Appeal No. UKEAT/0265/04/MAA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 27 October 2004

Before
THE HONOURABLE MR JUSTICE BEAN
MR J HOUGHAM CBE
MS P TATLOW

LIONEL LEVENTHAL LIMITED	APPELLANT

MR J NORTH	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR A NAWBATT
(of Counsel)
Instructed by:
Messrs Royds RDW
2 Crane Court
Fleet Street
London
EC4A 2BL	
For the Respondent	MR J NORTH
(the Respondent in Person)	

SUMMARY

Unfair Dismissal / Redundancy

Redundancy dismissal- alternative employment in subordinate capacity not suggested by employee nor considered by employer – whether ET entitled to hold dismissal unfair.

THE HONOURABLE MR JUSTICE BEAN

1.	This is an employer’s appeal from a finding of unfair dismissal.  Mr North, the employee has argued his case before us as he did before the Tribunal and has done so with great ability.  The employers have had the advantage in this Tribunal of being represented by Mr Akash Nawbatt of Counsel who did not appear below.

2.	Lionel Leventhal Limited are the owners of Greenhill Books a publishing business specialising in military books.  Mr North was first employed by them on 17 March 1997.  By 2001 he had progressed to the rank of Senior Editor which the Tribunal found to be more specialist in its duties than those of an Editor.  It was they said “much more of a management role working with other staff and outsiders”.

3.	In 2003 the company encountered serious financial difficulties.  The findings of the Employment Tribunal which in this respect are not disputed are set out in paragraphs 22 to 29 as follows:

“22.	Things became serious early in September 2003 when the Respondent received the US returns for August. Mr Leventhal sent a long e-mail to all staff which ended “we need to find ways to cut our overheads, and your ideas or suggestions would be welcome.”
23.	At that time the Respondent employed 12 full time staff (two of whom had transferred from Chatham Publishing) and two-part time secretaries,
24.	Mr Leventhal and Mr Wary decided that the best way to make savings was to make a staff member redundant. They concluded that the prime candidate for the redundancy was the Applicant, being the most expensive employee and one in a role that they could easily manage without.
25.	Mr Leventhal and Mr Wray saw the Applicant on 18 September 2003 and advised him that they did not consider that the Respondent needed a Senior Editor. They asked the Applicant for his views and reconvened another meeting for 22 September.
26.	The Applicant brought to that meeting a list of 11 suggestions for cost cutting. These were discussed at the meeting but subsequently Mr Leventhal and Mr Wray concluded that they were not capable of producing the required savings quickly enough. 
27.	The Respondent did not consider making any other member of staff redundant. 
28.	Mr Leventhal saw the Applicant the following day 23 September 2003 and told him that his employment would be terminated and that he would be given his two months' contractual notice ending on 21 November 2003, together with statutory redundancy pay. 
29.	Mr Leventhal's letter confirming this began 
“We much regret that following our consultation discussions, we confirm our decision to make your position of senior editor redundant”.”

4.	The submissions made below are summarised succinctly at paragraphs 45 and 46 of the Tribunal’s Extended Reasons.:

“45.	.Put simply, the Applicant contended that he cannot have been dismissed by reason of redundancy arguing that the amount of work within the Respondent was rising, rather than falling. If however we were to find a redundancy then the Applicant contended that the Respondent's procedure leading to his selection was defective. 
46.	For its part, the Respondent maintained that this was genuine redundancy brought about by a need to restructure the company for financial reasons. The Applicant was selected because his loss would cause the company least damage. 

The Tribunal concluded not surprisingly on the findings of fact we have already set out that the dismissal of the Applicant was indeed by reason of redundancy.  They so held in paragraph 47 of their decision adding that the requirement of the Respondent for employees to carry out work of a particular kind, namely the work of a senior editor, had diminished.  They added correctly in paragraph 49 that the test for redundancy concerns the Respondent’s requirements and not its work load and held that that test was satisfied.  The conclusion that the dismissal of the Applicant was indeed by reason of redundancy cannot in our view be faulted.

5.	Mr Nawbatt concentrates his attack on the finding of unfair dismissal in paragraph 50 which we should quote in full.

“50.	We conclude that the decision to dismiss the Applicant was however unfair. It had, in reality, been taken before any discussion with him and the Respondent did not consider seriously the other ideas that he put forward as possible alternatives. The Respondent took the view that by making. the Applicant redundant it could save his salary some £27,000 per annum at a stroke. For the same reason the Respondent did not consider the possibility of making redundant the only Editor on the staff and offering his position to the Applicant. Mr Leventhal told us that he did not think that the Applicant would have accepted the drop in salary consequent upon a demotion to Editor that such a move would have involved. However the Respondent was not given that opportunity.”
[In the text of the Tribunal’s decision, the last sentence of that paragraph reads “The Respondent was not given that opportunity” but all parties are agreed that this is simply a dictation or typing error and the reference should be to the Applicant].

6.	The first ground of Mr Nawbatt’s criticism is that the Tribunal were wrong to find in the second sentence of paragraph 50 that the Respondent did not consider seriously the other ideas that Mr North had put forward as possible alternatives.  We have available to us, as the Tribunal did to them, notes made by each party of the crucial meeting of the 22 September 2003.  The notes do not differ in substance and it is convenient to take Mr North’s note.  It shows that Mr North took the managers Mr Leventhal and Mr Wray through a list of 11 suggestions for the saving of money without making compulsory redundancies.  If it were a matter for us (which it is not) we would say that they were a sensible and constructive list of suggestions.  But it is not for an Employment Tribunal, still less for us, to second-guess the employers’ decision as to whether the suggestions for saving money are practicable, unless it is quite clear both that they were of merit and that the employers simply did not consider them.  Here the notes of both sides indicate that the suggestions were taken on board.  The Tribunal found in paragraph 26 of the Decision (to which we have already referred) that the suggestions were discussed at the meeting but subsequently Mr Leventhal and Mr Wray concluded that they were not capable of producing the required savings quickly enough.  Mr Nawbatt argues that, given that finding of fact in paragraph 26, the criticism in the second sentence of paragraph 50 of the judgment is rather harsh as a basis for a finding of unfair dismissal.

7.	We are inclined to agree with that.  But it does not dispose of the second finding made in paragraph 50 of the Tribunal decision, namely that proper consideration was not given to alternative employment within the group for Mr North by making another employee redundant whether voluntarily or compulsorily.  As to this we note that this was not a case of there being a vacancy for a subordinate position.  Nevertheless it is quite apparent from the case law (and indeed Mr Nawbatt did not suggest the contrary) that it can be unfair not to give consideration to alternative employment within a company for a redundant employee even in the absence of a vacancy: it is a question of fact for the Employment Tribunal.  See, among many decisions to like effect, Thomas & Betts Manufacturing Ltd v Harding [1980] IRLR 255.

8	However, the issue does not end there.  Mr Nawbatt points out that the probable alternative position in this case (namely that of Editor) was a subordinate position and we have been told that there was a difference in salary of 1/6th  between the senior editor’s position which Mr North occupied and which carried a salary of £27,000 a year, and the editor’s position at £22,500 per year.  Mr Nawbatt has referred us to the decision of Barratt Construction Ltd v Dalrymple [1984] IRLR 385 a decision of this Tribunal sitting in Edinburgh.  In that case, in a well known passage, the Appeal Tribunal said in paragraph 5:

“The Tribunal must decide the question of reasonableness on the evidence before them in accordance with equity and the substantial merits of the case. The evidence before them disclosed that efforts were made to see if alternative employment was available within the appellants' company and that no suggestion was ever made by the respondent that he would be interested in a more junior appointment until he gave evidence before the Tribunal. Without laying down any hard and fast rule we are inclined to think that where an employee at senior management level who is being made redundant is prepared to accept a subordinate position he ought, in fairness, to make this clear at an early stage so as to give his employer an opportunity to see if this is a feasible solution.
It is well accepted that a reasonable employer will not make an employee redundant if he can be employed elsewhere, even in another capacity.”

9.	Here it is plain from the documentary evidence and findings of the Tribunal that Mr North did not himself suggest to the employers that the Editor Mr David Palmer should be made redundant in his (Mr North’s) place.  Indeed, he was urging Mr Leventhal and Mr Wray not to make redundancies at all.  He did suggest in item 10 of his 11 points that there was another employee, an editorial assistant called Julian Mannering, who was (as he put it) “an expensive wage bill”, and that he could possibly be induced to act as a consultant or retire early and a junior brought in to help.  He did not however suggest that Mr Palmer should be made redundant.  However, as this Tribunal itself said in Barratt v Dalrymple, it was not laying down a hard and fast rule that it is for an employee willing to accept a subordinate position to take the initiative in discussions with management.  The fact that there is no hard and fast rule to that effect was recently emphasised by this Tribunal (Keith J presiding) in Dial-A-Phone v Butt, a judgment delivered on 30 January 2004 and so far unreported.

10.	It is unnecessary to go in to the details of the facts of the Butt case.  It involved an employee who was made redundant shortly after revealing to the employers that she was pregnant, which is sufficient to indicate that the case is very different on its facts.  However it was a case in which the employee Mrs Butt, while she had pressed for one post (that of Mr Kemp) to be eliminated instead of her own, had not indicated willingness on her own part to accept a subordinate position.  Counsel for the employers, Mr Sean Jones, naturally relied on the passage in Barratt Construction Ltd v Dalrymple to which we have referred.  As to that, this Tribunal in Dial-A-Phone v Butt said:

“19.	We have not overlooked Mr Jones' reliance on the comment in Dalrymple, but we make three points about it. First, the Employment Appeal Tribunal said that it was not laying down a hard and fast rule. Secondly, even if a senior employee should inform his employers (if it be the case) that he is prepared to accept a subordinate post, that does not necessarily mean that the employers will act fairly in not considering the employee for that post simply because the employee did not say that he would be willing to accept it. Thirdly, Mrs Butt was pressing for Mr Kemp's post to be eliminated instead of hers. It would have completely undermined that stance if she had in effect been required to say (before the Company had reached a final decision on whether Mr Kemp' s post should go instead of hers) that she would be prepared to take on his post. In our judgment, it was entirely open to the tribunal to find, to use the language of para. 6(j) of its reasons,  that Mrs Butt's selection for redundancy was not carried out after a proper and fair consideration of "the pool of employees", i.e. Mr Kemp and her, from whom the selection should have been made following a fair selection process. A fair consideration of which of them had to go once the decision had been made to eliminate her post would have involved considering which of them should be retained to carry out the duties of Mr Kemp's post. The need to consider that was not dependent on Mrs Butt saying that she would be prepared to take his post on.”

11.	Mr Nawbatt argues that the third of the three points in paragraph 19 of Dial-A-Phone v Butt namely that Mrs Butt was pressing for Mr Kemp’s post to be eliminated instead of hers, is essential to the decision.  But we think it is unnecessary to decide whether the third point was essential to the decision on the facts of the Butt case because they are, as we have said, so very different.  What we do derive from the Butt case is the emphasis on what was said in Barratt Construction Ltd v Dalrymple not being a hard and fast rule; and the importance as we see it of the second of the three points which (although made a little difficult at first reading because of the numerous negatives in the sentence) makes it clear that it is not necessarily the case that employers can rely on a failure by the employee to raise the question of the subordinate job as being a defence to an allegation of unfair dismissal.

12.	Whether it is unfair or not to dismiss for redundancy without considering alternative and subordinate employment is a matter of fact for the Tribunal.  It depends as we see it on factors such as (1) whether or not there is a vacancy (2) how different the two jobs are (3) the difference in remuneration between them (4) the relative length of service of the two employees (5) the qualifications of the employee in danger of redundancy; and no doubt there are other factors which may apply in a particular case.  Here the Tribunal concluded that the Applicant was not given the opportunity to say whether he would have accepted Mr Palmer’s position.  Mr Palmer was not approached to see whether he was interested in voluntary redundancy.  The Tribunal found that this was unfair and it seems to us that it is a finding with which this Appeal Tribunal cannot interfere.  There is no rule of law which leads us to the conclusion that this finding of the Employment Tribunal was wrong in law.  Paragraph 50 can be fairly be said to be somewhat compressed reasoning but nevertheless we find it a sufficient basis to uphold the finding that the dismissal, albeit for redundancy, was unfair.

13.	The second issue in the case, however, namely the question of what would have happened if the Respondent had offered the Applicant a less well paid position, is one on which we take different view.  As to this the Tribunal in paragraph 51 of their decision said:

“We do not think that we can speculate as to what might have happened had the Respondent consulted properly or offered the Applicant a less well paid position in exchange for his being retained. Consequently we do not reduce the compensatory award to take account of the possibility of a fair dismissal for redundancy after adequate consultation and a fair procedure.”

With respect to the Tribunal this reasoning is inadequate.  Having found that the Respondents acted unfairly in not taking the initiative on the alternative employment issue, it seems to us that it was essential for them to go on to consider what would have happened had the less well paid position been considered.  This is not a matter of speculation.  It is a matter of assessment of the possibility that a scrupulously fair procedure would have made no difference.

14.	The decision of the House of Lords in Polkey v Dayton [1987] 3 All ER 974 made it clear that the question of whether a fair procedure would have made a difference is not relevant to liability for unfair dismissal, but it is highly relevant to the question of remedy.  Sometimes the matter is considered at a single hearing (as was apparently done in the present case), sometimes at one or other part of a split hearing where remedy is deal with separately.  But, however it is dealt with, it must (as we see it) be dealt with at some stage, and in taking the course they did in paragraph 51 we regret to say that the Tribunal failed to grapple with the difficulties.
15.	In some cases of this type it has been found that the award that which would otherwise have been made in compensation should be reduced by a percentage to take account of the so-called Polkey reduction.  In other cases such as Abbotts v Wesson-Glynwed Steels Ltd [1982] IRLR 51 the Tribunal concluded that the result would inevitably have been the same had a proper procedure had been followed, but it would have taken a certain number of weeks, and that therefore the compensatory award should be limited to that number of weeks’ loss of earnings.
16.	We are not giving any indication to the Tribunal as to what the result of this inquiry should be; simply that it must be undertaken.  We therefore have no alternative but to set aside the award of compensation and remit the case to the Tribunal for re-hearing of the issue of the Polkey v Dayton reduction and what basic and compensatory awards should be made after that issue has been considered.  Neither party objects to the same Tribunal hearing the case.  It is plainly desirable for reasons of efficiency and economy that they should if available and the circumstances set out in the recent case of Sinclair Roche & Temperley v Heard & Fellows in which it is appropriate to remit to the same Tribunal plainly apply here.  So if they are available, they should hear it.

17.	We therefore dismiss the appeal against the finding of unfair dismissal but remit the case to the Tribunal in the way that we have suggested.  To that extent the appeal is allowed.