The Claimant was employed as a financial consultant by Your-Move (YM) in their Estate Agency Division. He was dismissed for failing to disclose that he had been made bankrupt; this was only discovered when a member of the HR team carried out a Google search.

There was no express term in the Claimant's contract, nor any policy or regulatory requirement that applied to him, that specifically required him to disclose his bankruptcy.

However, the employment tribunal (ET) found that YM had dismissed the Claimant because it nevertheless believed that, in all the circumstances, he knew or should have appreciated, that it would regard his bankruptcy as a serious matter, and would have expected him to disclose it, and that he had deliberately not done so.

The ET found that YM was entitled to view this conduct as warranting dismissal, and that the overall disciplinary and appeal process was fair. The Claimant appealed. The Employment Appeal Tribunal (EAT) concluded the ET did not err in finding this to have been a fair dismissal.


While this judgment will no doubt have come as a relief for YM, the outcome may have been different if the Claimant (who was unrepresented) had made more of his arguments at the ET stage. The EAT expressly acknowledged in its judgment that it was not in a position to reconsider questions of fact found at the ET or allow a rerun of the evidence, some of which may have had more of a bearing on the original outcome.

The key learning point to take away is that, while in this particular case there was no express term of contract (nor policy) requiring the Claimant to disclose his bankruptcy, employers would be prudent to ensure that such a provision is incorporated (along with any termination for cause provisions), if they do not already have this in place. There should also be a provision in the Articles of Association providing that directors will be required to cease their duties if they are declared bankrupt. If any advice or guidance is required on this, please contact us (details below).

This is particularly relevant to employers who have employees holding positions of trust or responsibility (for example, managing the employer's finances), who would be unable to work because of bankruptcy restrictions (very relevant in the financial services sector), or where they are under-performing as a result of their bankruptcy. Employees with financial problems will understandably suffer considerable stress and possibly illness, which may affect their performance.

It is interesting to note that, while the Claimant was employed by an authorised firm, he was not carrying out his function for the authorised firm, but rather for the firm that was its appointed representative (First Complete). Additionally, even though the activities and the dismissal pre-dated the Senior Managers and Certification Regime (SMCR) taking effect for firms such as YM, the Claimant would, at the time, have required to be registered with FCA (and thus approved as "fit and proper") if he were involved in certain customer-facing or management roles. He was not so registered. Being (previously) an approved person and, since the advent of SMCR a senior manager or certification employee and the attendant "fit and proper" test would have required the firm to check the Claimant was, among other things, honest and solvent, so the link to both the bankruptcy and the lack of its disclosure would have pointed to a more obvious right to dismiss. However, the fact that the Claimant was not subject to these tests made no difference to the firm when deciding to dismiss him. Although on the facts of the case it is clear the bankruptcy was not the only issue the firm had had, it is nevertheless interesting that the firm felt, and the ET and the EAT did not disagree, that bankruptcy in an individual holding the Claimant's position merited dismissal regardless. In the regulatory context it is also useful to note that it is sometimes the failure to disclose that is a more serious issue than the underlying issue.

YM had argued that it regarded the Claimant's bankruptcy as a matter of serious concern and expected the Claimant to disclose this. It relied on the Claimant's wider experience and prior employment in the regulated sector in concluding that it was likely he would have been subject to the application of structured training and supervision programmes, enforcing the high standards required of those performing a regulated activity. However, it will not always be the case that someone has this experience and there may well be circumstances where it is much harder to persuade an ET it was reasonable to take this view. As a result, employers should ensure that (aside from the contractual position) their expectations/ requirements are also made clear via induction, training and/ or compliance updates.

The disciplinary charges also referred to a breakdown in trust and confidence but this was said to be a consequence of the Claimant's failure to notify YM of his bankruptcy (found to be the principal reason for dismissal) and his inability to operate as a financial consultant due to the loss of authorisation with First Complete. The EAT accepted this.

Employers can find out if an employee (or potential employee) is bankrupt by carrying out a search at the Individual Insolvency Register where, amongst others, details of all bankruptcies that are current or have ended in the last three months are recorded.

Finally, it is worth emphasising that some bankrupt employees can continue to work effectively (particularly with their employer's support) and it should not be a default position to consider dismissal. Suspending or, in extreme cases, dismissing a bankrupt employee may expose an employer to an unfair dismissal claim – as with this case. There may also be grounds for a wrongful dismissal claim where there is deemed to be a breach of contract (ie where the employee is dismissed without notice for gross misconduct and the employer did not have grounds for doing this). The fact that an employee is declared bankrupt is not sufficient for an employer to fairly dismiss them; however, there may be circumstances to justify a dismissal where the bankruptcy clearly affects the employee's ability to work. Early advice should be sought where this may be the case.

If you have any queries resulting from this article, or need any support or advice on this topic or others that are related, please do not hesitate to contact Ben Duxbury (Managing Associate, Employment), Dan Fawcett (Legal Director, Employment) or Emma Radmore (Legal Director, Financial Regulation).

This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.