The claimant worked for a not-for-profit organisation. She refused to accept a 4% pay cut despite all her other colleagues accepting it. She brought a claim of unlawful deductions to the ET which the respondent had compromised by paying the shortfall. She was dismissed a few months later to avoid the respondent's continuing liability for unlawful deductions and was offered a new contract on the reduced rate. The claimant rejected the new contract and brought a claim of unfair dismissal to the ET. She claimed that the dismissal was automatically unfair because the reason for dismissal was for bringing an unlawful deductions claim. In the alternative, the dismissal was unfair because there were many other ways open to the respondent to save money other than staff pay cuts. The ET dismissed her claim and the claimant appealed.

The EAT allowed the appeal. The ET had not explained why it had rejected the claim. There was no mention at all of the automatic unfair dismissal claim or s104 REA 1996. There was no mention of reasons for rejecting the case based on other ways of saving money. The ET had merely decided the dismissal was fair because everyone else had accepted the pay cut. 
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Appeal No. UKEAT/0444/12/KN

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

At the Tribunal

On 5 March 2013

Before

MR RECORDER LUBA QC; MRS R CHAPMAN; MRS L S TINSLEY

KELLY (APPELLANT)

FYLDE COMMUNITY LINK LTD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR MATTHEW JACKSON (Representative)

Free Representation Unit

For the Respondent
MR DAVID BALL (of Counsel)

Instructed by:
SAS Daniels LLP
30 Greek Street
Stockpor
Cheshire
SK3 8AD

UNFAIR DISMISSAL – Procedural fairness/automatically unfair dismissal

Unfair Dismissal (UD) claim. Claimant dismissed for refusal to accept a 4 per cent pay cut which had been accepted by all other staff of the not for profit employer. Claimant had earlier brought a claim for unlawful deduction of the 4 per cent which the employer had compromised by paying the shortfall. Dismissal to avoid continuing liability for unauthorised deduction. New contract offered on the reduced rate. Claimant rejects that offer and brings UD claim alleging: (1) automatic UD because dismissal was for bringing unlawful deduction claim, and/or (2) ordinary UD because dismissal unfair – many other ways open to employer to reduce expenditure other than staff pay cuts.

Employment Tribunal rejects claim but does not explain why. No mention at all of auto UD claim or s104 ERA 1996. No mention of reasons for rejecting case based on other ways of saving money. ET simply thought it "fair" to dismiss because all other staff had accepted the cut. Clear reasons challenge. Remit to another ET.

1. This is an appeal from the Judgment of the Employment Tribunal at Manchester, (Employment Judge Hewitt and members). Following a hearing on 6 January 2012, that Employment Tribunal unanimously dismissed a claim for unfair dismissal brought by Mrs Kelly against her former employers, Fylde Community Link Ltd. In addition to the substantive appeal from that Judgment, we are also required to deal with an appeal against an order of the Registrar of this Employment Appeal Tribunal refusing an application for permission to amend Mrs Kelly's Notice of Appeal.

1. The employers are a not for profit organisation providing accommodation and support to vulnerable individuals. They have about 150 staff. Between 3 October 1994 and 31 May 2011 they employed Mrs Kelly as a community support worker. At a board meeting on 6 December 2010 the employers decided that they needed to make savings in expenditure. They decided to write to all the staff inviting them to accept a 4 per cent pay reduction. The chief executive, Mr Stokes, wrote to all staff communicating the board's decision. His letter included this: "Changes in pay are not a trivial matter, nor can they be imposed by an employer".

1. By 11 January 2011 all of the employees except Mrs Kelly had consented to the proposed reduction in their pay. On the next day – that is to say, 12 January 2011 – the chief executive wrote a letter to Mrs Kelly that included this passage:

"If, therefore, you remain firm in your decision not to consent, I am left in the position of having to inform you that the change in your terms and conditions of employment will take effect as from Sunday 16th January 2011 whether you agree to the change or not."

1. Indeed, from 16 January 2011 Mrs Kelly's pay was reduced by 4 per cent in accord with that notification.

1. On 10 February 2011 Mrs Kelly, who by then had sadly suffered a heart attack and was on sick leave, raised a grievance about the deduction from her pay. Her grievance was rejected in March 2011, and an internal appeal was dismissed. On 4 April 2011 Mrs Kelly initiated a claim with the Employment Tribunal asserting that there had been unlawful deductions by the employers from her pay. It appears that among her complaints was one concerning the 4 per cent deduction that had been operating since 16 January 2011.

1. On 31 May 2011, following a meeting between Mrs Kelly and the chief executive, she was dismissed. She was offered a new contract of employment to commence with immediate effect and backdated to give her continuity of service from 1994 but at the reduced rate of pay. Mrs Kelly, having been dismissed, refused the offer of the alternative terms and instead pursued an internal appeal against the decision to dismiss her; that appeal also failed.

1. In due course the Employment Tribunal, seized of the deduction of pay claim, delivered a reserved Judgment on 18 July 2011. Its Judgment concerns an unlawful deduction in sick pay, but in the course of the Judgment the Tribunal explained what had happened to the claim in respect of the reduction of 4 per cent. The Judgment reads at paragraph 8:

"In January 2011 the Claimant suffered a heart attack and has been off work ever since. Also in January 2011 the Respondent reduced the salaries of all its employees by 4 per cent because it lost a core grant. All of the 148 members of staff except for the Claimant agreed to the reduction. The Respondent accepts that the adjustment to the Claimant's pay may not have been contractually permitted and has now attempted to reimburse her for the £39.77 which had been deducted."

1. Against that background, it is understandable why the Employment Tribunal on that occasion did not make any order in relation to the deduction of 4 per cent of pay.

1. Mrs Kelly brought a claim of unfair dismissal to the Employment Tribunals Service. At paragraph 11 of the claim form she wrote:

"On 31st May 2011 the Claimant attended a meeting at which she was dismissed on the basis that she would not accept the new terms and conditions of employment."

1. Her claim form put her claim for unfair dismissal in two alternative ways. They are explained in paragraphs 16 and 17 of her claim form. They read:

"16. […] the Claimant submits that, inter alia, her dismissal was unfair on the basis that the proposed cut in her salary of 4% was unreasonable and inappropriate.

17. In the alternative, the Claimant submits that she was dismissed for asserting a statutory right"

1. The remainder of paragraph 17 then sets out that the relevant assertion of a statutory right was the assertion that there had been an unlawful deduction of wages about which she had brought the earlier claim.

1. By their response form, the employers joined issue with the case as put. They wrote:

"It is entirely clear that the Claimant was dismissed as a direct consequence of not accepting the proposed changes to her terms and conditions of employment; it is not the case that she was dismissed for any other reason or for asserting a statutory right."

1. The same two alternative bases of the claim were set out by Mrs Kelly in her witness statement at paragraphs 23 25, albeit that the ordering of the alternatives had been reversed. In her witness statement she recounts at some length the other ways in which she believed that expenditure could have been reduced by her employers and gives her account of the history of what, in her view, had been attempts by the employers over a number of years to change her terms and conditions of employment.

1. The Employment Tribunal heard evidence from Mrs Kelly and another witness on her behalf. It heard from the chief executive of the employers and the chairman of the employers board. The structure of its Judgment is that it sets out the factual background at section 5, it reproduces the terms of section 98 of the Employment Rights Act 1996 (ERA) in section 6, and it states its reasoning and conclusions in section 7. In that latter section, it first extracts paragraphs 23 25 of Mrs Kelly's witness statement, to which we have already referred, and it then sets out its reasoning in three short paragraphs, 7.2 7.4:

"7.2 The Tribunal unanimously rejects the claimant's arguments. Whether willingly or reluctantly, every one of the claimant's colleagues eventually accepted the respondent's proposed pay cut, recognising the reality of the situation and that the alterative outcome might have been far worse.

7.3 The new terms offered to all existing employers (the claimant included) and accepted by all but the claimant, provided for continuity of service from their original start date.

7.4 As recorded in (5.25) above, the claimant concedes that with the benefit of hindsight she should have accepted the new terms and conditions and, further, that had she done so and had the respondent continued to employ any single individual on the old pay terms, that would have been manifestly unfair."

1. By a Notice of Appeal filed on 18 May 2012 Mrs Kelly initiated her appeal to this Employment Appeal Tribunal. Her complaints about the Judgment are set out, unusually, in two separate parts of her Notice of Appeal. Firstly, in paragraph 3, which is the usual place for simply identifying the Judgment appealed against, Mrs Kelly wrote this:

"The Judgement failed to protect the appellant against unlawful deductions from wages which should have caused her dismissal to be automatically unfair.

The appellant asserts that credence wasn't given regarding her claim at page 7 (7.1) of the reasons document."

1. Then, under paragraph 7 of the Notice of Appeal, which is the place in which to record the grounds, Mrs Kelly has written the following, amongst other material:

"If the appellant had signed the contract which was offered to her in May 2011 her original contract would have been void and therefore she would have suffered an unlawful deduction from wages.

When the appellant was dismissed on the 31st May 2011 she was still entitled to a further six months wages [sic] at half pay, again this results in a further monetary loss which should have resulted in a Judgement of automatic unfair dismissal."

1. The thrust of that Notice of Appeal was that there had been a failure by the Employment Tribunal to address at least part of the claim that the Claimant had advanced before it; in particular, that is, the claim of automatically unfair dismissal. That is certainly how it appeared to the Judge of this Employment Appeal Tribunal who conducted the sift of the Notice of Appeal. He wrote, when giving directions for a full hearing:

"The issue is whether in paragraph 7 the Employment Tribunal dealt with (or dealt properly and adequately with) the claim for automatically unfair dismissal."

1. The matter having been put through to a full hearing, the employers joined issue with the appeal in an Answer delivered in September 2012, and the matter was set down for hearing today.

1. In November 2012 the Free Representation Unit accepted instructions to act for Mrs Kelly in the appeal. By letter dated 4 December 2012 Mr Jackson, of the Unit, applied on Mrs Kelly's behalf for permission to amend the Notice of Appeal. Such applications are governed by the Employment Appeal Tribunal's Practice Direction, and in particular there are specific requirements in paragraphs 2.7 and 9.4. Paragraph 2.7 reads:

"A party cannot reserve a right to amend, alter or add to a Notice of Appeal […]. Any application for permission to amend must be made as soon as practicable and must be accompanied by a draft of the amended Notice of Appeal […] which makes clear the precise amendments for which permission is sought."

1. Paragraph 9.4 provides that:

"An application to amend a Notice of Appeal […] must include the text of the original document, with any changes clearly marked and identifiable, for example with deletions struck through in red or the text of the amendment either written or underlined in red."

1. Faithful to those requirements, Mr Jackson submitted a version of the amended Notice of Appeal showing the amendments and, additionally, a clean copy showing the result should the amendments be allowed. The proposed amendments struck through all of the parts of the Notice of Appeal to which we have already referred and replaced them with two new grounds. Those grounds were as follows:

"i. The Employment Tribunal failed to have regard to the correct burden of proof in a case of automatically unfair dismissal; and

ii. The Employment Tribunal in giving reasons for its decision failed to adhere to the standard set out in Meek v Birmingham City Council [1987] IRLR 250."

1. That application to amend was opposed in writing by the employers and was ultimately refused by order of the Registrar. From the Registrar's decision Mrs Kelly exercises her right to appeal to a Judge of the Employment Appeal Tribunal. In accordance with the powers given by Employment Appeal Tribunal Rules rule 21(1), the appeal has been referred to this full Employment Appeal Tribunal for determination. Both parties are agreed that this appeal – that is to say, against the Registrar's order – should proceed by way of review of the criteria for the making of an amendment. On that basis, both parties took us through the matters identified in paragraph 86 of the Judgment of this Tribunal given in Khudados v Legate [2005] ICR 1013. We do not need to recite the familiar criteria listed in that paragraph which are described therein as being "among the matters to be taken into account in determining whether or not an amendment should be allowed". We have the benefit of submissions from both parties on each of the criteria. For Mrs Kelly, it was said that: (1) the application to amend had been made well in advance of the final hearing (it had been made in December 2012) and (2) no surprise could have been experienced by the Respondent, therefore, when it came to be adjudicated upon in March 2013. Moreover, that there was no substantive prejudice to the Respondent but there would be prejudice to Mrs Kelly if the amendment were not permitted. It was further submitted that the points taken by way of the Amended Grounds of Appeal essentially emerge from the original Notice of Appeal and were simply a recasting of them in legal language.

1. For the employers, Mr Ball submitted that the application should be refused. It had been made late; it should have been made as soon as reasonable practicable. No explanation had been given in evidence (as opposed to submissions) as to why it had taken until December 2012 to submit the application. The burden as to explaining the delay fell on Mrs Kelly, and it was unexplained. Further, and in any event, there was not in truth an amendment but a wholesale attempt to replace one Notice of Appeal with a wholly unrelated set of grounds in a new Notice of Appeal. There was in this scenario prejudice to the Respondent and success with the application to amend would effectively and unfairly avoid the EAT's 'sift' mechanism that a new Notice of Appeal would normally be subjected to in order to discover whether it contained reasonable grounds.

1. We have had careful regard to the matters raised on each side in those submissions. The Registrar dismissed the application essentially for the reasons given by the employers. She considered that the new Notice of Appeal was in substance a wholly new appeal, being brought out of time, and to permit it would circumvent the sift mechanism. We have carefully considered the reasons that she gave. However, we have considered the matter afresh. We have reviewed all of the factors identified in the Khudados decision. The application to amend should, in our judgment, be taken in two parts. First, the new ground relating to the burden of proof. In our judgment, this application is made late without explanation. It does not emerge from the Notice of Appeal as originally drawn. It is, in truth, a wholly new point. Moreover, we have had to consider whether it is reasonably arguable that the Tribunal did err in relation to the burden of proof. We are not satisfied that it is reasonably arguable. The application of that criteria applies the safeguard that the 'sift' would otherwise provide. It makes good that safeguard by applying the test that an amendment must only be permitted, or usually only be permitted, where a new point is reasonably arguable. For all those reasons, in the exercise of our discretion, having regard to the overriding objective as well as the criteria in Khudados, we will not permit the amendment in relation to the burden of proof.

1. However, the position is quite different in relation to the second ground of appeal, which is the Meek point. This too was made late, but it is essentially the same point being made in the original Notice of Appeal. In that original Notice, as we have indicated, Mrs Kelly criticises the Employment Tribunal for failing to grapple with the case as put to it, especially on automatic unfair dismissal. The reformulation in the new ground of appeal is precisely that. Although it is made late, it causes no prejudice to the Respondent. We will therefore allow that amendment, but we allow it only in the sense of a true amendment; that is to say, we will allow the new ground to be added to the original Notice of Appeal.

1. We turn now to the substantive challenge to the Employment Tribunal's Judgment and order. Mr Jackson, for Mrs Kelly, submitted that this is a Judgment from which the Claimant could not see why her claim had failed. In those circumstances, Mr Jackson submitted, there had been a failure to comply with the most basic of the requirements in relation to the giving of reasons as explained by the Court of Appeal in the case of Meek. Mr Jackson took us to the familiar terms of the Judgment of Bingham LJ and in particular the stipulation in paragraph 8 of his Judgment that it by the statement of Reasons or Judgment a party has to be "told why they have won or lost". Mr Jackson asserted that there was a complete failure here to address the Claimant's case on one limb of her claim; that is to say, automatic unfair dismissal. He submits that the Judgment simply does not say why the Tribunal rejected that part of her case. There is no indication whether the decision to reject the case was based on a preference for other oral evidence as opposed to her oral evidence, whether her case was found to be inconsistent with the contemporaneous documents, or whether it was inconsistent with the chronology of events.

1. As to the alternative case – that is to say, the ordinary unfair dismissal case – Mr Jackson submits that the Tribunal does not begin to say why it rejected her case that the dismissal was unfair because savings could have otherwise been made than by the salary reduction or her case that the new terms and conditions went beyond a salary reduction and represented wholly different terms and conditions altogether. Mr Jackson did not submit this was a case in which the employer could not have had a substantial reason for dismissal or that the Claimant must have succeeded in her claim. What he submits is that the essentials of her case were simply not addressed by the Tribunal in the Judgment delivered. In his submission, it is plain from reading the Tribunal's Judgment that the Employment Tribunal moved in a fast forward sense to a finding that what the employers had done in the round was fair. He says that the Claimant is entitled to have identified in the Tribunal's Judgment exactly what the Tribunal found the employer's reason for dismissal really was. In support of that submission he took us to the Judgment in British Railways Board v Jackson [1994] IRLR 235 at [26]. In short, Mr Jackson submitted, the Employment Tribunal did not say why, despite the points raised by Mrs Kelly, it found her dismissal to be fair, and he posed the question rhetorically, "did they reject her case on evidence or law, or both?" The reasons why the claim failed, he submitted, remain a mystery.

1. For his part, Mr Ball supported the Judgment of the Tribunal and contended that adequate reasons had been given. As to adequacy, he took us to the standards as set out in two cases: the Court of Appeal decisions in Martin v Glynwed Distribution Ltd [1983] ICR 511 at page 520; and [Fuller v London Borough of Brent]() [2011] ICR 806 at paragraph [34]. In his submission, the Tribunal had given a Judgment sufficient to comply with those indicia of what would be adequate reasoning. He accepted that the Claimant's case had been put in two alternative ways, but he submitted that at the outset of section 7 of their Judgment the Employment Tribunal had set both of them out and unanimously rejected them. He submitted that the answer to the question why each of the alternative claims had been rejected may not have been spelt out in terms, but they did not need to be, because it was implicit from the wording in section 7 of the Tribunal's Judgment why the claims had been rejected. As he put it, the Tribunal had found that it was fair to dismiss when all other staff, after a process of consultation, had agreed to the variation in pay. Further, the Claimant herself had conceded, as the Employment Tribunal found, that with the benefit of hindsight she too might have agreed to the 4 per cent reduction.

1. In our judgment, the decision of this Employment Tribunal must be set aside. That is because the Judgment delivered simply does not meet the requirement to give sufficient reasons for the Claimant to know why it was that her claim failed. We broadly accept the thrust of Mr Jackson's submissions.

1. The first logical question for the Tribunal was: what was the reason, or principal reason, for the dismissal? That had been in hot contention. On the employer's case, they had dismissed Mrs Kelly because she would not accept a unilateral variation in her contract of employment reducing her pay by 4 per cent. On Mrs Kelly's case, she was dismissed in whole or in part because she had brought a claim to the Employment Tribunal for, among other matters, the unlawful deduction of 4 per cent from her pay from January 2011. Which did the Employment Tribunal find was the reason for dismissal, or did they find an alternative reason? We cannot be sure. The burden was on the employer to establish the reason. If it was established, it was for the Employment Tribunal to say what it was, i.e. to identify it. As Mr Ball reminded us, that may not be an essential requirement in every case, i.e. to spell out the reason for dismissal, but here it was to be the answer to the central question: why exactly was the Claimant dismissed? If the reason was for a refusal to agree to new terms and conditions of employment, what nature of reason was that? Was a refusal to agree new terms a reason falling within section 98 of the ERA 1996, on the basis that it was within sub section (2), such as "conduct", or was it "some other substantial reason" of a kind such as to justify the dismissal (falling within section 98(1)(b))? Again, reading the Judgment, one simply does not know.

1. Remarkably, in a case in which the Claimant was plainly raising the contention of automatic unfair dismissal, the Employment Tribunal failed to identify or set out the relevant provision – that is to say, section 104 of the ERA 1996 – or to identify which limb of that statutory provision the Claimant was relying on. It does not deal at all with the outcome of the earlier Employment Tribunal proceedings. In our judgment, the Tribunal has simply not addressed the case on the automatically unfair dismissal at all. If they were addressing it, they have not explained why it was rejected.

1. In relation to the fairness of the dismissal, the plain case that the Claimant was putting was that even if the only reason for her dismissal was to implement necessary expenditure savings – and Mr Jackson in the course of his submissions conceded that that might amount to "some other substantial reason" – she was contending that it was not fair to have dismissed for that reason because there were other ways in which the money could have been saved. That vital contention, forming a significant part of the Claimant's case, is simply not addressed at all. Plainly, it failed, but the Employment Tribunal does not explain why.

1. For those reasons, this appeal succeeds on, essentially, a Reasons point.

1. What then follows? We have considered whether this is the class of case in which the matter can be remitted to the same Tribunal for reconsideration. However, we accept Mr Jackson's submission that it is plain from the terms of the Judgment actually delivered that this Tribunal had quickly moved to the end stage of an analysis of this case and they had decided that the outcome had done justice as between the Claimant, the employer and other employees. It would be unfair to remit to a Tribunal that had formed such a plain view of the proper outcome. For all those reasons, we remit the Claimant's claim for unfair dismissal for consideration by a fresh Employment Tribunal.