Complainant

Respondent

Anonymised Parties

A Restaurant Assistant Manager

A Restaurant

Representatives

Danielle Sochan, Citizens Information Service

David Wright, Wright Consultancy Ltd

Act

Complaint/Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Section 8 of the Unfair Dismissals Act, 1977

CA-00017305-001

06/02/2018

The complainant in this case commenced employment in December 2014 as a front of house assistant manager in an Indian restaurant in a Dublin suburb. He worked evenings only for around 24 hours per week, earning €264, equivalent to €11.00 per hour. He made enquiries about a property advertised for rent two doors away from the restaurant where he worked. He met with the owners of this property and discussed its potential as a restaurant. He was dismissed on September 25th 2017. His letter of dismissal states that his actions were a breach of trust and a contravention of his contract of employment which states:

“During the period of this contract, you will devote the whole of your time and attention to the business of the company and you undertake that during the period of this contract you will not engage in any other activity which is likely to prejudice your ability to serve the company, nor will you engage in any business activity which may cause a conflict of interest with the business of the company.”

The complainant argues that he was simply curious and exploring the possibility of setting up a restaurant. In his letter appealing the decision to dismiss him he said that “any sensible person can see that the idea of setting up an Indian Restaurant, two doors down from another Indian Restaurant which is already struggling would not make any business sense at all.”   He said that he did not finalise any agreement with the property owners and he claims that his dismissal was unfair.

Background to the Complainant’s Dismissal

The respondent is the restaurant-owner and he said that he is employed overseas and does not run his restaurant on a day to day basis. He said that he purchased the business in June 2016 and, when the year-end accounts were produced in January 2017, he discovered a debt was owed to the Revenue Commissioners. He had to make arrangements with Revenue to repay this debt, and, as a result, the restaurant was in serious financial difficulty. The respondent said that he explained this to the senior staff, including the complainant.

The complainant reported to the manager, who was also dismissed because he too was involved in the exploratory discussions about renting the nearby property.

In his submission to the hearing, the respondent said that, around the end of August 2017, he was approached by a neighbour whose family had a vacant restaurant for rent.   I will refer to this neighbour as “Ms A.” The respondent said that, as the business community in the area is very closely knit, Ms A was aware of the vulnerable financial status of his restaurant. Ms A told the respondent that his manager and assistant manager were in “serious negotiations about opening a restaurant in opposition to me.”

In his submission at the hearing, the respondent gave evidence of the information supplied to him by Ms A and her sons regarding their meetings with the complainant and his colleague, the restaurant manager. In his submission, the respondent said that Ms A and her sons “could no longer keep this information from me…as someone who had struggled through hard times over the previous 17 years with all the other business owners…”

The respondent said that the problem in his restaurant is that staff costs are very high, at about 50% - 60% of turnover. He said that staff were being sent home early in order to reduce costs and, as this resulted in less wages, this policy had caused resentment among the employees.   He said that the staff knew that there was a risk that the restaurant might close. Also, there was a lot of competition as he was just one of three Indian restaurants in the locality. He said that he would definitely have had to close if the complainant and his colleague, the manager, had opened up in competition with him.

Ms A gave evidence at the hearing and she said that she was “surprised and annoyed” when, on August 9th, she discovered that the complainant was thinking of setting up a restaurant in a property that her sons had advertised for rent. She said that she met the complainant when he was waiting to meet her son, who I will refer to as “John.” Ms A said that she asked the complainant if the respondent was aware that he was investigating the possibility of renting their shop, and he responded “no” and he told her that the discussions were confidential.

On August 11th, Ms A said that the she met the complainant again. She said that they chatted while he was waiting for John to arrive and the complainant asked her about key money for their premises. Ms A said that she informed the complainant that the key money required was €100,000. She said that the complainant just nodded in response.

Ms A’s two sons were also called by the respondent to give evidence. John said that he met the complainant on August 11th 2017 and showed him the property for about 20 minutes and they discussed fixtures and fittings. He said that he explained to the complainant that his brother, who I will refer to as “Paul” was involved in the finances and that he would have to meet him to discuss money.

Paul gave evidence that, the following day, he met the complainant in a different restaurant, and over coffee, they discussed the finances associated with renting the vacant property.   He said that around 100 people made enquiries about the premises and he felt that the complainant had a genuine interest in renting it. He said that, after their meeting on August 12th, the complainant asked his about the possibility of reducing the key money.

John gave evidence that, on August 15th, the complainant returned to visit the property, this time with his colleague, the manager of the respondent’s restaurant.   John said that he left them in the property for about 45 minutes and then came back and answered their questions, which were about key money, rent, the number of seats, gas versus electricity and toilets. There was some disagreement over whether the complainant discussed the installation of a tandoori oven and the witness said that he could not remember if such a thing was discussed.

After this meeting on August 15th, Paul said that the next stage of the renting process was that he needed to see the accounts of any potential tenant. He said that the complainant had told him that he had access to money from his family. He said that he sent several text messages to the complainant asking him if he wanted to meet up and that he sent a final text message on August 22nd, but he got no reply.

The Reason the Complainant was Dismissed

The respondent’s case is that the complainant was dismissed because his actions contravened his contract of employment which includes a clause preventing him from engaging in “any other business activity which may cause a conflict of interest with the business of the company.”   In his submission at the hearing, the respondent said that the complainant’s behaviour “would have had devastating results on the business” because many of his customers would have moved to the new restaurant.

The Dismissal Process

The respondent said that “to ensure that this case was handled in a completely fair and professional manner,” he recruited an independent consultant. The complainant was invited to a disciplinary meeting which took place on September 22nd 2017. The complainant was represented by Ms Sochan of the Citizens Information Centre.   At this meeting, the complainant outlined the contacts he had with the owners of the premises for rent. He said that he had no money to invest in a restaurant and that he would never do anything to hurt the respondent or his restaurant. He said he was curious and that he checked out restaurants for rent on the internet, just as you might look at show houses, with no prospect of buying one.   The meeting adjourned and then the respondent and the consultant invited Ms A and her son, John, to attend.   John outlined the meetings he had with the complainant and his colleague, the manager of the respondent’s restaurant.

On September 25th, the HR consultant wrote to the complainant on behalf of the respondent.   In his letter, he said that the complainant’s assertion that he was simply curious and that he had no money to invest in a restaurant “is at odds with the compelling evidence” of Ms A and her son. Based on their evidence, the HR consultant concluded that the complainant was in serious talks about renting their property. He said that the complainant was free to pursue such a business interest, but not while employed by the respondent.   The letter concluded:

“In terms of sanctions, consideration was given to a range of options, recognising your service. However, given the significant discrepancies of your description of events and the location and type of restaurant proposed and the consequences for employees and employer of the planned action, the sanction is dismissal.”

In his letter, the HR consultant said that the complainant was being dismissed for gross misconduct and the termination of his employment was effective immediately.

The complainant appealed against the decision to dismiss him for gross misconduct, and, following an appeal hearing on October 19th 2017, his dismissal was upheld.

Evidence of the Complainant

At the hearing, in response to questions from Ms Sochan, the complainant said that he was looking on the internet and he saw that the premises two doors up from where he worked was for rent. He said that he had a plan that, some time in the future, he would open a restaurant.   He said that he knew that the premises had been set up as a café before it was converted to a restaurant, and he thought that it would work better as a café. He said that the last communication he had with Paul was on August 14th 2017.

On behalf of the respondent, Mr Wright suggested to the complainant that the evidence of Ms A and her sons was compelling, and that he intended to open an Indian restaurant two doors away from his employer. The complainant asked why he would do this, as there are three Indian restaurants close by. He said that it would make more sense to open a café, as there is the possibility of getting customers in in the morning, but the area is well served with night-time restaurants.

In any event, regardless of his aspirations, the complainant said that he had no money to invest in setting up a café and he abandoned the discussions with John and Paul after he met with them and he understood the finances required.

The Reasons Why the Dismissal of the Complainant is Unfair

For the complainant, Ms Sochan said that the respondent failed to comply with his own disciplinary process, when he held a disciplinary meeting before he carried out a full investigation into the cause of his concern about the complainant’s conduct. Ms Sochan said that when the complainant attended the disciplinary meeting on September 22nd, the respondent and his advisor were in possession of information from the “A” family which was not provided to the complainant in advance of the disciplinary hearing. Before the meeting, the complainant was not told that witnesses would be called and he was not given copies of witness statements.

In respect of fairness, Ms Sochan argued that the respondent was not impartial in respect of the decision to dismiss the complainant. She said that the notes of the disciplinary meeting show that the respondent was attempting to “make the facts fit” to his impression of events. An example of this is the respondent’s reference to an alleged discussion between the complainant and John about the installation of a tandoori oven. The complainant said that he did not mention a tandoori oven, but the respondent’s notes of the meeting show that he “said at first that he could not remember, but then said it was possible.”   The complainant said that he never mentioned anything about a tandoori oven and this subject was brought up by John, who subsequently apologised and said that he couldn’t remember if they discussed a tandoori oven.

The complainant was dismissed because the respondent reached the conclusion that he intended to open an Indian restaurant in competition with his restaurant. Ms Sochan said that, based on the evidence of the complainant, and the evidence of Ms A and her son John, there is no basis for reaching this conclusion. She said that the respondent appears to have reached the decision to dismiss the complainant on the evidence of a written statement of Mr A’s other son, Paul.   This statement was given to the complainant when he was informed by the respondent that he was being dismissed for gross misconduct. The complainant saw this statement only after a decision was reached to dismiss him and he got no opportunity to respond.   At the hearing of this complaint, Paul said that he didn’t write this statement himself, but that it was drafted by his mother.

Ms Sochan argued that the process that resulted in the complainant’s dismissal, the refusal of the respondent to consider his direct evidence, and the reliance on the spurious evidence of a third person renders the entire process unfair. Further issues of concern regarding the fairness of the disciplinary process arose at the appeal of the complainant’s dismissal.   In this decision however, I am concerned in the main with the decision to dismiss and I do not propose to investigate what occurred at the appeal meeting.

Mitigation of Loss

Following his dismissal, the complainant said that he was unemployed for 12 weeks and he then got a job in a grocery shop for 25 hours per week and he was driving a taxi for 20 to 25 hours per week. In December 2017, he got a job as a waiter for 25 hours per week. He currently earns about the same as he was earning when he worked for the respondent.

The Relevant Law

Section 6(1) of the Unfair Dismissals Act 1977 provides that:

“Subject to the provisions of this section, the dismissal of an employee shall be deemed, for the purposes of this Act, to be an unfair dismissal, unless, having regard to all the circumstances, there were substantial grounds justifying the dismissal.”

The burden of proof rests with the respondent to establish the substantial grounds justifying the dismissal of the complainant in this case. The respondent said that the complainant was dismissed because he was in negotiations to open an Indian restaurant that would be in competition with his own business. He considered this to be a breach of trust and a contravention of the complainant’s contract of employment which required him to not to “…engage in any business activity which may cause a conflict of interest with the business of the company.”

The questions to be decided are: Was it reasonable for the respondent to dismiss the complainant and was the process that ended with his dismissal a fair process?

Was the Decision to Dismiss Reasonable?

I have some concerns about the respondent’s decision to dismiss the complainant in the circumstances that were set out at the hearing.

The respondent’s case is that the complainant was in breach of his contract by negotiating to open an Indian restaurant. Much of the dispute at the hearing centred on the shaky recollection of one of the property-owners, Paul, of a discussion with the complainant about a tandoori oven. In the end, Paul said that he couldn’t remember if this discussion took place.

The complainant said it wouldn’t make sense to open an Indian restaurant in an area where there was already three such restaurants. He said that he checked out the restaurant after seeing it advertised on the internet, although he had no money to invest. He said that he had no intention of causing any harm to the respondent or his business and that he was grateful that he had a job.

If I consider the respondent’s case in the first instance, and, if the complainant was considering opening an Indian restaurant, it is my view that this did not place him in breach of his contract of employment. I have formed this view because, while he was exploring the possibility of opening a restaurant, he did not do so. In his submission at the hearing, the respondent stated, “We are not disputing (name of the complainant’s) right to start a new business in opposition to (his restaurant) but not while an employee of (name of the respondent’s restaurant).” The underlining is in the respondent’s submission.

While he was an employee of the respondent, the complainant did not engage in any business that could have been in conflict with the respondent’s business. For him to cause a breach of his contract, he would have had to remain working for the respondent, while, at the same time, becoming a lease-holder in an Indian restaurant in the locality. On the date of the hearing, almost one year after his dismissal, he had not achieved this aspiration. The history of people working in pubs and shops all over Ireland shows that many aspire to opening their own businesses and some eventually succeed. It strikes me as inherently unfair to dismiss an individual simply because they are exploring this possibility.

The issue of a conflict of interest and an employee’s desire to set up their own business is explored at chapter 16.89 of “Redmond on Dismissal Law” by Desmond Ryan, (Bloomsbury, 2017). A number of precedents are cited where the Employment Appeals Tribunal (EAT) has concluded that even where a restrictive clause is included in an employee’s contract, seeking to prevent them from setting up in business similar to their employer, “an employee cannot be dismissed for nurturing this intention.” The author refers to the EAT case of McDermott v Kemek Limited / Irish Industrial Explosives Limited, [1996] ELR 233 where the “general principles” relating to employees in these circumstances were set out:

“1 It is perfectly legitimate for an employee to aspire to set up in business on his own account.

2 Such a person would consider it normal to work in the industry with which he was familiar. It would be contrary to public policy to prevent someone from setting up in competition with his employer.

3 However, an employee’s duty of fidelity continues so long as he remains in employment. There may be a point at which preparations to set up a new business might be incompatible with continuing to serve the existing employer.

4 If an employer believes that an employee’s actions in pursuit of his ambition have so become incompatible, he owes the same duty not to dismiss unfairly as he would in any other type of case.”

It is my view that the complainant’s plans to open his own business never got to the point where his conduct was incompatible with his ability to work as assistant manager with the respondent.

It is interesting to note that the complainant is now working as a waiter in another restaurant, while also working as a taxi driver. It appears therefore that the complainant has not amassed the means to open a restaurant, which give credence to his claim that, in August 2017, he hadn’t got the funds to rent the premises owned by Ms A and her sons. I accept the evidence of the complainant in this regard because, any sensible person would know that, for an employee earning €264 per week, the likelihood of a bank providing credit of €100,000 is remote.   Without financial backing, if the complainant had access to this amount of money himself, it is unlikely that he would have been working for the respondent for €11.00 per hour.  

I agree with Ms Sochan when she referred to the fact that the respondent appears to have taken no account of the fact that, when Paul contacted the complainant on August 22nd about continuing their discussions, the complainant did not reply.   That should have been the end of the matter, and, apart from causing difficulty for the complainant, it is my view that the family had no proper cause to speak with respondent about their meetings with him.

Was the Process Fair?

At the hearing of this complaint, the respondent produced a submission which, early on, has a paragraph titled, “Discovery of Shocking Information.” We learned that this was information provided by the respondent’s neighbour, Ms A, that two of his employees were investigating the possibility of renting her family’s premises as a restaurant.

It is apparent from the evidence of Ms A that she was not impartial regarding the complainant’s conduct. When I asked her why she felt the need to tell the respondent about his enquiries, she said “I wouldn’t like it if I owned the restaurant.” How might she have reacted if a stranger had approached her sons with key money in hand and with the intention of opening an Indian restaurant? It was apparent that she and the respondent are friends and they had been business acquaintances in the locality for many years.   I find Ms A’s interest in this matter and her and her sons’ involvement in the disciplinary meeting and at the hearing of this complaint very disturbing. If the complainant was serious about renting their premises, this was a commercial transaction and he deserved to be treated as a potential tenant. Copies of text messages produced in evidence by the respondent show some of the text messages between the complainant and Ms A's sons in early August 2017. In response to a question “Can I tell (name of the respondent)?” one of the sons replies, “Yes, but tell him to keep it very quiet as I am trying to get as much info out of them as possible for (name of the respondent’s) benefit.”

From the evidence of the three family members, it was clear to me that their interaction with the complainant was not straight up and business-like. They should have no part in the disciplinary hearing, or in the hearing of this complaint. If the respondent was concerned about the complainant’s conduct, as he clearly was, he could simply have taken a statement from one of the family members and presented it to the complainant for his response. It seems that by bringing the three family members to the disciplinary hearing, he was attempting either to intimidate the complainant or to bolster an insubstantial case for dismissal.

Almost two hours after the text message referred to above, the evidence of the string of texts shows that the respondent’s reaction to being told the news of the complainant’s enquiries was that “he didn’t seem too surprised.” This seems to be at odds with the melodramatic-sounding “shocking information” referred to in the respondent’s written submission.

I agree with the complainant’s representative, Ms Sochan, that a proper investigation was not carried out by the respondent, before he moved to calling the complainant to a disciplinary meeting. The respondent invited the family members to the disciplinary meeting, without notifying the complainant in advance and without providing any details to him of the evidence that they would provide. I find that this was unfair, and, again, an attempt to contrive a case against the complainant.  

Included with his letter of dismissal was a statement of Ms A’s son, Paul, which, it has emerged was written by Ms A. I find this to be deceitful, entirely unfair and another example of the collusion that was apparent between the respondent and his neighbours.

Conclusion

Having considered the evidence of all the parties, it is my view that the dismissal of the complainant for exploring the possibility of renting a premises as a restaurant was not a breach of his contract. I also find that the process that the respondent followed was flawed and incomplete and the evidence of the people he relied upon to reach his decision to dismiss was subjective and biased. I conclude therefore that the dismissal of the complainant was unfair in all respects.

In respect of his earnings after he was dismissed, the complainant said that he was unemployed for 12 weeks. As I have found that his dismissal was unfair, I decide that the respondent is to pay the complainant a sum of €3,168, equivalent to 12 weeks’ pay.

Dismissal, conflict of interest, competition with employer