United Kingdom Employment Appeal Tribunal

BAILII case number: [1993] UKEAT 297_93_0510

Appeal No. EAT/297/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 5th October 1993

Before

THE HONOURABLE MR JUSTICE KNOX

MR J H GALBRAITH CB

MR G H WRIGHT MBE

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MR T SENNITT          APPELLANT

FYSONS CONVEYORS LTD          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR B CARR

(Of Counsel)

Messrs Rowley Ashworth

Solicitors

247 The Broadway

Wimbledon

LONDON

SW19 1SE

For the Respondents NO APPEARANCE BY OR

REPRESENTATION ON BEHALF OF THE RESPONDENTS


 


MR JUSTICE KNOX: This is an appeal by Mr Terence Sennitt from a decision of the Industrial Tribunal sitting at Bury St Edmunds on the 7th September 1992. The Reasons of the Industrial Tribunal were initially sent out as Summary Reasons on the 21st October 1992 but were re-published on the 2nd March 1993 as the Full Reasons, there being no difference between the two versions. The decision that was then taken was that Mr Sennitt was not entitled to the redundancy payment that he claimed. There was also a decision that the Industrial Tribunal would not have jurisdiction to deal with a Wages Act claim that Mr Sennitt had advanced. There is no appeal against that decision and we need not go further into that aspect of the matter. We should also mention that there was no decision in terms in relation to a claim that was in Mr Sennitt's Originating Application, presented on the 21st February 1991, that is, a claim to relief in respect of unfair dismissal.

The factual background, is briefly as follows. Mr Sennitt was employed by C J R Fysons & Son Ltd, an old established company, as a Fitter/Welder. Unfortunately that Company fell on hard times and went into administrative receivership on the 18th July 1990 and the next day 43 out of 61 employees were made redundant. The remaining 18 of whom Mr Sennitt was one remained on, but the Company's business was undoubtedly in low water and the Administrative Receiver was looking, without much success, for purchasers of the business.

On the 7th September matters came to a head and three significant events occurred in the afternoon of that day. The Administrative Receiver of C J R Fyson & Son Ltd at a meeting attended by employees and by a prospective purchaser that the Administrative Receivers had found gave notice making the remaining 18 employees redundant in their turn. That was found by the Industrial Tribunal to have occurred shortly after 4 o'clock in the afternoon of that day.

Immediately thereafter, (and those two words are taken from the Industrial Tribunal's own decision), an offer was made of new employment to the persons thus made redundant on behalf of the holding Company of the Respondent before us. The holding Company was called "PVH Industries Limited" and the Respondent before us is called "Fyson Conveyors Limited". It was a relatively new Company which had been purchased off-the-shelf and had its name changed for the purpose of the acquisition.

The third relevant event was that there was, at about 7 o'clock that evening the 7th September, a contract entered into between the Administrative Receiver of C J R Fyson & Son Limited and Fyson Conveyors Limited, for the sale and purchase of assets previously in the ownership of C J R Fyson & Son Limited, and that contract has been held by the Industrial Tribunal in an earlier decision from that presently under appeal, to have been a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations. The dismissal of the Applicants on that occasion, who included Mr Sennitt, by the Receivers of C J R Fyson & Son Limited, was held to be for a reason connected with that transfer. That decision is binding on the parties, there was no appeal from it, and we therefore have the position that the Transfer of Undertaking Regulations do apply to that contract between those two companies.

The majority of the employees who had survived the first wave of redundancies but had been made redundant on the 7th September 1990 accepted the offer of employment on behalf of Fysons Conveyors Limited and started work on the following Monday. The 7th September was a Friday, and those who accepted the offer went on working much as before from Friday to Monday. That there were substantial changes in the terms that were offered from the terms that the employees had previously enjoyed is, in our view, clear from the findings of the Industrial Tribunal in the decision which is under appeal. They are listed in paragraph 3 of the decision in the following terms:

"At the time of the Transfer of Undertaking the 3rd respondent [that is Fysons Conveyors] offered to the applicant a contract of employment which varied in some details from the previous contract of employment in the following respects in particular:

3.1 The former contract of employment had the benefit of a 4

monthly retail price index wage review, whereas the new contract offered an annual wage review without any retail price index or other linkage."

Mr Carr, in a careful argument on behalf of Mr Sennitt, showed us that there was a double potential for review in the former contract, not only the four monthly retail price index review, but also the annual wage review which was to have survived.

"3.2 The old contract guaranteed 39 hours per week and 2¹/₂ hours

overtime in addition whereas the new contract offered a 39 hour basic week. This resulted in a reduction of £15 per week, gross, pay and the terms of overtime were less advantageous than under the old contract."

Again, Mr Carr showed us, and we need not go into the financial details of it, that there was both a reduction in the rate of pay for the basic pay and also in respect of the overtime terms.

"3.3 Under the previous contract of employment the applicant was

entitled to 25 days annual leave increasing to 30 days according to the length of service whereas the new contract provided for 24 days annual leave.

3.4 The previous contract of employment had a generous bonus scheme

whereas the new contract offered a bonus scheme but gave no details of how it was to be calculated."

It is not possible to be precise as to exactly what that difference was because the new contract was completely open ended, it merely said that details would be provided, and indeed the old scheme is not set out in the evidence before us although one of the items claimed under the Wages Act claim, which in fact was unsuccessful for time reasons, was a claim in respect of some £535 indicating that the bonus was a matter of some significance to put it no higher. Continuing the quotation for the changes.

"3.5 The former contract of employment offered a

guaranteed sick pay scheme supplementing statutory sick pay, increasing according to the length of service whereas the new contract of employment provided that, on sickness, statutory sickness pay only would be paid.

3.6 The place of work and the nature of the applicant's

employment did not otherwise change."

So the changes were entirely directed at the terms upon which Mr Sennitt was being offered employment. They did not extend to what his functions in the course of his employment were to be. He did not, as I have already intimated, accept the offer of this new employment and it was not until the 21st February 1991 that the Originating Application in this matter was presented. The majority of the intervening period was taken up in his applying, at the invitation of the representatives of his previous employer, to the Department for a redundancy payment and there emerged a dispute as to whether or not the Transfer of Undertaking regulations applied to what had occurred on the 7th September 1990. The 21st February 1991 is of course more than three months after the 7th September 1990, it was in fact even longer since the potential claim under the Wages Act 1986 arose, and it is on that basis of that length of time that the Industrial Tribunal decided that it would not extend time so as to confer upon itself jurisdiction to deal with the claim under the Wages Act. There is of course a similar time limit in relation to claims in relation to unfair dismissal but there is nothing in the Industrial Tribunal decision under appeal before us dealing with time limit, or indeed dealing with the claim, in respect of unfair dismissal.

The decision of the Industrial Tribunal which is under appeal turns on the provisions of Section 82 of the Employment Protection (Consolidation) Act 1978, which has various general exclusions from rights to redundancy payment. The particular one that arises in this appeal is that contained in subsection (3) and subsections (5) and (6). Subsection (3) reads as follows:

"If an employer makes an employee an offer (whether in writing or not) before the ending of his employment under the previous contract to renew his contract of employment, or to re-engage him under a new contract of employment, so that the renewal or re-engagement would take effect either immediately on the ending of his employment under the previous contract or after an interval of not more than four weeks thereafter, the provisions of subsections (5) and (6) shall have effect."

The one that matters is subsection (5) which I read omitting paragraph (a) which has no application in this case. With that omission it reads:

"If an employer makes an employee such an offer as is referred to in subsection (3) and -

(b) the first-mentioned provisions would differ (wholly or in part) from those corresponding provisions, but the offer constitutes an offer of suitable employment in relation to the employee;

and the employee unreasonably refuses that offer, he shall not be entitled to a redundancy payment by reason of his dismissal."

The first-mentioned provisions are the provisions of the new contract and the corresponding provisions are the terms of the previous contract that correspond.

There are, therefore, two matters that arise if subsection (3) applies and there has been an offer renewal or re-engagement. One, is whether what is offered is, to use the statutory wording "an offer of suitable employment in relation to the employee" and the other is whether, assuming that to be so, the employee has unreasonably refused that offer.

The decision that Mr Sennitt was not entitled to a redundancy payment was based on the unanimous view of the Industrial Tribunal that the offer of alternative employment was an offer of suitable employment within Section 82(5)(b) and that was elaborated in terms that seemed to us to indicate that the Industrial Tribunal did, although it did not specifically mention it, come to the conclusion that there was an unreasonable refusal of that offer. We say that because in dealing with this first question that arose they first of all said this:

"7.1 Our reasons are that, whilst the terms and conditions of employment were more disadvantageous to the applicant, the terms were accepted by more than the majority of the work force taken over and were not so disadvantageous as in the tribunal's view, having regard to the economic circumstances prevailing, and in the knowledge that the previous employer - and we can certainly infer, no doubt partly because of the generous terms of the contract of employment then in force - went into receivership. The guaranteed hours were shorter, the pay was less and the fringe benefits were less, but none of these reductions in terms and conditions were unreasonably unfair or unreasonable in themselves."

So far that is looking at the reasonableness or lack of reasonableness of the terms offered in the light of the economic circumstances surrounding the business in question. As already mentioned the business was in remarkably low-water, and the Industrial Tribunal took the view that in those parlous circumstances the employer, or the prospective employer, was acting reasonably in offering more disadvantageous terms than had previously prevailed. That is an entirely economic argument, looking at it from the employer's point of view. It does not, in terms, address the question of how far the terms of employment are substantially different from the previous terms of employment so as potentially to make the new employment offered not suitable.

The reason why we have come to the conclusion that the Industrial Tribunal did also look at the question whether there was a reasonable or unreasonable refusal is that the second paragraph dealing with this issue records the fact that the Applicant was questioned about his motives for declining the new contract and that he had two erroneous understandings regarding the new contract which the Tribunal had pointed out to him were unfounded and the Industrial Tribunal also said this:

"He had taken the contract home over the weekend, but the tribunal took the view that his real reason for declining the new contract was that he could not see any future with the new employer but in our view that was not a realistic approach to take to the matter in all the circumstances."

That last sentence, it seems to us, is only reconcilable with the view that the Industrial Tribunal did in fact look at the question of whether the refusal was reasonable or unreasonable and that the conclusion that they came to was that it was an unreasonable refusal.

The decision has been attacked before us on a variety of grounds. The first two are based on the applicability of Section 82(3) at all and of course unless that subsection applies one does not get into any question under subsection (5). The two points that were made under Section 82(3) were these. First of all it was said that the subsection did not apply because the order of events was not the correct one. It will be recalled that for subsection (3) to apply there has to be an offer made before the ending of the employment under the previous contract and it was pointed that the findings of the Industrial Tribunal in its first decision that the Transfer of Undertakings (Protection of Employment) Regulations 1981 did apply, included specific findings that the dismissal by the Administrative Receivers of C J R Fyson & Son Limited came at that meeting on the 7th September before the offer was made by the gentleman who represented the Company that subsequently employed such of the employees as took up the offer of new employment. That of course is perfectly true but as I mentioned at an earlier stage the interval between the two was described in the Industrial Tribunal's earlier decision as "immediately thereafter" and at the end of that decision they also said this in relation to the time span within which these events occur:

"The precise timing, it seems to this tribunal, is not relevant when all took place within minutes. We also appreciate that the actual transfer was not in the form of a binding contract until about 7 o'clock that evening, but again, that was a matter of negotiation between solicitors and for all practical purposes the dismissals, the issue of the new contracts and the contract of sale of the undertaking, all took place at the same time in broad terms certainly each was connected with the other and the dismissals were connected with the transfer."

We were referred to two authorities on, what I can perhaps call the chronological point. First of all we were referred to Baker v. Gill [1971] 6 I.T.R p.61, which shows that if there was an offer one day after the first employment had come to an end that was too late to come within the terms of the legislation which then obtained which was very closely similar to, and in respect of the phrase "before the ending of his employment under the previous contract", identical with the present legislation. In other respects the redundancy payment legislation that then obtained was different but the reasoning of Lord Chief Justice Parker would appear to be applicable to the current form of legislation. One day, of course, is quite another matter from something that occurs at a single, albeit protracted, meeting. But on that aspect of the case we were also referred to Octavius Atkinson & Sons Ltd v. Morris [1989] ICR 431 where the Court of Appeal was satisfied that a dismissal without notice took effect at the precise point of time, in that case 2 pm, in such a way as to render the employee in question no longer employed by 4 o'clock that afternoon, by which time he had got home, and by which time the employers became aware, for the first time, of employment that could have been offered to him but which was not and the Court of Appeal held that there was no breach of the duty to make an offer of available employment to a redundant employee if the employee has been dismissed for as short a time, as in that case, a period of two hours. Reliance was placed on that in favour of the proposition that one has to descend to hours and minutes in considering questions of the operation of immediate dismissals.

Because we have decided that this appeal should be allowed on other grounds it is not necessary for us to reach a final conclusion on this point but, it would be right to say that, we are not impressed with the approach of using a stop-watch to calculate the effect of a continuous meeting between former employer, employees and prospective employers where the Transfer of Undertaking Regulations apply to a constitutent part of the overall transaction. In a case where it is just a matter of minutes it does seem to us very difficult to sub-divide the separate events in such a way as to prevent Section 82(3) from applying in the context of transactions which overall, as a result of the Transfer of Undertaking (Protection of Employment) Regulations had the effect of providing notional continuity of employment from one employer to the other.

The second argument that was adduced against Section 82(3) applying was that the offer was made by a person outside the provisions of the subsection because, although the subsection says "an employer" it is, it was said, implicit that it has to be the employer under the existing contract of employment, or in appropriate circumstances an associated employer, but there is no question of there being any such association as between C J R Fyson & Son Limited and Fysons Conveyors Limited. They were wholly separate companies, and it was said that it was not the appropriate person who made the offer for the subsection to apply. Here again, we are unpersuaded that this necessarily so but it is not necessary for us to reach a final conclusion upon it. The reason we have grave doubts about the validity of this argument is that where the Transfer of Undertaking Regulations apply as they undoubtedly do in this case, so as to make the transfer between these two companies a relevant transfer, as that phrase is defined, one effect of that is described in Regulation 5(2)(b) in the following terms:

"anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee."

"That contract" is the contract of employment of the relevant employees and as we see it the effect of the operation of the Regulation, in the context of this particular case, is that one has to treat anything done before the 7th September, by C J R Fyson & Son Limited, as having been done by Fysons Conveyors Limited and on that basis there is identity, albeit notionally, between the employer under the previous contract and the person who makes the offer. We need say no more about those two points.

We come now to the point upon which we think this appeal does succeed and that is in relation to the suitability of the offer that was made. It seems to us clear, as already mentioned, that there was a substantial difference in the terms of the new employment offered as against the terms of the existing employment. That seems to us to bring the matter within Regulation 5(5) of the Transfer of Undertaking (Protection of Employment) Regulations which reads as follows:

"Paragraph (1) above is without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice if a substantial change is made in his working conditions to his detriment; but no such right shall arise by reason only that, under that paragraph, the identity of his employer changes unless the employee shows that, in all the circumstances, the change is a significant change and is to his detriment."

Paragraph (1) provides:

"A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor . . . but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee."

In terms Regulation 5(5) preserves the right that employees always have to claim constructive dismissal if there is a sufficiently fundamental breach of the terms of their employment, notably, by offering them only continued employment on terms which are substantially different from those that they had previously enjoyed. It is not necessary for us to repeat at this stage all the various changes that were proposed to Mr Sennitt but they were, undoubtedly, in our view, such as could only lead to the conclusion that they were at least substantial. The Industrial Tribunal certainly does not say the contrary and the aggregate does seem to us to amount to a substantial change in working conditions. In those circumstances it does seem to us, as a matter of law, that it simply is not possible to say that a new employment is one which is suitable to an employee where the employee is in a position to treat himself as having had his contract of employment terminated by a form of constructive dismissal. This is not irreconcilable in any way with there being a situation under which the former employer is under such economic pressure that it is perfectly reasonable for him to offer employment to future employees on terms which include such substantially altered, and detrimentally altered, terms. The economic circumstances of the enterprise may easily be so adverse as to render its continued existence impossible unless there is such a fundamental alteration in the terms on which the employees operate. We see no irreconcilability between the reasonableness of an employer in seeking to bring about such radical alterations in the terms of service and, at the same time, those alterations conferring rights on the employees not to accept the proferred employment because they constitute a constructive dismissal of the employee.

For those reasons it does seem to us that in the context of such a substantial, as well as detrimental, change it was not open to the Industrial Tribunal to find that there was suitable employment and it seems to us that the Industrial Tribunal only looked at the economic reasonableness on this aspect of the case from the employer's point of view which we find to be too narrow an approach.

That means that it is not necessary for us to consider the further question whether the decision that, we think on a fair reading, the Industrial Tribunal did make that there was an unreasonable refusal, can stand. It was accepted by Mr Carr before us that so far as that aspect alone was concerned, assuming that there was such a decision, it would be necessary for us to be persuaded that the decision of the Industrial Tribunal was perverse. It is of course clear that the suitability and the question whether the offer has been reasonably or unreasonably refused are interlocking questions and circumstances which make an offer unsuitable are extremely likely to make it reasonable to refuse the offer, so that it is difficult to disentangle the two entirely, but if and in so far as there is a separate point from the point which we have sought to describe regarding the suitability of the employment, it does seem to us to be a question of whether there was perversity and we find it unnecessary to express a concluded view on that point, it being notoriously difficult for perversity to be established, more especially in the context which obtains here of there not being Notes of Evidence before this Tribunal. We therefore do not find that there is a case of perversity in relation to the refusal of the offer of employment. However, because of the suitability point this appeal, in our view, succeeds and because we have come to the conclusion that the only possible view is that there were substantial changes, as well as detrimental changes, in the terms offered it seems to us that there is only one possible conclusion in relation to the availability of the redundancy payment and that is that such a payment was available to Mr Sennitt. We therefore propose to remit the matter to the Industrial Tribunal to quantify the award in accordance with that decision.

That, we think, probably makes it academic and unnecessary to deal the question of unfair dismissal. That would, in our view, largely turn on the question whether the Industrial Tribunal should or should not have regarded the claim for unfair dismissal as being so out of time as not to be within its jurisdiction, a matter upon which, as we mentioned earlier, there is no decision. In the circumstances, subject to anything that Counsel may say to us, we do not propose to remit any further consideration of that separate question; it would seem to lead to no useful purpose.