SW Global Resourcing Limited v Docherty & Anor (Unfair Dismissal : including substantial other reason) [2012] UKEAT 0032_11_0805

EAT
SW Global Resourcing Limited v Docherty & Anor (Unfair Dismissal : including substantial other reason)
[2012] UKEAT 0032_11_0805 · 2012-05-08
[1]This is an employer’s appeal from the judgment of an Employment Tribunal sitting at Glasgow (Employment Judge Lucy Wiseman, sitting with members). There was also a cross‑appeal stated in the response to the Notice of Appeal but it was not argued at the hearing before us.[2]We will, for convenience, continue to refer to parties as Claimants and Respondents.[3]Following a full hearing on the merits, the Tribunal found that the Claimants had been unfairly dismissed and made monetary awards in their favour.[4]The Respondents were represented by Ms Somerville, solicitor, before the Tribunal and by Ms Stobart, advocate, before us. The Claimants were represented by Mr Martyn, trainee solicitor, before the Tribunal and represented themselves before us. Background[5]The style of the Tribunal’s rather lengthy judgment is somewhat prolix but the following essential facts can be identified from their findings.[6]The Respondents provide manpower services to civil engineering companies, particularly to the rail industry. The Claimants were employed by them as welders.[7]A statement of terms and conditions of employment signed by the First Claimant and Respondents in 2002 provided that his pay was £13,000 per annum and that that was based on a 40 hour week. Subsequent terms and conditions, dated 31 March 2003, provided: “You are employed as Thermit Welder Advanced. Your job title does not define or limit your duties. When welding related duties are unavailable alternative duties commensurate with your experience will be allocated for you to work. Failure for you to work such alternative will necessitate the appropriate reduction in the basic weekly minimum wage for the period not worked and could result in discipline procedures being taken.” that he would be paid: “… a minimum basic weekly amount of £250 …” and that his normal working hours would be as dictated by the relevant client.[8]The Second Claimant and Respondents signed a set of terms and conditions on 6 February 2003 which were in identical terms to those entered into by the First Claimant in 2003 save for the specification of job title and guaranteed minimum pay. The Second Claimant was designed as a:
“Welder Chargehand” and the terms provided that he would be paid: “… a minimum basic weekly amount of £269.23...”
[9]The welding department was, from 22 April 2005, organised so that there were two grades of welder – ‘Welder’ and ‘Advanced Welder’. Also, the guaranteed minimum weekly pay was increased to £280 for the latter and £320 for the former, as from that date, and provision was made for bonuses to be paid. The Claimants were paid in accordance with those terms.[10]By 2008/2009, the Respondents began to feel the effects of the recession. Competition for contracts was keen, the Rail Regulator was calling for cost reductions and contractors such as the Respondents sought to find ways of securing a competitive edge.[11]Prior to 2009, a pre-contractual requirement imposed on contractors tendering for Network Rail contracts was that they had to “engage with people on a PAYE basis”, which was interpreted in the industry as meaning that the work tendered for had to be carried out by employees. In 2009, the requirement was relaxed. Contractors were permitted to use people who they could engage in the most tax efficient way. Many contractors then changed their practices and saved on costs by engaging people to work on such contracts on a self employed basis.[12]By April 2009, the Respondents were the only rail services contractor still maintaining a guaranteed minimum weekly wage. On 23 April 2009, four of the Respondents’ personnel (Operations Director, Building Supervisor, a Welding Supervisor and a Personnel Manager) met with 12 of the Respondents’ welders, including the Claimants, to advise them of the effects of the recession and of the need for the department to become more efficient. Discussions took place as to how that might be achieved.[13]There was a further meeting on 21 May 2009, by which time the department was losing money – as the welders were advised. Cost savings were discussed although, at that stage, the Respondents wished to retain the welders on a full time basis, with guaranteed minimum pay.[14]On 22 May 2009, the Respondents issued a memo advising that although they had been awarded several contracts by Network Rail, they were at a price involving greatly reduced profitability - efficiency required to be reviewed and costs needed to be managed. The Claimants realised that this meant that the Respondents were struggling to remain profitable, as was the case.[15]A further meeting took place on 8 September 2009. Matters had become much worse and the department was losing money. The welders were informed that the Respondents could no longer afford to pay the guaranteed minimum weekly wage. The welders would need to become “ad hoc”. The Claimants understood that to mean that they would be offered work when the Respondents had work available for them and be paid only for the work they carried out.[16]As matters turned out, the guaranteed payment was not in fact removed at that stage – it was reduced to £240 per week for each welder, irrespective of grade, with effect from 26 December 2009.[17]The Respondents’ difficulties did not, however, cease. They lost their biggest client, Jarvis plc, who went into administration in March 2010. The Respondents were struggling to stay afloat. There was less work available and the Respondents were not competitive enough.[18]On 26 May 2010, there was a further meeting. Its purpose was to discuss the removal of the guaranteed minimum wage. The Operations Director, Mr Cook, considered that removal of the guarantee would make the Respondents more competitive and they would win contracts. By letter of the same date from the Respondents, the Claimants were advised that:
“… further steps will need to be taken to reduce costs if the company is to retain its welding department in any format. As was explained at today’s meeting a key part of this policy is the removal of the guaranteed £240 per week when earnings fall below this level and the change to ad hoc contracts for all welding personnel. This will help us to price jobs more competitively and could help us win orders.”
[19]On 8 June 2010, there was another meeting. It was confirmed that the guaranteed weekly wage would be removed as soon as practicable after consultation and in accordance with each individual welder’s entitlement to notice. Thereafter, by letter dated 21 June 2010, the Respondents wrote to each Claimant in terms which included:
“… in order to price work on a more competitive basis, the company wishes to terminate the guarantee of £240 per week with effect from 18.00 hours on Friday 2 July 2010 for all employees. In return a one off enhanced payment according to length of service will be made on 9 July 2010 to all employees who accept the change in writing by Tuesday 29 June. The amounts are … more than 8 years continuous service £1125. On the same date all personnel will be designated as welder and will operate on an ad hoc contract basis.”
[20]The letter asked the Claimants to sign a revised contract which was attached. Insofar as relevant, it was in the following terms:
“ Title: You are employed as a Welder/safety Critical Staff as applicable to your certification level. Your job title does not define or limit your duties. If your normal work is not available, you will be given alternative work commensurate with your experience. Failure to carry out such work will lead to loss of pay for the period and may result in disciplinary action against you. ... ... Remuneration: Due to the nature of your role there are no set or standard hours for you. You are not guaranteed a minimum number of hours of work each week and in a particular week you may receive no work at all from the Company. However the company will endeavour to give you advance notice of the hours that you will be required to work in a particular week. Rates of pay for a Welder will be £15 per hour for midweek welding work and £17 per hour for weekend welding work. For non welding work the rate will depend on the individual’s qualifications, the role undertaken on the shift and the rate agreed by clients for such duties. This will be explained to you before you confirm agreement to accept the shift offered. Operations departments will have a reference table of rates for you to view. ... If no work is undertaken with SWGR Ltd within a period of two months then this contract will be terminated and a P45 will be issued. Hours of work : Your normal working hours will be as dictated by our client.”
[21]The Claimants were not happy with this proposal and did not respond. By letter dated 6 July 2010, the Respondents wrote to them stating:
“As a result of your non response we have no option but to assume you are not accepting the proposed offers and therefore you are being given 12 weeks notice as per your contractual entitlement. The new contract will be introduced for you with effect from 1 October 2010 at the end of this required notice period.”
[22]Curiously, whilst there was provision for 12 weeks notice – of termination – in the Claimants’ 2003 contracts, the only notice provisions in their 2005 contracts (which superseded the 2003 contracts) were for 4 weeks notice within 6 months and within 12 months of the commencement of those provisions. It is, accordingly, not at all clear what notice provisions the Respondents had in mind. Nothing appears, however, to turn on that, it being accepted by parties that the circumstances were that the Respondents put the Claimants on notice that they would, irrespective of their failure to respond to the letter of 21 June 2010, be subject to the terms and conditions attached to that letter as from 1 October 2010.[23]On 30 September 2010, the Claimants resigned by letters which stated:
“Due to the fundamental breach of contract of employment i.e. the withdrawal of a basic salary I feel I can no longer work for this company without a guaranteed income as proposed in the new contract and therefore feel obliged to resign and give notice of my intention to take this matter to tribunal seeking constructive dismissal by legal representation.”
[24]In addition to those stated reasons, the Claimants, on the Tribunal’s findings in fact, also felt that the effect of the proposed change would be to alter their status from employee to that of worker, involving loss of rights. They felt hurt and betrayed by what had occurred.[25]We also note that the Tribunal found that Mr Cook felt that he would be under a moral obligation to offer work to the welders on the same basis as he had done under the earlier contracts but accepted that he would be under no legal obligation to do so.[26]Finally, it is plain from the Tribunal’s findings in fact that, whatever the legal effect of the contractual changes that the Respondents sought to impose, they genuinely thought that the Claimants would still be employees, working under a contract of employment. Forms ET1[27]Both complaints were stated in the same terms and were that the proposed changes to the Claimants’ contracts amounted to “a fundamental breach of contract” and that the reason for their resignations was “the Respondent’s anticipated fundamental breach of contract”. The nature of the breach was breach of the express term that they would receive a guaranteed minimum payment.[28]No complaint of breach of the implied term of trust and confidence was stated in the forms ET1. The Tribunal’s Reasoning[29]The Tribunal found and concluded as follows: · The effect of the terms and conditions under which the Claimants would have been required to work as from 1 October 2010 was that they would no longer have been employees. The removal of the guaranteed minimum payment, the provision whereby the Respondents had no obligation to offer any work to the Claimants and that which provided that the contract would terminate if the Claimants did no work for two months, were destructive of the requisite mutuality of obligation. · The Respondents had sound, good business reasons for making the changes proposed to the welders’ contracts and they were not imposed for arbitrary reasons. · The imposed changes amounted to a fundamental breach of contract entitling the Claimants to resign. · The Respondents had not, however, shown that these constructive dismissals were for ‘some other substantial reason’ ( Employment Rights Act 1996 s. 98(1)(b)). That was because the fundamental breach of contract by the Respondents and the hurt to the Claimants meant that they had breached the implied duty of trust and confidence and that where a proposed reorganisation breached the implied duty of trust and confidence the reason for it cannot be such as to justify dismissal. · Whilst there had been a significant degree of consultation about the proposed changes, there was no consultation about changing the Claimants’ status from that of employee to that of worker. That being so, even if the reason for dismissal was ‘some other substantial reason’ dismissal was not within the range of reasonable responses: “… no other reasonable employer would, without consultation, explanation and realising the effect of their actions, have dismissed the Claimants for refusing to agree a variation of their contracts of employment which had the effect of removing their guaranteed payment and changing their status from employee to that of worker.”(paragraph 342) The Appeal Submissions for the Respondents[30]The Respondents’ grounds of appeal can be summarised as follows:(i) The Tribunal erred in holding that the Claimants’ status would, under the new terms and conditions, have changed from that of employee to that of worker.(ii) The Tribunal erred in holding that there had been a breach by the Respondents of the implied term of trust and confidence.(iii) The Tribunal erred in holding that there was no potentially fair reason for dismissal in the circumstances.(iv) The Tribunal erred in holding that even if there was a potentially fair reason for dismissal, dismissal was not reasonable.[31]Dealing with each of these in turn, Ms Stobart submitted as follows.[32]Regarding (i), what was proposed in the new terms and conditions was simply a continuation of the pre-existing arrangement whereby the welders’ work was dependent on client contracts without any guarantee of welding work. The only material change was the withdrawal of the guarantee payment. Welding work had been shared out equally before and Mr Cook intended that that would continue. History showed that the men had had sufficient work before, duly shared out amongst them. The Claimants were being asked to continue giving personal service to the Respondents and would be subject to their control.[33]Ms Stobart submitted that the Tribunal had erred in their view of the concept of mutuality of obligation. It existed before the guaranteed payment was removed and therefore it existed after that. There was a wage/work bargain, the Claimants performed the work personally and had been assured that work would be allocated on a fair basis amongst the welders. She referred to: Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 , Montgomery v Johnson Underwood Ltd [2001] ICR 819, Khan v Checkers Cars Ltd UKEAT/0208/05/DZM and ABC News Intercontinental v Mr Gizbert UKEAT/0160.[34]In support of her argument relating to the Claimants’ status, she also submitted that the Tribunal had failed to consider whether, when there was work for the Claimants, there would be the requisite mutuality of obligation which had the effect of abridging the gaps between those periods. It was possible that section 212(3)(b) of the 1996 Act applied so as to deem them to have continuous service. She referred in support of that submission to Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471 and Cornwall County Council v Prater [2006] ICR 731 . She did, however, recognise that the applicability of section 212(3)(b) was conceded in the latter case.[35]Overall, she submitted that all the indicia of employment would still have been present – control, personal service, lengthy employment, pay, benefits, integration, provision of facilities and equipment, financial risk, parties’ intentions and the description applied to the contract. The Tribunal ought to have found that the Claimants’ status as employees would not have altered.[36]Regarding (ii), Ms Stobart submitted that the Tribunal had no jurisdiction to consider whether or not there was a breach of the implied term of trust and confidence as no such case had been pled in the forms ET1. The Claimants had based their complaints only on a breach of the express term about pay. No notice had been given that they sought to make any such case in the pleadings nor during the evidence. It had first been raised on behalf of the Claimants in the course of submissions – although Mr Martyn had started his submissions by referring only to the Respondents’ withdrawal of the guaranteed minimum payment being a fundamental breach of contract, he added a reference to the implied term, as recorded by the Tribunal at paragraph 126:
“The claimants maintained the letters of 6 th July, 14 th and 28 th September were each anticipatory fundamental breaches of contract because the respondent intimated to the claimants that they did not intend to honour an essential term of the contract –that is, payment of the basic guaranteed salary – with effect from the 2 nd October 2010. This breached an express term of their contracts as to pay and an implied term as to trust and confidence.”
[37]No explanation had been given of how or why the Respondents’ actions amounted to a breach of the implied term. An explanation was called for, particularly since the Tribunal were satisfied that there was a good business reason for the Respondents deciding to do as they did. Notwithstanding the lack of any prior notice of such a case and the lack of explanation of the basis for the submission, the Tribunal had jumped from making a finding of fundamental breach to finding that there was a breach of the implied term. There was no proper basis on which they could do so. It was unfair to have sprung a case of breach of the implied term on the Respondents. She referred in support of these submissions to Chapman v Simon [1994] IRLR 124 and Ladbrokes Racing Ltd v Traynor UKEATS/0067/06.[38]Regarding (iii), Ms Stobart submitted that the Tribunal had confused the issue of whether there was ‘some other substantial reason’ with overall considerations of reasonableness. They had failed to realise that once they had found that there was a good business reason for removing the guaranteed minimum payment, the section 98(1) hurdle had been overcome. The Tribunal had, further, wholly failed to consider and apply the test for breach of an implied term as set out in Malik v BCCI [1997] ICR 606. The hurdle for showing a potentially fair reason was a low one – Gilham v Kent County Council [1985] ICR 233. She also submitted that the Tribunal had been wrong to conclude that where a proposed reorganisation breaches the implied duty of trust and confidence it cannot be a potentially fair reason which is what, at paragraph 329, they had done – Bournemouth University v Buckland [2010] ICR 908 per Sedley LJ at paras 20-22.[39]Regarding (iv), the Tribunal had been diverted by falling into error regarding the issue over the Claimants’ change of status. However, even if she was wrong about the status point, the Tribunal still required to ask themselves whether in all the circumstances, dismissal would have been open to a reasonable employer. They required, she said, to do so bearing in mind their findings as to the sound business reasons for having done as they did. The Tribunal’s decision had been based on the lack of consultation about the change of status but that did not make sense because they had accepted that the Respondents did not think that the Claimants’ employment status would change. Otherwise, the Tribunal had been satisfied about the nature and extent of consultation and there were no other findings which pointed to dismissal not having been within the range of reasonableness.[40]In all these circumstances, we should, she submitted, uphold the appeal, set aside the judgment of the Tribunal and substitute a finding of fair dismissal. Submissions by the Claimants[41]Mr Jones spoke first. He said that he and Mr Docherty had had a problem understanding the new contract that was proposed. They knew that the Respondents were in a ‘bad place’ and had to make changes. They were vying for work with their competitors. However, what was proposed meant no guaranteed income and no guarantee of any work. They could not see into the future. Nobody knew whether there would be any work coming in. If he had gone to the benefits office it was plain that they would have classed him as unemployed given that he had no work and no money.[42]Mr Docherty added that he had been worried that the Respondents would not be obliged to offer them any work and that if there was no work for 2 months then they could get their P45’s.[43]Although a cross appeal had been marked, the effect of which was to give notice of an argument regarding whether or not prior to 1 October 2010, the Claimants had been obliged to accept work offered to them (the Tribunal had stated that they were not so obliged), they did not present any arguments in relation to it. Ms Stobart’s position was that even if the Tribunal were wrong about that, it was not material. Relevant Law Employer/employee relationship[44]We do not propose to rehearse at length the authoritative discussions of the various elements of the employment relationship. They are well known and, for present purposes, it need only be noted that the central issue for the Tribunal was whether that part of the test for employee status often referred to in the authorities as the “irreducible minimum of mutual obligation” [1] would be satisfied once the new terms and conditions were imposed on 1 October 2010. If there was no such mutuality, then the issue of whether or not the relationship was going to be one of service or some other kind of relationship did not even arise. That this is the correct approach was confirmed by Elias LJ in the case of Stephenson at para 11:
“The significance of mutuality is that it determines whether there is a contract in existence at all. The significance of control is that it determines whether, if there is a contract in place, it can properly be classified as a contract of service, rather than some other kind of contract.” under reference to what had been said by Longmore LJ in Montgomery v Johnson Underwood Ltd [2001] ICR 819 at para 46: “Whatever other developments this branch of the law may have seen over the years, mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment.”
[45]As observed by Elias LJ in Stephenson , no problem arises during periods when an individual is actually working, undertaking to work and with the employer undertaking to pay for that work. “Fundamental mutual obligations” (para 13) indicative of the existence of some contract between parties subsist during that period. Where the difficulty arises, in a case such as the present, is where the putative employer is under no obligation to offer any work at all and no obligation to pay the individual when he is not working. In those circumstances, can that first hurdle of establishing mutuality of obligation be overcome? The indications per Elias LJ in Stephenson are that the answer to that question has to be, ‘no’:
“53 … On any view it would, in our opinion, be unusual to describe an individual as having a contract of employment with a party who has no legal obligation to pay his wages and to whom he has no legal obligation to provide work.”
Fair Notice[46]Turning to issues of fair notice, it is trite that an employment tribunal can only determine issues of which notice was originally given in the forms ET1/3 or included as a result of subsequent amendment. We would refer, in that regard, to the discussion in the case of Ladbrokes . It is not open to an employment tribunal to determine a case on the basis of a substantive issue which is raised for the first time in submissions, without any attempt being made to amend the claim either then or at an earlier stage. To do so is simply not fair to the other party. Implied Term of Trust and Confidence[47]Regarding the implied term of trust and confidence, we refer first to the relevant passage in the speech of Lord Steyn at p.628 of Malik :
“… the implied mutual obligation of trust and confidence applies only where there is “no reasonable and proper cause” for the employer’s conduct, and then only if the conduct is calculated to destroy or seriously damage the relationship of trust and confidence.”
[48]Accordingly, a tribunal requires to ask whether the employer had reasonable and proper cause for the conduct complained of and then ask whether or not it was calculated to destroy or seriously damage the trust and confidence element of the employer/employee relationship. Fundamental breach of contract entitling the employee to resign may - depending on the circumstances - then be established if but only if both those questions are answered in the affirmative. However, the establishment of such breach does not relieve the tribunal of the requirement to go on and therereafter ask themselves – for the purposes of s.98(4) of the 1996 Act - whether or not in all the circumstances, dismissal was reasonable. Put shortly, the fact that an employer breached the implied term of trust and confidence does not necessarily deprive him of the opportunity or ability to show a potentially fair reason for dismissal or to persuade that dismissal was in all the circumstances, reasonable. In the Bournemouth University case, Sedley LJ endorsed what had been said when that case was before this Tribunal, by HHJ Peter Clark QC:
“47. In summary, we commend a return to settled authority, based on the following propositions. (1) In determining whether or not the employer is in fundamental breach of the implied term of trust and confidence, the unvarnished Mahmud test should be applied. (2) If, applying the Western Excavating (ECC) Ltd v Sharp [1978] ICR 221 , principles, acceptance of that breach entitled the employee to leave, he has been constructively dismissed. (3) It is open to the employer to show that such dismissal was for a potentially fair reason. (4) If he does so, it will then be for the employment tribunal to decide whether dismissal for that reason, both substantively and procedurally (see J Sainsbury plc v Hitt [2003] ICR 111, fell within the range of reasonable responses and was fair.”
[49]It is, accordingly, not open to an employment tribunal to conclude that a constructive dismissal was unfair simply because the employee’s resignation was in response to a breach of the implied term of trust and confidence. ‘Some Other Substantial Reason’[50]If an employer can show that a dismissal was for ‘some other substantial reason’ then he has discharged the onus imposed on him by s.98(1) of the 1996 Act. Whether or not the reason in question can be so categorised is a question of fact. In the case of Gilham , the reason put forward by the employer for proposing – via dismissal and re-engagement - to reduce employees’ remuneration was to achieve economies required because of a national policy to reduce public spending. At p.239, when considering the same statutory provisions in the earlier legislation, Griffiths LJ said:
“It is quite impossible to argue that such a reason could not be a substantial reason for dismissing an employee. The hurdle over which the employer has to jump at the stage of an inquiry into an unfair dismissal complaint is designed to deter employers from dismissing employees for some trivial or unworthy reason. If he does so, the dismissal is deemed unfair without the need to look further into its merits. But if on the face of it the reason could justify the dismissal, then it passes as a substantial reason, and the inquiry moves on to section 57(3) and the question of reasonableness.”
[51]Tribunals require, accordingly, to be careful not to slip into a s.98(4) mindset when considering what is purely a s.98(1) issue. Discussion and Decision Employer/ employee relationship[52]We are not persuaded that the Tribunal erred in concluding that the terms and conditions that would have been imposed on the Claimants as from 1 October 2010 were not those of an employer/employee relationship. Whatever Mr Cook may have considered to be his moral obligation so far as offering work was concerned and whatever may previously have been the situation in practice, the only conclusion open to the Tribunal was that what was on the table was not a contract of employment. Indeed, it was doubtful whether it amounted to any contract at all. Whilst the ‘Job Title’ paragraph states that the Respondents would be obliged to provide ‘alternative work’ if normal (i.e. welding) work was not available, that is wholly contradicted by the ‘Remuneration’ paragraph which spells out, in terms, that ‘in a particular week, you may receive no work at all from the Company’ and that, if that happens, the Respondents are under no obligation to pay them anything at all. At best, it can be read as requiring the Claimants to carry out ‘alternative work’ if it is offered and obliging the Respondents to pay for such work but the ‘traffic’ is all one way; that degree of mutual obligation only arises if the Respondents choose to make it happen. They do not have to do so. Accordingly, reading the document as a whole, it cannot be concluded that there would have been any basic mutuality of obligation in it. The Respondents would not have been obliged to provide any work at all, not obliged to pay the Claimants if no work was provided to them and would have been entitled to bring the arrangements that are referred to (£15 or £17 per hour for welding work when offered and undertaken and an unspecified but lesser amount for other work) to an end if they provided no work to the welder in question for two months. Their right to do so would have applied even if there had been work available – they were under no legal obligation to offer work to any welder at all (as Mr Cook had recognised). The circumstances are very similar to those envisaged by Elias LJ at paragraph 53 of Stephenson . It could not, as the Tribunal rightly recognised, be concluded that after 1 October 2010, the Claimants were going to have the status of employees. We would add that as regards the somewhat tentative argument that was presented under reference to s.212 of the 1996 Act, that the provisions of that section were not relevant to the issue that the Tribunal had to determine which was not one of whether or not there had been continuity of employment. It was, accordingly, not an error on their part to fail to consider them.[53]Unfortunately however, the Tribunal did thereafter fall into error. First, they ought not to have entertained the submission - which seems to have appeared almost by way of afterthought - that there was a breach of the implied term of trust and confidence. No fair notice of any such case had been given.[54]Further, the matter had not been explored in evidence and the Tribunal did not, in any event, work their way through the questions that would have required to be addressed as discussed in our ‘Relevant Law’ section above. They, erroneously, do appear to have proceeded on the basis that because the Respondents fundamentally breached the parties’ contract in relation to pay, they also, necessarily, breached the implied term of trust and confidence. That does not, however, follow for the reasons discussed above. In particular, it does not make sense in circumstances where the Tribunal, at the same time, held that the cause of the Respondents’ decision to withdraw the guaranteed pay was for good, sound business reasons that were not arbitrary. That is, they concluded that the Respondents had reasonable and proper cause for acting as they did ( Malik supra ) and where that is so, an employer cannot be held to have breached the implied term of trust and confidence. It was not open to the Tribunal to find that there was such a breach.[55]We are also satisfied that the Tribunal erred in concluding that the Respondents had not shown that dismissal was for ‘some other substantial reason’. Their conclusion on the matter was influenced by their finding that there was a breach of the implied term of trust and confidence (see, for instance, paragraphs 329 and 330) and for that reason alone is not sustainable. It was also, however, because the Tribunal considered that it could not be ‘some other substantial reason’ because it altered the Claimants’ status, the Respondents did not realise that that was the effect and that ‘there can have been no thought behind it and no reason for doing it.’ The Tribunal had, however, already found that the Respondents had good reasons for acting as they did and we agree that, on their findings in fact, they were right to do so. As for the suggestion that there was a lack of thought, the Tribunal had found that the Respondents genuinely believed that the welders would still be their employees. They were not lawyers. There was no evidence or finding that they were experts in contract law or which pointed to them being put on notice that they were running the risk of destroying the welders’ pre-existing employment status. The hurdle imposed by s.98(1)(b) is a modest one: Gilham . The only proper basis for reaching a conclusion on this matter was the Tribunal’s finding that the Respondents had good, sound, non-arbitrary business reasons. That being so, it was not open to them to do other than conclude that the dismissal was for some other substantial reason and, accordingly, for a potentially fair reason.[56]Turning then to the Tribunal’s conclusions on reasonableness, they too were, we are satisfied, flawed. The Respondents had engaged in full consultation regarding the need to cut costs, particularly by removing the guaranteed payment, over a lengthy period and could not reasonably have been expected to consult on the potential of the Claimants’ status changing from that of employee to that of worker when they were not aware that that would be the outcome of what they were proposing. That, however, is, essentially what the Tribunal held that they were obliged to do. We cannot see that that makes sense. Once that aspect of their reasoning is removed, all that remains is the potentially fair business reason which had commended itself to the Tribunal. There are no other circumstances in the findings in fact which could show that the dismissals were other than fair.[57]We would only add that we can fully understand the Claimants’ feelings about what happened, as so respectfully and eloquently expressed at the hearing before us. They were, however, plainly victims of the recession, not of an unfair dismissal. Disposal[58]We will, accordingly, pronounce an order upholding the appeal, setting aside the judgment of the Employment Tribunal, substituting for it a finding that the Claimants were fairly dismissed and dismissing their claims. [1] Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612 at 623 C-G; Clark v Oxfordshire Health Authority [1998] IRLR 125 at p.128; Carmichael v National Power Plc [1999]ICR 1226 at p.1230.