LORD JUSTICE SULLIVAN
Introduction
1.
In a Judgment dated 7 October 2010 the Employment Tribunal found by a
majority that the Appellants had been unfairly dismissed. In a Judgment dated
16 June 2011 the Tribunal unanimously concluded that applying the principle in Polkey
v A E Dayton Services Ltd [1988] AC 344 (‘Polkey’) the
likelihood of the Appellants being made redundant if a fair redundancy
procedure had been adopted was 100% and reduced their compensatory awards
accordingly. The Appellants appeal against the Tribunal’s 100% Polkey
finding.
2.
In a nutshell the Appellants contend that the Tribunal’s Polkey
reasoning did not take proper account of the conclusions of the majority in the
first Judgment. On behalf of the Appellants, Ms Martin did not contend that
there would have been no likelihood whatsoever of any redundancy, she
realistically accepted that there was some chance of redundancy but she
submitted that prospect was fairly modest. We made it clear to the parties that
the question for us was not whether we would have made 100% Polkey
finding but whether the Tribunal erred in law in making its 100% Polkey
finding.
Background
3.
The background is set out in some detail in the Tribunal’s two Judgments
and a brief summary will suffice for present purposes. The Appellants worked
for the Respondent as welders, the Respondent erroneously regarded them as
self-employed but the Tribunal at a pre-hearing review concluded that they were
employees. The Respondent provided welders to the railway industry, its main
customer was Network Rail.
4.
In April 2009 there was a reduction in the size of the railway
maintenance industry generally because the Government had allocated a smaller
budget for that purpose, and more particularly the Respondent lost its Network
Rail contracts, save for one contract in Scotland. Other rail maintenance
companies suffered a loss of work at that time and one of them, Amey, gave up
directly employing welders and offered its work to the Respondent to cover its
contracts with Network Rail. Amey thus became the Respondent’s principal
customer.
The Tribunal’s first Judgment
5.
The loss of welding work by the Respondent after 1 April 2009 was
described by the Tribunal as ‘dramatic’. Figures before the Tribunal showed
that a turnover in 2008 of £1.669 million of which £1.263 million was derived
from Network Rail and £342,000 was derived from Amey had reduced in 2009 to
£819,000 of which £218,000 was derived from Network Rail and £580,000 from
Amey. For convenience I have rounded up the figures referred to in paragraph 28
of the Tribunal’s first Judgment to the nearest £1,000.
6.
Because the Respondent did not appreciate that its welders were
employees, it did not embark on a redundancy procedure for them, although other
employees were made redundant. The Respondent ceased paying its welders a
weekly retainer and shared out the much reduced amount of welding work between
them. The Tribunal heard evidence of the factors which the Respondent had used
in allocating the reduced amount of work. In addition to accreditation with
Amey, which was the principal factor, those factors were quality, reliability,
geography (that is to say where the welder lived) and pairings because two
welders worked together and at least one of any pair had to be a qualified
welder and able to stamp his own welds.
7.
In its first Judgment on liability, the Tribunal concluded that the
Appellants had been assured by the Respondent that the reduced amount of work
would be allocated fairly but the Respondent had failed to honour that promise.
This failure had entitled the Appellants to resign and to claim constructive
dismissal. The Tribunal made a number of other criticisms of the Respondent’s
conduct.
8.
When considering the claim of Mr Budge (then known as Mr Baker) the
Tribunal said in paragraphs 98 and 99 of its Judgment:
“98. The Respondent attributed [Mr] Baker’s lack
of work after July partly to his loss of Amey approval following some defective
welds on 10 June but, with work on another site and re-assessment, he could
have regained Amey accreditation. The Respondent made no effort to enable him
to regain that accreditation.
99. The other part of the Respondent’s explanation was that Mr
Baker lost his national registration as a qualified welder on 4 July because he
was not reassessed by that date. Mr Wilson, the welding manager who was going
to re-assess him, told us that it had been arranged for him to work alongside
Mr Baker and re-assess him on the last possible day - 4 July. However, he
claimed, Mr Baker telephoned a day or two earlier and said that there was no
need for the assessment because he was going to join another company - Bridgen.
Mr Baker said that he had spoken to Mr Wilson from time to time about jobs with
other companies but denied making a call to say that the assessment had become
unnecessary. On that conflict of evidence, we prefer the evidence of Mr Baker
because continued national accreditation was essential to him and it is
inherently unlikely that he would have failed to take the opportunity on the
last day when renewal was a straightforward procedure. Moreover, Mr Wilson was
responsible for checking the dates when his welders needed their assessments
and he chose to leave Mr Baker’s until the last possible day, which does not
indicate any keenness to retain Mr Baker’s services.”
9.
In respect of Mr Martin, the Tribunal said in paragraphs 101 and 102:
“101. We accept Mr Martin’s evidence that one of the attractions
of the job which he was offered by the Respondent was that he would be trained
as a qualified welder. There was no suggestion by the Respondents’ witnesses
that he was told that this was a mere possibility, dependent on there being
three other trainees, and that it might never take place. After two and a half
years of employment by the Respondent, without the promised training, we
consider that the Respondent is in fundamental breach of contract.
102. We have already explained our conclusion
that work was not allocated fairly to the three Claimants. One factor which
made it more difficult for Mr Martin to obtain work was the removal of his
company van. By stocking consumables in his garage, he had been self-sufficient
for many jobs but used the van to travel with his equipment and consumables to
the sites. In our view, the removal of the van placed Mr Martin at an unfair
and unwarranted disadvantage in being allocated work.”
The Tribunal’s second Judgment
10.
In its second Judgment the Tribunal referred to the case of Polkey
and said that it would consider what would have been the likely outcome if the
Respondent had taken appropriate steps by way of a redundancy procedure; see
paragraph 44.
11.
The Tribunal then reached certain conclusions which were common to both
of these Appellants. Before the Tribunal there was a third Claimant, Mr Howard,
but he has not appealed to the Employment Appeal Tribunal.
12.
The Tribunal concluded that because of the substantial reduction in the
volume of welding work the Respondent would have declared a substantial
proportion of its welding workforce redundant in a redundancy procedure that
would have begun in March 2009. In paragraph 59 of its second Judgment, the
Tribunal said:
“59. In summary, if the Respondent had begun a
redundancy procedure at any time in 2009, it is certain that it would have
reduced the workforce of welders to no more than 14 and, if it had understood
their employment status, it is more likely that it would have reduced to even
lower levels. It is against that scale of redundancies that we have to measure
the Claimant’s prospects of avoiding being selected for redundancy in such a
procedure.”
13.
The Tribunal then considered what criteria would be likely to have been
applied by the Respondent in such a procedure and said this in paragraph 60:
“We heard evidence as to the criteria according to which the
available work was distributed during the Claimant’s employment in 2009 and it
seemed to us that it is highly likely that these would have been the criteria
used.”
14.
In paragraph 61 of its second Judgment, when dealing with the criteria
and their impact, the Tribunal said:
“The most important criterion was Amey accreditation. Fewer
welders were Amey approved than the number who could stamp welds for Network
Rail. Amey provided 85% of welding turnover after 1 April 2009. None of the
Claimants possessed such accreditation during or shortly before the respective
dates when their employments ended. This alone is likely to have proved a
major negative factor for all three Claimants, making them highly likely to
have been selected for redundancy.”
15.
The Tribunal then referred to the other four criteria and considered how
the Appellants faired against them. In paragraphs 63 and 64 it said:
“63. The change of principal work provider from
Network Rail to Amey had an adverse geographic impact on the Claimants. The
Network Rail contract was for its western territory, which covered from Cornwall to Bristol, as well as South Wales. By contrast, Amey’s work was predominantly
in South Wales, where they had a large re-signalling programme at Newport. The Claimants lived in Somerset, so they were no longer conveniently located.
This would have been another significant adverse factor affecting all three
Claimants.
64. Of the 14 welders who remained after November 2009, all
except one was based in Wales and we were told he normally undertook work in Scotland. Most of those who left during 2009 lived outside Wales and included the ‘pairs’
of the Claimants. Thus, geographic and pairing considerations would have
adversely affected the Claimant’s prospects in any redundancy procedure.”
16.
The Tribunal then considered the three Claimants individually. Its
conclusions in respect of Mr Baker in paragraphs 67 and 68 were as follows:
“67. The criteria would have applied to Mr Baker as
follows:
67.1 Amey: Mr Baker was Amey accredited until his
accreditation was suspended by Amey on 10 June. Moreover, his ability to stamp
welds for any company lapsed with his welding qualification on 4 July. So, a
major negative factor (Amey) would have become an even worse negative after 4
July.
67.2 Quality: Mr Baker lost his Amey accreditation because he
carried out and stamped three welds on 10 June which were found to be
defective, so the Respondent would have been likely to score Mr Baker adversely
under this heading.
67.3 Reliability: We were not told of any complaints about the reliability
of Mr Baker’s attendance. So, we conclude that this would have been a positive
score.
67.4 Pairings: His normal pair was Mr Howard until the latter
resigned on 21 May, leaving him without a regular pair. Mr Martin could have
been paired with him until Mr Baker lost first his Amey accreditation and then
his welding qualification - thereafter such a pairing would have lacked a
qualified welder. So, the pairing heading would have yielded another negative
score.
67.5 Geography - Mr Baker lived in Taunton, Somerset. This
would have been another significant negative factor.
68. Mr Baker would have been among the lowest scoring welders in
any redundancy procedure - with low scores on Amey (after 10 June), Quality,
Pairings and Geography headings and a positive score only on one heading. So,
we conclude that there is a 100% probability that he would have been selected
for redundancy either in March or on 26 October (his effective date of
termination).”
17.
The Tribunal’s conclusions in respect of Mr Martin in paragraphs 69 and
70 were as follows:
“69. The criteria would have applied to Mr Martin
as follows:
69.1 Amey: He was not a qualified welder - working only an
assistant - and therefore could not be accredited by Amey. This would have
been a significant negative factor.
69.2 Quality: We were not told of any complaints about the
quality of his work or about any exceptionally good quality work. So, we
conclude that this would have been a neutral factor.
69.3 Reliability: We were not told of any complaints about his
reliability. So, again, we conclude that this would have been a positive
score.
69.4 Pairings: His normal pair was Mr Roger Wilkins, who was
Amey accredited, but Mr Wilkins left in mid-April. Thereafter, Mr Martin
lacked a regular partner and no qualified welder was available in or near Somerset after Mr Baker lost first his Amey accreditation on 10 June and then his welding
qualification lapsed on 4 July. Finally, from 26 October, there was not even
another of the Respondent’s welders living anywhere near him. So, this would
have been an increasingly negative score.
69.5 Geography: Mr Martin lived in Weston-super-Mare, Somerset. This would have been another significant negative factor.
70. Mr Martin would have been among the lowest scoring welders
in any redundancy procedure, with negative scores on Amey, Pairings (after
mid-April and especially after 4 July) and Geography headings and, on the other
two headings, one neutral and one positive score. So, we conclude that there
is a 100% probably that he would have been selected for redundancy either in
March or on 18 November 2009 (his effective date of termination).”
Discussion
18.
In our Judgment the Tribunal directed itself as to the correct question
by reference to Polkey. We are satisfied that it did not fall
into the error very recently identified by the President of the Employment
Appeal Tribunal, Langstaff P, in Ministry of Justice v Parry
UKEAT/0068/12/ZT of adopting an “all or nothing” approach as to whether
redundancy was likely or unlikely if the Respondent had adopted a fair
redundancy procedure.
19.
Although Ms Martin submitted in her skeleton argument that the Tribunal
should have considered whether the Respondent ought to have applied different
criteria for deciding who to make redundant under a fair redundancy procedure,
we are satisfied that the Tribunal was entitled to conclude that it was likely
that the Respondent would have used the same criteria as it had used to
distribute the reduced amount of work. We are not here concerned with the issue
of redundancy in the abstract but with redundancy in particular circumstances
where the Respondent had lost a major customer, where that customer had been
replaced by another customer, Amey, which had its own specific requirements as
to accreditation and location of the available welding work.
20.
It seems to us that the Tribunal’s conclusion that there would have been
a substantial number of redundancies was inevitable given the dramatic
reduction in the amount of welding work. As I have mentioned, Ms Martin
accepted that there was some chance of redundancy but submitted that the chance
was not very great. During her submission she pointed to the fact that welding
work had picked up in 2009. However, we are bound by the Tribunal’s findings of
fact and on those findings there was undoubtedly a substantial likelihood of
redundancy. The only question is whether the Tribunal was entitled to conclude
that that likelihood was as high as 100%.
21.
When giving permission to appeal on 30 April 2012, HHJ David Richardson
summarised the issue as follows in paragraph 12 of his Judgment:
“It is arguable that the Tribunal has not reflected in its Second
Judgment findings which it made in the reasons for the First Judgment; see
especially paragraphs 98, 99, 100, 101 for the majorities’ reasons for the First
Judgment. It is arguable that the fact that the Respondent was in breach of
contract and had behaved unfairly as regards the way it dealt with training and
accreditation, ought to have been taken into account by the Tribunal in it’s Polkey
reasoning. Could and would the Respondent have dismissed fairly on the basis
that an Amey accreditation was required when it had treated the Claimants in
the way the Tribunal found at the First Hearing?”
22.
Ms Martin pointed to the Tribunal’s conclusion that although Mr Baker
had lost his Amey accreditation following some faulty welds on 10 June, with
work on another site and re-assessment he could have regained that
accreditation. Re-assessment was not a complicated or particularly onerous
procedure; it was simply a question of going out on the following shift and the
quality of the welds being re-assessed. Although there was no express finding by
the Tribunal as to how easy or difficult the process of re-assessment would
have been, it seems to us that the fact that the Tribunal concluded that the
Respondent was to be criticised for making no effort to enable Mr Baker to
regain his accreditation suggests a recognition by the Tribunal that
re-accreditation was a relatively simply and straightforward process which the
Respondent could and should have facilitated.
23.
So far as the loss of Mr Baker’s national welding registration, the
Tribunal found that that was due to failures on the part of the Respondent to
make the necessary arrangements until the last possible moment.
24.
As far Mr Martin is concerned, Ms Martin’s submissions were threefold;
first the fact that he was still an assistant welder and not a fully qualified
one was, on the Tribunal’s findings in its first Judgment, because of the
Respondent’s failure to honour its promise that he would be trained; see paragraph
101 of the first Judgment. We were told that this training would involve a
three week course and thereafter working on the job for six months, effectively
under the oversight of an experienced welder. Secondly Ms Martin submitted that
Mr Martin was unfairly disadvantaged in terms of the location criterion because
his van had been removed from him; see paragraph 102 of the first Judgment.
Thirdly, in any event, as an assistant welder, he could have still have been
paired with Mr Baker if the latter had been fairly treated by being enabled to
regain his Amey accreditation.
25.
On behalf of the Respondent, Mr Rees submitted that the Tribunal was not
required to speculate. While a hypothetical fair redundancy procedure had to be
assumed, that hypothetical fair procedure had to be applied to the facts as the
Tribunal had found them to be after 1 April 2009. On the facts as found by the
Tribunal Mr Baker had lost his Amey accreditation in July, Mr Martin was not a
qualified welder and without a qualified welder as a pair he would have failed
the pairing criterion.
26.
We accept the Tribunal is not required to speculate but it was a central
plank of Mr Rees’s case on behalf of the Respondent that this is one of those
appeals where the Tribunal was in a position to reach conclusions as to what
would have been the likely outcome of a fair redundancy procedure and what that
fair procedure would be likely to have been.
27.
It is common ground between the parties that although the other criteria
were relevant and would have been applied, the Amey accreditation criterion was
the most important factor. The difficulty in our judgment with Mr Rees’s
submission that the hypothetical fair redundancy procedure had to be applied to
the facts as found by the Tribunal, and the Tribunal in its first Judgment had
found that the fact that Mr Baker, having lost his accreditation with Amey, had
not been enabled to regain it was part and parcel of the Respondent’s own
unfair treatment of him; paragraph 98 of the first Judgment.
28.
In respect of Mr Martin, the Tribunal found that the reason why he was
still an assistant welder was because the Respondent had failed to honour its
promise to train him to be a fully qualified welder. In applying the most
important criterion, Amey accreditation, a fair redundancy process would have
taken into consideration the fact that Mr Martin’s lack of accreditation was
due, on the basis of the Tribunal’s conclusions in its first Judgment, to the
Respondent’s own unfairness, but this issue is not addressed at all in the
Tribunal’s second Judgment.
29.
Mr Rees submitted that in a situation where the Respondent had a surplus
of qualified welders it would have been most unlikely that even acting fairly
it would have gone to the time and expense of training Mr Martin to be a
qualified welder. It seems to us that there is some force in that submission
but on the Tribunal’s findings in paragraph 98 of the first Judgment, the
position in respect of Mr Baker is very different. Regaining his Amey accreditation
was not a difficult matter, hence the Tribunal’s criticism of the Respondent
for making no effort to enable him to regain his accreditation, and if Mr Baker
had not been treated unfairly and had been able to regain his Amey
accreditation and to retain his national registration then, of course, he would
have been available as a fully qualified welder as a pair for Mr Martin as an
assistant welder even if the Respondent’s failure to give Mr Martin training
was ignored. The Respondent’s unfair removal of Mr Martin’s van had placed him
at a further disadvantage, but it does seem that the principal reason why the
Tribunal found that Mr Martin would have been among the lowest scoring welders
was his lack of Amey accreditation because he was not a qualified welder and
the unavailability of a qualified pair for him.
Conclusion
30.
For these reasons we have concluded that the Tribunal did err in
reaching the conclusion that the Polkey reduction should be 100%
in that it failed to take account of its own conclusions in its first Judgment,
in particular paragraphs 98 and 99 and 101 and 102 when considering how the
Respondent would have applied the criteria, in particular the all important
Amey accreditation criterion, if it had been operating a fair redundancy procedure.
31.
We would like to make it clear that we did not accept Ms Martin’s
submission that the risk of redundancy under a fair procedure would have been
relatively small. We are satisfied that it would have been in excess of 50%. We
do not say that it could not have been as much as 100% but in deciding what the
appropriate percentage should be, the Tribunal should have full regard to its
conclusions that I have mentioned in its first Judgment. We are not in a
position to reach any finding ourselves as to that matter. Regrettably the
matter must be remitted to the Tribunal. We have considered whether it ought to
be remitted to a different Tribunal. In our view, the balance of advantage lies
clearly with remitting it to the same Tribunal which will be well familiar with
the facts having already given two Judgments in the matter. For those reasons
this appeal is allowed.
