Appeal No. EAT/0520/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 30 October 2001

Before
HIS HONOUR JUDGE J R REID QC
MR P R A JACQUES CBE
MR J C SHRIGLEY

MR H ELKOUIL	APPELLANT

CONEY ISLAND LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR ADAM OHRINGER
Tribunal Representative
Free Representation Unit
Fourth Floor
Peer House
8-14 Verulam Street
LONDON
WC1K 8LZ	
For the Respondent	MR C S WATT
Solicitor
Instructed by 
Messrs Stewart Watt & Co
Solicitors
171-173 Dalry Road
Edinburgh
EH11 2EB	

JUDGE REID QC

1.	This is an appeal from the decision of an Employment Tribunal held at London South on 2 March 2000, the decision being entered in the Register and sent to the parties on 15 March.  By the decision the Tribunal determined that the Applicant, Mr Elkouil, had been unfairly dismissed and awarded £458 compensation against the Respondent employers, Coney Island Ltd. Against that decision Mr Elkouil, the Applicant, appeals.

2.	The circumstances which gave rise to his claim are as follows.  He was employed from October 1996 until his dismissal on 27 July 1999, as a credit controller by Coney Island Ltd which is part of a group of companies, the parent of which is Caledonian Heritable Ltd.  The Applicant was employed at a nightclub owned by the Respondents.

3.	Between May 1998 and July 1999 a number of the Applicant’s tasks were taken over by the company’s head office in Edinburgh.  The Applicant’s duties relating to weekly cash sheets and VAT work were passed to head office in May and July 1999.  In fact the bulk of purchase ledger and payroll duties performed by the Applicant had gone in May and November 1998.  

4.	From July 1999 the introduction of a new electronic system removed credit control duties from the Applicant to the managers.  Although in May the Applicant had been given some work on membership lists, when the membership computer came into play the membership secretaries were able to deal with the work on a daily basis in about half an hour.

5.	On 27 July 1999 Mr Crawford who was a director of Coney Island Ltd told the Applicant he was being made redundant.  He paid him until the end of the week and gave him his redundancy pay, notice and holiday pay.  That decision had been taken on the Thursday of the previous week.  On the Tuesday of the previous week, that is the 20 July, Mr Crawford had asked the group’s financial director if there were any administrative jobs at head office in Scotland.  That was where the group’s administration was centered but he was told there was no such job.  Similarly, there was no other job available in London because the group was selling its restaurant in London which left it only with two clubs.

6.	It followed that there was no possibility of the Applicant being found alternative work. It was indeed a redundancy situation and he was made redundant.  The problem so far as the employer was concerned was that there had been no consultation prior to the redundancy.  It was this that led to the finding of unfair dismissal and the award of £458 was compensation of two weeks pay.  The Tribunal expressing its decision in these terms:

“Regarding the lack of consultation, we consider that even if proper consultation had taken place, on the basis of the facts as we have found them, the applicant would have been made redundant in any event.  We think that had consultation taken place he would have been employed for a further two weeks and award him two weeks wages as a compensatory award which amounts to £458.”

7.	On behalf of the Applicant it has been argued that this decision was in error in two ways, that there should have been a finding of fact that the dismissal was unfair not simply to lack of consultation, but also because there was no prior warning of unexpected redundancy and secondly that the award of only two weeks wages was incorrect because the Tribunal incorrectly applied the process for assessing compensatory awards.  It should, it was said, have found under section 123 of the Employment Rights Act that he was entitled to a far greater compensatory award to compensate for the fact that according to the Applicant it was known some seven months in advance of his actual dismissal that he was inevitably going to be made redundant, and he should at that stage have been warned of his impending redundancy so that he could look for alternative employment.
8.	In the course of the argument we have been referred to a number of cases.  The starting point, I think, must be Phillips J decision in the British United Shoe Machinery Co Ltd v Clarke [1978] ICR 70 case where in a passage at page 73 Phillips J said:

“In such a case where the industrial tribunal finds dismissal was unfair it will be necessary for them to proceed to assess compensation, and for that purpose to make some estimate of what would have been the likely outcome had that been done which ought to have been done.  It is often a difficult question but one which the industrial tribunal in their capacity as an industrial jury are well suited to answer, and in respect of which they will not go wrong if they remember that what they are trying to do is to assess the loss suffered by the claimant, and not to punish the employer for his failure in industrial relations.”

9.	In Mining Supplies (Longwall) Ltd v Baker [1988] ICR 417, Wood J dealing with another case in which a toolmaker had been made redundant and in which there was no period of consultation quoted a passage from Abbott and Standley v Wesson-Glynwed Steels Ltd [1982] IRLR 51 EAT which concluded:

“We think that the probability is that would have taken in the order of 14 days before Mr Stalker would have made up his mind.  After all, as the Industrial Tribunal found, there is no real reason for urgency shown in the case.  So in our judgment, by reason of the absence of consultation Mr Abbotts finished two weeks’ take-home pay worse off and is entitled to compensation to that amount."

And then commenting on that Wood J said: 

“It is clear from the reading of that case of the Employment Appeal Tribunal found that a period of 2 weeks was reasonable for consultation and that that period in view of the immediate dismissal started from the date of that dismissal and that 2 weeks compensation was therefore due.”

He went on to note that one of the lay members in that division of that Court was also a member of his Court.  After looking at all the circumstances of this case including the small numbers involved, he recorded that the two lay members of the Court took the view that 2 weeks, the same period as in the Abbotts case and in a very similar circumstances, was a reasonable period for personal consultation with Mr Baker and the six weeks awarded by the Tribunal was wholly excessive.

10.	It was from those cases, it appears, that the test of “How long consultation would have taken” emerged.  In Polkey, a decision reported amongst other places at [1988] ICR 142, which was decided a little while before the Mining Supplies case, Lord Bridge had said this at pp 163-164 in relation to the situation that would arise where a dismissal was procedurally unfair:

“But if the likely affect of taking 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 puts 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 affected by reducing the normal amount of compensation by a percentage representing the chance of the employee still but have lost his employment.”

The second consideration is perhaps of particular importance in redundancy cases.  An industrial tribunal may conclude, as in the instant case, that the appropriate procedural steps but would not have avoided the employee’s dismissal as redundant.  But if, as your Lordships now hold, that conclusion was not defeat his claim of unfair dismissal, the industrial tribunal, apart from any question of compensation, will also have to consider whether to make any order under section 69 of the Act 1978.”

He then goes on to deal with the possibility of the re-engagement 

11.	Taking all those decisions together it seems to us that the true position is that in looking at compensation where a dismissal is unfair by reason of an employer’s failure to go through the appropriate steps before making an employee redundant the Tribunal is not put into any form of strait jacket.  It has to look at what is the appropriate compensatory award under section 123 of the Employment Rights Act 1996, namely such compensatory award as the Tribunal considers just and equitable in all circumstances having regard to the loss sustained by a complainant in consequence with the dismissal in so far as that loss is attributable to action taken by the employer.

12.	In order to do that exercise in the present case we have to look at the suggestion that there is a separate duty to warn apart from the duty to consult.  In support of that proposition Counsel on behalf of the Appellant, the Applicant below, referred us to Rowell v Hubbard Group Services Ltd [1995] IRLR 195, Williams v Compair Maxam Ltd [1982] ICR 156 and in Polkey another passage in the speech of Lord Bridge at p 162H to 163A.

13.	When we look at those various passages it seems to us that the submission that there is separate duty to warn is not made out.  The process by which an employee is dismissed for redundancy necessarily should include, if it is to be done properly, a consultation process.  That consultation process should commence with a warning that the employee is at risk.  There are not two separate processes, one of warning and another separate one of consultation and we do not read the passages to which we had been referred as saying anything of that sort.  The two parts, warning and consultation, are part of a same single process of consultation which begins with the employee being given notice that he is at risk.  In Williams v Compair the way it was put by Browne-Wilkinson J was this at p162:

“Two lay members of this Appeal Tribunal hold the view that it would be impossible to lay down detailed procedures which all reasonable employers would follow in all circumstances.  The fair conduct of dismissal for redundancy must depend on the circumstances of each case but in their experience there is a generally accepted view in Industrial Relations but in cases where the employees are represented by an independent union recognised by the employer reasonable employers will seek to act in accordance with the following principals:

(1)	the employer will seek to give as much warning as possible of the impending redundancies so as to enable union and employees to make the effort to take early steps to inform themselves the relevant facts, consider possible alternative solutions and if necessary final terms of employment in the undertaking or elsewhere

(2)	the employer will consult the union as the best means by which the desired management result can be achieved fairly with as little hardship to the employees as possible.  In particular the employer will seek to agree with the union the criteria to be applied in selecting the employees to be made redundant.  When a selection has been made the employer will consider with the union whether the selection has been made in accordance with those criteria then carries on with other matters.”

14.	It does not seem to us that that is suggesting that there are entirely separate steps.  The warning, the giving notice of risk, that is spoken of there is for an essential prerequisite of the consultation process because without it the representatives of the employee will not be able to formulate a strategy or consider what suggestions they can put to the employer.  In this case it is true that a single person was being made redundant and no union was involved but the principles are exactly the same.

15.	Similarly, it seems to us that in Polkey the references that made to notice or consultation do not indicate that there were two separate steps but simply that there is a process in which the consultation necessarily includes informing the persons at risk either personally or through their union representatives they are indeed at risk as a necessary part of consultation process.  It follows, it seems to us, that the point of law raised in the first ground of appeal, that the Tribunal was perverse in not deciding that the dismissal was also unfair because of a failure to forewarn the Applicant, is bad for the reason that there is no such separate duty.  It does not however, in our judgment, follow that the second ground necessarily falls with it.  

16.	In this case it must have been clear to the employers at the latest by May 1999 that the Applicant was going to be made redundant.  At that stage they should have started the consultation process by warning him that he was at risk.  Although, as the Employment Tribunal found, the consultation process would not have taken more than two weeks, it does not follow, that that process should be taken to have started at the date of dismissal nor does it follow that the appropriate method of calculating compensation in this particular case was by assuming that had a consultation process started on the date of his dismissal he would have been employed for two further weeks and that therefore he has lost two weeks’ money.

17.	The reason for the unfairness here was the failure to start the consultation process timeously or at all.  The consultation process should have been started by giving notice to the Applicant that he was at risk in May.  The result of failing to do that was that he was disadvantaged in seeking another job.  He could have begun that process, in our judgment, some ten weeks earlier than he in fact could i.e. some ten weeks before the actual date of his dismissal and the finding that we make is that had he done so that he would have been likely to have a new job substantially earlier.

18.	We do not think as a matter of law the Employment Tribunal approached the matter correctly in the particular circumstances of this particular case.  We take the view that the Tribunal erred in law because it, not unnaturally, looked to the decisions such as those that I have mentioned where the Court in particular circumstances has held that had the employers acted properly the employee would have had further two weeks tenure and that that is the measure of his loss.

19.	But those are simply examples of cases where the appropriate findings of fact that have led to a particular conclusion as to what was just and equitable by way of compensation.  The Tribunal in this case has allowed itself to be forced into a strait jacket by what has become a conventional method of expressing the compensation payable in non consultation on redundancy cases.  But it always has to be remembered that the award under section 123 is to be calculated on a more general basis.  This particular case highlights the danger of allowing what is a useful tool to assist in calculating the measure of compensation to become a rigid rule of thumb.

20.	In our judgment the appropriate course in this particular case is to assess compensation by reference to what would have been the situation, to go back to the words of Phillips J in the British United Shoe case, and look at what would have been the likely outcome had that been done which ought to have been done.  In this case the Applicant would have had the opportunity to be on for a new job some ten weeks earlier.  In these circumstances he lost the chance of being re-employed substantially earlier than he was and the appropriate measure of compensation in our view (in the absence of evidence as to the extent of his pay in his new job) is ten weeks at the rate of £229 per week namely £2290 compensation.  The appeal will therefore be allowed to that extent.  We would like to thank both representatives for a skilful and educational argument.