Appeal No. UKEATS/0001/12/BI
EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF
At
the Tribunal
On
15 June 2012
Before
THE HONOURABLE LADY SMITH
MR J M KEENAN MCIPD
MRS G SMITH
MISS
GILLIAN ELIZABETH WELCH APPELLANT
THE
TAXI OWNERS ASSOCIATION (GRANGEMOUTH) LTD RESPONDENT
JUDGMENT
THE
HONOURABLE LADY SMITH
Introduction
1.
Miss Welch was employed as a radio control operator by the Taxi
Owners Association (Grangemouth) Limited. She resigned from her employment on 2 April 2011 and claimed that she had been unfairly constructively dismissed. Her
complaint was heard by an Employment Tribunal sitting at Glasgow, Employment
Judge Walter Muir presiding and in a judgment registered on 4 November 2011, they dismissed her claims.
2.
We will, for convenience, continue to refer to parties as Claimant and
Respondent.
3.
The Claimant was represented by Mrs F Munn, solicitor, before
the Tribunal and before us. The Respondents were represented by
Mrs M Hodgson, their office manager, before the Tribunal and by Mr F
Tait, solicitor, before us.
The Claimant’s ET1
4.
In her form ET1, the Claimant alleged that she had been unfairly
(constructively) dismissed. She resigned on account of the Respondent’s
material breach of contract; they had unilaterally sought to vary her hours so
as to reduce them. In that part of the form which requires a claimant to state
what she is claiming, nothing was marked against the option: “c. I am claiming
a redundancy payment”. The option “a. I was unfairly dismissed (including
constructive dismissal)” is marked with a cross, as is the option “e. I am owed
notice pay”.
Background
5.
The Claimant began working for the Respondents in February 2007.
She worked a 36 hour week, on nightshifts. She was one of 8 radio
operators employed by the Respondents. There was one other nightshift
operator. That operator covered the nightshifts that the Claimant did not work
(Thursday and Friday) which amounted to 13 hours.
6.
Until 2009, there were two taxi operators in the area. Some time that
year, a third taxi operator commenced business in Grangemouth. The increased
competition led to a downturn in the Respondent’s business, particularly during
the nightshift. There was a reduction of at least fifty per cent in their
nightshift business. The Respondent looked for ways to make savings in
overheads and decided to divert customers’ calls direct to taxi owners during
the nightshift hours (apart from Saturday nights), thus making some savings on
the wages bill. The Saturday nightshift was a 6 hour shift between 2am and 8am.
7.
The Tribunal found that the Claimant was a “valued employee” of the Respondent,
that they wanted to retain her and that they saw no need to make any of their
radio operators redundant. They initially proposed to the Claimant that her
hours be reduced to 14 hours per week, namely 6 hours on the Saturday
nightshift and the hours of 6am to 8am on each of Monday, Tuesday, Wednesday
and Thursday, advising her of the position in letters dated 28 February
and 4 March 2011 but, following discussions, they issued her with a fresh
set of proposals by letter dated 17 March 2011 which would have amounted
to her working a 28 hour week for 6 weeks with a commitment to their
reviewing the situation thereafter. The Claimant rejected it, by letter dated
20 March 2011. She had been asking to be made redundant and she referred
in that letter to having indicated she was prepared to accept “voluntary
redundancy”. The Respondent’s position was, also, that they would have been
able to give her a guarantee of at least 26 hours work per week (she was
not, however, advised of that because of the departure on holiday of the office
manager, who was aware of the extent of that guarantee). They did not propose
to dismiss her as redundant or for any other reason.
8.
The Claimant was not the only radio operator whose hours the Respondent
proposed to reduce to deal with the business need which had arisen.
9.
The Claimant resigned on 2 April 2011. Her reasons for doing so
were that the Respondents were seeking to impose a variation to her contractual
hours which she did not consent to and that, despite having allowed them a
reasonable time to try and reach an acceptable compromise, they had failed to
do so.
10.
For the avoidance of doubt, we note that the Claimant’s resignation was
not under the ‘Short Time’ provisions of ss 147 – 150 of the Employment
Rights Act 1996 (which entitle an employee, in certain circumstances, to
resign and claim a redundancy payment) nor indeed, on the facts, did those
provisions apply.
The Tribunal’s Judgment and Reasons
11.
The Tribunal accepted that the Respondent had fundamentally breached the
Claimant’s contract by their proposed reduction in her working hours. Equally,
however, they were satisfied that they had genuine business reasons for doing
so. They had acted as they did for “some other substantial reason” (Employment
Rights Act 1996 s.98(1)(b)). There had been a downturn in their business
and there were obvious cost savings to be made by stripping out all nightshift
hours apart from Saturdays – they were reasonably seeking to pursue a
legitimate objective. They had sought to accommodate the Claimant and plainly
wanted to keep her in work. They had given her plenty of notice of the
proposed changes and had consulted with her. It could not be said that they
had acted unreasonably in relation to her.
12.
The Tribunal observe that “the issue of redundancy loomed large in this
case”. The Claimant had not, however, been dismissed by the Respondent. There
was, accordingly, no issue as to whether or not they had in fact dismissed her
by reason of redundancy. We also note that her claim, as set out in her form
ET1, did not include a claim for a redundancy payment nor any allegation that
she had been made redundant. The approach of the Claimant’s solicitor, as
recorded by the Tribunal, was that “the respondents should have asked
themselves whether this was truly a redundancy situation”. It may be able to
be inferred from that that an aspect of the Claimant’s case was to the effect
that she should have been made redundant – at paragraph 4, the Tribunal
observed that she “was certainly pushing to be made redundant”; if, however,
that was her case, she could have been expected to make that plain in
her form ET1 (which was drafted by her solicitor). No such claim is made – her
complaint is that the reduction in her hours was a fundamental breach of
contract entitling her to resign. The alternative inference, namely that her
argument was that she was infact unfairly dismissed for redundancy reasons,
would not, we consider, be able to get off the ground given that she appears to
have presented no evidence of, for instance, lack of consultation or an unfair
selection process.
13.
In any event, the Tribunal disposed of such redundancy issues as there
were in the following manner:
“4…With the greatest of respect to both solicitors and to any of
the agencies which gave the claimant advice that she was in a redundancy
situation the Tribunal says that they are all plain wrong.
Section 139(1)(b) of the Employment Rights Act 1996 states that there is a
redundancy situation where the requirements of the business to carry out work
of a particular kind have ceased or diminished. The kind of work
the claimant was doing was that of radio controller. The solicitors acting for
the claimant evidently took the view that the kind of work was that of a
nightshift radio controller. It was undoubtedly the case that the claimant
worked predominantly nightshifts. However, this statutory provision is
directed towards the kind of work and not to when the work is carried
out. The respondents’ requirements for radio controllers had “neither ceased”
nor diminished at the material time. They still needed the same number of
employees to carry out the work. What changed was that they didn’t need either
the claimant or Mrs Mundie to work between 1am and 6am on 6 nights out of 7 because they could more economically run their business by
diverting calls from customers straight to owners/drivers. The Court of Appeal
has held on a number of occasions that work and the requirement for employees
to do it do not change simply because the work is carried out under different
terms and conditions. Changes in terms and conditions are relevant to the
fairness of a dismissal but they do not create a redundancy situation – see Chapman
and Others v Goonvean and Rostowrack China Clay Coal Limited [1973] ICR 310 and
Johnson v Nottinghamshire Combined Police Authority [1974] ICT 170. As
the Tribunal saw it, the significance of this erroneous advice given to the
claimant was that, from a very early stage after she learned that her working
hours were to be reduced, she had it in her mind that she was entitled to be
made redundant which, as the Tribunal understood the position, suited her from
a financial point of view. It is the requirement for people viz
employees that is essential to meeting the statutory test for redundancy – not
the requirement for a position viz nightshift controller.”
Relevant Law
14.
The legal principles which applied to the circumstances of this case
were, essentially, as follows.
15.
Where an employer seeks to impose a material variation to an employee’s
terms and conditions of employment, he may be in breach of contract; the
contract may not, for instance, allow for such variations. The employee may
resign, claim that he has been constructively dismissed - i.e. he has not been
expressly dismissed but what has occurred has,, under the law of contract, the
same effect - and that he is, accordingly, entitled to the statutory remedies
that arise on unfair dismissal. He will, however, only succeed in such a claim
if, first, he can demonstrate that his employer was not only in breach of
contract but, testing matters objectively (see: Mahmud v Bank of Credit
and Commerce International SA [1997] ICR 606 at p.611 per
Lord Nicholls and at p.611 per Lord Steyn), was in fundamental breach
of contract. That is because the issue is a contractual one; he can only claim
that he has been dismissed by his employer in such a case if he has resigned
“in circumstances in which he is entitled to terminate it without notice by
reason of the employer’s conduct” (see: s.95(1)(c) of the 1996 Act). The
word “entitlement” is a reference to his contractual rights (Western
Excavating (ECC) Ltd v Sharp [1978] ICR 221) and the contractual right
to resign only arises if the employer is in fundamental breach of contract. As
observed by Sedley LJ in the case of Bournemouth University v Buckland [2010] ICR 908 at paragraph 19:
“Modern employment law is a hybrid of contract and status. The
way Parliament has achieved this is to graft statutory protections on to the
stem of the common law contract.”
16.
Thus it is that, in accordance with general principles of the law of
contract, the employee is entitled to resign if, looking at matters
objectively, the employer has conducted himself in a manner which is a
significant breach of an express or implied term going to the root of the
contract or in a manner which shows that he no longer regards himself as bound by
the contract. Secondly, if the employee does resign and his resignation is a
response to such a breach then it may be that his right not to be unfairly
dismissed (see: s.94 of the 1996 Act) has been breached. That will depend on
whether or not the employer shows that, as a matter of fact, his conduct was
for a potentially fair reason and if he does, whether or not in all the
circumstances, the tribunal considers that the (constructive) dismissal was a
fair one (Bournemouth University per Sedley LJ, approving
the EAT at paragraph 22). Put shortly, there can be conduct which is both
fair/reasonable and is also a fundamental breach of contract. A fundamental
breach of contract is not necessarily a breach of the s.94 right. It will
depend on the circumstances of the individual case. In the present case, the Respondents
submitted that their conduct was potentially fair because it was due to “some
other substantial reason”. The Tribunal accepted that that was so.
17.
The Respondents did not say that their conduct was potentially fair
because the Claimant was redundant. That is, perhaps, not surprising; it was
not their case that this was, to use the common shorthand, “a redundancy
situation”. Further, it must be that even where there is a cessation or
diminution in, for instance, the employers’ requirement to have employees carry
out work of a particular kind, it is highly unlikely that any employer would
seek to rely on it where the employee has not in fact been dismissed and there
has, accordingly, been no redundancy procedure for the employer to rely on as
being demonstrative of fair treatment. We rather agree with the import of the
Employment Judge’s decision that the issue was nothing to do with redundancy
but we should, given the arguments before us, deal briefly with the relevant
law. The provisions of the 1996 Act insofar as relevant are that an
employee is to be taken to have been dismissed as redundant if the reason for
his dismissal is wholly or mainly attributable to:
“139(1)(b) the fact that the requirements of that business –
……….
(ii) for employees to carry out work
of a particular kind in the place where the employee was employed by the
employer,
have ceased or diminished…”
18.
Those statutory provisions were interpreted by HHJ Peter Clark
in the case of Safeway Stores plc v Burrell [1997] ICR 523 in a manner which was subsequently approved and endorsed by the House of Lords in Murray and anr v Foyle Meats Ltd [1999] ICR 827. In the Safeway
case, the claimant’s post (petrol filling station manager) was to disappear
under a management restructuring and a new post (petrol filling station
controller) with a similar job description was created. He did not accept that
substitute post and he was dismissed (he did not resign). In considering
whether or not there was redundancy the tribunal should have appreciated that
the proposed alteration to his terms and conditions of employment was not
relevant. At p. 528, HHJ Peter Clark QC said:
“The concept of redundancy as a reason for dismissal was
imported into the law of unfair dismissal in this way. By section 57 of the
Employment Protection (Consolidation) Act 1978 it is, first, for the employee
to establish that he was dismissed. That is admitted in this case. Secondly, it
is for the employer to show that his reason or his principal reason for
dismissal falls within one of the prescribed categories set out in section
57(2) or was for some other substantial reason. Section 57(2)(c) provides that
one of the prescribed reasons is that the employee was redundant. Finally, the
employee must consider the question of reasonableness under section 57(3).”
Then, at p.530:
“From time to time the mistake is made of focussing on a
diminution in the work to be done, not the employees who do it.”
and, at the end
of the same paragraph, he continued:
“The only question to be asked is: was there a
diminution/cessation in the employer’s requirement for employees to
carry out work of a particular kind, or an expectation of such
cessation/diminution in the future?”
19.
The tribunal requires, accordingly, when considering whether or not
there has been a dismissal for redundancy, to consider what the requirements of
the business were to have employees carry out the work in question. Did the
business still need any employees to carry out that work? Did they need fewer
employees to do so?
20.
If it is shown that there was redundancy, then the tribunal requires to
determine whether or not dismissal was caused wholly or mainly by that
redundancy.
The Appeal
21.
Whilst Ms Munn’s initial submission was to repeat the Claimant’s
case before the Tribunal to the effect that there was a separate kind of work
called ‘night shift radio operators/controllers’ she accepted that the Tribunal
had found in fact that there was but one type of work that was relevant, namely
that of radio operator/controller. On that basis the Tribunal had, however,
still erred.
22.
She submitted that the reduction in the nightshift business demonstrated
that there had been a redundancy. The Tribunal were wrong to hold otherwise.
Changes in terms and conditions did not always amount to a redundancy situation
but they could do so: Chapman; Johnson. The change
in terms and conditions in the present case was definitely due to a redundancy
situation namely the diminution of the nightshift business. The Claimant was
to be put on part time work. That meant she was redundant.
23.
Ms Munn also referred to the case of Hanson v Wood [1967]
ITR 46 Div Court and drew our attention to HHJ Ansell’s judgment in the
case of Aylward v Glamorgan Holiday Home Limited [2003]
UKEAT/0167/02 where the number of paid weeks worked by employees was reduced
from 52 to 42 per year, Murray and Safeway
were followed and the tribunal were said to have been correct in focussing on
the requirement for employees to do work of a particular kind rather than on
the amount of work done. There were to be no fewer employees working at the
hotel and the tribunal had not erred in its approach – which had resulted in a
finding that there had been no redundancy. Employees who had been dismissed on
refusing to agree to the changes were not entitled to redundancy payments nor
had they been unfairly dismissed. She recognised that that decision did not
appear to be supportive of her position but drew our attention to a passage at
para 913 of Harvey on Industrial Relations and Employment Law which
cautions against the case being relied on as authority for the proposition that
reduced demand alone cannot constitute a redundancy situation.
24.
Ms Munn accepted that Harvey also stated (at
para 912) that a reduction in hours of itself could not give rise to a
right to a redundancy payment because a reduction in hours did not constitute
dismissal. The authors continued, however, by stating that if the reduction of
hours was achieved by dismissal whether actual or constructive then that would
be dismissal by reason of redundancy (we are not entirely clear as to the
circumstances the authors have in mind when they suggest that an employee’s
resignation could amount to dismissal by reason of redundancy – except perhaps
in the unlikely event of an employer seeking to rely on that as a potentially
fair reason – and we observe that they point to no authority in support of that
comment). Further, she sought to distinguish Aylward. There was
a consistent trading record in that case whereas there was, in the present
case, a definite downturn.
25.
Ms Munn, in conclusion, submitted that there was a diminution in
the need for employees to carry out work of a particular kind and therefore
there was a redundancy situation; if it was not redundancy there would be an
untenable situation whereby employers could avoid redundancy simply by reducing
hours possibly in extreme fashion to only one hour per week. The Tribunal had
misdirected itself in law. The Claimant’s claim should have been upheld.
26.
Ms Munn’s submissions on the subject of redundancy puzzled us. The
Respondent did not dismiss her – she resigned. This was not, accordingly, a
case where the issue of whether or not she had been dismissed for redundancy
arose. The Claimant did not, in her form ET1, claim that she had been made
redundant. She did not seek to recover a redundancy payment. It transpired
that the essence of Ms Munn’s submission was, in reality, not that the Claimant
had been made redundant at all. Rather it was what we found to be a somewhat
surprising proposition (particularly given its absence from the ET1) that, in
the circumstances, the Respondent ought to have made her redundant. In
essence, her case was that she was unfairly dismissed because she was not
dismissed (on grounds of redundancy). That was what the Tribunal ought to have
found.
27.
For the Respondents, Mr Tait submitted that the Tribunal’s judgment
and reasons were sound. The Tribunal’s reference to authority was appropriate
and their interpretation of it was correct. They had followed Safeway
and it had been approved by the House of Lords in Murray. It was
not disputed that the Respondent sought to alter the Claimant’s terms and
conditions of employment. The reason for their doing so was a sound business
reason, as the Tribunal accepted. Redundancy did not arise purely from the
fact that her terms and conditions were to be altered. As for the proposition
that the Respondent ought to have made the Claimant redundant, it was, simply
put, crazy to punish the employer for failing to make an employee redundant.
Discussion and Decision
28.
The Claimant’s appeal did not seek to take issue with the Tribunal’s
conclusion that although the Respondents were in fundamental breach of contract
there was no unfair dismissal because there were legitimate sound business
reasons for their decision to reduce the Claimant’s hours and dismissal for
those reasons was, in all the circumstances (which included that they had
treated her reasonably) fair. Rather, it was presented on a single ground
which proceeded on the proposition that the Respondents ought to have dismissed
the Claimant as redundant. She was not asserting, for instance, that the true
position was that she was redundant and it was unfair to have selected her
rather than someone else. On the contrary, the Claimant’s proposition was that
the Respondents ought to have dismissed her by reason of redundancy and they
were in fundamental breach of contract by not doing so. She wanted to be
dismissed, not retained in their employment. That was not the case she pled in
her ET1. Further, it is very difficult to accept that an employer could, in
principle, be in fundamental breach of contract by not dismissing an
employee whether on grounds of redundancy or for any other reason. This was not
a claim for a statutory redundancy payment; it was a claim for unfair
dismissal. We would also observe that there was no evidence before the Tribunal
as to what would have happened if the Respondent had gone down the redundancy
route, as the Claimant would, according to the argument before us, have had
them do. It is not at all obvious, for instance, that from the pool of eight
radio operators, the Claimant would have been selected for redundancy. We
would also, finally, observe that on the Tribunal’s findings in fact, the
reason for the Claimant’s resignation was not that the Respondent had
failed to dismiss her or that they had refused to make her redundant. It was,
shortly put, that they were in breach of contract in proposing to impose on her
the reduction in hours to which we refer above.
29.
Accordingly, interesting as it may be thought that the excursus into the
issue of whether or not there was a redundancy situation in this case was, it
was irrelevant. The Claimant was not dismissed as redundant by the Respondent.
There was no question of them being in fundamental breach of contract by
refraining from dismissing the Claimant. The Claimant did not, in any event,
resign for that reason. Further and perhaps most importantly, the Tribunal’s
reasoning and conclusion that the constructive dismissal of the Claimant which
did occur was a fair one, was not subjected to any criticism at all by
Ms Munn.
30.
In these circumstances, the appeal must fail.
Disposal
31.
We will, in the circumstances, pronounce an order dismissing the appeal.
