United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	ELIZABETH SLADE QC and MR J CROSFILL (of Counsel) Messrs Santers Solicitors 44-44a Longbridge Road Barking Essex IG1 8RT
For the Respondent	MR D BASU (of Counsel) Messrs Langley & Co Solicitors Sun Court 66 Cornhill London EC3V 3NB


 


MR JUSTICE MORISON (PRESIDENT): This is an appeal by LRG (Enfiled) Limited ["the employers"] against the unanimous decision of an industrial tribunal held at London (North) entered in the Register on 16 January 1997, that (1) the dismissal of their employee, Ms Smith, was unfair, and (2) that Ms Smith was entitled to an enhanced redundancy payment because she was contractually entitled to one when working with the LEX Retail Group Limited ["LEX"] and the obligation to make payment transferred to the employers after a transfer of an undertaking pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981.

The facts as found by the tribunal are as follows:-

On 4 November 1968 the respondent commenced employment with Arlington Motor Co. ["Arlington"] based in Waltham Cross, North London, and was promoted to the post of Car Hire Manager. Arlington was subsequently purchased by Unigate but retained its original name. On 23 June 1993 LEX acquired the Waltham Cross dealership from Arlington and there was a transfer of the respondent's contract of employment from Arlington to LEX. When the respondent was employed by Arlington, the redundancy policy stated that payments would be calculated at an "enhanced rate", above the rate of statutory payment. LEX invited transferred employees to accept Lex's standard terms and conditions. In Ms Smith's case, she was invited to sign a document headed Lex Retail Group Statement of Terms and Conditions of Employment. Under the heading "other terms and conditions" it was stated:

"Other terms and conditions relating to your employment are contained in the enclosed Lex Employee Handbook and in the LRG Policy Document Manual held by your Manager and in the LRG Personnel Department."

The Tribunal found that Ms Smith was told, before she signed the document accepting its terms and conditions, that she would be entitled to Lex's enhanced redundancy payments provisions in the event of her being made redundant by Lex. Other employees who were being dealt with at the same time were given similar assurances orally and in writing.

In an internal memorandum it was stated, under the heading Redundancy Policy:

"Lex operates a discretionary redundancy policy which, like the Unigate scheme has far greater provision than the normal State Scheme. The Lex Scheme replaces the Unigate Scheme with effect from 1 January 1994."

In the Manager's Manual, a scale was set out enabling the company to calculate an enhanced redundancy payment. In broad terms the company was allowing more weeks of service to count as the multiplier and an unlimited week's pay as the multiplicand.

Under the heading "Calculation of Entitlement" the Manual stated:

"The enhancements to the standard statutory compensation are implemented at the discretion of the Company but any proposal to depart from this scale must be discussed and agreed with the HR Director or Group Personnel Controller..."

In August 1995 all managers at the Waltham Cross site were considered for redundancy and the 2 managers made redundant at that time received an enhanced redundancy payment.

In November 1995 LEX informed all employees at Waltham Cross that the site would be sold to the appellant. Mr Gross, the Managing Director of the employers visited the site and assured Ms Smith that because of her proven track record he wanted her to continue as Car Hire Manager after the transfer.

On 14 December 1995, 9 employees at the Waltham Cross site were made redundant by LEX and they all received an enhanced redundancy payment calculated in accordance with the Manual. On 15 December 1995, the Waltham Cross undertaking was purchased by the employers from Lex and Ms Smith's contract of employment transferred to the employers in accordance with TUPE Regulations. Ms Smith went away on holiday on 20 December and in her absence Mr Gross decided that he needed to make 4 posts redundant at the Waltham Cross site and that he did not require a manager on the site. Mr Hart, who was previously a Sales Manager, was promoted to General Manager at the Enfield site and he became responsible for most of Ms Smith's functions, and received a pay rise.

Ms Smith returned to work on 15 January 1995, but no mention of the company restructuring was made until she was summoned to a meeting on 12 February with Mr Gross and Ms Piggott, an independent employment advisor. She was told that her job could become redundant and was offered the alternative post of Rental Assistant at a salary of £10,250 p.a. Her existing salary was £16,838 plus the use of a company car and her receptionist, Ms Ford, was employed on a salary of £10,250 p.a.

A further meeting was held on 19 February at which Ms Smith rejected the offer of the Rental Assistant position and was informed that a decision had been made to make her post redundant. She was then handed a pre-prepared form setting out her entitlements.

The tribunal made findings that the dismissal was unfair due to a reason connected with the transfer of the undertaking from LEX to the appellant, or alternatively due to procedural unfairness. Given Ms Smith's 27 years of service the period of consultation of 1 week was wholly inadequate as the tribunal found, and though not a sham the employers were merely going through the motions. Had it been longer, the tribunal decided that Ms Smith may have come up with alternatives to redundancy. On 12 February Ms Smith was therefore faced with a fait accompli, and the decision to make her redundant had in effect already been taken. The only outstanding matter after the 12 February was whether Ms Smith would accept the alternative job offer, and the tribunal concluded that she did not act unreasonably in rejecting it.

The tribunal held that the LEX contractual terms applied to the respondent's redundancy settlement because of the TUPE transfer and as such she was entitled to an enhanced redundancy payment. The appellant failed to apply its mind to the LEX terms of redundancy and instead applied its own terms, and in not paying the enhanced redundancy sum to the respondent, failed to give an explanation for the decision, to which she was entitled.

Submissions

Ms Slade QC on behalf of the employers submitted that the tribunal fell into error both in finding the dismissal unfair and in finding the employers liable for an enhanced redundancy payment. It further erred in making perverse conclusions of fact unsupported by the evidence.

The finding that the period of consultation was inadequate and that a longer period may have made a difference showed that the tribunal failed to have regard to the proper question of whether the employers acted reasonably in the circumstances of the case. The Tribunal had fallen into the trap, so it was argued, of saying that because there was procedural unfairness the dismissal must have been unfair. Not every dismissal will be unfair just because of an unfair procedure. Further, the tribunal speculated as to the possible alternative outcomes in the absence of any evidence adduced by the parties. Given the poor profitability of the Waltham Cross site and Mr Hart's promotion it was likely that Ms Smith would have had to be made redundant. There were no other positions available for her, and neither Mr Gross, Ms Piggott nor Ms Smith could think of any alternatives to redundancy. Given this situation the nature and length of the consultation period was reasonable, particularly since no alternative to redundancy was raised by the employee herself.

As to the contractual entitlement, the tribunal erred in finding that the enhanced redundancy entitlement was an implied term of Ms Smith's contract on transfer. It was argued that the tribunal failed to consider whether the exercise of a discretion to make an enhanced redundancy payment was pursuant to a contractual obligation or a non-contractual policy. Had the tribunal properly considered the issue it would have concluded that the discretion arose from a non-contractual, discretionary policy. Although the LRG Policy Document Manual made reference to enhanced payments, that document was not, as the Industrial Tribunal held, part of Ms Smith's contract of employment. Furthermore there could not be an implied term based upon custom and practice because the ambit of the term was unclear. The Tribunal recognised that not every employee was entitled to an enhanced payment, but only those in Ms Smith's area of work. Ms Slade argued that the word "area" was uncertain. Was it geographical and if so what were its boundaries; was it to be judged by the sort of work done by Ms Smith or by seniority?

The Lex personnel officer gave evidence that the Manual was not a contractual document, and that although every person made redundant in the Operations Group for which she was responsible received an enhanced payment, the same was not universally true for the whole of Lex's business. The tribunal's finding that LEX would have applied the enhanced terms to Ms Smith had she remained employed by them was also pure speculation without any basis in evidence and was therefore perverse.

In summary, as the policy of enhanced payments was discretionary and not mandatory and as it was too uncertain to found an implied term based on custom and practice the policy could not be implied into Ms Smith's contract. Instead, the tribunal should have concluded that an ex gratia scheme was in operation which was not contractually binding, and did not transfer to the appellant.

In any event, even if the enhanced payments were a contractual term, the respondent was only entitled to have the appellant exercise its discretion in a proper manner. Again the tribunal erred, as the employers exercised their discretion appropriately in deciding that Ms Smith was not entitled to an enhanced payment.

Mr Basu, on behalf of Ms Smith, submitted that the tribunal's decision with regard to the unfair dismissal was a finding of fact. He said that there was no room for a perversity argument in this case.

The tribunal found that Ms Smith was effectively presented with a fait accompli on 12 February 1996: the consultation process was not a genuine exercise. That was a reasonable conclusion given the fact that many of her duties were transferred to Mr Hart whilst she was away on holiday and that when she returned the employers waited nearly a month to warn her of the threat of redundancy. The tribunal found that the employers failed to investigate with Ms Smith any alternatives to redundancy other than the offer of a demotion, and in only allowing one week for consultation, there was insufficient time for proper consideration of any alternatives.

In response to the appellant's argument on Polkey, Mr Basu submitted that the tribunal had to consider if a reasonable employer in the appellant's position could reasonably have concluded in the light of the circumstances known to him at the time of the dismissal, that consultation would be utterly useless. Only if there was a finding that genuine consultation would have been utterly useless would the tribunal then be justified in finding that a dismissal was fair. The tribunal found as a fact that Ms Smith was taken by surprise by the meeting on 12 February, and after 27 years of service, merely allowing her one week was unreasonable. The tribunal came to a clear finding that proper consultation would not have been utterly useless, accordingly the Polkey provision did not apply.

In relation to the question of the enhanced redundancy payment Mr Basu asked us to consider the evidence as to whether there was a contractual entitlement in the LEX contract to an enhanced payment. Although the tribunal found that the LRG Policy Document Manual was not a contractual document, it reflected parts of the contract of employment and was referred to in the contractual document as containing "other terms and conditions" of employment. It was contended that even if the term about enhanced redundancy payments was a matter of policy, it could, nonetheless, become a term of the contract through custom and practice if it was established that the policy had been drawn to the attention of the employees or had been followed without exception for a substantial period. The tribunal also had to consider the whole circumstances of the formation of the contract and the parties' actions before and after the formation of the contract, to decide what terms had been agreed. We were directed to Duke v Reliance Systems Ltd [1982] ICR 449 and Quinn v Calder Industrial Materials Ltd [1996] IRLR 126 as authority for those respective principles.

Given the findings of fact, the tribunal were entitled to find that the policy of enhanced redundancy payments was a well known custom and practice within this particular operations group. The evidence before the tribunal showed that the policy had been applied to all employees, including those made redundant immediately before the transfer and Ms McGlashan had been unable to think of an exception. Mr Basu repeated this argument in defence of the tribunal's finding that LEX would have continued its policy of enhanced payments into the future and would have paid Ms Smith such a sum had they still been her employers at the time of her redundancy.

In response to the employers' contention that the redundancy policy was too uncertain to be a contractual term, Mr Basu stated that the tribunal could calculate the value of the enhanced payment by reference to the Manager's Manual. Furthermore, the mere fact that a term gives a party discretion as to its performance does not render the term void for uncertainty following Clarke v BET plc [1997] IRLR 348.

As to the employers' contention that it could properly exercise its discretion not to pay the enhanced redundancy sum, Mr Basu submitted that the discretion not to make an enhanced payment would only be exercised in exceptional circumstances, such as poor performance or where a reasonable offer of alternative employment was refused. It was contended that the only matter which could have affected the question of discretion was Ms Smith's refusal to accept the offer of the post of Rental Assistant. As Ms Smith would have been demoted and taken a substantial pay-cut, the tribunal were entitled to consider that she did not decline the offer unreasonably. Therefore the employers would have been unjustified in exercising its discretion not to pay Ms Smith an enhanced redundancy sum on that ground.

Mr Basu concluded his submissions by adding that as Ms Smith was expressly told of her entitlement to an enhanced redundancy payment, that amounted to an express oral term of her contract, or alternatively, the LRG Policy Document Manual was incorporated into her contract of employment.

Decision

We thank the counsel for both parties for their helpful skeleton arguments and submissions made before us.

We have to say that we regard the first point on this appeal as wholly unarguable. It seems to us that there could hardly be a clearer case of an employee being unfairly treated in relation to a redundancy situation. Ms Smith had been employed in the business for some 27 years. Very shortly before the transfer she was given specific re-assurance about her future by the managing director of the transferee company. No doubt had she been dismissed immediately prior to the transfer she would have received an enhanced redundancy payment as had all her colleagues who were dismissed at that time. Without any indication that the position had changed in relation to her employment, she left for a holiday after only a few working days with the new employer. Whilst she was away on holiday, her job was dismembered and parts of her responsibilities were transferred to another employee [Mr Hart] who was given a pay rise to reflect his additional responsibilities. Effectively, therefore, Ms Smith's existing job was no longer open to her on her return from holiday but she was told nothing until, out of the blue, she was told that her job could become redundant. That was less than a complete statement of the position, as Mr Gross had already decided that the Waltham Cross operation should be managed by Mr Hart and that there were only vacancies for rental assistants, who were paid substantially less than Ms Smith and who worked under her. Ms Smith had no advance warning of the purpose of this meeting; she was shocked. She was given a week to see if she could come up with an alternative to what the company were offering.

It seems to us that the way Ms Smith was treated fell well below the standards of fairness and decency to be expected of employers who are engaged on the delicate task of considering redundancies. Consultation should have begun before Mr Gross had decided to transfer Ms Smith's managerial role to Mr Hart. Furthermore, we regarded as unattractive the submission that it was for her to think of alternatives: the employers have a duty to explore alternatives.

In Mugford v Midland Bank [1997] IRLR 208 this court held that it will be a question of fact and degree for the employment tribunal to consider whether consultation with the individual was inadequate as to render the dismissal unfair. It seems to us that the tribunal have set about the task with admirable clarity. The attack upon the decision made on behalf of the employers seems to us to be without foundation. The tribunal concluded that there was inadequate consultation such as to render this dismissal unfair. The submission that they have jumped to a conclusion that every breach of procedure renders every dismissal unfair does not accord with our interpretation of the Decision: rather the tribunal were deciding this case on the basis of the facts found in this case: no more and no less. We have detected no perversity in the Decision: they chose which evidence they preferred. They were well entitled to conclude that had there been proper consultation Ms Smith might well not have lost her job. In this case, timeous consultation might well have persuaded the employers not to dismember Ms Smith's job. It seems to us that, on the facts, the tribunal were entitled not to make what is sometimes called a Polkey reduction, and we are not at all convinced that the employers submitted to the tribunal that such a reduction should be made. It would appear that the parties treated this case as an all or nothing case.

As to the second issue, again the tribunal appear to have responded to the submissions as they were expressed by the parties' representatives. Ms Smith had asserted in her IT1 that she was contractually entitled to an enhanced payment. She did not say whether that entitlement was as a result of an express or an implied term of her contract and she was not asked for particulars of it. At the hearing she had the benefit of some form of representation, but possibly not by a solicitor or barrister; the employers were represented by a solicitor.

The tribunal concluded that Ms Smith was entitled to an enhanced payment by virtue of an implied term. It is not entirely clear whether the tribunal were saying that there was an implied term that the employers should exercise their discretion or whether there was an implied term that when the discretion was exercised it would be exercised in favour of an enhanced payment. Ms Slade QC, quite properly concentrated her criticism of the decision on the basis that there was no express term and that the tribunal must have put the basis of the claim upon custom and practice and, hence, her criticism of the lack of clarity of the term. She said that Mr Basu was now seeking to support the decision of the tribunal by another route and either the point was not argued before the Industrial Tribunal or, if it was, we should not now permit him to argue a case for an express term as it was too late for him to do so.

The relevant facts show that Ms Smith was sent by Lex some particulars of terms and conditions of employment and was asked to sign signifying her acceptance of them; which she did.

Whilst it is trite law to say that the statutory particulars [as here] will not normally be the contract but evidence of the contract, it seems to us clear that the document sent to Ms Smith constituted an offer to vary her existing contract and substitute the enclosed terms for those she had enjoyed with Unigate. She accepted that variation by signing her acceptance. These facts are not in dispute. It seems to us clear, therefore, that the terms contained in the document she was asked to sign constitute the express terms of the contract. One of those terms required a further reference to a Handbook and the Manual for the other terms and conditions she was being asked to accept. The Manual explained how enhanced redundancy payments were calculated and how the discretion would be exercised. Accordingly, if it is open to Mr Basu to argue the point, the answer is clear: the right to an enhanced redundancy payment was an express term of the contract of employment and the oral statement made to her to persuade her to accept the terms on offer simply confirms what was already in the contract.

Unhesitatingly we give leave to Mr Basu to argue the point. It is not precisely clear how the case was advanced before the tribunal, but it can be said that nothing appears to have been said to the Industrial Tribunal which was inconsistent with a submission that there was an express term dealing with an enhanced payment. The tribunal's finding that the Manual was not a contractual document can only have been based on their willingness to accept the evidence of the Lex Personnel manager that it was not. That evidence had, we think, no evidential significance. What a party to the contract thought was or was not contractual can be of no more than passing interest. The question before the court is to determine whether a document is incorporated or not and not to determine whether the parties thought it was or was not. Allowing the point to be argued here causes no injustice to the parties. Ms Slade QC sought to suggest that new evidence would be required; we disagree. It is a self-contained point of law, readily determined by this Court; and which is simply part of the process of determining on what terms Ms Smith was "actually" employed: see Quinn. The employers ought to have come to the Industrial Tribunal 'armed' with such evidence as they thought appropriate to deal with the applicant's claim that she was contractually entitled to an enhanced payment. It seems to us that there was nothing which they could usefully say on that issue having regard to the documentation. On her dismissal, Ms Smith was, we think obviously, contractually entitled to the benefit of the exercise by her employers of a discretion, to be exercised in accordance with the criteria in the Manual, to award her an enhanced redundancy payment. Had the discretion been exercised, she would have received an enhanced redundancy payment calculated in accordance with the Manual, as every other employee in her operations group had done.

But, in any event, it seems to us that the tribunal were entitled to conclude that there was a settled practice of making such payments in circumstances giving rise to a contractual entitlement based upon custom and practice. Ms Slade's reference to the word "area" as used by the tribunal was fair, but we were not in the end impressed by it. It is clear that the personnel officer distinguished one operations group within Lex from the other such groups. We have no doubt that the tribunal were reflecting her evidence and used a word which is ambiguous but which could be replaced quite happily with the words "operations group".

In the end we regard the arguments presented to us on behalf of the employers as being technical and without legal merit.

Finally, the identity of the employers needs to be amended to LRG (Enfield) Limited.

The appeal is dismissed.

We were asked for leave to appeal. We can see no basis for the grant of leave. The legal position seems to us to be clear, despite Ms Slade's attempts to persuade us otherwise. If Lex are concerned about the possibility that their enhanced redundancy payments scheme is contractual, then it seems to us that they have only themselves to blame. To tell employees that other terms and conditions of their service are included within the Manual can lead to only one answer We assume that they must have mistakenly believed that because payment was expressed to be discretionary it could not be contractual. That is not the law.