Employment Cases Update

Zebrowski v Concentric Birmingham Ltd UKEAT/0245/16/DA

Date published: 13/03/2017

Appeal against the calculation of the Claimant's compensation in respect of a Polkey deduction that was applied. Appeal allowed and remitted to the ET for it to explain, before assessing the appropriate compensation, which calculation option it had chosen and for it then to assess that compensation accordingly.

The Claimant won his claim for constructive unfair dismissal at the ET. The ET went on to apply a Polkey reduction to the compensation, saying:

"...if a fair procedure had been followed by the respondent there was a 60% chance that the parties would have been unable to resolve the issues relating to the claimant's health concerns and his working environment and that the claimant's employment would in any event have terminated fairly by way of resignation/dismissal within two months."

The Claimant appealed on the basis that the approach taken by the ET was ambiguous.

The EAT allowed the appeal, agreeing that the approach of the ET on the Polkey issue was ambiguous. Once the ET had found that there was a 60% chance that the Claimant would have been dismissed if the Respondent had gone about matters properly, it was not open to the ET to seek to limit the Claimant's compensation to the two-month period it appears to have found it would have taken to conduct a fair process.  This is because the ET did not expressly find here that there was a 100% chance that the Claimant would have been dismissed after two months.

The EAT also provided a useful summary of the various options open to the ET to calculate a Polkey deduction. The ET could either:

  • compensate the Claimant fully for a certain period (subject to mitigation) and after that to reduce his compensation by a percentage, but only where the ET is 100 per cent confident that dismissal would have occurred within that period; or
  • reduce his compensation by a percentage throughout.

What an ET cannot do is limit the period of compensation AND apply a percentage reduction to the compensation during that period.

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Appeal No. UKEAT/0245/16/DA

EMPLOYMENT APPEAL TRIBUNAL

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

At the Tribunal

On 31 January 2017

Before

THE HONOURABLE MRS JUSTICE ELISABETH LAING DBE

(SITTING ALONE)

ZEBROWSKI (APPELLANT)

CONCENTRIC BIRMINGHAM LTD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellant
MR JAMES DIXON (of Counsel)
Free Representation Unit

For the Respondent
MR JONATHAN MEICHEN (of Counsel)
Instructed by:
Browne Jacobson LLP
Victoria Square House
Victoria Square
Birmingham
West Midlands
B2 4BU

SUMMARY

UNFAIR DISMISSAL - Compensation

UNFAIR DISMISSAL - Polkey deduction

The Employment Appeal Tribunal ("the EAT") allowed an appeal from the Employment Tribunal ("the ET"). The ET held that the Claimant had been constructively dismissed. The EAT held that paragraph 169 of the ET's Judgment, in which it decided its approach to the compensation which it would award the Claimant, was ambiguous. The ET held that there was a 60 per cent chance that the Claimant would have been dismissed after a fair procedure. The EAT held that, in that situation, it was not open to the ET to limit the Claimant's compensation to the losses suffered in the two months after dismissal, because the ET was not, on its own findings, 100 per cent confident that the Claimant would have been dismissed after a fair procedure. It would have been open to the ET either, to compensate the Claimant fully for two months (subject to mitigation) and after that to reduce his compensation by 60 per cent, or to reduce his compensation by 60 per cent throughout. The EAT remitted the case to the ET for it to explain, before assessing the appropriate compensation, which of those two options it had decided on at paragraph 169 of its Judgment and for it then to assess that compensation accordingly.

THE HONOURABLE MRS JUSTICE ELISABETH LAING DBE

Introduction

1. This is an appeal from a Decision of the Employment Tribunal ("the ET") sitting at Birmingham. The ET consisted of Employment Judge Goraj, Dr B Tirohl and Mr P Hemming. In a Decision sent to the parties on 6 May 2016 the ET dismissed the Claimant's claims of detriment pursuant to section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 ("the 1992 Act") and section 44 of the Employment Rights Act 1996 ("the 1996 Act") and his claim that he had been constructively dismissed contrary to section 152 of the 1992 Act and section 100 of the 1996 Act. The ET held that the Claimant had been constructively dismissed pursuant to section 95(1) of the 1996 Act and that that dismissal was unfair pursuant to section 98 of the 1996 Act. The ET held, as the formal Decision records, that the compensatory award should be reduced by 60 per cent pursuant to section 123(1) of the 1996 Act. It did not hold in the formally recorded part of the Decision that the Claimant's compensation should be limited to compensation for two months.

2. The Claimant appealed, representing himself. He said that there seemed to be a contradiction between paragraph 4 of the Judgment (the reduction of the compensation by 60 per cent) and the reasoning at paragraph 169 (which referred to a 60 per cent chance that the employment would not have continued beyond two months had a fair procedure been followed). The two approaches were not the same; that was his ground 1. In any event, he said, the finding of the ET that there was a 60 per cent chance that the parties would not have been able to resolve the issues and thus that the appropriate period of compensation was two months was wrong. First, its premise was that the only flaw in the dismissal was that a fair procedure had not been carried out, yet, he said, the ET had found that the dismissal was substantively unfair. The logic of that was that the Claimant was entitled to resign when he did and was not obliged to engage further with the Respondent. The usual position in relation to compensation should have applied. Alternatively, he said, the ET had not explained why two months was the appropriate period; this was his ground 2.

3. On the paper sift HHJ David Richardson ordered that there be a Full Hearing of the appeal. He said that all the Polkey v A E Dayton Services Ltd [1988] ICR 142 HL grounds were arguable. He said that the ET had held that the Claimant was entitled to resign because the Respondent had not done a risk assessment of the Claimant's health. There was an issue whether the ET's approach in finding that the Respondent would have taken those steps starting in February 2015 was correct; when the Respondent had not taken those steps, then the Claimant had resigned as a result. HHJ David Richardson said that this was not a straightforward topic.

4. On this appeal the Claimant has been represented by Mr Dixon and the Respondent by Mr Meichen, both of counsel. They both appeared below. I thank them both for their helpful written and oral arguments. I shall refer to the parties as they were below. Paragraph references in this Judgment are to the ET's Judgment unless I say otherwise.

The Facts Taken from the ET's Judgment

5. The Claimant was employed by the Respondent from 7 December 2009 until 24 April 2015. There was little dispute about the facts (see paragraph 12). The Respondent runs a specialist fluid engineering business. It makes fuel and water pumps at its premises in Birmingham. The Claimant was employed there. The Respondent employed 220 employees. Of the 95 shop floor employees, 30 to 40 - including the Claimant - were grade 2. Such employees were required to move between production cells. The Claimant had not objected to that in the past. The ET made detailed findings about health and safety matters (see paragraphs 17 to 21) and about policies and procedures (see paragraphs 22 to 24). It referred in paragraph 25 to the removal and replacement of part of the factory roof between April 2011 and September 2012. The roof contained asbestos. This had been done by a specialist company during shutdown periods.

6. The Claimant is from Poland. He had obtained a degree there. He has a good understanding of day-to-day English. His computer skills, however, were limited. He did not know how to get access to the Respondent's shared drive. He did not tell the Respondent about this at the time. In November 2013 he joined the GMB union. At the end of February 2014 he was elected to be their health and safety and welfare representative. He went on a ten-day induction course, and the Respondent paid his salary during the course.

7. At paragraphs 30 to 36 the ET recounted events between 2011 and 2013. The Claimant felt tired and had a bad cough in 2011. He saw the Respondent's specialist Occupational Health physician, Dr McVittie. Dr McVittie sent the Claimant to his GP for inhaler therapy. He did not recommend any workplace restrictions. The Claimant asked to be moved from the clean room in November 2011 because he said it was making him ill. The Respondent did not accept that that was so but transferred him to a different cell, Group 20 machining. That job was more complicated. So the Respondent organised training for the Claimant, including health and safety training. Dr McVittie saw the Claimant again. He wrote to the Respondent in December 2011 to say that the Claimant's chest had cleared up. Dr McVittie said that he was aware that the Claimant wore a dust mask but he did not consider that any adjustments were necessary. He suggested that the air in the clean room could be monitored, though he did not think that there was an environmental problem.

8. The Claimant was transferred to a new cell in November 2012. The Respondent did not consider that masks were necessary, because its daily assessments indicated low levels of airborne contaminants. The Claimant had a further test in January 2013, which suggested mild obstruction of his airways. He went to his GP and to a clinic. He was referred to a GP who was a respiratory specialist. This doctor, Dr Ramachandran, said that the Claimant seemed fit and healthy and had a normal X-ray. The spirometry test was essentially normal. Nonetheless, the Claimant had a chronic intermittent cough and might have had asthma with an occupational element. It seemed to have improved since he had moved out of the fuel testing area.

9. Dr Ramachandran reviewed the Claimant in July 2013. His view was that the Claimant might have been exposed to fumes which had sensitised him or caused bronchial hyperactivity. This seemed largely to have settled. He thought that many of the earlier problems had been resolved with better ventilation. He was happy to discharge the Claimant into the care of his GP but equally happy to investigate if the Claimant had more symptoms.

10. The Claimant was absent during 2013 with tiredness and shortness of breath. He had counselling under the Respondent's absence procedure. He received a warning and did not appeal against it. He was reviewed at a chest clinic in November 2013 and January 2014. The chest X-ray was clear, but there was mild obstructive spirometry. The Claimant was discharged from the clinic as there were no active issues.

11. When he was on holiday in Poland in 2014, the Claimant found blood in his phlegm. He was admitted to hospital for tests. Small infectious changes to his mucous membranes were found and a slight lower airway obstruction. He was prescribed an inhaler. The ET found that around April 2014 the Claimant told Mr Smith and Mr Palmer that he had been diagnosed with asthma and the Claimant asked Mr Smith to see a company doctor and repeated that request in an email dated 9 June 2014. The ET was not satisfied, however, that the Claimant had showed the Polish hospital report to the Respondent or that Mr Smith had said to the Claimant that he had psychological issues.

12. The Claimant went to a health and safety committee meeting on 11 June 2014. The Claimant said that the air in the factory was polluted and caused people to suffer from asthma. Mr Palmer said that the audit report showed that the air was extremely good but the Claimant was welcome to see the company doctor. The Claimant was reviewed by an Occupational Health practitioner, not a doctor, on 25 June 2014. The tests administered showed that the Claimant's airways were mildly obstructed; the Claimant might have a mild form of asthma. There is no evidence, the ET said, that the Respondent took any action in response to this.

13. At paragraphs 49 to 51 the ET dealt with later health and safety matters. The Claimant and a fellow trade union representative sent the Respondent a letter about various health and safety issues, including air pollution and asbestos from the roof, on 16 June 2014. The Respondent replied on 17 June 2014. The letter responded to concerns and said that information was available on the Respondent's shared drive. There was further correspondence and a request for a meeting. Mr Palmer asked them how they would like to receive information, and he said that his door was always open. On 21 August 2014 Mr Palmer met the Claimant and two other trade union representatives. Mr Palmer took notes. The ET was satisfied that those were brief but accurate. The Claimant asked for information, and Mr Palmer said that apart from confidential information and accident reports the Claimant could have what he liked and most of it was available on the shared drive to which the Claimant had access. The ET did not accept that Mr Palmer had said in the meeting that asbestos had been removed from the roof while employees were present in the factory.

14. Two working days after that meeting, on 26 August, the Respondent transferred the Claimant to the clean room. There was a dispute about what was said about this transfer. The ET were satisfied that Mr Smith told the Claimant he was being transferred because he had caused problems over a manual handling issue and that that was the reason for his transfer (paragraph 61). The ET accepted that the Claimant was distressed by the Respondent's actions and comments on 26 August 2014. The ET accepted that Mr Faulkner warned the Claimant on 27 August to keep a low profile or he would get the sack. The ET was not satisfied that Mr Faulkner, however, had made that comment on behalf of Mr Palmer. The Claimant went to his GP in September 2014. He had problems at work, and his asthma was getting worse. He was given medication. The ET rejected the Claimant's evidence that there were problems getting masks at work. The ET found that they were readily available from 2013 onwards.

15. The Claimant was signed off work with stress on 19 September 2014. On 22 September he handed a sicknote to Mr Storer. The ET rejected the Claimant's evidence about the comments made by Mr Storer when he was given the sicknote. The Claimant was referred for six sessions of stress control between October and December. He was off work with stress until the end of his employment, in April 2015.

16. On 27 November 2014 the Claimant sent a grievance letter to the Respondent. The Claimant said that the Respondent was in breach of its statutory duty to provide a safe working environment and protect him from harassment, he had developed a breathing problem in 2011 and the Respondent had not provided him with health and safety information including risk assessments and had subjected him to a detriment, including transfer, threat of dismissal and harassing comments from senior employees who knew about the Claimant's father's mental illness.

17. The Claimant went to an investigatory meeting on 11 December 2014 with Mrs Smart. She investigated and concluded that employees did not intend any comments that would upset the Claimant. There were no grounds to conclude that the Claimant could reasonably have felt harassed. She decided that any problems with access to computers were because the Claimant had failed to comply with the Respondent's procedures for such access. The Respondent had a meeting on 15 January to discuss the Claimant's grievance. The Respondent's notes, the ET held, were broadly accurate. Mr Storer said that the Respondent was keen for the Claimant to get back to work as soon as possible. The Claimant said if he was satisfied with the response to his grievance he would return to work. The focus was on an allegation that the Claimant had not been provided with information. The Claimant did not at that point say that he did not know how to get access to the Respondent's computer records. Mr Palmer said he would print off whatever the Claimant wanted and that his door was always open. It was agreed that the meeting should be adjourned for the Claimant to review the information that he needed.

18. The Claimant had an appointment at the chest clinic on 11 February 2015. The Claimant accepted that he had received hard copies of the information for which he had asked in February 2015. On 25 February he emailed Mrs Smart. He was seen by Dr Robertson, a consultant in occupational lung diseases, at the Birmingham Chest Clinic. Dr Robertson had said that the Claimant had occupational asthma caused by working with metalworking fluids and by breathing in oil mist. The Claimant thought after reading the documents that his manager should have known that there was a high risk of that and that his complaints had been ignored. He said others had been misled about the factory environment and he had been harassed and victimised. He also said that he had not been protected from asbestos. He had been doing grade 4 work for five years but was still on grade 2. He felt discriminated against. He said a legal battle would be costly but if they were able to reach a settlement they would be able to close the case. He sent a further chasing email on 3 March. Mrs Smart apologised for the delay. His case was passed to a higher level of management. The ET rejected Mrs Smart's evidence that she asked for a copy of Dr Robertson's report (paragraph 87).

19. The Claimant continued to submit sick notes about stress. Mrs Smart proposed a reconvened grievance meeting on 16 April. On 20 March the Claimant sent the Respondent a detailed settlement agreement. He said he would settle his claim for £29,000. It was, in the words of the ET, a "legalistic style document" (paragraph 90). The Claimant decided to present himself at the meeting. He made various stipulations about the meeting and complained that the Respondent had breached his confidentiality. Mrs Smart told the Claimant on 15 April that the purpose of the meeting was to discuss what the Claimant had made of the information that Mr Palmer had provided. She denied any breach of his confidentiality. There was no suggestion, the ET said, in the file note that she had asked him to bring Dr Robertson's report to the meeting.

20. The Claimant went to the meeting on 16 April with an interpreter, as he had indicated that he would. The ET were satisfied, again, that the Respondent's notes were broadly accurate, although they were not complete. The ET summarised what happened at paragraph 94. The Claimant said he had read the reports. He could not return to work because of his occupational asthma. He said that the environment was likely to be the reason for his illness; he had told the Respondent about it two years ago, and the Respondent had done nothing. Mr Storer said the meeting was going over old rope; the purpose of the meeting was to conclude the issue, and if the Claimant did not feel safe, the Respondent would take it that the Claimant was resigning, although there was no pressure from the Respondent; and the Respondent took care of its employees and wanted him to return to work. The report showed that the Respondent was within the law. Mr Storer said that he was sorry that the Claimant was ill but what did the Claimant want him to do about it. The Claimant said that the Respondent thought it had done everything within the law but he disagreed. His case was summarised at paragraph 94(6). Mr Storer said the issues in the grievance had been dealt with; there was no pressure on the Claimant to leave, but the Respondent needed to bring matters to a conclusion. There was discussion about the Claimant's occupational asthma and how he could have contracted it if the air was good. Mr Storer said that the Respondent had survey results and complied with regulations and legalisation. Mr Storer said that the Claimant would not want to return to work with the Respondent if he felt this way. The Claimant said he would resign the next day as he disagreed with what the Respondent had said.

21. There was a dispute about whether the Claimant brought to the meeting a letter from Dr Robertson dated 27 February 2015 containing his diagnosis of probable occupational asthma caused by exposure to Castrol oil and later exposure to metalworking fluids. Further investigations could be done, such as serial peak flow recordings during exposure, to see if there was a work-related pattern. Dr Robertson said that the Claimant did not intend to return to be exposed to such substances. Dr Robertson had advised the Claimant to try and avoid working near metalworking fluids. Dr Robertson had advised the Claimant to apply for industrial injuries benefit and about the possibility of a civil claim. The ET accepted that the letter was on the table at the meeting but did not accept that the Claimant had referred in the meeting to its contents.

22. The Claimant resigned by letter dated 17 April 2015, giving one week's notice. He referred to the occupational asthma he had developed and the vindictive behaviour he had been subjected to. He thanked the Respondent for the knowledge he had obtained over the years and wished the company success in the future. Mrs Smart accepted his resignation.

The ET's Analysis

23. The parties presented the ET with a list of issues, which the ET attached to its Judgment. The only reference to compensation in that list was in paragraphs 4 and 5 on page 3 under the heading "The respondent's position". Paragraph 4 said that if the ET found that the Claimant was constructively dismissed the Respondent would argue that the dismissal was fair. The reason relied on was conduct. The conduct was the Claimant's refusal to accept the health and safety information, which showed there was no issue with air pollution or any other health and safety concern at the Respondent's premises. Paragraph 5 said that:

"5. For the same reason the respondent will asked [sic] the tribunal to consider making deductions on Polkey grounds and/or on the basis of section 123(6) of the [1996] Act."

24. At paragraph 112 the ET described the implied term of trust and confidence. At paragraph 113 it said that it had to consider whether the Claimant had shown that (1) there was a fundamental breach of contract by the Respondent, (2) that breach had caused the Claimant to resign, and (3) the Claimant did not delay too long before resigning and so affirmed the contract. The ET said at paragraph 114 that where an employee relied on a course of conduct culminating in a "last straw", the last straw does not have to be a breach of contract though it must contribute to the alleged breach of trust and confidence. The ET considered the detriment claims between paragraphs 116 and 130. It rejected them on the grounds that they were not presented in time. There is no appeal against that aspect of the ET's Judgment. The ET then considered the list of breaches of the implied duty of trust and confidence. It held that many of the allegations were not breaches of that term.

25. It held, however, that the Respondent had failed to take reasonable steps to protect the health and safety of the Claimant in respect of a lack of proper risk assessments after, in particular, the diagnosis of asthma in June 2014 and of probable occupational asthma in February 2015. The ET listed at paragraph 143 four matters that it took into account in particular. These were breach of the implied term of trust and confidence to take reasonable steps to protect the Claimant's health and safety (paragraph 145). The ET described at paragraph 146 the factors that it had taken into account. It noted that the Respondent had made no attempt to investigate whether the Claimant's diagnosis of occupational asthma arose as a result of his work with the Respondent, to ask for a copy of Dr Robertson's report or otherwise to consider whether any adjustments could be made to the Claimant's working environment or to consider it further at the meeting on 16 April. The ET found that those breaches entitled the Claimant to resign, that the Respondent's breaches were one of the principal reasons for the Claimant's resignation and that the Claimant did not affirm the contract. The ET listed the matters that it took into account in reaching that view at paragraph 148.

26. The ET rejected the claim that this position related to the Claimant's health and safety or to his trade union activities (paragraphs 144 and 149). The Respondent's reason for not taking any further steps to protect the Claimant's health was that the Respondent thought that what it had done was adequate (paragraph 149):

"149. … it believed that its independent monitoring and audit reports had confirmed that the respondent had complied with the relevant legislation and that any difficulties experienced by the claimant were unrelated to the claimant's work environment."

27. At paragraphs 164 to 166 the ET considered whether the Claimant's dismissal was not unfair. The ET concluded that the Respondent had failed to show that its reason for dismissing the Claimant was a potentially fair reason for dismissal. The Claimant's dismissal was therefore unfair for the purposes of section 98 of the 1996 Act. The penultimate section of the Judgment is headed, "What would have happened if a fair procedure had been followed". The ET was satisfied that if a fair procedure had been followed the Respondent would have taken various steps after getting the Claimant's email of 25 February 2015 (paragraph 167). These included getting Dr Robertson's report and referring the Claimant to its own Occupational Health provider, who would, after getting the peak flow recordings recommended by Dr Robertson (and with the consent of the Claimant), be asked to make recommendations about what if any changes should be made and who would have sought recommendations from an independent air monitoring company and having undertaken further risk assessments.

28. This procedure might not have resolved the issues. Previous air monitoring reports had not shown any problems. There might have been further disputes about peak flow measurements. The Claimant might have refused to return to the workplace, the Claimant did not identify what further steps might be taken by the Respondent, and the letter from Dr Robertson showed that he had decided to avoid such exposure in his employment (see paragraph 168). At paragraph 169 the ET said this:

"169. Having weighed all of the above, the tribunal is satisfied, on the balance of probabilities, that if a fair procedure had been followed by the respondent there was a 60% chance that the parties would have been unable to resolve the issues relating to the claimant's health concerns and his working environment and that the claimant's employment would in any event have terminated fairly by way of resignation/dismissal within two months (having regard to the time that it would have taken to pursue such further investigations) of the original date of termination (24 April 2015). Any award pursuant to section 123(1) of the [1996] Act should therefore be reduced accordingly."

29. In paragraph 170 the ET decided that it was not appropriate further to reduce the basic or compensatory awards on the grounds of culpable conduct.

The Law

30. Section 123(1) of the 1996 Act provides that an award of compensation should be:

"… such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

31. Section 123(6) provides that where the ET finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such amount as it considers just and equitable having regard to that finding.

32. In Polkey, the House of Lords held in a redundancy case that the question for the industrial tribunal was whether the employer had acted reasonably in treating his reason for dismissal as a sufficient reason not whether the employee would have been dismissed in any event if there had been consultation. If the employee had been dismissed in any event, that was relevant potentially to compensation but not to the fairness of his dismissal. Lord Bridge of Harwich - approving a dictum of Browne-Wilkinson J (as he then was) in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 - said at page 163H that this was not an "'all or nothing' decision". If there was doubt whether or not the employee would have been dismissed, the employee's compensation could be reduced by a percentage representing the chance that the employee would still have lost his employment.

33. In O'Donoghue v Redcar & Cleveland Borough Council [2001] EWCA Civ 701; [2001] IRLR 615 CA, the Appellant's claim of unfair dismissal succeeded. The industrial tribunal, however, held that she would in any event have been dismissed within six months of her actual date of dismissal. The ET considered whether to reduce compensation by a percentage but rejected that approach on the facts. The Appellant's dismissal in that case had been substantively and procedurally unfair. She had not contributed to it and had been discriminated against on the grounds of her sex, and she had been victimised. However, she had had difficulties with her attitude and approach and in getting on with colleagues and, on the ET's findings, would have been dismissed for another substantial reason within six months of the actual date of dismissal. In the ET's view, she had shown no insight into the problems she was causing. The Appellant in that case submitted that where an ET finds a dismissal substantively unfair it is not open to it to reduce compensation on the grounds that at a later date the employee would have been dismissed fairly. At paragraph 44 Potter LJ, giving the judgment of the Court of Appeal, said this:

"44. While we acknowledge its exceptional nature, we do not think that the exercise undertaken by the industrial tribunal which led to decision (4) is necessarily impermissible. An industrial tribunal must award such compensation as is "just and equitable". If the facts are such that an industrial tribunal, while finding that an employee/applicant has been dismissed unfairly (whether substantively or procedurally), concludes that, but for the dismissal, the applicant would have been bound soon thereafter to be dismissed (fairly) by reason of some course of conduct or characteristic attitude which the employer reasonably regards as unacceptable but which the employee cannot or will not moderate, then it is just and equitable that the compensation for the unfair dismissal should be awarded on that basis. We do not read Polkey or King v Eaton Ltd [(No.2) [1998] IRLR 686] as precluding such an analysis by an industrial tribunal and we do not think that the exercise which they performed was self-evidently incorrect given the adverse view which they had formed of this particular appellant (see further at paragraphs 56-58 below). It follows that we are unable to accept Ms Gill's first submission."

34. At paragraph 48 the Court of Appeal rejected the further submission that the industrial tribunal was bound to assess the percentage chance that the employment would have continued. It said that the percentage chance might vary over time and it might not be easy to reflect those varying percentages in a single figure or to do so at all; it would all depend on the facts. At paragraph 53 of the judgment the Court of Appeal said:

"53. We read these sentences in their context as meaning that the industrial tribunal were satisfied that the chances of a possible fair dismissal taking place after an actual, unfair dismissal were 100% (i.e. certain) by a particular date. That seems to us a legitimate approach. Where the appellant was in the estimation of the industrial tribunal on an inevitable course towards dismissal, it was legitimate to avoid the complicated problem of some sliding scale percentage estimate of her chances of dismissal as time progressed, by assessing a safe date by which the tribunal were certain (if it felt able to be certain) that dismissal would have taken place and making an award of full compensation in respect of the period prior thereto (ignoring any question of 'interim' percentages)."

35. In Gover v Propertycare Ltd [2006] EWCA Civ 286, [2006] ICR 1073 the Court of Appeal was asked to consider whether the ET can make Polkey findings in a case where it holds that an employee has been constructively unfairly dismissed. The Court of Appeal considered this issue obiter as it did not grant permission for the point to be argued. The Court of Appeal said that the argument that it could not was not inconsistent with the language of the decision in Polkey but was inconsistent with the decision of another division of the Court of Appeal in O'Donoghue. At paragraph 14 Buxton LJ, giving the judgment of the Court of Appeal, had this comment on the argument that it was not open to an ET to make a Polkey deduction in a constructive dismissal case:

"14. … My first and overriding difficulty about the claimant's first point is that, at least as explained to us, it would introduce some very technical and verbally sophisticated rules into a decision-making process that should be a matter for the common sense, practical experience and sense of justice of the employment tribunal sitting as an industrial jury."

36. At paragraph 22 Buxton LJ quoted paragraph 19 from the judgment of Lord Prosser in King (which had been cited by approval by the Court of Appeal in Lambe v 186K Ltd [2005] ICR 307 at paragraph 58):

"the matter will be one of impression and judgment, so that a tribunal will have to decide whether the unfair departure from what should have happened was of a kind which makes it possible to say, with more or less confidence, that the failure made no difference, or whether the failure was such that one cannot sensibly reconstruct the world as it might have been."

37. Buxton LJ went on to say at paragraph 22 of Gover that, when applied to an Employment Tribunal, this:

"… indicates very strongly that an appellate court should tread very warily when it is being asked to substitute its own impression and judgment for that of the tribunal. I have set out how the employment tribunal approached the issue in this case, and despite the lengthy criticisms addressed to that treatment I am not persuaded that they went outside the very wide ambit permitted to them by Lambe."

38. In a similar vein, the Court of Appeal in Thornett v Scope [2006] EWCA Civ 1600, [2007] ICR 236 said at paragraph 36 of its judgment:

"36. The appeal tribunal appear to regard the presence of a need to speculate as disqualifying an employment tribunal from carrying out its statutory duty to assess what is just and equitable by way of compensatory award. Any assessment of a future loss, including one that the employment will continue indefinitely, is by way of prediction and inevitably involves a speculative element. Judges and tribunals are very familiar with making predictions based on the evidence they have heard. The tribunal's statutory duty may involve making such predictions and tribunals cannot be expected, or even allowed, to opt out of that duty because their task is a difficult one and may involve speculation. Giving judgment in the leading case on loss of earning capacity, Moeliker v A Reyrolle & Co Ltd [1976] ICR 253, an important head of damage in personal injury cases, Stephenson LJ when seeking words to define the correct approach to be followed stated, at p 265: "I avoid 'speculative' because this head of damages can really be nothing else." "

39. In Frith Accountants Ltd v Law [2014] ICR 805 EAT Langstaff P (as he then was) said this at paragraph 15 of his judgment:

"15. … It cannot be said with certainty that a percentage of 40% or 60% or 30% is any better than the other. The assessment has to be made in good faith by the tribunal but of its nature will always be expressed in a round figure and is not easily susceptible to further analysis. …"

40. He went on to say at paragraph 16:

"16. The tribunal's conclusion seems to me a conclusion which can only be upset if it falls outside the very wide range within which it is permissible for a tribunal to place it. …"

41. Frith was a constructive dismissal case. The ET held in that case when assessing compensation that nothing would have happened for eight months and that after that there was a 40 per cent chance that the employee would have lost her employment. There was no challenge by the Respondent to the eight-month figure, and the EAT upheld the 40 per cent figure.

Submissions

42. Mr Dixon submitted that the 60 per cent reduction was wrong and that in any event the fixing of a two-month period contradicted the 60 per cent reduction and was also wrong. He contended that when considering compensation an ET could either fix a period after which a Claimant could have been fairly dismissed or make a deduction from the compensation to reflect the chances that the employment might have ended fairly in any event. What it cannot do is a mixture of the two. I asked Mr Dixon if he was submitting that it was not open in principle for the ET to make a Polkey deduction in a constructive dismissal case. He made it clear that that was not his submission. He also accepted that it was open to the ET on these facts to make some percentage deduction. His point was that there was no rational connection between the figure of 60 per cent arrived at by the ET and the uncertainties that the ET graphically described at paragraph 168 of its Decision. He submitted that the 60 per cent figure was therefore wrong.

43. He further submitted that there were two permissible options open to the ET on these facts. The first was a 60 per cent reduction in the compensation, and the second, which he advanced in oral argument in response to a question from me, was to compensate the Claimant fully for two months' loss of earnings, subject of course to mitigation, and then to reduce the compensation by 60 per cent. This option came to be described in argument as the "Frith" option, as it is what the ET did in the Frith case. He accepted that this case should be remitted to the ET for them to explain before they went on to assess compensation at the remedy hearing which of the two permissible options that he had identified the ET had intended to describe in paragraph 169 of the Judgment.

44. In his skeleton argument, Mr Meichen submitted that the ET's approach was broadly consistent with the decision of the Court of Appeal in Rao v Civil Aviation Authority [1994] ICR 495. He submitted that the ET was doing no more than to decide that there was a 60 per cent chance that the Claimant would have lost his employment in any event and that this Tribunal should not interfere on appeal because the ET had made extensive findings of fact that supported its conclusion on that point. He submitted in his skeleton argument that an award of compensation is essentially discretionary. He accepted that an ET could either make a reduction on a percentage basis by identifying a date by which the ET considered the Claimant would have been dismissed or award full compensation up to that date and that either approach was permissible. He submitted that the ET made a percentage deduction and not a fixed-term deduction.

45. He went on to submit in his skeleton argument that the period over which the Claimant should be compensated for his losses is still open on the remedy hearing although:

"22. … based on the reasoning in the liability judgement it appears they consider an appropriate period to be two months."

46. He also submitted that it was open to the ET to find that the procedure would have taken two months. That finding was not material to the Polkey deduction, as the ET had simply elected to make a Polkey deduction of 60 per cent.

47. In his oral submissions Mr Meichen somewhat modified his position. He accepted that paragraph 169 of the Judgment was not clear. He also accepted that it would not have been permissible for the ET to have decided to award compensation for a period of two months and then to reduce that compensation by 60 per cent. This was common ground between him and Mr Dixon. He further submitted that there were three ways of reading paragraph 169 and each of them represented an option that was permissible for the ET. They were (1) compensation should be reduced by 60 per cent, (2) a two-month limit should be applied to the compensation, or (3) the Frith option. He submitted that the case should be remitted for the ET to explain before they went on to conduct the remedy hearing which of those three permissible options they had intended to choose in paragraph 169 of the Judgment.

Discussion and Conclusions

48. Logically, the first question is: what did the ET decide? I accept the parties' submissions that paragraph 169 is profoundly ambiguous. There are at least three possible ways of reading it. It therefore seems to me sensible to start by asking, and deciding, what options were lawfully to the ET on this part of the case.

49. The first issue is whether it was open to the ET to apply a Polkey deduction at all in a case where the employee has been unfairly constructively dismissed. I have already referred to the relevant authorities on this issue, and I respectfully agree with the principle that the courts should not create a complex structure of subsidiary rules from the open language of the statutory provisions. In any event, it was not disputed by Mr Dixon that it was open to the ET in this case, where it had held that the Claimant was constructively unfairly dismissed, for it to apply a Polkey deduction to his compensation. So I need say no more about this issue.

50. I turn to the second issue, then, which is, given that it was open to the ET to make a Polkey deduction, what options were lawfully open to the ET. I accept the parties' agreed position that it would have been open to the ET either to apply a percentage reduction to the compensation or to have held that after a certain period, which in this case appears to be two months, and which should be fully compensated, a percentage reduction should apply. That is what I have described as the Frith option. I also accept the parties' agreed position that it was not open to the ET to have held that the Claimant should be compensated only for two months and that that compensation should be reduced by 60 per cent.

51. Finally, I accept the parties' agreed position that it is not clear from the language of paragraph 169 of the ET's Judgment which of those options they were choosing. On any view, therefore, the case should be remitted to the ET for them to explain which of the two lawful approaches that I have just described they intended to adopt.

52. There are then two issues on which the parties do not agree. They are first, whether 60 per cent was a figure that it was open to the ET to choose; and secondly, whether it was open to the ET to limit compensation to a period of two months. On the first of these two issues Mr Dixon accepted that he had a high test to meet: he had to persuade me that the decision of the ET to adopt the 60 per cent figure was perverse. I have carefully considered the dicta in the cases to which I have referred and the meticulous approach of the ET, together with the uncertainties that they rightly described in paragraph 168. I cannot say in those uncertain and admittedly speculative fields that their decision is perverse. I therefore dismiss that ground of appeal.

53. The next issue is whether on their findings it was open to the ET to hold that compensation should be limited to two months. It is true that the Court of Appeal in O'Donoghue did not hold in terms that an ET could not both apply a percentage chance and ask after what period an employee would have been fairly dismissed, but its analysis of the industrial tribunal's Reasons shows that it assumed for it to be open for the industrial tribunal to have decided after what period an appellant would have been dismissed the tribunal was necessarily also holding that after that period there was a 100 per cent chance that the appellant would have been dismissed. The ET here has not held that there was a 100 per cent chance that the Claimant would have been dismissed. It seems to me, on the reasoning in O'Donoghue, that once the ET had found that there was a 60 per cent chance that the Claimant would have been dismissed if the Respondent had gone about matters properly, it was not open to the ET to seek to limit the Claimant's compensation to the two-month period it appears to have found it would have taken to conduct a fair process. This is because the ET did not expressly find here that there was a 100 per cent chance that the Claimant would have been dismissed after two months. That means, in turn, that when the ET assesses compensation it will first have to find the Claimant's fully proved losses subject to mitigation and then reduce that sum by 60 per cent. That loss will extend into the future subject to mitigation and will not be limited to the two months after dismissal.

54. In other words, in my judgment, the approach of the Court of Appeal in O'Donoghue, properly understood, is that it is only open to an ET to limit compensation to a period as opposed to making a percentage deduction where the ET is 100 per cent confident that dismissal would have occurred within that period. It is clear to me that the ET here had no such confidence (see the uncertainties to which they referred in paragraph 168 and their choice of the 60 per cent figure). In other words, option two is not an option that is consistent with O'Donoghue or with the ET's finding that there was a 60 per cent chance that the parties would not have been able to resolve their differences, nor is it consistent with the formal record of the ET's Decision at the start of the written Judgment.

55. For those reasons, I allow the appeal. If the ET intended to limit compensation to a period of two months or to award 60 per cent of the Claimant's losses over two months, it was not open to it to do so, but it was open to the ET to reduce the appropriate compensation by 60 per cent. That decision is unaffected by my decision. I remit the case to the ET for them to explain at the remedy hearing whether they intended at paragraph 169 to compensate the Claimant for two months' losses and then to reduce his compensation by 60 per cent or simply to reduce the Claimant's compensation by 60 per cent. The ET should then decide the appropriate compensation accordingly.