Gibson v Ciro Cittero (Menswear) Plc [1998] UKEAT 1276_97_0806

EAT
Gibson v Ciro Cittero (Menswear) Plc
[1998] UKEAT 1276_97_0806 · 1998-06-08

JUDGE J HULL QC :

This is an appeal to us by Mrs Gibson, a lady in her early 30s who was employed as a sales assistant at the Romford Branch store of the Respondents. She was first employed by the Respondents' predecessors on 19 September 1987 as an assistant and then, after she had been there for nearly nine years, in June 1996, the business including a number of other stores was transferred to the Respondent firm, Ciro Citterio Menswear Plc. They are a large concern with more than 200 stores.The branch manager at Mrs Gibson's branch resigned and Mr Thullier took over and there were a number of changes, of course, consequential on the take-over. It was undoubtedly a transfer of the undertaking of the Respondents' predecessors under the Transfer of Undertakings (Protection of Employment) Regulations 1983 (to which I shall refer in a little while).So far as Mrs Gibson was concerned, her employment ended in the following circumstances (I am referring to it very shortly). Among her duties as an assistant she had been a key holder for the shop and that, of course, involved extra responsibility and it meant that she was paid, just for discharging that, an extra £20 a week which the Tribunal found was 8% of her total earnings.The Tribunal also found that it was not the policy of the Respondents that an ordinary assistant should be the key holder. It was the policy of the Respondents that that duty should be transferred to the manager or assistant manager or somebody more senior in the hierarchy and that had to be implemented, and was implemented and, as a result, Mrs Gibson found herself deprived of her £20 a week. So far as we know, no particular steps were taken to see whether she could do any other duties to make up her earnings. She regarded that as a serious matter. She had other complaints and to go forward a little, the Tribunal, without finding that those complaints were not made in perfectly good faith - they were made in perfectly good faith, as the Tribunal found - nonetheless, the Tribunal found those other matters did not add up to anything entitling Mrs Gibson to terminate her employment. But, bearing in mind those matters and this matter of the loss of her £20, she gave her notice in and her employment ended on 8 September 1996.She complained of a number of matters. She said that she was owed money; there was no doubt about that, that was conceded. She complained, as I say, of various ways in which she had been treated by the new employers. The Tribunal found that those complaints were perfectly genuine, but they did not add up to anything very serious. But when it came to this question of the money, the Tribunal held that that was a serious matter; the £20 was part of her remuneration. The cut proposed was a substantial cut and she was, said the Tribunal, entitled in those circumstances to terminate her employment and say that she had been dismissed because it was (to use a lawyer's language) a repudiatory breach of contract by the employers. It went to the root of the contract.So that in those circumstances, she complained to the Industrial Tribunal first of all concerning the money (about which it turned out eventually there was no dispute) and secondly, she said that in the circumstances she had been unfairly dismissed.The Tribunal held a hearing on 9 July 1997. They reached their decision on 23 September 1997 and it is from that decision that Mrs Gibson appeals to us.In her Notice of Appeal she sets out three grounds under paragraph 6. First of all, she says that the findings of the Tribunal were contradictory. It seems to us that there is nothing in that ground as it stands. Ground 2 did not get past the preliminary stage and Mrs Gibson was refused leave to proceed with that ground, but paragraph 6 (iii) raises the matter which we have to decide. She complained that, having decided that there was a constructive dismissal, the Tribunal erred in law in failing to consider the statutory test for unfairness in section 98 (4) of the Act.The way in which a Tribunal has to approach these cases in which there has been a transfer of undertaking is to look first of all, after deciding what the facts are, at the terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981 , which are far from plain and straightforward. Regulation 5 creates what is (in lawyers' terms) a statutory novation of contracts of employment in the circumstances where an undertaking is transferred. You take the employees with the business and their contracts continue as though they were made with the party taking over the business. That is in Regulations 5 (1) and 5 (2), but Regulation 5 (5) preserves an important right to the employees. After saying that their contracts continued Regulation 5 (5) says,
" [The provisions of the paragraphs I have referred to are] without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice if a substantial change is made in his working conditions to his detriment; but no such right shall arise by reason only that, under that paragraph, the identity of his employer changes unless the employee shows that, in all the circumstances, the change is a significant change and is to his detriment."
For example, one supposes that if a very good employer was replaced by a very bad employer, notoriously so, who treated the employees right from the start in a very unsatisfactory way, an employee might under Article 5 (5) be well entitled to say, "Although this is only the effect of the changeover, nonetheless I wish to exercise the right to terminate". This is, in effect, a repudiation. That was not this case, of course, this case was Mrs Gibson complaining that she had lost her £20 and saying that, if that could not be given back to her, she would give notice, as she did, and so the Tribunal found that she came in under Article 5 (5) and she was, they said, affected by a repudiation which went to the root of the contract; it was an important term of the contract.Then, of course, they had to go to Article 8 (1) because, even if that arose, then Regulation 8 might save the employer. Regulation 8 provides for an automatic unfair dismissal. It adds, in other words, to the grounds on which a Tribunal may say and, indeed, must say "in this case that dismissal has been unfair". Regulation 8 (1) says:
"Where either before or after a relevant transfer [this was a relevant transfer] , any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part V of the 1978 Act .... [now, of course, replaced, but those are the provisions relating to unfair dismissal] as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal."
And the Tribunal in the present case found that it was. The reason for this dismissal, as it was in law, was a reason connected with the transfer and if that stood alone, of course, that would mean that Mrs Gibson was automatically unfairly dismissed. But they had to go on to Regulation 8 (2) which provides as follows:
"Where an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer is the reason or principal reason for dismissing an employee - (a) paragraph (1) above shall not apply .... ."
So having been on the face of it within it, then the employee might be taken out of Regulation 8 (1). And then it goes on:
"(b) without prejudice to the application of section 57 (3) of the 1978 Act or Article 22 (10) of the 1976 Order (test of fair dismissal), the dismissal shall for the purposes of section 57 (1) (b) of that Act and Article 22 (1) (b) of that Order (substantial reason for dismissal) be regarded as having been for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held."
But that is without prejudice to the application of section 57 (3) of the 1978 Act. So you have to go on. If Regulation 8 (2) applies you have to go on and look to see whether, under what is now section 98 of the Employment Rights Act 1996 (it has become sub-section (4)) the employee is to be treated as unfairly dismissed or not. Section 98 (4) says:
"Where the employer has fulfilled the requirements of subsection (1), [those are the requirements which the Regulations say are to be regarded as fulfilled] 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."
The inter-relation of these provisions is, of course, settled for our purposes by the case of Berriman v Delabole Slate Ltd [1985] ICR 546. That was a decision of the whole of the Court of Appeal, which was delivered on their behalf by Browne-Wilkinson LJ, and the principles are set out, as the Industrial Tribunal in the present case quite rightly reminded themselves, at pages 549 and 551. After they had set out the provisions which I have read, the Court of Appeal went on as follows (F and G on page 549):
"The combined effect of these regulations and the Act of 1978 is as follows. On the transfer of a business, the employees of the transferor become the employees of the transferee. An employee has the right to treat himself as constructively dismissed by any detrimental change in his working conditions (regulation 5 (5)) but the question whether his dismissal is fair is dealt with by regulation 8. Under regulation 8 (1), if any employee is dismissed in connection with the transfer, the dismissal is unfair unless the reason or principal reason for dismissing the employee is an 'economic, technical or organisational reason entailing changes in the workforce'. In this event the case is taken out of the automatic unfairness provisions of regulation 8 (1) and the employer is treated as having demonstrated some other potentially fair reason for his dismissal thereby satisfying the requirements of section 57 (1) [that, of course, is section 98 (1) now] of the Act of 1978. The question will still remain whether, in the circumstances of the particular case, the dismissal of that employee was in fact fair for the purposes of section 57 (3) [which is now section 98 (4)]. "
So we look to see how the Industrial Tribunal dealt with that. As I say, many of the matters they were concerned with are not, in any way, in issue before us and they referred in paragraph 14 to what was said by the Court of Appeal in Berriman v Delabole . They said that they found the judgment particularly valuable in determining the inter-relation of Regulations 5 and 8, though it is perhaps significant that they did not go on to say that they add to those inter-relations section 98. They set out, quite correctly, the effect of regulations 8(1) and 8(2) and they went on as follows in paragraph 15 of their decision:
"In the present case, there was clearly no change in the number of the workforce but we have found that there was a change in the functions of the workforce. There was clearly a change in the function of Mrs Gibson. She no longer had the role of key holder. The loss of key-holder status was very far from being mere 'standardisation in pay', it went to the functions to be carried out by the Applicant as part of her contract of employment. The reason Mrs Gibson resigned was because of the taking away of the key-holder function. The reason it was taken away was an organisational one involving changes in the functions of a member of the workforce. The reason was not the transfer of the undertaking per se. The loss may have followed the transfer but the principal reason for it was the pre-existing organisation of the functions of the Respondents' workforce and the reasonable need for the Applicant to comply with it, not the transfer itself. We therefore find that there was an organisational reason for the change in the contract with Mrs Gibson and the constructive dismissal was in consequence not unfair."
That was the full decision on this point. Where is the reference to what they had to consider under section 98 (4)? There it is, plain as a pikestaff:
"Where the employer has fulfilled the requirements of subsection (1), [as they had by, of course, the findings of the Tribunal under Regulation 8 (2)] 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."
Not only is there no reference to this vitally important stage, in terms, but the Tribunal does not go on to consider the sort of facts which one would have expected of them. We should certainly have expected them to consider such facts, however briefly, in deciding whether the employer had acted reasonably or unreasonably. What is said here by Mr Lock is that they referred to the decision in Berriman v Delabole . They certainly did, but they seem, being wrapped up in the complications of the inter-relation of these statutory and regulatory provisions, to have lost sight of the fact, having found that Regulation 8 (2) was satisfied, that they still had to go on to section 98 (4) which, of course, came logically next. Did they ask themselves "Well the employers should have considered, should they not, the length of time which this lady had been employed by the firm, the responsibility that she discharged?" She had discharged that responsibility, so far as was known, quite satisfactorily. Here was what for her must be quite a substantial cut in pay proposed. "Is there any way in which we can restore some or all of that lost pay, perhaps by giving her other extra duties? Is there some way in which we can compensate her or, at any rate, make her feel that this is not a situation in which she ought to resign and that if, perhaps, she stays on for a few weeks or months, there would be vacancies which she could reasonably look forward to occupying with higher pay?" "Would it be reasonable to pay her for a short while, at any rate, something to cushion the blow?" Those are the sort of considerations (and there may be many others) which the Industrial Tribunal should consider. They should look at how the parties behaved towards each other. As we say, there were complaints which we are not, in any way, concerned with which were made in good faith but not upheld as repudiatory matters by the Tribunal.None of that happened, so we do not think that this was a mere slip of the tongue, a mere technical omission of something which they had well in mind and which they must be taken to have decided. On the contrary, we think it is one of those cases to which the decision in Conlin v United Distilleries [1994] IRLR 169 applies, a decision of the Court of Session in Scotland, to which our attention has quite rightly been invited. The headnote says:
"The Employment Appeal Tribunal had rightly emphasised that although failure to make express reference to the terms of s. 57 (3) of the Employment Protection (Consolidation) Act or to the 'range of reasonable responses' test may not always amount to a fatal flaw in the decision of an Industrial Tribunal; nevertheless, it is essential that it should be apparent from the Tribunal's decision that the correct test has been identified and applied. Unless the Tribunal refers to s.57 (3), or at least summarises the wording, the EAT may have difficulty in concluding that the Tribunal has applied its mind to the statutory requirements."
It seems to us not merely that there is difficulty in saying that, but it is quite impossible in the circumstances for us to think that the Industrial Tribunal did apply their mind to that. They seem to us totally to have omitted a matter, which might well have given them pause. They might very well have had to consider a number of matters expressly before they could decide the question, and that has been omitted.So it seems to us that this is a flawed decision on the short basis that it does not tell the Applicant why she had lost. Either they entirely omitted a vital consideration or they do not tell her why it is that she lost on this important part of her case.So we think that, in the circumstances, the case should go back to an Industrial Tribunal, differently constituted, so that they can consider the matter anew. We think it would be very embarrassing to this Tribunal, having decided the matter in a particular way, to be asked to reopen their minds (so to speak) as well as the case and consider the question, which they omitted altogether, and consider it fairly in the circumstances. So it should be tried by an Industrial Tribunal, differently constituted.Since all these issues - whether under Regulation 5, Regulation 8 or of course, Section 98 of the Act - since they are all, in a sense, interlinked evidence on one may be relevant to the others and we do not think it would be right that any of the findings of this Tribunal should stand or be regarded as binding on the new Industrial Tribunal. We think it right that the new Tribunal should consider the matter completely unfettered and, in effect, start again with the consideration of Miss Gibson's complaint and that is the order which we propose to make.