United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR P GREATOREX (of Counsel) Instructed By: Messrs Richard C Hall & Partners Solicitors Crown Buildings 121A Saughall Road Blacon Chester CH1 5ET
For the Respondent	MR D F HUGHES (of Counsel) Instructed By: Messrs Malcolm C Foy & Co Solicitors 52 Hallgate Doncaster DN1 3PB


 


MR COMMISSIONER HOWELL QC:

1. This appeal and cross-appeal raise some short but difficult points on the assessment of compensation for unfair dismissal. The Appellant before us is a company called Glass Systems (UK) Ltd which employed Mr Christopher Allsopp, principally as a Salesman but also as a Personnel and Health and Safety Officer from 12 June 1996 to 11 November 1998 when he was made redundant. For the last five months or so of this period of employment Mr Allsopp had been continuously absent from work on the ground of sickness because of a back injury and surgery he had had to undergo for this.
2. According to the findings of the Employment Tribunal which first considered the case at Sheffield on 9 April 1999, as recorded in their Extended Reasons sent to the parties on 7 June 1999, the company's decision that they had to cut back on staff and no longer required anybody in his sales position was taken during his absence. It was conceded that they had not entered into any consultations with him as they had with the other staff affected, because he was not there. As the Tribunal put it "coincidentally" it had been on the same day, 11 November 1998, that the company had written to Mr Allsopp notifying him of his redundancy, and also that he had attempted to contact them to raise the possibility of his imminent return to work: it appears elsewhere that he had previously notified them in September that he was still expected to be off for a further three to six months.
3. The Tribunal's Decision of 7 June 1999 remains the determinative decision on the question of liability. In it they recorded express findings of fact that Mr Allsopp's role as a salesman had genuinely disappeared and he was genuinely redundant, there being no other person in the company performing the same role who could have been selected for redundancy in the alternative. They held however that his dismissal for this reason had been procedurally unfair in that no consultation with him had taken place, so that in that respect his complaint of unfair dismissal succeeded. However, they awarded him only £600 compensation for his dismissal in addition to his redundancy payment. That was because they found on the facts that there had been no prospect of him retaining his employment and no prospect of his remaining in any alternative employment with the company in some different capacity, because the evidence showed that there was no suitable alternative work available, in particular because of his limited experience and medical condition.
4. Mr Allsopp appealed against the Tribunal's decision on the amount of the compensation. His appeal was successful before a different division of the EAT sitting on 23 June 2000, for the reasons given in the judgment of His Honour Judge Altman of that date. It was held that the Tribunal had erred in the way they had approached the question of whether a proper process of consultation would have yielded any different result other than Mr Allsopp's dismissal, apart from the relatively minor matter of his remaining employed during the additional period while such consultations should have taken place, which was all the Tribunal had thought it right to take into account in limiting his compensation to an additional two weeks net pay. The Employment Tribunal's decision on compensation was therefore set aside on the ground that they had failed adequately to address for themselves the question of what would have actually happened if there had been proper consultation prior to the time when the decision to dismiss Mr Allsopp was taken. As it was put in paragraph 13 of the EAT's judgment, the employment tribunal had:

"… erred in failing … when assessing compensation, to ask themselves whether, in the light of consultations at the appropriate time, which may have revealed that the Appellant would be coming back to work, that the reorganisation … may have been handled differently, or that if the consultation had taken place at a later time, whether the result may have been adjusted back with hindsight. … The Employment Tribunal appears to have come to a conclusion without considering the role of consultation."

5. Without disturbing the Employment Tribunal's decision on liability (or, in particular, the finding of fact that Mr Allsopp had been genuinely dismissed for redundancy), the EAT accordingly set aside the decision on the amount of compensation and remitted this to the Tribunal for reconsideration. The judgment concludes by directing the Employment Tribunal as to the basis on which this reconsideration should take place, in terms which we should quote in full:

"17. This appeal relates only to compensation; there is already a finding of unfair dismissal. In all the circumstances, it would be a difficult process for this matter to be remitted for re-hearing. In any event, we are satisfied, looking at the evidence, that on the findings of fact of the Tribunal, an Employment Tribunal properly directing itself would inevitably have come to the conclusion that they could not tell whether consultation would have made a difference or not. Accordingly, we allow this appeal and we remit the case to the same Tribunal, if possible, to assess compensation on the basis that there should be no deduction on the basis of the dicta contained in the Polkey case."

That related back to passages from the judgments of Lord Mackay and Lord Bridge in Polkey v A E Dayton Services Ltd [1988] ICR 142 at 156, 162 to which the EAT had earlier referred, prefacing their remarks by saying that the Employment Tribunal appeared to have:

"approached the matter as one for what is sometimes called a 'Polkey deduction' although the use of that label has been deprecated, and we believe rightly".

6. The present appeal and cross-appeal to us are against the further decision of the same Employment Tribunal reassessing the question of compensation, after a further sitting on 4 December 2000, in a Decision with Extended Reasons sent to the parties on 22 December 2000 at pages 6 to 8 of the present appeal file. The fresh decision there recorded was that:

"The unanimous decision of the tribunal is that the applicant is entitled to an award of compensation in respect of losses to the date of the tribunal hearing in the sum of £9,400. The tribunal make no award in respect of future loss."

7. The reasons for this increased award were explained by the Tribunal by reference to further evidence they had received from the Applicant, that since his dismissal he had remained out of work despite having made numerous job applications. In addition, it appeared that he had been claiming and receiving state incapacity and disablement benefits on the basis that he had been wholly or partially disabled from working over the period from his dismissal down to the date of the further Tribunal hearing, and was likely to remain so. The Tribunal recorded that they accepted his evidence that he had made numerous job applications but that looking at the documentary evidence presented about this they were concerned to see "the number of posts which he had applied for which appeared to be beyond his reach certainly in terms of income expectation", which we read as a finding by the Tribunal that much of the Applicant's job search had been conducted unrealistically in terms of actually obtaining work.
8. As regards the important new evidence about his medical condition and the basis on which he had been claiming state benefits, what the Tribunal recorded was as follows:

"4 Further, the applicant had been in receipt of incapacity benefit from 12 December 1998 recently assessed on his own evidence 12%. The tribunal took this to mean that the applicant must be incapable for work to some considerable degree – he had had three medical examinations to date.

This was entirely contradictory to the applicant's evidence that he was fit able and willing to work normally, and more importantly that for seven months during 1999 he had worked for his local church as a general labourer doing reasonably substantial physical work.

5 During the two years and three weeks from the date of his dismissal the applicant had only had paid employment for two weeks as a trainee bus driver but he had failed his driving test.

His total earnings during his two periods of work (bus driving and at the church) amounted to £555.

6 On behalf of the applicant it was submitted that he was entitled to full compensation for his losses for the period of two years and three weeks from the date of termination and that, being a registered disabled person it was likely that he would remain unemployed for a further 52 weeks.

The applicant's evidence was that he felt that his back operation substantially hindered him in the job market. This was certainly likely to be so if it was correct that the applicant was incapacitated to the extent of 12% as assessed by the Department but, as indicated previously, was entirely contrary to his evidence about his capability.

On his behalf it was submitted that he was one of those people who in effect had to play the system and could not afford to be signed off incapacity benefit to find work because of the poverty trap."

9. The Tribunal then recorded that against that background they had to consider the award of compensation and, as their conclusions are again succinctly and clearly expressed, and relevant to understanding the issues before us on appeal, we will set them out in full as follows:

"7 Against that background the tribunal had to consider the award of compensation.

The tribunal took the view that on the face of the evidence from the applicant about his search for work there was no alternative but to award him compensation for the full period of two years from the date of termination on the basis of his losses.

However, on the issue of an award in respect of continuing loss the tribunal concluded that no award would be made to the applicant. If it was correct that the applicant was incapable of work then it was not just and equitable that the respondent should in any way finance this incapacity beyond the level at which the state was doing so.

If, as the applicant suggested, he was fit and ready for work the tribunal took the view that in all the circumstances the applicant should now be able to obtain work very quickly if he set his sights at a realistic level.

8 The applicant's losses were calculated at the net rate of £278.46 per week and in total amounted to £27,655.

He had earned £550 during this period.

He has received incapacity benefit from December 1998 to date in the sum of £648 and, from July 2000 for six months he would receive a disability tax credit of £600 a month.

The tribunal, in announcing its decision made reference to the recoupment of benefits scheme. This was incorrect on the basis that the applicant was in receipt of an incapacity benefit and disability tax credit.

The tribunal, in calculating the applicant's actual losses for the period are obliged to take into account the total of the benefit received which, amounts to £3,600 in respect of the disability tax credit and £14,400 in respect of the incapacity benefit.

The tribunal made an award in respect of loss of statutory rights of £200 and expenses for job search of £100.

Taking into account the earnings of the applicant during the period of unemployment and the benefit received the tribunal calculate his losses to be £9,400 (£27,655 plus £200 plus £100 less £555 plus £18,000)."

10. Against that decision the company appeals, on the basis that the Tribunal had erred in law in awarding Mr Allsopp any compensation at all on the evidence as revealed at the second hearing. In particular, there was evidence, which was not in dispute, that Mr Allsopp's only entitlement to any payment from his employer while he remained absent from work sick was to statutory sick pay, and the maximum period for this had already been exhausted. There was no further contractual entitlement to any sick pay from the company after such a prolonged period of absence: so that on the footing that Mr Allsopp remained incapable of returning to work as he had been claiming, no loss of earnings could be demonstrated from his dismissal compared to what would have happened had his contract of employment continued. It was thus not the dismissal that prevented him from being able to attend work on full pay.
11. Further or alternatively, no reasonable Tribunal would have awarded Mr Allsopp the full amount of the loss of earnings claimed when, by his own admission he had been "playing the system" and claiming incapacity and disablement benefits on the basis of inability to work, during a period he was now saying he had been fit and able to continue earning all the time: it would be contrary to public policy to award him compensation as well in these circumstances. Further, if he had indeed been capable of working and earning, as he now asserted for the purpose of claiming compensation, then there was an illogicality in the Tribunal awarding him compensation by reference to full earnings up to the date of their own decision, when their assessment that on this basis he should be able to obtain work very quickly if he set his sights at a realistic level applied with equal force to the period before that date.
12. By way of cross appeal it was contended on behalf of Mr Allsopp that the Tribunal's assessment of compensation was incorrect in making a pound-for-pound reduction in respect of the Social Security benefits it was admitted he had received. What should have been done was a "just and equitable" apportionment between the parties of the value of the State benefits he had managed to obtain, with only half of them being brought into account against Mr Allsopp's compensation. That would have resulted in a total loss on the Tribunal's figures of £18,400, and to his award of compensation being increased to the statutory ceiling then applicable of £12,000. However in the course of argument at the appeal hearing it was conceded on his behalf by Mr Hughes, we think realistically, that this ought to be further reduced so that he would not, in any event, receive more in total by way of benefits and compensation than the full amount of earnings he would have been getting over the same period if he had been attending work and earning normally and had not been dismissed at all.
13. We have reached the conclusion that the arguments of Mr Greatorex on behalf of the company are in the main to be preferred, and that unhappily the Tribunal's second Decision on the assessment of compensation has also to be set aside as erroneous in law. We of course do so only with reluctance as this matter has already been considered and determined by the Tribunal on two occasions, and because on the second they were, we are quite sure, concerned only to redetermine the limited issues remitted to them by the EAT and to do so in accordance with the directions they understood to have been given to them.
14. In particular, we think it plain that the tribunal based themselves on an apparent assumption that, in view of what was said in the final paragraph of the EAT's judgment about there being "no deduction on the basis of the dicta contained in the Polkey case", they were bound to award Mr Allsopp full compensation for the entire period of two years from his dismissal to the date of the re-hearing in December 2000 once he had demonstrated that he had no significant earnings during that period. We do for our part find what was said in that paragraph of the EAT's earlier judgment, about the duty of a Tribunal charged with assessing just and equitable compensation in a case where they cannot be certain whether a proper process of consultation would have yielded a different result in terms of dismissal or not, somewhat elliptically expressed when read just by itself. We doubt if it can be considered wrong for an Employment Tribunal to adopt what the same judgment earlier refers to as "the permissive approach" in Polkey, of reducing the compensation by such amount or percentage as they think fair to reflect those chances and uncertainties. A situation of such uncertainty seems to us exactly what Lord Browne-Wilkinson had in mind in the passage quoted with approval by Lord Bridge at [1988] ICR 162H, when he said:

"There is no need for an all or nothing decision. If the Industrial Tribunal thinks there is a doubt whether or not the employee would have been dismissed, this can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment."

Lord Browne-Wilkinson and all the Members of the House of Lords in Polkey plainly held this a proper thing for a Tribunal to do, and wholly consistent with the statutory code for assessing compensation for cases of unfair dismissal under the Employment Rights Act 1996, in particular section 123. The application of such a reduction to reflect uncertainty is a quite separate matter from any question of reduction under section 123(6) for blameworthy conduct, which was not suggested as relevant here in relation to Mr Allsopp's dismissal.

15. On any view however, the EAT's injunction in that final paragraph to the Tribunal not to apply any Polkey reduction in their reassessment of the compensation cannot, in our judgment, be properly read so as to mean that the reassessment was to be carried out otherwise than by the Employment Tribunal determining in accordance with the express requirements of section 123(1), such amount:

"… as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

The EAT cannot of course have intended (and in any case would have had no power) to direct any departure from the express requirements of the legislation. Accordingly, if what was said in the EAT's last paragraph was read by the Tribunal as requiring them simply to make a loss of earnings calculation over the period down to the date of their own decision and award that, we think it clear from the earlier paragraphs in the EAT's judgment, where the Tribunal's process of reasoning in their first Decision was criticised, that they must have been mistaken. As those earlier parts of the judgment show, the questions the EAT found to have been insufficiently addressed, and consequently the questions they were in truth remitting to the Employment Tribunal to reconsider on the assessment of compensation, were those always required to be addressed in any assessment of a compensatory award under section 123(1), namely:

(1) What loss is shown to have been sustained by the complainant in consequence of his dismissal?

(2) How far is it shown that that loss was attributable to action taken by the employer?

(3) What amount of compensation does the Employment Tribunal consider it just and equitable to award having regard to those two factors, and in all the circumstances?

16. In answering those questions the Tribunal is, of course, always bound to apply its own judgment and also to apply the provisions of the following subsections of section 123. In particular, any loss is to be ascertained taking account of the normal legal duty of any person to mitigate losses he suffers so far as he reasonably can. Then once the actual losses and their attribution to the employer's conduct have been properly identified, it is for the Tribunal to determine according to its own good sense and judgment how much or how little it is just and equitable to award by way of compensation in all the circumstances of the case. Thus the flexibility to achieve a fair and just result is expressly placed by the legislation in the hands of the Tribunal making the assessment.
17. In our judgment however, the Tribunal when carrying out the reassessment following the rehearing on 4 December 2000 do unfortunately appear to have regarded themselves as bound by what the EAT said not to carry out their own assessment of what actual loss had been caused and what was just and equitable to award in respect of it in the way we have indicated, but rather to award Mr Allsopp the full amount of an assumed continuing loss of earnings at the full rate for his previous job from the date of his dismissal down to the date of the rehearing. That in our judgment appears from the Tribunal's recorded view in paragraph 7 of their Extended Reasons that once it had been shown that the Applicant's search for work had been unsuccessful over the period of two years, there was "no alternative" for them but to award him compensation for the entire period down to the date of their own decision. It is also shown by the fact that they felt themselves bound to take that course, notwithstanding their own findings that (i) the evidence and contentions he had put forward about whether he had been in fact fit to work over this period at all were contradictory and unsatisfactory, (ii) in the earlier part of his job search at least he had been unrealistic in the attempts he made to obtain work, and (iii) so long as he was in fact fit to work, as he claimed, he should be able to obtain work very quickly if he set his sights at a realistic level.
18. In holding him entitled to full compensation for the entire period in those circumstances, despite their findings which suggest that if he was fit to work earlier he could have obtained it, and despite undisputed documentary evidence that if he was not fit to work earlier he would not have been entitled to any remuneration from the company at all, the Tribunal appear to us to have fallen into error in law in failing to address in accordance with section 123(1) whether all or any of the continuing loss claimed down to the date of the Tribunal's own decision really flowed from the dismissal at all, or how far any of it was attributable to action taken by the employer.
19. In our judgment therefore the Tribunal's further Decision on the assessment of compensation has regrettably also to be set aside. Despite the arguments of each side that we should attempt to bring finality to the case by substituting our own decision (in the company's contention, that there should be no compensation at all, and in Mr Allsopp's, that he should be awarded more) we have had to conclude that it would not be right for us to do so. The decision involves matters of fact and judgment which are properly for the Employment Tribunal under section 123 and not for us to determine. In addition, the information before us on the true nature of Mr Allsopp's medical condition and the basis on which he has been claiming state benefits is insufficient for a final decision to be made; and there are some unexplained discrepancies in the facts as recorded by the tribunal about these. For example, if the principal benefit he was receiving was incapacity benefit as we were assured it was, entitlement to that depends not on any percentage assessment as seems to be assumed, but on satisfying the appropriate test of "incapacity for work" under Part XIIA Social Security Contributions and Benefits Act 1992 as amended; while receipt of a "disabled person's tax credit" (formerly disability working allowance) would normally imply a claimant working rather than being unable to do so.
20. Accordingly we now remit to the Tribunal (which may be the same, or if more convenient, a differently constituted Tribunal) the entire issue of what, if any, compensatory award should be made, for what we hope will be the final redetermination. As already indicated, that redetermination is to be carried out in accordance with section 123 Employment Rights Act 1996 on the well established principles applicable to cases where (on the Tribunal's findings at the first hearing, which have not been set aside) it has been held that an employee has been dismissed for grounds of genuine redundancy but that the manner in which the decision to dismiss him on those grounds was arrived at was procedurally unfair because of the lack of proper consultation.
21. It is a matter for the Tribunal itself how to assess any compensation properly payable in the light of the evidence before it, but it may be of assistance to the Tribunal on the further rehearing if we attempt to identify the principal questions we consider need to be addressed for this purpose in the context of this case. They are as follows:

(1) The first question that needs to be determined is whether on the balance of probabilities Mr Allsopp really was fit and able to return to work at all during the period under consideration following his dismissal, and if so when.

(2) If he was not, and remained unable for medical reasons to return to his former employment or any reasonable alternative employment with the company over the period after 11 November 1998, then two further questions need to be addressed, namely

(a) At what point during the period after that date the company could and would have brought his contract of employment to an end by a reasonable termination, whether for redundancy, continuing lack of capability to do his job, or some other substantial reason. No employer is of course bound to keep an incapacitated employee on the payroll for ever, and at some stage in such prolonged absence given the previous history of Mr Allsopp's ill-health, it must have become reasonable for his contract of employment to have been brought to an end.

(b) What, if any, continuing loss of earnings from the company Mr Allsopp is able to show he has suffered during his assumed period of continuing sickness absence from work until his contract would have been so brought to an end, having regard in particular to the documentary and other evidence (undisputed before us) that his entitlement to statutory sick pay from his employer had already been exhausted and he had no further continuing entitlement to contractual sick pay at all.

(3) If the Tribunal determines that there was a point, at or after 11 November 1998 (and before such a reasonable termination, if any) when Mr Allsopp either already was or became fit and able to return to employment with the company,

(a) what have been his actual losses of continuing earnings from the day he could have so returned to work, down to the date of any such termination, and

(b) how far have those losses been properly attributable to the company's actual dismissal of him as distinct, for example, from any failure on his part to take reasonable steps to mitigate his losses by realistic attempts to obtain other work.

(4) In relation to any such proved losses which the Tribunal finds fairly attributable to the conduct of the company, what compensation the Tribunal considers it just and equitable in all the circumstances to award.

22. In relation to this last question, it was common ground before us that the facts relevant to Mr Allsopp's claiming and receipt of state incapacity and disablement benefits over the period for which he is seeking compensation are relevant matters for the Tribunal to take into account in the exercise of its flexible jurisdiction. We agree. We do not for our part think that the evidence and contentions put before the Tribunal on behalf of Mr Allsopp about these matters were satisfactory, and further inquiry into the facts about the basis on which he had been claiming and obtaining these benefits is needed before the Tribunal can make a finding on what was the true position of his being able to return to work. As the Tribunal pointed out, his evidence and contentions were entirely contradictory. The submission made on his behalf that he was "just playing the system" necessarily involved that, if he was in truth well enough to return to work all the time, he had been continuing to draw benefit on an incorrect factual basis and had (at lowest) failed to disclose to the Secretary of State, as he should have done, the relevant change of circumstances that he had become fit to resume normal employment.
23. Any Tribunal would in our judgment be justified in taking the view, as this one plainly did, that it was not just or equitable to make an unreduced award of compensation to an Applicant behaving in that way. To do so would leave him better off as a result of his failure to comply with his obligations under the Social Security scheme, in which both employees and employers are of course interested as contributors. There was no proposal from the Applicant to make restitution to the scheme out of any compensation awarded if that was not to be reduced.
24. Such considerations, in our judgment, all fall within the area of what it is proper for the Tribunal to determine for itself in considering what it is just and equitable to award in all the circumstances. That must be a matter for consideration on the individual circumstances of each case, and although our attention was helpfully drawn to the two authorities of Puglia v James [1996] IRLR 70 and Rubenstein v McGloughlin [1996] IRLR 557, we think those cases demonstrate that this is not an area for fixed rules and it is for the Tribunal to determine what is the just and equitable solution on the individual circumstances of the case before them.
25. The appeal is accordingly allowed, the cross-appeal dismissed, and the case remitted again to the Tribunal for redetermination on the compensation issues we have identified.