United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J HOLDEN (Solicitor) Messrs Roebucks Solicitors 7 & 12 Richmond Terrace Blackburn Lancashire BB1 7BG
For the Respondent	No appearance or representation by or on behalf of the Respondent


 


SUMMARY

UNLAWFUL DEDUCTION FROM WAGES

UNFAIR DISMISSAL:

Reason for dismissal including substantial other reason

Reasonableness of dismissal

The employee carried out tasks for her employer and for the employer's principal shareholder. She was dismissed for misconduct, much of which she believed arose out of tasks which were not part of her contract of employment. The Employment Appeal Tribunal found that she genuinely so believed but that her employer genuinely believed that those tasks were contractual and reasonably so believed. They made no finding as to whether they were contractual or not. They found that conduct was the reason for dismissal and that dismissal for that reason was fair. On appeal, it was held that the Employment Appeal Tribunal were, so far as unfair dismissal was concerned, not obliged to make such a finding; their approach was correct. But they were bound to make such a finding before deciding that summary dismissal was not a breach of contract; and the employee was therefore not entitled to damages for breach of contract for a two-week notice period.

HIS HONOUR JUDGE BURKE QC

The Appeal

1. This is an appeal by the Claimant before the Employment Tribunal, Mrs Ford, against the dismissal by the Tribunal sitting at Manchester and chaired by Employment Judge Slater of her claim that she had been unfairly dismissed and that she had been dismissed without notice, in breach of contract, by her employers Libra Fair Trades Ltd, whom we shall call "Libra". The judgment was sent to the parties on 18 September 2007.
2. We should state at the outset of this judgment that Libra were not present or represented before the Employment Tribunal, nor have they been present or represented before us today. They have, since January 2008, been in liquidation, with a vast deficiency of assets as against debt. The liquidators have written to the Employment Appeal Tribunal stating that they are not intending to take any part in this appeal.
3. Although Mrs Ford's claim has failed in the absence of any oral evidence from Libra, it has, of course rightly, not been suggested that that alone provides any ground of appeal.

The Facts

4. We can set out the relevant facts for present purposes with comparative brevity. We take them from the Tribunal's findings of fact, which are not attacked in this appeal. The majority shareholder of Libra was Ms White. Libra specialised in the import and export of electrical goods; but it had a number of subsidiaries operating in other areas; and Ms White had her own "buy to let" property portfolio. All of the businesses and, it seems, the property portfolio, were run from the same building with the same staff. Not surprisingly, in this situation, as the Tribunal have found, there was a blurring between the tasks which Mrs Ford carried out as part of her job and as a personal favour to Ms White.
5. In September 2006, Ms White presented to Mrs Ford (who had not previously had one or any other document defining her job content) a job description which included duties in relation to the property portfolio. Mrs Ford initialled or signed the job description and did not at any time, the Tribunal found, tell Ms White that she did not accept those duties to be part of her job, as opposed to part of the personal favours she was willing to do for Ms White; and she continued to do work on the property portfolio.
6. The Tribunal found that Mrs Ford genuinely believed that those duties were not part of her job but that Ms White genuinely believed that those duties were part of her job. It is, of course, unfortunate that this difference of understanding was never clarified between Mrs Ford and Ms White; but, given the Tribunal's description of the circumstances, it is perhaps unsurprising. In her claim form, Mrs Ford described herself as Ms White's right-hand man; and Ms White appears to have shared that view of Mrs Ford.
7. After a heated telephone conversation on 5 December 2006, Mrs Ford was, on 7 December, suspended and, on 15 December was, by letter, invited to a disciplinary hearing on 19 December. That letter gave Mrs Ford details of eight allegations of misconduct brought against her and enclosed a series of supporting documents. The majority of those allegations related to matters in connection with the property portfolio; but not all of the allegations fell into that category.
8. The Disciplinary Hearing was conducted by Ms Iceley who was on an equivalent level to Mrs Ford; both reported to Ms White. The Tribunal found that the notes of that hearing, which were before them and not before us, were agreed by Mrs Ford to be correct in all important respects. Mrs Ford did not put forward any substantial defence to the allegations relating to the property portfolio.
9. In her evidence to the Tribunal, she said that she had substantive defences to those allegations; but she did not advance them at the disciplinary hearing. She took the line that the properties were Ms White's and not Libra's and, therefore, tasks relating to them did not form part of her job. Whether she took that line on advice or of her own volition, the Tribunal do not state and may not have explored. If she had substantive defences to the allegations, it is unfortunate that she did not put them forward while continuing to maintain her first line that she was not obliged to carry out the relevant tasks in relation to the portfolio; but, whatever her reasons, she did not do so. In relation to other matters, she denied the misconduct alleged.
10. Two days later, Mrs Ford was summarily dismissed by a detailed letter, the contents of which are set out in paragraph 15 of the Tribunal's judgment. Essentially, Libra concluded that the property tasks did fall within Mrs Ford's job, she having signed or initialled the job description which included them without objection; and, no alternative explanation or defence having been offered, the misconduct derived from those tasks was regarded by Libra as established. The other allegations were also found to be established.
11. Mrs Ford's appeal in which, again, she did not put forward any substantive defence to the allegations in relation to the property portfolio, was heard by Ms White on 1 February 2007 and rejected on 14 February. In the case of the appeal hearing, Ms White put it to Mrs Ford that she had been dealing with the properties for some time but had never said they were not part of her job. Mrs Ford did not dispute that. She also accepted that she had seen the job description and initialled it.

The Tribunal's Judgment

12. Libra had, it seemed, intended to defend Mrs Ford's claim. They put in a detailed response and exchanged witness statements, at that stage unsigned. The Tribunal, therefore, had those witness statements before them, together with an agreed bundle of documents. However, it seems without explanation, they failed to appear at the hearing on 4 to 5 September 2007. We might now speculate that their reason for not appearing was related to the financial crisis which either had descended or was about to descend on them; but we have no positive information as to that and, in any event, it is irrelevant to speculate.
13. The Tribunal set out how it should proceed in those unusual circumstances in these terms in paragraph 3 of their judgment:

"We heard evidence from the claimant only. The respondent did not attend the Hearing. Until shortly before the Hearing, the respondent had been represented by solicitors. These solicitors had entered a response on the respondent's behalf, had agreed a bundle of documents with the claimant's solicitors and exchanged unsigned witness statements. With the claimant's agreement, the Tribunal read the unsigned witness statements from the respondents. It took these and the respondent's response as their written representations. The Tribunal read documents from the agreed bundle. The Tribunal was able to put little weight on the respondent's witness statements. These statements were unsigned and the witnesses were not present to have their evidence tested by cross-examination. However, the Tribunal was able to use these witness statements and the respondent's response and documents in the bundle as a basis for questions to test the claimant's evidence. The Tribunal did not base any findings of fact on statements in the respondent's unsigned witness statements which were not supported by documents in the bundle or the evidence of the claimant herself."

14. Mr Holden, who has appeared before us today on behalf of Mrs Ford, has not criticised that paragraph, which seems to us to be an ideal description of the correct approach. Having set out their factual findings, including at paragraph 15 that Libra had concluded that the property tasks fell within Mrs Ford's role because Mrs Ford had signed off the job description and had undertaken the work without objection, the Tribunal, at paragraphs 24 and 25 in considering the unfair dismissal claim, directed themselves as to s98(1) and s98(4) of the Employment Rights Act 1996 and as to the principles in British Homes Stores v Burchell [1978] IRLR 379 in terms which are not and could not be criticised.
15. They then turned to their conclusions. In paragraph 26, they considered what the reason was for the dismissal. It had been Mrs Ford's case that the real reason for the dismissal was not misconduct but a desire to get rid of her without cost; but the Tribunal repeated their finding that Libra genuinely believed that the work on Ms White's property portfolio formed part of Mrs Ford's duties under her contract of employment and, in the absence of any substantive response to the allegations relating to that portfolio, also had a genuine belief in Mrs Ford's failures relating to that portfolio.
16. The Tribunal found that Libra had a genuine belief in Mrs Ford's guilt in relation to the other allegations, save in respect of allegation 7 and 8 in the letter of 15 December. They said at the end of paragraph 26:

"Given that the respondent has satisfied us that they had a genuine belief in the claimant's guilt in relation to the majority, and the most serious, of the allegations and that they did dismiss for these reasons, the respondent has discharged the burden of showing that they dismissed the claimant for the potentially fair reason of conduct."

17. At paragraph 27, the Tribunal turned to consider whether Libra had acted reasonably or not in treating the reason of conduct as a sufficient reason for dismissal. They said:

"In relation to the property allegations, we concluded that the respondent had reasonable grounds for concluding that the tasks in relation to the property portfolio did form part of the claimant's job. The job description was issued without the claimant objecting to the inclusion of those tasks and the claimant carried out tasks in relation to the property portfolio without objections. We concluded that the respondent had reasonable grounds for concluding that the claimant was guilty of the offences since the claimant did not address the substance of the allegations. Given that the claimant did not raise any points about the substance of the allegations, the respondent carried out a reasonable investigation. In relation to the allegations about the correspondence, given that the claimant did not respond to the allegation that she did not rectify the situation after chasing letters from Bridgfords or alert the respondent to the problem, we consider that the respondent had reasonable grounds for their belief and had conducted a reasonable investigation. In relation to the UMBS and BT accounts, given the apparent failure at the appeal stage, on the basis of the documents we have seen, to investigate points the claimant makes about emails relating to the UMBS account and the failure to produce the application forms for the BT accounts, we are not satisfied that any belief the respondent had in the claimant's guilt in relation to these particular allegations was based on reasonable grounds after a reasonable investigation."

18. At paragraph 28, they found that, although the disciplinary procedure required that a manager senior to Mrs Ford should have conducted the disciplinary hearing, given the small size of Libra and the seniority of Mrs Ford, the procedure followed was not outside the range of reasonable responses. At paragraphs 29 and 30, they concluded that the dismissal was at the harsh end of but not outside the band of reasonable responses and, therefore, that the dismissal was fair.
19. Finally, at paragraph 31, the Tribunal addressed the second claim that Mrs Ford had put forward, namely, that she had been dismissed in breach of contract by being summarily dismissed and was entitled to two weeks notice pay. The Tribunal said about that at paragraph 31:

"In relation to the claim of breach of contract for failure to give notice, we conclude that the offences were sufficiently serious to have been categorised as gross misconduct. The respondent was not, therefore, in breach of contract by dismissing the claimant without notice."

The Submissions

20. The essential thrust of this appeal, both as to the unfair dismissal and the breach of contract claim, as put before us by Mr Holden on behalf of Mrs Ford, is that the Tribunal should, in the case of the unfair dismissal claim, before turning to the Burchell principles, have determined whether the misconduct alleged against Mrs Ford arising from what she was doing in relation to the property portfolio did or did not arise from her contractual duties.
21. The Tribunal, it is argued, had to resolve the issue as to whether, in the case of each such allegation, the failure of Mrs Ford's performance on which Libra relied was a failure or was not a failure to perform a duty which she was contractually obliged under her contract of employment to perform and not a failure to perform a service for Ms White which, as was Mrs Ford's case, she was not contractually obliged to perform. Only by making a decision as to that issue, Mr Holden submits, could the Tribunal properly proceed to make a decision as to what was the reason for the dismissal under s98(1) of the Employment Rights Act 1996 and properly decide whether it was fair or not to dismiss pursuant to section 98(4).
22. Recognising this central thrust of the appeal, at the sift stage of the Employment Appeal Tribunal's procedures, HHJ McMullen QC asked the Tribunal this question:

"whether it made findings as to what failures fell within the Claimant's contractual duties and whether the Claimant was in breach and what its reasons were for its findings, in addition to the extant findings as to what the Respondent reasonably believed those duties to be."

23. The Employment Judge replied, on behalf of the Tribunal as a whole, in these terms:

"the Tribunal did not make findings as to what failures fell within the Claimant's contractual duties and whether the Claimant was in breach. That being the case, the remainder of the question does not fall to be answered."

24. It is, therefore, clear the Tribunal did not omit their finding as to what failures fell within the Claimant's contractual duties from their judgment; they made no such finding; and, submits Mr Holden, that is fatal to their judgment because they could not, in law, find that the reason for dismissal was misconduct or make an assessment under s98(4) without first reaching a determination as to whether the failures fell or did not fall within Mrs Ford's contractual duties.
25. No authority for that proposition has been put before us; and, in our judgment, it is unsound. We have been referred in Mr Holden's skeleton argument to Burchell itself. Burchell is, of course, an old friend; but it contains nothing which assists us as to the proposition which Mr Holden advances, which did not arise in that case. Mr Holden's industry has, however, found a decision of the Employment Appeal Tribunal, HHJ Clark presiding, Farrant v The Woodroffe School EAT/1117/96. In that case, the employers sought to transfer an employee to different duties with a new job description. They were advised and, the Tribunal found, had a genuine belief that the employee's refusal to work to the new job description was gross misconduct; but that belief was mistaken. They did not have a contractual right to vary the employee's contract so as to make it contractually obligatory for him to do the relevant work.
26. The Tribunal applied the Burchell principles and concluded that the dismissal was for the reason of conduct and that it fell within the band of reasonable responses. It was submitted on behalf of the employee on appeal that the Tribunal could not, in law, hold that the employer's conduct was reasonable when they were mistaken as to the true effect of the employee's contract of employment. That submission was rejected by the Employment Appeal Tribunal.
27. Under the heading "Conduct Dismissals", at page 9 of the Employment Appeal Tribunal's judgment, the Employment Appeal Tribunal said this:

"The first question is whether the reason for dismissal relates to the conduct of the employee. A genuine, even if mistaken, belief on the part of the employer as to the conduct of the employee relied upon will be sufficient to discharge the burden of establishing this potentially fair reason for dismissal. Trust House Forte Leisure Ltd v Aquilar [1976] IRLR 251. Maintenance Co Ltd v Dormer [1982] IRLR 491."

28. The Employment Appeal Tribunal then turned to reasonableness and said this:

"We think that that proposition is amply demonstrated in the cases, many of which are conveniently referred to in Harvey on Industrial Relations and Employment Law, Volume 1, paragraphs B1357-1394. Reference has earlier been made to the case of Brandon. In Fishman, also considered by the tribunal, the employee was a teacher. The employer required her to alter her duties in circumstances which fell outside the scope of her contract of employment. The Industrial Tribunal found that her dismissal for refusing to accept the change of duties was unfair. That decision was upheld by this appeal tribunal. However, in the course of his judgment, Phillips J said this at paragraph 15:

"In truth, we think that the Industrial Tribunal perhaps paid too much attention to the contractual position. The jurisdiction based on paragraph 6(8) of the First Schedule of the Trade Union and Labour Relations Act, 1974, [now s.98(4) of the ERA] has not got much to do with contractual rights and duties. Many dismissals are unfair although the employer is contractually entitled to dismiss the employee. Contrariwise, some dismissals are not unfair although the employer was not contractually entitled to dismiss the employee. Although the contractual rights and duties are not irrelevant to the question posed by paragraph 6(8), they are not of the first importance."

We do not think that we could improve on that analysis of the significance of the contractual position in cases such as this.

Mr Lynch submits that the instant case is unique in that the Respondent took a mistaken view of its contractual right to require the appellant to work to the new job description. In fact, we think that Fishman was such a case on its facts. However, we would not, as a matter of principle, draw a distinction between the deliberate contract breaker (see Brandon) and the inadvertent contract breaker, as in this case. It would be absurd to characterise dismissal in the latter case as necessarily unfair, but not in the former case. In any event, we think that the proposition advanced by Mr Lynch is fundamentally flawed. The fact that the question of whether or not the relevant instruction fell within the scope of the contract is capable of only one correct answer as a matter of contract law should not be allowed to obscure the statutory question of reasonableness raised by s.98(4). If the employer's instruction is in fact unlawful as a matter of contract that will be a relevant factor in considering the overall question of reasonableness. It is not determinative of that question.

Further, were we to accept Mr Lynch's submission, we should be undermining, by extension, a strong and consistent body of authority which has grown up in cases where some other substantial reason, namely a business reorganisation, is relied upon as the reason for dismissal."

29. The Employment Appeal Tribunal ended their judgment in that case by summarising their conclusions as follows:

"(1) The question as to whether or not an employee has been constructively dismissed will depend upon the contractual position. Was the employer in repudiatory breach of contract, entitling the employee to treat himself as discharged from further performance?

(2) In a claim of wrongful dismissal, now brought within the jurisdiction of the Industrial Tribunal by the Extension of Jurisdiction Order 1994, where the employer relies upon the employee's refusal to obey an instruction to justify summary dismissal, that instruction must be shown by the employer to be both lawful and reasonable.

(3) Where the claim is for unfair dismissal, and the employer relies upon a refusal to obey an instruction as the reason for dismissal, the lawfulness of the instruction will be central to any question of constructive dismissal, but of relevance to, not determinative of, the fairness of the dismissal."

30. Mr Holden submits, while recognising that Farrant appears to be diametrically opposed to the submission which he puts forward, that Farrant should be distinguished from the present case, firstly, because, in Farrant, the misconduct consisted of unreasonable refusal to carry out an instruction rather than inefficient performance of duties and, secondly, because in Farrant, the employee had been provided with a statement of the terms and conditions of his employment while Mrs Ford had not.
31. Those, we recognise, are factual differences between Farrant and the present case; but, in our judgment, they do not affect the general proposition which is derived from Farrant, that where the employer requires the employee but the employee refuses to carry out certain duties (on the facts of Farrant) or the employee carries out the duties defectively (on the facts of the present case) the contractual position is not determinative as to either the employer's reason for dismissal or the overall question of reasonableness. Those distinctions do not detract from the application in the present case of the conclusion of Farrant that the submission made on the appellant's behalf, similar as it was to the submission made by Mr Holden, was fundamentally flawed.
32. While we are not bound by Farrant, we have no doubt that the Employment Appeal Tribunal's resolution of the central issue before it on that occasion was correct and that it is not necessary, in a case in which the employer is relying on conduct which he genuinely and reasonably believes to have been conduct in relation to duties which fell within the contract of employment, for the Tribunal in deciding whether the dismissal was unfair, to determine whether the duties were or were not part of that contract. It is open to the Tribunal to decide what the employer's reason was on the basis of the employer's genuine belief.
33. Mr Holden has submitted, by way of concise expansion of his skeleton argument and with charm and elegance, that his argument today is rather different from that in Farrant because he has concentrated on the approach of the Tribunal to the establishment of the reason rather than the approach of the Tribunal to their decision as to whether, given the reason, it was reasonable to dismiss for that reason. If one goes back to the early days of unfair dismissal claims when what could amount to a potentially fair reason was first being considered by Tribunals, we find that the Court of Appeal in the leading case of Abernethy v Mott Hay and Anderson [1974] ICR 323 defined a reason in this way:

"A reason for the dismissal of an employee is a set of facts known to the employer, or it may be a set of beliefs held by him, which cause him to dismiss the employee."

34. The cases of Aquilar and Dormer referred to by the Employment Appeal Tribunal in Farrant confirm that an employer can establish as his reason for dismissal something which he genuinely believes to have been a breach of contract even if in fact it was not. It is open to the Employment Tribunal to base a finding as to an employer's reason for dismissal on the employer's belief, including a mistaken belief, and to conclude that, if the employer believes that the employee has committed serious misconduct and dismisses him for that misconduct, the reason for dismissal is misconduct. Whether it was reasonable for the employer so to believe is a matter which falls to be considered under s98(4), i.e. as part of the issue as to whether it was fair to dismiss for that misconduct. That simply expressed proposition is no less applicable where there is an issue as to whether the employee's acts or failures, which the employer genuinely regarded as misconduct, did or did not fall within the scope of the employee's duties under his contract of employment.
35. So far as s98(4) is concerned, it goes without saying that the Tribunal has to look at the reasonableness of the decision made by the employer and, in the context of a potentially mistaken belief as to whether the conduct complained of fell within the duties of the employee under his contract of employment, whether such mistaken belief was one which it was reasonable to hold.
36. There is, however, another argument which Mr Holden has not, as we understand it, formally adopted but which could be said to arise from Farrant, namely that although the Employment Appeal Tribunal held that in a case in which the employer takes a mistaken view of the relevant contractual duties of the employee, whether the misconduct which causes the employer to dismiss is or is not in breach of contract is not determinative of the issue of either the reason or reasonableness, it is relevant to it. Can it be said that, if it is relevant to that issue, the Tribunal must decide whether the misconduct relied upon in such a case was or was not in breach of the contract of employment?
37. In our judgment, the answer to that question must be in the negative. There may be cases in which the misconduct on which the employer relies was not in breach of contract but the employer genuinely and reasonably believed that it was. What the Tribunal has to decide, in a case in which the reason for dismissal was misconduct, is whether the dismissal was within the range of reasonable responses open to a reasonable employer. In such cases, if a question arises as to the lawfulness of an instruction or as to whether the alleged misconduct occurred in the execution of a task which the employee was contractually obliged to carry out or not, the Tribunal must consider the employer's belief and whether, if the employer believed that the misconduct alleged arose in relation to a task which the employee was contractually obliged to carry out, that belief was a genuine and reasonable one, albeit mistaken.
38. In this case, it is perfectly clear that the Tribunal did carry out that task. They found, and expressed their conclusion more than once in their judgment, that Ms White genuinely held the view that the work which Mrs Ford did in relation to Ms White's property portfolio was part of Mrs Ford's job (see paragraph 7 and the passage in paragraph 15 to which we have already referred). They also found in paragraph 27 that Ms White had reasonable grounds for that belief. Those findings of fact were, in our judgment, sufficient discharge of the Tribunal's duty to consider the breach of contract issue as part of the issue of reasonableness. Accordingly, this appeal, insofar as it challenges the finding that Mrs Ford was not unfairly dismissed, must fail; and the Tribunal's decision that the dismissal was fair must stand.

The Breach of Contract Claim

39. The breach of contract claim needs to be seen in a different way. Mrs Ford could only be summarily dismissed if she had committed a fundamental breach of her contract of employment; and she was summarily dismissed. Unless such a fundamental breach was proved, summary dismissal constituted a breach of her contract on the part of Libra. Thus, for the purposes of the minor and very subsidiary claim for damages for failure to give notice, the Tribunal had, in our judgment, to ascertain whether either the allegations in relation to the property portfolio constituted fundamental breach of Mrs Ford's contract or whether the other matters, outside the property portfolio, were themselves sufficient to amount to a fundamental breach of contract.
40. The Tribunal did not consider either of those matters; it is readily understandable that the Tribunal's focus was almost exclusively on the unfair dismissal claim; but in considering the breach of contract claim they erred in law. Their judgment on the unfair dismissal claim cannot be faulted and, with respect, appears to us to be exemplary. At the last moment, perhaps, they took their eye off a very small part of what it was they had to consider and made an error in relation to the breach of contract claim. To that extent and to that extent only, this appeal has to be allowed.
41. However, it is manifest, firstly, that we cannot decide whether there was a fundamental breach of contract on Mrs Ford's part; secondly, that therefore, if the claim for damages for dismissal with notice is to proceed, there would have to be a remission and, thirdly, that there is no money available to meet any kind of judgment in Mrs Ford's favour were she ever to obtain one. Whether she would ever obtain one on a remission is not for us to say; but we can see considerable difficulties in her way.
42. In any event, we have put to Mr Holden that it would be disproportionate to remit to the Tribunal a claim for, in effect, two weeks salary, particularly when, win, lose or draw, Mrs Ford will actually receive nothing; and he has agreed that it would be disproportionate to do so. For that realistic approach, we commend him. In the circumstances, we do not propose to make an order that the breach of contract claim should be remitted; and we make no further order about it.