Taylor v H Backhouse (Baker St) Ltd [1995] UKEAT 900_94_2911

EAT
Taylor v H Backhouse (Baker St) Ltd
[1995] UKEAT 900_94_2911 · 1995-11-29
MR JUSTICE KEENE : This an employee's appeal from an Industrial Tribunal decision whereby it was held that the Appellant was fairly dismissed by the Respondent.The Appellant began her employment with the Respondent in July 1990 as a relief manager in the Respondent's business. The Respondent runs a chain of betting shops two of which are in London area, and the remainder of which are located in Wiltshire. The Appellant covered all the shops in Wiltshire as and when required.On 15th June 1993 her employment was terminated by one months' notice because of her refusal to accept a variation to her terms of employment. Originally the Appellant's contract required her to work five days a week between 9.15 a.m. and 5 p.m. in the winter, and 9.15 a.m. and 6 p.m. in the summer.What brought about the proposed variation in the terms of her employment was, initially at least, a change in the law. Up until January 1993 betting shops by law were obliged to close not later than 6.30 p.m. Legislation however, was then enacted, which enabled betting shops to open until 10 p.m. because of the then recent introduction of evening racing. The Respondent company decided that commercially it had no alternative but to open its shops to provide a service to its customers for evening racing, because its competitors had decided to do that, and it was felt that its customers who became used to visiting a competitor's premises in the evenings might well then choose to do so in the daytime. In consequence, business would be lost to the Respondent. This decision about evening opening was communicated to all managers and counter hands in the employ of the Respondent by a memorandum dated 3rd March 1993. That spelt out the detailed changes in the hours which in broad terms were going to require evening working on the part of managers. It is to be noted that the memorandum contained this paragraph:
"We are therefore altering your terms of employment purely for the period April 1st to August 31st. Your existing terms will apply again from September 1st. We will then be able to review our experience and introduce new terms of employment in time for summer 1994."
Thus, it would seem that the evening working was being introduced as something of an experiment.The Appellant objected to the Respondent's proposal that employees should be prepared to work in the evenings when required. She indicated that she was not prepared to work more than one evening per week between Monday and Thursday until the company gave her a number of assurances including a guarantee about the maximum number of evenings in a week which she would be expected to work.At a meeting on 20th April 1993, the Appellant was warned that if she did not accept the proposed variation to her contract terms she would be dismissed and that warning was confirmed in writing. There was then a further meeting on 15th June 1993. At that meeting after some discussion the Appellant again indicated that she would not accept the change to her contract terms which was being proposed, and at that she was given one month's notice of termination. An appeal hearing on 6th July 1993 upheld the dismissal.At paragraph 6 of its decision, the Industrial Tribunal said this:
" The issue to determine is whether or not the company was entitled in the circumstances of this case to vary the terms of employment of its Managers and as it purported to do by the Memorandum of 3 March 1993. If the company was not so entitled then the proposed variation could not be imposed upon the applicant."
It then set out the terms of Section 57(1) of the Employment Protection (Consolidation) Act 1978 which we shall call "the Act". That provision of course deals with the need for the employer to show what the reason for dismissal was, and that it fell within the terms of Section 57(1)(b).The remaining part of the Tribunal's decision then reads as follows:"The respondents contend that this case falls within the category of "some other substantial reason" by virtue of the applicant's refusal to accept the variation to her contract terms which the respondents were entitled to make. We have been referred to and have considered the cases of Hollister v National Farmers Union, Bowater v McCormick, Sartor v P&O European Ferries and Dick v Glasgow University . We have also considered the cases of Banerjee v City and East London Health Authority, Evans v Elimeter Holdings Ltd, Chubb Fire Security Ltd v Harper and St John of God (Care Services Ltd v Brooks . In the case of Chubb Fire Security Ltd v Harper the Employment Appeal Tribunal stated that even though an employee may be acting reasonably in refusing to accept a change to contractual terms it does not follow that the employer must be acting unreasonably in proposing it. Both may be acting reasonably and the employer must consider whether the advantage to it of implementing the change outweighs any disadvantage which the employee may suffer.7 We find that the respondents in this case had good and sufficient commercial reasons for altering the contractual hours during which its Managers and counterhands may be required to work to cover evening racing. In these circumstances although it was perfectly proper for the applicant to endeavour to negotiate additional benefits for herself she was bound by the company's decision in this regard and her refusal to accept it when all other Managers and counterhands had done so amounted to "some other substantial reason" of a kind as to justify her dismissal within the meaning of Section 57(1) of the Employment Protection (Consolidation) Act 1978. Accordingly we find that the applicant was fairly dismissed."On behalf of the Appellant, Mr Millar contends first of all that the Tribunal misdirected itself on whether "some other substantial reason" for dismissal was established. He has referred to the decision in Banerjee v City and East London Area Health Authority [1979] IRLR 147 and also to Evans v Elimeter Holdings Ltd [1982] ICR 323 . It is submitted on behalf of the Appellant that in the present case there was no evidence of clear advantage to the employer in the changes proposed. The two cases cited do indicate that to constitute "some other substantial reason" for dismissal, proposed changes in terms of employment have to be arrived at as a result of considering advantages which will be attained by the employer as a result, and that there needs to be evidence before the Tribunal to demonstrate that that is so. In consequence, Mr Millar submits that this particular case falls within that line of authority since he asserts that in the present case there was no such evidence. We say straightaway that we cannot accept that argument. In both Banerjee and Evans there was not any evidence before the Tribunal as to the advantages that the changes would bring. There was in Evans for example no particular justification for the new terms which were being proposed, and a similar situation existed in Banerjee . In the present case however, the Respondent's requirement to operate in the evenings was very far from difficult to discover. The statutory change, together with the evidence about the reactions of the Respondent's competitors to the change in legislation allowing evening opening, produced a situation where the potential advantages to the employer of evening opening and the proposed changes in working hours were evident. The Tribunal itself said:
"We find that the respondents in this case had good and sufficient commercial reasons for altering the contractual hours during which its Managers and counterhands may be required to work to cover evening racing."
In that situation, it is impossible for one to say that the Tribunal in this case misdirected itself in finding that "some other substantial reason" for dismissal had been established.Secondly, the Appellant contends that the Tribunal erred in law in that it failed to consider and apply Section 57(3) of the Employment Protection (Consolidation) Act 1978 , nut applied their minds solely to Section 57(1). Mr Millar goes on to emphasise that under the structure of the legislation there is a two stage process which the Tribunal has to go through. He contends that the Tribunal did not go through the necessary weighing process which is required by Section 57(3).It is necessary in this situation to set out the terms of Section 57(1) and (3) familiar, though they are. By Section 57(1) it is provided as follows:
"(1) In determining for the purposes of this Part whether the dismissal of an employee was fair or unfair, it shall be for the employer to show_ (a) what was the reason (or, if there was more than one, the principal reason) for the dismissal, and (b) that it was a reason falling with subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.
...(3) Where the employer has fulfilled the requirements of subsection (1), then, [ subject to various other provisions ] the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend 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 that question shall be determined in accordance with equity and the substantial merits of the case."In response to these arguments the Respondent argues that the issue of whether there is "some other substantial reason" as referred to Section 57(1) will cover much of the same ground as is covered by the provisions of Section 57(3). Mr West on behalf of the Respondent submits that by its very nature, if "some other substantial reason" is shown, then there is not much scope left for Section 57(3). There is, he says, lots of overlap and the cases do suggest that the two provisions may be considered together. He accepts nonetheless that it does not automatically follow that, because "some other substantial reason" within Section 57(1) is shown, the dismissal was reasonable in accordance with equity and the substantial merits of the case. But he contends that in all cases of changes in terms of employment, the outside pressing commercial need for changes in the employer's operations means that once it has been decided that it is reasonable to propose the new terms and the employee refuses them, then dismissal must be fair in the sense of Section 57(3).We return to the structure of the Act, and in particular to structure of Section 57. The position is that Section 57(1)(b) of the Act puts the burden on the employer to show that the reason for dismissal was one falling within subsection (2) or "some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held". If he succeeds in discharging that burden, then a potentially fair reason for dismissal has been shown. However, subsection (3) is dealing with whether the dismissal was actually fair or not. It directs attention to the circumstances of the individual employee and all the circumstances which relate to that employee, and not merely as under subsection 57(1)(b) to whether the reason was of a kind such as to justify the dismissal of an employee holding the position which that employee held. At the Section 57(3) stage there is no burden on the employer to show that the dismissal was fair in the sense used in that subsection. In other words there are or may be two stages to an Industrial Tribunal's consideration of a claim for unfair dismissal, once dismissal has been proved.As was said in Gilham and Others v Kent County Council (No.2) [1985] ICR 233 by Griffiths LJ at page 239 D-F:
" It is quite impossible to argue that such a reason could not be a substantial reason for dismissing an employee. The hurdle over which the employer has to jump at this stage of an inquiry into an unfair dismissal complaint is designed to deter employers from dismissing employees for some trivial or unworthy reason. If he does so, the dismissal is deemed unfair without the need to look further into its merits. But if on the fact of it the reason could justify the dismissal, then it passes as a substantial reason, and the enquiry moves on to section 57(3), and the question of reasonableness.
The error into which the tribunal fell was to confuse the section 57(1)(b) and section 57(3) tests. In order to decide if the reason was a substantial one, they asked themselves if the employers were, in the circumstances of this case, reasonable in regarding it as a sufficient justification for the dismissal. This is the test that has to be applied when considering section 57(3) and not section 57(1)."That decision reminds us that the two stages and the two tests are separate and different.Now of course we recognise that no Industrial Tribunal is required to follow a particular format in its decision. In the words of Bingham LJ (as he then was) in Meek v City of Birmingham District Council [1987] IRLR 250 at page 251:
"The decision of an industrial tribunal is not required to be an elaborate formalistic product of refined legal draughtsmanship."
The courts have indicated that the decision should show expressly or by implication what were the questions to which the Industrial 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 Industrial Tribunal: See Martin v Glynwedd Distribution Ltd [1983] IRLR 198 at page 202.Having recognised that, we are nonetheless of the view that the reasoning of an Industrial Tribunal must reveal that it has applied the criterion contained in Section 57(3). We have gained some assistance from a recent decision of the Scottish Court of Session in the case of Conlin v United Distillers [1994] IRLR 169 . In that case the Court approved a passage from the decision of the Employment Appeal Tribunal which was in the following terms when dealing with the question of referring to Section 57(3):
"Failure to make such express reference may not always amount to a fatal flaw in the decision of an industrial tribunal; we would be reluctant to say that there is some formula which must always appear in a decision on a matter of this kind. There may be cases in which it is possible to tell from the reasoning of the industrial tribunal taken as a whole that the correct test has been applied, notwithstanding the absence of express reference to it, just as there are cases in which it can be seen that although the industrial tribunal have expressed the correct test, they have failed to apply it. Nevertheless, it is essential that it should be apparent from the decision of the industrial tribunal that the correct test has been identified and applied."
The Court of Session then added this (as a comment):
"In Scottish and Newcastle Beer Production Ltd v Cannon the Employment Appeal Tribunal emphasised that unless the industrial tribunal does refer to Section 57(3) or at least summarise the wording, the Employment Appeal Tribunal may have difficulty in concluding that the industrial tribunal has applied its mind to the statutory requirements. That is no doubt so, and we agree with what the Employment Appeal Tribunal has said regarding this matter in this case."
Applying those principles to the present case, we cannot accept the argument advanced on behalf of the Respondent that in cases such as this, once it has been decided that it is reasonable for the employer to propose new terms and the employee then rejects them, then the dismissal must be fair in the sense used in Section 57(3). There is still, once one has jumped the hurdle of showing some substantial reason for dismissal, a judgment for the employer to make and for the Industrial Tribunal to make. It cannot close its eyes to the whole range of pros and cons of dismissing the employee. The mere fact that the Tribunal here found that the employer had good and sufficient commercial reasons for altering the contractual terms does not mean that dismissal therefore was fair or that the Industrial Tribunal had given proper consideration to Section 57(3). For example in the present case at the time of dismissal the altered hours of work had only some 10 weeks to run before the original hours of work would re-apply, and in fact there were only 6 weeks left from the date when the Appellant's employment actually ended. That could be a relevant consideration when deciding whether or not to dismiss. Length of service and the performance of the employee in the past will normally also be relevant considerations. Such matters may all affect the substantial merits of the case, and those merits must be considered, and it must be possible to tell from the decision that they have been considered.In the present decision not merely does the Tribunal make no express reference to Section 57(3) but its two concluding paragraphs seem to be dealing almost exclusively with the test set out in Section 57(1)(b) which is quoted in terms. The final paragraph appears to deal solely with the Section 57(1) test, with the Industrial Tribunal concluding that the Appellant's refusal to accept the company's decision:
"when all other Managers and counterhands had done so amounted to "some other substantial reason of a kind as to justify her dismissal" within the meaning of Section 57(1) of the Employment Protection (Consolidation) Act 1978."
The decision then immediately states:

"Accordingly we find that the applicant was fairly dismissed."

We are bound to comment that that final sentence does not follow from the preceeding passage in the way which "accordingly" would suggest. It may be that the Tribunal did have in mind the further stage laid down by Section 57(3) and the considerations there set out, but we cannot identify from the reasoning any clear indication that that was so. As things stand the reasoning of the decision are deficient. For that reason this appeal must be allowed and we will remit this matter for it to be reconsidered in the light of this judgment.