ERG Industrial Corporation Ltd v Knibbs [1995] UKEAT 207_93_2202

EAT
ERG Industrial Corporation Ltd v Knibbs
[1995] UKEAT 207_93_2202 · 1995-02-22
MRS JUSTICE SMITH: This is an appeal by ERG Industrial Corporation Ltd from the decision of an Industrial Tribunal sitting at Bedford on 17 December 1992. The Tribunal unanimously decided that Mrs Knibbs, the Respondent to this appeal, was entitled to receive a redundancy payment in the sum of £1,554.Mrs Knibbs was employed by the Appellants for just over 20 years from 1971 until March 1992. Her job was that of a coil winder. This was described as a `Skill 1' job and it is not disputed that she was highly skilled in that work. She never did any other work for the Company.In 1977 she was given a statement of terms and conditions of her employment, pursuant to the Contracts of Employment Act 1972. In that document she was described as a production operative. That document did not contain a flexibility clause.In 1992 the Appellants sold their Resistor manufacturing business of which the Coil Winding Department was a part, and from that time they had no need for coil winders. They intended to continue with other aspects of their business in which they would need production operators, although obviously not as many as before.When the Resistor manufacturing business was about to be sold, the Company made redundant those coil winders who were doing only 16 hours work per week. They wrote to the rest of the coil winders, including Mrs Knibbs, telling them about the proposed sale of the Resistor manufacturing business and informing them about their future. They said this:
"We expect to be continuing manufacturing resistors at least until the end of March and as we run down we will transfer all operators and staff we consider suitable, to one of our other departments for training with a view to continued employment with us.
Until an agreement is eventually agreed and signed we must continue to operate as well as possible since it is also possible that the attempt to reach an agreement will fail. How we will deal with the run down of the department and the transfer of operators to our other departments will have to be worked out in detail after an agreement is reached".The agreement to sell the business went through. Mrs Knibbs was told to transfer to work in a department supervised by Mrs Bunker, in which other types of manual work were carried out including taping, base sealing and assembly, all of which were 'Skill 2' jobs. Mrs Knibbs chose to work on taping and she underwent a short period of training.It appears that she managed well to adapt to the new skill required. However, she was unhappy in the department. She found it too hot and claustrophobic and she began to feel unwell. She took some time off and visited her doctor. She came back again and explained her difficulties in coping with the new job. She was offered work on base sealing or assembly but she felt that she could not cope with any work in that department. It was the environment of the department rather than the nature of the work which affected her. Her doctor told her, and indeed told the employers, that working in the new department was not satisfactory for Mrs Knibbs's health.Mrs Knibbs told the Appellants that she wanted to leave and asked for a redundancy payment. The Appellants refused saying that she was not redundant. They explained that she had been transferred on to other work and that their view was that if she left her job, as indeed she did, she had resigned voluntarily.Mrs Knibbs then applied to the Industrial Tribunal claiming that she was entitled to a redundancy payment. She was not legally represented. Her husband has assisted her both before the Industrial Tribunal and before this Appeal Tribunal.In her Originating Application Mrs Knibbs described herself as a coil winder. The Notice of Appearance entered by the employer said this:"The applicant was employed throughout her employment as a production operative. The respondent company had a policy of multi-skilling and it was well established custom and practice that operatives could be required to transfer to other work as and when trading circumstances dictated. In general the time taken for an average employee to be trained in new work ranged from as little as one hour to one week. The applicant's work in the resistor department was classed and paid as Skill 1. Much of the alternative work was classed Skill 2 and carried lower earnings".The document went on to explain about the sale of part of the business making resistors and continued:"The applicant was transferred to the new work and given the option of three assembly jobs .... ".The history which followed was then set out in detail as to which there was little controversy. Thus, the Notice of Appearance had fairly and squarely put before the Industrial Tribunal the question as to whether the employee, Mrs Knibbs, was in truth employed as a coil winder, or whether she was a production operative who could, within the terms of her contract, be transferred to other work.It is convenient at this stage to set out the statutory framework of the questions which the Industrial Tribunal had to answer in reaching their decision. Part 6 of the Employment Protection (Consolidation) Act 1978 deals with the right to a redundancy payment. At Section 81(1) it is provided that:
"(1) Where an employee who has been continuously employed for the requisite period - (a) is dismissed by his employer by reason of redundancy, (b) ...
then, subject to other provisions, the employer will make a redundancy payment. Section 81(2) provides:"(2) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to:(a) ....(b) the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish".Section 82(3) provides:"(3) If an employer makes an employee an offer (whether in writing or not) before the ending of his employment under the previous contract to renew his contract of employment, or to re-engage him under a new contract of employment, so that the renewal or re-engagement would take effect either immediately on the ending of his employment under the previous contract or after an interval of not more than four weeks thereafter, the provisions of subsections (5) and (6) shall have effect".Subsection 5 provides:
"(5) If an employer makes an employee such an offer as is referred to in subsection (3) and either - (a) .... (b) the first-mentioned provisions would differ (wholly or in part) from those corresponding provisions, but the offer constitutes an offer of suitable employment in relation to the employee;
and in either case the employee unreasonably refuses that offer, he shall not be entitled to a redundancy payment by reason of his dismissal".Section 84(1) provides:"(1) If an employee's contract of employment is renewed, or he is re-engaged under a new contract of employment in pursuance of an offer .... made by his employer before the ending of his employment under the previous contract, and the renewal or re-engagement takes effect either immediately on the ending of that employment or after an interval of not more than four weeks thereafter, then, subject to subsections (3) to (6), the employee shall not be regarded as having been dismissed by his employer by reason of the ending of his employment under the previous contract".And subsection 6 provides:
"(6) If during the trial period - (a) the employee, for whatever reason, terminates the contract, or gives notice to terminate it and the contract is thereafter, in consequence, terminated; or (b) ....
then, unless the employee's contract of employment is again renewed .... he shall be treated as having been dismissed ....".It is well established law that in applying the test for redundancy a Tribunal should ask whether there had been a diminution in the employer's need for the kind of work which the employee was employed to do under his contract of employment, rather than whether there had been a diminution in the employer's need for the kind of work which the employee was actually doing - see Cowen v Haden Ltd [1983] ICR 1. These approaches are sometimes referred to colloquially as "the contract test" and "the function test". The contract test is the proper approach, namely "has there been a diminution in the employer's need for the kind of work which the employee was employed to do under his/her contract".Thus the first question for this Tribunal to consider was whether Mrs Knibbs was employed, under her contract of employment, to work as a coil winder, or was she on the other hand, employed as a production operative, working on coil winding, but being a person who could be transferred to other production work? If she was employed as a coil winder, then her contract of employment came to an end when the resistor manufacturing function was sold. The employers no longer had any need for coil winders. The offer of other work in Mrs Bunker's department would then have been an offer of alternative employment and Mrs Knibbs would have been entitled to four weeks trial period in which to see whether that work suited her. If the alternative work were suitable, but she rejected it within four weeks, she would be entitled to a redundancy payment only if her rejection of it was not unreasonable. She would then be deemed to have been dismissed.If on the other hand, the Tribunal were to hold that she was employed as a production operative, with implied flexibility, then although there had been some reduction in the employer's requirements for production workers, they still had enough work for her and her transfer to other work would not have been a breach of her contract. No question of a redundancy payment would have arisen. She would not have been working under a trial period and there would have been no deemed dismissal.The Industrial Tribunal gave a brief decision which was later amended under the slip rule. We will read the relevant passages as amended. At paragraph 2 the Tribunal said this:
"2. In February 1992, the respondents received an offer to acquire their entire resistor manufacturing business and this offer was accepted. This meant that they no longer had any need for coil winders.... . This meant that the work of the particular kind in which Mrs Knibbs was engaged had ceased and accordingly, the requirements of the Respondents' business for employees to carry out this particular kind of work had ceased. Mrs Knibbs was therefore redundant within the meaning of Section 81(2)(b) of the Employment Protection (Consolidation) Act 1978 ."
They then described the transfer of Mrs Knibbs to taping work in Mrs Bunker's department and the medical problems which she there suffered. At paragraph 4 they say this:"4. We think that the provisions of the contract as renewed in accordance with the offer [that is the offer of work in Mrs Bunker's department] would not differ from the corresponding provisions of Mrs Knibbs' previous contract, or at any rate we think that the offer constituted an offer of suitable employment in relation to Mrs Knibbs, except possibly on the matter of pay, at any rate in the long term".That last phrase was a reference to the lower rates of pay which operated for Skill 2 workers. It appears that there had been some evidence, not recorded in the Chairman's notes, that Mrs Knibbs had been promised that after transfer she would continue on her Skill 1 rate of pay, at least for some time, and that she had received some compensation for the change in her rate of pay. However, as we indicate, there are no specific findings of fact and no evidence recorded in the Chairman's notes.Having found that the offer of alternative employment was suitable, the Tribunal then went on to consider whether Mrs Knibbs' rejection of it during the trial period was reasonable or unreasonable. They concluded, after some hesitation, that it was reasonable.It is not disputed by the Appellants that the Tribunal decided that Mrs Knibbs was redundant. Mr Cavanagh, who appears on behalf of the Appellants, complains that although the decision makes that plain, it does not make plain the basis upon which that conclusion was reached. He submits that there are two possible bases. The first is that the Tribunal may have found that Mrs Knibbs was employed as a coil winder. If they did find that, they must have applied the correct contractual test to determine whether she was redundant. On the other hand, he submits, the Tribunal may have found that Mrs Knibbs was a production operative in which case they applied the wrong test, the function test, in deciding that she was redundant. He submits that it is not clear what they have decided. We agree. The Tribunal have not stated their conclusion on this issue as they should have done. The issue had been expressly raised and it was plainly fundamental to their considerations.We have read the decision with care to see whether we can determine whether this issue was dealt with by implication and whether we could safely infer what their conclusion was. On looking at paragraph 4 of their decision it does appear from the language used that the Tribunal had in mind the contract test. They use expressions such as "the contract as renewed" and "the previous contract". Those expressions, as it seems to us, point to the likelihood that they had considered that Mrs Knibbs' contract of employment for 20 years was a contract of employment as a coil winder.However, Mr Cavanagh submits that the passage to which we have referred in paragraph 2 suggests the contrary. He submits that there the Tribunal were using the language of the function test. We can see the force of that submission and we regret to say that we are unable to be sure what conclusion the Tribunal had reached and what test they had applied.It seems to us that there was evidence on which they could have found either way. In favour of the employer's submission, there was the statement of terms and conditions of employment which described Mrs Knibbs as a production operative. Of course, such a statement is not conclusive evidence of the terms of the contract of employment. As Browne-Wilkinson J., then the President of the Employment Appeal Tribunal made plain in System Floors (UK) Ltd v Daniel [1982] ICR 54 , a statement made pursuant to the Contracts of Employment Act is not the contract of employment, but it provides very strong prima facie evidence of what the terms of the contract were. So, in this case, there was strong prima facie evidence that Mrs Knibbs was employed as a production operative. The Notice of Appearance claimed that the employers operated a policy of job flexibility. Their letter to employees, including Mrs Knibbs, advised of an intention to transfer to other work. Their approach was consistent throughout.On Mrs Knibbs' side of the argument, it can be said that the statement of terms, although describing Mrs Knibbs as a production operative, did not contain a flexibility clause. Many such statements of terms do contain flexibility clauses where that is the employer's intention. Further, her work as a coil winder had lasted for 20 years and had pre-dated the statement of terms and conditions by some five or six years. She had never been asked to move on to other work during the whole period of 20 years. Also, in favour of her side of the argument, was the employer's assertion in their Notice of Appearance that Skill 2 operatives were paid at a lower rate than Skill 1 operatives. We interpose to say that that, as it seems to us, would be a material consideration although not conclusive of the point.We are told, by both parties, that some evidence was given before the Industrial Tribunal by Mrs Bunker that operatives were moved from job to job. This was evidence in support of the employer's claim that they operated job flexibility. However, Mrs Knibbs, although she agreed that Mrs Bunker gave such evidence, had understood her to be speaking about the situation within her own department. Mrs Bunker, as she said, had nothing to do with the coil winding department. It is a disturbing feature of this case that the Chairman's notes of evidence make no reference at all to this evidence, which the parties agree was given and which, as it seems to us, was of some importance.Mr Cavanagh has referred us to the case of Meek v City of Birmingham District Council [1987] IRLR 250 . This was a decision of the Court of Appeal of which the facts need not be stated. However, there is a passage at paragraph 8 of the report which sets out the duties of an Industrial Tribunal when giving their decision.

Lord Justice Bingham, as he then was, said this:

"It has on a number of occasions been made plain that the decision of an Industrial Tribunal is not required to be an elaborate formalistic product of refined legal draftsmanship, but it must contain an outline of the story which has given rise to the complaint and a summary of the Tribunal's basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basis facts. The parties are entitled to be told why they have won or lost".Later he cites a passage from the Judgment of Lord Justice Eveleigh in Martin v MBS Fastenings (Glynwed) Distribution Ltd [1983] IRLR 198, at page 202 where Lord Justice Eveleigh said this:".... The duty of an industrial tribunal is to give reasons for its decision. This involves making findings of fact and answering a question or questions of law. So far as the findings of fact are concerned, it is helpful for the parties to give some explanation of them, but it is not obligatory. So far as the questions of law are concerned, the reasons should show expressly or by implication what were the questions to which the Tribunal addressed its mind and why it reached the conclusions which it did, but the way in which it does so is entirely a matter for the Tribunal".We regret to say that we think this Industrial Tribunal failed adequately to explain its reasoning. They have not made any finding as to the terms of Mrs Knibbs' contract. We consider that the employer in this case has been left in the position where it does not know whether the decision went against it because Mrs Knibbs was employed as a coil winder and was therefore redundant or whether their contention that she was a producton operative had been accepted and that the Tribunal had applied the wrong test in deciding that she was redundant.We have considered what step we ought to take in the light of our conclusion that the decision was inadequate. We would have wished to send this matter back to the same Industrial Tribunal for further consideration had we confidence that the materials were available for them to continue with their deliberations and explain their reasoning adequately. However, regrettably, we have come to the conclusion that the Chairman's notes of evidence are inadequate. The Tribunal could not refresh their memory as to that which had been said before them. Both sides agree that evidence was given which was not recorded. Therefore, we have come to the conclusion that that would not be a proper course for us to adopt. The case must be remitted for a re-hearing before another Tribunal. However, it goes to a re-hearing with one restriction. Mr Cavanagh has accepted, properly in our view, that it would no longer be open to the employer, should it become relevant, to argue that Mrs Knibbs' rejection of the work in Mrs Bunker's department was unreasonable.We consider that this course of action to which we have been driven is most unfortunate. It is unfortunate for both parties because, through no fault of their own, they find themselves back at square one, three years after the termination of this employment, and two years after the Industrial Tribunal's decision was given. It is, in our view, particularly unfortunate for Mrs Knibbs who is, as is plain to everybody, a thoroughly decent lady and a good employee. She is, as she has explained and as her husband has confirmed, of nervous disposition, and she has suffered a great deal of anxiety during the years which have elapsed since the termination of her employment. She has said that she would be unwilling now to embark upon another round of battle. We hope that that will not be her final decision.Before leaving this case, we wish to say something about the events which followed shortly after the decision of the Industrial Tribunal was handed down on 28 January 1993. The Appellant employer wrote requesting a review on 10 February 1993. The first substantive paragraph said this:"We are concerned to note that this decision failed to deal with one of the Respondent's main arguments as to why the applicant was not entitled to a redundancy payment. The Respondent argued at the Tribunal hearing that the applicant was not entitled to a redundancy payment as she was not in fact redundant. The Respondent's very first argument at the hearing was that the applicant was employed as a production operative and as there was still production operative jobs available the applicant was transferred to one of these positions and therefore not made redundant. This is an extremely important part of the Respondent's case, because if the applicant was not in fact redundant but simply put on different work in accordance with the terms of her contract of employment, she would not be entitled to a redundancy payment".In other words the request for a review was making the point which has been made before this Tribunal. The reply from the Secretary to the Tribunal dated 16 February said:
"Your letter .... has been referred to a Chairman (Mr J.G. Drysdale) who has directed me to reply in the following terms:
`Please refer Mr Over to paragraph 2 of the Reasons, 2nd sentence. The `work of the particular kind' which had ceased was that of coil winder'."The second sentence to which Mr Over's attention was drawn, presumably as providing the answer to his query, was "This meant that they no longer had any need for coil winders". As it seems to us, that was an answer to Mr Over's letter which did not deal with the question which he had raised. However, we have not mentioned this matter for that reason.On the same day, the Chairman amended his decision under the slip rule, Rule 9 of Schedule 1 of the Industrial Tribunals (Rules of Procedure) Regulations 1985. The first respect in which he made an amendment was a clerical mistake in the date of the commencement of Mrs Knibbs' employment. That was just the kind of amendment which the slip rule was designed to permit.The second amendment comprised the insertion of a substantial sentence which sought, in effect, to add to and explain the reasoning of the decision. It seems to us that it should be made clear that the slip rule is not designed to allow Chairmen the opportunity to add to and alter the essential basis of their decision. It is designed to allow the correction of slips.There ought, in this case, to have been a review and the parties should have been summoned, so that there could have been further argument, if necessary, on the issue which the decision had failed to address. We make these observations although this was not a matter which was raised in the Notice of Appeal.It follows that this appeal must be allowed. The case must be remitted to another Industrial Tribunal for a re-hearing.