Grayson v Paycare (Unfair Dismissal: Polkey deduction) [2016] UKEAT 0248_15

THE HONOURABLE MR JUSTICE KERR

1. This appeal was well presented and argued by both counsel, to whom I am grateful. It is unusual because the Respondent employer argues that, contrary to the Employment Tribunal’s decision, the dismissal of the Appellant employee (the Claimant) was fair and that the Tribunal was wrong to decide that it was unfair; yet the Respondent has not appealed against the finding that the dismissal was unfair. Mr Brockley, counsel for the employer (the Respondent), explained that the Respondent had taken a “pragmatic” approach and that he was not instructed to ask for leave to bring a cross-appeal.

2. The appeal is against the Tribunal’s decision that although the dismissal was unfair because the Respondent did not engage in any consultation before making the Claimant (and others) redundant, the Claimant’s compensatory award should be reduced by 100 per cent, to nil (i.e. what is commonly called a “Polkey” reduction) on the basis that if a fair procedure had been followed, the outcome would have been the same: the Claimant would have been dismissed by the same date as that on which he was in fact dismissed.

3. The Claimant argues, with the leave of the President, Simler J, that the Tribunal misdirected itself on which party bore the burden of satisfying the Tribunal in relation to the Polkey issue; that the Tribunal’s finding that a fair procedure would have made no difference to the outcome was unsupported by any evidence to that effect; that the decision was perverse; and that it was inadequately reasoned because the Tribunal did not properly explain why, in its judgment, use of a fair procedure would not have affected the outcome.

4. The hearing lasted from 27 April to 1 May 2015 before Employment Judge Perry, sitting in Birmingham with Mrs Howard and Mr Macdonald. The reserved decision dated 28 May 2015 comprised 199 paragraphs. The Tribunal dismissed a whistleblowing claim and a money claim for commission. There is no appeal from those decisions. They found that the Claimant was dismissed by reason of redundancy; that the Respondent failed to follow a fair procedure when dismissing and the dismissal was unfair, but that “[t]he claimant would have been dismissed in any event by the same date”.

5. The salient findings for the purposes of this appeal are as follows. The Respondent is a non-profit company limited by guarantee, based in Wolverhampton. It provides help to families and businesses with health care costs. It is regulated. At the time of the hearing, it had 23 employees and an annual turnover of about £7 million. The Claimant was head of sales and business development and was employed from July 2010 to lead the external sales team (EST).

6. Another member of the EST was Ms Margaret Keane, who had occupied a different role with the Respondent before joining the EST (see paragraph 33 of the decision). Ms Keane was also later made redundant, and was a witness for the Claimant. The Tribunal regarded her previous different role as “relevant” for reasons that would become clearer much later in its decision.

7. In February 2014 (paragraph 75), a board meeting was held. It was noted that the board had previously sought a review of the commission structure. It was agreed that there would be a review of the senior management team (SMT) “with its focus on the Sales Team” (the EST), and the aim was to complete this review by the next board meeting. The minutes also recorded that the long term sustainability of the sales team was discussed and that redundancies were being considered, and would have to be considered carefully.

8. However, by June 2014 no review of the commission structure, nor of the SMT, had taken place (paragraphs 76-77). Despite that, at a board meeting in June 2014, the board decided (paragraphs 72 and 74) that due to the Respondent’s financial position, the entire EST would be made redundant and, after those dismissals, the Respondent’s business model would be reassessed and ways of generating new business would be considered. The board did not discuss any alternatives to dismissing the EST members for redundancy.

9. The Tribunal stated at paragraph 77:

“In our judgment the decision to dismiss was taken without either review having taken place and if either review had taken place the conclusions and rationale for the same were not before us. No rationale was given to us by the respondent why neither review was undertaken before the decision to dismiss was taken.”

10. Meetings were later held with the EST members who were told they were “at risk of redundancy” (paragraph 80). The Claimant was told that the Respondent had not asked for volunteers for redundancy because no one else was in the pool (paragraphs 82-83). The Vlaimant was among those dismissed. He was dismissed with pay in lieu of notice on 6 September 2014, and a termination date of 6 December 2014 (paragraphs 2 and 22). He attempted to appeal, but a date could not be agreed and the appeal did not take place (paragraphs 86-87).

11. No complaint is made about how the Tribunal directed itself on the impact of a failure to consult on the fairness of a redundancy dismissal. The Tribunal correctly stated (paragraphs 126-127) that on the authority of Polkey v A E Dayton Services Ltd [1988] ICR 142 (citing from Lord Bridge’s speech), dismissals for redundancy without consultation would normally be unfair, other than in an exceptional case where the employer could reasonably have concluded that consultation would “utterly useless” or “futile”.

12. The Tribunal was well aware that, as Lord Bridge had said, an employer will not normally act reasonably unless it warns and consults any employees affected or their representative, adopts a fair basis on which to select for redundancy and takes such steps as may be reasonable to avoid or minimise redundancy by redeployment within the organisation. Neither party contended before me that this Respondent had done those things. The Tribunal found that it had not.

13. In relation to the Polkey issue of reduced compensation, the Tribunal said (paragraphs 138-140) the issue:

“requires us to consider the likelihood that the employee would have ceased to be employed at a future point had a fair procedure been followed and to assess the likelihood of that happening and at what date that would have occurred.

…

Whilst it is for the employer to bring forward any relevant evidence we are required to have regard to all the evidence when making that assessment, including any evidence from the employee.

…

[T]here will be circumstances where the nature of the evidence which the employer wishes to adduce, or on which he seeks to rely, is so unreliable that the tribunal no sensible prediction [sic] based on that evidence can properly be made. However … a degree of uncertainty is an inevitable feature of the exercise and the mere fact that an element of speculation is involved is not a reason for refusing to have regard to the evidence.”

14. The Tribunal found that the Respondent genuinely held the view in June 2014 that it needed to make savings because of the financial position of the business (paragraph 158). There was a redundancy situation (paragraph 173). The procedure was unfair: the Respondent had at first said it would consider alternatives to redundancy; it had not explained why it did not then do so; nor why it had not called for volunteers which, Ms Keane said in evidence, had happened in previous redundancy exercises. All the Respondent had done was to consider whether internal posts were available (paragraph 174).

15. The Tribunal found (paragraphs 175-181) that there had effectively been no consultation with those made redundant; the Respondent had simply decided at the June 2014 board meeting to dismiss all the EST members for redundancy, and had then done so. The limited discussions with those affected thereafter, did not amount to fair consultation. The Respondent had not advanced any rationale for having acted in the way it did. It advanced no good business reason for having failed to consider alternatives to redundancy, such as calling for volunteers.

16. The Tribunal pointed out that the Respondent had itself previously done that, and had made an unimplemented decision to review the commission structure, the SMT and the EST. The Respondent had determined the outcome before genuinely consulting. It actions fell outside the band of reasonable responses and the dismissal of the Claimant was therefore unfair.

17. The Tribunal then went on to consider the Polkey issue, and at paragraphs 181-183 said this:

“… we considered if the alternatives such as a review of the senior management team or commission structure or seeking volunteers would have resulted in any different position for Mr Grayson. Unlike Mrs Keane who could potentially have undertaken alternative roles within the respondent’s business we heard no evidence that would have made any difference to the outcome for him.

We find that that [sic] had the respondent provided the rationale we refer to at paragraphs 177-180 or genuinely considered alternatives before proceeding or as part of the individual consultation process rather than rejecting them out of hand that would have taken little or no time. It could have called for voluntary redundancies at the very first meeting in July, considered if that was tenable in the intervening 2 months that the redundancy procedure took to complete and thus terminated in any event at the same date. Similarly with the reviews it could have undertaken.

In our judgment, had a fair procedure been followed the claimant would have been dismissed in any event by the same date.”

18. Mr McNerney, for the Appellant, has argued the appeal in his grounds and skeleton, and orally, in various ways. It seems to me he is really making the four points already mentioned, on which the President, Simler J, gave leave to proceed. Before addressing them in turn, it is necessary to deal with some preliminary matters.

19. First, what are the applicable principles derived from the statute and case law? There was no disagreement about the law, so I can deal with this aspect briefly. The statutory provision simply states that 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” (section 123(1) of the Employment Rights Act 1996).

20. The cases are quite numerous, and several were cited to me. I take comfort and guidance from, in particular, the useful summary in Software 2000 Ltd v Andrews and others UKEAT/0533/06/DM provided by Elias J (as he then was) at paragraph 54, after reviewing earlier case law (including on the now repealed section 98A(2) of the 1996 Act, with which I am not concerned).

21. Elias J’s summary provides a useful reminder that Tribunals need to disentangle in their minds distinct questions that may need to be addressed in particular cases. The following are possible formulations of the questions that may arise in particular cases:

(1) How long the employee would have continued working for the employer, but for the dismissal; this is the question that in ordinary cases must be answered on the balance of probabilities, to assess loss;

(2) Whether either party has adduced evidence entitling the Tribunal to conclude (the burden of satisfying the Tribunal being on the employer) that the employee would or might have ceased to be employed in any event had fair procedures been followed;

(3) Is the evidence relied on to support a Polkey reduction in compensation too unreliable or vague to be useful, and is the exercise of seeking to reconstruct what would have happened too uncertain to ground any sensible prediction based on it?

(4) If not, what is the chance - not the probability or likelihood - that that would have happened at a time in the future, and if so at what point in the future might that chance have produced the relevant event, namely the end of the employment?

(5) Has the employer satisfied the Tribunal that there was a chance of the employment terminating in the future, and if so how great or small was that chance? This is commonly expressed as a percentage.[1]

(6) Has the employer satisfied the Tribunal that employment would have continued, but only for a limited fixed period, whether or not for reasons wholly unrelated to the circumstances relating to the dismissal itself?

22. In redundancy cases where dismissal is unfair due to inadequate or no consultation, a compensatory award may sometimes comprise loss of earnings in full for a certain period, followed by loss of earnings reduced by a Polkey percentage for a further consecutive period thereafter. This may be the just result where the first period (of recovery in full) represents the time subsequent to the actual dismissal date which fair consultation would have taken; while the second period (recovery in part only) represents the continuing loss of earnings reduced by the percentage chance that the employee would have been fairly selected for redundancy if fair procedures had been followed.

23. I must also bear in mind some important propositions where an Appellant seeks to attack the reasoning in a Tribunal’s decision, or to argue that a finding was not open to it on the evidence or was perverse. I remind myself that the Appeal Tribunal must not expect pristine drafting of exquisite elegance and must not subject Tribunal decisions to textual scrutiny using the linguistic equivalent of a fine tooth comb. As Mr Brockley properly reminded me, infelicities of language do not matter unless they reveal an error of law.

24. I also remind myself that the Appeal Tribunal “must be extremely cautious not to conclude that the decision of the … Tribunal is flawed because the Appeal Tribunal would have reached a different conclusion on the evidence or thinks that another … Tribunal would have reached a different conclusion on the evidence… [or] disagrees … as to the justice of the result, the merits of the case or the interpretation of the facts” (per Mummery J (P) in Stewart v Cleveland Guest (Engineering) Ltd, EAT/683/93, at pages 9-10).

25. A further preliminary matter is that the Respondent argues in this appeal for the proposition that the dismissal was fair, but has not, on pragmatic grounds, mounted a cross-appeal seeking a ruling to that effect. Mr Brockley submits, nonetheless, that the Appeal Tribunal should uphold the Tribunal’s decision on the basis that its reasoning is correct even though it drew the wrong (and unappealed) conclusion that the dismissal was fair.

26. Mr Brockley defended the reasoning of the Tribunal and its decision to reduce compensation by 100 per cent, submitting, in effect, that it must have found that this was an exceptional case as described by Lord Bridge in Polkey, where consultation would have been utterly useless or futile, even though the Tribunal did not say so in terms and even though, if it had, it would or should have decided that the dismissal was fair.

27. I have a number of difficulties with this unusual submission. The first is that the Tribunal did not say that consultation would have been useless and futile; though it is true that part of its reasoning on the Polkey issue might have led it towards that conclusion. The second difficulty is that the Polkey issue does not arise at all if the dismissal is fair. The Tribunal can only embark on that exercise if it is unfair.

28. The third difficulty is that the fairness of the dismissal is not in issue in this appeal. I would feel inhibited about impugning an unappealed decision by the back door. The final difficulty is that the Tribunal was right to find the dismissal unfair. The unfairness lies in not undertaking any genuine consultation with an open mind, i.e. in not doing the very thing that might have made a difference to at least some of the employees in the pool, whether or not that might have included the Claimant.

29. If consultation is undertaken with a closed mind, it is indeed utterly useless and futile. Since the employer is deaf to any alternatives to dismissal, the consultation cannot make a difference to the outcome. But that is not what brings the case within Lord Bridge’s exceptional category in Polkey. His category of exceptional case is one where consultation undertaken with an open mind would be utterly useless and futile; even with the best will in the world, the employer would be unable through consultation to avoid dismissal.

30. Here, the Tribunal made clear findings supporting its conclusion that the dismissal was unfair. The financial position in February 2014 led to consideration of redundancies and research work was commissioned to look at that possibility. The research was not done. Volunteers were not called for. The board decided in June 2014 to dismiss the EST, without any consultation. The discussions thereafter were not consultation worth the name. The decision was already made. That was unfair. It was a classic case of unfairness through failure to consult.

31. I have grave doubts as to whether that reasoning can co-exist with the proposition that the consultation that ought to have taken place, but did not, would have made no difference to the outcome for any of the employees concerned. It could only (absent some external force majeure event) have been incapable of making such a difference if it were a sham, in which case there would be no point in it having been undertaken at all. A Polkey reduction on the facts here only makes sense if it could be said that the consultation which, unfairly, did not take place, would have generated a nil or reduced chance of this Claimant avoiding dismissal, even though others in the pool might have done.

32. I turn to consider the four grounds raised by the Claimant in this appeal. The first is that the Tribunal misdirected itself on which party bore the burden of satisfying the Tribunal in relation to the Polkey issue. It is not apt to describe this as a burden of proof. A burden of proof is an evidential burden to prove a fact on the balance of probabilities. In a Polkey situation, the burden on the employer is not to prove any fact on the balance of probabilities, but to satisfy the Tribunal that a future chance would have happened (as discussed above).

33. Mr McNerney submitted that the Tribunal failed to require the Respondent to discharge that burden, and looked to the Claimant to provide evidence that the consultation that should have taken place, would or might have saved him from dismissal. Mr Brockley resisted that, saying the Tribunal correctly directed itself on the law, and was entitled to rely on evidence called by the employee as well as the employer.

34. There was no reason why the employee’s evidence could not help the employer discharge the burden. That happened here, said Mr Brockley: the Tribunal heard evidence from Ms Keane, and differentiated her position from the Claimant’s. Her evidence showed that she had worked in a non-EST, administrative role. The Claimant had not. That meant it was open to the Tribunal to find that Ms Keane, but not the Claimant, could potentially have been redeployed, had reviews been carried out or volunteers for redundancy sought.

35. I doubt whether the Tribunal made any error of law in directing itself on the nature of the Polkey exercise, including the burden on the employer. The direction at paragraph 138 includes two uses of the word “likelihood” where “chance” would have been more apt. That may or may not be more than a linguistic point. In paragraph 139, the Tribunal recognised that it was “for the employer to bring forward any relevant evidence” but “we are required to have regard to all the evidence when making that assessment”, including evidence called by the employee.

36. There was no clearly discernible error of law in the Tribunal’s description of the correct legal approach to the exercise. Did it nonetheless fail to apply correctly the law which it had described (linguistic infelicity apart) correctly? In its account of the facts, the Tribunal stated (paragraph 33) that it was “relevant that Mrs Keane had been employed for a number of years by Paycare and had prior to working in the sales team occupied a different role”. The Tribunal said it would return to that point.

37. It did so at paragraph 181, asking itself whether the identified steps that fairness required (reviewing the SMT or commission structure, and seeking volunteers for redundancy) “would have resulted in any different position for Mr Grayson”. In the same paragraph, the Tribunal reasoned that Ms Keane could undertake alternative roles within the Respondent’s business, whereas “we heard no evidence that would have made any difference to the outcome for him”.

38. It is arguable from that use of language that the Tribunal wrongly placed the burden on the Claimant to satisfy the Tribunal that he might have avoided dismissal if the Respondent had acted fairly. However, the inapt language in paragraph 181 must be read in the context of the earlier apparently correct direction on the law. On balance, it may be that the Tribunal’s statement that it heard “no evidence” on the issue favourable to the Claimant’s case should be read as the Tribunal saying it had heard significant evidence to the contrary. This ground, taken in isolation, might not have persuaded me that there was any material legal flaw in the decision that would justify interfering with it.

39. I turn next to consider the second, and linked, ground of the appeal: that the Tribunal’s finding that a fair procedure would have made no difference to the outcome was unsupported by any evidence to that effect. Mr McNerney’s complaint was that the Tribunal did not consider the difference which consideration of the alternatives to outright redundancy of the whole EST (calling for volunteers, reviewing the commission structure, reviewing the SMT and reviewing the EST) might have made or not have made.

40. This is because, the Claimant argues, there was no such evidence. The Respondent did not adduce any analysis of what the reviews that were not done, and the call for volunteers that was not made, would have achieve or rather not achieved. The evidence was lacking that costs could not have been saved by these alternative measures on which consultation did not take place.

41. The Respondent, through Mr Brockley, accepted that the Tribunal’s reasoning is very brief on this point; brevity, he said, is a virtue. He did not suggest the Respondent had adduced evidence about what would have happened if the employer had carried out the reviews and called for volunteers for redundancy. The essential point, he submitted, was that there no was alternative role for the Claimant to fill and therefore, as the Tribunal briefly found, no way he could have avoided dismissal by the same date as his actual dismissal date. That was a defensible finding with which the Appeal Tribunal could not properly interfere.

42. I consider that this ground of appeal is well founded. I do not accept that once the Tribunal had found there was no alternative role for the Claimant to fill, that was the end of the matter. The Tribunal’s finding that the Claimant had never worked for the Respondent outside the EST does not deal with whether that fact meant there was a 100 per cent chance he would have been dismissed by the same date. To reach the latter conclusion, the Tribunal had to consider the effect of the Claimant’s lack of non-EST experience within the Respondent.

43. The Tribunal did not do this. It must have assumed that the Claimant’s lack of prior non-EST experience made him “un-redeployable”, in contrast to Ms Keane. But would he have needed to be redeployed? If the review of commission structure had taken place, what would it have produced? Might the Claimant or others have been prepared to work for lower commission or none, with alternative and cost-saving pay arrangements? What if the reviews had produced recommendations that would have saved considerable costs?

44. None of these issues was discussed in the Tribunal’s decision. Nor did it discuss what would have happened if a call for volunteers had taken place. Was the Claimant really “un-redeployable” to the position of a notional volunteer in a different role? The Tribunal must have assumed so. But it did not ask itself whether the Claimant was adaptable; whether he would have tried to persuade the employer that lack of experience did not matter; whether the reviews that were not done might have produced a restructured workforce with individuals mixing sales and non-sales work; and so forth.

45. It did not ask itself those questions for the very good reason that the Respondent did not call evidence to negate any of those (which are by way of example) or other hypothetical scenarios. There was therefore very little evidence on the basis of which to conclude that the Respondent had shown a 100 per cent chance that the Claimant would have been dismissed by the same date as he was in fact dismissed.

46. I am concerned that the Tribunal’s decision that there should be a 100 per cent Polkey reduction looks suspiciously like a finding that, on the balance of probabilities, the Claimant would have been fairly dismissed by the same date as his actual dismissal if a fair consultation process had taken place. In paragraph 182, the Tribunal reasoned that the Respondent “could have” completed a fair consultation process very quickly, over the same time period as that leading to the Claimant’s dismissal.

47. But nothing in the decision indicates that the Tribunal evaluated the chance that the Respondent would have done that, beyond saying that there would be no award of compensation and thereby implying that the chance must have been 100 per cent. The Tribunal stated baldly at paragraph 183 that “had a fair procedure been followed the claimant would have been dismissed in any event”. The “judgment” section preceding the reasons simply says that “[t]he claimant would have been dismissed in any event by the same date”.

48. There is no explanation of how the Tribunal came to assess the chance of that at 100 per cent. The language used (“would have been dismissed”) says nothing about the quantum of the chance. I accept the argument that the Tribunal failed to evaluate the quantum of the chance and I think it may well have confused the standard of proof on the balance of probabilities with the Polkey exercise of evaluating the chance that a future event would have happened, on the basis of a scenario supported by evidence.

49. Thirdly, it is said that the decision on the Polkey issue was perverse. I do not think that contention adds anything to the second ground of the appeal, already discussed. I accept, as indeed did Mr Brockley, that there is - to say the least - a tension between the conclusion that the dismissal was unfair for want of fair consultation, and the conclusion that a fair consultation process would have left the Claimant 100 per cent certain of the same outcome by the same date.

50. If that amounts to perversity, then the third ground of appeal would be well founded. But it would not of itself necessarily amount to perversity. There may be cases where the characteristics of an employee are such that a hefty Polkey reduction is justified even where unfair redundancy procedures could have benefited other employees such as (to borrow from the facts of this case) Ms Keane.

51. I prefer to base my decision on the second ground (and on the fourth ground to which I am coming), since the real flaw in this decision is the failure properly to evaluate, on the basis of evidence and with the burden firmly on the employer, the chance of the Claimant avoiding or suffering dismissal had a fair consultation process taken place.

52. Finally, Mr McNerney criticises the paucity of the Tribunal’s reasoning in relation to the Polkey issue. I do not accept Mr Brockley’s submission that the reasoning is brief but “Meek compliant” (see Meek v City of Birmingham District Council [1987] IRLR 250 CA). For the reasons already given, the decision does not tell the Claimant even in outline why the Tribunal concluded that there was a 100 per cent chance that he would have been dismissed by the same date if a fair procedure had been followed. He was therefore not told by the Tribunal why he lost his claim for any compensation apart from his redundancy payment. The reasoning is not Meek compliant on that point; indeed, it is virtually non-existent.

53. The parties were agreed that if the appeal were to succeed to any extent, the Polkey issue, and that issue alone, should be remitted for further consideration. At first, the Claimant advocated remission to a differently constituted Tribunal, and competing submissions were made in the light of the guidance from the then President, Burton J, in Sinclair Roche & Temperley v Heard [2004] IRLR 763, at paragraph 46.

54. However, after further discussion with counsel, it emerged that the Respondent accepted that it could not be permitted to call further evidence on the remission, since (see Kingston v British Railways Board [1984] ICR 781 CA, per May LJ at 796 and per Dillon LJ at 797) remission is not a good reason to defeat the strictures of the rule precluding the calling of fresh evidence that could with reasonable diligence have been called earlier (Ladd v Marshall [1954] 1 WLR 1489).

55. That being so, it would be difficult for a freshly constituted Tribunal to deal with the remission: it would be confined to a largely paper exercise, examining the previous decision, this judgment, and such further submissions as it might permit or require from the parties. It would not have the benefit of having heard - albeit as long ago as April 2015 - the oral evidence heard by the previous Tribunal.

56. Sensibly, the parties therefore agreed at the hearing of the appeal that the remission should be to the same Tribunal as before. There was some discussion about whether the reconvened Tribunal should include the participation of lay members sitting with the Employment Judge, as on the last occasion. The lay members had taken part, I infer, mainly because of the whistleblowing claim rather than the unfair dismissal claim.

57. I think the right course is simply to remit the matter to the same Tribunal for reconsideration of the Polkey issue. The standard wording of the Appeal Tribunal’s Order includes enough flexibility to enable the Regional Employment Judge to direct that the Tribunal should sit in a different constitution, for example if a lay member proves to be unavailable. I propose simply to adopt that wording in the Appeal Tribunal’s Order. As to the scope of the remission, I think the best formulation is simply to remit “the Polkey issue”.

[1] The percentage expresses the likelihood that the event to which the chance is relevant (dismissal) would have happened in the scenario envisaged by the employer of what would have happened had fair procedures been followed. This should not be confused with the “51%” formulation sometimes used to describe the standard of proof on the balance of probabilities. As Browne-Wilkinson J famously said, there is no need for an all or nothing decision (Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91, approved in Polkey).

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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Grayson v Paycare (Unfair Dismissal: Polkey deduction) [2016] UKEAT 0248_15_0507 (05 July 2016) URL: http://www.bailii.org/uk/cases/UKEAT/2016/0248_15_0507.html Cite as: [2016] UKEAT 0248_15_0507, [2016] ICR D13, [2016] UKEAT 248_15_507

United Kingdom Employment Appeal Tribunal