Guilt by association has NEVER been an acceptable ground for dismissal, and in over 20 years as a trade union steward in the local government sector
I never saw it put forward as a ground for disciplinary action by an employer.
Would be interested in reading details of where it was successfully used by an employer to dismiss a group of employees without direct evidence against each individual.
Whitbread & Co. plc v. Thomas
Monie v Coral Racing
Parr v Whitbread
All were blanket dismissal cases. In Whitbread & Co plc v Thomas, the management of an Off Licence were unable to identify, after detailed investigation, which of three employees had been guilty of stock losses. All three were dismissed, and this was held to be fair.
As long as an employer can demonstrate:
(a) that the act, if committed, would justify the dismissal of the employee
(b) that the act was committed by one or more members of a group and any member of that group could have been responsible
(c) that after a proper investigation, the employer is unable to identify who is responsible
Then they are entitled to dismiss the entire group.