England and Wales Court of Appeal (Civil Division) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		2nd February 2011

Lord Justice Maurice Kay:

1. This is an appeal from the order of the Employment Appeal Tribunal, HHJ McMullen QC, Sir Alistair Graham and Ms G Mills, ("EAT"), which partly allowed and partly dismissed an appeal by the appellant, Ms Carol Ward, from a remedies decision of an employment tribunal ("ET"). An earlier ET decision on liability was not appealed. It had found that the appellant had been unfairly dismissed by the respondent in circumstances where the automatic unfair dismissal provisions of section 104 of the Employment Rights Act 1996 applied. In short, she had been dismissed for asserting her statutory right to be provided with written particulars of her employment pursuant to section 1 of the Employment Rights Act 1996.
2. Automatically unfair dismissal in such circumstances is remediable even though the employee does not have one year's continuous employment, which is the usual qualification for unfair dismissal claims. This appellant had been employed by the respondent for a considerably shorter time.
3. The ET awarded the appellant £1,841.80 as a compensatory award for unfair dismissal, plus an additional £1,320 pursuant to section 38(3) of the Employment Act 2002, which applies to an employer's breach of section 1 of the Employment Rights Act; thus the total awarded was £3,161.80. It rejected as an eligible item for the compensatory award a part of the claim based on loss of benefits in kind. It also refused to apply an uplift to the award pursuant to section 31(3) of the 2002 Act.
4. The EAT concluded that the ET had erred in these latter two respects by its order. It added £1,060 to the compensatory award in relation to benefits in kind (accommodation and meals). This increased the award to £4,221.80 to which it then applied a 50% uplift pursuant to section 31(3) for non-compliance with statutory disciplinary procedures. The total award therefore became £6,332.70 plus interest. The appeal to this Court relates to the compensatory award, which is said to fall foul of section 123(1) of the 1996 Act, which provides:

"Subject to the provisions of this section … the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

I now turn to the facts, which I take primarily from the judgment of the ET on liability.

5. The appellant began to work for the respondent as either a housekeeper or head housekeeper on 7 January 2008. She began working at the respondent's home in Surrey. There was little in the way of formality to mark the commencement of her employment and she was not given a letter of appointment. Even the title and extent of her role were not confirmed in writing. The household included four other housekeepers, a chef and a driver.
6. The position had been offered to the appellant by Mr Paul Wells, who was then employed as a butler/manager. However, he soon left his position to be replaced on 1 February 2008 by Mr Graham Stephenson. The ET accepted that Mr Stephenson had authority to dismiss staff.
7. The appellant described her housekeeping duties as including shopping, purchasing flowers, laundry, dry cleaning and associated financial accounting; all such duties carried out at the direction of Mr Wells and later Mr Stephenson. Very soon after Mr Stephenson took up his position the appellant became concerned that her authority was being undermined because a variety of tasks that she had previously performed under the direction of Mr Wells were removed from her sphere of responsibility by Mr Stephenson. He also criticised some aspects of her work, such as alleging that she had not laid the table properly. She began to believe that he was behaving badly towards her in an attempt to make her resign.
8. The appellant said that the issue of a contract of employment was raised on two occasions before she was finally dismissed; first when Mr Stephenson expressed surprise that she was not bound by a confidentiality clause, and on another occasion when he made a comment that staff at private households are not issued with contracts of employment.
9. Whilst all this was going on it seems that the respondent's solicitor was instructed to prepare draft contracts of employment for each of the respondent's employees, including the claimant. On about 29 February 2008 a copy of each draft contract was given to Mr Stephenson with directions to deliver it personally to the relevant member of staff. He was instructed to have each member of staff sign the contract and return the signed copies to the solicitor. The intended contract provided for a probationary period of three months and other terms and conditions, including a defined job title, detailed particulars of an employee's duties to be set out in a job description, written notice of dismissal, a three-stage grievance procedure and a four-stage disciplinary and dismissal procedure. In the event Mr Stephenson failed to distribute the draft contracts of employment to any of the employees.
10. On 10 March 2008 the appellant spoke to Mr Stephenson. During that conversation, which is said to have been amicable, she asked for a job description because she had become concerned by Mr Stephenson's actions and she wanted to clarify what her duties and status were. Mr Stephenson replied that her job description had been sent to the respondent three times and each time proposed adjustments had been marked by her in red ink. The ET concluded that the appellant was led to believe that a contract of employment containing terms and conditions of her appointment was being prepared on the very day of the 10 March. However, unbeknown to the appellant Mr Stephenson had been in possession of the draft contract for approximately ten days.
11. Later that day there was a further meeting between the appellant and Mr Stephenson. He told her that she was no longer permitted to go into the main house and that she no longer worked there. She was bewildered; she did not accept his criticisms of her work or her relationship with other members of staff. That was the last day upon which she worked.
12. Later in its judgment the ET said at paragraph 34:

"We find that Mr Stephenson deliberately withheld issuing the written terms of employment that had been forwarded to him […] when the claimant made her request. It was apparent from the evidence that Mr Stephenson had no grounds on which to withhold the written terms, the instructions to him had been clear and unequivocal."

13. The ET further found that Mr Stephenson had deliberately misled the appellant. It added at paragraphs 36 to 39:

"36. …It is the Tribunal's view that, by 10 March 2008, Mr Stephenson had decided that he would dispense with the [appellant's] services. He would have been familiar with the contents of the terms and conditions and may have had concerns at the prospect of [the appellant] being issued with a document setting out her job title, job description and contractual rights and that she would be in a position to enforce them. We conclude that set against the disagreements that had arisen between them about her role and duties and Mr Stephenson's view that [she] was a disruptive influence on the household he preferred to terminate her employment unhindered by the prospect of her invoking any rights to which she was entitled, that were set out in the draft contract.

37. …The tribunal concluded that when on 10 March 2008 [the appellant] asked Mr Stephenson for a job description she was asserting a statutory right to be given a copy of the written statement of particulars of her employment. We find that [her] act of asking for her contract amounted to an assertion to the Respondent that her statutory right had been infringed within the meaning of Section 104(b) of the Act.

39. …We are satisfied that Mr Stephenson had [her] in his sights as an employee whom he intended to dismiss. We are satisfied that [she] would in all likelihood have been dismissed within a short time. The Tribunal considered it likely that Mr Stephenson chose the occasion ... to dismiss her to avoid giving her the opportunity of stalling or challenging his decision. Therefore, the Tribunal found, on the balance of probabilities, that the principal reason for her dismissal was that [she] asserted a statutory right to be given a written statement of particulars of employment."

The case was then adjourned to a remedies hearing which took place on 30 November 2008 and which resulted in the award of compensation, as I have previously related.

14. The judgment on remedies is relatively short but refers back to, and by implication incorporates, the findings in the liability judgment. The paragraph in the remedies judgment which has given rise to this appeal is paragraph 9, which states:

"Turning then to the compensatory award, we recognize that the minimum period of notice would have been one week or one week's pay in lieu of notice, pursuant to section 86A of the 1996 Act; however, in awarding a compensatory award the Tribunal must have regard to what it considers would be a just award having in mind what a reasonable period of notice would be. We considered that [the appellant] by working in a residential position might reasonably expect to receive one month's notice in order to have sufficient time to arrange her affairs, which would include finding alternative accommodation.  We find that the Claimant did not fail to mitigate her loss during that initial one month period.  The Tribunal therefore awards [the appellant] compensation of one month's pay for the period commencing 1 April 2008 which we understand from the parties to be the sum of £1,841.80."

It follows from that that the period for which the appellant was actually compensated was from 10 March until the end of April, namely a period slightly in excess of seven weeks.

15. A dismissal which is automatically unfair by reason of Section 104 of the 1996 Act gives rise to consideration of a compensatory award pursuant to Section 123. It is submitted on behalf of the appellant that the ET fell into error by misdirecting itself in relation to Section 123. Instead of assessing the award on the basis of what was "just and equitable... ", it referred simply to what was "just", omitting reference to "equitable", and compounded its error by adding the words "having in mind what a reasonable period of notice would be". The submission is that the reference to "a reasonable period of notice" suggests that the ET slipped into the methodology of common law damages for wrongful dismissal.
16. I do not accept these criticisms. The omission of the word "equitable" was not a material legal error. I know of no case in which an element of compensation that was "just" that was not also "equitable". Moreover, I am quite sure, as was the EAT, that the ET had the 40-year-old "just and equitable" test well in mind. As regards the prominence given to reasonable notice, it cannot be said that it was an irrelevant consideration in connection with the assessment of compensation pursuant to Section 123 in this case.
17. The central complaint about the approach of the ET can be discerned in the question posed in the appellant's skeleton argument:

"Should future loss in an automatically unfair dismissal case be based on the employee's contractual rights or on her right not to be unfairly dismissed?"

18. It seems to me that this is a false antithesis. The fact that contractual rights played a part in the assessment of compensation in this case does not mean that the ET was limiting itself to a common law rather than a section 123 approach. Where an employee who does not have one year's continuous employment, and her dismissal is automatically unfair by reason of section 104 and for no other reason, it may be the case that, but for section 104, the employer could dismiss the employee within the one year without any exposure to liability for unfair dismissal. Much will depend on the evidence in the particular case. If the finding is that, but for the dismissal prompted by the assertion of a statutory right, the employment relationship would probably have continued for the foreseeable future, the door may open to a compensatory award with a substantial element of loss of future earnings. In the present case, however, the evidence is significantly different. I refer again to the findings set out in the liability judgment, especially those at paragraphs 36 and 39.
19. Thus, with or without an assertion by the appellant of her statutory right to written particulars, she would have been dismissed "within a short time" and certainly before she had established one year's continuous service. In my judgment that incontrovertible finding of fact is fatal to the main ground of appeal.
20. This analysis is founded on an application of well-known principles, of which Polkey v AE Drayton Services Ltd [1998] ICR 142 is the leading illustration. For present purposes, the best example is O'Donoghue v Redcar & Cleveland BC [2001] EWCA Civ 701, [2001] IRLR 615, where Potter LJ, giving the judgment of the court, said at paragraph 44:

"An Industrial Tribunal must award such compensation as is 'just and equitable'.  If the facts are such that an Industrial Tribunal, while finding that an employee/applicant has been dismissed unfairly (whether substantively or procedurally), concludes that, but for the dismissal, the applicant would have been bound soon thereafter to be dismissed (fairly) by reason of some course of conduct or characteristic attitude which the employer reasonably regards as unacceptable but which the employee cannot or will not moderate, then it is just and equitable that compensation for the unfair dismissal should be awarded on that basis."

21. It is submitted on behalf of the appellant that that approach is expressly limited to the situation where the later hypothetical dismissal would have been in itself "fair". In my judgment, however, it also applies where the later hypothetical dismissal would have occurred within the first year of the contract and would not therefore, without more, have attracted the statutory protection of the unfair dismissal provisions. The harsh reality of this case is that, absent the engagement of the automatically unfair dismissal provision, the respondent could and would have dismissed the appellant without liability for unfair dismissal before the end of the first year. As Mr Solomon puts it:

"for any reason or none, provided that it was not a reason made unlawful by statute."

For these reasons, I reject the main ground of appeal.

22. At this point I interpose that when Smith LJ granted permission to appeal she did so because, in particular, she thought it arguable that:

"Given that the contract provided for a staged disciplinary process, it seems unlikely that the appellant could have been fairly dismissed within a month."

However, there are, with respect, insuperable difficulties with this analysis, not least the fact that "the contract" containing disciplinary and grievance procedures never became the subject of agreement with the appellant to whom its provisions were not communicated prior to her dismissal. Indeed, she was dismissed for seeking to assert her statutory rights in that regard. Moreover, even if it had been, its express provisions described the disciplinary procedure as "non-contractual" and stipulated that no notice of dismissal would be required during the three-month probationary period which had yet to expire when the appellant was dismissed. In any event, the prescribed procedure, if it had applied, was not tied to a timescale and it is reasonable to suppose that in domestic employment it would be operated speedily. As it was, the appellant was compensated not just for a month but for a period of seven weeks.

23. I now turn to a point that drifted into this appeal by a side wind and without having been foreshadowed in the grounds of appeal, the skeleton argument or in the proceedings below. It is in the form of a submission that, once automatically unfair dismissal was established, the appellant could rely on the provisions in the Employment Act 2002 relating to disciplinary procedures so as to contend that the hypothetical future dismissal would itself have been unfair with the result that the appellant failed to be equiparated with a person who had one year's continuous service.
24. The short answer to this point is that, in view of the way in which it materialised at the hearing, we should simply decline to deal with it. However, if correct, it would have serious implications and in these circumstances I propose to address it.
25. The submission is advanced in the context that at the EAT it was accepted, or at least not disputed, that the ET had been wrong not to apply an uplift to the award by reference to section 31(3) of the 2002 Act. It is now suggested that by applying such an uplift the EAT was tacitly accepting that a person in the position of the appellant -- a person subjected to automatically unfair dismissal in the first year of her employment -- has all the statutory rights and remedies of a person who has one year's continuous employment. In other words, although she began without the right to claim unfair dismissal on the simple ground of non-compliance with the statutory disciplinary procedure, she was shoehorned into such a right by the automatically unfair dismissal. I am satisfied that this submission is simply wrong. Section 33 of the 2002 Act does not provide a foundation for an unfair dismissal claim in year 1. What it does is to provide for the application of an uplift to an award in the event of non-compliance with the statutory disciplinary procedure, and it does so regardless of whether the employee had accrued one year's continuous service.
26. Although an employee without such service is not in a position to establish unfair dismissal simply on the basis of such non-compliance, if she establishes automatic unfair dismissal pursuant to one of the statutory provisions the non-compliance may result in an uplift. This is apparent from section 31(3), which provides that, where it applies, a tribunal "must... increase any award which it makes to the employee" by between 10 and 50%
27. In my judgment the EAT extended to the appellant all the benefit that she could derive from the 2002 Act in general, and that provision in particular, when it corrected the failure of the ET to apply an uplift; it did so to the maximum permitted. This analysis is consistent with the approach of the EAT in Scott-Davies v Redgate Medical Services [2007] ICR 348 where HHJ McMullen QC, at paragraph 13, rejected a submission that section 38 grants a freestanding right to bring an unfair dismissal claim within the first year.
28. The final ground of appeal is in the form of a reasons challenge. It is said that the reasoning of the ET in relation to compensation fell short of what is required by Meek v City of Birmingham District Council [1987] IRLR 250. I do not agree. The remedies judgment which incorporates and must be read with the liability judgment may be laconic in places but it is clearly sufficient to be Meek compliant. It is quite obvious why the ET found as it did on these issues. It was somewhat bare on the issues which later came to be corrected by the EAT. However, there is no remaining issue in relation to those matters.
29. For all these reasons I would dismiss this appeal.

Lord Justice Stanley Burnton:

30. I entirely agree.

Lord Justice Gross:

31. I also agree.

Order: Appeal dismissed