United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 681_94_2711

Appeal No. EAT/681/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 27 November 1995

Judgment delivered on 11 January 1996

HIS HONOUR JUDGE P CLARK

MRS J M MATTHIAS

MR S M SPRINGER MBE

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HARBOROUGH ENGINEERING LTD          APPELLANTS

W S HILL & OTHERS          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR J SWIFT

(of Counsel)

Edge & Ellison

Rutland House

148 Edmund Street

Birmingham

B3 2JR

For the Respondents MR D LOCK

(of Counsel)

Coffee Randall

Warnock

25/27 Upper King Street

Leicester

LE1 6XF


 


JUDGE CLARK: This is an appeal by the employer against a unanimous decision of the Leicester Industrial Tribunal dated 1 June 1994 that the 7 Respondents were fairly dismissed by the Appellants.

The background facts, as found by the Industrial Tribunal, were that the Appellants were a small engineering company employing some 50 employees of whom 5 were staff. In June 1990 its 2 sites at Market Harborough and Corby were disposed of and the whole operation moved to South Wigston, Leicester. Some employees, including these Respondents, lived in or around Market Harborough. In order to assist travel arrangements a free bus service, or mileage allowance for those travelling by private car, was provided. These Respondents remained with the Company and took advantage of these travel benefits.

In 1991 the Company made an operating loss of £90,000 and in 1992 £82,000. Corrective action was necessary.

Management put forward suggested costs savings totalling £124,000 to the Works Committee. The proposals included (1) saving £20,000 by discontinuing the travel concession (2) reducing the overtime premium rate and (3) implementing new working practices such as multi-manning of machines. A buy-out payment of £200 was proposed to compensate each employee who agreed to the changes in his terms and conditions of employment.

A series of meetings then took place between management and the works committee. The Committee rejected management's proposals and suggested voluntary redundancies. This was in turn rejected by management which wanted to keep the same numbers in the workforce but to reduce costs.

No agreement having been reached, management took the step of issuing an amended form of contract of employment to all staff. Clause 27 specifically abolished travel expenses. It was made clear that refusal to sign the new contract would result in dismissal coupled with an offer of re-employment on the new terms.

Further meetings were held, involving ACAS, a representative of the employers federation, and a solicitor acting for the employees. Still no resolution was reached.

The Respondents did not accept the new terms, and they were dismissed. Six other employees living in the Market Harborough area accepted the changes and remained with the Company.

The Industrial Tribunal found that the reason for dismissal was some other substantial reason within the meaning of Section 57(1)(b) of the Employment Protection (Consolidation) Act 1978. The Tribunal then went on to direct itself in paragraph 20 of its reasons as to the test of reasonableness under Section 57(3) of the Act. It is in relation to the application of Section 57(3) that Mr Swift aims his first ground of this appeal.

He submits that what the Tribunal has done, particularly in paragraphs 21 and 29 of its reasons, is to elevate a factor identified in the judgment of this Tribunal in Chubb Fire Security Ltd v Harper [1983] IRLR 311 to the sole determinative test to be applied in answering the question posed by Section 57(3). He points in particular to the language used by the Industrial Tribunal in paragraph 21 of the reasons, which reads:

"21. Mr Justice Balcombe in the case of Chubb Fire Security Ltd - v - Harpur [1983] IRLR 311 EAT in deciding whether employers were reasonable in dismissing employees for their refusal to enter into a new contract enunciated the test as to whether the advantages to the employer of implementing the proposed re-organisation out-weighed any disadvantage which they should have contemplated that the employees might suffer. That is a test which we have adopted in this case."

and paragraph 29, where the Tribunal say:

"29. Having applied the test which was laid down in Chubb Fire Security - v Harpur (a case where there was no evidence which enabled the industrial tribunal to find as a fact that Mr Harpur's earnings would be reduced, which is different from these cases) we find that the respondents [employer] should have given further contemplation to the effect of the removal of the travelling expenses on the employees concerned who had had that benefit since transferring to Wigston in 1991 and bearing in mind that some of the applicants were in receipt of family credit, which was a pointer to the income that they were receiving."

In Chubb the applicant was employed as a sales representative. He refused to enter into a new contract of employment consequent upon a reorganisation, which he calculated would result in a drop in income and a move to a new sales territory with which he was unfamiliar. The employer could not persuade him to accept the new terms and he was dismissed. The Industrial Tribunal found the dismissal to be unfair. In particular, they found that the employer acted unreasonably in treating the applicant's refusal to accept the new contract as a sufficient reason to dismiss him.

On appeal, giving the judgment of this Tribunal, Balcombe J. commented on the findings of the Industrial Tribunal. He said this at paragraphs 8 - 9 of the report:

"(c) In particular, the Industrial Tribunal made no finding as to the advantages to Chubb of the proposed re-organisation and whether it was reasonable for them to implement the re-organisation by terminating existing contracts and offering employees new ones - see Hollister v NFU [1979] IRLR 238 CA. In the absence of such a finding the Industrial Tribunal failed to ask themselves the appropriate question which was: Was Chubb acting reasonably in dismissing Mr Harper for his refusal to enter into the new contract? In answering that question the Industrial Tribunal should have considered whether Chubb was acting reasonably in deciding that the advantages to them of implementing the proposed re-organisation outweighed any disadvantage which they should have contemplated Mr Harper might suffer.

The Industrial Tribunal appear to have concentrated their approach on the reasonableness of Mr Harper's belief that the new contract would be disadvantageous to him. For the reasons given above, in our judgment that was an incorrect approach. ..."

The judgment in Chubb was considered in the case of Richmond Precision Engineering Ltd v Pearce [1985] IRLR 179. After considering that Industrial Tribunal's reference to Chubb in its reasons, Beldam J, giving the judgment of this Tribunal said at paragraphs 22-23:

"22 We now return to this case and to paragraph 24 of the reasons. The Industrial Tribunal said that they had gained assistance from the case [Chubb] to which we have just referred. They then paraphrased the words in the head-note of that decision and said that the question which they had to consider in the present case was:

`Were the respondents acting reasonably in dismissing the applicant for his refusal to enter into a new contract?'

They went on:

`In answering that question we should consider whether the respondents were acting reasonably in deciding the advantages to them of implementing the proposed reorganisation outweighed any disadvantage which they should have contemplated that the applicant might suffer.'

23 Without, we hope, overlooking the statement of Lord Denning in the case of Hollister v National Farmers' Union that it is not right to go through the reasoning of Tribunals with a toothcomb to see if some error can be found, nevertheless, it seems to us that in those two paragraphs the Tribunal are falling into the error of treating the questions which were relevant in the case of Chubb as if their consideration of the words in s.57(3) could be confined to answering the question whether the appellants in the present case acted reasonably in deciding that the advantages to them of implementing the proposed reorganisation outweighed any disadvantages which they should have contemplated that the respondent might suffer."

Finally, we should refer to the case of St John of God (Care Services) Ltd v Brooks [1992] ICR 715, an authority specifically referred to in the Appellants' Notices of Appearance in this case, and cited to the Industrial Tribunal. Again, that case involved a "substantial reason" dismissal. Both the Chubb and Richmond cases were referred to in the judgment of Knox J. At page 722 E of the report, Knox J expressed the majority view of this Appeal Tribunal as follows:

"The second reason why the majority of us consider that treating the nature of the offer of new terms and conditions as the crucial question is difficult to reconcile with the statutory provisions of section 57(3) of the Act of 1978 is that such an approach tends to lead to giving undue importance to the factor that the employee is acting reasonably in refusing the offer. The situation may very well be one in which the employer's legitimate interests and the employee's equally legitimate interests are irreconcilable. If there is a sound good business reason for the particular reorganisation (see Hollister v National Farmers' Union [1979] I.C.R. 542, 551) the unreasonableness or reasonableness of the employer's conduct has to be looked at in the context of that reorganisation. To look at the offer as the crucial question is apt to blur that aspect of the matter."

Based on these authorities, Mr Swift submits that this Industrial Tribunal fell into the error identified by Beldam J. in the passage which I have read from Pearce.

We reject that submission. Although the Tribunal refers to the "test" in Chubb, we think that what they were doing was to identify the factor of determining whether the employer acted reasonably in weighing the advantages to the employer of discontinuing the travelling concession against the disadvantage that would cause to the Respondent employees as one of the factors to be taken into account in deciding the overall question of reasonableness under Section 57(3). This is illustrated by the Tribunal's finding in paragraph 30 of its reasons that sufficient consultation had taken place, and their findings in paragraphs 23 and 24 that the decision to alter the overtime premium rate and introduce multi-manning of machines was reasonable, bearing in mind, as the Tribunal found, there was a requirement to make savings calculated in total at £124,000. They weighed up all these factors and concluded that the employer's failure to take into account the disadvantages to these employees of the abolition of travel benefits took this dismissal outside the range of reasonable responses. That is what we understand the Tribunal to be saying in paragraph 31 of the reasons which reads:

"31. However, we conclude on the evidence that the employers were not acting reasonably in pushing through the withdrawal of the travelling expenses and paid little and insufficient attention to the disadvantages which the applicants would suffer."

They did not, in our judgment, look solely at the "Chubb factor"; however it was that factor which took the decision to dismiss outside the range of reasonable responses open to this employer in the judgment of the Industrial Tribunal. That was a conclusion which the Tribunal was entitled to reach.

Mr Swift took two further points. First, he said that in paragraph 27 of the reasons the Tribunal had substituted its own view for that of the employer in suggesting an alternative solution to that imposed by the employer. However, that paragraph is prefaced by the words:

"It is not for a Tribunal to say what a reasonable employer would have done ..."

We are satisfied that this Tribunal was very well aware of the need not to substitute its own view for that of management, and we do not consider that it fell into that trap.

Finally, Mr Swift complains that the Tribunal made 2 material findings of fact unsupported by any evidence. The first is at paragraph 25 where the Tribunal conclude:

"25. ... We are not satisfied that the respondents took into account the disadvantages which their proposals would mean to the applicants. In fact one of the respondents witnesses said that that aspect of the matter was nothing to do with him."

Mr Swift points out that there is nothing in the Chairman's notes of evidence of Mr Goody, the Appellants' General Manager, to support this finding attributed to him. We do not regard that omission as conclusive. Nor were we prepared to admit the Appellants' solicitor's note of Mr Goody's evidence, in the absence of agreement between the parties and a reference back to the Chairman. Dexine Rubber Co Ltd v Alker [1977] ICR 434. In the circumstances we conclude that there was evidence before the Tribunal on which that finding was based.

Secondly, it is said that there was no evidence to support a finding at paragraph 26 of the reasons.

"26. ... The proposals regarding the removal of the travel expenses and bus meant that £20,000 out of a proposed saving of £124,000 would fall on the 14 employees who lived in Market Harborough, which includes the 7 applicants. ..."

We accept the submission of Mr Lock that there was no evidence before the Tribunal that employees other than the 14 (including these Respondents) living in and around Market Harborough were affected by the ending of the travel concession, and that it was open to the Tribunal to conclude that the withdrawal of this concession had a disproportionate affect on the Market Harborough employees, when compared with other members of the workforce.

In all the circumstances we are unable to detect any error of law in this decision and accordingly the appeal must be dismissed.

Legal aid taxation ordered as appropriate.