Is an employee required to disclose bankruptcy?
18 August 2022
In this case, The Employment Appeal Tribunal (EAT) considered whether a financial consultant, who had not disclosed to his employer that he was bankrupt, had been fairly dismissed for gross misconduct.
The claimant, P, was employed as a financial consultant by the respondent estate agency. Following a period of unpaid sick leave, P got into financial difficulties and applied to enter bankruptcy. He did not inform his employer of this, but the bankruptcy was subsequently discovered by a member of the respondent’s HR team. P’s authorisation to operate as an adviser through the third party mortgage business used by the respondent was terminated, on the basis that P was no longer a ‘fit and proper person’ as required by the FCA.
The respondent considered that P’s failure to disclose his own bankruptcy raised serious questions over his honesty and integrity. Following a disciplinary hearing, he was summarily dismissed for gross misconduct, due to his deliberate and intentional failure to inform the respondent of his bankruptcy.
P brought a number of claims in the employment tribunal, including a claim for unfair dismissal. His claim was rejected by the tribunal. It held that the respondent had been entitled to treat his failure to disclose his bankruptcy as gross misconduct, due the nature of his role, the sector in which he was working and the high standards of propriety expected of the respondent’s advisers.
P appealed against the tribunal’s decision on the basis that there had been no contractual term or policy in place,that expressly required him to disclose his bankruptcy.
The EAT has dismissed P’s appeal, upholding the tribunal’s decision that his dismissal was fair. The respondent had been entitled to take the view that P’s failure to disclose the bankruptcy was serious, and that he knew (or should have known) that he should disclose it to them, even in the absence of any express term or policy. The respondent had followed a fair procedure and the claimant’s conduct was sufficiently serious to warrant dismissal.
The Birketts View
There is generally no implied duty on an employee (unlike a company director) to disclose allegations of their own misconduct in the absence of an express term, or when fiduciary duties may impose such an obligation. This case demonstrates, however, that there will be circumstances when an employer can reasonably expect an employee to disclose a serious factual matter, such as bankruptcy. This is likely to apply in quite limited situations in practice, and will depend on the nature of the employer’s business and the role carried out by the employee. It is always preferable, where possible, to set out any such requirements in the contract of employment or in a policy. It will put an employer in a much stronger position when seeking to terminate employment.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at August 2022.