United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR T CROXFORD (Of Counsel) Instructed by: Messrs Barlows Solicitors 55/56 Quarry Street Guildford Surrey GU1 3UE
For the Respondent	MR M WEST (Representative) Instructed by: Peninsula Business Services Ltd Riverside New Bailey Street Manchester M3 5PB


 


JUDGE PETER CLARK

1. This is an appeal by Ms Whitehead, the Applicant before an Employment Tribunal sitting at Reading under the chairmanship of Mr J G Hollow against that Employment Tribunal's remedies decision promulgated with extended reasons on 11 January 2001.
2. At all relevant times the Respondent firm operated 3 Nursing Homes, located in Godalming Ascot and Fareham. The partners in the firm were Dr John Colville and his wife. Each of the Homes was managed by a matron. They reported to the Appellant as Operational Director.
3. On 29 October 1999 the Appellant drafted, but did not send, a letter of resignation to the Respondent. On 4 November she telephoned the Personal Assistant to Mr Young, the Respondent's accountant; during that conversation that Personal Assistant, Mrs Gamage expressed her concern that Dr Colville may have lost confidence in the Appellant's ability to manage the Homes. The Appellant said that she was considering resigning. She repeated that thought to Mr Young the following day.
4. On 5 November the matrons of the Homes at Godaling and Ascot contacted Dr Colville. They said that they had a number of complaints about the Appellant. A meeting was arranged for 10 November. Until 5 November Dr Colville had no inkling that there were any misgivings about the Appellant and/or her management style.
5. At that meeting the matrons presented a long list of complaints. They were not, at that stage, investigated, but Mr Young arranged a meeting with the Appellant on 12 November.
6. At that meeting Mr Young told the Appellant that Dr Colville had lost confidence in her. He did not threaten her with any form of discipline at that stage but he did say that if she resigned her resignation would be accepted; alternatively an investigation would ensue.
7. The Appellant packed her possessions and on 16 November saw Mr Young, complaining that she felt that she had been sacked. She then collected her possessions. On 17 November, during a conversation between the Appellant and Mr Young, he offered her 3 months gross salary in lieu of notice together with 2½ weeks holiday pay and 3 months' worth of pension contributions. The Appellant was concerned to have a suitable reference. Agreement was reached whereby the Appellant would tender her resignation upon terms to be agreed as to financial arrangements and the wording of a reference. Terms were agreed as to the wording of the reference and the Appellant tendered her resignation and received 3 months pay in lieu of notice.
8. On 11 February 2000 the Appellant presented her complaint of unfair dismissal to the Employment Tribunal. That claim was resisted by the Respondent on the basis that she had not been dismissed.
9. That issue came before Mr Hollow's Employment Tribunal on 28-29 June 2000. By a decision with Extended Reasons promulgated on 11 July 2000 (the liability decision) the Employment Tribunal found that the Appellant had been constructively dismissed on 12 November 2000 when Mr Young told her that Dr Colville had lost confidence in her. They further found that the Respondent had not established a potentially fair reason for dismissal, consequently the dismissal was unfair. However, the Employment Tribunal emphasized, at the liability hearing stage, that they had heard no evidence and therefore had formed no view as to the strength or otherwise of the complaints made against the Appellant by the members of the Respondent's staff. In these circumstances they adjourned the question of remedy. The Appellant having indicated that she sought compensation rather than re employment by the Respondent directions were given for a remedies hearing. The issues at that hearing were to be what compensation was just and equitable in the circumstances of the case and secondly whether the Appellant had contributed to her dismissal by her own conduct? In particular, the Respondent was ordered to supply a list giving full particulars of all matters on which they relied in relation to the compensation issues.
10. The remedies hearing took place on 18-20 October 2000, followed by a meeting by the Employment Tribunal in private to consider the matter held on 19 December 2000. By their remedies decision dated 11 January 2001 the Employment Tribunal reached the following main conclusions:

(1) Having heard evidence form Dr Colville and 5 senior members of his staff as well as the Appellant they were not satisfied that any of the allegations raised by the Respondent were proved so as to find the Appellant guilty of any contributory fault.

(2) However, they could not discount the fact that a significant number of staff were bringing forward complaints against the Appellant; she might have been able to mount a sufficiently convincing case to enable Dr Colville to discount all or most of the allegations against her. In this state of mind the Employment Tribunal held that there was a 50 percent chance that had a fair procedure being carried out the Appellant would have been dismissed. They applied a 50 percent reduction to the Appellant's compensatory award losses. Polkey v AE Dayton Services Ltd [1988] ICR 142. "The Polkey reduction."

It is against the Polkey reduction that this appeal is brought. In support of the appeal Mr Croxford takes broadly 2 points. First, that the finding of a 50 percent Polkey reduction by the Employment Tribunal was impermissible given their further finding that the Appellant had not contributed to her dismissal by reason of her own conduct. Secondly, that the Employment Tribunal has failed to give adequate reasons for their conclusion that a 50 percent Polkey reduction was appropriate.

11. Dealing with his first submission, we can find no inconsistency between the Employment Tribunal's findings on just and equitable compensation under section 123(1) of the Employment Rights Act 1996 and on contribution under section 123(6).
12. In O'Donoghue v Redcar & Cleveland Borough Council [2001] IRLR 615, the Court of Appeal upheld an Employment Tribunal's decision which found that the Applicant's dismissal was unfair both substantively (it was for an inadmissible reason) and procedurally, but that a fair dismissal for a potentially fair reason would have occurred 6 months later, so that compensation was limited to that period.
13. In this case, a finding of fact that the Appellant did not contribute to her dismissal on 12 November 1999 by her own conduct did not preclude the possibility that, following a proper investigation, the Respondent might have an honest belief on reasonable grounds that she had misconducted herself and that dismissal for that reason was fair, so that compensation could be properly reduced, in whole or in part, under section 123(1).
14. Mr Croxford places considerable reliance on what he submits was the approach of the Employment Appeal Tribunal in Fisher v California Cake & Cookie Ltd [1997] IRLR 212, a case to which this Employment Tribunal was referred by Counsel for the Respondent below in relation to the argument under section 123(1), but tied in by the Employment Tribunal to their findings in relation to contribution under section 123(6) at paragraph 14 of their remedies reasons. We accept Mr Croxford's submissions that Fisher is a case dealing with section 123(1) of the Act rather than section 123(6) as Mr West submitted.
15. Mr Croxford submits that the Employment Appeal Tribunal were there saying, particularly at paragraph 7 of the judgment delivered by Lord Johnston, that the enquiry for the Employment Tribunal at the remedies stage under section 123(1) was whether in fact the Employment Tribunal found that the Applicant had been guilty of misconduct, rather than the fairness question now spelled out again by the Court of Appeal in Foley v Post Office [2000] ICR 1283 in the ordinary unfair dismissal issue.
16. We think that Fisher must be viewed in the context of its particular facts. There, the Employment Tribunal found that the Applicant's dismissal arising out of stock deficiencies was procedurally unfair, but that had a fairly conducted disciplinary hearing been held the outcome would have been the same. The appeal challenged that latter finding, resulting in a nil award of compensation, on the basis that the evidence before the Employment Tribunal was insufficient for them to reach that conclusion (see judgment, paragraph 5). That submission was rejected.
17. It follows that Fisher was a case on its facts in which the Employment Tribunal, permissibly so the Employment Appeal Tribunal found, concluded that the Applicant was guilty of conduct justifying dismissal following a fair disciplinary hearing.
18. The factual position is quite different in the present case. Here, the Employment Tribunal was not satisfied as a matter of fact for the purposes of the contribution question, that the Appellant had misconducted herself. However, that finding does not answer the relevant question under section 123(1), which is, more explicitly, what are the chances that, following a reasonable investigation and a fair disciplinary procedure, the employer would have fairly dismissed the Applicant.
19. It is possible to answer that question in a way adverse wholly or in part to the Appellant, whilst going on to conclude that she did not contribute to her dismissal by her own conduct.
20. Similarly, we are not persuaded that the Employment Tribunal's finding of a 50 percent reduction under section 123(1) was perverse. It is not an illogical outcome given the later finding on contribution.
21. However, and this brings us to Mr Croxford's second line of attack, where such findings are made it is necessary for the Employment Tribunal to adequately explain their reasoning process. It is here that we think Mr Croxford's submission is to be preferred to that of Mr West.
22. The relevant paragraphs of the Employment Tribunal's reasons are paragraphs 11-13. In answering what we have earlier described as the explicit question it is, we think, incumbent upon the Employment Tribunal to demonstrate their analysis of the hypothetical question by explaining their conclusions on the following sub-questions:

(a) what potentially fair reason for dismissal, if any, might emerge as a result of a proper investigation and disciplinary process. Was it conduct? Was it some other substantial reason, that is a loss of trust and confidence in the employee? Was it capability?

(b) depending on the principal reason for any hypothetical future dismissal would dismissal for that reason be fair or unfair? Thus, if conduct is the reason, would or might the Respondent have reasonable grounds for their belief in such misconduct even although the Employment Tribunal found as a fact that misconduct was not made out for the purposes of the contribution argument; alternatively, if for some other substantial reason, was that a sufficient reason for dismissal: similarly, capability.

(c) even if a potentially fair dismissal was available to the Respondent, would he in fact have dismissed the Appellant as opposed to imposing some lesser penalty, and if so, would that have ensured the Appellant's continued employment?

23. We think that the Employment Tribunal's failure, in their reasons, to deal with the fairness of the potential dismissal following a proper investigation causes these reasons to fall short of the degree of reasoning required by the guidance given by the Court of Appeal in Meek v City of Birmingham District Council [1987] IRLR 250.
24. We having reached that conclusion it follows that this appeal must be allowed. However, it is common ground that if the matter is to be remitted, as we think it must be, to the Employment Tribunal it should be remitted to the same rather than a different Employment Tribunal so that the original fact-finding Employment Tribunal may spell out its reasoning in answering the above questions and reach a conclusion on the section 123(1) question, having heard the parties' fresh submissions in the light of this judgment.
25. One final matter arises from the argument before us. The Employment Tribunal found that a proper procedure would have been concluded in late January 2000. However, that starting point for reduced compensation is not, it seems to us, reflected in paragraph 21 of their reasons. That raises a further question for the Employment Tribunal on remission; on what basis would the hypothetical dismissal have taken place? With or without notice? If with notice, how much notice? If with pay in lieu of notice, would that pay be gross or net of statutory deductions?
26. We leave this point to further argument before the Employment Tribunal.