Miss I T Solsona v Heaven Beauty Ltd and Others: 8001514/2024 and Others
JUDGMENT
The Judgment of the Employment Tribunal is as follows –[1]The claims brought by the claimant for breach of contract and unfair dismissal succeed and the fourth respondent (Heaven Beauty Edinburgh Ltd) is ordered to pay to the claimant –(a) In respect of breach of contract, the sum of ONE THOUSAND FOUR HUNDRED AND SIXTY TWO POUNDS AND FIFTY PENCE (£1462.50) less the appropriate deductions for income tax and employee’s National Insurance contributions.(b) In respect of unfair dismissal, a monetary award of TWO THOUSAND SIX HUNDRED AND FORTY NINE POUNDS AND EIGHTEEN PENCE (£2649.18); the prescribed element is FOUR HUNDRED AND FIFTY FIVE POUNDS AND FORTY THREE PENCE (£455.43) and relates to the period from 11 May 2024 to 31 January 2025. The monetary award exceeds the prescribed element by TWO THOUSAND ONE HUNDRED AND NINETY THREE POUNDS AND SEVENTY FIVE PENCE (£2193.75).[2]The employer’s contract claim does not succeed and is dismissed.REASONS
[1]These combined cases came before me for a final hearing in Edinburgh to deal with both liability and remedy. The claimant appeared in person and Mr Smith represented the respondents. Ms E Stratulat was the Spanish interpreter for the claimant, and she participated by means of the Cloud Video Platform.[2]The claimant had presented two separate claims. Case no 8001514/2024 named the first respondent (Heaven Beauty Ltd) as the employer. Case no 8001518/2024 named the second respondent (Mr Smith) as the employer. In the ET3 responding to this claim(a) the employer was named as the third respondent (Heaven Beauty Edin West Ltd) and(b) an employer’s contract claim was intimated (8001754/2024). These claims were subsequently combined.[3]It was apparent from the case file that the claimant had a good command of English. She confirmed that she was happy to proceed in English without everything being translated, provided she could use the interpreter’s services if she wished to do so. The hearing proceeded on this basis and the claimant required only limited assistance from Ms Stratulat. Preliminary issues[4]At the start of the hearing I identified three preliminary matters –(a) Which of the respondents was the claimant’s employer (the “Identity of Employer” issue)?(b) Had there been a transfer of the undertaking in which the claimant was employed under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) (the “TUPE” issue)?(c) Had the claim brought by the claimant been presented outwith the relevant statutory time limit (the “Time Bar” issue)? Identity of employer[5]Four respondents were identified for the following reasons –(a) The first respondent (Heaven Beauty Ltd) was named by the claimant as her employer in case no 8001514/2024. This company was named as the employer in the first Statement of Particulars provided to the claimant (C1 -C5)(b) The second respondent (Mr Smith) was named by the claimant as her employer in case no 8001518/2024.(c) The third respondent (Heaven Beauty Edin West Ltd) was named as the employer in the ET3 submitted by Mr Smith.(d) The fourth respondent (Heaven Beauty Edinburgh Ltd) was named as the employer in the second Statement of Particulars provided to the claimant (C16-C20).[6]Heaven Beauty Ltd was incorporated on 16 December 2016 with company number SC552822. Mr Smith acquired this company and the business operated by it from premises at 213 St Johns Road, Edinburgh (the “Corstorphine business”) in 2019. Mr Smith was recorded at Companies House as the sole shareholder and director of this company.[7]Heaven Beauty Edinburgh Ltd was incorporated on 12 May 2021 with company number SC698603. This company was identified as the claimant’s employer on her payslip for March 2024 (C23), her P60 for 2023/24 (C25), her payslip for April 2024 (C28), her P45 dated 24 May 2024 (C80-C81) and her payslip for May 2024 (C83). The address for this company was 11 Jeffrey Street, Edinburgh where Mr Smith had acquired a second business (the “Jeffrey Street business”). Mr Smith was recorded at Companies House as the sole shareholder and director of this company.[8]Heaven Beauty Edin West Ltd was incorporated on 4 August 2023 with company number SCSC778100. Mr Smith was recorded at Companies House as the sole shareholder and director of this company.[9]There was a further company called HB Holdings Edin Ltd which was incorporated on 22 February 2022 with company number SC724045. Mr Smith held 90 ordinary shares and the claimant held 10 ordinary shares in this company. Mr Smith was recorded at Companies House as the sole director. By reason of her shareholding in this company Mr Smith regarded the claimant as joint owner of the businesses. However, given the shareholding position in the other companies (of which Mr Smith was the sole shareholder) this was misconceived on his part.[10]It was apparent from the information set out above that the claimant had been employed initially by Heaven Beauty Ltd and subsequently by Heaven Beauty Edinburgh Ltd. The claimant and Mr Smith were in agreement that Heaven Beauty Edinburgh Ltd had been the employer at the time of the events detailed below, ie when the claimant’s employment ended.[11]In these circumstances I determined that the fourth respondent was the employer for the purposes of these proceedings. Accordingly all references below to the “respondent” or “respondent company” are references to Heaven Beauty Edinburgh Ltd. TUPE[12]I considered that it was appropriate to establish whether the Corstorphine business and/or the Jeffrey Street business had been transferred at or after the termination of the claimant’s employment so as potentially to engage the TUPE regulations.[13]Mr Smith told me that the lease of the Jeffrey Street premises had been taken over by a new tenant operating a fleet of electric buses. The St Johns Road premises remained vacant. The claimant did not dispute the accuracy of this information.[14]In these circumstances I was satisfied that there was no question of either the Corstorphine business or the Jeffrey Street Business being transferred and accordingly the TUPE regulations were not engaged. Time bar[15]I noted from the case file that, at vetting of the second claim presented by the claimant, it had been noted that the claim was timebarred. This was not reflected in the Tribunal’s subsequent correspondence with the parties. The point was not taken by Mr Smith in the ET3 which he submitted. Notwithstanding that, I considered that it was appropriate to consider whether there was an issue of time bar as it related to the Tribunal’s jurisdiction to hear the claim.[16]The time bar issue arose because –(a) In her ET1 the claimant stated her date of dismissal as 11 May 2024. In the ET3 Mr Smith confirmed that the dates of employment given by the claimant were correct.(b) The claimant contacted ACAS on 9 July 2024 and ACAS issued the Early Conciliation certificate on 19 August 2024.(c) Having regard to section 207B of the Employment Rights Act 1996 (“ERA”) and regulation 8B of the Employment Tribunals Extension of Jurisdiction (Scotland) Regulations 1994 (the “1994 Regulations”) the time limit for lodging the present claims was 18 September 2024.(d) The claimant’s two ET1s were lodged on 23 September 2024 and were accordingly out of time.[17]The circumstances in which the Tribunal can extend time are expressed in similar terms in ERA and the 1994 Regulations. In section 111 ERA the language used is as follows – “within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months”[18]The period of three months is the primary time limit under ERA and the 1994 Regulations. This is subject to the provisions referred to in paragraph 16(c) above. This meant that, if I was satisfied that it had not been reasonably practicable for the claimant to present her claim in time, I could extend the time limit provided I was also satisfied that the claim was presented with a reasonable period after the expiry of that time limit.[19]I was conscious that neither party had come to the hearing prepared to argue an issue of time bar, and neither had the benefit of representation. However, I considered that(a) the prejudice to each party in having to address the time bar point was evenly balanced and(b) it was preferable to deal with the point immediately rather than delay the proceedings. I therefore decided to hear evidence from the claimant about the circumstances in which her claim had been presented late.[20]Having done so, and after cross-examination by Mr Smith for the respondent, I found that –(a) The factors in favour of allowing the claim to proceed were (i) English was not her first language, (ii) she had no prior experience of the Employment Tribunal system and (c) she was suffering from anxiety at the relevant time (as confirmed by her GP records – C76) which adversely affected her ability to focus on matters including this claim.(b) The factors against allowing the claim to proceed were (i) the claimant had spoken with a trade union (she was not able to recall which one), the Citizens Rights Project and the Citizens Advice Bureau and (ii) she had approached ACAS timeously which indicated some awareness of the timescales for bringing a claim in the Employment Tribunal.[21]After a short adjournment to consider matters I decided that(i) on balance, the claimant’s lack of knowledge of the Employment Tribunal process (which I found to be reasonable in all the circumstances) and the state of her mental health at the relevant time rendered it not reasonably practicable for her claim to be presented timeously and(ii) the period of five days beyond the applicable time limit was relatively short and was reasonable. I advised the parties that the claim could proceed. Application for reconsideration[22]The issue of time bar was raised by Mr Smith at the start of the second day of the hearing and it is convenient to deal with that here. In relation to my decision on time bar, Mr Smith made two points –(a) It was apparent from the first day of the hearing that the claimant had minimal difficulty with English, both spoken and written. She had referred to the interpreter only once.(b) He produced a WhatsApp message, said to date from 2019 (R3), in which the claimant said “I know quite a lot about the law in this country”. Mr Smith said that this involved the claimant giving him advice about another employee’s entitlement to holidays (which might have been a slip of the tongue as the message bore to relate to overtime).[23]Mr Smith indicated that he accepted the decision I had made on time bar was correct on the basis of the material available to me when I made that decision. However, the WhatsApp message he had now produced meant that the matter needed to be revisited.[24]The claimant’s response was to acknowledge that she had known the law in the situation mentioned in the WhatsApp message but did not have a broader knowledge of employment law. She tried her best but spoke what she described as “broken English”.[25]I decided that what Mr Smith had said should be treated as an oral application, made in the course of the hearing, for reconsideration of my decision in relation to time bar. I referred to rules 68-71 of the Employment Tribunal Procedure Rules 2024. I determined that I would not deal with this application immediately but would defer it until this Judgment had been issued. I considered that this was appropriate because the respondent might want to reflect on the reconsideration application once the outcome of the case was known.[26]I direct that the respondent should notify the Tribunal within 14 days of the date upon which this Judgment is sent to the parties whether it wishes to continue with the application for reconsideration of my decision on time bar. If the respondent does wish to do so, I will resume consideration of the matter. Issues[27]I summarised what I considered to be the issues in this case. These were as follows –(a) Had the claimant been dismissed by the respondent? The claimant’s position was that she had been dismissed on 11 May 2024. This was disputed by the respondent.(b) If the claimant had been dismissed, was that dismissal unfair? I explained to the parties that if the claimant had been dismissed, the respondent would need to show what was the reason, or principal reason, for the dismissal. If the respondent showed a potentially fair reason for dismissal, the Tribunal would require to decide if the respondent had acted reasonably or unreasonably in treating it as a sufficient reason to dismiss.(c) Had the respondent acted in breach of the claimant’s contract of employment? This arose because, according to the claimant, she had been dismissed with notice on 7 May 2024, then subsequently been dismissed without notice on 11 May 2024.(d) Had the employer’s contract claim been made out?(e) If any part of the claim, or the employer’s contract claim, succeeded, what compensation should be awarded? Application to adjourn[28]At this point in the hearing (around 11.30am on 13 January 2025), following my identification of the issues, Mr Smith asked for the hearing to be delayed to delayed to allow him to engage a solicitor. He said that he had taken advice from his accountant, and he had anticipated the businesses closing through the process of voluntary striking off of the respondent company.[29]The claimant opposed this. Her preference was for the hearing to proceed so that the case could be concluded as soon as possible.[30]I considered that the prejudice to the claimant if the hearing was delayed outweighed the prejudice to the respondent if it proceeded. I observed that both parties had come to the hearing in the expectation that it would proceed. I noted that Mr Smith had taken professional advice, albeit from his accountant, and could have arranged for legal representation if he had chosen to do so. I decided that the hearing should proceed.[31]I asked Mr Smith if he wanted to be allowed time to read through the documents (including a witness statement) which the claimant had submitted to the Tribunal in December 2024. Mr Smith indicated that he was happy to proceed without an adjournment. Evidence[32]I heard oral evidence from the claimant and from Mr Smith. I had a bundle of documents which the claimant had prepared, extending to 107 pages. I had two documents provided by Mr Smith, supplemented by a third document submitted at the start of the second day of the hearing. I refer to these above and below by page number, prefixed by “C” in the case of the claimant’s documents and by “R” in the case of the respondent’s documents.[33]The claimant gave her oral evidence by reference to a written statement which she had earlier submitted to the Tribunal. This contained numerous references to the documents in the claimant’s bundle, and the claimant’s evidence was paused as necessary to allow me (and Mr Smith) time to read these. Findings in fact[34]It is not the function of the Employment Tribunal to record every piece of evidence presented to it, and I have not attempted to do so. I have focussed on those parts of the evidence which I considered to have the closest bearing on the issues I had to decide.[35]The claimant commenced employment with the Corstorphine business on 1 August 2019 as a Beauty Therapist. Some three months later she was promoted to Manager. The claimant’s management role was subsequently expanded to cover the Jeffrey Street business. That reflected Mr Smith’s positive view of the claimant. As well as her managerial role, the claimant continued to work as a Beauty Therapist.[36]Mr Smith is in full-time employment entirely separate from, and unrelated to, the Corstorphine and Jeffrey Street businesses. His area of expertise is data analysis. He had financial oversight of the businesses but did not involve himself directly in their day-to-day operation.[37]Prior to the events described below, the businesses had faced a number of challenges. A consequence of Brexit was that it became difficult to recruit suitable staff. The Covid-19 pandemic had a negative impact because(a) it necessitated temporary closure of the businesses,(b) it affected the willingness of older customers to enter the salons and(c) the businesses lost staff who chose to work on their own account. Due to financial pressures the business overdraft (guaranteed by Mr Smith) increased.[38]Before moving on, I should reassure the parties that I considered all of the evidence they presented about their communications and their working relationship prior to May 2024. I have not made findings in fact in relation to these matters because they did not have a material impact on the key issues in this case. Mr Smith receives advice[39]In or around March 2024 Mr Smith spoke with an acquaintance who operated in the same business sector as his own businesses. Mr Smith mentioned the difficulties he was experiencing. The acquaintance told Mr Smith that he had faced similar problems and had decided to change his business model, with his workforce moving from employment contracts to self-employed contractor status. Mr Smith learned that this had proved beneficial to both the acquaintance as business proprietor and his workforce.[40]Mr Smith conducted an exercise based on the 2023 turnover of his own businesses. This demonstrated to Mr Smith that a similar approach could be taken and might be “a goer”, as he put it. The businesses were approaching their busiest period of trading, over the summer months, and Mr Smith decided to roll out the new business model.[41]Mr Smith prepared new contracts. In the claimant’s case, these comprised –(a) An employment contract (headed “Statement of Particulars”) between the respondent and the claimant. This described her job title as “Salon Manager” and referred to a commencement date of 3 June 2024. The hours of work were stated as “10 days per month limited to 6hrs per day, to be worked from Tuesday to Saturday at times as agreed”.(b) A “Contract for Services” between Heaven Beauty Holdings Ltd and the claimant. This referred to the claimant as a “subcontractor” for the provision of “Beauty Therapy Services”. This contract was to commence on 3 June 2024 and to terminate on or before 3 June 2025. The claimant was to provide her services on an ad hoc basis and was to be under no obligation to accept work offered to her. She was to receive, in broad terms, 50% of the net value of the work she undertook. Events of 7 May 2024[42]On 7 May 2024 Mr Smith sent a WhatsApp message to the claimant (C29) in these terms – “As a result of the difficulties the business has suffered in trading, due to current financial climate and staff shortage, after consultation with other salon owners and my Accountants I have decided to take the following steps. All employment contracts will be cancelled effective from the 3rd June. These will be replaced by a service contract on offer to you with details i will run through later this week. The service contracts will be directly tied to the income you deliver for the business. I have altered the model slightly by adding a variaiable (sic) mgt component to ensure this change has minimal impact on your income. May will be the last month working as an employee and as such p45s will be handed out in early June. This news may not be what your expecting but unfortunately it’s either this road or closure. Will catch up with you in coming days to discuss.”[43]Mr Smith described this in evidence as the “opening shot” in changing the business model. According to the claimant Mr Smith asked her to forward the message to Ms L Whittleworth who was employed as a Hairdresser.[44]Mr Smith did not regard this message as telling the claimant she was being dismissed. The claimant was surprised by the message because(a) a new employee had started on 25 April 2024 and another new employee was due to start on 30 May 2024 and(b) the busiest time of year for the business was approaching.[45]My view of this was that Mr Smith’s message did constitute notice of termination of the claimant’s employment with effect from 3 June 2024. It expressed in unambiguous terms that the employment relationship would not continue as from 3 June 2024. This was fortified by the reference to a P45. The period of notice was broadly in line with statutory minimum notice under section 86(1)(b) ERA.[46]I was also of the view that the reason for dismissal given by Mr Smith in his message was his intention to change the model under which the business operated, so that the claimant would cease to be an employee and become a self-employed contractor providing her services to the business. In fact this was not exactly his intention – see paragraph 41 above and the narrative of events below – but it was what his message conveyed. Events of 10 May 2024[47]On 10 May 2024 there was an exchange of WhatsApp messages between the claimant and Mr Smith (C30-C31). The claimant asked Mr Smith what she should do if someone wanted to purchase a gift voucher. These were still available for purchase online. Mr Smith replied – “No vouchers sales please until June 3rd. If we have staff to carry on with business come June 3rd then we can address.”[48]Mr Smith followed this with two further messages – “After we chat tomorrow ill let you guys mull over the weekend to consider the change. Would suggest no future bookings also later than 3rd June.” “Looked at figures for this week and they support by (my?) business concerns and why change of model is necessary.” The second message concluded with a sad face emoji.[49]Mr Smith then sent a further WhatsApp message to the claimant – “Selling both businesses now as joint venture. Will update details online tonight and share with other sites.” The claimant said in evidence that Mr Smith announced his intention to sell without allowing her time to consider the offer he had given her and her colleague. That was factually correct. Mr Smith accepted that he had set up an account with a business sales agency with a view to selling the businesses. Events of 11 May 2024[50]Mr Smith and the claimant met at a café close to the Jeffrey Street premises on 11 May 2024. They discussed the new arrangement which Mr Smith had proposed. Mr Smith pressed the claimant to give him a decision.[51]The claimant said that Mr Smith “began yelling at me and speaking disrespectfully”. Mr Smith said that the claimant “exploded” when he mimicked Ms Whittleworth and accused him of “shouting” and said “Don’t you speak to me like that”. My view of this was that the conversation between Mr Smith and the claimant became heated. Mr Smith’s mimicking of Ms Whittleworth was probably the catalyst for this but both parties participated. The claimant brought the discussion to an end by standing up and leaving the café.[52]The claimant had a further conversation with Mr Smith when he returned to the Jeffrey Street premises later in the day. He referred in evidence to “things spinning through my head” and said that he believed the business was unlikely to survive after the earlier episode with the claimant. He said as much to the claimant and indicated that he was closing the business. He instructed the claimant and Ms Whittleworth to return their keys and they did so.[53]The claimant said that she and Ms Whittleworth pleaded with Mr Smith to be allowed to continue to work until 3 June 2024 so that they could inform clients about the closure and arrange for the refund of deposits and vouchers. Mr Smith said that he would deal with this himself and that there was no need for the claimant and Ms Whittleworth to return. I accepted the claimant’s evidence about this.[54]Mr Smith posted an announcement on the Heaven Beauty Facebook page on 11 May 2024 (C32) which began “It is with deep sadness and regret that we announce the closure of Heaven Beauty”. This was accompanied by a picture with the legend “Permanently Closed”. He also disabled the claimant’s and Ms Whittleworth’s access to the business computer system and App (C33-C34).[55]I was satisfied that the correct interpretation of Mr Smith’s actions on 11 May 2024 was that he dismissed the claimant with immediate effect on 11 May 2024. Mr Smith’s actions were inconsistent with the claimant working out a period of notice until 3 June 2024 – she was denied access to the business premises and systems making it impossible for her to continue to work and the permanent closure of the business was publicly announced. That 11 May 2024 was the claimant’s date of dismissal was subsequently confirmed in her P45 (C80) dated 24 May 2024. Events of 14 May 2024[56]Mr Smith sent a series of WhatsApp messages to the claimant on 14 May 2024. The first of these was sent at 5.30am – “Morning Ivanna. Are you free to come up to Jeff St. today for a chat? Had a big rethink on where we could go with the salons and also on staff your contract. I haven’t appreciated how difficult been running both salon and therefore I do intend closing St Johns with Jeff St. remaining open. If not already said I apologise for my behaviour which wasn’t intended to offend you, I was more angry with someone else and my Autism personality kicked in as usual. Please hear me out as my plans are viable and financially rewarding for both of us.”[57]Mr Smith’s subsequent messages included the following – “Are you and Lauren able to cover appts to end of month?” “Business is not closed yet. Have updated accountants in keeping HMRC account open until we come to a final agreement. Will pen new contracts on a new hybrid model of employee/service. If you agree then new terms come into force from 3rd June.” “Although intimated closure on Saturday, business is still open and as you are still under contract I expect you to turn up for work till end of this month. Days off will be taken as unpaid leave. I will take time off tomorrow to ensure you have access to salons etc.” “St John’s will be closed end of this month. Contracts are for jeff st.”[58]The claimant alleged that by sending these messages Mr Smith was “harassing me from very early in the morning with contradictory messages”. Mr Smith denied that his messages constituted harassment and described them in terms of engaging with his business partner to try and save the business. My view of this was that Mr Smith did not intend to harass the claimant and was regretting having acted in haste on 11 May 2024 when announcing the permanent closure of the Heaven Beauty business.[59]Mr Smith then sent an email to the claimant at 8.32pm on 14 May 2024 (C46-C47) which included the following paragraph – “Therefore as director and major shareholder I have taken the necessary following steps to ensure the companies survival. Reduce full time employment hours by half from 20 days per month @ 6hrs per day to 10 day @ 6 hrs per day. Introduce a Contract Service option for the 20+ remaining working days per calendar month with flexible working available at contractors discretion.”[60]This email was accompanied by two attachments. One was a Statement of Particulars by Heaven Beauty Edinburgh Ltd in respect of employment of the claimant as Salon Manager (C48-C52). The other was a Contract for Services between the claimant and Heaven Beauty Holdings Ltd (C53-C55). These contracts were, or were developed from, the ones mentioned at paragraph 41 above. I pause to note that there is a company called Heaven Beauty Holdings Ltd but, according to Companies House, it has a registered office in Shropshire and no connection with Mr Smith. Emails and messages of 15-17 May 2024[61]There was then an exchange of emails between Mr Smith and the claimant. Mr Smith emailed the claimant on 15 May 2024 (C57) including – “Due to certain information that’s come to light I am afraid to say that the offer is now withdrawn. Business is now closed permanently.”[62]The claimant replied on 16 May 2024 (C59) seeking clarification – “are we still required to turn up for work as the shop is permanently closed now? If so, I would like to take my time back for the extra hours I did the last two weeks.”[63]Mr Smith responded on 16 May 2024 (C60) – “As referred in a previous email. I believe the “shitty” boss has had to close the salon down due to staff opting not to turn up for work last 2 days. Accounts (Accountants?) have also been informed that last day of trading was Saturday 11th of May and have confirmed that staff will be paid contractual hours and pro rata holiday payments on the 28th.”[64]The background to the “shitty boss” reference was that Mr Smith believed that the claimant had described him in those terms. The rest of his email made no sense – why would the claimant and Ms Whittleworth turn up for work when on 11 May 2024(a) Mr Smith had announced the permanent closure of the business and(b) they had had returned their keys at Mr Smith’s request?[65]The claimant made much the same point in her reply to Mr Smith on 16 May 2024 (C61) – “It was your decision to close(d) the shops and asked us to stop working from last Saturday.” The claimant told Mr Smith that she had been advised that she was entitled to a redundancy payment.[66]The claimant concluded her email by offering to work the following day. Mr Smith replied, still on 16 May 2024 (C62), declining the claimant’s offer. He also disputed the claimant’s assertion that she was entitled to a redundancy payment. He accused the claimant of abandoning the business.[67]Mr Smith sent a WhatsApp message to the claimant on 17 May 2024 (C66) referring to a “possible business sale” and the claimant having a 10% interest in a sale of the Jeffrey Street business. In her reply (C67-C68) claimant complained about Mr Smith “flip-flopping” about closing or staying open and his “endless messages”, but the upshot was an arrangement that they would meet on 18 May 2024. Meeting on 18 May 2024[68]The claimant and Mr Smith met at the Jeffrey Street premises on 18 May 2024. The claimant was accompanied by her teenage son. The claimant’s version of this meeting was that Mr Smith told her he had realised that, if he wanted to sell the business, she had to be working there. He said that if she did so then, as a shareholder, she would benefit from(a) having a job and(b) receiving part of the sale proceeds of the business.[69]The claimant told Mr Smith that she could not do business with him because of how he had treated her, accusing her of leaving her job. According to the claimant, Mr Smith said that he would “call his accountant to readdress everything” and would “make a new contract …. to start on Tuesday, 21st May”. The claimant responded that she did not want to work under a new contract, and Mr Smith simply said “Then bye”. At this point the claimant became distressed and “started crying uncontrollably”.[70]Mr Smith’s version of events was broadly consistent with that of the claimant. Following this meeting Mr Smith messaged the claimant on 20 May 2024 (C73) – “…. I’m now beginning to face the reality of what I have done and it was so very wrong. A headache I could have done without. Could you send me hours for you and Lauren up to Saturday 11th. I wish we could have sorted this out and I’m sorry I’ve put you and Lauren in this position.” Final payment to claimant[71]As mentioned (at paragraph 55) above the claimant’s P45, which was dated 24 May 2024, stated her leaving date as 11 May 2024. The claimant’s final payslip for the month ending 31 May 2024 (C83) disclosed gross pay of £1110.00 (based on 74 hours at £15 per hour) and holiday pay of £421.50. The claimant was not paid for the period between 11 May and 3 June 2024. She did not receive a redundancy payment.[72]The claimant’s contract of employment at the time her employment ended (C16-C20) provided for normal hours of work of 30 per week, worked from Tuesday to Saturday inclusive. Her payslip for March 2024 (C23) disclosed 132 hours at £15 per hour and her payslip for April 2024 (C28) disclosed 128 hours at £15 per hour. Taking these with the claimant’s final payslip, it was apparent that the claimant normally worked 32.5 hours per week which equated to average weekly earnings of £487.50 gross. Mitigation[73]The claimant took some steps to secure alternative employment. She attended a job interview on 22 May 2024 and was offered the position she had applied for. However, she had been prescribed medication for anxiety on 21 May 2024 (as confirmed in her medical records – C76) and did not feel able to accept. She continued to look for work but did not find anything “that aligned with my expectations or requirements”.[74]From the start of August 2024 the claimant began to take steps towards establishing her own business. She sought advice from City of Edinburgh Council and Business Gateway. She also approached a number of salons with a view to renting a room. She had previous experience of running her own business in Spain. The claimant’s efforts to become self-employed were ongoing at the date of the hearing. She had received Universal Credit. Employer’s contract claim[75]Mr Smith said that this claim arose because the value of the business had been lost because of the claimant’s actions. He provided two documents which comprised a formal demand dated 28 February 2024 sent to him as guarantor (for the obligations of Heaven Beauty Ltd) by the Bank of Scotland (R1) and a letter dated 22 April 2024 sent to him as a director of Heaven Beauty Ltd by HM Revenue and Customs (R2).[76]The employer was Heaven Beauty Edinburgh Ltd. Neither of these documents demonstrated that this company had suffered any loss, let alone loss attributable to any action of the claimant. Submissions[77]I heard brief submissions from both parties. The claimant said that she had lost her job without prior notice, which was not fair. This had impacted adversely on her mental health. She sought compensation as set out in her written statement.[78]Mr Smith argued that the claimant had brought her claim to get money to start her own business. He accepted that he had closed the business and that people had lost their jobs but said that he had not wanted to do so. He would still have liked to recover the business which had been a big part of his life. Applicable law[79]The right of an employee not to be unfairly dismissed is found in section 94 ERA. In terms of section 98 ERA –(a) it is for the employer to show a potentially fair reason for dismissal, and(b) if the employer does so, it is for the Tribunal to decide whether the dismissal was fair or unfair, taking account of the matters set out in section 98(4) ERA.[80]An employee’s entitlement to minimum notice is set out in section 86 ERA. In the case of an employee, such as the claimant, with four complete years of service, minimum notice by the employer is four weeks. Discussion and disposal[81]I approached matters by working through the list of issues set out at paragraph 27 above. Was the claimant dismissed by the respondent?[82]My findings set out in paragraph 45 above effectively deal with this question. The statement by Mr Smith in his WhatsApp message to the claimant on 7 May 2024 that “all employment contracts will be cancelled effective from the 3rd June” could only mean that the claimant would cease to be an employee under her existing contract of employment from that date. This was confirmed by Mr Smith’s subsequent statement in the same message that “May will be the last month working as an employee and as such p45s will be handed out in early June”.[83]Mr Smith had not at this point decided to close the business. He had decided to change the business model. He referred in his message to “a service contract” but provided no detail of what this might entail. However the effect of an employer using language, which is reasonably understood by an employee as bringing the employment relationship to an end, is that the employee is dismissed. That is what happened in this case. Mr Smith gave the claimant notice that her current employment would end on 3 June 2024.[84]That was however superseded by the events of 11 May 2024. As set out at paragraph 55 above, and for the reasons given there, Mr Smith’s actions on that date amounted to dismissal of the claimant on that date with immediate effect. Was that dismissal unfair?[85]The respondent’s position was that had been no dismissal. No alternative was pled. However, bearing in mind that both parties were unrepresented, I believed that it was appropriate to consider whether the evidence showed that the respondent had, albeit inadvertently, made out a potentially fair reason for the claimant’s dismissal.[86]I found it was reasonably clear that what Mr Smith was seeking to do on 7 May 2024 was to bring the existing employer/employee relationship with the claimant to an end and to replace that with a new relationship. Under that new relationship, the claimant would still work in the business but not as an employee (or at least, based on the contracts sent to the claimant on 14 May 2024, only as a parttime employee and part-time self-employed contractor).[87]I considered that this could amount to “some other substantial reason” for dismissal in terms of section 98(1) ERA. It could also amount to redundancy – looking to the definition of redundancy in section 139(1) ERA, the requirement of the respondent’s business for an employee (the claimant) to carry out work of a particular kind (working 30 hours per week as Salon Manager) had ceased or diminished or was expected to cease or diminish.[88]It seemed to me that, on balance, the correct view was that the respondent had in mind to bring the claimant’s current employment contract to an end so as to introduce a different arrangement. That could come within the statutory definition of redundancy, but only if the dismissal was “wholly or mainly attributable” to the cessation or diminution (actual or expected) of the requirement set out in the preceding paragraph. I considered that it better aligned with the respondent’s motive and intention to treat the reason for dismissal as a form of business reorganisation. Accordingly I was prepared to find that a potentially fair reason for dismissal had been established by the respondent.[89]I then considered the application of section 98(4) ERA. This provides as follows – “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.”[90]It counted in the respondent’s favour that this was a small business with limited administrative resources. These resources amounted to Mr Smith’s own experience and his access to professional advice from his accountants. It counted against the respondent that the process adopted by Mr Smith to implement the proposed change to the model under which the business operated was seriously flawed.[91]Those flaws included –(a) Intimating to the claimant that her employment under her existing contract was to terminate without having provided any information about the proposed new arrangements.(b) Providing contradictory information to the claimant: in his message to the claimant on 7 May 2024 Mr Smith referred to “a service contract” when in fact he was proposing a hybrid arrangement as detailed in the form of the two contracts he subsequently sent to the claimant on 14 May 2024.(c) Failing to give the claimant a reasonable period within which to consider the proposed changes.(d) Failing to engage in any meaningful dialogue with the claimant about the proposed changes.[92]I found that no reasonable employer, even with limited administrative resources, would have acted as the respondent did in this case. The changes which Mr Smith was seeking to implement were significant for the claimant and a reasonable employer would have(a) provided more information, ideally by providing the new forms of contract at the outset,(b) allowed the claimant time to digest what was being proposed and(c) engaged in dialogue with the claimant including answering any questions and concerns she might raise.[93]These failures were sufficient on their own to render the claimant’s dismissal unfair. However, I also had to consider the events of 11 May 2024. As at that date the claimant was under notice of dismissal taking effect on 3 June 2024. Instead of letting that notice run its course (and using that time for dialogue with the claimant about the proposed changes) Mr Smith decided on the sudden and immediate closure of the respondent’s business. To his credit, he was able to recognise that he got this wrong, as recorded in his message to the claimant on 20 May 2024 (see paragraph 70 above).[94]It was Mr Smith’s actions on 11 May 2024 which brought the claimant’s employment to an end. No reasonable employer would have acted in that way. The claimant’s dismissal was unfair. Did the respondent act in breach of contract?[95]I can deal with this briefly –(a) The original dismissal with notice on 7 May 2024 was not in breach of contract. The claimant was given the statutory minimum period of notice to which she was entitled.(b) The subsequent dismissal without notice on 11 May 2024 was in breach of contract. The claimant had done nothing which entitled the respondent to terminate her employment in this way. Was the employer’s contract claim made out?[96]I found that this purported claim amounted to nothing more than Mr Smith seeking to blame the claimant for the loss of the respondent’s business. There was no evidence that the employer (ie the respondent company) had suffered any loss because of any action on the part of the claimant.[97]It did not help his cause that Mr Smith had an erroneous understanding of the relationship between HB Holdings Ltd and his other companies. He believed that the other companies were wholly owned subsidiaries of HB Holdings Ltd (the company in which the claimant held 10% of the shares) when the information publicly available at Companies House showed this to be incorrect (see paragraphs 5-8 above).[98]The employer’s contract claim was entirely without merit. What compensation should be awarded?[99]It is convenient to deal first with the breach of contract claim. When the claimant’s employment ended on 11 May 2024 she was under notice which was due to expire on 3 June 2024. Had she not been dismissed on 11 May 2024, the claimant would have worked 15 days between that date and 3 June 2024. Based on my findings as set out in paragraph 72 above, the claimant would have earned £1462.50 (3 x £487.50) gross for working in that period, and the measure of her loss was the net pay she would have received.[100]Turning to unfair dismissal, the claimant was entitled to a basic award in accordance with section 119 ERA. At the date of her dismissal the claimant was aged 49 and had 4 complete years of service. The amount of the basic award is based on her gross weekly pay (£487.50) multiplied by her complete years of service (4) multiplied by the appropriate age-related factor (1.5). This produces a total of £2193.75.[101]The claimant was also entitled to a compensatory award in accordance with section 123 ERA. In terms of that section the amount of that award was “such amount as the tribunal considers reasonable 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”.[102]The case of Polkey v AE Dayton Services Ltd 1987 UKHL 8 is relevant here. In that case Lord Bridge of Harwich quoted with approval a passage from the Judgment of Browne-Wilkinson J (as he then was) in Sillifant v Powell Duffryn Timber Ltd 1983 IRLR 91 – “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.”[103]I found that, in the present case, the respondent could have fairly dismissed the claimant if(a) she had been given sufficient information about the changes to her employment situation which Mr Smith was proposing to introduce,(b) she had then been allowed a reasonable amount of time to consider those changes and(c) Mr Smith had engaged in a reasonable dialogue with the claimant before implementing those changes.[104]I considered that a reasonable period for the claimant to consider the changes and for such dialogue to take place would have been four weeks from 14 May 2024 (the date on which Mr Smith sent her the proposed new contracts). The corresponding loss suffered by the claimant was the net pay she would have received in that period. I believed that, in the particular circumstances of this case, awarding compensation for that specific period was more appropriate than calculating compensation based on the likelihood of the claimant securing comparable earnings at some future date, and then applying a percentage reduction. A result of that was that consideration of the steps taken by the claimant to mitigate her loss was not required.[105]Having already decided that the claimant should be compensated for breach of contract for her loss of earnings in the period up to 3 June 2024, I determined that the compensatory award for unfair dismissal should reflect loss only for the period from that date until 11 June 2024 (being four weeks from 14 May 2024). This represented 6 working days and amounted to £585.00 gross. Based on the figures provided by the claimant in her ET1 (which appeared to be reasonably accurate) this equated to £455.43 net.[106]I remind the claimant that the sums awarded to her are payable by the respondent (Heaven Beauty Edinburgh Ltd). They are not payable by Mr Smith personally.[107]The attention of parties is drawn to the attached schedule in terms of the Employment Protection (Recoupment of Benefits) Regulations 1996. 29/01/2025