The recent decision in Zen Internet Ltd v Stobart [2025] EAT 153 provides useful guidance for employers on the requirements of procedural fairness in a dismissal relating to poor performance (here, in the context of a senior executive).

It also clarifies the timeframe within which the principle in Polkey v A.E. Dayton Services Ltd [1988] AC 344 (“Polkey”) – that compensation for unfair dismissal may be reduced where the employee would have been dismissed anyway if the employer’s process had been fair – may apply.

What happened in the Zen Internet Ltd case?

Paul Stobart became the CEO of Zen Internet Ltd (“Zen”) on 1 October 2018, projecting significant growth for the company. This failed to materialise. From 24 February 2023, there were clear concerns about Mr Stobart’s capability to generate sustainable profitability. Zen subsequently gave him notice of the termination of his employment on 17 March 2023, citing capability (i.e. poor performance) as the reason. No formal process was followed. Mr Stobart brought an Employment Tribunal (“ET”) claim against Zen for unfair dismissal.

What was the ET’s decision?

The ET accepted that capability was a potentially fair reason for Mr Stobart’s dismissal (i.e. that his dismissal may have been substantively fair), but found that Zen had not followed a fair process when dismissing him.

Zen’s own applicable policies and procedures (which were consistent with the ACAS Code of Practice on Disciplinary and Grievance Procedures (“ACAS Code”) required that certain formal steps take place prior to dismissal (including undertaking an investigation, holding a hearing with the employee in which they could make representations, and offering an appeal against the outcome). These steps had not been followed in this instance. The ET therefore upheld Mr Stobart’s claim for unfair dismissal, on the basis that his dismissal had been procedurally unfair.

However, the ET then applied the Polkey principle. It found that, had Zen followed a fair process, Mr Stobart would still have been dismissed, for the potentially fair reason of capability, sometime between 17 and 31 May. Therefore, the compensation payable to Mr Stobart should be calculated based only on the period from 17 March (when he was given notice of dismissal) to between 17 and 31 May (when a hypothetical dismissal following a fair process would have occurred).

Zen appealed to the Employment Appeal Tribunal (“EAT”).

What was the EAT’s decision?

The EAT upheld the appeal in part and remitted the case to the ET, for the compensation due to Mr Stobart to be reconsidered.

The EAT clarified two important points in its decision:

  • First, Zen had argued that there was no absolute requirement for every procedural step to be followed in a capability case, particularly with respect to a senior executive. It claimed that following a process was futile, given Mr Stobart’s seniority. The EAT commented that there may be cases in which a truncated process could be reasonable, albeit this was a very high threshold to reach and would only rarely apply. However, this was, in any event, not one of those cases. No process had been followed, and this was not a case in which procedural steps (e.g. holding a hearing, offering an appeal) could fairly be dispensed with. The finding of a procedurally unfair dismissal was therefore upheld.
  • Second, the ET had limited its Polkey analysis (and therefore deduction) to the period between 17 March (the date on which notice of termination was given) and 31 May (the date on which it considered Mr Stobart would have been dismissed had a fair process been followed). The EAT found that there was no clear reason for doing so: the Polkey analysis was not exclusively forward-looking from the date of dismissal. In this case, Zen’s capability concerns had crystallised by 24 February. This was the relevant point in time from which to assess the hypothetical Polkey outcome – i.e. a hypothetical fair process could have been initiated as of that date, and Mr Stobart could have been fairly dismissed two months later (by 24 April). The case was consequently remitted to the ET to reconsider compensation.

Key takeaways for employers

  1. Document performance concerns. Zen successfully established (through documentary evidence) that the concerns it had about Mr Stobart’s performance were genuine, and that they had crystallised by 24 February 2023 (over a month before the dismissal). This established a potentially fair reason for dismissal (albeit the resulting process was flawed) and widened the scope of the Polkey deduction which was subsequently made to the compensation awarded to Mr Stobart. This highlights the importance, for employers, of clearly and carefully documenting concerns about employees’ poor performance, in real time – regardless of their level of seniority.
  2. Make sure that your performance management procedure is fair and reasonable. As a starting point, any performance management policy should at least be consistent with the ACAS Code. This can help to ensure compliance with the expected legal standard for a fair process.
  3. And follow it! In this case, Zen failed to follow its own policies and procedures appropriately, which led to a finding of a procedurally unfair dismissal. Performance management policies should be applied consistently, to all relevant staff, irrespective of their level of seniority. This can help to mitigate legal risks on dismissal. If you must diverge from your policy, make sure that the procedure remains fair, minimise the extent of divergence, and clearly record the rationale for doing so.
  4. Circumstantial variations to the process may be ok, as long as it remains fair and reasonable overall. A capability process is not simply a tick-box exercise. In practice, the process may need to be tailored to the circumstances of a particular case. Though employers can have some flexibility in their approach, they must be careful to still adhere to the principles of the ACAS Code and follow a fair and reasonable process in the circumstances.
  5. Don’t forget to allow a right of appeal. Doing so is likely to be crucial to fairness. It may also allow the employer the opportunity to rectify any procedural flaws which may have taken place at earlier stages.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further advice or information about management training which we offer.