United Kingdom Employment Appeal Tribunal

Appeal No. UKEATS/0001/12/BI

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH, EH3 7HF

At the Tribunal

On 15 June 2012

Before

THE HONOURABLE LADY SMITH

MR J M KEENAN MCIPD

MRS G SMITH

MISS GILLIAN ELIZABETH WELCH APPELLANT

THE TAXI OWNERS ASSOCIATION (GRANGEMOUTH) LTD RESPONDENT

JUDGMENT

APPEARANCES

SUMMARY

UNFAIR DISMISSAL

Constructive dismissal

Reasonableness of dismissal

Claimant – a radio control operator for a taxi company – resigned when her hours were reduced.  Tribunal held she was not unfairly constructively dismissed.  Although the reduction in her hours was a fundamental breach of contract, it was justified in circumstances where competition from another taxi cab operator had led to a downturn in business.  There was no question of redundancy since, although the Respondent’s need to have the Claimant (and another employee) work as many hours as before, there was no reduction in their need for employees to work as radio control operators.  Appeal on grounds that Tribunal should have found that the Claimant was in a redundancy situation dismissed.

THE HONOURABLE LADY SMITH

Introduction

1.            Miss Welch was employed as a radio control operator by the Taxi Owners Association (Grangemouth) Limited.  She resigned from her employment on 2 April 2011 and claimed that she had been unfairly constructively dismissed.  Her complaint was heard by an Employment Tribunal sitting at Glasgow, Employment Judge Walter Muir presiding and in a judgment registered on 4 November 2011, they dismissed her claims.

2.            We will, for convenience, continue to refer to parties as Claimant and Respondent.

3.            The Claimant was represented by Mrs F Munn, solicitor, before the Tribunal and before us.  The Respondents were represented by Mrs M Hodgson, their office manager, before the Tribunal and by Mr F Tait, solicitor, before us.

4.            In her form ET1, the Claimant alleged that she had been unfairly (constructively) dismissed.  She resigned on account of the Respondent’s material breach of contract; they had unilaterally sought to vary her hours so as to reduce them.  In that part of the form which requires a claimant to state what she is claiming, nothing was marked against the option: “c. I am claiming a redundancy payment”.  The option “a. I was unfairly dismissed (including constructive dismissal)” is marked with a cross, as is the option “e. I am owed notice pay”.

5.            The Claimant began working for the Respondents in February 2007.  She worked a 36 hour week, on nightshifts.  She was one of 8 radio operators employed by the Respondents.  There was one other nightshift operator.  That operator covered the nightshifts that the Claimant did not work (Thursday and Friday) which amounted to 13 hours.

6.            Until 2009, there were two taxi operators in the area.  Some time that year, a third taxi operator commenced business in Grangemouth.  The increased competition led to a downturn in the Respondent’s business, particularly during the nightshift.  There was a reduction of at least fifty per cent in their nightshift business.  The Respondent looked for ways to make savings in overheads and decided to divert customers’ calls direct to taxi owners during the nightshift hours (apart from Saturday nights), thus making some savings on the wages bill.  The Saturday nightshift was a 6 hour shift between 2am and 8am.

7.            The Tribunal found that the Claimant was a “valued employee” of the Respondent, that they wanted to retain her and that they saw no need to make any of their radio operators redundant.  They initially proposed to the Claimant that her hours be reduced to 14 hours per week, namely 6 hours on the Saturday nightshift and the hours of 6am to 8am on each of Monday, Tuesday, Wednesday and Thursday, advising her of the position in letters dated 28 February and 4 March 2011 but, following discussions, they issued her with a fresh set of proposals by letter dated 17 March 2011 which would have amounted to her working a 28 hour week for 6 weeks with a commitment to their reviewing the situation thereafter.  The Claimant rejected it, by letter dated 20 March 2011.  She had been asking to be made redundant and she referred in that letter to having indicated she was prepared to accept “voluntary redundancy”.  The Respondent’s position was, also, that they would have been able to give her a guarantee of at least 26 hours work per week (she was not, however, advised of that because of the departure on holiday of the office manager, who was aware of the extent of that guarantee).  They did not propose to dismiss her as redundant or for any other reason.

8.            The Claimant was not the only radio operator whose hours the Respondent proposed to reduce to deal with the business need which had arisen.

9.            The Claimant resigned on 2 April 2011.  Her reasons for doing so were that the Respondents were seeking to impose a variation to her contractual hours which she did not consent to and that, despite having allowed them a reasonable time to try and reach an acceptable compromise, they had failed to do so.

10.         For the avoidance of doubt, we note that the Claimant’s resignation was not under the ‘Short Time’ provisions of ss 147 – 150 of the Employment Rights Act 1996 (which entitle an employee, in certain circumstances, to resign and claim a redundancy payment) nor indeed, on the facts, did those provisions apply.

11.         The Tribunal accepted that the Respondent had fundamentally breached the Claimant’s contract by their proposed reduction in her working hours.  Equally, however, they were satisfied that they had genuine business reasons for doing so.  They had acted as they did for “some other substantial reason” (Employment Rights Act 1996 s.98(1)(b)).  There had been a downturn in their business and there were obvious cost savings to be made by stripping out all nightshift hours apart from Saturdays – they were reasonably seeking to pursue a legitimate objective.  They had sought to accommodate the Claimant and plainly wanted to keep her in work.  They had given her plenty of notice of the proposed changes and had consulted with her.  It could not be said that they had acted unreasonably in relation to her.

12.         The Tribunal observe that “the issue of redundancy loomed large in this case”.  The Claimant had not, however, been dismissed by the Respondent.  There was, accordingly, no issue as to whether or not they had in fact dismissed her by reason of redundancy.  We also note that her claim, as set out in her form ET1, did not include a claim for a redundancy payment nor any allegation that she had been made redundant.  The approach of the Claimant’s solicitor, as recorded by the Tribunal, was that “the respondents should have asked themselves whether this was truly a redundancy situation”.  It may be able to be inferred from that that an aspect of the Claimant’s case was to the effect that she should have been made redundant – at paragraph 4, the Tribunal observed that she “was certainly pushing to be made redundant”; if, however, that was her case, she could have been expected to make that plain in her form ET1 (which was drafted by her solicitor). No such claim is made – her complaint is that the reduction in her hours was a fundamental breach of contract entitling her to resign. The alternative inference, namely that her argument was that she was infact unfairly dismissed for redundancy reasons, would not, we consider, be able to get off the ground given that she appears to have presented no evidence of, for instance, lack of consultation or an unfair selection process.

13.         In any event, the Tribunal disposed of such redundancy issues as there were in the following manner:

“4…With the greatest of respect to both solicitors and to any of the agencies which gave the claimant advice that she was in a redundancy situation the Tribunal says that they are all plain wrong.  Section 139(1)(b) of the Employment Rights Act 1996 states that there is a redundancy situation where the requirements of the business to carry out work of a particular kind have ceased or diminished.  The kind of work the claimant was doing was that of radio controller.  The solicitors acting for the claimant evidently took the view that the kind of work was that of a nightshift radio controller.  It was undoubtedly the case that the claimant worked predominantly nightshifts.  However, this statutory provision is directed towards the kind of work and not to when the work is carried out.  The respondents’ requirements for radio controllers had “neither ceased” nor diminished at the material time.  They still needed the same number of employees to carry out the work.  What changed was that they didn’t need either the claimant or Mrs Mundie to work between 1am and 6am on 6 nights out of 7 because they could more economically run their business by diverting calls from customers straight to owners/drivers.  The Court of Appeal has held on a number of occasions that work and the requirement for employees to do it do not change simply because the work is carried out under different terms and conditions.  Changes in terms and conditions are relevant to the fairness of a dismissal but they do not create a redundancy situation – see Chapman and Others v Goonvean and Rostowrack China Clay Coal Limited [1973] ICR 310 and Johnson v Nottinghamshire Combined Police Authority [1974] ICT 170.  As the Tribunal saw it, the significance of this erroneous advice given to the claimant was that, from a very early stage after she learned that her working hours were to be reduced, she had it in her mind that she was entitled to be made redundant which, as the Tribunal understood the position, suited her from a financial point of view.  It is the requirement for people viz employees that is essential to meeting the statutory test for redundancy – not the requirement for a position viz nightshift controller.”

Relevant Law

14.         The legal principles which applied to the circumstances of this case were, essentially, as follows.

15.         Where an employer seeks to impose a material variation to an employee’s terms and conditions of employment, he may be in breach of contract; the contract may not, for instance, allow for such variations.  The employee may resign, claim that he has been constructively dismissed - i.e. he has not been expressly dismissed but what has occurred has,, under the law of contract, the same effect - and that he is, accordingly, entitled to the statutory remedies that arise on unfair dismissal.  He will, however, only succeed in such a claim if, first, he can demonstrate that his employer was not only in breach of contract but, testing matters objectively (see: Mahmud v Bank of Credit and Commerce International SA [1997] ICR 606 at p.611 per Lord Nicholls and at p.611 per Lord Steyn), was in fundamental breach of contract.  That is because the issue is a contractual one; he can only claim that he has been dismissed by his employer in such a case if he has resigned “in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct” (see: s.95(1)(c) of the 1996 Act).  The word “entitlement” is a reference to his contractual rights (Western Excavating (ECC) Ltd v Sharp [1978] ICR 221) and the contractual right to resign only arises if the employer is in fundamental breach of contract.  As observed by Sedley LJ in the case of Bournemouth University v Buckland [2010] ICR 908 at paragraph 19:

“Modern employment law is a hybrid of contract and status.  The way Parliament has achieved this is to graft statutory protections on to the stem of the common law contract.”

16.         Thus it is that, in accordance with general principles of the law of contract, the employee is entitled to resign if, looking at matters objectively, the employer has conducted himself in a manner which is a significant breach of an express or implied term going to the root of the contract or in a manner which shows that he no longer regards himself as bound by the contract.  Secondly, if the employee does resign and his resignation is a response to such a breach then it may be that his right not to be unfairly dismissed (see: s.94 of the 1996 Act) has been breached.  That will depend on whether or not the employer shows that, as a matter of fact, his conduct was for a potentially fair reason and if he does, whether or not in all the circumstances, the tribunal considers that the (constructive) dismissal was a fair one (Bournemouth University  per Sedley LJ, approving the EAT at paragraph 22).  Put shortly, there can be conduct which is both fair/reasonable and is also a fundamental breach of contract.  A fundamental breach of contract is not necessarily a breach of the s.94 right.  It will depend on the circumstances of the individual case. In the present case, the Respondents submitted that their conduct was potentially fair because it was due to “some other substantial reason”. The Tribunal accepted that that was so.

17.         The Respondents did not say that their conduct was potentially fair because the Claimant was redundant. That is, perhaps, not surprising; it was not their case that this was, to use the common shorthand, “a redundancy situation”. Further, it must be that even where there is a cessation or diminution in, for instance, the employers’ requirement to have employees carry out work of a particular kind, it is highly unlikely that any employer would seek to rely on it where the employee has not in fact been dismissed and there has, accordingly, been no redundancy procedure for the employer to rely on as being demonstrative of fair treatment. We rather agree with the import of the Employment Judge’s decision that the issue was nothing to do with redundancy but we should, given the arguments before us, deal briefly with the relevant law.  The provisions of the 1996 Act insofar as relevant are that an employee is to be taken to have been dismissed as redundant if the reason for his dismissal is wholly or mainly attributable to:

18.         Those statutory provisions were interpreted by HHJ Peter Clark in the case of Safeway Stores plc v Burrell [1997] ICR 523 in a manner which was subsequently approved and endorsed by the House of Lords in Murray and anr v Foyle Meats Ltd [1999] ICR 827.  In the Safeway case, the claimant’s post (petrol filling station manager) was to disappear under a management restructuring and a new post (petrol filling station controller) with a similar job description was created.  He did not accept that substitute post and he was dismissed (he did not resign).  In considering whether or not there was redundancy the tribunal should have appreciated that the proposed alteration to his terms and conditions of employment was not relevant.  At p. 528, HHJ Peter Clark QC said:

“The concept of redundancy as a reason for dismissal was imported into the law of unfair dismissal in this way. By section 57 of the Employment Protection (Consolidation) Act 1978 it is, first, for the employee to establish that he was dismissed. That is admitted in this case. Secondly, it is for the employer to show that his reason or his principal reason for dismissal falls within one of the prescribed categories set out in section 57(2) or was for some other substantial reason. Section 57(2)(c) provides that one of the prescribed reasons is that the employee was redundant. Finally, the employee must consider the question of reasonableness under section 57(3).”

Then, at p.530:

“From time to time the mistake is made of focussing on a diminution in the work to be done, not the employees who do it.”

and, at the end of the same paragraph, he continued:

“The only question to be asked is: was there a diminution/cessation in the employer’s requirement for employees to carry out work of a particular kind, or an expectation of such cessation/diminution in the future?”

19.         The tribunal requires, accordingly, when considering whether or not there has been a dismissal for redundancy, to consider what the requirements of the business were to have employees carry out the work in question.  Did the business still need any employees to carry out that work?  Did they need fewer employees to do so?

20.         If it is shown that there was redundancy, then the tribunal requires to determine whether or not dismissal was caused wholly or mainly by that redundancy.

21.         Whilst Ms Munn’s initial submission was to repeat the Claimant’s case before the Tribunal to the effect that there was a separate kind of work called ‘night shift radio operators/controllers’ she accepted that the Tribunal had found in fact that there was but one type of work that was relevant, namely that of radio operator/controller.  On that basis the Tribunal had, however, still erred.

22.         She submitted that the reduction in the nightshift business demonstrated that there had been a redundancy.  The Tribunal were wrong to hold otherwise.  Changes in terms and conditions did not always amount to a redundancy situation but they could do so: Chapman; Johnson.  The change in terms and conditions in the present case was definitely due to a redundancy situation namely the diminution of the nightshift business.  The Claimant was to be put on part time work.  That meant she was redundant.

23.         Ms Munn also referred to the case of Hanson v Wood [1967] ITR 46 Div Court and drew our attention to HHJ Ansell’s judgment in the case of Aylward v Glamorgan Holiday Home Limited [2003] UKEAT/0167/02 where the number of paid weeks worked by employees was reduced from 52 to 42 per year, Murray and Safeway were followed and the tribunal were said to have been correct in focussing on the requirement for employees to do work of a particular kind rather than on the amount of work done.  There were to be no fewer employees working at the hotel and the tribunal had not erred in its approach – which had resulted in a finding that there had been no redundancy.  Employees who had been dismissed on refusing to agree to the changes were not entitled to redundancy payments nor had they been unfairly dismissed.  She recognised that that decision did not appear to be supportive of her position but drew our attention to a passage at para 913 of Harvey on Industrial Relations and Employment Law which cautions against the case being relied on as authority for the proposition that reduced demand alone cannot constitute a redundancy situation.

24.         Ms Munn accepted that Harvey also stated (at para 912) that a reduction in hours of itself could not give rise to a right to a redundancy payment because a reduction in hours did not constitute dismissal.  The authors continued, however, by stating that if the reduction of hours was achieved by dismissal whether actual or constructive then that would be dismissal by reason of redundancy (we are not entirely clear as to the circumstances the authors have in mind when they suggest that an employee’s resignation could amount to dismissal by reason of redundancy – except perhaps in the unlikely event of an employer seeking to rely on that as a potentially fair reason – and we observe that they point to no authority in support of that comment).  Further, she sought to distinguish Aylward.  There was a consistent trading record in that case whereas there was, in the present case, a definite downturn.

25.         Ms Munn, in conclusion, submitted that there was a diminution in the need for employees to carry out work of a particular kind and therefore there was a redundancy situation; if it was not redundancy there would be an untenable situation whereby employers could avoid redundancy simply by reducing hours possibly in extreme fashion to only one hour per week.  The Tribunal had misdirected itself in law.  The Claimant’s claim should have been upheld.

26.         Ms Munn’s submissions on the subject of redundancy puzzled us.  The Respondent did not dismiss her – she resigned.  This was not, accordingly, a case where the issue of whether or not she had been dismissed for redundancy arose.  The Claimant did not, in her form ET1, claim that she had been made redundant.  She did not seek to recover a redundancy payment.  It transpired that the essence of Ms Munn’s submission was, in reality, not that the Claimant had been made redundant at all.  Rather it was what we found to be a somewhat surprising proposition (particularly given its absence from the ET1) that, in the circumstances, the Respondent ought to have made her redundant.  In essence, her case was that she was unfairly dismissed because she was not dismissed (on grounds of redundancy).  That was what the Tribunal ought to have found.

27.         For the Respondents, Mr Tait submitted that the Tribunal’s judgment and reasons were sound.  The Tribunal’s reference to authority was appropriate and their interpretation of it was correct.  They had followed Safeway and it had been approved by the House of Lords in Murray.  It was not disputed that the Respondent sought to alter the Claimant’s terms and conditions of employment.  The reason for their doing so was a sound business reason, as the Tribunal accepted.  Redundancy did not arise purely from the fact that her terms and conditions were to be altered.  As for the proposition that the Respondent ought to have made the Claimant redundant, it was, simply put, crazy to punish the employer for failing to make an employee redundant.

28.         The Claimant’s appeal did not seek to take issue with the Tribunal’s conclusion that although the Respondents were in fundamental breach of contract there was no unfair dismissal because there were legitimate sound business reasons for their decision to reduce the Claimant’s hours and dismissal for those reasons was, in all the circumstances (which included that they had treated her reasonably) fair.  Rather, it was presented on a single ground which proceeded on the proposition that the Respondents ought to have dismissed the Claimant as redundant.  She was not asserting, for instance, that the true position was that she was redundant and it was unfair to have selected her rather than someone else. On the contrary, the Claimant’s proposition was that the Respondents ought to have dismissed her by reason of redundancy and they were in fundamental breach of contract by not doing so.  She wanted to be dismissed, not retained in their employment. That was not the case she pled in her ET1. Further, it is very difficult to accept that an employer could, in principle, be in fundamental breach of contract by not dismissing an employee whether on grounds of redundancy or for any other reason. This was not a claim for a statutory redundancy payment; it was a claim for unfair dismissal.  We would also observe that there was no evidence before the Tribunal as to what would have happened if the Respondent had gone down the redundancy route, as the Claimant would, according to the argument before us, have had them do.  It is not at all obvious, for instance, that from the pool of eight radio operators, the Claimant would have been selected for redundancy.  We would also, finally, observe that on the Tribunal’s findings in fact, the reason for the Claimant’s resignation was not that the Respondent had failed to dismiss her or that they had refused to make her redundant. It was, shortly put, that they were in breach of contract in proposing to impose on her the reduction in hours to which we refer above.

29.         Accordingly, interesting as it may be thought that the excursus into the issue of whether or not there was a redundancy situation in this case was, it was irrelevant.  The Claimant was not dismissed as redundant by the Respondent.  There was no question of them being in fundamental breach of contract by refraining from dismissing the Claimant.  The Claimant did not, in any event, resign for that reason.  Further and perhaps most importantly, the Tribunal’s reasoning and conclusion that the constructive dismissal of the Claimant which did occur was a fair one, was not subjected to any criticism at all by Ms Munn.

30.         In these circumstances, the appeal must fail.

31.         We will, in the circumstances, pronounce an order dismissing the appeal.