The claimant was found to have been automatically unfairly dismissed. His compensation was reduced by 20% for contributory fault, and also the Tribunal calculated compensation according to the claimant’s potential earnings limited to a period of 9 months, saying that the employment would have come to an end by then anyway. The Tribunal based their decision on their view of the relationship between the claimant and the respondent, saying that ‘it would appear that the claimant set out to irritate [the respondent] and indicate to him impending litigation in relation to his working conditions…’ The claimant appealed against the limit of 9 months.

At the EAT, counsel for the claimant raised the point that the reasons which the Tribunal appeared to accept as giving rise to dismissal in the future would not justify a fair dismissal, namely allegations of breach of contract and failure to observe statutory regulations. This would contravene the understanding that, if a Tribunal is contemplating a dismissal as being the event which gives rise to the end of compensation which would otherwise continue, it must necessarily be contemplating a fair dismissal. The EAT concluded that it could not be quite sure what the Tribunal had in mind as being the occasion for the claimant hypothetically leaving the respondent’s employment in the future, and the ET judgment fell short of the extent of reasoning required.

____________________

Appeal No. UKEAT/0237/10/JOJ

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 30 November 2010

Before

THE HONOURABLE MR JUSTICE LANGSTAFF

MR M CLANCY

MRS M V McARTHUR BA FCIPD

MR P JOHNSON (APPELLANT)

ROLLERWORLD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR STEPHEN HEATH (of Counsel)

Instructed by:
Messrs Lyons Davidson Solicitors
Victoria House
51 Victoria Street
Bristol
BS1 6AD

For the Respondent
MR GARY MORTON (of Counsel)

Instructed by:
Messrs Birkett Long LLP Solicitors
Essex House
42 Crouch Street
Colchester
CO3 3HH

UNFAIR DISMISSAL - Compensation

Employment Tribunal decided that the employment of the Claimant would have come to an end within 9 months, and thus limited compensation to that period for a dismissal on the ground of conduct, yet where contributory fault was only 20 per cent. As examples of the possible conduct which might precipitate the anticipated dismissal the Tribunal had relied predominantly on behaviour which the employee was entitled to adopt. Its decision was insufficiently reasoned and in the light of the legitimate behaviour apparently relied on as potentially leading to a justified dismissal might be wrong: the Appeal Tribunal remitted the case.

1. This appeal arises out of a decision of the Employment Tribunal at Bury St Edmunds, Reasons for which were dated 8 October 2009.

1. The Tribunal upheld the employee Mr Johnson's claim that he had been unfairly dismissed. They found that he had been automatically unfairly dismissed, contrary to section 98A of the Employment Rights Act 1996, but that had they had to consider the matter under section 98(4) they would anyway have found the dismissal unfair. That was because there had been inadequate investigation into a complaint of misconduct by him, unfair process leading to the dismissal and an overstatement of the seriousness of that which had happened.

1. They found contributory conduct in the behaviour of the Claimant in the incident which gave rise to the dismissal but assessed that at 20 per cent. No issue arises in this appeal as to those findings.

1. The issue centres entirely upon the conclusion which the Tribunal came as to compensation. However, it is necessary to put this in the context of the case as a whole.

1. The background facts are that there was an altercation, at their work, between the Appellant (the employee), who was a Duty Manager at a roller skating rink, and a Mr Starr who was the owner of the rink.

1. In the course of that altercation the Claimant alleged that Mr Starr had deliberately trodden on his toe and that this constituted an assault upon him. The Tribunal was to find, as indeed the employer had said at the time and the police had found having viewed CCTV recordings of the incident in question, that the incident had been entirely accidental on Mr Starr's part.

1. It had "no doubt" (see paragraph 42) that the Claimant had followed Mr Starr around and raised his voice towards him and was complaining loudly. That was inappropriate in the workplace, and both embarrassing and noticeable to those who had witnessed it and gave evidence. However, it fell short of abuse, swearing or threatening words and behaviour; rather it was rude and accusatory (see paragraph 40).

1. The Employment Tribunal came to its conclusions, on remedy, in four very short passages. Paragraph 46 is at the heart of this appeal. It reads:

"We have however, formed a very firm view that the relationship between Mr Starr and Mr Johnson was very strained and unlikely to continue for long. The Claimant gave Mr Starr the impression that he wished in some way to make claims for hours worked between 2003 and 2005, during the course of the disciplinary process he informed staff that they were underpaid and accused the Respondent of breaching their duty of care in relation to him in connection with the incidents of 2003, 2005 and the incident concerning standing on his toe. He was also suggesting action for breach of Paternity Leave Regulations some three years earlier and had reported Mr Starr to the Police for an offence of occasional actual bodily harm which derived from an accident prompted, in the view of the Police, by the Claimant blocking Mr Starr's path. It would appear that the Claimant set out to irritate Mr Starr and indicate to him impending litigation in relation to his working conditions and those of the other staff. The relationship between Mr Starr and Mr Johnson, in our judgment, would not have lasted very long, and the Tribunal is only prepared to award compensation for a total period of nine months."

It then set out calculations based upon the figures of potential earnings for those nine months.

1. Mr Heath, for the Claimant, complains that in that paragraph the Tribunal set out a number of reasons which led to the conclusion that there would be a parting of the ways between Mr Johnson and his employer at Rollerworld.

1. It is common ground between the parties that those reasons are essentially; (1) the impression that the Claimant gave the Respondent that he wishes, in some way, to make claims for hours worked between 2003 and 2005; (2) the allegation about informing staff that they were underpaid; (3) the accusation that the Respondent was in breach of the duty of care arising out of the implied term in the contract that an employer will provide a safe place of work for an employee (alternatively arising under section 1 and 2 of the Health and Safety at Work etc. Act 1974); (4) that the Claimant accused the Respondent of breaching the duty of care in connection with the incident concerning standing on his toe, the same duties arising; (5) the Claimant has suggested a breach of The Paternity and Adoption Leave Regulations 2002 some three years earlier, when he had not been given the paternity leave or pay to which he complained the regulations entitled him; and (6) that he had reported the Respondent to the police for an offence of actual bodily harm which derived from an accident, that being, as we understand it, the self same incident as that involving the standing on the toe.

1. Mr Heath takes two points. He submits that here the reasons which the Tribunal appeared to accept as giving rise to dismissal in the future would not justify a fair dismissal. As he characterised them, they were all reasons which would fall either under section 104(1)(b) of the Employment Rights Act 1996:

104 "Assertion of statutory right

(1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee - …

(b) alleged that the employer had infringed a right of his which is a relevant statutory right."

It should be noted that:

"(2) It is immaterial for the purposes of subsection (1) -

(a) whether or not the employee has the right, or

(b) whether or not the right has been infringed."

If not section 104 then section 103A:

103A "Protected Disclosure

(1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure."

That takes one back to the provisions which form Part IVA of the Act which defines what qualifying disclosures are. By section 43B(1)(b) they include disclosures that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject.

1. Mr Heath says that a claim for hours worked between 2003 and 2005, that is, a claim that the Claimant had worked hours for which he did not receive pay, was an allegation of a breach of duty. It is a claim the Claimant would be entitled to make, at least if he made it within time, because of the provisions relating to unfair deductions from wages. As to the second element, informing staff that they were underpaid, that too relates to a right which they had to be paid the rate for the job for each hour of the job, otherwise suffering an unfair deduction from their wage. The duty of care is a duty to which the employer was subject. The Paternity and Adoption Leave Regulations were regulations to which the employer was subject. The offence of actual bodily harm is more personal, but Mr Heath maintains that the bulk of the matters upon which the Tribunal chose to rely (paragraph 46) were all matters which, on his submission, would have in effect made a dismissal unfair automatically if the dismissal had been for those reasons.

1. Mr Morton, for his part, argues that the Tribunal here must be understood in context. He draws attention in particular to paragraph 42 in the findings of the Tribunal as to contributory behaviour. He focuses upon the words:

"The Claimant had set out to irritate Mr Starr."

He sought to explain the Tribunal's reasons by speculating, which he confessed to doing, as to the reasons which might have lain behind any dismissal if a dismissal had followed.

1. A Tribunal is fully entitled to make an assessment, often on slim evidence, as to the loss which an unfair dismissal has caused. It is obliged to do so, to some extent, by section 123 of the Employment Rights Act. Familiar territory though it may be, it is worth repeating its terms insofar as material:

123 "Compensatory award

(1) …the amount of the compensatory award shall be such amount as the Tribunal considers just and equitable in all the circumstances…"

That is, of course, having regard to the loss sustained by the Claimant and consequence of the dismissal insofar as that loss is attributable to action taken by the employer.

1. Against that starting point the case of O'Donoghue v Redcar & Cleveland Borough Council [2001] IRLR 615 is a helpful authority. In that case the Tribunal, whose decision came for appeal before the Court of Appeal, set out a number of reasons in some considerable detail for its conclusion that an employee whom it regarded as unfairly dismissed would not have spent very much longer in the employment of her employers. It assessed that the employment would, in any event, have terminated after a further 6 months. It should be noted that the Tribunal there reasoned that she would be fairly dismissed. In particular (see paragraph 39 of the judgement), the Court of Appeal set out what the Tribunal had reasoned as giving rise to the parting of ways between employer and employee in that case.

1. Three attacks were made by counsel for the Appellant in that case upon that reasoning. The Court of Appeal dismissed each of them in holding that, ultimately, a Tribunal was entitled to limit loss to a fixed period of time should it think that that was appropriate as being just and equitable in all the circumstances as section 123 would require.

1. At paragraph 44, this was said:

"While we acknowledge its exceptional nature, we do not think that the exercise undertaken by the industrial tribunal which led to decision (4) [that is, the decision in question] is necessarily impermissible. An industrial tribunal must award such compensation as is "just and equitable". If the facts are such that an industrial tribunal, while finding that an employee/applicant has been dismissed unfairly (whether substantively or procedurally), concludes that, but for the dismissal, the applicant would have been bound soon thereafter to be dismissed (fairly)…"

[for our part we would stress that word]

"….. by reason of some course of conduct or characteristic attitude which the employer reasonably regards as unacceptable but which the employee cannot or will not moderate, then it is just and equitable that compensation for the unfair dismissal should be awarded on that basis."

1. At paragraph 61, returning to the same theme, the judgment notes:

"True it may be that such an option will rarely be open, and that it will need evidence of a compelling nature to support it. However, it seems to us that it existed in this case…"

1. From this we conclude; (1) a Tribunal is entitled, in appropriate cases, to limit compensation by reference to the period of time which it expects an employee to remain in employment with his or her present employer. This is obvious. It is stated in many cases as the starting point for the calculation of compensation. What might, for instance, affect the calculation might be economic circumstances; knowledge of an impending redundancy might, for instance, affect the length of time for which an employee would have been employed. Similarly the employee him/herself might be close to retirement age, he or she might express a desire to move, he or she might have had a better job in the pipeline, or have an earning capacity on the labour market beyond the prospects of his present job which he was bound sooner or later to exploit, and such like. All these are factors which an Employment Tribunal is entitled to take into account.

1. So too, it is entitled to take into account, in our view, the chances of an employee being dismissed where those chances are real. Those reasons may be expressed in percentage terms, since it is an assessment of the chance of a future event happening. They might also however conveniently be expressed in terms of a loss covering a period of time. The exercise is necessarily imprecise because it is an exercise of judgment. Judgment always comes with some margin of appreciation. A Tribunal may often have to do its best in difficult circumstances: but it seems to us entirely appropriate in many cases for a Tribunal to express the period of loss where there is a risk of dismissal not as being one in which a percentage is adopted to some overall continuing period of loss of earnings, to reflect the risk of dismissal balanced against the chance of continuing employment, but in which the Tribunal states that the best estimate it can make is that the employment will last for a period of months (or it may be years) having weighed the various factors telling one way and the other..

1. Thus we do not, in this case, see that there was anything inherently wrong in the Tribunal deciding that there would have been a period of months only within which the employment would have persisted.

1. However, if the Employment Tribunal is contemplating a dismissal as being the event which gives rise to the end of compensation which would otherwise continue, it must necessarily be contemplating a fair dismissal. It is no part of the Employment Tribunal's function to cap an award by imposing a time limit on continuing loss of earnings if the dismissal which it contemplates is one which is unfair. This is perhaps obvious, though one simple example not drawn from this case might suffice to illustrate it. If, let it be supposed, an employee was of a different racial group from his or her employer, in a small undertaking, a Tribunal when finding that the employee was unfairly dismissed by the employer for reasons which had nothing to do with the racial difference might nonetheless have it in mind that the employment would not last much longer if it were to have become aware that the employer had exhibited significant racial prejudice in respect of which the employee was, so to speak, on the receiving end. It would be wholly impermissible for a Tribunal in such circumstances to limit compensation to a period of time assessed by reference to such prejudice in anticipating that dismissal would in any event occur, because any dismissal inspired by such discrimination would inevitably be unfair if it happened and would give rise itself to compensation. .

1. Thus we regard it as axiomatic that if a Tribunal is anticipating a future dismissal then that dismissal has to be for good, that is, lawful reasons.

1. Where an employee and an employer behave toward each other in such a way that there is a breakdown of the trust and confidence that there ought to be between them it is not difficult to see that that might give rise to one of two consequences. One might be that the employee would choose to leave; the other might be that the employer, if the behaviour was sufficiently difficult, would use that behaviour as justifying a dismissal upon the ground of "some other substantial reason". Providing that in the circumstances it was fair within section 98(4) of the Employment Rights Act 1996 to rely on such a reason, the dismissal would be one that would meet the terms that we have identified as axiomatic.

1. However, any such conclusion needs to be carefully expressed, and in some detail as was the conclusion, as it happens, in the case of O'Donoghue v Redcar & Cleveland Borough Council to which we have referred.

1. Here paragraph 46 is, as we see it, unhelpful in its lack of clarity. We cannot tell whether the Tribunal had in mind that Mr Johnson might leave the employment of Rollerworld of his own free will, and - if he had been choosing to resign or leave to seek better employment elsewhere - what the reasons would have been. They give none.

1. We do not know if the Tribunal had in mind whether Mr Starr might, as the owner of Rollerworld, dismiss Mr Johnson from his employment. If he did so we do not know whether they contemplated that it would be for the reasons that are set out. Mr Morton draws our attention to the finding, expressed in the words quoted:

"…would appear that the Claimant set out to irritate Mr Starr…"

This indicates, in the use of the words "set out", that it was the purpose of the Claimant's action deliberately to annoy and irritate his employer. Standing on its own, such behaviour might conceivably give rise to a proper dismissal. But it does not stand on its own in this paragraph. The words are preceded by:

"It would appear that…."

That seems to us to relate the conclusion back to the earlier sentences in paragraph 46, in which the various incidents are enumerated as we have already set out. It is the fact he engaged in that conduct which is relied on for the finding of "setting out to irritate". What the Tribunal made of those incidents is not clear. The Tribunal might have had the view that when the Claimant indicated a claim for work between 2003 and 2005 the Claimant was fully entitled to do so. On the other hand, it might have had the idea that this was simply mischief making and there was no proper basis for it. It might have formed the view that informing staff that they were underpaid had no proper basis to it and was simply stirring up trouble. Equally, it might have been the notifying of workers, otherwise exploited, of their true rights. When it draws attention to the Claimant accusing the Respondent of breaching a duty of care the Tribunal expresses no view as to whether that was totally unjustified, had some proper basis though was mistaken, or was entirely justified.

1. Without any such characterisation it is difficult to know whether the Tribunal saw the irritation potentially suffered by Mr Starr as irritation at perfectly permissible claims being mentioned to him, albeit claims that he would not necessarily wish to hear, or whether they were simply deliberately irritating with no proper basis for them. In short we cannot tell from paragraph 46 whether the matters mentioned, which give rise to the conclusion that this was in irritation of Mr Starr, followed by the words "…and indicate to him impending litigation in relation to his working conditions and those of the other staff" suggest a recourse to court rather than a deliberately provocative approach. We cannot say whether those are merely examples from the evidence before the Tribunal of what it considered to have been symptoms of a relationship which had already broken down for personal reasons, which would inevitably lead to a parting of the ways for either of the permissible reasons which we have mentioned: that is, either Mr Johnson choosing to go, because he would be happier elsewhere although his employer had committed no repudiatory breach of contract toward him, or Mr Starr being in a position when he could fairly dismiss the employee for some other substantial reason arising out of his behaviour.

1. Mr Morton, in his submissions, conceded that in order to support his argument it would be necessary to indulge in considerable speculation as to what the Tribunal actually had in mind.

1. We acknowledge that the reasoning of a Tribunal is not to be regarded with the same eye as one would use to look at the drafting of a statute. Tribunals frequently may express themselves tersely when greater explanation would be better. It is no proper basis for attacking a Tribunal's decision to argue that it has not dotted every 'i' or crossed every 't'. A Tribunal does not have to do so. However, the paragraphs in O'Donoghue v Redcar & Cleveland Borough Council to which we have drawn attention remind a Tribunal that where it is making a finding such as this which is unusual, to the effect that after a period of months the employment will cease, it must give sufficient reasons to justify its conclusion. It is an error of law not to give sufficient reasons. That is because a party is entitled to know why it has lost, just as a party is entitled to know why he or she has won. Secondly, a court of appellate review, such as this court, must be in a position to know what the reasoning is in order to see whether or not there has been any error of law as alleged. Thirdly, the process of giving sufficient reasons acts as a reminder to the Tribunal of the particular points which have to be considered and is a useful aid memoir to reaching a cogent and accurate decision.

1. Here, despite the generally forgiving approach which must be adopted, we have concluded that we cannot be sure quite what the Tribunal had in mind as being the occasion for the Claimant hypothetically leaving the Respondent's employment in future. It has, in our judgement, fallen short of the extent of reasoning required.

1. We can see that the Tribunal might have had in mind that the Claimant's relationship with Mr Starr was already so poor that it was not likely to get any better. We can see it might have had in mind that some of the accusations Mr Johnson was making were unfounded, or insofar as they might have been matters which could probably be described as making qualifying disclosures, they were not made with the good faith which those sections require. All of this would have to be spelt out.

1. We can equally see that the Tribunal may have had only in mind that the Claimant was pursuing legitimate claims. If it thought the former then it would be justified in coming to a conclusion, if properly expressed, that the employment would last only for whatever period it thought was just and equitable; if the latter it would not be, in our view, entitled to come to the conclusion that on that basis the employment would end, because what it must contemplate is a fair dismissal and not an unfair one.

1. That being our conclusion on the merits of the appeal, we have accepted the invitation of both parties that in this case the matter should be remitted to the same Employment Tribunal for determination.

1. Subject to our comments in the next paragraph, that Tribunal will approach the matter in the light of this judgment, by first asking what is likely to be the parting of the ways and why. It must focus throughout upon either a fair termination - that is one reached of his own free will by Mr Johnson had he remained in employment and without him being driven by the pressures of what would otherwise be a constructive dismissal to resign, or a fair dismissal by the employer for whatever reason, such as some other substantial reason arising out of unacceptable behaviour, as the Tribunal identifies, in which case the Tribunal will have to indicate what, precisely, it has in mind as giving rise to that finding.

1. However, the Tribunal should be at liberty, having read this decision, to conclude that it would not approach the calculation of compensation in the way that we have indicated, as it originally set out to do, but approach it in some other way which would fulfil its task under section 123 of the Act.

1. For those reasons we allow this appeal and make the order we have indicated.