The claimant had been dismissed by way of redundancy without any notice or consultation. After the dismissal, the claimant wrote to the owner of the business seeking to resolve the grievance but received a blunt letter that did not attempt to address the issue. Before the tribunal, this was used to support a submission that the wholesale failure to follow procedure should result in the maximum 50% uplift.  No reason for the eventual 10% uplift were given but under the Burns/Barke procedure the ET gave reasons that broadly, the respondent had not been malicious in the dismissal and he had acted hastily because of the financial difficulties of the business.

In the appeal, the respondents were debarred and, because of that and the repeal of the relevant provisions, Underhill J declines to given any firm guidance on how employment tribunals should exercise their discretion under section 31 (3) of the 2002 Act. However he makes several broad points

* s 31(3) does not simply give tribunals a discretion to award an uplift, it has very specific structure and that it is always safer to follow the precise statutory formula – the 10% is mandatory * reasons must be given where an uplift of more than 10% is awarded and where it has declined to award more than 10% and a claimant has submitted that the award should be increased * the relevant circumstances should be confined to the failure to comply with the statutory procedures * the circumstances will include whether failure to comply was deliberate and whether other circumstances mitigated the blame for failure * provided the ET had directed itself properly the EAT will be very slow to interfere * the judgment in Aptuit  should be not be read as authority that the size and resources of the employer are irrelevant to the exercise of the ET's discretion

Against this background, the EAT concludes that none of the circumstances put forward justify refusing to award more than 10% and so they increased the award to 40%. They also found that the ET had erred in using the balance of probabilities test when considering whether the claimant would have been made redundant if the correct procedure had been followed. Instead the claimant should be compensated for the loss of chance that he would not have been dismissed, where that is a sufficient chance.

____________________

Appeal No. UKEAT/0333/09/JOJ

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal
On 27 April 2010

Before
THE HONOURABLE MR JUSTICE UNDERHILL (PRESIDENT)
MR B BEYNON
MR M WORTHINGTON

MR R P LAWLESS (APPELLANT)

PRINT PLUS (DEBARRED) (RESPONDENT)

Transcript of Proceedings

JUDGMENT

APPEARANCES
For the Appellant
MR OLIVER MANLEY
(of Counsel)
Instructed by:
Messrs Thompsons Solicitors,
Agincourt
14-18 Newport Road
Cardiff
CF24 0SW

**SUMMARY
**STATUTORY DISCIPLINE AND GRIEVANCE PROCEDURES: Impact on compensation
UNFAIR DISMISSAL: Polkey deduction

Tribunal wrong to impose no more than a 10% uplift in a case of wholesale non-compliance with statutory procedures – figure of 40% substituted.  Observations on effect of Aptuit (Edinburgh) Ltd v Kennedy.

Tribunal wrong to adopt a "balance of probabilities" approach in calculating future loss.

**THE HONOURABLE MR JUSTICE UNDERHILL (PRESIDENT)
Introduction
**1.The Respondents to this appeal are a father-and-son partnership who run a small printing business in Hereford.  At the material time they had eight employees.  The Appellant, a man in his late 50s, was employed by them as a printer.  He was dismissed for redundancy on 25 February 2008.

2.By a reserved Judgment sent to the parties on 20 November 2008 an Employment Tribunal sitting at Hereford, chaired by Employment Judge Lloyd, found that the dismissal was "automatically" unfair by reference to section 98A(1) of the Employment Rights Act 1996 and awarded the Appellant the sum of £9,101.60.  That figure comprised: (a) £1,930 by way of the unpaid portion of the basic award, after taking into account a redundancy payment already made; (b) a compensatory award of £6,353.28; and (c) a 10 per cent uplift on both figures pursuant to section 31(3) of the Employment Act 2002.  The compensatory award was calculated on the basis that if a fair procedure had been followed the Appellant would have been dismissed in any event "by the end of March 2008" - in other words a classic Polkey reduction.

3.The Appellant in his original Notice of Appeal challenged various aspects of the calculation of the award, but that Notice was rejected under rule 3 (7) of the Employment Appeal Tribunal Rules 1993.  At a hearing under rule 3 (10) I allowed the appeal to proceed on the basis of two points only, which were incorporated in an amended Notice of Appeal.  We will consider those points in turn.

4.The Respondents have not submitted an Answer and are debarred from participating in the appeal.  The Appellant has appeared by Mr Oliver Manley of Counsel, who also appeared before the Tribunal.  We are grateful to him for his succinct submissions.

**(1) THE AMOUNT OF THE UPLIFT
**5.Section 31 (3) of the 2002 Act reads as follows:

"If, in the case of proceedings to which this section applies, it appears to the Employment Tribunal that

(a) the claim to which the proceedings relate concerns a matter to which one of the statutory procedures applies,

(b) the statutory procedure was not completed before the proceedings were begun, and

(c) the non-completion of the statutory procedure was wholly or mainly attributable to failure by the employer to comply with a requirement of the procedure,

it must, subject to subsection (4), increase any award which it makes to the employee by 10 per cent and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount, but not so as to make a total increase of more than 50 per cent."

We need not set out subsection 4 which is there referred to: in short, it gives the Tribunal the power in "exceptional circumstances" to make a lesser uplift than 10 per cent or no uplift at all.

6.The Tribunal made no express findings as to the manner of the Appellant's dismissal, but the bare bones are sufficiently apparent from a letter from one of the two partners, Mr Adcocks senior, dated 25 March 2008, and a letter from the Appellant dated 17 April 2008 (though by mistake the date 17 March 2008 appears on the letter itself).  The Respondents had in the week prior to the Appellant's dismissal lost an Employment Tribunal claim brought by a Mr Berrow, who was the Appellant's partner (in the modern sense of that term) and were accordingly liable for a substantial amount.  On 25 February 2008 Mr Adcocks called the Appellant into his office and said that the Respondents could no longer afford to employ him.  The Tribunal found that the amount that the Respondents were liable for in relation to the Berrow claim was the trigger for that decision, but the principal reason was genuinely that he was redundant.  Mr Adcocks gave some figures as to the amount which the Respondents believed was due to the Appellant.  It is not clear whether it is common ground that he referred to the loss of the Berrow claim as the reason why the Respondents could no longer afford to keep him, but that may not matter.  What does matter is that it is clear that there was no prior notice to the Appellant of what was proposed, let alone consultation; nor was any attempt made at consultation at the meeting itself, either about the decision to dismiss him or about the consequences.  The Appellant was simply presented with a fait accompli.  It was not until Mr Adcocks' letter of 25 March 2008 that the Appellant was given any written confirmation of either the reason for the dismissal or the amount which it was proposed to pay him.

7.On 17 April 2008 the Appellant, who had consulted a union official, Mr Lewis, wrote complaining of how he had been treated and asked "to resolve the matter on the basis of a grievance".  Despite the wording, that was treated by the Tribunal, no doubt realistically, as a request for an appeal.  On 24 April 2008 Mr Adcocks replied as follows:

"I refer to your letter dated the 18th April 2008.  My letter I sent you on the 25th March 2008 explained everything, so please stop sending me any more bullshit letters.  They have obviously been drafted out by David Lewis which I want nothing to do with as I do not recognise him or his union.

If you want to talk to me, talk to me, but don't try and hide behind your union, I don't want anything to do with them.

Everything I wrote in my original letter (copy enclosed) stated everything you were owed which I have adhered to."

8.It was the Appellant's case before the Tribunal that in the light of (a) the wholesale nature of the Respondents' failure to apply the statutory dismissal and disciplinary procedures and/or (b) the attitude evinced by the Respondents in Mr Adcocks' letter of 24 April 2008 the Tribunal should exercise its discretion under section 31 (3) to award the maximum available uplift of 50 per cent.

9.The Tribunal did not in its Reasons give any explanation of why it had chosen the figure of 10 per cent for the uplift - or, to put it perhaps more accurately, why it had not considered it just and equitable to award any higher figure than that.  Clearly it should have done so. It was required on the sift to provide further reasons in accordance with the so-called Burns/Barke procedure.  The reasons which it gave were as follows:

"(a) the Respondent was not malicious in his handling of the Claimant's dismissal and neither did he show flagrant disregard for Employment Law and Practice.  The Respondent, by its proprietor Mr Adcocks, acted hastily in a climate which was charged with urgency borne off falling business revenue and increasing costs pressures;

(b) the Respondent was a small business with limited resources;

(c) the Tribunal accepted that the business could not go on in the face of the revenue and costs difficulties.  Mr Adcocks' judgment was clouded by that realisation;

(d) there was no underlying enmity between the Claimant (and his partner) on the one hand and Mr Adcocks on the other;

(e) the redundancy situation was not a sham;

(f) all these matters needed to be weighed against the Respondents' default in failing to adhere to the statutory procedure for dismissal;

(g) it was not just and equitable to uplift the award by greater than the minimum level of 10 per cent."

10.This Tribunal has so far been unwilling to lay down any general guidance as to how employment tribunals should exercise their discretion under section 31 (3) of the 2002 Act, though various particular points have emerged in the case-law.  The need for such guidance has diminished following the repeal of the relevant provisions, though no doubt some cases to which they apply are still in the pipeline.  Even if it would still be helpful, this is not an appropriate case in which to give comprehensive guidance, given that we have only heard argument from one side.  We will confine ourselves to the following headline points which are material to the facts of the present case:

(1) Section 31 (3) does not, as has sometimes been loosely said, simply give tribunals a discretion to award an uplift of up to 50 per cent subject only to the "exceptional circumstances" provision in sub-section 4.  As Lady Smith pointed out in her judgment in Aptuit (Edinburgh) Ltd v Kennedy UKEATS/0057/06, the section has a very specific structure.  An uplift of 10 per cent is mandatory.  The Tribunal then has a discretion to award more than 10 per cent, up to a maximum of 50 per cent, if it considers it just and equitable to do so in all the circumstances.  It may be debateable whether there is a logical difference between a duty so formulated and a duty to award an uplift in the range 10 to 50 per cent; but it seems to us that there may be at least a difference of emphasis, and it is in any event always safer to follow the precise statutory formula.

(2) It follows, as Lady Smith pointed out in McKindless Group v McLaughlin [2008] UKEAT/0010/08, that where a tribunal exercises its discretion to award an uplift of more than 10 per cent it must give reasons for doing so.  It will equally, of course have to give reasons for not doing so where, as will generally but not invariably be the case, the claimant has advanced an argument that it was just and equitable to award more than 10 per cent.

(3) Although the phrase "just and equitable in all the circumstances" connotes a broad discretion, the relevant circumstances must nevertheless be confined to those which are related in some way to the failure to comply with the statutory procedures: see Aptuit at paragraph 47.

(4) The circumstances which will be relevant will inevitably vary from case to case and cannot be itemised, but they will certainly include: (a) whether the procedures were ignored altogether or applied to some extent (see Virgin Media Ltd v Seddington & Eland UKEAT/0539/08; (b) whether the failure to comply with the procedures was deliberate or inadvertent; and (c) whether there are circumstances which may mitigate the blameworthiness of the failure.  Those factors are sometimes embraced under the labels of the "culpability" or "seriousness" of the failure.

(5) Provided a tribunal has directed itself appropriately, this Tribunal will be very slow to interfere with its exercise of discretion: Cex Limited v Lewis [2007] UKEAT/0013/07.

11.We should note one particular point.  Paragraph 47 of the judgment of Lady Smith in Aptuit has, it appears, sometimes been read as authority for the proposition that the size and resources of the employer are in principle irrelevant to the exercise by the tribunal of its discretion under section 31 (3).  If the passage in question is read carefully, that is plainly not what Lady Smith is saying.  We have no doubt that this factor is capable of being relevant to the exercise of the Tribunal's discretion, to the extent that it finds that it aggravates or mitigates the culpability and/or the seriousness of the failure.  Whether it does so in any given case is of course a matter for the tribunal in that case.  Certainly we would not wish it to be though that failures by small businesses should always be regarded as venial.

12.Against that background, it seems to us that the proper starting-point for the Tribunal in this case could only have been that an award at or near the top of the available scale was required.  There was here a wholesale failure to apply any proper procedures, aggravated by the deliberate and somewhat offensively phrased refusal to conduct (in effect) an appeal contained in Mr Adcocks' letter of 24 April 2008.

13.That of course is only, as we say, the starting-point.  There may be factors mitigating the seriousness or culpability of the default.  We have looked at the factors relied on by the Tribunal in its supplemental reasons provided subsequent to the Burns/Barke request.  Points (f) and (g) are merely by way of summary.  The actual factors relied on are at (a) to (e).  Factors (d) and (e) seem to us, with respect to the Tribunal, irrelevant: they do not relate to the Respondents' failure to comply with the statutory dismissal procedures.  Factors (a) to (c) come down really to two points - (1) that the Respondents were a small business with limited resources, and (2) that Mr Adcocks acted in haste under the pressure of events.  As to (1), we have already held that this is a relevant consideration in principle, but it must be of fairly limited weight here.  This was, for all its difficulties, a well-established business with eight employees (and with more in the past) which had had recent experience of the requirements of employment law.  As to (2), that is, again, relevant; but such weight as it properly has is reduced by the fact that, although Mr Adcocks may have made his initial decision in haste and under pressure, he was maintaining an intransigent attitude a full month later.  It seems to us that none of those circumstances is capable of justifying a refusal by the Tribunal to award more than 10 per cent.

14.Mr Manley has made it clear that he does not wish the matter to be remitted to the Tribunal, and he invites us to exercise our powers under Section 35 of the Employment Tribunals Act 1996.  We are prepared to do so.  In our view the right level of uplift in this case is 40 per cent.  That is a figure near the top of the available scale for the reasons which we have identified above; but it is not at the very top because of the mitigating circumstances which we have also just discussed.

*(2) THE CUT-OFF AT 30 MARCH 2008
*15.The Tribunal found that the financial difficulties facing the Respondents were genuine and that there was a genuine redundancy situation at or about the date of the Appellant's dismissal.  It appears to have believed, though the reasoning is rather telescoped, that the pool for redundancy purposes consisted of the Appellant and a colleague called Kim Hurkett.  At paragraphs 11 and 12 of the Reasons it said this:

"11. We find that on the balance of probability job losses at the Respondent's workplace were inevitable.  Taking the evidence in the round and having deliberated carefully on the evidence of the Claimant and the Respondent concerning the role of Ms Hurkett it is clear that the Claimant was very vulnerable to selection for redundancy dismissal.  The Claimant has acknowledged that Ms Hurkett was virtually as skilled a printer as he was; with 40 years experience to his credit.  That was a brave and candid acknowledgment for the Claimant to make.  But it is to the Claimant's credit and reflective of his honesty and integrity that he makes it.  Ms Hurkett we accept was a more cost effective employee for the Respondent to retain in its employment.  We conclude therefore that even had the redundancy process been completed fairly there was significant chance - of greater than 50 per cent - that the Claimant would have been made redundant within a short timescale.

1. We have considered the Claimant's schedule of loss.  We find that in the balance of probabilities the Claimant would have been made redundant by the Respondent by the end of March 2008."

It was on that basis, as we have already said, that it assessed the compensatory award.

16.With all respect, the Tribunal's approach as expressed in those paragraphs is clearly wrong.  If it had found that it was a practical certainty that the Appellant would have been dismissed by the end of March 2008 there would of course have been no problem in limiting the period of his compensation accordingly.  But if there was a sufficient chance - that is, sufficiently substantial to require recognition in what is inevitably a somewhat broad exercise - that the Appellant might not have been dismissed at that time, he is entitled to be compensated for loss of that chance.  A balance of probabilities approach is wrong in principle.

17.Again, Mr Manley urges us not to remit the issue to the Employment Tribunal but to decide it for ourselves.  This is not as straightforward a task as in the case of the uplift, since we have very limited information; but we can see the desirability of avoiding a further hearing, and we are prepared to accede to Mr Manley's request on the understanding that the exercise will inevitably be even more than usually rough-and-ready.

18.The Tribunal's award compensates the Appellant in full up to 31 March 2008.  Pragmatically, we will not seek to recalculate loss from scratch but will ask how best to compensate the Appellant for the chance that he might have continued in employment after that date.  The Appellant was fortunately able to obtain alternative employment almost at once, though at a reduced level of earnings: his net weekly loss at the time the matter was before the Tribunal was £82.05.  In considering how far into the future he should be compensated for that loss, or potential loss, it is necessary to take into account a number of contingencies, of which the most significant are as follows:

(a) The chance that he would anyway have been made redundant fairly at or about the end of March 2008.  On any view, that chance is more than 50 per cent because the Tribunal has so found.  In what is inevitably an imprecise exercise, with other contingencies also operating, we do not propose to put a precise figure on how much more than 50 per cent the chance was.  We would only say that the Tribunal's findings in paragraph 11 about the greater cost-effectiveness of retaining Ms Hurkett mean that the chance was in our view more than minimally above 50 per cent.

(b) The chance that even if the Appellant had retained his job in March 2008 he would have lost it fairly at some time in the period between then and his attaining retirement age.  That chance was plainly very significant.  The financial health of the business was clearly, on the Tribunal's findings, poor.

(c) The chance that the amount of the differential between the Appellant's net earnings in his actual job and in his hypothetical continuing employment with the Respondents would have diminished.  That chance too seems to us to be significant, given the financial problems being experienced by the Respondents; the chances of his having any substantial pay increase appeared to us quite low.

19.Taking all those factors together, the mid-point of the probabilities is in our view best represented by compensating the Appellant for a further period of six months loss of earnings beyond the end of March 2008.  That produces a figure of £2,133.30.

**CONCLUSION
**20.We take the figure of £2,133.30 and add it to the pre-uplift award which was made by the Tribunal, which was £8,283.28.  That produces a total of £10,416.58.  Applying a 40 per cent uplift to that figure produces a total of £14,583.21.  We allow this appeal to the extent of substituting that figure for the award made by the Tribunal of £9,111.60.