MS G MASON v THE GOVERNING BODY OF WARD END PRIMARY SCHOOL [2006] UKEAT 0433_05_1204

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2006] UKEAT 0433_05_1204Case No Appeal No. UKEAT/0433/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MS G MASONAPPELLANTTHE GOVERNING BODY OF WARD END PRIMARY SCHOOLRESPONDENT
Before
His Honour Judge McMullenDate 12 April 2006
[1]APPEARANCES For the Appellant MR E MALLETT (of Counsel) Instructed by: Ashby Cohen Solicitors Ltd 18 Hanover Street London W1S 1YN For the Respondent MISS E HODGETTS (of Counsel) Instructed by: Birmingham City Council Legal Services Department Ingleby House 11-14 Cannon Street Birmingham B2 5EN SUMMARY Unfair Dismissal: Procedural Fairness/Automatically Unfair Dismissal; Compensation The reversal of Polkey ... 1987) IRLR 503 effected by Employment Rights Act 1996 s98A(2) applies to dismissals occurring on or after 1 October 2004. It applies to a failure to follow a procedure or policy covering dismissal, whether in writing or existing by custom and practice and whether contractual or non-contractual. It does not apply to failure to follow statutory procedures described in s98A(1) and (3). Nor to failure to follow the guidance in the ACAS code or general non-specific failure to follow standards of good employment practice. Where s98A(2) does apply, so that it is found on the balance of probability that dismissal would have occurred if the procedural failure had not, the dismissal is fair and no compensation is payable. Where the chance of dismissal is less than 50%, the finding will be unfair dismissal and a reduction of compensation of that percentage is appropriate. HIS HONOUR JUDGE McMULLEN QC This case concerns the assessment of compensation for unfair dismissal when a relevant procedure has not been followed. It is the second occasion when the changes in the law introduced by the insertion of s98A(2) into the Employment Rights Act 1996 has come before the EAT for decision (see Pudney v Network Rail Infrastructure Ltd UKEAT/0707/05/2203. It is known as the "reversal of Polkey " provision, a reference to Polkey vAE Dayton Services Ltd [ 1987] IRLR 503HL.[2]The judgment represents the views of all three members. We will refer to the parties as the Claimant and the Respondent. Introduction[3]It is an appeal by the Claimant in those proceedings against a judgment of an Employment Tribunal sitting at Birmingham (Chairman: Ms V Jones) registered with extended reasons on 5 April 2005. The parties were represented by solicitors then and today are represented respectively by Mr Edward Mallett and Ms Elizabeth Hodgetts, of Counsel. The Claimant claimed unfair dismissal. The Respondent accepted that she had been dismissed, and accepted that consultation with her prior to that dismissal was inadequate. It was not in dispute that the Claimant had been dismissed by reason of redundancy. The issues[4]The question for the Tribunal was whether the dismissal was unfair, and if so, whether compensation should be reduced to take account of the claim that the unfairness stemmed from the failure properly to consult the Claimant; or whether the dismissal was fair because she would have been dismissed in any event (s98A(2)).[5]The Tribunal applied s98A(2) and held that the dismissal was fair. If it were wrong, and the decision would be based on Polkey , it was held that it was 100% likely that the Claimant would have been dismissed anyway.[6]The Claimant appeals against the finding of unfair dismissal and the application of s98A(2). She also contends that even if the Tribunal were right, it failed to give a date by which the dismissal would have occurred fairly. Directions sending the appeal to a preliminary hearing were given by Bean J in Chambers and to a full hearing by HHJ Richardson and members. The legislation[7]The sole relevant provisions of the legislation are Employment Rights Act 1996 , s98 and 98A which deal with fairness: "98 General (4) 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. 98A Procedural fairness (1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if— (a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal, (b) the procedure has not been completed, and(c) the non-completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements. (2) Subject to subsection (1), failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by itself making the employer's action unreasonable if he shows that he would have decided to dismiss the employee if he had followed the procedure. (3) For the purposes of this section, any question as to the application of a procedure set out in Part 1 of Schedule 2 to the Employment Act 2002, completion of such a procedure or failure to comply with the requirements of such a procedure shall be determined by reference to regulations under section 31 of that Act".[8]The insertion of s98A was provided for by s34 of the Employment Act 2002 . These provisions took effect on 1 October 2004 by reason of Employment Act 2002 (Dispute Resolution) Regulations 2004 , Regulation 18 of which provides: "18. These Regulations shall apply- (a) in relation to dismissal and relevant disciplinary action, where the employer first contemplates dismissing or taking such action against the employee after these Regulations come into force".[9]The dismissal of the Claimant and the presentation of her claim took place in April and July 2004 respectively and the hearing and judgment in March and April 2005.[10]When compensation is awarded s123(1) of Employment Rights Act 1996 applies. "123 Compensatory award (1) … the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances 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". The facts[11]As far as is relevant to the claim ultimately presented to the Tribunal and to the issue now on appeal, the facts can be summarised as follows. The Claimant began employment with the Respondent as a learning centre support manager on 23 April 2001 for a three-year fixed period ending on 22 April 2004. The post was funded from an initiative known as Excellence in Cities . There was a management committee to organise the use of the funding. A review took place in 2003 and it was decided that the centre would close. The Respondent accepted that there was no consultation with the Claimant. She thought she should have been retained as manager of a new decentralised service. The Respondent failed to follow a fair procedure in that it had no meeting with her or her trade union and no opportunity was given for her to receive a full explanation and for alternative employment to have been explored. The Tribunal found that there were, in fact, no suitable alternative jobs for her.[12]The dismissal was by reason of redundancy which satisfied s139, and s98(1) of the Act. It then made the following conclusions: "19. Mr Nwosu submitted that it was not the tribunal's function to speculate as to what would have happened had the respondent followed a proper procedure before dismissing the claimant. We respectfully disagree. Following the ruling in Polkey tribunals have been obliged to make such an assessment, and the wording of section 98A expressly requires consideration of what would have happened had proper procedures been followed. 20 Taking the above findings into account we have concluded that, had formal consultation taken place the outcome would have been no different. The respondent would have gone ahead with its decision to close the centre and, there being no suitable alternative position to offer the claimant, would have terminated her contract when it expired on 22 April. Applying section 98(A), we therefore find the dismissal was fair. 21. For the completeness, and having received submissions on the matter from Mr Bear, had Polkey applied, we would have found the dismissal to be procedurally unfair, with a 100% likelihood that the claimant would have been dismissed had a fair procedure been carried out. But in those circumstances, section 98(A) is now applicable with the result that the dismissal was fair". . The submissions[13]Two points are made. First, the Tribunal should not have considered s98A(2) as it was not in force at the date of dismissal. Secondly, even if it were applicable, it creates what is effectively a defence for an employer only where statutory disciplinary procedures had not been followed.[14]On behalf of the Respondent, it is contended that s98A(2) applies to a dismissal prior to 1 October 2004. The normal rules for holding that statutory provisions are not retrospective does not apply unless there is a substantive change in a person's rights. Secondly, if s98A(2) applies in this case, it applies only where procedures other than the statutory procedures have not bee followed.[15]Mr Mallett further contended that if it were correct to apply Polkey in its old form, and even if there were a 100% likelihood that the Claimant would have been dismissed in any event, the Tribunal was wrong not to have set down the date on which that would have occurred i.e. at some date later than the actual dismissal. That finding did not make this appeal pointless, because the misdirection on s98A(2) infected the approach to the other questions. Discussion and conclusions[16]We prefer the argument of the Claimant on the first point (retrospection) and so it is not strictly necessary for us to decide the second. However, we have been told that the effect of s98A(2) is controversial in Employment Tribunals and so we will attempt to resolve the issue. In doing so, we prefer the argument of the Respondent. In any event, it seems necessary to us to decide this issue since the treatment of it by the Employment Tribunal is said to have tainted its approach to the old style application of Polkey .[17]In order to understand whether the provision applies retrospectively, it is first useful to know what the provision means, especially as it is accepted that there is some relationship between the subsections. Procedural fairness[18]The starting point must be the exposition of the principle of procedural fairness by Lord Bridge in Polkey at paragraph 30. "But if the likely effect of taking the appropriate procedural steps is only considered, as it should be, at the stage of assessing compensation, the position is quite different. In that situation, as Browne-Wilkinson J puts it in Sillifant's [1983] IRLR 91 case, at p.96: '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.'"[19]A recent description of the Polkey doctrine has been given by the Court of Appeal in Gover v Propertycare [2006] EWCA 286, a judgment following the oral hearing in our case, but upholding the EAT judgment[20]S98A(2) is known in the employment community as the "reversal of Polkey ". It is important to note that this description applies only to that subsection. As a matter of construction, we hold that s98A(2) does not apply to breaches of the statutory dismissal procedure. This is because both ss98A(1) and (3) refer in terms to the full statutory source, whereas there is merely reference to "a procedure" in subsection (2).[21]Secondly, subsection (2) is expressly "subject to subsection (1)". The effect of subsection (1) is to make automatically unfair a dismissal in breach of the minimum statutory requirements. It is not open to an employer to contend that dismissal would have occurred notwithstanding breach of the minimum statutory requirement. Section 98A(2) however does allow that argument to be made with the effect not only of reducing the employer's exposure to compensation, but actually changing the judgment from unfair to fair dismissal.[22]What does "a procedure in relation to the dismissal of an employee" cover? In a simple case of a small employer without access to any human resources advice, it might be said that where there is no procedure in place for the dismissal of an employee, and an employee is dismissed summarily, there has been failure to follow a procedure. This would be the kind of procedure that any reasonable employer would follow before dismissing an employee in the circumstances. That criticism is different from one which focuses on a particular procedure in force at a given workplace, the terms of which are not carried out.[23]Outside the statutory disciplinary procedures set out in the 2002 Act and the 2004 Regulations, the Employment Rights Act 1996 deals with other procedures. For example, s110 deals with dismissal procedures agreements although only one order under that section was ever made. A more useful example is Part I of the Act which, at s3, requires "a note about disciplinary procedures" to be given to employees. There is no reason why procedural safeguards should not be made available to employees in ways which are not contractually binding. Policies relating to equal opportunities, job security and "whistle blowing" are widespread. These are frequently unilateral statements by employers and they provide assurances as to the way employees will be dealt with in circumstances within scope of the relevant policy. These, too, are apt to fall within s98A(2). Procedures established by custom and practice are also included. Just because a long standing practice, applying for example a simple rule of "last in, first out" in a redundancy situation, has been respected over time without it being written down does not mean that it falls outside the description of "a procedure in relation to the dismissal of an employee".[24]It was also submitted by Mrs Hodgetts that a failure to follow the 2004 ACAS Code of Practice on Disciplinary and Grievance Procedures falls within s98A(2). We disagree. This Code was revised specifically to take account of the 2002 and 2004 changes. The fact that its predecessor is not mentioned in subsections (1) or (3) with the statutory provisions, or in subsection (2) with the other procedures, points to the purpose of the Code. It is to give advice and guidance on the statutory procedures and on employers' other procedures. It is not itself "a procedure" but contains important and authoritative advice upon the handling of disciplinary matters and dismissals. A Tribunal may criticise an employer for falling below the standards of a reasonable employer if it has a procedure which does not include a provision which corresponds to advice given in the Code. It would also criticise our example of the simple employment relationship (para 22 above) where the employer has no procedure at all. Yet on our construction of s98A(2), neither would constitute "a failure…to follow a procedure in relation to the dismissal".[25]In the past, all of these failures might fall within the Polkey doctrine, making the dismissal unfair, but invoking a reduction in compensation where the dismissal would or might have occurred in any event, absent the procedural failing. To a limited extent only, then, the Polkey doctrine is reversed by s98A(2). That occurs where there is a procedure as we have defined it, written or unwritten, contractual or non-contractual, contained in an agreement or a policy which relates to dismissal of employees and which has not been followed. It does not apply to any more general criticism based upon a failure to comply with the standards of a reasonable employer, whether as exemplified in the ACAS Code or not.[26]The second limitation is in the use of the words "by itself" in s98A(2). A breach of a procedure such as we have described accompanied by a more general criticism deriving from the standards of a reasonable employer or from the Code would not fall within the subsection. In coming to our conclusion on s98A(2) we have applied the following canons of construction which are not controversial.a. The object in construing a written instrument is to ascertain the intention of its author as expressed in the instrument: Halsbury's Laws of England (4th ed.) vol 44(1) @ 1372. Therefore the object in construing an Act is to ascertain the intention of Parliament as expressed in the Act: ibid.b. If, on an informed interpretation, there is no real doubt that a particular meaning is to be applied, that meaning is to be taken as its legal meaning: ibid @ 1374,c. Where the enactment is grammatically capable of one meaning only and, on an informed interpretation of that enactment, the interpretative criteria raise no real doubt as to whether that meaning is the one intended by the legislator, the legal meaning is taken to correspond with the grammatical meaning: ibid@ 1391.d. The court should presume that the legislator intended common sense to be used in construing the enactment: ibid @ 1392.e. An enactment must be construed so that significance is given to each component of the Act containing it according to its legislative function ibid@ 1393.f. A section of an Act is the primary indication of Parliament's meaning and intention, and must be construed, by virtue of the functional construction rule, as a proposition, or series of propositions, consisting of one of more enactments: ibid @ 1398. Further, the way the sections are organised and arranged is to be taken as a reliable guide to legislative intention: ibid.[27]In reaching our conclusion, we have been fortified to read the judgment of EAT Elias (P) and members in Silman v ICTS (UK) Ltd (UKEAT/0630/05) paragraph 18 given after we had met in chambers to decide our own judgment. Silman was made on the basis of an agreed approach by Counsel and represented only a provisional view but we, having heard argument in a contested dispute reached the same conclusion.[28]We were invited to consider the Parliamentary debates if we were in doubt, following the criteria set out in Pepper v Hart [1993] AC 593 (HL). This relaxes the rule against the introduction of Parliamentary material in order to construe an Act of Parliament if:a. The legislation was ambiguous or obscure or led to absurdity,b. The material relied upon consisted of one or more statements by a minister or other promoter of the Bill together, if necessary, with such other Parliamentary material as was necessary to understand such statements and their effect andc. The statements relied upon were clear.[29]The application was resisted by Mr Mallett on the ground that, according to his argument, s98A(2) is clear and it applies only to statutory disciplinary procedures. It proved impracticable for us to decide in advance on the admissibility of this material so we decided to read it and hear argument before deciding. We have come to the conclusion that the criteria in Pepper v Hart are not met since s98A(2), read in the context of the whole of s98A, is not ambiguous. We reach that opinion as a matter of construction and not by comparison with the words used in Parliament. However, if we are wrong on that procedural approach and we could apply what we have learned from the debates, we would unhesitatingly hold that criteria (b) and (c) are amply met and support our construction.[30]Finally, we heard argument and have been asked to decide on the effect of a finding in favour of an employer under this subsection. It is common ground that if, applying Polkey , the Tribunal decided that there was a less than 50/50 chance of the employee being dismissed, the dismissal is unfair and an appropriate award would be made. If there was a 33% chance of dismissal, a compensatory award would be reduced by 33%. A finding under s98A(2) is to be made on the balance of probability. Using traditional Polkey language, if it is more likely than not that the employee would be dismissed, it is not now appropriate to award compensation reduced by more than 50%. The consequence of a finding on the balance of probability that he or she would have been dismissed, on a scale of anything from 51% to 100%, is that no compensation is awarded at all since s98A(2) makes the dismissal fair. Indeed, it is now no longer necessary under this reversal of Polkey doctrine for a percentage to be fixed.[31]In coming to this view, we regard as correctly stated the principle in IDS Supplement Statutory Disciplinary and Grievance Procedures which is as follows:
"Up to now, Polkey reductions have been anything up to 100 per cent of the employee's compensatory award. However, in the light of new S.98A(2), a reduction of more than 50 per cent should no longer be possible in a case where the statutory DDP has been completed but where other aspects of the procedure were unfair. Where an employer in such a case can show a greater than 50 per cent chance (i.e. show on the balance of probabilities) that he would have dismissed the employee fairly had a proper procedure been adopted, this should be sufficient to persuade a tribunal that the dismissal was not unfair owing to S.98A(2). In such a case, no Polkey reduction can arise because the tribunal will find the dismissal to be fair, and thus no compensatory award (and, indeed, no basic award) will be payable"
. It also follows that we disagree with the statement of principle in Harvey on Employment Law at para 2809. Section 98A(2) is not available to rescue a failing under subsection (1) since, for the reasons we have given above, and in particular by reference to the precedence to be given to subsection (1) by the terms of subsection (2), the procedures there described are different.[32]So, this case does not engage section 98A(2). No specific procedure was identified by the Respondent or by the Tribunal. The criticisms are genuinely those made against an employer failing to reach reasonable standards and do not specifically focus upon any procedure of the Respondent's own. This Tribunal should therefore have considered the matter untrammelled by s98A(2) at all. Retrospection[33]It is common ground that s98A(1) and (3) came into effect on 1 October 2004 and if they had been in play in this case, would not have affected the Claimant who was dismissed in April 2004. As we have shown, there is a relationship between those two subsections and subsection (2). This is provided by the linkage "subject to subsection (1)…". It is illogical for the non-statutory regime invoked by subsection (2) to come into effect when the statutory regimes invoked by subsections (1) and (3) to which subsection (2) is subject, have not come into effect. If subsection (2) is applicable to a dismissal occurring prior to the coming into effect of s98A so as to control the outcome of a hearing in 2005, clear words should have been used so as to avoid the presumption against retrospective legislation.[34]The simple rule of construction is that a statute should not be applied retrospectively so as to impair an existing right or obligation unless that result is unavoidable on the language used: see Yew Bon Thew alias Yon Bon Thew & Another v Kenderaan Bas Mara [1983] 1 AC 553 (PC). A statute is retrospective if it takes away a right acquired under existing laws, creates a new obligation, imposes a new duty or attaches a new disability in respect of past events. Since s98A(1) did come into effect on 1 October and there is silence as to s98A(2), it is submitted, correctly by Mr Mallett, that the proper construction must be that there never was any Parliamentary intention that the latter was to have retrospective effect; the general presumption about retrospection should be followed.[35]It was contended by Ms Hodgetts that there was no change in existing rights. We reject that. The short-hand expression "reversal of Polkey " conveys precisely the disfranchisement which this provision introduces. The central thesis of the Polkey principle is that an all or nothing approach is eschewed. The employee receives a declaration of unfair dismissal, but the employer is exposed to reduced compensation. The reverse is the case when s98A(2) applies, for the employee loses the claim and the employer pays nothing. In simple terms, the subsection takes away the right to a declaration of unfair dismissal and replaces it with an entitlement in the employer to a declaration that the dismissal was not unfair. That is precisely the kind of adjustment of rights covered by the principle against retrospective legislation. Clear words have not been used and the subsection applies only to dismissals taking effect on and after 1 October 2004. Result[36]As can be seen, s98A(2) has no application in this case for both of the reasons we have given. It was not in force at the relevant time, and it did not cover procedural breaches of the kind identified in this case. Thus, the Tribunal was entitled to make findings based on traditional Polkey principles. We hold it to have decided this case on the basis that s98A(2) applied. It might be thought that, despite its error, there would be no point in taking further action since the Tribunal indicated that there would be a 100% reduction. Since s98A(2) did not apply, it is easy for us to set aside the finding in favour of the Respondent on that provision. This means that the auxiliary finding of unfair dismissal remains. This is the relief acknowledged by the Respondent on that alternative basis.[37]The next question is whether its auxiliary finding of a 100% reduction should be set aside. The sole basis upon which this is urged by Mr Mallett is that the Tribunal with its focus upon s98A(2) clouded its correct approach to Polkey . In particular, the Tribunal did not consider whether this dismissal was substantively unfair as well as being procedurally unfair.[38]We do not accept this proposition. It is not necessary for a Tribunal to describe the unfairness as being procedural or substantive: see Gover (above). It is clear from the findings of the Tribunal that the depiction of the Respondent's action as procedurally unfair was correct. This was a genuine redundancy and there was no alternative work. The Claimant was not consulted about it but, had she been, she would still have been dismissed. The assessment of the chance of dismissal is one of fact, with which we will not interfere and which we regard as correct on the evidence.[39]All that remains is the ground of appeal based on the date at which the Claimant would have been dismissed fairly had she been consulted. We have no evidence upon which to reach a conclusion about this and so it must be remitted. It is apt to return it to the same Tribunal. We would consider that this could be done on written submissions but if the Tribunal wishes, it may hear evidence according to any order it makes. In the meantime, we hope with the skilled advice available to these two parties, and taking a proportionate approach to how little is now at stake, such a hearing may be avoided by the reaching of a conciliated agreement. We would like to thank both Counsel for their considerable help in this case. The appeal is allowed in part: finding of unfair dismissal substituted with compensatory (but not basic) award reduced by 100%; remitted to same Employment Tribunal.