Dismissals involving dishonesty: dealing with the “Robin Hood”
employee who suggests that they were subjectively honest
Introduction
In the recent case of Gondalia v Tesco Stores Ltd [2015] UKEAT/0320/14/JOJ the
Employment Appeal Tribunal (EAT) has held that the concept of subjective dishonesty did
not mean that an Employment Judge was bound to consider how dishonesty is determined in
a criminal context, which is set out in the leading ‘theft’ case of R v Ghosh. Therefore, the
approach taken in John Lewis plc v Coyne [2001] IRLR 139 which encouraged the
application of the Ghosh test to employment cases is now in doubt and tribunals will, perhaps
unsurprisingly, be applying the ‘Burchell test’ (Burchell v BHS [1978] IRLR 379) without
embellishment.
So where does the heroic outlaw Robin Hood come into all of this? Well, the facts of the
Gondalia case will need to be considered first.
Facts
Gondalia was a cashier who had realised that customers were complaining that the Easter
Egg they had thought was priced at £1 was costing them £1.50 when scanned at the till. As is
sometimes the case in supermarkets, a pricing error had taken place; the price label on the
aisle was wrong because the price of the egg was actually £1.50. However, customers in that
position were permitted to be compensated by this error by attending customer services and
claiming “double the difference” (so, if the difference was 50 pence the customer would get
£1 back, therefore in this example as the customer bought the egg for £1.50, they would get
£1 back and therefore ultimately purchase the egg for 50 pence). Gondalia did inform
management of the pricing error, but upon no action being taken (as far as she could tell),
she finished her shift and on two occasions purchased a large quantity of the eggs herself (as
a customer) and claimed double the difference under the applicable policy. She knew there
was a pricing error so was not deceived into buying the eggs at the wrong price (as the
original customers were), but claimed her discount openly and without hiding what she was
doing. When faced with a charge of unacceptable conduct at a disciplinary she said that she
did not think what she was doing was wrong. She was dismissed. The tribunal found that she
was dismissed fairly, but this was overturned by the EAT for inadequacy of reasons.
However, importantly, the omission of any reference to R v Ghosh (see below) by the tribunal
was not viewed as an error of law.
Comment
We've all faced an employee who, during investigations to determine whether he/she has
committed an act of dishonesty or unacceptable conduct (which may implicitly raise
dishonesty issues), says "but I didn't know that what I did was dishonest or wrong"? These
types of situations should be rare, because often (a) the issue of what constitutes dishonest
conduct will be obvious and/or (b) the cases will essentially be determined on whether the
employer's policies and procedures - or other internal rules - captured the conduct in question
(whether it is dishonest or otherwise). Assuming the policies/rules were expressly clear (or
reasonable, notorious and certain), any dismissal is likely to be fair particularly where due
process is followed - and the employee's state of mind (subjective mindset) is likely to lack
any credibility whatsoever or be much less relevant.
However, where there is some ambiguity as to whether the conduct is actually dishonest or
constitutes gross misconduct, or where there is no specific rule covering the act in question
(e.g. it could be the first time an employee has carried out such an act), then the employee's
subjective mindset is likely to be more relevant or even determinative, depending on the
circumstances. In John Lewis plc v Coyne it was held that:
Using an employer's telephone for personal calls is not necessarily dishonest. The test
of dishonesty is not simply an objective one. What one person believes to be
dishonest may in some circumstances not be dishonest to others. Where there may be
a difference of view of what is dishonest, the best working test is that propounded by
Lord Chief Justice Lane in R v Ghosh. In summary, there are two aspects to
dishonesty, the objective and the subjective, and judging whether there has been
dishonesty involves going through a two-stage process. First, it must be decided
whether according to the ordinary standards of reasonable and honest people, what
was done was dishonest. If so, then secondly, consideration must be given to whether
the person concerned must have realised that what he or she was doing was by those
standards dishonest
Following this case, it appeared that employment law had imported the criminal approach to
understanding what is dishonest. R v Ghosh [1982] QB 1053 draws a distinction between
dishonesty as a state of mind and dishonesty as a course of conduct, and encouraged trial
judges to remind juries about the distinction between objective and subjective mindsets.
Ghosh mentions the character ‘Robin Hood’ as an example of how such people (that is,
those who morally believe they are not doing anything wrong) would be treated by the
criminal law. It was felt that Robin Hood would fall foul of the test because the subjective
element of the test is not a pure one; overall Ghosh advocates a hybrid test to determine
dishonesty. So Robin Hood, subjectively knowing what he does is, by objective standards,
dishonest, is caught.
It is true that the Ghosh approach, in the context of theft, asks a juror to imagine the ordinary
standards of a “reasonable and honest” person and then apply that to the beliefs of the
accused. But often the debate is whether that application is a fiction, whether it rests upon a
confused idea of public standards of honesty or implies the existence of a relevant
community norm? Also, would Robin Hood be tried by a jury of bishops or a jury of serfs (who
had received some of his gifts); would the result be different? Probably.
Many commentators in fact suggest that Ghosh does permit a “Robin Hood” defence,
because if the defendant thinks (rightly or wrongly) that the rest of the community would
agree that it was not dishonest to steal from the rich to give to the poor, then he is not
dishonest under Ghosh. It follows that the more out of touch the defendant is with ordinary
standards of honesty in the community, the greater the chance he has of formulating a
successful Robin Hood defence.
Clearly, this purely subjective standard of dishonesty should not be the proper legal test for
dishonesty, but when put in less broad terms it raises a number of conceptual difficulties,
some of which have arisen in regulatory proceedings (e.g. General Medical Council, General
Dental Council, etc). These professional standards bodies sometimes have to decide
whether a defendant was dishonest, using their own test of dishonesty as set out in their own
rules. In the case of Uddin v GMC [2012] EWHC 1763 (Admin) the High Court urged caution
about the use of the Ghosh test in a regulatory context, given that (i) it was devised in the
criminal law context where there was a different standard of proof (ii) even in criminal
proceedings it was not the general practice to give a Ghosh direction in all cases, but only
where an issue was raised as to whether particular conduct was dishonest by the standards
of ordinary people.
Indeed, there has been a wealth of case law about how dishonesty should be determined in
particular circumstances or jurisdictions. Over the years, the exact nature of the appropriate
test for dishonesty and whether it is objective or subjective - or a hybrid - has changed in
different contexts and jurisdictions, reflecting perhaps the fact that we rarely see characters
like Robin Hood anymore! We usually have less extreme examples, but in the employment
context, it is fairly common to be faced with an individual who genuinely pleads ignorance or
makes a passionate case for not realising the wrongdoing in their behaviour.
However, the problem with using principles from the criminal law is employment lawyers,
tribunals and employers misunderstand them or do not keep up to date with changes, or
even worse, misapply them in practice. Other problems with applying Ghosh in the
employment context are easy to see:

Who gives the ‘Ghosh direction’ to who?

Is it the employer who has to decide whether there was subjective knowledge of the
wrongdoing? Or the tribunal, as the 'jury'? (Applying section 98, it would be the
employer, but the tribunal would perhaps review the rationale of the employer, whilst
not substituting their own decision)

Whose standards do the employer apply - the management board, a reasonable
employee (if so, what qualities should this employee possess in terms of experience,
knowledge, intelligence) or the man on the Clapham omnibus?

What if the disciplinary procedure (or the nature of the allegation itself) does not
advocate an assessment of the employee’s state of mind and therefore the employee
could be in breach purely on an objective analysis?
To avoid the above technicalities or difficulties, the Burchell test is used (i.e. did the employer
have a genuine belief in the employee’s guilt; did the employer have reasonable grounds to
sustain that belief; and had the employer carried out as much investigation into the matter as
was reasonable in all the circumstances of the case?”). Burchell itself was a case involving
dishonesty and does not advocate an approach akin to a criminal court; it positively
discourages such an approach. Clearly, the John Lewis was correctly decided but perhaps it
didn't need to introduce Ghosh principles. Burchell would have sufficed.
Robin Hood
So how would a ‘Robin Hood’ character now be treated in the context of employment law?
Let’s suggest he is now gainfully employed in the Nottingham region as, say, a respectable
and popular office worker, who is faced with an allegation of gross misconduct.
If the
allegation against Mr Hood was one of theft, or actual dishonesty, then the employer would
have to be careful in how it framed such an allegation, because it could lead to various
technical arguments, such as those raised above. Generally speaking such a serious
allegation is more likely to arise, or lead to a tribunal, where the substantive facts are in
dispute, that is, where the employee denies doing the act (“I didn’t do it”, not “I didn’t think it
was wrong”). However, in our example, let’s assume that the allegation is some type of
unacceptable conduct (perhaps with some implicit suggestion that Mr Hood is not honest or
can’t be trusted) not specifically covered by any internal rules, where Mr Hood accepts that
he did the act in question, but claims he did not view it as “wrong” or in any way dishonest or
a breach or trust.
The employer’s decision may be an easy one, depending on the circumstances (e.g. how
blatantly “wrong” the conduct was to others), as they may decide that they could not possibly
employ someone who failed to appreciate the alleged wrongdoing. However, they will still
need to investigate matters in order to properly consider issues such as intention and
mitigation. Indeed, it may well be that Mr Hood is so out of touch with ordinary standards of
honest behaviour within the employer’s workforce that such a fact, rather than it being used
to his benefit under some type of Ghosh argument, becomes an aggravating factor in the
assessment of his wrongdoing. If the employer does dismiss Mr Hood, who then brings a
tribunal claim, the EAT has now reaffirmed that his subjective state of mind will be relevant as well as objective standards. Therefore, when facing a disciplinary, Mr Hood would have to
argue that he (subjectively) didn’t believe what he did was wrong. If he also believed that
other employees would not have viewed his conduct as wrong, then that is also a factor he
will want to raise.
What is important is whether Mr Hood’s employer acts within the band of reasonable
responses, in respect of all three elements of the Burchell test. In order to have reasonable
grounds for a belief and depending on the nature of the allegation, the employer may well
want to satisfy itself that Mr Hood knew or should have known what he was doing was wrong.
In any event, if Mr Hood’s employer believes that he genuinely did not know it was wrong but should have done - then Mr Hood’s state of mind is likely to be influential in determining
what is a reasonable response, in terms of the appropriate sanction. Indeed, a well advised
employer would probably frame the disciplinary allegations so that Mr Hood’s conduct is
captured, even if he did not know what he was doing was wrong, so that the primary issue
becomes one of mitigation. Such a scenario may in fact lead to a strong argument in
mitigation, encouraging the employer to decide that a sanction short of dismissal, or no
sanction at all, is appropriate. However, the employer and the tribunal will not have to go
through a complicated two-stage process or get bogged down in a test (Ghosh) which was
intended for application in a wholly different context. The employer will be able to arrive at its
conclusions on the balance of probabilities, so if it follows a fair process and, despite all
mitigation, concludes that Mr Hood cannot be trusted going forward, or its trust in him had
completely eroded, then it would seem that dismissal could be a reasonable response. As
such, Mr Hood may well be an honest chap, but he could also be fairly dismissed in light of
the flexible nature of the reasonable responses test.
As for the tribunal, when it decides the case, it must be careful to address all the factual
issues in dispute, including how it resolved the issue of whether the conduct in question was
“wrong” or “unacceptable” (depending on how the conduct was framed in the disciplinary
correspondence) and whether the employer did consider all mitigation and alternative
sanctions to dismissal.
Summary and conclusion
Traditionally, employment tribunals dealt with dishonesty in very simple terms - they applied
Burchell, which did not over-complicate matters too much. Indeed, Burchell itself was a
dishonesty-based dismissal. However, in 2001 the case of John Lewis arguably put a
significant gloss on the Burchell test and section 98 Employment Rights Act 1996, by
encouraging tribunals to explore dishonesty issues via the Ghosh test. Gondalia v Tesco now
makes it clear that the Burchell test in its pure form - and section 98(4) - remain the starting
point for tribunals, when considering any express or implicit allegation of dishonesty.
However, as the allegation against Gondalia was not, expressly at least, one of dishonesty
then it may be that this area of employment law will require further clarity from the EAT in the
future.
Link to Gondalia case:
http://www.bailii.org/uk/cases/UKEAT/2015/0320_14_2001.html
Richard Ryan
March 2015