United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 781_95_0112

Appeal No. EAT/781/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 1 December 1995

Before

THE HONOURABLE MR JUSTICE KEENE

LORD GLADWIN OF CLEE CBE JP

MR T C THOMAS

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UNITED NORWEST CO-OPERATIVES LTD          APPELLANTS

MR E D WILLIAMS          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MISS J C WOODWARD

(Of Counsel)

MR J P PALMER

Messrs Croftons

Solicitors

Television House

Mount Street

Manchester

M2 5FA

For the Respondent MR M KNOWLES

(Representative)

Personnel Advisory Services

1 Howey Lane

Congleton

Cheshire

CW12 4AE


 


MR JUSTICE KEENE: This is an appeal by an employer against the decision of an Industrial Tribunal that the Respondent was unfairly dismissed by reason of redundancy and that he should be awarded £9,423.94 plus an additional payment under the Wages Act 1986. There is no challenge to the finding of unfair dismissal. The issue in this appeal concerns the way in which the Tribunal below approached the award of compensation.

The Respondent, Mr Williams, was employed by the Appellant from 20 January 1992 until 29 October 1994, initially as Supplies Officer at Haydock Non-food Warehouse. He rose rapidly as it seems. On 25 February 1994 his appointment with effect from 7 February as Traffic Planning Manager at Talke Grocery Warehouse was confirmed by the senior Personnel Manager, Mr Barratt. An increase in salary was promised after a 3-month trial period. There was no issue before the Tribunal that the Respondent fulfilled his duties to the entire satisfaction of his employer. He was an excellent employee. Nonetheless the 3-month trial period came and went, and no increase in salary was forthcoming. He, as a result, arranged an appointment with Mr Barratt for the 3rd October 1994.

In the meantime, before the arrangements were made for that meeting, and unknown to the Respondent, the decision to dismiss him by reason of redundancy had already been taken. That occurred according to the Tribunal's finding at least as early as 11 August; but for some reason, the decision was delayed. When the Respondent went to the meeting on 3 October 1994, he assumed that this was, as he had requested, a meeting to discuss his increase in salary. He was completely unprepared for what in fact happened, which was that he was informed bluntly by Mr Barratt that he was to be made redundant.

The origins of that decision lay in the fact that the Respondent as Traffic Planning Manager from February 1994 onwards was assisted in that task solely by a Mr Lockett, who was a young management trainee. The Appellant company took the view that Mr Williams had to be made redundant, because it had become apparent since his appointment that the operation within the Traffic Planning department could be run by one person. No thought seemed to have been given to Mr Williams or of his position, vis-a-vis Mr Lockett. The Tribunal recorded that it was accepted by the Respondent that a redundancy situation existed. It was an economic decision to retain Mr Lockett and dismiss Mr Williams, because there was a difference in the salary paid to each of the two men. The saving amounted to some £6,000 per annum.

What particularly concerned the Industrial Tribunal was the complete lack of consultation. As they put it:

"... No discussions or consultations took place."...

There was no evidence that the Appellant company had considered any alternatives, such as dismissing Mr Lockett for reasons of redundancy. Apparently the Appellant company did not consider whether Mr Lockett might be moved to another sphere of operation so that Mr Williams, the Respondent, could be left to continue running traffic planning. The Tribunal also recorded that the Appellant:

"... did not consider whether Mr Williams might return to his former post in Haydock. That they claim would have been "bumping"."...

After spelling out these matters, they said this:

"... Whether if they [the Appellant] had consulted it would have made any difference is not for us to say; that would be second guessing the respondents, but their failure to consider these options and to consult with the applicant makes the selection unfair and the dismissal by reason of redundancy unfair. Mr Williams is entitled to compensation."

They noted that a list of jobs available had been presented to Mr Williams but that it was conceded that none of those jobs were suitable for him. In their decision they then go on to elaborate at some greater length the unfairness of the dismissal.

On compensation, the Tribunal calculated a compensatory award as running from the date of termination on 29 October 1994 until 28 July 1995. Nothing is said at that part of the decision as to the considerations which went into that assessment of compensation. No apparent reduction was made for any factor, other than the subsequent earnings by the Respondent after he had left the employment with the Appellant company.

The Appellant now contends principally that the Industrial Tribunal has erred in law in the way in which it has applied Section 74(1) of the Employment Protection (Consolidation) Act 1978. That sub-section reads as follows:

"Subject to [various sections] the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

Miss Woodward refers to the Tribunal's comment at paragraph 6 of its decision, to which we have already referred, that:

"... Whether if they [the Appellant] had consulted it would have made any difference is not for us to say;"...

She submits that while that statement is entirely correct in relation to the Tribunal's decision when applying Section 57(3) of the Act in relation to the fairness or otherwise of the dismissal, it is a mis-direction if applied to its task under Section 74(1). She contends that the Tribunal erred in law in failing to consider for the purposes of compensation what might have happened had consultation occurred. The Appellant contends that the Tribunal has assessed the loss on the basis that the Respondent's employment would have continued, even if the Appellant had consulted the Respondent and considered alternative possibilities, without ever making such a finding of fact, or indeed apparently even considering it. Miss Woodward submits that in a case such as this, a Tribunal must take a view as to what would have happened but for the unfair dismissal.

The Tribunal, in our view, were quite correct in refusing to speculate when dealing with the issue of unfairness under Section 57(3). At the compensation stage, however, things are different. In Polkey v A E Dayton Services Ltd [1987] IRLR 503, Lord Bridge indicated that where a dismissal is unfair because of the employers' failure to take the appropriate procedural steps, the likely effect on the situation should be considered at the stage of assessing compensation. He quoted with approval the words of Mr Justice Browne-Wilkinson, as he then was, in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 where it was said:

"There is no need for an `all or nothing' decision. If the Industrial Tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment."

More recently, in Red Bank Manufacturing Co Ltd v Meadows [1992] IRLR 209 this Appeal Tribunal said at page 210:

"... it seems to us that since the decision in Polkey it is necessary for a Tribunal when calculating the amount to be awarded for compensation to ask itself this two-stage question: If the proper procedure had been followed, and if consultation had taken place, would it have resulted in an offer of employment? This was the question to which the Tribunal did address themselves in the earlier hearing, and to which they gave the answer that it might have done so. What the Tribunal failed to do, and what in our view they should have done, was to go on to consider first what that employment would have been, and second what wage would have been paid in respect of it."

That is an appropriate way, in general, to assess compensation in a case of unfair dismissal. However, on behalf of the Respondent, Mr Knowles asserts that this point was not raised before the Industrial Tribunal. There is a conflict here, in that the Appellant says that the point was taken. The Respondent goes further and submits that the necessary evidence was not even adduced before the Tribunal. In contrast, Miss Woodward contends that the evidence was there. In particular, she submits that if there is evidence before a Tribunal on this matter, then the Tribunal mis-directs itself if it fails to apply the approach in Polkey, even if the point is not expressly taken by an employer. She emphasises that it is often the case that both sides are unrepresented by a legally qualified representative before an Industrial Tribunal. She accepts that the relevant evidence must be produced if the Tribunal is to deal with the matter on such a basis, but she draws attention to the wording of Section 74(1) of the Act, and submits that that indicates that the Tribunal has a duty to assess what is the loss sustained by the complainant in consequence of the dismissal:

"... in so far as that loss is attributable to action taken by the employer."

In support of that proposition, she has referred us to the cases of Dunlop Ltd v Farrell [1993] ICR 885 and Wolsley Centres Ltd v Symmonds [1994] ICR 503. It is to be observed that in both those cases the point was clearly raised before the Tribunal by the employer, that some deduction ought to be made from the compensation to allow for this possibility of the employee being kept on in the employer's employment. It is submitted on behalf of the Appellant that there was a real possibility that the Respondent would have been dismissed in any event, and that the Tribunal ought therefore to have gone on to consider and to assess what the degree of that possibility was. In support of her contention that this is something which a Tribunal should consider in any event, Miss Woodward has referred to the decision in the Steel Stockholders (Birmingham) Ltd v Kirkwood [1993] IRLR 515. In that decision, which was the decision of the Employment Appeal Tribunal in Scotland, it was said by Lord Coulsfield giving the decision of the Appeal Tribunal at page 517:

"... while we accept that it is the duty of an Industrial Tribunal to apply the Polkey principle as a rule of law binding upon them, as was held in Hepworth Refractories Ltd, supra, it is not their duty to embark on an independent investigation of the facts and circumstances in order to see whether they can identify some other criterion of selection upon which the dismissal of the applicant might have been justified when, as was the position, we understand, in the present case, no attempt has been made to ask them to do so, or to suggest what that criterion might have been."

The particular part of that passage upon which the Appellant relies is a reference to the fact that it is the duty of a Tribunal to apply the Polkey principle as a rule of law. The part of that decision which indicates that the Tribunal does not have the duty to cast about seeking to obtain evidence on such a matter if it is not adduced before it, was supported and followed by this Appeal Tribunal in the case of Bolton & Poole Ltd v Arnold [1994] IRLR 532.

We interpret the authorities as indicating this: first of all, if evidence is not put before an Industrial Tribunal on the basis of which evidence it could assess properly the prospects of an employee being dismissed even if appropriate procedures had been followed, then the Tribunal is not required to undertake its own investigation of the necessary facts. It is not a body which is expected itself to seek to discover what the facts might be of its own volition. That burden rests upon the parties. Secondly, if such evidence is before the Tribunal, it should seek to apply the approach indicated in Polkey. The existence of such evidence would normally itself suggest that this point on the measure of compensation had been raised by the employer, since it is not relevant to the issue of the fairness or unfairness of the dismissal; as is well established when that issue of fairness is being determined, it is irrelevant whether fair procedures would nonetheless have still led to the employee's dismissal. On such matters as consultation and investigating alternative solutions in a redundancy situation, the Tribunal is concerned at the stage of its decision on unfair dismissal, with whether such consultation and investigations were in fact carried out. In contrast, at the compensation stage, the Tribunal is concerned with the hypothetical matter of what the results of such steps would have been, had they been taken. That is why the existence of evidence about what the results would have been tends to suggest in any given case that the Polkey point was taken at the hearing, such evidence not otherwise being relevant.

In any event, there is a statutory duty under Section 74(1) to award compensation, having regard to the loss sustained by the complainant in consequence of the dismissal:

"... in so far as that loss is attributable to action taken by the employer"

Patently, that is not a task which requires the Tribunal to seek to assess the chances of the employee having remained in his employment had fair procedures been followed, if evidence is not put before them which enable them to perform that task. If the evidence is before them, then the task is one which they should carry out.

In the present case there are at paragraph 6 of the decision various references to what steps should have been taken by the company, and some references to what the prospects of some alternative employment for the Respondent would have been. We have already referred to the fact that the Appellant before the Tribunal claimed that it would not have been possible for the Respondent to return to his former job in Haydock, because that would have been "bumping", by which we understand it to have indicated it would have meant that some other employee would have had to have lost that particular post. There was evidence also of a list of jobs available; that list being presented to Mr Williams around the time of his dismissal. Those jobs were all unsuitable for his age and experience and some of them were part-time, but the evidence was nonetheless there before the Tribunal. The Tribunal was also informed that this company had some 4,000 employees. Finally, it is clear that the Tribunal did turn its mind, albeit it seems in the context of the fairness of the dismissal, to what the consequences would have been had consultation been carried out.

We have not found this an easy decision, but in the end we have concluded that there was a sufficient evidential basis for the Tribunal to have applied the approach, spelled out in Polkey, of considering the chances of the Respondent having been kept on by the Appellant, if fair procedures had been observed. This case therefore must be remitted to the Industrial Tribunal for it to consider that aspect of the assessment of compensation.

It must also be remitted on another part of the compensation award. At the beginning of this hearing, we gave leave to the Appellant to add a further ground to its Notice of Appeal, raising the point that the Tribunal had erred in law in assessing the amount of compensation on the basis of the gross wages which the Respondent would have received in his employment by the Appellant. There is no doubt looking at paragraph 7 of the decision that, in approaching that matter, the Tribunal did assess compensation by taking into consideration the gross amount which the Respondent would have received from the 30 October 1994 to July 1995, on the basis of his gross earnings during that period. From that they then deducted net earnings in his post-dismissal employment. That is clear, because the decision reveals that the gross salary which the Respondent was told he would receive after the 3-month trial period would be a salary of £16,000 per annum and that equates to the £12,000 used by the Tribunal in its assessment of compensation for a period of approximately 9 months; that is to say, 3/4 of £16,000. We gave leave for this point to be raised because it seemed to us to be right that this matter should be dealt with on a proper basis and the amendment was one which, in our view, could be made without any injustice to the Respondent, despite the late stage at which this matter was raised.

There is really no issue that the calculations had been done on the basis of the gross salary, and it is of course well-known and established that net figures should have been used. In those circumstances, this matter must be remitted to the Industrial Tribunal on that point also, so that the appropriate calculation of the compensatory award can be carried out using net figures throughout the calculation. In our view, this matter should go back to the same Industrial Tribunal as dealt with this matter originally. For the reasons we have indicated this appeal succeeds.