1. The Employment Appeal Tribunal (‘EAT’) handed down judgment in Zen Internet Limited v Stobart [2025] EAT 153 on 27 October 2025, in which Stuart Brittenden KC and Alex Shellum appeared for Mr Stobart.
2. Deputy High Court Judge Pilgerstorfer KC held that the Employment Tribunal (‘ET’) had not erred in finding that Mr Stobart’s dismissal was unfair, but had erred in its approach to the issue of Polkey. The Judgment provides useful guidance on the following questions, the latter of which concerned a novel point of law.
(i) Must an employee always be given a warning and opportunity to improve before being dismissed for reasons of capability? (‘The Fairness Question’)
(ii) Upon a dismissal being found to be unfair, on the question of remedy, is the assessment of what would have happened if the employer had behaved fairly limited to the period following the dismissal? (‘The Polkey Question’)
3. The ET Judgment. Mr Stobart served as CEO of Zen Internet Limited (‘Zen’) from October 2018 to March 2023, when he was dismissed for alleged performance concerns held by the Chairman and founder of Zen, Mr Tang. The ET held that Mr Stobart’s dismissal was procedurally unfair. Following very positive performance reviews, the ET found that it was “difficult to see how Mr Stobart was being informed of actual concerns regarding his performance which might threaten his ongoing position of CEO” [14].
4. It was not until 24 February 2023 that Mr Tang expressed the view that he had lost confidence in him and that he could not continue as CEO. However, Mr Tang made an offer to swap roles with Mr Stobart so that he would become Chairman, which was open for acceptance until 13 March 2024 [16]-[17]. On 17 March 2023 a board meeting took place, at Mr Tang’s instigation, and it was decided to serve notice of termination on Mr Stobart. In finding that the dismissal was unfair, the ET held that Zen had failed to follow its own policies and procedures, which reflected the ACAS Code, and in particular to take steps to formally establish the facts, inform the employee of the problem, arrange meetings where he could be accompanied and put his case, decide upon the outcome and to allow him an appeal. Each of these steps had been bypassed.
5. The effective date of Mr Stobart’s termination was subsequently brought forward to 31 March 2023. On the Polkey question, the ET held that, had a fair process taken place, “a fair dismissal would have taken place a little over two months following the 17 March 2023 Board meeting and certainly by no later than 31 May 202[3]” [32].
6. Appeal to the EAT. Permission was granted to appeal to the EAT on two grounds, namely whether:
(i) the Tribunal erred in law in deciding that Mr Stobart’s dismissal was procedurally unfair; and
(ii) the Tribunal erred in law in deciding that a fair dismissal would have taken place no later than 31 May 2023 and not prior to 1 April 2023?
The first ground included the Fairness Question; the second included the Polkey Question.
7. The Fairness Question. The EAT reviewed the leading authorities in this area, beginning with James v Waltham Holy Cross Urban District Council [1973] ICR 398. It found their “consistent message” to be that:
[T]here is no absolute requirement that in every capability case the employee must be given warning of performance concerns and an opportunity for improvement before a dismissal can be found to be fair. However it is clear, and should be emphasised, that such procedural steps are the normal expectation: to dismiss for capability without adopting such a procedure will usually result in a finding that the employer’s actions fell outside the range of reasonable responses in all the circumstances of the case [51].
8. The EAT considered the circumstances in which an employer might fairly dispense with warning an employee and providing an opportunity for improvement:
(i) Where such steps would represent no benefit to the employee and an unfair burden to the business (James);
(ii) Where the employer might reasonably conclude such steps would be “utterly useless” (Polkey v A. E. Dayton Services Ltd [1988] AC 344, per Lord Mackay of Clashfern LC);
(iii) Where such steps “would be merely an empty charade” (Burns v Turboflex Ltd (Unreported, EAT/377/96)).
9. It cautioned that “these are high hurdles which reflect the fact that in most cases warnings and an opportunity to react and improve serve a useful function and are important elements of fairness” [52].
10. Finally, the EAT noted dicta in James and Laycock v Jones Buckie Shipyard Limited (Unreported, EAT 395/81) suggesting that the need for warning and an opportunity to improve may be much less apparent in cases concerning employees in senior management roles. However, it characterised those remarks as “merely guidance”, and echoed the view expressed in Turboflex that “it is inappropriate to lay down a general rule of law dependent upon the status or nature of an employee’s job” [53].
11. The EAT rejected the appeal against the finding of unfair dismissal. It considered that the ET had decided that Mr Stobart’s dismissal was unfair not because he was not warned or given an opportunity to improve, but rather because Zen had failed to follow its own policies and procedures [65]-[66]. Moreover, on a fair reading of the judgment, the ET had not imposed any absolute procedural requirement to give warning of performance concerns and an opportunity for improvement; it had correctly approached the issue of fairness with a focus on all the circumstances of Mr Stobart’s case [67].
12. While the ET had not expressly asked itself whether any further procedural steps would have been utterly useless, unnecessary or unfairly burdensome to Zen, it was implicit in the reasons that the procedural errors it identified were considered “to be of at least some practical utility” [68]. Accordingly, Zen’s appeal against the finding of unfair dismissal was dismissed.
13. The Polkey The EAT set out the correct approach to the Polkey Question in its statutory context, particularly the language of section 123(1) of the Employment Rights Act 1996 [85]. It then went on to examine the principles in the previous authorities (at [85]-[97]), including the observation in Stonehouse Coaches Limited v Smith (Unreported, UKEATS/0040/13/BH) that:
There is always likely to be a time gap between an actual decision to dismiss, reached unfairly by unfair procedure, and a decision which would or might have been reached following a fair procedure. That gap is a period of time during which the employee would remain in employment and for which the employee is entitled to be compensated.
14. Having done so, the EAT answered the Polkey Question as follows:
In a case involving Polkey arguments, when predicting what is likely to have occurred if the employer had acted differently and fairly, is a Tribunal limited to looking forward from a particular date (e.g. the date of dismissal or notice of dismissal)? In my judgment the clear answer is that there is no such legal fetter. It must be remembered that the Polkey exercise is one part of the function of the Tribunal in assessing compensatory loss pursuant to section 123 ERA. The governing principle underlying that section is to award compensation that is just and equitable having regard to the loss caused. No restriction in terms of time periods is discernible from the statute, and in my view it would be wrong to develop one … [102].
15. The EAT observed that confusion may have arisen because in a typical Polkey case, the employer is accused of unfairly failing to take a step, such as consultation or investigation, which would have prolonged the employment. Such a failure would likely lead to a “time gap” of the type referred to in Stonehouse Coaches, for which an employee would be entitled to be compensated [103].
16. However, the Tribunal must focus in on the particular unfairness that it has found in the facts of the case before it. Other less typical scenarios might arise where the particular unfairness in question has led to an employee being dismissed later than would have been the case had a fair procedure been followed. The employee in such a scenario would not have lost out financially by that unfairness [104].
17. Finally, the EAT set out guidance on the correct approach to be taken:
In a case concerning how the employer might have responded differently and fairly to the situation that led to the dismissal that took place (as opposed to e.g. where it is said that the employee would have been fairly dismissed for an entirely separate reason), the Tribunal should look at what it was about the dismissal that rendered it unfair. It should then assess the evidence the parties put before it and consider what is likely to have happened had the particular employer acted differently and fairly in the respects identified. The Tribunal is not limited to considering how the actions may differ from a particular point in time; however practically speaking the focus is often likely to be on the period after the original concern came to light [105].
18. The EAT held that, in finding that a fair dismissal would have occurred no later than 31 May 2023, the ET appeared to have confined its consideration to what would have occurred after 17 March 2023, being the date on which Mr Stobart was given notice of termination (to the exclusion of what discussions took place on 24 February 2023). The EAT held that, despite the fact that the language used by the ET was focused on when a fair dismissal would have taken place, it could not be confident that the ET adopted the correct approach, as set out earlier in the EAT’s Judgment [109]. The EAT also considered that inadequate reasons had been provided in support of the finding that dismissal would have taken place no later than 31 May 2023. Accordingly, Zen’s appeal against the Polkey finding was allowed and the issue remitted to the same ET.
19. The EAT’s Judgment contains an in-depth analysis of both the relevant principles governing Polkey as well as its practical application. It also provides confirmation of the limited scope for challenging a finding of unfair dismissal on appeal, the requirements of procedural fairness in the context of capability concerns levelled against senior employees, and the correct application of the Polkey analysis.
The judgment can be read here.
Stuart Brittenden KC and Alex Shellum were instructed by Chris Booth of Employment Law Advisor.
The article was written by Patrick McBride, Pupil Barrister.
