United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR R POWELL (of Counsel) Instructed by: Messrs DLA Solicitors Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ
For the Respondent	MR G HODKINSON (Representative)

SUMMARY

Unfair Dismissal / Disability Discrimination

This appeal concerned the assessment of future loss of earnings following an unfair and discriminatory dismissal. The Employment Tribunal assessed such loss over an eight year period but it did not deal with "old job facts" – remitted for it to do so. The Employment Tribunal allowed a single 2.5% discount for accelerated payment – remitted with guidance for it to reconsidered.

Kingston upon Hull v Dunnachie No 3 [2004] ICR 227 and

Bentwood Bros (Manchester) Ltd v Shepherd [2003] ICR 1000 applied


 


HIS HONOUR JUDGE RICHARDSON

1. This is an appeal against a Decision of the Employment Tribunal, sitting at Reading, entered in the Register on 16 January 2004. The appeal concerns the question whether and to what extent the Employment Tribunal erred in law in its assessment of compensation for loss of earnings consequent upon a dismissal and upon disability discrimination.

The background

2. The background may be sketched quite briefly. Mr Michael Perfitt worked more than 30 years as a dental technician in continuous employment. The Tribunal found that his work was of a consistently good standard, although it was not speedy. It is important to note that he was profoundly deaf: his deafness affected his ability to communicate and his ability to understand. The Tribunal had to get used to him and to his way of speaking and understanding in the course of the tribunal hearing, even though he had the assistance of sign language interpretation.
3. Latterly, Mr Perfitt's employer was Benchmark Dental Laboratories Group Ltd ("Benchmark"). On 19 November 2002 Benchmark dismissed him on the grounds of redundancy. He alleged unfair dismissal and disability discrimination. In a Decision dated 21 October 2003 the Employment Tribunal upheld his principal complaints, finding that his dismissal was unfair and that Benchmark discriminated against him, a disabled person, by dismissing him.
4. The same tribunal reconvened on 3 December to determine the remedy. By its decision on 16 January 2004 the Employment Tribunal awarded the Respondent the sum of £139,514 by way of compensation for disability discrimination. It made no separate compensatory award for unfair dismissal (save a modest amount for loss of statutory rights) to avoid double recovery: see section 12 Employment Rights Act 1996.
5. The major part of this award related to loss of earnings. Mr Perfitt had not worked since his dismissal. The Employment Tribunal awarded him £11,813 loss of earnings to the date of the hearing, and future loss of earnings in the sum of £118,818.34. The Employment Tribunal reached this calculation in the following way. Mr Perfitt was 56 years, 10 months old at the date of the hearing. That left eight years two months to age 65, his retirement age. The Employment Tribunal awarded him his net current earnings until that date – a figure of £121,864.96. The Employment Tribunal then made a one-off deduction of 2.5% for accelerated payout. This brought the award down to £118,818.34.
6. The ET made provision in its decision for the parties to put in tax calculations which would allow the balance of the award above £30, 000 to be grossed up to allow for tax which Mr Perfitt will have to pay on the award. At the date of this hearing, the parties were not equipped with the Tribunal's final Order, made after those tax calculations were put in. It is apparent that a final Order has been made. The final Order will be faxed to my Associate after this hearing.

The scope of the appeal

7. In May 2003, and again in July 2003, Benchmark made offers of employment to Mr Perfitt. He refused them – as the Employment Tribunal found, because he genuinely no longer had trust and confidence in Benchmark. A major part of the remedies hearing, and therefore a major part of the Employment Tribunal's decision, was concerned with the question whether Mr Perfitt had acted unreasonably in refusing the offers. The Employment Tribunal resolved this question in Mr Perfitt's favour. Grounds one to four of the Notice of Appeal were concerned with different aspects of the Employment Tribunal's reasoning in this respect. These grounds of appeal are no longer directly relied on. As we turn to the remaining grounds of appeal, which relate to the assessment of future loss, it is only right to point out that the focus of the hearing below was not upon these issues.

Accelerated payment

8. As we have pointed out, the Employment Tribunal made a one off' reduction of 2.5% for accelerated payment in receipt of the award of loss of earnings. Benchmark's Notice of Appeal does not relate to this point. However it was raised as an issue by the time of the preliminary hearing before the President on 5 July 2004: see paragraph 24 of his judgment.
9. Benchmark apply for permission to amend the Notice of Appeal to take the point that the Employment Tribunal erred in law in making a one-off reduction of 2.5%. We consider that it is just to permit the Notice of Appeal to be amended to take this point. It is dealt with by both parties in their Skeleton Arguments. Mr Hodkinson, who appears on behalf of Mr Perfitt, frankly and sensibly acknowledges that he is not taken by surprise by it. So we grant permission to amend the notice of appeal.

Employment with Benchmark to retirement

10. The Employment Tribunal, in assessing loss of earnings up to retirement age, approached the case on the basis that Mr Perfitt would not have been made redundant in 2002 and would have remained employed up to retirement age. Benchmark complains that the Employment Tribunal failed to make any assessment of the prospect that he would in fact have remained employed up to retirement age: ground six of the Notice of Appeal.

Alternative employment

11. The Employment Tribunal, in assessing loss of earnings up to retirement date, found expressly that Mr Perfitt was extremely unlikely to find any employment again. Benchmark complains of this finding in various respects: ground five of the Notice of Appeal.
12. Those are the issues which arise on the appeal. In addition, if some or all of the matters raised on appeal are allowed, we have to consider whether to remit the case the same or to a differently constituted tribunal.

Dunnachie (No 3)

13. Before coming to the individual grounds of appeal, we turn to the Decision of the Employment Appeal Tribunal in Kingston upon Hull v Dunnachie (No 3) [2004] ICR 227. This case was concerned with the assessment of future loss of earnings following an unfair dismissal. But similar principles in our judgment apply to the assessment of future loss of earnings following a discriminatory dismissal.
14. In Dunnachie (No 3) the Employment Appeal Tribunal was concerned with the question whether the Ogden Tables should generally be used in assessing compensation for unfair dismissal. The Ogden Tables, devised for use in personal injury cases, for the most part provide a multiplier for loss of earnings to date of retirement, which takes into account mortality and the accelerated payment of an award of damages. Various different retirement dates are given, for both sexes, and various different discount rates are used.
15. Giving the judgment of the Employment Appeal Tribunal, Burton J said:

"…we are entirely satisfied that the Ogden Tables, and any similar such tables which may be devised, should only be relied on by employment tribunals in relation to the calculation of future loss in unfair dismissal claims, so far as concerns loss of remuneration and benefits, if it is sought to be, and once it is, established that there is a prima facie career-long loss. Before their applicability arises, such loss should first be addressed by reference to what we would call "old job facts" and "new job facts", and which we suggest by way of guidance, but in no way in derogation from the obligation of the "industrial jury" to apply section 123 of the 1996 Act:

(i) Old Job Facts would include the following (dependent of course on the particular facts of each case). Would the applicant have remained in the job anyway: and if so for how long? Assuming he or she would otherwise have intended/wished to remain in such job, were there apparent factors, whether personal (health, family situations, location) or economic (new technology, fall-off in orders, lay-offs, redundancies) which on the available evidence, including the experience of the employment tribunal as industrial jury, should be taken into account? Would he or she have taken early retirement, or considered a second career? Would he or she have been promoted? Would his or her earnings have remained stable (other than by reference to the cost of living)?

(ii) New Job Facts. (a) The first question is whether he or she would be likely (after using reasonable mitigation) to obtain a new job at all? If he or she has not yet obtained a new job, what steps (using reasonable mitigation) should he or she now take, and what new job is he or she likely to have obtained, by what date and at what remuneration? (b) The next question is whether (having taken reasonable steps and mitigation) he or she now has a job, but at a pay differential (or would have obtained a job at such differential if/when reasonable steps in mitigation were taken). In the latter case: will he or she stay in that job or (in accordance with the obligations of reasonable mitigation) change jobs to one which is better paid, thereby in whole or in part eliminating the differential? Will he or she be promoted: to the same effect? Will the earnings in the new job be stable (subject to the cost of living) or will they improve: to the same effect?"

16. As the quotation illustrates, the essential task of the Employment Tribunal is to place the dismissed employee, as regards loss of earnings, in the position in which that employee would have been if he or she had not been dismissed unfairly or (as the case may be) by unlawful discrimination. This involves estimating what the employee would have earned but for the dismissal, taking into account the employee's prospects of remaining in employment, and it also involves estimating what will actually happen, taking into account the employee's prospects of obtaining other employment. As the Employment Appeal Tribunal said, the Ogden Tables come into their own if and only if the Employment Tribunal concludes, after making these estimates, that the employee should be compensated for a period which lasts up to an age for which the Ogden Tables provide a figure. Otherwise the tribunal will have to do its own calculations based on its own estimates. In particular, it will have to make its own allowance for accelerated payment: see paragraphs 29 and 30 of the judgment
17. The Employment Tribunal did not have the benefit of legal argument from qualified advocates. Dunnachie (No 3) was not cited to it. It had been decided, but not reported in the established sets of reports, by the time the Employment Tribunal considered this case. For the future, Dunnachie (No 3) contains valuable guidance which employment tribunals will consider.

Accelerated Payment

18. The Employment Tribunal made a "one off" allowance of 2.5% for accelerated payment of an award representing a period of eight years two months. The Employment Tribunal appears to have thought that in doing so it was following the practice of the civil courts in personal injury cases: see paragraph 42 of its Decision. In this respect it was wrong. The amount of allowance for accelerated payment is not fixed. It depends on the extent of the acceleration.
19. In Bentwood Bros (Manchester) Ltd v Shepherd [2003] IRLR 364 the Court of Appeal had to consider a similar mistake. An employment tribunal had applied a single discount of 5% to take account of accelerated payment on awards covering two and a half years loss of earnings and 10 years pension loss. The Court of Appeal held that this was wrong. Peter Gibson LJ said:

"In arriving at the computation which it is proper to require the employer to pay to the employee, it cannot be right to ignore the fact that the employee receiving compensation has the benefit of receiving immediately what he would otherwise have to wait to receive in instalments over the period of loss. The accelerated payment can be invested to produce an additional benefit to the employee during that period of loss. The conventional discount of 5% which one finds referred to in the text books, such as Harvey on Industrial Relations and Employment Law, is designed to reflect, as I understand it, the annual yield that would be obtainable on investment of the sum paid, though it is rather higher than the 4.5% figure which, until fairly recently, was applied in personal injuries cases. Now, by statute, that figure has been reduced to 2.5% for such cases. Of course, if the amounts are very small, tribunals may be excused from introducing this complication; but in principle tribunals ought not to ignore the fact of accelerated receipt."

Gibson LJ went on to say that the annual rate of 5% was out of line with rates used in other areas of law.

20. The discount rate which the Employment Tribunal used in this case derived from personal injury law and practice. The discount rate prescribed for use in personal injury cases is set by the Lord Chancellor, pursuant to section 1 of the Damages Act 1996. By the Damages (Personal Injuries) Order 2001, the Lord Chancellor has set a rate of 2.5%. The legal background to the setting of this rate is helpfully described in a note to section 1 of the 1996 Act, contained in section 3(f) of Volume II of the Supreme Court Practice. An employment tribunal is not bound by this discount, but it is, in our judgment, good practice to adopt it.
21. In this case, therefore, the Employment Tribunal committed no error of law in taking a 2.5% discount rate. But in our judgment it was clearly wrong to limit the discount to a single amount. The loss was calculated on the basis that it would accrue on a straight line over more than eight years. The discount for accelerated payment should reflect the fact that the employee would be able to invest the sum and obtain an additional benefit before it was required to meet his loss. For example, the amount required to meet his loss in the eighth year would be available for him to invest for seven years before it was required, and so on. No sophisticated calculation by an employment tribunal is required, but it is important to reflect the whole period.
22. Equally, of course, to allow 2.5% over the whole period of loss would be too great. Receipt of the whole sum is not accelerated for the whole period. If the loss accrues in a straight line, rateably over the whole period, receipt of the sum is, overall, accelerated for approximately half the period and the discount rate will apply to the whole sum for approximately half the period. Thus, in a case where the loss accrues rateably over eight years, one would expect a discount of approximately 10%. If further sophistication is required, no doubt the parties are entitled to refer an employment tribunal to an appropriate table. But an employment tribunal makes no error of law if it sets a discount rate upon the broad considerations which we have set out above.
23. It is right to acknowledge that Mr Hodkinson, appearing for Mr Perfitt, did not seriously challenge that the Employment Tribunal had erred in law in this respect. He was right to make the concession that he did

Employment with Benchmark – ""old job facts"

24. On behalf of Benchmark Mr Powell criticizes the Employment Tribunal for failing to consider and evaluate what are called in Dunnachie (No 3) "old job facts", that is to say, those facts which are relevant to an estimate whether Mr Perfitt would have continued in employment with Benchmark and if so for how long.
25. His submissions can be summarized succinctly. He says that the Tribunal failed to consider at all any chance that Mr Perfitt would have been made redundant in November 2002, though he was one of six members of staff in the pool for redundancy and two persons were to be made redundant from within that pool. He says that the Tribunal nowhere considered future risk of redundancy, new technology, falloffs in orders or layoffs. He referred to evidence before the Tribunal that there had been a falloff and then a return of a particular contract. He referred to the introduction of new procedures and to the outsourcing of work abroad. He says these were matters which required consideration by the Tribunal. He further says that the Tribunal failed to factor in health and other personal factors, including Mr Perfitt's preference for limited travel and his dependence upon his sister for support. It did not consider whether he might have taken early retirement.
26. Nowhere in the Remedies Decision are "old job facts" dealt with. The Employment Tribunal assumes, without giving reasons, that the loss should go to retirement. In our judgment there was material for the Employment Tribunal to consider on this issue. There were the facts relating to the redundancy; the pool of six employees from whom redundancy had to be made. The Employment Tribunal stated in its Merits Decision that Benchmark had not demonstrated that it was inevitable that if a proper procedure had been followed Mr Perfitt would still have been made redundant. Further than this, it had not gone, or needed to go, for the purpose of the Merits Decision. But such a finding is not conclusive for the purposes of a Remedies Hearing and we therefore accept the submission that both in that respect, and also in other "old job fact" respects, the Employment Tribunal has either failed to consider the matter or entirely failed to give reasons from which Benchmark can see why the Tribunal reached the conclusion it did.
27. We are left with the impression that the Employment Tribunal may have so concentrated on the mitigation issue and upon Mr Perfitt's prospect of obtaining further employment that it omitted to analyse and consider this issue. At any rate the parties are unable to see why they won or lost.
28. On behalf of Mr Perfitt, Mr Hodkinson again has made a concession that the Employment Tribunal has not given reasons in respect of this point. He is, however, at pains to submit that there was ample material on which the Employment Tribunal could have estimated that Mr Perfitt would have been employed until retirement age.
29. He relies upon the fact that Mr Perfitt had been in the same job since in 1971, that there was every incentive for him to remain in the same employment until retirement age. He might have added that within a very short time, Benchmark were, in fact, offering him his job back, although, unfortunately, the wrong side of a redundancy exercise which the Employment Tribunal has found to have been discriminatory and unfair.
30. We are satisfied that the matter must be remitted to an employment tribunal. We shall say in a moment what kind of employment tribunal. But we should not be taken in any way as pre-judging the conclusion the employment tribunal may reach in relation to "old job facts" on remission.

Alternative employment

31. On behalf of Benchmark Mr Powell's final line of attack is upon the Employment Tribunal's findings as to "new job facts". The Employment Tribunal's finding is summarized in paragraphs 40 and 42 of its Decision:

"Sadly Mr Perfitt's future employment prospects as a dental technician are bleak. He has widened his search area to take into account other possible work such as supermarket shelf staking but in both cases where he has submitted applications they have been rejected. In view of his age and disability it appears that his future employment prospects are minimal. It is easy to overlook the very real difficulties that the applicant faces in day to day communication whether oral or written as a result of his disability and the impact of that on his search for work."

"…the Tribunal are entirely satisfied that the applicant is extremely unlikely to find any employment again and have calculated a compensatory award up to his retirement age of 65."

32. Mr Powell has submitted, in detailed submissions made in his Skeleton Argument and developed orally, that the Employment Tribunal erred in law in reaching this conclusion and in failing to take into account various matters of detail in the evidence. We have reviewed the findings of fact of the Employment Tribunal which in this respect run from paragraph 5 up to paragraph 21 of the Decision. We are satisfied that there is ample basis for the Employment Tribunal's findings in relation to "new job facts". This Appeal Tribunal only interfere if there has been an error of law. The categories of error of law are well known. We are entirely satisfied that there is no error of law in the Employment Tribunal's Decision in so far as "new job facts" are concerned in paragraphs 40 and 42.

Remission

33. The appeal will therefore be allowed and the case remitted to the Employment Tribunal but only to re-consider the issues of accelerated payment and "old job facts".
34. This leaves finally the question whether the case should be remitted to the same Employment Tribunal or to a differently constituted Employment Tribunal. Guidance is given in Sinclair Roche and Temperley v Heard [2004] IRLR 763 at paragraph 46. This case articulates – we believe for the first time – considerations which this Appeal Tribunal should apply in deciding whether to remit to the same, or to a different, tribunal.
35. We will not quote extensively from that paragraph, but we will summarize the relevant factors which the President, giving the judgment of the Tribunal, there set out. The factors are not in order of importance, nor are they necessarily exhaustive. Some appeals will engage one factor more than another. Above all, of course, the Appeal Tribunal must be satisfied before it orders remission to the same tribunal that the remitted hearing will be fair to both parties, and will fairly determine the issues which are remitted.
36. What are the factors? There is proportionality; this will involve considering the extent to which remission to a fresh tribunal will increase the expense, emotional and financial, to the parties, and the extent to which that expense is justified. There is the passage of time; this will involve considering whether delay and loss of recollection will render it difficult or impossible for the same tribunal to hear properly those points which are to be remitted. There is the question of bias or partiality; there can be no question of remitting an issue to a tribunal which has shown bias or partiality. There is the question whether the decision was totally flawed; no useful purpose will be served by remitting the case to a tribunal whose decision can be characterized in such a way. There is the question whether the tribunal will be prepared to look fully at further matters and will be willing to reach a different conclusion in the light of matters which it had not yet considered or considered properly. Ordinarily the Appeal Tribunal will expect, in the absence of clear indication to the contrary, that the tribunal below is capable of a professional approach, paying attention to the guidance given it by the appellate tribunal.
37. On behalf of Benchmark it was submitted that the case should be remitted to a different tribunal. It was submitted that Mr Hinkley, against whom and in respect of whom the Tribunal made adverse comments, would have the perception of bias if the case were remitted to the same Tribunal. It was submitted that there would have to be some fresh evidence to deal with the likelihood of redundancy. It was submitted that the case was nearly two years old now and that the period of delay was too long to allow remission. It was submitted that the argument and evidence that would be required additionally would be substantial.
38. On behalf of Mr Perfitt, Mr Hodkinson submitted that the case should go back to the same Tribunal. That this Tribunal had already heard three days on liability and a day in relation to remedies. That it would be perfectly capable of addressing issues which it had omitted to address before, and that it would be most unfortunate for the case to go to a differently constituted Tribunal.
39. We have reached the conclusion that the remaining matters should be remitted to the same Tribunal. We do bear in mind that the Tribunal has already devoted three days to merits and one day to remedies. We do think that, in all likelihood, a hearing before a fresh Tribunal would substantially increase the expense, emotional and financial, to the parties. We do not think that that expense is justified in this case. We do not think the passage of time since the Employment Tribunal dealt with the matter means that it cannot properly deal with those points. We do not think that the Employment Tribunal can be said to have been biased or partial: it had to reach conclusions about the witnesses before it and the fact that it has done so does not mean that it is biased or partial. The Decision is far from totally flawed and we are satisfied that the Tribunal will be prepared to look fully at further matters and will be willing to reach a different conclusion in the light of matters which it has not yet considered or considered properly.
40. A point was made that the Tribunal Chairman, in writing to the Appeal Tribunal, had incorrectly, at one point, summarized the effect of the Merits Decision. We note that he added the word "likely" to the word "inevitable". In that respect he was wrong, but that does not lead us to the conclusion that he is incapable of taking a professional approach to the hearing below – on the contrary, we have no doubt that the Tribunal will do so.
41. Accordingly the appeal will be allowed and remitted to the same Tribunal.