Appeal No. EAT/755/95

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 7 October 1996

Before
HIS HONOUR JUDGE J HICKS QC
MR R SANDERSON OBE
MR J A SCOULLER

MR G HORTON	APPELLANT

FARNEL ELECTRONIC SERVICES LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR J D HILL
(Representative)
Citizens Advice Bureau
50A Hemnall Street
Epping
Essex
CM16 4LS	
For the Respondents	MR PITT-PAYNE
(of Counsel)
Mr P Schofield
Legal Adviser
EEF
Broadway House
London
SW1H 9NQ	

	JUDGE J HICKS QC:	Mr Horton was employed by Farnel Electronic Services Ltd as a Stores Operative.  That was certainly the capacity in which he began work with them in April 1989 and the duties of a Stores Operative and of Mr Horton had two main aspects.  One was lifting and packing stores, some of which were in quite heavy boxes, packages, or in whatever form they came.  The second aspect of the work was checking small components which could be done sitting at a bench, and Stores Operatives were expected to undertake either type of work as required.

	Mr Horton continued in that employment, on those conditions, and subject to those requirements, until September 1992, when he had five weeks’ sick leave, the reason for that being that he was suffering from rheumatoid arthritis, and when he returned to work he found that he was unable to stand comfortably for any length of time and could not lift heavy weights or handle large awkwardly shaped objects.  The result of that was that of the two main areas which his work had previously fallen into he was unable comfortably, or perhaps at all, to carry out the first category, the lifting of weights and the handling of large components, but he was still perfectly able to do the other part, the line checking, as it was called, and the employers allowed him to spend all his time doing that.  

	There was no change in his remuneration and, as far as the findings of the Industrial Tribunal went, no other communication of any contractual import between Mr Horton and the employers, other than the simple permission to confine himself to that less physically demanding work, and that went on for another 18 months.  

	In May 1994 the Respondents, the employers, reorganised their working arrangements in such a way that the need for carrying on the line check operation by Stores Operatives ceased, and Mr Horton was then dismissed.  The reason given in the dismissal letter was that the function he performed would cease on 23 May 1994.

	He applied to the Industrial Tribunal for compensation for unfair dismissal and/or redundancy and the Industrial Tribunal dismissed his application, having set out the facts as they found them and reminded themselves of the words of section 81(2) of the Employment Protection (Consolidation) Act 1978, in particular the words relevant to the test for redundancy in such circumstances, that the requirement of the business for employees to carry out work of a particular kind had ceased or diminished.  They then went on to consider the submissions which had been made to them and those came, so far as the submissions on behalf of Mr Horton were concerned, in two parts, and Mr Hill, who has represented Mr Horton before us, also put his very helpful submissions under those two heads.

	The first was that the contract between Mr Horton and his employers, having originally been a contract under which he was required to do all the work of a Stores Operative in both of the aspects which I have mentioned, was varied on his return from sick leave so that he was only required to do the line checking.  The contract having been so varied, Mr Hill submits that whatever the test for diminution of work and the requirements of the business for work of a particular kind, the requirement for work of the kind which Mr Horton was doing and by his contract was required to do, namely line checking, had ceased and therefore he was redundant and redundancy was a reason for his dismissal.

	The Industrial Tribunal rejected that submission and said in paragraph 13 of their Reasons:

“13  ...  We take the view that, on the proper construction of that clause, [the relevant clause of his contract] the Respondents could require the Applicant to perform duties outside the function of Stores Operative, so that it expanded rather than restricted the range of duties which the Applicant could be required to undertake.”

	That is a reference to a provision in the job description which, having referred to the title of the job as Stores Operative, goes on to say:

“This title does not define or limit your employment.  The Company may require you from time to time to do any work within your capacity ”

	Having dealt with that aspect of the construction of the contract, which is in fact not one which Mr Hill has further developed here, they go on to say, in relation to the submission of a variation, that they rejected that, and they say:

“15  ... We take the view that there is no evidence to support the existence of any variation to the Applicant’s contract of employment.  We consider that the proper view of the situation is that the Respondents, as a concession to the Applicant, allowed him to perform tasks within his job description which were also within his physical capability.  In so doing, they acted as a good employer in obtaining medical advice and in finding work for the Applicant which he could do.  However, we take the view that the Respondents did not, by that action, alter the scope of the Applicant’s obligations to them.”

	They go on, on that basis, to find that the reason for dismissal was his physical incapacity to carry out the work which he was obliged to perform in accordance with his contractual obligations.

	Mr Hill, as I have said, did not pursue any separate argument concerning the flexibility provision, as it is commonly called, in the contract, but he did submit that the Industrial Tribunal erred in law in that finding that there was no variation of the contractual terms.  He relied on two authorities for that.  The first is the case of O’Brien & Others v Associated Fire Alarms Ltd [1968] 1 All ER 93 in which he cited a short passage in the Judgment of Lord Denning, the Master of the Rolls, at page 95G to the effect that the question whether a term is to be implied in a contract is a question of law, not a question of fact.  

	That citation does not, in our judgment, assist Mr Horton in the present case, because the point at issue here is not whether a term should be implied in the contract, but whether the contract itself was varied.  Whether a contract is varied must involve findings of fact and indeed, in this case, where the submission on Mr Horton’s behalf was that the variation came about, not by express words, either written or oral, but by the conduct of the parties, it is pre-eminently a question of fact for the Industrial Tribunal whether there had been such a variation and the law as implied to terms, in our understanding, has no bearing on that point.

	The other authority relied on by Mr Hill was that of Royle v Trafford Borough Council [1984] IRLR 184.  That concerned an action by a teacher for salary withheld by the employer on the basis that the teacher, in the course of industrial action, had refused to teach classes of more than 31, when he was required to teach classes of up to 36.  The employer’s justification for withholding the salary was that that was a repudiatory breach of contract.  Park J in the High Court held that the teacher was entitled to be paid 31/36ths of his salary.  The actual proportion and the justification for that, although perhaps obvious from the facts we have recited, are not the point at issue in relation to the present case.  What is important for the present case is the decision that he was entitled to be paid, albeit a slightly reduced amount, although, as the High Court accepted, he was in breach of contract in refusing to teach the extra children, which indeed was presumably the basis for the reduction in the amount of his salary by way of a kind of set-off for damages, although we have not been taken through the case in detail.  Nevertheless, although that was a breach, it was not a repudiatory breach and therefore did not justify the employers in treating the contract as having been rejected by the teacher.  In any event, they had not accepted any rejection because they allowed him to go on teaching and therefore they could not treat the contract as at an end.  That again is a quite different point from the present one and, in our judgment, does not assist the appeal in relation to this question of whether there was a variation.

	Mr Hill submitted thirdly that the finding that there had been no variation was inconsistent with the primary facts.  We have referred to the basic facts and, in our judgment, on the evidence which they heard, it was a question of fact, not of law, for the Industrial Tribunal whether there had been a variation of this contract and they fell into no error of law in reaching the conclusion that there had not, and we must therefore reject the appeal so far as it turns on that ground.

	The second limb of Mr Hill’s argument put in question the assumption that it was the contractual obligation which was the relevant one for the purpose of deciding whether the redundancy requirement of the statute was met.  I have referred in brief to that requirement more than once already, but for present purposes it is important to read the relevant provision in full.  

	Section 81 in subsection (1) gives the basic right to a redundancy payment when an employee is dismissed for redundancy, and subsection (2) sets out the circumstances in which a dismissal is to be taken to be by way of redundancy.  It has two sub-paragraphs, of which (a) deals with a cessation of business and is not relevant here because this business continued.  We are dealing with a situation within sub-paragraph (b), and omitting irrelevant words subsection (2) paragraph (b) reads as follows:

“(2)  For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to -
“(b)  the fact that the requirements of that business for employees to carry out work of a particular kind ... have ceased or diminished or are expected to cease or diminish.”

	I have omitted words which refer to the place of employment as distinct from work of a particular kind.  

	The question whether those conditions have been met has been the subject of a number of decisions and this branch of the appeal is perhaps best approached by starting with the proposition advanced by Mr Pitt-Payne, for the Respondents, which is that we are bound by the authority of the Court of Appeal to apply what has been called the ‘contractual test’, in other words that the question “what was the work in question in relation to the Applicant?” is to be approached by asking, “what work could he be required to do?” by the employers under his contract of engagement.

	Mr Hill submits that that approach is not invariable - I think he submits that it is not binding on us.  He wishes us to follow and apply a different test.  One alternative which Mr Hill advances is that of the function which the employee (in this case Mr Horton) was actually performing - and he says that, on the facts of this case, for 18 months Mr Horton had not been carrying out the full duties of his original contract as a Store Operative, but had simply been a line checker and even if, as for this purpose he must accept, there had been no variation, nevertheless the work that he was actually doing was that of a line checker and that should be the test to be applied, not the contractual provision that he could be required to do the full work of a Store Operative.

	As a yet third possible test (and we understand that this indeed is the one that Mr Hill puts at the forefront of his argument because of a particular authority that he relies upon) he says that the test is neither contractual nor functional in the sense which I have explained, but is “what sort of employee was the Applicant and have the employer’s needs for employees of that particular sort ceased or diminished?”  He relies, for that purpose, on an extended passage in Harvey on Industrial Relations in which, undoubtedly, the author or editor of that work advances arguments in favour of the sort of solution that Mr Hill submits to us, in particular the “sort of employee” test (if I may call it that) but, in our view, the conclusive question before us is the one of authority.

	We are bound to say that, if the matter were approached free of authority, while the arguments on each side as between the contract test and the function test are perhaps open (and certainly we do not need to decide how we would otherwise resolve them if the matter is governed by authority) we would see great difficulties on any view in applying a “sort of employee” kind of test.  When we pressed Mr Hill to tell us what in the instant case were the defining characteristics of the sort of employee that Mr Horton was, he was constrained (we think) to reply (and almost inevitably, on the facts of this case and the submissions that he made) that the characteristics were that the employee in question was capable of doing all the work of a Store Operative except those which were excluded by Mr Horton’s medical inability to handle heavy or awkward weights or packages.

	It seems to us that that would be a very difficult kind of test to apply, because section 57 of the Act, in dealing with reasons for dismissal in subsection (2), lists those reasons which are capable of being fair, of which (c) is redundancy, but (a) is a reason related to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do.  It is quite plain that (although qualifications are not relevant to this point) capability is fairly and squarely a matter which is affected by medical conditions such as those from which Mr Horton suffered, and the relationship between the reason of redundancy and the reason of capability or incapability of that kind would be blurred and made very difficult to apply or distinguish if the test were of the kind which Mr Hill advances.

	As between the contract test and the function test, as we have said, were matters open and free from authority, interesting and not particularly simple arguments would need to be considered on both sides, but we do not reach those arguments if, as Mr Pitt-Payne submits, we are bound by authority, and we must therefore turn to the authorities on which he relied.  He in fact cited them to us in a sense at one remove, at because the cases in question in the Court of Appeal are those of Nelson v The British Broadcasting Corporation [1977] IRLR 148 and Cowen v Haden Carrier Ltd [1982] IRLR 225 and Mr Pitt-Payne took us to them by reference to citations of passages from the judgments in those cases in a case called Pink v White & Co [1985] IRLR 489.  Mr Hill did not take us to the originals of those cases to suggest that the passages cited in Pink v White are other than fairly representative of the results of those cases and we proceed on that basis, and indeed it is only right to say that the passage in Harvey on Industrial Relations to which Mr Hill referred us, although critical of the results, accepts, as in our understanding do the later cases in the Employment Appeal Tribunal, that they are authorities which proceed on the basis that Mr Pitt-Payne puts forward.

	In the case of Pink v White the passages from first of all Nelson v BBC which are 

cited begin in paragraph 12, the basic facts of Nelson v BBC being that Mr Nelson was employed as a producer but had in fact been engaged in the Caribbean Service of the BBC in terms of the work which he had actually been doing.  The contract of employment expressly provided that he should serve wherever and however he might be required and the case of Nelson is summarised in Pink v White as involving the Court of Appeal in having held that, in face of that express term, it was impossible in law to imply a term that he was employed only for the purposes of broadcasts to the Caribbean; the contract of employment expressly provided that he should serve wherever and however he might be required.  Thus the closing down of the Caribbean Service, which had happened, did not render him redundant and the Employment Appeal Tribunal in Pink v White having summarised it in that way go on to say:

“As we understand that decision, the Court of Appeal applied what has been called the ‘contract test’.”

 and then in support of that understanding of the Court of Appeal case the judgment in Pink v White goes on to consider a second Nelson v BBC case, also in the Court of Appeal, but differently constituted, dealing with the question of contribution and cite a passage from the judgment of Brandon LJ to show that the Court of Appeal, as then constituted in the second Nelson case, clearly took the first Nelson case as establishing the contract test as being the correct one to apply.

	Then in paragraph 13 of Pink v White the Employment Appeal Tribunal goes on to consider the other Court of Appeal case, that of Cowen v Haden, and cite this passage from the judgment of Cumming-Bruce LJ, in which he refers to another case called Chapman as being distinguishable and goes on to say this:

“...  Further, it was an essential foundation of the decision in the first Nelson v British Broadcasting Corporation case that the court decided whether there was a cessation or diminution of the requirement under the contract of employment for employees to perform the particular kind of work that Mr Nelson was employed to do.  That was necessary to the ratio desidendi of the decision and as the Appeal Tribunal held was binding upon them.”

the importance of that being the reference to the contract of employment for employees. 

	We therefore approach this case on the basis that the Court of Appeal in the first Nelson case, powerfully reinforced by the view of a differently constituted Court of Appeal in the second Nelson case and by the Court of Appeal dealing with Cowen v Haden Ltd, did hold that the test for whether work of a particular kind ceased or diminished must be answered by reference to the contractual obligations of the employee.

	Mr Pitt-Payne also relied upon the Pink v White case in its own right, although not strictly binding on us, but as of assistance, persuasive assistance to us, because he submitted that on its facts it was very similar to the present case, those facts being that the employee there had been employed as a making and finishing room operative in a shoe factory.  For most of his time he was engaged within that general category in the particular functions of a sole layer and pre-sole fitter.  He was then absent for some time and in his absence another employee was trained to carry out the work and when, later, it became necessary to reduce the workforce, he was selected for redundancy and his replacement retained.  In relation to the question whether the dismissal was for redundancy the Employment Appeal Tribunal held that the Industrial Tribunal had not erred in holding that the reason was redundancy, and the ground on which the Employment Appeal Tribunal came to that conclusion was that the employee was employed as a making and finishing room operative and there was a diminution in the work of that section, so the fact that there was no diminution in the particular work of sole laying and pre-sole fitting which he had been doing was not the relevant question.

	Mr Pitt-Payne also referred us to the case of Johnson v Peabody Trust in the Employment Appeal Tribunal [1996] IRLR 387.  Because the facts there were rather different it is sufficient we think for the purposes of this case to note that the Employment Appeal Tribunal there plainly accepted the authority of Nelson v BBC and Cowen v Hayden as establishing the contract test, but held that it had to be applied in a commonsense kind of way so that, for instance, in that example a person employed as a roofer was redundant if the demand for roofers diminished, notwithstanding that under a flexibility clause in his contract he might be required to work in other trades as well.

	Mr Hill submits that we are not bound by that line of authority to apply the contract test in this case, and he relies in particular on the case of Murphy v Epsom College [1985] ICR 80.  The facts of that case were that the employee was one of two plumbers employed by a school.  He was engaged as the second plumber on terms that, although plumbing was the principal object of his employment, he would spend a part of his time on the maintenance of the central heating system.  The time came when the employers reached the conclusion that they needed, for the purposes of the maintenance of the central heating system, a person with suitable qualifications for that purpose, which would be qualifications beyond those held by the employee Mr Murphy, and which (although this is probably not material to the decision) he was not prepared to obtain.  They therefore abolished the post of second plumber with additional central heating responsibilities and instead decided to recruit a central heating tradesman who would be capable of assisting in general plumbing when required, but who would have the necessary qualifications for dealing with all aspects of the central heating system and would be employed primarily on that basis.  The question was whether in those circumstances the dismissal of Mr Murphy was for redundancy and the history of the subsequent application to the Industrial Tribunal and the Appeals was complicated by the fact that the Industrial Tribunal found that the dismissal was either for redundancy or, in the words of section 57(1) “for some other substantial reason”.  

	For the purposes of the appeal before us the subsequent history of the second limb of that decision are not really relevant.  The question was whether the conclusion of the Industrial Tribunal that the dismissal was for redundancy should be upheld.  The Employment Appeal Tribunal upheld the finding of the Industrial Tribunal that the dismissal was for redundancy, and the Court of Appeal again dismissed the appeal from the Employment Appeal Tribunal.

	The relevant passages in the judgment of Sir Denys Buckley to which Mr Hill referred us begin, after the passage dealing with the facts which I have already summarised, at page 92G.  There Sir Denys Buckley says:

“In my judgment the facts found by the industrial tribunal afforded ample justification for the majority view that the dismissal was due to redundancy in the second plumbing post, that is, resulting from the introduction to the staff of a heating engineer to carry out work of one particular kind, which was distinct from general plumbing, and the subsequent reduction of the employers’ requirement for plumbers to carry out work of another particular kind, namely, plumbing.”

	Then, a few lines further on, there is this sentence:

“In each case it must be for the industrial tribunal to decide whether the re-organisation and re-allocation of functions within the staff is such as to change the particular kind of work which a particular employee, or successive employees, is or are required to carry out, and whether such changes has had any, and if so what, effect on the employer’s requirement for employees to carry out a particular kind of work.”

	Then, finally, Mr Hill relied upon the passage at page 93D:

“...  the employers ceased to require a plumber in the employee’s post because they appointed a different kind of tradesman, namely a heating engineer, having different qualifications and skills from those of a plumber, to perform functions and assume responsibilities in connection with the employers’ heating installations of a more extensive and more responsible kind than the functions which the employee was competent to perform in that respect.  That heating engineer would be available and competent to help part-time in the carrying out of the normal plumbing work of the employers, and in consequence the employers’ requirement for the part-time services of a plumber to assist Mr Williams in the general plumbing work ceased. ”[ Mr Williams being the first plumber].

	We were not referred directly by Mr Hill or Mr Pitt-Payne to any of the other judgments; in fact, the judgment of O’Connor LJ is largely occupied in dealing with a different point, but he does say, at the end at page 96D:

“As to the question whether the employee was redundant, for my part I am quite satisfied that the modernisation of the heating arrangements diminished the requirement of the employers for plumbers, because the maintenance of the plant as modernised was not a plumber’s work.  The fact that the heating technician did some plumbing work, or would be required to do some plumbing work, does not alter the situation.  Sir Denys Buckley has dealt with the matter fully;  I agree with his judgment on that part of the case and I also with the reasoning and judgment of the appeal tribunal.”

	Stephenson LJ agreed with both of the earlier judgments.
	Mr Hill naturally, and very cogently, relies on the words in particular “the employers ceased to require a plumber in the employee’s post because they appointed a different kind of tradesman” and that is the main plank, as we understand it, on which he builds his submission that the test is “what sort of employee is the Applicant and has the need for that sort of employee ceased or diminished?”.  But we find ourselves unable to conclude that Murphy v Epsom College in any way excludes the authority of Nelson v British Broadcasting Corporation and Cohen v Haden for a number of reasons.

	In the first place, of those two cases, which were both decided and reported before the argument in Murphy v Epsom College, Cohen v Haden is not referred to in the judgments and was not apparently cited to the Court of Appeal, so there can be no suggestion that the Court of Appeal there was distinguishing it or justifying any departure from it.  Nelson was cited and is referred to in the judgments of Sir Denys Buckley and O’Connor LJ, but without any suggestion that the decision in Nelson v BBC was not one which was binding on the Court of Appeal.  Sir Denys Buckley simply says that it was factually distinguishable from that case, although he agreed with the view expressed by the Employment Appeal Tribunal in Murphy v Epsom College that the Nelson case had a bearing on Murphy.  So the first point is that this is not a case where a later decision of the Court of Appeal has departed from earlier decisions or purported to do so.  

	The second reason, and perhaps the most important, is that on analysis it seems to us that there is nothing in Murphy v Epsom College to cast any doubt on the proposition that the general rule is that a contractual test must be applied.  Of the passages to which Mr Hill referred us and which I have read, the first at the foot of page 92 and going over to age 93 is completely neutral, because it uses the phrase “work of one particular kind” and “work of another particular kind” and those are plainly simple quotations from the section and do not attempt or purport to be explanations or interpretations of those words.

	The second passage which Mr Hill cited from the judgment of Sir Denys Buckley, a little further on, uses words which, if anything, would seem to be clearly contractual.  They are the words “a change of the particular kind of work which a particular employee or successive employees is or are required to carry out” and the most natural understanding is required legitimately because they are part of his or her contractual duties.

	The only passage of those three from Sir Denys Buckley on which Mr Hill, it seems to us, can rely with any comfort or support, is the phrase “they appointed a different kind of tradesman, namely a heating engineer”, but in the context of Murphy v Epsom College it seems quite clear that which test was applied was irrelevant and perhaps not debated and not in the forefront of the Court of Appeal’s mind in giving judgment, so that the difference between “required to carry out “ in one paragraph and “different kind of tradesman” in the next seems to us to be a difference of no significance so far as the present point is concerned.

	Moreover, as Mr Hill was frank enough to concede, in so far as “different kind of tradesman” is to be looked at closely, it points rather towards what he called “the test of what sort of employee” rather than the functional test, and we have already explained our difficulties about the test of what kind of employee is this, in addition to the difficulty of authority.

	The passage in the judgment of Lord Justice O’Connor again has no real bearing on the debate as to what is the type of test to be implied, whether contractual or functional, or even “what sort of employee.” 

	In our view, therefore, there is nothing in Murphy v Epsom College to suggest that the law as established in Nelson v BBC and Cohen v Haden has been departed from, or is subject to any relevant exceptions.  Mr Hill did point (perfectly properly) to a number of factual distinctions between the cases relied upon by Mr Pitt-Payne on the one hand, and the facts of Murphy and the present case on the other, but we are not concerned with trying to match facts exactly from one case to another.  What matters for the purposes of looking for binding authorities is whether the principle on which a decision of a Court of Appeal turns is one which is applicable to the present case.  Moreover even in terms of matching cases, fact for fact, we think there is force in Mr Pitt-Payne’s submission that perhaps the closest on the facts to the present is that of Pink v White. 

	We have come to the conclusion, therefore, that we are bound by the authority of Nelson v BBC and Cohen v Haden to hold that the approach which we must apply is that of the contract test, and whether that test is applied strictly or with the latitude of common sense suggested in Johnson v Peabody Trust is of no materiality so far as the facts of the present case are concerned.  In fact, as Mr Pitt-Payne pointed out in the course of his submissions, one could regard this as being a case where the same kind of flexibility or rather common sense is applied, because the Industrial Tribunal treated Mr Horton’s job as being that of a Store Operative, whereas his original contract had in fact contained the flexibility clause entitling the employers to require him to carry out even wider functions, so that rather as in Johnson v Peabody Trust it is what might be called the ‘core obligation’ which has been treated as material, although it is only right to say that in the present case it seems extremely unlikely that either party was concerned to suggest to the Industrial Tribunal that the relevant category was the wider one of “Store Operative or anything else which the employee might have been required to do”.  The contest was between Store Operative on the one side and the narrower category of “Store Operative employed exclusively as a line checker” on the other.

	For those reasons we reject the second ground advanced by Mr Hill in support of the appeal, namely that the test should be functional or should be related to the kind of employee that the Applicant was, and we accept that the appropriate test is the contract test.  It is quite plain that the Industrial Tribunal applied that test and, having rejected the submission of a variation in the contract, were fully entitled to reach their conclusion that this dismissal was not on the basis of redundancy, but for a reason related to Mr Horton’s capability.

	We therefore dismiss the appeal.