United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MS R DOWNING (of Counsel) Instructed by: Messrs Sherman Phillips Solicitors 90 Mill Lane London NW6 1NL
For the Respondent	MR P MEAD (of Counsel) Instructed by: Messrs Thompson Solicitors St Nicholas Building St Nicholas Street Newcastle upon Tyne NE1 1TH


 


HIS HONOUR JUDGE D M LEVY QC

1. This is an appeal by Susie Radin Limited ("the Appellant") from a decision of an Employment Tribunal sitting at Newcastle upon Tyne. The issue for the Tribunal was whether a complaint by several Applicants ("the Respondents") against the Appellant under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 ("the Act") was well-founded and, if so, what award should be made.
2. The hearing before the Tribunal was held on 19 December 2001. There was deliberation between members on 16 April 2002 and the decision was promulgated on 13 May 2002. The unanimous decision of the Tribunal was that the complaint by the Respondents to this appeal was well-founded and a protective award was made in respect of such of the former employees of the Respondent as that company dismissed by reason of the redundancy on or after 14 July 2000. The Tribunal held that a protective period of 90 days was appropriate beginning on 14 July 2000 and the Tribunal held that the Respondents were fairly dismissed.
3. An amended Notice of Appeal was lodged on 13 November 2002. The Respondents Answer to the Notice of Appeal was dated 18 November 2002. Judge Pugsley and colleagues on the Preliminary Hearing gave directions for this hearing including ones that the Chairman's notes of evidence were not needed. We have had the advantage of having before us the same Counsel as appeared before the Employment Tribunal.
4. In her Skeleton Argument and her oral submissions, Ms Downing for the Appellant invites us to consider the appeal under three heads, the first encompassing two matters:

A: The Time Point:

(i) If employees of the Appellant were to be dismissed, the correct test regarding the need for consultation to commence was when redundancies were "contemplated". This is the word used in Article 2 of Directive 98/59/EC ("the Article").

(ii) Alternatively, it is when they were "proposed". This is the word used in section 188 (1) of the Trade Union and Labour Relations (Consolidation) Act 1992 ("the 1992 Act").

B: Consultation:

Whether the Employment Tribunal erred in holding that (paragraph 40 of the Extended Reasons): "No consultation was carried out in this case as required by section 188 (1)".

C: The Protective Award Point:

Whether it was appropriate for the Respondents to be awarded the maximum amount permitted under section 189 of the 1992 Act.

5. Remarkably neither Counsel provided us with a chronology, obligatory for all appeals to the Employment Appeal Tribunal and needed for this one.
6. Its findings of fact are found in the earlier part of the Extended Reasons, which lead to the findings of law. Many authorities were cited to the Tribunal. Many further authorities were cited before us in addition to those cited before them. The primary authority before us is the judgment of Lindsay J when President of the EAT in MSF v Refuge Assurance Plc & Another [2002] IRLR 324. The reserved decision was given 15 February 2002, not available for Counsel addressing the Employment Tribunal the previous December.

A: The Time Point

7. We have had an amount of argument as to whether the wording used by the Tribunal was appropriate or inappropriate trying to reconcile the words of the Directive with those of section 188. We have been referred to Hough & Apex v Leyland DAF Ltd [1991] ICR 696, R v British Coal Corporation ex p Vardy [1993] IRLR 104, Scotch Premier Meats v Burns [2000] IRLR 639. Particular attention was drawn to one passage in MSF at paragraph 45 when Vardy was cited:

45 "…there was no duty to consult before the employer had formulated its own proposals; there was a distinction to be drawn between the employer at a management level formulating a plan that there may have the likely consequences of redundancy and his making a proposal to dismiss."

8. Ms Downey submitted that the Tribunal should have focused on the proper division between the time at which the management and the employees first considered the question of redundancies and the moment when management formulates a plan, at which point the counting should have begun. In order to fix that date, the Tribunal had to determine a point at which the possibility that redundancies were likely to be considered.
9. In answer to that Mr Mead, who appears for the Respondent, submitted, referred us to
   R v British Coal Corporation and Secretary of State ex p Price [1994] IRLR 74, Middlesbrough Borough Council v TGWU [2002] IRLR 332, Scotch Premier Meat Ltd v Burns [2000] IRLR 639 and Hough & Others v Leyland DAF Ltd [1991] ICR 696. He then drew our attention to the findings made by the Tribunal.
10. In paragraph 4 of the Extended Reasons, the Employment Tribunal cite parts of a two-page fax from the Appellants to the Respondents dated 20 March 2000. One sentence reads:

"Our main focus remains on keeping the factory open, however I must make it very clear to you at this point – even this is far from guaranteed and being continually reviewed."

The paragraph continued:

"The first indication of a closure was the follow-up to a letter written by Miss Woodhall to Mr Grant dated 28 February 2000 (page 1) in which she submitted a pay claim for April 2000. Mr Grant responded by letter dated 20 March 2000 (pages 2 and 3). In the letter he states that trading was difficult and that the factory had been kept open by production being moved from units in China. He goes on to say "The losses in this current year in the UK factory have been substantial, yet still we continue to look for ways in which we can continue to trade as a UK manufacturer." After rejecting the pay claim Mr Grant goes on to say "Our main focus remains on keeping the factory open, however I must make it very clear to you at this point – even this is far from guaranteed and being continually reviewed." Upon receipt of this letter Miss Woodhall tried to contact Mr Grant but was unable to do so. She says that she tried on several occasions and was told that Mr Grant was out of the office."

The fax was sent in reply to a request by the Respondent's trade union representative made on 28 February in which an annual pay review was being sought. The Tribunal in the Extended Reasons at paragraph 29 stated that section 188 (2):

"…envisages that the employer is to genuinely seek solutions other than dismissal, and that being so, it would follow that the proposals to dismiss must be a tentative proposal."

At paragraph 33 the Tribunal concluded that the Respondents were, prior to 20 March 2000:

"…proposing the closure of the factory and the making of the workforce redundant in totality. By that time it is clear, from the letter of 20 March 2000 to the union, that the continued existence of the Crook factory was under consideration."

11. This is something which was contested by Ms Downing. She referred to a passage in paragraph 29 of the Extended Reasons:

"Section 188 (2) now provides that consultation shall include consultation about avoiding dismissals, reducing the number of employees to be dismissed and mitigating the consequences of dismissal. That envisages that the employer is to genuinely seek solutions other than dismissal, and that being so, it would follow that the proposals to dismiss must be a tentative proposal because otherwise the effect of the subsection would be nullified."

That, she submitted, was wrong. However the Extended Reasons continued:

"The purpose of the directive and the Act is to ensure that employers who consider that redundancies might be necessary firstly consult with the appropriate representatives to see whether they can be avoided or limited. If that is not possible then there should be consultation with the appropriate representatives to ensure that the need for those redundancies is understood by the workforce and that appropriate methods for making those redundancies are put in place."

12. The Tribunal's findings as to the day by which the Respondents could be said to be making the workforce redundant was a date about 20 March when the Respondent stated in its letter rejecting the pay claim "that financial closure might be necessary". Ms Downing submitted that it could not be right that a forceful rejection of the pay claim on this time fixed a time when the Appellants had formulated the same proposals. At most it reflected the situation where the Appellants were formulating a plan that might have the likely consequences.
13. Ms Downing submitted that the concentration by the Tribunal in paragraph 3 about the events in March 2000 show the error made. What seems to have happened is that there was a meeting with accountants at which, as the Tribunal found, the accountants gave the Respondents advice and various options which they could take. If they wished to close the factory they were told that they needed to take legal advice on how redundancies, could be achieved. The Tribunal said:

33 "We are satisfied that, certainly prior to 20 March 2000, the Respondents were proposing the closure of the factory and the making of the workforce redundant in totality…"

The Visit to the Accountant and the Lawyer

14. Ms Downing submitted vigorously, that was a contemplation of redundancies and she said that paragraph 33 compounded the errors by its treatment of the evidence that because Mr Grant and Ms Radin had consulted solicitors about making redundancies it followed that by that stage they had not decided to make redundancies.
15. In our judgment the inferences to be drawn from the letter and the taking advice from the accountant was that the die was cast before solicitors were consulted. The solicitors were only consulted so that the Appellants would thereafter take the steps required of them by law. We have carefully considered all the oral and written submissions made by both Counsel on the two matters under "the Time Point". We preferred the submissions made by Mr Mead to those of Ms Downing on these points. We do not accept the submissions of Ms Downing that paragraph 29 of the Extended Reasons contains any errors of law which vitiated the decision of the Employment Tribunal on the time point. On the evidence the Tribunal was entitled to reach the conclusion in paragraph 33 set out above.

Consultation

16. The material facts as to what took place between Mr Grant's reply dated 20 March to Miss Woodhall's submission of a pay claim are clearly and fully set out in paragraphs 3 to 16 of the Extended Reasons. Having set out the opposing submissions in paragraphs 17 to 24, the law regarding which they took account in paragraph 26-32, the Tribunal set out in its decision. The findings on consultancy are found in paragraphs 36-39 where the Tribunal set out why the Tribunal reached the conclusion that there was no consultancy.
17. In setting out the law the Tribunal in paragraph 29 took note of a passage from the judgment of the EAT given by Peter Gibson J (as he then was) in T&GWU v Ledbury Preserves [1985] IRLR 412 at paragraph 11 where he said:

"that there must be sufficient meaningful consultation before notices of dismissal are sent out. The consultation must not be a sham exercise…

Dismissal in the context of section 188 is as defined by section 198 of the 1992 Act and by section 95 (1) and 97 (1) of the Employment Rights Act 1998. In the case of dismissal with notice, dismissal takes place on the expiry of the notice."

Earlier within paragraph 29, the Tribunal said:

"…the proposals to dismiss must be a tentative proposal because otherwise the effect of the subsection would be nullified."

18. Ms Downing submitted the obligation on the employer who is considering making anyone redundant was too high and is an error of law. We could not accept that submission in the light of the dictum in Hough to which we have referred. We were referred also to the recent decision of Judge Peter Clark in this Tribunal, reported Middlesbrough Borough Council v TGWU [2002] IRLR 332, where it was said that three limbs of section 188 (2) (a) to (c) were to be viewed disjunctively.
19. Ms Downing also submitted that, as there is no finding that would enable the Appellant to know why if they had, as was never doubted, a genuine belief that closure was necessary, they failed the test of genuine consultation. The facts clearly were that:

(a) the rejection of a pay claim in a fax dated 21 March 2000 included the words "the very survival of this unit is far from guaranteed."

(b) the Appellant's solicitor wrote a letter dated 6 April maintaining that its recipient, Mr Palmer, was "entitled to elect employee representatives to consult with [the Appellant] about the redundancies" and at the same time gave advance notification of redundancies to the DTI.

(c) no consultation was then possible because the two directors of the Appellant were in Hong Kong shortly before 19 April.

(d) On that date there was an inconclusive meeting.

(e) After that there were no other meetings other than a cursory one with the shop steward.

20. In our judgment, there was overwhelming evidence from the facts found for the Tribunal to conclude that there was no consultation.
21. Ms Downing also submitted that the Tribunal was wrong to suggest that the words there "was not consultation as envisaged by section 188" vitiated the Tribunal's holding that there was no consultation. In our judgment that was a finding the Tribunal were well entitled to make, given the sequence of events which happened before the dismissal of the employees.

The Protective Award

22. The final point appealed against was whether a 90-day protective award was appropriate. Here it is common ground that the point of an award under section 189 (4) (b) is to make an order of:

189 (4) (b) "…such length as the Tribunal determines to be just and equitable in all the circumstances…"

23. The Tribunal stated that the purpose of the protective award was to ensure that the employers carry out proper consultations. Ms Downing submitted that such statement suggested a punitive purpose. She referred us to Talke Fashions Ltd v Amalgamated Society of Textile Workers and Kindred Trades [1977] ICR 833 which made clear it was to compensate the employee not punish the employer.
24. She submitted the preferable rationale of the purpose of section 189 (4) (b) was to be found in the judgment of Slynn J and colleagues in Spillers-French (Holdings) Ltd v USDAW [1980] ICR 31, 154A:

"…it is to compensate for the failure to consult…the question which has to be looked at is not the loss or potential loss of actual remuneration during the relevant period by the particular employee. It is to consider the loss of days of consultation which have occurred. The Tribunal will have to consider, how serious was the breach on the part of the employer?"

25. Mr Mead reminded us that in the same case, at page 40 it was held:

"It may be that the employer has done everything that he possibly can do to ensure that his employees are found other employment. If that happens, a Tribunal may well take the view that either there should be no award or, if there is an award, it should be nominal. It does not seem to us that the Tribunal has to be satisfied, before it can make an award, that the employees have been paid during the relevant period. Indeed, if the application is made before the dismissals take place, these facts may not be known. It might be quite impossible to know, until the end of the period, what is the position so far as earnings from the same employer or from other sources are concerned."

26. He also referred us to the judgment in Sovereign Distribution Services Ltd v TGWU [1990] ICR 31 at page 37. This was a decision of a panel headed by Wood J. After referring to Spillers-French, at page 40-41 Wood J said:

"It seems to us undesirable to seek to lay down any golden rules for the approach to this matter. We would urge that the industrial tribunal start with the wording of the Act and look at the whole purpose of section 99. It must surely be clear that the purpose of section 99 is to ensure that consultation takes place. It is important even where an employer may think that to consult is really going to achieve nothing. Nevertheless it is important that that consultation should take place."

The judgment concludes:

"It is insufficient to argue that the information is available and can be gleaned from the surrounding circumstances and one or two more documents. The requirements of the Act are clear, and in this case the Tribunal were entitled to take the view on the facts that there had in effect been virtually no consultation in the sense of meaningful consultation. It may very well be that criticism can be made of the rather brief way in which the matter is drafted in paragraph 12 of the industrial tribunal's reasons. It could very well be that other industrial tribunals might have taken a shorter period in the circumstances for the award. But this was an issue of fact. We are quite unable to find that the Tribunal erred in law, there was clearly evidence upon which they could reach the decision which they did; although both sides may in the event have been taken by surprise. However the fact remains that this is a decision which must stand and this appeal must be dismissed."

27. It is right, as Ms Downing submitted, that the Tribunal did not set out that during the 90 day period the Respondents remained in work, but the fact which really concerned the Tribunal was the clear lack of consultation throughout the period; a finding it was entitled to make. Other Tribunals may have made a lesser award but on what was called "the jury point" the award made by the Tribunal was one which could properly be considered just and equitable in the circumstances.
28. We were fortified in our conclusion on this point by a reference to Yeboah v Crofton [2002] EWCA Civ 794 where, in several places, Mummery LJ, giving the judgment of the Court of Appeal, emphasised the limited circumstances in which this Tribunal should interfere with decisions of the Employment Tribunal, even if they themselves would have reached a different decision.
29. In the circumstances, in our judgment, all the grounds of appeal fail. We thank both Counsel for their well argued submissions. In the circumstances we dismiss this appeal.