Is an employer entitled to dismiss an employee based on a third party's allegations alone?

He was referring to a BBC Watchdog programme, which had aired a piece on one of his salesmen who was criticised for using misleading and fear-led sales techniques. On being told by the BBC that the programme was to air, Direct Response suspended the salesman and, following an internal investigation, gave him a final warning. However, it only dismissed the salesman after the programme was actually aired and once it had seen the evidence gathered by the BBC. Comments by visitors to the Watchdog website showed that many members of the public thought the salesman should have been fired immediately and on the back of the BBC's allegations alone.

So who was right? And more generally, is an employer entitled by law to dismiss an employee based on a third party's allegations alone?

In order to dismiss an employee fairly at law, the employer's reason for that dismissal must be one of six ‘fair’ reasons, namely conduct, capability (which covers continued poor performance and circumstances where an employee is not capable of carrying out their role because of health problems), redundancy, breach of a statutory restriction, retirement or ‘some other substantial reason’. In cases like the Direct Response salesman, the employee was dismissed for his conduct. If he subsequently brought a claim for unfair dismissal, the tribunal would have to decide whether the decision to dismiss him fell within the range of reasonable responses that a reasonable employer in those circumstances might have adopted.

Case law has expanded this test to require that, at the time of dismissal, Direct Response would have to have believed that the salesman was guilty of misconduct and that it had reasonable grounds for that belief based on a reasonable investigation. This test is reinforced by ACAS's Code of Practice that provides guidance on conducting a fair dismissal procedure. The tribunal will take account of an employer's compliance with the Code when it considers whether a fair procedure has been followed. Further, if Direct Response unreasonably failed to follow the ACAS Code, the tribunal may increase any employee's compensation (if he won) by up to 25%.

On hearing of the pending Watchdog programme, Direct Response suspended the salesman, prohibiting him from undertaking any further sales visits or from contacting any existing customers.  This is good practice.  It then undertook an internal investigation based on what it knew at the time which, given the BBC would not provide the footage that substantiated the allegations, was limited.  At that stage, it concluded it had enough grounds to issue him a final warning but nothing more. On the face of it, this all appears in accordance with the ACAS Code.

Direct Response later dismissed the employee after the programme was aired. Were they acting decisively only after the programme was shown in an effort to minimise the damage to their reputation or because they now were able to conclude reasonably that the salesman's behaviour amounted to misconduct? If the latter, they would be in a strong position to argue that dismissal was within the range of reasonable responses having now reviewed all the evidence, although best practice would dictate that the conduct included in the programme should still be shown to him as part of a further investigation and dismissal process.

So would you blame an employer for immediately dismissing in response to bad publicity? Clearly employers need to consider their reputation when deciding on the best course of action, particularly when an employee's conduct will attract public attention. But that must always be balanced with the risk of an unfair dismissal claim for dismissing an employee without substantiating the allegations that have sparked the public outcry.  From a legal perspective, it seems that Direct Response were just about spot on with the action they took.