HASHIMOTO LTD v MR G MCINTOSH [2002] UKEAT 1151_01_2510

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2002] UKEAT 1151_01_2510Case No Appeal No. EAT/1151/01Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
HASHIMOTO LTDAPPELLANTMR G MCINTOSHRESPONDENT
Before
His Honour Judge J BurkeDate 25 October 2002
[1]APPEARANCES For the Appellant MR MARK SUTTON (of Counsel) Instructed By: Ward Hadaway Solicitors Sandgate House 102 Quayside Newcastle-on-Tyne NE1 3DX For the Respondent MR SEAMUS SWEENEY (of Counsel) Instructed By: Patterson Glenton and Stracey Milburn House Dean Street Newcastle-Upon-Tyne NE1 1NR JUDGE J BURKE QC : Mr McIntosh was employed as a Material Handler by the Appellant employers who make components for the motor industry at a factory in the Bolden Business Park, Tyne and Wear. His employment ended on 11 October 1999 when he resigned. At the time he was suffering from a psychiatric illness, namely depression and anxiety. He claimed before the Employment Tribunal that he had been unfairly constructively dismissed and that he had been the victim of disability discrimination in three ways, firstly by the employers' suspending his contractual sick pay while he was off work as a result of his illness, secondly by the employers subjecting him to disciplinary investigation while he was off work for that reason and thirdly, by the employers continuing, in repudiation of his contract of employment, to refuse to pay sick pay due to him and thus constructively dismissing him.[2]The Employment Tribunal, sitting at Newcastle upon Tyne and chaired by Mr Hargrove, in their Decision sent to the parties with Extended Reasons on 8 August 2001, decided that Mr McIntosh had been unfairly constructively dismissed, that by withholding sick pay the employers had made unlawful deductions of wages and that Mr McIntosh was a person under a disability within the definition of Section 1 of the Disability Discrimination Act 1995 and that he had been discriminated against for a reason which related to his disability. The Tribunal further found that the decision to launch a disciplinary investigation of him was, in the circumstances, justified but that the withholding of sick pay and the constructive dismissal were not justified and that, in those two respects, there had been discrimination which was unlawful under Section 4 of the 1995 Act.[3]The employers sought to appeal against the Tribunal's decision in favour of the employee under the Disability Discrimination Act and against the unfair dismissal decision on various grounds; but after a preliminary hearing of their appeal on 11 April 2002 only one ground of appeal has remained alive and is now before us, namely whether the Tribunal had erred in law in concluding that the employer's suspension of contractual sick pay, which the Tribunal had found to be discriminatory, and the breach of contract in so doing which caused the dismissal were not justified under Section 5(3) of the 1995 Act.[4]Because the ground of appeal is limited in its scope as compared with the much wider factual enquiry before the Tribunal, we can set out the facts, insofar as they are material for present purposes, in brief terms. Mr McIntosh had disciplinary problems with the employers at the end of January and early in February 1999. He also had a history of depressive illness. While facing disciplinary proceedings, on 3 February 1999 he went off work ill. His contract entitled him to sick pay, at tapering rates for a period of six months, while off work through illness. At first he received his sick pay. However, ten days after he had gone off work through sickness, which absence was properly certificated by his GP, he was seen one evening at a leaving party for another employee where he was allegedly drinking alcohol. When they learnt of this, the employers, on 1 March 1999, suspended payment of Mr McIntosh's sick pay, pending a further investigation which was to take place when he returned to work. The contract of employment provided that if the employers were satisfied that there had been abuse or misrepresentation, Mr McIntosh would be disqualified from receiving sick pay. It did not provide for any right in the employers to suspend payment of sick pay pending investigation.[5]In their letter to Mr McIntosh of 1 March 1999 setting out their decision to suspend his sick pay, the employers said that they were suspicious of his absence from work for two reasons, namely(1) the timing of the initial absence just as Mr McIntosh had got himself into disciplinary difficulties(2) Mr McIntosh's presence at a party while absent "on the sick".[6]There was a great deal of correspondence and meetings over the next few months, the details of which it is not necessary to go into. Mr McIntosh said that he needed his sick pay and was being put into grave financial difficulty; the employers maintained the position that they would not pay sick pay until the outstanding disciplinary issues had been resolved, which resolution could not occur until Mr McIntosh returned to work. They took that stance at the final meeting between the parties on 13 July 1999. After that meeting sick pay continued to be withheld and Mr McIntosh continued to be signed off work by his GP; on 11 October 1999 he resigned.[7]The Tribunal found, at paragraphs 13 to 14 of their Decision, that he had done so as a result of the employer's unjustified suspension of payments of his sick pay; the employers were held to be in breach of contract either in that there was no right to suspend sick pay in the absence of a finding of abuse or misrepresentation or, if there was an implied right to suspend sick pay, it was only open to the employers to exercise such a right if they had acted reasonably and promptly in investigating the causes of their suspicion which they had not done; the Tribunal alternatively held that the employers had conducted themselves in breach of the implied term of trust and confidence. The Tribunal found that the employers' breaches were so serious that Mr McIntosh was entitled to terminate and had terminated his contract of employment as a result and that, despite the delay before he did so, there had not on the facts been affirmation. The employers did not seek to argue that, if there had been a constructive dismissal, it was fair.[8]In addressing Mr McIntosh's claims under the Disability Discrimination Act the Tribunal had to decide, firstly whether Mr McIntosh was a person under a disability within Section 1 of the Act and, secondly, whether he had been discriminated against within Section 5(1) of the Act. We have already set out their conclusions on these issues. They dealt with the next issue, that of justification of the employer's suspension of sick pay and the constructive dismissal, in paragraph 12(i) and (iii) of the Decision. They rightly said in paragraph 12(iii) that the dismissal flowed from the suspension of sick pay; and therefore they concentrated on deciding whether the suspension of sick pay was justified; if it was not, then, clearly, the dismissal equally was not. They unanimously decided that the suspension of sick pay was not justified, at least for the period that it continued. They drew attention to the fact that the procedure did not provide for suspension of sick pay and was limited to disqualification of sick pay in the circumstances which we have described. They found that the basis of the employer's action was Mr McIntosh's attendance at the party; and they continued:
"This did not, in the view of the Tribunal, justify the suspension of sick pay until the applicant was fit to return to work so that an investigation could take place. The suspension of sick pay in such circumstances was a serious matter which did cause serious financial hardship to the applicant who was already vulnerable due to his depression. There is a distinct possibility that it contributed to his depression. On a number of occasions the applicant made this clear to the respondent. The applicant's attendance at a colleague's party was not a gross and obvious breach of the sickness procedure. It called for an explanation, but a formal investigation delayed until he was fit to return was excessive. Mr Manning's contention that he could not hold an investigation while the applicant was sick was disingenuous. There was no reason why he could not have visited him at his home and there is no reason to suppose that the applicant would have refused. He was desperate to have his sick pay reinstated. At the very least he should have been given the opportunity. In any event a meeting did eventually take place on 13 July 1999, but Mr Manning refused a request for the reinstatement of sick pay, apparently on the basis that the applicant had stated that he was getting better and expected to return in three to four weeks. This has to be looked at against the context that there was by this stage no dispute that the applicant was in fact sick and the breach of the sick pay procedure if any had occurred over five months earlier."
[9]The Tribunal gave their decision with Summary Reasons at the conclusion of the two days of hearing before them, on 21 March 2001. Their Extended Reasons were sent to the parties on 8 August 2001. At the date of the Tribunal's decision, the Court of Appeal had not yet given judgment in Jones v Post Office [2001] IRLR 384 ; by the date of the promulgation of their Extended Reasons the decision in Jones , handed down on 11 April 2001, was reported (in the June part of the IRLR); but neither party drew the Tribunal's attention to it. While no criticism is to be made either of the parties or of the Tribunal, it can be taken as certain, having regard to the way in which the Tribunal expressed their views on the issue of justification, that they were unaware of Jones and therefore of the effect of Jones on the approach to be adopted by a Tribunal in considering an issue of justification under Section 5(3) of the 1995 Act.[10]Until the decision of the Court of Appeal in Jones , there had been some doubt about the way in which a Tribunal considering such an issue of justification should approach their task. In Baynton v Saurus General Engineers Ltd [1999] IRLR 604 the EAT held that a Tribunal, in considering Section 5(3), had to carry out a balancing exercise between the interests of the disabled employee and the interests of the employer; this was taken to mean that the Tribunal would have to consider the evidence as a whole, look at the interests of both sides and decide in the round whether the conduct complained of was justified. The task was not dissimilar to one of looking at general reasonableness. In H J Heinz Ltd v Kenrick [2000] IRLR 146, the EAT, presided over by Lindsay P, retreated to some extent from the position seemingly set out in Baynton . While expressing, at paragraph 14 of the Decision, full agreement with the inclusion within the relevant circumstances of the circumstances of both the employer and the employee, the EAT at paragraph 16 said:
"During the hearing the President flirted with the idea that s. 5(3) provided only a necessary rather than a sufficient condition for justification, meaning that a tribunal could not hold there to be justification unless the reason for the treatment was both material to the circumstances of the particular case and substantial' but that even if the reason satisfied that test there was not necessarily justification. Given that the Code of Practice at para. 4.6, speaking of 'both material to the circumstances of the particular case and substantial' says that that means: '… that the reason has to relate to the individual circumstances in question and not just be trivial or minor'. it might be thought such a very low threshold for justification was itself indicative of s. 5(3) providing, surely, only a necessary condition rather than a sufficient one. Were the condition to be merely necessary, tribunals would have been able, as many would applaud, to adopt a broad approach to justification based on their views, as 'the industrial jury', of the substantial merits of the case rather as is required of them under s. 98(4). However, we must recognise that s. 5(3) provides that the treatment 'is justified' if the condition is met, not that it 'can' or 'may' be. It thus seems, in the category we are dealing with, that the condition stipulated in s. 5(3) is both necessary and sufficient. As the Code has to be taken into account … then whatever one might think about the lowness of such a threshold, (lower, it might be thought, than the word 'substantial' would usually indicate), if the reason for the treatment relates to the individual circumstances in question and is not just trivial or minor the justification has to be held to exist in the category of case which we are dealing with."
And in paragraph 20:- "Whilst we would not preclude some balancing exercise, the comparatively limited requirements of s. 5(3) are to be borne in mind. It does not require a wider survey of what is reasonable having regard to specific features such as is found in s. 6(1) and s. 6(4)."[11]The process of departure from the guidance given by the EAT as to the balancing exercise, started in Heinz , was continued in Jones in which the appeal turned on the construction of Section 5(3). In giving the first judgment in that case, Pill LJ, at paragraph 21, referred to paragraph 16 of the EAT's decision in Heinz and agreed that the condition stipulated in section 5(3) was both necessary and sufficient. He accepted the submission on behalf of the employers that Section 5(3) does not permit the Tribunal to make up its own mind upon justification on the basis of its own consideration on the evidence (in that case disputed medical evidence) in these terms, at paragraph 25:- "Upon a consideration of the wording of s. 5(3) in context, I conclude that the employment tribunal are confined to considering whether the reason given for the less favourable treatment can properly be described as both material to the circumstances of the particular case and substantial. … In order to rely on s. 5(3) it is not enough for the employer to assert that his conduct was reasonable in a general way; he has to establish that the reason given satisfies the statutory criteria … . The employment tribunal must consider whether the reason meets the statutory criteria; it does not have the more general power to make its own appraisal of the medical evidence and conclude that the evidence from admittedly competent medical witnesses was incorrect or make its own risk assessment."[12]Pill LJ continued, at paragraph 26 as follows:- "Consideration of the statutory criteria may also involve an assessment of the employer's decision to the extent of considering whether there was evidence on the basis of which a decision could properly be taken. Thus if no risk assessment was made or a decision was taken otherwise than on the basis of appropriate medical evidence, or was an irrational decision as being beyond the range of responses open to a reasonable decision-maker … the employment tribunal could hold the reason insufficient and the treatment unjustified." And, at paragraph 27:- "… a reason may be material and substantial within the meaning of the section even if the employment tribunal would have come to a different decision as to the extent of the risk. An investigation of the facts by the tribunal will often be required, but it cannot go to the extent of disagreeing with a risk assessment which is properly conducted … . This constraint limits the power of tribunals to provide relief to disabled employees, but in my view it follows from the wording of the section, which requires consideration of the reason given by the employer, and recognises the importance of the employer's responsibility for working practices." And in paragraph 28:- "The limited function of the employment tribunal may in some circumstances place them in a situation which is less than straightforward procedurally. However, it is not one with which they are unfamiliar. It is different but not very different from the task employment tribunals have to perform in cases of unfair dismissal. … In both cases, the members of the tribunal might themselves have come to a different conclusion on the evidence, but they must respect the opinion of the employer, in the one case if it is within the range of reasonable responses and in the other if the reason given is material and substantial."[13]Kay & Arden LJJ agreed with the judgment of Pill LJ. Arden LJ added guidance as to the meaning of the words "material" and "substantial" in Section 5(3) and as to how a Tribunal faced with a claim of justification may find it helpful to proceed, in the following terms:- "36 Section 5(3) uses the words 'material' and 'substantial'. In my judgment, those words cover different subject matter. 'Material' denotes the quality of the connection which must exist between, on the one hand, the employer's reason for discriminating against the employee and, on the other hand, the circumstances of the particular case. The circumstances of a particular case may include those of both the employer and employee ( Baynton v Saurus Ltd [1999] IRLR 604 ). Under s.5(3), this connection must be 'material'. 37 Mr Griffith-Jones submits that 'material' means 'relevant'. As to this, it is often said that there are degrees of relevance. In this context, I would add to Mr Griffith-Jones's submission the rider that it is not sufficient that the connection is an extenuated one. The use of the word 'material' rather than 'relevant' or 'applicable' indicates to me that there must be a reasonably strong connection between the employer's reason and the circumstances of the individual case. The strength of this connection involves largely a factual enquiry. It ought not to involve an enquiry into medical evidence since an enquiry is relevant, if at all, only to the second limb of s. 5(3). 39 The second requirement in s. 5(3) is that the reason should be 'substantial'. This means, in my judgment, that the reason which the employer adopted as his ground for discrimination must carry real weight and thus be of substance. However, the word 'substantial' does not mean that the employer must necessarily have reached the best conclusion that could be reached … . Employers are not obliged to search for the Holy Grail. It is sufficient if their conclusion is one which on a critical examination is found to have substance. Thus a reason which on analysis is meretricious would not be a 'substantial' reason. It would fail to meet the test in s. 5(3). 40 A tribunal faced with a claim of justification may well find it helpful to proceed by asking the following questions: What was the employee's disability? What was the discrimination by the employer in respect of the employee's disability? What was the employer's reason for treating the employee in this way? Is there a sufficient connection between the employer's reason for discrimination and the circumstances of the particular case (including those of the employer)? Is that reason on examination a substantial reason?"[14]It hardly needs to be said that the effect of Jones is to require Tribunals to approach Section 5(3) in a manner significantly different from that which prevailed when Baynton was the leading authority. Mr Sutton tells us, and we accept, that the Tribunal in this case were not only unaware of Jones but that neither party drew their attention to Heinz . As Mr Sutton puts it, his submissions were based on the Baynton approach. Thus it is that the Tribunal did not in their reasons expressly pose to themselves the five questions set out by Arden LJ at paragraph 40 of Jones or refer to the materiality and substantiality tests. We have little doubt but that, if they had been aware of either Heinz or Jones , they would, in paragraph 12(i) of their Decision, have set out their reasons in a different form.[15]Mr Sweeney, on behalf of Mr McIntosh, submitted that while he accepted that the Tribunal had not expressly set out and responded to the five questions set out by Arden LJ in Jones , they had, with considerable prescience, in fact posed and answered them all. As to the first and second questions, he correctly submitted that by the stage of their decision at which the Tribunal were considering justification they had already found (by a majority) that Mr McIntosh was a person who had a disability as defined by Section 1 of the 1995 Act, namely depression and (unanimously) that the suspension of sick pay and the constructive dismissal (if there was a constructive dismissal as they subsequently found there was) constituted less favourable treatment of Mr McIntosh for a reason related to his disability.[16]As to the third question "What was the employer's reason for treating the employee in this way?", Mr Sweeney submitted that the Tribunal, in the fourth sentence of paragraph 12(i) of the Decision, made a finding that the employers' reason for acting as they did was Mr McIntosh's attendance at a colleague's leaving party on 13 February 1999. Mr Sutton pointed out that, at paragraph 2(d) of the Decision, the Tribunal appeared to have found that there were two reasons for the employers' actions, the temporal relationship between the initiation of disciplinary proceedings on 2 February 1999 and Mr McIntosh's going off work on 3 February 1999 and his presence at the party; but we accept Mr Sweeney's argument that, in paragraph 2(d) the Tribunal were reciting what the employers had said in their letter to Mr McIntosh of 1 March 1999 and that the Tribunal's finding as to the actual reason for the employer's suspension of the payment of sick pay over a long period and in breach of contract was that set out in paragraph 12(i). In the light of the obvious fact that the supposedly suspicious temporal relationship did not cause the employers to take any action at the outset and that they took no action until they learned of Mr McIntosh's attendance at the party, the Tribunal's finding in paragraph 12(i) as to the employers' reason for suspending sick pay is wholly understandable.[17]Mr Sweeney was, however, in more difficulty in seeking to persuade us that the Tribunal had, in the remainder of paragraph 12(i), answered, whether by prescience or not, the fourth and fifth questions proposed by Arden LJ, namely "Is there a sufficient connection between the employer's reason for discrimination and the circumstances of the particular case?" and "Is that reason on examination a substantial reason?". There is no doubt that the Tribunal's conclusions were strongly critical of the employers; they plainly regarded the employers' actions in relation to sick pay as wholly unreasonable and thus unjustified; but they did not expressly direct themselves to consider and did not expressly consider whether there was, to use the expression used by Arden LJ, "a reasonably strong connection between the employers' reason and the circumstances of the individual case"; nor did they ask themselves whether the reason for the discrimination was substantial in the sense that it carried real weight and was of substance. We have concluded that the Tribunal were, in paragraph 12(i), consistently with the way in which the case had been put to them, reaching their own conclusion after looking at all the evidence as to whether the employer's conduct was reasonable or unreasonable and was therefore justified or not justified.[18]That approach to the application of Section 5(3) was, although the Tribunal could not have known it, inconsistent with the law as subsequently laid down in Jones and was, in law, erroneous.[19]Mr Sweeney submitted that, if we were so to conclude, we should nevertheless dismiss the appeal rather than remit the case to the Tribunal. He relied on the well known principle enshrined in Dobie v Burns International Security Services UK Ltd [1984] IRLR 329 , that if, but only if, it is satisfied that the conclusion reached by the Tribunal was unarguably right and unarguably would have been reached by the Tribunal had they properly directed themselves, an appellate tribunal may uphold the original decision. Alternatively, Mr Sweeney submitted, if there was to be a remission it should be to the same Tribunal and should be limited to a decision by the Tribunal, after submissions from the parties, on the issue of justification on the basis of the evidence already provided to them and on the basis of the application of the law as set out in Jones .[20]Mr Sutton submitted that we could not be satisfied that, if a wholly different approach to justification were to be applied to the evidence, requiring the Employment Tribunal to consider a low threshold (as per Heinz , paragraph 16), the Tribunal would inevitably have reached the same result. The proper course, on his argument, was that the issue of justification should be considered anew on fresh evidence by a differently constituted Tribunal which had not already reached a conclusion which included such descriptions of the employers' actions as "disingenuous". He further submitted that the Tribunal's findings that the discrimination was not justified and that the employers were guilty of breach of the implied term of trust and confidence, which necessarily involved acting unreasonably, were so intertwined that the necessary remission to a differently constituted Tribunal should include not only the issue of justification but also the issue of constructive dismissal – even though there is, as he had to accept, no existing appeal before us against the Tribunal's conclusion on the constructive dismissal issue.[21]In Arnold v Pointon York Ltd (EAT/0649/00) the EAT, chaired by Lord Johnston, had before it an appeal by an employee against the Employment Tribunal's rejection of her unfair dismissal and disability discrimination claims. The Tribunal's decision was given before but the EAT's decision was given after the Court of Appeal's decision in Jones . The Employment Tribunal had not directed themselves to consider the tests of materiality or substantiality. The EAT, however, held:- "14 We recognise that the test that [Arden LJ in Jones ] sets out in that case with regard to the words 'material' and 'substantial' in considering the issue of justification do not in fact feature in the decision in paragraph 9 but we do not consider that to be relevant if it is quite clear that as we think it is the Tribunal addressed the correct decision and the correct issue in reaching their decision. "15 For these reasons we are satisfied that this decision does not disclose on the face of it any error in law … which would entitle us to interfere with it."[22]We recognise, of course, that the principles in Jones require an employer who seeks to establish justification for his discriminatory acts to cross a lower threshold than that which was previously believed to exist and that an employee who failed before the Tribunal on the issue of justification would be unlikely to benefit from the existence, post- Jones , of that lower threshold. Nevertheless the decision in Arnold provides support for Mr Sweeney's submission that, providing the decision can be seen to have been unarguably right, remission post- Jones of a case in which justification was considered by the Tribunal on a pre- Jones approach is not inevitable.[23]In our judgment the decision of the Tribunal on the issue of justification in this case was unarguably right and an application of the principles in Jones to the facts established by the Tribunal would inevitably have produced the same outcome. We have dealt, at paragraphs 15 and 16 above, with the first three of the five questions proposed by Arnold LJ; the disability and the discriminatory conduct were established by the Tribunal before they came to consider justification; and in paragraph 12(i) they made a factual finding as to the employer's reason for that conduct. It is, as we see it, plain beyond argument that there was a reasonably strong connection between that reason and the circumstances of the particular case; the reason arose immediately and directly from those circumstances or some of them, namely Mr McIntosh's claim to be genuinely off work through illness and to be entitled to sick pay and the employers' suspicion of those claims because of his attendance at the party. Thus the Tribunal would, if they had properly directed themselves, have inevitably concluded that the reason was material to the circumstances of the case.[24]In our judgment it is equally inevitable that the Tribunal, if properly directed, would have concluded that the reason was not substantial i.e. not a reason which carried real weight (as per Arden LJ in Jones at paragraph 39). We have reached this conclusion predominantly on the basis of the same factors as those set out by the Tribunal in paragraph 12(i) of their Decision. The starting point is the undoubted fact that the contract of employment provided for disqualification from the right to sick pay only if the employers were satisfied that there had been abuse or misrepresentation and did not provide for any right to suspend payment of sick pay. The employers were not so satisfied; and they had no right in law to act as they did. They knew, as the Tribunal found, that the effect of their refusal to pay sick pay was causing serious financial hardship to Mr McIntosh; yet they continued that refusal over a period of several months after the party during which Mr McIntosh was being certified by his GP as unfit for work; and they refused to carry out an investigation of their suspicions until Mr McIntosh came back to work when he was being so certified, thus prolonging the period in which sick pay was not paid. They could, as the Tribunal found, have investigated earlier without Mr McIntosh having to return to work. The source of the initial suspicion was, as the Tribunal found at paragraph 12(ii), worthy of investigation; but we cannot see how any reasonable Tribunal could regard the employer's reason as a reason carrying substantial weight for the withholding of sick pay for a sustained period of many months and in breach of contract when all that Mr McIntosh had done was attend a party out of work hours and allegedly consumed some alcohol, which withholding of sick pay continued long after the party and without investigation.[25]We should add that, had we decided that a remission was necessary, we would have remitted the case to the same Tribunal to decide the issue of justification on the application to the facts of the law as set out in Jones . While we understand Mr Sutton's concern that the Tribunal would upon such a remission have to look again at the evidence given before them over 18 months ago, their task would not be impossible or indeed uncommon; and the necessary findings of primary fact have in any event been made and are recorded in the Tribunal's decision. Furthermore, any difficulty thus caused would be of substantially lesser substance than those caused by the remission of the justification issue to a new Tribunal which would have to hear new evidence as to events which occurred well over three years ago, quite apart from the extra cost and time involved. There is no warrant for the submission that the issue of unfair dismissal should also be remitted; while we accept the close relationship between the Tribunal's findings as to unjustified discrimination and constructive dismissal, there is now no appeal against the decision that Mr McIntosh had been unfairly constructively dismissed and no live issue between the parties as to constructive dismissal which could be the subject of any remission.[26]However for the reasons we have set out we do not regard a remission as necessary.[27]Accordingly the appeal is dismissed.