United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR SIMON FORSHAW (of Counsel) Instructed by: Messrs Barlow Robbins LLP Solicitors Concord House 165 Church Street East Woking Surrey, GU21 6HJ
For the Respondent	MR RICHARD HIGNETT (of Counsel) Instructed by: Messrs Nicholas Frimond Solicitors Six Riverview Walnut Tree Close Guildford Surrey GU1 4UX


 


SUMMARY

REDUNDANCY: Fairness

UNFAIR DISMISSAL: Compensation

The Claimant was the only employee of a family firm. A redundancy situation arose. The Claimant was then unfairly dismissed. He applied to the Employment Tribunal. Three relevant issues arose. (1) Would he have been dismissed if a fair procedure had been adopted? (2) What uplift should the Tribunal award for failure to follow statutory procedures? And (3) to what figures should the uplift be applied? Held: (1) The Tribunal had been wrong to construct a pool comprising a partner and an employee. As the only employee the Claimant would inevitably have been made redundant. (2) The Tribunal was entitled to award the maximum 50 per cent uplift. (3) The uplift could only be applied to awards, so the employer could successfully avoid the uplift by paying sums due shortly before the Tribunal hearing.


 


HIS HONOUR JUDGE REID QC

1. This is an appeal against a decision of an Employment Tribunal held at London (South) on 14 July 2008. The judgment was sent to the parties on 22 July and that judgment was followed by the Reasons which were sent on 3 September. By its decision the Tribunal held the Claimant had been unfairly dismissed, that the Respondent should pay the Claimant holiday pay for holidays which had been accrued but not taken at the date of termination and that the Respondent should pay the Claimant compensation for unfair dismissal and failure to pay holiday pay in the sum of £23,871.04. There was a calculation in relation to recoupment, the prescribed element being £4,754.68, so that the grand total over the prescribed element was £19,116.36.
2. Both before the Tribunal and on appeal the issue was only one as to quantum because it was accepted that the Claimant had been unfairly dismissed. It was admitted that he had been owed money for damages of breach of contract, i.e. money in lieu of notice, and it was also accepted that he was entitled to statutory redundancy pay. The claim had been brought in the form of a claim for unfair dismissal on the basis that he had been unfairly selected for redundancy and the issue was to whether or not there was a redundancy situation was never a live issue.
3. The background to the case was that the Claimant had been employed by the Respondent as a painter and decorator for some six years. The Respondent was a partnership comprising four partners - father, mother and two sons - and the Respondent was the only employee. The relevant dates were that the employer Claimant was first employed on 9 July 2001; he was dismissed in a telephone call in the morning on 22 February 2008 and a letter confirming his dismissal was delivered by hand later that day. He had had no prior Step 1 letter, there had been no meeting, there had been no consultation, and there had been nothing before the dismissal.
4. When he was dismissed he was given no notice pay, no redundancy pay and none of his accrued holiday pay. He was told to get in touch with a Mr Tree, the Respondent's accountant, and did so on 4 March. On 14 March the Respondent changed its tune and asserted that he had resigned for a new job and that in fact the Respondent was doing him a service by not insisting that he work out his notice. In the meantime there had been a grievance letter sent on 8 March; about that the Respondent did nothing.
5. A week before the hearing in the Employment Tribunal the Respondent paid the notice money and the redundancy pay. The tribunal took the view, against the Respondent's submission, that the Claimant would in any event inevitably have been dismissed for redundancy. What the Respondent ought to have done was to form a pool comprising one of the partners, one of the sons, and the Claimant and because that son had an unspecified quantity of outside work a fair result of the appropriate redundancy process would not have been the dismissal of the Claimant.
6. The first of the issues before us relates to that decision that if a fair procedure had been adopted then there would have been no dismissal. The submission made to us was that that was a flawed procedure because one could not form a pool comprising an employee and a partner, one of the employers. Although Mr Hignett tried with considerable ingenuity to get round this particular problem, it seemed to us to be insurmountable. The position is that so far as dismissal in respect of redundancy is concerned what one is concerned with is whether there is a redundancy situation and whether there has been a reduction or cessation of the need for work by employees. Section 139 of the Employment Rights Act 1996 provides

"For the purpose of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to --

(b) The fact that the requirements of that business

(1) for employees to carry out work of that particular kind have ceased or diminished or expected to cease or diminish."

7. Quite apart from the legal problems that might arise out of the "dismissal" of a partner it might well lead to the dissolution of a partnership it is clear that what the Act is concerned with is a reduction in the requirements of the business for employees to carry out work. It was not a permissible step for the Tribunal to take to say that a pool should have been formed comprising one of the employers and the employee.
8. It seems to us clear, it being accepted on both sides before the Tribunal and here, that there was a redundancy situation, that the only person who could have been made redundant was the only employee of the business. It was, therefore, inevitable that he would be dismissed and the Tribunal's finding to the contrary was based on its mistaken view of the law that it was possible for the Tribunal to create a pool comprising a partner and the only employee.
9. We were taken to the various authorities which indicate that the Employment Appeal Tribunal must be extremely careful in deciding to overturn a decision of an Employment Tribunal that an employee would or might have been dismissed had a fair procedure been followed, in particular Software 2000 Limited v Andrews [2007] IRLR 568. In our judgment, in this particular case it is clear but for the Employment Tribunal's error of law, it would inevitably have come to the conclusion that had a fair procedure been followed the employee would necessarily have been dismissed. Following on from that, given the size of this organisation, we take the view that it was quite apparent that had a fair procedure been followed, an employee in the Claimant's position would have survived for only a further week and that compensation should be awarded on that basis.
10. The second of the issues that was raised before us was the question of uplift pursuant to section 31(3) of the Employment Act 2002. The position so far as this was concerned was that the Tribunal took the view that the employer had taken no steps to comply with its statutory obligations either in relation to the dismissal or in relation to the employee's grievance of 8 March. It is true to say that the Tribunal lumped its consideration at this point together in a single paragraph, paragraph 10.2 of its decision, before concluding that the appropriate uplift, rather than the minimum and mandatory 10 per cent, should be the maximum permissible, 50 per cent.
11. It was urged upon us that the Tribunal's decision in this regard was inadequately reasoned and was clearly wrong, and it was said to be perverse. It was pointed out that to a limited extent the employer had complied with its obligations in that it had at least, admittedly after the event, provided a letter setting out the dismissal of the employee and it was suggested that in effect what should be said was that at worst there had been a partial failure to comply, that one should look in effect at the two failures - one in relation to the statutory procedures on the grievance and the other in relation to the statutory procedures on the dismissal - separately and, therefore, one should come up with a figure substantially less than the 50 per cent.
12. It was also said that this was a case in which the employer had acted out of ignorance rather than out of any form of malice or the like and that the only evidence of knowledge was that some time after the dismissal Mr Tree, the accountant, had sent to the Claimant documentation which made reference to the statutory provisions. It was submitted that there was no evidence that this had been in Mr Tree's possession at the time, that there was no evidence that any of the partners had known of the statutory position and that when the Tribunal said "It was a deliberate disregard of the procedures," that it, i.e. the Respondent, was, via Mr Tree, aware of, the Tribunal was wrongly fixing the Respondent employer with Mr Tree's knowledge.
13. It is of course a truism these days that if a tribunal is going to do more than award the mandatory minimum 10 per cent it should give its reasons for doing so. It seems to us that in this particular instance the Tribunal did give perfectly adequate reasons. It clearly found, and was entitled to find, that Mr Tree was aware of the situation. It was clearly entitled to find that the employer was using Mr Tree's services. The employer had after all referred the Claimant to Mr Tree when the issue of obtaining payment arose. It is clear also that the Tribunal was entitled to find that there had been a deliberate disregard of procedures. We take the view that the fortuitous circumstance that a letter of dismissal was sent does not mean that there was in any real sense any attempt to comply with indeed any of the statutory procedures. We note also, as did the Tribunal, that the redundancy pay and notice pay were not paid until 7 July, only seven days before the hearing. That, again, it seems to us, is a factor which can properly be taken into account.
14. Taking all these matters together the total failure to comply with the statutory requirements, the blithe disregard for the statutory requirements and the manner in which the employer conducted itself, not only dismissing but then choosing to pretend for a time that there had been no dismissal, the Tribunal was well within its rights to take the view that the appropriate uplift was one of 50 per cent. It cannot be said that there was any error of law; it cannot be said that the decision was perverse. In those circumstances having considered the various cases referred to us, in particular McKindless Group v McLaughlin [2008] IRLR 678, CEX Limited v Lewis [2007] UKEAT/0013/07/1008 and Virgin Media v Seddington [2009] UKEAT/0539/08/3103, we take the view that the decision that the Tribunal reached on that point was one which was not capable of seriously being challenged.
15. There remained what might be described as a melange of other points. The Tribunal had awarded the uplift on the entirety of the sum which is awarded and it was conceded that the uplift should not have been awarded on the basic award. Then it was said that no award for loss of statutory rights should have been included. That, it seems to us, is something which really went with the issue of whether or not it was inevitable that the Claimant would have been dismissed. We take the view that since it was clear that the Claimant would, in any event, be dismissed by reason of redundancy it is not possible for him to make a claim in relation to his loss of statutory rights and that head of claim also must go.
16. Then there is the question on the uplift on the notice pay. The position so far as that is concerned is that we take the view that it would have been possible for an uplift to be attributable to the notice pay but both in relation to this and in relation to the redundancy payment the position would have been that there was no award in respect of this so nothing on which the uplift could bite. I am told the appropriate word to describe this conclusion is that it is rebarbative. Certainly it goes against all instinct to allow a party to get away from the statutory uplift merely by paying the sum due at the last possible moment before the award is made. But we are stuck with the words of Section 33(3):

"It must, subject to subsection four, increase any award which it makes to the employee by 10% and may, if it considers it just and equitable in all circumstances to do so, increase it by a further amount, not so as to make it a total increase of more than 50%."

17. Here because the payment was made, albeit at the last moment before the hearing, the award which the Tribunal made in favour of the Claimant did not in fact include any sum in respect of the notice pay or the redundancy payment. It is not, it seems to us, possible to escape from that extremely unattractive conclusion by fancy drafting and by saying that the award is in respect of such and such a sum but against that sum certain credits for monies already paid should be given. It may be that this was not the intention that Parliament had, but if that be the position it is for Parliament rather than for us to correct the legislation. In any event, in this particular instance given the way in which the decision has been set out, it cannot be said that any such fancy footwork took place in relation to the drafting.
18. The result of all that, it seems to us, is that the Claimant instead of the monies which he was awarded was entitled to a week's pay, in respect of a period when had he been treated fairly he would have remained employed, plus an uplift of 50 per cent in relation to that and the holiday pay together with 50 per cent uplift in relation to that. The week's pay was £339.62, the uplift on that would be £169.81 and the holiday pay was £359.99 with the uplift on that of £179.99. We reach a grand total of £1,049.41. It follows that the appeal will be allowed to the extent of substituting those figures for the figures awarded by the Tribunal.
19. We considered whether, as we were urged to, we should remit the matter either to the same or to a different tribunal. It seemed to us that that would not be the appropriate course to take, firstly, because all the material was before us on which we could make the appropriate decision, secondly, because given the comparatively small sum by this stage involved, it would be grossly disproportionate for the matter to go back for a further hearing. We appreciate that the term "disproportionate" when used in other cases has been referring to a question of disproportion between the same and a different tribunal when there is going to be a remittance, but it seems to us that the provision applies equally in a case such as this.
20. So, in those circumstances it remains only to thank both Counsel for interesting arguments and to allow the appeal to the extent that I have indicated.