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What can employers do when an employee’s behaviour outside of work causes damage to the company’s reputation?

The world is made smaller with social media and the divide between work life and private life seems to have been blurred. People appear to be all too eager to declare their views to the world. The assumption being that they are free to say and do what they like in their own time – even if this is expressing odious views about women or going to a party dressed in Nazi uniform. This is throwing up some new challenges for employers.

There have been a number of high-profile cases where the employee’s behaviour, albeit in his own time, has resulted in dismissal. This has included cases where the employee has been involved in criminal activity, membership of an extremist political party and sexual misconduct. Companies are especially wary when senior executives are caught out in this way and understandably so as there is an expectation that a senior employee represents and upholds the values of the company. Also, the reality is that the conduct of an employee can result in huge embarrassment as well as financial damage to the company. Often the employer needs to be seen as taking action against the offending employee in order to mitigate risk to its organisation.

Can the company dismiss an employee for damaging its reputation?

Employers need to proceed with caution when considering whether an employee’s conduct outside of work will justify disciplinary action. Even criminal activity, outside of work, will not necessarily be grounds for dismissal. However, a dismissal may be justified in circumstances where the employee’s actions have brought the company into disrepute. This is more likely to be a risk when the employee involved is a senior person within the company. Even with junior employees, the fallout for the company can be considerable – this often depends on the gravity of the conduct and publicity surrounding it.

It’s therefore crucial that the employer follows a thorough process when investigating the conduct and if a dismissal results, ensure that the reason(s) given for dismissal are credible.

Employers should consider the following:

  • Is suspension a reasonable option? – In theory suspension is a neutral act. It can allow the company some breathing space to formulate an adequate PR response as well as to investigate the employees conduct. Suspension must be on full pay;
  • Bear in mind that when investigating the conduct, the usual rules apply – so the employer needs to ensure that a fair and reasonable process is followed. In investigating the alleged misconduct. It should comply with its own disciplinary procedure, which should adhere to the minimum standards set out in the Acas code of practice. When conducting the disciplinary the employer should ensure it carries out a fair and thorough investigation, the employee is informed of the allegations against him, is given an opportunity to respond before a decision is made, he is informed of his right to be accompanied to the disciplinary meeting as well as of his right to appeal the decision, the employer should act consistently;
  • Does the conduct amount to gross misconduct? If so, the employer will be able to dismiss immediately and without notice – this may go some way towards mitigating the damage to the company’s reputation as it will signal to clients and stakeholders that it disapproves of the employees conduct and has taken prompt action to remedy the problem. However, even in cases of gross misconduct the employer still needs to ensure a fair disciplinary process is followed.

What are the legal ramifications of dismissing the employee?

If the dismissal isn’t handle properly the company could face claims for unfair dismissal and breach of contract. The following points should be considered:

  • Check the employment contract for notice period, relevance of disciplinary procedure, consider if it’s possible to dismiss without notice;
    Consider whether the employee is likely to raise a complaint that he has been discriminated against;
    Where applicable, take steps to remove the executive as a director;
    Examine stock option scheme rules to determine how the executive’s stock options will be effected by the termination;
    Consider how the departure will be communicated both internally and externally.

What can a company do to protect against damage to reputation?

Prevention is better than cure. Companies will want to avoid any potential embarrassment arising in the first place and can minimise the risk by taking the following steps:

  • Include a clause in the contract which allows the company to terminate should the employees conduct outside of work bring the company into disrepute;
  • Give examples in the staff handbook of what amounts to such behaviour;
  • Have a robust social media policy which prohibits employees from identifying the company in personal blogs, posting inappropriate pictures, making defamatory statements, or criticising the company. It’s important that the policy also covers the use of social media outside of work.

The approach adopted by the employer in each case will very much depend on the facts. The most important piece of advice would be that even where the employee’s bad conduct has gone viral it doesn’t always follow that a dismissal will be lawful – the employer still has to follow the usual process, just as it would with any other disciplinary matter.