Appeal No. UKEAT/0540/11/SM

UKEAT/0541/11/SM

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

At the Tribunal

On 25 June 2012

Before

HIS HONOUR JUDGE DAVID RICHARDSON, MR B R GIBBS, MR T HAYWOOD

MR G NICHOLLS (APPELLANT)

ROCKWELL AUTOMATION LTD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
MS JENNIFER ANDREWS (Representative)

For the Respondent
MS CLAIRE DARWIN (of Counsel)

Instructed by:
EEF Ltd
Broadway House
Tothill Street
London
SW1H 9NQ

**SUMMARY**

UNFAIR DISMISSAL

Reasonableness of dismissal

**Polkey deduction**

The Claimant was dismissed on grounds of redundancy. The Tribunal found the dismissal to be unfair by reason of the Respondent's scoring in respect of certain items within its matrix.

Held: the Tribunal had not applied the approach set out in British Aerospace v Green [1995] IRLR 437 and had in effect substituted its own view of the appropriate marks for that of the Respondent. Appeal allowed; finding substituted that the dismissal was fair.

Appeal and cross appeal on Polkey points dismissed (and academic in any event, having regard to result of appeal concerning unfair dismissal).

**HIS HONOUR JUDGE DAVID RICHARDSON**

1. By a judgment dated 16 June 2011 the Employment Tribunal sitting in Birmingham (Employment Judge Roper presiding) determined that Mr Geoffrey Nicholls was unfairly dismissed by Rockwell Automation Foundation Limited ("Rockwell"). It also expressed its intention to make what is generally known as a Polkey reduction of one third in the amount of compensation to be awarded.

1. On the question of unfair dismissal itself, the Tribunal held the dismissal to be unfair for reasons related to the way in which Mr Nicholls was marked during a redundancy process. Rockwell challenges the Tribunal's reasoning; and says that if the Tribunal had applied the law correctly it would inevitably have found the dismissal to be fair.

1. Both parties have also appealed the Polkey finding. On behalf of Mr Nicholls it is submitted that there was no sufficient evidential basis for the finding; Rockwell argues that the Tribunal did not adopt a fair procedure prior to arriving at the reduction.

**The background facts**

1. Rockwell's business includes a department for field sales engineering department. Mr Nicholls was employed by Rockwell as a field service engineer ("FSE") from 3 January 1989 until his dismissal on 20 August 2010. Since 2005 he had worked a 4 day week from Monday to Thursday - although he also worked some Fridays and hours in the evenings and at weekends.

1. In June 2010 Rockwell wished to make cost savings in its field service engineering department. It decided to make one redundancy among its 11 FSEs in the UK. On 23 June it informed staff and began a redundancy process.

1. Rockwell set out detailed redundancy criteria based on those which it had used in the past. There were four sections, three of which required detailed marking. The first section (10 points) only concerned current disciplinary matters. The second (80 points) concerned performance and included a section entitled "flexibility" to which we will return. The third (90 points) concerned "skills/ability". The fourth (400 points) concerned "competency in role" and involved specific product or project skills.

1. The marking process was carried out by one manager and checked by another, who managed the employees on a day-to-day basis and made relatively minor amendments to the scores. Mr Nicholls was marked the lowest with (respectively) 275 and 265 points. The nearest candidates to him were some distance higher. The next was marked by both managers at 300; and the next again at 310 and 315. After that all FSEs were marked at more than 350.

1. As we have seen, the largest section of marks was for "competency in role". Out of 400 Mr Nicholls received only 150/160. To a significant extent this was because it was considered that he did not have skills with particular products: out of 11 products, each given 20 points, he was marked with no points for five. He received less than full scores for others. But of particular relevance to this appeal is the scoring he received under "flexibility". For "readily available at short notice to undertake customer related engineering services" he received 5 out of 20. For "applies oneself to all product issues and undertakes tasks to resolve problems on all issues faced whether fully skilled on product or not" he received 10 out of 20. For "adaptable to work on customer projects to meet the project timeframes, working hours and requirements", he scored 5 out of 20. Under the heading "Administration" he received 20 out of 40.

1. The next largest section was Skills/Ability, under which he received the middling mark of 60 out of 90, equating to satisfactory. Under the section Performance, he received 45 out of 80. Here again there was a section headed "flexibility". He received only 5 points out of 20 - which equated to the description "Has only limited capability, rarely flexible in approach. Reluctant to co-operate with reasonable Company requirements, and even then, the task has to be carefully selected".

1. Mr Nicholls was selected for redundancy on the basis that his scores were the lowest. After further consultation he was dismissed with effect from 20 August. His appeal was heard and dismissed on 1 November 2010.

**The Tribunal's reasons**

1. The Tribunal had to deal with a wide range of challenges to the dismissal. It found that Rockwell's reason for dismissal was redundancy, rejecting Mr Nicholl's argument that there was no genuine redundancy (paragraph 31). It found that the procedure adopted was reasonable and fair (paragraph 32), again rejecting his argument to the contrary. It rejected an argument that his selection for redundancy was motivated by his questioning the business need for redundancy; and a further argument that it was motivated by a dislike of his part-time status (paragraph 33).

1. In order to explain the Tribunal's reasoning for finding the dismissal unfair, it is necessary to cite three paragraphs from its findings of fact.

"19. Other relevant background is as follows. In 2005 the claimant had agreed with the respondent to reduce his working hours to a four-day week from Monday to Thursday. The claimant alleges that Mr Thirtle objected to this part-time working on the basis that it compromised the claimant's ability to be flexible in meeting customer needs, for instance when commissioning or remedial work was needed to be undertaken at weekends. The respondent has a Performance and Development Review system, known as PADR, under which a full appraisal was taken at the end of each financial year, and a six monthly review was undertaken during each financial year. It is clear from the PADR review sheets for the previous few years which we have seen that the matter of flexibility and Friday working was raised, and the claimant was set targets to be sufficiently flexible to work at least four Fridays a year. These were all met by the claimant. We have also seen a record of overtime worked by each of the 11 FSEs during the financial year 2009/2010. There are three distinct types of overtime which the respondent pays. These are overtime during a normal week paid at a time and a third; Saturday overtime paid at time and a half; and overtime on Sundays or night working paid at double time. Only four of the 11 FSEs worked more normal weekly overtime than the claimant. Only five of the FSEs worked more Saturday overtime than the claimant. Only four of the 11 FSEs worked more Sunday or overnight overtime than the claimant. In addition, we have heard from the claimant about the number of overseas trips which he undertook and which involved flexible working over and beyond simply working Monday to Thursday.

20. In addition, we have seen a PADR review sheet for Mr Robinson who was criticised for his administration skills and put on a specific performance improvement plan to improve these. There were no such difficulties raised with the claimant in connection with his administration skills.

21. The marks given to the claimant during the process do not appear to us accurately to reflect the claimant's capabilities with regard to flexibility, administration, or his product skills. The respondent only gave the claimant 5 out of a possible 20 under Flexibility in section 2.3 which corresponded to the explanation 'has only limited capability, rarely flexible in approach'. In addition, under Flexibility in section 4, the respondent gave the claimant only 5 out of 20 against 'readily available at short notice to undertake customer related engineering services; 10 out of 20 against 'applies oneself to all product issues..' and 5 out of 20 against 'adaptable to work on customer projects to meet the project timeframes, working ours and requirements'. He was given 0 out of 20 for product skills competency under the headings of Human Machine Interface, and Ethernet, when he had skills with these products. He was given an average score of 10 out of 20 for each of the two headings under Administration when Mr Robinson was given exactly the same score despite having been put on a performance improvement plan to improve his weak administration. We find that the scores given to the claimant in connection with product skills, administration, and in particular flexibility, do not accurately reflect the claimant's true capabilities as evidenced by several years worth of PADR reviews, the overtime schedule for 2009/2010, and the claimant's evidence in connection with his product skills and the fact that he worked abroad and worked at weekends when required."

1. The Tribunal found:

"34. However, we do find that the dismissal was unfair because the marks allocated to the claimant in connection with Flexibility in particular, and also in connection with Administration and Product skills, are not capable of objective assessment as being fair and accurate. For the reasons explained in our findings of fact, the marks given to the claimant do not actually reflect what was recorded in the relevant documentary evidence namely PADR review sheets and the schedule of overtime payments. It is not for us to substitute our view for that of the employer, and we have not done so. Nonetheless we find that the marks given to the claimant in this respect were clearly lower than they should have been. We find that the respondent did not act fairly and reasonably in all the circumstances of the case, and accordingly the claimant succeeds in his unfair dismissal claim."

1. During the course of the hearing the Tribunal had asked Mr Nicholls what marks he thought he should have been given under the challenged headings. It noted that his best case would have involved a further 90 marks and noted that this still placed him below all but two candidates.

1. The Tribunal's reasoning on the question of the Polkey deduction was as follows.

"35. The matter will now be listed for a remedy hearing and directions in this regard will follow. However, we have considered in detail the Polkey decision and we make the following important finding prior to the remedy hearing. As explained in the findings of fact above, on the claimant's best case he would still have been in the bottom three candidates from which one had to be selected for redundancy. It is not for us to embark upon a sea of speculation, nor to seek to re-mark the various candidates in the application process, and we do not seek to do so. Nonetheless there must remain the possibility that the claimant would still have been selected for redundancy even if the correct marks had been allocated. There was in effect a one in three chance that he would have been fairly dismissed in any event. For this reason we intend making a Polkey deduction of one third from any compensation which might be ordered to be paid by the respondent following the forthcoming remedy hearing."

**Unfair dismissal**

Submissions

1. On behalf of Rockwell Ms Claire Darwin submits that the Tribunal erred in law in the following ways. (1) It embarked on the exercise of investigating the scores given for individual items when there was no good reason for doing so. (2) It subjected aspects of the scoring to minute investigation - an impermissible exercise in the context of section 98(4) of the Employment Rights Act 1996. (3) It reached its conclusions on the basis of contemporaneous written documentation alone, whereas an employer was entitled to (and in this case did) rely on the assessment of managers in the course of scoring. The fact that all the scores were "not capable of objective assessment as being fair and accurate" (paragraph 34) was not to the point: an employer was not obliged to make exclusive use of such criteria. (4) The Tribunal effectively placed a burden of proof upon the employer to justify the marking. No such burden of proof existed: it was sufficient for the employer to show that he set up a good system of selection and that it was fairly administered. (5) Despite a correct self-direction the Employment Tribunal effectively substituted its own assessment of the Claimant's capabilities; the language of paragraphs 21 and 34 of the reasons points to this conclusion.

1. On behalf of Mr Nicholls Ms Jenny Andrews submits that the Tribunal not only directed itself correctly in law but also applied that direction appropriately. She answers the submissions of Ms Darwin in the following ways. (1) There is no absolute rule prohibiting a Tribunal from investigating markings and assessments. In this case, given the allegations made by Mr Nicholls, which included a bias against him on the grounds that he worked part-time, it was essential for the Tribunal to look at the detail of the marking and assessment. (2) The Tribunal did not subject the marking to "over minute analysis". It compared the marking to known sources of information - in particular written assessments - and noted plain and obvious discrepancies. (3) It would be an error to say that the marking criteria had to be wholly objective, but the Tribunal did not fall into this error. Rather the Tribunal's conclusion was that a reasonable employer would not ignore objective evidence, such as assessments or overtime records. (4) Nothing in the Tribunal's reasons suggests that it placed a burden of proof on the employer to prove the accuracy of the information. (5) It is not fair to criticise the Tribunal for substituting its own view. The Tribunal gave itself a correct self-direction in law. While it is true that the Tribunal stated its own finding that "the marks given to the Claimant were clearly lower than they should have been" this was in reality no more than a way of saying that Rockwell did not support its marking by reference to any objective markings system.

1. Counsel referred us to numerous authorities on the question of fairness in selection for redundancy. Many were, we think, really no more than illustrative of the principles of law, to which we shall now turn.

Discussion and conclusions

1. The Tribunal, once it had found that the reason for dismissal was genuinely redundancy, was required to apply section 98(4) of the Employment Rights Act 1996 whereby:

"......the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)--

(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case."

1. The Appeal Tribunal's task is different. It is empowered by Parliament to intervene only on questions of law: see section 21(1) of the Employment Tribunals Act 1996. The sole question for the Appeal Tribunal is whether the Tribunal reached its decision in accordance with the law. See, as to this, [Fuller v London Borough of Brent ]()[2011] IRLR 414 at paras 27-31.

1. Section 98(4) requires a Tribunal to make a broad assessment of the question whether an employer acted reasonably in dismissing an employee. It is well established that it is not for a Tribunal to investigate the facts underlying a dismissal and reach its own conclusions about those facts. It must start with the reasoning of the employer; ask how the employer reached the decision to dismiss; and consider whether the employer acted reasonably, having regard to factors within section 98(4) which include size and administrative resources as well, of course, as equity and the substantial merits of the case.

1. These features of section 98(4) underlie the reasoning of the Court of Appeal in British Aerospace v Green [1995] IRLR 437. In that case, which concerned the question of disclosure of documents in the context of a very substantial redundancy exercise, Waite LJ said (page 1010A-E):

"Employment law recognises, pragmatically, that an over-minute investigation of the selection process by the tribunal members may run the risk of defeating the purpose which the tribunals were called into being to discharge, namely a swift, informal disposition of disputes arising from redundancy in the workplace. So in general the employer who sets up a system of selection which can reasonably be described as fair and applies it without any overt signs of conduct which mars its fairness will have done all that the law requires of him."

1. Later, after reviewing cases concerning "marking" (see page 1010E-1011D) he applied this general proposition to the use of a marking system in order to select for redundancy (page 1016G - 1017A):

"The use of a marking system of the kind that was adopted in this case has become a well-recognised aid to any fair process of redundancy selection. By itself, of course, it does not render any selection automatically fair; every system has to be examined for its own inherent fairness, judging the criteria employed and the methods of marking in conjunction with any factors relevant to its fair application, including the degree of consultation which accompanied it. One thing, however, is clear: if such a system is to function effectively, its workings are not to be scrutinised officiously. The whole tenor of the authorities to which I have already referred is to show, in both England and Scotland, the courts and tribunals (with substantial contribution from the lay membership of the latter) moving towards a clear recognition that if a graded assessment system is to achieve its purpose it must not be subjected to an over-minute analysis. That applies both at the stage when the system is being actually applied, and also at any later stage when its operation is being called into question before an industrial tribunal."

1. Although many other authorities were cited to us they were, to our mind, merely illustrative. The general approach to section 98(4) is plain.

1. In this case the Tribunal certainly embarked upon detailed consideration of certain aspects of the scoring of Mr Nicholls. Ms Andrews has explained, and we understand, why it did so. Since Mr Nicholls challenged the motivation of the Rockwell's management there will have been cross examination designed to show, from such details as might be challengeable, that its motivation was suspect. So long as the exercise was kept within bounds (and we emphasise that setting the boundaries would be a matter for the Tribunal exercising case management powers) it would be permissible to look to some extent at the way scores were reached to see if anything in those scores lent weight to the challenge to Rockwell's witnesses.

1. The Tribunal, however, having seen and heard Rockwell's witnesses, including the member of management who did the marking, rejected the challenge to the motivation. Having done so, section 98(4) required it to stand back and look at the selection process in a broader way.

1. In our judgment the Tribunal has fallen into error in the following ways.

1. Firstly, in our judgment the Tribunal has erred in law in embarking upon a detailed critique of certain individual items of scoring for the purpose of determining whether it was reasonable to dismiss. Once granted that there is a fair system of selection applied without overt signs of unfairness it was not for the Tribunal to embark on a detailed critique of individual items of scoring: British Aerospace v Green. This - it seems to us - is what the Tribunal has done. It has concentrated upon a small number of scores, accounting for only a very small proportion of the total points available. It does not seem to have been referred to the line of authorities approved in British Aerospace v Green; and to our mind it erred in law in its approach to this part of the case.

1. Secondly, even if it was permissible at all to embark upon this exercise, the Tribunal has fallen into the error which is generally described as substituting its own view for that of the employer. As we have already said, the task of the Tribunal was to discover the reasons of the employer and ask whether those reasons were reasonable. Within paragraphs 19-21 there are no findings as to why the markers attributed the marks they did to the items in question. This should have been the starting point for the Tribunal. Once the Tribunal found what the reasons actually were for the scores, it could then review whether the markers acted reasonably. Paragraphs 19-21, and paragraph 34, show no real sign of this process. The Tribunal has noted that the question of flexibility did not loom large in Mr Nicholls' assessments; noted that he worked a significant amount of overtime; and made its own finding that the markings "do not accurately reflect the Claimant's true capabilities" so that the marks given to the Claimant were "clearly lower than they should have been".

1. Particularly noteworthy, in this context, is that the Tribunal has overturned findings by Rockwell's management that Mr Nicholls did not have the requisite skills with particular products - Human Machine Interface and Ethernet. The Tribunal has made no findings as to why Rockwell's management reached these conclusions, still less that its conclusions were unreasonable.

1. We have borne in mind Ms Andrew's submission - to the effect that the Tribunal may have intended to say that Rockwell was unreasonable because it did not take into account objective information (by which she means historic assessments and - she tells us - a skills database) before reaching its conclusions. We have also borne in mind the Tribunal's statement that it concluded the marks in question to be "not capable of objective assessment as being fair and accurate" (paragraph 34). But it is not the law that every aspect of a marking scheme has to be objectively verifiable (by which we mean verifiable independently of the judgment of management) as fair and accurate. If overall the redundancy criteria were reasonable (as the Tribunal appears to have accepted) then the fact that some items were not capable of objective verification is not fatal to the scheme. See, for example, the comments of Lord Neuberger MR giving the judgment of the Appeal Tribunal in [Mitchells of Lancaster v Tattersall]() [2012] UKEAT/0605/11/SM (para 23):

"The Tribunal in this case also criticised the criteria adopted by the Respondent because they were not "capable of being scored or assessed or moderated in an objective and dispassionate way". Just because criteria of this sort are matters of judgment, it does not mean that they cannot be assessed in a dispassionate or objective way, although inevitably such criteria involve a degree of judgment, in the sense that opinions can differ, possibly sometimes quite markedly, as to precisely how the criteria are to be applied, and the extent of which they are satisfied, in any particular case. However, that is true of virtually any criterion, other than the most simple criterion, such as length of service or absenteeism record..."

1. Selection criteria are not to be limited to "those which can be the subject of box-ticking exercises" (para 23).

1. For these reasons we conclude that the appeal against the finding of unfair dismissal should be allowed. Moreover we have no doubt that we should substitute a finding that the dismissal was fair. The Tribunal found that redundancy was the true reason; rejected the challenges to the motivation of the members of management concerned; and found that a fair procedure had been followed. It does not seem to have thought that the selection criteria themselves were unreasonable: it is, we think implicit in paragraph 32 of the reasons that the criteria were reasonable, and we note that the skeleton argument introduced by Ms Andrews below realistically put her arguments about the selection process under the rubric of consultation (see paras 3.1 -21 of the skeleton) which is how the Tribunal dealt with them (paragraph 32 of its reasons). Given the Tribunal's findings taken as a whole, we think the dismissal was plainly and arguably a fair dismissal.

**Polkey**

1. In view of our conclusions on the question of unfair dismissal, the Polkey question does not arise; but we have heard argument upon it and we can deal with it briefly.

1. On behalf of Mr Nicholl Ms Andrews keeps open, but does not strongly argue, her challenge. She submits that any Polkey reduction had to be evidence based, and that the Tribunal did not have the requisite material to make a reduction. Any reduction would, she submits, be speculative. Alternatively, one-third was the maximum which could have been awarded. We reject this argument. A Polkey reduction must of course have an evidential foundation; but it will inevitably involve a substantial degree of estimation. In this case there was ample material from which to make an estimation.

1. On behalf of Rockwell Ms Darwin puts forward a challenge of a different kind. She argues that the evidence that the Claimant might, at best, have scored another 90 points was adduced in response to questions from the Tribunal during the hearing; that the Respondent's representative was not aware that the Tribunal would rely on this evidence in support of a Polkey finding; accordingly it was impermissible to make such a finding.

1. We reject this submission. It is not now challenged that the Polkey question was in issue at the hearing. Once granted that Polkey was in issue at the hearing, the Tribunal's question and Mr Nicholl's answer was plainly relevant to it. Rockwell's solicitor was in a position to deal with it in submissions, and if he felt that he required further evidence from his own witnesses he could have sought to adduce it. The Tribunal did not behave unfairly and was entitled to make the Polkey finding.

1. Accordingly we reject the appeals in respect of the Polkey finding; but in view of our earlier conclusions the appeal against the finding of unfair dismissal will be allowed.