United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 379_94_1805

Appeal No. EAT/379/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 18 May 1995

THE HONOURABLE MR JUSTICE MORISON

MR T C THOMAS CBE

MRS P TURNER OBE

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BARNSLEY MBC          APPELLANTS

MRS J O PREST          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR P LIMB

(of Counsel)

The Solicitor

Barnsley Metropolitan

Borough Council

Town Hall

Barnsley S70 2TA

For the Respondent MR A WHITE

(of Counsel)

Mr Bruce Piper

Director of Legal Services

UNISON

Mabledon Place

London WC1H 9AJ


 


MR JUSTICE MORISON: In this case, the Barnsley Metropolitan Borough Council appeal against the decision of an Industrial Tribunal that Mrs Prest is entitled to a statutory redundancy payment of £3,858.48. That decision was entered in the Register on 18 February 1994.

In this judgment we shall refer to the Appellants as "the Council" and to the Respondent to this appeal as "the employee".

The issue before the Industrial Tribunal was whether the Council had previously made her such a payment, so that they were not liable to make her another one. The circumstances giving rise to the appeal may be shortly stated. Following her alleged dismissal, Mrs Prest made a complaint of unfair dismissal to the Industrial Tribunal, which gave its decision in writing on 12 August 1993. Her complaint was rejected by a majority. The Industrial Tribunal concluded that the employee was fairly dismissed by reason of redundancy.

The facts set out hereafter are taken from the two Industrial Tribunal decisions. Mrs Prest was a caretaker employed by the Council from 4 November 1974 at one of their schools. Part of her duties included cleaning work. She was provided with a bungalow nearby as tied rented accommodation, which suited her needs, as she had a handicapped daughter living at home. By the Local Government Act 1988 the Council were required to submit its cleaning services to the process of compulsory competitive tendering. It was also envisaged by the Council that if some local schools became "autonomous" there might be large-scale redundancies although the Industrial Tribunal were told that the word "redundancy" was not part of the Council's vocabulary. In anticipation of these changes, the Council and their recognized Unions entered into discussions and negotiations and out of a workforce of 183 in the caretaking service, 170 were dealt with in a way satisfactory to them. The remaining 13 were not suited and further discussions ensued.

One possibility which was discussed was buying out these employees with generous payments to compensate for a future reduction in working house and hence significant reductions in pay. However, the District Auditor of another Metropolitan Authority cautioned against the propriety of making any such payments if and in so far as they exceeded the amount due to an employee on redundancy. That stance was upheld as correct by the Divisional Court in a case decided in the District Auditor's favour. Having taken legal and other advice following this judgment, the Council decided not to make these payments.

In the case of this employee, but for the decision of the Divisional Court, the Council would have paid her, as we understand it, some £7,000, which she would have been content to accept.

Negotiations with the Union broke down but after a period of time all the outstanding cases were compromised, except for that of Mrs Prest. Although the Council's own direct service organization won the cleaning tender, very correctly the Council felt unable to interfere with its staffing and transfer Mrs Prest into it, as that would defeat the objectivity of the tendering process. Various discussions ensued and the matter came to a head as a result of a series of letters which passed between the parties.

The time had come when the Council could neither relocate Mrs Prest nor extend her caretaking duties and thus her pay, at her school. It seems clear that the Council wished the employee to accept a variation of her contract, which would avoid them dismissing her and would be compatible with the Union's desire that there should not be any dismissals.

The Industrial Tribunal concluded that the letter of 14 April from the Council to Mrs Prest was a letter of dismissal:

"36. Our unanimous view is that the letter of 14 April 1992 ... was a letter of dismissal. Whilst she may verbally have been told of this or something along these lines shortly before, here by letter she was being told that come Monday 20 April she would no longer be working 39 hours but, instead, only 15 hours. However she would be paid `protective earnings' until 7 June after which she would only receive earnings commensurate with reduced hours. Additionally, she would be compensated by payment of £3,858.48 to be paid during the week commencing 8 June, ie the week when her earnings would drop substantially."

Further on they continued:

"This could not, in our view, be said to amount to a variation of the contract. It so changes its nature that it must be a fresh one altogether. There is clear evidence that at no time did this applicant ever consent to any variation of her contract."

The Industrial Tribunal rejected the contention that she had affirmed her position by continuing to work in the new role. In the alternative, they said that there was an accepted repudiatory breach by Mrs Prest of the old contract. They further held that her dismissal was by reason of redundancy.

In the light of the Industrial Tribunal's decision, the employee pressed for a redundancy payment. There is no dispute that by reason of what happened she is entitled to one. The question before the Industrial Tribunal and before us is whether she has already received it. In their second decision, the Industrial Tribunal said this:

"4. A redundancy payment is a statutory payment. In this particular case the amount that Mrs Prest was paid, though equivalent when grossed up to what a redundancy payment would have been, was never at any time expressed to be a redundancy payment. Indeed it was expressed as being compensation for the reduction in her terms and conditions of employment. It was not until 19 August 1992 and by letter, after her previous contract had come to an end, that it was suggested that the payment made equated with a redundancy payment. Before then it was argued that it was compensation and that in fact, there had never been a redundancy, a word that was not in this particular Council's vocabulary. With that being the case there had been no written statement showing how the payment was calculated as is required by the Act. [s.102 of the 1978 Act] For these reasons we conclude that a redundancy payment has not been made and that Mrs Prest is entitled to one. We are influenced too by the cited case of Galloway though we fully understand that each case has different circumstances."

It is to be noted that at the time when she was paid the "compensation payment" the employers were denying that they had dismissed her and that even if they had, that she was entitled to any redundancy payment because she had been offered suitable alternative employment. In her IT1 the employee specifically said:

"Nor have I received redundancy pay."

and in their IT3, in response to that, the Council said that because there had been no dismissal she was not entitled to a redundancy payment. The payment which was made to her in her first week's pay after the reduction in her wages was, of course, taxable in the employee's hands, whereas a redundancy payment is not taxable, as a result of which the employee has not, in the circumstances in which she received it, received the equivalent of a redundancy payment. The Council did not accompany the payment with a written statement indicating how the amount is calculated, as is required s.102 of the Act. An employer who fails to comply with that requirement without reasonable excuse is guilty of a criminal offence.

The question at issue is whether the gross payment, which was exactly equivalent in amount, is a redundancy payment which was made to the employee in her wage package, was paid in satisfaction of the Council's obligations to make a redundancy payment. It seems to us that the question is one to be determined by having regard to the common intention of the parties as ascertained objectively from all the relevant circumstances, including s.102 of the Act.

We have been entertained with succinct arguments presented in a most capable way by Counsel on either side. Counsel for the Council drew our attention to certain passages of the Industrial Tribunal decision. He indicated that both sides were anxious to avoid having to make anybody compulsorily redundant, i.e., both the employer and the Unions. He drew attention to the finding that the Respondent decided they would pay sums equivalent to normal redundancy payments in the light of the Divisional Court decision and he drew attention to paragraph 33 of the original decision where it was said:

"... but instead would receive the lesser sum of £3,858 being a sum equivalent to her redundancy entitlement."

It was submitted to us that when we examine the circumstances in which the payment came to be made by the Council, we could see that the Council had, in fact, calculated precisely the redundancy payments to which Mrs Prest was entitled and that they intended it to reflect the fact that it was a redundancy payment. He said that we should not be over-impressed by the form of this matter, i.e., as shown by the IT1 and the IT3. In relation to s.102 of the Act, it was argued on behalf of the Council, in our view quite correctly, that the absence of a written statement under s.102(2) does not, of itself, prevent a payment from being a redundancy payment. In relation to s.102(1) he indicated that there was no requirement in that subsection for the written statement to indicate that it was a redundancy payment.

On behalf of the employee, in an equally succinct argument, it was submitted to us that the Industrial Tribunal had to determine the nature of the payment which she had previously been paid and that the nature of a payment is a pure question of fact and that as there is no appeal on a question of law there is no merit in the appeal by the Council.

Secondly, it is observed that the payment was made as a compensation payment and that it did not cease to be a compensation payment merely because it had been calculated as a redundancy payment would have been. What has happened in this case, it was submitted, was that following the Divisional Court's judgment, instead of paying an uncapped sum of £7,000 by way of compensation, the Council decided to pay the capped sum, namely, the equivalent of her redundancy entitlement. Not, it is to be noted, the redundancy entitlement but the equivalent and, accordingly, it was submitted that the nature of the payment did not alter merely because the sum that was to be paid was capped in the way described.

Counsel also drew attention to the points to which we have already adverted in this judgment. He further submitted that it was not open to the Council to blow hot and cold or to approbate and reprobate, which is what the Council have, in effect, been doing by denying in the first Tribunal that there was a dismissal or a redundancy situation but contending in the second that the payment that had been made was a redundancy payment.

Both Counsel referred to the only two decisions which there appear to be relating to this issue, first, Collin v Flexiform Limited [1966] 1 ITR 253 and, two, Galloway v Export Packaging Services Limited [1975] IRLR 306. Those two decisions are decisions of Industrial Tribunals. We do not find them of assistance and neither Counsel thought that we would be greatly assisted by them in our consideration of their submissions.

It seems to us quite clear that looked at objectively it was neither the intention of the payer nor the payee that the compensation paid to the employee in her wage packet was to be treated as, or set against, the Council's statutory liability to make a redundancy payment. It was expressly paid as compensation for reduction in pay. It was received as such in partial satisfaction of the employee's claim for compensation. Had she been unfairly dismissed she would have been entitled to more compensation and the question would then have arisen for the Industrial Tribunal as to the amount of the offset that should be made in relation to the payment which was made to her.

It seems to us that the nature of the payment that they have made did not alter in character as a result of the decision of the Council to confine the compensation payment to the equivalent of the redundancy payment. Accordingly, having regard to the way in which the payment was made and to the other matters to which we have referred, we are in no doubt that the decision of the Industrial Tribunal was correct. We also are of the view that, technically, it is correct to say that this was largely a question of fact for the Industrial Tribunal. However, in the circumstances that apply here, it is obviously an important matter for the Council and we do not criticise them for bringing this appeal before us.

It seems to us that the obviously straightforward way for the Council to have behaved in this case, as at April 1994 and entirely consistent with the generous and careful way they had treated Mrs Prest up until then, was for the Council to have dismissed Mrs Prest by reason of redundancy, offered her alternative employment on a limited hours basis, accept that the alternative employment was not suitable, make her a redundancy payment and then contest any application she might thereafter bring for unfair dismissal. As a result of the way the Council have actually dealt with this matter, they may well have ended up paying to Mrs Prest more than they may have subjectively intended to do. There will also be a question, presumably, in relation to other employees who have accepted compensation payments of a similar nature, as to whether those payments are to be set off in the future against any further redundancy payments that the Council may become liable to pay in the event of any of those employees becoming redundant.

Despite the able arguments of Mr Limb on behalf of the Council, for which we are grateful, we are quite clear that we should dismiss this appeal.