United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Ms T Barsam FRU Representative Free Representation Unit 6th Floor 289-293 High Holborn London WC1 7HZ
For the Respondent	Mrs K S Fearon HR Manager Modus Telecom Group Modus Telecom Ltd Telecom House Princess Way Low Prudhoe Northumberland NE24 6NJ


 


SUMMARY

Contract of Employment – Notice and pay in lieu / Implied term/variation/construction of term

The employee was expressly given a 3 month probationary period in which she had a right to 1 week's notice; thereafter she was entitled to 3 months notice. The employer had an express right to extend the probationary period but did not exercise that right. After the 3 month period had concluded, the employer carried out a review as if the period had not concluded and dismissed the employee on 1 week's notice. The Employment Tribunal dismissed the employee's claim to 3 months notice money on the basis of an implied term that the employer could carry out such a review within a reasonable time after 3 months had elapsed.

Held that such a term was not necessary, would not be accepted by a reasonable bystander in the position of the employee and gave the employer a new right additional to that expressly provided by the contract. Appeal allowed; remitted to Employment Tribunal to assess compensation for breach of contract.


 


HIS HONOUR JUDGE BURKE QC

The Appeal

1. The Appellant, Miss Przybylska, was employed by the Respondent, Modus Telecom Ltd ("Modus"), from 3 October 2005 to 31 January 2006. On that date she was dismissed with 1 weeks pay in lieu of notice. She made a claim to the Employment Tribunal that she had been entitled to 3 months notice and that certain commission was due to her. The Employment Tribunal, sitting at London (Central) in the person of Ms Leslie sitting alone, dismissed both claims in a judgment sent with written reasons to the parties on 21 August 2006. Miss Przybylska now appeals against the Tribunal's decision rejecting her claim in relation to the notice period. There is no appeal against the Tribunal's decision on her commission claim. As before the Tribunal, Miss Przybylska has been represented today by Ms Barsam under the aegis of the Free Representation Unit and Modus have been represented by Mrs Fearon. I am grateful to both of them for their submissions and their help. The appeal is proceeding on an amended notice of appeal put in by Ms Barsam on behalf of her client which, it is accepted, crystallises the basis on which the appeal is put to a greater degree than as in Miss Przybylska's original notice of appeal; and I have, without opposition from Mrs Fearon, given leave for the requisite amendment to be made.

The Facts

2. Miss Przybylska, prior to joining Modus, had her own telecoms company which had been successful. She joined Modus at the invitation of Modus's director, Mr Solis, who had been impressed by her. There was a written document, entitled "Terms and Conditions of Employment" which was treated by the Tribunal as the contract of employment between the parties. My own copy is not signed. I do not know whether there is a signed original; but it makes no difference because the Tribunal's finding that that document represented or contained the contract of employment is not challenged. Miss Przybylska was employed under that contract as a Business Development Manager at a salary of £30,000 per annum, payable monthly. There was, in addition, what is described as a discretionary commission scheme.
3. Clause 12 of section A of the contract reads as follows:-

"The first 3 months of your employment will be regarded as your probationary period. During this time, the period of notice required by either party will be 1 week. Notice given must be in writing.

The company reserves the right to extend your initial 3 month probationary period and one-week notice period where circumstances may not have allowed an objective assessment of your performance to be made."

4. Clause 13 of section A of the contract provided under the heading "Termination by the Company" as follows (insofar as relevant):-

"a) During your probationary period – 1 weeks notice

b) Following successful completion of your probationary period – 3 months notice"

No other express provision of the contract of employment is relied upon for present purposes.

5. It was accepted on behalf of Modus that they did not exercise the right set out in the second part of clause 12 to extend the probationary period beyond its expiry on 2 January 2006. At that date Miss Przybylska was on holiday, that day being the New Year bank holiday. She returned to work on 4 January 2006.
6. On 12 January Mr Solis sent an email to Miss Przybylska which invited her to meet him to complete her probationary period review on the following Monday. She replied that any time would suit; and they met on 19 January. There was a dispute as to what occurred. Thereafter Mr Solis completed a probationary assessment form which stated that Miss Przybylska's performance was less than satisfactory in a number of respects. Miss Przybylska's case was that, at the meeting, Mr Solis had indicted satisfaction with her work. The Tribunal preferred Mr Solis's account, seeing no reason why Mr Solis would complete the form as he did if her performance had been as she said.
7. Miss Przybylska and Mr Solis met again on 31 January. Mr Solis told her that her employment was to be terminated because she had not successfully completed her probationary period and confirmed that in writing. On the same day she was sent a letter which said that her employment was being terminated because it was unsatisfactory in four different respects. Miss Przybylska was paid 1 weeks pay in lieu of notice. She lodged a grievance which was rejected. The Tribunal found that she did not exercise her right of appeal against the dismissal, nor, it seems, did she exercise a right of appeal against the rejection of her grievance.
8. Miss Przybylska's claim was simply put. Modus had not sought to extend her 3 month probation period as permitted by the contract; therefore, once that period had expired, she was entitled, pursuant to clause 12A, to a 3 months period of notice. She had been given only 1 week's notice and was therefore owed 3 months pay less 1 week. Technically, if payable, her claim would be for damages for breach of contract rather than for money owed; but nothing at this stage turns on that technicality.
9. Modus's case was that Miss Przybylska knew well before the 3 month period expired that Modus were unhappy with her performance and that any right in Miss Przybylska to move on from the probation period to the position of Appellant employee depended on the outcome of the review which took place shortly after the probation period expired and took place then because the holiday had intervened at the end of the 3 month period, so that it had not been possible to carry out the review before that period came to an end. The Tribunal, correctly, in my judgment, held firstly that the contract made no express provision either for the process by which Miss Przybylska's assessment was to take place, save by reference to an objective assessment and to a right to extend the probationary period where circumstances may not have allowed an objective assessment who made, or as to when any such assessment should take place, secondly, that the contract envisaged that there would be an assessment at some point during the probationary period and, thirdly, that the absence of any express provision as to the time of or mechanism for such an assessment did not prevent or, to use the Tribunal's word, "disentitle" Modus from making such an assessment.
10. The Tribunal went on at paragraph 24 in these terms:-

I take the view that it is necessary in these circumstances to imply a term to give business efficacy to the contract. The reasonable bystander in my view would expect the Claimant to receive some indication from the Respondent, by word or deed, that the probationary period had been successfully completed within a reasonable period of the expiry of the three-month period. In this case, the Claimant was on holiday when the probationary period expired. Thus the process commenced 11 days after the probationary period expired and was completed less than three weeks later. I do not consider a reasonable bystander would view this as an unreasonable delay. Had there been an unreasonable delay, I would have come to the opposite conclusion i.e. that the probationary period had in fact been successfully completed."

The Tribunal concluded that, for those, reasons the notice claim failed.

11. Ms Barsam submits that the Tribunal erred in law in implying into the contract of employment the term which the Tribunal implied and which formed the basis of the Tribunal's decision on that part of Miss Przybylska's case. She puts her argument in 3 ways. Firstly, she says that the term was unnecessary; there was already an express term in the contract as to what could happen if Modus were not able to make an assessment of Miss Przybylska's performance before the end of the 3 month period. That term permitted Modus to extend that period; but they did not do so. There was no need for the implication of a term which would give Modus a further and additional right in affect to extend that period. Secondly, she submits that the term implied by the Tribunal contradicted the express term to which I have referred, and, thirdly, she submits that, in so far as it is possible to discern the precise term on which the Tribunal relied from the words of paragraph 24 of the judgment, that term would have been uncertain and unclear in its application and operation.
12. Mrs Fearon submits (and I should point out, not in any critical spirit whatsoever, that Mrs Fearon is not a lawyer and does not claim to be one) that Modus really had no alternative, but to act as they did; as the time for the expiration of the period drew near, Miss Przybylska was on holiday; a review could not properly be carried out; an objective assessment could not be made without her contribution; and therefore it was only fair and reasonable that Mr Solis should delay the assessment until Miss Przybylska was back and then carry it out with reasonable speed. Therefore, she submits, the term implied by the Tribunal was necessary to enable Mr Solis to act in a sensible, commercial and reasonable way as between himself and his employee Miss Przybylska.
13. It is not in dispute, as is clearly established by authority into which it is not necessary for me to go, that whether or not a term should be implied into a contract, such as that which was implied here and on the basis on which the Tribunal implied the term here, is a matter of law and, therefore, a matter which raises an issue of law and not one of fact. I have no doubt that the Tribunal in this case was seeking to produce broad justice between the parties; but it did so on a basis which, in my respectful judgment, was in error of law.
14. I do not agree with Ms Barsam that the implied term held by the Tribunal to be part of the contract of employment was necessarily contradictory to the expressed term which gave Modus the right to extend the probationary period in the manner described. The effect of the implied term was not to expunge or remove the effect of that express term; but it did have an effect inconsistent with the express term in that, whereas, pursuant to the express terms of the contract, the 3 month probationary period could only be extended if, in the circumstances set out, Modus exercised their right to extend it, the implied term was capable of operating in such a way as to extend the probationary period or the period in which the contract could be terminated by 1 weeks notice, even though Modus did not exercise the express right given to them by the contract, so as to allow Modus to give 1 weeks notice within a reasonable time after 3 months from inception of the contract had passed. In other words, the implied term gave to Modus a second or additional right in effect to extend the probationary period or the period during which Miss Przybylska was entitled only to 1 week's notice, which right was not expressed in the contract. To that extent the implied term was inconsistent with the express term which gave a specific right to extend the relevant period.
15. Furthermore, I can see no basis on which such an implied term can be said in this case to have been necessary. It may well have been properly regarded as fair or reasonable to imply the term, although I can see arguments to the contrary; but it was not, in my judgment, necessary. Modus must have known that Miss Przybylska was going to be on holiday. Even if they did not know the precise dates of her holiday they must have known that she would not be working or would be unlikely to be working over the Christmas and New Year period. There is no finding of fact about whether Mr Solis was also on holiday in that period or some of it; but it would be surprising if he was not. If Modus were unable prior to 2 January, the date on which the 3 month period expired, to complete their assessment of Miss Przybylska's performance in the probationary period, they had the right to extend it; but they failed to do so. No further right was, in my judgment, necessary, however desirable it must have seemed to Modus or to the Tribunal. I agree with Ms Balsam's pithy submission that the express term was sufficient to ensure the business efficacy of the contract.
16. The Tribunal sought, in paragraph 24 of the judgment, to support the implication of the term to which I have referred on the basis that it would be expected by the reasonable bystander that Miss Przybylska would receive some indication from Modus that the probationary period had been successfully completed within a reasonable period of the expiry of the 3 month period. A reasonable bystander standing in Modus's shoes might so have felt; a reasonable bystander in Miss Przybylska's shoes might have felt that, unless the period was extended pursuant to the contract, once the 3 month probationary period had come to an end she was regarded as having successfully completed that period and was entitled to move onto an entitlement to 3 months notice.
17. As to Ms Balsam's third submission, that the operation of the implied term would be uncertain, perhaps I do not need to say very much in view of the conclusions I have reached upon her first 2 submissions. Precisely what the terms of the implied term were are not actually set out expressly in the judgment; but that is not a point about which Ms Barsam complains. If it were right to imply a term that Modus were entitled to bring the probationary period to a close as long as they indicated by word or deed that they were doing so within a reasonable period of the end of the 3 month period, that, it seems to me, would not be uncertain in its operation. Such a term could not be regarded as void for uncertainty; it would be for the Tribunal or any other relevant fact finding Tribunal to decide what was a reasonable period as the Tribunal in this case did; but I do not propose to go any further into that ground of appeal.
18. For the reasons I have given, I am quite satisfied that the Tribunal erred in concluding that the term upon which the Tribunal based its decision on the notice claim should be implied into the contract and that therefore this appeal must be allowed.
19. Ms Barsam invited me, in the circumstances, to substitute for the dismissal of the claim a finding that Miss Przybylska was entitled to 3 months earnings less 1 week, which of course she has been paid and submitted that I should so order. I raised the point with her that, in Modus's response, they had stated expressly that Miss Przybylska did not exercise her right to appeal against her dismissal and as I have said, it seems that she did not or may not have exercised her right to appeal against the dismissal of her grievance; and, since the breach of contract claim is a claim which prima facie appears to me (but I have not heard the argument on the matter) to fall within schedule 3 of the 2002 Employment Act, the Tribunal, had it been considering how much to award to Miss Przybylska, would have had to have considered the effect of section 31 of the Employment Act 2002 and whether a deduction of a minimum of 10%, potentially rising to 50%, should have been made.
20. The Tribunal would also have had to consider whether Miss Przybylska had earned anything during the 3 month period which had to be credited against the sum of damages for failure to give proper notice which the Tribunal awarded against Modus.
21. The Tribunal did not embark on either of those two lines of enquiry because it rejected the notice claim altogether. At my suggestion Ms Balsam has very helpfully considered whether it is open now to Modus to take the 2002 Act point and the credit for earnings achieved point; and she accepts that, since there was no order and indeed no decision of the Tribunal as to the amount of compensation, the fact that those points are not taken in any answer or notice of cross appeal on Modus's part does not mean that they cannot be taken now that, for the first time, compensation has to be assessed. She invites me, nevertheless, to make my own decision as to what the correct measure of compensation should be; and I can well understand why. The amounts here are not large, the parties are before me; and any step which can be taken to avoid further costs needs properly to be considered.
22. However I have absolutely no doubt that I do not have before me any findings of facts which would enable me to decide what, if any, discount from the full amount to which Miss Przybylska would otherwise be entitled, either under the 2002 Act or in relation to earnings received should be made. I have seen no evidence and I have certainly heard no evidence as to whether, if there were procedural steps which should have been taken under Schedule 2 of the Act, those steps were not taken. I know absolutely nothing about that. Similarly I know nothing and have not asked any questions about any earnings that Miss Przybylska might or might not have achieved during the relevant period.
23. Accordingly I have no alternative but to remit to the Tribunal the assessment of compensation for Modus's breach of contract in failing to give Miss Przybylska the 3 month's notice of termination to which she was entitled. I see no reason why that remission should not be to the same Tribunal Chairman. I have not invited the party's submissions on that issue; and I will hear them in a moment. Subject to any such submissions, the appeal is allowed and the case is remitted to the Employment Tribunal to the same Chairman to assess compensation for breach of contract.