England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEAL TRIBUNAL

		Royal Courts of Justice Strand, London, WC2A 2LL
		17 February 2004

Lord Justice Sedley :

The issue

1. This appeal represents a single stage in a protracted claim brought by the appellant against the university by which she was employed from 1 July 1995 until a disputed date in February or March 2001. The appellant, who suffered from depressive illness, applied in November 2000 for early retirement on grounds of ill-health. This was approved on 22 February 2001. On Friday 2 March she accepted retirement as from Wednesday 28 February. But she believed herself in law to have been dismissed and issued employment tribunal proceedings alleging that her employment had been terminated on 5 March (a date no longer relied on) and that, being disability-related, it was unlawful. She issued her claim on 1 June - within three months of 2 March but more than three months from 28 February.
2. The university put in an answer asserting, though not in this order, (a) that the application was out of time, (b) that the application recycled an earlier complaint which had been compromised and was therefore an abuse of process, (c) that the applicant had not been dismissed but had voluntarily retired, and (d) that if she had been dismissed the dismissal was not discriminatory. A preliminary hearing was directed on the time issue alone.
3. This has proved an expensive false economy, as the hiving off of preliminary issues often does. As this court has said before, it is only where the tribunal of first instance is satisfied that the costs capable of being saved substantially outweigh the costs capable of being wasted that trials should be split up. Here it is not only with hindsight that one can say that it would have been much better if the employment tribunal had dealt with the whole case, or at least with the issue of dismissal along with the issue of time.
4. The question that comes before us is nevertheless an important and difficult one. It is whether the effective date of termination of employment, which by law sets time running for lodging an originating application in the employment tribunal, is to be objectively determined or can be fixed by agreement between employer and employee.
5. The dilemma is crystallised in the finding of the employment tribunal:

"We find as a fact that the effective date of termination was 28 February 2001 and that this date, albeit a retrospective date, had been agreed between the parties."

Although it is not explicitly so found, the documents show clearly enough that it was on or after 2 March 2001 that 28 February was retrospectively agreed as the date of termination. On 2 March the appellant received a letter sent the previous day by the university which read:

"I understand from Cliff Marks that USS has agreed your ill-health retirement.

The University is assuming that the date of retirement should be 28 February 2001 and by copy of this letter I am asking Mr Marks to take action as necessary."

The appellant did not reply directly, but on that day she e-mailed all her colleagues to say:

"My recent application to take early retirement on the grounds of ill-health has been accepted, and I am writing to advise you that as of February 28^th, I am now a retired person."

6. The Employment Appeal Tribunal upheld the employment tribunal's decision that 28 February was the effective date of termination and the application consequently out of time. Judge Peter Clark nevertheless recognised that the question was important and gave permission to appeal.

The effective date of termination

7. The concept of the effective date of termination (EDT) is a statutory one. It has been present in the employment legislation since its origin in 1971. Its purpose is to give a fixed point of time by which to calculate such things as eligibility for protection against unfair dismissal, continuity of employment, loss of rights on reaching retiring age, the amount of the basic award and (as in this case) the time for lodging an originating application.
8. The material provisions in the Employment Rights Act 1996 are these:

97 Effective date of termination

(1) Subject to the following provisions of this section, in this Part "the effective date of termination" –

(a) in relation to an employee whose contract of employment is terminated by notice, whether given by his employer or by the employee, means the date on which the notice expires,

(b) in relation to an employee whose contract of employment is terminated without notice, means the date on which the termination takes effect, and

(c) in relation to an employee who is employed under a limited-term contract which terminates by virtue of the limiting event without being renewed under the same contract, means the date on which the termination takes effect.

(2) Where -

(a) the contract of employment is terminated by the employer, and

(b) the notice required by section 86 to be given by an employer would, if duly given on the material date, expire on a date later than the effective date of termination (as defined by subsection (1)),

for the purposes of sections 108(1), 119(1) and 227(3) the later date is the effective date of termination.

(3) In subsection (2)(b) "the material date" means –

(a) the date when notice of termination was given by the employer, or

(b) where no notice was given, the date when the contract of employment was terminated by the employer.

108 Qualifying period of employment

(1) Section 94 does not apply to the dismissal of an employee unless he has been continuously employed for a period of not less than [one year] ending with the effective date of termination.

109 Upper age limit

(1) Section 94 does not apply to the dismissal of an employee if on or before the effective date of termination he has attained -

(a) in a case where –

(i) in the undertaking in which the employee was employed there was a normal retiring age for an employee holding the position held by the employee, and

(ii) the age was the same whether the employee holding that position was a man or a woman,

that normal retiring age, and

(b) in any other case, the age of sixty-five.

111 Complaints to [employment tribunal]

…….

(2) Subject to subsection (3), an [employment tribunal] shall not consider a complaint under this section unless it is presented to the tribunal –

(a) before the end of the period of three months beginning with the effective date of termination, or

(b) within such further period as the tribunal considers reasonable in a case where it was satisfied that it was not reasonably practical for the complaint to be presented before the end of that period of three months.

(3) Where a dismissal is with notice, an [employment tribunal] shall consider a complaint under this section if it is presented after the notice is given but before the effective date of termination.

119 Basic award

(1) Subject to the provisions of this section, sections 120 to 122 and section 126, the amount of the basic award shall be calculated by –

(a) determining the period, ending with the effective date of termination, during which the employee has been continuously employed,

(b) reckoning backwards from the end of that period the number of years of employment falling within that period, and

(c) allowing the appropriate amount for each of those years of employment.

(2) In subsection (1)(c) "the appropriate amount" means –

(a) one and a half week's pay for a year of employment in which the employee was not below the age of forty-one,

(b) one week's pay for a year of employment (not within paragraph (a) in which he was not below the age of twenty-two, and

(c) half a week's pay for a year of employment not within paragraph (a) or (b).

203 Restrictions on contracting out

(1) Any provision in an agreement (whether a contract of employment or not) is void in so far as it purports -

(a) to exclude or limit the operation of any provision of this Act, or

(b) to preclude a person from bringing any proceedings under this Act before an [employment tribunal]

211 Period of continuous employment

(1) An employee's period of continuous employment for the purposes of any provision of this Act -

(a) (subject to subsections (2) and (3)) begins with the day the employee starts work, and

(b) ends with the day by reference to which the length of the employee's period of continuous employment is to be ascertained for the purposes of the provision.

212 Weeks counting in computing period

(1) Any week during the whole part of which an employee's relations with his employer are governed by a contract of employment counts in computing the employee's period of employment.

9. It is to be noted that the important provisions of s.97(2), which deny an employer any advantage by reason of the giving of short notice or no notice of dismissal, apply only to the computation of the qualifying period of employment (s.108) and the calculation of the basic award for an unfair dismissal (s.119). (The reference to s.227(3) is now obsolete, the subsection having been repealed in 1999.) The effect is that the subsection does not postpone the effective date of termination for the purposes of making a claim: here the employee who is dismissed summarily must start counting the three months from the day his or her job ends, not when by contract it should have ended.

The arguments

10. For the university Michael Duggan submits that there is no principle of law which prevents the parties to a contract from determining by agreement the date from which it is to be treated as terminated. In many cases, as he points out, the very fact that the arrangement is consensual will mean that no dismissal at all is involved. But one has only to think of a redundancy situation in which everyone is equally concerned to make the best possible provision for those who are losing their jobs to see that mutually agreed termination dates which do not correspond with the statutory formula may be quite common.
11. Mr Duggan has potent support for this view in the judgment of the EAT delivered by Peter Gibson J in Crank v HMSO [1985] ICR 1:

"In the present case it is a striking feature that it was the employee who himself suggested and asked agreement for 2 September 1983 as being the date from which his resignation was to take effect, and the employer's agreed to that. We think it is clear therefore that both sides intended that the contract should be terminated as of 2 September. Why, in those circumstances, should one not treat the effective date of termination, for the purposes of the statute, as being 2 September? Of course it is right that on the 13 September (to select one date by way of example) the contract of employment was still subsisting, but the position that we have to consider is that which has arisen in the light of the agreement between the parties. We think that the common sense answer to the question "When was the effective date of termination?" is that which the industrial tribunal reached. Both parties were therefore bound and we can see no sufficient justification to give the wording of the statute a special meaning so as to treat the termination as not having taken effect until a date later than that which the employee and the employers had agreed was the date of termination.

In Lambert v Croydon College [1999] ICR 409 this decision was challenged on the basis of an adverse commentary in Harvey on Industrial Relations and Employment Law but the EAT (Judge Peter Clark presiding) held that Crank was rightly decided, notwithstanding a fresh argument that it offended against s.203 by in effect sanctioning contracting out of the Act.

12. For the appellant, Richard Davison submits that the objection in Lambert to the decision in Crank was sound, both because of s.203 and - perhaps more important - because if it is right it permits other significant statutory calculations to be sidestepped and some of the statutory purposes to be subverted.
13. Thus, if the EAT is right, an employee whose notice of dismissal expires before he has been in the same employment for a year but whose employer agrees that he is to be treated as dismissed at a date falling beyond the year will acquire by agreement the right not to be unfairly dismissed which he is explicitly denied by s.108 of the statute. Similarly an employee whose notice expires after the first year has elapsed, and who has therefore gained the protection of the statute, if he then agrees to treat the dismissal as antedating the anniversary will forfeit the protection which he had acquired.
14. So too with continuity of employment, which is determinative of such things as eligibility for protection (s.108) and the computation of a basic award (s.119). A period of continuous employment is defined by s.211(1)(b) as ending with the day by reference to which its length is to be ascertained for the particular statutory purpose. This provision too, Mr Davison submits, falls away if the parties can redefine the terminal date by agreement. As Lord Denning MR pointed out in Wood v York City Council [1978] IRLR 228, employment is continuous under the statute so long as it with the same employer, "even though [the employee] may change the terms of his contract of employment and enter into a new contract of employment". Can the parties then agree that, whatever the statute says, the employee's continuity of employment is to be treated as having been broken at some date earlier or later than the EDT? If they can, an agreed backdating might mean for example that the basic award for an employee with two or more years' service had to be computed as if he had only a year's service. Or an employee with many years of what the statute treats as continuous service might find his rights confined by agreement to the tail-end of that period. Likewise an agreed postdating of termination would require tribunals to treat employment as continuous when, according to the Act, it was not. Redundancy rights too can be affected by consensual alteration of the date of termination.
15. The upper age limit for job protection is normal retiring age or, in its absence, 65. Under s.109 this is to be gauged at the effective date of termination. Here too, Mr Davison points out, the substitution of an agreed date for the statutory one may have major implications if the effective date of termination can be advanced by agreement so as to give an employee rights which under the statutory code he is too old to claim, or retarded by agreement so as to take away, on grounds of age, rights which the statute has given him.
16. In relation to the computation of time for bringing a claim, Mr Duggan has not sought to resist Mr Davison's proposition that liberty to fix the effective date of termination by agreement could result in its being advanced by three months or more, putting it beyond the employee's power to present any claim within time (at least without a discretionary dispensation, assuming that he can establish under s.111(2)(b) that it was not reasonably practicable to present the complaint within 3 months of the EDT). This too, Mr Duggan contends, is within the logic of the freedom of the parties to arrange their affairs. The same answer necessarily follows, as Mr Duggan was constrained to accept, in all the foregoing instances. It does him no injustice to say that his stance nevertheless remained the straighforward one expressed by Peter Gibson J in Crank. If it can be lawfully done, he submits, the problem of contracting out does not arise, since the true - that is the contractual - EDT will anticipate and supplant the statutory one.

Discussion

17. In all such cases there may well be good reasons, possibly to do with tax liability or pension provision, why an employee may agree to such re-dating, and accounting or other reasons why an employer, without obliquity, might propose it. In addition, however, (and this goes to the problem of contracting out) the possibility of re-dating the termination gives rise to a real risk that one party will by agreement secure an advantage under the Employment Rights Act 1996 which the statute itself denies them and which the other might not have wanted to concede. Moreover, if the end date of employment can be the subject of an agreement which overrides the statute, so presumably can the start date, with many of the same potential consequences. It is also at least arguable, as Mr Davison submits, that if a fictitious date can be made effective for statutory purposes, so can a fictitious reason for dismissal: for example, by providing in the contract of employment that any dismissal shall be deemed to have been for good cause.
18. Among the many effects of consensual re-dating not argued or therefore considered in Crank, two deserve particular attention. One concerns the purpose of s.97(2) and (3), which is to deny an employer the advantage of giving short notice or no notice of dismissal in relation to the computation of the qualifying period of employment or the amount of the basic award of compensation. If by securing agreement to an earlier, fictitious, date of termination an employer who gives less than due notice can deny the employee all protection against unfair dismissal or an element of the basic award assured by statute, the policy and objects of these two subsections are nullified.
19. Secondly, there seems to be no answer to the proposition that the EAT's decision disrupts the scheme for determining continuity of employment. Judge Peter Clark put the EAT's answer this way:

"All roads lead back to s.97(1)(b). What was the EDT? If, in this case, it is 28 February then no relevant provision of the Act is excluded or limited. That is the end date for the purposes of limitation, continuity and the calculation of the basic award in accordance with the relevant statutory provisions" (para. 26).

This, with great respect, is a petitio principii - reasoning which assumes the very thing which requires decision. If one starts from the proposition that 28 February was the appellant's EDT, everything else of course follows. But if one asks whether 28 February was in law her EDT, it is the roads which lead back to s.97(1)(b) and not s.97(1)(b) which determine the answer.

20. That answer in my judgment is that the effective date of termination is a statutory construct which depends on what has happened between the parties over time and not on what they may agree to treat as having happened. This was in fact the approach adopted by the EAT, again with Judge Peter Clark presiding, in Caines v Hamon-Lummus Ltd (unreported, 11 January 1996). There the EAT upheld the industrial tribunal's view that, in ascertaining the starting date of a period of continuous employment under what was then the Employment Protection (Consolidation) Act 1978, only the statutory provisions (viz those now found in s.211 of the 1996 Act) were admissible. In my judgment the same is true of the other elements of the statutory computation of time.
21. This is not for a moment to say that for purposes outside the statute the parties are not free to make binding agreements of this kind. As Mr Davison has rightly accepted from the start, all kinds of contractual arrangement may legitimately be made for pension and other purposes which fix suitable dates that do not correspond with events. Even then, no doubt, the fiscal effect of fictitious arrangements may be open to challenge by the Inland Revenue; and so forth. We are not concerned, it should be noted, with a compromise of a genuine factual dispute about dates. We are concerned here with the impact of voluntary arrangements on the provisions of a statute which, it is worth recalling, bears the short title of the Employment Rights Act.
22. The foregoing is in my judgment enough to conclude this appeal in Ms Fitzgerald's favour. But if it were not, s.203 would in my judgment do the same. The consensual arrangement relied on by the university as antedating the termination of her employment to 28 February falls squarely within the description of a "provision in an agreement [which] … purports to limit the operation" of s.111, and through it s.97, of the Act. The word "purports" is not designed only to catch provisions which expressly claim to have such an effect. It is there to take account of the fact that s.203(1) makes such provisions void. Mr Duggan concedes, in answer to a question put by Lord Justice Jacob, that an agreement which - taking the present facts - set 2 March as the date of termination but backdated the time for presenting a complaint to 28 February would be void. The distinction between that and the present situation seems to me to be one without a difference of principle.

Conclusion

23. I would therefore allow this appeal on the ground that, on the facts found by the employment tribunal, the effective date of termination of Ms Fitzgerald's employment was not earlier than 2 March 2001, with the consequence that her complaint was presented in time. I would remit the claim to the employment tribunal so that it can determine the remaining issues.

Lord Justice Jacob:

24. I agree.

Lord Justice Brooke:

25. I also agree.