THE HONOURABLE MR JUSTICE UNDERHILL
The Appellant company, YMCA Training Ltd, provides training programmes designed to assist young people in securing employment. The Respondent, Mrs Stewart, was employed by the Appellant as a training adviser working at its Centres in Maidstone and Dartford between September 2003 and her dismissal on 20 September 2005. The circumstances leading to her dismissal can be summarised as follows:
Mrs Stewart brought proceedings for unfair dismissal and wrongful dismissal. There was also a claim for arrears of holiday pay. Her application was heard over two days by an Employment Tribunal sitting at Ashford. Although initially evidence was confined to the issue of liability, when it became clear that the Tribunal would have to reserve its decision on that issue, it decided to use the remaining portion of the afternoon of the second day to take evidence on the question of remedy in case that should be material (though as to this see para. 30 below).
The Tribunal's decision was promulgated on 30 March 2006. It can be summarised as follows:
In this appeal the Appellant appeals against the finding of unfair dismissal and also against the Tribunal's failure to find "contributory fault" and/or to make a Polkey reduction of 100%; Mrs Stewart cross-appeals against the Polkey reduction; and both parties appeal against the assessment of compensation. As before the Tribunal, the Appellant was represented by Mr. Mallett of counsel and Mrs Stewart by her husband. Mr Stewart put his wife's case clearly and well, and in such a way that we do not believe that she has been under any disadvantage by not having legal representation.
We will consider those issues under the following heads:
(A) UNFAIR DISMISSAL
Unfortunately on this issue we are not unanimous. We give at paras. 7-17 below the view of the Chairman and Mr. Mallender: Ms. Tatlow's dissenting view appears at para. 18.
We should start by setting out the provisions of Chapter 1 of Schedule 2 to the 2002 Act. They are as follows:
We should also note that para. 13 (2) of Schedule 2 provides that meetings "must be conducted in a manner that enables both employer and employee to explain their cases".
The Tribunal's reasons for holding that the Appellant had failed to comply with the
statutory procedure are set out in paras. 60-64 of its Judgment as follows:
We consider first the finding (at paras. 61-62) that there had been a breach of the requirements of step 1. In our view this is unsustainable. The Appellant's letter of 8 September 2005 plainly sets out Mrs Stewart's "alleged conduct … which [led Mrs Coutts] to contemplate dismissing or taking disciplinary action against [her]", i.e. what para. 2 (2) (a) refers to as the "grounds" for the contemplated action. (It does so only in headline terms, but it is clear from Alexander v. Brigden Enterprises Ltd [2006] ICR 1277 that that is sufficient for the purpose of step 1.) The Tribunal seems to have thought that this letter had to be disregarded because it was sent prior to the "investigatory" meeting of 12 September and no further letter was sent prior to the "disciplinary" meeting of 20 September. But it is crucial in cases of this kind for tribunals not to be distracted by the fact that the parties may have been following an internal procedure with more elaborate requirements and different terminology from those required by the statute: it is necessary to look beneath the parties' own labels and focus on whether the substantive requirements of the statute, which are in simple and non-technical terms, were or were not in fact met. In this case there was a letter containing the necessary statement of the alleged conduct and there was an invitation to a meeting to discuss the matter. That is all that was required, and it is beside the point how the letter and the meeting may have fitted in to the Appellant's own procedure. The only possible conclusion on the undisputed facts was that the requirements of step 1 were met.
We should also say in this connection that we are puzzled by the Tribunal's statement that Mrs Stewart was, prior (we take it) to the disciplinary meeting, "unaware of the particular matter (the alleged falsification) which Mrs Coutts was considering might lead to her dismissal". The alleged falsification was expressly referred to in the letter of 8 September – being the final bullet, namely "signing documentation in place of the employer and providing inaccurate information regarding placements" – and amplified in Miss Brackley's witness statement; and it was fully discussed at the investigatory meeting. We believe that the point which the Tribunal may have been intending to make was that Mrs Stewart was not told in advance of the meeting of 20 September which of the five points raised in the letter of 8 September were still live. That may be right, but it does not mean that the Appellant had not complied with the requirements of the statutory procedure.
We turn to whether there was compliance with step 2. Again, it is important to focus purely on the words of the statute. The first question must be when Mrs Stewart was informed of "the basis" for the grounds of the contemplated action, as required by para. 2 (2) (a). As is made clear in Alexander (above), the "basis" for an allegation does not mean all the detailed evidence that may be relied on but, rather, a sufficiently detailed statement of the case against him to enable him properly to put his side of the story: see para. 39 of the judgment in Alexander , at p. 1288. In our view Mrs Stewart was plainly given such a statement in the form of Miss Brackley's witness statement. It does not of course matter that the requirements both of para. 1 (1) and of para. 2 (2) (a) were addressed in the same letter (or letter and enclosure). The statutory procedure permits the employer to present his case in two stages – stating the "grounds" first (para. 1 (1)), and supplying the "basis" for them later (though in good time before the meeting) - but it does not oblige him to do so, and no doubt it will be common for employers to do what the Appellant did here and state both the grounds for the contemplated action and the basis of those grounds at the same time. The only material of substance that was not supplied to Mrs. Stewart was copies of the documents on which she was said to have forged the signatures: they were not provided until the meeting of 12 September. But she did not need to see the documents in order to put her case - namely that she did not sign them and that, if they were indeed signed, it must have been someone at Wilkinsons who signed them.
The meeting of 12 September took place three days after Mrs Stewart received the letter of 8 September 2005. At the meeting she tabled her response to the allegations (see para. 1 (6) above) and there was a substantial discussion of them. We can see no basis for any suggestion, nor has any been made, that she had not had a reasonable opportunity to consider her response.
Once that point is reached, the conclusion necessarily follows that the Appellant had complied with the requirements of step 2. There had been a meeting attended by Mrs Stewart, as required by paras. 2 (1) and 2 (3) – namely the "investigatory" meeting of 12 September – and Mrs Stewart had had the information required by para. 2 (2) (a) prior to that meeting and been given a sufficient opportunity to respond to that information, as required by para. 2 (2) (b). After that meeting – namely at the meeting of 20 September (as confirmed by the letter of 25 September) – she had been notified of the decision and of her right of appeal, as required by para. 2 (4).
The Tribunal's conclusion to the contrary appears to be based on treating the second – "disciplinary" - meeting of 20 September as "the step 2 meeting" and thus ignoring the earlier – "investigatory" – meeting of 12 September. In so far as that approach may have been influenced by a view of what was required by the Appellant's own procedure, we repeat the point made in para. 5 above: that procedure is (as such) irrelevant for the purpose of s. 98A (1), and all that matters is whether the steps required by the statute were complied with. But the point which appears principally to have troubled the Tribunal was that Mrs Stewart had not prior to the meeting of 20 September been told the result of Mrs Coutts' enquiries with Wilkinsons. That criticism would only be relevant to the consideration of "automatic" unfair dismissal if the information in question was required to be communicated to Mrs Stewart as part of the "basis" for the grounds of contemplated dismissal under para. 2 (2) (a). We do not believe that it was. It will commonly be the case that the step 2 meeting may throw up a need for some further investigation (or indeed highlight a point which should have been investigated earlier): part of the point of giving the employee the opportunity to respond to the employer's case is, precisely, to allow him to identify such points. That is indeed what happened in this case: Mrs Stewart said (in substance) "I didn't sign these documents – if you ask Wilkinsons, they will confirm that they did". If the employer then (as he generally should do) goes away and makes the further investigations, that does not impose any further obligation on him under the statutory procedure. The statutory obligation on him is to give details of the grounds for the allegation(s) in his original step 1 letter: there is no express obligation, and none should be implied, to provide further information or evidence which may accrue in the course of his investigations thereafter, however important it may be in the interests of fairness that the employee should be made aware of the information and his response sought. Likewise, there is no obligation to convene a second meeting to consider such after-acquired information.
Such a literalist approach may seem counter-intuitive to tribunals which have been used to considering broader questions of substantive fairness: there may well be cases where fairness will require that material discovered in the course of an investigation is put to the employee for his response or that a further meeting be held. But the essential point that has to be borne in mind is that the statutory procedures are no more than a minimum. Complying with them will not necessarily mean that the employer escapes liability for unfair dismissal: it does no more than get him over the first hurdle, and there may (depending on the case) be other steps that he is obliged to take. All that such compliance means is that he will not be liable for "automatic" unfair dismissal, which – quite deliberately and as a matter of policy – is intended only to be available where the employer has failed to conduct even the most rudimentary procedure. That is why references such as that made by the Tribunal here (see para. 63) to "the spirit of [step 2]" may be dangerous. The temptation to bring in by the back door the full panoply of "ordinary" unfair dismissal when interpreting and applying the requirements of Chapter 1 of Schedule 2 to the 2002 Act must be resisted. Thus, while Mrs. Coutts' omission to put to Mrs Stewart what she had been told by Wilkinsons might – we need not say whether it necessarily would – have justified a finding of "ordinary" unfair dismissal, it does not justify the finding of "automatic" unfair dismissal on the basis of which the Tribunal held the Appellant liable.
On that basis we need not consider the Tribunal's further point that the meeting of 20 September was not "step 2 compliant" because Mrs Coutts announced her decision at the meeting rather than "after" it. However, we heard argument on the point and, since these provisions are still novel, it may be useful if we state our view. In our judgment it is inherent in the requirements of step 2 (and specifically paras. 2 (1) and (4)), taken with para. 13 (2) of Schedule 2, that the employer should not announce any decision (or – still less – take any action) until the employee has had the opportunity to put his case at the meeting. Thus, on the facts of the present case, if the Appellant had had to rely on the meeting of 20 September as "the step 2 meeting" the Tribunal would have been right to hold that it did not comply with the statutory requirements, because – see para. 1 (9) above – no such opportunity was given to Mrs Stewart: all that happened at the meeting was that Mrs. Coutts announced her decision. But if such an opportunity is given, then the fact that the employer announces his decision at some later stage during the meeting itself, rather than concluding the meeting and waiting a day or an hour before doing so, does not mean that he has failed to comply. Such a conclusion would be artificial and absurd. It is not required by the language of sub-para. (4): it is perfectly good English, even if not logically pure, to use "after" in the sense of "at the end of".
Having examined the issue above with some minuteness, it is worthwhile to step back and look at it in the round. In the present case the Appellant on the face of it went through the essential procedural steps. Mrs Stewart was sent a reasonably detailed statement of the case against her. There was then a meeting at which she had, and took, the opportunity to state her case in response. She was then informed of the decision and given the right to appeal. In our view it would not be right if an employer who had acted as the Appellant did here were found liable not for "ordinary" unfair dismissal – that is another matter – but for "automatic" unfair dismissal, which is intended for employers who fail to come up to even the minimum standards required and which attracts liability for the penal "uplift" provided for by s. 31 (3).
The foregoing is, as we have said, the view of the majority. Ms. Tatlow's opinion is as follows. She draws attention to the very explicit description in the letter of 8 September of the meeting to which Mrs. Stewart was being invited as "investigatory" and as being intended to "investigate concerns". In her view that language conveys that the meeting was intended simply to investigate whether there was a case to answer and that, if as a result of this investigatory meeting, the employer found that any 'concerns' should be translated into allegations, these would be notified to the employee and considered at a disciplinary meeting at which the employee would have the chance to deploy her full response in respect of any allegations notified and the employer would consider penalty. The inclusion of an investigatory meeting is common HR practice, and the Appellant was plainly intending to follow such a course (even if, in the end, it failed properly to do so). In Ms Tatlow's view an invitation to an investigatory meeting of that kind cannot fairly constitute the invitation required at step (1), nor can such a meeting satisfy the requirements of step (2) under the statutory procedures. She is concerned that employees should not be invited to a meeting on the basis that it is investigatory only and then discover, after the event, that it was in fact being treated as the definitive step ( 2) disciplinary meeting. If that is right, then the meeting of 12 September did not satisfy the statutory requirements; and the meeting of 20 September could not do so either since, as the Tribunal found (and as we all agree), Mrs. Stewart was given no opportunity at that meeting to present her case. The Tribunal also found that no letter was sent after the investigatory meeting of 12 September and prior to the meeting of 20 September to notify Mrs. Stewart of the allegations to be answered and Ms Tatlow concurs with the Tribunal's view that in these circumstances, the requirements of step (1) were also not fulfilled.
The majority understand Ms. Tatlow's view, but they believe that it goes beyond the statutory language, which requires only that there be a meeting "to discuss the matter", at which the employee has the chance to explain his or her case. They fully accept that if an employee were prejudiced in some way by a meeting which had been billed as "investigatory" being in fact treated as final, that might well make the dismissal unfair (subject to s. 98A (2)) - but it would nevertheless not be "automatically" unfair.
Other things being equal, the result of our quashing the decision of the Tribunal on the issue of unfair dismissal contrary to s. 98A (1) would be that the case fell to be remitted to it (or to another Tribunal) in order to decide whether the dismissal was fair in accordance with s. 98. That, however, is subject to the effect of s. 98A (2): see para. 24 below.
(B) THE POLKEY REDUCTION
The Tribunal explained its finding on the Polkey issue at para. 66 of the Judgment, as follows:
The reference to Ms Povey's signature at the beginning of that passage is to the fact that she had signed the "employer contract" in Daniel's case. That was confirmed by an endorsement from her which Mr Stewart (following the dismissal) asked her to sign on a copy of the contract. Mr Stewart also obtained from Jason a short letter stating that a manager at Wilkinsons ("a man as far as I could see") had signed "the paperwork". Both these documents were before the Tribunal: there appeared at one point to be a question as to whether the Tribunal had ruled them inadmissible because they were disclosed late, but we are satisfied that they were in fact taken into account.
We can see no error of law in the assessment made by the Tribunal. The principal point made by Mr Stewart on Mrs Stewart's behalf was that if a proper investigation had been carried out the Appellant would have obtained (at least) the evidence from Ms Povey and from Jason referred to above. But Ms Povey's signature to the contract (in only one of the cases) was not one of the signatures that principally mattered: the crucial signatures were those on the participant induction sheet and the timesheet which purported – untruthfully - to certify that the trainees had completed the day's programme, and these were clearly not signed by her. And although if Jason had given the Appellant a statement in similar terms to that obtained by Mr Stewart it would certainly have had to be considered, it would not have been conclusive: a view would have had to be taken as to his reliability, and it is also noteworthy that the statement does not state which "paperwork" had been signed. Against any such evidence would have had to be weighed the inherent improbability of any manager signing the timesheets or the participant induction sheets given the fact (which was not in issue) that the trainees had been disruptive and had been sent away after an hour or two, the express statement of Mrs Coutts' informant that none of the forms had been signed and the relative credibility of Miss Brackley and Mrs Stewart. In those circumstances the Tribunal was fully entitled to conclude that it was more likely than not that even after a full and fair procedure the Appellant would have believed Miss Brackley's allegations.
Mr Stewart also argued that the Tribunal's finding on the Polkey issue was inconsistent with its refusal to find contributory fault and its finding of wrongful dismissal. We consider the Tribunal's findings in these respects under heads (C) and (D) below: as there appears, they are in fact unsatisfactory in their reasoning. But even if they were correct, there is no inconsistency of the kind asserted by Mr Stewart. The exercises in question are different from the Polkey exercise. They depend on the decision which the Tribunal itself makes on the evidence which it is adduced before it, while the Polkey exercise is concerned with what the employer would (reasonably) have done on the evidence which it would reasonably have had. Even if the evidence in question were in fact the same, it would have been entirely possible for the Tribunal to say "we (on balance) do not believe that the case is proved; but views could reasonably differ, and we think it likely that the employers would have found the case proved".
In the circumstances of this case, the importance of the Tribunal's decision on this issue goes beyond the question of remedy. S. 98A (2) of the 1996 Act provides that:
It is now established that that provision is not to be interpreted narrowly. "Failure to follow a procedure" embraces any step which the employer ought to have taken before deciding to dismiss the employee: see Alexander (above), at para. 57 (p. 1292), as confirmed in Kelly-Madden v. Manor Surgery (not yet reported – UKEAT/0105/06). In the present case the Tribunal's finding as set out in para. 21 above means that the Appellant has shown, on the balance of probabilities, that if it had followed a fair procedure Mrs Stewart would have been dismissed. Since there is here no question that Mrs Stewart's dismissal was for an admissible reason, and the only issue is thus the reasonableness of that dismissal, to be determined in accordance with s. 98 (4), the effect of s-s. (2) is that any claim for "ordinary" unfair dismissal must fail. In those circumstances, the appeal on "automatic" unfair dismissal having succeeded, the case does not fall to be remitted and Mrs Stewart's claim for unfair dismissal falls to be dismissed in its entirety. This may perhaps seem a harsh result; but it was Parliament's plain intention in enacting s. 98A (2) to deny any compensation in cases where the employer has been able to show that whatever inadequacies there may have been in his procedures made no difference to the result. That is what the Appellant has shown here.
(C) CONTRIBUTORY FAULT
In the light of our conclusion above, the issue of contributory fault does not arise; but we should nevertheless deal with it briefly. The totality of the Tribunal's consideration of the issue is at para. 68 of the Judgment, which is in the following terms:
On its face, that appears to be a finding that the Appellant had failed to prove its case under s. 123 (6). If so, it is, with respect to the Tribunal, inadequately reasoned. There was plainly evidence implicating Mrs Stewart – namely that of Miss Brackley, who gave evidence to the Tribunal, arguably supported by the implausibility of Wilkinsons signing the paperwork when the trainees had in fact been sent home. It was open to the Tribunal to reject that evidence, but if it was going to do so, at least some analysis and explanation was necessary. It need not have been elaborate but a bald statement of the kind in fact made was on any view insufficient. In fact, we rather suspect that the Tribunal did not in fact conceive itself to be making a definitive finding on the issue. The language of para. 68, and in particular the reference to the evidence not being "compelling", tends to suggest that it believed that a finding under s. 123 (6) was only necessary in a clear case and that, because the evidence here was – as a result of the inadequacy of the Appellant's enquiries – equivocal, no finding should be made. That suspicion is increased by the fact that this was the approach explicitly taken by the Tribunal on the wrongful dismissal claim, which required a decision on essentially the same issue (cf. paras. 27-28 below). But whether that is right or not, this part of the Judgment seems to us to fall foul of the principle that a party must be given an adequate explanation of why it has lost on any given issue.
(D) WRONGFUL DISMISSAL
The wrongful dismissal claim is not affected by our decision that the unfair dismissal claim must be dismissed. The Tribunal dealt with it as follows:
This reasoning cannot stand, for two distinct reasons. First, it is inadequate. As discussed in para. 26 above in relation to the contributory fault issue, while it was perfectly open to the Tribunal to find that the Appellant had not proved its case, some reasoning was required, in however summary terms. Secondly, and substantively, the question whether the Appellant had carried out a sufficient investigation was, on this aspect, irrelevant: the only issue was whether the Appellant had proved its case by the evidence adduced before the Tribunal.
Accordingly, we see no alternative to remitting this issue for reconsideration by the Tribunal. It will not be necessary for it to hear any further evidence, though given the passage of time it is likely to wish to give the parties the opportunity to make brief further submissions. Its task will be to consider the evidence which it has already received and decide whether, on the balance of probabilities, the Appellant has proved that Mrs Stewart was guilty of misconduct such as to justify summary dismissal. Even this limited exercise is likely to involve the parties in some cost and effort that they might reasonably wish to avoid. They should certainly consider whether there is any chance of agreeing a compromise.
(E) QUANTUM
The issue of the quantum of any award for unfair dismissal does not arise in view of our decision on liability. We would only record that both parties were agreed that the way in which the Tribunal had dealt with the issue was unfair. Although, as noted at para. 2 above, it had started, on the afternoon of the second day, to hear evidence on quantum, both Mr Mallett and Mr Stewart tell us that it soon transpired that the exercise could not fairly proceed because the relevant documents (including, but not limited to, those on pension loss) were not before the Tribunal, and that the Tribunal in fact acknowledged this and agreed that if in the event it found for Mrs Stewart on liability there would have to be a further hearing to consider remedy. Both were therefore extremely surprised to find the Tribunal ignoring that agreed way forward and deciding remedy issues in its Judgment – though the consequent errors of which they each complained were of course different. If we had dismissed the appeal on liability we should have had to allow it as regards quantum.