Is a personality clash in the Boardroom a fair reason for dismissal?

A recent case has highlighted a trend that that we have seen over recent years, with Employment Tribunals finding that the dismissal of a senior executive can be fair where there has been a breakdown in relations amongst a management team and one director / executive is considered to be more at fault (Moore v Phoenix Product Development Ltd EAT/0070/20).  Also, the procedural requirements for such dismissals may be more limited, in this case, the fact that no right of appeal was offered did not render the dismissal unfair.
 

Facts found by the Employment Tribunal

Mr Moore was the inventor of a water-efficient toilet, called the “Propelair Toilet”.  Whilst the product had potential, its production and commercial development had been slow and problematic, with only a limited number being sold, despite millions of pounds of external investment.  Mr Moore had been the CEO of Phoenix Product Development Limited from 2001 until 2017, when he was replaced by Mr Dylan Jones.

Mr Moore had difficulty in accepting that the Company was no longer his company and that he was not in charge of it, although he remained an employee and a director. He did not appreciate the role of Phoenix’s institutional investors in keeping the business afloat.  He was found to have described the investors as “f***ing leeches”. His attitude and conduct caused a deterioration in his relations with his fellow directors.

In March 2018, the new CEO, Mr Jones, commissioned an external specialist in organisational development and HR, to conduct a review of the Company. This external specialist’s assessment was that the fundamental problem lay not with Mr Jones but with Mr Moore, and he was of the view that Mr Moore “would attempt to sabotage any CEO coming into the business”.  At a subsequent “off-site” meeting, Mr Moore and Mr Jones were told by the Board that acting in the best interest of the Company was paramount and that politics and finger pointing had no part in an acceptable constructive culture.  Both men agreed that they would work on the relationship between them.  They were also informed that the Board’s patience was wearing thin and that this review meeting was the last which should be held to discuss performance. The two shook hands and agreed to attempt to make it work.

Notwithstanding this message from the Board, in late April 2018, Mr Moore had a conversation with Mr David Vinokur, one of Company’s investors. During that conversation, Mr Moore was critical of the Company’s performance and, in particular, of Mr Jones’s performance. The Company viewed this as a breach of the agreement reached at the end of the “off-site”. Other concerns about Mr Moore’s conduct also came to light, including an intemperate e-mail exchange in early May 2018 with the recently-appointed Director of Operations, Mr Mosscrop. Mr Jones had attempted to caution Mr Moore against giving Mr Mosscrop what he described as a “public bollocking”, but this had not been headed by Mr Moore.

In view of these and other matters, the Board considered that the Claimant’s behaviour was not in the best interests of the Company and it considered how best to respond. At a Board meeting on 11^th May 2018, Mr Moore was told that there would be a formal Board meeting concerning his future. The Claimant was “combative” in response to being told about this meeting. Mr Smith, one of the non-executive directors, stated that his desire was to avoid a legalistic process and Mr Moore commented in response “Tough s**t. I’m sure you would wish to avoid a legal fight”.

Mr Moore was sent a letter after this Board meeting informing him that there would be a further Board meeting to: “discuss your employment with Phoenix Product Development Limited in the light of serious concerns that have arisen regarding your performance and conduct as an employee and director of the company.”

Mr Moore was permitted to have a colleague to accompany him to the meeting. At the meeting, Mr Moore was invited to respond to six separate allegations which had been notified to him in advance.

Shortly before the meeting, Mr Moore had submitted a long and detailed written statement seeking to refute each of the allegations. In that document the Claimant was unrepentant and continued to refer to Phoenix as “my company”.

The Employment Tribunal found that Mr Moore had entered that meeting in a “thoroughly confrontational manner” showing no insight, no regrets, no contrition and blaming others, particularly Mr Jones. The Claimant’s written submissions consisted largely of criticisms of Mr Jones’ performance and sought to blame Mr Jones for many of the flaws or shortcomings in the Company’s performance. As to the particular allegation about the conversation with Mr Vinokur, Mr Moore did not seek to deny what he said to Mr Vinokur, but sought to justify it by saying he was telling the truth in response to direct questions from an investor.

The meeting on 18^th May took over three hours in total. At the end of the meeting, four of the five directors voted to terminate Mr Moore’s employment, with only Mr Moore himself dissenting. On 22^nd May 2018, Mr Moore was given six months’ notice of termination and placed on garden leave. The letter notifying Mr Moore of his termination made no mention of any right of appeal against his dismissal. Mr Moore had raised various issues in his statement which the Company treated as a grievance. That grievance was investigated by one of the non-executive directors and was subsequently dismissed. Although a right of appeal against that grievance decision was notified to Mr Moore, no such appeal was, in fact, lodged by him.

On 16^th August 2018, half-way through Mr Moore’s period of garden leave, the Company wrote to Mr Moore informing him that the Board had resolved to end his employment and to pay the balance of his notice in lieu. Mr Moore then issued proceedings claiming that he had been unfairly dismissed.

The legal background

Under the Employment Rights Act 1996 (section 98) there are five potentially fair reasons for dismissal: (1) conduct; (2) capability; (3) redundancy; (4) breach of a statutory restriction; and (5) "some other substantial reason of a kind as to justify the dismissal of an employee holding the position which the employee held" (commonly known as “SOSR”).

SOSR is essentially a “catch all” provision which can permit an employer to fairly dismiss in circumstances which don’t readily fit into one of the 4 more clearly defined reasons.

The categories of SOSR have been expanded by case law over the years and, in particular, there is now a body of cases which confirm that personality clashes and differences between colleagues can amount to SOSR. 

The Decision of the Employment Appeal Tribunal in Moore v Phoenix Product Development Ltd is the latest in that line of cases and is welcomed by employers.

Other cases about personality clashes justifying dismissal

Treganowan v Robert Knee and Co Ltd [1975] ICR 405 QBD: In this case an employee's frank discussions about her sex life offended some female employees. It was stated that the atmosphere in the workplace "had become so tense that it was unbearable" and this was found to be seriously affecting the employer's business. The tribunal held that the dismissal was fair because the respondent's business was small and it had no real alternative but to dismiss her in the circumstances.

Perkin v St Georges Healthcare NHS Trust [2005] EWCA Civ 1174: In this case the Court of Appeal held that dismissing an employee because of his difficult personality cannot of itself amount to SOSR, although the ways in which the employee's personality manifested itself through his behaviour with other employees, clients, customers and colleagues could do so.

Mr Perkin was employed by St George's Healthcare NHS Trust as its director of finance. He reported to the Chief Executive, Mr Hamilton. There were concerns about his personality and relationship with colleagues and other third parties. On 29^th July 2002, Ms McLoughlin, the Trust's chairman, told KPMG that she wanted an "exit strategy" for Mr Perkin by the end of the month. On the same day Mr Hamilton called Mr Perkin into a meeting and asked him to resign with immediate effect. Mr Perkin refused.

The Trust instigated its disciplinary procedure. As part of the investigation Mr Hamilton held an investigatory meeting, following which Mr Perkin was suspended. At the meeting Mr Perkin made an accusation about Mr Hamilton. The disciplinary hearing was chaired by Ms McLoughlin and Mrs Mark. During the hearing Mr Perkin made accusations about a witness and the director of HR and reiterated the accusation about Mr Hamilton that he had raised at the investigatory meeting.

Ms McLoughlin and Mrs Mark found that Mr Perkin should be dismissed with immediate effect (but with six months’ pay in lieu of notice) because his relationship with the executive team had broken down and he failed to establish the quality of relationships with third parties necessary to preserve and advance the Trust's interest. They also held that Mr Perkin's allegations against Mr Hamilton during the disciplinary process meant that they could not work together again.

Mr Perkin brought a claim in the Employment Tribunal under both the whistleblowing and unfair dismissal provisions of the Employment Rights Act 1996.

The Employment Tribunal found that the reason for dismissal was "conduct some other substantial reason" and identified both as potentially fair reasons for dismissal within the meaning of section 98 of the ERA. However it found that the Trust did not follow a fair disciplinary procedure in:

• Choosing Ms McLoughlin to chair the disciplinary hearing, as she had expressed views on Mr Perkin's dismissal prior to the procedure commencing and so was not impartial. Appointing Mrs Mark to sit with her did not remedy that difficulty.
• Not giving Mr Perkin a right to appeal to an outside individual.
• Not observing the Acas code of practice for dealing with dismissals.
• Not giving Mr Perkin a warning and a chance to improve. However the tribunal stated that, at Mr Perkin's level, a warning is not strictly necessary and it was satisfied that Mr Perkin knew of the Trust's concerns and did nothing to address them.

It therefore held that, on procedural grounds, Mr Perkin was unfairly dismissed. However it also went on to find that, had the dismissal been procedurally fair, there was a 100% chance that Mr Perkin would have been dismissed in any event. It also held that he had contributed 100% to his dismissal and therefore made no financial award.

On appeal, Mr Perkin argued that dismissal on the grounds of personality could not fall within the ground of "conduct" and that the only possible fair reason for the dismissal would be "capability".  However, the EAT identified the reason for dismissal as falling into the category of SOSR. The EAT approved the tribunal's finding that, had the Trust followed a fair procedure, there was a 100% chance that Mr Perkin would have been dismissed.

Gallacher v Abellio Scotrail Ltd UKEATS/0027/19:  In this case, the EAT upheld a SOSR dismissal despite the fact that the employer had not followed any procedure. The EAT did acknowledge that this was a rare example of a case where following procedures could be considered to be futile, and that in many cases, a total lack of procedure would usually lead to the conclusion that dismissal was outside the band of reasonable responses. The evidence was that Ms Gallacher recognised the breakdown in relations herself and had no interest in repairing it.

Ms Gallacher worked as a senior manager for the Abellio Scotrail's predecessor from 2007. Her relationship with her manager, Ms Taggart, began to deteriorate when she sought a salary increase. In 2015, she raised the salary issue again. In 2016, she refused to participate in a mandatory on-call rota. She made it clear that she was looking for another role within the business but she was not selected for one. In November, she went on sick leave and annual leave for seven weeks. At a meeting in January 2017, Ms Gallacher and Ms Taggart agreed that there would be a four-week phased return to work during which Ms Gallacher’s ability to manage her workload would be monitored. There was discussion about her difficulty in dealing with business pressures and about medication she was taking. In March, Ms Gallacher and Ms Taggart were unable to agree as to a suitable candidate for recruitment. They also discussed the difficulties in their relationship. Ms Gallacher's direct reports were expressing concerns about her leadership and her ability to delegate and provide support. The company was entering a critical period and Ms Taggart felt that the situation with Ms Gallacher was not recoverable. Ms Taggart therefore took the decision to dismiss Ms Gallacher, who was informed of that decision at her pre-arranged annual appraisal in April. She received nine week's pay in lieu of notice but no other dismissal procedure was followed. The employee brought proceedings, claiming unfair dismissal and disability discrimination. The disability was menopausal symptoms and depression. The tribunal found that the difficulties in the working relationship with the manager had pre-dated her menopausal symptoms and that the manager was unaware of the details of those symptoms or the depression. It concluded that the dismissal was for “some other substantial reason", namely the irretrievable breakdown in trust and confidence, and was procedurally fair. It also found that the employee had not known of her disability until November 2017 and that there was no disability discrimination.

The EAT has upheld an employment tribunal's findings. The EAT observed that a failure to carry out any procedure would in many cases lead to the conclusion that the dismissal was outside the band of reasonable responses. However, where following procedures could reasonably be considered to be futile, the employer may dispense with them. This was a rare example of such a case.

Conclusions

It is not every case of a personality clash that will allow a fair dismissal of one or both of the protagonists.

In Mr Moore’s case factors which assisted the employer included:

• Mr Moore was a board-level director and employee;
• Phoenix was a relatively small organisation with no higher level of management;
• Mr Moore had brought about an "irreparable breakdown" in trust and confidence;
• This was considered to be "destructive", destabilising and a "drag-factor" for the company;
• There had been findings to this effect by an independent HR expert;
• That Mr Moore was unrepentant about his conduct and attitude;
• He had not shown any sign that he was likely to change.
• Although Mr Moore was not offered an appeal in relation to his dismissal, he had brought Grievances which had been considered and rejected by the Company.
• Mr Moore had been offered a right of appeal in relation to such Grievances but had not done so;

In these circumstances, while the offer of an appeal will normally, but not invariably, be part of a fair procedure, it had been open to the tribunal to conclude that an appeal by Mr Moore would have been futile.

In my experience, it is becoming more common for employers to dismiss senior executives citing SOSR and a breakdown of trust and confidence as the reason for doing so.  It is arguably the case that it is “tough at the top” and that senior executives have less protection, at least in terms of procedural fairness, than more junior colleagues.

Further Information

If you have any questions or concerns about the topics discussed in this blog, please contact Nick Ralph or any member of the employment team.

About the Author

Nick is a highly experienced employment lawyer with an exceptionally strong reputation in the City of London and beyond. Nick acts for executives, partners and employers across a variety of sectors including: professional services, “C-suite”, hedge funds, legal, retail, trading, insurance, technology, private equity, IT, accountancy, regulatory and banking.