United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR R WARREN (Of Counsel) Mr P Dearing Kingston upon Hull City Council Legal Services Dept The Guildhall Alfred Gelder Street Kingston upon Hull HU1 2AA
For the Respondent	Mr G Mountain (In Person)


 


JUDGE J ALTMAN: This is an appeal from the Industrial Tribunal sitting at Hull on 24 march 1998. We refer to the parties in their capacity before the Tribunal: the Tribunal ordered that the Respondents should make payment of a redundancy payment to the Applicant in respect of the termination of his employment with them and the Respondents appeal from that finding.

The Applicant's employment came to an end on the expiry of a fixed term contract which was not renewed. This raises the difficult question as to the entitlement to a redundancy payment in those circumstances. Ever since the beginnings of labour law, in relation to contracts of employment, Acts of Parliament have sought to find an accommodation between the statutory rights of employees and the need for the flexibility and security given by fixed term contracts. This particular case is concerned with section 197 of the Employment Rights Act 1996 which deals with the effect of fixed term contracts. This particular case carries with it, at this stage, if the Respondents are successful, a substantial and in-built hardship that arises from the peculiar facts of this case.

The Tribunal set out its findings of fact in helpful detail and I need only summarise them briefly. The Applicant began work for Humberside County Council in January 1976 as a teacher. He remained a teacher until 1991 when he was seconded to the role of helping with the application of assessments in education following upon the introduction of new curricula. His particular role was to support teachers in coming to terms with the new assessments in such a way as to help to raise standards. His teaching post at the school where he had been was left open.

Two years later he entered into a fixed term contract. He so enjoyed the work he wanted it to continue and, no doubt, at a very critical time for the local education authority, his work was obviously of some importance. He entered into a fixed term contract from 1 September 1993 to 31 August 1995. I pause to point out that that is the minimum period which an employer has to give to an employee if he wishes to obtain the advantages in what is now section 197. It was a condition that he waived his rights to claim redundancy and, in fact, unfair dismissal upon termination of that fixed term contract. He did so. At the same time he wrote a letter in July 1993 to the school where his post had been kept open. The letter is at page 21 of our bundle in the following terms:

"I would like to offer my resignation from the post of Head of Faculty of Science and Technology, David Lister School, Hull, with effect from 31 August 1993.

I intend to accept the contract offered by Humberside Education Services as a Curriculum Support Teacher for Assessment..."

Then the fixed term contract, with the same principals, was entered into. On behalf of the Respondents, Mr Warren has sought to argue that at that moment in time there was a break in continuity of service, because one contract came to an end and another began. He points to the fact that the letter refers to his resignation from the post, he says it was a resignation and not a dismissal, it was a different job at a different place with different terms and conditions. Therefore, he says, the commencement of the first fixed term contract represented the commencement of a totally new employment relationship which carried none of the history of continuity.

That argument, it seems to us, is completely unsustainable. The employer remained the same throughout. The employee remained the same throughout. There was no break in employment at all and all he was doing - so he told us and it makes sense - was making the position with the school clear so they could advertise for a replacement in stead of having to keep jobs technically open.

There has to be a distinction between the framework of a relationship in law between an employer and employee on the one hand and the factual contents of that relationship on the other. The factual contents frequently change from time to time; job content, job description, job title, work location, are all things which change from time to time. Those sections of the Employment Rights Act which deal with the way in which to measure the continuity of employment are clear in their relying on factual gaps. Indeed, there is continuity, for example, under section 212, simply if a person continues to be a member of the same works pension scheme, as authority has demonstrated. We have no doubt, therefore, that the argument of an ending of one employment and the start of another must be rejected.

At the end of that fixed term contract the Applicant entered immediately into another fixed term contract. This time the local education authority were taking advantage of a grant from government to help schools in inner city areas raise their standards and the Applicant was committed to that sort of work: very important and, no doubt, very valuable to his employers. But he was caused to sign the statement of the main terms of his employment which included a waiver in the following terms:

"Upon the expiry of this contract without its being extended or renewed on the same terms (other than the new date of expiry of the contract) I the undersigned agree that any claims that I may have in respect of unfair dismissal and to a redundancy payment be excluded."

The Applicant did not have the advantage of union or other advice. He had to sign in a very great hurry; within a day or so, he told us. He was given to understand that the thinking behind that was, that if at the end of the two year period the government grant were not renewed, the local authority did not want to expose themselves to a claim for unfair dismissal. That is what he thought and, indeed, he may have drawn some comfort from the fact that in section 7 of that contract, under the heading of 'Period of Continuous Service', it says this:

"Important rights are governed by the length of your continuous employment with your employer. The dates from which your continuous service is counted for specified purposes are shown below:-"

And it refers to 1 January 1976 for purposes of both redundancy payments and redundancy selection. In order for us to have accepted the argument of Mr Warren about the termination of the earlier contract, of course, we would have had to regard that particular clause as incorrect in law though proffered by the employer and acceded to by the employee.

The fixed term contract expired and it was not renewed. It is common ground that it came within the description in section 197 of employment "ending on the expiry of a fixed term contract without its being renewed" and it ended because of that reason. Those are essentially the facts of the case.

The argument of the Respondents is that the waiver is conclusive and there is no entitlement to a redundancy payment. In their decision the Industrial Tribunal, no doubt affected, as anyone would be, by both the length of service that this Applicant gave to his employers (even though by this time the identity of the employer had changed from the County Council to being Kingston upon Hull City Council) and also the service he had rendered to his employer by leaving his job as a teacher to help with specific tasks from time to time. They were no doubt concerned that such accumulated rights as were available to him should not be lost if at all possible. The learned Chairman, in his judgment, observed that there were no authorities on this particular point. That point was what happens to accrued rights under an ordinary contract of employment when that contract is succeeded by a fixed term contract which has a statutory waiver? The Tribunal sought to return to basic principles.

They came to the view that the two fixed term contracts were, in their words:

"...collateral to the underlying contract of employment that had begun in 1976. That contract had not been terminated and was not terminated until 1997, when the Personnel Manager of Kingston-upon-Hull City Council effectively brought to an end both the 1995 fixed-term contract and by implication, the underlying contract of employment that had commenced in 1976."

Following up that finding the Tribunal sought to apply what they described as a purposive test to the interpretation of section 197 and suggested that it:

"...flies in the face of the purpose of the Employment Rights Act should Mr Mountain, in those circumstances, be deprived of an entitlement to a redundancy payment."

Leaving the purpose of the section aside for a moment, we are driven to the conclusion that a contract of employment, in relation to which no-one has worked, or been paid, or acquired any rights to pension, or sickness, or holiday, and in relation to which no step has been taken from 1993 to 1997 cannot have continued. Although it is suggested that it remained as a sort of underlying contract, to use the words of the Tribunal, we are struck by the fact that in order to develop that argument the ending of the contract has to be described as being implied. There is no reason why, if the ending of that contract is to be implied, the implication has to be deferred from 1993 to 1997. Furthermore, those sections of the Employment Rights Act that deal with periods of continuous employment require actual work, and weeks without it, and without any other link, are regarded as bringing it to an end for the purpose of computing the employee's period of employment. We need only refer to section 211, which deals with the period of continuous employment, as follows:

"An employee's period of continuous employment for the purposes of any provision of this Act... begins with the day on which the employee starts work and... ends with the day by reference to which the length of the employee's period of continuous employment is to be ascertained..."

Section 212 provides the weeks which count in computing that period, none of which apply to the period from 1993 and section 213 provides for where there are intervals - none of which apply here. Section 214 itself provides that the period of continuity and the period of employment, for purposes of calculating redundancy payment, are broken where there has been a redundancy payment and when there is then a renewal or re-engagement. But, in this case, there have been none of those terms applicable. Whilst we can, and do, sympathise with the thinking behind that interpretation we are driven to the conclusion that it is not available on an interpretation of the statute.

It seems to us quite clear in this case that what happened was that the Applicant began work on 1 January 1976 for his employers and ended his contract with them on 31 August 1997. We then look to see what happened at the ending of his contract of employment. Section 197 provides:

"An employee employed under a contract of employment for a fixed term of two years or more is not entitled to a redundancy payment in respect of the expiry of that term without its being renewed (whether by the employer or by an associated employer of his) if, before the term expires, the employee has agreed in writing to exclude any right to redundancy payment in that event."

The distinction must be drawn, it seems to us, between two aspects of a redundancy payment. The first is the event which triggers entitlement to a redundancy payment. The second is the process of calculating that entitlement by reference to the length of continuous service. The two processes are quite separate. It is quite clear that where a fixed term of two years or more comes to an end without its being renewed, that does not trigger an entitlement to a redundancy payment where there has been a waiver. That is the first question and it follows from that, therefore, that the second question, which is the measure of continuous service which would give rise to an entitlement to a payment, never comes into play at all, because there is no redundancy entitlement to start with.

We would have no hesitation in finding that if there had been a redundancy entitlement then it would, of course, be measured from 1 January 1976. In that respect we differ from the arguments to the contrary put forward by the Respondents. There is no doubt that there was continuity of service in this case. It was one, single contract but the events never arose that gave rise to a redundancy payment because such entitlement had been waived - unwittingly, quite probably - by Mr Mountain.

There may be cases in which the creation of a fixed term contract is an added security to a short, earlier period of open-ended employment. That happens very often and in those circumstances nobody could complain if the price of security for a substantial period under a fixed term contract was to accept that, upon its end, there would be no redundancy payments or unfair dismissal. Therefore we cannot come to the conclusion that the purpose lying behind section 197 was confined to those situations where there was simply a succession of fixed term contracts without any preceding, open-ended employment. The fact that in this particular case it appears to produce a particularly harsh result is not due to the fact that an ordinary contract was followed by a fixed term contract but was simply due to the fact that, in this particular case, Mr Mountain had given very many years of apparently loyal service to his employers before embarking on a short period of assistance under the umbrella of fixed term contracts. In that context we were very re-assured at the outset of the case today that the Respondents would certainly take steps to explore the possibility, in this particular case, which must be exceptional, of making some ex gratia acknowledgement of all those years of service.

We note that it was not until part way through the hearing in the Industrial Tribunal that the transfer of responsibility for this particular contract from Humberside County Council to Hull City Council was clarified. It is a complex legal matter and we can well understand that up until then Hull City Council did not consider they had a responsibility, as the successor authority, for the earlier periods. We can therefore understand why any investigation of ex gratia payments, or anything of that kind, really never arose until this case came before the Tribunal. Now that the general matters have been clarified, however, and recognising that, no doubt like all education authorities, the Respondents may not wish to discourage people from doing exactly what this Applicant did in the future, or would not wish people who take on fixed term contracts necessarily to refuse waivers because they have been of long service, the Respondents may well wish to look at this case as an individual case for special consideration. That may be the case not only because of the readiness to acknowledge long service of an individual employee, which is always at the forefront of the actions of any responsible employer, but also, one can see, that there must be commercial advantages - if I can so describe them in the context of education - in not erecting barriers in the future to the sort of arrangement that the Applicant entered into in this case. But that is all, as it were, "by the by", and simply records what we understand to have been the expressed wish of the local authority to at least look at this matter.

On the clear provisions of the statute we are driven, and we say unashamedly, reluctantly driven, to find that the Industrial Tribunal erred in its interpretation of the legal provisions we allow this appeal and substitute a finding that the application for redundancy payment is dismissed. There is a modest costs order that still stands.