HIS HONOUR JUDGE DAVID RICHARDSON
Introduction
1.
This is an appeal by Mr Jonathan Ashby (“the Claimant”) against a
judgment of the Employment Tribunal sitting in Manchester (Employment Judge
O’Hara presiding) dated 24 October 2011. By its judgment, the
Tribunal rejected a claim of unfair dismissal which he brought against his
former employers, JJB Sports Plc (“the Respondent”).
2.
The Claimant was dismissed on grounds of redundancy without warning or
consultation. The Tribunal found that lack of warning and consultation did not
render the dismissal unfair. The question is whether the Tribunal erred in law
in reaching this conclusion.
The background facts
3.
The Claimant obtained an HNC in Business and Finance and a qualification
from the Chartered Institute of Secretaries. He then worked for a substantial
number of years as a Payroll, Training and Liaison Manager and then as a
Payroll Manager. His experience was principally therefore in payroll
management. He had no qualifications or significant experience in HR prior to
2007.
4.
The Respondent is a sportswear and sports equipment retailer employing
several thousand staff. The Claimant commenced employment with the Respondent
on 17 April 2000, again as Payroll Manager. In 2007 he was
appointed to a newly created post of Head of Human Resources and Payroll. He
became known by the title of Associate Director. His salary was substantially
increased. By 2010 it was £86,071. For a short time, from June 2008 until
January 2009, he was also company secretary. The Claimant had responsibility
for a range of tasks on the payroll management side, assisted by a payroll
manager. On the HR side there was a team consisting of the Human Resources
Manager and four HR advisers. The Human Resources Manager continued to oversee
most of the day-to-day running of the HR department.
5.
The years from 2007 onwards were years of decline for the Respondent.
Indeed it was on the brink of administration in 2008. Its revenue reduced from
£648 million in the year ending January 2009 to £372 million in the year ending
January 2010. With effect from 1 March 2010 a new Chief Executive, Mr Jones,
was appointed. Under his leadership the Respondent implemented fundamental
changes across the entire business. In particular, the Respondent decided that
it would create an operating board made of the heads of key functions within
the business; Retail, Marketing, HR and Trading. These were regarded as key
senior posts, senior to any associate director.
6.
In May 2010 the post of HR Director was offered to Mr Paul Mitford. He
had a Masters Degree in Management Development and 20 years of experience in
senior HR roles. There was no advertisement: the Claimant was not told of or
interviewed for the position. The Respondent considered that he had been a
willing, co-operative and loyal employee but that he was not cut out for the
new HR Director role required by the business in the circumstances in which it
found itself.
7.
The Respondent considered that the Payroll Manager could absorb the
Claimant’s payroll responsibilities. Other company administrative tasks for
which he had responsibility could be undertaken by the Legal and Operations
Director. He was, therefore, considered to be redundant. The Tribunal found
that “Mr Manning and his colleagues were unable to identify a suitable
alternative role for the Claimant within the company.”
8.
The Tribunal then said:
“Having made these decisions Mr Manning and his colleagues
decided that consultation with the claimant would serve little purpose and
would have been a sham which would not have been to the claimant’s benefit.
Whilst with the benefit of hindsight he conceded in Tribunal that the
respondent could have allowed the claimant to take part in a competition for
the HR Director role, he stressed that he could only have been considered for
the role with significant training and development. That was not appropriate
for the respondent at that time when in order to save the business it needed to
move with speed and alacrity. They therefore decided to appoint Mr Mitford.
Further, that Mr Mitford would have won any competition because he had the
right qualifications and experience at the HR director level. In the event
that the respondent had allowed the claimant to compete for the post his
employment might have lasted for a month longer than it did.”
9.
The Claimant was dismissed on 7 July 2010. When the new structure was
explained to him he asked for the chance to prove that he could fill the HR
role. He was told that Mr Mitford was already appointed. Mr Manning, who
conducted the interview, said he was upset to dismiss the Claimant and thanked
him for his ten years service. Details of his financial package followed. He
received six months pay in lieu of notice together with a redundancy payment
and a sum to compensate him for loss of fuel benefit. He did not submit an
appeal.
The Tribunal’s reasons
10.
The Tribunal made findings of fact on which we have already drawn in
this judgment. It set out the law in appropriate terms of which no complaint
is made. In particular it said:
“9. The employer is expected to go through a fair consultation
procedure, warning and consulting employees at risk of redundancy about the
reason for the redundancy, the reason they have been selected, alternative
roles available and financial proposals. Employers should give the employee an
opportunity to comment and respond before a final decision is made. The ACAS
Code of Practice on Discipline provides a procedure whereby written notice that
dismissal is being contemplated, attendance at a meeting to discuss and the
right of appeal from a decision to dismiss is included. However, the Foreword
provides that it: ‘…does not apply to dismissals due to redundancy.’
10. It may not be unfair to dismiss an employee without
consultation but only if the employer can show that, based on the facts known
at the time, it would have been futile to have done so. If the employer fails
to persuade the tribunal that it would have been futile, a percentage reduction
from compensation for unfair dismissal may be made if the employer can show
that even if they had consulted, they would still have decided to dismiss the
employee. This is the Polkey principle from the decision of the House of Lords
in Polkey v AE Dayton Services Ltd [1987] IRLR 503.”
11.
It is important to keep in mind that the Claimant’s advocate at the
hearing principally argued; (1) that there was no redundancy at all and (2)
that the Claimant should have been appointed to or at the very least
interviewed and considered for the new HR role. This is plain from
introductory material in the Tribunal’s reasons (paragraph 2) and from its
summary of the submissions which it received.
12.
The Tribunal accepted that the Respondent dismissed the Claimant because
his position was redundant. It found that the reorganisation involved a newly
created role which was fundamentally different to that which the Claimant
undertook and for which he was not qualified.
13.
On the question of the Respondent’s failure to tell the Claimant its
plans, the Tribunal said:
“With respect to Mr Norbury, the Tribunal did not agree that it
was unreasonable of the Respondent not to tell the Claimant of its plans. The
Respondent was entitled to reach a view on the Claimant’s capabilities which
resulted in it not including him in what were highly sensitive commercial
decisions for the future of the company. The Tribunal found that these were
not the decisions of Mr Manning alone and that he worked closely with his two
executive directors and the Board.”
14.
The Tribunal dealt with the question of fairness in the following
passage:
“27. These are potentially fair reasons for dismissal. The
tribunal went on to consider the test of fairness. The tribunal noted the lack
of warning, consultation associated with the meeting on 7 July when the
respondent dismissed him. It also noted the lapse of time from May when the
decisions were made to July. The respondent’s case was that consultation would
have been futile. The tribunal agreed that Mr Manning had assessed the
claimant’s skills and capabilities over the 18 months he had been his line
manager and that he was entitled to reach the conclusion he did that the
claimant would not be a suitable candidate for the new HR director role. The
tribunal found that the respondent did not make assumptions about the
claimant’s abilities and history. In those circumstances any further
discussion was not necessary and given the urgency of the circumstances for the
respondent to turn the business around from potential insolvency, the tribunal
concluded that it was reasonable to dismiss the claimant in the way the respondent
did. This included the appointment of Mr Mitford without inviting the claimant
to compete for the position and the timing of the decisions.
28. The claimant was able to put before the tribunal all the
evidence of his capability for the new HR director role. Even after having
read and heard this, the tribunal concluded that it was reasonable for the
respondent to conclude that the claimant was not qualified for the role. It
would therefore have been futile for the respondent to have invited the claimant
to take part in a competition with Mr Mitford for the role of HR director. His
qualifications and experience were heard and shoulders above those of the
claimant for this post. The tribunal therefore found that the dismissal was
fair.”
15.
The Tribunal went on to conclude, in paragraph 29 of its reasons, that
it would in any event have awarded no compensation – what is known as a Polkey
finding of 100%.
Submissions
16.
On behalf of the Claimant Miss Assunta Del Priore, argues as follows.
(1) The Tribunal introduced irrelevant material to its consideration of the
question whether the dismissal was fair, namely the Claimant’s evidence of his
abilities given at the Tribunal; see paragraph 28 of the Tribunal’s reasons.
(2) The Tribunal concentrated on the question whether it was reasonable for the
Respondent to conclude that the Claimant was not qualified to compete for the
new HR director role. It should have consultation more generally and, in
particular, it should have considered consultation about suitable alternative
employment. (3) The Tribunal did not recognise that the circumstances in which
an employer might reasonably dispense with consultation in a given case must be
exceptional. It erred in law in failing to identify matters which might be described
as exceptional. It is not enough that an employer believes he has no
alternative but to make his employee redundant. (4) The Tribunal failed to
have regard to the size and administrative resources of the Respondent as
required by section 98(4) of the Employment Rights Act 1996. (5) The
Tribunal did not give adequate reasons for its decision on the questions of
warning, consultation and Polkey. (6) The Polkey
finding is vitiated by the errors of law on the question of consultation. (7)
The Tribunal’s conclusions in this respect were perverse and irrational.
17.
On the behalf of the Respondent, Mrs Zoe Thompson prefaced her
submissions by emphasising the issues which were fought out below - these were
the question whether the Claimant was redundant and whether he should have been
informed of and interviewed for the HR role. On the question of alternative
employment, the Respondent’s witnesses were not cross-examined at all to
challenge their evidence that there was no suitable alternative employment. It
was not, for example, suggested that the Respondent should have considered
“bumping” in the respect of the lesser roles of Payroll Manager or HR Manager.
The Tribunal’s reasons should be seen in the context of the case which was put
before it. She made the following principal submissions. (1) The Tribunal
sufficiently and properly set out the factors by reason of which it considered
that it was reasonable for the Respondent to conclude that it was futile to
consult. She emphasised that the dire financial circumstances of the
Respondent required an urgent reorganisation. (2) The Tribunal stated and
applied the correct test. (3) The Tribunal did not confuse the question of
failure to warn and consult with the question whether the Claimant should have
been invited to compete for the post of HR Director. Paragraph 27 shows that
while the Tribunal concentrated on the appointment of Mr Mitford without
inviting the Claimant to compete, it concluded in the round that it was
reasonable to dismiss the Claimant in the way the Respondent did. (4) In any
event the 100% Polkey is unassailable.
18.
Counsel took us through leading authorities on the question of warning
and consultation in redundancy cases, to some of which we will refer in a
moment. Counsel also took us to familiar authorities on the requirement upon
the Tribunal to give sufficient reasons for its decision.
Statutory provisions
19.
Once the Tribunal found that the reason for dismissal was redundancy, it
had the familiar task of applying section 98(4) of the Employment Rights Act
1996 which provides:
“(4) Where the employer has fulfilled the requirements of
subsection (1), the determination of the question whether the dismissal is fair
or unfair (having regard to the reason shown by the employer)–
(a) depends on whether in the
circumstances (including the size and administrative resources of the
employer´s undertaking) the employer acted reasonably or unreasonably in
treating it as a sufficient reason for dismissing the employee, and
(b) shall be determined in accordance
with equity and the substantial merits of the case.”
Discussion and conclusions
20.
As a general rule, an employer is expected to give as much advance
warning of redundancy as is reasonable and to consult an employee as part of
the redundancy process. In Polkey v AE Dayton Services Ltd
[1988] AC 344, Lord Mackay said at pages 354 to 355:
“.... the subject matter for the tribunal's consideration is the
employer's action in treating the reason as a sufficient reason for dismissing
the employee. It is that action and that action only that the tribunal is
required to characterise as reasonable or unreasonable. That leaves no scope
for the tribunal considering whether, if the employer had acted differently, he
might have dismissed the employee. It is what the employer did that is to be
judged, not what he might have done. On the other hand, in judging whether what
the employer did was reasonable it is right to consider what a reasonable
employer would have had in mind at the time he decided to dismiss as the
consequence of not consulting or not warning.
If the employer could reasonably have concluded in the light of
the circumstances known to him at the time of dismissal that consultation or
warning would be utterly useless he might well act reasonably even if he did
not observe the provisions of the code. Failure to observe the requirement of
the code relating to consultation or warning will not necessarily render a
dismissal unfair. Whether in any particular case it did so is a matter for the
industrial tribunal to consider in the light of the circumstances known to the
employer at the time he dismissed the employee.”
21.
Lord Bridge said at page 364:
“If an employer has failed to take the appropriate procedural
steps in any particular case, the one question the industrial tribunal is not
permitted to ask in applying the test of reasonableness posed by section
57(3) is the hypothetical question whether it would have made any difference to
the outcome if the appropriate procedural steps had been taken. On the true
construction of section 57(3) this question is simply irrelevant. It is quite a
different matter if the tribunal is able to conclude that the employer himself,
at the time of dismissal, acted reasonably in taking the view that, in the
exceptional circumstances of the particular case, the procedural steps normally
appropriate would have been futile, could not have altered the decision to
dismiss and therefore could be dispensed with. In such a case the test of
reasonableness under section 57(3) may be satisfied.”
22.
In Duffy v Yeomans & Partners [1995] ICR 1, Balcombe
LJ said:
“It is what the employer (as a reasonable employer) could have
done which is required to be tested, so the tribunal must ask whether an
employer, acting reasonably, could have failed to consult in the given
circumstances.”
23.
On the fundamental approach to be taken by a Tribunal it is not
necessary to look further than these decisions. There is, however, helpful
guidance as to the purposes of consultation in a decision of the Appeal
Tribunal, Poat v Holiday Inn Worldwide [1994] EAT/883/93 (His
Honour Judge Hull presiding):
“It is, of course, normal for warning and consultation to take
place and, as has been pointed out in many, many cases, it is really a matter
of commonsense; the purposes of consultation are various. First of all, leaving
aside anything else, it is courteous and humane to consult people when you are
thinking of making them redundant, or have decided provisionally to make them
redundant. Of course, there is the possibility that the employee may have ideas
for ways in which redundancy can be avoided altogether, so far as he or she is
concerned. The employee may be able to make suggestions about alternative
employment, may indicate that he or she would be prepared to accept less
well-paid work or work on less favourable terms, or to retrain for other work,
or to go abroad, even. Or to do other things which would help the employer out
in the emergency which arises. Then, of course, there are other matters which
have been pointed out in other cases, such as the question of the length of
notice which is appropriate and whether the employer can help the employee in
some other way by finding him employment, perhaps with a quite different firm,
by giving him a good reference and so forth. These are all matters which might
be raised in consultation. Clearly, it will be a very bold thing for any
employer to say or, indeed, any person to say, "I can dispense with
consulting somebody. Nothing that person could possibly say would make me
change my mind in any material way." That is a very strong thing to say.”
24.
Against this background we will take Miss Del Priore’s submissions in
turn.
25.
Firstly, we reject her submission that the Tribunal in paragraph 28
erred in law by introducing material which was irrelevant to its
consideration. The Tribunal had set out in paragraph 27 of its reasons why it
found that the Respondent reasonably concluded that the Claimant was not
qualified for the new role for reasons. In paragraph 28 it did no more than
confirm that nothing in the evidence which the Claimant gave at the hearing
deflected the Tribunal from the view it had formed that the Respondent had
acted reasonably in this respect. Paragraph 28 may not have been necessary to the
Tribunal’s liability reasoning (although it might have been relevant to its
finding that there would in any event have been a 100% Polkey deduction)
but it betrays no error of law in itself.
26.
There is rather more force in Miss Del Priore’s second submission which
is that the Tribunal should have considered consultation more generally
including the question of alternative employment. It is certainly the case
that in paragraphs 27 and 28 the Tribunal concentrated upon the question
whether it would have been futile for the Claimant to have taken part in a
competition with Mr Mitford for the role of HR Director. But a Tribunal’s
reasons must always been read in the context of the case which it was
considering. It is plain in our judgment that the principal case put forward
on behalf of the Claimant on the question of fairness was that he should have
been considered for the HR role. There was no significant challenge to the
evidence given on behalf of the Respondent on the question of suitable
alternative employment in other respects. It is not surprising, and certainly
not an error of law, if a Tribunal concentrates in its reasoning on the
principal arguments put forward by a party.
27.
Reading the Tribunal’s reasons as a whole, we are satisfied that it did
not restrict its consideration to consultation in respect of the HR Director
post. The Tribunal considered the question of warning more generally in
paragraph 25 of its reasons, in a passage which we have quoted. The Respondent
was, as the Tribunal said, taking highly sensitive commercial decisions for the
future of the company involving reorganisation at a high level. The Tribunal
concluded that it was not unreasonable for the Respondent not to tell the
Claimant of its plans.
28.
The Tribunal considered the question of alternative employment in
paragraph 5.13 of its reasons, finding that Mr Manning and his colleagues were
unable to identify a suitable alternative role for the Claimant. It would have
been better if the Tribunal had expressly referred to this issue again in its
conclusions; but we do not believe that the Tribunal left it out of account.
It is to borne in mind that the Claimant occupied a very senior and well paid
position and that his experience was particularly oriented towards payroll management.
In truth, any suitable alternative vacancy, other than that of HR Director,
would have been readily apparent. In the context of this case we believe that
the Tribunal applied the correct legal test and did not unduly restrict itself
in the consideration of that test. Its reasons are to be seen in the context
of the arguments principally put before it.
29.
We turn to Miss Del Priore’s submission that the Tribunal failed to
address its mind adequately or at all to the question whether the circumstances
were sufficiently exceptional to justify a finding that warning and
consultation were futile.
30.
It is important to keep in mind that the test for the Tribunal was that
which is laid down in section 98(4) of the Employment Rights Act 1996.
In Duffy Balcombe LJ referred to:
“.. a grave danger that this area of the law is becoming over
sophisticated and that there is an attempt to lay down as rules of law matters
which are no more than factors which an industrial tribunal should take into
account in reaching its decision whether the employer acted reasonably in the
circumstances of the particular case.”
31.
The law does not require the Tribunal to label the circumstances which
it takes into account with the words, “exceptional”. It requires the Tribunal to
form the conclusion that in the circumstances known to the Respondent it was
reasonable not to consult. The Tribunal stated the law correctly in paragraph
10 of its reasons and set out within its reasons the factors upon which it
relied. This was, in truth, a case far from the ordinary case of redundancy
selection; it concerned a manager in a very senior post which was being lost
due to a substantial reorganisation. The Tribunal applied the correct test;
and we see no error of law in its reasons.
32.
Miss Del Priore also argued that the Tribunal did not give adequate
reasons for its decision on the question of warning and consultation and that
the Tribunal’s conclusions were perverse and irrational. We reject this
argument. We have said that it would have been better if the Tribunal had
returned to the question of suitable alternative employment in its conclusions,
but in the circumstances of this case, given the issues raised in the
proceedings, the parties know why they have respectively won and lost the case;
the reasons comply with the requirements of the law; and we see nothing
perverse or irrational in the Tribunal’s reasons. The appeal must therefore be
dismissed.
33.
We turn finally to Miss Del Priore’s submission that the alternative Polkey
finding of the Tribunal is vitiated by errors of law on the question of
consultation, in particular as regards alternative employment. In truth, the Polkey
finding, which is within paragraph 29 of the Tribunal’s reasons, was made on a
narrow basis. It was not intended to address questions of suitable alternative
employment. It must, however, be appreciated that questions of suitable
alternative employment had been raised in the Respondent’s evidence, that it
had not been challenged and that there was nothing before the Tribunal which
suggested any suitable alternative employment other than the new HR Director
role. While, therefore, the Tribunal’s reasoning on Polkey was
too narrow, we would have seen no basis for finding that there was any
significant chance of employment in other work. It was suggested by Miss Del
Priore that there were or might have been alternative jobs which the Claimant
could have suggested: but Polkey was an issue at the Tribunal
hearing and the evidence on the question was all one way.
