HIS
HONOUR JUDGE DAVID RICHARDSON
1.
This is an appeal by Hawes & Curtis Limited (“HCL”) against a
judgment of the Employment Tribunal sitting at London Central dated 9 March
2012. The Tribunal (Employment Judge Hodgson dissenting) held that it had
jurisdiction to consider claims of unfair dismissal brought by Mr Shamim Arfan
and Mr Aamir Mirza.
2.
The appeal is concerned with the “effective date of termination” (“the
EDT”) of the employment of Mr Arfan and Mr Mirza. The question for the Tribunal
was whether they had brought their claims in time. This depended on whether
the ETD was 5 October 2010 or 4 November 2010. If it was the former their
claims were out of time.
3.
The concept of effective date of termination derives from section 97(1)
of the Employment Rights Act 1996. Section 97(1) provides:
“97 Effective date of termination
(1) Subject to the following provisions of this
section, in this Part "the effective date of termination"–
(a) in relation to an
employee whose contract of employment is terminated by notice, whether given by his employer or by the
employee, means the date on which the notice expires,
(b) in relation to an
employee whose contract of employment is terminated without notice, means the date on which the termination
takes effect, and
(c) in relation to an
employee who is employed under a contract for a fixed term which expires
without being renewed under the same contract, means the date on which the term
expires.”
4.
In this case, as we shall see, HCL dismissed Mr Arfan and Mr Mirza
summarily on 5 October. They appealed under HCL’s internal disciplinary
procedure. For the most part their appeals were unsuccessful. But, if they
are right in their interpretation of a letter dated 4 November, they had some
limited success on appeal: the date of termination of their contracts was
varied to 4 November and they were paid until 4 November. The question arises:
does this limited success on appeal impact upon the EDT?
The background facts
5.
HCL carries on business as makers and retailers of shirts. Mr Arfan was
the manager of its store in Liverpool Street station. Mr Mirza was the store
supervisor – in effect the assistant manager – though he worked part-time.
6.
On 8 September 2010 Mr Arfan and Mr Mirza, together with one other
employee, were suspended on full pay. It is HCL’s case that an audit had
identified substantial stock losses at the shop, amounting to some 5,764 shirts
between 1 January and 13 August, which it valued at £144,100. They instituted
disciplinary proceedings. There was an investigation meeting on 13 September
and a disciplinary hearing on 28 September.
7.
On 5 October 2010 they were both dismissed. Each received a similar
letter of dismissal. The letter said:
“2. Despite our investigatory meeting and disciplinary hearing,
our two panels of investigation both chaired by different Senior managers,
could not identify a specific individual who would have been responsible for
the considerable stock losses as mentioned above.
In our view, had the ‘act’ of stock loss been committed by an
identified individual, the said person would justify his or her dismissal.
3. The Company is of the view that the act of stock loss was
committed by one or more of a group, all of whom could have been individually
capable of committing the said act.
4. A proper, extensive [involving many departments], thorough
and fair investigatory process was carried out by the Company.
5. Hawes and Curtis Ltd, at this present time, cannot identify
the individual who was responsible for the considerable stock losses at its
store of Liverpool Street Station. However, the Company has been able to
identify a ‘group’ of employees who were responsible for the said act.
Unfortunately, amongst another, as both a keyholder and the person in charge,
you have been identified as a member of the said group.
6. It is the view of the Company that stock losses at this level
would necessarily be either through theft or fraudulent activities, therefore
constituting a fundamental breach of trust and confidence and is viewed as
gross misconduct.
7. It is the conclusion of the Company, based on the above, that
your contract of employment with us be summarily terminated, as of the date of
this letter, for reasons of Gross Misconduct.”
8.
The letter informed them that they had a right of appeal under HCL’s
internal procedure, which was expressly described as non-contractual. They
each exercised that right. Their appeals were heard on 27 October by Ms
Alexander, HCL’s operations manager. She took time for consideration.
9.
On 4 November 2010 HCL wrote to Mr Arfan and Mr Mirza setting out the
result of the appeal. Ms Alexander’s conclusions included the following:
“6. The Company had identified a group of employees who were
responsible for the stock loss. Unfortunately you are identified as being in
that group.
7. It is the honest belief of the Company that the stock loss at
its branch of Liverpool Street is due to either theft or fraudulent activities,
therefore constituting a fundamental breach of trust and confidence in a
contract of employment.
8. The stock losses for the Liverpool Street branch of Hawes and
Curtis for the period of 1st January 2010 to 13th August
2010 amounted to 5764 shirts. The deliveries, which were signed, amounted to
13574 shirts and the Sales for the same period [figures taken directly from our
banking partners] amounted to £8560. Assuming that the average price of a
Hawes and Curtis shirt to be £25, the monetary value of the shirts missing from
the Liverpool Street branch could amount to £144,100. Therefore the Company
thinks that it has reasonable grounds to take any reasonable and necessary
actions.
9. The Company believes that its response has been reasonable,
faced with such a substantial loss, as stated above.”
10.
In words which are critical to this appeal, the letter then continued:
“Based on the evidence available to her, and as set out in
detail in the letter of 5 October 2010 sent to you, Ms Alexander has decided to
uphold the decision of summarily terminating your employment but has asked that
the effective date of termination of your contract be that of the date of this
letter, that is 4 November 2010.”
11.
Conformably with this letter HCL proceeded to pay Mr Arfan and Mr Mirza
under the PAYE system that which was due up to 4 November 2010. As the
majority found, no party considered these payments either to be notice pay or
an ex gratia payment.
The Tribunal proceedings
12.
Mr Arfan and Mr Mirza both instructed solicitors. They lodged claim
forms on 27 January 2011. Each claim form said that the employment ceased on 4
November 2010. As part of the narrative setting out the nature of the
complaint of unfair dismissal each claim form mentioned the letter dated 4
November 2010 “upholding the decision to summarily dismiss the claimant and
providing for the effective date of termination of the claimant’s employment as
at 4th November 2010.”
13.
HCL’s in house lawyer lodged response forms. They did not challenge the
termination date put forward in the claim forms; indeed one response form expressly
stated the date of termination to be 4 November. Nor did the response forms
challenge the way in which the claim form described the effect of the letter
dated 4 November.
14.
On all sides, therefore, preparations went ahead for a full hearing on
the merits. It was listed on this basis for 3 days commencing on 29 February
2012. The parties prepared for a full hearing.
15.
On 13 January 2012 HCL’s solicitors wrote to say that they wished to
amend the response form to assert that the ETD was 5 October 2010. It was far
too late for any preliminary issue to be listed; but at the full merits hearing
on 29 February the Tribunal (which was apparently told, to its surprise and
ours, that 3 days was insufficient to hear the case) was persuaded to hear the
question of jurisdiction as a preliminary issue. The merits hearing is to
take place next month (June 2012).
16.
The questions which the Tribunal identified were: what was the ETD?
Were the claim forms presented in time? If not, was it reasonably practicable
to present the claims in time?
17.
The witness statements which had been prepared for Mr Arfan and Mr Mirza
did not deal with these issues – which had, as we have seen, been raised only
the previous month. They gave oral evidence. HCL relied on no evidence at all
– written or oral – apart from documents, principally the letters dated 5
October and 4 November.
The
Tribunal’s reasons
18.
On the question of the ETD, the lay members formed the majority. Their
reasoning was as follows.
“7.57 At 5th October 2010 both parties understood that the
claimants had been summarily dismissed in writing on that date. An appeal was
held. The respondent upheld the finding of summary dismissal. The respondent
wrote to the claimants to tell them the outcome of the appeal on 4th November
2010. In this letter the respondent states "the effective date of
termination of your contract be that of the date of this letter, that is the
4th November 2010." If the respondents had not intended to change the date
of termination then the change of date would not appear in this letter.
7.58 The claimants continued to be paid under PAYE until 4th
November 2010. Neither party considered this to be notice pay. Neither party
considered this to be an ex gratia payment.
7.59 The ET1 and ET3 are both consistent with the letter of 4th
November 2010. The ET1 states the date of termination is 4th November 2010. In
the respondent's ET3 on page 24 of the bundle the respondent states in the
relevant box that the date of termination is 4th November 2010.
7.60 The respondent did not dispute the date of termination
until 13th January 2012. The respondent states in a letter to the Tribunal on
that date (R1/171) that the respondent made a 'mistake,' that the date of
termination was 5th October 2010 and that accordingly the claim is out of time
and seeks leave to amend.
7.61 The claimants relied on the respondent's letter of 4th
November 2010. The claimants understood the letter of 4th November 2010 to
supersede the letter of 5th October 2010.
7.62 In oral evidence the claimant Mr Mirza said when asked
about his understanding of the letter of 4th November 2010: 'I understood I had
been dismissed ... just the letter' and later he said 'this was the last date
of employment.'
7.63 The respondent intended to change the date of dismissal to
4th November 2010 as evidenced by the letter of 4th November. The respondent
did not give any oral evidence to the Tribunal regarding the effective date of
termination. If it is the respondent's case that the letter of 4th November 2010
was not intended to change date of termination to 4th November 2010 then the
respondent could have given evidence to that effect.
7.64 From the above we conclude that on 4th November 2010 both
parties considered that 4th November 2010 was the date of termination not 5th
October 2010. Accordingly, we take the view that the effective date of
termination was 4th November 2010.”
19.
These reasons were given orally on 2 March 2012. It appears that
counsel for HCL questioned the reasons in some respects, for the members added
an additional paragraph, attempting to analyse the position in terms of
contract law – in particular in terms of an offer and acceptance in November.
20.
It is, of course, the reasoning of the majority which must be
scrutinised on this appeal to see whether it is in error. But we will record
briefly the reasons of the Employment Judge on the question of the ETD. He
said that the letter dated 5 October 2010 contained clear words of dismissal
terminating the contract of employment. It was “not open to any party to
unilaterally decide the effective date of termination at any time” – it could
not be “agreed or unilaterally adopted or extended”. It therefore had to be
asked whether something happened to change the position such that there was a
new effective date of termination on 4 November 2010. He found the letter of 4
November 2010 ambiguous as to whether there was any intention to change the
original decision. He did not think it could be read as a clear intention to
vary the effective date of termination. But even it was to be read in that
way, he did not think it could be achieved for the purposes of section 97 of
the Employment Rights Act 1996. The contract would have to be reinstated
in some manner before there could be a fresh effective date of termination. He
could not read the letter dated 4 November in that way: clear words would be
needed to reinstate the contract and extend it which did not, in his view,
exist in the letter.
21.
The Tribunal unanimously agreed that if, contrary to the opinion of the
majority, the true effective date of dismissal was 5 October, the Tribunal had
no jurisdiction to hear the claim: it would, the Tribunal unanimously found,
have been reasonably practicable to have presented the claims to the tribunal within
3 months. That finding is not challenged on appeal by Mr Arfan and Mr Mirza.
Submissions
22.
On behalf of HCL Mr Daniel Barnett argued that the majority of the
Tribunal erred in law in one or more of the following ways. (1) They took into
account the parties’ intentions or belief as to the ETD as being either
determinative of or relevant to the effective date of termination. He
submitted that the effective date must be established objectively. (2) They
took into account what he described as an ambiguous statement of intent
regarding a change to the effective date of termination. He submitted that a
statement of intent, ambiguous or unambiguous, has no impact in law. (3) They
found that there was an agreement to extend their contracts until 4 November.
That was wrong: none of the essential elements for such an agreement existed.
He withdrew an argument based on the burden of proof, and we will say no more
about it.
23.
Mr Barnett submitted that when an employee is summarily dismissed, the
ETD crystallises at the date when the summary dismissal was communicated and
cannot be varied by what occurs on appeal. He countenanced a possible
exception if there was a contractual appeal procedure, or some other special
contractual relationship between the parties; but there was none here. We
asked him what the position would be if, on appeal, the employer substituted
for the summary dismissal a dismissal upon notice. He submitted that this
would not alter the position; an employer had no contractual right to impose a
period of notice on the employee in such circumstances.
24.
Mr Barnett took us to Fitzgerald v University of Kent at
Canterbury [2004] ICR 737, a case which was concerned with the
retrospective agreement of a date of termination; Horwood v Lincolnshire
County Council [2012] UKEAT/0462/11, a case which was concerned with
resignation, following which the employer set a different date of termination
for administrative purposes; and Board of Governors, National Heart and
Chest Hospitals v Nambiar [1981] IRLR196. Nambiar was
concerned with the ETD in the context of an appeal; and we referred the parties
to a recent case of the Northern Ireland Court of Appeal McMaster v Antrim BC [2011] IRLR 235, also concerned with the consequences of an appeal. Mr
Barnett submitted that this case was distinguishable because the appeal
procedure was contractual in nature.
25.
On behalf of Mr Arfan and Mr Mirza, Mr Beard placed reliance on the
decision of the Supreme Court in Gisda Cyf v Barratt [2010] ICR 1475: the underlying purpose of the statute was the protection of the
employee’s rights. If an employer, as a result of an appeal, varied a decision
to summarily dismiss, granting the employee some extra weeks of employment, it
followed that the ETD was varied. The dismissal might still be a summary
dismissal for the purposes of section 98(1)(b), but the date on which the
termination took effect was changed. Therefore the reasoning of the majority
was essentially correct. What counted was not the subjective intentions or beliefs
of the parties about the date of termination, still less any agreement as to
the date of termination, but rather the variation of the employer’s decision on
appeal. The decision of the majority was in essence that HCL did vary the date
of termination upon appeal; this was a proper conclusion to reach, involving no
error of law.
Discussion and conclusions
26.
It is important, as a starting point, to keep in mind that the majority
found that HCL intended to change the date of termination: see the last sentence
of paragraph 7.57 of the reasons, and paragraph 7.63 of the reasons. On their
findings HCL did not simply intend to put an artificial label of 4 November as
the ETD: it decided to keep the contracts of Mr Arfan and Mr Mirza open until
that date, and actual paid them amounts which were neither notice pay nor ex
gratia, using the PAYE system which is appropriate if there was a continuing
contractual relationship.
27.
There is no appeal as such against this finding, but we should say that
in our judgment it was a finding which the majority were fully entitled to
reach. It accords with the letter dated 4 November and with the manner in
which HCL paid Mr Arfan and Mr Mirza until that date. It is fanciful to
suppose that HCL would have written the letter in the terms it did, or paid Mr
Arfan and Mr Mirza up to 4 November, if the decision on appeal had changed
nothing.
28.
It is, of course, unusual for an employer who summarily dismisses an
employee to vary the date of dismissal on appeal. However there was an unusual
feature of this case. The letters dated 5 October and 4 November did not make
findings of fraud or dishonesty against either individual; and Mr Barnett
confirmed to us that HCL’s case was that the employees were dismissed as being
within a group suspected of misconduct (see Monie v Coral Racing [1981]
ICR 109). He further confirmed to us that he would have conceded, had the case
gone further at the tribunal, that dismissal in those circumstances ought to
have been with notice. So it is perhaps not as surprising as it might
otherwise be that HCL somewhat changed its position at the appeal stage.
29.
This, therefore, is one of those relatively rare (but not unknown) cases
where the employer varied the date of dismissal. Such cases in our collective experience
on the Appeal Tribunal occur from time to time. We have all had experience of
cases where, on appeal, a summary dismissal was changed to a dismissal on
notice. Other changes will sometimes occur – such as a decision to extend the
duration of employment while further investigations take place. Such cases, by
reason of their exceptional nature, are likely to cause difficulty; and it is
important to keep first principles in mind.
30.
The starting point must be the language of the statute itself. Section
97 distinguishes between contracts which are terminated by notice and those
which are terminated by without notice. In the case of a dismissal with
notice, the search is for the date when the notice expired. In the case of a
dismissal without notice, the search is for “the date on which the termination
took effect”.
31.
These very words were construed by the Supreme Court in Gisda Cyf
v Barratt [2010] ICR 1475. The appeal related to the question whether
a letter of summary dismissal took effect when it was delivered or at the later
date when the employee read it or had a reasonable opportunity to read it. It
was argued that the law of contract required the former result to be applied in
the context of section 97. In rejecting that argument Lord Kerr, delivering
the judgment of the court, said (para 37):
“We do not consider, therefore, that what has been described as
the "general law of contract" should provide a preliminary guide to
the proper interpretation of section 97 of the 1996 Act, much less that it
should be determinative of that issue. With the proposition that one should be
aware of what conventional contractual principles would dictate we have no
quarrel but we tend to doubt that the "contractual analysis" should
be regarded as a starting point in the debate, certainly if by that it is meant
that this analysis should hold sway unless displaced by other factors. Section
97 should be interpreted in its setting. It is part of a charter protecting
employees' rights. An interpretation that promotes those rights, as opposed to
one which is consonant with traditional contract law principles, is to be
preferred.”
And (para 41):
“The essential underpinning of the appellant's case, that
conventional principles of contract law should come into play in the
interpretation of section 97, must therefore be rejected. The construction and
application of that provision must be guided principally by the underlying
purpose of the statute viz the protection of the employee's rights.
Viewed through that particular prism, it is not difficult to conclude that the
well established rule that an employee is entitled either to be informed or at
least to have the reasonable chance of finding out that he has been dismissed
before time begins to run against him is firmly anchored to the overall
objective of the legislation.”
32.
Lord Kerr adopted a description of section 97 as a “statutory
construct”: see paragraph 35. In Fitzgerald v University of Kent at Canterbury [2004] ICR 737 the parties agreed that a contract of employment
should be treated as terminated with effect from a date 2 days earlier than
their agreement. It was held that the effective date of termination was not
the date they agreed, but the date when they made the agreement – since, until
they made the agreement, the contract of employment remained live.
33.
Sedley LJ said:
“7. The concept of the effective date of termination “EDT” is a
statutory one. It has been present in the employment legislation since its
origin in 1971. Its purpose is to give a fixed point of time by which to
calculate such things as eligibility for protection against unfair dismissal,
continuity of employment, loss of rights on reaching retiring age, the amount
of the basic award and (as in this case) the time for lodging an originating
application.
20 ….. the effective date of termination is a statutory
construct which depends on what has happened to the parties over time and not
on what they may agree to treat as having happened.”
34.
Against this background, we turn to consider the effect of an internal
appeal against summary dismissal on the effective date of dismissal.
35.
The principles which apply where the appeal is entirely dismissed are
clear. Generally speaking, in the case of a summary dismissal the EDT will be
the date when the summary dismissal is communicated to the employee or the
employee has a reasonable opportunity of finding out. The lodging and
dismissal of an internal appeal therefore does not usually impact upon the date
on which termination takes effect. There are, however, exceptional cases where
the employment contract provides, or the parties agree, that the contract shall
be kept alive during the appeal process. Those cases are the exception rather
than the rule – but in those cases the effective date of termination will
relate to the disposal of the appeal.
36.
Conversely, if the appeal is allowed in full, so that the employee
continues in employment indefinitely, then it is well established that the
dismissal decision falls away – the employee remains in employment. As Silber
J put it in Ladbroke Betting and Gaming v Ally [2006] UKEAT 0260_06_1105 (11 May 2006) (cited and applied in McMaster v Antrim
BC, where the cases on this topic are summarised) - “once the decision
to dismiss is overturned the inevitable consequence is (in the absence of any
contractual provision to the contrary) that the employment continues”.
37.
What if the employer, on appeal, takes a decision which necessarily
affects the duration of the employment – for example, if the employer
substitutes a dismissal on notice, or extends the period of the contact?
38.
In our judgment such a decision will have an impact on the effective
date of dismissal. Take first the case where the employer substitutes a
dismissal on notice; in principle section 97(1)(a) will apply, and the EDT will
be the date on which the notice expired. Take then a case like this, where the
appeal varies the date on which termination takes effect. In principle section
97(1)(b) will apply, and the EDT will be the date on which the termination
takes effect.
39.
We reject Mr Barnett’s submission that, in a case of summary dismissal,
the EDT always crystallises on the date of summary dismissal.
40.
As we have seen, the EDT is a statutory construct whose application must
be guided principally by the underlying purpose of the statute, namely the
protection of an employee’s rights.
41.
The provision of an internal appeal is integral to the protection of
employment rights. For example, the current ACAS Code of Practice on
Disciplinary and Grievance Procedures (2009) makes specific provision for an
opportunity to appeal: see paragraphs 25 to 28. The Code is statutory: see
sections 199 et seq of the Trade Union and Labour Relations Act 1992.
It is to be taken into account where it is relevant to any question arising in
proceedings before an employment tribunal: section 207(2). In the provision it
makes for appeals the Code follows and applies what has for many years been
good employment practice. Employers and employees alike expect internal
appeals to be heard; and expect that they will sometimes result in decisions
which will change the date of termination of employment.
42.
Given this background, it would be surprising if a decision on internal
appeal to change the date at which an employee’s contract was terminated were
irrelevant to the EDT. To apply section 97(1) in this way would create a
quite unnecessary trap for employees, while conferring no useful benefit on
employers. Employees would find, as in this very case, that an employer argued
for an EDT quite different to the date stated following an appeal hearing.
Employers, having varied the date of termination, can have no legitimate
complaint if the EDT complies with the varied date. We do not find it at all
surprising that on both sides for more than a year it was common ground that
the employment terminated on 4 November.
43.
This is not to say that the effective date of termination depends on any
agreement between the parties. It depends, as Sedley LJ observed in Fitzgerald,
on what happened between the parties; and it is to be objectively determined.
But in our judgment the decision reached at an internal appeal is part of what
happened between the parties for the purposes of establishing the EDT; and in
the (no doubt rare) case where the decision at an internal appeal results in a
change of the date on which the employment is terminated, that decision is to
be taken into account in determining the EDT.
44.
We therefore regard this case as quite different from Fitzgerald
(where the parties sought to backdate the termination) or Horwood
(where the date of resignation was plain, but the employer took a different
date for administrative purposes). Here the date was changed as part of the
disciplinary and appeal process itself.
45.
Mr Barnett placed reliance on the decision of the Appeal Tribunal in Nambiar.
In that case the employee refused to obey an order; he was summarily
dismissed. He appealed under the internal appeals procedure. The appeals
panel, having obtained medical evidence, said (1) that the employee should not
return to his job, but (2) that every effort should be made to find suitable
alternative employment for him. The employee insisted on reinstatement,
rejected offers of alternative employment and claimed unfair dismissal. It was
held that the date of dismissal, for the purposes of considering the
reasonableness of the decision to dismiss, was the time when he was summarily
dismissed, although what occurred at the internal appeal was relevant.
46.
We think it is critical to the reasoning in Nambiar, which
was not a case on the EDT, that the appeal panel rejected the employee’s
argument that he should return to his old job; indeed it said that he should
not return to his old job at all. He was therefore summarily dismissed; and the
result of the appeal did not alter that summary dismissal. Other cases show
that, if the appeal panel had reinstated him, and the employers had refused to
comply, the effective date of dismissal would indeed be after the hearing of
the appeal: see London Probation Board v Kirkpatrick [2005]
IRLR 443 and McMaster v Antrim Borough Council.
47.
The majority’s initial reasoning is contained in paragraphs 7.57 to
7.64. We consider that this reasoning is in substance correct. Contrary to Mr
Barnett’s submission, we do not think the Tribunal’s reasoning turns on a
finding about the subjective intention of one party or the other or both: it
turns on the Tribunal’s finding about the decision taken on appeal, the
communication of that decision, and the way in which HCL acted on the decision
by making additional payments under PAYE. These findings fully justify the
Tribunal’s conclusion that the EDT was 4 November.
48.
We wish, however, in conclusion, to say a word about the contractual
position.
49.
The majority’s additional reasoning seems to have been added after the
probing of counsel, and seeks to analyse the matter in contractual terms – in
particular offer and acceptance. We do not think the reasoning is correct; the
letter dated 4 November is not in reality an offer of any kind, and we find it
difficult to spell out a contract of the kind which the majority suggest. We are
inclined to think the contractual position can be stated simply: just as the
contract of employment revives indefinitely if an appeal reinstates the
employee, so it revives for a limited period if an appeal varies a summary
dismissal to a dismissal on notice or a dismissal on some other date.
50.
We do not, however, think that contractual analysis was essential to the
exercise of determining the EDT, for the reasons set out by the Supreme Court
in Gisda, which does not seem to have been cited to the
Tribunal. Nor do we think the majority’s additional reasoning detracted from
its earlier reasoning, which we regard as essentially correct.
51.
Given the proximity of the appeal to the hearing in June, we
announced at the conclusion of the appeal hearing that the appeal would be
dismissed. These are our reasons.
