Appeal No. UKEAT/0130/08/JOJ

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 29 July 2008

Before
THE HONOURABLE MR JUSTICE KEITH
MR B R GIBBS
MRS D M PALMER

MRS L AMEY	APPELLANT

PORTSMOUTH HOSPITALS NHS TRUST	RESPONDENT

Transcript of Proceedings

JUDGMENT 

	APPEARANCES

For the Appellant	MR D MASSARELLA
(of Counsel)
Instructed by:
Royal College of Nursing Legal Services
20 Cavendish Square
London W1G ORN
	
For the Respondent	MR D BROWN
(of Counsel)
Instructed by:
Messrs Mills & Reeve LLP Solicitors
Midland House 
78-84 Colmore Row
Birmingham B3 2AB

SUMMARY
UNFAIR DISMISSAL:  Dismissal/ambiguous resignation
(1)	Whether the Employment Tribunal failed to consider one of the bases on which the employee had alleged that she had been dismissed. 

(2)	Whether the Employment Tribunal’s decision that changes in the employee’s terms and conditions of employment were not so fundamental as to amount to the termination of her contract of employment (Hogg v Dover College) was perverse.

THE HONOURABLE MR JUSTICE KEITH

Introduction
1.	The Claimant, Mrs Lesley Amey, was employed by the Respondent, Portsmouth Hospitals NHS Trust (“the Trust”), as a midwife.  She used to be on band 7.  In January 2007, she was transferred to a band 6 post.  She continued to work for the Trust, but she complained that her transfer to a band 6 post had amounted to her dismissal, that her dismissal had been unfair, and that the Trust had been in breach of contract by failing to pay her an enhanced contractual redundancy payment.  An Employment Tribunal at Southampton dismissed her claims, and she now appeals against their dismissal.

The relevant facts
2.	The relevant facts found by the Employment Tribunal, supplemented by Mrs Amey’s unchallenged evidence, were as follows.  In the past, midwives who worked within the National Health Service were graded from E to H.  E was the appropriate grade for an advanced trainee, and H was the appropriate grade for a midwife with managerial responsibilities.  Mrs Amey was first employed by the Portsmouth Group of Hospitals in 1981.  Her employment was later transferred to the Trust, presumably on its creation.  By January 2004, she had been a grade F midwife working in the community for many years.  In February 2004, she was seconded to work in the maternity unit, and from May until the end of 2004, she spent half her time as a midwife in the community and the other half of her time in the maternity unit.  During the period of her secondment, she was temporarily upgraded to grade G, and in December 2004, her temporary grading was made substantive and she was, from then on, a grade G community midwife.

3.	In the meantime, a substantial re-organisation had taken place within the National Health Service which had resulted in a new framework for terms and conditions of staff and the introduction of a new grading system.  In consequence, Mrs Amey was employed from May 2005 on those new terms and conditions, and in the new grading system she was on band 7.  

4.	During 2006, the Trust decided to re-organise its midwifery service.  That re‑organisation involved a reduction in the number of band 7 midwifery posts from 29 to 16, and a corresponding increase in the number of band 6 midwifery posts.  Staff were consulted about the proposed change, and were told that those members of staff who were to be adversely affected in the re-organisation – in other words, those who were being downgraded from band 7 to band 6 – would have their salary protected.  They were also told that the selection would be carried out by comparing their individual “professional portfolios” with what the Tribunal understood to be new job profiles.  Mrs Amey submitted her portfolio on 31 October.

5.	On 5 November, Mrs Amey was informed that she had not been successful in obtaining one of the band 7 posts, and that she would be transferred to a band 6 post with effect from 28 January 2007.  She received confirmation of that in writing the next day.  The letter additionally informed her that her basic pay would be “protected based on [her] continuous NHS Service” and that she would be entitled to “48 months pay protection”.  When the period of pay protection ended, her “earnings [would] be appropriate to the new grade and working patterns and [she] would move to the maximum point of the new scale for the job”.  She was informed that she had the right to appeal, which she exercised, but the decision was confirmed.  She started her new band 6 post on 26 January 2007, and continued to work in that post thereafter, though we record simply as part of the narrative that since January 2008 she has once again been a band 7 midwife.  

6.	Mrs Amey’s contract of employment at the time permitted the Trust to vary the terms and conditions of her employment on condition that she was provided with a statement of her amended terms and conditions.  That was not disputed by Mrs Amey’s counsel, Mr David Massarella, who has continued to represent Mrs Amey today, though whether transferring her from a band 7 post to a band 6 one amounted to a variation of the terms and conditions of her employment or the termination of her contract of employment and her re-engagement on a new one is another matter altogether.  The other relevant provision in Mrs Amey’s contract of employment at the time related to one of the circumstances in which she would lose her contractual entitlement to an enhanced redundancy payment – namely if, at the date of the termination of her contract of employment, she had obtained, either without a break or following a break not exceeding four weeks, suitable alternative employment with the Trust.  

The Issues in the Employment Tribunal
7.	The critical issue for the Employment Tribunal was whether, on these facts, Mrs Amey had been dismissed.  Her claims of unfair dismissal and breach of contract depended on such a finding; the former because a dismissal is a pre-requisite for a claim of unfair dismissal; the latter because her contractual entitlement to an enhanced redundancy payment depended on her having been dismissed, albeit on the grounds of redundancy.  It was acknowledged on Mrs Amey’s behalf in the Employment Tribunal that, if she had not been dismissed, her claims would fail in their entirety.

8.	We should add that, in addition to her claims of unfair dismissal and breach of contract, Mrs Amey had also claimed a statutory redundancy payment.  That claim was also dependant upon a finding that she had been dismissed.  On the issue whether she had been dismissed for the purposes of her claim for a statutory redundancy payment, one of the grounds relied upon by the Trust for denying that Mrs Amey had been dismissed was based on section 138 of the Employment Rights Act 1996, subsection (1) of which provides as follows:
“Where— 
(a) an employee’s contract of employment is renewed, or he is re-engaged under a new contract of employment in pursuance of an offer (whether in writing or not) made before the end of his employment under the previous contract, and 
(b) the renewal or re-engagement takes effect either immediately on, or after an interval of not more than four weeks after, the end of that employment, 
the employee shall not be regarded for the purposes of this Part as dismissed by his employer by reason of the ending of his employment under the previous contract.”

Section 138 of the 1996 Act is in the Part of the Act relating to redundancy payments.  Clearly, Mrs Amey could not be regarded as having been dismissed for the purposes of that Part of the 1996 Act, and accordingly her claim for a statutory redundancy payment was withdrawn.

9.	 The Employment Tribunal found “unhesitatingly” - it used that word twice - that Mrs Amey had not been dismissed.  It regarded the decision of the Employment Appeal Tribunal in Hogg v Dover College [1990] ICR 39 (Garland J presiding) as providing the necessary guidance on the circumstances in which someone who remains in their employer’s employment can nevertheless be found to have been dismissed.  Applying that guidance, the Employment Tribunal found that Mrs Amey’s transfer from her band 7 post to a band 6 one amounted to a variation of her contract of employment, rather than the termination of her previous contract of employment and her re-engagement on a new contract of employment.

The alternative cases advanced on Mrs Amey’s behalf
10.	For the purpose of claims of unfair dismissal, section 95(1) of the 1996 Act provides, so far as is material, that “…an employee is dismissed by his employer if (and … only if) … the contract under which he is employed is terminated by the employer (whether with or without notice)”.  Since the focus is on the termination of “the contract under which he is employed”, the fact that the relationship of employer and employee continues after the termination of the contract is not inconsistent with the employee having been dismissed.

11.	The most obvious example of an employee having been dismissed despite the continuation thereafter of the employment relationship is where the employer expressly terminates the employee’s contract of employment and then re-engages the employee under another contract of employment.  The termination of the earlier contract will have amounted to the employee’s dismissal, though if the employee was given the notice of the termination of his original contract to which he was entitled, his dismissal will not have been wrongful, and if his dismissal was unfair, his compensation will be significantly affected, of course, by the fact that his pay and benefits under the new contract will have substantially mitigated his loss.  Whether there has been a dismissal of the employee in these circumstances depends upon whether, in the light of the employer’s conduct at the time, the original contract of employment had been terminated.  It is common ground that at the hearing in the Employment Tribunal the primary case advanced on Mrs Amey’s behalf was that on a proper construction of the documents which were sent to Mrs Amey by the Trust at the time, her original contract of employment had been expressly terminated.

12.	It is also common ground that Mrs Amey’s case was put as well in an alternative way in the Employment Tribunal.  That is where the line of authority starting with Hogg v Dover College comes in.  Suppose there has been no express termination of the original contract of employment.  Instead the employer has purported merely to vary the terms on which the employee has been employed.  Hogg v Dover College is authority for the proposition that such a variation will be treated as amounting to the termination of the employee’s original contract of employment and the employee’s re-engagement under a new contract so as to have amounted to the employee’s dismissal if the change in the employee’s terms and conditions is so fundamental that the employee could not be said to be employed under the original contract of employment.  It is not possible to identify all the circumstances in which a change in the employee’s terms and conditions should be treated as so fundamental as to amount to a termination of the employee’s contract of employment and the engagement of the employee under a new contract rather than simply a variation of the original contract, but the decision of the Employment Appeal Tribunal in Alcan Extrusions Ltd v Yates [1996] IRLR 327 (Judge Colin Smith QC presiding), in which the employers introduced a rolling shift system to replace a fixed shift system, was an example of the former.  In that case, the Employment Appeal Tribunal in effect said at paragraph 24 that the issue was whether the change was “so substantial as to amount to a withdrawal of the whole contract”, and that whether it was or not was “a matter of degree and … accordingly … a question of fact for the [Employment] Tribunal to decide.”

13.	It is important to note that this alternative way of putting Mrs Amey’s case involves looking at the nature of the changes to be made to the terms and conditions of her employment to see whether her original contract of employment should be treated as having been terminated, rather than looking at the language used by the Trust to see whether her original contract of employment had been expressly terminated.  The fact that it was open to Mrs Amey to have her case put in these two alternative ways is borne out by what the Employment Appeal Tribunal said in Hardy v Tourism South East [2005] IRLR 242 (Judge Richardson  presiding) at paragraph 17:
“In our judgment, therefore, an employer ‘proposes to dismiss’ an employee if on an objective consideration of what the employer says or writes, the employer is proposing to withdraw the existing contract of employment from the employee, or the departures which the employer is proposing from the existing contract are so substantial as to amount to the withdrawal of the whole contract.”

The Employment Tribunal’s approach: Mrs Amey’s primary case
14.	 The principal criticism of the Employment Tribunal is that it only addressed the alternative case advanced on behalf of Mrs Amey, and not her primary case.  At times, the Tribunal appeared to be alive to the alternative ways in which her case was being put: compare the references in paragraphs 12 and 13 of the Tribunal’s reasons to Hogg v Dover College with the references in paragraphs 14 and 15 of its reasons to the cases of Yates and Hardy.  But having correctly rejected the Trust’s reliance on section 138 (because section 138 did not relate to what constituted a dismissal for the purposes of claims of unfair dismissal), the Tribunal in paragraph 27 then said that it was going to confine its consideration of whether Mrs Amey had been dismissed to the language of section 95 and the guidance given in Hogg v Dover College.  That is borne out by the reasons the Tribunal gave for concluding that Mrs Amey had not been dismissed.  Those reasons are set out in paragraphs 46-51 of the Tribunal’s reasons.

15.	Apart from a point about proportionality - to which we shall return later - those reasons address only the issue relating to the differences between a band 6 and a band 7 post.  They do not address at all the issue of whether Mrs Amey’s original contract of employment had been expressly terminated.  Mr Damian Brown for the Trust realistically conceded as much, but he argued that although the Tribunal gave no reasons for its conclusion that Mrs Amey’s employment had not been expressly terminated, that is what the Tribunal must have found for it to have to gone on to consider whether the differences between the old post and the new one were so fundamental that Mrs Amey must be regarded as having been employed subsequently under a new contract of employment.  We do not agree with that submission.  As we have said, not only did the Tribunal not give any reasons for such conclusion it may have reached on whether Mrs Amey’s original contract had been expressly terminated, but it said that it was going to confine its determination of the issue which arose under section 95 to the guidance in Hogg v Dover College.  It may be that it said that in the context of its correct view that the Trust’s reliance on section 138 was misconceived, but the fact remains that the Tribunal said that it was not going to look beyond Hogg v Dover College for the approach that it should take.

16.	Our view that the Employment Tribunal did not address the primary way in which Mrs Amey’s case was put is, in our judgement, reinforced by the absence in its reasons of any reference to the seven points made in paragraph 12 of Mr Massarella’s written submissions about why the language of the relevant documents and their context were said to show that Mrs Amey’s original contract of employment had been expressly terminated.  The Tribunal’s failure to address the primary way in which Mrs Amey’s case on dismissal was being put amounted to legal error on the part of the Tribunal, and we shall return in due course to whether that is an issue which we should decide for ourselves or whether a remission to the Employment Tribunal is necessary.

The Employment Tribunal’s approach: Mrs Amey’s alternative case
17.	What there is no doubt about is that the Employment Tribunal addressed Mrs Amey’s alternative case.  The findings which the Tribunal made about her alternative case were that Mrs Amey’s professional work remained very substantially the same after 26 January 2007 as before.  Her primary role – whether on band 6 or band 7 – was the practice of midwifery.  The Tribunal acknowledged that she had lost some of her duties, but those duties could properly be described as supervisory duties rather than professional ones.  Those duties were not, said the Tribunal, the duties of someone at a high managerial level, and if there was a loss of status, that was more in the mind of Mrs Amey than anything else.

18.	The rejection of Mrs Amey’s alternative case on that basis is challenged on the ground that the implicit finding of the Tribunal that the changes were not fundamental was perverse since the Tribunal had failed to have regard to a number of unchallenged features of the evidence.  They were as follows.  The Trust’s own consultation paper said that the effect of the re-organisation was to provide a clearly defined difference between band 6 and band 7 posts in all areas of maternity services.  Mrs Amey’s unchallenged evidence was that the move from a band 7 post to a band 6 post amounted to a demotion which involved a significant loss of status and substantially damaged her prospects for career advancement and pay increases, and that, by virtue of the move, she had lost managerial responsibility in a variety of different areas - those responsibilities having represented about a quarter of her working time when she had been in her band 7 post.

19.	Mrs Amey’s evidence was unchallenged in the sense that the Trust called no evidence of its own.  It was not therefore open to the Trust, for example, to say that she had not lost the responsibilities which she claimed she had lost.  But whether the responsibilities she had lost could properly be characterised as managerial responsibilities as opposed to supervisory ones, and whether or not her move involved a significant loss of status, were more a matter of judgment than evidence.  The fact the Trust did not place any evidence of its own before the Tribunal - save, of course, for relying on the agreed bundle of documents - did not mean that Mrs Amey’s opinions on those topics could be said to have been undisputed.

20.	We have, of course, compared the different job titles of each of the posts as well as what the two job descriptions have to say about the core functions of each post.  The band 7 post is described as the “Midwifery Ward Manager/Team Leader”, whereas the band 6 post was described as “midwife”.  We think that some of the core functions of the band 7 post could be described as managerial rather than supervisory, and we note that many of those functions are missing from the job description of the band 6 post.  But these were all matters which the Employment Tribunal had to put into the equation.  It was their decision which counts, not ours.  In our view, it cannot be said that it was not reasonably open to the Tribunal on the evidence to make the findings which it did about the nature of Mrs Amey’s role before and after the change, or the characterisation of her previous duties as more of a supervisory nature than managerial, or the effect which a move to a lower band had on her status.  Those were issues for the Tribunal to assess, and its judgment on them cannot be regarded as so wayward as to be classified as perverse.

21.	Having said that, there are three discrete points which arise on the Tribunal’s analysis of the facts.  The first is that in various passages in its reasons the Tribunal referred to both the grades in the old grading system and the bands in the new one as pay bands.  The criticism of the Tribunal is that that suggests that the Tribunal wrongly assumed that the grading system was relevant only for the purposes of pay.  We do not think that that suggests anything of the kind.  We doubt whether the Tribunal could have thought, in the light of the evidence it had, that the grading system was relevant only for the purposes of pay, and we see no basis for saying that the Tribunal did not realise that the grading system was relevant as well for the purpose of identifying different levels of responsibility within the NHS.

22.	Secondly, the Tribunal found in paragraph 34 of its reasons that an appraisal of Mrs Amey had been arranged for her at the end of October 2006 with Sharon Hackett, a clinical supervisor.  A careful reading of Mrs Amey’s witness statement shows that no such appraisal took place.  However, the Tribunal’s error in this respect was not relevant to any issue we have to decide.  This part of the narrative played no part in the Tribunal’s reasons as to whether Mrs Amey could be regarded as having subsequently been dismissed from her employment.  We accept that the Tribunal’s error in this respect could have the effect of undermining one’s confidence about the Tribunal’s analysis of other parts of the evidence, but that would be an extremely refined basis on which to characterise the Tribunal’s finding about the differences between the two posts as perverse.

23.	Thirdly, in concluding that Mrs Amey had not been dismissed, the Tribunal regarded as significant the fact that a finding that she had been dismissed would have resulted in the possibility of Mrs Amey being entitled to a sum which it regarded as disproportionate under the Trust’s contractual redundancy scheme.  That was not a relevant consideration.  The consequences which might flow from a finding of dismissal are irrelevant to whether an employee had in fact been dismissed.  The Trust does not dispute that, but looking at the Tribunal’s reasons as a whole, we think that even if the Tribunal had not taken that consideration into account, it would have reached the same conclusion which it did.  

24.	It follows that Mrs Amey’s challenge to the Tribunal’s finding that she had not been dismissed on the basis of the alternative case advanced on her behalf must fail.

Is a remission necessary?
25.	We return, then, to the Employment Tribunal’s failure to address the primary case advanced on her behalf.  Can we decide her primary case for ourselves or should that issue be remitted to the Employment Tribunal?  The basis of Mrs Amey’s case was, as we have said, set out in paragraph 12 of Mr Massarella’s written submissions to the Employment Tribunal.  We do not think that Mrs Amey’s primary case is anything as likely to succeed as those submissions might suggest.  For example, the reference to the date of the commencement of “this employment contract” in her current contract of employment could be construed as the date on which her new terms and conditions were to take effect.  After all, the document is not strictly speaking her contract of employment: it is only the document which sets out the main terms and conditions of her employment.  Similarly, the fact that she ceased to be a band 7 midwife on 26 January 2007 and became a band 6 one instead simply reflects her new role.  It says nothing about whether she became a band 6 midwife because she was re-engaged under a new contract of employment or because she continued to be employed under her old contract of employment on different terms.  

26.	Moreover, the fact that the Trust approached the re-organisation as if it were a redundancy exercise can hardly be decisive.  Non-lawyers might well use that phrase to describe a re-organisation in which a certain number of posts have to go, but in which those who are displaced nevertheless are going to remain in the employer’s employment.  Indeed, the Trust could have been referring to the exercise as a redundancy exercise in order to enable any provisions in such redundancy scheme as the Trust had for the criteria to be used for selecting which people are to be made redundant to apply to the current exercise.  The fact of the matter is that describing the exercise as a redundancy exercise said nothing about whether those who remain did so under a new contract of employment or under the old one as varied, and the fact that the Trust sought to defend Mrs Amey’s claim that she had been dismissed by relying on section 138 does not necessarily mean that the Trust was accepting that for purposes other than her entitlement to a statutory redundancy payment Mrs Amey had been dismissed.  It is true that there is nothing in the documentation which tells Mrs Amey in terms that she is being dismissed but, by the same token, we do not think that the Trust’s case on whether Mrs Amey had been expressly dismissed is so strong that we should decide that issue for ourselves in the Trust’s favour.

27.	All in all, we think that the issues raised on Mrs Amey’s primary case are such that they should be considered by the Employment Tribunal on a remission, especially as we have only been provided with a small selection of the documents which the Tribunal had, and we have not seen, for example, the document referred to in paragraph 12.5 of Mr Massarella’s written submissions to the Tribunal.  Moreover, if it is found that Mrs Amey had been dismissed, a number of other issues will arise on her claim of unfair dismissal for the Tribunal to decide which have not yet been considered, namely, whether her dismissal would have been automatically unfair because the Trust had failed to comply with the statutory dismissal procedures in the Employment Act 2002, even if the sole issue now raised by the Trust is purely one of law on such facts as are not in dispute, and if Mrs Amey is found not to have been automatically unfairly dismissed, whether her dismissal would nevertheless have been unfair on the basis that her failure to retain her post as a band 7 midwife in the “redundancy exercise” had been unfair.

28.	For these reasons, the course we propose to take is to allow Mrs Amey’s appeal against the dismissal of her claim of unfair dismissal, to set aside the finding that she had not been dismissed, and to remit the issue whether her original contract of employment had been expressly terminated by the Trust to the same Employment Tribunal.  We appreciate that Mrs Amey claims to have lost faith in this Tribunal’s ability to determine her case further, but the fact remains that this remission is for the Tribunal to address that which it has failed to address up to now.  It will be for the Tribunal to decide whether to permit either of the parties to call further evidence on that topic, and of course on whether the dismissal was fair if the Tribunal decides that Mrs Amey had been dismissed.  However, it will not be necessary for the Tribunal to reconsider the alternative basis on which Mrs Amey’s case was put since the Tribunal’s finding on that issue cannot be said to have been legally flawed.

Mrs Amey’s contractual claim
29.	So far, we have addressed only Mrs Amey’s claim of unfair dismissal.  We turn to her claim for breach of contract.  Of course, the Tribunal dismissed the claim on the basis that she had not been dismissed at all, but the Tribunal dismissed her claim for breach of contract on another basis as well.  Even if it could be said that she had been dismissed, the Tribunal found that she was disentitled to a contractual redundancy payment because at the date of the termination of her employment, she had obtained what the Tribunal regarded to be suitable alternative employment with the Trust.  In other words, the Tribunal found that, as a band 6 midwife, Mrs Amey had obtained alternative employment which was suitable.

30.	 Whether her band 6 post was suitable was not the same issue as whether the differences between that post and her band 7 post were fundamental, but the Tribunal’s reasons for its finding that the band 6 post was suitable for her should be regarded as the same as those for its implicit finding that her transfer from a band 7 post to a band 6 post did not involve a fundamental change to her contract of employment.  That finding is attacked on the same grounds as the Tribunal’s earlier finding was.  All we need to say is that we disagree for the reasons we gave when concluding that the Tribunal’s finding on the alternative way on which Mrs Amey’s case on her dismissal was put was not legally flawed, and because, in this context, the fact that her pay was protected for four years is itself a highly relevant factor which the Employment Tribunal was entitled to give significant weight to.  It follows that Mrs Amey’s appeal against the dismissal of her claim for breach of contract must be dismissed.