United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MS S HARRISON (Company Accountant) R T Tanner & Co Ltd 40 Buxton Street Manchester M1 2QD
For the Respondents	MR G NORTON (Of Counsel) Messrs Robin Thompson & Partners Solicitors Compass House Pynnacle Close Stanmore Middlesex HA7 4XL


 


JUDGE CLARK: The three Respondents to this appeal, Messrs Mansfield, Mole & Lidsey were long-standing employees of the Appellants, R T Tanner & Co Ltd., until their dismissal by reason of redundancy on 30 November 1994. Each presented a complaint of unfair dismissal to an Industrial Tribunal.

Those complaints were heard and determined by a Tribunal sitting at Ashford and chaired by Miss V G Wallis, in two stages. First the Tribunal considered the issue of liability at a hearing on 31 May 1995. The Tribunal concluded that each Respondent had been unfairly dismissed in a decision together with full reasons dated 26 July 1995. (The liability decision.)

The same Tribunal was later reconvened on 25 October 1995 to consider remedies. The question of reinstatement had been discussed between the parties. The employer did not offer reinstatement and the Respondents opted for the remedy of compensation. Each Respondent was awarded compensation by a decision for which summary reasons were given on 21 November 1995 and full reasons on 19 February 1996 (the remedies decision).

The employer now appeals only against the remedies decision by a Notice dated 6 December 1995, accompanied by a letter setting out the grounds of appeal dated 29 November 1995.

The facts

The Industrial Tribunal made the following findings of fact: the company carried on business as a manufacturer of envelopes. On 24 October 1994 90% of its shareholding was acquired by The Manchester Envelope Co Ltd. At that time the company was in some financial difficulty and employed fifty staff. The Managing Director, Mr Rosser, looked for savings and attention focused on the production department in which each of the three Respondents was employed.

Mr Mole had been employed for some thirty years with a two-year break. He had started as a machine adjuster but had risen through the ranks so that in January 1994 he was appointed factory manager. Following the takeover of the company in October 1994, the Tribunal observed that Mr Mole had told Mr Rosser that he would be happy to go back to being a machine adjuster rather than continuing as factory manager.

Mr Mansfield had started his employment in 1960 initially as a lorry driver, then in other capacities until 1980, when he became warehouse manager.

Mr Lidsey, who had worked for the company since 1988, had started as a machine operator but at the material time was employed as a warehouse operative.

Mr Rosser decided to combine three posts into one. They were the positions of planning manager held by Mr Dalton, factory manager, Mr Mole, and warehouse manager, Mr Mansfield. The new post was that of production manager and it was decided that Mr Dalton, who had the most versatile background, would assume the new post and that Messrs Mansfield and Mole would be made redundant. All three Respondents were dismissed without warning on 30 November 1994.

An issue arose as to whether the employer was obliged to consult with the trade union the GPMU to which the Respondents belonged. The Tribunal held that there was no obligation to consult the union in respect of Messrs Mole and Mansfield, who were managers, but it was common ground that the employer ought to have consulted with the union in relation to Mr Lidsey.

For the employer it was argued that consultation could not alter the outcome. The Tribunal rejected that argument. Having been referred to the House of Lords decision in Polkey v A E Dayton Services Ltd [1988] ICR 142. It found that:

"26. ...There was no consultation with the individual in this case, no discussion of the selection criteria, or the other skills that the three Applicants had to offer particularly given their long experience in various roles with the company, or their possible willingness to accept other work," [as Mr Mole had indicated in his case, specifically to Mr Rosser]

Further, the Tribunal held that consultation could have made a difference to the situation and certainly they could not say that it would have been utterly futile so as to bring the cases within the exception to the general rule in Polkey that a failure to consult over redundancies will lead to a finding of unfair dismissal. (See per Lord MacKay LC, page 153F.) Accordingly the Tribunal found the dismissals to be unfair.

Remedies Hearing

In preparation for the remedies hearing held on 25 October 1995, both sides prepared calculations of compensation to which they submitted each Respondent was entitled. Before considering the Tribunal's remedies decision it is useful to set out the rival contentions in general terms in respect of each Respondent.

For the employees, calculations were prepared in each case based on their pre-dismissal net earnings, which included in Mr Lidsey's case average overtime payments in the work which he carried out in the warehouse. For the employer, the calculations were based, in the cases of Messrs Mole and Mansfield, on the net rates of pay applicable to alternative jobs as, respectively, senior envelope machine adjuster and warehouseman. Further, in relation to both Mr Mansfield and Mr Lidsey, the employer contended that their wage rate should be based on basic pay only, since it was the employer's evidence that overtime ceased in the warehouse immediately following these dismissals on 30 November 1994.

Remedies Decision

In calculating the loss to each Respondent, the Tribunal assessed their loss of earnings by using their net earnings in post with the company before dismissal and making a comparison with their net earnings in new employment obtained after the dismissal, so as to arrive at figures for both full and partial loss of earnings. In short they accepted the Respondent's calculations in toto.

That approach, submits Ms Harrison, ignores the guidance to be found in the speech of Lord Bridge in Polkey at page 163G-H. An Industrial Tribunal is required to consider where the employer contends that consultation would have made no difference, what were the chances of the employee retaining employment had a fair procedure been followed, and in what capacity and at what level of pay. Take the cases of Messrs Mole and Mansfield. In the liability decision reasons at paragraph 7, the Tribunal appear to accept that the roles of factory manager (Mr Mole), warehouse manager (Mr Mansfield) and planning manager (Mr Dalton) were combined into one new post, that of production manager. They record that Mr Rosser selected Mr Dalton for the new post on the ground that he had the more versatile background, so that the two Respondents were made redundant.

In these circumstances it was incumbent on the Tribunal to consider in circumstances where no criticism is made of their selection for redundancy, what was the percentage chance in each case of the Respondent being retained, as a result of proper consultation, in some other, and if so, what post? For example, Mr Mole had earlier indicated following the takeover by the company's new owners, that he was prepared to step down as factory manager and work as a machine adjuster. What alternative employment might have been offered to Mr Mansfield? Might he have been offered a job in the warehouse? Would he have accepted it? How is that chance to be assessed? In either event, the basic computation of loss, before any percentage reduction is applied to reflect that Respondent's loss of a chance, will be based on the appropriate net earnings of the alternative post, not the pre-dismissal post which had disappeared.

Different considerations may arise in the case of Mr Lidsey. He was one of six warehouse operatives at the date of dismissal. What were the chances of his being retained in preference to another member of the warehouse staff, had proper consultation taken place with his union and with him individually? There is no analysis of the likely selection process amongst the warehouse personnel had such consultation taken place in the Tribunal's reasons.

Mr Morton for the Respondents recognises that the Tribunal's reasons for the remedies decision give no indication as to whether the Tribunal has considered what we shall call the Polkey approach to compensation. In these circumstances, in our judgment, that decision is defective, in that it does not explain to the parties why they have won or lost on their rival contentions as to remedy. Meek v City of Birmingham District Council [1987] IRLR 250. In this regard the Tribunal fell into error.

Before considering what course we should take, having identified an error of law in the Tribunal's approach, we should mention the further matters of complaint raised by Ms Harrison in this appeal. First she submits that the Tribunal ought not to have calculated Mr Mansfield's additional mileage costs in his new employment on the basis of the AA figures advanced on his behalf. Secondly, the Tribunal ought not to have assessed Mr Mansfield's pension loss at £150. Thirdly, they were wrong to find that Mr Lidsey's temporary employment following dismissal had not broken the chain of causation for the purposes of assessing his loss. We have considered each of these contentions but conclude that each point was fully argued between the parties before the Tribunal and as their reasons show, the Tribunal preferred and accepted the case advanced on behalf of the employees. These were findings of fact, properly made by the Tribunal on the evidence before it. It is not our function to interfere with findings of fact made by Industrial Tribunals. Our jurisdiction is limited to correcting errors of law. Accordingly we reject these matters advanced by Ms Harrison.

It follows in our judgment that this is one of those rare cases where we should invoke our powers to remit the case to the same Industrial Tribunal for a further hearing on remedies. At that further hearing we direct that the following issues should be addressed and adjudicated upon:

(1) Had proper consultation taken place with Messrs Mole and Mansfield would they nevertheless have been selected for redundancy (see paragraph 7 of the reasons for the liability decision)?

(2) If not, what was the percentage chance in either case of them retaining their original employment.

(3) If so, what was the percentage chance of their being offered and accepting alternative employment?

(4) If there was some chance of their obtaining alternative employment, in what capacity would they have been retained?

(5) In the case of Mr Lidsey, what was the percentage chance of his retaining employment, had proper consultation taken place both with him and his trade union.?

(6) In each event, what net rate of pay would each of the three men have received in any continuing employment? For this purpose it may be necessary for the Tribunal to make a specific finding of fact as to the availability of overtime work in the warehouse after 30 November 1994.

Having made all necessary findings as indicated above, it will then be for the Tribunal to assess the overall loss in each case for the fifty-two week period on which their original calculation was based; to make any percentage deduction found under the Polkey approach to compensation, and finally, to deduct the lump sum payment in lieu of notice in each case, on the basis that no such payment would have been made by the employer, had the employee remained in employment.

Before parting with this case we should make one general observation. Tribunals frequently do have split hearings, dealing first with liability and then with remedy. That is a sensible and desirable practice. However, in cases such as this, it is important for Tribunals to follow through the two stages of the Polkey guidance: first to decide whether or not the dismissal is fair and secondly having found it to be unfair, in the assessment of compensation, where that is the remedy, not losing sight of any material findings made at the first stage of the enquiry.

Accordingly this appeal is allowed and the matter remitted to the same Industrial Tribunal for further hearing in light of the issues which we have identified in this judgment.