United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 986_94_0610

Appeal No. EAT/986/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 6th October 1995

Before

THE HONOURABLE MR JUSTICE MUMMERY (P)

MRS E HART

MR B M WARMAN

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R R DONNELLY (UK) LIMITED          APPELLANTS

(1) MR R COLLINS

(2) MR J A SINCLAIR

(3) MR D HAWLEY          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised on 16th January 1996


 


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APPEARANCES

For the Appellant MR S BLOCH

(of Counsel)

Messrs Baker & McKenzie

Solicitors

100 New Bridge Street

London EC4V 6JA

For the Respondents MR P CAPE

(of Counsel)

Messrs Short Richardson and Forth

Solicitors

4 Mosley Street

Newcastle-upon-Tyne

NE1 1SR


 


MR JUSTICE MUMMERY (PRESIDENT):

Introduction:

This is an appeal against the decision of the Industrial Tribunal held at Newcastle on 24th, 25th and 26th August 1994. The Tribunal unanimously decided that the three applicants were unfairly dismissed and orders were made for them to be re-instated to their employment with the respondent company, R R Donnelley (UK) Limited ["Donnelley"]. Orders were also made for the payment of a sum equivalent to net salary from the date of dismissal to the date of re-instatement, less certain sums for which the applicants should give credit. The extended reasons of the decision were sent to the parties on 21st September 1994. Donnelley appealed by a Notice of Appeal dated 8th December 1994. At a hearing for directions in the Employment Appeal Tribunal on 30th March 1995 leave was granted to Donnelley to amend the Notice of Appeal, with consequential leave to file an amended respondent's answer. Donnelley appeal against both liability and remedy. The appeal has been argued with great thoroughness by Mr Bloch, on behalf of Donnelley, and by Mr Cape on behalf of the applicant employees.

The Findings of Fact:

The facts found by the Industrial Tribunal maybe conveniently summarised as follows:

(1) Donnelley is the world's largest volume printer, with printing works at Gateshead, York and Thorp Arch.

(2) The applicants were employed by Donnelley in the origination department in the printing works at Gateshead. Work carried on in the department was regarded as a skilled job. It involved transferring customer's information into films and magnetic tapes for the printing presses to read out and print. There were two other departments in the printing works, printing and binding, as well as an administration department.

(3) The printing works were heavily unionised. All the applicants were members of the Graphical Paper and Media Union (GPMU) and amalgamation of the Society of Graphical and Allied Trades '82 (SOGAT) and the National Graphical Association (NGA).

(4) On 18th December 1990 Donnelley agreed with SOGAT criteria for making redundancies based on sickness records, making allowances for industrial injury, operations, long-term sickness and hospitalisation. The criteria were agreed by SOGAT for redundancies made by Donnelley in 1990 and later, though voluntary redundancies were taken first.

(5) In 1993 Donnelley decided that they needed to cut costs and they explained their intentions to a meeting called for all the workforce. Donnelley made proposals which included the origination department. There was a suggestion that nine employees from the origination department should be made redundant. The selection criteria were stated to be as previously agreed with SOGAT. It was accepted by Donnelley and by the union that the printing works at Gateshead had an unacceptable problem of sickness absenteeism which had cost the company a substantial sum in 1992.

(6) Between May and December 1993 negotiations took place between Donnelley and the unions about Donnelley's written proposals for cutting costs. The discussions included redundancy criteria, as well as other matters relating to working practices and flexibility. There was some discussion about the criteria for redundancies and about absence caused by industrial injury which had not been included in the original criteria. This had been recognised as a cause of unnecessary absenteeism. The union was able to have omitted from the criteria the inclusion of absences from work for industrial injury. In order to obtain that concession the union had to threaten to walk out of all talks.

(7) The selection criteria were finally agreed as follows:-

"(i) Any periods of hospitalisation/surgery involving an overnight stay to be omitted other than voluntary surgery ie vasectomy, cosmetic.

(ii) Periods in excess of 30 consecutive working days absence will be deemed as long term sickness and omitted (first 30 working days will be included).

(iii) Absences due to industrial injuries to be omitted ie the absence directly following and relating to the accident only. Consequent absences relating to the accident will be included.

(iv) Absences due to proven bone fractures to be omitted.

(v) The yearly average will include the full going year.

(vi) Cut off points for consideration of sickness absence to come into effect once down-manning/redundancy agreement has been reached with the unions."

(8) On 6th December 1993 a final meeting was held with the union. The union agreed with the package of proposals for cutting costs. On 12th December 1993 the package agreed between Donnelley and the unions was put to a mass meeting of all the workforce attended by the three applicants. The package was approved by the majority of the workforce, though the applicants voted against it. In the cost cutting package it was agreed that four employees from the origination department would be made redundant.

(9) The applicants were not directly involved in the negotiations in respect of the cost cutting package nor in regard to the selection criteria for redundancies. This was carried out by their union representative on their behalf. They were not formally informed by Donnelley of the selection criteria. Donnelley relied upon the applicants' union to inform them. Donnelley sent letters to all employees in the origination department asking for volunteers for redundancy, but none were forthcoming. This meant that calculations had to be made of sickness absences for all members of the origination department. The three applicants and one other came at the top of the list of absences.

(10) On 20th December 1993 letters of redundancy were sent to each of the three applicants. None of them were consulted about their records prior to the letter being sent out. The letter gave each applicant an opportunity to see the personnel manager of Donnelley and a meeting was suggested so that "all reasonable alternatives be considered." Two of the applicants met with the personnel manager to go through their sickness records and an adjustment was made to the record of one of them. Those two subsequently appealed to Donnelley's general manager, Mr Smith, on the ground that the criteria were unfair. The third applicant (Mr Hawley) decided to leave the employment of Donnelley without checking records or taking any part in consultation. The appeals failed. None of the applicants were told that, following the appeal to Mr Smith, there was a further appeal to higher management. In fact Mr Smith himself was not aware that there was a higher appeal. The applicants were not represented at the appeal hearing and Donnelley did not suggest representation, though it was normal at disciplinary hearings for employees to be represented. Donnelley kept no records of skills or abilities relating to their employees, other than schedules of training they had undertaken.

(12) The personnel manager gave consideration to obtaining alternative jobs for the applicants and made enquiries at other plants to see whether there were jobs available. None of the applicants were individually given details of any vacancies, except that vacancies in the Bindery Department were brought to their attention. The applicants did not regard themselves as capable of taking a job in the Bindery Department as they regarded those as SOGAT jobs. Donnelley would, however, employ anyone in the Bindery Department, whether or not they were members of SOGAT, thought they did not explain this to the applicants.

(13) On 18th January 1994 two of the applicants (Mr Collins and Mr Sinclair) left Donnelley's employment.

The Industrial Tribunal Decision:

The Tribunal heard rival submission on the facts and the law from Mr Short, who represented the applicant Mr Collins, and from Miss Armstrong who represented Donnelley. The applicants agreed that there was a redundancy situation and that it applied to them. Their complaint was that the criteria for selection for redundancy was unfair. The criteria had as their sole specification sickness absenteeism. They contended that the criteria had been devised to weed out malingerers from the Donnelley's employees. Donnelley argued that there was a true redundancy situation, that they had applied fair selection criteria previously agreed with the unions and applied by them. They were objective criteria and had been modified after criticism by the union.

The other two applicants were not represented. They made no submissions and relied on the submissions made by Mr Short.

On the question of liability the Tribunal came to the following conclusions.:

(1) There was a redundancy situation within the meaning of Section 81(2) of the Employment Protection (Consolidation) Act 1978. The reason for the dismissal of the applicants was redundancy. Their effective date of termination was 18th January 1994.

(2) The dismissals were not rendered unfair by Section 59 of the 1978 Act.

(3) It was for the Tribunal to consider whether the dismissals were fair in the context of Section 57(3) of the 1978 Act. The Tribunal had to look to see whether there was fairness as regards both selection and consultation.

(4) As to the selection criteria there was an agreement with the union on the redundancy criteria. The Tribunal said:

"This was not a redundancy procedure. The respondents and the union only agreed the means of selection."

The Tribunal observed that a redundancy procedure would have dealt with matters such as early retirement and reduction of overtime. The agreement put to the unions regarding selection for redundancy was part of a larger package of cost reduction exercises which Donnelley wished to have applied to all their hourly paid employees. The package was put as a whole to the unions and by the unions to the employees as a whole. It was voted on as one package. The selection criteria formed a small part of that package. The union's agreement to the selection criteria must be taken in that context. Even if the agreement was with the full agreement of the unions, Donnelley still were under a duty to use fair criteria.

(4) In deciding whether the criteria for redundancy were fair, the Tribunal had to have regard to the principles laid down in Williams v Compair Maxam Ltd. The Tribunal accepted that there was sufficient and adequate warning given to the union that there would be redundancies. The selection criteria were negotiated to achieve a fair system with as little hardship as possible. Donnelley, in the package given to the unions, specified that the redundancy criteria was non-negotiable. Donnelley sought to impose an agreement they made in 1991 with a particular union, albeit with some modifications, in regard to redundancies to be made in the origination department. The 1991 criteria were designed for unskilled workers. There was no modification of the criteria for this unit of selection, the origination department, or for those particular applicants who were regarded as part of a skilled workforce. The Tribunal referred to a passage in Williams v Compair Maxam Ltd to the effect that this selection criteria must be criteria which can be objectively tested "checked against such things as attendance records, efficiency at the job, experience or length of service." The Tribunal held that Donnelley only did the first in that list, namely select on attendance records. They had to make a selection fairly. The Tribunal found that the selection for these particular redundancies was made consistently, but that did not necessarily make it fair.

(5) The selection criteria were not those which a reasonable employer would have adopted. They accepted that, as originally conceived, it was designed as a method for weeding out malingerers from parts of the workforce. That was still an important consideration in 1993, but not possibly the only one. The Tribunal said:

"We consider a reasonable employer of the size and resources of the respondent would have devised a system of selection which took into account the skills, length of service, experience and efficiency of its employees. We are supported in our view by the fact that Mr Sinclair was regarded as the best employee in the Origination Department. Mr Collins was in the top 50%, and Mr Hawley was not an employee which his manager would have wished to see leave. A reasonable employer would have considered the problems of losing its best employees and would have devised a scheme to enable those employees to be kept on. The respondents at other plants used different criteria. At their new Greenfield plant they have adopted a matrix system for selection."

(6) The Tribunal considered that there was sufficient consultation with the two applicants Mr Collins and Mr Sinclair, repeating that Mr Hawley had chosen not to enter consultation. The Tribunal were unanimously of the opinion that the consultation process was fatally flawed. There was no prior consultation with any employee before the list of absences was compiled by the personnel department. The first time that the applicants became aware that they were at the top of the list was when the list was published. Consultation should have started prior to that time. After redundancy notices were sent to the employees there was no attempt to inform the applicants of the procedure for consultation. No procedure for consultation was laid down. The applicants were unaware, as the general manager was also unaware, of the right to appeal to higher management. The applicants were not given an opportunity to be represented at the appeal hearings before Mr Smith. He had been involved in the origination of the criteria in 1991 and in the negotiations for the cost cutting exercises in 1993, including the redundancy criteria. The appeal to Mr Smith was to "a Judge in his own court" who was unlikely to change his mind regarding the criteria.

(7) There was no proper information given to the applicants about alternative vacancies. Vacancies that did exist in other plants were merely put on a notice board and not notified individually to the applicants. Donnelley must have been aware of the confusion in the mind of the applicants regarding the jobs which appeared to have existed in the Bindery Department and which the applicant considered were only SOGAT jobs. Donnelley did nothing to indicate to them that they regarded their jobs as available to them, irrespective of whether they were in a SOGAT chapel.

(8) The dismissals were therefore unfair because the criteria for selection were unfair. There was no consultation with two of the applicants. Their dismissals were also unfair on that ground.

(9) On the matter of remedies each of the applicants elected for re-instatement. The Tribunal made findings of fact in respect of the individual applicants and heard submissions on each side. The Tribunal's decision, in paragraph 49 of the extended reasons was that Donnelley had not shown that re-instatement was impracticable. They were having some success in finding alternative orders at home and in Europe. There was a probability of increased work and continued overtime.

The Applicants' Submissions:

Mr Cape reminded the Tribunal that an appeal would only lie on a point of law and that, if the Tribunal had asked the right questions and if there were evidence before them such as they could properly reach the conclusions they did, there was no error of law. The Tribunal had given reasons for the decision. They were not obliged to give a comprehensive or detailed analysis of law or fact. It was not the function of the Appeal Tribunal to go through the extended reasons with a fine tooth comb looking for a point of law. The proper approach was to consider the decision broadly, not hunt for legal technicalities. Mr Cape took us in detail through the reasoning of the Tribunal on the question of the unfairness of the criteria and the failure to consult. There was no dispute that the reason for dismissal was redundancy. The Tribunal found that the dismissals were not rendered unfair by Section 59 of the 1978 Act. The Tribunal had correctly directed itself to Section 57(3) of the 1978 Act, and had concluded, for the reasons already summarised, that Donnelley had not acted reasonably. This was a permissible conclusion having regard to all the facts found by the Tribunal.

Mr Cape made the following particular points.:

(1) Burden of Proof

Mr Cape accepted that, taken out of context, part of paragraph 29 of the decision seemed to indicate that the Tribunal had imposed a burden of proving fairness upon the employer. Another part of that paragraph suggested that the Tribunal recognised correctly the Section 57(3) was neutral as to the burden of proof. That indication was to be found in other paragraphs of the decision, such as paragraph 31. In any case, there was nothing in the reasons of the Tribunal to suggest that the Tribunal's decision was determined by reference to the burden of proof. Even if the Tribunal directed itself wrongly on that, the decision was plainly and unarguably right, despite any such misdirection.

(2) The Section 59 Point

The Tribunal found that there was an agreement on the means of selection. They did not hold that there was no Section 59 agreement. Of all the redundancy related issues which might be agreed with unions, the only one that was material to Section 59 was selection. The Tribunal found that dismissal was not rendered unfair by Section 59. There was no ground for criticising the Tribunal for failure to spell out at great length the facts and law applied in reaching that conclusion.

(3) The Section 57(3) Point

The Tribunal found that the selection criteria were agreed with the unions. In applying Section 57(3) the Tribunal were bound to take into account all the circumstances. They included the fact that Donnelley had put forward selection criteria which were expressed to be non-negotiable. They had included those criteria in a number of measures as a package. It was also relevant to consider the extent which Donnelley had complied with good industrial practice. As to the factors mentioned in Compair Maxam, the Tribunal correctly directed themselves to consider whether the selection criteria were fair. That decision was to be taken in the context of the Compair Maxam principles. The reasoning of the Tribunal on that point should be read as a whole. The Tribunal considered the principles in Compair Maxam and found that the approach taken by Donnelley conformed to some, but not all, of those principles. They explained in what respects they considered that the principles had not been followed. The Tribunal did not find that the selection criteria were unreasonable because they were intended as a method of weeding out malingerers. They were designed for that purpose in 1991, but the Tribunal appreciated that in 1993 weeding out malingerers was not the only consideration in relation to the criteria. The Tribunal took into account the fact that the criteria applied worked injustice by leading to the selection of employees who were well regarded by their managers. All in all, the Tribunal took all the matters into account which they should have taken into account in reaching the conclusion under Section 57(3).

(4) Consultation

It was important to read the reasoning as a whole. The Tribunal were entitled to conclude that there were fatal flaws in the process of consultation, having regard to the failure of management to understand and communicate to employees the appeals procedure, to the unsatisfactory conduct of the only appeal that was heard, and to the failure to consult employees about alternative employment and to clarify conclusion of their eligibility for vacant jobs. The Tribunal saw the issues of consultation and selection criteria as inextricably linked. Donnelley had put forward non-negotiable selection criteria. When applied they produced an injustice which would have been avoided if Donnelley had consulted employees about the circumstances of their attendance records before publishing a list of material absences and if they had applied their mind to the problem that the application of the criteria would result in dismissal of some of the best employees. It was only by consulting individual employees about attendance records that Donnelley could have properly assessed the effect of adopting the selection criteria put forward. There was no individual consultation, as there should have been, prior to the publication of the list absences. Once the selection criteria were laid down Donnelley had closed its mind to any consideration of the reasonableness of the criteria and had failed to consider the problem of losing their best employees. Employees were left unaware of their rights of appeal and of their eligibility for the vacancies. They were not consulted about the possibility of alternative employment in circumstances when such consultation was essential because there was work available. Donnelley knew that the applicants were confused about whether they could apply for it and did nothing to resolve the confusion. The Tribunal were entitled to reach the conclusions they did on consultation.

(6) Remedy

The fact was that Donnelley continued to operate on the basis of employees working overtime at levels which the Industrial Tribunal judged to be "fairly high". They have had some success in finding work in the United Kingdom and in Europe. They had begun to seek European order actively in April 1993. Re-instatement had not been shown to be impracticable. The Tribunal had a wide discretion of whether or not to order re-instatement. They had to determine on the evidence whether or not it was practicable for the employer to comply with the order. Whether or not re-instatement is practicable is a matter of fact for the Industrial Tribunal. One of the factors to which the Tribunal must give weight is the employers' commercial judgment, but that was only one of the factors. As overtime was being worked and there was some new business and prospects of winning further business, it was open to the Tribunal to reach a provisional conclusion that re-instatement was practicable. Having determined that it was practicable to re-instate the applicants, the Industrial Tribunal were entitled to exercise the discretion under Section 69 to decide that re-instatement was the appropriate remedy. Re-instatement is the primary remedy for unfair dismissal. The applicants were not guilty of any blameworthy conduct. Donnelley had confidence in their ability to do their job. The applicants had been well regarded by their superiors. The likelihood that an employer might not comply with an order for re-instatement was not a material consideration in deciding whether to make such an order.

For all those reason Mr Cape submitted that the appeal should be dismissed.

Conclusions

We have given full consideration to all the points made by Mr Cape, but we are unable to agree with his submission that the appeal should be dismissed. In our judgment, there are errors of law in the reasoning of the Industrial Tribunal which make it necessary to allow the appeal and remit the case for hearing by the same Industrial Tribunal. Mr Bloch has succeeded in persuading us that there are good reasons for taking that course.

Those reasons are as follows.

(1) The Burden of Proof

As held in Post Office Counters Limited v Heavey [1989] IRLR 515 there is no burden of proof on either party in relation to Section 57(3) of the 1978 Act. Yet in paragraph 29 of the decision the Tribunal said that the dismissals, having been made for redundancy, it was for Donnelley "to show that it was fair within the requirements of Section 57(3) ... as regards both selection and consultation." That was a misdirection, though not, in our view, fatal on its own to the correctness of the decision.

(2) Agreed Redundancy Procedure

The Tribunal erred in directing themselves in paragraph 30 of the decision that there was no agreed redundancy procedure. The Tribunal had found that the selection criteria of Donnelley were agreed in 1990 and used without complaint then. The definition of sickness absence was refined to make allowance for industrial injuries, operations, long-term sickness and hospitalisation. It was further refined in 1993 after objection by the GPMU during negotiations. The package was voted on by the workforce at a meeting at which the applicants were present, though they voted against it. The result was an agreement which fell within the definition of an agreed procedure within Section 59. It was an agreement "as to the system to be adopted in selecting those who are to be made redundant." It was not necessary for the agreed procedure to deal with other matters, such as early retirement or the reduction of overtime. The Tribunal erred in treating as relevant the fact that the union's agreement on the selection criteria was made as part of a package. The Tribunal also erred in treating as relevant the fact that the agreement was reached as a result of the Union being given to understand that, if the package was not accepted, Donnelley would shut down one shift and possibly close the plant. The effect was that the Tribunal failed to give proper consideration or weight to the fact that the Donnelley had complied within the procedure agreed with the union. In cases where such an agreement is reached it will usually be difficult for any Tribunal to hold that, in dismissing any particular individual, the employer has acted unreasonably: See Atkinson v George Linsay & Co [1980] IRLR 196 and Valor Newhome Ltd v Hampson [1982] ICR 407.

(3) Williams v Compair Maxam

We agree with Mr Bloch that the Tribunal appear to have misunderstood and misapplied the decision of Williams v Compair Maxam. They read the guidelines laid down too literally. That led them to take the impermissible step of substituting their own criteria for those of the employer. They had done this by reaching the conclusion that no reasonable employer would, in relation to skilled workers, have used selection criteria which did not have regard to their level of skill. The criteria of absenteeism, regarded as unfair by the Tribunal, was only one of the considerations. The fact that other plants used different criteria was not an indication that the management at Gateshead was acting unreasonably. The fact was that the criteria applied by Donnelley had been agreed with the union, used in December 1990 with the agreement of the union, further refined in December 1990 after objection by negotiation with the trade union and voted on by the workforce at the meeting at which the applicants were present. In those circumstances we agree with Mr Bloch that no reasonable Tribunal, directing itself to those facts and with a proper understanding of the law, could have reached the conclusion that there was no Section 59 agreement or that the criteria applied were unfair within the meaning of Section 57(3).

(4) Consultation

Mr Bloch reminded us of the facts found by the Tribunal in relation to the consultation in the case of Messrs Collins and Sinclair. He argued that the Tribunal acted on the view that consultation was a pre-requisite to fairness without giving proper consideration to the purpose of consultation and whether it was necessary. Lack of consultation does not automatically render dismissals unfair. Each case has to be considered on its own merits and circumstances. The Tribunal had failed to give due consideration to the special facts and circumstances of this case. There had been protracted negotiation, refinement and agreement on the criteria themselves with the trade union representatives acting on behalf of the applicants. The cost cutting package, including the redundancy criteria, had been voted on by the work force of Donnelley. The criteria themselves were capable of application by simple computation, devoid of subjective elements. The process was not therefore one which necessitated consultation. Any requirement for consultation was satisfied by subsequent checking of the accuracy of the list. There was a consultation procedure in place with the personnel manager, with an appeal to the general manager, Mr Smith. Consultation had taken place which had resulted in the correction of the records of Mr Collins and Mr Sinclair. As to vacancies, the Tribunal had found as a fact that vacancies that existed were posted on the notice board, though not notified directly to the applicants. The Tribunal did not appear to have considered whether this method was sufficient to bring the vacancies to the attention of the applicants and whether they should have seen them and whether they had in fact seen them. They were informed of the Bindery vacancies. There was no evidential basis for finding actual knowledge on the part of Donnelley as to confusion in the minds of the applicants about those jobs. Mr Bloch returned to the facts found by the Tribunal relating to the substantial and protracted negotiations between Donnelley and the union and about criteria, to the consultation that took place between Donnelley and the applicants about the application of the criteria to Mr Collins and Mr Sinclair individually and to the opportunity of appeal provided to them and used by them. In those circumstances no reasonable Tribunal could have found that the procedure was flawed by lack of consultation with them.

For those reasons we would allow the appeal. We remit the cases of Mr Sinclair and Mr Collins to the Industrial Tribunal for re-hearing only on the issue of consultation and, if necessary remedy. It is not necessary for us to deal with the arguments on re-instatement since, if there were errors of law in the Tribunal's decision, the determination that the dismissal was unfair must be the subject of a re-hearing and the errors in the reasoning that led to the decision of unfair dismissal would have affected the decision on re-instatement. We agree with Mr Bloch that the order for re-instatement is infected by the error made by the Tribunal in substituting its own selection criteria for those which management had agreed with the unions. In those circumstances it is not necessary to deal with the other independent grounds on which Mr Bloch criticised the decision on remedy.