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Misconduct and Unfair Dismissal – The Need for Consistency

Jerome Kerviel, the French currency trader who lost his employer Societe Generale some £3.9 billion after amassing around £40 billion of currency trades, bringing the bank to the brink of collapse, has recently made news headlines again after winning a claim for unfair dismissal against his former employer.

The verdict will seem puzzling to many. Kerviel has previously served a prison sentence for his illegal trading and there was no dispute that his trading activities led to the huge losses suffered by his employer. How, then, could he win a claim for unfair dismissal?

The Judge in the case found that it was unfair for the employer to dismiss Kerviel because the bank was not punishing his conduct, but its consequences. The Judge found that the employer had previously been aware of Kerviel’s actions, but had overlooked them while Kerviel’s trades made a profit and had only dismissed him when his actions led to the bank suffering a loss. It was unfair for the employer to dismiss Kerviel for actions which it had previously tolerated because those actions now caused it a loss.

While this is a French case, with different laws relating to unfair dismissal and no influence on the decisions of British courts, the reasoning of the French Judge does have parallels in English law.

In England and Wales the precedent that it may be unfair to dismiss an employee for conduct which the employer has previously treated less severely was first set by the Court of Appeal in 1981 in the case of Post Office v Fennell. This principle that employers must treat employees’ misconduct consistently was also addressed in the subsequent case of Hadjioannou v Coral Casinos Ltd [1981]. This case confirmed that if an employer’s previous treatment of misconduct led the employee to believe that that misconduct would be overlooked, or would not lead to dismissal, then subsequently dismissing an employee for the same misconduct could be unfair if the circumstances are the same.

The finding of unfair dismissal in the Kerviel case is an extreme example of the consequences of failing to deal with misconduct consistently, or of ignoring it all together; however it is a valuable lesson that a failure by an employer to deal with misconduct promptly and consistently may lead to difficulties in dismissing employees fairly.

For further advice please contact David Morgan in our employment law team.

Please read Reliance on information posted in our Terms of Website Use - see Legal section - before relying on this commentary.

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

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