United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR P ROSE QC (Of Counsel) Instructed by: Messrs Blake Lapthorn Linnel Solicitors Harbour Court Compass Road North Harbour Portsmouth
For the Respondent	MR P CADNEY (Of Counsel) Instructed by: Messrs Ford Simey Solicitors Hertford House Southernhay Gardens Exeter EX1 1EJ

SUMMARY

Constructive.Dismissal. Whether lawful termination of contract can give rise to breach of implied term of T& C. Johnson v Unisys. SORS – alteration of Terms. Hurdle to be crossed by employer.


 


HIS HONOUR JUDGE PETER CLARK

1. This appeal, brought by the Respondent employer, Kerry Foods Ltd against the judgment of the Exeter Employment Tribunal, promulgated with Reasons on 25 November, 2004 upholding the Claimant, Mr Lynch's complaint of unfair dismissal, raises 2 questions of law, identified by Burton P at the paper sift stage. The first relates to the Employment Tribunal's approach to the issue of constructive dismissal; the second to the employer's stated reason for dismissal; if there was a dismissal, namely some other substantial reason. In this judgment we shall describe the parties as they appeared below, that is Claimant and Respondent.
2. The Claimant was a long-standing employee of the Respondent and its predecessors. He began his period of continuous employment in 1972. At the effective date of termination, 22 March 2004, he was employed as an Area Sales Manager (ASM). He was then 58 years old.
3. Under his Terms and Conditions of employment he worked a 5 day week, excluding weekends, generally working from 7.30 am – 5.30 pm. He was entitled to 25 days holiday per annum.
4. By 2003 the Respondent had formulated a policy by which it sought to persuade all managers to work a 6 day week, Monday to Saturday, along with other staff at their Exeter depot. Some agreed to do so. The Claimant did not wish to alter his present arrangements and made his position clear in correspondence with Mrs Camm, the Human Resources Controller. On 8 January 2004 she wrote to the Claimant indicating in terms that it was the Respondent's intention to terminate his current contract in the absence of his agreeing to the new terms and to re-engage him under a new contract on those terms commencing on 29 March 2004. The proposed new Terms and Conditions involved 6 day working and a 6 day reduction in his then annual holiday entitlement.
5. The Claimant then sought to negotiate a redundancy package. He was told that there was no question of redundancy. Eventually he tendered his verbal resignation which was accepted by Mrs Camm with effect from 22 March 2004.
6. It was the Claimant's case before the Employment Tribunal that the proposed changes to his Terms and Conditions of employment had the effect of seriously damaging the relationship of trust and confidence between the parties. The Employment Tribunal accepted that proposition, found that he had acted promptly in accepting the Respondent's repudiatory breach of the implied term of mutual trust and confidence and that he was constructively dismissed (see the Employment Rights Act 1996 – Section 95(1)(c)).
7. The Respondent put forward, as a potentially fair reason if the Claimant was found to have been dismissed, some other substantial reason (see Employment Rights Acts 1996 – Section 98(1)(b)) and that dismissal for that reason was fair under Section 98(4) of the Act.
8. The Employment Tribunal found that the Respondent had failed to make out their reason for dismissal. They accepted a submission made on behalf of the Claimant but there was no evidence before them either to show what would have been the adverse impact upon the Respondent's business if the changes to the manager's Terms and Conditions had not been made or to show the quantum of improvement achieved if the changes were made. In these circumstances the Respondent had not discharged the burden of showing some other substantial reason for dismissal. Accordingly it was unnecessary to go on to consider the question of reasonableness under Section 98(4). The complaint of unfair dismissal succeeded. Compensation for that unfair dismissal was assessed in the total sum of £39,971.06.

The Appeal

9. It is convenient to deal with the 2 points raised in the appeal in reverse order. First, the Employment Tribunal's finding that the Respondent had failed to make out a potentially fair reason for dismissal
10. 'A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which causes him to dismiss the employer'. That formulation by Cairns LJ in Abernethy v Mott Hay & Anderson [1974] ICR 323 has been approved by the House of Lords in Devis v Atkins [1977] ICR 662. As Griffiths LJ observed in Kent County Council v Gilham [1985] ICR 233, if on the face of it the employer's reason could justify the dismissal, then it passes as a substantial reason and the enquiry moves on to what is now Section 98(4) and the question of reasonableness.
11. A business re-organisation involving changes in the Terms and Conditions of employment of the workforce may amount to some other substantial reason where there are good, sound reasons for the re-organisation – Hollister v National Farmers' Union [1979] ICR 542.
12. A useful example of a case in which that potentially fair reason was not established by the employer, the onus resting on him under Section 98(1)(b), is Bannerjee v City & East London Area Health Authority. There, the Respondent employed 2 part time consultants to cover a total of 9 half-day sessions per week. One consultant left. Instead of replacing him with another part-time consultant the Respondent decided to appoint a full-time consultant to cover all 9 sessions. Mr Bannerjee, the second part-time consultant was dismissed. On his complaint of unfair dismissal the Industrial Tribunal found that he had been fairly dismissed for some other substantial reason. The Employment Appeal Tribunal, Arnold J presiding, disagreed. The material passage in his judgment is at paragraph 19.

"19. If an employer comes along and says 'We have evolved such-and-such a policy' and either 'we regard it as a mater of importance' of 'the advantages which are to be discerned from this policy are so-and-so,' subject to there being any effective cross-examination, it seems to us that it must inevitably follow that that evaluation by the employer of the policy as a matter of importance, a matter in which substantial advantage is discerned, if it is properly the subject matter of another reason, can be seen to be the subject of a substantial other reason. But in this case what is the state of the evidence? One knows that there was the policy, because Miss Keogh said so - a policy of rationalising and appointing one person to fill separate part-time employments. We know that it was logical to do this from the Consultant's point of view, because Mr Woodward said so. We know that it was the custom and practice to amalgamate part time posts. And that is all we know. We have not the least idea and the Tribunal had not the least idea what advantages the policy was supposed, or thought likely, or hoped to bring. We have no idea, and the Tribunal had idea what importance was attached to this policy by the Health Authority."

On that state of the evidence the Employment Appeal Tribunal concluded that the Employment Tribunal was not entitled to find that a substantial other reason had been made out.

13. Returning to the present case, the Employment Tribunal found - their Reasons, paragraph 7:

"7 Insofar as the respondent gives reasons for wanting to make this change in the pattern of working they are set out in the evidence of Mrs Camm which I will refer to now. Firstly the respondent did not want to operate a two tier system with managers at different depots working a different rota from their colleagues in other depots. Secondly, the respondent wanted to rectify an historical situation whereby Saturday was not perceived as being a normal working day because there was no management presence. Thirdly the depots with managers working the same rota as their team showed an improvement in their Saturday trading performance and fourthly, there was a need to improve the quality of the supervisory cover."

14. In our judgment the Employment Tribunal was wrong to accept the submission advanced on behalf of the Claimant and to conclude (Reasons, paragraph 23) that the Respondent had failed to make out some other substantial reason for dismissal. The findings of fact set out at paragraph 7 plainly show the advantages to the Respondent of the new rota for managers. In particular, managers, working on the same rota as their team showed an improvement in the Saturday trading performance. Conversely, absent the managers Saturday was not regarded as a normal working day. That was sufficient to pass the low hurdle of showing some other substantial reason for dismissal. See in this connection the decision of the EAT in Scott & Co v Richardson (EATS 0074/04. 26 April 2005, Burton P presiding.) It was not necessary, as the Employment Tribunal accepted, to show the 'quantum of improvement achieved'; that was to put the onus on the employer too high. The adverse impact of not making the changes was the converse of the advantage specified by Mrs Camm as found by the Employment Tribunal. Accordingly, subject to the question of dismissal, the Employment Tribunal, in our judgment, was bound as a matter of law to find that the Respondent had shown some other substantial reason for dismissal, if it had taken place, and then gone on to consider Section 98(4) Reasonableness.
15. We return to the first point taken by Mr Rose QC on behalf of the Respondent, that the Employment Tribunal was wrong in law in finding the Respondent to be in repudiatory breach such as to found a constructive dismissal. This is not a case in which the Respondent employer unilaterally varied the Claimant's Terms and Conditions of employment. They gave lawful notice of termination to expire on 29 March 2004, coupled with an offer of continuous employment on the new terms proposed. During the notice period the old terms remained in force. Before expiry of the notice period the Claimant resigned and that resignation was accepted. Accordingly the effective date of termination took place before the expiry of the Respondent's notice. Could that give rise to a constructive dismissal?
16. We accept Mr Rose's submission that these facts cannot give rise to a breach of the implied trust and confidence term. The giving of lawful notice cannot of itself constitute a breach of the implied term. This was not an anticipatory breach of contract; either a dismissal under Section 95(1)(a) would take place at the expiry of the Respondent's notice or the employee accepts the new contractual terms and the contract continues on those terms. We cannot accept the Employment Tribunal's analysis at paragraph 20 of their Reasons that the proposed changes, in the absence of a unilateral variation of the contract, under the mechanism adopted by the Respondent following lawful notice to terminate the contract, could amount to a breach of the trust and confidence term. We are reinforced in that view by the majority decision of the House of Lords in Johnson v Unisys Ltd [2001] IRLR 279 that it is not appropriate to apply the implied term of trust and confidence to a dismissal.
17. In the line of EAT cases considering the question of constructive dismissal, Greenaway Harrison Ltd v Wiles [1994] IRLR 380 (EAT, Judge Hague QC presiding) has come in for a good deal of criticism by commentators – see for example Harvey on Industrial Relations and Employment Law Volume 1 D1 at paragraph 470. It is sometimes treated as authority for the proposition that the threat of dismissal on contractual notice, coupled with an offer of a new contract on different terms, is capable of amounting to an anticipatory breach of contract entitling the employee to resign in circumstances amounting to constructive dismissal. That is in effect what this Employment Tribunal found in the present case. Mr Cadney submits that this is a permissible approach, unless we find that Greenaway was wrongly decided. Mr Rose submits that it can be distinguished, both factually and due to the absence of any reference to the trust and confidence term.
18. We have re-read the judgment in Greenaway for the purposes of this appeal. We have some difficulty with the Employment Appeal Tribunal 's conclusion in that case which was to uphold the Industrial Tribunal's finding that 'the Respondent had fundamentally broken the terms of the contract by the change of hours and it was not reasonable for the Applicant to continue working in those circumstances.' - See paragraphs 4 and 12 of the judgment.
19. The facts of that case were that the employer wished to alter the Claimant's hours of work. She did not wish to do so. She was told that if she did not agree she would be dismissed. She resigned and claimed constructive dismissal.
20. We do not find it necessary to reach a firm conclusion as to whether or not Greenaway was correctly decided because, as Mr Rose, submits, the material term of the contract relied upon was not, unlike the present case, the trust and confidence implied term.
21. We accept Mr Rose's submission that an employer's service of a lawful notice of termination coupled with an offer of continuous employment on different terms cannot of itself amount to a repudiatory breach of contract. There is no present breach of the existing terms nor an anticipatory breach in indicating lawful termination of the contract on proper notice.
22. In these circumstances, without enthusiasm, we have concluded that here the Claimant jumped too soon. Absent an agreed shortening of the employer's notice period, leading to an actual dismissal (Section 95(1)(a)), he did not resign in circumstances amounting to a constructive dismissal.
23. During the course of argument we raised with Counsel a possible alternative formulation of the implied term in this case, based on the proposition that the employer would not terminate the contract on proper notice unfairly. However, Mr Rose has persuaded us that this is not how the case was put below, as Mr Cadney accepts, and in these circumstances, applying ordinary Kumchyk principles, it would not be right to consider the point for the first time on appeal.
24. It follows that this appeal must be allowed. We declare that there was no dismissal. Accordingly the Employment Tribunal's finding of unfair dismissal and consequent award must be set aside.