Appeal No. UKEAT/0118/13/JOJ
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX
At
the Tribunal
On
19 September 2013
Before
HIS
HONOUR JUDGE PETER CLARK
(SITTING ALONE)
SERVISAIR
UK LTD APPELLANT
MR S D O’HARE AND OTHERS RESPONDENTS
Transcript of Proceedings
JUDGMENT
SUMMARY
REDUNDANCY – Definition
Two-fold test in Murray v Foyle Meat
[2000] 1 AC 51 considered. Incorrectly applied by Employment Judge in finding
no redundancy situation by reference to diminution in the work, not employees
doing the work (Employment Rights Act s.139(1)(b)).
Employer appeal allowed. Case remitted to Employment Tribunal for
re-hearing.
HIS HONOUR JUDGE PETER
CLARK
1.
I began my judgment in Safeway Stores Ltd v Burrell
[1997] IRLR 200 with the question: what is redundancy? That question appears
to arise again in the present case, which came before
Employment Judge Sage, sitting alone at the London South Employment
Tribunal on 15 and 16 October 2012 to hear claims of unfair
dismissal brought by Mr O’Hare and nine others, the Claimants, against
their former employer, the Respondent, Servisair UK Ltd. Having considered the
matter in chambers on 22 October, the Judge delivered herself of a 27‑page
reserved judgment promulgated with reasons on 20 November 2012. She
upheld the complaints, finding that the Respondent had failed to establish a
potentially fair reason for the Claimants’ dismissals, thus rejecting the
Respondent’s principal case that the reason was redundancy and the alternative
case that it was some other substantial reason. It followed that she did not
find it necessary to consider the fairness of the dismissals under
section 98(4) of the Employment Rights Act 1996
(ERA). Absent a potentially fair reason, it followed that the dismissals were
unfair.
2.
The question arose in Burrell due to two earlier
conflicting lines of authority that adopted either the so‑called contract
or function tests for interpreting the definition of redundancy contained in
section 139(1)(b) ERA, which provides, so far as is material:
“(1) For the purposes of this Act, an employee who is dismissed
shall be taken to be dismissed by reason of redundancy if the dismissal is
wholly or mainly attributable to—
[…] (b) the fact that the requirements of that business—
(i) for employees to carry out work
of a particular kind […]
have ceased or diminished, or are expected to cease or
diminish.”
3.
In short, I eschewed both the contract and the function tests in Burrell,
preferring to apply the words of the statute following an analysis of the
earlier cases. The debate as to the proper meaning and effect of
section 139(1)(b) ERA was finally resolved by the House of Lords in the
Northern Irish Case of Murray v Foyle Meat Ltd [2001] 1 AC 51.
In giving the leading speech, with which each of their Lordships agreed, Lord
Irvine of Lairg, Lord Chancellor, in approving my analysis in Burrell,
put the matter clearly and concisely (page 56E‑F) in this way:
“My Lords, the language of paragraph (b) is in my view
simplicity itself. It asks two questions of fact. The first is whether one or
other of various states of economic affairs exists. In this case, the relevant
one is whether the requirements of the business for employees to carry out work
of a particular kind have diminished. The second question is whether the
dismissal is attributable, wholly or mainly, to that state of affairs.”
4.
I shall refer to the first question as “the redundancy situation”
enquiry and the second as “the causation issue”.
5.
As to the first, whether a redundancy situation exists, I emphasise the
two important words drawn directly from the statute “for employees”. The
question is not whether work of a particular kind done by the Claimant has
ceased or diminished or is expected to do so in the future but whether the
requirement for employees to do that work has ceased or diminished; in
other words, reduced headcount. There is a further wrinkle in that question
that has emerged more recently and that I raised with counsel in this case: can
a shift from full‑time to part‑time employees carrying out the
relevant work give rise to a redundancy situation? HHJ Ansell and members
thought not in Aylward v Glamorgan Holiday Homes Ltd
UKEAT/0167/02. However, that analysis was fully considered and rejected by
Langstaff P in Packman v Fauchon UKEAT/0017/12, 16
May 2012. The EAT in that case held that the replacement of a full‑time
worker by a part‑time worker did give rise to a redundancy situation.
The question is whether there has been a relevant reduction in full‑time‑equivalent
(FTE) headcount.
6.
In advancing the Respondent’s appeal Mr Andrew Burns submits
that the Judge fell into error by failing to ask herself the correct redundancy
situation question. I agree, for the following reasons. I begin with the
relevant factual background. The Respondent provides ground‑handling
services to airlines at Gatwick Airport. Each of the ten Claimants commenced
employment with the Respondent as dispatchers on grade CA4. They were later
promoted to the higher grade CA5.
7.
There was much debate in the evidence as to the distinction, if any, in
the particular kind of work done by grade 5 as opposed to grade 4
dispatchers as at the time of the dismissals in late 2011. That issue was
resolved by the Judge, who found as fact (see paragraph 48) that after
2008 there was no difference between grade 4 and 5 dispatchers.
8.
It was the evidence of Mr Newman, the Respondent’s head of
operations at Gatwick (see his witness statement, paragraphs 22‑27),
that by the autumn of 2011 the number of turnarounds – that is, flights dealt
with in and out of the airport – was expected to drop by 34 per cent in
the period August 2011 to January 2012. As a result of the drop in
business and demand it was necessary to cut costs by reducing the employee
headcount. As the Judge records at paragraph 22 of her reasons, at the
outset of the consultation process the recognised union, Unite, was informed of
the possibility of 57 redundancies and the possibility of 47 alternative
positions; in other words, a reduction in headcount.
9.
Missing from the Judge’s fact‑finding is any finding as to whether
the number of employees engaged in the relevant dispatch at
grades 4 and 5 was reduced or was expected to diminish at the
end of this process. I shall explore the possible reason for that lacuna in
due course. However, I note that there was evidence before the Judge,
particularly at paragraph 27 of Mr Newman’s witness statement, by
reference to the schedule at page 192 of the trial bundle, now EAT
supplementary bundle, page 31, as to the proposed reductions in headcount from
30 to 25 and a reduction in full‑time posts from 23 to 11. If accepted –
and I do not understand from the notes of Mr Newman’s cross‑examination
or Mr Cole’s submissions before me today, he having appeared below, that
it was challenged – that seems to me to demonstrate, prima facie at any rate,
that a redundancy situation existed at the time of these dismissals in that
there was a diminution or expected diminution in the Respondent’s requirement
for employees to carry out work of a particular kind; that is, the work of
dispatchers, whether at grade 4 or 5, there being no material difference
between those grades.
10.
How, then, did the Judge conclude (paragraphs 62‑64) that
there was here no redundancy situation? The short answer, in my judgement, is
that she applied the wrong test under section 139(1)(b). That error may
be traced back initially to the pleadings in the case. Both parties were
represented by experienced solicitors from the outset. Generic form ET1
Particulars of Claim and ET3 Grounds of Resistance, with individual
variations, were lodged. I take the case of Mr O’Hare by way of typical
example. In his form ET1 Particulars it is said at paragraph 7:
“As a result the Claimant contends that this was not a genuine
redundancy situation. The new CA4 role is identical to the CA5 role. In
particular there was no reduction of work of a particular kind.”
11.
In response the Respondent contended at paragraph 6 of the Grounds
of Resistance:
“Therefore, in or around August 2011 the Respondent
considered that as a result of this and the need to reduce costs generally it
potentially needed to reduce headcount. As it proposed up to 57 redundancies
in total (24 of which were CLDs [dispatchers]), the Respondent initiated
collective consultation procedures with Unite […].”
12.
And at paragraph 28 they submitted:
“The Respondent contends that with regard to this reason, its
size and administrative resources, the dismissal was fair in all the
circumstances. In particular the Respondent contends that there was a reduced
requirement for employees to carry out work of a particular kind.”
13.
It is plain to me that the Claimant was there advancing an argument that
was wrong in law. The question, I repeat, is not whether there was a reduction
in work of a particular kind but in the number of employees to do it. I do not
understand Mr Cole to argue to the contrary in this appeal.
14.
In her reasons the Judge correctly sets out the terms of
section 139(1) at paragraph 53 and records at paragraph 55 that
she was specifically referred to Murray. However, in her
reasoning at paragraphs 62 and 64 she then mis‑states the
statutory wording. At paragraph 62 she said:
“The Respondent’s primary case is that the Claimant’s [sic] were
dismissed by reason for [sic] redundancy relying on Section 139(1)(b)
namely that requirements for the Respondent for work of a particular kind to be
carried out has ceased or diminished.”
15.
That is not what the subsection says. It refers to the requirement for
employees to do the work diminishing. That is the provision invoked by the
Respondent at paragraphs 6 and 28 of their response and in their
closing submissions to the Employment Judge recorded in the reasons at
paragraphs 57.22 and 57.24.
16.
The Judge then went on to apply the wrong test in practice when she
opined later in paragraph 62:
“The need of the Respondent for work of a particular kind had
effectively diminished or ceased for those employed at Gatwick in 2008.”
17.
Then, at paragraph 64 she says:
“The test set out in Murray v Foyle Meats
requires the Tribunal to ask two questions the first of which is whether the requirement
of work of a particular kind had ceased or diminished. On the fact before me
there is no evidence that the requirement of work of a particular kind had
ceased or diminished at the time the Claimants were dismissed.”
18.
In so holding, it seems to me, the Judge fell into error. In resisting
the appeal Mr Cole has sought to persuade me that at
paragraphs 62 and 64 the Judge used a possibly infelicitous
shorthand expression. She plainly had in mind the correct statutory test as propounded
in Murray, to which she had earlier referred. I disagree. It is
highly significant, in my judgment, that the Judge makes no reference to the
unchallenged evidence of Mr Newman and the reference to the form HR1
schedule at page 192 of the ET bundle. That was evidence showing an
expected diminution in headcount for dispatchers largely met by five voluntary
redundancies, including the Claimant Mr Harmer (see the reference to him
in the reasons at paragraph 28). Not only was the test mis‑stated,
the wrong test was applied to the facts.
19.
However, that still leaves the second, causation, question.
Mr Cole submits that even if there was a redundancy situation at
stage 1, the Judge went on to consider the causation question at
paragraph 65 and reached a permissible conclusion that dismissal was not
attributable to redundancy and that no potentially fair reason for dismissal
was made out. I have carefully considered the reasoning at paragraph 65
and am unable to accept Mr Cole’s submission. The causation question
there posed by the Judge is whether the dismissal was attributable as a matter
of causation to that state of affairs. The state of affairs can only refer
back to the finding at paragraph 64 that there was no diminution in the
requirement for work of a particular kind (the wrong test). Curiously at
paragraph 65 the Judge then conflates the diminution in employees and work
of a particular kind in saying:
“The work carried out by the CA4 and CA5 grades were [sic]
identical as at 2011 when the dismissals took place. The dismissal was not
attributable to the reduction in the requirement for employees to carry out
work of a particular kind.”
20.
In doing so, she has mistakenly thought that because there was no
diminution in the type of work carried out by dispatchers, whether on
grade 4 or 5, that somehow answered the relevant question, which
is whether there was a diminution in the number of employees required to carry
out that work. That question has not been answered. Instead, the Judge went
on to find (paragraph 65) that the reason for dismissal was that the
Respondent no longer wished to pay the grade 5 Claimants the higher rate
of pay for a skill they had no further use for; the work could be done by
grade 4 dispatchers at a lower rate. That may well be so; I have never
encountered a redundancy exercise that was not cost-driven. However, that
motivation does not prevent a dismissal from being by reason of redundancy.
Having failed to correctly ask herself the first question, I cannot rely on her
answer to the causation question.
21.
It follows, in my judgment, that this decision cannot stand.
Mr Burns suggested that I rule that a redundancy situation existed and
remit the question as to the reason for dismissal and, if redundancy, the fairness
or otherwise of the dismissal under section 98(4) to a fresh Tribunal for
rehearing. I shall allow the appeal and remit the matter to a fresh Tribunal.
However, both the redundancy situation question and the reason for dismissal,
the causation question, will remain at large. My difficulty is that there are
insufficient findings of fact in the original decision for me to conclude with
the necessary degree of certainty on appeal that there was a redundancy
situation; that is, a diminution in the Respondent’s requirement for employees
to do the work of dispatchers.
22.
It follows that the case is remitted to be heard afresh by the new
Tribunal, which may, again, consist of an Employment Judge sitting alone.
