Johnson v Peabody Trust [1996] IRLR 387
The Employment Appeal Tribunal recently considered whether the "contract" test or "function" test was the appropriate test for determining whether someone is redundant. The "contract" test involves a literal reading of the terms of the contract while the "function" test looks at the contract and the surrounding circumstances.
In Johnson the EAT found that the Industrial Tribunal had correctly applied the contract test. This case is of wide interest as it concerns an employee who had a flexibility clause in his contract.
Mr Johnson was employed as a roofer by the Peabody Trust. He was also required to carry out multi-trade operations where possible. If there was no roofing work he carried out other work, mainly plastering.
It was decided that nine people would have to be made redundant, including one roofer, and Mr Johnson was selected as the roofer to go. By this time, he was carrying out multi-trade operations for more of the time than he was roofing. On a function test he would therefore be a multi-trade operative.
Mr Johnson complained that his dismissal was unfair. In dismissing his complaint the IT found that he had been dismissed by reason of redundancy in that he was employed as a roofer and the employer's requirements for employees to carry out roofing work had diminished.
On appeal the EAT held that the tribunal was correct in holding that Mr Johnson was employed as a roofer despite the flexibility clause. The EAT also held that in applying the "contract" test the contract should not be read in an over-technical or legalistic way but should be looked at in a commonsense manner in order to ascertain the basic task which the employee was contracted to perform.
Johnson should be read together with the earlier case of Bass Leisure Ltd v Thomas [1994] IRLR 104. Mrs Thomas was employed by Bass Leisure at their Coventry depot. Her contract of employment provided a right for the company to transfer employees either temporarily or permanently to a suitable alternative place of work.
The Coventry depot was closed and after a trial period at the Erdington depot Mrs Thomas resigned claiming a redundancy payment. The EAT held that Mrs Thomas was dismissed by reason of redundancy and closing down the Coventry depot amounted to a cessation of the employers business "in the place" where she was employed.
The EAT held that the question about the place where the employee is employed is primarily a factual one. The only relevant contractual terms are those which go to evidence or define the place of employment and its extent, rather than to make provision for the employee to be transferred from one "place" to another.
Both cases demonstrate tribunals looking at the contract and the factual situation. In neither case was the tribunal prepared to accept a broad definition of the "job" or "place of work" based on the wide wording of the contract. In both cases the tribunal attempted to establish the underlying reality of the situation: what was Mr Johnson's basic task; where did Mrs Thomas actually work?
Changing direction on parental leave: update
We reported in Issue 1 of LELR on the Directive to implement the Parental Leave Agreement. There have been some significant changes between the draft of the Directive and the final version which has now been passed.
The final version omits the guarantee that the Directive should not be used as an excuse to reduce the general level of protection and omits the obligation on member states to determine the range of penalties for infringing the parental leave requirements which must be "effective, commensurate with the infringement and must constitute sufficient deterrent".
These changes may be more cosmetic than real because general European Law principles mean that the existing protection should not be reduced and that sanctions must be effective.
A worrying development is the removal of the "non-discrimination" provision which prohibited any discrimination based on "race, sex, sexual orientation, colour, religion or nationality".
The provision was removed from the Directive and replaced by a weak statement in the preamble recognising the "importance of the fight against all forms of discrimination, especially based on sex, colour, race, opinion and creed".
This dilution sends a negative political message, particularly as reference to discrimination on grounds of sexual orientation has now been removed.
Procedure defective, not conclusive
Westminster City Council v Cabaj [1996] IRLR 399
In Cabaj the Court of Appeal looked at the effect of a breach of a contractual disciplinary procedure on the fairness of a dismissal. The court held that failure by an employer to observe their own contractually enforceable disciplinary procedure need not lead an Industrial Tribunal to conclude that a dismissal was automatically unfair.
The question the tribunal had to determine under S.57(3) of the EPCA was not whether the employer acted reasonably in dismissing the employee, but whether the employer acted reasonably or unreasonably in treating the reason shown as a sufficient reason for dismissal.
Mr Cabaj was dismissed by Westminster and exercised his right to appeal as set out in the Council's disciplinary code. The disciplinary code was expressly incorporated into his contract of employment and provided for an Appeals Tribunal comprising three members of the Council.
Mr Cabaj's appeal, heard by only two members of the Council, was dismissed. The Employment Appeal Tribunal found that Mr Cabaj had a contractual right to have an appeal heard by a tribunal composed of three members of the Council. For the appeal to be heard by only two members "was so fundamental a defect in the dismissal process" that the only conclusion the Industrial Tribunal could reach, if the case was returned to it for decision, was that the dismissal was unfair. The EAT held that Mr Cabaj was unfairly dismissed.
The Court of Appeal held that the EAT was right to regard the defect in the composition of the Appeal Tribunal as a significant failure rather than merely a procedural error. But the Court of Appeal found that the EAT was wrong to hold that the failure to observe the contractual appeals procedure meant that the decision to dismiss was automatically unfair.
The Court said the case must be sent back to the IT which was bound to consider whether, in providing an appeals tribunal consisting of only two members, the employers had impeded the employee in demonstrating that the real reason for his dismissal was not sufficient. It should also consider the reasons why the employers decided to dismiss without having observed the requirements of their disciplinary code.
Changing payments
Candler v ICL Systems Services
Mr Candler and 13 others were employed as customer service engineers working under contracts which could require them to work at inconvenient and unsocial hours for which they received additional payment for TSB ("telephone standby"). ICL gave the engineers two weeks' notice of a cut in the TSB payment.
The contracts of employment only allowed a variation of terms with 26 weeks' notice. An exception was the requirement to work the inconvenient hours triggering the TSB payments which could be ended with four weeks' notice. ICL therefore argued that TSB payments could be altered with only four weeks' notice.
The employees, represented by Thompsons, claimed that under the Wages Act 1986, the TSB rates could not be altered until the 26 week period was up. On appeal from the Industrial Tribunal they argued that it was wrong to imply a term which allowed the employers to change payments simply because the requirement to work the inconvenient hours could be terminated with four weeks' notice.
The EAT held that the IT was wrong. There was no material difference between the employer reducing the rate of pay for the standard 37 hour week and reducing the rate of pay for TSB. 26 weeks' notice was needed in both cases. Each employee was entitled to be paid the difference between the new lower rate for TSB and the higher rate for the 26 weeks' notice period.
Still waiting on two years' judgement
The House of Lords was due to hear the Government appeal from R v Secretary of State for Employment ex parte Seymour-Smith last month. This follows the Court of Appeal ruling that the two year qualifying period for bringing unfair dismissal claims was indirectly discriminatory against women.
The UK Government had been unable to justify the two year threshold. But the court didn't strike down the qualifying period and its status has been left unclear as a result.Â
Since the Court of Appeal judgment in 1995 many hundreds of cases have been lodged at Industrial Tribunal, but kept on hold awaiting the outcome of the Lords' judgment. The wait is still not over...the Lords' appeal has been adjourned until October.