The claimant complained that she was being sexually harassed by a Mr Ellis, the cousin of the Managing Director of the respondent. He was suspended for 5 days while investigations took place. It was found that there was insufficient evidence to discipline him and, although the claimant and other witnesses were given the opportunity to amplify their witness statements, they did not do so. The claimant and 2 other colleagues were then made redundant in an effort to stem the losses the respondent was incurring; no attempt was made to comply with the statutory dismissal procedures. Meanwhile, Mr Ellis was restored to work, although he too was later made redundant. The claimant maintained that she was not made redundant because of financial considerations but because she was being victimised for having raised complaints, and her belief was confirmed when she learnt that, notwithstanding she, a victim of Mr Ellis' conduct, had been dismissed, he was restored to his post. The ET found that Mr Ellis' conduct constituted harassment; the claim against him was settled between the parties. However, the ET also found that the respondent had made out its defence on the basis that as soon as Mr Ellis' misconduct was reported it took all reasonably practical steps to prevent such behaviour recurring. The ET found that the decision to dismiss was an act of unlawful victimisation and awarded a sum for injury to feelings in the lower Vento band, uplifting the amount by 10% in recognition of the respondent's failure to comply with the statutory procedures. The claimant appealed against the liability and remedy judgments.

The EAT concluded that the ET had misdirected itself as to the defence of having taken reasonable steps to prevent discriminatory conduct by employees. It relied on steps taken after the acts of discrimination, rather than before. The ET had given no reasons for awarding a 10% uplift for failure to comply with statutory procedures and had failed to give adequate reasons for awarding a sum as damages for injury to feelings.

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Appeal Nos. UKEAT/0035/11/JOJ

UKEAT/0183/11/JOJ

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 13 June 2011

Before

HIS HONOUR JUDGE SEROTA QC, MR T HAYWOOD, MS P TATLOW

MISS C FOX (APPELLANT)

OCEAN CITY RECRUITMENT LTD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR LIAM VARNAM (Representative)

Employment Law Advocates
Hamilton House
1 Temple Avenue
London
EC4Y 0HA

For the Respondent
MR STEVEN CARRIGAN (Solicitor)

Griffith Smith Conway
154 Church Road
Hove
East Sussex
BN3 2DL

VICTIMISATION DISCRIMINATION – Protected disclosure

SEX DISCRIMINATION – S4(2) defence

i) Employment Tribunal misdirected itself as to the defence of having taken reasonable steps to prevent discriminatory conduct by employees. It relied on steps taken after the acts of discrimination, rather than before.

ii) Employment Tribunal gave no reasons for awarding a 10% uplift for failure to follow statutory disciplinary procedures notwithstanding that the failure was complete.

iii) The Employment Tribunal failed to give adequate reasons for awarding the sum of £1,500 as damages for injury to feelings.

1. These are two appeals from decisions of the Employment Tribunal at London South presided over by Employment Judge Taylor, who sat with lay members. The first decision on liability was sent to the parties on 8 November 2010, and the decision on remedy was sent to the parties on 3 February 2011. The Employment Tribunal found that the Claimant had been harassed by the Second Respondent, Mr Ellis, but that the First Respondent had established the defence of having taken reasonable steps to prevent the harassment. It allowed a claim for victimisation; it dismissed the claim by the Claimant against Mr Ellis on withdrawal; the claim against him had been settled; he paid the sum of £3,500 to settle the claim. There was also an issue which is not relevant to the appeal relating to unauthorised deductions; this claim was dismissed. The issue of liability was referred to this Tribunal by HHJ Peter Clark on 2 February 2011 and on remedy by HHJ McMullen QC on 3 May 2011.

1. We now turn to the factual background, which we will take from the decision of the Employment Tribunal. The Respondent was a recruitment agency specialising in recruiting professional drivers for clients. The Claimant and her mother, Mrs Warren, were employed by a company whose business transferred to the Respondent less than a year before her dismissal. Although it was asserted there had been a TUPE transfer, there was no finding by the Employment Tribunal and also no claim for unfair dismissal, presumably because the Claimant accepted she did not have the 12 month qualifying period.

1. The manager of the Croydon branch of the Claimant was Mr Ellis, whom we have mentioned. He was a cousin of the Managing Director, Mr Malcolm Gates, and also of Mr Malcolm Gates' brother, Mr Larry Gates, who was the Operations Manager. The Employment Tribunal was satisfied that there was sexual banter between the Claimant and Mr Ellis, but also that he made unwanted comments, despite being requested not to do so by the Claimant's mother, Mrs Warren. In January 2009 Mrs Warren complained about Mr Ellis' management style and alleged conduct towards the Claimant to Mr Larry Gates' wife, and said that she would not work under such conditions. Mr Larry Gates spoke to Mrs Warren and called Mr Ellis to a disciplinary hearing on 20 January 2009. He was suspended for five days while investigations took place. His immediate reaction to the allegations was "bollocks", and that he was being "stitched up" by Mrs Warren and female staff.

1. Mr Saunders, the manager of the First Respondent's Crawley office, was asked to prepare a report and audit of the Croydon office and also to consider the truth of the allegations against Mr Ellis. He was asked to take witness statements. The Claimant's witness statement made a complaint about the constant reference by Mr Ellis to the Claimant's breasts, which she found embarrassing and demoralising; however, there was a lack of detail in her complaints and there was an absence of any corroboration of this complaint from her mother, Mrs Warren, or from another witness. This led Mr Saunders to find there was insufficient evidence to discipline Mr Ellis, and although Mrs Warren, the Claimant and the other witness were given the opportunity to amplify their witness statements they did not do so. Mr Saunders did report that the Claimant had complained that Mr Ellis had made a number of sexual comments about her, but also there were complaints about his general mismanagement. Mr Saunders concluded that Mr Ellis had not managed the office to the appropriate standards. This needed to be considered against the background of the Respondent's poor trading, and it was making financial losses which in early 2009 were running at £38,000 per month. There was however insufficient evidence to justify Mr Ellis' continued suspension, disciplinary action, or to dismiss him for sexual harassment. Meanwhile Mr Ellis had taken legal advice and was pressing to have his suspension removed. All three members of staff refused an offer to meet Mr Ellis to resolve the difficulties. They also refused to reconsider their position and they refused to work with Mr Ellis.

1. Mr M Gates then concluded in March 2009 that it was necessary to stem the losses in the Respondent by downsizing, and accordingly he made the three members of staff at the Croydon office (that is, Mrs Warren, the Claimant and Ms Gladwin, to whom I have referred without naming her) redundant and restored Mr Ellis. On 9 March 2009 Ms Gladwin, Mrs Warren and the Claimant were all made redundant; the effective date of termination was 22 March 2009. There was no attempt made by the Respondent to comply with the statutory dismissal procedures which were then in force, let alone any redundancy procedure. Losses continued to be made at the Croydon office notwithstanding the downsizing and the restoration of Mr Ellis, and in June the Croydon branch was closed and Mr Ellis was himself made redundant. The Claimant and Mrs Warren accepted there had been losses at Croydon but they maintained this was not the reason for the dismissal. They maintain that the Claimant was being victimised for having raised complaints, and her belief in the unfairness of the dismissal was confirmed when she learned that, notwithstanding she, a victim of Mr Ellis' conduct, had been dismissed, Mr Ellis was restored to his post.

1. We now turn to the decision of the Employment Tribunal on liability. The Employment Tribunal directed itself as to the law by reference to section 4A of the Sex Discrimination Act and the liability of employers under sections 41.1 and 41.3 of the Sex Discrimination Act. The Employment Tribunal, it is right to say, at paragraphs 56 and 57 did not accept this was the most serious case of harassment:

"56. In arriving at our decision, we accepted the Claimant's evidence that very soon after she began working for the company Mr Ellis began to make sexual comments and innuendos directed towards her and that his conduct continued throughout her employment. We found that Mr Larry Gates who gave evidence that he had heard some banter between the two of them of a sexual nature corroborated her evidence notwithstanding that he formed the view that the Claimant was a willing participant. We did not accept Mrs Warren's evidence that she had made a third witness statement detailing her allegations concerning the behaviour of Mr Ellis towards her daughter for Mr Saunders' investigation. We did not accept her evidence that Mr Ellis made sexual comments about the Claimant up to two or three times a day. We felt that if he had she would have made more than one complaint to him directly. However, the tribunal have taken into account the fact that the complainant, suffered harassment from a senior manager who was wholly responsible for creating a working atmosphere in which such talk was engaged in.

57. In the absence of direct evidence from Mr Ellis we were unable to conclude that some of the conduct Mr Ellis engaged in was unwanted verbal conduct that had the purpose of creating an offensive environment for the Claimant. However, we were satisfied that some of the conduct Mr Ellis engaged in was unwanted verbal conduct that had the effect of creating an offensive environment for the Claimant."

1. The Employment Tribunal found that Mr Ellis' conduct had the effect as opposed to the purpose of creating an offensive environment for the Claimant. They found however that the Respondent had made out its defence on the basis that as soon as Mr Ellis' misconduct was reported it took all reasonably practical steps to prevent such behaviour recurring. I shall read out paragraphs 58 and 59:

"58. Having found that the Claimant's allegations of sexual harassment succeeded we considered whether the Respondent escaped liability under S.41(1) SD Act for the discriminatory acts of Mr Ellis by making out the defence in S.41(3). We were satisfied that the Respondent took all reasonably practical steps to prevent acts of discrimination by Mr Ellis as soon as the matter had been reported to Mrs Gates. We concluded that by suspending Mr Ellis as soon as the allegation of sexual harassment was reported to them the Respondent took all reasonable steps to protect the Claimant from the unlawful actions of her manager.

59. The Tribunal considered whether the Respondent could reasonably have taken action before the specific complaints were made. We bear in mind that the Claimant failed to supply any detail of such claim before the written complaint made during the investigation. We consider that it was not reasonably evident to the Respondent before Mrs Warren's complaint that Mr Ellis' behaviour constituted acts of harassment."

1. It found that the Claimant had been dismissed because of the financial difficulties and a management problem caused by her refusal to work with Mr Ellis. Nevertheless, the dismissal was to be regarded as an act of victimisation because it was so closely connected to the complaint of harassment.

1. At paragraphs 18 and 19 of the remedies Judgment the Tribunal, having considered the parties' submissions, turned to consider whether it should make an award of compensation to correct an injury to feelings. It found the decision to dismiss was an act of unlawful victimisation; it bore in mind the Claimant gave evidence that she thought she was being punished for making a complaint. Notwithstanding that she was mistaken, however, the Employment Tribunal considered the evidence the Claimant gave of hurt feelings as the result of the decision to dismiss was sufficient to establish an award of compensation for injury to feelings, and that such an award should be made. Having regard to their findings of fact, they considered that the appropriate award was in the lower Vento v Chief Constable of West Yorkshire [2003] ICR 318 band, in which the Court of Appeal laid down guidelines for compensation for injury to feelings and discrimination cases. The Employment Tribunal concluded that the injury to feelings should be in the lower Vento band, and concluded that the appropriate level of compensation was £1,500.

1. The Employment Tribunal recorded at paragraph 19 that it took into account that the Respondent acted promptly and correctly in response to the Claimant's complaint of sexual harassment. It also had regard to the fact the Respondent faced a dilemma caused firstly by the lack of cogent evidence from the Claimant and her colleagues in support of their complaints against Mr Ellis, and secondly by the Claimant's refusal to return to work. The Employment Tribunal was satisfied the Respondent also had to take some action in response to real and pressing financial difficulties that existed at that time. The Employment Tribunal then went on to award, as I have said, £1,500, together with a ten per cent uplift. The ten per cent uplift was in response to the Respondent's failure to comply with the statutory procedures. The Claimant was also awarded loss of earnings of some £3,780.75.

1. The first point taken by the Appellant in the Notice of Appeal relates to the issue of vicarious liability. It is quite clear that, as the statute itself makes clear, the obligation on employers is to take steps before the discriminatory action has taken place. I myself had occasion to consider this in the case of [Mahood v Irish Centre Housing Ltd]() [2011] EqLR 586 when I said at paragraph 53:

"We would have thought that section 32(3) itself made clear that the defence is limited to matters done in order to prevent a discriminatory act and that it could only have effect therefore, if steps were taken before that act. The language used makes this clear, ie the use of the word 'took' in the past tense requires the employer to prove what he had done in the past. Accordingly we would have thought that no authority is necessary for this proposition but for the sake of completeness we refer to the cases cited to us; Marks & Spencer PLC v Martins [1997] EWCA Civ 3067 and Canniffe v East Riding of Yorkshire Council [[2000] IRLR 555] where Burton J observed that section 32(3) of the 1970 act was directed at those steps which an employer takes in advance of a discriminatory act to prevent it from happening. Similarly in Jones v Tower Boot Co Ltd [1997] IRLR 168 it was said by the Court of Appeal that the defence was open to an employer, 'who has used his best endeavours to prevent such harassment' (our italics)."

1. At one time Mr Carrigan was minded to submit that even if there had been misdirection the misdirection would have made no difference whatever, because the Claimant would have been dismissed in any event. It seems to us that this argument did not hold water, and indeed Mr Carrigan conceded that the misdirection was sufficiently fundamental as to concede that this aspect of the case needed to be remitted to the Employment Tribunal.

1. Mr Varnam went on to pursue two further grounds of appeal. It is convenient to deal with the Vento point first. He submits that so far as the Vento rule is concerned the Employment Tribunal needs to concentrate solely on the effect on the Claimant of the matters complained of. The Employment Tribunal in this case did not concentrate solely on the Claimant's feelings, as is apparent from paragraphs 18 and 19 of the remedies decision. Mr Carrigan did submit to us that paragraph 18 rather cured the defect in paragraph 19, which clearly only refers to matters of mitigation, so as to speak, so far as the Respondent is concerned.

1. However, as my colleagues Ms Tatlow and Mr Haywood have pointed out, there is no explanation given by the Employment Tribunal as to how it came to arrive at the figure of £1,500 and what matters were taken into account, and in those circumstances it seems to us that this award cannot stand. We say nothing further about it, but the Employment Tribunal, when the matter is remitted to them, will obviously have to consider what level of award is appropriate, having regard to the fact that the Claimant has recovered £3,500 by agreement with Mr Ellis and that the Respondent has on our finding been adjudged to be vicariously liable for his actions, so liable to pay such compensation if any as the Employment Tribunal considers appropriate.

1. So far as the ten per cent uplift is concerned, we note that this is simply dealt with at paragraph 20 in two short sentences: "The Tribunal awards injury to feelings of £1,500," and then it adds these words: "plus a 10% uplift." There is no explanation as to why ten per cent was chosen, and there is no consideration of the authorities. This was a case, it must be borne in mind, in which there had been a fundamental failure to comply with the appropriate statutory procedures. This is not a case in which there had been an inadequate attempt to comply, but no attempt at all. In those circumstances, there is authority that the Employment Tribunal will need to consider when the matter is restored. In particular we draw attention to the decision of [Wardle v Credit Agricole]() [2011] EWCA Civ 545. This was a decision of the Court of Appeal comprising the Master of the Rolls, Smith LJ, and Elias LJ, who gave the principal Judgment. He said at paragraph 24:

"24. In my view, some understanding of Parliament's intention can be gleaned by a careful consideration of the structure of the subsection. As the EAT has observed (e.g. in the Lawless v Print Plus [2010] All ER (D) 92 case) the tribunal is not charged with fixing a percentage somewhere between 10 and 50% as it deems just and equitable. Had that been the formulation then I can see that it may well have been appropriate for a tribunal to choose 10% for the least serious breaches and 50% for the most flagrant with the rest falling at the appropriate point within the range. Rather the tribunal is enjoined to start with 10% and it must then consider whether it is just and equitable to increase that percentage and, if so, by how much.

25. As Lady Smith pointed out giving the judgment of the EAT sitting in Scotland in McKindless Group v McLaughlin [2008] IRLR 678, para 13, this requires a tribunal to explain what facts or circumstances surrounding the failure to comply make it just and equitable to go beyond the minimum at all. This should not be an automatic response whenever the tribunal thinks that the breach is more than minor. On the contrary, there must be something about the particular circumstances which justifies the conclusion that 10% would be inappropriate and ought to be increased. The circumstances need not be exceptional, otherwise that word would have been used here as it is in subsection (4), but in my judgment they must be such as to clearly justify concluding that the starting point of 10% would not adequately reflect the degree of culpability.

26. In my opinion an increase to the maximum of 50% should be very rare indeed. It should be given only in the most egregious of cases. An example given by Lady Smith in the McKindless case which would at any event get close to the maximum is where there is a clear finding that the employer is determined to dismiss the employee whatever the merits and has deliberately and cynically ignored the procedures in case they get in the way of his being able to do so. However, the mere fact that the employer has ignored the procedures altogether would not in my view justify an increase to the maximum, although it would often justify some increase beyond 10%."

1. This is not one of the most serious cases, and this is not a case where there has been any egregious conduct on the part of the Respondent as found by the Employment Tribunal.

1. We also draw attention to the decision of Underhill P in [Lawless](). At paragraph 9 of that Judgment the Employment Appeal Tribunal criticised the Employment Tribunal for giving no reason why it had chosen the figure of ten per cent for the uplift. It was suggested, in this case by Mr Carrigan, that it had been laid down by Smith LJ in the McKindless case that there was no obligation on the Employment Tribunal to give reasons for making an award unless it was more than ten per cent. I do not believe that is what Smith LJ was saying and is not borne out by the Judgment of Underhill P to which I have just referred.

1. We also refer to the decision of [Brown v Baxter (T/A Careham Hall) ]()UKEAT/0354/09/SM in which the Employment Appeal Tribunal held that in a case where there has been a complete failure to comply with the statutory dismissal procedures the level of uplift should be generally between 30 and 50 per cent, and it might be increased if there were other aggravating factors. In this case it was suggested there were aggravating factors, in that the Respondent had failed to follow its own procedures, which we have at page 74 of the bundle, and it was closely tied to the issue of victimisation. However, we do not consider this is a case where aggravating factors beyond the total failure to comply with the dispute procedures have been made out. Nonetheless, it will be necessary for the Employment Tribunal to reconsider the level of the uplift, having regard to the dicta in Brown. We consider that the decision of the Employment Tribunal fails to recognise the appropriate level of uplift, and no reasons whatever have been given for its decision. It may be, and we do not know, that there were factors that would justify the Employment Tribunal in limiting the uplift to ten per cent, but if there were it is not apparent that they were from the Judgment.

1. So far as disposal is concerned, this matter must be remitted to the Employment Tribunal to reconsider the issue of vicarious liability on the basis of this Judgment; to reconsider the issues of the uplift and the failure to comply with statutory procedures; and with the award for injury to feelings, again in the light of our Judgment. It should be remitted to the same Employment Tribunal, and the manner in which the Employment Tribunal deals with this matter is a matter for its discretion, whether it deals with it on the basis of further submissions in writing or calls for further oral submissions or wishes to hear further evidence.