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Cite as: [1993] UKEAT 658_91_0311, [1993] UKEAT 658_91_311

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BAILII case number: [1993] UKEAT 658_91_0311

Appeal No. EAT/658/91

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 3 November 1993

Before

HIS HONOUR MR JUSTICE KNOX

MS D WARWICK

MR K M YOUNG CBE

TREBOR BASSETT LTD APPELLANTS

(1) MRS S A SAXBY (2) MRS B BOORMAN RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellants MR A HOGARTH

(OF COUNSEL)

Legal Dept

Cadbury Schweppes Plc

Franklin House

Bourneville

Birmingham B30 2NB

For the Respondents MR M MAITLAND-JONES

(OF COUNSEL)

Messrs Linforth Morris

2 Walderslade Centre

Walderslade Road

Chatham

Kent ME5 9LR

MR JUSTICE KNOX: This is an appeal by Trebor Bassett Ltd, which I shall call `the Company', from a decision of the Industrial Tribunal which sat at Ashford on 3 July and 7 August 1991 and sent its Summary Reasons on 20 August and its Full Reasons on 10 October 1991 for coming to the conclusion that two of the three Applicants before it, Mrs Saxby and Mrs Boorman were unfairly dismissed by the Company when it terminated their employment on 28 December 1990 by notices dated 25 September of that year.

The third applicant before the Industrial Tribunal was unsuccessful because she had not been employed for the necessary qualifying period of 2 years at the effective date of termination of her employment but in other respects her situation was similar to that of Mrs Saxby and Mrs Boorman who are the Respondents in this appeal. The factual background has been helpfully summarised to us by Counsel, Mr Hogarth, for the Company to whom we are indebted for a helpful summary, both of the facts and of his submissions.

The Company operated a factory at Maidstone making highly successful sweets called soft mints. The sweets are made by a process which has one end called the "soft" end when the inside part of the mint is prepared and an other end, the "hard" end, when its coating is applied. The Company had before July 1990 a 3 shift system but those 3 shifts did not cover the full 24 hours; there was a day shift from 7.30 a.m. to 5.00 p.m. Mondays to Thursdays and 7.30 a.m. to noon on Fridays and a night shift which went from either 8 p.m or 10 p.m. until 6 a.m. on 4 nights in the week. The difference between 8 and 10 pm was attributable to the fact that some employees of whom Mrs Saxby was one, worked a 32 hour week and others of whom Mrs Boorman was one, worked a 39 hour week and the difference in the 7 hours was partly made up by the 2 hour starting differential and 1 hour difference on the Thursday in respect of the 39 hour week workers.

It was throughout the practice at that stage for overtime to be paid at the rate of time and a half. The third shift (if that is the proper name for it) worked from 5 p.m. until 8 or 10 p.m. and from 6 a.m. to 7.30 a.m. by way of employees doing overtime. It is clear that this was a system which, because there was considerable pressure for production level to keep up with demand, necessarily depended on significant amounts of overtime being done and although Mrs Saxby and Mrs Boorman did not do exactly the same amount of overtime, they both did a significant amount of overtime. In particular of course Mrs Saxby did rather more that Mrs Boorman because she had shorter contractual hours.

The situation in July 1990 had become difficult from the Company's point of view notably because Dutch suppliers of the mint which they used for their finished product had given notice of intention to terminate production and the Company had found difficulty in finding an alternative source of supply and had in particular discovered that for it to acquire the necessary machinery would take a year and they were therefore effectively driven to increasing the amount of work that was done in the factory by altering the shift system so as to go onto 3 continuous 8 hour shifts for which the factory was to be opened for 5 days a week. The precise times of the shifts do not in fact signify for the purposes of our decision. What is of significance is that the process was introduced in a 2-stage way. In July 1990 the 3 shift pattern was introduced in respect of the early part, the soft part of the process and the rest of the production was to be converted to the new 3-hour pattern in January 1991, that is 6 months later.

It is common ground between the parties that the effect of these changes was overall detrimental to the employees, in particular these two employees and others in the same position as them. They were on the night shift and they would have had to work 5 nights instead of 4 and they would have in practice, it proved, no overtime available except on an occasional basis whereas it will be recalled, that more especially Mrs Saxby, had had very frequent and regular overtime entitlement; that is to say she worked overtime and was entitled to be paid accordingly.

This involved the proposition that for employees in the same position as Mrs Saxby the hours after 32 and up to 39 hours were going to be paid at ordinary standard rate rather than time and a half and that was a very clear detriment to Mrs Saxby and those in her position. What was equally detrimental but less apparent from the terms that were published to the workforce was the fact that there was in practice going to be significantly less overtime because the 3 eight hour shifts would in fact cover the whole of the 24 hours for 5 days a week and it was not proposed to open the factory on the other two days, at the weekend.

The extent to which consultation took place was a critical factor in the Industrial Tribunal's decision that these were unfair dismissals. The dismissals themselves were, as I have mentioned, effected by a notice served on 25 September 1990 to take effect on 28 December which gave enough notice to all and significantly more than enough by which I mean statutory entitlement to notice, to some of the employees who were thus served with notice. There were discussions with the unions before July 1990 but they are of very marginal relevance in this case because neither Mrs Saxby nor Mrs Boorman were members of the union and there was no evidence whether other persons in their position were or were not unionised. We are of course only concerned with Mrs Saxby and Mrs Boorman in this appeal.

The next part of consultation and the important one for our purposes is that on 24 September which was the eve of the service of the notices there was a meeting between management and the night shift of which Mrs Saxby and Mrs Boorman were members. The Industrial Tribunal says of that:

"On 24 September 1990, Mr Hamilton had a meeting with the night shift employees in order to inform them of the new arrangements. [Mr Hamilton was a representative of the Company] Each employee was subsequently handed a letter, to which was attached a copy of the briefing notes which had been prepared in advance of the meeting."

The letter contained the formal notice terminating employment on Friday 28 December 1990 and set out the new shift pattern. It indicated where an applicant should sign for new employment and the notes of the meeting were to the same effect but gave more details as to the new terms that were being offered. In particular, and this is the only one in which there was a substantial difference from what had previously obtained, there was this passage:

"Minimum hours worked: 40 hours (39 basic hours, 1 hour at 1¹/2 times basic rate)"

Those consultations, or that giving of notice, was then followed by a further element of consultation in that employees on the night shift were consulted about which of the days of the week they preferred to start their 5 night stint and they effectively chose the day which suited the majority. That was purely a question of choosing which of 2 possible days upon which to start the week's work.

There were formal notices of new terms of employment issued on 1 November 1990 and the next event that occurred was that the new shift pattern started when the workers returned to work after the Christmas break in the New Year and there was, so far as the evidence goes, no further process of consultation in the meanwhile between those two.

The Industrial Tribunal rehearsed the evidence that the 3 applicants before them gave regarding the way in which they had been given their notices and their respective understandings of what was going to happen as a result of the meeting of 24 September. The Industrial Tribunal summarised the question of how far the employees appreciated what was going to happen in a later paragraph of their decision, after they had stated the facts (para 24), which reads as follows:

"Although we note that the respondents agreed to Sunday night working in place of Friday night working, we do not consider that negotiations with employees after notice was served can be equated with negotiations prior to service of such notice. We have come to the conclusion that, in any event, the effectiveness of such consultations as there were with the workforce was undermined by the respondents' failure to draw the applicants' attention to the full impact of the changes. We accept the applicants' evidence that the full effects of the new contracts only became apparent after the meeting and, in some cases, only when they received their first pay packets under the new system. We observe that the briefing note for the meeting on 24 September says nothing about the effect of the changes on the applicants' wages, and we feel driven to the conclusion that the respondents did not draw that matter to the employees' attention in a desire to avoid concerted opposition to the changes."

Mrs Saxby and Mrs Boorman then presented their Originating Applications claiming that the dismissals that were clearly effected by the notices that had been served upon them were in the circumstances unfair and the Industrial Tribunal upheld those applications.

The Industrial Tribunal accepted, and this went without challenge before us, that the Company had established what an employer faced with a claim of unfair dismissal has the onus of proving namely that the dismissal was for a reason falling within section 57(2) of the Employment Protection (Consolidation) Act 1978 or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held. In this case the Industrial Tribunal held (and it was not seriously challenged) that there was indeed a need for the Company to move to the 3 shift rota and correspondingly it followed that there was a substantial reason of the kind mentioned in section 57(1)(b) of the 1978 Act.

The issue therefore revolved entirely around the provisions of section 57(3) which, although very familiar, bear repetition. They read as follows:

"Where the employer has fulfilled the requirements of subsection (1), then, subject to sections 58 to 62, the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee; and that question shall be determined in accordance with equity and the substantial merits of the case."

The Industrial Tribunal having made the decision that I have read from paragraph 24 of the decision and having also found as a fact that a consequence of the new shift pattern was that the applicants would suffer a drop in pay of the order of £20 - £30 per week, and that this was a very serious detriment for the applicants, reached their conclusion in the following paragraph regarding the fairness or unfairness of the dismissal. The paragraph is 25 and reads:

"Because the respondents did not attempt to reach agreement with their workforce before terminating their contracts of employment, they cannot pray in aid any failure of negotiations as making it reasonable for treating their reason for dismissing the applicants as a sufficient reason for doing so. Having regard to the very serious effects of their proposals on the applicants, we consider that the decision to dismiss the applicants was outside the range of responses of a reasonable employer. In so far as consultations after the service of notices might have rendered fair the decision to dismiss, those consultations were flawed by the failure to inform the workforce fully of the effects of the proposals. We therefore held that Mrs Saxby and Mrs Boorman were dismissed unfairly."

The following points were made in support of the appeal. First of all it was said that there was an undue and therefore legally erroneous concentration on the time of the issue of the notice to determine employment rather than on the time of the actual dismissal in deciding the question whether or not the dismissal was fair or unfair. In support of that argument, we were referred to the decision in St John of God (Care Services) Limited v Brooks [1992] ICR 715 the headnote of which contains the following summary of a central part of the relevant part of that decision as follows:

"Held, allowing the appeal by a majority, that there was a danger in promoting the nature of the employers' offer of new terms and conditions of employment to the status of the sole or crucial test because it involved a departure from the wording of section 57(3) of the Act of 1978 which required the industrial tribunal to consider the question of fairness at the time of the dismissal rather than at the earlier stage of the offer; that, therefore, the industrial tribunal had erred in law ..."

That is a case which Mr Hogarth accepted correctly as being factually distinguishable because what was done in that case was to offer a new employment rather than serve notices to determine employment as in this case. It also is to be noted that the reasons that were given by this Employment Appeal Tribunal in St John of God (Care Services) Ltd v Brooks for coming to the conclusion that the Industrial Tribunal in that case had erred in law, included this:

"...if the only thing that is looked at is the offer, this necessarily excludes from consideration everything that happened between the time when the offer was made and the dismissal. That must in principle be wrong because it is to the dismissal that section 57(3) points and whether it was fair or unfair must be judged in the light of the situation when it occurred and not when an earlier step was taken."

In our view if it could be shown that this Industrial Tribunal in the case with which we are concerned had closed their eyes to anything that happened after the date when the notices to determine had been served, the case would be of more assistance but in this case it seems to us that what the Industrial Tribunal did was to look at the situation when the notices to determine were in fact served and make a judgment on that aspect of the matter, and also to look at what happened or perhaps more accurately what did not happen, between that date and the date when the dismissals actually took effect. It does not appear to us that this is a case where the Industrial Tribunal closed its eyes to the events right down to the date of dismissal which we accept would be, in most cases at least, an error of law. In a sense there was not much to see if the Industrial Tribunal was looking at that period because so far as consultation was concerned for the reasons stated earlier, not a lot occurred but we find that the Industrial Tribunal did, because of the passages that I have read and do not repeat, at any rate take into account what occurred after the service of the notices to dismiss.

Secondly, it was said in support of the appeal that it was in fact clear enough what the changes were in the employees' entitlement in regard to overtime payments and that the Industrial Tribunal erred in failing to take into account the clarity of the contractual terms as offered.

No doubt to a lawyer the documents that were served upon the employees would be clear enough. They do not in fact cover the extent to which overtime would in future be offered to the employees but subject to that important exception we would accept that to a lawyer those documents were probably clear enough. That in our view is not the relevant question because one has to have regard to the impact that the documentation and the meeting had upon the particular employees concerned and as regards that there are the findings which I have read and do not repeat from paragraph 24 of the Industrial Tribunal's decision which can perhaps be summarised by saying that the message as to the full effects of these new contracts did not carry to these particular employees and we see no error of law in the Industrial Tribunal's approach to that aspect of the matter.

Thirdly, and this is perhaps in a way the most important of the points made by Mr Hogarth in his argument; he submitted that non-contractual overtime does not have to be the subject of consultation when an employer is proposing to make alterations to contracts of employment which as a matter of contract law cannot be done without bringing to an end the previous contract. The expression "non-contractual overtime" is perhaps apt to mislead. What it is intended to convey is that as a matter of contract there is no obligation on the employer to offer overtime to the worker and there is no obligation as a matter of law on the worker to work overtime if asked to do so and in that sense overtime is non-contractual. The expression covers a very wide spectrum of possible situations; at one end of the spectrum one has a situation where there may be occasional emergencies which result in a call for non-contractual overtime to be worked. At the other end of the spectrum one may have an organisation where the practice of working non-contractual overtime has become so regular and frequent as to become effectively institutionalised and in our view it would be impossible safely to lay down, as a matter of law, that there was or was not an obligation in all cases to embark on consultations in relation to non-contractual overtime given the wide spectrum that the expression is capable of covering.

The only question of course with which we are concerned is whether the Industrial Tribunal's judgment can be faulted on this aspect of the case. They undoubtedly did attach importance to the lack of what they regarded as proper consultation in relation to non-contractual overtime for Mrs Saxby and Mrs Boorman but we are unpersuaded that the circumstances are such that it would be right for us to say that in attaching significance to it this Industrial Tribunal made an error of law. There is no doubt that the degree of regularity with which overtime was worked and had as a matter of economics to be worked for the operation to continue successfully before these changes were introduced, put this particular case much nearer the second of the two ends of the spectrum that I mentioned earlier on and on that basis it seems to us impossible to establish that there was an error of law in treating that amount of regularity of overtime, albeit non-contractual in the sense in which I have used the term, as being improperly to be regarded as the subject of proper consultation.

We then were addressed on two aspects of the Industrial Tribunal's decision in relation to what would or might have happened had there been proper consultation. The point appears in two passages in the Industrial Tribunal's decision. The most important one was the penultimate paragraph (para 26) which reads as follows:

"We are also satisfied that, if the respondents had taken reasonable steps to consult the applicants, it is overwhelmingly probable that the applicants would have remained in their employment and arrangements satisfactory to the respondents would have been introduced. Because the respondents needed to achieve only changes in the shift pattern and did not need to achieve reductions in the pay of the applicants, we consider that there was considerable scope for negotiation. The employees needed to retain their job and the employers needed to retain their workforce and we can see no inherent reason why the changes in the shift pattern necessary to achieve increased production could not have been achieved by agreement. We therefore consider that compensation does not fall to be reduced on the basis of a chance that the applicants would have been dismissed if the respondents had acted fairly."

The other passage is in paragraph 23 of the decision in which there is this to be found:

"The respondents appear not to have had any need to reduce their workers' wages and we consider that this very serious detriment for the applicants, which was not needed for the achievement of the respondents' objectives, made proper consultation even more necessary if the respondents were to act fairly."

The issue arises in two different contexts because there is one aspect which is whether the dismissal was fair or unfair, in other words how section 57(3) applies, and the other aspect is the quantum of compensation assuming there to have been an unfair dismissal and the point that was forcefully made to us by Mr Hogarth is one that is capable of impinging on both those two aspects of the matter. We hope we do justice to Mr Hogarth's argument by saying that he invited us to consider how effect could have been given to the negotiations that the Industrial Tribunal considered were overwhelmingly likely to produce a satisfactory solution.

One solution Mr Hogarth identified as of paying these particular applicants and any other person in the same position as them, more by way of wages so as to ensure that they did not suffer the various serious detriments that the Industrial Tribunal identified. That, Mr Hogarth submitted, reasonably as it seems to us, might well have engendered dissatisfaction inside the workforce in that these applicants and persons in the same position would be being paid more for doing much the same work as other people.

The other possibility that he identified was that everyone should get an increase in salary which would so to speak float everybody up to the level of the applicants in this case and that, he submitted, would first of all be odd in relation to the fact that for some six months previously employees had actually been doing the self-same work at the initially proposed rates and would thus be receiving an uncovenanted bonus and secondly he submitted that there was no visible reason notwithstanding the fact that the Company was able to afford it, for the Company to increase wages in such a manner and he submitted that there really was not any other feasible way for the hypothetical successful negotiations to go and that the decision of the Industrial Tribunal in this respect, more especially in paragraph 26, was a perverse one.

Perversity is of course a thing which is very difficult to establish in this Tribunal because, although we were not actually referred to the authorities, they are numerous and well-known to the effect that it is only in very rare cases that this Tribunal is entitled to say that a decision on fact of an Industrial Tribunal is so far removed from what a reasonable tribunal could, if properly instructed as to the law have reached, that this Tribunal should set it aside. There is no question of an error of law on the face of their decision. It is entirely a question of fact and indeed we would add a question of speculation necessarily because nobody could know what the result of negotiations would be and we are unsatisfied that in fact there are only those two possible results of negotiations if embarked upon that Mr Hogarth identified. It seems to us possible that there might have been other solutions found, although Mr Maitland-Jones did not identify any for us, and more especially we think that the Company has not satisfied the very heavy onus of proof of satisfying us that this conclusion of the Industrial Tribunal is so far from what is practically possible that we should reject it as being perverse in the technical sense that that expression bears. For those reasons we are unpersuaded by that argument.

Finally it was submitted to us that the Industrial Tribunal had in fact used the failure to consult as a cloak for substituting its opinion for that of the employer. We think that argument in this particular case involves begging the question because if what the employer did was within the range of reasonable responses the dismissal was a fair one; if on the other hand what the employer did was outside the range of reasonable responses it was not a fair dismissal. But one has to beg the question whether what the employer did was within or outside the range of reasonable responses for the argument to succeed that the Industrial Tribunal substituted its own opinion in saying, as it did, that the Company in doing what it did went beyond the range of responses of a reasonable employer.

We think that the argument only succeeds if one starts by begging the question as to where the employers' conduct falls either within or outside the range of reasonable responses and it is undoubtedly clear to us that the Industrial Tribunal was well aware what the proper test was because of their specific use of the phrase, which is lifted from several authorities that are based on section 57(3), "outside the range of responses of a reasonable employer".

We are therefore not persuaded that the Industrial Tribunal in applying that test, which is undoubtedly the correct test, so far departed from it as to substitute their opinion for that of the employer and for all those reasons we propose to dismiss this appeal.