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United Kingdom Employment Appeal Tribunal |
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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Richard Burbidge Ltd v Pearce [1993] UKEAT 589_91_2307 (23 July 1993) URL: http://www.bailii.org/uk/cases/UKEAT/1993/589_91_2307.html Cite as: [1993] UKEAT 589_91_2307 |
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EAT/590/91
At the Tribunal
Before
HIS HONOUR JUDGE J HULL QC
MR J P M BELL CBE
MR D O GLADWIN CBE JP
RICHARD BURBIDGE LIMITED
RICHARD BURBIDGE LIMITED
Transcript of Proceedings
JUDGMENT
Revised
APPEARANCES
EAT/589/91
For the Appellants MR M JACKSON
(Of Counsel)
Messrs Sprott Stokes & Turnbull
4 College Hill
Shrewsbury
Shropshire
SY1 1LU
For the Respondent MR S GORTON
(Of Counsel)
Messrs Emrys Jones & Co
8 Broad Street
Welshpool
Powys
SY21 7RZ
EAT/590/91
For the Appellants MR M JACKSON
(Of Counsel)
Messrs Sprott Stokes & Turnbull
4 College Hill
Shrewsbury
Shropshire
SY1 1LU
For the Respondent MR E LAMB
(Of Counsel)
Messrs A W Brown & Lloyd
The Albany
37/39 Willow Street
Oswestry
SY11 AQ
JUDGE J HULL QC: This is an appeal by Richard Burbidge Limited, the employers, against the decision of the Industrial Tribunal sitting at Shrewsbury on 4th July 1991 by which it awarded Mr Pearce and Mr Griffiths compensation for unfair dismissal in the respective sums of £6,947 and £8,925.
Mr Pearce and Mr Griffiths were among four employees whose applications were considered by the Industrial Tribunal. All the applications arose out of an urgent need by the employers to cut costs which resulted in the dismissal of the Applicants with about forty other employees on the basis of redundancy in June 1990. The forty were chosen from a workforce of about 400, all employed at the employers' two factories at Chirk and Oswestry.
Mr Griffiths was employed as a Senior Buyer and had been with the employers since October 1977. Mr Pearce was an Assistant Manager and had been employed since November 1984. Their cases, and those of the other two Applicants, were heard by the Industrial Tribunal for four days between 21st and 24th January 1991. None of the Applicants was represented before the Tribunal. The employers were represented by Mr Mitchell, a Solicitor. The decision of the Industrial Tribunal was sent to the parties on 4th March 1991.
The Industrial Tribunal held that each of the applications succeeded and the Applicants had each been unfairly dismissed. Having made their findings of fact in some detail the Industrial Tribunal continued at paragraph 7 of the decision:
"Mr Mitchell, on behalf of the respondents, made a powerful and persuasive submission on the question of consultation. He submitted that the company were in exceptional circumstances and they had to act quickly. The fact was that the company's overheads had to be cut and the company had very little chance of talking to individual employees and no employee was astonished about the fact that the company needed some redundancies. All of the applicants had an opportunity to talk about their redundancy, because each had periods of weeks from four weeks to twelve weeks to discuss and consult before the effective date of the termination of their employment. Mr Mitchell submitted that only one of the four applicants took the trouble of appealing. Furthermore, the company were in such straits that the cut of some 20% of overheads could not be discussed by the workforce. He submitted that the letters given to the employees, were a genuine announcement that they had periods of time to discuss the matter and that to say that there was no consultation, was really a matter of semantics in the circumstances in this case.
We do not agree. In this case we can see no exceptional circumstances which would allow the company to forego consultation in the proper meaning of the word. The Directors on 7 June made the decision about the names who were to be made redundant. On 8 June all Senior Managers were called and given the brief. There was no pressing need for the Managers or Directors to send out these letters on 15 June. Before 15 June they had at least a week in which they could have had a proper meeting with the workforce, so that the workforce could have aired their views. Consultation must be a two way process.
In the well know case of Polkey v. A E Dayton Services Limited [1988] ICR 142, Lord BRIDGE said this:-
`. . . . But an employer having prima facie grounds to dismiss for one of these reasons will in the great majority of cases not act reasonably in treating the reason as a sufficient reason for dismissal unless and until he has taken the steps, conveniently classified in most of the authorities as "procedural", which are necessary in the circumstances of the case to justify that course of action. Thus, in the case of incapacity, the employer will normally not act reasonably unless he gives the employee fair warning and an opportunity to mend his ways and show that he can do the job; in the case of misconduct, the employer will normally not act reasonably unless he investigates the complaint of misconduct fully and fairly and hears whatever the employee wishes to say in his defence or in explanation or mitigation; in the case of redundancy, the employer will normally not act reasonably unless he warns and consults any employees affected or their representative, adopts a fair basis on which to select for redundancy and takes such steps as may be reasonable to avoid or minimise redundancy by redeployment within his own organisation. If an employer has failed to take the appropriate procedural steps in any particular case, the one question the industrial tribunal is not permitted to ask in applying the test of reasonableness posed by section 57(3) is the hypothetical question whether it would have made any difference to the outcome if the appropriate procedural steps had been taken. On the true construction of section 57(3) this question is simply irrelevant. It is quite a different matter if the tribunal is able to conclude that the employer himself, at the time of dismissal, acted reasonably in taking the view that, in the exceptional circumstances of the particular case, the procedural steps normally appropriate would have been futile, could not have altered the decision to dismiss and therefore could be dispensed with. In such a case the test of reasonableness under section 57(3) may be satisfied.'
Lord BRIDGE also at p.163 said this:-
`If it is held that taking the appropriate steps which the employer failed to take before dismissing the employee would not have affected the outcome, this will often lead to the result that the employee, though unfairly dismissed, will recover no compensation or, in the case of redundancy, no compensation in excess of his redundancy payment.'
Also see: Mining Supplies (Longwall) Ltd v. Baker [1988] IRLR 417, EAT.
Therefore we find that all four applicants were dismissed on the grounds of redundancy but the dismissals were unfair having regard to s.57(3) of the Employment Protection (Consolidation) Act 1978. A hearing will be held in the future to deal with the question of remedies, unless with the assistance of ACAS the parties can agree compensation. In the event they cannot agree, they can return to the tribunal for further directions."
It is clear to us that although the Applicants had complained that they were unfairly selected for redundancy the Industrial Tribunal held that the unfairness consisted of failure to consult the employees. In the case of Mr Evans, one of the other Applicants, the Industrial Tribunal heard evidence that if he had worked out his notice he might well, in view of certain events which occurred, have been kept on and that, I quote:
"consultation could have worked in Mr Evans' favour."
The evidence (and I quote again):
"gives rise to the feeling that consultation with Mr Evans would have prevented his selection for redundancy."
In the case of Mr Jones the Industrial Tribunal said:
"In our view, if there had been proper consultation before the decision to make Mr Jones redundant, that matter could well have been resolved in his favour."
In the cases of Mr Griffiths and Mr Pearce there were no such express findings about the likely or possible effect of consultation. The parties were unable to agree on compensation and the Industrial Tribunal held a further hearing on 4th July 1991 in respect of Mr Griffiths, Mr Pearce and Mr Jones. The employers were again represented by Mr Mitchell. The Industrial Tribunal awarded compensation to each of the three men. Mr Griffiths was awarded compensation on the basis of lost salary from 16th June 1990 to 4th January 1992. This far exceeded the statutory maximum of £8,920, as it then was, which was therefore the sum awarded. Mr Pearce was also awarded compensation in respect of lost salary between the same dates. After debiting earnings which he had been able to achieve in other employment, the sum amounted to £6,947. This decision was sent to the parties on 27th August 1991. It contains the wholly incorrect and prejudicial statements that the employers' Solicitor had not attempted to call in the assistance of ACAS nor had he put forward any offer which would have been the basis of a negotiated settlement. We cannot believe that these statements, which on the face of it were wholly irrelevant to the Industrial Tribunal's deliberations, indicated that they were biased in any way, and indeed that was not suggested; but there is no doubt that they have left the employers with a sense of unfairness and should not have been made. When an Industrial Tribunal decides that dismissal on the ground of redundancy was unfair because of failure to consult it is in our judgment obliged to go on as this Tribunal did in the cases of Mr Evans and Mr Jones to consider what effect consultation would, on balance of probabilities, have had. If the Tribunal is satisfied that consultation would have had no effect then the Applicant has suffered no loss by reason of the unfairness and the question of a compensatory award does not arise. If, on the other hand, consultation would have led to the Applicant continuing in his employment then he has, on the face of it, established causation between any loss suffered by him and the unfairness which he has established. There are intermediate cases where the Tribunal considers that it is impossible to be sure that consultation would have prevented dismissal but is nonetheless satisfied that there was a real prospect of its doing so. In that case it may choose to put a value on that prospect by means of a percentage valuation or otherwise. Again, the Tribunal may find that consultation would not have prevented the redundancy but that it would have disclosed that there was other work for the employer which the Applicant could have done and which he would have been offered and which he would have accepted, at a reduced salary. In that case the Applicant's loss, through failure to consult, will be reduced, because even if he had been fairly treated and consulted he would have suffered some loss. These are only examples.
We were referred to Red Bank Manufacturing Co Ltd v. Meadows [1992] IRLR 209. The statement of facts reads:
"Mr Meadows was dismissed on grounds of redundancy after 32 years' service with the appellant company. An Industrial Tribunal found the dismissal unfair because the employers had failed to consult with the employee before dismissing him. In assessing the amount of compensation to be awarded, the Tribunal based their calculations on the difference between Mr Meadows's actual earnings since dismissal and what he would have received in the job from which he had been dismissed.
The employers appealed against the sum awarded on the following grounds. First, even if a fair procedure had been followed, no job would have been found for Mr Meadows and, therefore, the award should have been nil, or there should at least have been a percentage reduction to reflect the chance that the outcome would have been the same. Secondly, since Mr Meadows's old job had disappeared through redundancy, his loss of earnings could at most have been the difference between his actual earnings in his new job and what he would have earned in any job he might have been offered by the appellants, and accepted."
The headnote reads:
"The EAT held:
The Industrial Tribunal had erred in assessing the compensation due to the respondent employee following their finding that his dismissal on grounds of redundancy was unfair because of the employers' failure to consult, without specific reference to what might have happened if a fair procedure had been followed.
Where a redundancy dismissal is unfair because of the employers' failure to follow a fair procedure, the decision of the House of Lords in Polkey v. A E Dayton Services Ltd requires an Industrial Tribunal to ask the following two-stage question when calculating the compensation to be awarded: If the proper procedure had been followed, would it have resulted in an offer of employment? If so, what would that employment have been and what wage would have been paid in respect of it? That is a fundamental question which the Tribunal should expressly address."
We were referred to parts of the decision and I shall read those parts now. At paragraph 4 this Tribunal said:
"The reason for the finding that the dismissal was unfair was that there had been no prior warning or consultation with the respondent. This was contrary to the provisions of para.46 of the Industrial Relations Code of Practice.
The Tribunal were referred to the decision of the House of Lords in Polkey v. A E Dayton Services Ltd [1987] IRLR 503. On the issue of liability, counsel for the appellants concedes that the Tribunal gave themselves an impeccable direction on the law. They reminded themselves of the following passage in the speech of the Lord Chancellor, which occurs at pp.504, 5 of the report:
`If the employer could reasonably have concluded in the light of the circumstances known to him at the time of dismissal that consultation or warning would be utterly useless he might well act reasonably even if he did not observe the provisions of the code.'
The Tribunal then said this paragraph 21 of their earlier decision:
`We are not satisfied on the evidence before us that consultation or warning would have been useless. Mr Meadows' evidence was clear and unequivocal; he told us he would have considered any job had one been offered to him as an alternative to dismissal. He told us that the company had been his life, which after 32 years did not surprise us. It may be that had there been consultation or even discussion prior to dismissal, the employers' reluctance to consider the applicant for a junior position may have been dispelled. We do not know and it is not for us to speculate what might or might not have occurred.'
We have no doubt that the Tribunal had those observations still in mind when they came to consider the question of compensation. Unfortunately, however, they do not make any express reference to the further consideration which ought to have been given to the second stage of the exercise, as referred to by Lord Bridge in his speech in Polkey at p.508, 30:"
and they cite from the passage which we have already read. They cite a further part of Lord Bridge's speech; he said:
"Thus in Earl v. Slater & Wheeler (Airlyne) Ltd [1972] IRLR 115, the employee was held to have been unfairly dismissed but nevertheless lost his appeal to the National Industrial Relations Court because his misconduct disentitled him to any award of compensation, which was at that time the only effective remedy. But in spite of this, the application of the so called British Labour Pump principle [1979] IRLR 94, tends to distort the operation of the employment protection in two important ways. First, as was pointed out by Browne-Wilkinson J in Sillifant's case, if the Industrial Tribunal, in considering whether the employer who has omitted to take the appropriate procedural steps acted reasonably or unreasonably in treating his reason as a sufficient reason for dismissal, poses for itself the hypothetical question whether the result would have been any different if the appropriate procedural steps had been taken, it can only answer that question on a balance of probabilities. Accordingly, applying the British Labour Pump principle, if the answer is that it probably would have made no difference, the employee's unfair dismissal claim fails. But if the likely effect of taking the appropriate procedural steps is only considered, as it should be, at the stage of assessing compensation, the position is quite different. In that situation, as Browne-Wilkinson J put in Sillifant's case, at p.96:
`There is no need for an "all or nothing" decision. If the Industrial Tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment.'
We do not ignore the fact that the Tribunal did state at paragraph 6 of their second decision that they had taken into account all the evidence and documents, and that they said that the fact that they did not mention particular matters did not mean that they had overlooked them. They also stated that the figures which they arrived at and the manner of calculation set out was taken from the evidence. They also refer in paragraph 7 to the argument advanced by the appellants' solicitor that no award should be made, alternatively that any loss should be extremely limited and should in any event stop following rejection of an offer of employment.
The Tribunal expressly dealt with the specific questions of the respondent's duty to mitigate his loss and with his solicitor's argument for an open-ended loss.
However, it seems to us that since the decision in Polkey it is necessary for a Tribunal when calculating the amount to be awarded for compensation to ask itself this two-stage question: If the proper procedure had been followed, and if consultation had taken place, would it have resulted in an offer of employment? This was the question to which the Tribunal did address themselves in the earlier hearing, and to which they gave the answer that it might have done so. What the Tribunal failed to do, and what in our view they should have done, was to go on to consider first what that employment would have been, and second what wage would have been paid in respect of it.
In considering the first of those questions, it would not have appeared to have been open to the Tribunal to conclude that the employment which might have been offered was the respondent's old job, since that had disappeared through redundancy.
It is not clear from the second decision whether or not the Tribunal did apply the Polkey principles to their consideration of the question of calculation of quantum. While of course Tribunals are not required when giving the reasons for their decisions to deal with all the arguments put before them, we feel in view of the appellants' counsel's submissions that it is unsatisfactory in the circumstances of the present case that a fundamental question such as this should not have been seen to be expressly addressed.
Furthermore, we think that the Industrial Tribunal should have made it clear whether or not they considered making a percentage reduction in the award to reflect the chances that the outcome might have been the same even if consultation had taken place.
Counsel for the respondent submits that there is, implicit in the reasons given by the Tribunal, an underlying analysis based on past practice that the respondent would have been offered a job at his old wage, and that it is not beyond the bounds of feasibility that that is what would have happened. We are unable to agree with this submission. It seems to us much more likely that there were no actual vacancies. We have the impression from the Tribunal's reasons that they took the respondent's old wage as the starting-point for their calculations, without considering what job would have been available to be offered to justify it.
For these reasons we are of the view that this decision cannot stand, and that the matter must be remitted to the same Industrial Tribunal for further consideration as to the appropriate award."
So that was the decision in Red Bank Manufacturing Co v. Meadows.
That case was of course decided after the decision in the present case which we are considering and so the Industrial Tribunal could not enjoy the benefit of its guidance. It appears to us that it is direct authority obliging us to allow this appeal. It is true, as stated by this Tribunal in the Red Bank Manufacturing case, that an industrial tribunal does not have to state every matter which it has taken into consideration or every finding of fact but on this essential question of causation this Industrial Tribunal appears, so far as its reasons go, to have made no enquiry and reached no conclusion.
We were informed by Mr Jackson, on instructions, that Mr Mitchell, the Solicitor, submitted to the Industrial Tribunal at the first hearing in January 1991 that consultation would have made no difference to the decision to dismiss and he considered that that issue had been decided in the employers' favour by the decision in March, and that he reminded the Industrial Tribunal of that at the hearing on 4th July 1991. There is no evidence of that very important matter and in particular the Chairman's Notes of Evidence record Mr Mitchell as saying in the case of Mr Griffiths:
"This is only a procedural issue - Mr Griffiths was paid more than £2,000 more than he was entitled to. There was a lack of consultation. The redundancy was necessary but was done badly. Three weeks pay - he should not get any more because of overpayment."
That is the Chairman's Note.
We cannot of course decide exactly what was said by Mr Mitchell without obtaining his comments and the Chairman's comments and we think that it is a pity that this important issue was not expressly raised by affidavit evidence. It may very well be that there was a misunderstanding on this matter. The question whether consultation would have made any difference to the decision to dismiss is, of course, irrelevant to the question whether the decision is unfair, save in the rare case where the employer has considered the matter and decided in a reasonable manner, on reasonable grounds, that consultation could not in the circumstances affect the decision in any way. Accordingly, an industrial tribunal may decide, and probably will decide, that consideration of the question should be deferred until compensation falls to be considered, perhaps at an adjourned hearing. On the other hand, since much of the evidence about unfairness and the decision to dismiss may be highly material to the question whether consultation would have had an effect the Industrial Tribunal may decide to consider that question too at its first hearing, leaving the compensation hearing purely as a occasion for considering the appropriate amount of money. It is obviously desirable that both industrial tribunals and the advocates and parties who appear before them should be absolutely clear about what is to be considered at each stage of the hearing if there is to be more than one stage.
Brave attempts were made by Counsel to persuade us that the Industrial Tribunal in this case had implicitly considered and decided the question whether consultation would have affected the decision to dismiss Mr Griffiths and Mr Pearce. We have however concluded that such an important part of the decision and the reasons for it should be stated expressly, however shortly. We therefore conclude that we should follow the course taken by this Tribunal in Red Bank Manufacturing Co v. Meadows and remit the case to the same Industrial Tribunal for further consideration of the appropriate award.
Mr Jackson cited to us paragraph 1462 from Part II of "Harvey on Industrial Relations and Employment Law" as authority for the proposition that it is for the employee to prove that he has suffered loss. Proof of loss, of course, involves showing that consultation would have made a difference to the decision to dismiss and that must depend on matters largely within the employer's knowledge. This burden of proof caused certain of us misgivings about the position of the employee in such cases. However, we think that this difficulty is more apparent than real. It is for the employer to show the reason for dismissal and this will inevitably give the employee, and the industrial tribunal, the opportunity to ask questions about the effect which consultation would have had. Equally important, if the employer chooses not to give evidence and produce any relevant documents he may have about the likely effect of consultation the industrial tribunal may well infer, from the known facts, not only that the omission to consult was unfair but that consultation would indeed have affected the decision. We think it unlikely that the rule about burden of proof will operate in practice to prevent industrial tribunals arriving at just conclusions on such matters.
We remit this case so that the Industrial Tribunal, if it has in fact already considered the question of the effect which consultation would have had on the decision to dismiss Mr Griffiths and Mr Pearce, can state its findings on that matter and its reasons and show how they led to its conclusions and award. If on the other hand the Industrial Tribunal has not, in fact, considered and decided that question then it must do so, express its findings and reasons and reconsider its award in the light of those findings. The Industrial Tribunal will, in the latter event at any rate, have to give the parties a further opportunity to be heard and possibly to adduce further evidence; that is a matter for the Tribunal. Subject to that it will of course be for the Industrial Tribunal to say how it will proceed. We will remit it to the Tribunal with that direction.
Legal Aid taxation of both Mr Griffiths' and Mr Pearce's costs.
