EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX
At the Tribunal
Judgment handed down on 24 February 2012
Before
THE HONOURABLE MR JUSTICE SILBER
BARONESS DRAKE OF SHENE
MR J MALLENDER
COMMERCIAL MOTORS (WALES) LTD APPELLANT
Transcript of Proceedings
JUDGMENT
APPEARANCES
(Solicitor-Advocate) Messrs OverTaylor Biggs Solicitors 4 Cranmere Court Lustleigh Close Matford Business Park Exeter EX2 8PW |
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(of Counsel) Instructed by: FWD Law Associates Solicitors 12 Clifton Road Newport NP20 4EW |
SUMMARY
TRANSFER OF UNDERTAKINGS – Consultation and other information
TUPE – date of transfer - Entitlement and calculation of payment for failure to consult and to comply with statutory regime.
Polkey deduction – approach
1. Claimant dismissed on 3 February 2009 but completion of sale by Claimant’s employer only occurred in March 2009. Was there an effective transfer of Claimant’s contract of employment under TUPE to transferee by date of dismissal?
Held – Yes because the transferee was in control of business at time of transfer (Wheeler v Patel [1987] ICR 631 explained and distinguished).
2. Claim for increase pursuant to section 31(3) of Employment Act 2002 because of breaches of statutory procedures. Was there enough detail in Employment Tribunal’s reasons?
Held - Yes.
3. Claim for breach of Regulation 13 of TUPE. Was there an implied obligation on the employer to invite employees to elect representatives?
Held –Yes as otherwise regulation 13 would be rendered pointless.
4. Employment Tribunal made 50% Polkey deduction. The Employment Tribunal was entitled to reach this decision.
THE HONOURABLE MR JUSTICE SILBER
I. Introduction
(a) There was a transfer of the business of Newport to Wales within the meaning of Regulation 3(1)(a) of the Transfer Undertakings (Protection Employment) Regulations 2006 (“TUPE”) which took place on 2 February 2009;
(b) The Claimant was dismissed by Wales on 10 February 2009 and the dismissal was automatically unfair under the provisions of section 98A of the Employment Rights Act 1996 by reason of Wales’ failure to comply with the provision of the Dismissal and Disciplinary Procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (“The 2002 Act”);
(c) By reason of Wales’ failure to comply with the statutory procedures set out in those provisions the award made to the Claimant would be increased pursuant to the provisions of 31(3) of the 2002 Act by 30%;
(d) The Claimant’s complaint against Newport under Regulation 15(1) of TUPE resulting from Newport’s failure to comply with the requirements of Regulation 13 of those Regulations (a duty to inform and consult representatives) to be well founded and it then ordered Wales (who was jointly and severally liable with Newport in respect of compensation payable under regulation 15(8)(a) of TUPE) to pay compensation to the Claimant in the sum of 13 weeks pay pursuant to Regulation 15(8)(a) of TUPE; and that
(e) A Polkey reduction had to be made because if Newport or Wales had embarked upon a fair procedure in dealing with the question of the Claimant’s continued employment as a Dealer Principal, following the transfer of Newport’s business to Wales, there was then some prospect of the Claimant being dismissed in any event and in the judgment of the Tribunal a reduction of 50% of the compensatory award due to the Claimant arising from his dismissal was appropriate.
II. The background to the Claimant’s dismissal
“Completion is conditional on:
1. The Leases being in a final form and in a form satisfactory to the Purchaser (acting reasonably); and
2. The Purchaser obtaining bank financing in relation to the payment of the Purchase Price and the ongoing working capital requirements of the business on terms satisfactory to the Purchaser.”
III. The grounds of appeal
10. Wales appeals on the grounds that:-
(a) The finding that the date of TUPE transfer was 2 February was bad as a matter of law (“Date of TUPE Transfer Issues”);
(b) The finding that the Claimant’s award should be increased by 30% for breach of statutory procedures was an error of law (“The 30% Increase Issue”);
(c) The Tribunal’s finding under Regulation 15 (1) of TUPE that the failure to comply with the duty to inform and consult representatives and to award the Claimant 13 weeks pay was as error of law (“ The 13 week award Issue ”); and that
(d) The 50% Polkey reduction was an error of law and that no reasonable Tribunal could have arrived at this reduction on the evidence before it. (“The 50% Polkey reduction Issue”).
IV. Ground 1- date of TUPE transfer issue
13. The definition of a “relevant transfer” is set out in Regulation 3(1)(a), which states that:-
“(a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity;”
14. The finding of the Employment Tribunal was that:-
“43…there was a ‘relevant transfer’ of the [Newport’s] business to [Wales] on the 2nd February 2009. By that date, the conditional sale agreement had been signed and [Wales] was expecting to complete the sale by the 6th February 2009. By going into possession of the [Newport’s] business on the 2nd February and taking over the running of the [Newport] business, not as agent for [Newport] but in its own right, the date on which responsibility for carrying on the business was transferred from [Newport] to [Wales] was easily established. That date was the 2 February 2009.”
15. The Employment Tribunal explained later in paragraph 43 that:-
“The critical matter for the Tribunal in this case was that [Wales] had taken over the running of [Newport]’s business with effect from the 2nd February 2009. This was not a case of a transferee waiting for a completion of a sale to take place before taking action in respect of the running of the transferred business.”
(a)“by going to possession of [Newport’s] premises on the 2nd February and taking over the running of [Newport’s] business, not as agent of [Newport] but in its own right, the date on which responsibility for carrying on the business was transferred from [Newport] to [Wales] was easily established” [43];
(b)“[Wales] had taken over the running of [Newport’s] business with effect from 2 February 2009. In this case, Wales … took direct responsibility for the running of the transferred business with effect from 2 February 2009 [43]; and that
(c)“With effect from 2 February 2009 [Wales] took over responsibility for paying the wages of the staff working at [Newport’s] premises” [22].
“19. Therefore, if the purchaser of an undertaking becomes the employer... the transfer must be considered as the transfer of an undertaking as a result of the legal transfer within the meaning of Article 1(1) of the Directive, even if the purchaser only acquires the ownership of the undertaking at the moment when he has paid the complete purchase price.”
“33.It has been held on several occasions that Directive 77/187 applies where there is a change in the legal or natural person who is responsible for carrying on the business regardless of whether or not ownership of the business is transferred.”
V. Ground 2 - the 30% increase issue
22. Section 31(3) of the 2002 Act provides that in respect of the statutory dismissal procedure:-
“If ...it appears to the Employment Tribunal that
(c) the non-completion of the statutory procedure was wholly or mainly attributable to failure by the employer to comply with a requirement of the procedure,
it must [subject to exceptions which do not apply in this case] increase any award which makes to the employee by 10 per cent and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount, but not so as to make a total increase of more than 50 per cent.”
a. No written statement was served on the Claimant explaining that the Respondents were contemplating dismissing him;
b. The Claimant was not invited to attend a meeting with the Respondent;
c. No meeting took place at which the Claimant could put forward his case;
d. The Claimant was not given the opportunity to appeal; and
e. No attempt had been made by Wales to consider or to seek the Claimant’s views as to whether suitable alternative employment could be offered to the Claimant.
28. Wales contends that there are no clear reasons justifying this uplift but, as we have explained, the Employment Tribunal had made relevant findings when setting out the chronology and as Keene J pointed out in Derby Specialist Fabrications Ltd v Burton [2001] ICR 833, that Extended Reasons of the Employment Tribunal are directed towards parties, who already know in detail the arguments and issues in the case so that the reasons of the Employment Tribunal
“do not need to be spelt out in the detail required where they to be directed towards a stranger to the dispute.”
“I think it would be a thousand pities if those reasons began to be subjected to a detailed analysis and appeals were to be brought on any such analysis. This, to my mind, is to misuse the purpose for which reasons are given.”
VI. Ground 3 – the 13 week award issue
31. Under Regulation 13(2) of TUPE, it is provided that:-
“(2) Long enough before a relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees, the employer shall inform those representatives of—
(a) the fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it;
(b) the legal, economic and social implications of the transfer for any affected employees;
(c) the measures which he envisages he will, in connection with the transfer, take in relation to any affected employees or, if he envisages that no measures will be so taken, that fact; and
(d) if the employer is the transferor, the measures, in connection with the transfer, which he envisages the transferee will take in relation to any affected employees who will become employees of the transferee after the transfer by virtue of regulation 4 or, if he envisages that no measures will be so taken, that fact.”
“A decision had been taken by [Newport] which [Wales] was content to go along with, not to inform employees including the claimant of those matters set out in Regulation 13(2) of TUPE. The evidence from Mr Sheddick [on behalf of Wales] was that Paul Williams on behalf of [Newport] had insisted that no information regarding the transfer be given to the employees. As a result of that deliberate withholding of information from the employees, there had been no compliance with the provisions of Regulation 13(2) by 2 February 2009…The Tribunal took the view that there had been a deliberate and sustained breach of the duty under Regulation 13(2) over a considerable period of time prior to the 2nd February 2009 on the part of [Newport] of which [Wales] was fully aware.”
“The Tribunal did consider whether the confidentiality agreement provided [Newport] and [Wales] with a legitimate basis for non-compliance with the duty under Regulation 13(2). In the judgment of the Tribunal, the confidentiality agreement did not have the effect of ousting the duty under Regulation 13(2). The Claimant’s submissions on that point were accepted by the Tribunal. Even if the confidentiality agreement was capable in law of producing that effect, the Tribunal felt it should consider whether all necessary steps had been taken by [Newport] and [Wales] towards performing the duty under Regulation 13 [2] and in the opinion of the Tribunal they had not.”
“28…It appeared to the Tribunal that by 3rd February 2009 Mr Sheddick was of the view that the protected transaction was so advanced that the confidentiality agreement could be ignored.”
35. There are four additional matters with which we must deal. First, although the majority of the obligations on the part of the employer were to inform and consult employee representatives, Regulation 13(11), there is also an obligation on the part of an employer to give to any affected employees the information set out in regulation 13(2) if the employer had previously invited any affected employees to elect representatives and they had not done so in a reasonable time. This was explained by Bean J in Howard v Millrise Limited [2005] IRLR 84 when considering the provisions in a predecessor regulation to Regulation 13 as he said that this provision:-
“14...would be rendered pointless if the employer were not obliged to set the ball rolling by inviting affected employees (assuming there were no recognised trade union representatives or other elected or appointed representatives already in place) to elect representatives for the purposes of TUPE”.
“30...the implicit obligation on the employer to invite employees to elect representatives and to comply with the requirements which regulation 14 [the obligation- on employers in relation to the employee representatives] imposes on employers.”
38. Third, it is suggested that although the Tribunal referred to the decision in Sweeting v Coral Racing Limited [2006] IRLR 252, it did not apply the principles established in that case which were first that Parliament must have intended that awards under these provisions were intended to be penal in nature rather than compensatory, but second that mitigating factors should be taken into account.
VII. Ground 4 - the 50% Polkey reduction issue
41. The Employment Tribunal correctly proceeded to consider whether the Claimant would inevitably have been dismissed if Wales had adopted a fair procedure in dismissing the Claimant. It reminded itself of the relevant principles including first that the issue was a matter of impression and judgment and second that if the Tribunal concludes that there is a doubt as to whether or not the employee would have dismissed, that factor can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment. This approach was explained by Lord Bridge in Polkey v AE Dayton Services Limited [1988] AC 344, in which he cited with approval the statements of Browne-Wilkinson J to that effect in Sillifant v Powel Duffryn Timber Limited [1983] IRLR 91.
42. In this case, the Tribunal stated that: -
“51…there were well-founded doubts that the claimant would inevitably have been dismissed had [Wales] adopted a fair procedure... there was a 50:50 chance that the claimant would have been dismissed had [Wales] adopted a fair procedure and therefore the appropriate Polkey reduction to be applied in this case is a 50% reduction of the claimant’s compensatory award.”
“The Tribunal was satisfied that the claimant had presented an arguable case that he would have been retained in a managerial position within [Wales’] organisation on a similar salary where it not for the unfair procedure adopted by the respondents in dealing with the redundancy situation.”
49. Insofar as it is suggested that the Claimant was at fault in not raising with the Respondent other jobs which he could perform as the onus was on him, that is incorrect because the onus was on the Respondent as was explained by Elias P in Software 2000 Limited v Andrews and Others [2007] ICR 825 at paragraph 54 when he said (with our emphasis added): -
“(1) In assessing compensation the task of the Tribunal is to assess the loss flowing from the dismissal, using its common sense, experience and sense of justice. In the normal case that requires it to assess for how long the employee would have been employed but for the dismissal. (2) If the employer seeks to contend that the employee would or might have ceased to be employed in any event had fair procedures been followed, or alternatively would not have continued in employment indefinitely, it is for him to adduce any relevant evidence on which he wishes to rely. However, the Tribunal must have regard to all the evidence when making that assessment, including any evidence from the employee himself. (He might, for example, have given evidence that he had intended to retire in the near future). (3) However, there will be circumstances where the nature of the evidence which the employer wishes to adduce, or on which he seeks to rely, is so unreliable that the tribunal may take the view that the whole exercise of seeking to reconstruct what might have been is so riddled with uncertainty that no sensible prediction based on that evidence can properly be made. (4) Whether that is the position is a matter of impression and judgment for the Tribunal. But in reaching that decision the Tribunal must direct itself properly. It must recognise that it should have regard to any material and reliable evidence which might assist it in fixing just compensation, even if there are limits to the extent to which it can confidently predict what might have been; and it must appreciate that a degree of uncertainty is an inevitable feature of the exercise. The mere fact that an element of speculation is involved is not a reason for refusing to have regard to the evidence.”
51. Mr Over seeks to derive assistance from comments made by Tucker J in Red Bank Manufacturing Co Ltd and Meadows [1992] IRLR 209 to the effect that an Employment Tribunal has to ask itself two questions when calculating the compensation to be awarded when considering the Polkey issue, namely (i) if the proper procedure had been followed, would it have resulted in an offer of employment? and if so (ii) what would that employment have been and what wage would have been paid in respect of it?
52. Those comments are not supported by some more recent statements which stress that a less rigid approach is required and it is noteworthy that no case was referred to us in which it was held that a failure by an Employment Tribunal to follow the Red Bank approach constituted an error of law. The first statements were made in the case of Gover and Others v Propertycare Ltd [2006] ICR 1073 by Buxton LJ at page 1079 (with whom Richards and Lloyd LJJ agreed) when he explained when considering the Polkey issue that he was concerned about introducing technical rules:-
“..into a decision making process that should be a matter for the common sense, practical experience and sense of justice of the Employment Tribunal sitting as an industrial jury” [14];
and that
“…an appellate court should tread very warily when it is being asked to substitute its own impression and judgement for that of the tribunal” [22].
“(7) Having considered the evidence, the Tribunal may determine (a) That if fair procedures had been complied with, the employer has satisfied it - the onus being firmly on the employer - that on the balance of probabilities the dismissal would have occurred when it did in any event. The dismissal is then fair by virtue of s.98A (2)(b). That there was a chance of dismissal but less than 50%, in which case compensation should be reduced accordingly. (c) That employment would have continued but only for a limited fixed period. The evidence demonstrating that may be wholly unrelated to the circumstances relating to the dismissal itself, as in the O'Donoghue case. (d) Employment would have continued indefinitely.”
“(5) An appellate court must be wary about interfering with the Tribunal's assessment that the exercise is too speculative. However, it must interfere if the Tribunal has not directed itself properly and has taken too narrow a view of its role.”
VIII. Conclusion