McClelland v RTU Limited [2011] NIIT 00357

THE INDUSTRIAL TRIBUNALS

CASE REF: 357/11

CLAIMANT: Colin McClelland

RESPONDENT: RTU Limited

DECISION

The unanimous decision of the tribunal is that: the claimant was unfairly dismissed but the tribunal award only the basic award of £1,520.00, as no compensatory award is made, as in the tribunal’s opinion he would have been dismissed, even if the necessary procedure had been observed by the respondent.

Constitution of Tribunal:

Chairman: Mr S M P Cross

Panel Members: Mr R McKnight

Mr I Foster

Appearances:

The claimant was represented by Mr G Daly of Francis Hanna & Company Solicitors.

The respondent was represented by Mr B Mulqueen, Barrister-at-Law, instructed by John McKee and Son Solicitors.

Findings of Fact

1. The claimant commenced employment with the respondent on 15June 2009. He was employed as Business Development Manager for the respondent company which manufactures a range of building products for the construction industry. These products include mortar, concrete, plaster, coloured sand, floor screed and Ultraflo. The purpose of the respondent employing the claimant was to promote and develop the sale of the new product Ultraflo and the intention was to develop the sales of Ultraflo throughout Ireland. The respondent, which had received a substantial government grant for this project, had projected sales of this material for 2010 at £1.5 million. Unfortunately due to the recession and the difficulties experienced by the building trade at this time, the sales for 2010 were less than 50% of the projected figure.

2. The respondent had sold Ultraflo before it employed the claimant. In evidence Mr David McIlroy, a director of the respondent, informed the tribunal that the respondent wanted someone to increase the sales of this material throughout Ireland and help the company through the recession by the successful development of this product. Whilst the claimant was working to promote Ultraflo, the respondent’s sales man Mr Philip Smith, was continuing with his task of selling the other materials manufactured by the respondent.

3. The claimant, whose contract of employment describes him as “Business Development Manager”, had a business card describing him as “Sales and Marketing Manager”. The claimant argued before the tribunal that he was in reality a salesman for Ultraflo.

4. On the morning of Friday, 24 September 2010, the claimant had a discussion with the directors of the respondent, Daniel and David Mcllroy, during which discussion the directors told the claimant that the respondent was going to have to consider redundancies. The directors had already reduced their drawings and had shortened the hours of some employees and had introduced extra capital into the company. The claimant, in a jocular way said he hoped that his redundancy was not amongst those being discussed. The directors said they would like to have a meeting during that afternoon to discuss the matter further. The meeting was held at 3.00 pm at which the directors told the claimant that the Northern Ireland grant which had been available for his post and to allow the respondent to develop the Ultraflo product, had been withdrawn and in the present economic climate the claimant was going to have to be made redundant. The claimant was shocked at this, as he had had no warning of the possibility of his post being made redundant. After further discussions it was suggested that the claimant should think about matters over the weekend. On the following Monday, 27 September, the claimant met with the two directors and suggested that he could continue in his post at a reduced salary or reduced hours and a possible change of role to allow him to deal with other sales, as well as the sales of Ultraflo. The directors felt these suggestions were not viable and that his redundancy should be confirmed.

5. One of the suggestions made by the claimant was that he could do Philip Smith's job, as a general salesman, taking a cut in salary and continue to do his existing job on Ultraflo, with reduced hours devoted to Ultraflo. The directors however felt that the claimant did not have enough knowledge to sell mortar, concrete and other products. The impression left with the claimant was that the decision to make him redundant had already been made and nothing that he said would alter that decision. The tribunal find that the claimant, who was earning a much greater salary than that of Mr Smith did not have the up to date knowledge of the products or the contacts with the clients, these having been the almost exclusive property of Mr Smith. Consequently, it would not have been sensible to dismiss Mr Smith and ask the claimant to take over from him.

6. The claimant would have had a right, both under his contract of employment and under the statutory code referred to below, to appeal the decision to make him redundant but he did not avail himself of an appeal. He told the tribunal he did not know that he could appeal. The tribunal do not accept this, as it is set out in his contract of employment and he would, as an experienced manager have been bound to have encountered such a right in the general employment field.

7. The respondent wrote to the claimant on 27 September 2010 to confirm his redundancy. The letter stated that the failure to meet sales targets, due to the recession, left the company with no alternative but to reduce costs. The claimant was asked to work out his notice. At the end of the notice period the claimant was given a reference by the respondent, which stated, that the company, with great regret had had to make the claimant redundant because of the impact of the recession on the building industry. The letter went on to set out the responsibilities which the claimant had undertaken during his employment including the ongoing planning and development of the company's sales and business development strategies throughout Ireland, the management of the sales team and identifying new business opportunities. The description of what the claimant had done, whilst he was with the respondent, went on to deal with other matters of a managerial type, that do not indicate in any way that the claimant was a salesperson.

8. The claimant accepted this letter and after working out his notice, left the employment of the company and has now bought these proceedings in the tribunal.

The Law

9. The claimant claims that he was unfairly dismissed. Under the provisions of Article 126 of The Employment Rights (Northern Ireland) Order 1996 (the 1996 Order), “an employee has a right not to be unfairly dismissed by his employer.” Article 130 of the 1996 Order states that it is for the employer to show that the reason for the dismissal is either a reason relating to the employee’s capability to do the job in question, his conduct, or because of a redundancy situation, or some other substantial reason, as to justify the dismissal of an employee, holding a position of the type held by the employee in question. In this case the reason for the dismissal is redundancy. Under Article 174 of the 1996 Order, redundancy is defined. One situation, that is so defined as a redundancy situation, is one where work of a particular kind ceases or diminishes or is expected to cease or diminish. In this case the respondent has argued that a redundancy situation existed and the claimant was made redundant. A redundancy payment was made to the claimant.

10. Certain dismissals are declared by Statute to be automatically unfair. One such is where the employer fails to comply with the terms of Article 130A of the 1996 Order. This states that a dismissal is to be regarded as unfair, if one of the procedures set out in Part 1 of Schedule 1 to the Employment (Northern Ireland) Order 2003 (“the 2003 Order”), has not been complied with and the non compliance is wholly or mainly attributable to the failure of the employer/ respondent. The procedure referred to in Schedule 1 of the 2003 Order provides for the employer to give written information to the employee as to his reason for wishing to terminate the employment of the employee and to invite the employee to a meeting to discuss the matter. The meeting must take place before the action of dismissal is implemented and if the employee is still intent on dismissing the employee he must give the employee a right of appeal. If the employee fails to carry out this procedure then the subsequent dismissal is automatically unfair. This is known as a failure to follow the statutory dismissal procedure. In this case the respondent admits that it did so fail to follow the statutory procedures laid down and indeed failed to observe its own contractual procedures.

11. Article 130A (2) of the 1996 Order states, that if the employer, who fails to follow its own contractual dismissal procedure, (leaving aside for the moment the statutory dismissal procedure), can show that he would have dismissed the employee in any event then the dismissal shall not be considered unfair. However there is no such statutory relief under Article 130A (2), for an employer who fails to even meet the basic requirements of the statutory dismissal procedure. In such a case the dismissal is automatically unfair. Under Article 154(1A) of the 1996 Order, the tribunal shall in such circumstances, bring the claimant’s basic award up to 4 weeks pay, unless the tribunal considers such an award would result in injustice to the employer.

12. There is however one other matter that the tribunal must consider before awarding compensation to a claimant who has been automatically unfairly dismissed under Article 130A. If the tribunal comes to the conclusion, that despite the unfair treatment on the part of the employer, the claimant would have been dismissed, even if a fair process had been adopted, then under the guidance set down in the case of Polkey v AE Dayton Services Limited 1987 [IRLR] 503, (hereinafter referred to as “the Polkey case”), the tribunal must refuse to award any compensatory award, if the tribunal is satisfied that there was a certainty of such dismissal taking place; or reduce the compensatory awarded, to reflect the tribunal’s view of the percentage chance of such dismissal occurring.

13. If the tribunal is satisfied that the claimant has been unfairly dismissed, then, subject to the Polkey case, it can award the claimant compensation, payable by the respondent. The tribunal, if the statutory procedures are not complied with, must increase the compensatory award that it makes by 10 per cent, (Article 17 of the 2003 Order). The tribunal also has power, under the same Article, to increase the compensatory award by a further percentage, up to 50 per cent, if the tribunal considers it just and equitable so to do.

Decision of the Tribunal

14. The claimant has tried to show to the tribunal that his position was in effect that of a salesperson similar to the position occupied by Mr Philip Smith. He argues that he and Mr Smith should have been considered jointly for redundancy in a pool. The respondents argued that the position of the claimant was that of Business Development Manager and that as such he was the only person performing that task and could only be considered for redundancy on his own. The tribunal find that he was the Business Development Manager and that his job was different from that of Mr Smith.

15. The respondents accept that the procedure adopted to make the claimant redundant breached the statutory redundancy procedures laid down and indeed breached their own procedures laid down in the claimant's contract of employment. This being the case the tribunal finds that the claimant has been automatically unfairly dismissed.

16. The tribunal now has to decide whether this automatic unfair dismissal leads to the claimant becoming entitled to a compensatory award. The tribunal has to be guided by the decision in the Polkey case, which states, that if the dismissal was going to occur in any event, then, despite the tribunal ruling that the dismissal is unfair, the claimant's compensatory award is eliminated in total or reduced by a percentage, depending on the likelihood of this dismissal occurring in any event.

17. The tribunal hold that the claimant was the Business Development Manager and as such his job was different to the job of salesman performed by Mr Smith. Consequently the claimant must be considered in isolation when it comes to selection for redundancy. The tribunal is satisfied that because of the economic downturn, the loss of the government grant, and the requirement for the company to make immediate and far-reaching financial savings, the post of Business Development Manager was inevitably going to have to be made redundant. The tribunal accepts the respondent’s evidence, that in such an event one of the directors would take on the tasks previously performed by the claimant.

18. Even if the tribunal is wrong in this finding, it is satisfied that were the claimant to be considered to be a salesman and therefore to be considered in a selection pool for redundancy, with Mr Smith, as the only other employee on the sales side; that the likelihood of the claimant being selected for redundancy in such a situation is overwhelming. The claimant was being paid a salary over one third more than Mr Smith's salary and had narrower sales experience than Mr Smith. The claimant had been dealing almost entirely with Ultraflo and his knowledge and customer lists in connection with other products would have been minimal. The tribunal hold that had a proper scoring situation arisen between the claimant and Mr Smith, it is certain that Mr Smith, as the more all round candidate, would have survived to the detriment of the claimant, who would have been made redundant. The tribunal find that this is not a case where it would be appropriate for a senior and better paid employee to replace a lower paid and junior colleague, with the latter being the person to be made redundant.

19. In these circumstances, whether the claimant was considered solely on his own for redundancy or in company with Mr Smith, the tribunal holds that it is 100% certain that in the economic climate in which the respondent found itself, that the claimant would have been made redundant almost immediately. For these reasons the tribunal holds that the rule in the Polkey case applies and that although the dismissal is unfair, the claimant is entitled to a basic award only and no compensatory award. As the claimant received no redundancy payment, his basic award entitlement under Article 154 (1A) of the 1996 Order is 4 weeks pay at the capped sum of £380.00 per week, a sum of £1,520.00. The tribunal is satisfied that this does not result in an injustice to the respondent. The tribunal considered whether there should be a payment of compensation to reflect the period of time that would have elapsed if the respondent had complied with the statutory dismissal procedure. The claimant was given verbal notice of his possible redundancy at the afternoon meeting on 24 September and not written notification as the procedure requires. However if the written notice had been given, the procedure could have been completed almost as quickly as it was in fact carried out and the notice period would have been no different. The tribunal is satisfied that the claimant would have known that he could appeal against the decision if he had so wished. The tribunal holds that no appeal would have been successful, in the light of the very serious financial situation of the building trade and in particular of the respondent at that time.

20. The claimant is awarded a sum of £1,520.00.

21. This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.

Chairman:

Date and place of hearing: 23 June 2011, Belfast.

Date decision recorded in register and issued to parties:

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