Suspension of an Employee Pending an Investigation - Key Update

The question of suspension of an employee pending an investigation of a complaint/allegation is one which frequently arises for employers. The recent judgements in the High Court in The Governor and Company of the Bank of Ireland v Reilly [2015] IEHC 228 and in the EAT in Smith v RSA have changed the landscape in this area and highlighted the importance of employers carefully considering the matter and ensuring that proper procedures were adhered to when deciding to suspend an employee pending an investigation into alleged misconduct.

The comments of Noonan J in Reilly are of particular importance and should be borne in mind by employers any time they are considering a suspension of this type. In essence, any suspension pending an investigation should be precautionary in nature and not punitive. If it were a punitive suspension then it would be akin to a sanction and a pre-determination of the issue, which is not in line with the principles of natural justice and fair procedures.

In this Hot Topics Articles, Deirdre Crowley of Crowley Solicitors considers the implications of these judgements and provides guidance on how employers should approach the question of suspending an employee pending an investigation.

The Governor and Company of the Bank of Ireland v Reilly [2015] IEHC 228 (“Reilly)

In Reilly, the High Court noted that the suspension of an employee is an extremely serious measure to take which has the potential to cause irreparable damage to the employee’s reputation and standing, even if the contract of employment provides for suspension. The High Court held that a paid holding precautionary suspension should not be undertaken lightly, and only after a consideration of the necessity for the suspension pending a full investigation of the conduct in question.

The comments of Noonan J in respect of suspension, in this case, are of particular importance and should be kept in mind by all employers when considering whether a suspension is warranted: ‘The suspension of an employee, whether paid or unpaid, is an extremely serious measure which can cause irreparable damage to his or her reputation and standing. It is potentially capable of constituting a significant blemish on the employee’s employment record with consequences for his or her future career'.

As noted by Kearns J. (as he then was) in Morgan v Trinity College Dublin [2003] 3 IR 157, there are two types of suspensions, holding and punitive. However, even a holding suspension can have consequences of the kind mentioned. Inevitably, speculation will arise as to the reasons for the suspension on the premise of there being no smoke without fire. In Mr. Reilly’s case, his evidence was that rumours and reports circulates about his ranging from possibly being involved in fraud to participation in a tiger kidnapping.

Thus, even a holding suspension ought not to be undertaken lightly and only after full consideration of the necessity for it pending a full investigation of the conduct in question. It will normally be justified if seen as necessary to prevent a repetition of the conduct complained of, interference with evidence or perhaps to protect persons at risk from such conduct.

It may perhaps be necessary to protect the employer’s own business and reputation where the conduct in issue is known by those doing business with the employer. In general, however, it ought to be seen as a measure designed to facilitate the proper conduct of the investigation and any consequent disciplinary process.’ (our emphasis added)

This short case concerned the suspension and subsequent dismissal of an employee for gross misconduct following the detection of inappropriate emails in his inbox. In total, 5 employees were being investigated for breach of the company email policy however only 3 of the employees, including Mr Reilly, were suspended while this investigation was ongoing.

In coming to its decision in favour of Mr Reilly, Noonan J, as well as making the comments quoted above, highlighted other clear shortcomings in the procedure followed by the employer:

The suspension of an employee is an extremely serious measure which has the potential to cause irreparable harm to the employee’s reputation, even if such suspension is a holding precautionary suspension rather than a punitive suspension. It can lead to rumour and innuendo, and indeed in this case Mr Reilly gave evidence that it had been rumoured that his suspension possibly arose from fraud or a tiger kidnapping.

As set out clearly in the quote above, a precautionary holding suspension can sometimes be justified to prevent repetition of the conduct complained of, to protect the evidence or a person who is at risk, or to protect an employer’s reputation. The Court stated clearly that a holding precautionary suspension should be seen as measure designed to facilitate the proper conduct of the investigation and any consequent disciplinary process.

In this case the Court noted that the person who made the decision to suspend Mr Reilly had not seen the relevant emails prior to making his decision to suspend Mr Reilly. It appeared to the Court that somebody else in the Company had ordered him to suspend Mr Reilly or in the alternative he had accepted someone else’s view of the matter rather than coming to his own view.

The Court held that no evidence was provided to justify the suspension, such as demonstrating that it aided the investigation. In particula, it noted that it was not necessary to preserve evidence, given that the emails the subject of the investigation had already been forensically frozen. In addition, the Court took the view that in reality there was no danger of repetition of the conduct while the investigation was ongoing.

The Court also noted that no explanation was provided as to why only 3 of the 5 employees in question were suspended. The Court concluded that the employer had decided to make an example of Mr Reilly to deter others from similar behaviour in the future. The Court also noted that no evidence was provided to justify the manner of the suspension. Mr Reilly was not given details of the reasons for his suspension or an opportunity to defend himself. In effect, it was a fait accompli and Mr Reilly was ‘marched out the door never to return’.

In coming to its decision, the Court directed reinstatement, saying there was no logic to the suspension and that the employer had predetermined and manipulated the entire process from the start, visiting a grave injustice on the employee. The Court noted that while lip service was paid to observance of procedures, it is clear that there was ever going to be one outcome.

Smith v RSA Insurance Ireland Limited (UD1763/2013) (“Smith”)

The statement of Noonan J quoted above was also relied upon in the recent EAT case of Smith v RSA Insurance Ireland Limited (UD1763/2013). This case was a constructive unfair dismissal claim where Mr Smith was suspended by RSA in November 2013 in relation to alleged financial discrepancies in the company. Later that month, Mr Smith resigned following these allegations. RSA argued that Mr Smith resigned when he realised that the company’s financial irregularities would be exposed. Mr Smith claimed that he has been made the “fall guy” by RSA for the issues.

In coming to its decision the EAT placed express reliance on the above passage from Reilly. While it appears in this case that it was the manner of the suspension (with it being announced on RTE news with only a few minutes notice to the claimant, with the detrimental effect this would have on his reputation) rather than the fact of the suspension itself it once again highlights the caution which must be exercised by employers when they are considering suspending an employee.

In summary, Philip Smith, former Chief Executive of Royal Sun Alliance Insurance, was awarded €1.25 million, just under two years’ salary, by the Employment Appeals Tribunal in a constructive unfair dismissal case. RSA has confirmed publically that it intends to appeal the decision.

As with the Reilly decision, this case reinforces the importance for employers to avoid predetermined decisions in an internal process. In its published decision, the EAT says that “the Respondent went on a fact finding exercise to justify its predetermined decision. The decision was probably made to appease the concerns of third parties i.e.: shareholders and the Central bank”.

In a rare commentary on the question of a Claimant’s reputation, the EAT said that suspending Mr Smith on national television, without prior notice to him, was “the equivalent of taking a sledge hammer to his reputation as well as to his prospects of ever securing employment in the industry again in Ireland, Europe or possibly beyond that.”

Among its criticisms of the manner in which RSA dealt with the issue, the Tribunal noted the manner by which Mr Smith was suspended without prior notice to Mr Smith and the effect that this had on Mr Smith personally and on his future employment prospects. The EAT also commented on RSA’s refusal to advise Mr Smith of the seriousness of the issues and how they related to him specifically.

The EAT was critical of the fact that a draft report issued prior to Mr Smith being offered an opportunity to respond to the allegations made against him in it, the fact that there was no board sanction or terms of reference for the secondary investigation, the fact that the disciplinary hearing was commenced prior to the completion of the investigation. The EAT was also critical of the involvement of one particular individual in the process. The Tribunal concluded that based on these factors, Mr Smith was justified in terminating his employment with RSA.

The amount of this award is notable given that according to the most recent Employment Appeals Tribunal Annual Report, the average award for unfair dismissals cases by the Employment Appeals Tribunal in 2013 was €16,686.65. Mr Smith’s award was based on the fact that he had been earning a remuneration package of approximately €635,000 per annum, giving rise to an award of just under two years’ salary. This case represents a rarely used discretion by the EAT to make an award in an employee’s favour which is close to its maximum jurisdiction to award.

Practical Guidance When Considering Suspension

In the Reilly case the Court noted that an employee’s reputation can be irreparably damaged by an employer’s delay in bringing an investigation or disciplinary process to a conclusion – employers should have particular regard to this when an employee has been on suspension. In addition, the Smith case re-iterated the comments of Noonan J in respect of the purpose of the suspension, also highlighted that the manner in which the suspension is communicated can also have a detrimental and irreparable effect on an employee’s reputation.

The judgments in Reilly and Smith have put an onus on employers to think very carefully before moving to suspend an employee pending an investigation. Before taking this step they should consider any alternatives to suspension, having regard to the particular circumstances of the case. If it is the case that there are no suitable alternatives to suspension then the employer must ensure that due process and fair procedures are afforded to the employee in respect of the suspension itself and the investigation and potential disciplinary process.

They should consider whether a suspension is necessary prevent repetition of the conduct, to protect evidence or persons at risk of the conduct or to protect the employer’s business or reputation. It is crucial that the suspension should be a measure designed to facilitate the conduct of the investigation and any consequent disciplinary process. Care must also be given when communicating the decision to suspend the employee, and the employee should be given prior notice of such suspension, and the fact of the suspension should not be made public until sufficient detail and notice has been provided to the employee in question.

An employer suspending an employee should take care that the suspension only lasts until the investigation process has concluded and the employer is in a position to decide on how to proceed. An employer should avoid any unnecessary and unreasonable delays in the investigation process. An employee has the right to be notified of the outcome of the investigation as soon as it has been concluded.

If, following the conclusion of the investigation, it is decided that a disciplinary process is necessary, this should once again be instituted and concluded without any unnecessary or unreasonable delay. Fair procedures should be followed throughout the disciplinary process, including affording the employee the right of appeal.

This article is a general summary of the subject and is not intended to be a thorough review or a complete statement of the law. Specific legal advice should be sought on a case by case basis.