ATLAS CLEANING LTD v (1) MR W D LIVERSIDGE (2) MRS P LIVERSIDGE (3) MRS K BALMAIN [2008] UKEAT 0043_07_0204

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2008] UKEAT 0043_07_0204Case No Appeal No. UKEAT/0043/07Venue 52 MELVILLE STREET, EDINBURGH, EH3 7HF
Between
ATLAS CLEANING LTDAPPELLANT(1) MR W D LIVERSIDGE (2) MRS P LIVERSIDGE (3) MRS K BALMAINRESPONDENT
Before
Lady Smith Miss S AyreDate 2 April 2008
[1]APPEARANCES For the Appellants Miss M Anderson, (Employment Consultant) Peninsula Business Services Ltd Litigation Dept Delphian House Riverside New Bailey St Manchester M3 5PB For the Respondents Mr A Hutcheson (Solicitor) Messrs Hutcheson & Co Solicitors 17 Strathmore House East Kilbride G74 1LF SUMMARY Unfair dismissal - Reasonableness of dismissal The claimants were employed by the respondents as cleaners. They worked at a "Zara" store and were dismissed when that client required that they no longer work in their premises. They had been offered alternative employment at another store. They claimed that they had been unfairly dismissed. An Employment Tribunal upheld their claims, holding that the dismissals had been procedurally fair but that "a" reasonable employer would have discussed the terms of the alternative job offer, considered whether the rate of pay could be increased, the hours altered and whether, at the end of their tenure of that cleaning contract, the claimants' employment would transfer to the new contractor. On appeal, Tribunal's judgment set aside and a finding of fair dismissal substituted. The Tribunal had erred: they had wrongly approached matters on the basis that all three claimants had made enquiries about whether TUPE would apply and in assuming that the respondents could, in any event, have answered those enquiries. Otherwise, on no view could it be said that no reasonable employer would have failed to consider taking the other steps referred to. Further, the Tribunal, in considering what "a" reasonable employer would have done had failed to apply the correct test in law; they had not asked themselves whether it could be said that no reasonable employer would have failed to take the steps referred to. THE HONOURABLE LADY SMITH Introduction In September 2006, three cleaners were dismissed when their employers' client refused to allow them back on their premises in circumstances where the only alternative work available was at the premises of other clients, the employers' contract with whom was about to end.[2]This is an appeal against the judgment of an Employment Tribunal sitting at Glasgow, Chairman Mr R A MacKenzie, registered on 1 June 2007, finding that the claimants were unfairly dismissed and awarding compensation.[3]We will continue to refer to parties as claimants and respondents.[4]Before the Tribunal and before us, the claimants were represented by Mr Hutcheson, solicitor and the respondents were represented by Miss Anderson, Employment Consultant. Background[5]The respondents are in the business of providing cleaning services. At the relevant time, one of their clients was the retail clothing chain "Zara UK Ltd" ("Zara") and they had a contract to clean all their stores in the UK.[6]Until they were dismissed on 6 September 2006, the claimants were employed to work in the Zara store in East Kilbride.[7]On 6 August 2006, a significant quantity of clothing went missing from the East Kilbride store and following upon that, on 10 August, the store manager told the respondents' regional area manager (Mr Sammerhoff) that the claimants were no longer permitted to work in the store. The respondents made numerous attempts thereafter to seek to persuade Zara to change its mind but they refused to do so. Zara's position remained that the claimants were not permitted to work in their premises. That was notwithstanding, as the respondents pointed out, that there was no evidence implicating the claimants in the disappearance of the missing clothing.[8]In these circumstances, the respondents explained to the claimants that they could not carry on working at Zara. They made verbal offers of alternative employment at another retail clothing store (H&M) in the same shopping centre on the telephone, on 18 August. The first claimant responded (on behalf of himself and the second claimant, his wife) by (according to the respondents' note of the telephone call) laughing and saying he would call his lawyer. The third claimant responded by indicating that she would need to take the advice of her solicitor. The offer of alternative employment was referred to in letters sent by the respondents to the claimants dated 18 August 2006. It was referred to again at meetings with the claimants on 24 August. The respondents had no other alternative employment to offer the claimants.[9]At those meetings, the respondents explained that they had tried to persuade Zara to change its mind but without success and there was nothing that they could do about it; Zara had banned them from working in their stores and could not be persuaded to change their mind. They warned the claimants that if they did not accept the offers of alternative employment, termination of their contracts would follow. The first and second respondents said that they had "a couple of problems" with the offer of a job at H&M: they had heard that the respondents would be losing the contract in a few weeks, they would be paid at £5.50 per hour rather than £6 per hour, and the hours would clash with another job that they had. The third claimant said that she was not sure about the H&M job offer; she would have to speak to her lawyer before making a decision. All claimants indicated that what mattered to them most was getting an apology from Zara and getting their names cleared.[10]On 1 September, the third claimant's solicitor wrote to the respondents in a letter which included the following:
"4. We understand that an offer of employment at the H&M store, East Kilbride has been made by your company. We are advised by our client that it is proposed that he (sic) salary be reduced from £7 per hour to £5.50 per hour. Such a deterioration in our client's salary would require her consent. 5. We understand that the company's contract with H&M subsists only for a very short further period. Please confirm if this client has confirmed that the new TUPE Regulations apply, and if that company has confirmed formally its acceptance of the applicability of these Regulations, and that it will assume those contracts of employment of your company's members of staff at the time of termination of your contract."
[11]No basis was given in the letter for the solicitor's evident belief that H&M would or should be taking over the contracts of employment of the respondents' staff as opposed to the contracts being taken over by a new contractor. No letters were written by or on behalf of the first and second claimants at that stage and they made no enquiries as to whether or not TUPE would apply if they took up the H&M job offer. Although the offers of alternative employment were not expressly rejected, the respondents took it that they were; the Tribunal accepted that a reasonable employer would, in the circumstances, have been satisfied that the offers were not being accepted.[12]The claimants were dismissed by letters dated 5 September which narrated the reasons for dismissal as being "some other substantial reason" namely Zara's refusal to allow them back in their premises, referred to as "third party pressure", and that they had declined to accept the only alternative work that was available, at the H&M store. The claimants appealed.[13]The third claimant's appeal was heard on 20 September. She was represented by her solicitor, Mr Hutcheson. He raised three matters on her behalf namely, whether more could have been done to retain her Zara job for her, the fact that she would have had a diminution in hourly rate at H&M and the fact that the respondents had not replied to the enquiries about the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") that were contained in his letter of 1 September. Intimation of the outcome of the appeal was postponed until 14 November during which time the respondents made further efforts to persuade Zara to allow the claimants to work in their premises again. Zara were, however, steadfast in their refusal and refusal of the third claimant's appeal was confirmed by letter of that date. By 20 September, the respondents had lost the H&M contract.[14]The first and second claimants' appeals were heard on 30 November 2006. Their appeals were, similarly, refused with those refusals being intimated by letter dated 20 December 2006.[15]The third claimant was represented by Mr Hutcheson, solicitor throughout the dismissal and appeal proceedings. The first and second claimants were represented by him from the appeal stage but not prior thereto. He wrote intimating their appeal by letter dated 13 November 2006.[16]Accordingly, as regards the offers of alternative work, the first and second claimants were concerned about rates of hourly pay and the specific hours required. The query raised by Mr Hutcheson on behalf of the third claimant regarding the applicability of TUPE was not raised on behalf of the first or second claimant. The concerns raised on behalf of the third claimant were rates of hourly pay and the applicability of TUPE in the event that the respondents lost the contract with H&M. The Tribunal's Judgment[17]At paragraph 41, the Tribunal refers to "the positions" held by the claimants being that they were cleaners at the Zara store in East Kilbride. At paragraph 42, they narrate the history of events as between the respondents and Zara and state:
"…. If the respondents had insisted the claimants be allowed to work as cleaners in their stores Zara could have refused to them access and the commercial relationship between the parties would have been at risk. In these circumstances the respondents had no option but to dismiss the claimants from the positions they held with them."
[18]At paragraph 45, having referred to the terms of section 98(4) of the Employment Rights Act 1995 , they state:
"We require to ask ourselves whether the decision to dismiss the claimants fell within the range of reasonable responses that a reasonable employer might adopt."
And they then continued:
"46. On procedural grounds we consider the claimants were fairly dismissed by the respondents. The claimants were aware that the meeting they attended with the respondents on 24 August was to consider whether they would be dismissed for some other substantial reason in light of the attitude adopted by Zara. They were given the right to be accompanied at the meeting. Following the decision to dismiss the claimants they were given the right to appeal against their dismissal. The appeals by Mr and Mrs Liversidge did not take place until 30 November but it is clear the appeals were held at that later date to allow the respondents to once again make representations to Zara."
[19]In paragraph 47, the Tribunal note that the offer of alternative employment was at a lower salary than that which was enjoyed by the claimants when working at the Zara store and that the hours of work would be different. They continue:
"The respondents did not consider if in the light of the circumstances which led to the claimants' dismissals the salary might be increased or the hours of work changed to allow Mr and Mrs Liversidge to continue to carry on working at their other positions."
[20]In paragraph 48, they turn to the matter of the respondents' imminent loss of the H&M contract. They state:
"The respondents contract to clean the other store was about to end. The claimants were aware the contract which the respondents had to clean the other store was about to end. It was quite reasonable for the claimants to know if their employment at the other store would continue by virtue of TUPE before deciding if the offer was to be accepted. The respondents did not advise the claimants if their employment would transfer to the new providers of cleaning services at that store."
[21]Thereafter, the Tribunal's conclusions regarding the claim of unfair dismissal are contained in paragraphs 50 and 51:
"50. Further, a reasonable employer would have fully discussed the terms of the offer with the claimants and considered if the rate of pay could be increased, the hours of work altered and if on termination the claimants' employment would transfer to the new provider of the cleaning contract. 51. We conclude the claimants were therefore unfairly dismissed by the respondents."
[22]In summary therefore, the Tribunal found that the claimants were dismissed for some other substantial reason and that the dismissal had been carried out in a manner that was procedurally fair but that the dismissals were unfair because the respondents had not "fully discussed" the alternative job offers with the claimants and they had not "considered" whether the hourly rate for that job could be increased, whether the hours could be altered and whether, on termination, the claimants employment would transfer to H&M's new cleaning contractor. To translate that into the language of section 98(1) and (4) of the Employment Rights Act 1996 ("the 1996 Act"), which are referred to below, the Tribunal, by its decision was saying that the respondents, in treating the Zara decision to exclude their employees as a sufficient reason for the dismissals were acting unfairly because of that lack of discussion and failure to give consideration to those factors. Relevant Law[23]The terms of section 98(1) and (4) of the 1996 Act, apply:
"(1) In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show – (a) the reason … and (b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position the employee held . .. (4) … 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."
[24]The fact that the employer's client has required the removal of an employee can qualify as some other substantial reason. If it does, the Tribunal then has to ask itself whether it can be said that no reasonable employer would have dismissed for that reason.[25]In judging the reasonableness of the employer's conduct, the proper function of the Tribunal is to decide whether the decision to dismiss fell within the band of reasonable responses open to a reasonable employer. There is a band of reasonable responses within which one employer might reasonably dismiss whilst another would not do so and Tribunals must guard against deciding the case by reference to their own subjective views of what they would have done in the relevant circumstances. The Appeal[26]For the respondents, Miss Anderson submitted that the Tribunal had fallen into error. They had misapprehended the import of TUPE. The respondents were not in a position to advise as to whether or not TUPE would apply. The Tribunal had interpreted the situation as being one whereby the respondents were able to do something that they simply could not do. That that was so was evident from the terms of the TUPE. Further, so far as the claimant's terms and conditions of employment were concerned, had they been varied, any such variation would have been "caught" by the provisions of regulation 4(4) of TUPE. She referred also, in support of that submission, to the case of Wilson v St Helens Borough Council [1996] IRLR 320. Further, the Tribunal had failed to ask themselves whether it was the case that no reasonable employer would have failed to take the steps set out by them. Their conclusion was not reasonable or supportable when the whole facts and circumstances were considered. They had no evidence before them regarding employee pay scales or regarding whether or not H&M would have agreed to altering the cleaners' hours, something which seemed highly unlikely when the contract had only a few weeks to run and the new contract would, no doubt, reflect the then current hours of work at H&M. What the respondents had envisaged when they offered the H&M work to the claimants was that employees then working at H&M would go and work on the Zara contract (where the rate was the higher hourly rate). The Tribunal had given no thought to the question of whether those employees would, if the claimants were kept on the Zara rate, would have been kept on the H&M rate and the difficulties that that might cause. No thought had been given to the possible commercial repercussions of paying three employees on a rate that was out of line with the norm for the particular job.[27]Miss Anderson's motion was that the appeal should be allowed and a finding of fair dismissal substituted.[28]For the claimants, Mr Hutcheson submitted that the Tribunal had not erred. He began by distinguishing the circumstances of the present case from those of Wilson . The respondents could, ex proprio motu , have changed the rate of pay and the claimants' hours. They could have remedied those matters before the transfer to the new contractor. In the event, we do not consider that the resolution of this appeal depends on the effect of regulation 4(4) of TUPE or an interpretation of the case of Wilson .[29]Mr Hutcheson accepted that the Tribunal did not hear any evidence as to whether a change in hours would have been acceptable to H&M. However, there was evidence and there were findings to the effect that the first and second claimants were concerned about the fact that the contract with H&M would be coming to an end. Those concerns were raised at the meeting on 24 August. Specific concerns were raised on behalf of the third claimant in the letter of 1 September. The respondents failed to provide any information at all. It would have been reasonable to expect them to respond to the claimants' concerns.[30]Mr Hutcheson accepted that, as he put it, the Tribunal may have been "incorrect" to refer to TUPE since it may not have been possible for the respondents to inform the claimants as to whether or not they would transfer under those regulations. However, the respondents gave no information and it meant that the claimants were being expected to make a decision about the H&M job without really knowing about it. He did, however, accept that any further enquiries made by the respondents such as enquiries regarding changing the hours, may well have been fruitless. The respondents should, nonetheless, have considered doing so and they should have considered offering to maintain the claimants at the Zara hourly rates. He, further, commented that the Tribunal may not have phrased matters as clearly as one would have liked when it came to applying the appropriate test. They were, however, he submitted, entitled to take the view that the respondents' decision to dismiss was outwith the range of reasonable responses in their failure to discuss terms of the alternative job offer with the claimants, their failure to consider variation of the hourly rate and their failure to consider seeking an agreement to variation of the H&M hours. Discussion and Decision[31]We turn firstly to the matter of TUPE. These claimants worked for a company of cleaning contractors whose clients included commercial retailers. They had a contract with Zara to clean all their shops in the UK. They had a contract with H&M. It included the cleaning of their shop in East Kilbride. The H&M contract involved the respondents' employees working there between 8am and 10am each day. The H&M contract was, however, about to come to an end. The respondents had not been successful in the last round of tendering and the H&M cleaning was, once the current contract came to an end, going to be carried out by another contractor. That contractor was, no doubt, one of the respondents' competitors.[32]These circumstances are the sort that are envisaged in TUPE, regulation 3, the relevant provisions of which include: "(1) These Regulations apply to –(a) …(b) a service provision change, that is a situation in which – (i) … (ii) activities cease to be carried out by a contractor on a client's behalf ………and are carried out instead by another person ('a subsequent contractor') on the client's behalf; ... (iii) … and in which the conditions in paragraph (3) are satisfied . … (3) The conditions referred to in paragraph 1(b) are that – (a) immediately before the service provision change – (i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client; (ii) the client intends that the activities will , following the service provision change , be carried out by the transferee other than in connection with a single specific event or task of a short term duration …..".[33]If there has been a service provision change that falls within the requirements of regulation 3 then regulation 4 provides that the transfer from one service provision contractor to another has the effect of transferring the contracts of employment of any employee assigned to the organised grouping of resources referred to in regulation 3(3)(i) to the new contractor. It does not operate so as to transfer the contracts to the client , which is what the letter to the respondents dated 1 September 2006 asked the respondents to confirm.[34]What can readily be gleaned from a reading of the provisions of regulations 3 and 4 of TUPE though is that in a service provision change case, some of the facts and circumstances that require to be examined before reaching a conclusion as to whether or TUPE applies include the terms and conditions on which the client has contracted with the new contractor and the client's intentions as regards the work to be carried out by the new contractor. Those are facts that can be expected to be within their knowledge but cannot reasonably be expected to be within the knowledge of the outgoing contractor. That will be particularly so if, as will often be the case, the two sets of contractors are competitors. Accordingly, if an employee of a service provision contractor were to enquire of his employer whether, when his employer loses the client contract on which he is working, TUPE will apply so as to transfer his employment to whichever contractor is successful in securing the client contract, it would be reasonable to expect the employer to respond that he simply cannot tell him.[35]In the present case, contrary to what is stated by the Tribunal, only one of the three claimants was concerned to find out whether TUPE would apply. The Tribunal were not, accordingly, entitled to find that the decisions to dismiss the first and second claimants were tainted by a failure to advise them whether TUPE would apply. Mention of those regulations was made only on the third claimant's behalf, by Mr Hutcheson in his letter of 1 September, and by him at her appeal hearing on 20 September 2006. Further, as regards the letter, as we have already noted, the respondents were asked to confirm that the position was one to which TUPE could not have given rise, namely a transfer of the third claimant's contract of employment to H&M and even if it was intended to ask simply whether the respondents could confirm that TUPE would apply that was not a reasonable question to ask of them in their position as outgoing contractor, for the reasons we have already discussed. Further, the question of whether or not TUPE applies is ultimately a question of law albeit it will fall to be determined according to the facts and circumstances of the case and it seems to us quite unreasonable to have expected the respondents to confirm what, in law, the position was going to be.[36]So far as her appeal hearing was concerned, the matter was history by then as the contract between H&M and the respondents had ended prior thereto.[37]The Tribunal had before it no evidence about the facts and circumstances of the new cleaning contract that H&M was entering into. It could not, accordingly, reach any conclusion as to whether or not TUPE applied. They have, however, calculated compensation for each claimant on the basis of their losses continuing for periods well beyond September 2006 (to the end of 2008 in the case of the first claimant, and to the end of 2007 in the case of the second and third claimant), when the respondents contract with H&M came to an end. There was no evidence that any work other than the H&M contract would have been available for the claimants. It would appear, accordingly, that the Tribunal have proceeded, for compensation purposes, on the basis of a hypothesis that the claimants would have taken up the H&M job offer and that TUPE would have operated. That is, however, a hypothesis for which there was no basis in the findings in fact and that the Tribunal have done so serves to underline the flawed nature of their approach to this case.[38]Moving to the criticism that the respondents failed to "fully discuss" the terms of the alternative job offer, we have difficulty in seeing how and where on the findings made and documents referred to by the Tribunal (apparently accepted by them as containing accurate records of what passed at the meetings on 24 August and at the appeal hearing on 20 September) the respondents could be said to have failed to discuss the alternative job offers. The claimants were told where it would be and when it would start. They knew what the hours were and they knew what the hourly rate was for that job. They knew that the contract between H&M and the respondents had only a few weeks to run. They knew that that was the only job that the respondents could offer as an alternative to the Zara job. What more did they need to be told about it? We cannot see that anything more required to be said.[39]It may of course be that in referring to the need to discuss, the Tribunal has in mind the matter of hours, rates of pay and whether TUPE applied. Turning to the matter of hours, we note that the first and second claimants indicated that they had a problem with the hours for the H&M contract. It was not, however, suggested in the Tribunal's findings that the third claimant had a problem with those hours or indeed, that whatever hours suited her would be those which suited the first and second claimants and any other cleaners who were working at the H&M store. There was no evidence and there are no findings to the effect that the first and second claimant asked if the H&M hours could be changed. Further, what we see is a situation where the contract with the client had only a matter of weeks to run; the Tribunal made a finding that it was about to end. A new contractor was about to take over the cleaning duties at the H&M shop. There are no findings as to the hours specified in the new contract. There are no findings that H&M would have been agreeable to the hours changing for the remainder of the contract period. It could not, in the circumstances, be inferred that the client would be prepared to do so; indeed, the Tribunal do not make any such inference. Mr Hutcheson accepted that, on the face of it, it was very likely that any approach to H&M to request a change in hours would be fruitless. We cannot see that in these circumstances it could possibly be concluded that no reasonable employer would have failed to make the approach, not that the Tribunal did so conclude. In finding, as they did, that "a" reasonable employer would have considered whether the hours of work could be altered they did not find that the failure to do so was such as take the decision to dismiss outwith the range of reasonable responses. We do not read it as a finding that no reasonable employer would have failed in the manner set out in paragraph 50 of the judgment. In any event, Mr Hutcheson's submission came to be that it was not even that the employer required to do the things set out; that really had to be his submission because the Tribunal restricted their conclusion to the failure to consider. They do not, it seems, criticise the respondents for failures to act, only for failures to "consider". Mr Hutcheson's submission was that the respondents needed to consider the matters set out. There was, however, no finding that these respondents did fail to consider carrying out what was liable to be a fruitless exercise of asking H&M whether they would agree to an hour change (for only two of their employees) for a matter of a few weeks; the Tribunal had, accordingly, no basis in fact for their conclusion that the respondents failed to do so.[40]As regards hourly rates, again, the Tribunal made no findings in fact to the effect that the respondents failed to consider whether they could maintain the Zara rate for the claimants whilst working on the H&M contract. It cannot be inferred from the fact that no offer was made to keep them on the Zara rate that the respondents did not do so. Plainly, various commercial considerations would apply and we can see that however well disposed towards an employee the employer might be, it could as readily be decided in circumstances such as these that no such offer could be made as it be decided that it could. In any event, the third claimant had made her position clear; she was not asking for confirmation or consideration. In her solicitor's letter of 1 September 2006 it was firmly asserted that she considered herself entitled to continue at the Zara rate. As regards the first and second claimants (in whose case the rate shortfall was less than the third claimant who had supervisor status) again, their reference to the rate change was that it was a "problem". It was not put forward as determinative of their failure to accept the offer of work at H&M and the respondents were not asked by them if they could be kept on the Zara rate.[41]Finally, it should be remembered that section 98(4) requires the Tribunal to consider whether "in the circumstances" the employer acted reasonably or unreasonably in treating the SOSR as a sufficient reason for dismissal. In a case such as the present we consider it relevant to take account of any efforts made by the employer to persuade the client to allow his employees back into their premises. Here, there were findings made by the Tribunal and documents referred to by them which make it clear that the respondents made repeated attempts to persuade Zara to allow their employees back into their premises. They appear to have gone to quite some lengths in that regard. That was something which the Tribunal ought to have taken into account for section 98(4) purposes but they appear to have failed to do so. Disposal[42]In all these circumstances we are satisfied that the appeal should be allowed. There was no basis on which the Tribunal could conclude that these dismissals were unfair and we will, accordingly, set aside the judgment of the Employment Tribunal and substitute for it a finding that the claimants' dismissals were fair.