Unfair dismissal - Case Round-Up: May 2015

In this month's round-up, Mark Shulman consultant solicitor with Keystone Law, looks at recent unfair dismissal cases on the "substitution mind-set", the burden of proof, unilateral variations of contract and a zero compensatory award.

Mark Shulman, Consultant Solicitor at Keystone Law

**ET substituting its own decision
*Did an ET substitute its own views for those of the employer when determining that there was an unfair dismissal? Yes, said the EAT in [Mears Ltd v Brockman* ]()UKEAT/0243/14/BA.

*The Claimant was an operative in a maintenance services company. He was summarily dismissed for gross misconduct after entering a flat which had been sealed off because of the risk of contamination with asbestos. The Claimant had gained entry to the flat concerned in order to deal with a stop cock which had caused a flood to another flat in the same block. However, the Claimant had not been made aware by his employer that the flat to which he had gained access contained an asbestos risk and he claimed that he had not seen yellow tape marked "Danger - Hazard – Asbestos".

The Claimant was summarily dismissed for gross misconduct and claimed both wrongful and unfair dismissal. Crucially, for the claim of breach of contract/wrongful dismissal, the ET had to form a view as to whether the Claimant had acted as the Respondent contended.

However, for the unfair dismissal claim, the focus had to be on what was in the Respondent's mind; whether it had reasonable grounds for its belief and whether it had carried out a reasonable investigation.

The ET found that whilst the Respondent had carried out a reasonable investigation and believed the Claimant to be guilty of misconduct, it did not have reasonable grounds for its belief. It went on to decide that if, contrary to the primary finding, there had been reasonable grounds for the Respondent's belief, dismissal was not a fair sanction in the circumstances and was not within the range of reasonable responses because of strong mitigating circumstances.

On appeal to the EAT, the Respondent employer argued that the ET had fallen "into the substitution mind-set" in terms of its conclusion as to the Respondent's grounds for its belief about the Claimant's conduct. Similarly, the ET had formed its own view as to what had taken place and considered the question of sanction on that basis.

The law
When assessing the question of the reasonableness of the dismissal under section 98(4) of the Employment Rights Act 1996, the test is whether the Respondent's conduct and decision-making fell within the range of reasonable responses of a reasonable employer in the circumstances of the case (Iceland Frozen Foods Ltd v Jones [1983] ICR 17). But, in assessing reasonableness, an ET must not lose sight of the fact that it is not its view as to what would have been fair or reasonable that is the question. The employer's decision must always be tested against the range of reasonable responses of the reasonable employer.

*Was there a reasonable belief?*
**Did the ET go wrong by substituting its own view as to whether there were reasonable grounds for the Respondent's belief? Yes, thought the EAT.

Whilst the ET had to carry out the fact-finding exercise to determine the wrongful dismissal claim, it needed to be careful not to confuse its function in that claim with what it was required to do in respect of unfair dismissal (where the Respondent's belief was the crucial issue). The EAT pointed out that whilst its role was "not to nitpick" its way through the ET's decision, the ET's focus had been on its own findings of fact and whether the Claimant was in fact culpable: whether he had actually seen the asbestos warning. But the correct starting point was to ask, what was the Respondent's actual belief? As found, that belief was that the Claimant had knowingly entered the hazardous area and put himself and others at risk.

The next question was then to ask whether the Respondent had reasonable grounds for its belief that the Claimant had acted knowingly. What the ET needed to do was not only to analyse the Claimant's evidence, but also to consider the Respondent's evidence as to the grounds that it had relied on. That would have included evidence that the Respondent's manager did not believe the Claimant's claim not to have seen the yellow warning tape and considered it impossible that the Claimant would not have been aware of the warnings. Given that the bathroom had been taped closed with both black and yellow tape and there was a warning of asbestos on the outside of the room, the ET needed to explain the view as to why the Respondent's belief had no reasonable basis.

From the ET's Reasons given, the EAT was unable to see that it had carried out that exercise.

In relation to the issues of sanction, the ET had relied on its own findings of primary fact in determining what were mitigating circumstances. Those findings were derived from what the ET had found, based on its view of the Claimant's evidence, rather than what the Respondent had found.

The ET's view that a final written warning would have been within the range of reasonable responses, whereas dismissal was outside that range might not have been fatal, but was moving into dangerous territory. The EAT would not have allowed the appeal solely on that point, but it added to the picture of an ET which fell into the "substitution mind-set" that case-law warned against.

Therefore, as the ET's conclusions on reasonable grounds and sanction were vitiated as being founded on its own conclusions as to what had taken place, the matter had to be remitted to a freshly constituted ET to determine the unfair dismissal claim.

**Automatically unfair dismissal - burden of proof
**Regulation 7(1) of TUPE 206 provides that:-

"Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal), as unfairly dismissed if the sole or principal reason for his dismissal is-

(a) the transfer itself; or

(b) a reason connected with the transfer, that is not an economic, technical or organisational reason entailing changes in the workforce"

What is the correct burden of proof in relation to a claim of automatic unfair dismissal under this provision? Is it for the Claimant to prove dismissal arising from the TUPE transfer or does the burden shift once the Claimant has adduced some evidence in support of their case? In [Marshall v Game Retail Ltd ]()UKEAT/0276/13/DA, the EAT confirms that it is the latter.

The Claimant was employed in a senior position by GSG, which went into administration. The administrators closed part of the business and transferred part to the Respondent under TUPE. The Claimant had been employed in the transferred part of the business but was dismissed as redundant days before the transfer. The Claimant alleged (amongst other things) that he had been dismissed for a reason connected with the transfer of the business.
One of the issues for the ET to decide was whether the sole or principal reason for the Claimant's dismissal was that transfer (or a reason connected with that transfer), which was not an economic, technical or organisational reason entailing changes to the workforce, such that the dismissal was automatically unfair. Although it was an unusual feature of the case that neither party had called the administrator who made the decision to dismiss the Claimant or had asked questions of the administrator which could be put before the ET in writing, the ET dismissed the claim of unfair dismissal, saying that "…the burden of proof is on the claimant to show that the sole or principal reason for his dismissal was the transfer itself or a reason connected with the transfer…".

Given its view about the burden of proof, the ET concluded that there was insufficient evidence to say on the balance of probabilities that the sole or principal reason for the dismissal was the transfer itself (or a reason connected with it). The Claimant appealed.

Burden of proof
The EAT allowed the appeal. It was common ground that the guiding principles as to the burden of proof were to be found in the decision of the Court of Appeal in Kuzel v Roche Products Ltd [2008] IRLR 530 (a case on protected disclosures). In that case Mummery LJ had said that:

"…when an employee positively asserts that there was a different and inadmissible reason for his dismissal, he must produce some evidence supporting the positive case…. This does not mean, however, that, in order to succeed in an unfair dismissal claim, the employee has to discharge the burden of proving that the dismissal was for that different reason. It is sufficient for the employee to challenge the evidence produced by the employer to show the reason advanced by him for the dismissal and to produce some evidence of a different reason.

Having heard the evidence of both sides relating to the reason for dismissal it will then be for the ET to consider the evidence as a whole and to make findings of primary fact…"

However, the EJ had failed to apply those principles. There was a burden on the Claimant in the present case to produce some evidence supporting his case that his dismissal was by reason of or connected with the transfer. Once that stage had been reached, it was for the Respondent to prove that the reason or principal reason for the dismissal was the different reason on which they relied. If the Respondent failed to do so, then it would be open to the EJ to find that the reason was the inadmissible reason on which the Claimant relied.

The EAT considered that although the burden of proof issue had to be kept in proper perspective and only very rarely would a case in practice turn on the burden of proof, the EJ in the instant case had approached the reason for the dismissal issue by applying an incorrect principle.

However, the EAT was unwilling to substitute its own decision. It felt unable to conclude either that, had the burden of proof been correctly placed on the Claimant, it would have been found that he had discharged it. Nor, on the basis that the burden of proof rested on the Respondent, could the EAT find that the Respondent must have been found not to have discharged it. Therefore it was "wholly clear" that the only appropriate disposal was a remission to the ET to reconsider the claims.

Constructive dismissal – variation of contract
Did a teacher's contract allow a unilateral variation of working hours by her school or did an imposed variation allow the teacher to resign and claim constructive dismissal? [Hart v St Mary's School (Colchester) Ltd]() UKEAT/0305/14/DM dealt with these issues.

The Claimant worked her hours over 3 days a week. She needed to balance her domestic care duties with holding down a part time job as a teacher. The school at which she worked wished to change the timetable so as to ensure that particular core subjects could always be taught in the mornings. In order to facilitate that change, the Claimant was asked to spread her working days over five days, not three. A process of consultation followed. The Claimant and the Respondent could not reach any agreement. Eventually the Respondent insisted that the changes must be implemented with effect from the following September term and the Claimant resigned and claimed constructive unfair dismissal.

An ET dismissed her claim, deciding that there was not a custom and practice that the Claimant should only ever work three days a week and that the Respondent had a right to vary the contractual hours.

Further, the ET decided that even if there had been a breach of contract, the Claimant did not resign in response, but because the Respondent refused to offer her reduced hours on the three days she normally worked so that she could continue to carry out various caring duties to members of her family. Alternatively, she had resigned because of ill-health.

The Claimant appealed arguing that what her written contract did was merely to confirm the existing position that had applied since her appointment offer letter, which was that the number of days she worked could not be varied without her consent.

*Power to vary
*The key relevant contractual clause was arguably ambiguous:

"In the case of the Teacher on a part-time contract the fractional part will be notified separately and may be subject to variation depending upon the requirements of the School Timetable."

The Claimant submitted that this provision could mean that the time when the hours were to be worked could be varied (although the number of hours remained fixed), or it could mean that the number of hours could be increased or decreased according to the wishes of the Respondent. However, it was suggested that the ambiguity should be clarified by looking at the whole of the background that led up to the original agreement about working hours. Reference was made to the Court of Appeal decision in Wandsworth London Borough Council v D'Silva [1998] IRLR 193 where Lord Woolf MR had stated that:-

"The general position is that contracts of employment can only be varied by agreement. However, in the employment field an employer or for that matter an employee can reserve the ability to change a particular aspect of the contract unilaterally by notifying the other party as part of the contract that this is the situation. However, clear language is required to reserve to one party an unusual power of this sort."

It was argued by the Claimant that given the factual matrix of somebody working part-time with a need for fixed commitments in order to balance work with domestic and caring responsibilities, it was likely that the permissive formulation in the words "may be subject to variation", must have meant the parties intended that such a variation would only come about by agreement. The Claimant also argued that the contra proferentem rule might apply to the circumstances of this case especially if the wording was ambiguous.

Reason for resignation
As to whether the Claimant had resigned as a result of a breach of contract, the Claimant referred to a passage in the case of Wright v North Ayrshire Council [2014] IRLR 4 where Langstaff J had said:

"… Where there is more than one reason why an employee leaves a job the correct approach is to examine whether any of them is a response to the breach, not to see which amongst them is the effective cause."

The Claimant submitted that on the facts, the EJ's findings on why the Claimant had resigned were perverse as it was quite clear that her resignation related to the fact that she was being required to work over five days.

No unilateral variations
The EAT allowed the appeal.

What alteration could be made to the Claimant's working hours without her consent? The contractual words "may be subject to variation depending upon the requirements of the School Timetable" did not tell the reader in what circumstances the variation may take effect. The wording was such that it could encompass a variation at the request of the school or from the teacher, but either way it did not amount to a power to vary unilaterally. And given the scope, it could not be regarded as amounting to a power of unilateral variation by the employer (which, as had been pointed out by the Court of Appeal in D'Silva, was an unusual power). These were matters that were never considered by the EJ who had taken the view that "this was all very clear and straightforward".

The EAT reached the conclusion that the EJ was in error as to her construction of the contract because it did not give a power of unilateral variation and no matter how reasonable it might be from the point of view of the employer, in the end, if there was not a mutual agreement about it, the contract could not be unilaterally varied. Therefore, trying to vary it unilaterally was a breach of contract.

Reason for resignation an open question
On the issue of the reason for resignation, the right approach was to ask whether the repudiatory breach "plays a part in the resignation". It was a question of causation. If the fundamental breach is part of the cause of the resignation, then that suffices because the law does not require sole causation or predominant effect. The law requires only that the fundamental breach be causally connected to the resignation: the issue is whether a repudiatory breach has been accepted by the employee's resignation.

But the EJ had not asked herself whether the purported variation of the Claimant's contract was part of the cause for her resignation. The EJ had wrongly come to the conclusion that, because the Claimant in the resignation letter referred to her own proposal about working hours having been rejected, that must have meant she had resigned because the Respondent had refused to offer her reduced hours on the three days a week that she did work.

But, the EAT said, it was arguable that the variation was at least part of the reason for the Claimant's resignation. Paraphrasing her resignation, the EAT's view was that she had arguably given notice in writing to terminate because she was saying: "You have insisted on unilateral variation…you insist on my spreading those hours over five days (by unilateral variation)". Looked at in that way, the letter was arguably an acceptance of the repudiatory breach.

Did the Claimant resign because of that breach? That was still an open question which had to be "looked at again through the prism of the correct direction that sole cause or predominant effect is not necessary; all that is required is that the variation was part of the cause of the resignation."

On that basis, the EAT substituted the EJ's conclusion for a finding that there was a repudiatory breach. The question as to what followed from that was remitted to a differently constituted ET.

*Was an ET right to make a reduced basic award and give no compensatory award in a case of unfair dismissal? Yes, said the EAT in the rather unusual case of [Anderson v Chesterfield High School]()* UKEAT/0206/14/MC.

The Claimant was a local politician and worked at a local authority school. Once his local government political duties became full time, it was agreed that he would remain an employee of the school and be paid the maximum allowed as paid leave to enable employees to hold public office (the Local Government and Housing Act 1989 permitted a maximum of 208 hours per annum paid leave). His post was held open and the school also continued to pay pension contributions.

The school then became an Academy and his employment transferred under TUPE. After the Claimant became the elected Mayor of Liverpool for a 4-year fixed term, the Academy terminated the Claimant's employment on the basis that the arrangement was "inequitable" principally because they were paying the Claimant some £4,500 per annum, but the pupils at the school received no benefit.

Unfair dismissal
The Claimant won his claim of unfair dismissal at the ET because, even though the Respondent had a potentially fair reason for dismissing the Claimant (on SOSR grounds), the procedure was woefully deficient; the Claimant had not even been told of the proposal that his employment was to be terminated, let alone given any chance to have his say.

No compensatory award was made and the basic award was reduced by 25% for contributory fault (under section 122(2) of the Employment Rights Act 1996).

An award can only be reduced for contributory fault if the conduct in question is culpable, blameworthy and therefore unreasonable (Nelson v BBC (No. 2) [1979] IRLR 346).

The ET concluded that the election as Mayor was effectively a commitment for a period of 4 years, whereas the post of Leader of the Liverpool Council had run from year to year. A Mayor could only be removed on the grounds of health or misconduct, or on the basis of a referendum following a petition. In those circumstances the ET thought it was "seriously remiss" of the Claimant not to have contacted the school to have ascertained whether the appointment as Mayor would have made any difference to its position on paid leave, particularly because he was aware that the school had become a freestanding Academy. Accordingly, this amounted to unreasonable conduct which could properly be characterised as culpable and blameworthy.

Polkey reduction
On the Polkey issue, the question the ET had to answer was: what would have happened had the school invited the Claimant to a meeting to discuss the possible termination of the arrangement with the school? The evidence was that, save for very limited exceptions, since becoming Leader in April 2010 the Claimant had shown no commitment to or involvement in the life of the school in any way. Nor had he shown any commitment to his own professional development in his professional role. The Claimant's relationship with the school was significant for him not because of the payment for the 208 hours per year (because even if withdrawn he could increase his civic allowances), but rather for the continuing contributions to the Local Government Pension Scheme.

Therefore, in the ET's view given that the Respondent could realistically expect no service at all from the Claimant for the remainder of the mayoral term and given that the Respondent had already had no service from him since April 2010 the ET concluded that it was 100% likely that the school would have dismissed the Claimant fairly (at the end of 2012) had a fair procedure been undertaken.

The Claimant appealed.

Obvious reason for dismissal
The EAT dismissed the appeal. The principal reason for the dismissal was "obvious". The realisation that a continuation of an arrangement whereby the Claimant, an elected official of a neighbouring Local Authority, was paid (albeit a modest amount) by a publicly funded school without having to provide any services for an indefinite period was considered to be of no value to the Respondent and might lead to significant criticism if the arrangement became public. The Respondent was reasonably entitled to regard the arrangement as inequitable and unsustainable.

It was also the case that the Respondent considered that the arrangement (including the indefinite holding open of the Claimant's post) led to some instability within the school. What most people would consider the Respondent's desire to extricate itself from this arrangement, which could have been a public relations disaster for the school, seemed to the EAT to be a clear example of SOSR for ending the employment relationship with the Claimant.

The EAT considered that the ET's conclusions on the Polkey deduction and deduction for contribution were conclusions to which it was entitled to come. Its conclusion that the Claimant was party to a misuse of public funds was certainly within the range of reasonable responses of a reasonable employer. Further, the Claimant's conduct could reasonably be regarded as culpable or blameworthy.

The ET's finding that the Claimant would have been dismissed in any event had a fair dismissal procedure been followed "was unassailable" and the EAT was unable to see how consultation would have made any difference.

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.

Published: 11/05/2015 11:03

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