Appeal No. UKEAT/0395/09/ZT

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 7 December 2009

Before
HIS HONOUR JUDGE BIRTLES
MR I EZEKIEL
MR R LYONS

MS D DREWETT	APPELLANT

MR M PENFOLD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MS S STEINHARDT
(of Counsel)
Instructed by:
The Free Representation Unit
6th Floor 
289-293 High Holborn
London
WC1 7HZ	
For the Respondent
	MR M PENFOLD
(The Respondent in Person)	

SUMMARY
STATUTORY DISCIPLINE AND GRIEVANCE PROCEDURES:
IMPACT ON COMPENSATION

The Employment Tribunal took an irrelevant consideration into account when making an uplift under s31(3) of the Employment Rights Act 2002 and reducing a basic award under s112(5) of the Employment Rights Act 1996 when it took account of the death of the employer’s wife two years before dismissal: McKindless Group v McLaughlin [2008] IRLR 678 applied.

HIS HONOUR JUDGE BIRTLES
Introduction
1.	This is an appeal from an Employment Tribunal sitting at London South on 19-20 March 2009.  The Judgment was sent to the parties on 19 April 2009.  The Employment Tribunal unanimously made the following findings: (1) That the Claimant was unfairly dismissed and the dismissal was automatically unfair by reason of non-compliance with the statutory regulations and Section 99 of the Employment Rights Act 1996; (2) The Respondent discriminated against the Claimant on the grounds of her pregnancy and treated her less favourably, contrary to Section 3A of the Sex Discrimination Act 1975; (3) The Claimant was granted leave to amend the ET1 form to add a claim under Section 38(3) of the Employment Act 2002.  The Tribunal went on to make an award of compensation.

2.	Today, at the hearing of this appeal the Appellant has been represented by Ms Sarah Steinhardt of Counsel, instructed by the Free Representation Unit, and Mr Penfold has appeared in person.  As always, we are grateful for the assistance that we get from the representatives of the Free Representation Unit.

Preliminary Issue
3.	At the commencement of the appeal Ms Steinhardt made an application to amend the Notice of Appeal by adding an additional paragraph 22 to it.  In essence it sought to add a ground of appeal that the Tribunal erred in law in not making an uplift for the award it made of £4,000 for injury to feelings.  Mr Penfold did not object and we allow the amendment.

The Material Facts
4.	The material facts are set out in the Employment Tribunal Judgment at paragraphs 3-23.  In summary they are these.  The Appellant’s parents and the Respondent’s family were friends.  The Appellant began babysitting for the Respondent’s children in February 2005, when the children were aged one, three and four.  Following the death of the Respondent’s wife on 30 June 2006, the Claimant began to babysit more often and was employed on 19 February 2007, on terms agreed orally, to perform general nanny and housekeeping duties.  The Claimant kept a note of what had been agreed at that time.

5.	The Employment Tribunal was “quite satisfied” that in reality, until the last few weeks of the Claimant’s employment as a nanny, there had been a perfectly amicable and neighbourly relationship between all members of the two families (see Judgment paragraph 3).

6.	The Claimant informed the Respondent that she was pregnant on 2 June 2008.  The Employment Tribunal found that:
“24.  Up until 2 June 2008 there had been no criticism of any kind about the Claimant’s performance in her work role and there had been no serious issue about the terms of her employment and insofar as there had been any discussion it had been a discussion raised by the Claimant herself.”

7.	After the Claimant notified the Respondent that she was pregnant there began to be difficulties in the working relationship, which are set out in paragraphs 13-21 of the Judgment.

8.	On 12 June 2008 the Respondent’s daughter mentioned to the Claimant that the Respondent had talked about them going to a breakfast club when the Claimant’s baby was born, as it would be too much for the Claimant to look after four children.  The Claimant was concerned about whether she was being dismissed and wrote a letter to the Respondent setting out her complaints over the events of the previous days but most importantly asking about whether she would have a job in the future.  The Respondent texted the Claimant and asked him to meet her early the next morning.  At that meeting he stated she would remain in employment and that her occasional job, picking up other children from school (which he had arranged) was not a problem (Judgment paragraph 15).  He stated that he would be providing new terms of employment for the Claimant.

9.	On 16 June 2008 the Respondent handed the Claimant a proposed written contract of employment (EAT bundle, pages 46-48).  It contained a list of responsibilities, most of which were entirely uncontroversial and reflected the tasks that the Claimant regularly performed.  However, it also contained a new requirement that the Claimant make and change the children’s bed sheets on the bunk beds.  This had always been performed by the Respondent’s cleaner and the Claimant was uncomfortable in climbing on the bunk beds as she did not believe them to be safe, especially whilst pregnant.  There was no discussion between the Respondent and the Claimant.  The contract was simply presented to her (Judgment paragraph 16).

10.	The Claimant discussed the contract with her grandfather, who advised her not to sign it if she was unhappy with what it said.  She therefore prepared her own proposed contract, which largely mirrored the one proposed by the Respondent, but did not include the requirement that she change the children’s sheets.  It also did not state, as the Respondent’s version erroneously had, that she had use of her employer’s car (EAT bundle pages 49-52).

11.	At some point in the following days the Respondent telephoned his cleaner and told her not to change the children’s sheets anymore and that the Claimant would be doing it (Judgment paragraph 18).

12.	On 20 June 2008 the Respondent asked the Claimant again to sign the contract that he prepared.  When the Claimant told the Respondent that she had discussed it with her grandfather she was told that she had “breached confidentiality”.

13.	On 24 June 2008 there was again discussion about the Claimant signing the Respondent’s proposed contract, which culminated in the Respondent stating that if she had to have time off because of her pregnancy, he would have to find someone else (Judgment paragraph 20).  During this conversation the Claimant became upset and after work went straight to her doctor, who signed her off with stress (EAT bundle page 61).

14.	At paragraphs 22-23 of its Judgment, the Tribunal set out the manner of the dismissal:
“22.  While the Claimant was absent signed off by her doctor as unwell because of stress the Respondent spoke to his current solicitors and they assisted him to draw up a letter of dismissal on 4 July 2008 within the bundle at page 26, 27.
23.  When the Claimant returned to work on 9 July 2008 she was presented with the letter of dismissal.  There was no discussion at all.  The Claimant was not invited to have a representative present.  She had not been given advance notice of the possibility of dismissal or any written or for that matter oral basis for the alleged grounds of the dismissal.  It was conceded from the outset of the proceedings on the Respondent’s behalf that there was non‑compliance with the statutory regulations and that the dismissal was automatically unfair.  We accept the force of the Claimant’s arguments that this was a very serious breach of the regulations and much more than just a technical breach.”

The Employment Tribunal Decision
15.	The Employment Tribunal set out its conclusions as to reasons for dismissal at paragraphs 23-31.  As I have said, the Respondent’s Counsel conceded at the outset that the dismissal was automatically unfair by virtue of not having followed the statutory dismissal and disciplinary procedure.

16.	The Employment Tribunal upheld the Appellant’s claim of unfair dismissal and pregnancy related sex discrimination, finding that:
“30.  ... the principal reason why the Respondent dismissed the Claimant when he did and the manner in which he carried out the dismissal was because he was anxious about his perceived problems as the pregnancy advanced and the maternity leave approached.”

17.	The Tribunal made the following findings on the dismissal:
“25.  We find that there was really no substantial dispute between the parties about the terms of employment and the Respondent was using the Claimant’s alleged refusal to sign the contract as part of an artificial case warranting dismissal.
26.  As to the alleged “improper performance of her duties” we find that this was one of the thinnest cases of alleged poor performance we have ever come across in our experience of hearing unfair dismissal cases ...
27.  We find that there was absolutely no basis at all for the Respondent to accuse the Claimant of “breaching confidentiality” or for “taking up further employment”.
28.  The fact that Respondent chose to terminate the Claimant’s employment so quickly and in such a high handed and arbitrary fashion coming as it did on the back of a number of comments about the Claimant being away from work and being away from work when she was pregnant or on maternity leave left us in no doubt at all that the inference should be drawn that the Respondent realised that there might be difficulties for him from time to time during the Claimant’s pregnancy and more importantly her maternity leave.”

18.	On the dismissal procedure the Tribunal made the following findings:
“24.  ...  Within just over one month of the Claimant notifying the Respondent of her pregnancy (2 weeks of that period consisted of the Claimant’s sickness absence) the Claimant was peremptorily dismissed without any type of procedure.
25.  ... there was no kind of investigation into the very few alleged examples of misconduct.
23.  ... this was a very serious breach of the regulations and much more than just a technical breach.
36.  We accept the Claimant’s submissions that in the ordinary way a Tribunal should take a very critical view of the complete disregard of statutory procedures in this case aggravated as we find it ought to be by the fact that the Respondent had received advice from a solicitor when drafting the notice of dismissal.  It is not for us to comment about what advice the Respondent did receive but we are entitled to treat the Respondent and his solicitor as it were jointly and it is not open to the Respondent simply to suggest words to the effect “I am an ordinary working man and do not know the technicalities etc”.”

Compensation
19.	The Tribunal made a total award of £16,420.66 consisting of a compensatory award of £9,194.50, an award for injury to feelings of £4,000 with interest and payment in lieu of holiday entitlement of £602.00.  An uplift of 20% was applied to the compensatory award pursuant to Section 31 of the Employment Act 2002 for non-compliance with the statutory dispute and dismissal procedure.  The basic award made pursuant to Section 112(5) of the Employment Rights Act 1996 was reduced from four weeks to two weeks.

20.	The Employment Tribunal’s reasons for dealing with the percentage uplift and the basic award in that way are set out at paragraphs 36-37 of its Judgment:
“36.  We accept the Claimant’s submissions that in the ordinary way a Tribunal should take a very critical view of the complete disregard of statutory procedures in this case aggravated as we find it ought to be by the fact that the Respondent had received advice from a solicitor when drafting the notice of dismissal.  It is not for us to comment about what advice the Respondent did receive but we are entitled to treat the Respondent and his solicitor as it were jointly and it is not open to the Respondent simply to suggest words to the effect “I am an ordinary working man and do not know the technicalities etc”.
37.  We do however accept that the Respondent has been personally speaking in a very tragic and awful family situation since the loss of his wife and for that one very important reason we came to the conclusion that we were entitled to mitigate what would otherwise be a substantial percentage uplift in a case of this kind.  We therefore decided that there should be a modest uplift in the sum of 20% for the compensatory award.  Additionally and for similar reasons we came to the conclusion that the 4 week statutory basic award should be reduced to a basic award of 2 weeks.”

The Law
21.	The relevant statutory provisions are these: Section 31 of the Employment Act 2002 so far as material provided at the relevant time:
“(3) If, in the case of proceedings to which this section applies, it appears to the employment tribunal that-

(a)	the claim to which the proceedings relate concerns a matter to which one of the statutory procedures applies,

(b)	the statutory procedure was not completed before the proceedings were begun, and

(c)	the non-completion of the statutory procedure was wholly or mainly attributable to failure by the employer to comply with a requirement of the procedure,

it must, subject to subsection (4), increase any award which it makes to the employee by 10 per cent, and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount, but not so as to make a total increase of more than 50 per cent.

(4) The duty under subsection (2) or (3) to make a reduction or increase of 10 per cent does not apply if there are exceptional circumstances which would make a reduction or increase of that percentage unjust or inequitable, in which case the tribunal may make no reduction or increase or a reduction or increase of such lesser percentage as it considers just and equitable in all the circumstances.”

22.	Section 112(5) of the Employment Rights Act 1996 provides as follows:
“(5)  Where—

(a)  an employee is regarded as unfairly dismissed by virtue of section 98A(1) [failure to follow statutory dismissal procedures] (whether or not his dismissal is unfair or regarded as unfair for any other reason), and 

(b)  an order is made in respect of the employee under section 113,

the employment tribunal shall, subject to subsection (6), also make an award of four weeks’ pay to be paid by the employer to the employee. 

(6)   An employment tribunal shall not be required to make an award under subsection (5) if it considers that such an award would result in injustice to the employer.”

23.	The statutory procedure in operation at that time was set out in Schedule II Part 1 of the Employment Act 2002.  It consisted of the following steps:
“Step 1: statement of grounds for action and invitation to meeting

1‑(1) The employer must set out in writing the employee’s alleged conduct or characteristics, or other circumstances, which lead him to contemplate dismissing or taking disciplinary action against the employee. 

(2) The employer must send the statement or a copy of it to the employee and invite the employee to attend a meeting to discuss the matter.

Step 2: meeting

2‑(1) The meeting must take place before action is taken, except in the case where the disciplinary action consists of suspension.

(2) The meeting must not take place unless— 

(a) the employer has informed the employee what the basis was for including in the statement under paragraph 1(1) the ground or grounds given in it, and

(b) the employee has had a reasonable opportunity to consider his response to that information.

(3) The employee must take all reasonable steps to attend the meeting. 

(4) After the meeting, the employer must inform the employee of his decision and notify him of the right to appeal against the decision if he is not satisfied with it.

Step 3: appeal

3‑(1) If the employee does wish to appeal, he must inform the employer.

(2) If the employee informs the employer of his wish to appeal, the employer must invite him to attend a further meeting. 

(3) The employee must take all reasonable steps to attend the meeting. 

(4) The appeal meeting need not take place before the dismissal or disciplinary action takes effect. 

(5) After the appeal meeting, the employer must inform the employee of his final decision.”

Case Law
24.	In her very helpful skeleton argument Ms Steinhardt has referred us to a number of authorities which set out what she has called the relevant considerations which an employment tribunal is entitled to take into account in deciding what percentage uplift to apply in an appropriate case.  Those are helpful and I briefly summarise them.

25.	The Tribunal is entitled to take into account the seriousness of the breaches of the statutory procedure.  See Metrobus v Cook [2006] UKEAT/0490/04 at paragraphs 17 and 31 per HHJ McMullen QC.

26.	The Tribunal is entitled to take into account the size of the award in determining the level of uplift.  Abbey National PLC and Hopkins v Chagger [2008] UKEAT/0606/07 at paragraphs 123 to 136 per Underhill J.  That is not this case.  In the Chagger case the EAT was looking at potential compensation of many hundreds of thousands of pounds.

27.	In considering whether or not it is just and equitable to adjust an award beyond the basic 10%, it is open to a tribunal to have regard to the culpability of the party which has failed to comply with the procedural steps as of relevance and in assessing culpability differentiate between the case of a party that has fallen into default through ignorance of those requirements rather than deliberate disregard.  CEX Limited v Lewis [2007] UKEAT/0013 at paragraph 50 per HHJ Burke QC.

28.	Finally, in McKindless Group v McLaughlin [2008] IRLR 678 at paragraph 13, Lady Smith said that the exercise of the discretion to increase the uplift must be by reference to some particular facts or circumstances surrounding the failure to complete the statutory procedure which can properly be regarded as making it just and equitable that the employer should pay a larger uplift.

The Grounds of Appeal
29.	The Notice of Appeal is set out in the EAT bundle at pages 14-22.  There is a short Respondent’s Answer, signed by Mr Penfold personally, at EAT bundle, pages 23-24.  He relies on the judgment and reasons of the Employment Tribunal.  We take each of the grounds in turn.

30.	Ground One - the uplift.  Ms Steinhardt submits that, in exercising its discretion under Section 31 of the Employment Act 2002 to increase the compensatory award where it is just and equitable in all circumstances to do so, the Tribunal took account of an irrelevant consideration, namely the matter mentioned in the Judgment at paragraph 37.  That is, that the Respondent had been through a very tragic and awful family situation since the loss of his wife.  That is the sole reason given by the Employment Tribunal for what they said would mitigate what would otherwise be a substantial percentage uplift in a case of this kind.  Ms Steinhardt submits that this was an irrelevant consideration, for the reasons set out in her skeleton argument.  Mr Penfold, I think, has largely come as an observer and did not make a submission on this ground of appeal.

31.	We agree with Ms Steinhardt.  As I have indicated, paragraph 37 of the Judgment makes it clear that the tragic and awful family situation since the loss of Mr Penfold’s wife is the sole reason why the Employment Tribunal decided to make an uplift of 20% for the compensatory award.  In our judgement this was an irrelevant consideration for these reasons.  First, it was a circumstance outside the Respondent’s role as an employer and the employment relationship generally.  Second, it was not a circumstance surrounding, related to or causally resulting in the failure to complete the statutory procedure.  See McKindless cited above.  Third, the facts as found by the Tribunal simply make reference to the tragic death of Mrs Penfold on 30 June 2006 (Judgment paragraph 4).  There are no facts found which indicate in any way whatsoever what impact that had on the Respondent or indeed on the employment relationship.

32.	Ground Two - the basic award.  Ms Steinhardt submits for the same reasons that the Tribunal was in error in taking account of an irrelevant consideration when it decided that the basic award should be reduced from four weeks to two weeks.  Again Mr Penfold does not make submissions on this ground of appeal.

33.	We agree with Ms Steinhardt, the Tribunal has misdirected itself in law in taking account an irrelevant consideration, namely the tragic loss of the Respondent’s wife two years before the dismissal.  It does not explain in any way how or why it regards that fact, sad as it is, as being a reason which is related to the employment relationship which entitles it to reduce the basic award of four weeks to two weeks.

34.	Ground three is that contained in the Amended Notice of Appeal.  Ms Steinhardt submitted there was an error by the Tribunal in failing to apply the clear wording of Section 31(4) to the award for injury to feelings.  The wording of Section 31(4) is the Tribunal:
“Must, subject to subsection (4) increase any award which it makes to the employee.”

35.	In fairness to the Tribunal, it appears to be an error which was shared by both Counsel who appeared below.  In the circumstances of this case we have allowed the amendment.  It follows that the same principle applies and the uplift must apply to the award for injury to feelings as well.

Conclusion and Disposal
36.	For these reasons the appeal will be allowed in respect of the two grounds of appeal in relation to uplift, that is, the compensatory award and the award for injury to feelings, and in respect of the basic award from four weeks to two.

37.	We have considered disposal.  As the Employment Tribunal has found all the necessary facts but made an error of law in taking account of an irrelevant consideration in considering those facts, we feel able to substitute our decision for that of the Employment Tribunal.  Looking at the findings of fact by the Tribunal, which clearly, apart from the irrelevant consideration they took into account, took the view in paragraph 23 that this was a very serious breach of the regulations and much more than just a technical breach, and in paragraph 37 that, putting the mitigation aside, there would otherwise be a substantial percentage uplift in a case of this kind.  We substitute our decision, and we will change the uplift to 50% and in the case of the basic award we will alter the two week award to one of four weeks.

38.	We would emphasise that we have not been able to go into whatever legal advice Mr Penfold received.  It was something the Employment Tribunal declined to do.  There were no facts found by the Tribunal about that.  We are not able to take that into account.  Suffice it to say that there has been a total breach of the dispute resolution provisions in the Employment Act 2002.  It is difficult to imagine a case which could be worse and in our judgement therefore a 50% uplift is appropriate on the facts of this particular case.