Complainant

Respondent

Parties

Natalia  Koziol

Stephen Hamilton Financial Services trading as Mortgageline

Representatives

Michael Kingsley BL instructed by KOD Lyons Solicitors

Hugh O’Donnell BL instructed by Ken Kennedy Law

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-00060746-001

27/12/2023

The Complainant is a financial advisor who was employed by the Respondent mortgage broker. She joined the company in 2018 at the encouragement of her, then to be, mother in law Natasza  Korajda. In 2022 the Complainant and Ms Korajda began taking steps to set up their own mortgage brokerage. In March 2023 they set up their own company, NK Capital Partners Limited, with the CRO.

This prompted a number of actions by the Central Bank of Ireland (“CBI”) as their regulator and on the 7th of July 2023 the Respondent’s Managing Director, Mr Hamilton, received communications from the CBI who were conducting pre-approval checks for the Complainant and Ms Korajda. This was the first time he became aware that the Complainant and she were setting up in business.

Mr Hamilton met with the Complainant and Ms Korajda on the 11th of July and made clear that he thought they had breached their contract and that if they were going to pursue their new Company they would need to resign or face a disciplinary process.  Their access was cut after that meeting and they were formerly suspended a couple of days later on the 13th of July. Mr Hamilton carried out an investigation which they did not engage with. Mr Hamilton’s investigation concluded that they had committed gross misconduct and should be dismissed.

The Complainant and Ms Korajda were then referred to disciplinary hearing overseen by an external HR consultant Ms Gillian Knight. On the 11th of August Ms Knight recommended that the Complainant and Ms Korajda be dismissed.  They were not offered any appeal.

The Complainant has alleged that her dismissal was prejudged and that the decision to dismiss her was unfair. She and Ms Korajda submitted complaints under the Unfair Dismissals Act. These complaints were heard together and the facts and circumstances of the dismissals overlap significantly. Ms Koziol’s complaint was considered under ADJ-00049384.

For ease of reference I have tended to refer to Ms Koziol and Ms Korajda jointly as the Complainants.

The Complainant’s counsel made oral and written submissions on her behalf. She gave evidence under oath.

She worked for the Respondent as a team leader. This meant organising mortgage closings, the associated insurances and sending loan offers. She worked with her mother in law and in 2022 they began planning to set up their own company. At the time they applied to the CRO and engaged with the CBI she wasn’t sure when she was going to leave her current employment. She had found out she was pregnant a few weeks before they incorporated.

In July she was called into a meeting with Mr Hamilton and told to resign or face a disciplinary process. Ms Knight then oversaw a disciplinary process but the Complainant was concerned about its independence.  The process seemed professional but was clearly just based on Mr Hamilton’s earlier report.

After she was dismissed she took maternity leave from September 2023. Her salary has reduced since she left employment.

The Respondent attended the hearing and their counsel made oral and written submissions on their behalf. The dismissal was fair and entirely caused by the actions of the Complainants.

Mr Hamilton gave evidence under oath. He was shocked to discover that the Complainant had set up a company to compete with the Respondent business. He did not know about this until the CBI told him. He assumed that the Complainant would leave as she was setting up in competition however she instead sought to return to work. He was concerned about her access to clients and other business sensitive information. He believed that dismissal was necessary in the circumstances but wanted to ensure that there was an independent process so he brought in Ms Knight.  He signed off on the CBI paperwork once the Complainant was terminated.

Unfair Dismissals Act (“UDA”) and the Burden of Proof

Once an employee has established that they have the 12 months’ service and that they have been dismissed, the burden will be on the employer to show that there were substantial grounds justifying the dismissal. 

Section 6(4) outlines that the conduct of the employee is a lawful reason to dismiss an employee.  

While in the course of the hearing new evidence and arguments were presented regarding the Complainants business I am cognisant of the principal set down by the EAT in the case of Looney & Co. Ltd. v Looney UD 843/1984  “It is not for the tribunal to seek to establish the guilt or innocence of the claimant …. Our responsibility is to consider against the facts what a reasonable employer in [the Respondent’s] position and circumstances at that time would have done and decided….”

The overriding obligation of reasonableness.

Section 6(7) of the UDA provides an overriding obligation on the employer to have acted reasonably in relation to the dismissal. This duty to act reasonably does not allow an Adjudication Officer to substitute their own judgement for that of the employer. Instead, I must decide whether the decision to dismiss was within the range of reasonable responses of a reasonable employer. This role was set out in more detail by the High Court in the case of Governor and Company of the Bank of Ireland v Reilly [2015] IEHC 241.

The Labour Court, in the case of Pottle Pig Farm v Panasov UD/17/24, has determined that a failure to properly investigate allegations of misconduct or to afford an employee who is accused of misconduct a fair opportunity to advance a defence will take the decision to dismiss outside the range of reasonable responses, thus rendering the dismissal unfair.

Fair Procedure - Policy and Statutory Instrument 146 of 2000. 

Section 14(1) of the UDA requires employers to have a written dismissal procedure and to provide employees with a copy of the same. Section 6(7)b of the UDA provides that the WRC may consider whether the employer has complied with their own procedure in determining whether the dismissal was unfair.

The same provision of the UDA also allows the WRC to consider whether the employer complied with any code of practice relating to procedures regarding dismissal approved of by the Minister for Enterprise, Trade and Employment. The only such code of practice is Statutory Instrument 146 of 2000 created under the Industrial Relations Act, 1990.

This code outlines a number of general principles which should govern a disciplinary process. Disciplinary measures should be applied in a fair and consistent manner and adhere to the principles of natural justice and fairness. 

More specifically the code provides that any disciplinary process should: ensure that the details of any allegations or complaints are given to the employee in writing; identify the source of the allegations or complaint to the employee; give the employee the opportunity to respond fully to any allegations; allow the employee to be represented by a colleague or trade union official; consider any representations made by, or on behalf of, the employee and any other relevant evidence, factors or circumstances; allow the employee concerned to question witnesses; allow the employee an internal appeal following the issuing of any sanctions; and remove warnings from an employee's record after a specified period.

Non-adherence to the Respondent’s policy or the code of practice does not automatically make a dismissal unfair, however it is something the WRC can rely on in determining that a dismissal was unfair. 

Findings of Fact

As outlined in the background section the Complainant had, as of March 2023, set up a company with Ms Korajda which would sell financial products. This would entail being approved by certain financial institutions to sell their products to customers in exchange for a commission. The Complainants set up their Company in March but had not begun trading as CBI permission was required. The Respondent was always going to have to be contacted as part of this process as the Complainants essentially needed to be vouched for by a former employer and Mr Hamilton was their only previous employer in the financial sector. 

They did not inform or seek permission from the Respondent before the Company was set up and these checks commenced. The Complainants had hoped of agreeing access to financial institutions through the Respondent and essentially continuing to sell for them as an independent broker rather than an employee. They were not aware that the CBI was going to contact Mr Hamilton when they did. However, I am not clear as to why they expected any sort of positive reception when, at some later date, they notified the Respondent that they had been developing their own rival business while still employees.

When Mr Hamilton received queries from the CBI on the 7th of July it was the first time he became aware that the Complainants were setting up their own firm. His evidence was that he understood that this meant they were leaving and he contacted Ms Korajda that day and let her know that he had received the CBI emails and would sign off the forms. They did not discuss ending the employment relationship at that point but both Mr Hamilton and Mr Korajda accepted in evidence that Mr Hamilton indicated that he couldn’t stop her from leaving. Mr Hamilton did not contact the Complainant in the same way and seems to have formed the view that Ms Korajda was the senior partner in this new enterprise.

After the call Mr Hamilton spoke to other brokers and reviewed the Complainant’s contract of employment which provides the following undertaking: During the period of this contract you will devote the whole of your time and attention to the business of the Company and undertake that during the period of the 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 conflict of interest with the business of the Company. Upon the termination of this contract you will not for a period of one year: (a)              solicit in competition with the Company the custom of any person, firm or company who at the date of the termination of this contract was a client of or in the habit of dealing with the Company or any associated Company or company with whom the Company has a business relationship, or (b) directly or indirectly employ or engage or offer to employ or engage or otherwise solicit, interfere with or entice away or endeavour to solicit, interfere with or entice away from the Company or any employee or person engaged by the Company.

Mr Hamilton’s evidence was that he tried to get in touch with Ms Knight at this time for HR advice but she was not available. Ms Knight had a relationship with the Mortgage Advisors association and was their recommended HR consultant. She had previously prepared policies for the Respondent. 

On the 11th of July Mr Hamilton had a meeting with each Complainant by zoom. There was a significant change of tone compared to his earlier meeting with Ms Korajda and he outlined that he was of the view that the Complainants were engaged in a breach of contract. He outlined the choice to them of resigning or in facing a disciplinary process. Mr Hamilton’s evidence was that he had also offered for them to stay and give up the new business but this is disputed by the Complainants. It is not alleged that the Complainants at any point offered to give up the new business and remain at work.  

It is reasonable to conclude that by the 11th of July Mr Hamilton had formed the view that the new company was incompatible their ongoing employment with the Respondent. The Complainant reserved her position and at this point the Complainant was suspended and her access was cut off from Company systems. Mr Hamilton also replied to the CBI to let them know that the Complainant was still an employee and that it was not at that time appropriate for them to respond. Formal notification of suspension would come in the following days.

Mr Hamilton carried out an investigation into “potential contractual breaches”  and invited the Complainants to provide their input in an email of the 13th of July. The Complainants instead replied by way of a solicitor’s letter disputing their suspension and demanding that their access to Company systems would be restored so they could attend to their duties. They threatened to bring an application for injunctive relief if this was not done.

Around the same time the Complainant’s partner emailed both Complainants at work and received autoreplies. Ms Korajda’s autoreply came back redirecting the query while the Complainant’s indicated she was no longer an employee of the Respondent. This was later altered when the Complainant raised the issue.

Mr Hamilton completed a report dated the 15th of July and sent this to Ms Knight to begin a disciplinary hearing. This report concluded that the Complainants set up a business in direct competition with the Respondent and that this was without consent and he believed it was a breach of the Complainants contract of employment and that it was gross misconduct and he believed that it warranted immediate dismissal. Mr Hamilton sent a copy of the contract, the staff handbook and the CRO documents on the Complainants’ company with his report. 

Ms Knight wrote to the Complainant on the 24th of July and invited her to a disciplinary hearing on the 27th . Ms Knight broke the issues down into a series of allegations for the Complainant to respond to or present any mitigating circumstances around. These allegations were that she had breached the above-mentioned contractual obligation as well as the Company handbook by incorporating a limited entity without prior approval that directly conflicted with her employment. The letter further indicated that this process would also satisfy the independent arbitrator appeal process in their handbook as Ms Knight was the independent arbitrator.

The Complainants’ solicitor responded on the 27th of July denying that they had breached any term in their contract and denied any wrongdoing. They stated that they would not be attending the hearing and restated their threat to seek an injunction to lift their suspension.  Mr Hamilton responded to this indicating the Respondent would deal with the Complainants directly and that he would ask Ms Knight to schedule a further hearing date on the 31st of July which the Complainant attended.

The Complainant disputed that there was a conflict of interest and highlighted that the Complainants’ company is only registered with the CRO and cannot provide services. She accepted that she would need to resign when they received CBI approval and confirmed that they would have told Mr Hamilton in August.

The Complainant raised a number of additional arguments in the hearing which were recorded by Ms Knight in her decision of the 11th of August. The Complainant had confirmed that her company had been incorporated without prior written approval and Ms Knight found this to be a clear breach of her contract of employment and specified company policies related to conflicts of interest. Ms Knight did not agree that the new Company could not form the basis for a conflict of interest.

Ms Knight recommended dismissal. She also recommended that Mr Hamilton sign off on the CBI approval and pay notice and provide her with a positive reference. Mr Hamilton accepted all four recommendations.

Conclusions

Referring back to legal summary at the outset of this decision this complaint turns on two inter-related questions of reasonableness. Firstly, was Mr Hamilton’s decision to dismiss the Complainant for the reasons stated within the band of reasonable responses of reasonable employers and secondly did any defects in the process push that decision out of the band of reasonableness?

The first question is relatively easy to answer in the sense that the person best placed to determine whether the Complainants’ actions were in conflict with the Respondent’s interests was Mr Hamilton. He owned the business and understood it best. Technicalities such as whether the new Company could be considered active or whether the Complainants status as directors was analogous to an employee are not particularly important relative to the views of Mr Hamilton once those views were reasonably held. It was for him to decide whether the steps the Complainants took to create a  competitor business without notifying him gave rise to a conflict of interest sufficiently serious to justify ending the employment relationship. Mr Hamilton’s evidence on this point was cogent and reasonable. During the course of the disciplinary process the Complainants largely failed to address the reasonable concerns any employer would be expected to have with their actions and instead threated legal action if they did not regain immediate access to the Respondent systems. They did not offer to abandon the new company to protect the employment relationship.

The second question is more difficult to resolve. Questions of fair procedure in the context of this act are not abstract and must be grounded in the same reasonableness requirements as discussed above. The actions of the Respondent must be considered in light of the circumstances they found themselves in as a small enterprise.

The core facts which led to dismissal were presented to the Managing Director, Mr Hamilton, by an outside agency without any prior notice to him or the Complainants. In so far as that is the fault of anyone, that is the fault of the Complainants. Even if the CBI had given them better warning that they were about to contact Mr Hamilton the underlying facts remained the same in that they had created a rival company without telling him. The discovery of the Complainants’ actions presented a potential risk for the business and revealed that the Complainants had been hiding an obvious conflict of interest. In the circumstances Mr Hamilton was reasonable to react and suspend the Complainants. While taking these actions Mr Hamiton clearly reached conclusions as to the Complainants conduct. I am satisfied that this was unavoidable and should not, in itself, give rise to finding of unfair dismissal once he gave the Complainants an opportunity to respond and present any further evidence or mitigating factors before any final decision was reached.

On the 11th of July Mr Hamilton met with the Complainants to suspend them and outline his preliminary views on what the CBI had revealed as well as outline that matters would proceed by way of an investigation if they did not resign. He then carried on with the investigation and gave them an opportunity to respond before he drafted his report referring this matter to Ms Knight. They opted not to engage with his investigation before it had concluded. His report went further than an investigation report would be expected to go and it outlined that the Complainants should be terminated before referring the matter to Ms Knight. The Complainants were not on notice that such an outcome could arise from the investigation phase.

Ms Knight undertook a further exercise which gave the Complainants an opportunity to present any evidence and respond to the evidence gathered by Mr Hamilton. Her work is well reasoned and she considered the issues raised by the Complainant before arriving at the same conclusion as Mr Hamilton. There was no offer of appeal despite this being outlined as a requirement of both the statutory instrument and the Respondent’s policy.

The Complainants have raised the argument that this entire process was predetermined by Mr Hamilton’s report and his explicit findings that the Complainants had engaged in gross misconduct and that they should be dismissed. It was open to Mr Hamilton to instead issue broad findings or even just limit the exercise to fact gathering and not arrive at any findings.

As I have outlined above, in the circumstance of this case it was probably unavoidable that Mr Hamilton formed a view soon after being notified by the CBI about the Complainants’ company. The Respondent’s obligation was to provide a reasonably fair process in that context.

I am of the view that they fell below that standard as a result of the investigation report and the explicit conclusions arrived at by the Managing Director that the Complainants should be dismissed. This is particularly so in circumstances where the Complainants were not told that that was a potential outcome of the investigation process. Ms Knight’s hearing and report could not remedy the obvious, and avoidable, prejudice arising from Mr Hamilton’s report.

In the circumstances I am satisfied that the dismissal was unfair.

Award

Compensation awarded under the UDA is limited to financial loss arising from the dismissal and is capped at two years’ renumeration. Section 7 of the act is clear on how awards should be determined and the High Court, per Mr. Justice Charleton in  Jvc Europe Ltd v Panisi [2011] IEHC 279, has outlined the process in some detail.

The first step of is to determine financial loss.

Before she was dismissed the Complainant earned €40,000 gross working for the Respondent. In the years since her termination she focused on building up her business with her mother-in-law. She was on maternity leave from September 2023 until May 2024, when she returned to work she was paid €1800 net per month and then from October 2024 she was paid €2200 net per month. She alleges she is at a significant and ongoing loss due to her dismissal.

I am satisfied that on the balance of probabilities that the Complainant did intend on resigning to pursue the new business with her mother-in-law. In her interview with Ms Knight she accepted she would have to resign when CBI approval had come through and she had intended on telling Mr Hamilton in August about the new business which would have brought things to a head. If she had not been dismissed the Complainant would still face a reduced income involved in building up a new business. The question of financial loss relates to the extent to which the dismissal resulted in loss which would not have arisen otherwise.

The dismissal took effect on the 11th of August 2023 and the Complainant was paid four weeks notice. The Complainant gave evidence that she would go on maternity leave in September and the Respondent had committed to pay her maternity leave for 3 months which after deductions related to maternity benefit would have come to approximately €6000. She was not in receipt of paid maternity leave from her new Company. I do not attribute any reduced income following her return to work in May 2024 to the dismissal. As such the financial loss arising from the dismissal was €6000.

The act then requires me to consider a series of factors in deciding an actual award that is just and equitable in all the circumstances. These are set out at Section 7(2) and include the following:

(a) the extent (if any) to which the financial loss referred to in that subsection was attributable to an act, omission or conduct by or on behalf of the employer,

(b) the extent (if any) to which the said financial loss was attributable to an action, omission or conduct by or on behalf of the employee,

(c) the measures (if any) adopted by the employee or, as the case may be, his failure to adopt measures, to mitigate the loss aforesaid,

(d) the extent (if any) of the compliance or failure to comply by the employer, in relation to the employee, with the procedure referred to in subsection (1) of section 14 of this Act or with the provisions of any code of practice relating to procedures regarding dismissal approved of by the Minister,

(e) the extent (if any) of the compliance or failure to comply by the employer, in relation to the employee, with the said section 14, and

(f) the extent (if any) to which the conduct of the employee (whether by act or omission) contributed to the dismissal.

On review of the facts and conclusions outlined above I am of the view that the Complainant’s conduct made a significant contribution to the dismissal. I also note that the Respondent’s failure in following the procedures outlined in Section 14 of the act. Having regard to all the circumstances I am of the view the final award should be half of the financial loss and is €3000.

I note that I have reduced this Complainant’s award by a lesser percentage than the Complainant in ADJ-00049384. This is because if I were to reduce this award using the same percentage as in that case it would become nominal and fail to sufficiently recognise the Respondent’s lack of compliance as per Section 7(2)(e).

I find the complaint well founded. I direct the Respondent to pay the Complainant redress of €3000.