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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Belcher & Ors v Great Bear Distribution Ltd [2005] UKEAT 0453_05_1912 (19 December 2005) URL: http://www.bailii.org/uk/cases/UKEAT/2005/0453_05_1912.html Cite as: [2005] UKEAT 453_5_1912, [2005] UKEAT 0453_05_1912

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APPEARANCES

 

For the Appellant	MR THOMAS LINDEN (Of counsel) Instructed by: Messrs Thompsons Solicitors Congress House Great Russell Street London WC1B 3LW
For the Respondent	MR SIMON GORTON (Of counsel) Instructed by: Messrs Allington Hughes Solicitors 10 Grosvenor Road Wrexham LL11 1SD

SUMMARY

Tribunal erred in law in its application of section 166(2) ERA 1996 by taking into account conduct after the giving of notice. Otherwise, appeal dismissed.


 


HIS HONOUR JUDGE RICHARDSON

1. This is an appeal by Mr Stephen Belcher and a number of other claimants against a judgment of the Employment Tribunal sitting at Stratford dated 23 May 2005. They had presented claims of unfair dismissal against their former employer, Great Bear Distribution Ltd, ("GBD")
2. GBD conceded that the dismissals were unfair (and the Tribunal so declared) but the Tribunal declined to make any award of compensation. Against that part of the judgment each Claimant appeals.

The Background

3. Mr Belcher and his colleagues were employees at a warehouse and distribution depot in Basildon which was the southern centre for Michelin Tyre plc, ("Michelin"). Originally Michelin operated the depot themselves and employed the workforce. Then they let the operation out under contract to TNT (UK) Ltd, ("TNT"). Then in March 2003 TNT lost the contract and GBD won it.
4. Altogether by March 2003 there were about 125 employees at the site. Their terms and conditions varied. If they were recruited when Michelin operated the site they had one of two packages depending on when they were recruited and where they worked; which the Tribunal called "Michelin 1" and "Michelin 2". If they were recruited during TNT's time they had another type of contract again.
5. The whole workforce was transferred from the employment of TNT to the employment of GBD pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981, ("TUPE"). There were no redundancies. Existing terms and conditions of contract were initially honoured; however, GBD wished to have all their employees across different sites on harmonized terms of conditions. As the Tribunal found there were two reasons for this; first, ease of administration; secondly, equality of earnings for like-work, thereby avoiding anomalies.
6. GBD approached the recognized trade union – the TGWU – about the issue. The TGWU, as the Tribunal found, did not oppose harmonization in principle. Consultation about harmonization however took place against a background of dissatisfaction which had existed between the workforce and TNT concerning other matters in dispute; in particular pay settlement and overtime rates. Suffice it to say that although moving to GBD's terms and conditions involved some loss of benefits the issues became intermingled with concerns over pay and over time which were different to harmonization.
7. Relatively early in the process, 79 employees accepted GBD's terms and conditions. They received compensation based on GBD's estimate of the value of 12 months loss of each benefit.
8. When progress stalled GBD wrote to the remaining employees as follows on 22 August 2003.

"In order to achieve our objectives of harmonisation of the terms and conditions and contracts of employment we must now advise you that as from 22 August 2003 we are serving you with 12 weeks notice of the termination of your existing terms and conditions and contract of employment and replacing them with Great Bear terms of conditions and contract of employment, copy attached. This means as from 23 November 2003 you will be required to work under the new terms."

Following that letter a further 11 employees accepted the terms offered, leaving 35 employees outstanding.

9. Between August and November the dispute escalated. The TGWU threatened that there would be Tribunal proceedings for unfair dismissal. Negotiations took place under the auspices of ACAS. The deadline was extended to 7 December and then to 14 December. An improved offer was made by GBD but rejected by the TGWU. The offer involved an increase in the compensation calculation period from 12 months to 15 months, a guaranteed pay increase from 1 April 2004 and perhaps an offer of £160 for loss of sick pay benefits. See paragraph 21 of the Tribunal's Reasons.
10. The workforce was balloted for industrial action. A strike started on 3 December. On 10 December GBD wrote to the 35 employees telling them they had two options. On the one hand if they allowed time to expire without agreement they would cease to be employees of GBD. On the other hand they could come to work on 15 December, agree to the harmonized terms and sign a legally binding compromise agreement, accepting the terms and relinquishing any right to pursue claims in the Employment Tribunal.
11. In the event the strike ended on 15 December and all but 9 employees signed a compromise agreement. One person resigned. The remaining 8 are the Claimants in this case.
12. The Tribunal made detailed findings as to the terms and conditions of individual employees and as to their reasons for holding out. As we shall see one point which concerns several employees was the lack of any guaranteed overtime. This however was not something that was afforded by any of the previous contracts; moreover as the Tribunal found it was never canvassed officially in the course of negotiations. It will suffice for the purpose of this judgment to summarize two examples from the different cases of the Claimants.
13. Mr Belcher had a Michelin 1 type of contract. He had 11 years service. His contract afforded him certain benefits which he would not have on GBD's terms. First and most important was the provision for sickness benefit. Under Michelin 1 after 10 years of service he was entitled to 26 weeks of absence on full-pay, then unlimited half-pay thereafter. GBD's sickness benefit on the other hand was less generous. There was no sick pay for the first 3 days, then there was a sliding scale for the rest of the first two weeks, then in weeks 3 to 8 there was basic pay, and from weeks 9 to 28, statutory sick pay. There were also certain advances in leave arrangements, a very small Christmas bonus and the possibility of a call-out payment.
14. As against these benefits, GBD were offering, partly as a result of re-grading, and partly as a result of a pay offer, an increase in pay from £19,023 to £19,996 per annum. They were also offering a one-off compensation payment of £476.85. The Tribunal found that of these elements the provision regarding sick pay was the major stumbling block for Mr Belcher. The Tribunal noted however that he had not himself been sick in recent times. The Tribunal noted that the rate of sickness absence at the site was 14 percent which was agreed by the union and GBD alike to be unacceptable.
15. Mr McCandlish, a driver, was on Michelin 2 terms. He had more than 17 years of service. He too had benefits which he would not receive under GBD terms: sickness benefit, advantages in leave, Christmas bonus and a meal allowance. In addition, in Mr McCandlish's case he would suffer a reduction in salary. The pre-transfer salary was £21,281, the proposed post-transfer salary, as a result of re-grading, was £20,823. As against the loss of these benefits he was offered by GBD the sum of £1,806.
16. The Tribunal made similarly detailed findings as regards other employees. In several cases there were substantial increases in salary and in those cases GBD offered little or no compensation. In other cases there were no such increases or there were even decreases, in which case compensation was offered. In several, but not all the cases, the Tribunal found that the employees were concerned about the lack of any guarantee of overtime.

The Tribunal's Reasons

17. The Tribunal heard full legal submissions from counsel on both sides. It will suffice to state its conclusions as regards Mr Belcher and Mr McCandlish and its final summary. As to Mr Belcher, the Tribunal said:

"45 Case number: 3200751/04, Mr S Belcher

On the evidence it is clear that Mr Belcher had set his face against the negotiated terms as he placed particular value upon his Michelin sickness policy. We view this against a picture of:

(a) 14% sickness absence figure which was recognised by both the TGWU and the Respondent as unacceptable;

(b) the fact that this was a contingent benefit, although no doubt a reassuring one, given the nature of the job concerned

(c) that Mr Belcher had not been off sick in recent times and was offered terms which meant that he would be better paid and received calculated compensation based upon the 15 month period.

The Tribunal finds as significant that he, like others was concerned about the failure to guarantee overtime. It had never hitherto been guaranteed, there was no diminution in overtime during the March to December 2003 period and given the advantageous pull through provisions. it is difficult to understand any rational or reasonable basis for his apprehension. This is a Claimant who was financially better off taking into account his pay rise as well, and rejected consistently, reasonably calculated compensation. We reject Mr Ohringer's submissions on the basis that this Tribunal is unanimously of the view that applying sections 122(2) and 123(6) it is on the facts of this case established

(a) he failed unreasonably to mitigate his loss, flowing from his dismissal by refusing to sign the new contract;

(b) caused his dismissal by unreasonably refusing to accept the new contract of employment. Accordingly, it would not be just and equitable to award compensation.

He, like others, chose to pursue, in our view, inflated and nebulous settlement figures without giving prior consideration to a reasonably calculated settlement package and terms and conditions of employment."

18. As to Mr McCandlish:

"Unlike Mr Knowles, this Claimant was a driver but like Mr Knowles he was on Michelin (2) terms. He was, amongst the Claimants, one of the longest serving with over 17 years continuous service. The major difficulty for Mr Knowles was a cut in pay which resulted in a loss of £457 per annum. His compensation however was four times this amount. Although that amount included sums to compensate for other factors, it is clear that during the life time of the current contract that existed between the Respondent and the client company, he would not be financially disadvantaged for some time to come. Like Mr Knowles however, he was tired of being a transferred employee. This is understandable but provides no basis for rejecting the offers made by the Respondent and then expecting to be compensated henceforth by a Tribunal. His attitude is encapsulated in his own statement which reads:

"At no time did I consider accepting the offer".

Accordingly, on the evidence, the Tribunal has reached the same conclusions in his case."

19. The Tribunal summed up:

"54 Finally, these cases have illustrated that the Respondent, although it might have admitted liability somewhat sooner, acted from motives consistent with reasonable industrial practice. The procedures they adopted were lengthy, they were patient throughout the negotiations, they even offered arbitration which was rejected. The sums as calculated and put forward by them were based upon rational considerations. The sums suggested in reply were clearly not. As a consequence and taking into account all the evidence, the Tribunal is unanimously satisfied therefore that the Claimants were unfairly dismissed but nevertheless should not, in justice and in equity, receive the remedy of compensation."

Submissions on Appeal

20. On behalf of the Claimant Mr Linden submits that the Tribunal misapplied section 122(2) of the Employment Rights Act 1996 which relates to the basic award by taking into account conduct after the giving of notice on 22 August 2003. The thrust of the Tribunal's criticisms, he submits, relates to the period between August and December. In any event, he submits that the Tribunal was wrong to adopt an "all or nothing" approach. It should have calculated the basic awards which would otherwise have been due and then considered whether they should be reduced, and if so by how much.
21. Mr Linden further submits that the Tribunal misapplied section 123(6) of the 1996 Act which relates to the compensatory award and requires the Tribunal to consider the question of contribution. He accepts, having taken us through the history of the provisions, that under section 123(6) the Tribunal was entitled to consider all the circumstances up to the date of dismissal. It was not bound to the date of 22 August 2003. But he submits that an all or nothing approach was erroneous.
22. He further submits that a 100 percent reduction would only be appropriate if the employees were the sole cause of their own dismissals. He relies for that proposition on Gibson v British Transport Docks Board [1982] IRLR 228. That, he submits, could not possibly be said in the circumstances of this case. He refers to the unfair termination of their employment by GBD. He refers to the policy of TUPE to preserve employees' terms and conditions upon a transfer. Having regard to these matters, it was, he says, impermissible or perverse to make a 100 percent reduction. In any event he submits the Tribunal has not sufficiently reasoned its conclusion for doing so.
23. Mr Linden further submits that the approach of the Tribunal to the issue of mitigation was flawed. It was, he submits, necessary for the Tribunal first to assess what each employee had lost and then to ask to what extent that loss could have been avoided if the employee had taken reasonable steps to mitigate it. Some losses would have been suffered by the employees even if they had accepted re-engagement. Those losses could not have been avoided by mitigation; so he submits the Tribunal should have awarded, or at least given consideration to awarding, the difference between what each employee would have earned, had their original contracts not been terminated, and what they would have earned had they accepted the offers of re-engagement.
24. Mr Linden also submits that there is a legal principle to the effect that an employee acts reasonably if he refuses to accept an offer of re-engagement where a pre-condition of acceptance is the signing of a compromise agreement. He relies on Shindler v Northern Raincoat Co Limited [1960] 2 All ER 239.
25. On behalf of GBD, in respect of section 122(2) Mr Gorton accepts that the Tribunal in its reasons has not explicitly distinguished between the period before and after 22 August 2003. He accepts that it is open to the Claimants to take this point on appeal. The Tribunal was obliged, he accepts, to apply section 122(2) even though the statement of issues, which he tells us was supplied to the Tribunal, perhaps in some relative haste, before the hearing, did not expressly identify the 22 August date. But he submits that the contributory conduct held by the Tribunal to justify the denial of the basic award had arisen by 22 August 2003 and never thereafter altered. Several of the employees had always set their face against any offer made by GBD, others had objections which always remained the same.
26. On the question of the compensatory award Mr Gorton submits that the Tribunal was fully entitled to take the approach that it did. The issue was dealt with by the Tribunal as one of principle. It properly considered the circumstances of the individuals but was entitled to find a 100 percent contribution. There is, he submits, in law, no reason preventing it from doing so. And Mr Gorton also submits that the Tribunal was fully entitled to reach the decision it did in relation to mitigation. It accorded with the way the issue was put before the Tribunal and was a sensible approach to take in the circumstances of the case.

The Law

27. The key provisions relating to this appeal are Regulations 8(1) and 8(2) of TUPE and sections 112(1) and (3), section 118(1), section 122(1) and (2) and section 123(1), (4) and (6) of the Employment Rights Act 1996.

"8.- Dismissal of employee because of relevant transfer

(1) 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 V of the 1978 Act and Articles 20 to 41 of the 1976 Order (unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal.

(2) Where an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer is the reason or principal reason for dismissing an employee

(a) paragraph (1) above shall not apply to his dismissal; but

(b) without prejudice to the application of section 57(3) of the 1978 Act or Article 22(10) of the 1976 Order (test of fair dismissal), the dismissal shall for the purposes of section 57(1)(b) of that Act and Article 22(1)(b) of that Order (substantial reason for dismissal) be regarded as having been for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

112 Remedies and compensation

(1) This section applies where, on a complaint under section 111, an industrial tribunal finds that the grounds of the complaint are well-founded…

(3) If the complainant expresses such a wish, the tribunal may make an order under section 113.

118. - (1) [… Where a tribunal makes an award of compensation for unfair dismissal under section 112(4) or 117(3)(a) the award shall consist of-

(a) a basic award (calculated in accordance with sections 119 to 122 and 126), and

(b) a compensatory award (calculated in accordance with sections 123, 124, [124A and 126]).

122. –

(1) Where the tribunal finds that the complainant has unreasonably refused an offer by the employer which (if accepted) would have the effect of reinstating the complainant in his employment in all respects as if he had not been dismissed, the tribunal shall reduce or further reduce the amount of the basic award to such extent as it considers just and equitable having regard to that finding.

(2) Where the tribunal considers that any conduct of the complainant before the dismissal (or, where the dismissal was with notice, before the notice was given) was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly.


123 Compensatory award.-

(1) Subject to the provisions of this section and sections 124 and 126, the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland.


(6) Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding."

GBD's Concession

28. Although GBD initially asserted that the dismissals were for some other substantial reason by the time of the Tribunal hearing GBD accepted that the dismissals were automatically unfair for the purpose of Part X of the Employment Rights Act 1996. We set out briefly as background to our conclusions why this is.
29. Under regulation 8(1) of TUPE, if an employee is dismissed and a relevant transfer of undertakings, or a reason connected with that transfer is the principal reason for the dismissal, the dismissal is treated as unfair. Under regulation 8(2) if the dismissal is for an economic, technical or organizational reason entailing changes in the workforce, the dismissal is not necessarily treated as unfair. The reason qualifies as some other substantial reason and the Tribunal may adjudge its fairness pursuant to section 98(4) of the Employment Rights Act 1996. But harmonization of terms and conditions will not in itself qualify as a reason under regulation 8(2) because "a change in the workforce" has been held to mean a change in the overall numbers or functions of the personnel employed. See Berriman v Delabole Slate Ltd [1985] ICR 546. Once granted therefore that the transfer of the undertaking from TNT to GBD, or a reason connected with that transfer, was the principal reason for the dismissal, the dismissal would be treated as unfair. GBD by the time of the Tribunal hearing conceded that point.

The Basic Award

30. We turn first to consider the Tribunal's refusal to order a basic award by reference to section 122(2). Where a Tribunal is considering an award of compensation there are two components to consider – a basic award and a compensatory award. A compensatory award will be made, if and only if, the Tribunal considers it just and equitable in all the circumstances. See section 123(1).
31. There is no similar overarching provision in relation to a basic award. The only provisions whereby it may be reduced are those in section 122. The basic award is broadly to compensate an employee who has been unfairly dismissed by giving him the amount of redundancy protection to which he was entitled at the time of dismissal. Given this limited and specific purpose it is perhaps not surprising that there is no overarching requirement that it should be just and equitable to make the basic award.
32. When the basic award was introduced as a feature of unfair dismissal law by the Employment Protection Act 1975 there was a provision empowering the Tribunal to reduce the basic award if the employee to any extent caused or contributed to the dismissal by his own conduct. See section 76(7) of the 1975 Act. That provision did not fasten upon the date of giving of notice. However, that provision was replaced by section 122(2) as it now is by section 9 of the Employment Act 1980. According to the recollection of this Tribunal the reason was believed to have related to the decision of the House of Lords in Devis v Atkins, namely the problem identified that sections 76(7) of the 1975 Act was not apt to deal with the case of an employee whose misconduct was unknown to the employer at the time of dismissal.
33. But whatever the reason for the introduction of what is now section 122(2) there is no doubt that where notice of dismissal was given it fastens upon conduct prior to the giving of notice. Counsel were not able to and we are not sure that we are able to suggest the reason why this should be so, but the statutory provision is clear; the Tribunal is required to consider the conduct of employees, up to and only up to, the giving of notice where dismissal is with notice. That is the law.
34. We accept Mr Linden's submission that the Tribunal plainly took into account the conduct of the Claimants after the giving of notice. This to our mind is plain, not only from the terms of the reasons as a whole but also from the way in which the Tribunal has framed the issue for itself in paragraph 4 of its Reasons.
35. Mr Gorton's submission is that the result would have been the same if the Tribunal had focused on the conduct of the employees up to the 22 August. We do not feel able to say that this must have been the case. As at August the Claimants' conduct was similar to that of a substantial body of fellow employees. After August the Claimants conduct persisted where that of other fellow employees did not: in rejecting further offers; in rejecting arbitration; in rejecting a final attempt by the employer to retain them.
36. For the purposes of section 122(2) that is not conduct which the Tribunal could take into account for the purposes of the basic award. A Tribunal, in our judgment, might weigh the balance differently in determining what is just and equitable if it limited itself to taking into account the conduct of the Claimants up to the date of the giving of notice.

The Compensatory Award

37. We deal first of all with the question of contribution and the Tribunal's judgment that in the light of the employees' conduct it was not just and equitable to make an award. The essential task of the Tribunal is plain from the decision of the Court of Appeal in Nelson v BBC [1980] ICR 110. See in particular page 121 where Brandon LJ said:

"An award of compensation to a successful complainant can only be reduced on the ground that he contributed to his own dismissal by his own conduct if the conduct on his part relied on for this purpose was culpable or blameworthy".

About that concept of culpability or blameworthiness he said:

"The concept does not in my view necessarily involve any conduct of the complainant amounting to a breach of contract or a tort. It includes no doubt conduct of that kind but it also includes conduct which while not amounting to a breach of contract or a tort is nevertheless perverse or foolish; or if I may use the colloquialism, bloody minded. It may also include conduct which although not meriting any of those more pejorative epithets, is nevertheless unreasonable in all the circumstances".

And as to the process of thought involved, he said that three findings were necessary:

"First, that a finding that there was conduct of Mr Nelson in connection with his unfair dismissal which was culpable or blameworthy in the sense which I have explained. Secondly, that the unfair dismissal was caused or contributed to some extent by that conduct. Thirdly, that it was just and equitable having regard to the first and second findings, to reduce the assessment of Mr Nelson's loss".

38. It has been established for many years, certainly since the decision of the House of Lords in Devis v Atkins that a Tribunal does not necessarily err in law if it finds that it is just and equitable to award no compensation even where a dismissal is unfair. Indeed, Mr Linden in his careful submissions did not argue the contrary to that proposition. In our judgment, Gibson v British Transport Dockboard [1982] IRLR 228 upon which Mr Linden relied is not authority for the proposition that the Tribunal must make an award of any particular figure so long as the Tribunal addresses itself to the essential questions – did they employee contribute to his dismissal; or cause his dismissal to any extent, if so is it just and equitable to reduce the compensation and, if so, to what extent?
39. Mr Linden submitted that the Tribunal gave no sufficient rationale for failing to reflect the finding of unfairness which it had made (by concession) in some award of compensation. In our judgment the Tribunal did give sufficient rationale; in particular in the paragraphs relating to individual employees, some of which we have quoted in this judgment and in the final summary paragraph 54 which brought into a single conclusion its overall reasons.
40. Mr Linden submitted that the Tribunal took an all or nothing approach and failed to reflect findings which it had made concerning individual Claimants in individual percentage findings. We disagree. The Tribunal was obliged to consider the cases individually and did so. But having given individual consideration to the cases, it was entitled to reach the conclusion overall that similar considerations led to the conclusion that it was not just and equitable to award compensation. By making individual findings in relation to the employees and then drawing its conclusions together it dealt in our judgment properly with the matter and committed no error of law.
41. In view of that conclusion it follows that the appeal relating to the compensatory award will be dismissed. Anything that we say about the question of mitigation would be academic. We do not propose to express any final conclusions on questions of mitigation; no useful purpose would be served by doing so. We are not inclined to regard Shindler as setting out any invariable rule that an employee may not be required to mitigate loss by entering into a binding settlement. But it is not necessary to our decision to make any final judgment on that point.
42. We find it difficult without a more detailed understanding of the hearing below to be sure whether in the circumstances of this case it would have been required of the Tribunal to make detailed calculations of the loss which would have been suffered under the original contract. We doubt whether this was necessary. The Tribunal's assessment that the compensation that had been offered in relation to the original contract was consistently reasonably calculated may well have sufficed in this regard. But, as I say, we do not need to decide these points and in the event will not do so.

Remission

43. The question then arises whether this case should go back to the same Tribunal or to a different Tribunal to deal with the basic award point. We have in mind the approach to this issue set out in the judgment of the Appeal Tribunal in Sinclair Roche & Temperley v Heard [2004] IRLR 763 at paragraph 46. The reasoning of that judgment stands even though in the event the conclusion reached in Sinclair Roche & Temperley v Heard has recently been reversed on review.
44. Applying those considerations we have no hesitation in saying that this case should go back to the same Tribunal. The Tribunal has produced a thorough and careful judgment. It is unfortunate that it did not consider the basic award point as at 22 August but we are conscious first it may have to a significant extent been led to focus on the later date by a list of issues put in by the parties. We have no doubt at all in trusting the Tribunal to reach its own independent conclusion on the question of the basic award taking into account conduct only up to 22 August. This certainly will require re-evaluation. The circumstances were significantly different as at 22 August. We believe that the existing Tribunal is in an excellent position to provide that re-evaluation and that it is not necessary or in the interests of justice to incur the substantial additional burden for all concerned of starting afresh before a new Tribunal.