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Terminating employment as a result of a custodial sentence

August 9, 2023

Those who follow US political events closely have had a lot to keep on top of in regards to the numerous criminal allegations which have been raised against Donald Trump in recent months. The former POTUS is, at the time of writing, facing three indictments in the US courts, with a fourth rumoured to be on the way.

Leaving aside the rights and wrongs of these charges, one of the most interesting points in the reporting of matters which caught my attention is that, even if convicted and sentenced to serve time in prison, Mr Trump would not be prevented from standing for and, if elected, becoming the US President in the elections to take place next year.

I was recently asked by a client to give advice on how they should manage a situation where an employee had been arrested and remanded in custody following an altercation outside of work. In what seemed to be a particularly naughty week for the general population, the next day I had a query from a different client who had been advised an employee had been sentenced to 3-years in prison following a conviction for a serious assault.

While it would seem Mr Trump would be free to continue as President if he were to be convicted (and elected), the view both my clients shared with me was that performance of the convicted employees’ respective jobs was not a possibility while they were detained. So how should employers deal with these situations?

Frustration?

An initial consideration will be whether the employee’s imprisonment means that the  contract of employment has been frustrated. Frustration is a common law doctrine where a contract is treated as discharged where an event has occurred which renders further performance impossible, illegal or radically different from that contemplated by the parties when they entered into the contract.

However, employers should be slow to rely on the doctrine of frustration as the case law indicates that tribunals will be slow to apply it. This is especially the case since the advent of unfair dismissal protection for employees, which the tribunals are reluctant to allow employers to sidestep.

However, certain factors can support an employer’s position that a contract of employment has become frustrated by an employee being placed into custody. The following factors are the ones that should be considered:

  • By definition, a frustrating event will not be something which is expressly provided for in the contract; it will be something that falls outside the contemplation of the parties. As such, if the employer’s disciplinary policy provides for the event which has led to imprisonment, it will be harder to show frustration has occurred.
  • The employer would need to be able to show that the imprisonment of the employee will mean that they are unable to perform their obligations under the contract of employment. This will be obvious in most cases, but if remote working is a possibility, this is a relevant factor.
  • A material consideration will be the length of the custodial sentence. The longer the sentence, the greater likelihood there will be that continued performance of the employment contract will not be possible. Looking at the case law, a prison sentence of 12 months was found to have frustrated a contract of employment, whereas a prison sentence of 20 days had not.
  • Would the employee be required to carry out any duties during the period of imprisonment. If not, it will be difficult for the employee to say the contract is frustrated. This may be more relevant with seasonal workers or where the employee is on an extended break from work.
  • When will it become commercially necessary for the employer to recruit a replacement to cover for the employee’s absence? If a replacement is required more immediately and for a longer-term period, then this may help an employer show there has been frustration.

Whether a contract of employment is frustrated is always a matter of fact and all relevant issues would need to be considered.

Dismissal?

Given the risks which can arise in treating a contract of employment as being frustrated, it may often be safer for an employer to seek to formally dismiss an employee who is subject to a custodial sentence. While it may appear that an employee being in prison might always lead to a fair dismissal, employers ought to bear in mind that any tribunal dealing with any subsequent claim of unfair dismissal will still apply the same principles as they would to any other claim. That will require the employer to show:

  • It had a potentially fair reason to dismiss the employee. In the case of imprisonment, this would normally be either conduct or some other substantial reason.
  • That the decision to dismiss for that potentially fair reason falls within the range of reasonable responses open to the employer and having regard to all relevant factors.

Normally, employers would seek to show either:

  • The employee’s imprisonment arose from conduct which is related to and would impact upon the nature of the employer’s business and or the employee’s work. Moore v C and A Modes [1981] IRLR 71 is an example of alleged criminal conduct being fundamentally incompatible with the nature of the employee’s work. In that case, a supervisor in a department store was fairly dismissed after it was discovered that she had shoplifted from another store nearby. The tribunal described it as “unreal” to expect an employer in the retail trade to be able to overlook conduct of this nature.
  • That continued employment of the imprisoned employee would cause reputational risk or damage to the employer’s business. In Kearney v Royal Mail Group Ltd ET/3100476/10, it was fair for the employer to dismiss an employee who was charged with murder, notwithstanding that he protested his innocence. When deciding that the relationship of trust had been destroyed by the charge, the employer was entitled to have regard to the negative publicity surrounding the case, even though it was not of Mr Kearney’s own making. Regard was also had to the fact that one employee did not want to work with Mr Kearney and that, as part of his bail conditions, he was prohibited from having contact with two members of staff.

The employer would need to try and adhere to the terms of its internal disciplinary procedure and the principles of the ACAS Code on discipline and grievance as far as possible whenever it was looking to dismiss an employee for being imprisoned. This may require some modification to the procedure given the employee would not be able to participate in a normal disciplinary hearing. The key element to any process would be ensuring that the employer carries out a reasonable investigation and does not proceed on the basis of any assumption they are dealing with an open and shut case.

Practically, a number of the factors listed above in considering whether a contract had been frustrated would also be relevant to whether it was reasonable to dismiss the employee as a result of their imprisonment.

Termination

If an employee’s contract of employment is found to have been frustrated, it will automatically be deemed to have come to an end when the frustrating event (i.e. the imposition of the custodial sentence) happens. Termination will be automatic and would not amount to a dismissal for the purposes of the Employment Rights Act, meaning no claim of unfair dismissal could be brought (if there is genuine frustration). The employee would also not be entitled to any notice of termination or a payment in lieu of termination. Their only entitlement would be payment of outstanding salary and any other monies due to them (e.g. any holiday pay).

If the employee is dismissed, then the usual arrangements regarding the giving of notice would apply. If a view was taken the incident which led to imprisonment or imprisonment itself amounted to an act of gross misconduct, no notice or payment in lieu of notice would need to be made.

Working from home?

There are a number of circumstances that would have to fall into place for Mr Trump to govern from a prison cell. It would certainly bring something new to the idea of “home working”. While time will tell if he is placed in that position, it will also be interesting to see if the US political system allows that situation to persist or whether that would see an intervention to avoid any national embarrassment.

While instances where employees are subject to prison terms are rare, employers need to remember that due process still needs to be followed where that incarceration sees them seek to terminate employment, otherwise they will experience a very different type of frustration in having to respond to claims in the employment tribunal.

If you need any employment law advice, please get in touch with Blackadders’ Employment Law team working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland.

Nicola Burns

Nicola Burns

Director of Operations

Marketing Team

+44 1382 342217

The opinions expressed in this site are of the author(s) only and do not necessarily represent the opinions of Blackadders LLP.

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