Appeal No. UKEAT/0466/09/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 17 August 2010
                                                                             Judgment handed down on 25 November 2010

Before
THE HONOURABLE MRS JUSTICE SLADE DBE
MR D BLEIMAN 
MR G LEWIS

MR D ROBERTS	APPELLANT

ACUMED LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR SIMON JONATHAN BROWN
(of Counsel)
Instructed by:
Amanda Capon Solicitors
180E Bridge Road
Sarisbury Green
Southampton
SO31 7EH	
For the Respondent	MR SIMON RICE-BIRCHALL
(Solicitor)
Messrs Eversheds LLP
Bridgewater Place
Water Lane
Leeds
LS11 5DR	

SUMMARY

UNFAIR DISMISSAL
Reason for dismissal including substantial other reason
Reasonableness of dismissal
Procedural fairness/automatically unfair dismissal

The Claimant area sales manager was remunerated on a different basis from the other four area managers.  His commission was based on total sales whereas theirs was based on annual increase in sales.  On reviewing remuneration the Respondent considered that he should be paid on the same basis as his colleagues and that his remuneration did not reflect the substantial financial investment made by the Respondent in the business.

The Employment Tribunal did not misdirect themselves in law nor come to a perverse conclusion in deciding that a termination of the Claimant’s then current terms and offering new terms was a dismissal for some other substantial reason within the meaning of Employment Rights Act 1996 section 98(1)(b).  Kent County Council v Gilham [1985] ICR 233 and Kerry Foods v Lynch [2005] IRLR 680 applied.  Nor was the decision that the dismissal was fair within the meaning of section 98(4) perverse.

The Employment Tribunal erred in holding that Regulation 4(1)(a) of the now repealed Employment Act 2002 (Dispute Resolution) Regulations 2004 applied to the dismissal of the Claimant thus disapplying the Statutory Dismissal Procedure.  The Employment Tribunal erred in holding that an employee with the same job functions and title as others was nonetheless to be regarded as being in a different category from them for the purpose of Regulation 4(1)(a). The Employment Tribunal further erred in that Regulation 4(1)(a) did not apply where there is only one employee in a particular category or of a particular description. 

Accordingly the Employment Tribunal erred in failing to consider whether the Statutory Dismissal Procedure in Schedule 2 Employment Act 2002 had been complied with.  The evidence relied upon by the Respondent to contend that it had been complied with was contained in the documents before the EAT. These were all steps taken after notice of dismissal had been served on the Claimant.  Step 1 was to be taken when an employer is ‘contemplating dismissing’ the employee and Step 2 before ‘action is taken’.  The Regulations provide a definition of ‘action’ as ‘any act or omission’.  This must apply to the Employment Act 2002 pursuant to which the Regulations were made.  Having regard to the meaning of the term and the purpose of the Statutory Dismissal Procedure, the EAT held that Steps 1 and 2 must take place before notice of dismissal is served. Smith Knight Fay v McCoy UKEAT/0245/08/DA and Fitness Solutions v Park UKEATS/0032/09/BI considered and distinguished.  No Tribunal properly directing themselves could have concluded that Steps 1, 2 and 3 of the Statutory Dismissal Procedure had been complied with in time or at all.  Accordingly the EAT substituted a decision that the dismissal of the Complainant was unfair by reason of the now repealed Employment Rights Act 1996 section 98A.  Case remitted to the Employment Tribunal for determination of remedy.

THE HONOURABLE MRS JUSTICE SLADE DBE

1.	Mr Roberts appeals the dismissal of his claim for unfair dismissal by the judgment of an Employment Tribunal (‘ET’) entered in the Register on 6 April 2009.  At the hearing we gave permission to re-amend the grounds of appeal and to amend the Respondent’s Answer. The re-amended ground of appeal relates to the now repealed statutory dismissal procedure (‘SDP’) in Schedule 2 of the Employment Act 2002 (‘EA 2002’). Written submissions on these amendments were made on behalf of the Claimant and the Respondent after the conclusion of the hearing before us.  We will refer to the parties by their titles before the ET: Claimant and Respondent. 

Summary Facts
2.	The ET made the following findings of fact. The Respondent is a wholly owned subsidiary of Acumed Inc., a company based in the USA which designs and manufactures a range of orthopaedic implants. Its customers are orthopaedic surgeons who use the Respondent’s products in hospital operating theatres. 

3.	The Claimant commenced employment with the Respondent, then called Ostek Ltd, in September 2001 as a sales representative with the title of Area Manager.  Ostek Ltd had been incorporated by Mr Cradduck after he had obtained the distribution rights for Acumed products in the UK.  At the time Ostek Ltd was a very small company whose offices were based in Mr Cradduck’s home.  The company did well and there was rapid and consistent growth in sales.

4.	A letter dated 3 March 2004 recorded the renegotiated terms of the agreement between the Claimant and Ostek Ltd. His remuneration consisted of a basic salary and a 4.6% commission on invoiced sales. 

5.	In May 2005 Acumed Inc acquired Ostek Ltd which became its subsidiary and changed its name to Acumed Ltd.  There was a rapid growth in sales.  The Claimant became one of five Area Sales Managers each reporting to Mr Cradduck, the Managing Director.  There was some adjustment to sales territories as a result of the introduction of the additional sales representatives.

6.	The other four sales representatives received a basic salary and commission.  Unlike the Claimant whose commission had been increased following a review of his remuneration on 1 January 2006 to 5% of total sales, their commission was based on a percentage of growth in sales. 

7.	In 2007 the Respondent decided to conduct a review of the way in which sales representatives were remunerated.  They formed the view that the Claimant’s remuneration package did not properly reflect the continuing investment in the business.  Also the Respondent had adopted a consignment system so that once Acumed products were supplied to a hospital and were used there would be likely to be repeat orders for replacements.  The Claimant was the only employee whose commission was based on a percentage of total sales rather than a percentage of growth in sales.  This led to a marked disparity in the earnings of the Claimant and that of his four colleagues.  The ET found that the effect of the rapid growth in sales meant that the Claimant’s total earnings had risen rapidly from £45,000 in 2003 to £70,195 in 2006 and in 2007 to £89,000.

8.	In July 2007 discussions with the Claimant began about bringing his remuneration terms more in line with those of his colleagues.  The Respondent proposed to base his commission, like that of the other Area Sales Managers, on sales growth rather than total sales. 

9.	On 11 October 2007 the Claimant raised a grievance about the proposal to change the terms of his remuneration.  The grievance was not upheld by Mr Cradduck and an appeal from this decision heard on 11 December 2007 by two executives from the US parent company, Acumed, Mr Alan Koslowski President and Mr Kelly Packard the International Sales Manager did not succeed.  The Claimant was notified of this decision by letter dated 17 December 2007. 

10.	There were further discussions and meetings between the Claimant and Mr Cradduck in an attempt to agree terms.  The Respondent confirmed its original offer of £50,000 basic salary plus 10% commission on sales growth with an additional £5,000 bonus to be paid if a 25% growth target was achieved.  By letter dated 14 February 2008 the Claimant’s solicitor wrote that he did not agree the proposed new terms. 

11.	By letter dated 14 March 2008 Mr Cradduck wrote to the Claimant that as it had not been possible to reach agreement the Respondent was giving the Claimant six weeks’ notice to terminate his contract such notice to expire on 25 April 2008.  The letter enclosed a copy of the proposed new terms to be accepted by 4 April 2008 after which they would be withdrawn.  If they were not accepted by the deadline the Claimant’s employment would terminate on 25 April 2008. 

12.	On 28 March 2008 Mr Cradduck held a meeting with the Claimant at which he put forward counter proposals for his remuneration.  Minutes of the meeting show that the Claimant stated that he believed his colleagues were ‘OK with his current package and are aware that it is different to theirs’ and that ‘some of them were offered a similar package to his when they joined the Company, but that they chose the contract with the higher base salary.’  The counter proposals were not acceptable to the Respondent.

13.	On 7 April 2008 the Claimant appealed from the decision not to accept his counter proposals and to dismiss him.  Mr Kozlowski held an appeal meeting with the Claimant on 14 April 2008.  The Claimant put forward three options for his remuneration all of which proposed that he leave the Respondent in a year and a half’s time.  Mr Kozlowski recorded in that these options were:

“1. To keep your current compensation scheme, but agree to leave the Company at the end of next year.
2. To increase your salary to £90,000 per annum with a bonus of 10% of sales growth above a 25% growth threshold, on the basis that you leave the Company at the end of next year.
3. As an alternative to options 1 and 2, to set a maximum limit on your total compensation again on the basis that you would leave the Company at the end of next year.”

The Claimant was asked to but declined to sign the new remuneration agreement proposed by the Respondent.  After discussion with Mr Cradduck, Mr Kozlowski considered that none of the Claimant’s three proposals were reasonable.  He was again asked to but declined to sign the new agreement. 

14.	On 16 April 2008 the Claimant was informed that his proposals for remuneration were unacceptable.  He was told that he had no further rights of appeal.  His employment terminated on 25 April 2008. 

The judgment of the ET
15.	The ET held that by reason of Regulation 4(1)(a) of the Employment Act 2002 (Dispute Resolution) Regulations 2004 (‘the Regulations’) the statutory dismissal procedure did not apply to the dismissal of the Claimant.  They held at paragraph 24:

“We accept the respondent’s submission that Rule 4(1)(a) applies in this case, and that the statutory dispute resolution regulations do not apply to the dismissal of the claimant. The description or category to which the claimant belonged was those employees whose commission was based on sales and not on growth. He was the only employee in that category. All the other Sales Managers were paid commission on the basis of sales growth. Regulation 4(1)(a) applies. Neither of the dismissal and disciplinary procedures applies in relation to the dismissal of the claimant, and the claimant’s dismissal is not automatically unfair under Section 98A of the Employment Rights Act 1996.”

16.	They concluded that the Respondent had established ‘some other substantial reason’ for the Claimant’s dismissal within the meaning of the Employment Rights Act (‘ERA’) section 98(1).  At paragraph 28 they held:

“We are satisfied in this case that there were good business reasons for the change in the claimant’s terms and conditions of employment. Sales had been increasing year on year since the company had been formed. Unlike other sales representatives, the claimant’s commission was tied to sales and not growth. As a result his remuneration had grown out of proportion to this contribution to the success of the company. The respondent also wished to ensure that there was parity between the five Area Managers. The reorganisation was for sound good business reasons. We are satisfied that the respondent company has shown that some other substantial reason was the reason for dismissal, which is [a] potentially fair reason.”

17.	The ET held that the Respondent had acted fairly in dismissing the Claimant.  They set out their reasoning in the following paragraphs:

“29. Once an employer has shown the reason for dismissal, it is then for the Tribunal to determine whether the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissal. That question must be determined in accordance with equity and the substantial merits of the case and the circumstances to be taken into account include the size and administrative resources of the employer’s undertaking. 
30. The Tribunal must not substitute its own view for that of the employer. We are aware of, and apply the test that there is a range of reasonable responses to an employee’s conduct within which one employer may take one view and be acting fairly, and another may take a different view and still be acting fairly. In determining whether an employer has acted reasonably in dismissing an employee who refuses to agree to changes in his terms and conditions of employment consequent upon a reorganisation, the task of weighing the advantages to the employer against the disadvantages to the employee is merely one factor which the Tribunal has to take into account in determining the question in accordance with equity and the substantial merits of the case. It does not follow that because there are disadvantages to the employee, the employer acted unreasonably in treating his refusal to accept the changes as a reason for dismissing him. The test is whether the terms offered are, from the employer’s point of view, ones which a reasonable employer could offer in the circumstances (Richmond Precision Engineering Ltd v Pearc[e] [1985] IRLR 179).
31. For the claimant to continue to be remunerated in relation to sales was unfair to his colleagues, who were remunerated as a percentage of growth. Two of them had raised the disparity. The claimant’s commission had got out of hand because it was related to a percentage of his sales and was not related to a percentage of the growth in sales, as in the case of his colleagues. From the foundation of the company there had been a rapid growth in sales of something approaching 30% year on year.
32. This rapid increase continued following the acquisition of the company in 2005, and substantial investment by the new owners had helped to maintain the rapid rise in sales. The claimant’s pay rose from £45,000 in 2003 to £70,195 in 2006, then to £98,000 in 2007, and in 2008 the claimant was predicted to earn in the region of £107,000. If sales had continued to increase at a similar rate, the claimant’s predicted salary for 2009 was in the region of £130,000. It was clear that the claimant would soon be earning more than his Managing Director and was already being paid hugely more than his colleague Area Managers.
33. Negotiations with the claimant began in July 2007 and continued right up to the termination of the claimant’s employment on 25 April 2008. The discussions were protracted and detailed. All the claimant’s arguments had been considered and the respondent put its case for the reasons for reorganisation carefully to the claimant. The respondent pointed out the difficulties, the marked disparity in earnings between the claimant and his colleagues. 
34. Steps had been taken by the respondent to make an adjustment to the claimant’s earnings to ameliorate the effect of the adjustment they proposed. Despite these efforts, the claimant clearly indicated to the respondent that he was not prepared to accept the variation in terms occasioned by the business reorganisation. In our unanimous judgment, the respondent acted reasonably. The decision for dismissing him was within the range of reasonable responses to be expected of an employer faced with the same problem. We are unanimously of the view that the dismissal of the claimant was fair.’

Relevant Statutory Provisions
Employment Rights Act 1996 (‘ERA’)
18.	Section 98(1)

“In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show -
(a) the reason (or, if more than one, the principal reason) for the dismissal, and
(b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.”

19.	Subject to other provisions including section 98A, section 98(4)(1) provides:

“…where the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer) -
(a) depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and
(b) shall be determined in accordance with equity and the substantial merits of the case.”

20.	Section 98A (now repealed)

“(1) An employee who is dismissed shall be regarded for the purposes of this part as unfairly dismissed if –
(a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal,
(b) the procedure has not been completed, and
(c) the non-completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements. 
(2) Subject to subsection (1), failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by itself making the employer’s action unreasonable if he shows that he would have decided to dismiss the employee if he had followed the procedure.
(3) For the purposes of this section, any question as to the application of a procedure set out in Part 1 of Schedule 2 to the Employment Act 2002, completion of such a procedure or failure to comply with the requirements of such a procedure shall be determined by reference to regulations under section 31 of that Act.”

21.	Employment Act 2002

“SCHEDULE 2 Statutory dispute resolution procedures (now repealed)
Part 1 Dismissal and disciplinary procedures
Chapter 1
Standard procedure
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.”

22.	Employment Act 2002 (Dispute Resolution) Regulations 2004 (‘the Regulations’)(now repealed)

“4(1) Neither of the dismissal and disciplinary procedures applies in relation to the dismissal of an employee where -
(a) all the employees of a description or in a category to which the employee belongs are dismissed, provided that the employer offers to re-engage all the employees so dismissed either before or upon the termination of their contracts.”

The Re-amended grounds of appeal as developed in the skeleton argument of 20 July 2010 and written submissions of 6 September 2010

Ground 1: The ET misdirected themselves in law in that they failed properly to consider and/or apply the provisions of ERA Section 98(1)(b) in finding that the Claimant was dismissed for some other substantial reason justifying his dismissal
Submissions of the parties
23.	Mr Brown summarised in paragraph 29 of his skeleton argument the basis for the submission that the ET erred in law finding that the Respondent had established that there was some other substantial reason for the Claimant’s dismissal within the meaning of ERA section 98(1)(b).  He contended that:

“…there were serious errors of law in the approach of the ET, in particular:
(1) It did not address the issue as to whether the dismissal could be justified and whether some serious effect were demonstrated if the changes they proposed to the Claimant’s contract were not implemented;
(2) It misdirected itself as to a matter of law as to whether the Respondents had to demonstrate the proposed changes were necessary;
(3) It did not address the issue as to whether the proposed changes to the Claimant’s contract could properly be regarded as part of a business reorganisation; and
(4) It did not address the potential effect upon the Claimant and or the unfairness to him of the proposed changes (albeit that they noted it was important to consider the former…)
In all four respects it is submitted that the ET misdirected itself in law.’

24.	Mr Brown submitted that to justify a dismissal on the grounds of a business reorganisation it is necessary for the employer to demonstrate at the very least some serious effect on the business if the changes are not to be made.  Were this not so an employer could at their wish reduce terms and conditions of their employees.  He pointed out that the authorities referred to by the ET were those in which the employers were able to demonstrate that there would be a serious effect upon the business were the proposed changes not to be implemented. These included Catamaran Cruisers v Williams [1994] IRLR 387 in which the EAT noted that although an employer may not need to establish that his business is at stake, the relevant provisions do not present an open door to change terms and conditions. 

25.	In considering whether a business reorganisation justifies a dismissal Mr Brown pointed out that the ET must consider the effect of proposed contractual changes on the employee. 

26.	Mr Rice-Birchall for the Respondent submitted that the ET did not misdirect themselves in law in considering whether the dismissal of the Claimant for refusing to accept new remuneration terms was for some other substantial reason within the meaning of ERA section 98(1)(b).

27.	Mr Rice-Birchall relied on Kerry Foods Ltd v Lynch [2005] IRLR 680 at paragraph 14 in which the EAT referred to Scott & Co v Richardson EATS/0074/04 which in turn referred to Kent County Council v Gilham [1985] ICR 233 paragraph 18 to contend that in determining whether the reason for dismissal of a complainant falls within ERA section 98(1)(b) an ET should consider whether the employer has established a reason which could justify dismissal.  He submitted that the following principles are applicable when considering whether the reason put forward by the employer qualifies as a ‘substantial reason of a kind such as to justify dismissal of an employee holding the position which the employee held’. 

“8.1. The hurdle is designed to deter employers from dismissing employees for some trivial or unworthy reason. However, if on the face of it the reason could justify the dismissal, then it passes as a substantial reason (Scott, Gilham); and
8.2. the hurdle is low (Lynch).”

28.	Mr Rice-Birchall contended that the ET correctly directed themselves in law and set out in paragraph 28 good reasons for their conclusion that the Respondent had established some other substantial reason for the Claimant’s dismissal.  These factors were fully supported by the evidence. 

Discussion and conclusion
29.	The ET set out in paragraph 27 of the judgment the approach they applied to the issue of whether the Respondent had established that the reason for the dismissal of the Claimant fell within ERA section 98(1)(b).  They directed themselves that:

“…A sound business reason for reorganisation is sufficient to establish some other substantial reason for dismissing an employee who refuses to accept a change in his terms and conditions (Hollister v National Farmers Union [1979] ICR 542 CA). It is not necessary for the employer to establish that a reorganisation was essential; thus an employer can dismiss an employee fairly if he refuses to accept changes to his terms where there is a sound business reason for doing so. Such action is not restricted to a situation where the survival of the business is at stake (Catamaran Cruisers v Williams [1994] IRLR 386).”

30.	Catamaran Cruisers is an example of a case in which dismissal to effect a change in terms and conditions of employment was held to be a dismissal for some other substantial reason.  Griffiths LJ (as he then was) in the Court of Appeal in Gilham held at paragraph 18 that at the stage of considering whether an employer has established some other substantial reason for dismissal: 

“The hurdle over which the employer had to jump at this stage of an enquiry into an unfair dismissal complaint is designed to deter employers from dismissing employees for some trivial or unworthy reason. If he does so, the dismissal is deemed unfair without the need to look further into its merits. But if on the face of it the reason could justify the dismissal, then it passes as a substantial reason, and the enquiry moves on to s.57(3) [the equivalent to what is now at s.98(4)], and the question of reasonableness.”

31.	An employer does not have to establish that their business reason for dismissal to effect changes in terms of employment is essential in order to show that the reason for dismissal falls within ERA section 98(1)(b).  As explained in Gilham, if on the face of it the reason could justify the dismissal, then it is a substantial reason and the enquiry moves to consider the fairness of the dismissal.  It is a question of fact in each case for the ET to determine whether the employer has established that reason for dismissal has satisfied the threshold set by Gilham, Scott and Kerry Foods.  The balancing exercise of the needs of the employer and the detriment to the employee comes into play at the next stage of determining whether the dismissal was fair in all the circumstances.  To take these factors into account in deciding whether the employer had established a substantial reason justifying dismissal would be to ‘conflate the questions of whether there was a substantial other reason, a sound business reason which seemed good to the employer, with the question as to whether it was a fair dismissal in the circumstances.’: the error in the judgment of the ET identified by the Employment Appeal Tribunal (‘EAT’) in paragraph 20 of Scott. 

32.	In our judgment the ET did not misdirect themselves in law in their approach to the question of whether the Respondent had established that the Claimant was dismissed for some other substantial reason justifying dismissal within the meaning of ERA section 98(4)(b). 

Grounds 2 and 4: The decision of the ET that the reasons for the proposed changes to the Claimant’s pay fell within ERA section 98(1)(b) and that his dismissal was fair within the meaning of ERA section 98(4) were perverse
Submissions of the parties
33.	Mr Brown submitted on behalf of the Claimant that insofar as the ET relied on the Respondent’s concern about the difference between his terms of remuneration and that of the other Area Managers as supporting some other substantial reason for his dismissal or its fairness they erred.  It was said that there was no evidence of any current dissatisfaction amongst other Area Managers as to any disparity in pay.  To support this contention reliance was placed on evidence in the Claimant’s witness statement, the Employment Judge’s notes of evidence and emails from other Area Managers.

34.	Further Mr Brown contended that because the changes to remuneration brought about by dismissal related only to the pay of the Claimant the dismissal could not be said to be to bring about a business reorganisation. 

35.	The relevant facts did not support a conclusion that the Respondent’s reasons for changing the terms of the Claimant’s remuneration were such as to justify his dismissal or were more than trivial.  Accordingly the decision of the ET that the dismissal was for some other substantial reason was perverse. 

36.	The conclusion of the ET that the dismissal of the Claimant was fair within the meaning of ERA section 98(4) was perverse. Amongst other matters it was said that the effect of changing the Claimant’s pay structure would have substantially reduced his pay and were unfair to him.  Mr Brown submitted that the ET failed to take into account:

1)	The absence of serious business consequences if there were no change in the basis for the Claimant’s remuneration;

2)	The original reason for the Claimant’s remuneration terms and that he had taken a lower basic salary than other Area Managers.  He would be deprived of the benefit of his earlier investment in building up the customer base if the new terms had been implemented.  It was contended that the ET could not properly form a view as to whether the Claimant’s remuneration on the former pay structure was ‘out of proportion to his contribution to the success of the company’;

3)	The absence of objection to his remuneration terms from the other Area Managers;

4)	That in rejecting the Claimant’s suggested compromise pay arrangements, the Respondent refused to recognise that the Claimant had a contractual entitlement to his existing pay structure which had been agreed as recently as 18 months ago. 

5)	The prejudice to the Claimant in reduced earnings under the new terms.

37.	The ET had failed to recognise that the Claimant had chosen to take a substantially lower base salary than his colleagues who had been offered but rejected a similar arrangement. He took a risk which his colleagues did not.  The ET should have taken into account the absence of objection from his colleagues to his remuneration. 

38.	The notes of evidence show that Mr Cradduck and Mr Kozlowski of the Respondent proposed to alter the remuneration terms of the Claimant believing that they had the contractual right to do so.  In cross examination Mr Kozlowski said ‘I believed that the contract allowed us to change.’  Mr Cradduck gave evidence that ‘The contract allows us to review the commission scheme annually.’ 

39.	The ET should have borne in mind in assessing the fairness of the dismissal what the Claimant was offering as compromise solutions.  The ET failed to refer in their judgment to the counter proposals made by the Claimant.  Mr Brown submitted that there was no negotiation with the Claimant based on the true legal position recognising his contractual entitlement to his existing pay structure. 

40.	The ET failed to take into account the adverse effect of the proposed change on the Claimant’s earnings.  To the extent that the ET held that the Claimant’s pay was too high they made a judgment they were not in a position to reach.  Notwithstanding these submissions it was said by Mr Brown that the ET failed to consider the evidence that the proposed changes would have increased the Claimant’s remuneration.  The predictions made by the Respondent of the Claimant’s remuneration had he remained on his existing terms recorded by the ET in paragraph 23 of their judgment as reaching in the region of £130,000 in 2009 were said to be comparable to the total remuneration he would have received under the new structure. Accordingly it was said there was no justification for the change. 

41.	Further the letter of dismissal was sent out before any prior meeting with the Claimant to discuss termination.  The negotiations that followed took place under threat of dismissal. Accordingly the ET ought to have concluded that there was inadequate negotiation and insufficient attempt to avoid dismissal and that the dismissal was unfair.

42.	For the Respondent Mr Rice-Birchall submitted that the evidence before the ET supported their findings of fact and conclusion that there was some other substantial reason for the dismissal of the Claimant within the meaning of ERA section 98(1)(b) and that his dismissal was fair. 

43.	Mr Kozlowski gave evidence of the reasons for the changes to the Claimant’s remuneration terms.  One of those reasons was that Acumed Inc and the Respondent had made significant investments in the business and that sales had grown significantly year on year. Acumed had launched several new products incurring associated costs.  The other reason was to have all Area Managers on the same remuneration terms.  The evidence was accurately reflected in the findings of fact and the conclusion on the reason for the dismissal set out by the ET in paragraph 28 of the judgment. 

44.	As for the contention that the other Area Managers did not object to the Claimant’s remuneration terms, Mr Rice-Birchall pointed to evidence that two of them had asked to be placed on the terms enjoyed by the Claimant.  The contention that the other Area Managers had been offered but had declined terms enjoyed by the Claimant was contested before the ET.  In any event such evidence was immaterial as irrespective of their views, the Respondent reasonably considered that it was not fair and reasonable for the Claimant to be on different terms from those applying to the other Area Managers.

45.	The findings made by the ET at paragraphs 31 and 32 of the judgment as to the remuneration of the Claimant were he to remain on his existing terms was based on evidence adduced before them.  It was clear from paragraph 30 of the judgment that the ET appreciated the disadvantage to the Claimant if the proposed change were implemented and that they took account of this factor. 

46.	Mr Rice-Birchall submitted that the ET were right to conclude at paragraph 33 of the judgment that negotiations with the Complainant were protracted and detailed and continued from July 2007 to 25 March 2008.

47.	It was contended by Mr Rice-Birchall that the decision of the ET that the Respondent had established some other substantial reason for the dismissal of the Claimant and that his dismissal was fair was not perverse.

Discussion and conclusion
48.	It was not in dispute before the ET that the Claimant was dismissed to bring about a change in the basis for his entitlement to commission.  The ET were satisfied that there were good business reasons for doing so which included ensuring that there was parity between the five Area Managers.  The use by the ET of the label ‘reorganisation’ in this context questioned by Mr Brown does not affect the reason for the dismissal.  Mr Brown contended that the Respondent erroneously considered that they had the right to effect change when they could not do so.  If there was no contractual power to effect unilateral change, in the absence of agreement change could only be achieved by terminating the Claimant’s contract and offering him new terms.  On the evidence before the ET it cannot be said that they erred in failing to conclude that the reasons for changing terms were trivial as was contended.

49.	In our judgment the unchallenged findings of fact made by the ET supported their summary and conclusion at paragraph 28 that the Respondent had established some other substantial reason for dismissal.  That decision was not reached in error of law nor was it perverse. 

50.	The ET set out their findings on the fairness of the Claimant’s dismissal in paragraphs 29 to 34 of the judgment.

51.	Before us it was contended on the one hand that the ET erred in failing to consider the prejudice which would have been suffered by the Claimant in loss of remuneration if he had accepted the new terms and on the other that there was no need to impose the change as on the evidence the remuneration under the old and the new terms was comparable.  The Employment Judge’s notes of the cross examination of Mr Cradduck show that there was evidence before them that he considered that under his existing terms the Claimant would be earning £130,000 in 2009.  Thus there was evidence before the ET supporting their finding in that regard at paragraph 32 of their judgment.  There was also evidence before them supporting their observation in paragraph 33 of the judgment on the ‘marked disparity in earnings between the claimant and his colleagues’.  The ET could not be said to be unaware of or to have failed to consider the effect on the Claimant’s remuneration of a change to his terms to those under which his colleagues were employed.

52.	The contention that the change to the new terms would not have led to savings because earnings under the existing and proposed terms were comparable fails to acknowledge that this was only so because as a result of negotiations, in an email to the Claimant dated 21 January 2008 subject to meeting targets and to leaving at the end of 2009 as he wished, Mr Cradduck offered to guarantee that his earnings for 2008 would be equivalent to those for 2007 and that he would be paid a reasonable package for 2009.  

53.	In our judgment it was not material to the decision of the ET on the fairness of the dismissal that they failed to record that the Respondent negotiated with the Claimant believing that they had a contractual right to vary his remuneration terms.  The Respondent did not seek to impose new terms.  As is appropriate where there is no contractual right to vary terms, when the Claimant refused new terms the Respondent gave contractual notice to terminate the Claimant’s contract and offered the new terms. 

54.	It was apparent from the emailed letter of 16 April 2008 to the Claimant his counter offers were considered but were found to be unacceptable.  Mr Koslowski wrote:

“During an adjournment, after discussion Bob and I felt that none of your three options were reasonable, in-line with the other Acumed Ltd sales professionals, nor motivational to continue the growth of the Company. In summary, none of your proposals were in line with the sales or financial goals of the Company.”

55.	In our judgment the conclusions of the ET on the reason for the dismissal of the Claimant and its fairness were not perverse.  They are supported by the findings of fact.  The notes of evidence, statements and documents relied upon to advance these grounds of appeal do not undermine those findings.  The conclusions of the ET were amply supported by the evidence. 

Ground 3: The ET erred in law in holding that the dismissal of the Claimant fell within Regulation 4(1)(a) of the now repealed Employment Act 2002 (Dispute Resolution) Regulations 2004 (‘the Regulations’) so that the statutory dismissal procedure did not apply
Submissions of the parties
56.	The provisions under consideration in this ground of appeal have now been repealed. 

57.	Regulation 4(1)(a) of the Regulations provided that the statutory dismissal procedure set out in EA 2002 Schedule 2 did not apply to the dismissal of an employee where:

“(a) all the employees of a description or in a category to which the employee belongs are dismissed, provided that the employer offers to re-engage all the employees so dismissed either before or upon the termination of their contracts.”

58.	Mr Brown for the Claimant contended that the ET erred in holding at paragraph 24 that the dismissal of the Claimant fell within Regulation 4(1)(a) because he was in a description or category of one as the only Area Manager whose commission was based on total sales and not on growth in sales. 

59.	Mr Brown contended that the clear purpose of Regulation 4(1) is to exclude from the protection of the Regulation collective dismissals and dismissals in which the individual characteristics of the employee play no or no real role in the decision to dismiss.  The ET erred in defining the category by reference to the individual characteristics of the Claimant. 

60.	Mr Rice-Birchall for the Respondent contended that the ET did not err in concluding that Regulation 4(1)(a) applied.  Because the Claimant was the only sales representative whose commission was based on total sales rather than sales growth he was in his own category.

Discussion and conclusion
61.	Regulation 4(1)(a) of the Regulations  applied where:

“all the employees of a description or in a category to which the employee belongs are dismissed, provided that the employer offers to re-engage all the employees so dismissed either before or upon the termination of their contracts.”

By its language the Regulation 4(1)(a) applied to the dismissal of an employee when all employees in the category to which he belongs are dismissed.

62.	The ET erred in deciding that because the basis for the Claimant’s commission payments was different from that of the other four Area Sales Managers therefore he was not an employee in the same category or description as theirs.  Employees of the same description or in the same category may have different rates of remuneration for a variety of reasons or, perhaps because they commenced employment on different dates, may be on different pay scales or have different components to their remuneration package.  Those differences do not remove them from a particular description or category. 

63.	In our judgment ‘description’ or ‘category’ is to be determined by reference to job function and title.  On the evidence the Claimant was one of five Area Sales Managers.  The remaining four were not dismissed. 

64.	Further, in our judgment Regulation 4(1)(a) does not apply where there is only one employee in a particular category or of a particular description.  On its wording it applies where others than the affected employee are dismissed and are offered re-engagement. To hold otherwise would be to fail to pay regard to the use of the word ‘all’ in Regulation 4(1)(a). 

65.	Accordingly the ET erred in holding that the statutory dismissal procedure did not apply to the dismissal of the Claimant by reason of the operation of Regulation 4(1)(a).

Ground 5 added by Re-Amended Notice of Appeal: Failure to determine whether the statutory dismissal procedure had been complied with
66.	The ET record in paragraph 20 that the Claimant had contended that his dismissal was automatically unfair by operation of ERA section 98A because the Respondent did not carry out the statutory dismissal procedure in the now repealed Schedule 2 to the EA 2002 (‘SDP’), or undertake any dismissal or disciplinary procedures, statutory or otherwise. 

67.	The Respondent contended before the ET that the statutory dismissal procedure did not apply by reason of Regulation 4(1)(a).  It was not until the skeleton in the EAT that the Respondent advanced the argument that if the SDP applied it had been complied with.  This was not in the ET3 or the Respondent’s Answer in the EAT.  Mr Brown accepted that the original Amended Notice of Appeal and skeleton for the EAT did not expressly raise the contention that the ET erred in failing to hold that the SDP had not been complied with.  In these circumstances we gave leave to the Claimant to amend the Notice of Appeal to contend that the ET erred in failing to determine whether the Respondent had complied with the SDP and to the Respondent to amend the Respondent’s Answer to contend that the procedure had been complied with.

68.	Since we have held that the SDP did apply to the dismissal of the Claimant, the ET should have considered whether the standard statutory dismissal procedure had been complied with.  If the SDP is not complied with, the dismissal is automatically unfair.  We received detailed written submissions on whether the Respondent complied with the SDP.  Since all the matters relied upon were in the documents before us and the relevant facts are not in dispute we are in as good a position as the ET to determine whether the Respondent had complied with the SDP. 

The contentions of the parties
69.	It was contended on behalf of the Claimant that any purported compliance with the SDP was too late.  It came after notice of dismissal had been given to the Appellant.  Where employment is terminated by notice, Steps 1 and 2 must be complied with before notice of dismissal is given.  In any event the evidence relied upon by the Respondent to support their argument that there was compliance with the SDP does not satisfy the requirements it imposed. 

70.	The Respondent contended that the following evidence established that the SDP was complied with:

Step 1: (a) an email from Mr Cradduck to the Complainant on 25 March 2008 giving proposed dates for a meeting which was to:

“…focus on discussing your thoughts on continuing your relationship with Acumed Ltd. While you have until 4 April 2008 to sign the new employment contract, if you have already decided to seek out other opportunities, it is to your benefit to have the time and flexibility to conduct your job search. To that end, Acumed Ltd would be willing to pay you your remaining notice salary in one lump.”

(b) an email sent by Mr Cradduck to the Complainant on 26 March 2008 inviting him to a meeting ‘to do one of two things, they are:

“1. For you to sign both the new contract and new remuneration (compensation) agreement. Copies of both documents were enclosed  with my letter of the 14 March 2008, please bring them with you. 
2. If you do not wish to sign both of these documents then the plan is to agree an early departure date from your employment with Acumed Ltd.
With only these two items on the agenda I see no reason for a record of the meeting to be taken.”

Step 2: (a) Notes of a meeting with the Complainant on 28 March 2008 under the following headings: 

‘His thoughts on continuing to work for Acumed’.  These included: 

“Doesn’t want to sign contract. Believes we have no grounds to end contract. Still willing to negotiate a 2 year exit plan.”

‘His thoughts on how we should handle his notice period if he does not sign the new contract.’
(b) Minutes of a meeting held on 28 March 2008 in which:

“David stated that he is still happy to discuss new terms and requested that they review the terms outlined in the letter from Amanda Capon. Bob C explained that there had been some misunderstanding in Acumed over that issue, but that the Company will review their position on this.”

(c) An email from Mr Cradduck to the Complainant on 2 April in which he wrote:

“You suggested that there might be a way forward for you to remain on the same bonus structure and agree to leave in two years’ time, or alternatively agree a different outcome. 

I have discussed this with the board and, unfortunately, your offer is not acceptable to the Company.”

Step 3: Minutes of a meeting on 14 April 2008 between Mr Koslowski and the Complainant which recorded:

“Alan started the meeting by summarising his understanding of the situation regarding this case. David provided a statement of appeal for Alan to read. David talked through the statement.
…
Alan asked what alternative remuneration schemes would be acceptable to David within a contract to expire at the end of 2009. David stated that he is flexible and subject to all other terms being agreed, would consider the following:
1. His earnings in the previous year, which is approximately £90,000
2. His current contract to run until the end of 2009
3. His current contract to run until the end of 2009 with an upper earnings cap.
Alan noted these ideas and left the meeting to discuss these proposals with Bob Cradduck. 
Alan subsequently returned to the meeting and stated that the Company position remains that David shall either sign the contract that the Company submitted in March, or they will proceed with the termination. David confirmed that he will not sign the contract.’

The Respondent confirmed the outcome of the meeting by letter.

71.	It was common ground that the Respondent had issued the Claimant with a notice of dismissal on 14 March 2008 before Steps 1 to 3 of the SDP are now said to have been undertaken.  Mr Brown contended that it was too late to attempt compliance with the procedure after the employee has been given notice of dismissal.  Steps 1 and 2 of the SDP are to be undertaken when the employer is contemplating dismissal.  Regulation 3(1) of the Regulations is framed in similar terms so that the relevant provisions apply when the employer is contemplating dismissing an employee. 

72.	As the Respondent had ceased contemplating dismissal when they served notice of dismissal it was too late thereafter to comply with Steps 1 and 2 of the SDP. 

73.	Paragraph 2 of the Standard SDP expressly provides that Step 2 must take place before ‘action is taken’.  Since Step 1 must be taken before Step 2 this too must take place before action is taken. 

74.	‘Action’ in the SDP is not to be equated with the taking effect of notice of termination of employment.  The distinction between the action of the employer and the taking effect of termination of employment is illustrated by the language of paragraph 3(4) of the SDP.  Step 3 contemplates that all three steps may be completed before the dismissal takes effect. 

75.	Mr Brown contended that it is difficult to see how the SDP could work effectively at a time when the employee was under notice of dismissal.  The procedures are aimed at avoiding dismissal.  Further, the fact that by reason of ERA section 111(3) an employee may bring a complaint of unfair dismissal once issued with a notice of dismissal is consistent with the conclusion that the employer is expected to have complied with the procedures before issuing a notice of dismissal. 

76.	Reliance was also placed on Junk v Kuhnel [2005] IRLR 310 and Leicester City Council v Unison [2005] IRLR 920 to contend that as in the context of consultation before collective redundancies, the required action must take place before notice of dismissal is given not before it takes effect.

77.	Mr Brown sought to distinguish Smith Knight Fay v McCoy UKEAT/0245/08/DA and Fitness Solutions v Park UKEATS/0032/09/BI on the basis that in neither of those cases had the employer implemented any decision to dismiss.  Neither claimant was under notice of dismissal.  The claimant in Smith Knight Fay had merely been advised that he would be made redundant and the appeal in Fitness Solutions proceeded on the basis that when the procedures were said to have been complied with the claimant had not been dismissed but suspended.

78.	It was contended that the SDP was not complied with in any event. The documents relied upon by the Respondent do not support the contention that they complied with the SDP.

79.	At Step 1 the employee must be told that he is at risk of dismissal.  Reliance was place on Alexander v Brigden [2006] ICR 1277 to contend that the statement of grounds for action must be set out in sufficient detail in a Step 1 communication to enable the employee to give a considered and informed response to the proposed action.  Mr Brown submitted that the emails relied upon by the Respondent as constituting Step1 did not set out the circumstances which led them to contemplate dismissing the Claimant.

80.	The meeting relied upon as constituting Step 2 was not convened to give the Claimant the opportunity to respond to the grounds for proposed action.  The meeting took place on the basis that the Claimant’s existing terms were to terminate.  Notice of termination had already been served.  Step 1 and Step 2 were not completed or even started before the decision to dismiss was taken. 

81.	The meeting with Mr Kozlowski on 14 April 2008 did not constitute a Step 3 appeal as there was no opportunity to challenge the decision to terminate the Claimant’s existing terms.  It was the Claimant’s alternative proposals for his remuneration for the next two years which were the subject of the meeting.

82.	Thus even if the steps relied upon by the Respondent as complying with Steps 1 and 2 of the SDP were carried out in time they did not satisfy the requirements of the statutory procedure. 

83.	Mr Rice-Burchall contended that Steps 1 and 2 of the SDP must be taken ‘before action is taken’.  The relevant action in this case was dismissal.  In accordance with Regulation 2 of the Regulations, ‘dismissal’ is to be interpreted in accordance with ERA section 95(1)(a) and (b).  A contract of employment is not terminated by the employer until it comes to an end.  In this regard Mr Rice-Birchall relied upon authorities on when a contract of employment terminates and the effective date of its termination.  If termination is by notice that is when the notice expires.  The employee is dismissed on that date.  Mr Rice-Burchall distinguished the meaning of ‘dismissal’ in the context of consultation on collective redundancies as explained by the European Court of Justice in Junk from its meaning in the ERA, the EA 2002 and the Regulations.

84.	Further, Mr Rice-Birchall contended that the documents relied on by the Respondent set out in paragraph 68 above constituted compliance with the three Steps of the SDP.

Discussion and conclusion
85.	The decision as to whether the acts relied upon by the Respondent as constituting Steps 1 and 2 of the SDP were in any event taken too late depends on the meaning of ‘contemplate dismissing’ in Step 1 and ‘before action is taken’ in Step 2. 

86.	Underhill J made it clear at paragraph 11 of the judgment in YMCA v Stewart [2007] IRLR 185 that although the SDP refers to Step 1 and Step 2 it is not a requirement that the Step 2 events should follow the Step 1 letter.  HH Judge Peter Clark observed in Homeserve Emergency Services Limited v Mr Dixon UKEAT/0127/07/CEA at paragraph 15:

“It seems to us that the matters set out in Step 2 may precede or come at the same time as or post date, the step 1 letter.”

87.	What is clear, however, is that the Step 2 meeting must take place ‘before action is taken’.

88.	Lady Smith in the EAT in Fitness Solutions held at paragraph 17:

“The phrase “action taken”, in subparagraph 2(1) is not further defined but we agree with the analysis of HHJ Judge Burke QC in the case of Smith Knight Fay Ltd v McCoy UKEAT/0245/08 at paragraph 32, where he explains:
“32 …in our judgment, ‘action taken’ refers to the action which the employer is contemplating, either dismissal or disciplinary action other than dismissal.  This view is supported by the fact that the modified procedure in Chapter 2 of Part 1 of Schedule 2 to the 2002 applies, by regulation 3(2) of the Regulations, to limited circumstances in which the dismissal has already occurred; it contained no reference to any requirement in relation to ‘action taken’.  ‘Action taken’, in our judgment is not some lesser step such as informing the employee that he is going to be made redundant.”’

89.	Regulation 2 of the Regulations contains not only a definition of ‘dismissed’ but also of ‘action’.  In the Regulations ‘action’ ‘means any act or omission’.  Regulation 3(1) provides:

“3(1) Subject to paragraph (2) and regulation 4, the standard dismissal and disciplinary procedure applies when an employer contemplates dismissing or taking relevant disciplinary action against an employee.”

Regulation 3(2) provides that the modified dismissal procedure applies to summary dismissals for misconduct when the employer was entitled to dismiss the employee without notice by reason of his misconduct and it was reasonable for the employer to do so before enquiring into the circumstances in which the conduct took place.  These Regulations were made pursuant to powers in EA 2002 section 31(6)(a).  In our judgment the interpretation provisions in the Regulations apply to the EA 2002 pursuant to which they were made.  Thus ‘action’ in the SDP in Schedule 2 to EA 2002 is to be interpreted as ‘any act or omission.’

90.	Paragraph 2(1) of the SDP provides that the Step 2 meeting must take place ‘before action is taken’.  If the legislature had intended that this should be before the disciplinary action or dismissal takes effect it could have so provided as it did in Step 3(4):

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

The SDP recognises the distinction between the action of an employer dismissing an employee and that dismissal taking effect.  Step 1(1) refers to an employer contemplating dismissing an employee.  This is an action of an employer.  The taking effect of a dismissal requires no further action by the employer.  It is the former and not the latter to which Steps 1 and 2 are directed.  Recognition must be given to the broad definition of ‘action’ for the purposes of the SDP and the action of the employer upon which the implementation of the SDP is to have some influence.  If the procedure is to have an influence on whether or not an employee is dismissed, the SDP must have been intended to have a bearing on actions which inevitably lead to dismissal.  Once an employer has served notice of dismissal the employment of the employee will terminate on its expiry without further action by him.

91.	Accordingly in our judgment where an employer is contemplating dismissing an employee on notice ‘before action is taken’ in Step 2(1) is to be interpreted as ‘before the employer serves notice of dismissal’.

92.	Smith Knight Fay and Fitness Solutions are to be distinguished.  In those appeals the employer had not served the employee with notice of dismissal which would have led to the termination of the contract of employment.  In the appeal before us notice of dismissal had been served on the Claimant on 14 March 2008 terminating his employment on 25 April 2008 if he had not accepted by 4 April 2008 the new terms offered.  The Respondent had moved beyond the stage of contemplating the dismissal of the Claimant, they taken action to bring it about. The matters relied upon by the Respondent as constituting Steps 1 and 2 occurred after notice of dismissal was given.  The Respondent failed to comply with Steps 1 and 2 of the SDP before action was taken by them.  Accordingly the dismissal of the Claimant was unfair by operation of ERA section 98A. 

93.	Although the actions said by the Respondent to constitute compliance with the SDP were taken too late we consider whether they otherwise fulfilled the requirements of the statutory procedure. 

94.	The obligations imposed on an employer by Step 1 and Step 2 were set out by the EAT, Elias P as he then was, in Alexander v Brigden:  

“38. Taking these considerations into account, in our view, the proper analysis of the employer’s obligation is as follows. At the first step the employer merely has to set out in writing the grounds which lead him to contemplate dismissing the employee, together with an invitation to attend a meeting. At that stage, in our view, the statement need do no more than state the issue in broad terms. We agree with Mr Barnett that at step one the employee simply needs to be told he is at risk of dismissal and why. …Of course, most employers will say more than this brief statement of grounds, but compliance with the statutory minimum procedure is in our view met by a limited written statement of that nature.
39. It is at the second step that the employer must inform the employee of the basis for the ground or grounds given in the statement. This information need not be reduced into writing; it can be given orally. The basis for the grounds are simply the matters which have led the employer to contemplate dismissing for the stated ground or grounds. In the classic case of alleged misconduct this will mean putting the case against the employee; the detailed evidence need not be provided for compliance with this procedure, but the employee must be given sufficient detail of the case against him to enable him properly to put his side of the story. The fundamental elements of fairness must be met.”

95.	In our judgment the emails of 25 and 26 March 2008 from Mr Cradduck to the Claimant do not satisfy the requirements of Step 1.  By that stage the Respondent had progressed beyond contemplating dismissing the Claimant.  They had given notice dismissing him.  Further, the emails do not set out the reasons why they wish to terminate his contract.  The stated purpose of the proposed meeting which was the subject of the emails was for the Claimant to sign a new contract or to agree an early departure date. 

96.	It is clear from the notes of the meeting of 28 March 2008 between the Claimant and Mr Cradduck that the Respondent’s grounds for terminating the Claimant’s contract were not outlined by Mr Cradduck.  The Claimant protested at his treatment and his proposed new contract.  The purpose of the meeting was not to enable the Claimant to put forward his case as to why the contemplated action should not be taken.  The meeting concluded with Mr Cradduck saying that he would discuss with his fellow directors the remuneration terms for the Claimant’s continued employment proposed by the Claimant’s solicitor.  Action to terminate the Claimant’s contract had already been taken on 14 March 2008 by giving notice of dismissal. The meeting did not fulfil the purpose or requirements of Step 2.

97.	The Respondent relied on the meeting between the Claimant and Mr Koslowski on 14 April 2008 as constituting a Step 3 appeal.  From the notes of the meeting it appears that the Claimant continued to protest at the termination of his contract.  He put forward proposals for his remuneration until his departure at the end of 2009.  The minutes record that Mr Koslowski left the meeting to discuss matters with Mr Cradduck and returned to inform the Claimant that the Respondent’s position remained that he should either sign the  contract the Respondent gave him in March or ‘they would proceed with the termination’.  These notes accord with what Mr Koslowski said in his witness statement on the meeting on 14 April 2008.

“12. I advised Mr Roberts that unless he signed the new contractual terms offered to him, his notice of termination would remain in effect. I told him that I hoped he would sign the contract so that the parties could move on.
…
17. I asked Mr Roberts what his suggested alternative was.
…
19. I queried why all the options he presented involved him leaving the Company the following year. He said that this was his intention.”

98.	In our judgment on the evidence the purpose of the meeting of 14 April was not to enable the Claimant to appeal the decision to terminate his contract but to give him the opportunity to put forward alternatives to the new remuneration terms which the Respondent had previously offered.  The meeting was not a Step 3 appeal meeting. 

99.	The Respondent had failed to comply with Steps 1, 2 and 3 of the SDP.

Disposal
100.	In light of the unchallenged factual basis for determining whether the Respondent had complied with the statutory dismissal procedure and the view that we take that no Employment Tribunal properly directing themselves would reach a conclusion other than that set out above as to whether there had been compliance with the SDP we have reached a conclusion on the issue.  We do not consider it necessary or appropriate to remit the matter to an Employment Tribunal to determine whether there had been compliance with the statutory procedure.

101.	The finding of the ET that the Claimant was not unfairly dismissed by the Respondent is set aside and a finding that he was unfairly dismissed substituted.  The case is remitted to the same Employment Tribunal if practicable for determination of remedy.