Law Relating to Employment Investigations - UK Legal Information Blog

In British Home Stores Ltd v Burchell ICR 303 remains the cornerstone authority for assessing the fairness of misconduct dismissals in England and Wales, despite being decided over 45 years ago. The “Burchell test” establishes a three-stage framework that Employment Tribunals must apply when determining whether an employer acted reasonably in dismissing an employee for misconduct. While the Supreme Court in Reilly v Sandwell Metropolitan Borough Council UKSC 16 expressed reservations about whether the test correctly fits the statutory framework under section 98(4) of the Employment Rights Act 1996, it declined to overturn the established approach, leaving the Burchell test as binding precedent.^[1]^[2]^[3]^[4]^[5]

Part I: The Burchell Test – Origin and Development

The Original Decision

The case arose from the dismissal of Miss Burchell, a shop assistant at British Home Stores (BHS), who was accused of dishonestly abusing the staff discount scheme. The Employment Appeal Tribunal, presided over by Arnold J, established the test that bears the case’s name. Arnold J held that where an employer dismisses for misconduct, the Employment Tribunal must consider three matters:^[3]^[4]^[1]

First, whether the employer believed the employee was guilty of misconduct. Second, whether the employer had reasonable grounds upon which to sustain that belief. Third, whether at the stage at which the belief was formed, the employer had carried out as much investigation as was reasonable in all the circumstances of the case.^[4]^[3]

The EAT emphasised that the tribunal’s role is not to determine whether the employee was actually guilty of the alleged misconduct, nor to assess the merits of the evidence independently. Rather, the tribunal must evaluate the reasonableness of the employer’s decision at the time it was made.^[2]^[1]

The Statutory Framework

The Burchell test operates within the framework established by section 98 of the Employment Rights Act 1996. Section 98(1)-(3) requires the employer to show a potentially fair reason for dismissal, which includes conduct. Section 98(4) provides that determination of whether the dismissal is fair or unfair:^[6]

“(a) depends on whether in the circumstances… the employer acted reasonably or unreasonably in treating [the reason shown] as a sufficient reason for dismissing the employee, and (b) shall be determined in accordance with equity and the substantial merits of the case.”^[6]

Part II: Development Through Case Law

The Range of Reasonable Responses

The Burchell test was supplemented by Iceland Frozen Foods Ltd v Jones ICR 17, which established the “band” or “range” of reasonable responses test. Browne-Wilkinson J held that the tribunal must determine whether the decision to dismiss fell within the band of reasonable responses which a reasonable employer might have adopted. This means that if a reasonable employer could have dismissed in the circumstances, the dismissal is fair, even if the tribunal would not itself have dismissed.^[7]^[8]^[9]

British Leyland UK Ltd v Swift established that there exists a “band of reasonableness, within which one employer might reasonably take one view, another quite reasonably take a different view”.^[10]

Confirmation by the Court of Appeal

The combined authority of Burchell and Iceland was definitively confirmed by the Court of Appeal in Post Office v Foley and HSBC Bank plc v Madden ICR 1283. Mummery LJ held that:^[11]^[12]

The range of reasonable responses test is correct and remains binding authority^[11]
Tribunals should not substitute their own view for that of the employer^[12]
The Burchell tripartite test applies to both the reason for dismissal and its reasonableness^[11]

This decision overruled Haddon v Van den Bergh Foods Ltd ICR 1150, which had questioned whether the range of reasonable responses test was too favourable to employers.^[12]^[11]

Extension to Investigations

Sainsbury’s Supermarkets Ltd v Hitt IRLR 23 clarified that the range of reasonable responses test applies equally to the investigation stage. The Court of Appeal held that tribunals must not substitute their own standards as to what constitutes an adequate investigation. The question is whether the investigation was one that a reasonable employer could have conducted, not whether the tribunal would have investigated differently.^[13]^[14]^[15]

Part III: The Current Legal Position

The Three Elements in Practice

The modern application of the Burchell test requires employers to demonstrate:^[16]^[2]

Element 1 – Genuine Belief: The employer must have genuinely believed that the employee was guilty of misconduct. This is a subjective test – the tribunal examines whether the employer actually held the belief, not whether the belief was correct.^[2]^[3]

Element 2 – Reasonable Grounds: There must have been reasonable grounds for the employer’s belief. This requires factual evidence or information available at the time of dismissal that a reasonable employer could rely upon.^[16]^[2]

Element 3 – Reasonable Investigation: The employer must have carried out as much investigation as was reasonable in all the circumstances. What constitutes “reasonable” will vary depending on the seriousness of the allegations and the practical circumstances.^[3]^[13]^[2]^[16]

The Investigation Standard

The Court of Appeal has provided extensive guidance on what constitutes a reasonable investigation:

Shrestha v Genesis Housing Association Ltd EWCA Civ 94 established that an employer is not obliged to investigate every line of defence raised by an employee. Lord Justice Vos held that the reasonableness of an investigation should be assessed as a whole, and employers need not investigate explanations that are manifestly improbable.^[17]^[18]^[19]

Salford Royal NHS Foundation Trust v Roldan EWCA Civ 522 emphasised that where there is a key dispute of fact between the accuser and the accused, and the accusation involves serious matters with potentially devastating consequences for the employee, a reasonable investigation requires probing the accusation with care.^[20]^[21]

London Ambulance Service NHS Trust v Small EWCA Civ 220 warned against the “substitution mindset” – tribunals must not substitute their own view of the investigation for that of the employer.^[22]^[23]

The ACAS Code of Practice

The ACAS Code of Practice on Disciplinary and Grievance Procedures 2015 provides practical guidance that complements the Burchell test. Key requirements include:^[24]^[25]

Carrying out necessary investigations to establish facts^[26]
Informing the employee of the problem and giving them opportunity to respond^[25]
Allowing employees to be accompanied at formal hearings^[26]
Providing a right of appeal^[27]^[25]

Employment Tribunals are legally required to take the Code into account when considering relevant cases, and may adjust compensatory awards by up to 25% for unreasonable failure to comply.^[28]^[27]

Part IV: Judicial Criticism and Future Developments

The Supreme Court’s Reservations

In Reilly v Sandwell Metropolitan Borough Council UKSC 16, Lord Wilson (with whom Lord Carnwath, Lord Hughes and Lord Hodge agreed) observed that the three requirements identified in Burchell “do not well fit the inquiry mandated by what is now section 98(4)”. Lord Wilson noted that Burchell was originally directed at the first part of the inquiry (establishing the reason for dismissal under section 98(1)-(3)), not the reasonableness inquiry under section 98(4).^[5]

Lady Hale, in a concurring judgment, described section 98(4) as “both problematical and contentious” and noted that the Burchell approach “can lead to dismissals which were in fact fair being treated as unfair and dismissals which were in fact unfair being treated as fair”. However, she identified three reasons why the test had not been challenged:^[5]

It has been applied for over 40 years and remains binding at all levels below the Supreme Court^[5]
Parliament has had opportunity to clarify the approach but has not done so^[5]
Those experienced in the field may consider the approach does not lead to injustice in practice^[5]

The Supreme Court therefore left the law unchanged, stating: “the law remains as it has been for the last 40 years and I express no view about whether that is correct”.^[5]

The Employment Rights Bill 2024-25

The Employment Rights Bill, expected to receive Royal Assent before Christmas 2025, will significantly affect unfair dismissal law. Following negotiations between business representatives and trade unions, the Government has revised its original proposals:^[29]^[30]

The qualifying period for unfair dismissal claims will be reduced from two years to six months (rather than the originally proposed “day one” rights)^[31]^[29]
Existing day-one protections for automatically unfair dismissals (e.g., whistleblowing, discrimination) remain unchanged^[30]
The compensation cap for unfair dismissal may be lifted or increased^[29]^[30]

These changes emphasise the importance of robust probationary procedures and proper investigations from the outset of employment.^[29]

Part V: Practical Implications for Employers

Conducting a Reasonable Investigation

Based on the case law, employers should:^[32]^[15]^[13]

Appoint an appropriate investigator – ideally someone different from the person conducting the disciplinary hearing^[32]
Gather evidence promptly – delay can undermine the fairness of the process^[25]
Interview relevant witnesses – though not necessarily every witness the employee suggests^[33]^[34]
Keep records of all investigation activities and findings^[27]
Consider exculpatory evidence – investigate matters that might support the employee’s innocence^[21]
Allow the employee to respond to allegations before decisions are made^[25]

Common Pitfalls

Investigations may be found unreasonable where employers:

Fail to investigate obvious inconsistencies in the evidence^[21]
Rely solely on anonymous evidence without proper safeguards^[34]^[35]
Do not disclose relevant evidence to the employee^[36]
Conduct superficial investigations into serious allegations^[13]
Allow unreasonable delay^[36]

Table of Cases

Case Name	Citation	Court	Year	Key Principle
British Home Stores Ltd v Burchell	ICR 303	EAT	1978	Established the three-stage test for misconduct dismissals^[1]^[4]
W Weddel & Co Ltd v Tepper	IRLR 96	CA	1980	Approved the Burchell test^[37]^[38]
British Leyland UK Ltd v Swift	IRLR 91	CA	1981	Introduced band of reasonable responses^[10]
Iceland Frozen Foods Ltd v Jones	ICR 17	EAT	1982	Structured approach to reasonableness test^[7]^[9]
Polkey v AE Dayton Services Ltd	UKHL 8	HL	1987	Procedural fairness; Polkey deduction^[39]^[40]
Linfood Cash & Carry Ltd v Thomson	IRLR 235	EAT	1989	Anonymous witness evidence guidance^[34]^[41]
Boys and Girls Welfare Society v McDonald	IRLR 129	EAT	1996	Burden of proof neutral under s.98(4)^[42]^[43]
Haddon v Van Den Bergh Foods Ltd	ICR 1150	EAT	1999	Questioned range test (overruled)^[11]^[12]
HSBC Bank plc v Madden	ICR 1283	CA	2000	Confirmed Burchell binding^[11]^[44]
Post Office v Foley	ICR 1283	CA	2000	Definitively endorsed tripartite approach^[11]^[12]
Sainsbury’s Supermarkets Ltd v Hitt	IRLR 23	CA	2003	Extended range test to investigations^[13]^[14]
A v B	IRLR 405	EAT	2003	Serious allegations require careful investigation^[36]^[45]
London Ambulance Service NHS Trust v Small	EWCA Civ 220	CA	2009	Warning against substitution mindset^[22]^[23]
Salford Royal NHS Foundation Trust v Roldan	EWCA Civ 522	CA	2010	Duty to investigate key disputes^[20]^[21]
Orr v Milton Keynes Council	EWCA Civ 62	CA	2011	Knowledge attribution^[46]^[47]
Graham v Secretary of State for Work and Pensions	EWCA Civ 903	CA	2012	Tribunals must not substitute own view^[48]^[49]
Turner v East Midlands Trains Ltd	EWCA Civ 1470	CA	2012	Band test applies where Article 8 engaged^[50]^[51]
Stuart v London City Airport Ltd	EWCA Civ 973	CA	2013	Further investigations not required^[33]^[52]
Shrestha v Genesis Housing Association Ltd	EWCA Civ 94	CA	2015	Not obliged to investigate every defence^[17]^[19]
Reilly v Sandwell Metropolitan Borough Council	UKSC 16	SC	2018	Supreme Court expressed reservations but left test unchanged^[53]^[5]
Royal Mail Group Ltd v Jhuti	UKSC 55	SC	2019	Real reason can be hidden from decision-maker^[54]^[55]

Table of Statutes and Statutory Instruments

Legislation	Relevant Provision	Application
Employment Rights Act 1996	Section 98(1)-(4)	Primary framework for unfair dismissal^[6]
Employment Act 2002	Section 98A (repealed)	Former statutory procedures^[56]^[57]
Employment Act 2008	Sections 1-2	Repealed statutory procedures; reverted to Polkey^[56]^[28]
Employment Relations Act 2004	Section 40	Protected disclosure provisions^[58]
ACAS Code of Practice 2015	SI 2015/649	Disciplinary and grievance procedures^[24]^[59]
Employment Rights Bill 2024-25	Pending	Reduces qualifying period to 6 months^[29]^[30]

Other Sources

Source	Description
Blackstone Chambers	Leading employment law set
Cloisters Chambers	Specialist employment barristers
Littleton Chambers	Employment law specialists
Old Square Chambers	Employment and discrimination expertise
Matrix Chambers	Human rights and employment law
Doughty Street Chambers	Employment and discrimination
39 Essex Chambers	Employment law practice
ACAS	Advisory, Conciliation and Arbitration Service guidance
Employment Tribunals Service	First instance tribunal decisions
BAILII	British and Irish Legal Information Institute
legislation.gov.uk	Official UK legislation database

Conclusion

The Burchell test remains the definitive framework for assessing the fairness of misconduct dismissals in England and Wales. Despite judicial criticism at the highest level regarding its doctrinal fit with section 98(4) of the Employment Rights Act 1996, the test has proven remarkably durable and continues to be applied daily in Employment Tribunals across the country. Employers must ensure they have a genuine belief in misconduct, that this belief is based on reasonable grounds, and that they have conducted as much investigation as is reasonable in the circumstances. The forthcoming reduction in the qualifying period for unfair dismissal claims from two years to six months makes robust investigation and disciplinary procedures more important than ever.^[1]^[2]^[3]^[29]^[5]

References