Redundant Employees were Unfairly Dismissed

In the EAT case of Contract Bottling Ltd v Cave (1) and McNaughton (2) it was held that the reason for the Appellants’ dismissals was, indeed, redundancy even though the jobs they had both performed continued to exist after their dismissals. How so?

The key statutory provision is section 139(1) of the ERA 1996, which defines redundancy in the following way:

“For the purposes of this Act an employee who is dismissed should be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

Have ceased or diminished or are expected to cease or diminish.”

In this case the employer’s case was that it had a reduced requirement for employees to carry out work of a particular kind. However, strangely, although the cuts were only needed amongst administration and accounts staff, it decided to put ALL its staff in the pool and apply a generic selection matrix in order to determine who would be dismissed. What this meant was that people were retained in administration and accounts and others from other departments where such a reduction in headcount was not required, were dismissed. The Employment Tribunal mistakenly held that, because the individuals who were dismissed were not from the departments where the reduction in headcount was needed, their dismissals could not have been by reason of redundancy. However, the EAT overturned this decision on the basis that it was perfectly clear that there was a reduced requirement in the company for employees to carry out work of a particular kind. It was irrelevant, for the purpose of the definition, whether the pool from which the staff were selected went beyond the areas where reduction in headcount was needed. What the pool for selection does is help determine whether or not the decision to dismiss for redundancy was fair.

As a result, the EAT upheld the company’s appeal against the Tribunal’s finding that the reason for the dismissals was not redundancy. However, it agreed with Tribunal’s finding that the dismissals were, nevertheless, unfair. It then remitted the case back to the original Tribunal for it to assess whether the compensation awarded to Cave and McNaughton should be subject to a Polkey reduction on the basis that they would likely have been dismissed anyway even if a fair procedure had been followed.

Interestingly, the original tribunal’s finding of unfair dismissal was not centred around the somewhat unusual (to put it mildly) pool for selection, but was instead highly critical of the process for selection from that pool. This case is therefore also useful as an illustration of how difficult it is for an employment tribunal to criticise the pool from which employees are selected for redundancy provided the employer can (a) show it has given real consideration to the pool and (b) provide evidence to establish that it was not outside the range of reasonable responses to select from such a pool.

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The Dismissal Vanishes!

Beware the employer who reinstates an employee following a successful appeal against dismissal but then seeks to impose conditions to the reinstatement, particularly if the original decision to dismiss was based upon a flawed disciplinary or capability procedure.

In the recent EAT case of Thomson v Barnet Primary Care Trust UKEAT/0247/12, a district nurse was summarily dismissed on capability grounds.  She lodged an appeal and was successful.  So far so good and the PCT probably felt it was out of the woods.  However, although she was reinstated with full back pay for the period between the initial dismissal and the outcome of the successful appeal, her employer, a primary care trust said she could only actually return to work if she accepted (a) a final written warning to remain on her file for three years; (b) attendance on a training programme and (c) a competency assessment.  She was suspended on full pay whilst she decided whether to accept these conditions.  After a period of time during which the PCT and the nurse were wrangling over these conditions, she resigned claiming constructive dismissal, stating that the reasons for her resignation were the fact that the PCT had committed significant contract breaches prior to her original dismissal and had compounded those breaches by seeking to impose new contractual terms upon her following her reinstatement.

The employment tribunal held that the Claimant, in accepting her pay whilst effectively suspended, had accepted the new conditions.   It also held that she was not able to rely upon any alleged breaches which occurred prior to her dismissal as she had effectively waived them by accepting her pay.

The EAT disagreed and upheld the Claimant’s appeal.   Although she never returned to her post, her employment had been reinstated, the effect of which was that there had been no dismissal.  The dismissal effectively vanished.  However, the primary care trust’s handling of the disciplinary process, combined with the subsequent imposition of the conditions, amounted to a repudiatory breach of her contract. The EAT held that the tribunal had erred in its conclusion that the employee had waived the right to complain about breaches which occurred prior to the original dismissal because the success of her appeal meant that she hadn’t actually ever been dismissed.  The dismissal was as if it had never taken place and as such the Claimant could not be found to have accepted the new contract terms or waived the previous breaches.

So what should an employer do when it decides to overturn a decision to dismiss on appeal?  In my opinion, the first thing the employer must decide is whether the success of the employee’s appeal was because of the employer’s own failure to follow its original procedure properly or whether it was because the employee brought new evidence to the appeal which meant the dismissal was no longer appropriate.  If the former (as in this case) then it would seem to me to be wholly inappropriate to try and impose a different sanction (even if the relevant procedure allowed for this) as the imposition of any sanction would be based upon a flawed procedure.

My advice in this case would be for the employer carry out the procedure again but this time correctly.  If, at the end of the process, it determined to dismiss or instead that some lesser sanction could be imposed in accordance with its own procedure, then it could be fairly confident in the safety of its decision.  However, if the employer determined when considering the employee’s appeal that the decision to invoke the procedure which led to the original decision to dismiss had not been the right decision, then the only option is to reinstate the employee without invoking any conditions.  It would also be very wise to apologise to the employee in either case!

Employment Tribunal Fees – Part 2

I attended an employment law master class this week given by Daniel Barnett of Outer Temple Chambers and one of the topics covered related to the introduction of fees in the Employment Tribunal.  As those of you who read my January post will know, I was initially very much in favour of their introduction, but I have now had a chance to reflect and I am not quite so positive in my views.  It now seems apparent that, whilst the introduction of fees will certainly act to significantly reduce the number of claims being pursued,  it is unlikely that the reduction will be as a result of those with unmeritorious claims simply deciding not to pursue them.  What is more likely is that those with highly meritorious but low value claims will simply not be able to afford to pursue them given that the issue and hearing fees may exceed the value of the claims and those with unmeritorious discrimination claims (i.e. those who believe their perceived claims have significant value) will still bring them in order to try and wrestle a pay off from their (former) employer.  That, regrettably, is unlikely to change.

I also said in January that those who cannot afford the fees will be able to invoke the Civil Fees Remission Scheme.  However, this is a hugely complex scheme which has been described by the Citizens’ Advice Bureau as not fit for purpose.  A Claimant will be entitled to a full remission of fees if he or she is on non-means tested Income Support.  However, anyone who loses a job and claims benefits will be on a means-tested benefit.  Furthermore, if an individual resigns (even if that resignation is because of a constructive dismissal), or gets a bad reference, there is no entitlement to Job Seekers’ Allowance for 28 weeks.  Therefore, in practice, it is going to be extremely difficult, if not impossible, for individuals to qualify for a full remission of fees.

The introduction of fees, coupled with the introduction of compulsory early conciliation (prior to claims issue), will undoubtedly reduce the number of claims by an estimated 25% – 33%.  However, there is no evidence that the Tribunals are currently over-burdened and there is similarly no evidence to suggest that it is the unmeritorious claims which will be filtered out.

So here you have it, a complete U-turn from me.  Something which my husband and friends will tell you is an event rarer than hens’ teeth.

Blowing the Whistle on False Whistle-blowers?

For those of you who don’t know much about the law on whistle-blowing (as set out in the Public Interest Disclosure Act 1998), it essentially protects  workers from detriment or dismissal if they make, in good faith, what are known as “qualifying disclosures” (usually to their employers) that, in their reasonable belief, one of the following events has occurred, is occurring or is likely to occur:

1.  A criminal offence

2. Breach of any legal obligation

3.  Miscarriage of justice

4.  Danger to the health and safety of any individual

5.  Damage to the environment

6.  The deliberate concealing of information about any of the above

The key here is that, as the law currently stands, in order to be “protected qualifying disclosures”, they need only to be made in good faith.  There is no specific requirement for the disclosures to be made in the public interest.  What this means is that an employee who, in good faith, makes a disclosure which relates to a breach of his own contract of employment (i.e. a breach of a legal obligation), such breach affecting only him, will be protected from suffering detriment or dismissal as a result.

The protection from unfair dismissal for whistle-blowers is immediate.  There is no “qualifying period” of employment before the employee can pursue such a claim and the ordinary cap on compensation which can be awarded for unfair dismissal is removed.  This has arguably made pursuing a whistle-blowing claim very attractive, especially for those who have not been working for their employer very long or whose high salaries mean that ordinary unfair dismissal compensation, being capped, would not adequately compensate them if they were unfairly dismissed.

The Government’s view, however, is that this very wide protection currently afforded to whistle-blowers is open to abuse by employees with limited service or very high salaries who suspect that they might be about to lose their jobs and hence make disclosures about alleged breaches of their own contracts of employment.  However, I have seen no evidence that any such abuse is any more widespread than the undoubted abuse by a small number of Claimants of the Equality Act 2010 which affords immediate protection from discrimination from the point of recruitment and which, too, has uncapped compensation.    It is a fear of such claims that has certainly made many of my clients overly (and unnecessarily) fearful about dismissing (for perfectly reasonable and legitimate grounds) black, Asian or other employees with protected characteristics.  However, as I tell my clients time and again, just because someone is black, doesn’t mean that he or she can’t be dismissed for misconduct or poor performance and, provided there is no other evidence of unlawful discrimination, on what basis could they pursue such a claim?  The same could be said of employees without qualifying service who might seek to pursue whistle-blowing claims.  If the employer has done nothing wrong, then the employer has nothing to fear.

Nevertheless, the Government has determined that the law as it stands does not provide enough protection for employers from spurious whistle-blowing claims and as such Clause 15 of the Enterprise and Regulatory Reform Bill will amend the Employment Rights Act 1996 so that qualifying disclosures must in the reasonable belief of the worker be made “in the public interest”.  This will apply to all the categories of protected disclosure above.  However, the requirement for the disclosure to be made “in good faith” will be removed.

In seeking to solve one perceived problem, to my mind, the Government has created another – there will undoubtedly be endless litigation seeking to determine exactly what is meant by “in the public interest” given that breaches of an individual’s’ contract of employment may well have an element of public interest and it will also place an extremely onerous burden on the employee, particularly in the case of the employee without legal representation.   Hardly likely to promote the culture of openness that the Government says it is seeking, particularly in light of the recent problems with the NHS.

 

 

 

 

 

 

 

 

Must Principal Reason for Resignation be a Fundamental Breach of Contract in Order to Found Claim of Constructive Dismissal?

The recent EAT case of Logan v Celyn House Ltd involved a claim by a veterinary nurse who resigned from her job because she was not satisfied with the response given to her by her employer when she raised a grievance.  The grievance concerned two issues.  The first was that the employee believed she was the victim of bullying.  The second was because she averred that her employer had failed to pay her contractual sick pay.  Neither grievance was upheld and she resigned claiming unfair constructive dismissal.  She stated that she resigned principally because of the bullying, however the employment tribunal decided, on the evidence, that the bullying was a figment of her imagination and because the alleged bullying was the principal reason for her resignation, her claim of constructive dismissal must fail.  It held this notwithstanding the fact that the employer had, in fact, fundamentally breached the contract of employment by failing to pay her sick pay to which she was contractually entitled.

The EAT disagreed with this judgment for the following reason:

Constructive dismissal arises when the employee resigns in response to a fundamental breach of contract by his or her employer.  There is nothing in the definition which states that the resignation must be wholly or even principally in response to such a fundamental breach of contract.  Therefore, where there is a fundamental breach of contract by the employer, it is sufficient that the employee’s resignation is only in part in response to that breach.  Based on the evidence presented in this case it was held that, whilst the employee’s main reason for resigning was the imagined bullying, she was also resigning in part because of the failure to pay contractual sick pay.  As a failure to pay contractual sick pay amounted to a fundamental breach of contract and this was one of the reasons for her resignation, then her appeal succeeded and she was found to have been constructively unfairly dismissed.

Note:  Employers should be aware that any breach related to a failure to pay contractual remuneration (whether that is wages, a contractual bonus payment, commission or contractual sick pay) is deemed to be a fundamental breach of contract and employees who resign in response to such a breach will have sound claims for both unfair constructive dismissal and unlawful deduction of wages.

Can an Employer Cure a Breach of Trust and Confidence?

There is an implied duty of mutual trust and confidence in all contracts of employment.  If an employer acts in a way which is likely to destroy or seriously damage the relationship of mutual trust and confidence between itself and the employee, then the employee is entitled to treat his obligations under the contract as discharged.  He is therefore entitled to walk out, with or without giving notice and claim that he has been constructively dismissed.

The leading case on this issue is Buckland v Bournemouth University.  In this case the Court of Appeal held that, once a repudiatory breach of contract has been committed by the employer, it cannot be cured unless the wrong party waives the breach or affirms the contract.  If he chooses not to do either, it remains open to him treat the breach as terminal and to resign and claim constructive dismissal notwithstanding any olive branches presented to him by the employer or any other steps taken to try and rectify the breach.  The nature of trust and confidence is such that every breach will be repudiatory (i.e. fundamental).

At first sight, the recent EAT case of Assamoi v Spirit Pub Company (Services) Ltd seems to contradict Buckland.  In this case the employee’s line manager acted in a way which the Tribunal held was “likely to damage” the relationship of trust and confidence between the employer and Mr Assamoi but it nevertheless held that Mr Assamoi’s resignation did not amount to a constructive dismissal because the employer took significant steps to make amends for the line manager’s actions.  Mr Assamoi appealed against the decision, seeking to rely on Buckland.  However, the EAT distinguished the two cases by stating that the Tribunal had said only that Mr Assamoi’s line manager had acted in a way which was “likely to damage” the relationship of trust and confidence, and not that he had acted in a way “likely to destroy or seriously damage the relationship of trust and confidence”.  As a result, the line manager’s conduct was not serious enough to amount to a repudiatory breach of contract and the fact that the employer immediately took steps to rectify the damage which had been done, meant that no repudiatory breach ever occurred.  As such Mr Assamoi’s appeal failed.

This case is particularly interesting as it highlights the fine line between actions which amount to a repudiatory breach and those which are only deemed likely to damage the relationship between employer and employee but not destroy it (i.e. an anticipatory breach).  Where does one draw the line given the inherently personal nature of the employment contract?

Sedley LJ in Buckland acknowledged the difficulties of treating all breaches of trust and confidence as repudiatory and expressed disquiet about the possible injustice of applying this rule to employment contracts, which are “inherently personal” in nature, and thought the law was perhaps out of step with “sensible industrial relations” in which a conciliatory approach is key. Nevertheless, he held that the law should not create a separate rule for employment contracts.  The Assamoi case arguably demonstrates that a conciliatory approach can still be key provided the breach is only anticipatory and has not yet actually taken place.

Protected Conversations – Will they Help?

The Enterprise and Regulatory Reform Bill is being scrutinised by Parliamentary committee all this week.  Under proposed legislative reforms the Government has said that employers will be able to have “protected conversations” with their employees to try and negotiate exit terms before dismissing them and those conversations will not be able to be relied upon by the employee in any subsequent unfair dismissal claim. 

In reality, such conversations already frequently take place and the issue of whether or not they can be relied upon in subsequent tribunal hearings is often a moot point on the basis that the conversations almost always result in a settlement governed by a compromise agreement – in future to be called a “settlement agreement”.  Therefore, as with many of the proposed changes put forward by the Government with a view to appeasing business, I cannot see how, in any practical way, things will change. 

Indeed, it is already the case that such conversations can be protected under the ordinary “without prejudice” rule.  If the parties are already in dispute, even if the dismissal has not yet taken place, then the employer can enter into such negotiations on a “without prejudice” basis, knowing that such negotiations cannot then be relied upon in any future court or tribunal proceedings. 

However, the Government wishes to add a new section 111A to the Employment Rights Act 1996:

 111A Confidentiality of negotiations before termination of employment

(1) In determining any matter arising on a complaint under section 111 [an unfair dismissal claim], an employment tribunal may not take account of any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee.

This is subject to the following provisions of this section.

(2) Subsection (1) does not apply where, according to the complainant’s case, the circumstances are such that a provision (whenever made) contained in, or made under, this or any other Act requires the complainant to be regarded for the purposes of this Part as unfairly dismissed.

(3) In relation to anything said or done which in the tribunal’s opinion was improper, or was connected with improper behaviour, subsection (1) applies only to the extent that the tribunal considers just.

(4) The reference in subsection (1) to a matter arising on a complaint under section 111 includes any question as to costs, except in relation to an offer made on the basis that the right to refer to it on any such question is reserved.

(5) Subsection (1) does not prevent the tribunal from taking account of a determination made in any other proceedings between the employer and the employee in which account was taken of an offer or discussions of the kind mentioned in that subsection.”

What this means in simple terms is that the conversations will only be protected in claims of ordinary unfair dismissal.  The conversations will not be protected in claims of:

  •  automatically unfair dismissal (such as for whistle-blowing etc)
  • discrimination
  • breach of contract
  • where the conduct of the employer has been “improper”

 It’s going to be interesting to see what happens in reality as any legally represented Claimant who wants to rely on a pre-dismissal conversation (which is not protected by the “without prejudice” rule) will no doubt advance multiple claims, with the unfair dismissal being but one of them.  Indeed, even a simple constructive dismissal is frequently both wrongful (i.e. a dismissal in breach of contract) and an unfair.  In that case, will the employee be able to rely on any pre-dismissal conversations?  Quite possibly.

 I am also looking forward to hearing the arguments about what amounts to “improper conduct” in such circumstances.  No doubt employees will try and advance that argument in every case. 

My feelings about these proposed changes are that they will unnecessarily complicate even simple tribunal claims, resulting in even more unnecessary time spent by lawyers arguing over technical points.  The Government wants to free up tribunals and promote early settlement, but I can see this going only one way – increasing the length and cost of proceedings.  Employers and employees who want to reach early settlement of disputes are already well able to do so and therefore these changes will, in my view, affect only those who would have ended up in tribunal anyway and will affect them negatively.

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