Appeal No. UKEAT/0261/07/DM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 June 2008

Before
HIS HONOUR JUDGE BURKE QC
MR D EVANS CBE
MR B M WARMAN

(1) BRITISH ASSOCIATION FOR SERVICE TO THE ELDERLY	
(2) MRS B DUCKWORTH	APPELLANTS

MRS P K LAWTON	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For Appellants	MR J LEWIS
 (Representative)
	
For the Respondent	No appearance or representation by or on behalf of the Respondent.	

SUMMARY
UNFAIR DISMISSAL
  Reason for dismissal including substantial other reason
  Reasonableness of dismissal

The employers dismissed the employee because they were in financial difficulties and she refused to accept a lesser set of terms and conditions.  The Employment Tribunal found that the reason for dismissal was some other substantial reason but the dismissal was substantively unfair and automatically unfair.  The employer’s appeal failed; the Employment Tribunal had taken the financial difficulties into account; their complaints as to the employee’s conduct were not live before the Employment Tribunal.  In any event, there was no appeal against the finding of automatically unfair dismissal.

HIS HONOUR JUDGE BURKE QC

The appeal
1.	This is the appeal of British Association for Service to the Elderly (BASE) against the judgment of the Employment Tribunal sitting at Shrewsbury under the chairmanship of the employment judge, Ms Dean, sent to the parties with written reasons on 19 December 2006.  By that judgment the Tribunal found that the Claimant, Mrs Lawton, had been unfairly dismissed by BASE as we will call the Association.  

2.	The dismissal, the Tribunal found, was both automatically unfair pursuant to s98A(1) of the Employment Rights Act 1996 because BASE had not complied with steps 2 and 3 of the Statutory Dismissal and Disciplinary Procedures set out in schedule 2, part 1, chapter 1 of the Employment Act 2002, and was substantially unfair under s98(4) of the 1996 Act.  

3.	They awarded Mrs Lawton, in respect of her unfair dismissal, sums in excess of £11,000 by way of basic and compensatory award and they uplifted the compensatory award by 10 per cent pursuant to section 31 of the 2002 Act.  The Tribunal also found in Mrs Lawton’s favour upon her claims to unpaid holiday pay and for failure to provide her with a statement of terms and conditions of her contract of employment.  Those aspects of the Tribunal’s judgment are not relevant to this appeal, which challenges only the Tribunal’s conclusions as to unfair dismissal.

4.	BASE originally put forward a number of grounds of appeal;  those grounds having been rejected at the sift stage of the Employment Tribunal’s procedures, they put forward an amended Notice of Appeal which also raised numerous grounds, including bias.  

5.	At a preliminary hearing on 19 October 2007 the Employment Appeal Tribunal, presided over on that occasion by Nelson J, permitted the appeal to proceed to a full hearing on two grounds only; all other grounds were dismissed.  Those two grounds, as set out in the Employment Appeal Tribunal’s order are, 
a. the Employment Tribunal failed to consider the Appellant’s evidence as to the Respondent’s conduct in accepting a part‑time job with Age Concern without informing the Appellant that this was the reason why she changed her hours of work. 
b. the Employment Tribunal failed to take into account the Appellant’s reasons for the change in the Respondent’s terms and conditions of employment, namely the Appellant’s precarious financial situation.

6.	Accordingly, we have pointed out during the course of this appeal that we are concerned only with those two grounds.  BASE were given leave to amend their Notice of Appeal so as to encompass those grounds by 24 October 2007.  They did not do so.  They did, however, send to the Employment Appeal Tribunal an amended Notice of Appeal which included those two grounds in January 2008.  No application for leave to amend out of time has been sought.  However, we shall proceed as though those two grounds were properly before us.  

7.	It will be seen that neither of those grounds seek to attack the Tribunal’s conclusion that BASE had failed to comply with the Statutory Dismissal and Disciplinary Procedures and that the dismissal of Mrs Lawton was, in any event, automatically unfair.  It has been accepted today on behalf of BASE that there is no attack by way of appeal upon that aspect of the Tribunal’s decision.  We have been told that BASE were unaware of those statutory procedures at the relevant time.  That does not surprise us; experience tells us that in 2005 and 2006 many small employers were in a similar position.  However, ignorance of those procedures, of course, is no excuse for failing to comply with them.  They are statutory requirements where they apply.

8.	Neither BASE nor Mrs Lawton nor, indeed, Mrs Duckworth, the chair of the Trustees of BASE, who was made a party to the proceedings, have been at any time professionally represented.  Before the Employment Tribunal BASE were represented by Mr Lewis, their Chief Executive, who has also appeared for them before us.  Mrs Lawton appeared in person for the Tribunal; she has not attended this appeal hearing today.  We are grateful to Mr Lewis for his courteous arguments.

The facts
9.	We shall set out briefly the relevant facts which we take from the Tribunal’s findings.  BASE is a charity of long-standing, by whom Mrs Lawton had been employed since 1989.  Mr Lewis became Chief Executive in October 2004, by which time the charity was in decline and had been for some time.  He was tasked with rectifying that situation.  

10.	He discovered that the staff had no contracts of employment or statements of terms and conditions of employment.  The terms on which Mrs Lawton was in practice employed, arising it seems from a combination of custom and practice and policy documents, were regarded by BASE and, indeed, by the Tribunal as generous.  There were three particular aspects of this generosity.  It was common ground that Mrs Lawton was entitled to 30 days paid holidays per year together with what were called link days, that is days surrounding bank holidays (for example the days between Christmas and New Year) in addition to statutory bank holidays.  She was entitled to sick pay on a full-pay basis for 6 months and a half-pay basis for a further 6 months and was required to provide a sickness certificate only after 20 days of absence.  She was able to work flexi‑time.  By agreement she was employed on a part‑time basis, working three days a week; so her holidays amounted to three‑fifths of the entitlement we have described.

11.	The Tribunal found that these terms arose from bench‑marking against National Health Service standards.  BASE say that this was factually incorrect; they were derived from local authority standards; but that difference is immaterial.  They were not fanciful terms but represented terms enjoyed in other workplaces which, no doubt, had more financial support.

12.	Mr Lewis, in the interests of this seriously ailing charity, sought to change things.  He has told us that he needed to change wholly the thrust of the charity’s work and set about making such changes.  So far as the employees were concerned, he sought to impose a single standard of terms and conditions which reflected statutory minimum obligations but also would impact substantially and adversely on Mrs Lawton.  The proposed terms would have reduced her holiday pay, removed the link days, abolished sick pay and tightened up the sickness reporting requirements.

13.	Mrs Lawton and others who were to be affected by these proposed changes raised a grievance in June 2005 about the proposal;  but that grievance was never determined.  At a meeting on 14 October 2005, she was told the changes were to be made;  and on 10 November she received an email giving her three months notice from the date of the 14 October meeting that she must accept the new terms and conditions or be dismissed.  That letter, as the Tribunal recorded in paragraph 12, ended with these words:
“Please be aware that these changes are absolutely vital for survival of the charity.”

14.	In the light of that letter, Mrs Lawton wrote a further grievance about the proposed changes.  She received no response.  On 6 January she met Mr Lewis again.  She declined to accept the new terms and was summarily dismissed.

The Tribunal’s conclusions
15.	So far as automatically unfair dismissal pursuant to s98A(1) of the 1996 Act is concerned, the Tribunal held that the standard disciplinary and dismissal procedures set out in schedule 2 of the 2002 Act applied.  They found that, more by accident than design, the letter of 10 November was a sufficient step 1 letter but that, after the meeting on 6 January, Mrs Lawton was not informed of her right to appeal and, although on 13 January 2006 she had, by writing to Mrs Duckworth complaining of what was happening to her, exercised her right to appeal, BASE failed to deal with that appeal.  Therefore, there were failures on the part of BASE to comply with step 2, paragraph 4 and step 3, paragraph 2 and thereafter, of the statutory procedures.

16.	It is not necessary for the purposes of this judgment to set out the well known terms of section 98A(1) of the 1996 Act.  In the light of the breaches of procedure which the Tribunal had found to have taken place, the Tribunal were required to find that Mrs Lawton had been unfairly dismissed.  So far as substantive unfairness was concerned, the Tribunal identified, at paragraphs 21 and 25 of their judgment, that the potentially fair reason which they had to consider was some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held (see section 98(1)(b) of the 1996 Act).

17.	
They said at paragraph 21, when setting out the law,
“We find that it is for an employer from time to time to introduce changes to their terms and conditions of employment which, potentially may, amount to a fair reason to dismiss being for some other substantial reason that is permissible under the provisions of section 98 of the Employment Rights Act 1996.  However, an employer under the provisions of section 98(2) must act fairly and reasonably in all the circumstances having regard to equity and merits of the case.”

18.	In paragraph 25 at the beginning of their conclusions they said:
“25. Having considered the findings of fact that we have made and been guided by the requirements of law that has been outlined we make the following conclusions.  We find that the need of an employer to introduce a variation or change in terms and conditions of employment may, in some circumstances, amount to a fair dismissal being for some other substantial reason.  However, we are mindful that in January 2006 the claimant and Mr Lewis were the only two employees of the respondent organisation.  We find that the respondents’ decision to impose unilaterally a fundamental change in terms and conditions of employment which were detrimental to the claimant was an unreasonable decision and not one which any reasonable employer would have taken.  There was nothing to prevent the respondents, and indeed it was a solution that the claimant had suggested, from providing her with the existing contractual terms and benefits that she enjoyed but making different arrangements for any future employees of the respondent company.  The Tribunal find that had the respondent introduced a written contact of employment that reflected her actual terms and conditions and benefits that operated and existed by custom and practice such that formalised the arrangements including the arrangements to work flexibly and benefits relating to holidays and sickness arrangements that the respondents would have been fair and reasonable in requiring the claimant to sign such a written contract.
26. However, the respondents’ decision to impose changes that were detrimental to the claimant and the manner in which they did so was unreasonable.  We find also that the respondents’ decision to dismiss the claimant in the circumstances without even issuing a contract to the claimant to refer specifically to the claimant as an individual who has been required, on pain of dismissal, to sign a contract was the act that no reasonable employer would have undertaken in the circumstances. 
27. In those circumstances we find that the respondent has failed to comply with the statutory procedures and have failed to comply with the standards that are required of a reasonable employer to treat an employee fairly.  We find that the dismissal was both substantively and procedurally unfair for the reasons that we have set out above.  The dismissal would have been unfair even had the proper procedures been followed.”

19.	We do not need to set out the basis on which the Tribunal approached compensation, save to say that the Tribunal increased the compensatory reward because of BASE’s failure to comply with the statutory procedures by only the minimum 10 per cent normally permitted by s31 of the 2002 Act.

The First Ground
20.	Mr Lewis has put forward a Skeleton Argument which sets out a factual history of BASE from its origins in 1968 to his appointment in 2004 and of the factual reasons why he had to act as he did.  He says that BASE did everything they could to persuade Mrs Lawton that change was necessary for survival;  but she, unreasonably, either refused to listen to their arguments or did not understand them and soon, in any event, found herself other full‑time work. 

21.	Unfortunately, and we say this in no critical spirit, that Skeleton Argument does not put forward, even in outline any submission in support of the two grounds of appeal before us.  However, we have considered the argument as set out in the latest amended Notice of Appeal; and, as we have said, we will treat that notice as effective without deciding that it is.

22.	In relation to the first ground, that notice sets out that Mrs Lawton changed her working time to enable her to work part‑time elsewhere without telling BASE that that was the reason and, indeed, they only learnt of that reason when these proceedings started.  BASE also complain that she failed to keep appointments with management and left her offices unattended; but we will not go into the detail of those complaints because the ground of appeal permitted at the preliminary hearing to proceed is confined to Mrs Lawton’s conduct in accepting a part‑time job without informing BASE that that was the reason why she was changing her hours of work.

23.	There are, in our judgment, a number of straightforward and simple answers to this ground of appeal.  The first is that, although the change of hours to which we have referred is mentioned in BASE’s response to Mrs Lawton’s claim form, at no time did BASE put forward, as the reason for dismissal, misconduct on Mrs Lawton’s part.  It is entirely clear from their response that BASE regarded her attitude towards the changes generally as unreasonable; but in the context that could not amount to misconduct on her part when faced with an ultimatum, namely, either agree terms which, on the Tribunal’s findings, meant a substantial reduction in the overall benefits which she was getting from her work or be dismissed.  The response does not, in our judgment, begin to set out misconduct as a reason for the dismissal; and, indeed, since changing her hours in order to work for somebody else was something which BASE did not know about at the time of the dismissal, it could not have been a reason for the dismissal. 

24.	Mrs Lawton told BASE that the change was “due to a change in her commitments”.  The Tribunal found that she was entitled in any event to work flexible hours;  but Mr Lewis has told us that, although they did not like the change that she was thus effecting, BASE did not complain about it in the interests of staff motivation and allowed it to happen.  In those circumstances, even if misconduct had been put forward as a reason for the dismissal and the Tribunal had had to consider that reason, which manifestly they did not, the only aspect of conduct which under the ground of appeal now being considered would have been relevant could not possibly have been regarded as misconduct at all.  It is difficult to see why, if Mrs Lawton had wanted to change her working times, it was necessary for her to explain why she wanted to;  but it is not suggested that, when she explained that it was due to a change in commitments, BASE sought to investigate that in any way.

25.	Furthermore, had the Tribunal considered misconduct in addition to or alternatively to some other substantial reason for Mrs Lawton’s dismissal, they would have been bound to have found that the dismissal was automatically unfair in any event, not only because of the failure of BASE to take the statutory steps we have already identified, but also because there is no suggestion that the letter of 10 November set out misconduct on her part and there was no disciplinary hearing of any description.  Thus, BASE, had they run misconduct as the reason for dismissal would have found that the dismissal would be held to have been automatically unfair for additional reasons to those for which it was, in any event, found to be automatically unfair.

26.	We have considered whether the real thrust of this ground is that the Tribunal failed to consider Mrs Lawton’s conduct either by applying the Polkey principle or as contributory fault.  There is nothing to show that this aspect of Mrs Lawton’s conduct was actually put before the Tribunal under either of those principles;  but for the reasons we have set out it could not have been contributory fault;  and the Tribunal expressly considered the Polkey test in the light of the facts at paragraph 24 and later and found against BASE upon it.  

27.	Finally, even if we were persuaded that this ground of appeal should succeed which we are not, it would not in any way benefit BASE;  for it does not attack or undermine the Tribunal’s conclusions that Mrs Lawton was automatically unfairly dismissed for the reasons which we have set out.  This appeal is, in reality, wholly academic.  However, for the reasons we have set out, we have concluded this ground of appeal does not succeed.  

The second ground
28.	We accept that the second ground is more than a complaint that the result is harsh on a charity in a precarious financial position.  The ground permitted to be argued is that the Tribunal did not take that precarious financial position into account. 

29.	Mr Lewis’ argument is that it was entirely reasonable for BASE to act as they did in their stricken financial circumstances and that BASE could only survive if it made the radical changes both in relation to the way in which it operated and in relation to the terms and conditions of its staff which we have outlined earlier.

30.	In our judgment, however, it is plain that the Tribunal did not fail to take the financial situation of BASE into account.  At the very beginning of the Tribunal’s judgment, in paragraph 1, they referred to the fact that the charity had been in a period of decline and was not thriving.  In paragraph 2, they referred expressly to the need to impose changes because of the precarious future of the charity.  In paragraph 12, they specifically referred to the words at the end of the letter of 10 November which we have already set out.  They clearly recognised that the thrust of BASE’s case before them was that the dismissal of Mrs Lawton was for some other substantial reason in circumstances in which BASE felt that, for economic reasons, they had to act as they did.

31.	Paragraph 25 of the Tribunal’s judgment, when read in the context of the judgment as a whole as it should be, spells out that the Tribunal had well in mind the particular difficulties from which BASE was suffering.  In our judgment, when the judgment is read as a whole, it can be seen with clarity that the Tribunal did not err by failing to take BASE’s precarious financial situation into account.  They did take it into account.  The factual result which emerged is one which, understandably, BASE have felt difficult to accept; but it does not contain any error of law.  In any event, even if it did, BASE would still be left, as we have said in dealing with the first ground, with the Tribunal’s decision that Mrs Lawton was automatically unfairly dismissed in any event.

Conclusions
32.	The thrust of Mr Lewis’ submission to us have not, in reality, been directed at the two grounds of appeal to which we have referred at all.  He believes with clear conviction that the Tribunal should have reached a different decision on the issue of the reasonableness of BASE’s dismissal of Mrs Lawton, once she did not accept the new terms on offer.  Mr Lewis has told us today with passion of the essential role that charities in general play and that BASE, as reorganised and redirected, is playing in the care of the elderly and how requiring this impecunious charity to pay a very substantial sum to Mrs Lawton will have a devastating effect on BASE’s ability to continue in that role.

33.	We have sympathy for his view.  However the issue of reasonableness was determined by the Tribunal on the facts and cannot be reviewed on appeal unless it is demonstrated to have been perverse; and there is no ground of appeal before us which asserts perversity.  Accordingly, the appeal must be dismissed.