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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Hardy v. Polk (Leeds) Ltd [2004] UKEAT 0301_03_0202 (2 February 2004) URL: http://www.bailii.org/uk/cases/UKEAT/2004/0301_03_0202.html Cite as: [2004] IRLR 420, [2004] IRLR 402, [2005] ICR 557, [2004] UKEAT 301_3_202, [2004] UKEAT 0301_03_0202

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APPEARANCES

 

For the Appellant	THE APPELLANT IN PERSON (Assisted by a friend, Mr McGrath)
For the Respondent	MISS E MISRA (of Counsel) Instructed by: Messrs Denison Till Solicitors Stamford House Piccadilly York YO1 9PP


 


THE HONOURABLE MR JUSTICE BURTON (PRESIDENT)

1. This has been the hearing of an appeal by Miss Hardy, against the unanimous Decision of the Employment Tribunal at Leeds on a remedy hearing held on 17 January 2003, in relation to the amount of compensation which that Tribunal awarded her.
2. The circumstances of the case are that she worked for the Respondent for some seven years and then gave notice, in accordance with her contract, we think eight weeks notice, by way of a resignation letter on 29 May 2002, at a time when she had accepted a post with a direct competitor of the Respondent, at an annual salary which was, at least, £5000 more than she was receiving from the Respondent. The Respondent asked her to sign a confidentiality agreement, concerned, at it appears they were, about the fact that she was going to a competitor, and she refused to do so. She was dismissed by the Respondent in those circumstances, some few days into her notice period, on 5 June 2003. She then took some time off and, pursuant to her duty to mitigate, or at any rate in accordance with it, she started with her new employer at an earlier date than she would otherwise would have done, had she been required to work out her full notice period which she had given, commencing the new employment, at the higher rate of salary, on 8 July 2003. That left a four week period when she had not received any earnings from either the Respondent or from the new employer.
3. The Respondent argued before the Employment Tribunal that the Applicant ought to have mitigated her loss further, by starting with the new employer earlier than she did, and the Tribunal rejected that argument. The Tribunal stated a conclusion that she was disgracefully dismissed, and that the tone of the dismissal letter was insulting, and that she had been entitled to take some time to recover from that, before she started her new job. The Respondent did not contest the application which was made by the Appellant for unfair dismissal. It conceded unfair dismissal by a letter sent to the Tribunal in November 2002, and the Tribunal was requested by the Respondent to turn the full hearing, which had been listed for January 2003, from a liability hearing into a remedies hearing.
4. The Appellant indicated that she wanted to have an opportunity to state her case to the Tribunal, and was so not prepared to agree to turn the liability hearing into a remedies hearing, and so the Tribunal left the matter as listed for 17 January, on the basis that it would hear submissions at the full Tribunal. It is apparent that the Appellant was incensed by what she saw to be the conduct of the Respondent, and went to the Tribunal with two of her brothers, one of whom is a lawyer, to have her say, and to seek to make clear her own view that she had been badly treated.
5. However, the Respondent had, as we have indicated, conceded liability, in the sense that it conceded unfair dismissal, and the Tribunal appears to have sought to walk the fine line between not having an issue to decide any more so far as liability was concerned, and consequently regarding much of the evidence that the Appellant wanted to give as irrelevant on the one hand, and yet on the other hand giving her some opportunity to use the occasion as a platform to express her views about the Respondent; and, rightly or wrongly, how the Tribunal dealt with it appears to have been by allowing her to give evidence which, given the concession of unfair dismissal, may well be thought to have been irrelevant, but without detailed reference to documents, and thus leading to an opportunity for cross-examination by the Respondent, insofar as such evidence as she did give impinged upon remedy.
6. It was not a compromise which pleased the Appellant, and we have seen a letter which she subsequently wrote by way of a complaint to the Regional Chairman with which we have not to deal. However, the outcome also was not what the Appellant had hoped for. The claims that she sought to recover for the unfair dismissal, and/or for wrongful dismissal, was set out in paragraph 3 of the Employment Tribunal's Decision. She sought to recover, in addition to the basic award in respect of her employment for seven years, a claim for seven weeks' notice pay, pension contributions and health plan contributions, notwithstanding that she had only been out of work for four weeks, and in addition to her loss of statutory rights, she sought further substantial sums, namely what was set down as "£10,000 to £15,000" for what she called "future loss through career blight", and £10,000 for injury to feelings, and certain holiday pay.
7. What she was awarded was the basic award of 7 x £250, one month, or four weeks', net loss in respect of salary, pension contributions and medical care contributions, and a slightly smaller sum in respect of holiday pay. She was not awarded any injury to feelings or future loss through career blight, nor was she awarded the seven weeks which she had sought, as opposed to the four weeks. Her appeal to this Tribunal is limited to two grounds, both of which are grounds of law.
8. The first relates to the failure to award her the injury to feelings she claimed of £10,000, and the second relates to the award to her of four weeks rather than seven weeks net loss. So far as the injury to feelings is concerned, the Decision of the Tribunal was handed down on 11 February 2003, before the Decision of this Tribunal in Dunnachie -v- Kingston Upon Hull City Council No 1 [2003] IRLR 384, which was delivered on 22 May 2003. But it came to the same conclusion to which this Tribunal came, namely that there was no jurisdiction for an Employment Tribunal to award compensation for injury to feelings, humiliation and distress, notwithstanding obiter dicta by Lord Hoffman in the House of Lords in Johnson -v- Unisys [2003] 1 AC 518.
9. The unanimous decision of this Employment Appeal Tribunal, after full argument in relation to three conjoined cases, came, as we have indicated, to the same conclusion as the Employment Tribunal in rejecting the availability of such claims. The appeal of the Appellant in those circumstances against the Decision of the Employment Tribunal is bound to be met, as it has been, by Miss Misra, of Counsel, on behalf of the Respondent, with the recent fully reasoned decision of this Employment Appeal Tribunal. Strictly speaking, the doctrine of precedent is such that an earlier decision of this Tribunal is not binding upon a subsequent decision. In practice, save for those circumstances in which there is some obvious and manifestly apparent error in an earlier decision of the Employment Appeal Tribunal, or where there are two or more inconsistent decisions, and particular in the case of a very recent decision, this Tribunal will regard itself as bound to follow the earlier decision, and we do so here.
10. It would be, as we indicated at the outset of this hearing, utterly pointless for us to hear what are, with respect to Miss Hardy, even with the benefit of the clear help she has received from a representative, Mr McGrath (who sat with her today and made some additional oral submissions and may well have played some part in the preparation of the documents) what were, nevertheless, the same arguments as were run in Dunnachie, and did not find favour with this Tribunal.
11. As of the moment, therefore, the law of this country in this area is represented by the decision in Dunnachie, as reported. There is, as is known to all parties, a pending appeal to the Court of Appeal in Dunnachie which has concluded, save that, we understand, very recently, the Court of Appeal sought additional submissions from the parties, and there is no sign that a decision is immediately imminent, although no doubt it will be coming out in the new few weeks.
12. The course upon which we have determined in relation to this ground, after hearing both parties, although neither of them vigorously urged us against the course we proposed to take, is to dismiss the appeal on this ground, but to extend the time for an application for permission to appeal to be made by the Appellant to the Court of Appeal, not to the Employment Appeal Tribunal, until fourteen days after the publication of the judgment of the Court of Appeal in Dunnachie.
13. The second ground, relating to the seven weeks rather than four, arises in respect of the compensatory award, which on any basis there was jurisdiction in this Tribunal to make. It arises really in the context that Miss Hardy says that if the employer had made a payment in lieu of notice at the outset when she gave her notice, then, she submits, she would have, or might have received, eight weeks payment in lieu of notice in full, or at any rate, seven weeks to which she was entitled as a result of the provisions of section 86 of the Employment Rights Act 1996, and, she submits, had she then gone off and worked for a competitor, even receiving a higher salary, she would have been entitled to keep both the payment in lieu of notice and the money from the alternative employer. That is a factual hypothesis which we do not feel able to accept, and we do not believe it is likely that the Employment Tribunal would have accepted, had it been articulated in that form.
14. In the course of argument before us, the Appellant referred us to a statement she made in her witness statement, which she had read before the Tribunal, and which said as follows at paragraph 28:

"From what you have heard, many others have left Polk to go to competitors without the requirement to sign a Post Termination Confidentiality Agreement, and were not dismissed for the extreme penalty of Gross Misconduct without notice."

That may be the case, but it is only a starting point, even assuming that the hypothesis which she puts forward is one which carries her anywhere in law (to which we will return). What she is not able to say, and we have given her the opportunity to expand further on what she said before the Tribunal, if there were anything she could say, is that any other such employees have been paid up front in lieu of notice, notwithstanding the knowledge that they were to go to a competitor, and to have been allowed to retain that money, in addition to salary earned from the competitor.

15. It appears to us clear that if in this case, or in any other similar case, such an employee as the Applicant were to say "I am going off to a competitor", then there are other possible scenarios, short of the unfair dismissal which took place in this case. One would be that the employer would release the employee immediately, but not paying the full amount of the notice period up front, rather taking into account, after some discussion and agreement, when she was going to go to the alternative employer at the higher salary, and negotiate some lesser payment.
16. Another, and perhaps more likely, scenario would be that the employer, if entitled to do so, would seek to put the employee on garden leave, and require the employee to work out her notice period on full pay, but remaining at home and in the employment of the employer, and thus being prevented from going off to the competitor; but in those circumstances, the employee would receive full payment from the employer but would receive no payment from the competitor, with whom the employee would not be able to commence until the expiry of the period.
17. The third possibility would be that which would have occurred in this case, but for the unfair dismissal by the employer, namely that the Applicant in this case would have remained in the employment of the Respondent until the expiry of the notice period, and then gone to the new employer.
18. What we have not had pointed to us, either as a hypothetical possibility, or certainly by reference to the fate of any similar employee, is what appears to us the wholly unlikely scenario of such an employee being able to obtain money in lieu of notice in full, in the knowledge that that person was going to go off within the notice period, and work for a competitor, or, indeed, another employer, retaining the amount of payment in lieu in full, and in this case actually earning a higher salary from the alternative employer.
19. These are scenarios of which there could feasibly be consideration if they were relevant, but they did not occur. We have dealt with them in detail, because they are at least as likely as, if not more likely than, the hypothesis of what might have happened which the Appellant now puts forward, and because of the concern which emphasised that she felt, that she had been hardly done by in comparison with other employees, in relation to whom there is and was in any event no evidence.. The reality, however, is that there was a finding of unfair dismissal, and thus she has indeed been hardly done by, as found by the Tribunal on the admission by the Respondent. This triggers her right to a basic award which gives her one week for every year that she has worked for the employer, and thus, through the mechanism of the basic award, gives her the reward for having remained loyal to one employer for that period of time, which again she had in mind when she has been expressing a view that her seven years' employment ought to be reflected. In addition, she obtained the conventional award for loss of statutory rights, £250, because she would now have to start again with a new employer in accruing an entitlement to such a basic award or to a redundancy payment with her new employer.
20. But, in addition, she became entitled, as a result of the unfair dismissal, to a compensatory award. That is an award of compensation, it is not the same as the basic award which is analogous to a redundancy payment, calculated by reference to the number of years worked for the employer. Section 123(1) reads in material part as follows:

"123. - (1) Subject to the provisions of this section …… the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

(2) The loss referred to in subsection (1) shall be taken to include-

 (a) any expenses reasonably incurred by the complainant in consequence of the dismissal, and
 (b) subject to subsection (3), loss of any benefit which he might reasonably be expected to have had but for the dismissal.

 (3) The loss referred to in subsection (1) shall be taken to include in respect of any loss of-

 (a) any entitlement or potential entitlement to a payment on account of dismissal by reason of redundancy …….. or
(b) any expectation of such a payment,

only the loss referable to the amount (if any) by which the amount of that payment would have exceeded the amount of a basic award (apart from any reduction under section 122) in respect of the same dismissal.

(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland."

21. The principle underlying the statute is thus clear, so far as the compensatory award is concerned:

(1) It is a claim based on compensating the victim of an unfair dismissal for his or her loss; it is not a penal award, penalising the employer for its conduct.

(2) There is the same duty to mitigate that loss, so far as the employee is concerned, under the statute as there is at common law. "Duty to mitigate" means that an employee must take reasonable steps to obtain alternative employment.

22. In her written submissions, and by way of re-emphasis in oral argument before us, Miss Hardy relied for the right to recover, in respect of seven weeks - albeit that she was only out of employment for four weeks, and in respect of the latter three weeks was actually earning more than she would have done if she had either continued in the employment of the Respondent, or been allowed to work out that notice period in employment - upon the decision of the National Industrial Relations Court ("NIRC"), given by Sir John Donaldson, in Norton Tool Company Ltd -v- Tewson [1972] ICR 501 That was a case in which the NIRC held that, notwithstanding that a complainant had on the facts of that case, been paid for a part of the notice period, nevertheless the employee should be entitled to recover without deduction.
23. The basis, in respect of what was then very new law, was that the 1971 Act, it was said by Sir John Donaldson at paragraph 5, created an entirely new cause of action, namely the unfair industrial practice of unfair dismissal, and the measure of compensation for that statutory wrong said to be the creature of statute and found in the Act and nowhere else. The Tribunal found that the dismissal was an unfair industrial practice, and that the employer in that case, had it acted in accordance with fair industrial practice, would and should have paid the full amount of salary in respect of the notice period, and so the employee should not have to give credit for monies earned during the notice period.
24. That decision was followed by Sir John Donaldson, by now Master of the Rolls, sitting in the Court of Appeal with Ralph Gibson LJ and Bingham LJ in Babcock FATA Ltd -v- Addison [1987] IRLR 173. The Court of Appeal there, while concluding that there might be grounds for thinking that the Norton Tool logic could not necessarily be followed, or certainly would not need to be followed in every case, nevertheless recognised that the decision had stood unchallenged for some fifteen years, so far as its result was concerned, and in that case too concluded that, on the facts of the case, no credit need be given by the applicant in respect of wages earned in other employment.
25. Notwithstanding those two decisions, it does not appear that this point has come before the Employment Appeal Tribunal very often, and, although those two decisions were referred by Miss Hardy and her advisers to the Employment Tribunal in this case, the Employment Tribunal had little difficulty in applying what it appears to have regarded as plain common sense. It concluded simply that four weeks rather than seven weeks was the proper calculator. The claims are by way of damages and the Applicant had mitigated her loss, she is not permitted to make a profit - that was a reference to the fact that she had earned more in the alternative employment - and so to allow recovery from the Respondent would not only be double recovery, but would actually be in excess of double recovery because the alternative salary was higher.
26. Although the case of Isleworth Studios Ltd -v- Rickard [1988] IRLR 137 was referred to before the Employment Tribunal, there is no mention of it in its Decision. This was a decision of the Employment Appeal Tribunal, per Popplewell P, which did not follow Norton Tool and Babcock, on the particular facts of the case. It recited, at paragraph 17, that, ever since the decision of Norton Tool, it has been regarded as good industrial relations practice to pay an employee wages in lieu of notice, leaving him free to seek other employment, but on the facts of the case, and after reciting relevant passages from Babcock, it concluded that it was not appropriate, where the applicant, Mr Rickard, had twenty nine weeks to run under a fixed term one year contract, and in fact set up in business on his own account the day after his dismissal, and in the first seven months of trading received gross earnings in the sum of £10,000 in excess of what he would have earned had he remained in his former employment, to apply Norton Tool, so as to ignore or fail to give credit for those earnings. Indeed, the Employment Appeal Tribunal concluded that a result which ignored those earnings would be bizarre. We read paragraph 31 of the decision:

"Any other finding than that the applicant has suffered no loss in fact would be perverse in the extreme. We do not believe that the Norton [1972] IRLR 86 principle nor anything which was said in Babcock [1987] IRLR 173 compels us to come to a conclusion that there is anything for which the applicant needs to be compensated."

27. The underlying basis behind Miss Hardy's argument, and indeed perhaps behind the thinking of Sir John Donaldson in Norton Tool, was that there is in some way a debt owed by the employer to the employee, that what Mr McGrath calls 'statutory notice' in some way resulted in a payment that ought to be made to an employee in any event. If that was indeed the basis of the thinking, then it appears to us not to be supportable: -

27.1 Insofar as there is anything along those lines created by the industrial relations legislation it is the basic award, analogous to the sum payable on redundancy, calculated simply by reference to the years worked by the employee.

27.2 It is so often, in lay language, as we can entirely understand, the fact that people talk about "notice" as if it was money. When an employee goes to an employer and says "Give me my notice" or "Aren't you going to give me my notice?" that could be used in loose phraseology to refer to a payment in lieu of notice. Section 86, to which we have referred, does not, however, provide the right to a payment. It provides for the right of an employee to be given a certain amount of notice before his employment is terminated. Section 86 reads as follows:

"86. - (1) The notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for one month or more-
 ….

(b) is not less than one week's notice for each year of continuous employment if his period of continuous employment is two years or more but less than twelve years"

If an employer gives to an employee, or an employee has a contract which, on the face of it, entitles or obliges the employee to receive, less than the period of notice laid down by section 86, then the contract is overridden and automatically extended. Of course, a contract might, such as it did in Isleworth, oblige the giving of a longer period of notice or constitute a fixed term contract, not terminable short of the expiry of the term, with or without anterior notice. But what section 86 does not do is lay down an entitlement to payment in lieu of notice, or create a debt, and if an employer fails to comply with a contractual or statutory period of notice, either actually in, or statutorily implied to be in, a contract of employment, then the employer is in breach of contract, and is required to pay damages in the High Court or, by analogy, compensation in the Employment Tribunal, in respect of the unexpired period of notice. So far as unfair dismissal is concerned, of course, the right to unfair dismissal is not limited by the notice period, and compensation can carry on much longer, until an employee obtains fresh employment, but so far as contract is concerned, the employee's right is limited by his contract, as amended, if appropriate, by the imposition of the relevant period of notice, by virtue of section 86 of the Act; and the employee's remedy is in damages for wrongful dismissal. In this case, the claim by the Appellant, Miss Hardy, was for such compensation, either in wrongful dismissal or in unfair dismissal, because she obtained fresh employment within the notice period, so in fact the answer would be the same, whichever way her claim was put. The claim is in damages or compensation, not in debt.

28. Neither the decision in Norton Rose nor the decision in Babcock made any reference to the duty to mitigate, which is now enshrined in section 123(4) of the 1996 Act, which we have read, but which at the time of Norton Rose was similarly, in almost identical terms, enshrined in section 116(2) of the Industrial Relations Act 1971, and at the time of Babcock was enshrined in identical terms in section 74(4) of the Employment Protection (Consolidation) Act 1978. It appears to us that had the Tribunal in either of those two cases specifically addressed the duty to mitigate, by reference to the relevant subsection in force at the time, it would have been the more difficult for either of the Courts to reach the conclusions they did, not only by reference to the statutory definition of loss, but also by reference to the obligation to mitigate: because, of course, where an employee has mitigated, it would appear irrational for the consequences of that mitigation to be ignored, if there was a duty to mitigate to start with. If there is to be no consequence of a failure to mitigate, or of a fulfilment of the duty to mitigate, because of some rule which ignores the consequences of the mitigation, then it would undermine the existence of the provision at all.
29. Whereas it might have been difficult and inappropriate for this Appeal Tribunal to question Norton Rose or certainly Babcock, being a Court of Appeal decision, by virtue of either decision having overlooked the provision of the relevant mitigation subsection in the legislation at the time, not only is this Appeal Tribunal, in our judgment, entitled to look at the position again in the light of Isleworth, an Employment Appeal Tribunal decision in which, as it happens, leave to appeal to the Court of Appeal was given but not taken up, but more significantly, in the light of the very recent decision of Cerberus Software Ltd -v Rowley [2001] IRLR 160, a decision by the Court of Appeal by which we are bound.
30. We turn to consider that case. Cerberus Software involved a claim for wrongful dismissal. As we have indicated, it appears to us clear that the issue in this case is the same in both wrongful dismissal and unfair dismissal for two reasons. First, so far as the facts of this case is concerned, on any view the loss is limited to a time within the notice period, because of the particular circumstances in which the Appellant had another job to go to. Secondly, and more significantly, the express terms of section 123(4) make it clear that the duty to mitigate is the same under the statutory industrial relations legislation as it is at common law. The argument that is sought to be made in Cerberus Software is not dissimilar from that which is run by Miss Hardy in this case, although it was, it seems to us, in that case a fortiori. In this case, it appears to us quite clear that the loss can only be put by way of damages and the only provision that was relied upon, namely section 86, does not begin to give a right to a sum of money, as we have indicated, but rather imposes an obligation, of which the employer is in this case in breach.
31. In Cerberus, however, there was a contract which gave to the employer the entitlement to make a payment in lieu of notice, and it was there argued that this created effectively a debt claim, an entitlement to be paid a sum of money in respect of the notice period, such that even if the applicant did mitigate his loss in the broad sense by obtaining alternative employment, he did not need to give credit for the earnings received from that alternative employment during the notice period; because the duty to mitigate damage did not arise, since the claim for payment in lieu of notice was said to be a claim for a sum due under the contract, that is a debt claim, rather than a claim for damages for wrongful dismissal.
32. The Court of Appeal rejected this submission, allowing the appeal from the Employment Appeal Tribunal by a majority, on the basis that, even in such a case, the ordinary obligation to mitigate damage arose, and that the claim by the employee was still a claim for damages, against which the consequences of mitigation fell to be offset. It appears to us clear that Cerberus Software is a decision of the Court of Appeal, and a very recent one, which we must and should and would wish to follow; it accords entirely with common sense, as we see it, and with the proper construction of section 123(4) and section 86 of the Employment Rights Act 1996.
33. Mr McGrath has sought to say, although he has not been able to produce any argument which met the provisions of section 123(4) or, indeed, the decisions in Cerberus and Isleworth, that the words "just and equitable" in section 123(1) give some broad discretion to the Tribunal to award a sum of money which does not necessarily correlate to the loss actually suffered by an employee, and indeed would entitle her, as this Tribunal put it, to make a profit; and Miss Hardy has asked us effectively to penalise the employer, or at any rate, as she puts it, not to penalise her, by comparison with other employees who, as we have indicated, she says, have been allowed to leave the Respondent in other circumstances.
34. The answers to these pleas by Mr McGrath and the Appellant herself will be apparent from the judgment which we have given.

34.1 It is not clear to us, and indeed rather the reverse, that she has been penalised. There is no suggestion that the employer can be shown to have allowed any other employee to obtain double recovery; in any event if they had chosen to act differently, that would have been a matter for them.

34.2 There is no right to receive a payment in lieu of notice, whether in respect of a contractual or a statutory period, and the right period of notice is not given, then there is a claim for damages for breach of contract, in relation to which the duty to mitigate arises.

34.3 The basis of a compensatory award is one founded upon establishment of what the loss of the applicant is, and if the applicant has suffered no loss, he or she recovers nothing over and above the basic award to which he or she is entitled to in any event. The "just and equitable" arises in respect of the calculation of that loss. There is no way, and this has been said on many occasions, by both this Appeal Tribunal and the Court of Appeal, in which a compensatory award, whether to be regarded as "just and equitable" or otherwise, is to be used in order to penalise misconduct by an employer, if such there has been, either on the basis that it is thought to be just and equitable so to punish the employer, or otherwise. The statute does not say that the award will be such an amount as the Tribunal considers just and equitable by reference to the conduct of the employer. It is wholly by reference to the loss suffered by the employee, and the award is properly described in the headnote to the section, albeit such is not strictly determinative, as a compensatory award.

35. In those circumstances, we are entirely satisfied that there is no ground of appeal against the Tribunal's Decision and we dismiss this appeal.
36. We have already indicated in the course of argument that we would, although refusing permission to appeal ourselves in relation to this matter because we consider it entirely clear, be prepared to extend the time for an application for permission to appeal to the Court of Appeal in respect of the second ground also, until fourteen days after the decision in Dunnachie, not because it relates to Dunnachie in any way, but because, in order to save time and cost, it would be sensible, if there is to be an appeal at all by Miss Hardy, for both grounds to be dealt with at the same time.