Industrial Tribunals Northern Ireland Decisions

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URL: http://www.bailii.org/nie/cases/NIIT/2008/00451.html
Cite as: [2008] NIIT 451_8IT, [2008] NIIT 451_08IT

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THE INDUSTRIAL TRIBUNALS

CASE REF: 00451/08

CLAIMANT: Kevin H Ramsey

RESPONDENT: RPS Ireland Ltd

DECISION

The unanimous decision of the tribunal is that the claimant was not constructively dismissed and that there was no breach of contract in relation to a discretionary bonus scheme.

Constitution of Tribunal:

Chairman: Mr Kelly

Members: Mr H McConnell

Mr R Hanna

Appearances:

The claimant was represented by Mr Michael Potter, Barrister-at-Law, instructed by E J Lavery & Co Solicitors.

The respondent was represented by Mr Conor Hamill, Barrister-at-law, instructed by Judith Blair Solicitors.

THE ISSUES

The issues for the tribunal to determine were;

Whether the claimant had been constructively and unfairly dismissed by the respondent.

Whether the respondent had breached the claimant’s employment contract in relation to a discretionary bonus scheme.

FINDINGS OF FACT

The claimant is a 53 year old chartered engineer with 30 years professional experience. After qualifying as an engineer, he started work for Kirk McClure and Morton and became an equity partner in that firm in 1994. That firm was taken over by the respondent 10 years later in 2004. In common with the other equity partners in Kirk McClure and Morton, the claimant sold his share of the business to the respondent for a significant sum, which was payable in instalments in cash and shares over a 3 year period. The last instalment was paid in or around September 2007. He became an employee of the respondent in 2004 as part of the takeover deal.

The respondent is part of a group of limited companies arranged in a pyramid structure. At the apex of that pyramid is RPS Group Plc which is a company incorporated in Great Britain. The next and lower level comprises a group of limited companies including RPS Group Limited, a company incorporated in the Republic of Ireland. The Chief Executive Officer of that company is Mr Frank Ferguson. That company controls four limited companies at the next and lowest level of the structure. One of those four companies is RPS Ireland Limited, the respondent in this case. It is based in Belfast and at the relevant time employed approximately 211 employees arranged in different sections. One of those sections was called section 30. It dealt with water and sewerage projects. Another was called section 45. It dealt with ports and harbours projects.

The job titles used within RPS Ireland Limited were confusing and bore no relationship to the technical and statutory meaning normally given to those titles under companies legislation or in common usage.

The most senior person in RPS Ireland Ltd was Mr Eric Porter. He was described as the managing director. Beneath him in the chain of line management was Mr Jonathan Hegan, who, like the claimant, was a former equity partner in Kirk McClure and Morton. His title was Chairman. At the next level there was a group of senior managers who were each in charge of a section. Confusingly, they were given the title of “directors”. The director of section 30 was the claimant. The director of section 45 was Dr Michael Shaw.

Beneath the directors were associate engineers and then graduate engineers.

There were 4 associate engineers in section 30 ie at the management level below the level of director. These included Mr Kieran Dillon and Mr Ken Gregg. One of the graduate engineers working to Mr Dillon and through him to the claimant was Mr Gavin McFarland.

Mr McFarland had worked for the respondent since qualifying in 2005. He had always worked within section 30 on water engineering projects. He had a particular interest in using computer software to model sewerage systems ie to predict how planned sewerage or drainage systems would perform (or not) in particular circumstances.

The claimant in evidence stated that he, and each of the directors, was solely responsible for the management of their sections. His role was “exactly as a partner”. He took the decisions in relation to staffing within his section. He was “in charge”. Mr Hegan agreed that after Kirk McClure and Morton was taken over, and operated as the respondent company, the directors continued to work as they had when they were an equity partnership. Each director regarded himself as autonomous in his own area. Both the claimant and Mr Hegan felt that it was contrary to the culture and ethos of the respondent company not to seek the claimant’s permission before a graduate engineer was moved from section 30 to section 45.

Nevertheless the claimant was an employee of the respondent and was answerable, through Mr Hegan, to Mr Porter and ultimately to Mr Ferguson in Dublin. The claimant was no longer an owner, or part owner, of the business.

Each director compiled a brief monthly report which covered all management issues affecting their section, including whether or not their annual budget target would be met. Those directors’ reports were then collated by the Financial Director in Belfast and would be submitted by RPS Ireland Limited to a monthly RPS Group Limited meeting in Dublin. Mr Porter would have attended those meetings in Dublin on behalf of RPS Ireland Limited and would have reported to Mr Ferguson who acted on behalf of RPS Group Limited. Those meetings would also be attended by Mr Porter’s colleagues from the three other limited companies within the group which were based in Dublin, Cork and Galway.

A major part (approximately 60%) of the work of section 30 in 2006 was a consultancy framework dealing with water projects within Northern Ireland. That work abruptly came to a halt in September/October 2006. The client intended to resume the work at some point in the future but there was no indication at that time as to when that resumption was going to occur. That meant that approximately £60,000 per month in fees was no longer being earned by section 30, while the overheads for the section remained substantially the same. The claimant managed to identify some additional work for his section including work in relation to a fish plant in Donegal, but there was a significant reduction in workload and therefore a significant reduction in the profitability of section 30. The fish plant contract depended on planning approval being granted and in 2007, and for the short term, was unlikely to produce any improvement in the position of section 30. The anticipated profit margin fell from approximately 20% to a figure of between 10% and 12.5%. That anticipated profit margin took account of figures in the section’s accounts in respect of work in progress. Matters would have been significantly worse if some staff had not left at that time, including Mr Matthew Greene, the engineer with primary responsibility for computer modelling and the person who had trained Mr Gavin McFarland in that particular area of work.

The claimant reported the downturn in work and the consequent effect on actual and projected profitability in his monthly section reports. That information was then passed on a monthly basis to RPS Group Limited and Mr Ferguson in Dublin. The claimant’s monthly reports were also discussed in Belfast at a monthly meeting of directors of RPS Ireland Limited with Mr Porter. In August 2007, Mr Ferguson came to Belfast to meet both Mr Hegan and the claimant to discuss the position of section 30. Mr Hegan was asked to take over the running of Section 30 with the claimant. Mr Hegan’s evidence was that he did not do so. There appears to have been some ambiguity about the precise task given to Mr Hegan at this meeting. However it is clear that he was to work with the claimant to produce a solution to the problems facing section 30 and, in so doing, to review the structure, staffing and work of the section. No specific time limit was given for this task but Mr Ferguson stressed that it was urgent. The claimant remained in charge of Section 30 but Mr Hegan worked with him in relation to his review of the structure and staffing of the section. Mr Hegan examined the section’s accounts and reassessed the work in progress figures which he felt were “ambitious”. During the September 2007 directors meeting in Belfast, the claimant gave assurances to Mr Porter and to his director colleagues that he was looking at options for restructuring his team and at the performance of individuals. He was preparing a report to be delivered to a strategic conference of RPS Group Limited on 19 October 2007. In early October 2007, Mr Porter circulated to Mr Ferguson, and to the Belfast directors, the preliminary results of the reassessment of work in progress. A figure substantially in excess of £100,000 had to be written off as irrecoverable. This immediately made the financial position of section 30 significantly worse.

Dr Michael Shaw was the director in charge of section 45 which dealt with ports and harbours projects. This section was, in contrast to section 30, extremely busy in 2007. “A couple of months before October 2007”, Dr Shaw realised that he needed to acquire staff from elsewhere within the respondent company. Attempts at external recruitment, which had involved the use of a specialist recruitment agency, had been unsuccessful. During August and September 2007, Dr Shaw had several brief and informal conversations with Mr Hegan who, as with the claimant, was his immediate line manager and who reported in turn to Mr Porter. Work pressures were discussed during these conversations but Dr Shaw was unable to recall whether the movement of staff from section 30 to section 45 had been specifically mentioned. He was however fully aware of the downturn in section 30’s work. At the Belfast directors meeting on 21 September, he had raised the general possibility of internal staff transfers into section 45 with Mr Porter and the other directors for the first time. After that meeting on 21 September 2007, the claimant asked one of the section 30 associate engineers to speak to the section 45 associate engineer to see if section 45 work could be transferred to section 30. Nothing came of this meeting.

Dr Shaw’s evidence was that approximately one week before 16 October, he raised with the claimant the possibility of Mr McFarland transferring to section 45. He stated that this suggestion elicited a frosty response from the claimant. The claimant had no recollection of that meeting but stopped short of denying that it had taken place. The tribunal concludes that it would not have been inappropriate, in such circumstances, for Dr Shaw to have raised the possibility of specific staff movements. However, while the tribunal sees no reason to doubt Dr Shaw’s bona fides in giving evidence, it was obvious that some of his recollection was shaky at best. His evidence in chief was that he had, at this meeting, said that Mr McFarland was “the ideal candidate”. In cross examination, he was vague and said that “my main memory is that the claimant said no”. When he was asked whether he was sure that it was a one word response he said “No”. The tribunal therefore concludes that Dr Shaw’s recollection of these events is hazy and that, on the balance of probabilities, Mr McFarland was not specifically mentioned at this meeting in the context of a possible move to section 45 or at all. It is however highly probable that the issue of transferring staff from section 30 to section 45 was discussed.

Over the same period in the run up to 16 October 2007, Dr Shaw had discussions with Mr Hegan on two to three occasions during which Dr Shaw mentioned the possibility of moving Mr McFarland to section 45. However the claimant was neither included in those discussions nor informed of them.

On 15 October, at approximately 5pm, the claimant was on his way out of the office to go home. He stopped at Mr Hegan’s office. Mr Porter was present. Mr Porter asked him what he was doing about releasing staff from his section. The claimant said that he would deal with this issue in his paper for the strategic conference a few days later. He offered to discuss his paper with Mr Porter on the afternoon of the next day.

Three different versions of this meeting were given in evidence. The claimant said that Mr McFarland’s name had not been mentioned at all in the course of the meeting. Mr Porter, in contrast, said that Mr McFarland’s name had been mentioned by both the claimant and Mr Hegan with Mr Hegan urging the claimant to consider moving him to section 45 and with the claimant being reluctant to agree to such a move. Mr Hegan’s recollection of the meeting differed from Mr Porter’s recollection and from the claimant’s recollection. He stated that Mr McFarland was mentioned by name in the context of a possible move to section 45, but only by Mr Porter. The tribunal notes that the meeting on 15 October was accidental and not pre-arranged. The significance of what was actually said or not said would not have been apparent to any of the witnesses at that time and no notes were taken. As events unfolded subsequently, the claimant’s memory and the memories of both Mr Hegan and Mr Porter have, in the opinion of the tribunal, become confused between what was actually said, what each witness wished had been said and what each witness assumed had been said. The tribunal does not believe that any of the three individuals deliberately sought to misrepresent the position when giving evidence. It seems clear that Mr McFarland had been mentioned by name in earlier discussions between Mr Hegan and Dr Shaw. He was clearly in the frame for a move to section 45. Given the circumstances, it would not have been at all unusual for his name to have been mentioned during the meeting on 15 October. On the balance of probabilities, the tribunal concludes that his name was at least mentioned at this meeting, but it is not possible to be sure who mentioned it or whether it was mentioned when the claimant was in the room.

Mr Peter Downe was a director of the UK parent company, RPS Group PLC, with specific responsibility for business in the Republic and in Northern Ireland. He attended the monthly meetings of RPS Group Ltd in Dublin in that capacity. Mr Downe had, over the course of the summer of 2007, grown increasingly insistent that something should be done to rectify the situation in section 30. He was particularly disturbed at the financial reports that he had received in September 2007. A further meeting of that Board was scheduled for 18 October 2007 and the position of section 30 would inevitably have been raised again, particularly in the context of the reassessment of the work in progress figures. Mr Ferguson in Dublin telephoned Mr Porter in Belfast on the morning of 16 October and asked what had been done in relation to section 30. Mr Porter referred to the informal meeting on the previous evening and told him that Mr Hegan and the claimant were considering moving Mr McFarland to section 45. Mr Ferguson asked Mr Porter whether he was sure this was going to happen. When Mr Porter indicated that he was not sure, Mr Ferguson told him to go ahead and to arrange the move immediately. Mr Ferguson was clear in his evidence that he had lost patience with the situation and with the claimant. He felt that the ongoing financial difficulties could, and should, have been resolved much earlier. On 16 October, the claimant was out of the office during the morning at a site meeting in Belfast and Mr Hegan was in Meath on business. Both carried mobile telephones. Neither Mr Porter nor Mr Ferguson made any attempt to contact either the claimant or Mr Hegan to inform them of this development. Mr Ferguson felt that further discussion with the claimant would have been pointless. The matter had been unresolved for some months. It is not entirely clear why Mr Porter did not telephone the claimant or Mr Hegan before acting on Mr Ferguson’s direction. Mr Porter called Mr McFarland into his office and told him that he was moving to section 45 the next day. He had the rest of 16 October to tidy up his work and to clear his desk. His new desk was to be located with his new colleagues in section 45.

This was the first that Mr McFarland had heard about a potential staff move. He had thought that section 45 work might come to section 30 but he had not heard of any staff movement. Mr McFarland met Dr Shaw and also Mark McConnell the relevant associate who would be his line manager. Mr Porter then told Mr Dillon, the associate in section 30 who was then Mr McFarland’s line manager. Mr Dillon telephoned the claimant who returned to his office immediately.

The claimant was very upset at the failure on the part of Mr Porter and Mr Ferguson to consult with him in relation to Mr McFarland’s move. He stated he was also very upset on behalf of Mr McFarland. He resigned on 18 October 2007. He regarded Mr McFarland as a key member of section 30 and felt that his computer modelling skills were particularly important for the work of the section. However, the claimant stated that the only reason for his resignation was the manner in which the staff transfer had been carried out. He continued to carry out some consultancy work for the respondent until the end of November 2007. He did this because, for professional reasons, he did not want to let the respondent’s clients down.

Over the few days after 16 October 2007, a compromise was worked out between Mr McFarland and Dr Shaw by which Mr McFarland worked firstly two and then three days per week in rotation in each section. The claimant did not know about this arrangement until after he had resigned. The claimant lodged a grievance on 2 November 2007, and it has not been argued that the tribunal does not have jurisdiction to determine this claim.

The Law

At D403 of Harvey of Industrial Relations and Employment Law, the basis for a claim of constructive dismissal is described as follows:

“In order for the employee to be able to claim constructive dismissal, four conditions must be met;

There must be a breach of contract by the employer. This may be either an actual breach or an anticipatory breach.

That breach must be sufficiently important to justify the employee resigning or else it must be the last in a series of incidents which justify his leaving. Possibly a genuine, albeit erroneous, interpretation of the contract by the employer will not be capable of constituting a repudiation in law.

He must leave in response to the breach and not for some other, unconnected, reason.

He must not delay too long in terminating the contract in response to the employers breach otherwise he may be deemed to have waived the breach and agreed to vary the contract.”

The Court of Appeal in Brown -v- Merchant Ferries Ltd [1998] IRLR 682, held that;

“In determining whether there has been a breach of the implied term of trust and confidence such as to amount to constructive dismissal, the test to be applied to in the light of the observations of Lord Steyn in Malick –v- BCCI, is whether the employer’s conduct so impacted on the employee that, viewed objectively, the employee could properly conclude that the employer was repudiating the contract. Although the correct approach to constructive dismissal is to ask whether the employer was in breach of contract and not did the employer act unreasonably, if the employers conduct is seriously unreasonable, that may provide sufficient evidence that there has been a breach of contract.”

The Employment Appeal Tribunal in Abbey National PLC -v- Fairbrother [2007] IRLR 320 stated;

“It is evident that questions of reasonableness arise in a constructive dismissal claim at the outset, when deciding whether or not the employee has been dismissed at all, since the s.94 right does not fall to be considered unless dismissal is established under s.95. That means that the implied term requires to be examined. It is set out in Malik. We find the passage at the end of Lord Steyn’s speech, under the heading “The effect of my conclusions”, to be of considerable assistance:

“Earlier, I drew attention to the fact that the implied mutual obligation of trust and confidence applies only where there is no “reasonable and proper cause” for the employer’s conduct and then only if the conduct is calculated to destroy or seriously damage the relationship of trust and confidence. That circumscribes the potential reach and scope of the obligation.

What is stressed there that has perhaps sometimes been overlooked is that conduct calculated to destroy or seriously damage the trust and confidence inherent in the employer/employee relationship may not amount to a breach of the implied term: it will not do so if the employer had reasonable and proper cause for the conduct in question. Accordingly, the questions that require to be asked in a constructive dismissal case appear to us to be:

1. What was the conduct of the employer that is complained of?

2. Did the employer have proper and reasonable cause for that conduct?

If he did have such cause, then that is an end of it. The employee cannot claim that he has been constructively dismissed. If the employer did not have such cause, then a third question arises.

3. Was the conduct complained of calculated to destroy or seriously damage the employer/employee relationship of trust and confidence? “

Decision

24. It is clear that if an employer treats an employee sufficiently unreasonably, that can create circumstances in which, viewed objectively, an employee is entitled to regard the employer as having repudiated his contract or as having indicated that he intends to do so. The reasonableness or otherwise of the employer’s action has to be judged, again on an objective standard, in all the circumstances, having regard to the merits and equity of the case.

25. The claimant was a senior manager responsible for a section which had been facing significant difficulty for a period of slightly over one year by the time Mr McFarland was moved and the claimant resigned. He knew that approximately 60% of the work normally undertaken by the section had been lost and that it had not been replaced to any significant extent. He knew that section 45 needed staff. He had not taken any concrete steps over that year to reallocate any of his surplus staff to section 45. The furthest he had got was, in a document which Mr Ferguson had not yet seen, to propose as part of a presentation to be delivered at an annual strategic conference on 19 October 2007, that an unnamed graduate engineer would transfer to section 45 on an unspecified date. Apart from that, some wastage of staff had occurred without any intervention from the claimant. The tribunal heard a great deal of debate about whether the staff numbers in the section, which originally comprised 21 staff, fell to 19 staff or alternatively fell to 16 staff. It does not seem to matter to this tribunal which figure was correct. Firstly, where the 2006 level of work, which engaged 21 staff profitably, was reduced by 60%, 19 staff or 16 staff still represented overstaffing and the claimant accepted that he was in a position to move staff. Secondly, it is clear that the claimant’s employer, in the form of Mr Porter and Mr Ferguson wanted the claimant to take action to reallocate staff within the company and specifically to section 45. The claimant had not been asked to simply sit tight, to do nothing concrete, and to let natural wastage resolve section 30’s overstaffing over time.

26. While there is some doubt as to when the claimant became aware that Mr McFarland was a likely candidate for a move to section 45, it can hardly have come as a surprise to him when that time arrived. There were a limited number of potential candidates for reallocation. Given the position of section 30 and the position of section 45, any reasonable employer would have been entitled to have expected the claimant, with or without the assistance of Mr Hegan, to have come up with definite proposals to transfer staff, on either a temporary, permanent or shared basis, long before October 2007. In those circumstances, the decision of Mr Ferguson to direct Mr Porter to move Mr McFarland was not, in the view of this tribunal, when viewed against an objective standard, a decision which entitled the claimant to regard his contract as having been repudiated. The respondent had reasonable and proper cause for that decision.

27. There remains the failure of the respondent to notify the claimant on 16 October 2007 of the decision to move Mr McFarland before Mr McFarland was himself informed. Mr Ferguson had lost patience by this stage and did not feel the need to speak to the claimant first. Neither, apparently, did Mr Porter. This is regrettable. It would have been better for one or both of them to have spoken to the claimant before Mr McFarland was spoken to by Mr Porter. That said, the claimant’s permission was not required either as an explicit contractual obligation or as an implied term through custom and practice. The claimant was an employee, albeit a senior employee, and had to answer to those above him in the respondent’s hierarchy. While the decision to reallocate Mr McFarland could and should have been implemented in a more sensitive manner, not every unreasonable act by an employer amounts to a repudiation of contract, entitling an employee to resign and claim constructive unfair dismissal. This was not a “final straw” case. It was a single incident which has to be judged on the merits having regard to equity, in all the circumstances of the case. The manner in which the decision was implemented was not, in the opinion of this tribunal, a matter so fundamental that, on an objective standard, it entitled the claimant to regard his contract as having been repudiated.

28. The tribunal therefore concludes that the claimant was not constructively dismissed and dismisses that claim.

29. The tribunal has heard no evidence on which it could conclude that the respondent had acted in breach of any contractual provision, whether express or implied, in relation to the employee bonus scheme.

The tribunal therefore dismisses the breach of contract claim.

Chairman:

Date and place of hearing: 11-12 and 23 September 2008; 6 October 2008, Belfast

Date decision recorded in register and issued to parties: