United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR D BARNETT (of Counsel) Instructed by: Messrs Andersons Solicitors Queen's Bench Chambers 42 The Rope Walk Nottingham NG1 5EJ
For the Respondent	MR P HYLAND (Solicitor)

SUMMARY

Disability Discrimination

Employment Tribunal erred in construction of ERA s 122 and application of Boorman v Allmakes Ltd [1995] IRLR 553


 


HIS HONOUR JUDGE MCMULLEN QC

1. This case is about an arcane corner of the law relating to compensation for unfair dismissal when an employee's entitlement would otherwise be above the statutory cap. The judgment represents the views of all three members, who pre-read the relevant papers. We will refer to the parties as Claimant and Respondent.

Introduction

2. It is an appeal by the Claimant in those proceedings against a Decision of an Employment Tribunal sitting at Bedford, Chairman Mr P Willans, entered in the Register with Summary Reasons, which are to be regarded as Extended Reasons, on 20 September 2004. The judgment of the Tribunal was to award the Claimant £53,500.00. It followed a Decision of the same Tribunal, sitting in July 2004, which unanimously upheld the Claimant's case that she was unfairly dismissed. The parties were represented at both of those hearings by solicitors. Today Mr Hyland appears for the Respondent and Mr Barnett of Counsel appears for the Claimant.
3. The claim of unfair dismissal was resolved in an unusual way. The contention by the Respondent was that it had dismissed the Claimant for reason which was redundancy / reorganisation. That is a reason which falls within section 98(1) and (2) of the Employment Rights Act 1996. However, the burden of showing the reason for dismissal is upon the employer and this Employment Tribunal decided that it had failed to discharge that duty, for it said as follows:

"21. The Respondent's case was that the Applicant had been dismissed for redundancy / reorganisation. That is a reason which is capable of being a fair reason for dismissal and falls within the Act.

22. On the basis of the facts that they had found, the Tribunals were not satisfied however that the Respondents had discharged the burden of proof and demonstrated on a balance of probabilities that the reason why the Applicant was actually dismissed was that she was redundant within the context if this case. The question of whether or not the Applicant was genuinely redundant is a different one to the question of whether or not a redundancy situation exists. It is not for the Tribunal to speculate as to the reason for the Applicants' dismissal. On the evidence which they heard the Tribunal were unanimously not satisfied that the reasons advanced by the Respondent were the reasons why the Applicant had lost her job.

23. Although in those circumstances it might not be necessary for the Tribunal to have considered the fairness or otherwise of the decision to dismiss the Applicant, nonetheless the Tribunal did go on to consider that and were unanimously satisfied that the manner in which the [Respondents] went about the Applicant's dismissal was procedurally wholly unfair as well as substantively unfair."

4. Thus, having decided against Respondent's contention, it was unnecessary for it to go into discussion of the fairness, whether substantive or procedural, of the dismissal. Yet it did so, and decided in favour of the Claimant on both of those aspects. In short, the reasons given represent a condemnation of the Respondent's approach to conducting a redundancy or reorganisation exercise, both collectively and individually, and its failures to consider alternative work within its empire which extended to companies including a workforce of 60,000 or so. The Respondent's assessment of the Claimant, broadly speaking, was unfair, and the Tribunal found that, if it were necessary to decide this matter, her dismissal was unfair substantively, that is, going to the heart of the decision making of the relevant management.
5. The Claimant was made a number of payments by the Respondent, which are set out on page 18:

Number of completed years of service for Statutory Redundancy purposes =	17 years
Weekly equivalent of contractual pay =	£673.15
Weekly pay of Statutory Redundancy purposes =	£260.00
Number of weeks' pay under Statutory Redundancy rules =	24 weeks
Statutory Redundancy Pay = (24 weeks x £260)	£6,240.00
Company Supplementary Payment = (calculated in accordance with contract of employment)	£3,814.54
Total Severance Pay =	£10,054.54

6. It will be seen that statutory redundancy pay of 24 weeks was awarded to the Claimant of £6,240 and a supplementary payment, calculated in accordance with the contract of employment, of £3,814.54.
7. The Tribunal went on to award, at its remedies hearing, £53,500.00. The Tribunal considered the arguments upon which compensation should be assessed and it was clear that, were it not for the statutory cap, the claim would have been in excess of £200,000. The Tribunal decided to accept the Respondent's arguments about offsetting, which is based on a consideration of section 122(4)(b) of the 1996 Act, and one authority: Boorman v Allmakes Ltd [1995] IRLR 553. It decided, in short, that the Claimant was not entitled to retain the money which she had been paid upon her dismissal, to put it neutrally at this stage.
8. The Claimant appealed against that Decision. Directions sending this appeal to a full hearing were given by Burton P on the sift.

The legislation

9. The Employment Rights Act is divided into parts. Part IX deals with termination of employment. Part X deals with unfair dismissal, and within that are section 98 and section 122. Part XI deals with redundancy payments, and that includes section 139. Employment Rights Act 1996: section 124(1) and 122(4)(b) provide CHK INSERT section 124(1)

"122 Basic award: reductions

….

(4) The amount of the basic award shall be reduced or further reduced by the amount of-

(b) any payment made by the employer to the employee on the ground that the dismissal was by reason of redundancy (whether in pursuance of Part XI or otherwise)

124A Adjustments under the Employment Act 2002

Where an award of compensation for unfair dismissal falls to be-

(a) reduced or increased under section 31 of the Employment Act 2002 (non-completion of statutory procedures), or

(b) increased under section 38 of that Act (failure to give statement of employment particulars),

the adjustment shall be in the amount awarded under section 118(1)(b) and shall be applied immediately before any reduction under section 123(6) or (7).

…

139 Redundancy

(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

(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.

(2) For the purposes of subsection (1) the business of the employer together with the business or businesses of his associated employers shall be treated as one (unless either of the conditions specified in paragraphs (a) and (b) of that subsection would be satisfied without so treating them).

(3) For the purposes of subsection (1) the activities carried on by a local education authority with respect to the schools maintained by it, and the activities carried on by the governors of those schools, shall be treated as one business (unless either of the conditions specified in paragraphs (a) and (b) of that subsection would be satisfied without so treating them).

(4) Where-

(a) the contract under which a person is employed is treated by section 136(5) as terminated by his employer by reason of an act or event, and

(b) the employee's contract is not renewed and he is not re-engaged under a new contract of employment,

he shall be taken for the purposes of this Act to be dismissed by reason of redundancy if the circumstances in which his contract is not renewed, and he is not re-engaged, are wholly or mainly attributable to either of the facts stated in paragraphs (a) and (b) of subsection (1).

(5) In its application to a case within subsection (4), paragraph (a)(i) of subsection (1) has effect as if the reference in that subsection to the employer included a reference to any person to whom, in consequence of the act or event, power to dispose of the business has passed.

(6) In subsection (1) "cease" and "diminish" mean cease and diminish either permanently or temporarily and for whatever reason."

11. Also relevant to the arguments upon which we have been addressed is section 195 of the Trade Union and Labour Relations (Consolidation) Act 1992, as amended by the Trade Union Reform and Employment Rights Act 1993:

"195 Construction of references to dismissal as redundant etc

(1) In this Chapter references to dismissal as redundant are references to dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related.

(2) For the purposes of any proceedings under this Chapter, where an employee is or is proposed to be dismissed it shall be presumed, unless the contrary is proved, that he is or is proposed to be dismissed as redundant."

12. The Tribunal directed itself by reference to section 122(4)(b) and to the judgment of the Court of Appeal in Boorman. The central issue in this case on appeal, is whether or not Boorman was relevant and applied in this case or should be distinguished.

The Claimant's case

13. It is contended on behalf of the Claimant that Boorman applies, for in this case there was no finding by the Tribunal that there was a dismissal by reason of redundancy of the Claimant, notwithstanding that her dismissal tool place against what is generally understood as a redundancy situation. The reasoning of the Employment Tribunal is scant on its Decision against the Claimant's argument, and the correct approach is, by reference to the construction of section 122(4)(b), that the Claimant was not required to offset the monies which she had received.

The Respondent's case

14. On behalf of the Respondent, Mr Hyland has argued that the payment was correctly determined by the Tribunal, although he acknowledged that its reasoning on this aspect of the case is fairly light. Examples were given both by Mr Hyland and Mr Barnett to illustrate the consequences of the judgment being upheld or overturned.

The legal principles

15. In our judgment there is only one authority, Boorman, and the approach in a case such as this is informed by that authority. It also appears that the presumption in
    section 139, appearing as it does in Part XI, does not cross over into Part X, where redundancy also appears. The principle for a case where, as here, there has not been a finding that the Claimant was dismissed by reason of redundancy is set out in the judgment of Nourse LJ at paragraph 11 of Boorman.

"In my view the answer to the question is to be found in the first limb of s.73(9) which, when suitably abstracted, provides:

'The amount of the basic award shall be reduced… by the amount of any redundancy payment awarded by the tribunal under Part VI in respect of the same dismissal…'

It is important to emphasise that s.73(9) can only apply where there has been an unfair dismissal. So the first limb contemplates a state of affairs where there has been both redundancy and unfair dismissal, for example where the employer has unfairly chosen the employee as the person to be made redundant in circumstances to which s.81(2) applies. The first limb can only apply where the dismissal has in fact been by reason of redundancy. Although without the first limb the wording of the second might have been equivocal, it is in my view impossible to construe it as applying in circumstances different from the first. Parliament cannot have intended that a reduction in the amount of a basic award should in some cases depend on whether the payment was awarded by a tribunal or made by an employer. The distinction would have been nonsensical. Like the first, the second limb only applies where the dismissal was in fact by reason of redundancy."

16. Evans LJ also stated the principle, as follow:

"14. I agree with the judgment of Nourse LJ and that Mr Boorman's appeal should be allowed. There might be much to be said for a statutory scheme which encouraged or permitted an all-purpose ex gratia payment on termination of the employment which could later be deducted, if necessary, from the basic award of compensation when the dismissal was unfair. But that is not the wording of s.73(9). It refers only to a redundancy payment and the present case was not one of redundancy: the tribunal so held.

15. As Mr Boorman put it in argument, s.73(9) was intended to apply in cases of redundancy in fact, not in other cases which the employer chooses to describe as redundancy, even if the employee accepted that description at the time.

16. If s.73(9) applies only in cases of redundancy in fact, then it cannot apply here. The full amount of the payment could of course be deducted from the amount of compensatory damages under s.74, but that does not concern the respondents because they are protected already by the statutory ceiling of £10,000 on their liability under that head."

Conclusions

17. In our judgment the arguments of Mr Barnett are correct. We will deal first with an argument of Mr Hyland based upon the cross-over, which is said to exist between the definition of redundancy in the 1992 and 1993 Acts. The old-fashioned definition of redundancy, for the purposes of section 139, has applied since at least 1978, when the Employment Protection (Consolidation) Act 1978 came into effect. We say at least since that date since, it being a consolidation Act, it would not have changed the law. It was also in place for the purposes of the collective consultation provisions in the 1992 Act, But the provisions had been changed by the 1993 Act to provide as we have set out above. Thus, the definition of redundancy predated the 1993 definition and the 1993 definition is of no assistance.
18. The difficulty in this case is in the construction of the words "or otherwise" in
    section 122(4)(b). However, the construction which favours the Claimant in a case such as this (whether or not the payment is made contractually or ex gratia seems not to matter) was set out in those two passages from the judgments of Nourse and Evans LJJ. We do not find any distinction between the approach which should be adopted in Ms Bowyer's case and that adopted in the case of Mr Boorman, and for that reason the Tribunal was wrong not to have followed Boorman.
19. We have accepted Mr Hyland's critique of the Tribunal's reasoning as being scant, and we are not assisted by the conclusion which it reaches, which is that the words "or otherwise" were relied on by the Respondent in support of an argument. We have had to go back both to statute itself and to the leading authority in order to form our own view of the approach to this section. Th Court of Appeal was binding upon the Employment Tribunal, there are no relevant distinctions to be made in the two cases, and it follows that the Employment Tribunal erred in law when it concluded that the payment should effectively be offset. We allow the appeal.