United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR DAVID LEWIS (of Counsel) Instructed by: Messrs. Banks Kelly Solicitors 60 Cheapside London EC2V 6Js
For the Respondent	MR NEIL McCOY (The Appellant in Person)


 


SUMMARY

UNFAIR DISMISSAL

Procedural fairness/automatically unfair dismissal

S.98A(2) ERA

Polkey deduction

The employee was told at a meeting that he or his post would be made redundant at a meeting; but he was not then made redundant; further meetings followed before he was given notice of dismissal. The Employment Tribunal found (1) that the dismissal was automatically unfair because that meeting did not comply with the Step 2 requirements and there had not been a Step 1 complaint letter (2) that the dismissal was substantively unfair (3) that there was no evidence and only assertion that the employer would have been dismissed anyway.

Held on appeal:

(1) (i) The ET erred in law in failing to consider the subsequent meetings prior to the dismissal in deciding that Step 2 was not complied with; no action was taken before these meetings; the Employment Tribunal was bound to pay heed to them. The meaning of "action taken" discussed and decided.

(ii) The ET erred in setting too high a standard for the requirements of a Step 1 letter; they failed to consider the guidance on that topic in Alexander v Bridgen.

(2) The Employment Tribunal were entitled to find the dismissal substantively unfair; there was no error of law.

(3) There was evidence, oral and documentary to support the employer's case that the employee was not suitable for the only post in which he was interested. The Tribunal erred in law in concluding to the contrary.

Claim remitted on issues (1) and (3) to a fresh Employment Tribunal.


 


HIS HONOUR JUDGE BURKE QC

The Facts

1. This is an appeal by Smith Knight Fay Ltd against the reserved judgment of the Employment Tribunal, sitting at Manchester, chaired by Employment Judge O'Hara, and sent to the parties with reasons on 13 March 2008. By that judgment the Employment Tribunal found that the Claimant before them, Mr Neil McCoy, had been unfairly dismissed.
2. We shall refer to the Appellant, Smith Knight Fay Ltd, as "SKF" and to the Respondent before us as Mr McCoy.
3. We take the facts from the Employment Tribunal's findings; insofar as those facts are, to a relevant extent, in dispute, we will refer to such dispute later.
4. Mr McCoy was employed by SKF from 18 June 1998 to 11 May2007. Prior to July 2005 he was a Finance Director and Managing Director of the Volkswagen ("VW") Division of SKF's business, reporting directly to the Chairman. The Tribunal found that his duties included responsibility for profit and loss of the division, full franchise responsibility, determining strategy and membership of the Board of Directors. Prior to July 2005 he was promoted to the position of Brand Director. The business had grown from seven to twenty-two sites; Mr McCoy was responsible for eight of them.
5. In July 2005 the shares in SKF were acquired by European Motor Holdings ("EMH"). The new owners divided the VW Division into two because additional VW sites had been acquired; and Mr McCoy became one of two brand directors, the other being Mr Renzulli; but they put a further tier of management between the brand directors and the Board, in the form of a VW Franchise Director to whom both Mr McCoy and Mr Renzulli reported. Mr McCoy was now responsible for five sites. The Tribunal found that, in that role, Mr McCoy was responsible for direct dealings with the manufacturer, attended at board meetings as a member, but only up to September 2006, reported to the Franchise Director, had responsibility, with the Franchise Director, for profit and loss for his division and had active involvement in the five year strategy for his division.
6. In February 2007 the shares of SKF were once again acquired, this time by the Inchcape Group, whose Chief Executive, Mr Lock, set about assessing the management roles in the business which his Group had just bought. The Franchise Director resigned in February 2007; so his post became vacant.
7. The Tribunal found that, towards the end of March 2007, Mr Lock decided to remove, as unnecessary and inconsistent with Inchcape's managerial structure, the level of management occupied by the two brand directors. He asked his secretary to invite Mr McCoy to a meeting in Watford on 3 April. When Mr McCoy asked the secretary what was the purpose of the meeting, he was told that she did not know. No letter preceded the meeting. It was Mr Lock's evidence that he had formed a preliminary view that Mr McCoy and Mr Renzulli were or their posts were redundant and that at the meeting on 3 April he intended to announce that preliminary view. In his witness statement he did not set out the words which he used; his witness statement said:

"6. I had a preliminary meeting with the Claimant on 3 April 2007 to announce my preliminary view to him. Immediately I communicated this to the Claimant, he became unwell and collapsed onto the table."

8. Mr McCoy's witness statement said about that meeting:

"5. On the 3^rd of April 2007 I travelled to Watford with Tony Renzulli, Tony had his meeting and then the Human Resources Director Nigel Turner took Tony into his office and I went for my meeting with Spencer. See document 1 for details of that the conversations with Spencer and myself and Nigel Turner and myself.

6. Spencer Lock stated to me in the meeting that my role as a Brand Director was not part of their structure and they were going to restructure the division to bring it into line with Inchcape structure of Franchise Directors, and there would be one job looking after the North West Volkswagen.

7. In that meeting I was informed that my role was going to be made redundant and that he did not think that I would be suitable for the new role as Franchise Director and he also already had somebody in mind."

9. The Tribunal's finding as to that meeting are set out in paragraphs 5.8 of their judgment in these terms:

"5.8 The meeting was due to start at 9.30. The claimant travelled from Manchester departing at 5 a.m. He arrived early and the meeting started at 8.40 am. The only note of the minute was provided to the Tribunal by the claimant. The only dispute from Mr Locke [sic Lock and throughout Tribunal judgment] as to the accuracy of the note concerned a statement which he said he made that his decision was only preliminary. The Tribunal finds that Mr Locke did not say that this was a preliminary view. What the note indicates that he did say and which is not disputed was that the claimant was to be made redundant and that Mr Locke already had someone in mind to appoint to the role of Franchise Director looking after VW Northwest. He said that he did not think that the claimant was suitable for this role. The claimant, in his words, lost his colour and felt a little light headed. Mr Locke said that the claimant: '… became unwell and collapsed onto the table.' It is clear that this news came as a great shock to the Claimant."

The Tribunal continued, at paragraph 5.9, as follows:

"5.9 The Claimant was then invited to meet with a person from Inchcape Human Resources to discuss a financial package which included a notice payment for the period of 6 months and a compromise sum. No agreement was reached."

10. On 5 April Mr Lock sent to Mr McCoy a letter which said:

"As confirmed at our meeting the reason for making this provisional decision is a restructure of the operational management team."

The letter invited Mr McCoy to a meeting to suggest ways in which redundancy could be avoided and referred to Mr McCoy's right of appeal from any decision.

11. On 19 April Mr Lock again met Mr McCoy, with Mr Renzulli. Mr Lock told Mr McCoy that he was not performing the duties of a franchise director, because he did not attend board meetings or report to the Chief Executive and said that Mr McCoy did not possess the skill-set for that role. He invited Mr McCoy to consider taking a general manager's role, at half his salary. Mr McCoy declined that offer.
12. There was a further meeting on 11 May which appears to have gone over the same ground as the previous meeting. Mr Lock, at the end of the meeting, confirmed his decision that Mr McCoy was dismissed; he was given nine weeks notice of termination. Mr McCoy's appeal was unsuccessful.

The Tribunal's Decision

13. The changes in ownership of SKF took place by way of share transfer; although the TUPE Regulations had been raised, the Tribunal held, in those circumstances, that they had no part to play; there had been no change in the identity of Mr McCoy's employer.
14. The Tribunal, having dealt with that issue, turned to consider the provisions of the statutory standard dismissal and disciplinary procedure set out in Schedule 2 to the Employment Act 2002 which, as they correctly directed themselves at paragraph 6, must be complied with for the purposes of s98A of the Employment Rights Act 1996 i.e. if not complied with the dismissal is automatically unfair. Their conclusions on the issue of automatically unfair dismissal were set out in paragraphs 15 – 20 of their judgment in these terms:

"15. Turning to the complaint of unfair dismissal, the respondents have failed to comply with the requirements in Steps 1 and 2 of the standard procedure. They informed the claimant at a meeting on 3^rd April that he was to be dismissed for redundancy without giving him any written notice of the purpose of the meeting or the reasons for their decision. Even if it had been described as a preliminary decision, the claimant was taken completely by surprise. He had no opportunity to gather his thoughts or to put forward any information as to why he should not be dismissed or why he ought to be considered for other posts.

16. The respondent relied on the letter of 5^th April and subsequent meeting which they described as model procedures. In view of the fact that the claimant had been informed without notice at the meeting on 3^rd April that his position was redundant these later actions cannot be said to render the employer's actions compliant with the statutory procedure.

17. The respondent put forward no evidence to show that even if they had complied with the procedure in this respect, they would still have decided to dismiss the claimant. The skeleton argument put forward by Mr Lewis referred to the procedure adopted by the respondent as compliant. Mr Locke said that he would not have appointed the claimant to a position of Franchise Director even if he had held an open competition for the post but he did not say and was not asked what he would have done if he had carried out these meetings in accordance with the statutory procedure.

18. The respondent had not sent to the claimant a statement setting out the circumstances which led the respondent to contemplate taking the decision to dismiss the claimant. In order to comply with the statutory procedure this statement would have had to be sent to the claimant before he met with Mr Locke on 3^rd April and in such a way as to provide the claimant with a reasonable opportunity to consider the information. Even when he asked Ms Flynn what the purpose of the meeting was to be, he was not told. He attended that meeting in the belief that he was to discuss the budget for his division.

19. The letter which was relied on by the respondent for these purposes contained only the line set out at paragraph 5.10 above. In the tribunal's view this was not sufficient for the purpose as stated in the Schedule. In this case the letter would have had to contain more information along the lines of:

Following our acquisition of EMH I have conducted a review of EMH senior management structure. We want to take the business forward without the level of management titled brand director so that the business fits in within the Inchcape model. This proposal will have an impact on the role you carry out and possibly on the role you carry out within the business. This is what we propose to discuss with you at our meeting.

The letter of 5^th April does not in the Tribunal's view comply with the requirement.

20. Furthermore, if the respondents are relying on the 5^th April letter as Step 1, the meeting which took place on 3^rd April cannot be compliant with the procedure as it had taken place before the Step 1 letter. The respondents have not provided any evidence to the effect that they would have dismissed the claimant even if they had followed the statutory procedure. They put forward their case on the basis of full compliance with what they described as a model procedure."

15. The Tribunal then, at paragraphs 21 and 22, considered the alternative case that Mr McCoy had been, to use employment law terminology, substantively unfairly dismissed i.e. his dismissal was unfair in the circumstances pursuant to s98(4) of the 1996 Act. The Tribunal did not expressly identify what they found to be the reason for the dismissal; they referred to the long established principles as to fair handling of a redundancy situation, set out in the well-known decision of the Employment Appeal Tribunal in Williams v Compair Maxam Ltd [1982] IRLR 83 and said:

"21. Turning to the test in section 98 of the 1996 Act, the respondents have failed to comply with the principle set out in Williams v Compair Maxam that they would seek to see whether if instead of dismissing the claimant they could offer him alternative employment. Mr Locke closed his mind as to whether the claimant could be considered for the vacant post of Franchise Director having restricted his consideration to whether the claimant was actually fulfilling that role prior to the acquisition. He did not provide the claimant with a job description or an opportunity to demonstrate that he could be considered for that role. In the tribunal's view this rendered the dismissal unfair as the evidence showed that the claimant had performed all of the duties during his tenure at the respondent albeit that after the appointment of Mr Wallace to the newly created Franchise Director post for VW Northwest the claimant thereafter reported to him rather than the chief executive.

22. On the analysis from the Robinson v British Island Airways Ltd case, the tribunal found that the decision reached by Mr Locke that the claimant did not possess the skills set for the post of Franchise Director, could not be considered as one which he could reasonably reach given the process by which he reached it. The claimant was never given an opportunity to set out the reason why he should be considered for it as Mr Locke himself said that he had reached his conclusion on that before the meetings he had with the claimant. Also, Mr Locke was not aware of the duties carried out by the claimant during his history with the respondents especially prior to the acquisition in 2005 when the claimant had performed at a senior level. In considering this part of the evidence, the tribunal were in no doubt that it was within the prerogative of the respondent company and Mr Locke to determine how and why to appoint personnel. The conclusion reached by the panel was that he wrongly restricted his consideration in such a way that he did not act upon a reasonable basis within the meaning envisaged in the Robinson decision."

Robinson v British Island Airways [1977] IRLR 477 was a decision of the EAT to which we will return.

16. Finally at paragraph 23 the Tribunal said:

"23. Turning to 98A(2), by which the respondent might argue that any compensation ought to be reduced by the chance that they would have decided to dismiss the claimant even if they had sought to consider the claimant for suitable alternative employment. Mr Locke said that even if he had held a competition he would not have appointed the claimant. The Tribunal considered that this comes within the quality of mere assertion in the sense of that phrase referred to by the EAT in Alexander. In the absence of evidence of a review of the claimant's personnel record, an exchange with the claimant about his experience, skills and talent after he had been provided with the relevant job description and person specification, it was not possible to conclude that there was even a chance of him having been dismissed. The respondent did not provide evidence of any investigation amongst the wider organisation showing that there were no roles which matched the skills of the claimant, other than the role of General Manager which was not a suitable alternative."

17. SKF advance in their Notice of Appeal and skeleton argument ten grounds of appeal against the Tribunal's judgment. They have been put before us by Mr David Lewis of Counsel who also appeared before the Tribunal. Mr McCoy has not been represented before us and was not represented before the Tribunal. We are grateful to both for their helpful arguments.
18. We propose to address those ten grounds of appeal under the following heads: (1) Reason for the dismissal (2) Automatically Unfair Dismissal (3) Section 98(4) (4) Section 98A(2) and the Polkey Principle.

Reason for the Dismissal

Ground 1

19. Mr Lewis submits the Tribunal erred in law in failing to identify a reason for the dismissal. They did not, he points out, put the reason for the dismissal in the list of issues to be identified at paragraph 4 of their judgment. Despite the reference in his written submissions (which appear to have been composed before the hearing) to a dispute as to whether there was a redundancy situation; and, having found that the dismissal was automatically unfair, in the paragraphs we have set out above, the Tribunal proceeded directly to a consideration of the principles in Williams v Compair Maxam, without stating what they found to be the reason for dismissal.
20. We have had some difficulty in understanding the purpose of these submissions; but we put that wholly on one side and consider the argument on its merits. In our judgment while it would have been preferable if the Tribunal had expressly set out their finding as to the reason for the dismissal – for the reason had to be established for the purpose of proper consideration of s98(4) even though it did not have to be established for the purpose of proper consideration of automatically unfair dismissal – in the circumstances of this case, in which at the hearing the reason for the dismissal was not substantially in dispute, the Tribunal's views as to that reason can be readily inferred from the terms of their judgment. It is important that in the claim form Mr McCoy did not suggest that there was any other reason than redundancy for his dismissal. He said, in his two-page response to the question in the claim form as to why he believed his dismissal to be unfair:

"On the 11^th May 2007 the applicant's employment was terminated on the ground of redundancy."

and

"If the tribunal find that TUPE does not apply the redundancy was unfair as … "

And he went on to refer to the lack of a proper selection procedure and to inadequate consultation.

21. In the light of that clearly pleaded case (although Mr Lewis tells us that in the course of the hearing Mr McCoy sought to depart from it, he would have had little prospect of successfully doing so) and it being SKF's case that Mr McCoy had been fairly dismissed for redundancy (or alternatively some other substantial reason in the context of a reorganisation) there was, in truth, no real issue as to the reason for the dismissal; the alternative pleaded by SKF did not need to be considered. We have no doubt that that is why the Tribunal did not list the reason for the dismissal as one of the issues which they had to decide. That the Tribunal proceeded on the basis that that reason was redundancy and that there was a redundancy situation is clear from paragraph 12 where the Tribunal referred, in relation to the fairness of the dismissal, to the Williams v Compair Maxam principles, which applied only in the context of a redundancy situation, and from paragraph 21 in which the Tribunal, turning their attention to s98(4), went straight to those principles and to consideration of compliance with them on the facts on the case before them.
22. For these reasons we conclude that the Tribunal's view as to the reason for the dismissal satisfactorily appears from their decision when it is read as a whole and in the context of there having been no real dispute as to what that reason for at the hearing before them.

Automatically Unfair Dismissal

23. The relevant part of the standard statutory procedure provides as follow:

"Employment Act 2002 Schedule 2: Statutory Dispute Resolution Procedures

Part 1

DISMISSAL AND DISCIPLINARY PROCEDURES

Chapter 1

STANDARD PROCEDURE

Step 1: statement of grounds for action and invitation to meeting

1 (1) The employer must set out in writing the employee's alleged conduct or characteristics, or other circumstances, which lead him to contemplate dismissing or taking disciplinary action against the employee

(2) The employer must send the statement or a copy of it to the employee and invite the employee to attend a meeting to discuss the matter.

Step 2: meeting

2 (1) The meeting must take place before action is taken, except in the case where the disciplinary actions consists of suspension

(2) The meeting must not take place unless-

(a) the employer has informed the employee what the basis was for including in the statement under paragraph 1(1) the ground or grounds given in it, and

(b) the employee has had a reasonable opportunity to consider his response to that information

(3) The employee must take all reasonable steps to attend the meeting.

(4) After the meeting, the employer must inform the employee of his decision and notify him of the right to appeal against the decision if he is not satisfied with it."

Ground 2

24. Mr Lewis submitted that the Tribunal reached their decision that SKF had failed to comply with the statutory procedure without giving SKF an opportunity to address the issue. One might expect to be forgiven for the initial response to that submission, in the light of the clear complaint in the claim form that that procedure was not complied with, that there had never been a document complying with the Step 1 requirements (a "Step 1 letter") and that no further letter was issued after the meeting on 3 April, that that submission was bound to fail. However, Mr Lewis's argument is rather more subtle or complex than the general way in which we have so far set out this ground. It is that the Respondent's case that they had carried out a model dismissal procedure with (we quote the Notice of Appeal) a Step 1 letter on 5 April and a Step 2 meeting on 11 April was not challenged and that SKF could not predict that the Tribunal would or might regard the meeting of 3 April as the Step 2 meeting required by paragraph 2 of the statutory procedure or might find that action was taken at that meeting. On SKF's case, that meeting was only a preliminary meeting to notify Mr McCoy of a possible impending redundancy and was followed by a Step 1 letter (not a meeting as in the Notice of Appeal) on 5 April and a Step 2 meeting on 19 April. Mr McCoy, it is said, never put his case on a different basis; and the Tribunal could not in fairness reach the decision which they did on the statutory procedure issue without flagging up to SKF that they might do so and giving SKF the opportunity address them on the point.
25. Mr Lewis correctly points out that Mr Lock, at paragraph 6 of his written statement said, using the words we have set out earlier, that he communicated only a preliminary view. However, in the claim form Mr McCoy said:

"On the 3^rd April 2007 the applicant was called to a meeting in Croxley Watford when he was informed by Spencer Lock of Inchcape that he was to be made redundant."

and he said, as we have pointed out, that he did not have a Step 1 letter (by inference before the meeting of 3 April). Mr McCoy's position was set out more clearly in the passage in his witness statement we have set out earlier, asserting that he was told on 3 April that he was going to be made redundant, an assertion repeated in paragraph 10 of the witness statement.

26. It is, in our judgment, clear, from paragraph 5.8 of the Tribunal's decision, that Mr McCoy put before the Tribunal his notes of the meeting of 3 April, typed on 4 April, which read as follows (and we shall for completeness set out the whole of the note):

"Notes from the meeting with Spencer Lock on the 3^rd April

I was contacted by Shelia Flynn last week and asked when I could make myself available for a meeting with Spencer Lock. I told her I was available on Tuesday 3^rd April and set a time for 09.30 at the Head Office (Rushmere Court Watford).

I was asked by Spencer to go into his office at 0840 we both sat down and had a discussion about how March had finished and then Spencer started to talk about the company and the need for a re-structuring. He said that my role as Brand Director was not part of their structure and that they were going to restructure the division to bring it into line with their structure of Franchise Directors, and that there would be one job looking after the North West VW.

He said that he did not think that I would be suitable for the role and my current role would be made redundant; he also stated that they had a person in mind for the role. He asked how I was several times, and also stated that he thought this would be difficult to take in. He also offered me some time on several occasions, as well as a drink of water. I lost my colour at one stage and felt a little light headed.

Spencer then asked if I wanted to speak with Nigel Turner the HR Director to discuss the issue and any details.

Spencer then left the office and brought Nigel to the office and introduced him to me. I then went with Nigel to his office and he started by asking if I had ever been in this type of situation before, which I replied that "I had not". He then went on to say that he understood if I did not feel able to talk but if I wanted to he could give me any details I needed.

I asked him what the package would be and he stated the following

Redundancy £2700

Six months Notice of Appeal £36500

Loss of car (six months) £6000

Loss of Pension (six months) £5280

Possible Compromise £5000

Health Care £500

I then asked Nigel about the bonus payment for 2006/7 that I had been promised by my director and he stated that he had the E-Mail that John Wallace had sent and that he thought it should not be paid as if [sic] was self explanatory.

I stated that for various reasons during the year John Wallace had told me since February that it would be paid and that it was accrued for in the management accounts.

Nigel invited me to send more information on the subject and he would look into the issue.

I asked Nigel about the process from here and he said that I needed to go back to work and digest the situation and that I was at the first stage of the redundancy process. He also stated that the process normally takes about a month but if we came to a compromise it could be sooner.

Meeting finished at 09.10."

and that Mr Lock agreed with the content of that note, except that Mr Lock maintained that he had described what he had expressed to be a preliminary view.

27. In our judgment, the written material available before the hearing started made it plain that, on Mr McCoy's case, he had been told on 3 April that he was to be dismissed for redundancy or that his post was to be redundant; there was an issue as to whether at that meeting he had or had not been given only a preliminary view. On Mr McCoy's version it was, as we see it, open to the Tribunal at least to consider whether the 3 April meeting was a Step 2 meeting at which Mr McCoy was told he would be dismissed for redundancy. At that stage there had been no Step 1 letter. Whether or not SKF's representatives appreciated the risk that the Tribunal might look at events in that way, we have no doubt that they could and should have seen that as at least a possibility and addressed it if they so wished. There was, in our judgment, no need for the Tribunal expressly to flag that possibility up to SKF; it was there to be seen from the material to which we have referred.

Grounds 3 and 4

28. We shall consider Grounds 3 and 4 together, as did Mr Lewis in his skeleton argument and orally; they both assert that the Tribunal erred in finding that SKF had failed to comply with the statutory procedure. Ground 3 asserts that the Tribunal erred in law in so finding; Ground 4 asserts that that finding was perverse.
29. The essence of the first of these two limbs of Mr Lewis's argument is that, whatever happened on 3 April, the meeting was followed by a letter sent on 5 April which fully complied with the requirements of Step 1 of the statutory procedure and by a meeting on 19 April and another on 2 May which fully complied with the requirements of Step 2 of that procedure and that Mr McCoy was not dismissed until 11 May at a further meeting at which he was told by Mr Lock that his employment would be terminated after a nine week notice period. Thus the requirements of Step 1 and Step 2 were fulfilled before action was taken. Although the Tribunal, at paragraph 16, referred to SKF's case that the procedures had been thus complied with, they wrongly rejected that case on the basis that Mr McCoy had been told that his position was redundant on 3 April without compliance with the Step 1 and Step 2 requirements and that later actions could not constitute compliance.
30. Mr McCoy submits that the letter and meetings after 3 April constituted an attempt to close the doors after the horse had bolted; that is, indeed, a fair way to summarise the nature of the Tribunal's decision. He submitted that the Tribunal were entitled to reach that conclusion; Mr Lock had made his decision by 3 April and was not going to go back on it.
31. But had the horse bolted? That raises, even now in the latter stages of the relatively brief life of s98A of the 1996 Act, which provides that dismissal is automatically unfair if the relevant statutory procedures have not been complied with, a new point on the construction of that provision, namely when is "action taken" for the purpose of paragraph 2(1) of that procedure. Paragraph 1 of the relevant Schedule to the 2002 Act requires the employer to provide what is called, in jargon which has developed around the statutory procedures, a Step 1 letter, i.e. a document which sets out the alleged conduct or characteristics of the employee or the circumstances which lead the employer to contemplate dismissal or disciplinary action. That document should be provided to the employee before the Step 2 meeting - see paragraph 2(2)(a) - although it need not be if paragraph 2(2)(a) is otherwise complied with; and the Step 2 meeting must take place before "action is taken"; see paragraph 2(1). There is no definition in the Schedule or in the 2002 Act as a whole of "action taken". Nor is there, as far as we are aware, any appellate decision in which those words have been considered.
32. The context is that of a procedure which, by Regulation 3(1) of the Employment Act 2002 (Dispute Resolution) Regulations 2004, applies where an employer contemplates dismissing or taking relevant disciplinary action against an employee and which provides that the employer must take certain steps, plainly intended to protect an employee against whom dismissal or disciplinary proceedings are contemplated, from being dismissed or disciplined without having been properly informed of the employer's reasons for so contemplating and without being given an opportunity to respond to those reasons and to attend a meeting at which he can put forward his response. In that context, in our judgment, "action taken" refers to the action which the employer is contemplating, either dismissal or disciplinary action other than dismissal. This view is supported by the fact that the modified procedure in Chapter 2 of Part 1 of Schedule 2 to the 2002 Act applies, by regulation 3(2) of the Regulations, to limited circumstances in which the dismissal has already occurred; it contains no reference to any requirement in relation to "action taken". "Action taken", in our judgment, is not some lesser step such as informing the employee that he is going to be made redundant.
33. If we are correct in our view that "before action is taken" means "before the contemplated dismissal or disciplinary sanction takes place" then it must follow that an employer who holds a meeting with an employee at which he informs him that he is to be made redundant may, whether because he has himself appreciated or has obtained advice that he has thus far failed to comply with the Step 1 requirements or that the meeting did not comply with the Step 2 requirements or by accident or fluke, before the dismissal or disciplinary action occurs retrieve the position by acting so as to comply with Step 1 and Step 2 by an appropriate letter and an appropriate meeting. If the employee has been dismissed or subjected to disciplinary sanction before the employer's attempt to retrieve the position occurs, the attempted retrieval will of course be of no effect; if not it may be effective.
34. There is an important reason why this analysis makes good industrial sense in a redundancy situation. As a result of the decision by the employer that an employee's post is to go by reason of the cessation or reduction in work of the relevant kind, the employee or his post may be seen as redundant. However at that stage the William v Compair Maxam principles require that the employer should consult with the employee about the prospective redundancy and whether it can be avoided and about finding alternative employment. When an employer in a redundancy situation contemplates dismissal for redundancy, it does not follow that the action of dismissal will need to be taken; there may in such cases be a substantial period of time between the point at which dismissal is contemplated and the point, if it ever comes about despite consultation, at which the employee is actually dismissed. That point may, as a result of consultation, never be reached. The distinction between a contemplated dismissal for redundancy and the taking of action by making someone redundant is of very considerable importance.
35. For those reasons, we conclude that, in saying in the second sentence of paragraph 16 of the judgment that, Mr McCoy having been told on 3 April that his position was redundant or that Mr McCoy was to be made redundant, SKF's, subsequent actions by way of what might have been regarded as a Step 1 compliant letter and a Step 2 compliant meeting could not render SKF's actions compliant with the statutory procedure, the Tribunal erred in law. Those subsequent steps were, in our judgment, capable of amounting, when events were looked at as a whole, to such compliance. The Tribunal found that Mr Lock did not indicate only a preliminary view on 3 April; Mr McCoy was told that his position was redundant; but he was not dismissed there and then, nor was he given a date when or a period at the end of which his employment would be terminated. There was at that stage no dismissal under section 95(1) of the 1996 Act.
36. Accordingly the Tribunal, in our judgment, reached a conclusion on the issue of SKF's compliance with the requirements of the statutory procedure which was legally flawed.
37. We were referred to Draper v Mears [2006] IRLR 869; but that decision of the EAT does not refer to or bear on the point of law now under consideration and is of no assistance to either party in the present context.
38. We do not, however, accept Mr Lewis's perversity point, ground 4. The Tribunal were entitled to prefer Mr McCoy's evidence that he was told that his role to be made redundant to Mr Lock's evidence that he expressed a preliminary view only. The Tribunal did not distinguish between "you will be made redundant" and "your role will be made redundant" because there is, in real terms, no substantial difference. As Mr Lewis acknowledged, an appellant arguing perversity has to overcome a very high threshold; see Yeboah v Crofton, [2002] IRLR 634 per Mummery LJ at paragraph 93. The Tribunal's error in relation to this issue, was one of law, as we have set out above; the facts were for them to decide: there was evidence to support their factual conclusions.

Ground 5

39. However, despite our conclusions as to Ground 4, we still need to consider SKF's attack on the Tribunal's finding at paragraph 19, that the letter of 3 April did not comply with the requirements of Step 1.
40. Those requirements, as they apply to this case, are, simply, that the letter must set out the conduct or characteristics of the employee or other circumstances which have led the employer to contemplate dismissal. We have set out the relevant contents of the letter and of paragraph 19 of the Tribunal's decision in which the Tribunal expressed their view as to what the letter needed to say if it was to be compliant with the paragraph 1(1) of the standard procedure.
41. Mr Lewis submitted that the Tribunal erred in law in paragraph 19. The letter was unambiguous and contained enough information to enable Mr McCoy to respond. Alternately if it was on its face unambiguous the Tribunal should have considered but failed to consider whether Mr McCoy regarded it as ambiguous or whether the position was sufficiently clearly to him.
42. Mr McCoy submitted that the Tribunal's conclusion was one of fact, which they were entitled to reach on the evidence.
43. The leading authority on the Step 1 requirement is Alexander v Brigden Enterprises Ltd [2006] IRLR 422. In that case the employers decided, in a catastrophic financial situation, to reduce the size of their welding department and to make ten redundancies. They explained the situation orally to the employees, telling them that, if there were insufficient volunteers, there would be a redundancy selection process. Nine employees were subsequently informed by letter that, there having been insufficient volunteers, their position was at risk of redundancy; they were invited to a meeting at which they were told of the selection criteria and of the option of transferring to a different section, that they were potentially at risk of redundancy but that no final decision had been taken. They were subsequently dismissed. The employment tribunal found that they had not been automatically or substantively unfairly dismissed. One of the issues raised on appeal to the Employment Tribunal was whether the letter to which we have referred complied with the Step 1 requirements. It was argued for the employees that they had to be informed by that letter of the selection criteria, what their scores were and how they had been assessed against the relevant criteria and had to be given similar information relating to the remainder of the relevant pool. It was argued for the employers that Step 1 was satisfied by providing the information that the proposed dismissal was by reason of redundancy. The EAT, presided over by Elias P, addressed the issue at paragraphs 33-38 in these terms:

"What information is required?

33. The issue, therefore, is what information ought to be provided to an employee in order for the employer to comply with the statutory obligation. In answering that question, it seems to us that there are three matters in particular which should inform the answer, although they do not all point in the same direction.

34. First, the position of these statutory procedures is to seek to prevent the matter going to an employment tribunal if possible by providing the opportunity for differences to be resolved internally at an earlier stage: see the observations in the Canary Wharf case, paragraph 24. Hence the reason why these procedures apply at the stage when dismissals are still only proposed and before they have taken effect. However, to achieve that purpose the information to be provided must be at least sufficient to enable the employee to give a considered and informed response to the proposed decision to dismiss.

35. Second, these procedures are concerned only with establishing the basic statutory minimum standard. It is plainly not the intention of Parliament that all procedural defects should render the dismissal automatically unfair with the increased compensation that such a finding attracts. They are intended to apply to all employers, large and small, sophisticated and unsophisticated. They are not intended to impose all the requirements breach of which might, depending on the circumstances, render a dismissal unfair. This suggests that the bar for compliance with these procedures should not be set too high.

36. Third, we think that it is relevant to bear in mind that once the statutory procedures have been complied with, employers are thereafter provided with a defence for failing to comply with fuller procedural safeguards if they can show that the dismissal would have occurred anyway even had such procedures been properly followed. This factor, in our view, militates against allowing the bar for the statutory procedures being set too low.

37. It must be emphasised that the statutory dismissal procedures are not concerned with the reasonableness of the employer's grounds, nor the basis of those grounds, in themselves. It may be that the basis for a dismissal is quite misconceived or unjustified, or that the employer has adopted inappropriate or vague criteria, or acted unreasonably in insisting on dismissing in the light of the employee's response. These are of course highly relevant to whether the dismissal is unfair, but it is irrelevant to the issue whether the statutory procedures have been complied with. The duty on the employer is to provide the ground for dismissal and the reasons why he is relying on that ground. At this stage, the focus is on what he is proposing to do and why he is proposing to do it, rather than how reasonable it is for him to be doing it at all.

38. Taking these considerations into account, in our view, the proper analysis of the employer's obligation is as follows. At the first step the employer merely has to set out in writing the grounds which lead him to contemplate dismissing the employee, together with an invitation to attend a meeting. At that stage, in our view, the statement need do no more than state the issue in broad terms. We agree with Mr Barnett that at step one the employee simply needs to be told that he is at risk of dismissal and why. In a conduct case this will be identifying the nature of the misconduct in issue, such as fighting, insubordination or dishonesty. In other cases it may require no more than specifying, for example, that it is lack of capability or redundancy. That is consistent, we think, with the approach which this Tribunal has adopted in relation to grievance procedures in the Canary Wharf and other cases. Of course, most employers will say more than this brief statement of grounds, but compliance with the statutory minimum procedure is in our view met by a limited written statement of that nature."

44. The EAT went on, at paragraphs 39-49, to describe the nature of the fuller information required for Step 2; but we need not consider those paragraphs; for there is no challenge to the adequacy of the meetings held after 5 April if, contrary to the Tribunal's view, they were to be taken into account at all.
45. Although the Tribunal referred to Alexander at paragraph 9 of their judgment, they did so on a different point (to which we will come later in this judgment). They did not direct themselves as to the principles contained in the passage we have just set out. In our judgment, had they done so, they would not have decided as they did. While we accept that, to a substantial extent, their conclusion was one of fact, the Tribunal had to approach the question – "Was the letter of 5 April a sufficient Step 1 letter?" – on the basis of the application of those principles. They included what is said at paragraph 38 of Alexander that, at Step 1 the employee simply needs to be told that that he is at risk of redundancy and why, and that in a redundancy case, the requirement may not need to go further than stating the reason for the contemplation of dismissal as redundancy. In the present case the Step 1 letter, while not informative as to detail, went further than simply stating the reason for SKF's contemplating Mr McCoy's dismissal as redundancy; it explained that that contemplation arose because of a restructure of the operational management team. In our judgment the Tribunal sought to improve upon the letter without directing themselves at all to the basic minimum requirement for such a letter; and in reality what they suggested should have been added went beyond what is statutorily required. Their decision was not merely one of fact; it had to be guided by and to be consistent with, the principles established in Alexander; but it was not.
46. For these reasons we conclude that, in this respect too, the Employment Tribunal erred in law.
47. It is therefore not necessary for us to consider Mr Lewis's alternative argument under this ground. We should however, say that any ambiguity in what is relied upon as a Step 1 letter as to the nature and extent of the proposed reorganisation has, according to Draper v Mears (see above) to be considered in the light of the information which the employee already has. Mr McCoy's note of the 3 April meeting shows that he was given, before the letter of 5 April, an account of the reasons why his role was to be made redundant. This point adds, in our judgment, to the potential sufficiency of the Step 1 letter.
48. It should not be thought that we are substituting our factual judgment for that of the Tribunal; we are not doing that. We conclude that the Tribunal failed to apply the correct principles.
49. It must follow from what we have said so far that the Tribunal's decision as to automatically unfair dismissal cannot stand; SKF's appeal must, to that extent, be allowed. We will come later to the consequences.

Substantive unfair dismissal: Ground 7

50. We have earlier set out paragraphs 21-22 of the Tribunal's judgment. The Tribunal found that, before Mr Lock made up his mind that Mr McCoy could not be considered for the position of Franchise Director left vacant by the resignation of his line manager, he had not given sufficient consideration to what Mr McCoy actually did, had not made himself aware of Mr McCoy's duties and had not given Mr McCoy any opportunity to demonstrate that he could and should be considered for that post. Mr Lewis submitted (1) that the Tribunal considered whether the decision was fair when they should have considered whether the process was fair, (2) the Tribunal did not test this issue by applying the band of reasonable responses test but substituted their own view for that of SKF.
51. He relied, for these purposes, on Robinson v British Island Airways (see above) in which the Employment Tribunal rejected the employee's appeal against the Employment Tribunal's decision that his dismissal was not unfair. The employee had been Flight Operations Manager who reported to the General Manager Operations and Traffic. In a reorganisation, the duties of both posts were amalgamated into one new post. The employee, it was decided by the employers, did not have suitable qualities for the new post. At paragraph 11 the Employment
    

Appeal Tribunal (Phillips J presiding) said:

"Finally, Mr Sedley submits that no properly instructed Industrial Tribunal could have reached the conclusion that British Island Airways had discharged the onus upon them under para. 6(8) of the First Schedule to the Trade Union and Labour Relations Act 1974. Matters of this kind are essentially ones of fact for the decision of the Industrial Tribunal, and in our judgment Mr Sedley has not made good this submission. However, we would put the matter more affirmatively and say that we agree with them. Mr Sedley complains that British Island Airways never considered Captain Robinson for appointment to the newly created post of operations manager. His complaint is not so much that he was not appointed, as that he was not properly or fairly considered. What happened was that during the process of re-organisation Mr Villa and his colleagues came to the conclusion that Captain Robinson did not have the qualities needed for the new enhanced post; and it was for this reason that when he returned from his leave he was given the three options mentioned above and told that he would not be considered for the new post. Assuming that they were genuine, and acted upon a reasonable basis, it does not seem to us that the British Island Airways acted unreasonably. It would hardly have assisted Captain Robinson to put him on a short list for a job for which the appointers considered him unfitted. The point to observe is that it was not that they considered him less fitted than other contenders, but that they did not consider that he had the qualifications for the job."

52. We agree with Mr Lewis that the correct test was whether, in relation to the Franchise Director's post, the employers' decision was outside the range of reasonable responses. We do not, however, agree that the Tribunal were bound to consider only the process by which that decision was reached. The Tribunal were entitled, in our judgment, to consider and indeed had to consider whether the decision was one which fell within that range. Of course consideration of the process was relevant and could affect the outcome one way or another; but an admirable process may, if the results are misapplied, lead to an unacceptable decision.
53. We do not derive great assistance from Robinson; the EAT, in the passage we have quoted, do not state any principle of law beyond that the test was one of reasonableness (before the range of reasonable responses test had reached the prominence which it has obtained 30 years on). There will, of course, be cases in which it can be said by a Tribunal that it was not necessary for the employer to give to the employee the opportunity to set out why he should be appointed to a vacant post; Robinson was one such; but each case is, inevitably, fact-dependent. It is not possible to argue, based on Robinson, that, in all cases, it is not necessary to give the employee such an opportunity; and the Tribunal did not make the mistake of proceeding on that basis.
54. Did the Tribunal substitute their own view and fail to consider whether SKF's decision lay within the range of reasonable responses? In our judgment they did not. The first sentence of paragraph 22 of their judgment demonstrates sufficiently, as we see it, that the Tribunal had applied the correct test; the decision, they found, was not one which SKF could reasonably have reached. Mr Lewis argues that, by setting out their reasons for so concluding i.e. no opportunity to Mr McCoy to "pitch" for the post and failure properly to consider what Mr McCoy had done in the past, the Tribunal were recommending what steps it was reasonable to have taken and then concluding that SFK acted unreasonably in not taking them; but we do not read the Tribunal's words in that way. The Tribunal were, in paragraphs 21 and 22, explaining why they considered that Mr Lock's decision was not one which he could reasonably have reached. They were entitled and indeed bound to set out what Mr Lock had done or not done which caused them to conclude that his decision was to be so described; and they did so.
55. The decision as to fairness within s98(4) of the Act was very much one of fact for the Tribunal. On that issue the Tribunal, in our judgment, applied correct legal principles and came to a factual conclusion which is not said to have been perverse and which was open to them. This ground of appeal fails.

The position so far

56. If we now stand back from the detail for a moment, it can be seen that we have concluded (1) that the Tribunal's decision that the dismissal was automatically unfair was based on errors of law; (2) that the Tribunal's decision that the dismissal was substantively unfair contained no error of law.

Section 98A(2) and the Polkey Principle

Grounds 6, 8, 9 and 10

57. The remaining grounds, Grounds 6, 8, 9 and 10, go to the Tribunal's consideration of the question whether Mr McCoy would have been dismissed had there not been the procedural failures/unfairness which the Tribunal found to have existed; and we turn now to those remaining grounds.
58. These grounds related to the Tribunal's conclusions at paragraphs 17 and 23 that – in the former – SKF put forward no evidence to show that, if they had complied with the statutory procedure, they would still have decided to dismiss and that – in the latter – Mr Lock's evidence that, had there been a competition for the vacant post he would not have appointed Mr McCoy was mere assertion and that in the absence of any evidence of a review of Mr McCoy's record and qualities, after he had been provided with the job description and personal specification for the vacant post, it was not possible to conclude that there was even a chance of his being dismissed.
59. SKF's case, as set out in these four grounds and orally, was, to a substantial degree, overlapping; and it is more helpful is we summarise the thrust of their argument and that put forward in response by Mr McCoy.
60. SKF's case, in summary form, is that:

(1) The s98A(2) and Polkey issues were both raised as live issues by SKF in their closing submissions; it was, therefore, incumbent upon the Tribunal to consider those issues on the basis of the evidence as a whole. It having been their case that they had complied with the statutory requirements, they could not be expected to give evidence as to what they would have done if they had not failed so to comply. It was for the Tribunal to decide, in the light of all relevant evidence, what the chances were that, had the decision not been unfair, Mr McCoy would have been given the vacant post, it being his case that that is what he should have had.

(2) The evidence that Mr McCoy would not have been appointed to that post went beyond mere assertion. It was supported by evidence including documentary evidence that Mr McCoy had been assessed against criteria for the post and had been shown not to have the requisite ability and Mr McCoy's account that he had performed the duties of the vacant post was inaccurate. Mr Lock had been to see Mr McCoy in action. He had taken that into account in making his assessment. Mr Lock had made an evidenced-based judgment that Mr McCoy was not suitable for the vacant post; but the Tribunal appear to have omitted that evidence from their consideration and to have regarded Mr Lock's evidence as mere assertion when it was not.

(3) The Tribunal failed to give reasons for disregarding the evidence which went to support Mr Lock's conclusion, in particular the evidence of the documents referred to above and the evidence from senior employees of SKF.

(4) The Tribunal's conclusions as to the role and responsibilities of Mr McCoy before dismissal, in effect that he was performing the function of the vacant post, was perverse.

61. Mr McCoy in response submitted that:

(1) If SKF failed to comply with the statutory procedure, the dismissal remained automatically unfair even if they could show that, if they had followed the correct procedure, there would nevertheless have been a dismissal.

(2) The Polkey issue was one to be decided at a compensation hearing; that is why the Tribunal did not expressly refer to it; and in any event the application of the Polkey principle could not render the dismissal fair.

(3) An appellate court should be slow to interfere with the Tribunal's assessment of what was essentially a factual question.

(4) While Mr McCoy accepted that he had not performed the duties of a Franchise Director in his role immediately before the takeover by Inchcape, the Tribunal were, he submitted, entitled to find that he had in the past performed the duties set out in the specification for the vacant post and was well capable of performing them. In effect the Tribunal had preferred his evidence to that of SKF's.

62. Our conclusions on these rival submissions are:

(1) We have explained why, in our judgment, the Tribunal misdirected itself in law in considering that there had been an automatically unfair dismissal; that issue must be remitted to the Employment Tribunal for reconsideration, as we shall set out below. Therefore, insofar as the Tribunal's conclusion on s98A(2) is based on the view that the dismissal was automatically unfair, that conclusion clearly cannot stand and has to be reconsidered in the light of the conclusion reached on remission as to automatically unfair dismissal.

(2) Indeed the s98A(2) issue and the Polkey issue must be reconsidered in the light of the conclusions reached on remission as to compliance with the statutory procedure for another very important reason. If the Claimant was automatically unfairly dismissed, then s98A2) cannot apply; see Kelly-Madden v Manor Surgery [2007] IRLR 17 and Software 2000 Ltd v Andrews [2007] IRLR 568, at paragraphs 32/3; the dismissal will be unfair whatever decision is made on application of the Polkey principle; to that extent Mr McCoy is correct in his analysis; but if the dismissal was not automatically unfair but unfair within s98(4), then s98A(2) may apply; and Mr McCoy's submission is incorrect.

(3) The Tribunal did not indicate that it was intending to postpone any consideration of the Polkey principle to a remedies hearing; it would seem from the last sentence of paragraph 9 of their judgment that they intended to consider Polkey; the fact that they did not expressly refer to it does not mean that they were not considering it; indeed in the light of their finding of automatically unfair dismissal s98A(2) could not apply – as they appreciated; see paragraph 9. In considering whether, had the dismissal not been unfair, Mr McCoy would have been dismissed in any event the Tribunal were in reality, considering Polkey – although the reference to s98A(2) at the beginning of paragraph 23 is somewhat confusing.

(4) Whatever exercise the Tribunal thought they were carrying out, the conclusion that SKF put forward no evidence to show that they would have dismissed Mr McCoy, had they not acted unfairly and that Mr Lock's evidence consisted of mere assertion was, in our judgment, unsupportable. These were findings which were not open to the Tribunal; for there was evidence from Mr Lock that he had considered Mr McCoy for the only position in which Mr McCoy appears to have been interested, the vacant post, but considered that Mr McCoy had not been acting at the same level as that post and did not have the requisite ability. Both the documents, to which we have referred and the evidence of SKF's witnesses went to support Mr Lock's views. It was open to the Tribunal to have preferred Mr McCoy's evidence as to his experience and talents to that of Mr Lock and the other witnesses. Mr McCoy submits that that is what they did; and, if they had taken that course and explained their conclusion with even brief reasons, it would have been difficult for Mr Lewis to mount a successful attack. However that is not the route which the Tribunal took; in paragraphs 17 and 23 they expressed themselves in much more absolute terms; and those terms appear to have involved either a failure to consider the evidence put forward on this issue on behalf of SKF or an unreasoned rejection of that evidence. There was a substantial body of evidence which the Tribunal appears simply not to have addressed or to have subjected to reasoned scrutiny.

63. For these reasons the Tribunal's conclusions on the s98A(2)/Polkey issue also cannot stand.

Disposal

64. Mr Lewis did not ask us, if any of his grounds of appeal were successful, to substitute our view as opposed to remitting this case for reconsideration; and we remit the following issues to the Employment Tribunal, namely (1) whether the dismissal was automatically unfair pursuant to s98A(1) of the 1996 Act, including the issue as to whether the letter of 5 April was a sufficient Step 1 letter; (2) if not, whether s98A(2) applied; (3) in any event the application of the Polkey principle.
65. We have no doubt that, if this case proceeds to a remitted hearing, it should take place before a freshly constituted Tribunal. We have taken into account the principles established in Sinclair Roche & Temperley v Heard [2004] IRLR 763. In our judgment, the nature of the errors of law on the part of the Tribunal and the way in which they expressed themselves in paragraphs 17 and 22 are such that, in fairness to both parties, justice required that the outstanding issues be considered afresh by a different Tribunal. We make it clear that the finding of unfair dismissal under s98(4) (subject of course to s98A2) should it become applicable) will not be the subject of any reconsideration. The appeal against the Tribunal's conclusion on that issue has failed.
66. We cannot part from this appeal without expressing the hope that it will be possible for the parties to avoid the commitment of further time and expense to this litigation by negotiations or through alternative dispute resolution. We strongly urge them to follow one or both of these courses.
Addendum to Judgment
67. Since our judgment was handed down, we have been informed that, before the hearing of the appeal, the Employment Tribunal had held a remedies hearing which resulted in the award to Mr McCoy of £63,000 and that Mr McCoy has registered that award in the Coventry Court and is seeking to enforce it. Smith Knight Fay have lodged an appeal against that award.
68. The effect of our judgment must inevitably be that that award should not be open to enforcement at present. If the differently constituted Employment Tribunal on remission reaches a different conclusion from that reached by the previous Employment Tribunal on either the automatically unfair dismissal issue or the section 98A(2)/Polkey issue or on both of them, the original remedies award cannot serve and will have to be set aside; and the new Employment Tribunal will have to reconsider compensation. Until the remitted hearing it cannot be determined whether or not the original remedies award will survive; and it is self-evident that it cannot in the present circumstances be enforced.
69. Had the enforcement issue been raised with us at the hearing of the appeal we would have invited the parties to agree that, if our decision were to be as it was, the remedies award should be set aside. Because it is not before us we cannot now take that course; but we repeat that that award cannot now be enforced.
70. Smith Knight Fay's appeal against the remedies award should be stayed until after the remitted hearing and any reconsideration of compensation which may follow.