United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0028/16/JOJ

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

 

 

                                                                                                             At the Tribunal

                                                                                                             On 27 June 2016

 

 

 

Before

HER HONOUR JUDGE EADY QC

PROFESSOR K C MOHANTY JP

MR T STANWORTH

 

 

 

 

 

MISS A SANDLE                                                                                                      APPELLANT

 

 

 

 

 

ADECCO UK LIMITED                                                                                         RESPONDENT

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR EDMUND WILLIAMS (of Counsel) and MS CAROLINE MUSGRAVE (of Counsel) Instructed by: Slater and Gordon (UK) 50-52 Chancery Lane London WC2A 1HL
For the Respondent	MISS NAOMI OWEN (of Counsel) Instructed by: Adecco Group UK & Ireland Millennium Bridge House 2 Lambeth Hill London EC4V 4BG

 

 

SUMMARY

UNFAIR DISMISSAL - Dismissal/ambiguous resignation

 

Unfair dismissal - dismissal - section 95(1)(a) Employment Rights Act 1996

The Claimant was an agency worker employed by the Respondent but working on assignment to another entity.  When her assignment came to an end, the Respondent failed to take proactive steps to find other work for the Claimant and made little attempt to contact her, assuming that she was not interested in further agency work.  For her part, the Claimant also made no attempt to contact the Respondent.  On the Claimant’s subsequent claim of unfair dismissal, the ET found that she could have claimed constructive dismissal but had not done so.  It further found that there had been no direct dismissal by the Respondent: it had done nothing to communicate a dismissal to the Claimant; the employment relationship was still continuing when the Claimant lodged her claim.  She had not met the burden of proving she was dismissed for the purpose of section 95 Employment Rights Act 1996 and thus could not pursue a claim of unfair dismissal.  The Claimant appealed.

 

Held: Dismissing the appeal.

Accepting that a direct dismissal for the purposes of section 95(1)(a) could be implied from the employer’s conduct and, further, that the circumstances giving rise to the possibility of a constructive dismissal could co-exist with a direct dismissal (Hogg v Dover College [1990] ICR 39 EAT), the employer’s unequivocal intention to dismiss still had to be communicated to the employee.  The burden of proof remained on the Claimant.  The ET had not erred in asking whether the Claimant had established that the Respondent had communicated an unequivocal intention to treat the contract of employment as at an end - that she was dismissed.  And, in the circumstances of this case, had reached a permissible conclusion that she had not.

 

HER HONOUR JUDGE EADY QC

 

Introduction

1.               This is a unanimous Judgment of the Employment Appeal Tribunal.  We refer to the parties as the Claimant and the Respondent, as below, albeit that there were then two Respondents, now only one.  This is the Full Hearing of the Claimant’s appeal against a Judgment of the Manchester Employment Tribunal (EJ Horne, sitting alone on 29 June to 2 July and then on 30 July 2015 in chambers; “the ET”), sent out on 6 August 2015.  Representation below was as before us, save now Mr Williams is assisted by Ms Musgrave and also then the other Respondent, BASF plc, was separately represented by counsel.

 

2.               This matter was allowed to proceed to a Full Hearing by the Honourable Mr Justice Langstaff on one ground of appeal, as follows:

“The ET erred in holding that dismissal was not communicated to [the Claimant], in that [the Respondent] did nothing to communicate a dismissal to her … In particular … the meaning of “termination” in s95(1)(a) [Employment Rights Act 1996] should be interpreted in such a way that provides for the protection and safeguarding of vulnerable employee’s [sic] rights.  In [this case] the dismissal was communicated on an implied, rather than express basis to [the Claimant]. …”

 

3.               In listing this matter before a three-member panel Langstaff J observed that:

“What constitutes dismissal from a contract “of employment” by an agency may involve questions of employment practice and understanding upon which [lay members] are particularly well qualified to speak.”

 

The truth of that observation has been borne out in our deliberations in this case.

 

The Background Facts

4.               The Respondent is a large recruitment and employment business that provides temporary agency workers to its clients.  It operates a number of branches, one of which was based at Stockport, at which the manager was a Mr Scott Orr.  For the Stockport branch, one of the Respondent’s most important clients was BASF plc (“BASF”), the First Respondent in the proceedings before the ET. 

 

5.               The Claimant was employed by the Respondent from November 2011 as an agency worker.  Her contract of employment was with the Respondent but she was assigned to BASF as a commercial lawyer. 

 

6.               As the ET found (see paragraph 36 of its Reasons), the Claimant enjoyed working for BASF and nurtured an ambition to secure a permanent role there:

“36. … By contrast, she had no interest in being employed by the … respondent and noticeably kept Mr Orr at a distance. …”

 

7.               More generally, the ET found that, throughout the assignment, there was little contact between the Claimant and the Respondent (see the ET’s Judgment on the Preliminary Hearing, at paragraph 43). 

 

8.               During the course of 2013, various circumstances arose impacting upon the Claimant’s relationship with BASF.  These included the announcement of a recruitment freeze, which would severely limit her prospects of obtaining a permanent role.  At the same time, however, BASF had concerns over the Claimant’s performance and took the decision that her assignment should be terminated.  It instructed the Respondent to that effect on 30 October, on the same day giving notice to the Claimant that her assignment would end on 30 November 2013.

 

9.               The Claimant worked her notice period with BASF but did not, during that time, attempt to make any contact with the Respondent.  Mr Orr made one attempt to telephone the Claimant on her mobile phone, and left a message on her voicemail, but did not make any further attempts to contact her, either by further phone calls or by email or letter.  He did not proactively enquire of his clients whether they had any vacancies for senior lawyers - that was not his way of doing business - and he did not enquire of any of the Respondent’s other branches as to whether their clients had any suitable vacancies.  Given the Claimant’s previous dealings with the Respondent, Mr Orr assumed she would not be interested in any further assignments; he did not check.

 

10.            The Claimant’s last day at work with BASF was 22 November 2013.  She then took a week of annual leave, and her assignment came to an end on 30 November 2013.  Still neither she nor Mr Orr made any attempt to get in touch with each other. 

 

11.            On 12 February 2014, the Respondent’s payroll department generated a P45 for its own records.  It recorded that the date of termination of the Claimant’s employment was 30 November 2013.  The P45 was, however, not sent to the Claimant (see paragraph 66 of the ET’s Judgment); she only saw it as part of the ET disclosure process.

 

The ET Proceedings, the Relevant Decisions and Reasoning

12.            On 28 February 2014, the Claimant lodged her ET claim, bringing complaints against BASF and the Respondent.  The Respondent accepted the Claimant was its employee but denied it had ever dismissed her.  Following a Preliminary Hearing before EJ Hill in January 2015, it was held the Claimant was an employee of the Respondent, not BASF.  The issue whether she had been dismissed by the Respondent was left for the Full Merits Hearing.   

 

13.            At the Full Merits Hearing, the ET proceeded on the basis that the Claimant had the burden of proving that she had been dismissed so as to meet the pre-condition for a claim of unfair dismissal.  It considered the various ways in which her case was put in this respect.  It rejected her contention that BASF acted as the Respondent’s agent (paragraph 114) or that the Respondent had dismissed her at the behest of BASF (paragraph 118).  On the other hand, the ET found the Respondent had breached a contractual obligation, to use its best efforts to promote the Claimant to its clients to maximise her assignment opportunities.  Had the Claimant resigned from the Respondent’s employment in response to that breach, the ET allowed she might well have been entitled to regard herself as constructively dismissed; but that is not what had happened: she did not communicate any resignation to the Respondent (see paragraphs 116 and 117).  The ET also rejected an argument made on the Claimant’s behalf that her contract of employment was void between assignments (paragraph 120).  On the other hand, it rejected the Respondent’s argument that the employment had terminated by agreement pursuant to a specific clause of the Claimant’s contract (paragraph 121).

 

14.            Specifically, the ET held there had been no direct dismissal of the Claimant by the Respondent: dismissal must be communicated to the employee, and the Respondent had done nothing to communicate a dismissal to the Claimant (paragraph 119).  Taking the view that the adversarial system of justice required it to do no more than consider whether the Claimant had made out her case on dismissal, the ET held that she had not.  That said, it recognised it was unsatisfactory not to explain what it considered had happened to the contract.  It also needed to form a view as to the status of the employment relationship at the time the Claimant’s claim was lodged, for the purpose of a breach of contract claim also before the ET.  It concluded the most likely explanation was that the Claimant remained an employee of the Respondent for far longer than either party had thought.  She had not resigned, and the Respondent had not dismissed her; she had remained employed, albeit in limbo, at the time she presented her claim.

 

15.            Had the Claimant been dismissed, the ET would, in the alternative, have found the dismissal to be unfair.  As the Claimant’s assignment with BASF had been terminated and the Respondent believed that the Claimant was not interested in any further assignments, that was a dismissal for redundancy or, alternatively, some other substantial reason of a kind that would be sufficient to justify the dismissal, but the Respondent had not acted reasonably in this regard.  Mr Orr’s efforts to get in touch with the Claimant were only cursory.  He did not make enquiries of other branches.  He had unreasonably assumed that she would not be interested in other assignments.  That said, the ET was not persuaded that the Claimant would then have asked the Respondent to make proactive enquiries of its clients, and an issue under Polkey v A E Dayton Services Ltd [1987] IRLR 503 HL would thus have arisen.

 

The Appeal and the Parties’ Submissions

16.            As set out above, it is the ET’s presumption that a dismissal must be communicated to the employee that is challenged by this appeal.  For its part, the Respondent resists the appeal, essentially relying on the reasoning provided by the ET.

 

The Claimant’s Submissions

17.            The Claimant’s case is characterised as raising a novel point: whether a dismissal can be implied by the inaction of an employer to find work for its employee.  It is said that this is a point of particular importance for employees employed by agencies. 

 

18.            The Claimant contends the ET erred in holding there had been no dismissal by the Respondent because there had been no communication of dismissal.  That was at odds with the law that permits dismissal to be implied by conduct (and, on this point, certainty was not the only consideration, see per Lord Hope in Gisda Cyf v Barratt [2010] ICR 1475 SC, at paragraph 43).  Further, the ET appeared to assume there could not be a direct dismissal where there was a repudiatory breach such as would warrant a claim of constructive dismissal; that was not so (see, for example, Hogg v Dover College [1990] ICR 39 EAT).

 

19.            The ET’s approach was also at odds with an interpretation of section 95(1)(a) Employment Rights Act 1996 (“ERA”) that provides for the safeguarding of vulnerable employees’ rights (noting in this regard that section 95(1)(a) did not require communication on the part of the employer; see, generally, Barratt).  It was, further, at odds with the direction of EU-derived law in terms of the Temporary Agency Directive enacted in the UK from 2011 in the form of the Agency Worker Regulations 2010 (“AWR”). 

 

20.            Termination by an employer under section 95(1)(a) ERA should be read as covering a situation where, at the end of an assignment, an employment agency employer does nothing to find the employee any further work and subsequently issues a P45 confirming the last date of employment to be the end of that particular assignment.  The Claimant’s interpretation of section 95(1)(a) was the one that best protected the rights of employees, comprehending the need to develop that protection to respond to changes in employment practices such as the rise of agency working.  If an agency was going to be an employer - albeit acting merely as a conduit for pay, as here - then it should be held to the same standards as an employer in an ordinary employment relationship.

 

21.            In response to the Respondent’s submission that this was effectively putting the burden of proof on the employer, the Claimant disagreed.  The burden of showing dismissal stood on the employee, but it was not unknown for an ET to determine an issue on the basis of an omission by an employer.  In this case, the reasonable person would observe that the Respondent was merely a conduit for pay - so much was apparent from the contract and also from how the parties behaved - and would see, in the circumstances of this case, the Respondent’s omission was not nothing.  There was a contractual failure to act that could be sufficient to demonstrate dismissal by conduct.

 

The Respondent’s Submissions

22.            For the Respondent it was contended that to interpret the word “termination” so as to encompass implied communication by way of the Respondent’s inaction would be to make a mockery of the burden of proof.  Such an interpretation was not required in order to preserve vulnerable employees’ rights as suggested by the Claimant and it would be an oppressive interpretation and burden imposed on employers.  If there could be dismissal by inaction, it was very hard to see where the line would be drawn.  The ET’s approach in this case demonstrated a correct application of the relevant legal principles and did not offend the protection of the rights afforded to vulnerable workers.

 

23.            Testing the Respondent’s conduct objectively, as the ET was bound to do (see Martin v Glynwed Distribution Ltd [1983] ICR 511 CA and Willoughby v CF Capital plc [2012] ICR 1038 CA), the ET had concluded that it did nothing to communicate dismissal to the Claimant.  That was a permissible conclusion on the evidence and findings of fact.  Nothing done by the Respondent signified any other intention.  Thus, for example, its failure to send out to the Claimant the P45 it had drafted was at least equally indicative that it did not consider that her employment had terminated.

 

The Relevant Legal Principles - Discussion

24.            The ET was tasked with determining the Claimant’s claim of unfair dismissal.  It is a precondition for such a claim that the employee has been dismissed.  The employee bringing the claim of unfair dismissal bears the burden of proving that this is so.  

 

25.            Dismissal is defined by section 95 ERA 1996, which, relevantly, states:

“95. Circumstances in which an employee is dismissed

(1) For the purposes of this Part an employee is dismissed by his employer if (and, subject to subsection (2) …, only if) -

(a) the contract under which he is employed is terminated by the employer (whether with or without notice),

…

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct.”

 

26.            Determination of this question will require the ET to consider who really terminated the contract of employment (see per Sir John Donaldson MR in Martin v Glynwed Distribution Ltd [1983] ICR 511 CA, at 519G-H).  Where the question of termination is to be determined in the light of language used by an employer that is ambiguous, the test is not the intention of the speaker but rather how the words would have been understood by a reasonable listener in the light of all of the surrounding circumstances (see Martin v Yeoman Aggregates Ltd [1983] ICR 314 EAT); the approach is that of contract law (see Willoughby v CF Capital plc [2012] ICR 1038 CA, at paragraph 26).

 

27.            For the Claimant, it is said that the position is somewhat more nuanced than the importation of a contractual test might imply.  As has been emphasised in a number of cases concerned with defining the effective date of termination for the purposes of section 97 ERA, that is a statutory and not a contractual concept - an approach that recognises the need for the protection and safeguarding of employee rights (see per Lord Hope in Barratt, above) - and that recognition of statutory purpose outweighs other factors including, in certain circumstances, that of certainty.  This approach, the Claimant contends, should also inform this Court’s construction of section 95(1)(a).  We have sought to bear that in mind in what follows.

 

28.            Turning to the specific question raised by the appeal, to the extent the Claimant is saying that determining whether an employer has terminated a contract of employment for the purposes of section 95(1)(a) should allow that to be implied from an employer’s conduct, we do not disagree.  The real issue, however, seems to us to be one of communication. 

 

29.            Thus, referring to the authorities relied on by the Claimant as examples of cases where dismissal has been implied from the employer’s conduct, we recognise that removing an employee from the payroll can amount to termination of the employment contract (see Kirklees Metropolitan Council v Radecki [2009] ICR 1244 CA), but we note that in that case the action in question was known to the employee (“[Mr Radecki] was aware that his employment had been brought to an end”, per Rix LJ at paragraph 48, and also see paragraph 55 and per Toulson LJ at paragraph 47).  Similarly, removing a teacher from one post and offering him different terms on a reduced salary could amount to a summary dismissal (see Hogg v Dover College, supra), but, again, the conduct in question - that from which dismissal was to be implied - was communicated to the employee (per Garland J: “He was being told that his former contract was from that moment gone”).

30.            Where there are no contraindications, the sending of a P45 can also be taken to communicate a dismissal, but it is the receipt of the P45 that is the crucial event (the communication of the employer’s decision to treat the employment contract as at an end); see Kelly v Riveroak Associates Ltd UKEAT/0290/05/DM, per Burton J at paragraph 24.  And, for completeness, we note that the receipt of a P45 may not be the relevant act that determines the question of dismissal: if the dismissal is communicated by some other means at an earlier time, that will be the effective date of termination of the employment contract, not the later receipt of the P45 (London Borough of Newham v Ward [1985] IRLR 509 CA).

 

31.            Turning to the agency context with which we are concerned on this appeal, whether or not it reflects the position of the present case, we proceed on the basis that there may indeed be many agency workers who are “less well paid and realistically have no power to negotiate their own terms”, see per Langstaff J at paragraph 2 of Adecco Group UK & Ireland v Gregory and Anor UKEATS/0024/14/SM and UKEATS/0026/14/SM, a case that we have found helpful in addressing the issues raised by the current appeal.

 

32.            In Gregory, Langstaff J returned to the question identified in Yeomans: who really ended the contract of employment?  He observed:

“14. … That is always going to be difficult in a situation in which there is agency work, where an employee may, for instance, have the services of a number of agencies by which to secure work.  There may be many situations in which it is plain from looking at the relationship between agency and worker that it has ceased.  That will largely be because over a period of time the one provides no work for the other and the other does no work for the first.  If the situation is that the agency has simply withdrawn work which it might otherwise have been expected to provide, a factual conclusion might follow that the agency has by its actions deprived the employee of work and that could, in the relevant context, amount to a dismissal, though it may be very difficult to place a precise date upon it since no definite action will have been taken.

15. The converse is true too.  If an employee simply drifts away, the agency will have them, as it were, on their books, but there will be no meaningful relationship between them.  If the question arises for legal reasons when precisely the relationship ended, the difficulties of analysis are plain.  If the question arises who ended it, again the difficulties may exist.  Where it is the worker who simply drifts away, loses touch and makes no use of services which remain available, then she is in no position to prove, as prove she must if she is to make a claim in respect of her dismissal, that she has been dismissed because the circumstances are at least equally consistent with her having ceased to be an employee from her own wish.  There is no formal resignation in such a case, but there can be no doubt to any objective observer that the relationship has ended.

16. These are all issues for a tribunal, as it seems to me, to determine. …”

 

33.            In that case, the ET had found that there had been a direct dismissal communicated by the Respondent sending out the Claimant’s P45 and a covering letter that stated that it would treat her as dismissed if she failed to make contact within two weeks.  We note, however, that Langstaff J allowed that if the agency had simply withdrawn work that it might otherwise have been expected to provide it might be permissible to conclude that this constituted a dismissal.  This might be characterised as an extension to the case law, allowing for communication of dismissal to be implied, applying an objective test and taking into account all of the circumstances from an employer’s conduct.  Certainly, it is a context specific example of that approach, which we respectfully adopt in the present case.

 

Discussion and Conclusions on the Appeal

34.            We have set out above our understanding of the relevant legal principles applicable to the question raised by this appeal.  We note, further, Langstaff J’s observation when directing that this matter should proceed to a Full Hearing:

“… the answer … may well be that to succeed in a claim for unfair dismissal, an employee has to prove that she has been dismissed.  She did not do so here, and the attempt to say that Adecco dismissed her by inactivity is to place the burden on them to disprove dismissal. …”

 

35.            The Claimant says that the real problem in the present case is that the ET took too restrictive an approach to section 95(1)(a): it neither allowed for the possibility of a case that could give rise to both a constructive and a direct dismissal, nor did it allow for a direct dismissal to be implied in circumstances such as the present case.  The Claimant says the broader approach she urges is all the more important given the need to protect vulnerable workers, such as those who provide services through agencies. 

36.            As we have indicated above, we are alive to what is very often an unequal relationship between employer and employee (particularly in an agency context), and we do not lose sight of the reminder given by the Supreme Court as to the potential vulnerability of employees, as set out in Barratt.  Whilst we note that specific protections are afforded to agency workers through, for example, the AWR 2010, we can accept that our approach to unfair dismissal protection should be informed by Lord Hope’s characterisation of that protection as “part of a charter protecting employees’ rights” (see paragraph 37 of Barratt). 

 

37.            All that said, we note that section 95 - which provides a gateway to unfair dismissal protection - afforded the Claimant the option of herself making clear that she was treating the Respondent’s conduct as amounting to a constructive dismissal (section 95(1)(c)).  It did not close that path to her; she chose not to utilise that route.

 

38.            Notwithstanding the Claimant’s failure to claim constructive dismissal when (as the ET found) she might have done so, we agree that would not be fatal to her case of direct dismissal; the two forms of dismissal can co-exist (see Hogg v Dover College), albeit we would not accept - and do not understand the Claimant’s case to be put so high - that all cases of potential constructive dismissal must also amount to direct dismissals (section 95(1) would not need to distinguish between the two types of dismissal if that were so).  We therefore ask whether the ET’s decision in this case is rendered unsafe by an assumption that a case that could give rise to a claim of constructive dismissal could not also be construed as a direct dismissal?  Did it introduce a false distinction between constructive dismissal and the existence of a direct dismissal?  Did it close off the possibility that the two might coincide in this case? 

 

39.            We do not read the ET’s decision in this way.  In its reasoning, the ET was addressing a number of different alternative ways of putting the Claimant’s case.  It had allowed that the Respondent had acted in breach of its contractual obligation in such a way as would have permitted the Claimant to claim constructive dismissal; that she did not choose to do so was her option.  The ET did not, however, stop there.  It further considered whether the Respondent had done anything that should lead the ET to conclude that it had communicated that it was itself dismissing the Claimant.

 

40.            Did the ET thereby err?  We can see the argument that an ET might get overly fixated on the issue of communication - failing to remind itself as to the language of section 95(1)(a), which requires merely that the employee’s contract “is terminated by the employer (whether with or without notice)”.  Whilst we can see why an ET might look for express language before finding a dismissal under section 95(1)(a) - the employer’s decision to terminate the contract should be unequivocal - and we can see a real danger from lack of certainty, we accept that certainty is not the only relevant criterion.  A dismissal may be by word or deed, and the words or deeds in question may not always be entirely unambiguous; the test will be how they would be understood by the objective observer.  Further, as the case law shows, an employer’s termination of a contract of employment need not take the form of a direct, express communication.  It may be implied by the failure to pay the employee (Kirklees), by the issuing of the P45 (Kelly) or by the ending of the employee’s present job and offer of a new position (Hogg).  In each of those cases, however, there was a form of communication; the employee was made aware of the conduct in question, conduct that was inconsistent with the continuation of the employment contract and in circumstances where there were no other contraindications.  The question is: given the facts found by the ET, given what was known to the employee and to the relevant circumstances of the case, what is the conclusion to be drawn?  Has the employer communicated its unequivocal intention to terminate the contract? 

 

41.            In our judgment, the ET in the present case was not wrong: dismissal does have to be communicated.  Communication might be by conduct and the conduct in question might be capable of being construed as a direct dismissal or as a repudiatory breach, but it has to be something of which the employee was aware. 

 

42.            The Claimant here relies on the Respondent’s omission - its omission to act in accordance with its contractual obligation to proactively seek assignment opportunities for the Claimant, as the ET found.  The Claimant says that, in any standard employment context, this failure to provide her with the work that would thus have resulted would have been sufficient to amount to the communication of a dismissal; just because the employment was with an agency should not introduce any lesser standard.  The difficulty with that point, however is that the circumstances of the Claimant’s employment were not irrelevant to the determination that the ET had to make.  Agency workers may well experience gaps between assignments that will not fit the standard direct employment model; context is everything.  The Claimant’s own response - the failure to treat the Respondent’s conduct as a constructive dismissal - was a relevant consideration in this regard, as was the absence of any finding on the part of the ET to the effect that the Respondent itself considered its contract with the Claimant had come to an end.  It might have completed a P45 for payroll purposes, but it did not send that on to the Claimant. 

 

43.            As Mr Williams acknowledged in argument, allowing that an omission to perform a particular act - to pay an employee or proactively seek out work for them to do - does not mean the burden of proof has shifted to the employer when determining whether there has been a dismissal for the purposes of section 95(1)(a).  The ET could not see that the Claimant had demonstrated that anything had been done by the Respondent to communicate it had dismissed her, that it intended to treat its contract with her as at an end; nothing had been communicated to her, the relationship remained in stasis.  The Claimant had not treated herself as constructively dismissed, and nothing had been communicated to her by the Respondent that the ET concluded was a dismissal.

 

44.            Ultimately, as Langstaff J anticipated, the insurmountable difficulty for the Claimant is that she had to prove that she had been dismissed.  Even allowing that it might have been permissible to imply communication of dismissal by conduct, she was unable to demonstrate that she had, and it is on that basis that her appeal must fail.