Royal and Sun Alliance (“RSA”) Ireland has this month confirmed that it is appealing the shock decision of the Irish Employment Appeal Tribunal to award €1.25 million to its former CEO Philip Smith for a constructive dismissal. The amount has been described as “jaw dropping” by much of the newspaper coverage. RSA is claiming that the tribunal decision failed to appreciate the critical role of reserving for claims in an insurance company and the importance of accurate case reserves. It is also saying that the tribunal failed to properly take into account RSA’s obligations as a regulated financial institution including its obligation to provide information to the Bank of Ireland, as well as its obligations as part of a publicly listed group. Mr Smith had claimed to the tribunal that he was made the “fall guy” for problems at the Irish insurer which it was said were well know to the parent company in Britain.
It is difficult to imagine as high an award in a similar case in a UK employment tribunal unless it was brought as a whistleblowing case. Currently in England and Wales unfair dismissal claims are capped at either a years’ pay or a compensatory award of £78,335, whichever is less. The cap can be lifted in certain circumstances which are usually either relating to whistleblowing or some form of outlawed discrimination.
The issue of understanding the environment in which particular circumstances took place is absolutely vital. Financial institutions currently operate in a tightly regulated environment. It is really important when cases are taken to the employment tribunal that the panel making the decision fully understands and empathises with reality of the working environment. They have to deal with every conceivable work place and often try their best to do this, but it is really important for employers (and their representatives) to paint as detailed and accurate a picture as possible. With all the changes approaching in relation to the senior managers regime for banks this will become increasingly important, as it is very likely that banks will want to re-assess what might be reasonable behaviour for an employer in light of increased liabilities for senior managers. We will comment more on this in the coming months.