United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR IVAN CHARLES HARE (of Counsel) Instructed by: Gaby Hardwick Solicitors 33 The Avenue Eastbourne East Sussex BN21 3YD
For the Respondent	MR DAVID JONES (of Counsel) Instructed by: Messrs Chadwick Lawrence Solicitors 13 Railway Street Huddersfield West Yorkshire HD1 1JS


 


SUMMARY

Where employees are dismissed for refusal to sign a new contract containing proposed covenants in restraint of trade, the test is no different from that in respect of dismissal for refusing to sign a fresh contract in any other case, namely that, in respect of the proposed terms said to be unreasonable, it is not that the defence of some other substantial reason is not available, but that the reasonableness of the terms falls to be considered under s98(4), in accordance with the line of authorities recently summarised in Scott v Richardson EATS/0074/04: Forshaw v Archcraft Ltd [2005] IRLR 600 not followed. However, the Tribunal's alternative decision that there was an unfair procedure and that Polkey did not apply meant that the finding of unfair dismissal stood and/or that there was no ground for remission.


 


THE HONOURABLE MR JUSTICE BURTON

1. On 5 October 2005 we dismissed this appeal, affirming the decision of the Employment Tribunal at Leeds, but on different grounds. This is the unanimous judgment of the Tribunal setting out our reasons for so doing.
2. The decision of the Employment Tribunal, after a hearing on 8, 9 and 10 February 2005, by a judgment sent to the parties on 16 March 2005, was that three of the Claimants, now the respondents to this appeal ("the Claimants"), were unfairly dismissed by the Respondent Windsor Recruitment ("the Respondents"), a staff recruitment company, specialising in the supply of agency workers for the health and associated services, and part of the HH Group, which also specialises in human resources staff recruitment. The Respondents dismissed the Claimants because they refused to sign fresh contracts of employment containing a number of restrictive covenants, which were dedicated towards seeking to protect the Respondents from what had already been a substantial number of efforts, many successful, by competitors, to poach staff and business from them, and at a time when the Respondents planned to expand its business from 8 branches, with a turnover of £14m per annum, to 100 branches across the country, with a turnover of up to £164m per annum. The Employment Tribunal concluded (at paragraph 8.2) that "some form of restraint of trade, restricting staff from competition after ceasing employment, would be necessary in order for the respondent to achieve [its] objectives".
3. The Employment Tribunal determined that the restrictive covenants, or, at any rate, one or more of them, which the Respondents were requiring the Claimants to sign, were in unreasonable restraint of trade or, as the Tribunal put it in paragraph 19 of its Judgment under Conclusions, were not "themselves fair and reasonable from the employer's point of view" or were (paragraph 23) "unreasonably wide". The Tribunal did so after considering the evidence, but without in terms addressing the justification which the Respondents put forward, e.g. in paragraph 28 of the witness statement of their Operations Director Mr Brook-Watson.
4. The Tribunal then concluded that the Respondents were unable in law to establish the availability of the defence that the dismissal of the Claimants was for "some substantial other reason", within s98(1)(b) of the Employment Rights Act 1996 ("ERA") if, as the Tribunal had thus determined, the covenants, which the Claimants were dismissed for failing to sign, were unreasonably wide in extent. Thus the Respondents failed to satisfy the onus under s98(1)(b), and their defence fell at the first hurdle, irrespective of any question of fairness within s98(4) of ERA, which did not arise for consideration, and even though, as the Tribunal found, the Respondents were acting on legal advice that their existing covenants were "not adequate to meet the degree of competition they were now facing from ex-employees or adequate to prevent the risk of further haemorrhaging of staff and confidential information" (paragraph 8.10 of the Judgment) and in the "reasonable belief that their competitors were continuing in their attempts to poach staff in order to set up in competition" (paragraph 11). This is the main target of the Respondents' appeal (s98(1)(b)).
5. The Employment Tribunal then, in paragraph 24, set out that "if we had found that the dismissal was for some other substantial reason, we would have had to consider whether the dismissal was fair in all of the circumstances". They record in that paragraph that their decision would have been that the Respondents did not adopt a fair procedure:

"The difficulty is not simply a lack of prior consultation, although consultation would have been helpful from the claimants' point of view; but the fact [is] that they were asked to sign these documents within 30 minutes of first being given them, in a busy working environment without any proper opportunity to read and understand them. This is a complex document which the respondent's lawyers clearly spent some time drafting, and which we have spent a considerable amount of time interpreting. It was not reasonable to ask anyone to sign it in such circumstances. That unreasonableness set the tone for all the future discussions. The claimants were not warned that a failure to agree to the new terms would or may result in dismissal. We would have found the dismissals procedurally unfair."

6. Indeed the Tribunal find that, had a fair procedure been adopted, the Claimants would in all probability have accepted the covenants, notwithstanding their unreasonableness, so that there would have been no Polkey deduction (by reference to Polkey v AE Dayton Services Ltd [1988] AC 344). The Respondents allege that this alternative approach is flawed and this forms the basis of the second limb of their appeal (s98(4)).

S98(1)(b)

7. As discussed above, the Tribunal decided that the new contract, which the Respondents required the Claimants to sign, contained covenants which were unreasonably wide and thus that the Respondents could not satisfy the onus of showing that the dismissal was for some other substantial reason. At paragraph 19 it stated:

"Had this respondent sought to impose restrictive covenants which prevented the claimants from working for a reasonable period of time within a reasonable distance of the area in which they currently worked, or just in the field in which they currently worked, then on the remaining facts found we would in all probability have said that that was some other substantial reason."

8. In reaching its conclusion, it addressed first a covenant which was, it seems, not in fact the subject of any concern or consideration at the time, namely Clause 3.1. This was a clause which would have introduced a restriction upon the Claimants not for a period of 12 months after the termination of their employment to poach another employee or ex-employee of the Respondents. The Tribunal concluded (although without express reference to the doctrine which can loosely be called 'purposive construction' by reference to Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472), in paragraph 8.15 of the Judgment, that such a clause would be unreasonably wide, by virtue of its preventing, for that 12-month period, the poaching of any employees who had previously worked for the Respondents, unlimited by period or area. The Tribunal concluded:

"We do not therefore consider it to be reasonable to insist on … acceptance [of that term] then or at any subsequent time."

9. The Tribunal then turned to consider the clause which was the subject matter of concern to the Claimants at the time, on the basis of the evidence they gave, namely the three subclauses of Clause 4.1. These related to non-competition for a period of 6 months after employment. The Tribunal concludes, at paragraph 8.16:

"We can see the need for a restriction in respect of persons the claimant has come into contact with and areas she has worked in, but not, as this could be, potentially countrywide. The reference to "any business which is or is likely to be wholly or partly in competition" is also extremely wide. It does not restrict the claimants simply from competing in respect of the health care sector but … could restrict them from competing in the human resources fields, in respect of which they have no experience with the respondent or in any other field which the respondent or any potential competitor is likely to branch out into in the future, whether or not the claimant had any direct knowledge or experience of those fields."

10. Again there is no consideration of Littlewoods, nor of the well-established concept of 'blue-pencilling', or severability.
11. In the light of its conclusions, the Tribunal therefore resolved that the Respondents fell at the first hurdle, did not qualify under s98(1)(b) and that, consequently, questions of fairness under s98(4) did not arise.
12. The approach taken by the Employment Tribunal is the same as that adopted by the Employment Appeal Tribunal in a decision in fact given on 13 December 2004, but not reported until [2005] IRLR 600, and understandably not known to, and certainly not referred to by, the parties or the Tribunal at the February 2005 hearing. This is Forshaw v Archcraft Ltd, in which the judgment was given by Rimer J. The facts of that case are not dissimilar to the present. The employment tribunal in that case had dismissed complaints of unfair dismissal, upholding the employers' reliance on some other substantial reason. Facing a real risk of competition and loss of staff and business, the employers decided to ask the claimants to sign a new contract of employment, containing a restraint of trade clause imposing a nationwide ban on their working in a competing business for a period of 12 months following the termination of their employment; and the claimants were dismissed when they refused to do so. The tribunal found that, although the proposed restraint on the claimants post-termination activities was "doubtless wider than necessary", some other substantial reason was established and also, in the circumstances, that the dismissals for that reason were fair.
13. Only two authorities were referred to by Rimer J in his judgment. The first is Attwood v Lamont [1923] KB 571, the seminal case on invalidity of restrictive covenants. The other was R.S. Components Ltd v Irwin [1973] ICR 535. In that case, an employee's refusal to sign up to a new contract containing a reasonable restraint had been held a potentially fair reason for dismissal. The facts in Irwin were that the employee was told that if he did not sign a new agreement containing a 12-month non-solicitation of customers clause, he would be dismissed, and when he refused to do so, he was so dismissed. The decision of the majority of the tribunal was that, although the restrictive covenant was reasonable, the employee's refusal to sign it was not some other substantial reason, because it concluded that dismissal for such a reason did not, on a proper construction of the then equivalent of s98(1)(b), fall within the ambit of some other substantial reason. The National Industrial Relations Court, presided over by Sir John Brightman, allowed the appeal, on the basis that the tribunal had wrongly and too restrictively interpreted the ambit of some other substantial reason. Sir John Brightman ended his judgment (at 541D) with some obiter remarks:

"[The solicitor for the employee at the tribunal] conceded that the covenant was probably enforceable. Counsel did not seek to resile from that view in argument before us, and the validity of the covenant was not challenged. We mention this point, not because we desire to express reservations as to the validity of the covenant, but merely to emphasise that we have heard no argument, and, accordingly, this judgment is not a decision on the validity of the covenant. If the employers had dismissed the employee for his refusal to enter into a restrictive covenant believed by the parties to be valid but void as a matter of law, other and more difficult considerations would have arisen in regard to the application of section 24(1) to the facts of this case."

14. Rimer J concluded his judgment as follows:

"22. We readily accept that, in the circumstances faced by [the respondent], it was reasonable for it to invite the three appellants to sign up to contracts containing a reasonable restraint clause … A similar point was considered in … Irwin … in which it was held that the employee's refusal to sign up to a new contract containing a reasonable restraint was a potentially fair reason for his dismissal.

The problem in the present case, however, is that the tribunal's finding was that the proposed restraint was wider than was necessary for [the respondent's] protection … Any such restraint, had it been imposed, would probably have been void and unenforceable as an illegal restraint of trade …

The finding of the tribunal is that it was the appellant's refusal to sign up to the new agreements which was the reason for their dismissal: and that it was this refusal which was claimed by [the respondent] to be a potentially fair reason for their dismissal for the purposes of s98(1)(b). In the closing paragraph of the judgment of the Irwin case, Sir John Brightman left open the question of whether it is open to an employer to assert his employee's refusal to sign up to an unreasonable restraint as being a potentially fair reason for his dismissal. In our view, the question answers itself. We consider it was unreasonable of [the respondent] to ask the appellant to sign up to a restraint which was unreasonably wide and which purported to impose an unreasonable fetter on their future trading activities. We do not accept that such a refusal can amount to a potentially fair reason for dismissal, since we do not understand how an employer can assert as such a reason the fact that the employee refused to sign up to unreasonable terms of employment. It is true that the employees in the present case made no counter-proposals, as to restraint terms which might be reasonable, but we do not see why they should have done. It was [the respondent] that wanted to impose a restraint and it was for [the respondent] to come up with a reasonable one. We are disposed to accept that, had [the respondent] not attempted to impose the restraint, but had simply taken the view that they should get rid of the appellants there and then, for fear that their continued employment might impair all the confidential information which [the respondent] wanted to protect, that might by itself have been a potentially fair reason for their dismissal …However, this was not the reason for the dismissal found by the tribunal. We conclude that the reason they did find was not a potentially fair reason and that it anyway cannot have been reasonable, to dismiss the appellants for refusing to sign up to an unfairly wide, and unreasonable, restraint clause. In finding, as they did, that the refusal to sign up to the new contracts was a potentially fair reason for dismissal, we hold that the tribunal was in error."

15. Consequently the EAT in Forshaw did not go on to consider the question of fairness, which in fact that tribunal had resolved in the employer's favour.
16. Ms Helen Mountfield, Counsel for the Respondents, submitted that the approach adopted by the Tribunal in this case, and by the EAT in Forshaw, is erroneous. She refers to the line of authority in respect of some other substantial reason, which was summarised by this Appeal Tribunal recently in Scott and Co v Richardson [EATS/0074/04 26 April 2005 unreported]. That case was one of dismissal for not consenting to alteration to terms and conditions of employment, although such terms did not include the imposition of any fresh restrictive covenants; but in my judgment I reviewed the relevant authorities in the area of some other substantial reason, beginning with Hollister v National Farmers Union [1978] ICR 713 per Arnold J and [1979] IRLR 542 CA. By reference to those authorities, in particular Dobie v Burns International Security Services (UK) Ltd [1984] IRLR 329, I stated (at paragraph 18 of my judgment):

"The principle [is] that the test is whether the reason for which the dismissal took place could be a substantial other reason."

17. To that line of authority Ms Mountfield adds the recent decision of the Court of Appeal in Copsey v WWB Devon Clays [2005] IRLR 811 C.A., particularly per Neuberger LJ at paragraphs 80 to 89. She points to my criticism of the employment tribunal in Scott v Richardson, in my judgment at paragraph 20, that they had "conflate[d] the questions of whether there was a substantial other reason, a sound business reason which seemed good to the employer, with the question as to whether it was a fair dismissal in the circumstances". She submits that all that is necessary is for the employer to establish that the reason for dismissal could be for a substantial other reason – for refusing to sign a new contract of employment containing terms genuinely believed by the employer to be required for a good business reason: and that the question whether the new contract was in unreasonable restraint of trade is (a) not an issue for the tribunal actually to decide itself, but (b) a matter for the tribunal to consider, as it must, as part of the issue of the reasonableness/fairness of the employer, an issue which is before it. She submits that the decision of the EAT in Forshaw is per incuriam, because no authorities were referred to, other than the obiter remarks of Sir John Brightman, on the issue of some substantial other reason, and particularly not the line of authorities reviewed in Scott v Richardson, and the decision of the EAT in St John of God Care Services v Brooks [1992] ICR 715, to which we make reference below.
18. Mr David Jones of Counsel, for the Claimants, supports the approach of the Tribunal, and of the EAT in Forshaw. He accepts however the general proposition that it is not for the employment tribunal to consider the substance of the employer's reasons at the s98(1)(b) stage (provided they are more than "whimsical or capricious" [Harper v National Coal Board [1998] IRLR 260 at para 8, referred to in Scott v Richardson at paragraph 17]). But he submits that it is appropriate for a tribunal to consider whether the restrictive covenant is fair at the stage it considers the issue as to whether the reason can be justified by reference to s98(1)(b), because, as he puts it in paragraph 2.8 of his skeleton argument, "only if such a contract is established as reasonable, will it be valid … in contrast to other contractual terms the reasonableness of which is not a matter for the common law". He thus seeks to distinguish the approach of a tribunal in the case where dismissal is for failure or refusal to sign a new contract of employment containing covenants in restraint of trade as opposed to one containing other terms. He puts forward as such an example the case of an employee asked to sign a new contract by which he would be paid a lower salary and one below the minimum wage, and/or was to work longer hours and/or hours in excess of those permitted by the Working Time Regulations. Ms Mountfield submits that any such distinction is not supported by any authority - not even the obiter remarks of Sir John Brightman in Irwin - and is indeed inconsistent with the authorities. If anything, she submits, any distinction would point in an opposite direction. She accepts that insistence that an employee sign an illegal contract, one which either furthered some illegal object, or could only be illegal in performance, such as payment of less than the statutory minimum wage, might fail at the s98(1)(b) stage; but she pointed out the clear distinction that there is between contracts which are illegal and contracts which are simply unlawful as in restraint of trade. She points to the passage in Chitty on Contracts (29^th Edition) Vol I at 16-075 which recites that:

"A covenant in restraint of trade (if unreasonable) is void in the sense that courts will not enforce it, but if the parties wish to implement it they will not be acting illegally and the courts will not intervene to prevent them from doing so."

19. She emphasises that the exercise of deciding whether a covenant is unreasonable as in restraint of trade or contrary to public policy is one which requires careful assessment, the answer to which may well not be obvious and will depend upon the particular factual situation: she points to the dictum of Lord Wilberforce in Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd [1968] AC 269 at 331, that "the doctrine of restraint of trade is one to be applied to factual situations with a broad and flexible rule of reason". This exercise, Ms Mountfield submits, should not be carried out retrospectively by a tribunal in such a manner as to negate the proposition that there could be a substantial other reason for dismissal, any more than a retrospective analysis of the soundness or otherwise of any business reasons of the employer can do so. In any event, she submits that the factual analysis by this Tribunal was inadequate, a matter not only relevant by way of criticism of the instant decision but indicative of the inappropriateness of such an exercise if it is to rule out an employer's defence, irrespective of whether it acted fairly in all the circumstances. First, Ms Mountfield submits that there was no adequate addressing of the employer's case that in fact a nationwide covenant would be appropriate. More significantly, the Tribunal did not address the impact of severability of one or more of the clauses or subclauses, or indeed severing or blue pencilling one or more of the provisions within the subclauses. If the some other substantial reason defence is to be ruled out in limine, as opposed to at the stage of fairness, the question of whether the contract would be in whole or in part enforceable must be considered.
20. We agree with Ms Mountfield's submissions. We are satisfied that it is not appropriate for the employment tribunal to decide the validity of a proposed covenant. We note that in Forshaw what Rimer J referred to was that (paragraph 23) "any such restraint, had it been imposed, would probably have been void and unenforceable" [our underlining] but he appears, in the passages we have recited in paragraph 14 above, nevertheless to be concluding on the balance of probabilities that it was (or would have been) so void and unenforceable. It is perhaps particularly illustrative in our case of the inappropriateness of the exercise that the Tribunal reached its 'objective' conclusion as to the reasonableness/ validity/enforceability of the covenants at least in part by reference to its views as to a covenant – Clause 3.1 – which was not in issue between the parties at the time of the dismissal. Sir John Brightman's dicta in Irwin were on any basis obiter, but even then all he said was (541G) that " if the employers had dismissed the employee for his refusal to enter into a restrictive covenant believed by the parties to be valid but void as a matter of law, other and more difficult considerations would have arisen in regard to the application of section 24(1) to the facts of this case" [our underlining]. He did not say that the consequence would be that the defence of some other substantial reason could not be relied upon, and in any event he plainly left the matter open for further argument.
21. We have referred above to the St John of God case. That was a case which did not concern the proposed imposition of a restrictive covenant, but of the offer to staff, upon which the employers insisted, to the point of dismissing for refusal to sign, of less favourable terms, including reduced pay and holiday entitlement and the abolition of overtime rates for weekend and bank holiday work. The Tribunal held that no reasonable employer should have expected the Applicants to accept the new contracts, and the dismissals were unfair. The majority of the Employment Appeal Tribunal, by a judgment given by Knox J, allowed the employer's appeal. It concluded that there was a danger in promoting the nature of the employer's offer of new terms and conditions of employment to the status of the sole or crucial test, because that involved a departure from the wording of the then equivalent of s98(4), which required the Tribunal to consider the question of fairness at the time of the dismissal rather than at the earlier stage of the offer, and (at 722f) "if there is a sound good business reason for the particular reorganisation (see Hollister v National Farmers' Union [1979] ICR 542, 551) the unreasonableness or reasonableness of the employer's conduct has to be looked at in the context of that reorganisation". We do not accept that there is any difference in the case of a restrictive covenant; in such a case also the question of the reasonableness of the covenant, even though it may have the consequence that, if imposed, the covenant would be unenforceable and void, falls to be looked at the stage of fairness, and as part of the whole context, and in all the circumstances, as provided for in s98(4). After all, the issue is whether it is reasonable to dismiss for refusal to sign the new contract. As, by definition, dismissal will only arise where an employee has refused to sign such a contract, there seems to us to be no distinction between dismissal for failure to sign a contract which, if imposed, would contain unreasonable terms and one which, if imposed, would contain terms which were unreasonably in restraint of trade. The Tribunal is not sitting as a court of the Chancery Division in adjudicating the validity or enforceability of the covenant, since it has not in fact been imposed, but simply required on pain of dismissal.
22. To adopt the approach of consideration and determination of the objective reasonableness (putative validity) of a proposed restrictive covenant would create an exception to the well-established general approach to the defence of some other substantial reason, by which, as referred to above, the test is whether the reason for the dismissal – in this case dismissal for refusal to sign a contract seeking to give to the employer protection against competition not previously contained in the contract - could be "of a kind such as to justify the dismissal of an employee holding the position which the employee held". It would be a reason which would not be "a whimsical or capricious reason which no person of ordinary sense would entertain" (Harper at para 8). There is, in our judgment, no basis or need for a departure from that normal approach, as established by the authorities. It cannot be the proper approach that an employer with a genuine need for protection, which seeks, acting on legal advice and adopting a fair and timeous procedure, to introduce a covenant, which, after exact analysis, turns out to have been, perhaps marginally, too wide, is liable 'automatically' for unfair dismissal.
23. The proper approach is, in our judgment, that such a reason, i.e. one which is not whimsical or capricious, would pass the s98(1)(b) test, being the first stage. The Tribunal will need to consider, at the second stage, whether the employer had a genuine belief that the dismissal for that reason was justified. In this case, there was no problem about this, or about the obtaining of legal advice in that regard, but there might be cases in which a tribunal concludes that the contract which the employer was seeking to make the employee sign was so manifestly unreasonable that the purported reason was in fact a cover or a ruse to get rid of the employee.
24. In all save very exceptional such circumstances, the consideration of the reasonableness of the new contract, including the reasonableness of the covenant or covenants sought to be imposed, arises at the third stage, that of fairness:

24.1 If the proposed covenant appears to the tribunal to be plainly unreasonable and (where relevant) was being put forward as all or nothing, or not severable, then it may make it all the easier for a tribunal to conclude that there was unfairness.

24.2 If the proposed contract or covenant or covenants is/are arguably unenforceable (and/or severable) then there will be the greater need to consider the approach of the employer, in particular the amount of time given to consider the proposals and the opportunity given, if appropriate, for legal advice.

24.3 If the covenant is plainly reasonable, then, of course, before a dismissal can be justified there will still need to be consideration of the fairness of the procedure, but the tribunal may well be able to be satisfied that the dismissal was fair.

25. In those circumstances, we are entirely satisfied that the approach of the Tribunal was wrong in law in effectively ruling that the proposed covenant was (or would have been) in unreasonable restraint of trade, and consequently that the some other substantial reason defence does not arise and fairness did not fall to be considered. We are however faced with a decision of this Appeal Tribunal, both very recent and given by a respected and distinguished panel, which is almost on all fours with this case and is to the contrary. In such a case, we would ordinarily regard ourselves, albeit not bound, certainly heavily persuaded by the conclusion and no doubt the reasoning of such judgment. However it is clear to us that that Tribunal did not have the benefit of consideration of the authorities to which we have referred above, not just the St John of God case, but in particular any of the authorities as to the correct approach to the defence of some other substantial reason, which we do not believe can be distinguished – and which Rimer J, because those cases were not cited to him, did not seek, or have the opportunity, to distinguish. Respectfully disagreeing as we do with the conclusion in Forshaw, for that reason we feel free not to follow it, and indeed to conclude that the decision in Forshaw was inconsistent with earlier binding authority not cited to it.
26. We would therefore, not have ruled out the Respondents' defence at the s98(1)(b) stage. There is no issue as to the genuineness of the Respondents' belief, and the proper approach would have been to consider the fairness or unfairness of the dismissal in accordance with s98(4).

S98(4)

27. We refer to the findings of fact by the Tribunal, over and above its views as to the reasonableness (putative enforceability) of the covenants sought to be imposed. The findings of fact are in paragraph 8 of the Judgment. There was no prior consultation, the new draft contracts being dealt out like a pack of cards on 19 May 2003, Mr Watson giving each member of staff who was present at the time half an hour to sign and return them, which the Tribunal did not find was reasonable: and he was "very abrupt and irritated" [all para 8.14]. The Tribunal concluded that there were no reasonable grounds for Mr Watson's suspicions of the Claimants that they had been planning to leave in any event (para 8.17). A request by Ms Plumridge, the new branch manager, on the Claimants' behalf to Mr Watson for a further 7 days to consider the document on 24 May was refused, with the response that if the contracts were not signed by 25 May the Claimants would not receive the commission to which they were entitled (para 8.19). On 28 May Mr Watson was, prior to a meeting with one of the Claimants, rude and abrupt, and, although the Claimants were given a further 7 days to return the signed agreements to their manager, Mr Watson's tone in the meeting, towards the Claimants, as the Tribunal found, was not reasonable or conciliatory, and his body language appeared aggressive and intimidating (para 8.20). Although at a meeting on 1 June Ms Plumridge did her best to placate the Claimants, on 4 June each of them was given notice of termination: none of them had been forewarned in specific terms that they would be dismissed if they did not accept the new clauses, Mr Watson was again rude, the note of such meetings as occurred was "hopelessly inadequate as a record of a dismissal meeting" and, as the Tribunal found, the Claimants were left in some confusion (para 8.22). The content of the dismissal notice, which, while giving notice to terminate on 2 July 2004, indicated that an offer of "alternative employment", being "employment on fresh terms which will be no less favourable than those you are currently on - save that it will include the proposed amendments to the confidentiality clause and restrictive covenants" was concluded to "lead to confusion in the mind of the Claimants" (para 8.23).
28. It is clear, subject always to their primary conclusion as to s98(1)(b), to which we have referred above, that the Tribunal did consider the question of fairness:

(i) "It is not … inevitable that a lack of consultation will render a dismissal fair. We have to consider all of the circumstances of the case. If the new contract is the only sensible way to deal with the difficulties faced by the Respondent, then that can be a substantial reason for dismissal, irrespective of previous consultation" (para 12).

(ii) "It does not follow that because there are disadvantages to the employee, the employer acts unreasonably in treating his refusal to accept changes as a reason for dismissal … It is not for us to decide what terms and conditions would have been reasonable, but we can decide whether a reasonable employer could or should expect its employees to take the new terms and conditions. We should not focus just on the offer of new terms, but on whether the decision to dismiss at the time it was taken was fair" (para 13).

(iii) "If … we do accept that there was some other substantial reason, then we have to consider the factors in s98(4), one of which is the procedure used, which is also subject to a band of reasonable responses test. If the procedure used was outside of that band, then the dismissals are unfair" (para 14).

(iv) "Although the respondent went some way towards explaining what they meant in the document, they did so in such an unreasonable fashion that the claimants could not trust what they were being told. It is not, in our view, within a band of reasonable responses to decide to dismiss staff who simply needed further clarification on that point, but who were deprived of the opportunity of obtaining it in a reasonable manner" (para 19).

(v) "We do not accept the respondent's submission that, as they held more meetings, the procedures they used were more fair than those in the case of Irwin, given the hostile nature of those meetings" (para 21).

(vi) "In this case, having found that the restrictive covenant was unreasonably wide, it would be difficult for us to say that the claimants were unreasonable in refusing to accept new terms and conditions on those terms. Further, we accept that the claimants had by then lost trust and confidence in the respondent. Therefore we find in all the circumstances that it was not unreasonable of them to refuse that offer" (para 23).

29. The Tribunal makes findings of fact in paragraph 22 in relation to ruling out any Polkey argument:

"Had the respondent in this case conducted negotiations in respect of the changed terms and conditions in a sensible and reasonable manner, there was every prospect, in our view, of the claimants or their solicitor being able to discuss the matter with the respondent's personnel department or the respondent's solicitors and resolving their concerns. We do not, therefore, consider that it would be appropriate to make a Polkey reduction."

30. The Tribunal returns to this in paragraph 24 of the Judgment, on the basis that "in all probability they would have accepted those terms, albeit that we have found them unfair, in order to retain their high levels of income".
31. It is in the light of these findings, and expressions of view, that the Tribunal sets out what the Claimants submit to be its alternative conclusion or ratio, in paragraph 24 of the Judgment, which we have set out in full in paragraph 5 above, and which commences as follows:

"If we had found that the dismissal was for some other substantial reason, we would have had to consider whether the dismissal nevertheless was fair in all of the circumstances. The procedure used would have been highly relevant."

32. We are satisfied in the circumstances that the Tribunal reached two conclusions, and that if, as we have decided, its first and principal conclusion was erroneous, it can, and we can, look to its second conclusion. This is expressly in accordance with what we have often encouraged employment tribunals to do, if they are able to do so without unnecessary waste of time or considerable further evidence, namely to reach an alternative finding, in case it should turn out that their principal finding is wrong in law, in order to assist the Appeal Tribunal if the matter goes to appeal and to avoid unnecessary remissions.
33. Is there any error of law in such alternative conclusion and/or is it irremediably flawed by the error in the principal conclusion?
34. 1 The alternative conclusion is framed by the first sentence of paragraph 24, which we have cited immediately above. Its premise is that the Tribunal had found the dismissal to be for some other substantial reason and were then addressing s98(4). This might comprehend two different scenarios:

(a) That they were wrong that the covenant/covenants was/were invalid/unenforceable, and they ought to have found that they were reasonable. Then they are deciding that, even if the proposed new contract, if imposed, would have been valid, the unfairness of the procedure would still have rendered the dismissal procedurally unfair.

(b) Alternatively, if they should have found that the covenant/covenants was/were only arguably putatively unenforceable, as opposed to actually unenforceable, then the alternative conclusion that they reached is equally apt, namely, that "this is a complex document … which we have spent a considerable amount of time interpreting. It was not reasonable to ask anyone to sign it in such circumstances."

In our judgment, the alternative conclusion is not irretrievably flawed by the error in the principal conclusion, but the Tribunal is genuinely approaching its conclusion on an alternative basis.

35. .2 Ms Mountfield submits that the Tribunal has applied the wrong onus of proof. She does not specifically suggest that there is any incorrect wording in the Judgment, but she submits that, because the approach wrongly adopted by the Tribunal led to the Respondents' failing at the first stage, at which the onus is upon them, it is likely that the Tribunal brought a mindset to bear on its subordinate consideration of s98(4) which would be affected by the erroneous application of that onus. We are wholly unpersuaded by this. We only have to point to two important passages of the Judgment of the Tribunal, which in each case is plainly addressing s98(4), and doing so correctly:

"If, however, we do accept that there was some other substantial reason, then we have to consider the factors in section 98(4), one of which is the procedure used, which is also subject to a band of reasonable responses test. If the procedure used was outside of that band, then the dismissal are unfair" (para 14).

"If we had found that the dismissal was for some other substantial reason, we would have had to consider whether the dismissal was nevertheless fair in all of the circumstances" (para 24, first sentence).

36. 3 An argument of perversity was raised by Ms Mountfield in her skeleton argument, but it became clear in the course of argument, as she conceded, that this was aimed solely at her criticism of the Tribunal's conclusion that the covenant was not reasonable (by reference to its failure to address the evidence of the Respondents as to why nationwide protection would be relevant), which at best would go to the arguability of the covenant, which for the purposes of paragraph 24 of the Judgment was being assumed in the Respondents' favour, and as such could not be used to impugn the alternative conclusion.
37. We are therefore satisfied that the Tribunal was entitled to find that the dismissal was unfair, but for its alternative, not its principal, reason.
38. If we are wrong that there was an alternative ratio and/or that the Tribunal's judgment can be upheld on that ground, even if disapproved on the basis of its conclusion with respect to s98(1)(b), then that would mean that, because of the error of law identified by the Respondents, the reasoning of the Tribunal must fall and its decision could not be justified on that basis. However, in those circumstances, the issue would still arise as to what remedy it would be to which the Respondents would be entitled. Where an error of law is identified in a Tribunal's judgment, it can be corrected on appeal, but remission for rehearing is not by any means automatic. The burden of course would be upon the party seeking to avoid the remission to establish that it is entitled to retain the benefit of the judgment, even though decided on the basis of an error of law. But it can seek to do so, if a remission would be to no purpose, since it is clear what the result would be on a remission (see for example O'Kelly v Trust House Forte [1984] QB 90).
39. Ms Mountfield makes two submissions why there might be a different result on a remission:
40. 1 She refers to the fact that, whereas, on the basis of the findings of the Tribunal, inadequate time was given to the employees to consider matters up to 4 June, on a remission, particularly if to a different Tribunal, the conclusion might be reached that, by 18 June (the expiry of the 14-day offer period contained in that letter) sufficient time had been given. Leaving aside the fact that this very argument appears to have been considered and rejected (with reference to the St John of God case) by this Tribunal in paragraph 20 of the Judgment, this is effectively a suggestion that this Tribunal's decision was perverse (in a respect not suggested on this appeal) and that another Tribunal might decide differently.
41. 2 More generally, she refers to my judgment in Scott, where I concluded, at paragraph 29, that, since the Tribunal had conflated the two questions,

"It is apparent, in our judgment, that by virtue of the finding by the Tribunal on the first limb, in which, in effect, it rejected the arguments for the Appellant that there was any sound commercial reason for the organisation, inappropriately, and applying the wrong test, as we have concluded, when it came to consider what is suggested to be an alternative basis, it had disabled itself from carrying out the Catamaran balancing act. In any event, it did not, for the purpose of such alternative conclusion, reach conclusions as to what the sound business reasons were, and as to their merits, and as to the advantages to be gained to the Respondent, in order to inject that important question into the balancing act."

She submitted that a tribunal that had not erred in respect of s98(1)(b) should now carry out afresh the "Catamaran balancing act" (a reference to Catamaran Cruises Ltd v Williams [1994] IRLR 386). However:

(a) Scott was not a case in which there was, as here, a separate and unflawed independent and sufficient conclusion as to the unfairness of the procedure (see paragraphs 32 to 36 of that judgment).

(b) This is not a case in which the same, or a different, tribunal on remission would be likely to find that the proposed covenants were plainly reasonable. Once the tribunal is deterred by our judgment, in accordance with Ms Mountfield's submissions, from making a determination as to the enforceability of the covenants, the inevitable result in our judgment would be that there would be a finding that these covenants were arguably unenforceable for the reasons set out in this Tribunal's judgment. That factor has been fully filtered into the balancing act in fact carried out by this Tribunal in paragraph 24 of its Judgment, for the purposes of its alternative conclusion.

42. In those circumstances, even if it arose, we would not conclude that this would be a suitable case for remission, and we are entirely satisfied on that ground also that the decision of the Employment Tribunal that there was unfair dismissal should stand.
43. Accordingly this appeal must be dismissed.