United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MS H GOLDIE (Solicitor) Instructed by: National Association of Citizens Advice Bureaux The Development Centre Coxwell Avenue Wolverhampton Science Park Wolverhampton WV10 9RT
For the Respondent	MR M WEST (Advocacy Systems Manager) Peninsula Business Services Ltd Riverside New Bailey Street Manchester M3 5PB


 


THE HONOURABLE MR JUSTICE BURTON (PRESIDENT)

1. This is an appeal by five Applicants who were dismissed by the Respondent, Elizabeth Bradley Designs Ltd, in very sad and unfortunate circumstances, even so far as the Respondent employers are concerned, because their business has taken a very substantial knock. They are in the business of the supply of specialist needle kits direct by mail order and through retail stockists and times are bad, it seems, in the knitting industry.
2. The Appellants had the job of picking, packing and dispatching sewing kits. In circumstances, to which we will refer briefly in a moment, by reference to the findings of the Employment Tribunal, they were dismissed and the claimed redundancy was imposed by the employers on the basis set out in their Notice of Appearance, which said as follows:

"Over a period of time, up to December 2000 the Respondent suffered from a downturn in business. The Respondent decided, in an attempt to deal with this, to decrease the hours worked, with the agreement of all the part-time staff including the Applicant, to one day per week.

The Respondent discussed this and consulted fully with the Applicant: the reduction in hours was subsequently implemented across the board for all part-time production staff.

During the course of the next six months the decrease in hours did not result in the improvement the Respondent had hoped for. It became evident that the part-time pool was not proving effective, with 10 employees each working one day a week. The administrative overheads were disproportionate and additionally communication and efficiency was failing. As there was no additional improvement in business it was decided that there would be a reorganisation of all part-time positions by offering them as full-time posts…

The Respondent therefore resists that this is a redundancy situation."

That argument, as will be seen, was upheld by the Employment Tribunal sitting at Caernarfon who dismissed the claim for redundancy payment and the Appellants now appeal.

3. It appears to us that there is a fundamental misunderstanding about the question of redundancy. Redundancy does not only arise where there is a poor financial situation at the employers, although, as it happens, there was such in this case. It does not only arise where there is a diminution of work in the hands of an employer, although, as it happens, again, there was in this case. It can occur where there is a successful employer with plenty of work, but who, perfectly sensibly as far as commerce and economics is concerned, decides to reorganise his business because he concludes that he is overstaffed. Thus, even with the same amount of work and the same amount of income, the decision is taken that lesser number of employees are required to perform the same functions. That too is a redundancy situation.
4. The statute was, for some reason, inaccurately quoted (and we suspect it was garbled in transposition) in paragraph 5 of the Tribunal's decision. Section 139 (1) reads as follows:

139 (1) "For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to: -

(a) the fact that his employer has ceased or intends to cease-

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or"

We interpose this is the relevant sub-clause for the consideration of this Tribunal, and this is the sub-clause which was incorrectly transposed into paragraph 5 of their decision:

(b) "the fact that the requirements of that business-

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish."

5. The most helpful authority, which Ms Goldie has referred to us, is that in Safeway Stores Plc v Burrell [1997] IRLR 200, a decision of this Tribunal, chaired by Judge Peter Clark, which was specifically approved in the speech of the Lord Chancellor, Lord Irvine, in Murray v Foyle Meats Ltd [1999] IRLR 562.
6. The relevant paragraph in Judge Clark's judgment is at paragraph 70 where he refers to what he calls the stages of the questions to be asked on the issue of redundancy: the first stage, which is normally not a problem, is whether the employee was dismissed, and the second is effectively whether there was a redundancy situation, put in very broad terms, falling within section 139 (1), and then stage 3 relates to causation with which we do not need to worry, certainly in this case.
7. Approaching the question of stage 2, Judge Clark summarised what he saw to be the law as follows:

"70 (1) There may be a number of underlying causes leading to a true redundancy situation; our stage 2. There may be a need for economies; a reorganisation in the interests of efficiency; a reduction in production requirements; unilateral changes in the employees' terms and conditions of employment. None of these factors are themselves determinative of the stage 2 question. The only question to be asked is: was there a diminution/cessation in the employer's requirement for employees to carry out work of a particular kind, or an expectation of such cessation/diminution in the future [redundancy]? At this stage it is irrelevant to consider the terms of the applicant employee's contract of employment. That will only be relevant, if at all, at stage 3 (assuming that there is a dismissal)."

8. Mr West in his succinct written submissions in opposition to the appeal to which he has not felt it necessary to add orally, referred us to Johnson v Nottinghamshire Combined Police Authority [1974] 170. That was a decision of the Court of Appeal, in which Lord Denning MR gave the judgment, in which the Court of Appeal was unable to find a redundancy situation because in that case, contrary to this, as will appear, there was a dispute about a business reorganisation. There was a dispute about a change of terms of employment from one shift system to another. But the underlying facts were that the two women clerks who were dismissed were replaced by two fresh women clerks doing the same work, and working the same number of hours, but on the new shift system. It was concluded that the two Applicants who had been dismissed in those circumstances were not made redundant. It seems obvious to us why that should be the case, because the requirement for employees doing that work had not diminished, and that can be best illustrated by the fact that exactly the same number of employees were doing the work, albeit on a different shift basis, before and after the dismissal of the unfortunate ladies. Lord Denning MR at page 176 said as follows:

"Typical of redundancy situations are these. There may be a recession in trade so that not so many men are needed. There may be a change in the kind of work done, as from wood to fibre glass, so that woodworkers are no longer needed: see Hindle v Percival Boats Ltd [1969] 1 WLR 174. The business may be no longer profitable so that the employer has to cut down somewhere. Or he may be overstaffed. The employer may meet such a situation by dispensing with the services of some of the men: or alternatively he may lower the wages: or put men on part-time. If he does it my making a change in the terms and conditions of employment, it is due to a redundancy situation. Those who lose or leave their work in consequence are entitled to redundancy payments."

9. It is plain from that case and from Safeway Stores Plc v Burrell and Murray and Foyle Meats Ltd that it is not an automatic consequence of there being a business reorganisation that there is a redundancy; nor is there a need for a business reorganisation in order that there should be a redundancy situation. The two are entirely self-standing concepts. But if a business reorganisation leads to a diminution in the requirement for employees carrying out the relevant work, then that business reorganisation leads to a redundancy situation and if not, not.
10. The facts here, as we already briefly referred to by quoting the Respondent's Notice of Appearance, are found in the decision of the Tribunal as follows:

3 (i) Each of the Applicants were employed by the Respondents on a part-time basis one day a week. The Applicants had described themselves variously as Production Workers and Assembly Workers. It was accepted that all the Applicants did the same type of work. The Respondent company supplied specialist needle kits direct by mail order and through retail stockists. In essence the Applicants picked, packed and despatched sewing kits.

(ii) The Respondent company had financial difficulties, the nature of the business had shifted from bulk wholesale orders to individual mail order, there was a downturn in production and the company could not afford to pay staff when there was no work for them to do.

(iii) In late December 2000 / early January 2001 Elizabeth Bradley and Gaynor Jones had a meeting with the majority of the staff which included the Applicants. The staff were told that it was either reduce their hours or staff would have to go.

(iv) Rather than be dismissed the staff which included the Applicants agreed to reduce their hours and from then on they would work one day a week."

Then the Tribunal deals with whether this was or was not intended at that stage to be temporary, with which we do not need to deal.

(v) "It became clear to Claire Kershaw on behalf of the Respondent that the management of a work force of ten people working one day a week was causing difficulties, it was inefficient, it was more costly in terms of the payroll and it was proving difficult when staff were needed to work extra hours.

…

(vii) The Respondent indicated that the reason for the dismissal [which had occurred] was that she required two full time members of staff rather than ten part timers. There was no dispute that the two full timers would be doing the same work and working the same number of hours as the ten part timers.

That appears to us to be a significant finding.

"As it happened through negotiations four staff were retained and carried out a job share."

We interpose that it appears that it was four of the original ten who were fortunate enough to be retained, six therefore being dismissed, five of whom are the Applicants.

"The hours were not increased nor was there less work to be carried out.

11. The conclusion of the Tribunal is set out in paragraph 5, after the incorrect citation of the section to which we have referred:

5 "In this case the work carried out by the Applicants had not diminished. The Respondents intended to have full timers carrying out the same work for the same number of hours. Full timers were replacing part timers. We had to decide were these employees dismissed, if so had the requirements of the employers business for employees to carry out work of a particular kind ceased or diminished or were they expected to cease or diminish and if so was the dismissal of the employee caused wholly or mainly by the cessation or diminution."

That is a recital of Judge Clark's three stages.

12. Their conclusion is as follows:

"In this case there was no dispute that the same amount of work was being done before and after the Applicants were dismissed. The employees that continued to work for the Respondent worked for the same hours in total as the hours that had been worked by the ten part time employees before the business reorganisation took place. It was not a case of a temporary cessation of work, there was a hope that things would improve, which is quite usual in this type of case. There was no diminution in the requirements for employees to carry out work of a particular kind."

That appears to us to be a conclusion that the Tribunal cannot have intended to make. It certainly makes no sense to us.

"Part-time work is not work of a particular kind. The requirements of the Respondent's business for employees to carry out work of a particular kind had not ceased or diminished. The same amount of work needed to be done. The nature of the work carried out by the full time staff was the same as that carried out by all the part time staff."

13. Then they add the conclusion, which was in fact immaterial to their decision but perhaps points up the peculiarity of the result, if it was right, as follows:

"Whilst we sympathised with all the Applicants because had they…opted for dismissal in January rather than reduction of hours it was clear they would have been entitled to a redundancy payment whereas now they were not. However they chose the option when they did and there was no redundancy situation when they were subsequently dismissed. It follows that the Applicants were not dismissed by reason of redundancy. They were dismissed because of her business reorganisation."

That again appears to us to be a non sequitur, because of course there can be, and in our judgment there was, both.

14. It appears to us clear that in fact the requirement for work of a particular kind, namely knitting for direct mail orders, had diminished, so that even if the test posed by the Tribunal was the right one, even on that basis, they ought, in our judgment, to have reached a different conclusion.
15. It also, as we have indicated, appears to us to be strange that they should even ask the question as to what would have happened if the employees had been dismissed half way through the exercise, when they were not. But if they did ask themselves that question one would have thought bells should have rung when they concluded that at that stage they would have been dismissed for reason of redundancy, when in fact there was a further decision, rendered economically necessary for exactly the same reasons as the earlier decision, which led to their dismissal.
16. But, in fact, we are entirely satisfied that all that was the wrong approach by this Tribunal. The simple approach is synthesised by their own statement that four employees now carried out the same work instead of ten. That, in those simple terms, as Ms Goldie has pointed out in her helpful written submissions and Notice of Appeal, furnishes the complete answer to this case. It is quite apparent that, for good economic and commercial reasons, the employer reorganised the work so that the same (in fact, diminishing, but that does not matter) work was now to be carried out by four employees instead of ten, and consequently the six employees were dismissed, because the requirements of the business for employees to carry out work of a particular kind, namely knitting work, in the place where the employee was employed by the employer, had diminished. As Lord Denning pointed out, that could have diminished simply by virtue of a laudable desire to reorganise in an overstaffing situation. It could have resulted, as it did here, in circumstances of financial stringency. But however, it resulted, it resulted in the diminution of the employer's requirement for employees, to the tune of six employees. Those six employees are, in our judgment, plainly entitled to redundancy payments.
17. In those circumstances, we allow the appeal. We would have wished to have done what Ms Goldie on behalf of the Applicants asked us to do, namely to order the appropriate sum by way of redundancy payments, and thus avoid any continuing cost and delay in this case. Unfortunately, that is not possible, because we are told by Mr West that although there is a desire to seek to see if some compromise or agreement can be reached, there is presently at any rate a dispute about the underlying hours and/or rates.
18. It appears to us very unfortunate that this, I suspect, short issue of quantum was not resolved by this Tribunal, albeit that they concluded that no redundancy sums were payable. It is plainly undesirable for Employment Tribunals to launch into issues which might take one or two days to try where they do not need to, in the light of their decision; but where, as here, making a fallback decision on compensation as to what would be the case if they were wrong on holding would be a matter, we suspect, of tens of minutes, and all the parties were before them, we would have expected that the Tribunal would have concluded it appropriate to have reached that decision, in order to avoid what has now occurred, namely, as it turns out, a successful appeal, and now the need for remission to the same Tribunal for further consideration.
19. It is to be very much hoped that this can be sorted out by agreement, or that some method can be found in which a resolution on paper can be carried out, and the undoubted costs and time taken of the constitution of another oral hearing can be avoided. But in the absence of any such course being taken we have no alternative but to remit this matter for consideration of the quantum of the compensation for redundancy to the same Tribunal.