Knee-jerk dismissals are no way to resolve boardroom conflicts

Simran Lalli

Article written by Simran Lalli, Solicitor, Employment department

Boardroom tensions can often lead to precipitate action but resorting to dismissal without following proper procedures is never a good solution. An Employment Tribunal (ET) made that point in upholding whistleblowing, unfair dismissal and age discrimination complaints brought by a start-up company’s former Chief Financial Officer (CFO).

The dismissal occurred against a background of increasingly dysfunctional boardroom relationships. Without due process, the employee was removed as a Companies House director while on annual leave and the decision to terminate her employment was taken whilst she was off sick, suffering from stress.

The company asserted that it had no option but to dismiss her under pressure from its investors, who were unhappy with her performance. In upholding her automatic unfair dismissal complaint, however, the ET found that the principal reason for her dismissal was her whistleblowing activities.

She had made protected disclosures concerning various matters, including corporate governance and the treatment of a colleague whom she believed to be on the verge of a breakdown. As a result, she had been subjected to detriments, including her removal as a director and her placement on gardening leave.

Her request for an extraordinary general meeting to discuss her grievances was rejected as frivolous, defamatory and vexatious and, shortly before her dismissal, documentation was issued with a view to raising further investment that made no reference to her role as the company’s CFO and one of its founders.

Her claim of ordinary unfair dismissal was also well founded in that the decision to dismiss her was taken before she was invited to any meeting. She was subjected to a disciplinary process without being given an opportunity to respond to any allegations against her during an investigatory stage.

In also upholding her age discrimination complaint, the ET found that at least part of the reason for her dismissal was her age, which was 55 at the time. At one meeting, one of her fellow directors had told her to ‘calm down…don’t let the hormones get out of control’. That was evidence that he regarded her as a menopausal woman who was not familiar with the company’s IT business.

The ET acknowledged that the company and its investors did have some substantial concerns about her performance. Although that was not the reason for her dismissal, it found that there was a 30 per cent chance that she would have been dismissed in any event on capability grounds. The amount of her compensation, which would be assessed at a further hearing if not agreed, would be reduced by that percentage accordingly.

To discuss this ruling further or for more information on a specific employment law matter, please feel free to email me or contact the team on 020 8858 6971.