MR M SHIRMARDI v CAPITAL LIMO LIMITED [2009] UKEAT 0225_08_1501

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2009] UKEAT 0225_08_1501Case No Appeal No. UKEAT/0225/08Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR M SHIRMARDIAPPELLANTCAPITAL LIMO LIMITEDRESPONDENT
Before
Mrs Justice Slade Mr T Haywood Mr H SinghDate 15 January 2009
[1]APPEARANCES For the Appellant MR R KOHANZAD (Representative) Employment Law Advocates, Hamilton House, 1 Temple Avenue, London EC4Y 0HA For the Respondent MR S BHATIA (Solicitor) Beaumonde Law Practice, Solicitors & Commissioner of Oaths, Evans House, 107 Marsh Road, Pinner HA5 5PA SUMMARY UNLAWFUL DEDUCTION FROM WAGES UNFAIR DISMISSAL: Contributory fault / Polkey deduction The Employment Tribunal erred in its finding as to the number of occasions on which the Appellant worked days in addition to Fridays and Saturdays. This error is likely to have led to a miscalculation of the number of hours worked each week and of whether the National minimum wage had been paid. An error in the calculation of the number of hours worked would also affect the Appellant's claim under the Employment Rights Act 1996 in respect of deductions from this weekly wage. Minimum wage and deduction from weekly wage claims were remitted to an Employment Tribunal. The appeal against nil basic and compensatory awards for unfair dismissal was dismissed. THE HONOURABLE MRS JUSTICE SLADE This is an appeal by Mr Shirmardi against the judgment of an Employment Tribunal sitting in Watford, entered in the register on 28 January 2008. Several grounds of appeal have not proceeded to a full hearing and are not before us today.[2]There are two grounds of appeal. The first is a challenge to the finding of the Employment Tribunal that Mr Shirmardi was employed to work for Capital Limo Ltd on two days, Fridays and Saturdays and was a part-time employee. It is said that that finding was perverse having regard to the evidence before the Tribunal including the Respondent's own evidence. It is said that this erroneous finding affected the conclusion of the Employment Tribunal on the claim advanced by Mr Shirmardi that he was paid less than the minimum wage. It is also said on behalf of Mr Shirmardi that that error infected, as Mr Kohanzad put it, the Tribunal's decision to dismiss his claim that he suffered unlawful deductions from wages. It is also contended that the Tribunal erred in failing to make either a basic or a compensatory award for unfair dismissal. The Facts in Outline[3]Mr Shirmardi was employed by Capital Limo Ltd from 1 April 2004 until his summary dismissal in October 2006. He was employed as a manager. His role was to take bookings for limousines and deal with enquiries. He carried out other ancillary duties. The system for making bookings was that, if bookings were made on the telephone a credit card deposit was taken. If bookings were taken from people walking into the office of Capital Limo Ltd they would make a cash deposit on the day of the booking. Quite naturally with a limousine business much of their business was for Fridays and Saturdays and also for particular events when Mr Sharmardi may have performed additional duties.[4]Mr Shirmardi received wages of £150 per week. There was a stark conflict of evidence before the Employment Tribunal as to the hours which Mr Shirmardi worked and the pay and other benefits which he expected to receive. It was said by Mr Shirmardi that he worked 70 hours per week; the Respondent's position was that he worked only for 25 to 30 hours per week, principally on Fridays and Saturdays.[5]So far as remuneration is concerned Mr Shirmardi contended that at the outset of his employment it was said that he would be paid £700 per week. He claimed that he was told that in June of each year he would receive an automatic increase of 20 per cent. This would mean that from June 2005 to June 2006 he should have received £1,008 per week and from June 2006, £1,209.60 per week. Mr Shirmardi further asserted that it was agreed that he would receive a 5 per cent bonus each year on the gross turnover of the business and that he would also receive 20 per cent commission on limousines sold by him and 20 per cent commission on limousines purchased by him on behalf of the company.[6]The Tribunal found that Mr Shirmardi's employment came to an end in the following circumstances. In July 2006 the proprietor and Managing Director of Capital Limo Ltd, Mr Mohammadi, was informed by drivers that Mr Shirmardi was in the habit of smoking drugs in the upstairs port-a-cabin. Mr Shirmardi was caught by Mr Mohammadi smoking opium in the upstairs office. Having caught Mr Shirmardi smoking drugs Mr Mohammadi expressed his displeasure and told him that he could not have people in his employment smoking drugs. After his plea not to be dismissed and an assurance that he would not smoke drugs on the premises, Mr Shirmardi's employment was not terminated on that occasion; he was given a chance. However, subsequently after Mr Mohammadi had been on a trip to Iran he caught Mr Shirmardi smoking opium in the upstairs office. On that occasion he dismissed Mr Shirmardi for misconduct and his employment terminated summarily on 25 October 2006. It was agreed that no dismissal procedure was carried out. Minimum Wage[7]Mr Kohanzad, on behalf of the Mr Shirmardi, contended that the Tribunal's decision in relation to the claim that the minimum wage was not paid was based on an erroneous understanding of the evidence as to the days upon which Mr Shirmardi worked. Therefore their decision as to the hours for which he worked was similarly erroneous. Whilst it was agreed by both parties that Mr Shirmardi's weekly pay was £150, the number of hours worked per week would materially affect the calculation as to whether the minimum wage was being paid or not.[8]For Capital Limo Ltd Mr Bhatia agreed that the company's case before the Tribunal was that Mr Shirmardi did work principally on Fridays and Saturdays but there were occasions when he worked on other days of the week. Mr Shirmardi was called upon to work those other days of the week if and when he was needed.[9]The Tribunal held at paragraph 5.1.2 of the judgment that Mr Shirmardi, "Was required to work Fridays and Saturdays of between 25 and 30 hours and was paid £150.00 for those shifts." In paragraph 5.1.3 of the judgment the Tribunal observed:
"Further the Claimant's own documents suggest that this was the case particularly document 8 from the Claimant's bundle at page 55 in which he shows from his own prepared sheet identifying dates when "walk in" customer job sheets provided cash for the booking of limousines. If one looks at that document there are 42 entries only 7 of those entries refer to working on a non-Friday or Saturday."
[10]On the basis of that analysis of document 8 the Tribunal looked at the minimum wage throughout Mr Shirmardi's employment for the hours he worked, and concluded that in the entirety of his employment there was only one period in which there was an underpayment and that was of £9.09.[11]We were helpfully provided by Mr Kohanzad with a schedule analysing the material in document 8. That document was fairly limited in its relevance and effect. It covered a period of about one year of the employment of Mr Shirmardi and it did not show the number of hours worked on any particular day. What it did show is bookings apparently taken by Mr Shirmardi on certain days. Whilst there was a suggestion which was referred to in a letter from the Employment Judge that he had certain concerns about the documents in document 8, the Tribunal did not make any findings in relation to these. We deal with the matter on the basis of the documents rather than on the basis of the concerns expressed by the Tribunal judge in his letter of 10 September 2008.[12]If the record is accurate which it is not for us to assess, the schedule prepared from document 8 showed that there were quite a number of days when it appears that Mr Shirmardi was at work taking bookings on days other than Fridays and Saturdays. The Tribunal in their judgment at paragraph 5.1.3, referring to document 8 from which the schedule is prepared, stated that, "There are 42 entries only 7 of those entries refer to working on non-Friday or Saturday."[13]The Tribunal Judge was asked to consider whether that was a correct figure. By letter dated 10 December 2008, he agreed that there was an error in paragraph 5.1.3 of the judgment in that out of the 42 payments on job sheets, 30 of those occurred on Fridays and Saturdays, the other 12 on other days. Unfortunately it appears that even that correction may require further correction because there were more than 12 occasions on which the Claimant worked on days other than a Friday or a Saturday.[14]On behalf of Mr Shirmardi, it was said that this error infects the conclusion of the Tribunal as to the number of hours worked not just the days worked. That error directly affects the conclusion of the Tribunal as to whether the minimum wage was paid.[15]On behalf of Capital Limo Ltd it is said by Mr Bhatia that it is clear from the judgment of the Tribunal in particular from later passages that it did not consider Mr Shirmardi's evidence to be credible. Credible evidence of the number of hours worked was of great importance and the Tribunal relied on its view of Mr Shirmardi's evidence of the number of hours he worked independently of their reliance on the documentation as to when Mr Shirmardi took bookings.[16]In response, Mr Kohanzad stated that in considering the minimum wage claim it is apparent that the Tribunal relied principally, if not exclusively, on document number 8 and their view that Mr Shirmardi only worked on Fridays and Saturdays. He contended that the other findings of the Tribunal as to the credibility of Mr Shirmardi related to the separate claim of unauthorised deduction from wages.[17]We have carefully considered the importance or otherwise of the Tribunal's reliance on document 8. An obvious and unfortunate error was made by the Tribunal in its findings as to the number of occasions on which Mr Shirmardi appears to have worked on days other than Fridays and Saturdays. It appears that the Tribunal also did not take into account the Respondent's evidence that Mr Shirmardi could be required to work as and when required on days other than Fridays and Saturdays.[18]It may be that the error in deciding how often he worked on days other than Fridays and Saturdays does not affect the total number of hours worked per week by Mr Shirmardi. However, in our judgment, somewhat reluctantly, we have come to the conclusion that the Tribunal erred in basing its decision on whether there had been a breach of the National Minimum Wage and on its erroneous analysis of the material before it. A correct analysis of document 8 showed that Mr Shirmardi appears to have worked on other days to a greater extent than the Tribunal held in their judgment. Working on more days per week is likely to have resulted in working more hours per week.[19]Accordingly the appeal against the decision of the Tribunal rejecting Mr Shirmardi's claim for the breach of the minimum wage provisions succeeds to the extent that it is remitted to the Employment Tribunal for reconsideration. In conjunction with that remission we point out that it will be necessary for the Employment Tribunal to determine the hours actually worked by Mr Shirmardi, not just what was alleged to have been agreed as to the hours to be worked. It is for the Claimant to establish how many hours he worked.[20]The Employment Tribunal to which this matter is to be remitted does not have an enviable task because it will no doubt be difficult to reach a conclusion as to whether and to what extent the Claimant has established the number of hours that he worked over the period in question. Nonetheless, because we consider that a material error in understanding of the evidence upon which the decision in this regard was based, we have come to the conclusion that its decision on the minimum wage claim has to be set aside and reconsidered. Deduction from Wages[21]Mr Shirmardi appealed from the Tribunal's dismissal of his claim that he had suffered an unauthorised deduction from wages. Mr Shirmardi contended that he was to be paid £700 per week initially. That sum was to be increased by percentages in June of each year, resulting ultimately in an agreed weekly wage, he said, of £1,209.60 per week. There was evidence before the Tribunal that throughout this period he received £150 per week. We assume that PAYE forms would have shown that figure. In addition to the weekly wage, Mr Shirmardi contended that he should receive the 5 per cent bonus each year on the gross turnover of the business and that he was told that he would receive 20 per cent commission for limousines sold by him and 20 per cent commission for limousines purchased by him on behalf of the company.[22]On behalf of Mr Shirmardi it is said that the Tribunal's erroneous conclusion on the way in which Mr Shirmardi worked, namely that he worked on Fridays and Saturdays only, infected, in the words of Mr Kohanzad, not only the decision on the minimum wage claim but also in relation to the unauthorised deduction from wages claim. It is suggested that that erroneous conclusion must have affected the Tribunal's view of the nature of the relationship between Mr Shirmardi and Capital Limo Ltd, and its view of the likelihood of agreements being reached for the payments of sums claimed by him.[23]Mr Bhatia, on behalf of Capital Limo Ltd, relied on the adverse findings of the Employment Tribunal about the lack of credibility of Mr Shirmardi. They simply did not believe his evidence in several respects. At paragraph 5.5.5 they observed, "It's odd that the Claimant accepts that he never challenged the Respondent, particularly, Mr Mohammadi each year when the said increase was due to take effect and was not paid to him in his wages […] when on his evidence he should have been paid initially £840 per week."[24]At 5.5.7 the Tribunal observed, "It is simply inconceivable to the Tribunal that an employee who had agreed a rate of pay of £700.00 for example, would accept payment of £150.00 per week." That continued with ever increasing differences between actual payment and payment that was due.[25]The Tribunal observed of the claims in respect of bonuses and commission in 5.5.9, that they were, "Of the unanimous view this claim simply was misconceived, never existed, made no commercial sense and was quite simply untrue. There simply was no agreement between the Claimant and Mr Mohammadi on behalf of the Respondents to pay such bonuses and commissions."[26]Although the Tribunal were mistaken in their approach to the evidence as to whether and how often Mr Shirmardi worked on days in addition to Fridays and Saturdays, in our judgment its findings of fact independently support the rejection of the claims by Mr Shirmardi in respect of deductions from wages in respect of commission and bonus. We dismiss his appeal from the rejection of such claims.[27]Since the Tribunal on a remitted hearing of the minimum wage claim will have to consider the number of hours worked, the claim for deduction from weekly wages is remitted to be heard together with that claim. Thus save for the claim in respect of the weekly wage, the appeal against the rejection of the claim of unlawful deduction from wages is dismissed. Compensation for Unfair Dismissal[28]Mr Shirmardi appealed from the decision of the Tribunal not to make either a basic award or a compensatory award in respect of his dismissal, which was found to be unfair. The Tribunal found that the reason for the dismissal, smoking of illegal drugs on office premises during office hours, was a potentially fair reason to dismiss. The Tribunal observed at paragraph 6.3, "what investigations could the Respondents have carried out" as clearly the conduct was not in dispute. No ground of appeal was permitted to go forward which challenged that conclusion. We therefore deal with the decision to make no awards for the unfair dismissal on the basis that it was not in dispute but that Mr Shirmardi was caught smoking opium and that he was dismissed for that reason.[29]The Tribunal made the following observations in relation to the dismissal, at paragraph 6.4:
"6.4. Had the Claimant been given a Step 1 letter (and that is referring to the statutory dismissal procedure) inviting him to a disciplinary meeting setting out the reason for the disciplinary hearing namely, the conduct in smoking the drugs, would the decision to dismiss had been any different. The Tribunal were unanimously of the view, it simply would have made no difference. … 6.6. In those circumstances the Tribunal were unanimously of the view that although the procedure was flawed had there been a fair procedure under Section 98A, as laid out in the Employment Act 2002 and a fair procedure under ordinary unfair dismissal, the result would have been inevitably the same namely, dismissal for conduct. That dismissal being substantially fair."
[30]Mr Kohanzad, on behalf of Mr Shirmardi, contended that the decision of the Employment Tribunal showed that it did not properly consider the basis upon which it could properly reduce the basic award and the compensatory award to zero. It failed to refer to the statutory approaches to those possibilities and did not display that it went through the appropriate reasoning.[31]Mr Bhatia contended that, whilst every step in the reasoning may not have been spelt out, it was commonsense and inevitable that the Tribunal concluded that it was Mr Shirmardi's conduct which was the sole contributory factor to his dismissal and, in those circumstances, it was entirely proper and indeed inevitable that pursuant to the Employment Rights Act 1996 Sections 123(1) and (6) there would be no award of compensation. It has been clear since the judgment in W Devis & Sons Ltd v Atkins [1977] ICR 662 that the reduction may be as much as 100 per cent in an appropriate case. So far as the basic award is concerned the Tribunal may make no such award and not even the minimum four-week award pursuant to Employment Rights Act 1996 Section 120(1A) where there has been a failure to comply with the statutory dismissal procedure resulting in an automatically unfair dismissal.[32]We first consider the basic award. The Employment Rights Act 1996 Section 122(2) provides that where the Tribunal considers that any conduct of the Claimant before the dismissal was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the Tribunal shall reduce or further reduce that amount accordingly.[33]By Section 120(1B) of the Employment Rights Act 1996 an Employment Tribunal shall not be required by subsection 1A - which is a subsection setting out the minimum of four weeks pay where there has been, as in this case, a failure to comply with the statutory dismissal procedure and an automatic unfair dismissal - to increase the amount of an award if it considers that the increase would result in injustice to the employer.[34]It was agreed by Mr Kohanzad that it was within the powers of the Employment Tribunal to make a nil basic award. However, he contends that the Employment Tribunal failed to articulate the approach and the reason why it made a nil basic award. He contended that the approach displayed by the Tribunal to the making of no award was more akin to a Polkey exercise ( Polkey v AE Dayton Services Ltd [1998] ICR 142) which was appropriate to reducing the compensatory award but not appropriate to the exercise which is required if no basic award is to be made. He contends that pursuant to Section 122(2) it is the contributory conduct of the Complainant which is the factor which the Tribunal should treat as determinative of whether and to what extent the basic award should be reduced.[35]So far as the compensatory award is concerned, under section 123(6) where a Tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding.[36]Mr Kohanzad contended that the Employment Tribunal appear to have adopted an all or nothing approach to the question of whether the compensatory award should be reduced. He contended that it appears that the Tribunal may have approached the matter on a balance of probabilities. If on a balance of probabilities if the proper procedure had been gone through Mr Shirmardi would have been dismissed the Tribunal reasoned there should be a nil compensatory award.[37]Mr Kohanzad contended that if the Tribunal had properly approached the issue of reduction of compensatory award, it would have adopted, in accordance with Polkey , a more nuanced approach and assessed the percentage chance that Mr Shirmardi would have been dismissed. He contended that when the Tribunal held in paragraph 6.6 of its judgment that if a fair procedure under ordinary unfair dismissal had been adopted the result would have been inevitably the same, dismissal for conduct, that would not or not necessarily lead to a conclusion that the Tribunal were certain that the dismissal would have followed.[38]Mr Kohanzad observed that it does not follow from the finding in paragraph 6.4 that, "The Tribunal were unanimously of the view, it simply would have made no difference," that it concluded there was 100 per cent chance that Mr Shirmardi would have been dismissed had fair procedure been followed.[39]In Kelly Madden v Manor Surgery [2007] IRLR 17 , Elias P in the Employment Appeal Tribunal made some observations about the conclusion of the Tribunal in that case that if it had not found the dismissal to be fair it would have reduced both the basic and compensatory awards by 100 per cent. Although the finding of fair dismissal was upheld, Elias P observed at paragraph 61 that the Employment Appeal Tribunal would not have upheld the finding of a 100 per cent reduction in basic and compensatory awards in the case. For a 100 per cent reduction to be sustainable:
"…. the relevant contributory conduct must have caused or contributed to the dismissal (Section 123). …. Secondly the blameworthy conduct must be the sole ground of dismissal. If the employer's conduct is also blameworthy then a 100% reduction will be inappropriate."
[40]Although specific reference was made to section 123 which deals with compensatory awards the passage to which we have referred followed an observation relating to both basic and compensatory awards. In applying those observations to this case, in our judgment the Employment Tribunal did not err in making a nil basic award. It clearly had power to do so. That power could be exercised where the conduct of the complainant before the dismissal was such that it would be just and equitable to reduce, or further reduce the amount of basic award. The Tribunal is empowered by the Employment Rights Act 1996 Section 120 (1B) not to make the minimum four weeks award where that would result in injustice to the employer.[41]Where, as in this case, an employee after a warning after a previous incident is caught red-handed smoking opium on his employer's premises, it cannot be said in our respectful judgment that a Tribunal errs in making a nil basic award. The fact that the Tribunal did not in terms refer to contributory conduct or injustice, or set out the precise statutory provisions under which they were exercising discretion not to make an award, may be said to be slightly unfortunate but goes nowhere near to amounting to an error of law.[42]It is not in issue that a Tribunal can make a nil compensatory award. If the Polkey test of whether the employee would have been dismissed if the employer had gone through the appropriate procedure had been applied, in our judgment the conclusion of the Tribunal that it simply would have made no difference is the clearest possible finding, that if a proper procedure had been followed, Mr Shirmardi who had been caught smoking opium on his employer's premises would have been dismissed. That is equivalent to a finding that there was a 100 per cent chance. The fact that the Tribunal did not express itself in percentages does not undermine the decision reached by the Tribunal which in our judgment cannot be said to have been reached in error of law or to be perverse.[43]Accordingly we dismiss the appeal against the refusal of this Tribunal to make any basic or compensatory award.