United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR ROGER HARPER (Of Counsel) Instructed by: Messrs Sims Cook & Teague Solicitors 3 All Saints Court Bristol BS1 1JN
For the Respondent	MISS D SENGUPTA (Of Counsel) Instructed by: Messrs Alan Hodge Solicitors & Mediators 4 Castle Street Thornbury Bristol BS35 1HB

SUMMARY

Contract of Employment and Unfair Dismissal

The Tribunal erred in law in its approach to the question whether Mrs Benjamin's contract of employment contained a term entitling her to be paid while sick.

The Tribunal did not otherwise err in law in its approach to the issue of constructive dismissal.


 


HIS HONOUR JUDGE RICHARDSON

1. There are two appeals before the Appeal Tribunal today arising out of the same proceedings. Firstly, there is an appeal against a judgment of the Employment Tribunal in Bristol dated 4 April 2005. Mrs Benjamin had brought a claim against her former employers, Interlacing Ribbon Ltd, hereafter IRL, alleging constructive dismissal. By its judgment the Tribunal held that that Mrs Benjamin was not unfairly constructively dismissed by IRL. Secondly, there is an appeal against a further judgment of the Employment Tribunal dated 1 June 2005, awarding costs to IRL in the sum of £5,000.

The Factual Background

2. IRL is a small company. Its two owner directors, Mr Owen and Ms Clease, had previously worked with Mrs Benjamin for another company carrying on similar business. When Mr Owen and Ms Clease left to form IRL Mrs Benjamin joined them. She had the title Design Co-ordinator; it is clear that her job involved managing and co-ordinating the process of preparing and selling ribbon bows, the work of preparing the bows mainly undertaken mainly by outworkers engaged by IRL. She was not given any written terms and conditions of employment. At the time when her employment ended, her salary was £16,000.
3. It is clear that by mid-2004 there were severe difficulties between Mrs Benjamin and a lady called Maureen Blackwell. Mrs Blackwell submitted a grievance in May 2004. IRL dealt with it by moving her into the factory so she had less to do with outworkers. The times at which Mrs Benjamin and Mrs Blackwell were employed meant that they did not overlap so much after that. The Tribunal found that there was a continuing battle with Mrs Blackwell which took its toll and that the resulting stress helped to make Mrs Benjamin ill.
4. The events with which the Tribunal was most closely concerned began in August 2004 when Mrs Benjamin became ill and ceased to work. It was her case that her immediate breakdown with stress related illness followed a problem with an outworker where she was not supported by Mr Owen and Ms Clease except with sympathy. It was the case for IRL that before she left Mrs Benjamin had called a meeting at which in principle she had resigned, saying she was not happy any longer but would stay until the busy period had finished and then work in her husband's business.
5. At all events, Mrs Benjamin ceased to work at about that date and remained off work until her resignation on 5 November 2004.
6. During her period of sickness Mrs Benjamin did not receive any sick pay. She had never delivered a sickness certificate during her employment before August. She had been paid salary for one previous short illness where she had not delivered a certificate. From August to November 2004 she, as we are told, did deliver certificates and was paid statutory sick pay, but no contractual salary.
7. During her period of sickness Mrs Benjamin submitted two letters containing five pages of grievances. The first letter was in early October; the second in early November. Mr Owen acknowledged receipt of them. He considered them with his fellow director but he did not call any meeting or take any further steps.
8. It is common ground that Mrs Benjamin's husband took over matters on her behalf during October - she says, because her stress-related illness was worse and she was advised to have as little to do with work as possible.
9. There was a dispute between the parties as to what occurred between IRL and Mr Benjamin. Matters culminated in a letter of resignation by Mrs Benjamin dated 5 November claiming constructive dismissal.

The Issues for the Tribunal

10. The claim form for Mrs Benjamin asserted constructive dismissal and put her case fairly widely, setting out a number of complaints in shorthand form. Later she served a statement, evidently prepared with assistance, which set out her claim in a focused form. She made it clear that whilst she was complaining of lack of support that in itself was not the immediate cause of the constructive dismissal. The immediate causes of which she complained were the following. Firstly, the failure to pay her sick pay: see paragraphs 12 to 18 of her statement. Secondly, the failure to deal with her grievances: see paragraphs 19 to 20 of her statement. Thirdly, conversations with her husband in which she said IRL told him they were inviting her to resign and had lost trust and confidence in her: see paragraph 21 of her statement and paragraph 6 of Mr Benjamin's statement.
11. The issues therefore included the following. Firstly, was there a term of Mrs Benjamin's contract of employment entitling her to be paid when absent through illness? If so, there was without doubt a breach of that term. Whether failure to pay Mrs Benjamin when absent caused or contributed to a breach of the implied term of trust and confidence or was in itself repudiatory, would also be matters for the Tribunal to consider. Secondly, was there a breach of any express term or of the implied term of trust and confidence by reason of IRL's failure to deal with the grievances or otherwise by reason of what IRL said to Mr Benjamin? Thirdly, was any breach repudiatory? A breach of the implied term of trust and confidence would certainly be repudiatory. Fourthly, did Mrs Benjamin resign by reason of any such repudiatory breach?

The Tribunal's Decision

12. The Tribunal dealt with the issue of pay during absence as follows:

"We find insufficient evidence to satisfy us that it was a term of her contract of employment that she would be paid her full salary during any period of sickness. Clearly, had the Claimant received from the Respondent, as required by the Employment Rights Act 1996, a statement of her terms and conditions, that matter would have been resolved."

The Tribunal dealt with the issue relating to the grievances as follows:

"As regards the Claimant's complaint the Respondent, in failing to deal with her grievances, was in fundamental breach of her contract of employment, we find that, taking into account particularly the principles of s.98 of the Employment Rights Act 1996, those matters were sufficiently dealt with by the Respondent. It was reasonable, in view of the Respondent's understanding that the Claimant had expressed a clear intention to leave and that she was off sick for the Respondent to postpone the grievance meeting required by the Employment Act 2002 until her return to work, if that ever occurred. We find, accordingly, no fundamental breach of contract in this respect."

The Tribunal dealt with the question of what was said between Mr Benjamin and IRL as follows:

We make no specific findings as to who said what to whom in those meetings: but we find that the general tenor of them was a mutual understanding that the Claimant had decided to leave and that Mr Benjamin, on her behalf, was seeking to negotiate terms upon which there would be a mutual termination of her employment. When Owen was not prepared to offer Mr Benjamin what he thought the Claimant was reasonably entitled to, Mr Benjamin became threatening and Mr Owen was concerned that he might become violent.

The Claimant then tendered her resignation on 5 November complaining that she had been constructively unfairly dismissed."

13. It is important to note the background to that finding. The Tribunal had concluded (clearly in this respect accepting evidence on behalf of IRL) that towards the end of August Mrs Benjamin had told a number of people that she had decided to leave and at a meeting with IRL informed the directors that she intended to leave although she gave no precise date for doing so. The Tribunal found that Mr Benjamin had started his own business and that Mrs Benjamin probably intended to work in that business in the latter part of the year. That is important background to the way in which the Tribunal resolved what happened in October.
14. The Tribunal, apart from resolving the particular matters to which we have adverted, set out a reference to Western Excavating (ECC) Ltd v Sharp and to the contractual test for constructive dismissal. It found as a whole that IRL had not conducted itself in a manner either calculated or likely to destroy the trust and confidence between the parties. There is, curiously, in both paragraphs 14 and 17 of the Tribunal's Reasons a reference to the principles of s.98 of the Employment Rights Act 1996. We think it is clear in the context of the Tribunal's Reasons as a whole that this is no more than the Tribunal taking into account the size and administrative resources of IRL as part of the background to its reasons. The Tribunal was well aware that it had contractual principles to apply in determining constructive dismissal. There is indeed no ground of appeal arising out of the references to s.98 of the Employment Rights Act 1996.
15. In its reasons for awarding £5,000 costs, the Tribunal said:

"The principle element of the Claimant's claim supported by her evidence to the hearing was that the Respondent had failed to address her grievances as to the conduct of Maureen Blackwell in that the Respondent had failed to take any disciplinary or other managerial action against her. That assertion was wrong as a matter of fact. The Claimant at all material times was advised by either the CAB or her solicitors and we find that the Claimant in bringing the proceedings has been misconceived."

16. The Tribunal said that it had considered the parties' written representations and applied Rule 40(3) of the Employment Tribunal's Constitution and Rules of Procedure Regulations 2004: but it gave no further reasons. The Tribunal was asked for further reasons and set out in more detail its reasons for concluding that the claim was misconceived. It did not say anything further about the exercise of a discretion. The Tribunal had had before it detailed submissions as to how it might exercise a discretion under the Costs Rules. It had in particular, had a supplementary letter dated 26 April by Mrs Benjamin's solicitors reminding the Tribunal that regard should be had to the relative ability to pay of anyone against whom an order might be contemplated and reminding the Tribunal that Mrs Benjamin had been on very limited income from part-time work.

Submissions

17. On behalf of Mrs Benjamin it is submitted that the Tribunal erred in law by failing to make findings as to or in any way to resolve a crucial issue between the parties. It was Mrs Benjamin's case that the last straw leading to her resignation was Mr Owen saying to her husband that IRL no longer had confidence in her. The Tribunal, it is said, made no finding and did not address a key part of Mrs Benjamin's reason for resigning. Secondly, it is submitted that the Tribunal did not deal adequately or properly with the failure of IRL to hold a hearing in respect of her grievance. It is said that under the Employment Act 2002 Schedule 2 the IRL was obliged to hold such a meeting: it did not do so but that ought to have been reflected in a finding that there was a breach of the implied term of trust and confidence. Thirdly, it is submitted that the Tribunal erred in law in the manner in which it resolved the issue concerning pay during absence while sick. The Tribunal did not adopt the neutral starting point required by Mears v Safeguard Security Ltd [1982] IRLR 183.
18. As to costs it is submitted that the Tribunal erred in law in saying that the claim was misconceived; that the Tribunal failed to take into account the means of Mrs Benjamin, or otherwise to give reasons for its exercise of discretion as to costs. It is also said that the heading is missing, which would indicate that the full Tribunal considered the question of costs and that the decision was or may have been a decision by Chairman alone and it was issued as an order rather than as a judgment.
19. On behalf of IRL it is submitted that adequate findings were made in respect of the case put forward by Mrs Benjamin. The findings in paragraphs 7 and 10 in the context of the case as a whole were sufficient. In any event, they were supplemented by what is found on page 45 of our bundle by way of additional comment from the Chairman. In any event, it is said that a Tribunal does not have to make findings on every issue if it conscientiously unable to do so (see Morris v London Iron and Steel Co Ltd [1987] ICR 855).
20. As regard to grievance it is said that the Tribunal was entitled to find and did find that IRL had acted reasonably. The procedure under the 2002 Employment Act which is in any event not of itself contractual, requires only that there should not be unreasonable delay in the holding of a hearing: see Schedule 2 at paragraph 12.
21. It is submitted that no error of law is shown in the Tribunal's judgment so far as sick pay is concerned. Even if the Tribunal's formulation of its reasons is unfortunate, it discloses no error of law.
22. So far as costs are concerned, it is submitted that the Tribunal correctly applied Rules 38 to 40 of the Employment Tribunal Rules 2004 and that no error of law is shown in its judgment. Reference is made to the recent case of Salinas v Bear Stearns International Holdings Inc and another [2005] ICR 1117.

Our Conclusions

23. We begin with the question of pay during sickness absence. It does not appear that the Tribunal had cited to it any authority on the question of pay during sickness absence. The leading modern case is Mears v Safecar Security Ltd [1981] IRLR 99 (in the Employment Appeal Tribunal) and 183 (in the Court of Appeal). The authorities prior to the decision in Mears are summarised in the judgment of Slynn P. Some of the authorities had said that a workman remained entitled to his wages throughout sickness and incapacity. Thus, for example, in Marrison v Bell [1939] 1ALL ER 745 Scott LJ had said:

"Those cases say in my opinion quite clearly that under a contract of service irrespective of the question of length of notice provided by that contract, wages continue through sickness and incapacity from sickness to do the work contracted for until the contract is terminated by a notice by the employer in accordance with the terms of the contract."

However subsequent authorities had made it clear that the general principle laid down by Scott LJ had to be read subject to any term to be implied in a particular contract to the contrary effect. In the Appeal Tribunal Slynn P said:

"In our judgment the proper approach is to look at all the facts and the circumstances to see whether a term is to be implied that wages shall or shall not be paid during periods of absence through sickness. Such a term as the cases show may be implied from the custom or practice in the industry. It may be implied from the knowledge of the parties at the time the contract is made. The implication may depend upon whether the contract is one whether payment is due if the servant is ready, willing and able to work. It may depend not so much as to whether the employee is willing and ready or willing and able to work but on whether payment for the wages of the consideration for faithful service at other times during the contract and during the period of absence rather than for a particular week's work actually performed. These are all matters which will have to be taken into account; so will the nature of the contract itself."

He said also:

"The right approach is to ask on all the facts and circumstances of the case to which it is proper to have regard what term is to be implied. One does not begin by assuming the term as to payment is to be implied unless the employer displaces it."

Finally, he said this in paragraph 32:

"It may be at the end of the day if there are no factors either way which can be properly relied upon that the correct inference is that if a man is employed for a period on a wage then if nothing else can be found the presumption will be that the wage is to be paid during the period of employment but if there are other factors it seems to us that they come in at the beginning of the exercise and not after certain presumptions have been made."

The judgment of Slynn P was approved in the Court of Appeal: see the judgment of Stevenson LJ at paragraph 34. Stevenson LJ said that the correct approach was:

"An approach to the facts and evidence in each case with an open mind unprejudiced by any pre-conception, presumption or assumption."

We think it very unlikely that the Tribunal if it had had in mind the guidance set out in Mears v Safecar Security Ltd would have expressed itself in the way it did in paragraph 16 of its Reasons.

24. The Tribunal's task, in our judgment, was to look at all the facts and having looked at all the facts draw an inference one way or the other. It might have drawn the inference that no sick pay was to be payable. It might have drawn the inference that sick pay was to be payable. It might, in modern conditions, have drawn an inference that sick pay was to be payable but with statutory sick pay taken into account in some way.
25. We do not think that it is appropriate in the light of the guidance in Mears v Safecar Security Ltd to decide a case of this kind simply by saying that the Tribunal finds insufficient evidence to satisfy it that it was a term of the contract of employment. It would be hard on a claimant in a case of this kind in particular to decide the case on the burden of proof when contrary to law the employer had not provided the claimant with any statutory statement of terms and conditions.
26. The task of the Tribunal as we have said was to make its mind up weighing the points one way or the other. We do not think we are in a position to say that there is only one answer to the question whether Mrs Benjamin should have been paid during her absence. There are factors which may be said to point both ways. On the one hand, it may be said that IRL are a small company and it may be argued that small companies generally do not have, as a matter of custom and practice, generous provision for sick pay. On the other hand, it may be said that Mrs Benjamin had been paid sick pay on the one previous occasion when the matter had arisen; that she was the only person employed, as opposed to being an outworker and that she had in particular circumstances come with the directors from another company. All of these, together with all the relevant circumstances in the case were matters for the Tribunal to weigh up in deciding what inference it drew about sick pay: but in our judgment paragraph 16 was not an appropriate way of dealing with the issue in accordance with law. As we say, we doubt whether the Tribunal was referred to or had in mind the guidance in Mears v Safecar Security Ltd.
27. We turn then to the question of grievances. In our judgment the Tribunal was entitled to reach the conclusion it reached in paragraph 17 of its Reasons namely that it was reasonable for IRL in view of its understanding that she had expressed a clear intention to leave and that she was off sick not to hold - that is to say to postpone, as the Tribunal put it - a grievance meeting. The Tribunal's conclusion in our judgement contains no error of law. It was a conclusion which the Tribunal was entitled to reach.
28. We turn then to the argument that the Tribunal has not adequately dealt with what took place between Mr Benjamin and Mr Owen. In this regard it is true that the Chairman when asked for Notes of Evidence provided a note of Mr Owen's cross-examination which includes the following sentence:

"In the October meeting I agreed when Mr Benjamin said I had lost trust and confidence in the Claimant."

Nevertheless, in all the circumstances of this case which include the findings the Tribunal did make in paragraphs 7 and 10, we do not think the Tribunal needed to resolve the specific issue of precisely what was said on that point. It is important to bear in mind the Tribunal's overall findings. In August Mrs Benjamin had already said that she intended to leave, even if she gave no precise date for doing so. So the meetings in October were meetings held, on the Tribunal's findings, at a time when there was already a mutual understanding that Mrs Benjamin had decided to leave. Mr Benjamin on her behalf was seeking to negotiate terms on which there would be a mutual termination of employment. According to the Tribunal's findings Mr Benjamin became threatening; Mr Owen was concerned that he might become violent. In our judgement against that background, the Tribunal was entitled to take the view that anything that Mr Owen specifically said mattered not, viewed against the overall picture. We therefore do not think that the Tribunal erred in law in reaching the conclusion that it did not need to make a specific finding on that point.

29. It follows from what we have said that having viewed the judgment and the Reasons of the Tribunal as a whole and considered all the points that are made on Mrs Benjamin's behalf, the only error of law in our judgement by the Tribunal was the way in which it dealt with her sick pay. It did not deal with that adequately because it did not have the guidance in Mears v Safecar Security Ltd in mind.

Costs

30. It follows because this matter is returning to the Tribunal that the decision as to costs will, in any event, have to go and that any question of costs will have to be reconsidered at a later stage. In our judgement however, there was force in the arguments that the Reasons of the Employment Tribunal as to costs were flawed and incomplete.
31. We say immediately that we reject the submission made today but not in fact within the Grounds of Appeal, that this was a decision as to costs by Chairman alone. It is true that the order of the Employment Tribunals does not state at the heading the name of Chairman or members in what would be the customary fashion. Paragraph 1 of the Reasons makes it plain that the Tribunal has considered the written representations; paragraph 4 of the Reasons is in the plural case and we have no doubt that the Employment Tribunal, namely Chairman and members, did consider the question of costs.
32. The Tribunal found that the claim was misconceived. It is right to say that the submissions that were made to it on behalf of IRL had rather at their forefront that the making of the claim and the pursuit of the claim was vexatious and ill thought out rather than misconceived. Certainly the word 'misconceived' itself does not appear in the submissions. The Tribunal will in any event if a question of costs arises once it has considered the matters it will have to consider approach afresh the question of whether the claim was misconceived. It would be wise to do so having listened to express submissions from both sides on that issue. We should certainly not be taken today as ourselves agreeing with or approving the Tribunal's view that the claim was misconceived; it would be for the Tribunal afresh to consider that matter.
33. In our judgement the Tribunal has not adequately given reasons for exercising its discretion to award costs in the sum of £5,000. A finding that the proceedings have been misconceived is a gateway to the making of an order for costs. There is still then an exercise of discretion to be undertaken. There was significant material on both sides on which an exercise of discretion could have been undertaken: on the one hand, that there had been no initial statement in Terms of Conditions and no grievance meeting ever held; on the other hand, that there were the deficiencies in the case for Mrs Benjamin which the Tribunal found.
34. A matter which in our judgement the Tribunal certainly ought to have had regard and should have considered in its Reasons was the question of the means of the paying party. It is now plain (in contra-distinction to the position before the 2004 Rules) that a Tribunal may take into account the means of a paying party. The Tribunal is not obliged to do so; there will be cases where the Tribunal will not need to do so, for example, where a party is an employer with very large financial resources. In our judgement where, as here, a Tribunal was asked to take into account the paying party's ability to pay under Rule 41(2), it ought to have stated in its reasons whether it did so and how it did so; and for that reason also, in our judgement, the Tribunal's decision on costs could not stand.
35. In our judgement the right course of action is to remit this case to the same Tribunal. The majority of the Tribunal's findings have stood. The Tribunal will have to consider the issue of sick pay afresh and how its finding on the question of sick pay then feeds in to the question of constructive dismissal. We have set out earlier in this case the issues which arose for the Tribunal. Depending on the Tribunal's eventual findings it may then have to consider questions of remedy and costs. We only say that the Tribunal should approach those matters afresh after it has determined the sick pay issue and the consequences of that issue for its overall judgment.