Zen Internet Limited v Stobart [2025] EAT 153

In this case, the Employment Appeal Tribunal ("EAT") partly allowed the Respondent’s appeal against an Employment Tribunal (“ET”)'s finding that the dismissal of its CEO was procedurally unfair. The EAT upheld the unfairness finding, but the question of when a fair dismissal would have occurred under the Polkey principle was returned to the ET.

The Claimant was employed as the Respondent’s CEO from October 2018 to March 2023, having been recruited to drive significant revenue and profit growth. However, from 2020 to 2023, the Respondent made losses each year, despite the losses reducing annually. In February 2023, the founder and majority shareholder of the Respondent proposed swapping roles with the Claimant, stating he had "lost confidence in [the Claimant’s] ability to lead the business back to sustainable profitability". The Claimant did not accept the role swap (with substantially reduced remuneration), and he was subsequently dismissed due to performance concerns in March 2023.

The ET concluded that the reason for dismissal was capability, specifically the Claimant’s performance and capacity to achieve profitability. However, it considered the dismissal procedurally unfair because the Respondent had not followed its own procedures (which mirrored the ACAS Code of Practice). In particular, the Respondent had failed to follow a formal process to establish the facts, and the Claimant was not given the opportunity to answer the issues raised and put his case, nor appeal these findings. The ET acknowledged sympathy for the Respondent dealing with a CEO in a senior leadership role, but, despite his seniority, the Claimant was still an employee subject to the company's policies and procedures.

The ET considered whether the Claimant’s compensation should be adjusted to reflect the likelihood that he would have been dismissed fairly in any event, had a fair procedure been followed (the Polkey principle). The ET decided that, had a fair procedure been followed, the Claimant would have been dismissed by no later than 31 May 2023 and should be compensated only for loss up to that date.

The EAT dismissed the Respondent’s appeal against the unfairness finding. Whilst there is no absolute requirement that particular procedural steps must be taken in every capability case, and exceptional cases may exist where warnings would be "utterly useless", or cases where it would be unnecessary in light of an employee’s seniority, the EAT decided the ET had correctly found this was not such a case.

However, it allowed the appeal on the Polkey finding which it decided was flawed on two grounds:

1. The ET wrongly confined its consideration to the period from 17 March 2023 onwards, when it should have considered what would have happened from 24 February 2023 when concerns about the Claimant’s capability had crystallised; and

2. The ET failed to give adequate reasons for its conclusion that a fair dismissal would have taken place by 31 May 2023, without referring to any evidence to justify that timeframe.
   

The EAT returned the Polkey issue to the same ET for reconsideration.

This case reinforces that whilst there is no absolute requirement for an employee to be given warnings and opportunities to improve in every capability case, such steps remain the normal expectation and will help to mitigate potential legal risks on dismissal. The process and procedural steps may need to be tailored to the particular case. However, policies should be applied consistently and a senior position alone does not exempt an employer from following fair procedures. This case also confirms that when assessing what would have happened, had a fair procedure been followed, tribunals are not limited to looking forward from the date of dismissal but should consider the full picture of what would have occurred, had the employer acted fairly from the point the relevant concerns crystallised.