Mr D Thompson v Informatica Software Ltd
In a recent appeal at the EAT an individual (the “appellant”), who had been a senior employee of the employer (ISL), was found to have been fairly dismissed for gross misconduct after authorising payment of ~$5,400 to cover the cost of a golf trip for a senior public sector client in California. The appellant had breached ISL's Code of Business Conduct, Global Travel and Expense, and Anti-Corruption and Compliance Policies (the “Policies”). Among other things, the Policies placed a limit on gift and entertainment expenses of $150, above which approval would be required, and set out clear lines for such approvals. As a global company, ISL's Anti-Corruption and Compliance Policy expressly referred to both the U.S. Foreign and Corrupt Practices Act (“FCPA”) and the UK Bribery Act 2010 (the “Bribery Act”). The statement of principles in the Policies noted that the Anti-Corruption Policy and supporting Guidelines were adopted to facilitate both ethical and legal compliance with obligations under the FCPA, the Bribery Act, “and other anti-bribery laws and regulations” in other countries. The appellant had signed and accepted an affirmation every three months that he would read and abide by ISL's policies (including the Policies), and also undertook an annual certification and online training that included training on these Policies.
The appellant – who previously had an “impeccable work record” – did not seek advice from Legal or HR at ISL (as clearly prescribed in the Policies) as to whether the payment was in line with the Policies. This was despite the fact that the appellant knew the trip's costs were too high and he was aware a different procedure existed for public officials but did not check what the procedure was. ISL investigated the issue in line with its disciplinary policy. At a disciplinary hearing, the appellant acknowledged that he was “not comfortable” with the cost of the trip, that he overlooked or was unaware of the Policies and, in hindsight, he should have cancelled the trip. He was summarily dismissed for gross misconduct, with ISL citing in the dismissal letter that he had acted in “willful disregard” of the Policies.
The appellant's subsequent internal appeal was dismissed, with the Appeal Manager acknowledging he had not been accused of bribery, explaining instead that he had “been accused of breaching company policies. There is a difference between the two. The Company's policies are designed to prevent even inadvertent breaches or the appearance of impropriety.” The appellant then brought a claim in the ET for unfair dismissal.
The Principal Function of an Effective Anti-Bribery and Anti-Corruption Policy
Under section 1 of the Bribery Act, a person commits an offence if he offers, promises, or gives an advantage (financial or otherwise) to another person, either intending the advantage to induce a person to perform a relevant function improperly, or to reward a person for the improper performance of such a function. Section 6 also provides for a separate, specific offence of bribing a foreign public official. Importantly for employers, under section 7 of the Bribery Act, a company commits an offence if a person who performs services for or on its behalf (such as an employee) bribes another person intending to obtain or retain business or an advantage in the conduct of business for the company (the so-called “failure to prevent” offence).
A company has a defence to prosecution under section 7 if it can prove that it had in place “adequate procedures” designed to prevent persons associated with it from engaging in bribery. Adequate procedures include a properly implemented anti-bribery and corruption policy, which serves to “articulate a commercial organisation's anti-bribery stance, show how it will be maintained and help to create an anti-bribery culture”.1 Gifts and hospitality are two areas perceived as presenting greater risks from a bribery and corruption perspective, and therefore are commonly and explicitly addressed in such policies.
ISL's Policies, and in particular its Anti-Corruption Policy, were of central importance to the EAT's decision on unfair dismissal in this case.
In order to “fairly” dismiss an employee in line with UK legislation2, an employer must show that:
- The reason (or principal reason) was one of five potentially fair reasons, including conduct; and
- The employer acted reasonably in treating that as a sufficient reason for dismissal.
Broadly speaking, the second limb requires an employment tribunal to consider whether the employer followed a fair procedure and, if so, whether dismissal was in the range of reasonable responses that a reasonable employer would have taken in the circumstances.
The ET and EAT
The ET found that ISL had acted reasonably in concluding that the appellant had shown a “willful disregard” for the Policies and that there were, therefore, reasonable grounds for ISL's belief that the appellant was guilty of misconduct. The ET also noted that the terms of an employer's internal policies should not be interpreted in the same manner as legal statutes.
The EAT upheld the ET's decision. Taking into account the “nature, spirit and purpose” of the Policies, the EAT agreed that the Policies (and in particular the Anti-Corruption Policy) sent a clear message to employees to err on the side of caution, recognising the reputational risk to the company even if it is not clear whether the terms of the legislation had actually been broken. The EAT acknowledged that if the employer “were to get a reputation for sailing close to the wind, this would be very harmful in itself”. The EAT also confirmed that the spirit and purpose of the Policies was “not to tell employees that they will be in breach only if they are clearly and demonstrably in breach of the FCPA, UK Bribery Act or other anti-bribery legislation” but that employees should “avoid situations in which they might be in breach”.
Taking these issues into consideration, the EAT agreed with the ET that the appellant had willfully disregarded the Policies, and this amounted to gross misconduct in line with ISL's UK Disciplinary Policy. Willful disregard here entailed knowledge of a potential issue and the company's policies, and choosing to act in contravention of the policies without seeking advice. The EAT also referred to the appellant being a “very senior employee” and the fact that he affirmed his understanding of the Policies every three months.
The decisions highlights some important takeaways for those working across HR, Compliance and Legal when grappling with the tricky issue of staff compliance with anti-corruption, bribery and gifts and entertainment policies:
- The importance of clear policies. Both the ET and the EAT scrutinised the Policies in detail and the EAT confirmed that, when interpreting policies, employers can take a purposive approach – taking into account the “spirit and purpose” of the policy – and that it is appropriate to consider bribery and corruption from a “global” standpoint. When drafting and implementing anti-corruption and bribery policies, relevant international legislation (including the Bribery Act and the FCPA) should be considered. Further clarity can be achieved by providing guidance on upper limits for gifts, hospitality and expenses. For example, in this case, anything above $150 required approval from someone who was at Vice President level or higher.
- Continuous training and affirmation of policies. Requiring employees (especially senior employees) to regularly review such policies, and affirm they have read and understood the policy, can form an important part of a company's anti-bribery and corruption procedures. In this case, the fact that the employee affirmed that he had read and understood the Policies every three months was an important factor in determining that he had acted in “willful disregard” of them.
- Keeping clear records. Any gifts, hospitality and expenses should be documented – whether given, received or refused. If, as in this case, any of these records are found to be problematic, the company should ensure it has the correct disciplinary procedure in place to handle the matter.
- Follow the process. This case serves as a reminder to employers of the importance of ensuring that allegations of wrongdoing are investigated in line with their established processes and procedures in order to avoid a finding of unfair dismissal.
- Compliance risks from employee conduct. This case is an important reminder that employee conduct can continue to present compliance risks for companies, even in circumstances where clear policies and procedures to prevent misconduct have been implemented. In this instance, there was apparently no intention on the appellant's part to provide a bribe or corrupt payment and therefore no question of criminality, although we note that neither the ET nor the EAT was required to consider ISL's assessment as to whether the cost of the hospitality provided might amount to potential bribery offences under the Bribery Act. If the appellant had such an intention, an offence could potentially have been committed by both the appellant and ISL under section 1 and, in turn, section 7 of the Bribery Act. This demonstrates the importance of employers ensuring that anti-bribery and corruption policies and procedures are effectively implemented throughout the organisation. Doing so will be vital to establishing adequate procedures under the Bribery Act if a company is prosecuted under section 7. The UK overnment has provided specific guidance on what to include in anti-corruption policies.
1 Ministry of Justice, The Bribery Act 2010 - Guidance, page 21.
2 S. 98, Employment Rights Act, 1996.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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