with employees whose disability may impact upon their performance.

By virtue of s.98(2)(a) of the ERA, the ground put forward by the employer need only relate to capability and/or qualifications. It need not, therefore, be a reason which prevents the employee from performing all work of the kind he or she was employed to do. So, while an employer should be able to show that the employee was incapable of performing duties required under the contract of employment, it need not prove that the employee was incapable of performing all such duties.

For example, in Shook v Ealing London Borough Council, the EAT held that the fact that Ms Shook was shown to be incapable of carrying out her duties as a residential social worker was a sufficient reason for her dismissal for incapability, although there were other duties within the scope of her contract which she was capable of performing. However, the proportion of work that an employee is still able to carry out at the time of dismissal may be relevant to the issue of reasonableness.

The incapability may also relate to contractual duties that the employee was not actually performing at the time of dismissal. "Work of the kind which [the employee] was employed by the employer to do" encompasses all work that the employee could be required to do under the contract of employment, and not just that work which he or she was actually engaged on at the time of dismissal. It would therefore be wrong for a tribunal to concentrate solely on an employee's duties at the time of dismissal without considering whether or not there were any duties within the scope of the contract that he or she was incapable of performing (Plessey Military Communications Ltd v Brough).

Skill

This refers to lack of ability, skill or knowledge which renders an employee unable to perform the job to the standard expected by the employer. "Skill" is much easier to establish with new or promoted employees where, as we have seen, the cause may be attributed to poor recruitment or selection procedures, or inadequate training. Conversely, it is more difficult to satisfy a tribunal that a long-serving employee does not have the skills to perform satisfactorily the job she or he has been doing for a long time, unless the problem has arisen because new skills are required or standards have been raised or are higher than the norm in the industry (see, for example, Gozdzik & Scopigno v Childema Carpet Co Ltd).

Aptitude and mental quality

"Aptitude" covers intransigent, inflexible, disruptive and difficult employees, as well as those employees not prepared to adapt to change in the workplace.

This may on occasion overlap with "mental quality". For example, in Harmel and other v London Borough of Haringey, the EAT held that the dismissal of an employee for refusing to attend to the personal care of the elderly because the prospect made her "feel sick" fell within mental attitude, rather than ill health. Mental quality may also relate to a worker's "lack of drive", or with having a personality that has a detrimental effect on colleagues' work or on customers, such as abrasiveness (Bristow v ILEA and Abernethy v Mott, Hay & Anderson). Note that personality clashes with management or colleagues may take aptitude into the area of misconduct or "some other substantial reason" for dismissal, making a plea in the alternative advisable for the employer.

Physical quality

This refers to the situation where, for example, an employee has or develops problems with his or her vision, while engaged on work for which sight is important. Again, the provisions of the DDA may become relevant here and, in particular, the employer's duty to make "reasonable adjustments".

Qualifications

Where possession of a qualification, such as a valid driving licence, is a requirement of employment, its lapse or loss falls within this category. An employment tribunal must, however, satisfy itself that the requirement of the qualification was in reality an ingredient of the job. In Anderson v Safety Kleen UK Ltd, for example, a branch manager was dismissed when he lost his driving licence after failing a breathalyser test. It was part of his contract that he made regular scheduled customer visits along with his sales staff in order to improve customer relations. In a letter to his employer before dismissal, the employee indicated that as he did not do a great deal of driving, he could manage his job with the necessary driving being done by someone else.

The employment tribunal refused to hear any evidence as to whether or not the requirement of a driving licence was an ingredient of the job of branch manager. But, the EAT said, this point clearly went to reasonableness. If it turned out that a branch manager in fact never did any driving at all against a requirement that he should hold a valid driving licence, it might be the case that it would be most unreasonable to dismiss him if he lost his licence. In this case there was a clear need for the employee to do some driving, so the appeal was dismissed.

A requirement for "qualifications" need not be expressly stated in a contract of employment, as it may be inferred from the job advertisement or from the nature of the job (Tayside Regional Council v McIntosh). A failure to pass aptitude tests may relate to both capability and qualifications (Blackman v Post Office). And "mere licence, permit or authorisation" does not amount to "qualifications" unless "substantially concerned with the aptitude or ability of the person to do the job" (Blue Star Ship Management Ltd v Williams).

Substantive fairness of dismissal

If the employer establishes a potentially fair reason for dismissal, the fairness or otherwise of its actions will then be judged against the test of "reasonableness" contained in s.98(4) of the ERA. This states:

"... the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer) -

(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case."

Applying that provision, employment tribunals are governed by the following broad principles:

Establishing incapability

In most cases of incapability, the aim should be to identify the cause or causes of poor performance and to assist or encourage the individual to reach the desired standard of performance. All procedures adopted in handling a case should be scrupulously fair from the outset because, ultimately, they will be crucial to the fairness or otherwise of any subsequent decision to dispense with the services of the individual.

An employer who gives incapability as the reason for dismissing an employee must be prepared to provide evidence of this to the satisfaction of the employment tribunal. Tribunals are rarely in a position to assess an employee's work performance for themselves, or to know the standard of performance required in every job situation. As we have just observed, a tribunal may not substitute its own view of incompetence for that of an employer.

Reasonably-held belief

The test for establishing an employee's incapability does not require an employer to actually prove incompetence, but simply to show a belief in the employee's incompetence based on genuine and reasonable grounds, and evidence that the employer has taken reasonable steps to verify its conclusions. As expressed by the Court of Appeal in Taylor v Alidair Ltd: "It is sufficient that the employer honestly believes on reasonable grounds that the man is incapable and incompetent. It is not necessary for the employer to prove that he is in fact incapable or incompetent." The tribunal's function is, the Court continued, to decide "whether the employer honestly and reasonably held the belief that the employee was not competent and whether there was a reasonable ground for that belief".

Similarly, in McPhie and McDermott v Wimpey Waste Management, the EAT said that a tribunal's job is to establish if the employer honestly believed that the worker was incompetent or unsuitable for the job; whether such belief was held on reasonable grounds; and if, in forming such a belief, the employer carried out a proper and adequate investigation, including giving the employee an opportunity to answer the criticisms.

Whereas incompetence may easily be established by objective means where work is routine or straightforward, tribunals generally accept that, with senior or management level jobs, this will often be no more than the employer's subjective judgement As the EAT observed in Cook v Thomas Linnell & Sons Ltd, "imponderables" such as the quality of management can be judged only by those competent in that field, and so "when responsible employers have genuinely come to the conclusion over a reasonable period of time that a manager is incompetent we think that it is some evidence that he is incompetent".

Expressing the difficulties surrounding the establishment of a senior employee or manager's incompetence, the EAT in Cook took the view that there were possibly "...two extremes. At one extreme is the case where it can be demonstrated, perhaps by reason of some calamitous performance, that the manager is incompetent. The other extreme is the case where no more can be said than that in the opinion of the employer the manager is incompetent, that opinion being expressed for the first time shortly before his dismissal. In between will be cases such as the present where it can be established that throughout the period of employment concerned the employers had progressively growing doubts about the ability of the manager to perform his task satisfactorily. If that can be shown, it is in our judgment some evidence of his incapacity. It will then be necessary to look to see whether there is any other supporting evidence".

A reasonably-held belief in an employee's incompetence requires an employer to show the standards expected of the employee; that the employee knew or must have been aware of those standards; and that the employee fell short of them. In addition to the employer's own investigations, supporting evidence may come from customer complaints or complaints from other employees, but these must always be thoroughly investigated before being accepted. Evidence accepted by tribunals as establishing incompetence has included an inability to motivate staff or deal with customers' orders (Queensway Discount Warehouses Ltd v McNeall), and a failure to reach realistic sales targets (Sibun v Modern Telephones Ltd). In "aptitude" or "mental quality" cases, the employer must be able to show the detriment to the business caused by the employee's intransigence, inflexibility or attitude.

Single acts

One act of incompetence will usually not provide grounds for a reasonably-held belief in an employee's incompetence, except in situations where the consequences of that one act are so serious that it would be dangerous or risky to keep the employee in employment. Typically, these situations involve risks to life, health, safety and property, or any other situation in which an employer can reasonably demand a high degree of care, and where a summary dismissal for one lapse in skill or error of judgment will be fair.

This was the case in Alidair Ltd v Taylor, where the EAT held that an airline pilot was fairly dismissed for a bad landing that caused serious damage to the aircraft and put the lives of passengers and crew at risk. The EAT took the view that the pilot was engaged in a special category of activities requiring a high degree of professional skill, and that the potential consequences of small departures from that high standard were so serious that any sub-standard performance justified dismissal. It also gave other examples of this special category of activities, such as: "the scientist operating the nuclear reactor; the chemist in charge of research into the possible effects of, for example, thalidomide; the driver of the Manchester to London Express, the driver of an articulated lorry full of sulphuric acid." The EAT's reasoning and conclusions were upheld by the Court of Appeal (Taylor v Alidair above).

In ILEA v Lloyd, the Court of Appeal rejected an attempt by the employer to draw an analogy between Alidair and the case of a probationary teacher's incompetence which, it was said, was such that it would have been wrong to allow him to continue to teach. The Court restricted the Alidair principle to cases where safety, particularly the safety of a large number of people, was at stake. Where incompetence results in less serious consequences, there should be other evidence of incompetence besides the one incident.

Group dismissals

In some cases an employer may establish that an act of incompetence has occurred, but is unable to identify which one of a group of employees was responsible for it.

For example, in Whitbread & Co v Thomas and others, three employees were dismissed for their incompetence in failing to prevent serious stock losses. The EAT took the view that the principle established in Monie v Coral Racing could be extended to situations of capability, as well as misconduct, to enable an employer, in certain limited circumstances, to be justified in dismissing all members of the group of employees, "even where it is possible, or indeed probable, that not all were guilty of the act".

More recently, this principle has been applied in Parr v Whitbread plc in which the EAT held that an employer would be entitled to dismiss all of a group of employees where:

As the EAT said in Monie, it will be rare that on a proper investigation it is impossible to determine the culprit and unlikely that more than a mere handful will be left under suspicion.

Capability and misconduct

Incapability may shade into misconduct when, despite all efforts to prevent poor performance, or to bring an employee "up to scratch" through training, supervision, support and appraisals, the employee continues to underperform. The employer must then establish the cause of the poor performance, as this will have implications for the proper procedure to be adopted in dealing with it.

In the ACAS handbook, for example, a distinction is made between "negligence" and "lack of ability". It says the former "usually involves a measure of personal blame arising, for example, from lack of motivation or inattention for which some form of disciplinary action will normally be appropriate, whereas the latter may be caused by poor recruitment procedures or inadequate training.

And, in Littlewoods Organisation Ltd v Egenti, the EAT said that the strict requirements applicable in misconduct cases do not necessarily apply where lack of capability is the reason for dismissal. An employment tribunal thus erred in law when it held a dismissal unfair because an appraisal letter received by the employee did not constitute a warning that dismissal would follow if performance did not improve. In so holding, the EAT said that the tribunal had confused disciplinary procedures with capability procedures.

Moreover, in Sutton & Gates (Luton) Ltd v Boxall, the EAT required employment tribunals to distinguish between cases of sheer incapability owing to an inherent incapacity to function, and those in which there was simply a failure to exercise to the full such talent as the employee possessed. It was said that cases of carelessness, negligence or idleness could be dealt with as misconduct rather than capability.

As this discussion demonstrates, the distinction between incapability and misconduct is not always an easy one to make. It is thus always advisable, as a matter of practice, to plead both conduct and capability where there is any doubt or some overlap between the two, setting out the factual basis fully and clearly. Although an employer is not tied to the label it puts on the particular facts relied on (see p.8), the EAT in Hotson v Wisbech Conservative Club held that, where the original reason given for dismissal is lack of capability, the substitution or addition of suspected dishonesty as a reason, even though precisely the same facts may be relied upon by the employer, goes beyond a mere change of label. The EAT said that suspected dishonesty is a grave and serious ground for dismissal, which should be stated at the outset by the employer or not stated at all.

Procedural fairness

For a finding of fair dismissal, it is crucial to follow a fair procedure throughout, from investigating and establishing the employee's incompetence to finding a solution to the problem. A recent DTI report found that procedural irregularities account for most tribunal decisions in which employers lost unfair dismissal cases against them, and that, conversely, in most unfair dismissal cases won by the employer, the tribunal generally noted that fair procedures had been followed throughout.

Note: It is important to bear in mind in this respect the provisions of the 1977 ACAS Code of Practice No.1: Disciplinary practice and procedures in employment. Whilst a breach of the Code does not of itself impose liability on an employer, it is admissible in evidence in unfair dismissal proceedings, and any provision relevant to any question arising in the proceedings will be taken into account in determining that question. Although the Code is not directly applicable to capability dismissals, the EAT has said that it should "guide management in considering a dismissal for inefficiency" (Lewis Shops Group v Wiggins), and that "very considerable weight" should be given to it (Littlewoods Organisation Ltd v Egenti). Reference may also usefully be made, for advisory purposes only, to the ACAS handbook (see below ).

Basic principles

The case law deals extensively with the procedures that a reasonable employer faced with an employee's incapability will follow. In Polkey v A E Dayton Services Ltd, for example, the House of Lords said that an employer will not normally act reasonably in a case of incapacity unless it gives the employee fair warning and an opportunity to improve. And, in James v Waltham Holy Cross UDC, Sir John Donaldson warned: "An employer should be very slow to dismiss upon terms that an employee is incapable of performing the work which he is employed to do, without first telling the employee of the respects in which he is failing to do his job adequately, warning him of the possibility or likelihood of dismissal on this ground and giving him an opportunity of improving his performance."

Also, in Ministry of Defence v Worrollo, the EAT said: "Where an employer is considering dismissing an employee for reasons of incompetence ... he must act fairly in concluding that the employee is incapable of doing his work and in treating that as a reason justifying dismissal. And the ingredients are these: he must act fairly throughout; he must give, in the ordinary case, a warning. Of course, there may be cases in which warnings are entirely out of place. But generally, he must clearly warn the employee that his conduct is under scrutiny and he must give him a fair trial after that warning to see whether, having been warned, he can pull himself together or do whatever is required to make himself capable of carrying out his task."

Appraisals

A fair procedure for dealing with incapability may start with the formulation of a policy for dealing with the problem separate from that which exists for dealing with misconduct (see box on p.11). Although it is management's responsibility to develop this initiative, the rules and procedures should be acceptable both to those to be covered by them and those who have to operate the policy, and the ACAS handbook advises that "management should therefore aim to secure the involvement of employees and all levels of management when formulating new or revising existing rules and procedures".

The earliest procedural steps consist of a careful appraisal of the employee's work with the aim of evaluating the employee's performance and assessing any training and development needs. It also involves a discussion of any criticisms with the employee. Any reasonable steps considered necessary to remedy the employee's shortcomings, such as support, supervision, retraining, the setting of targets and monitoring of the employee's progress, should be implemented. The extent of assistance offered will depend on the employer's administrative resources and size of enterprise, and will also depend on the type of employee.

Warnings

An employer should nearly always give an underperforming employee sufficient and adequate warnings. A warning should aim to do the following: remind the employee of the expected standard of work; specify how the employee's work falls short of this standard; provide the employee with an opportunity to improve; allow the employer time to monitor carefully the employee's work and to make sure of the reason for the poor performance.

A warning should be clear and unequivocal. This is particularly important where the employee is a long-serving employee who has given consistently poor performance. In Sharpe & Fisher Ltd v Aldridge, an employee with 20 years' service had consistently failed to achieve his sales targets. There was a history of meetings with management and warnings, including two written warnings, about his performance. He was then given an ultimatum that unless things drastically improved further disciplinary action would be taken. This was not acted on. Subsequently, a final written warning was issued, and the employee was then dismissed.

The EAT upheld a tribunal's decision that a reasonable employer would have indicated clearly to an employee "who needed prodding to achieve", that if sales targets were not reached, employment would be terminated. A reasonable period of time to achieve the specified sales targets should have been placed unequivocally before him. In this case, the ultimatum given had not been acted upon, despite the employee's continued failure to reach the sales targets set. The period that the tribunal thought reasonable to allow for the small chance that the employee would have improved was 12 months.

Reasonable opportunity to improve

What amounts to a reasonable period of time for improvement will depend on the circumstances of each particular case, and may include: the nature of the employment; the length of the employment; the employee's past performance; the seniority of the employee; and the extent to which the employee's work falls below standard.

That period may be longer where an employee has taken on new responsibilities, or where new skills are required. For example, in Steelprint Ltd v Haynes, the EAT upheld an employment tribunal's decision that an employer unfairly dismissed an employee when it changed the job content of her employment without allowing her a reasonable period of time to gain the necessary skills and to adapt to those changes. She had previously been required to do mainly proof-reading work about which there had been no complaints. The employer then introduced computerisation and required the employee, in addition to proof-reading, to undertake the inputting of orders onto the new computer system; the employee lacked the touch-typing skills necessary to do so. The employer found her speed and accuracy for inputting orders unacceptable and, after monitoring her performance over a three-month period from February to April 1994, initiated disciplinary proceedings. She was given a succession of warnings and was finally dismissed in September of that year.

The tribunal found that the employee had received little or no training in the new duties, and that undue pressure had been placed upon her during the period in question. In particular, she had, from that time begun to receive warnings about her performance. Only two months had transpired between the verbal warning and her dismissal, and a period of less than two weeks between her final written warning and her dismissal. The tribunal found this far too short a time to give her sufficient opportunity to show an improvement in her work and comply with the standards set by the employer.

In Ansells Ltd v Davies, the employer considered it important that couples should be employed as managers of its public houses, and Mr and Mrs Davies were employed in that capacity. The employees had received previous warnings in respect of their performance and, on 22 October 1992, they were issued a final written warning to the effect that there would be a review on 12 December 1992. A failure to arrest the decline in business by then might, they were warned, result in their dismissals. Soon afterwards, the marriage broke down and Mrs Davies left. The employer took the view that Mr Davies was incapable of running the pub without his wife and that, in his very distressed state, he was even less likely to achieve any improvement in performance, so it dismissed him three weeks before the review date.

An employment tribunal held that the employer did not act reasonably in failing to abide by the agreed period for improvement. In its view, a reasonable employer would have regarded Mr Davies's domestic problems as reason to extend the improvement period rather than accelerate it. Given Mr Davies's distressed state, the tribunal said that it would not be possible to make a fair assessment of his performance even by the review date, let alone at the earlier time when he was dismissed. The EAT upheld the tribunal's conclusion.

In Maloney v Nicholas Hotels Ltd, the employer switched to computerisation and, after giving Ms Maloney only one complete day of training, expected her to input into the computer all the balances on the sales ledger accounts. However, the change from manual book-keeping to computerisation did not go well, with the result that there was pressure on the staff. In February, Ms Maloney was dismissed on the ground that it had become apparent that she was unable to cope with the computer system. The tribunal held the dismissal unfair on the basis that no procedures were followed to establish the truth or falsehood of this allegation, and that it was too early to make a judgment as to the employee's capability as the change to computerisation was still ongoing.

And, in Whitbread plc v Mr and Mrs Beattie, the employer considered that Mr and Mrs Beattie were capable performers and transferred them to manage a problem public house. This pub had a history of drug use and dealing on or near the premises, the police were likely to object to a renewal or transfer of the licence and customers expected to be allowed to drink after hours. To reflect the problem nature of the house, the Beatties were paid a higher salary. On arrival, the Beatties found an existing stock deficiency. When this continued to deteriorate, the employer, without taking any prior disciplinary steps, issued them with a final written warning and dismissed them some months later.

The EAT upheld an employment tribunal's decision that their dismissals were unfair. The employer had not taken into proper consideration that the employees had been occupied with getting rid of unsatisfactory customers and attracting satisfactory customers, a process that would most likely have a very adverse effect on turnover or profits or both. Insufficient time had been given for the rectification of the problems identified. The dismissal was also procedurally unfair, particularly in relation to Mrs Beattie who had not been invited to attend the disciplinary hearing at which she had been dismissed.

Warnings not always necessary

The object of a warning is to bring the employee up to the standards which it is thought he or she is capable of reaching but is failing to achieve. While it is appropriate to give a warning in nearly every case, it has been recognised that there are some exceptional situations in which a warning may not be necessary and so may be dispensed with (Polkey).

Where an employer can take the reasonable view that the "inadequacy of performance is so extreme that there must be an irredeemable incapability", it has been held that a warning and opportunity for improvement would be of "no benefit to the employee and may constitute an unfair burden on the business". (James v Waltham Holy Cross UDC).

Warnings are also of little use in the situation where the incompetent employee may fairly be dismissed summarily for one serious act or omission, such as that described in Alidair Ltd v Taylor (see pp.10-11 above). Moreover, where the employee is incapable or unwilling to change, the situation may be better dealt with under misconduct rather than by issuing warnings.

Employees in a senior or managerial position may have less need for a warning than others. This is because they are expected to be "fully aware of what is required of them and fully capable of judging for themselves whether they are achieving that requirement" (James). In Mcphail v Gibson, however, the EAT took the contrary view that there was a greater obligation on an employer to give a warning to a manager before dismissal than there was to warn an operative on the shop floor. The fact that a "higher standard of duty" could be expected from a senior employee was, according to the EAT, a factor which could be reflected in a reduction in compensation for the employee's contribution to his or her dismissal.

The EAT in Burns v Turboflex Ltd considered whether there was a conflict between James and Mcphail. Mr Burns, the managing director of the company, was dismissed for incapability, namely, his failure to implement certain specific business objectives set for him by the employer. He contested his dismissal on procedural grounds. The tribunal found as a fact that, although it had been indicated to him that all jobs would be at risk if things did not improve, the employer never expressed to him in clear terms the following: that his performance was below expectation; the respects in which it was below expectation; what he needed to improve; and what the consequences might be if he failed or was unable to improve. Moreover, the decision to dismiss had been taken while Mr Burns was out of the country, and he had not been given an opportunity to know the nature of the allegations made against him or to deal with them. The tribunal also found that some progress had been made towards achieving some but not all of the objectives. Nevertheless, the majority of the employment tribunal took the view that as the most senior member of managerial staff, his dismissal was not unfair simply because of the lack of a warning. The employer had made its concerns known to the employee to a sufficient extent whereby in his senior position he could appreciate, and should have realised, the peril he faced.

Allowing Mr Burns's appeal, the EAT found that the tribunal had confused the need to give a warning and the need to conduct an enquiry before a dismissal. As to warnings, the EAT said that it was not possible to lay down as a proposition of law any general rule that was dependent upon the status or the nature of the job. "A van driver employed at a modest salary does not need to be warned that he should not drink before he drives; the personnel director of a large company does not need to be told that he should not make racist or sexist comments about or to members of his staff: a pilot does not need to be warned that he should not crash the plane. There can in our view be no absolute rule as to when warnings are or are not inappropriate. All must depend upon the facts of the case." The EAT went on to say: "Before the decision to dismiss is made an employee is entitled to know the nature of the allegations made against him, and to have the opportunity to give his version of events. The tribunal here did not distinguish between the need to provide warnings about which it makes its findings and the need to give an employee an opportunity to meet those criticisms which are made on the ground of his capability."

Promotion of senior employees

Senior employees in probationary promotion may also have less need for a warning than other probationers. In British Heart Foundation v Harrison, for example, Ms Harrison was promoted from assistant manager to area manager and placed on probation for six months. It was accepted that at the time of her dismissal she had not received all the training she should have had to bring her up to scratch in her new position. An employment tribunal, applying Post Office v Mughal, held her dismissal unfair on procedural grounds. The procedural faults identified were that she had not been told in advance of a review meeting that the employer had criticisms of her work, or that her inability to answer those criticisms might lead to her dismissal. Moreover, she had not been given time to seek advice or representation or to prepare a case as to why she should not be dismissed. Finally, it was said that what started out as a probationary review meeting had, without any warning, turned into a disciplinary procedure.

The EAT disagreed with the tribunal. It accepted that there was a distinction between the present case and Mughal. Ms Mughal was a newly recruited trainee clerical officer whose more modest skills could have been more easily improved given guidance and training. If her probation was unsuccessful she would be out of a job. By contrast, Ms Harrison was at a managerial level and was already working for the employer. If her probationary promotion failed, she was likely to be offered alternative employment. The EAT said that, given those circumstances, it was wrong for the tribunal to proceed on the basis that Mughal imposed a need to warn.

And the employer had good reason for not warning Ms Harrison in any admonitory way. She was of a nervous disposition and was best dealt with by way of positive encouragement. The EAT said that, based on Mughal, the tribunal should have asked whether there was, on the evidence, any reason to think that the employer had set an unreasonable standard for Ms Harrison to achieve. And, if not, whether the employer could reasonably have concluded that Ms Harrison had not measured up to the reasonable standard that had been set for her. The EAT said that the tribunal should also have recognised that a probationer must be taken to know that he or she is, throughout probation, "on trial", and that he or she can expect to be strictly judged. The EAT allowed the appeal, substituting a finding that the dismissal was not unfair.

Less-formal warnings

In small companies, warnings may be expressed less formally than would be appropriate for larger ones. For example, in Eddels v Anne French Ltd, the employer, a small company with less than 40 staff, promoted Ms Eddels from her post as secretary to a managerial position with the warning that if she was unsatisfactory in her new role her employment would be terminated, as her old position was no longer available. The employer dismissed her 16 months into the job when it became apparent that she could neither control the workload nor cope with the pressures of the job.

Ms Eddels took a complaint of unfair dismissal to an employment tribunal. The tribunal considered that there had been a failure to warn and advise Ms Eddels that she was not measuring up to standard, but it took the view that she had been offered the job on the basis that there would be no other job if she did not measure up. The dismissal was not unfair simply "because of some lack in a small company of any giving of written warnings to the applicant. We think that she was in fact advised and warned verbally throughout the time when she was managing the sample room as to what might happen if she was unable to measure up to her responsibilities ...". The tribunal dismissed the complaint.

The majority of the EAT upheld this decision. It said that it would have been an error of law for the tribunal to accept as sufficient warning after a period of 16 months the warning given at the outset of Ms Eddels' employment. This was because unless a person has been put on probation, such a warning would not be a sufficient basis upon which to dismiss an employee if it later transpired that he or she was incompetent. But the majority here noted the tribunal's view that Ms Eddels had in fact been warned about her performance throughout the 16 months.

Where a warning states that it will be disregarded after a specific period if the employee performs satisfactorily, the EAT has held that the conduct upon which the warning was based must likewise be treated as "spent", so that it would be unreasonable for an employer to take into account such conduct in deciding to dismiss an employee (Eccles v Ribble Motor Services Ltd).

Identity of decision-maker

In Ndazi v East Surrey Hospital NHS Trust, an employment tribunal was asked to consider whether it was right for the same person who instigated the original disciplinary procedure against the under-performing employee, extended the period of warning against the employee, and took the decision to suspend him should have been allowed to chair the disciplinary hearing and to take the decision to dismiss. The tribunal held that, having regard to the disciplinary procedure agreed between the employer and staff representatives, that person was indeed the appropriate person to have dealt with matters of final warnings and dismissal, and so there was no unfairness.

The EAT said that the tribunal was entitled to its conclusion on this issue. "It is not uncommon for an employer, faced with the person who has most involvement with criticisms of an employee's conduct, or behaviour, having to take a decision ultimately to dismiss. Indeed, there are sometimes good reasons for the person who is most closely involved taking the decision in the first instance, rather than it being delegated to a third party who has no such knowledge. This is perhaps particularly so in the case of a person who is being considered for dismissal by reason of capability, where intimate knowledge of the performance of the employee's work will be of assistance, rather than a detriment to the fair disposal of the allegations."

Complete failure of procedure

As we have already noted, except in extreme cases, an employer will be expected to have taken at least some procedural steps if it is to obtain a finding of fair dismissal.

For example, in Seawise Insurance Consultants Ltd v Day, Mr Day, an accounts manager for six years with no previous complaints about his work, suffered a heart attack and was off work for some time. During his absence, the company consulted another firm of auditors who pointed out certain mistakes Mr Day had made in his work. The company refused to allow Mr Day to return to work after his sick leave. The company answered his unfair dismissal complaint by alleging that the mistakes made by Mr Day were as serious as that made by the airline pilot in Alidair Ltd v Taylor, and that it had therefore acted reasonably in dismissing him.

The employment tribunal found that the dismissal lacked any procedural steps at all. There had been no discussion of any criticisms with the employee, and no warnings had been given. And the tribunal refused to equate the case with Alidair: "The only possible argument would be if these matters would cause the criminal law to result in the closure of the company or something like that, or for serious financial loss, or for there to be a lack of financial control. The company had been carried on in this way for some six years without the auditors commenting adversely on Mr Day's performance, and we are not satisfied that these errors come into this category." The tribunal took the view that, while the employer had cause for concern, the allegations as to Mr Day's competence were never investigated properly, and Mr Day was never given an opportunity to respond. Upholding the decision, the EAT commented that the allegations against Mr Day were not of such a kind as to make any reasonable employer take immediate action.

The final straw

Sometimes the dismissal of an employee for incompetence is triggered by one last act or omission which forms the culmination of a series of careless acts or omissions on the employee's part. As the case below illustrates, care must be exercised in taking the decision to dismiss, as it is often the case that this last incident by itself would not have given sufficient grounds for dismissal.

In Teknacron Circuits Ltd v Tracey, Mr Tracey was employed as a process worker in electronic matters. His work history showed carelessness on his part on a number of occasions. For example, in December 1986 he wrongly approved a board which had not been properly processed by another worker. In January 1987, he wrongly certified that some boards, which turned out to be bad boards, had been properly processed. He received a written warning. In May 1988, his testing of a multi-layer panel for the quality of work was found to be careless. He received another written warning. In June 1988, he again certified a panel as tested when it had not been tested. At this point, he was issued with a final written warning, and warned that any further act of a similar nature would result in the termination of his employment.

In August 1988, Mr Tracey was working with a colleague on a particular mechanism which went wrong. As there was some doubt as to whose fault it was, the final written warning was not activated. Mr Tracey was nevertheless reminded that it still stood against his name. He was eventually dismissed in October 1988, when he failed to remove a piece of tape around a Perspex board before lifting it with the result that it broke. The reason given for dismissal was that this was the culmination of a series of careless acts on his part while still under a final warning for carelessness.

An employment tribunal found the dismissal unfair. The employer had stated that the breakage of the Perspex board would not have sufficed on its own as grounds for dismissal, but only as a culmination of a series of incidents arising during 1988. In the tribunal's opinion, the various incidents which had occurred previously in 1988 had been incidents of a different nature. Moreover, it said that the employer had failed to properly investigate whether there was any defect in the Perspex board which could have been the cause of the breakage. That decision was upheld by the EAT.

Alternative employment

An employer who finds that the problem of incapacity persists, despite all its efforts to help the underperforming employee come up to the required standard, may wish to consider taking further action, including dismissal. Before it takes this last step, however, the reasonable employer should also address the possibility of alternative employment more suited to the aptitude and ability of the employee in question. The obligation to do so is not a strict or absolute one, and an employer is not expected to create a post artificially for the underperforming employee. The duty is simply one to consider redeploying the employee and, of course, the ability of the employer to do this will depend on the circumstances of each case and, in particular, the size and administrative resources of the employer (Cook v Thomas Linnell & Sons Ltd).

In Magna Housing Association Ltd v Butler, the dismissal of an employee was held to be unfair because the employer never considered options other than dismissal, but fixed its mind on the dismissal option to the exclusion of all other options. This itself, the EAT said, went outside the band of reasonable responses of a fair employer. Mr Butler was a site foreman with 22 years' service with the company, who had received a number of warnings regarding his standards of supervision. He was then given a first and final written warning to the effect that "any proven allegations made against you in the future will result in dismissal". Following this warning, there was a 100% improvement in his work. Subsequently, however, there were again problems with Mr Butler's supervision of a contract. He was summoned to a disciplinary hearing and then dismissed.

At the tribunal, the employer took the view that it had no choice but to dismiss given the terms of the final written warning. The tribunal held that the dismissal was unfair. On appeal, the company submitted that "Mr Butler had been shown the yellow card. If he misbehaved again the answer was to give him a red one." The EAT suggested to the employer in argument that "a player sent off the field in a football match does not have his employment with the football club automatically ended". It dismissed the employer's appeal.

Alternative employment which falls outside the scope of an employee's contract of employment, and which is not sanctioned by disciplinary procedures, may amount to a repudiatory breach of the contract entitling the employee to resign and complain of constructive dismissal. It is therefore advisable to seek the employee's consent to the move to more suitable employment.

There is no automatic right for a promoted employee who fails to make the grade in the new job to return to his or her old position. A reasonable employer will probably consider whether this is a possibility, but will not be held to any such obligation by a tribunal (White v London Transport Executive). Where the employee's contract of employment provides for demotion of the employee in circumstances of incapability, an employer will not act unreasonably in adhering to the terms of the contract. In Halstead v Marshall of Wisbech Ltd, the EAT upheld a decision of the employment tribunal that an underperforming manager's demotion was fair, in circumstances where the disciplinary procedure incorporated into Mr Halstead's contract provided for demotion in cases of persistent sub-standard work.

Dismissal and compensation

An employer may, as a last resort, dismiss an employee whose performance is unacceptable. If a complaint of unfair dismissal is successful, the tribunal may make an award of compensation to the employee made up of a basic award and a compensatory award (s.118 of the ERA). An employment tribunal has a discretion to reduce the basic award where it considers that the employee's conduct was such that it would be just and equitable to do so (s.122(2) of the ERA). The compensatory award may also be reduced to a just and equitable amount where the tribunal finds that the employee's dismissal was caused or contributed to by the employee (s.123(6) of the ERA).

The conduct on account of which a reduction is made must to some extent be blameworthy (Nelson v BBC (No.2)). This raises the issue of whether it can be said that an employee who has been dismissed for capability can have contributed in any way to his or her own dismissal. In Kraft Foods Ltd v Fox, the EAT said that in "true" cases of incapability, where a person has tried, but has simply been unable to cope, it would be wrong to say that he or she has contributed to the dismissal by his or her incapacity, and so no reduction should be made in those circumstances. Contribution suggests conduct over which an employee has control, such as misbehaviour or lack of effort. On the other hand, reduction may be appropriate where an employee has been "lazy, negligent or idle" (Sutton & Gates (Luton) Ltd v Boxall).

But in Moncur v International Paint Co Ltd, the EAT cast doubt on the soundness of the proposition in Kraft Foods. It said that Kraft Foods did not purport to state as an absolute proposition of law that an act of failing which is attributable to a defect of character or personality of the applicant, and which is not within his or her control to alter, can never be material when deciding whether, and if so, to what extent, the applicant has contributed to the dismissal.

There is also the possibility that an employment tribunal might reduce compensation on the basis that a clearly incompetent employee, who is found to have been unfairly dismissed as a result of a defect in procedure, would, in any event (and had proper procedures been followed), have been fairly dismissed at some time in the future. The House of Lords in Polkey established that the fact that a procedural defect in an otherwise fair dismissal can be shown to have made "no difference" to the employer's ultimate decision to dismiss is not relevant to the question of reasonableness under s.98(4) of the ERA (except in cases where the employer could reasonably have concluded that carrying out proper procedures would have been "utterly useless"). It may, however, be relevant to the assessment of compensation.

Capability and qualifications: the main points to note

Work capability procedures: an example

Some employers have developed "work capability" procedures which operate separately from their disciplinary procedures, and are used in dealing with employees whose performance, while unsatisfactory, cannot be classed as misconduct.

In an instructive example, Reigate and Banstead Council now operate a procedure¹ which was adopted by management and the relevant recognised trade unions as a fairer way of handling capability problems than by recourse to the existing disciplinary procedure. The procedure aims to tackle cases of incapability where an employee is lacking in knowledge, skill or ability and so cannot carry out his or her duties to the standard required. The emphasis is on getting such an employee to improve to the standard required, with dismissal seen as being the last resort. The procedure goes on to draw a clear distinction between this situation and "a deliberate failure on the part of the employee to perform to the standards of which he or she is capable", for which the disciplinary procedure may be used. By so doing the issue of capability is taken out of the more threatening disciplinary environment.

¹ This procedure is published in full in IRS Employment Trends 648, January 1998.

Guidance from the ACAS advisory handbook Discipline at work²

Employers are advised by ACAS that poor performance should be dealt with as follows:

²Available from ACAS Reader Ltd, PO Box 16, Earl Shilton, Leicester LE9 8ZZ, tel: 01455 852225, price £2 plus postage.

CASE LIST

Abernethy v Mott, Hay & Anderson [1974] IRLR 213

Alidair Ltd v Taylor [1976] IRLR 420 (EAT)

Anandarajah v Lord Chancellor's Department [1984] IRLR 131

Anderson v Safety Kleen UK Ltd 8.10.92 EAT 306/90

Ansells Ltd v Davies 8.11.94 EAT 979/93

Blackman v Post Office [1974] IRLR 46

Blue Star Ship Management Ltd v Williams [1979] IRLR 16

Bristow v ILEA 1979 EAT 602/79

British Heart Foundation v Harrison 5.2.98 EAT 1354/96 and 430/97

Burns v Turboflex Ltd 4.2.97 EAT 377/96

Clarke v Trimoco Group Ltd and another [1993] IRLR 148

Cook v Thomas Linnell & Sons Ltd [1977] IRLR 132

Devis & Sons Ltd v Atkins [1977] ICR 662

Eccles v Ribble Motor Services Ltd 5.10.92 EAT 609/90

Eddels v Anne French Ltd 13.4.94 EAT 848/93

Gozdzik & Scopigno v Childema Carpet Co Ltd 26.4.79 EAT 598/78

Halstead v Marshall of Wisbech Ltd 5.10.89 EAT 257/88

Harmel and other v London Borough of Haringey 10.10.96 EAT 1389/96

Hotson v Wisbech Conservative Club [1984] IRLR 422

Iceland Frozen Foods Ltd v Jones [1982] IRLR 439

Inner London Education Authority v Lloyd [1981] IRLR 394

James v Waltham Holy Cross UDC [1973] IRLR 202

Kraft Foods Ltd v Fox [1977] IRLR 431

Lewis Shops Group v Wiggins [1973] IRLR 205

Littlewoods Organisation Ltd v Egenti [1976] IRLR 334

Magna Housing Association Ltd v Butler 29.4.97 EAT 1215/96

Maloney v Nicholas Hotels Ltd 6.4.88 COIT 4223/88/LN/C

Maund v Penwith District Council [1984] ICR 143

Mcphail v Gibson [1976] IRLR 254

McPhie and McDermott v Wimpey Waste Management [1981] IRLR 316

Meltog Ltd v Jogee 9.3.93 EAT 404/91

Ministry of Defence v Worrollo 19.10.94 EAT 1048/93 and 1049/93

Moncur v International Paint Co Ltd [1978] IRLR 223

Monie v Coral Racing [1980] IRLR 464

Ndazi v East Surrey Hospital NHS Trust 7.2.97 EAT 257/96

Nelson v BBC (No.2) [1979] IRLR 346

Parr v Whitbread plc [1990] IRLR 39

Plessey Military Communications Ltd v Brough 1.5.85 EAT 518/84

Polkey v A E Dayton Services Ltd [1987] IRLR 503

Post Office v Mughal [1977] IRLR 178

Queensway Discount Warehouses Ltd v McNeall EAT 569/85

Seawise Insurance Consultants Ltd v Day 31.1.95 EAT 298/93

Sharpe & Fisher Ltd v Aldridge 25.6.96 EAT 725/95

Shook v Ealing London Borough Council [1986] IRLR 46

Sibun v Modern Telephones Ltd [1976] IRLR 81

Smith v City of Glasgow District Council [1987] IRLR 326

Steelprint Ltd v Haynes 1.7.96 EAT 467/95

Sutton & Gates (Luton) Ltd v Boxall [1978] IRLR 486

Taylor v Alidair Ltd [1978] IRLR 82 (Court of Appeal)

Tayside Regional Council v McIntosh [1982] IRLR 272

Teknacron Circuits Ltd v Tracey 2.3.90 EAT 128/89

Whitbread & Co v Thomas and others [1988] IRLR 43

Whitbread plc v Mr and Mrs Beattie 16.6.95 EAT 372/94

White v London Transport Executive [1981] IRLR 261