Appeal No. UKEATS/0030/07/MT

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF

	At the Tribunal
On 8 February 2008

Before
THE HONOURABLE LADY SMITH
MR P HUNTER
MR P PAGLIARI

MR B HENDERSON, MR D ROSS, MR D PRYDE, MR W RODGERS, 
MR W MANNARN, MR S DEACON & MR M LARKIN                             APPELLANTS

MITE OLSCOT LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellants	Mr B Henderson
(The Appellant in Person) 

(Representative )	
For the Respondents	Mr T Muirhead, 
(Employment Consultant)
Peninsula Business Services Ltd  Litigation Dept
Delphian House
Riverside
New Bailey St
Manchester
M3 5PB	

SUMMARY

Unfair dismissal – Polkey deduction

An Employment Tribunal sitting in 2003, held that the claimants had been unfairly dismissed because the respondents failed to show that the only reason advanced by them for the dismissals was redundancy.  It found as fact that the reason for the dismissal was the “applicants’ stubborn refusal to accept the revised terms and conditions” which were being offered by the respondents.  Due to that refusal, the division of the respondents in which the claimants had worked, closed down on the same day that they were dismissed.  There was no finding in fact that attributed the dismissal to any failing on the part of the respondents.  At a subsequent remedies hearing, another Tribunal determined that no sums were due as compensation for unfair dismissal since, taking account of the reason for dismissal found by the first Tribunal, there was no chance of the claimants employment continuing beyond the date of their dismissal: there was no work for them to do.  The claimants appealed, seeking to argue that the Tribunal had erred in the application of the Polkey principle.  Appeal refused.  This was not a Polkey deduction case.  The Tribunal was not satisfied that the claimants had proved that their dismissal caused them to lose earnings, a conclusion which followed, logically, from the findings in fact.

THE HONOURABLE LADY SMITH

Introduction 
1.	This is an appeal at the instance of seven claimants from a judgment of an Employment Tribunal sitting at Edinburgh, Chairman Professor V Craig (“the 2006/7 Tribunal”), whose judgment was registered on 5 April 2007.  It relates solely to remedy and is restricted to the issue raised in the Notice of Appeal of whether or not the tribunal erred in law in applying a “Polkey” deduction to the compensation awarded.  

2.	We will refer to parties in this judgment as claimants and respondents.

3.	The claimants were all represented by the first claimant both before the 2006/7 Tribunal and before us.  The respondents were represented by Mr Muirhead, consultant, before that tribunal and before us.  

Procedural History
4.	The claimants were all dismissed by the respondents on 15 October 2002 and they were found to have been unfairly dismissed by an Employment Tribunal sitting at Edinburgh in June 2003 (“the 2003 Tribunal”).  The respondents had advanced a case that the dismissals were by reason of redundancy but it was not accepted.  That tribunal found that the reason for the dismissals was that the claimants had refused or delayed to accept revised terms and conditions.  Had they done so, they would not have been dismissed.  

5.	The 2003 Tribunal sisted the case with regard to remedy.  There was subsequent appeal procedure, there were attempts to reach agreement as to remedy thereafter and remedy not having been agreed, the matter returned to the Employment Tribunal to be determined.  By the time that occurred, however, the Chairman who had presided in June 2003 had retired and one of the lay members had died.  A fresh Tribunal was, accordingly, constituted.  It was originally listed to be heard before a Tribunal chaired by Mrs Cape.  She chaired a case management discussion on 27 November 2006, sitting alone.  It was intended that the case would proceed to a full hearing before Mrs Cape and members the following day.  She, unfortunately, became unwell overnight and the Tribunal was, accordingly, chaired by Professor Craig (the 2006/7 Tribunal).  

Background 
6.	The respondents’ business was that of industrial cleaning.  The claimants were employed by them as cleaners in one particular division of the business, the Edinburgh division.  They would be sent out in teams to clean commercial premises.  Each contract would be separately priced.  Whilst the cleaners were paid a daily rate in respect of some jobs, they were remunerated in respect of all others in accordance with a system whereby 40% of the value of the job was treated as due to the cleaners working on the job and 60% of that value was retained by the respondents.  

7.	The claimants were dismissed on 15 October 2002 and the division in which the claimants had been employed was closed down on that date.

8.	The claimants sought to establish that the respondents had been in breach of what came to be referred to as the 60/40 arrangement resulting in significant underpayment.  However, after having heard evidence on the matter (including evidence which was accepted by the 2006/7 Tribunal that there had in fact been overpayment), the 2006/7 Tribunal did not find their case to that effect to have been established.

9.	That left the question of what compensation, if any, was due in respect of the unfair dismissals.  The 2006/7 Tribunal awarded each claimant the sum of £250 as compensation for loss of statutory rights but nothing further.  It restricted the awards in that manner because it found that there were no grounds for believing that the claimants’ employment with the company would have continued after the date when they were dismissed.  We note, in passing, that four of the claimants had also received redundancy payments.  Basic awards were made in favour of those who had not.

10.	The factual background to the dismissals was that by the date when the claimants were dismissed, the division of the respondents’ business in which they were employed was running at a substantial loss.  The 2003 Tribunal, whilst not accepting that the reason for the dismissals was redundancy, found that it was because the claimants refused or delayed to accept changed terms and conditions which the respondents regarded as a pre-requisite to being able to keep the division open.  The reason that they refused to do so was that they wanted grievances that they had about their pay answered first of all.  At page 17 of its judgment, the 2003 Tribunal state:

“the Tribunal …..are of the opinion that the real reason for dismissal was the applicants’ stubborn refusal to accept the revised terms and conditions.” 
The 2006/7 Tribunal’s Judgment 
11.	It is clear from the 2006/7 Tribunal’s judgment that it considered that it was not possible for any award of compensation for continuing loss of earnings to be made because the fact was that the division closed on 15 October 2002.  At paragraph 119, they observe that the reason for the claimants’ dismissal was, according to the 2003 Tribunal, that they refused or delayed to accept revised terms and conditions.  Had they done so, they would not have been dismissed but as at 15 October that was not something that they were willing to do.  In the circumstances, the 2006/7 Tribunal found that:

“It is difficult to envisage circumstances in which the claimants’ employment with the respondent company would have continued beyond 15 October.” 

12.	As the 2006/7 Tribunal develop their reasoning, their conclusion is firmly stated to be:
“… there was no chance of the claimants’ employment continuing  with the respondent company after 15 October for the simple reason that the claimants were not prepared to accept any changes in their terms and conditions of employment which the company regarded as essential for keeping the division open ………………...  There was no convincing evidence before us that the division was not closed and its work (or the work done by the claimant) was done by other employees.  None of the claimants lost the opportunity of continuing to work for the respondent company after 15 October.”  Paragraph 122)

13.	It is the tribunal’s further explanation in paragraph 123 that seems to have caused difficulty and given rise to the single ground of appeal before us.  They state there:
“While the previous tribunal denied the respondent company the opportunity of pleading that if redundancy was not the reason for the dismissal it was for some other substantial reason the decision of that tribunal makes it clear that discussions and  consultations had taken place with a view to persuading the claimants to accept revised terms and conditions.  These proved fruitless because the claimants wanted grievances they had about their pay answered first of all.  In light of the evidence we heard regarding the losses being sustained by the Edinburgh division where the claimants worked had the respondent company pleaded some other substantial reason at an earlier stage there was a considerable chance that it would have been successful.  It is well established that such a reason can be successfully pleaded where an employer for business reasons is required to change contractual terms – even to the disadvantage of employees – and provided the employer offers opportunities for consultation and discussion should these prove fruitless a dismissal for some other substantial reason can be fair.  In this case there were such opportunities but they proved fruitless and the chances of the claimants’ employment continuing beyond 15 October were non existent.  The division was making a substantial loss, its closure could only be saved by the claimants accepting a reduction in their terms and conditions; they had indicated they were not prepared to do so;  as they were already unhappy about their existing conditions it is fanciful to believe that even less advantageous terms would have been agreed to so that there was no grounds for believing that employment beyond 15 October would have continued.  While sec 123 of the Employment Rights Act requires a tribunal to award such compensation as a tribunal considers to be just and equitable it must relate to the loss sustained in consequence of the dismissal.  The closure of the division meant there was no work for the claimants to do so that their dismissal did not result in them being deprived of the opportunity of doing that work.” 

14.	At paragraph 124, they turn to the “just and equitable” requirements of s.123 and add:
“… having regard to the question of justice and equity it is clear from the decision of the previous tribunal that it was the claimants’ delay in accepting the new terms that led to their dismissal and as early as March the claimants were advised the respondents could no longer afford to pay them the rates they were on and Mr Henderson accepted there had been some opportunity to advance ideas but felt matters had become hampered by the respondents refusal to address their concerns.  The closure was undoubtedly precipitated by the claimants’ intransigence or delay in accepting nearing in mind the consultation on the change of terms began in March 2002 and not until June was there mention of potential redundancy.” 

15.	Accordingly, there were essentially two reasons for the 2006/7 Tribunal deciding that no compensation for continuing loss of earnings should be awarded.  On the one hand, the division closed on the day of their dismissal.  It could not remain open unless the claimants accepted revised terms and conditions and that was something that they had refused to agree and were not, as at that date, prepared to agree to.  We note that there is no suggestion in the decision of either Tribunal that the respondents were being unreasonable in proposing these revised terms and conditions.  On the other hand, the tribunal took the view that to make an award would not have been just and equitable given the claimants’ intransigence or delay in accepting the new terms.  It is plain that had they done so, the division would have continued to operate.  
The Appeal 
16.	Extensive grounds of appeal were lodged but only one ground was allowed through the sift to a full hearing.  That was that the tribunal erred in law in making a “Polkey” deduction cutting off the claimants’ entitlement to compensation.  In the event that they were entitled to make such a deduction it was, it was said, perverse to have fixed it at 100%.  

17.	Mr Henderson displayed considerable diligence in his preparation for the appeal and made every effort to explain the claimants’ position to us as clearly as he could.  He provided us with written submissions and referred to them in the course of the hearing.  We should record that we appreciate the anxiety that representing not just himself but his fellow employees has evidently caused him and that he cannot be faulted for having tried to leave no stone unturned on their behalf.  

18.	Some of what Mr Henderson said amounted to attempts to reopen the evidence on the breach of contract claim.  Some of it amounted to an attempt, it seemed, to suggest that the claimants had been subjected to redundancy dismissals that were unfair on account of consultation deficiencies.  Some of it amounted to an attempt to suggest that the Edinburgh division had not in truth closed down.  We could not, of course, entertain of these points on appeal, given that they were not part of the single ground that had been allowed through the sift.

19.	Regarding the matter that does feature in that ground of appeal we would summarise the claimants’ argument as being that the 2006/7 had impermissibly concluded that the dismissals were for some other substantial reason and on that basis, concluded that there was no compensation due.  That was impermissible because the 2003 Tribunal had properly restricted its considerations to the single issue put before it by the respondents namely that the dismissals were by reason of redundancy.  A Polkey deduction could not, in these circumstances, properly be made.

20.	For the Respondents, Mr Muirhead submitted that the 2006/7 had not made a Polkey deduction.  They had applied s.123 of the Employment Rights Act 1996 and found that no loss was established.  Further they had found it was just and equitable to make no award, which was a matter of their discretion and not subject to interference without perversity.  The decision was not perverse.  There were several possible scenarios.  One was that the claimants could have accepted the new terms and conditions in which case their employment would have continued.  But both Tribunals had found that the claimants did not and would not have accepted those terms.  Another was that the claimants could have carried on working under the same terms and conditions but that would not work because of the finding that the respondents would not have agreed to that.  The division would have closed down.  Another was that claimants’ work could have been still available in Edinburgh but on the findings in fact, it was not.  

21.	It could, Mr Muirhead added, be said that, for s.123 purposes, any losses sustained by the claimants were due to their own actions, not due to action taken by the respondents.  

Relevant Law 
22.	Section 123(1) of the 1996 Act provides:

“… the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.” 

23.	As regards the requirement that the loss must be attributable to action taken by the employer, it is not enough to show that but for the dismissal, the loss would not have occurred.  The claimant requires to show that action by the employer was the effective cause of the loss.  

24.	Turning to the case of Polkey v AE Dayton Services Ltd [1987] IRLR 503, we mention it only to exclude its relevance to the issue in this case.  The House of Lords there determined, put shortly, that if a dismissal is unfair due to a failure by the employer to take appropriate steps before dismissing, then there need not be an “all or nothing decision”.  It is open to the Tribunal to assess what would have been the chances of the employee being dismissed even if those steps had been taken and make a percentage reduction in compensation to reflect that chance.  As will have been observed, the circumstances of this case were not such that any question of a Polkey deduction arose.  The dismissal was not held to be unfair on account of any procedural failing.  It was unfair simply because the respondents had failed to show that it was due to redundancy.  That being so, an inference of unfairness arises but it is, in reality an inference without any particular content and in this case there were no findings of any actings by the respondents that caused  the dismissals apart from the acts of dismissal themselves.  

Discussion and Decision
25.	We are satisfied that this appeal falls to be refused.  The 2003 Tribunal found as fact that the dismissals were caused by the claimants’ stubborn refusals to accept the revised terms and conditions that were on offer.  The 2006/7 Tribunal were bound by that finding in fact and, indeed, they endorsed it.  The 2006/7 made findings in fact that were open to them that the Edinburgh division genuinely closed on the day that the claimants were dismissed.  The cause of that closure was not action taken by the employer but the claimants’ refusal to agree the new contracts that were being offered.  There were findings in fact that were open to the Tribunal to the effect that the claimants were not prepared to agree to those new terms.  Their job losses followed.  In the light of those circumstances, the only conclusion open to the 2006/7 Tribunal was that the effective cause of the claimants’ lost employment was their own decision not to accept the deal that was on offer.  They could not, on the findings in fact made by them and by the 2003 Tribunal, have concluded that the lost employment was attributable to actions on the part of the respondents.  

26.	In these circumstances, a straightforward application of s.123(1) can only result in the conclusion that the claimants had not suffered any recoverable loss and therefore it was not open to them to award compensation.  That was sufficient for disposal of the issue.  In fact the Tribunal went on and asked themselves the “just and equitable” question that arises under the provisions of s.123(1) and reached the view that it would not, in any event, have been just and equitable to make any award.  Since they had concluded that no loss arose, that was not a question which they required to consider but had they had to do so, we do not find that it was perverse of them to reach the view that they did.  

27.	In all these circumstances, we will pronounce an order refusing the appeal.