EAT slashes compensation payments

Digital Equipment Co Ltd v Clements [1996]
IRLR 513 

The Employment Appeal Tribunal has opted for a method of calculating compensation which, in some cases, will slash the amount employers have to pay. In Clements the difference amounted to more than £10,000. 

Using the original Industrial Tribunal calculation and applying the statutory maximum then in force Mr Clements' compensation should have been £11,000. But the EAT's approach cut it to £837. 

The EAT's look at the method for calculating compensation for unfair dismissal for redundancy concerned a contractual severance payment where the IT had concluded there was a 50% chance that the Applicant would not have been selected for redundancy. 

The approach taken by the IT in Clements was 1) to calculate the total loss; 2) deduct the contractual severance payment; 3) halve the sum because they found there was a 50% chance that he might have remained employed had a fair procedure and proper consultation taken place. Finally they applied the statutory maximum award to the figure reached at stage 3. The EAT said this method of calculation was wrong. By switching stages 2) and 3) around they slashed the compensation award. In reaching their conclusion they considered S.74(7) of the Employment Protection (Consolidation) Act 1978 (now S. 123 (7) Employment Rights Act 1996). 

This provides that "If the amount of any payment made by the employers to the employee on the grounds that the dismissal was by reason of redundancy,...exceeds the amount of the basic award which would be payable...that excess shall go to reduce the amount of the compensatory award". 

The EAT found that the object of this provision was to award compensation for loss, not to penalise an employer for fault on his part in failing to follow a fair procedure for dismissal. The EAT's decision in Clements was made without considering its earlier decision in Cox v London Borough of Camden [1996] IRLR 389. 

In Cox a differently constituted EAT held that a termination payment should be deducted from the employee's loss first, and then the percentage applied. In Cox the EAT rejected the argument that the employer should be given full credit for a termination payment, an argument implicitly accepted in Clements. 

Whilst Cox dealt with a "termination payment" to be included in the calculation of loss under S.123 (1) ERA 1996 and Clements a "contractual severance payment" coming within S.123 (7) it is difficult to see how the two contradictory approaches of the EAT can in practice be reconciled.

Redundancy payable after fixed term ends

Pfaffinger v City of Liverpool Community College
Muller v Amersham & Wycombe College [1996] IRLR 508 

Two further education college lecturers employed on a succession of fixed term contracts were dismissed and entitled to redundancy when their contracts were not renewed. Both lecturers were employed for over10 years on term time only contracts.

It is established law, from the House of Lords decision in Ford v Warwickshire County Council [1983] IRLR 126, that teachers employed in successive years under fixed-term contracts with periods of unemployment during holidays, have continuous employment for the purposes of claiming unfair dismissal and redundancy payments. 

In the Pfaffinger and Muller cases the EAT considered the legal position of a part time lecturer whose contract for a college term expires without being renewed for the next term. Is the lecturer dismissed and if so, what is the reason for the dismissal? Does the lecturer have a claim for a redundancy payment? 

The EAT found that the lecturers were dismissed and made redundant on the expiry of their fixed term contracts. The need for part time lecturers stopped or diminished from the beginning of the holiday until the start of term in September. This is a redundancy situation within the meaning of the legislation. Mrs Pfaffinger was therefore entitled to a redundancy payment but not compensation for unfair dismissal. Mr Muller's case was remitted back to the Industrial Tribunal to determine the amount of the redundancy payment to which he was entitled. 

Mr Muller was offered and accepted a further fixed term contract and returned to work on less favourable terms. The EAT found that this did not mean that he lost his entitlement to a statutory redundancy payment. 

His right to a statutory redundancy payment arose because of his dismissal by reason of redundancy and the failure to renew the contract before the expiry of the original contract or within four weeks of the termination date. 

The case means that once employees on a series of fixed term contracts have the necessary two years' service they will be entitled to a statutory redundancy payment on the expiry of their fixed term contract. However, a redundancy payment will break the employee's continuity of employment. 

Despite the Pfaffinger decision, unless a new contract is offered on less favourable terms than the existing one, employees and those advising them will opt to preserve continuity of employment and the rights that brings rather than press for a redundancy payment and start the two year period running again.

Bullying can be sex harassment

Pethrick and Dobbin v Denholm Ship Management (UK) Limited and McNiven(unreported, Industrial Tribunal, Glasgow 16 September 1996) 

A man who bullied a female colleague was guilty of sex harassment, an Industrial Tribunal has found. The woman suffered persistent ridicule, abuse, was deliberately bumped into and stared at. 

The tribunal concluded this was unwanted conduct which affected her dignity at work and amounted to sex harassment. The fact that there was no sexual motive did not prevent this conclusion. 

The tribunal identified the employee's gender as the important critical factor in the treatment she received. It relied on a pattern of behaviour in relation to other female employees and that the nature of the treatment was of a type to which a woman was more vulnerable than a man.

The sex discrimination test is whether the less favourable treatment is on grounds of gender. 

The case, in which Thompsons were instructed by the Equal Opportunities Commission, demonstrates that there are remedies available to deal with bullying in the workplace.

The employers were criticised for failing to treat the allegations sufficiently seriously, or to treat the allegations as an issue of sex harassment. The employers were also criticised for failing to follow the principles of the European Commission Code of Practice on Measures to Combat Sexual Harassment. 

The employer had failed to do enough to protect the employee and stop the offending behaviour. The employer was held liable to pay two-thirds of the compensation, with the remaining third being paid by the man. 

The case should serve as a general warning to employers. They face proceedings unless they adopt and operate proper equal opportunities procedures and treat allegations of sex harassment seriously. 

The outcome is an important reminder that sex harassment does not mean harassment with a sexual motive. Bullying, intimidation, abuse, ridicule or unwanted physical contact directed at those of one gender, may all amount to unlawful sex discrimination if similar treatment would not have been meted out to those of the other gender, whatever the sex of the person responsible for the unlawful behaviour. It remains illogical that an employer who treats all employees equally badly may escape liability.

Industrial pressure or industrial action?

Knowles v FBU (unreported, Court of Appeal 31 July 1996) 

The Fire Brigade's Union policy of opposing full-time firefighters enrolling for additional duties as retained firefighters does not amount to industrial action, the Court of Appeal has held. The appeal court stopped short of giving a definition of industrial action, but gave a helpful pointer on the dividing line between industrial pressure and industrial action. 

The case was brought by two members disciplined for breaking the FBU policy which, they argued, amounted to unlawful industrial action because there had been no ballot. The appeal court, backing an earlier Employment Appeal Tribunal decision, reported in Issue 1 of LELR (see What is industrial action?), held that although the policy required workers not to undertake additional work under new contracts, it did not involve workers breaking their contracts of employment. 

Employers may have felt under pressure as a result of the policy, and inhibited in their actions as a result, but pressure plus inhibition is not enough to constitute industrial action. It did not even amount to a threat of industrial action.

Part-time pensions appeal fast tracked

The Court of Appeal has agreed to fast track the part-time workers' pension rights appeal case, Preston and others v Wolverhampton Health Care NHS Trust, Secretary of State for Health and others [1996] IRLR 484, reported in Issue 2 of LELR (see Time's up at six months).

The appeal will now be heard this autumn when the court will consider whether to refer the issue directly to the European Court of Justice - a possibility made more likely by the Employment Appeal Tribunal's decision in Levez, reported in Issue 3 of LELR (see Equal pay compensation: how far back can you go?).