knowledge | 6 February 2019 |

High Court Highlights the Importance of Proper Corporate Authority in Effecting Dismissals

The High Court’s recent decision in the on-going case of Grenet v Electronic Arts Ireland Limited (“EA”), which involves the purported ‘no-fault’ dismissal of a senior employee, will be of particular interest to multinational employers operating within a corporate group structure.

Background

On 9 November 2018, the employee, Mr Grenet, attended a one-to-one video conference call with a female employee based in Austin, Texas.  During the video conference, an alleged “inappropriate remark” was made, leading to a formal harassment complaint against Mr Grenet. Mr Grenet denied the allegation against him, although acknowledged that his comment was “inelegant”.

A few days later, Mr Grenet attended a brief meeting at which he was suspended from his role.  At a further meeting on November 14, he was informed that his employment had been terminated.  No formal investigation or disciplinary process was undertaken.  Mr Grenet brought proceedings seeking an injunction against the Company arising from the decision to dismiss, which was granted on 6 December 2018.

The Company then proceeded to ‘withdraw’ the original dismissal, and made a second effort to dismiss Mr Grenet on 10 December 2018, this time on a “no-fault” basis in accordance with Mr Grenet’s contract of employment.

The second dismissal of 10 December 2018 was effected by a Mr Pompeii. Mr Pompeii was an employee of EA’s US parent company. He was neither an employee nor an officer of the Irish entity, and there was no evidence that Mr Pompeii had been authorised by the Irish entity’s Board to terminate Mr Grenet’s employment.  However, an EA Director stated on affidavit that there was an “ostensible delegated authority invested in Mr Pompeii to manage the majority of employees at EA’s site in Galway”.

Decision

The Court found that there were essentially two matters at issue: (i) whether the fact that the original dismissal had been withdrawn rendered the injunction moot; and (b) whether the second dismissal was lawfully effected by a person with ostensible authority.  

In relation to the first issue, Mr Grenet argued that no proper or valid investigation of the claims against him had taken place, and that the Court must conclude from the failure to give a reason for the termination that the no-fault termination was cloaked “in new and relatively see-through clothes…” The Court considered that:

“The ‘see-through clothes’ argument persuades this Court, particularly having regard to the deliberate decision to gloss over the serious impact on the plaintiff’s reputation, that there is a strong case in this regard. In other words, the state of the evidence at the moment is that the so-called no-fault termination is, on the balance of probabilities, a cynical contrivance...”

In relation to the second issue, the Court was critical of Mr Pompeii’s action of effecting dismissal, noting Mr Pompeii “somewhat arrogantly (…) takes upon himself the authority to act on behalf of the defendant without recognising that an ultimate parent corporation and a subsidiary company are separate legal entities”.

The Court was also critical of EA’s “bold” belief that its parent corporations in Holland and the US are “part of a global business with a global management structure” and so this should “in some way trump the obligations under Irish law and European law”.  The Court stated that this belief “is worrying if brought to its logical conclusion”.

Stating that it could not make a binding determination at this stage on whether or not Mr Grenet himself had agreed or consented to the ostensible authority of Mr Pompeii to terminate his employment, the Court was satisfied, pending the trial of action, that Mr Grenet had not agreed that the contract could be terminated by anyone other than by the company acting in accordance with its constitution and in compliance with the Companies Act 2014.

Finally, the Court examined the balance of convenience and noted that “the plaintiff’s reputation may be irreparably damaged if he succeeds in establishing that the purported no-fault termination by letter dated 10th December, 2018, has been interpreted by employees of the defendant and prospective employers as equivalent to a disciplinary measure for misconduct alleged by Ms Simmons.”

It ordered that EA continue to pay Mr Grenet’s salary and benefits as they fall due and, granted an injunction restraining the Company from recruiting or hiring or appointing any person to replace Mr Grenet or to fill his role.

Conclusion

Employers should take note of the emphasis the Court placed on who the appropriate decision maker is within a corporate group and the questions raised regarding the decision maker’s authority. While we await a more comprehensive consideration of this point during a full trial or on appeal, in the meantime, employers should ensure that full consideration is given to the authority of decision makers before effecting a dismissal, particularly within a multinational organisation or corporate group structure.

More generally, the case is an interesting development in the approach being taken by the Courts in relation to no-fault dismissals and demonstrates the fine line that employers walk when effecting such dismissals. 

In the case of Bradshaw v Murphy and Others for example, Ms Justice Finlay Geoghegan refused to grant an interlocutory injunction, finding that despite the fact that there had originally been allegations of gross misconduct and a threat of dismissal against Mr Bradshaw, the employer was not precluded from dismissing Mr Bradshaw in accordance with his notice provisions and the terms of his contract. In Grenet however, a termination had in fact taken place following allegations of misconduct; that termination was withdrawn by the employer; and that withdrawal was followed by a purported ‘no-fault’ dismissal. This ‘change of tack’ was, in the Court’s view, a ‘cynical contrivance’ which justified the granting of an interlocutory injunction. It is clear therefore that the background to a no fault dismissal will be scrutinised by a court in an application for an injunction, and that in appropriate cases, such dismissals can still give rise to a successful application for injunctive relief.

How we can help

The Employment, Pensions and Incentives Group at McCann FitzGerald has significant experience of providing strategic advice to Ireland’s major employers on all issues relating to the termination of employment. Your usual contact in McCann FitzGerald would be happy to provide for further information.

This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.

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