How would similar actions be viewed in an employment relationship? In an employment relationship similar behaviour may well fall within the band of reasonable responses for an employer to dismiss an employee for breach of mutual trust and confidence as such conduct has caused the relationship to irretrievably break down. 

 

Mutual trust and confidence is an overarching principle that is implied into every employment relationship and overlaps with the other implied terms of obedience and fidelity. The term obliges both employer and employee, not to “without reasonable and proper cause, conduct themselves in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between employer and employee“. A breach of that provision is most commonly used by employees to establish a claim of constructive or unfair dismissal but it can also be used by employers to terminate the employment relationship if it has irreparably broken down. 

 

Employers trust their employees to submit fair and honest expenses for costs incurred in the course of their duties. At a time when business profits will be under pressure given the current economic climate employers should ensure that expense policies are followed. If an expense system is abused, and it becomes public knowledge, it can damage the reputation of the company and incur a significant tax bill for the employer. Business expenses are generally tax beneficial but an employer will be liable to pay tax due on expenses to HMRC if an individual has incorrectly declared it as a business expense.

 

If an employer has reasonable grounds to suspect fraud or deceit an employer should take disciplinary action in accordance with the company’s expenses policy, disciplinary policy and the ACAS Code of Practice. An employer can deduct an overpaid expense from an employee’s salary but it would be prudent to either include a clause in the contract of employment to that effect or to obtain written consent of the employee to avoid a claim for breach of contract and unlawful deduction from wages. Directors have a fiduciary duty to act in the best interests of the company and if a director submits a dishonest or fraudulent expense claim, an employer would be entitled to claim an account of profits if it could establish a breach of fiduciary duty. 

 

It has been reported that both Gordon Brown and David Cameron have repaid expenses that they state were within the rules but made the payments “for the avoidance of doubt” in an attempt to rebuild public confidence in the political parties. MPs have paid back approximately £500,000 of expenses claimed over the last 4 years but does the repayment of expenses rectify the breach of mutual trust and confidence? As a matter of employment law, it is arguable that there can be no trust left after the event irrespective of whether the money is recovered from the employee and the only option is to dismiss the individual for breaching trust and confidence. If an employer suspects breach of an implied term it is entitled to take disciplinary action up to and including dismissal and a prudent employer, to avoid claims of unfair dismissal, would consider a range of sanctions available to them to ensure the penalty reflects the seriousness of the offence.  

 

As we state above, the Parliamentary expense system is currently being reviewed by the Independent Committee on Standards in Public Life and changes to the system have been made in the interim period as “flipping”, claims for furniture, cleaning and gardening are stopped and mortgage interest and rent payments have been capped at £1,250. Employers suspecting abuse of their expenses system should do the same and review their expenses policies, set clear guidelines and ensure staff are fully trained in the procedure. One of the issues highlighted in the Parliamentary expenses furore is that the expenses had been approved and paid by the Fees Office and the system was complex and unclear. Employers would therefore be wise to tighten up their accounts department and ensure all staff are fully trained on expense procedures to ensure a transparent and workable expense system. It is also recommended that employment contracts should contain an express contractual clause to follow reasonable instructions (which would include policies and staff handbooks) to back up the implied term of mutual trust and confidence.

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