United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MS D ROMNEY (Of Counsel) Messrs Lawrence Graham Solicitors 190 Strand London WC2R 1JN
1st Respondent Mr D A Mann 2nd Respondent Mr A R Romney 3rd Respondent Mr D Bagnall 4th Respondent Mr A B Massey 5th Respondent Mr D C Barley	Neither present nor represented Neither present nor represented In Person In Person MR T LINDEN (Of Counsel) Messrs Pattinson & Brewer Solicitors 30 Great James Street London WC1N 3HA


 


JUDGE HICKS QC: The Respondents to this appeal, who were the Applicants before the Industrial Tribunal, were five persons, all male, who were Class III delivery drivers for a soft drinks manufacturer, Masons. The significance of their being Class III drivers was that they were qualified to drive heavy goods vehicles of certain categories, but not of the complete range of categories, and in particular they were not qualified to drive articulated vehicles, for which a Class I licence was required.

In February 1996 Masons agreed that the Appellants, Rhys Davies & Sons Ltd, take over the distribution of Masons products. On 7 February the Applicants were told that there would be a transfer of their employment to Rhys Davies & Sons Ltd on 12 February. That happened and all the drivers including the Applicants were taken over by the Appellants. It is common ground that the Transfer of Undertaking Regulations applied.

At the time or very shortly after the transfer, the Applicants were told that there would be difficulties if they were not (as they were not) licensed for Class I driving and that even if they were re-trained there would be problems because the Appellants' insurance policy for drivers was such that Class I drivers had to have two years' experience in that capacity, so that even re- training would not help. It was also made clear that there might not be enough Class III jobs to go around, although the new employers took the view that if that happened it would not be what is commonly called a "redundancy" situation. Nevertheless, it was indicated that there would be an ex gratia payment of 80% of what would have been the redundancy entitlement.

Shortly after the transfer but undoubtedly on the findings of the Industrial Tribunal after, rather than simultaneously, the Appellants made firm decisions as to how they were going to deal with Masons' deliveries and in particular they decided to use articulated vehicles for that purpose because it would be more economic. It is implicit in that recital of events, and as we understand it not in dispute, although no explicit finding seems to have been made by the Industrial Tribunal, that until the carrying into effect of that decision, Masons' deliveries were carried on under the new employers as they had been before, that is to say, by the ex-Masons' drivers driving ex-Masons' vehicles; or certainly what one might call Class III vehicles.

The Appellants have a substantial organisation with six depots but the facts of this case are all concerned with the Tipton depot, where they already had 23 Class III vehicles with their own drivers engaged either wholly or almost wholly in the delivery of paper. The situation was therefore that in that interim the Appellants were running their Tipton depot on the basis of their existing 23 drivers plus the ex-Masons' drivers, who seem to have been six, because in addition to the Appellants there was a driver who was, in the event, kept on by the Appellants and therefore does not feature in the proceedings, making 29, and that seems to be common ground between the parties although the Industrial Tribunal gives the number as 28; nothing turns on that slip if it was a slip, or that misunderstanding if it is the case that the Tribunal got it right and the parties have misunderstood the position. Of the 23 Appellants' drivers at Tipton some had Class 1 licences. That is what the Tribunal find and that is all they find. We do not know how many. We do not know whether they had two years' experience and therefore were insurable. That is all that is known on that point.

The way in which the Appellants decided to operate the Masons' deliveries was, as we have said, by the use of articulated vehicles, but to be more precise they needed and intended to use four articulated vehicles and either one or two Class III vehicles (whether it should be one or two had not finally been determined). There was, as a result of those facts, in addition to the 23 previously existing employees, at least one additional Class III post available, and the Tribunal find that it was one. It appears to have been agreed among the ex-Masons' drivers that that post should go to a Mr Sharret, who is the person I have already mentioned as being retained by the Appellants and therefore not a party to these proceedings.

When all that had been announced there were then individual interviews with the ex-Masons' drivers at which they were asked two questions and those are dealt with in paragraph 31 of the Industrial Tribunal's reasons. The first question was whether they would wish to be considered for the single Class III post that was available, called the Class III Masons' post. As I have already indicated, they had all agreed that Mr Sharret should have that. Although the Tribunal does not make this explicit it seems obvious that it was for that reason that they all, apart from Mr Sharret, replied no to that question. After a second point concerned with the interview which amounted to an explanation of the problems about insurance and so on which made it effectively not possible for them to be taken on as Class I drivers, there was the other question, which was whether they would be interested in being employed on the paper contract. They all answered no to that question also. There is no explanation in the findings or reasons of the Industrial Tribunal as to why they did that.

Following that interview they all received notices of dismissal, which after referring to the general meeting of 12 February and the individual meetings on 16 February went on to say that they would receive a discretionary severance payment, the amount to be specified in each letter on termination of their employment, subject to:

"40 i) you completing your contractual period of notice with the company

ii) you continuing to work in a co-operative and responsible manner during your notice period."

As we understand it, they all complied with those conditions and received those payments and the dismissal notices took effect.

They applied to the Industrial Tribunal for redundancy payments. It appears that they may originally have expected only to obtain what one might call a "topping up" of the 80% of the redundancy figure they had all received to the full figure, but the decision of the Tribunal was that the dismissals were for redundancy, that they were entitled to redundancy payments and that, for reasons which we must come to, the employer was not entitled to set off or deduct against that award the payments already made, and the Appellants appeal against that decision in both parts, that is to say the finding that their dismissal was for redundancy and the finding that there could be no deduction for the payments already made.

Before we deal with the issues raised on the appeal I should explain what the position is as regards the individual Respondents. There were five Applicants, Messrs Barley, Mann, Romney, Massey and Bagnall. All except Mr Barley sent letters in response to the appeal saying in effect that they did not oppose the appeal. Mr Barley resisted the appeal and is represented here today by Mr Linden. Two of the others, Mr Massey and Mr Bagnall, however, have attended and explained that their letters were intended not to say that they consented to the allowance of the appeal, but simply that they did not wish to appear or put forward separate arguments and it is conceded, in our view rightly, by Ms Romney for the Appellants, that however that may be - and she does not dispute the genuineness of that explanation in any event, but however that may be - there can be no disposal of the appeal except by a formal Order dismissing it, to which this Court must be a party. Since that has not happened, if this appeal is not allowed and it is dismissed, then the benefit of that will accrue just as much to them and indeed to the two still absent Respondents as to Mr Barley who has appeared and through Mr Linden has prosecuted the Respondents' case.

The other thing to be said about the individual Respondents is that there was in fact, somewhat ironically, a distinction of fact between the situation of Mr Barley and all the rest in that Mr Barley was absent through sickness on 16 February when the interviews took place and therefore did not take part in the interview. It is perfectly conceivable therefore that his situation might be different from the others, but in substance no distinction was made between the five cases as argued before the Industrial Tribunal, no distinction was made in their decision and no distinction has been made in the argument before us, so that although it is on behalf of Mr Barley that Mr Linden speaks, in truth most of the discussion has been about the situation of the other four and it is not contended that we should do otherwise than deal with the matter on that basis. Indeed, Ms Romney expressly conceded that as Mr Barley's case was not argued separately before the Industrial Tribunal, that is also the position here.

We come to the first ground of the appeal, which is that the Industrial Tribunal were wrong in law in finding as they did that the dismissal was on the ground of redundancy. The relevant provision of the statute is Section 139(1)(b)(i) of the Employment Rights Act 1996 which omitting irrelevant words reads:

"For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(b) the fact that the requirements of that business—[that is to say the business for the purposes of which the employee was employed]

(i) for employees to carry out work of a particular kind,

have ceased or diminished or are expected to cease or diminish."

Cessation is not here in question. The question is diminution.

In relation to the tests which have to be applied for the purpose of that provision, the position is that at the date of the Industrial Tribunal decision the authorities, as understood by the Tribunal, were summarised and their purposes governed by a decision of the Court of Appeal in the case of Cowen v Haden Ltd [1983] ICR 1. Since the decision in the Industrial Tribunal there has been a decision of this Employment Appeal Tribunal, Safeways v Burrell [1997] IRLR 200, which expresses the test in somewhat different terms but neither party to this appeal, as we understand it, seeks to argue that that impinges upon the issues which arise for the purposes of this appeal and we agree, so I shall not embark upon what could be a lengthy and discursive description of the path which the law has followed over a number of decisions through a long period of years.

The question, therefore, being whether the requirements of the employers' business for employees to carry out work of a particular kind had diminished or were expected to diminish, was one which the Tribunal answered "yes". The basis on which they did so, as Ms Romney accepts, was that the work of a particular kind which had to be considered was work as what I may call for brevity Class III drivers. It is also clear that the Tribunal approached the matter on the basis that the question whether those requirements had diminished or were expected to diminish involved a comparison between the position at Tipton under Rhys Davies & Sons Ltd before and after the change which the employers intended to carry out in the way in which the Masons' deliveries took place.

Now, that being the way in which the Tribunal approached the matter, certain important concessions or agreements must first be mentioned. The first is that at the Tribunal - Ms Romney accepts that she cannot go behind this - it was accepted that the Transfer of Undertaking Regulations applied but also that the employers did not seek to consider whether

there were economic, organisational or technical reasons to dismiss the Applicants at the time of the transfer. The reason why that is relevant is because that is a specific exception to the provisions of the Transfer of Undertaking Regulations. We need not examine those provisions or there effect in detail. What is important for present purposes is that they are concerned with the change or a change which takes place, as it were, at the moment of transfer and as part of the transfer, and any reliance on that was disclaimed by the Appellants.

The second important concession is that Ms Romney accepts that she can point to no error of law in the finding of the Tribunal that the relevant particular kind of work - "work of a particular kind" in the terms of the statute - was what I have called Class III driving work, in other words she does not seek to say that the Tribunal should in law have treated Class I and Class III driving together as a single particular kind of work, namely, heavy goods vehicle driving.

Against that background we consider the arguments which were advanced by Ms Romney in support of the appeal as showing that the Tribunal erred in law in their decision that this was a dismissal on the ground of redundancy. She points out that in the situation in which the Appellant employers found themselves, one possibility was that their existing Class I drivers at Tipton could have been transferred to driving the articulated vehicles which were to deliver Masons' deliveries and that that would free additional Class III jobs for the ex-Masons' drivers. We accept that that was no doubt a possibility but it seems to us that that is nothing to the point so far as concerns the issue whether there was a diminution or expected diminution in the requirements of the business for employees to carry out work as Class III drivers. The simple fact is that on the findings of the Tribunal, unchallenged and unchallengeable, there had been a diminution in that requirement, or would be upon the carrying out of the intended reorganisation, from either 28 or 29 to either 24 or 25.

Of course if a case had been advanced that the employers did indeed intend to seek to resolve the matter by that means, or should have done so, then that could have been canvassed and explored before the Industrial Tribunal. It plainly was not. If there had been enough Class I drivers, if they had been qualified by two years' experience and therefore insurable, it is possible that the argument that that was a possible solution would have gone to the question of whether the occurrence of the redundancy situation had indeed caused the dismissal of the Applicants. If the Applicants had been given firm offers of continued jobs delivering paper, either because the employers saw their way to moving other drivers to the Class I jobs or for any other reason and they had refused, an issue might have arisen as to whether that meant either that there was no redundancy or that they had refused all reasonable alternative offers of employment. But we are quite satisfied that that did not happen.

The second question put to them on 16 February was not "we offer you a job driving paper, do you accept or not?". Like the first question, it was a question as to their willingness to consider or whether they were interested in such a job (by implication, if it were available) and it is very material to note that everybody knew that as far as the first question was concerned there was only one such post available and there is certainly nothing in the findings of the Industrial Tribunal to indicate, and no suggestion that any case was advanced before them during the hearing, that the position was different in regard to the other question as to the work delivering paper. There simply is not any basis on which it can be said, we think, that the Tribunal could have found, and certainly no criticism can be levied against them for not finding, that there were five paper driving jobs being then and there offered to the Applicants. We therefore consider that that point cannot succeed.

The second argument advanced by Ms Romney on this aspect of the appeal is that for much the same reasons of the availability of Class I drivers, the diminution in work for Class III drivers might be expected to be or could have been temporary and that although there would be some period as she put it of interregnum, there was the possibility that the employer would "get back to where he was", as she put it. So far as that relates to what would happen in the future, if Class I jobs were offered to and accepted by pre-existing Rhys Davies Class III drivers, it is covered by the point we have already dealt with, but in part at least of the submission by Ms Romney on this it seemed that by "getting back" she was referring to the position immediately before the transfer of undertaking. That, in our view, must be fallacious, for at least two reasons. The first is the factual one that the position immediately before was not 23, 24 or 25 Class III drivers and 4 at Class I, the position immediately before was 28 or 29 Class III drivers, albeit at that stage under two employers. But the second and more fundamental reason why that argument must be fallacious is that it effectively seeks to go behind the employers' concession that they did not seek to rely upon the "economic, organisational or technical" exception to the Transfer of Undertaking Regulations. Had the facts been and had the employers' case been that at the moment of the transfer they had already decided firmly upon the reorganisation that eventually took place, then it may be that they could have relied upon that exception. We say nothing of course about whether it would have succeeded, but at least it might have been arguable. They did not do so. That was not only a decision by which they are bound, it is also entirely consistent with the findings of fact made by the Tribunal that although some reorganisation was in the air at the moment of the transfer, a firm decision as to what form it should take did not come until some days later, in other words after a period during which, as a single employer, the Appellants were employing 28 or 29 Class III drivers at Tipton, and it is therefore that situation which must be compared with what was happening or was going to happen under the reorganisation. It is that comparison which governs the question whether the requirements of that business for employees to carry out Class III driving had diminished or was expected to diminish.

We therefore reject that ground of criticism of the Tribunal's decision also and that disposes of the first head of appeal; the appeal against the finding that the dismissal was on the ground of redundancy.

The second ground turns as I have said on the award by the Tribunal of the full amount of the redundancy payments due, rather than effectively 20% of that amount, by reason of setting off against the full amount the 80% paid when the employees complied with the conditions of the notices of dismissal, including their offer of severance payment.

The question whether the payments made by an employer should go in reduction of the amount to be paid under an award by the Tribunal of compensation for unfair dismissal or redundancy payment has been dealt with in two reported cases. The first is Chelsea Football Club and Athletic Co Ltd v Heath [1981] ICR 323. The situation there was that there was a complaint of unfair dismissal following a summary dismissal of the chief talent scout for the employers' football club. There was then some negotiation between the employee and the employers, following which a letter was written by the Chief Executive of the Club to the employee, on the basis that that negotiation had resulted in an agreement. The letter went on:

"I therefore have very much pleasure in enclosing the club's cheque for £7,500, being the ex gratia compensation that was agreed by the board, as a result of the termination of your employment, ...."

The Industrial Tribunal in effect treated that payment as disposing of the compensatory award under the legislation but came to the view that they still had to make in addition the basic award and that decision was appealed to this Tribunal and the appeal was allowed. A great deal of the judgment is occupied in dealing with an argument which turned on the reference to the Tribunal's powers to reduce a payment under the statute, which is not germane to the present appeal. That is disposed of, finally, on page 327 C in these words:

"But the defence of payment is not reducing the amount of the basic award; it is accepting the amount and putting forward the payment as answer".

The judgment of the Employment Appeal Tribunal then goes on to deal with the situation where an employer, while denying that there is unfair dismissal, pays a sum on the basis that despite that denial, if the employer is wrong, the payment is made by way of the compensation that will then be due. The Employment Appeal Tribunal hold that in such a case the Industrial Tribunal is not required to make an award, if the amount paid is equal to or greater than the amount which the award would have been. The Employment Appeal Tribunal then goes on at page 327 E as follows:

"The case is more difficult where a general payment is made and in each individual case it is a question of construction as to whether the payment made is to be taken to have included any rights which the employee might have under the provisions of the statute. If the employer makes a general payment— particularly if it is made ex gratia— he will risk the argument that he has not paid something which is referable to the liability for the basic award should he be held to have dismissed unfairly. But it seems to us that there can be cases in which a payment is made and which is, as a matter of construction or of fact, to be taken as including such rights as the employee may have under the statute, even if entitlement to the moneys is initially denied by the employer."

Having expressed that general principle, the Employment Appeal Tribunal turned to the particular facts of that case and came to the conclusion that the payment should be treated as having been made by way of compensation and that since it was undoubtedly more than the total amount which would have been awarded by way of basic and compensatory award no further payment should be ordered and the decision of the Industrial Tribunal was therefore reversed.

It is clear that relevant facts in that case were, first, the fact that there had been negotiations precisely as to whether the employee was entitled to compensation and how much it should be, which had resulted in some agreement, secondly, that the amount paid was more than the amount which would have been awarded by the Tribunal and, thirdly, that what was paid was expressly described as compensation, albeit it was also described as ex gratia. Of course the facts of any particular case are of only illustrative importance. What matters is the principle and albeit that that was an unfair dismissal case rather than a redundancy case, we accept the principle stated by the Employment Appeal Tribunal in that case, namely, that it is a question of construction and, we would add, of construction when only a document is involved but a question of fact when other factual considerations come into the matter, as to whether the payment made is to be taken to have included any rights which the employee has under the statute or not. We also note the words "if the employer makes a general payment - particularly if it is made ex gratia - he will risk the argument that he has not paid something which is referable to the liability" in question.

In this particular case the matter turns upon, and this is common ground, two areas of enquiry. The first is what was said on the subject at the meeting of 12 February and the second is what was written on this point in the notices of dismissal. What was said on 12 February, and this I think is a direct transcript because a recording was in fact taken, were these words spoken on behalf of the employers (and, being words spoken no doubt ex tempore, that they are not as tightly organised grammatically as they might have been in other circumstances simply adds verisimilitude to the record):

"Now again, because we have been through this in the past it is normal policy, normal company policy, from Rhys Davies Transport where this exists for there to be an offer made, an ex gratia offer made because you aren't redundant as such, as ex gratia payment offer made to yourselves of 80% of the value of that redundancy payment."

Then what was written was that the employee would:

".... Receive a discretionary severance payment of £ on termination of your employment, subject to:-

i) you completing your contractual period of notice with the company

ii) you continuing to work in a co-operative and responsible manner during your notice period."

The way in which the Industrial Tribunal dealt with that is this: having dealt with the amounts and said that the more vexed question was whether the Applicants have to give credit for the "severance payment" (and they use those words, which are words taken from the letter), they say that their view is that the Applicants are not obliged to give credit. That is the decision. The reasons follow. In dealing with the reasons they first of all refer to Section 162(1)-(5) of the Act, which show how the redundancy payment is to be calculated. They then refer to S.162(6), which provides that:

"..... it is for the Tribunal to determine how much the employer is liable to pay being either the whole of redundancy payment or such part of the redundancy payment as is left if the employer has been required to make payment by "some other provision. So far as we can see under the Act the redundancy payment that we order to be paid could only be reduced:-

61.1 if we were satisfied that the employer had in fact already paid a sum which purported to be a redundancy payment; or [they then refer to other provisions of the Act and rightly say that that had not been argued]"

So the question was simply whether the employer had in fact already paid a sum which purported to be a redundancy payment, and they deal with that in this way in paragraphs 63 and 64 of their Reasons:

"63. It is also plain that the nature of the payment, although calculated in a similar fashion to a redundancy payment, was not intended to be a redundancy payment:-

63.1 It was only 80% of what a redundancy payment would have been; and

63.2 More critically, in offering the payment to the Applicants it was done on the condition that each Applicant completed his contractual notice period and worked during that period in a co-operative and responsible manner.

64. The imposition of the conditions referred to in paragraph 63.2 makes it quite plain in our view that the Respondent was offering the payment to secure the co-operation of the Applicants during the notice period. It is not expressed to be in total or even partial satisfaction or any statutory redundancy right."

The issue before us is whether the Tribunal were wrong in law in reaching that conclusion. Ms Romney has submitted first of all that both of the considerations which the Tribunal took into account, namely that the amount was less than the full redundancy payment and secondly that conditions were imposed, are not relevant. There is some attraction in the first point, at first blush, that the fact that the amount is less is irrelevant, but we are satisfied that although it is not of the greatest weight - and the Tribunal clearly did not consider it the most important of the considerations - nevertheless it cannot be excluded, and the reason for that is that it is common ground, as we understand it, between Ms Romney and Mr Linden, and we accept, that if for instance the exact amount of the redundancy payment were paid or, as is very often the case, substantially more, then that would inevitably make it more difficult to argue that the employee should on top of that still get the full amount of the redundancy payment, and if that is a material consideration in that direction then manifestly the converse must also be true. Although not of course conclusive, and perhaps not of great of weight, it must be relevant that the amount was less than the full amount of the redundancy payment.

But the more important reason - given in addition, of course, as the Tribunal make that plain, they have in mind that the letter itself refers to it as a severance payment, not a redundancy payment, and also the fact as is common ground that it was made under a denial of liability - the other consideration and the one which weighed more heavily with the Tribunal, was that conditions were imposed. Ms Romney says that those conditions amounted to no more than saying that the employees should continue to comply with their existing obligations under the contract. In our view that is no reason why this should not be a relevant consideration. In the first place we do not consider that this is a situation where one is asking oneself according to the technical rules of law what amounts to consideration. Whatever would amount to good consideration for a contract the industrial reality of the situation is very plainly that it was an advantage to the employer to have well-affected and willing workers for the whole of the period during which they had to work out the notice that was given, rather than otherwise. Secondly, even on the most narrow and technical approach to the matter, this did give the employers more in law than they were otherwise entitled to, because it required the employees to work out the full notice given by the employers, whereas there seems no doubt that the employees could perfectly lawfully themselves have given a shorter notice and left earlier if they had been minded to do so. We therefore consider that the Tribunal was perfectly entitled to take that into account in their assessment of this question.

Ms Romney then says that they did not sufficiently take into account the fact that the calculation was indeed by a formula referable to the redundancy payment. That really I think puts her in a dilemma, because she either has to say this was effectively a conclusive consideration - and she cannot possibly put the matter that high - or else she has to say that they did not take that into account at all, and that cannot be right, because it was plainly in their mind; they referred to it and the words "although calculated in a similar fashion to a redundancy payment" clearly means that they are setting that on one side against the considerations that go in their view to tell the other way. We see no error of law in the Tribunal's approach to that issue and reject the appeal on that ground also. The consequence is that this appeal must be wholly dismissed.