United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MS S ASHTIANY (Solicitor) Messrs Cole & Cole Solicitors Buxton Court 3 West Way Oxford OX2 0SZ
For the Respondent	MR S JONES (of Counsel) Messrs Manches & Co Solicitors 3 Worcester Street Oxford OX1 2PZ


 


JUDGE JOHN BYRT QC: This is an appeal from a decision of the Employment Tribunal sitting at Reading. Its decision was promulgated on 23 June 1997, and by it they held that the employee, Mrs Eileen Windows had been unfairly dismissed. The employers appeal.

The Appellants are a firm of occupational psychologists. The firm was set up in 1984, and by 1987 it consisted of 14 occupational psychologists and some 8 support staff. Mrs Windows started working for them in January 1986 as an accountant. At that time, her employment was only part-time, and she was paid an hourly wage. She had no written contract of employment; nothing was discussed about a retirement age; she entered into no pension scheme with the firm.

In October 1987, the Appellants organised a pension scheme for their staff who were employed full-time with them. At the same time, they sent round a memorandum which described the benefits to be provided by the scheme "on retirement at age 60". The rules of the scheme itself provided that "the normal retirement date meant the 60th birthday anniversary of a member". Mrs Windows was not a member of the scheme. Initially, she was excluded because she was not a full-time employee. In 1991, she was issued with an employment contract, and thereafter was treated as a full-time employee but she was still ineligible for the pension scheme as she was paid by the hour. In 1994, she became a fully fledged member of the firm, and therefore eligible to join the pension scheme. However, she declined to join as she had her own personal pension plan and she was advised it would be unwise for her to join the Company scheme because of the start up costs and she would only be able to go on paying into it until the age of 60, and there would be a limit on her contributions. She was told she would be better off continuing her own private pension policy as she could pay in higher contributions and continue those contributions beyond the age of 60.

Although Mrs Windows was not a member of the Company pension scheme, she did help to administer it. For example, she would pass on to the members their benefit statements, all of which referred to a "normal retirement age" of 60. Furthermore, when she herself completed a questionnaire for the Clerical Medical, the pension plan providers, she gave the answer "60" to the question "what is the normal retirement age?"

On 31 May 1996, the firm issued a handbook to the staff who, by now, included Mrs Windows. It was launched at a meeting with the staff. The handbook contained the statement "the normal retirement age for men and women is 60". On 13 June, Mrs Windows sent her employers a memorandum in which she said she had planned to work until she was 65, and "would very much appreciate it if she could continue to work for you after my 60th birthday". She had no response. She sent a second memorandum on 12 July saying she was worried about the matter and would appreciate an early response. She had a meeting with Dr Kandola, a partner in the Appellant firm, at which he confirmed that "the retirement date would apply to her on her 60th birthday". That would be in March 1997. On 16 July, she sent the partners a further memorandum in which she expressed her disappointment. Her contract, she said, made no mention of a retirement date and she had always assumed she would retire at 65. She said she had taken legal advice and been told that, if she was dismissed at 60, she would have a very good case against the Appellants for discrimination and unfair dismissal. Correspondence between Solicitors followed. The Appellants' response was that the retirement age of 60 was Company policy, and would be applied without exception. Her employment was terminated on 2 March 1997, her 60th birthday.

The Tribunal first addressed the issue of their jurisdiction to entertain Mrs Windows' application of unfair dismissal. The relevant statutory provisions is Section 109 of the Employment Rights Act 1996. This states that:

"(1) Section 94 [the right not to be dismissed unfairly] does not apply to the dismissal of an employee if on or before the effective date of termination he has attained -

(a) in a case where -

(i) in the undertaking in which the employee was employed, there was a normal retiring age for an employee holding the position held by the employee, and

(ii) the age was the same whether the employee holding that position was a man or a woman,

that normal retiring age, and

(b) in any other case, the age of sixty-five".

In applying that section to the facts of the case, the Tribunal made certain additional findings of importance. They found:

1. that there was no express nor implied contractual retirement age for Mrs Windows at the time of her dismissal;

2. that when the pension scheme was introduced in 1987, its reference to a "normal retiring age" merely indicated the age at which the benefits under that pension scheme would be triggered;

3. they "accepted Mrs Windows' evidence" that while she was well aware of the relevance of the age of 60 for the pension scheme, it never occurred to her that this was the "normal retiring age" which applied to her;

4. the introduction of the pension scheme was not sufficient to establish a normal retiring age for employees of the Appellants;

5. Mrs Windows had not ever joined the pension scheme, and therefore was not in the same "position" as those employees who had;

6. there never was a "normal retiring age" of 60 for Mrs Windows, and therefore she was not deprived of her rights under Section 94 until she reached 65.

Having found these facts, the Tribunal decided they had jurisdiction to entertain the application for unfair dismissal. The employers had not formally pleaded a defence to that application but the Tribunal allowed an amendment which enabled the employers to allege a reason for Mrs Windows' dismissal to be for "some other substantial reason" and claim that her dismissal had been fair because they had acted reasonably in applying their policy of retirement at 60.

The Tribunal nowhere state what they found to be the employers' reason for dismissal. They focussed on the Appellants' conduct in the period leading up to Mrs Windows' dismissal, and found that they had not taken the trouble to discuss with her the issues arising on a retirement policy, and had failed to take her position into account before dismissing her. Accordingly, the Tribunal found the dismissal to be unfair.

This case first came before the EAT on 10 December 1997 at a preliminary hearing when the Appellants were granted leave to proceed to a full hearing on three points which this Tribunal considered arguable. They are:

1. that the Tribunal failed to consider the Appellants' alternative submission that "a normal retirement age" had been established as a matter of policy by issuing on 31 May 1996 the handbook to all the firm's employees;

2. that in considering the position held by Mrs Windows within the Appellant firm, the Tribunal failed to apply properly the definition of what is meant by "position" contained in Section 235 of the Employment Rights Act;

3. that the Tribunal failed to give proper reasons for their finding that the dismissal was unfair.

We propose to take each point in turn.

Having read the Appellants' written closing submissions before the Employment Tribunal, it is clear that a substantial part of their case dealt, in the alternative, with the legal position arising as a result of the presentation of the staff handbook on 31 May 1996, and the contention that it established a normal retirement age policy. The extended reasons are silent upon this point, and despite Mr Jones's helpful submissions on the Respondent's behalf, we are not satisfied that the Tribunal considered it. It is necessary therefore that we should do so in order to see whether the Tribunal's omission matters.

It was agreed between the parties and accepted by the Tribunal that, at no material time, was there any contractual provision, express or implied, which fixed a retirement age for Mrs Windows. When, as at 31 May 1996, it was proposed she should, along with the rest of the staff, sign up to terms and conditions of employment, incorporating a policy statement in the handbook to the effect that the normal retirement age would be 60, she refused to do so and persisted in that refusal until she was dismissed on 2 March 1997, her 60th birthday. The question arises whether, by making a simple policy statement, an employer can impose upon an employee a non-contractual requirement such as a normal retirement age. On the authorities, the simple answer to the question is that he can on condition that the term it is sought to impose does not conflict with any contractual provision. As Browne-Wilkinson J (as he then was) said in Duke v Reliance Systems Ltd [1982] IRLR 347:

"... there is no need for any contract of employment to specify a normal retirement age ... age of retirement is normally a matter of policy adopted by the employer, not of contractual arrangement between the employer and employee."

In Brooks v British Telecommunications Plc [1992] ICR 414, Butler-Sloss LJ said at page 430:

"... It is open to an employer to change his policy for the normal retiring age, and so long as it does not breach the contractual retiring age such a policy can change overnight. It requires, of course, properly to be communicated to the employees affected before it can take effect, but once communicated, I see no reason why the effect should not be immediate. ..."

In Barclays Bank Plc v O'Brien [1994] IRLR 580. Gibson LJ reviewed earlier authority and said, in relation to the comparable provisions of the 1978 Act:

"The following propositions can be distilled from the authorities:

1. The social policy underlying s.64(1) [of the Employment Protection (Consolidation) Act 1978] is to secure fair treatment as regards compulsory retirement as between different employees holding the same or a similar 'position' (in the statutory sense).

9. A normal retiring age is an aspect of an employer's policy which, once promulgated to the employees concerned, will take effect as their normal retiring age unless it is a sham or has been abandoned or is never implemented."

In Secretary of State for Education and Science v Birchall No. 1, Mr Justice Mummery, President (as he then was), handed down a judgment on 23 May 1994 in which he set out three relevant propositions, established by earlier authority, for the guidance of the Tribunal:

"1. 'Normal retiring age' is the age at which employees in the relevant group reasonably expect or understand they are expected to retire.

2. If there is an express or implied term in the contract of employment specifying a retiring age, that will prima facie be the normal retiring age ....

3. Normal retiring age may feature as an aspect of an employer's employment policy. If it does, evidence relevant to normal retiring age may be found in the general policy of the employer. That may change from time to time. So long as there is no breach of a contractual retiring age, the policy may change with immediate effect, as communicated by him to the group of employees affected by the policy change."

This latter case was followed by Birchall v Secretary of State for Education and Science in which Mummery J, in a judgment handed down on 18 September 1996, considered the submission made on behalf of the employee that, as a matter of law, the employer was not entitled by a unilateral decision, to announce an event which, when it arrived, would terminate employment and disentitle the employee from protection for unfair dismissal. He said:

"The Secretary of State was entitled to rely on a policy, even though the subject-matter of the policy was not incorporated as a term in the contract of employment. The policy was not itself a breach of any existing contractual term."

In argument, our attention was drawn to the cases of Dryden v Greater Glasgow Health Board [1992] IRLR 469 and Bratko v Beloit Walmsley Ltd [1995] IRLR 629, but we do not consider that either case adds or detracts anything to what has already been cited above.

The conclusion we draw from these authorities and the admitted facts is that the Appellants were entitled, in the absence of any or any contradictory contractual term, to establish a normal retiring age as a result of a policy statement announced in the staff handbook promulgated on 31 May 1996. The handbook made plain that there was a policy of normally retiring all employees at 60, and, in the absence of any evidence to the contrary, that remained the policy at the date of Mrs Windows' dismissal on 2 March 1997. If, in legal and factual terms, she was a member of the group of staff to whom the policy applied, then that retirement age would apply to her. These conclusions coincide with the Appellants' alternative case. In that the Tribunal's decision never sought to deal with that case, their omission must, in view of our reading of the law, amount to an error which would be fundamental to the outcome of this appeal.

So the next question has to be whether that policy was intended to apply to a group of staff of which Mrs Windows was one. This entails a consideration of Section 235 of the 1996 Act. This defines "position", as referred to in Section 109, in the following terms:

" 'position', in relation to an employee, means the following matters taken as a whole -

(a) his status as an employee,

(b) the nature of his work, and

(c) his terms and conditions of employment."

If Mrs Windows held a position within the Appellant firm which placed her outside the group of staff to whom her normal retiring age policy applied, then it would be a matter of no consequence that the Tribunal omitted to consider or, if they did, to pronounce up the legal position arising from the statement of policy in the handbook.

The Tribunal did find that Mrs Windows held a position outside the relevant group of staff and so outside the provisions of Section 109; and that conclusion, Mr Jones submits, is a finding of fact or of fact and law which is wholly within the province of the Tribunal to decide. He says that if the Appellants are to up-end that finding, they must establish perversity. Ms Ashtiany, for the Appellants, submits that if the extended reasons show the Tribunal took matters into account which they should not have done or vice versa, then the Tribunal has erred in law, and the EAT should act to correct that error.

The first limb of the Appellants' argument before the Industrial Tribunal on the issue of a normal retirement age, dwelt on the introduction of the employers' pension scheme in October 1987. The introduction of that scheme was accompanied by rules of the scheme and a memorandum in both of which documents there was a statement that the normal retirement age was 60. Throughout, Mrs Windows helped with the administration of the scheme and accepted that she was aware of the provision relating to retirement but never regarded it as having any application to her. First, she was ineligible to join the scheme because she was not a full-time employer of the firm. When she did eventually become fully employed by them, her contract of employment gave her the option of joining or opting out of the pension arrangements. She exercised her right to opt out. The Appellants argued that, throughout, she was aware of their policy on retirement age because of her familiarity with the features of the pension scheme, and she therefore ought to have had the expectation that the policy would apply to her.

It is clear from the extended reasons that the Tribunal gave much thought to this limb of the Appellants' argument and in paragraph 17 of the reasons said this:

"17. This Tribunal does not believe that the introduction of the pension scheme was sufficient to establish a normal retiring age for employees of the respondents [now the Appellants. But if the Tribunal is wrong on this point, we find that it would be effective only as regards the employees who in fact joined the scheme. Mrs Windows had not joined the scheme and until 1994 had had no right to do so. This meant that Mrs Windows was not in the same 'position' as those employees who had joined the pension scheme."

The Appellants now criticise that passage saying that the Tribunal erred in choosing membership of the pension scheme as the determining factor as to who was within or outside the group. Ms Ashtiany reminded us that Section 235 required all the three factors named in the section to be taken into account as a whole, and the Tribunal failed to do that. She says the critical date for assessment is 2 March 1997, the date of the Respondent's 60th birthday, and by that time, the handbook and the new terms and conditions of employment had been distributed in identical terms, without distinction between all of the employees of the firm. Mention of the pension provision was also in identical terms. It was available to all employees and they had the right to join in or opt out of the scheme. The choice was theirs. Thus, the only distinction between employees was how they exercised their option. Ms Ashtiany submits that the Tribunal erred in holding that the manner in which the employee exercised that option, was a factor which fell to be considered under any of the three heads named in the section.

Mr Jones bid us to put a broader interpretation on what was said in paragraph 17 of the reasons. The Tribunal does not have to set out each step of the way by which they were led to a particular conclusion. In constructing their stated findings, the EAT should lean towards that construction which validated the conclusion. He submitted that paragraph 17 should not be construed as meaning that membership of the pension scheme exclusively determined the "position" of the employee. The question to be asked was whether there was evidence before the Tribunal which entitled them to find that Mrs Windows enjoyed a unique position in the firm. If there was, the EAT should not disturb the Tribunal's finding.

In our judgment, the conclusion is irresistible that the Tribunal did regard membership of the pension scheme as the paramount consideration they took into account in coming to their finding. Paragraph 17 refers exclusively to factors concerning the scheme, and in the last sentence they say those factors "meant" that Mrs Windows was not in the same "position" as the other employees. There is, in our view, no legitimate scope for inferring that the Tribunal had any other factors in mind. One factor the Tribunal should have taken into account was that, on 31 May 1996, the employers were putting forward proposals which showed they had never hitherto recognised any distinction between the several employees and which did not seek now to import any such distinction for the future. It is difficult to infer from the extended reasons that this factor was ever taken into account. On the contrary, the fact that, in coming to their conclusion on the issue of a policy on a normal retiring age, they seem to have overlooked the events of 31 May, and the legal consequences which flowed from them, suggests that they overlooked the significance of what was promulgated that day in the context of Section 235 also.

In conclusion, we are of the view that the Tribunal erred in their interpretation of what was required by section 235; alternatively, they erred in their application of the section. We remind ourselves of the social purpose behind the section as outlined by Gibson LJ in Barclays Bank Plc v O'Brien (supra), and ask whether it could be said the employers would be ensuring fair treatment between employees who otherwise were equal in all respects to allow for one of them a unique position because unilaterally she chose an option as regards the pension scheme which was not prescribed by the terms of her employment. We think not.

In our judgment, therefore, Mrs Windows was a member of the same group as the remainder of the employees, and the firm's policy of a retirement age applied to her . Therefore Section 109 of the Employment Rights Act 1996 applies, and the Tribunal therefore had no jurisdiction to entertain her application for unfair dismissal.

As for the third point of appeal for which leave to proceed was given: Ms Ashtiany contends that nowhere do the Tribunal state what they found to be the Appellants' reason for dismissal. Without such a statement, it is impossible to be certain the Tribunal had a clear idea what it was, whether it was an admissible reason, and whether, in the circumstances, the employers acted reasonably in treating it as a sufficient reason for dismissal. In short, it is uncertain whether the Tribunal faulted the Appellants under Section 98 (1) or Section 98 (4).

Mr Jones submits that the Tribunal set out all its material findings in paragraph 21 of the extended reasons, and they were sufficient to enable the Appellants to know why they lost on the point.

In our view, the Tribunal failed to adhere to the requirements of Section 98, namely that they should deal with the two separate issues which determines the fairness of a dismissal. In the result, they failed to make the required finding under Section 98 (1), or if they did, they failed to state what it was or if they did, they failed to state what it was in their reasons. Their finding that the Appellants dismissed Mrs Windows without good reason suggest that the Appellants failed under Section 98 (1); and yet their findings set out in paragraph 21 suggest the Appellants failed under Section 98 (4). In conclusion, we find that the Tribunal erred because of the inadequacy of their reasons under this section. However, in view of our decision that, for reasons earlier set out, the Tribunal had no jurisdiction to consider the fairness of the dismissal, the lack of stated findings under this section is of little consequence.

Our conclusion is that the appeal must be allowed. Our only concern now is whether we should remit the case for a rehearing. We, however, are of the view that we are in possession of all the relevant facts so as to enable us safely to come to a decision on the first two points of the legal argument, and that no useful purpose would be served by remitting the case. We therefore order that the appeal be allowed and direct that a substituted finding be recorded to the effect that, by reason of Section 109 of the Employment Rights Act 1996 the Tribunal had no jurisdiction to entertain Mrs Windows' application for unfair dismissal.

Last, there is a cross-appeal by Mrs Windows against the Tribunal's decision to allow the Appellants to amend their Response so as to enable them to deal with the issues under Section 98 relating to fairness of dismissal. The Tribunal below allowed the amendment because, in their view, the factual issues arising on the amendment had already been dealt with when the applicability of Section 109 was being considered. It was a matter within the discretion of the Employment Tribunal who heard this case to decide whether to allow the amendment. That discretion must of course be exercised judicially. Our task is to consider whether the Tribunal took some matter into account which they should not have taken into account or failed to take a matter into account which they should have or otherwise acted contrary to law. We do not see that they misdirected themselves in any respect on this issue, and consider they were well within their rights to allow the amendment. Accordingly, we dismiss the cross-appeal.