Employers could be forgiven for being confused by press coverage of the Court of Appeal’s (CoA) decision on the claim by Sharon Shoesmith, the former director of children’s services at Haringey Council.
While the media has speculated about compensation running into seven figures, employers will be aware that there is an upper limit to what a tribunal can award for unfair dismissal, which currently stands at £68,400.
Typically, the significant figures awarded as compensation in tribunal claims arise in cases where unlawful discrimination on grounds of sex, race, disability and a range of other protected characteristics under the Equality Act 2010 are involved. That appears not to be the case in relation to Shoesmith.
So what gives rise to the possibility of significant compensation in this case, and is this a concern for employers outside the public sector? The answer lies in the fact that the claim was one of judicial review and not unfair dismissal.
Shoesmith has separately brought unfair dismissal proceedings in the Employment Tribunal but these have been stayed pending an outcome of the decision in the High Court judicial review proceedings.
Judicial review proceedings are not applicable in circumstances in which the employer or decision-maker is not a public sector body or otherwise an ’emanation of the state’. Regulators such as Ofsted, Ofcom and Ofgem as well as local and central government bodies are susceptible to judicial review.
In a judicial review it is open to a court to find, as it did in the Shoesmith case, that a dismissal was void and thus wholly ineffective, giving rise to a continuing entitlement to salary. This is not an option in the private sector.
The CoA judges made some interesting points on the appropriateness of a ’heads must roll’ response to the concept that a senior individual is accountable for the services carried on under their stewardship, stating clearly that ”accountability is not synonymous with heads must roll”.
The judgment focused, however, on procedural flaws in the process that led to Shoesmith’s dismissal. The court concluded that she had not been given a chance to put her case before final decisions were taken and that it was
not possible to be sure that what she might have said would not have made a difference.
These principles are likely to be translated across to senior executives in the private sector. The courts will want at least basic levels of procedural fairness to be adopted even when a senior individual is expected to carry the can for significant failings of those reporting to them. A disciplinary process allowing the individual time to consider and respond to allegations will be required if liability for unfair dismissal is to be avoided, but the CoA does not rule out the possibility that an individual could be fairly dismissed if held accountable for the failings of others.
However, it is important to remember that cap on compensation. This means that in the absence of credible grounds for an individual to allege discrimination over a protected characteristic, compensation will be limited to £68,400.
Indeed, employers may believe that a prompt dismissal that helps a company maintain its reputation in the face of disastrous events is a risk worth taking, even if it gives rise to a claim for unfair dismissal compensation and compensation for the individual’s notice period – and the Shoesmith ruling will not alter that belief.