Appeal No. UKEAT/0001/05

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH EH3 7HF

	At the Tribunal
	On 20 May 2005

Before
THE HONOURABLE LADY SMITH
MISS S B AYRE
MISS A MARTIN

TASKFORCE (FINISHING & HANDLING) LTD 	APPELLANT

RICHARD LOVE	RESPONDENT

Transcript of Proceedings

JUDGMENT

APPEARANCES

 
For the Appellant	Mr S Briggs, Representative
Of-
Law at Work
151 St Vincent Street
GLASGOW
G2 5NJ

 	

For the Respondent

 	

Mr G MacLean, Representative
Of-
Mr Richard Love
(2F3) 54 Water Street
LEITH
EH6 6SU

 	

SUMMARY

REDUNDANCY

Fairness

The claimant alleged unfair dismissal and the respondents' case was that he had been fairly dismissed on grounds of redundancy, which failing for some other substantial reason. The Employment Tribunal found that he had been unfairly dismissed and awarded compensation. On appeal, the Employment Appeal Tribunal held that the Employment Tribunal had erred in law in their approach to the case and that the decision, which was confused and bore the hallmarks of approaching the case as though they were dealing with a disciplinary dismissal rather than a case of redundancy, was flawed in such a way that it was appropriate to remit to a differently constituted Tribunal for a rehearing.

THE HONOURABLE LADY SMITH:

Introduction:
1.	This case is about redundancy and unfair dismissal.

2.	The judgment represents the views of all three members who pre-read the relevant papers.

3.	We will refer to the parties as claimant and respondents.

4.	This is an appeal by the respondents against a decision of an Employment Tribunal sitting at Edinburgh, Chairman Mr M Sischy, registered with extended reasons on 30 March 2004.

5.	The claimant was represented there and before us by a friend, Mr J. MacLean.  The respondents were represented there by Ms J. Lang, solicitor, and before us by Mr S. Briggs. The claimant claimed unfair dismissal.  The respondents contended that the claimant had been made redundant and was fairly dismissed.

The Issues:
6.	The essential issues in the case were whether or not the claimant was redundant and, if so, whether or not he had been dismissed fairly either on the grounds of redundancy or for some other substantial reason.

The Decision of the Employment Tribunal:
7.	The Employment Tribunal decided that the dismissal was unfair.  As we explain later in this judgment, they did not indicate whether they were satisfied that a redundancy existed.  They did make a finding to the effect that the claimant was not dismissed for some other substantial reason.  They awarded compensation.

The Appeal:
8.	The respondents appeal against that decision.

The Legislation:
9.	The relevant provisions of the legislation are to be found in the Employment Rights Act 1996 s.98 and 139 the provisions of which include the following:

“98 (1) In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show–
(a)	the reason (or, if more than one, the principal reason) for the dismissal,
and
(b)	that it is either a  reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.

(2) A reason falls within this subsection if it–
……..
(c) is that the employee was redundant, ……..

(4) Where the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)–
(a)	depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and
(b)	shall be determined in accordance with equity and the substantial merits of the case.
…………..

139 (1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal was wholly or mainly attributable to–
……….
(b)	the fact that the requirements of that business–
(i)	for employees to carry out work of a particular kind, ….

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

The Facts:
10.	The respondent company binds and laminates printed matter supplied to them by customers in order to produce finished brochures and other similar material.  As at the date of termination of the claimant's employment the respondents employed approximately 17 people which had been reduced to 15 people as at the date of the hearing before the Employment Tribunal.  Mr Robertson was the managing director and his wife was his co-director.  Immediately below Mr Robertson there was a production manager and production supervisor.  Prior to the termination of his employment, the claimant was employed as the respondents’ only guillotine operator.  Before the claimant joined the respondents, there had been no separate guillotine operator.  Other employees working on the production line had performed the necessary guillotining functions.  The Tribunal made a finding that it was noticed by senior management that when the claimant was absent from work, other production operators were able to use the guillotine machine themselves with no deterioration (and possibly an improvement) in the performance of the production process.

11.	Mr Robertson gave consideration to the question of whether there was a need for the specific post of guillotine operator.  On 30 September 2003, he met with the claimant.  He told him that the respondents were considering whether the separate role of guillotine operator could be justified.  The claimant was told that the operation would be monitored.  The claimant was then absent from work, ill, for two and half weeks and there was no deterioration in production. He returned to work on 22 October 2003 and met with Mr Robertson, advising him that he had been suffering with nerves.  Mr Robertson told him that, having reviewed the matter, he was planning to lose the position of guillotine operator.  The claimant was told that his role was effectively redundant as far as management were concerned and that there were no vacant positions at present but he was invited to think of whether there was any position he could fit into.  A further meeting was arranged and that meeting took place on 14 November 2003.  Mr Robertson confirmed that there were no vacancies.  No suggestion was made by the claimant regarding an alternative job that he could fill.  The claimant was told that his employment was being ended on the grounds of redundancy.  Mr Robertson wrote to the claimant by letter dated 14 November 2003 confirming the terms of the meeting, the claimant's redundancy pay entitlement and his entitlement to other pay.  He was advised of his rights to appeal in that letter and asked to write to Mr Robertson within five days setting out his grounds in the event of him deciding to appeal.  The claimant did so.

12.	Mr Robertson did not convene any appeal hearing.  He did not advise the claimant that he was entitled to be accompanied at any such hearing.  He considered the claimant's appeal and decided to refuse it.  He did so by writing to the claimant responding to each of the points raised by him, in turn.  He did not remit the matter to anyone else.  He had previously involved his wife in a disciplinary appeal matter, which she had found stressful.  He decided not to involve her on this occasion.

13.	The claimant was not replaced.  The Employment Tribunal found that when his employment was terminated, Mr Robertson felt the respondents were under severe pressure due to sales being down by some 25% in the four months prior to the claimant's departure.  At the same time that the claimant left, two other members of the company left and were not replaced. Whilst the respondents took on two new employees at that time, the claimant did not, Mr Robertson is recorded as having said, have the skills to perform the jobs for which they were employed.  Whilst the Tribunal made no specific finding that he was correct about that, they do not find that he was lacking in credibility or reliability regarding it. 

14.	The claimant never received a written contract of employment, despite having requested one.

15.	Before the Employment Tribunal, the claimant disputed whether there was a real redundancy situation.  He complained of it being unfair that he was summoned to a meeting without being given prior notice and that he was expected to put forward alternative proposals himself.

16.	It was submitted on behalf of the respondents that a redundancy situation had arisen.  The requirement to have a separate guillotine operator had ceased.  There was a pool of one.  Regarding fairness, the respondents had consulted with the claimant on a number of occasions in an effort to find alternatives.  Further, even if there were no redundancy, the events immediately prior to the claimant's dismissal regarding the discovery of the ability of the company to cope without the claimant’s services brought the case within the ambit of "some other substantial reason", entitling the respondents to dismiss the claimant.

17.	The Employment Tribunal found that the claimant's dismissal was unfair, stating:

“In short therefore the Tribunal were of the unanimous opinion that the whole consultation process in relation to the applicant’s redundancy was not genuine.  In the opinion of the Tribunal Mr Robertson had his mind made up on or before the initial meeting on 30 September 2003.  Over and above that the process was unfair.  The applicant was not given prior notice of the situation.  The applicant was not invited to bring a representative with him to any of the meetings.  The crucial meeting took place with undue haste.  Notwithstanding the respondents’ awareness that the Appeal should be determined by a separate individual Mr Robertson who had made the decision on redundancy determined the Appeal himself.  The Tribunal were also not impressed with the respondents’ arguments in relation to their esto position ie some other substantial reason given the fact that no evidence was led thereanent and that the respondents apparently engaged two new employees at or about the time that the applicant was made redundant.”

The Respondents’ Case on Appeal:
18.	It was submitted on behalf of the respondents that the Employment Tribunal had gone seriously wrong when it came to apply the law.  At pages 4 and 7, they had made reference to the claimant’s “right to be accompanied” but no such rights existed in the context of a redundancy consultation meeting: Heathmill Multimedia ASP Ltd v Jones and Jones [2003] IRLR 856.  The only statutory right to be accompanied arose in the context of disciplinary proceedings.  They were critical of the respondents’ appeal procedures but the absence of an appeal procedure does not of itself make a dismissal unfair: Robinson & Ors v Ulster Carpet Mills Ltd [1991] IRLR 348, even in the case of dismissal for misconduct: Shannon v Michelin (Belfast) Ltd [1981] IRLR 505. 

19.	Attention was drawn to the fact that the Employment Tribunal appeared, at p.6, to be critical of the fact that Mr Robertson replied to the claimant's appeal letter “only two days” later yet nothing was said of what it was they thought that he could not responsibly do in respect of the claimant's appeal letter in a period of two days.  Similar “editorialising” had been carried out at p.9 where, at line 14, they referred to the “very day” without explaining why it was inappropriate for Mr Robertson to interview the claimant that day.  Attention was also drawn to the fact that the Tribunal appeared to be sympathetic to the claimant's position to the effect that it was not appropriate to ask him to put forward a proposal for some alternative job that he might be able to do, yet in the redundancy context, management is obliged to consult and ask employees for their suggested alternatives where redundancy is proposed.

20.	It was submitted that it was evident from the Employment Tribunal's concentration on the need to give notice, appropriate practice regarding rights of appeal and rights of representation that they had failed to distinguish between the procedures which were appropriate for employers to follow in the disciplinary context and those which are appropriate in the redundancy context.  In a similar vein, the Tribunal were wrong, it was said, to criticise Mr Robertson for having failed to approach the procedure with an open mind.  As a matter of law, employers are not required to approach redundancy situations with an open mind.  In small businesses, it would be very unlikely that the employer would be able to go through the process of drawing only preliminary conclusions.  There was nothing inherently wrong, it was said, with an employer who is considering redundancy having reached the view that his requirements for employees to carry out work of a particular kind, for example, had ceased or diminished ambit he could not see that there was any alternative to making the employee in question redundant.  Overall, the problem was that the Tribunal had taken a disciplinary set of requirements and applied them to a redundancy procedure which was a fundamentally erroneous approach.

21.	Further, importantly, the Tribunal failed to state whether or not they were satisfied that the employer had established redundancy as being the reason for dismissal.  Without doing that they had not, as a matter of law, followed the structure of section 98 of the Employment Rights Act 1996.  Nor had the Tribunal considered, as they should, the questions of pool, consultation process or selection criteria as one would have expected in a redundancy case. 

22.	Regarding the Tribunal's finding that the respondents had failed to establish some other substantial reason, it was misconceived in respect that it proceeded on their observation that no evidence had been led regarding the matter.  The respondents’ position had been that if the Tribunal were of the view that it was wrong to characterise what had happened as redundancy then, on the same evidence, they submitted that it should have been characterised as “some other substantial reason”.

23.	Finally, the respondents submitted that the Tribunal had erred on the matter of compensation.  They found in fact that the claimant had received two-week’s pay in lieu of notice but had failed to deduct it from the compensation that they ordered.  They had also failed to reduce the compensation to take account of his receipt of incapacity benefit (10 weeks at £54 per week) although they should have done so: Morgans v Alpha Plus Security Ltd [2005] IRLR 234. 

24.	It was submitted, under reference to the factors listed in Sinclair Roche & Temperley & Ors v Heard & Anor [2004] IRLR 763, that the case should be remitted to a freshly constituted Tribunal for a rehearing. 

The Claimant’s Case on Appeal:
25.	Initially, on behalf of the claimant Mr McLean indicated that he wished to submit that there was an inequality of arms on account of his lack of legal qualification.  We confirmed with him, however, that he fully understood the points being taken by the respondents in the appeal and that he understood the points that had been drawn from the various authorities that were referred to.

26.	Reference was made to the respondents’ failure to provide the claimant with a copy of his contract of employment.  It may have given him a contractual right to be represented before his employer, for all he knew.  The claimant's position was that his redundancy was not genuine.  There had been a lack of fairness.  No evidence had been led that the guillotine work had reduced.  Even if it had, it did not mean that the claimant was the employee who should have been paid off.  The employer did not have an open mind.

27.	It was clear that the Tribunal said that the claimant had been unfairly dismissed and their decision should be supported.  It was a startling proposition that the firm worked more efficiently when the claimant was off sick.  That was clearly an allegation of incompetence which meant that it was a disciplinary matter.  It was quite clear that the Tribunal had correctly identified what had occurred as having been a disciplinary dismissal for the claimant’s alleged lack of performance.

28.	The submission that the dismissal was clearly one for lack of performance was robustly refuted by Mr Briggs.  Firstly, the Tribunal had not made finding in fact that the respondents’ business worked more efficiently when the claimant was off sick.  The finding went no higher than to say that there was “possibly” an improvement at that time.  In any event, such finding did not give rise to the inference that the claimant was incompetent.  It did not follow that was a question in competence at all.

29.	Reference was made by Mr MacLean to a report in the Scotsman newspaper on 13th May 2005 of the case of Lionel Leventhall Ltd v North, a decision of the Employment Appeal Tribunal, and the fact that no evidence had been led that Mr Robertson had given consideration to paying off somebody else rather than the claimant.  It was conceded that the deductions from compensation referred to by the respondents should have been made. 

The Legal Principles:
30.	The legal principles to be applied would appear to be firstly that a determination had to be made as to whether or not the reason for the claimant's dismissal was that he was redundant. If the Tribunal were satisfied that it was, they then required to go on and consider whether or not the dismissal was fair or unfair having regard to the fact that it was due to redundancy and having regard to the other factors set out in s.98(4) of the 1996 Act.  It would be normal, in a redundancy case, when considering fairness, to look, not only at the nature of the proposed redundancy but at the consultation process carried out, the pool of employees involved and the selection criteria used.

31.	We are satisfied that there is no rule, in a redundancy case, that the employee has a right to be accompanied at any consultation meeting.  Nor is there any rule that a dismissal for redundancy will automatically be regarded as unfair on account of the absence of an appeal procedure or, indeed, the type of appeal procedure provided in the event that there is one.  The matter was specifically tested in the case of Robinson where three employees dismissed on grounds of redundancy claimed that they had been unfairly dismissed in circumstances which did not give them a right of appeal against the redundancy situation although employees dismissed for misconduct were afforded such a right.  The Court of Appeal in Northern Ireland, taking account of the decisions in two Scottish cases, clearly determined that, in the absence of special facts, an appeal procedure was not required before a dismissal for redundancy could be found to be fair.  Further, even in redundancy cases, the absence of appeal or review procedure does not of itself make a dismissal unfair; it is just one of the many factors to be considered in determining fairness, as was determined in the case of Shannon.  Accordingly, it would be wrong to find that a dismissal on grounds of redundancy was unfair because of the failure to provide an employee with an appeal hearing.  Similarly, it would be wrong to find that a dismissal on grounds of redundancy was unfair because of the failure to have an appeal hearing conducted by someone other than the person who took the original redundancy decision.

32.	As regards the proposition that an employee who is facing redundancy has a right to be accompanied at a meeting with his employer, it is clear that there is no such a right.  Firstly, it seems clear that where the purpose of a meeting is to inform an employee that a redundancy situation has arisen that is not a hearing, still less could it be said that it is a disciplinary hearing. Therefore the requirements of fair procedures in the context of disciplinary hearings and the appeal procedures following thereon, do not arise. Whilst in the disciplinary context, it may well be difficult to show that fairness has been adhered to if an employee has not been given the right to be accompanied to hearings it does not follow that any right to be accompanied to a redundancy meeting arises: see Heathmill Multimedia ASP Ltd v Jones & Jones.  Accordingly, it would be wrong to determine that a dismissal for redundancy was unfair on account of a failure to inform an employee of his right to be accompanied, since no such right arises.

33.	If the Tribunal were not satisfied that the reason for dismissal was redundancy, they required to determine whether they were satisfied that it was some other substantial reason of a kind such as to justify the dismissal of an employee holding the position that the claimant held. If they were satisfied that it was such a reason, then, again, they required to go on and consider whether or not it was fair under reference to the terms of s.98(4).

34.	Redundancy is defined in terms of s.139 of the 1996 Act and, in the circumstances of this case, the Tribunal required to consider whether or not the dismissal was wholly or mainly attributable to the fact that the requirements of the respondents’ business for employees to carry out work of a particular kind had ceased or diminished or was expected to cease or diminish. 

35.	The question of whether or not a claimant has been provided with a contract of employment is not, of itself, relevant to the issue of whether or not the reason for dismissal was redundancy or some other substantial reason.

36.	Salary paid in lieu of notice and incapacity benefit both fall to be deducted from compensation for unfair dismissal, the latter on the authority of Morgans v Alpha Plus Security Ltd. 

Conclusions:
37.	We uphold the submissions of the respondents and allow the appeal.  The Tribunal's extended reasons are demonstrative of a confused approach.  For the most part, they appear to have in mind the questions which would normally arise in a case where an employee has been dismissed for disciplinary reasons.  That impression is reinforced by the failure to state whether or not they were satisfied that the respondents had established that the reason for dismissal was redundancy.  It is further reinforced by their failure to consider the nature of the facts and circumstances which, according to the respondents, showed that there was a redundancy, and their failure to consider what, in such circumstances, would have been appropriate consultation, what was the available pool and what would have been fair selection criteria.  And it is also reinforced by their apparent criticism of Mr Robertson having reached a view as to the need for the claimant’s redundancy and asking the claimant whether he could suggest any alternative job that he would be able to do.  We do not see that these are matters which would prevent a finding that there was a genuine redundancy and if it were felt that they, in some way, showed that the dismissal was nonetheless unfair, it would be necessary to explain why.  The Tribunal do not do so.  Their approach would have been understandable had the claimant been dismissed for disciplinary reasons but that was not the case before them. 

38.	It is not clear what relevance the Employment Tribunal considered the failure to provide a copy of the contract of employment could have, as a matter of law.  They have, wrongly, regarded the claimant as having been entitled to an appeal hearing and to have been entitled to be advised of a right to be accompanied at such a hearing.  They have, wrongly, regarded the claimant as entitled to have his appeal determined by someone other than Mr Robertson.  They have also, it seems, proceeded on a view of the evidence which was not justified by their own findings: whilst at p.2, they found, under reference to Mr Robertson’s evidence, that “when the applicant was absent from work ..., other Production Operators were able to use the guillotine machine themselves with no deterioration (and possibly an improvement) in the performance of the production of process.”, at p.5, they comment on Mr Robertson’s evidence having been that “the production process if anything speeded up in the applicant’s absence” and to the obvious inference being that Mr Robertson wanted to get rid of the claimant “in relation to his competence or lack thereof.”  That gloss is not one which, in our view, can be justified on the basis of the Tribunal’s earlier finding in fact.  Further as regards their approach on the evidence, they would appear to have proceeded on the basis that the two new employees taken on in some way replaced the claimant yet they made no finding in fact that could support such an inference. On the contrary, they record Mr Robertson’s evidence to the effect that both were employed to do work that the claimant could not have done and they do not reject that evidence. 

39.	We also have difficulty in seeing that the Tribunal were justified in criticising Mr Robertson either for having a meeting with the claimant the day that he returned to work or in criticising him for responding to the claimant’s appeal letter within two days.  They do not explain why these actions are worthy of criticism and without an explanation it is not at all apparent that they are of any relevance in supporting the claimant’s case.  It would not, for example, be difficult to envisage circumstances where an employer might be criticised for failing to advise an employee regarding a proposed redundancy at an early opportunity or for failing to respond promptly to a letter of appeal. 

40.	We could not, in all these circumstances, be satisfied that the Employment Tribunal worked their way properly through the tasks required of them by ss.98 and 139 of the 1996 to which we have already referred and we are left with a concern that they approached matters on the basis that this was a case where a disciplinary dismissal was alleged, not one for redundancy. 

41.	Further, we agree that the Tribunal misdirected themselves as regards the respondents’ case that esto there was no redundancy, the claimant was dismissed for “some other substantial reason”.  It is clear from the IT3 form and the context of this case that the respondents were founding on exactly the same evidence for that argument as they were founding upon for their principal case that the claimant was redundant.  The Tribunal’s comment to the effect that there was no evidence led in support of the respondents’ esto case is, accordingly, not apt.  The question for them was whether, looking at the same evidence, they were persuaded that the reason for the dismissal, though not redundancy, could be characterised as “some other substantial reason”.  We would add that the fact that the Tribunal have sought to deal with this issue does raise in our minds the possibility that they had in fact rejected the respondents’ case that the claimant was redundant, since they would not have had to address it at all if they had been satisfied that he was.  If that is so, it is hard to see why the Tribunal were looking at questions of fairness, which they undoubtedly have done, since the answer would simply have been that the respondents had not established a potentially fair reason and they did not need to consider s.98(4) at all.  Our impression that the Tribunal, for some reason, became fundamentally confused in their approach to this case is again, reinforced. 

42.	We note the concession that was properly made in respect of deductions which ought to have been made from the compensation awarded. 

43.	In all the circumstances, we consider that the case requires to be remitted for a rehearing. We are persuaded that the nature and extent of the flaws in the decision in this case are such that the remit should be to a freshly constituted Employment Tribunal and we will so order.