James Doherty+gary Jones V. S.w. Global Resourcing Limited From An Order Of The Employment Appeal Tribunal Dated 8 May 2012
| Jurisdiction | Scotland |
| Judge | Lord McEwan,Lord Drummond Young,Lord President |
| Neutral Citation | [2013] CSIH 72 |
| Court | Court of Session |
| Published date | 21 August 2013 |
| Year | 2013 |
| Date | 21 August 2013 |
| Docket Number | XA137/12 |
| FIRST DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord President Lord Drummond Young Lord McEwan | [2013] CSIH 72 XA137/12 OPINION OF THE LORD PRESIDENT in the Appeal by JAMES DOCHERTY and GARY JONES Appellants; against S W GLOBAL RESOURCING LIMITED Respondent: from an Order of the Employment Appeal Tribunal dated 8 May 2012 _______________ |
For the respondent: Campbell (sol adv); Brodies LLP
21 August 2013
Introduction
[1] This is an appeal against an order of the Employment Appeal Tribunal (EAT) dated 8 May 2012. The Employment Tribunal (ET) found that the appellants had been constructively and unfairly dismissed. The EAT substituted a decision that the appellants had been fairly dismissed for "some other substantial reason" in terms of section 98(1)(b) of the Employment Rights Act 1996 (the 1996 Act). That is the order appealed against.
The facts
[2] The appellants were employed by the respondent from 1997. The respondent specialised in sub-contracting work for the railway and construction industry. It suffered a serious downturn in business. To avoid redundancies, reduce labour costs and offer more competitive tenders, the respondent rescinded the appellants' terms and conditions of employment. By letter dated 6 July 2010 the respondent notified the appellants that their guaranteed minimum weekly salary was to be abolished and that thenceforth they would be employed on an ad hoc basis. This meant that the respondent would engage them whenever they were required, but had no obligation to engage them at all. The new terms included a provision that if the appellants were given no work for two months, the respondent would give them P45s. The respondent gave the appellants 12 weeks' notice of these changes.
The Employment Rights Act 1996.
[3] The Employment Rights Act 1996, as amended and so far as material, provides:
"98 - General
(1) In determining ... whether the dismissal of an employee is fair or unfair, it is for the employer to show-
(a) the reason (or, if more than one, the principal reason) for the dismissal, and
(b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.
(2) A reason falls within this subsection if it-
(a) [is that the employee was incapable or unqualified] ...
(b) [is that the employee committed misconduct] ...
(c) is that the employee was redundant, or
(d) [is that continued employment would be unlawful] ...
(4) Where the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)-
(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and
(b) shall be determined in accordance with equity and the substantial merits of the case ... "
The decision of the ET
Constructive dismissal
[4] Before the ET the appellants pled that the respondent was in breach of an express term of the contract of employment and, separatim, in breach of the implied duty to maintain mutual trust and confidence in the employment relationship. The ET upheld both cases and concluded that the appellants had been constructively dismissed.
Some other substantial reason
[5] The ET then considered whether the re-organisation of the business in order to make it profitable constituted "some other substantial reason." It found that there was a "good, sound business reason" for removing the guaranteed minimum payment (para 325). It then considered whether there was a good, sound business reason for removing the appellants' employment status. These were its conclusions:
"326 We asked whether there were good, sound business reasons for changing the employment status of the claimants. We concluded there were no good, sound business reasons for doing so. The main reason for our conclusion was the fact the respondent did not realise the consequences of offering a zero hours contract, where there was no obligation to offer work and no obligation to accept work. The change to the employment status of the claimants was unintended by the respondent and accordingly there can have been no thought behind it and no reason for doing it.
327 We should state that even if the respondent had intended the change from employee to worker and had argued there was a good, sound business reason for making the change, that was not an argument we would have accepted in the circumstances of this case where employee welders were not made aware of the effects of the change.
328 We also had regard to the fact we had decided (above) that there had been a breach of the implied duty of trust and confidence when the respondent gave notice of a unilateral variation to the contract of employment upon expiry of 12 weeks' notice, to remove the guaranteed payment and change the employment status of the claimants from employees to workers ... "
The ET therefore concluded that there was not "some other substantial reason."
Fairness
[6] The ET then had to determine whether if, contrary to its own conclusion, the dismissal was "some other substantial reason," it was fair. The ET considered that it should not focus exclusively on the reasonableness of the respondent's new terms from the appellants' perspective. The interests of the respondent and the appellants had to be balanced (St John of God (Care Services) Ltd v Brooks [1992] IRLR 546; Catamaran Cruisers Ltd v Williams [1992] IRLR 546; Decision, paras 333-334).
[7] The ET concluded that although there was a good business reason for the respondent's decision to remove the guaranteed payment, that had the consequence that the appellants were left with no rights (para 335). The respondent had carried out a "significant degree of consultation" on the removal of the guaranteed payment, but had not appreciated the effect of that on the appellant's status. It therefore had not consulted on that question (para 338). The respondent's other ten welders had consented to the change, but they would not have appreciated that the change would result in the loss of their employment status (para 339). Although the arrangements that the respondent introduced were common in the industry, the appellants had worked for the respondent for several years. The change would therefore cause them to lose their accrued statutory rights, such as the right to a redundancy payment (para 340).
[8] This was the ET's conclusion:
"341. We concluded that when carrying out a 'balancing process', considering the position from the point of view of both employees and the employer, the 'balancing process' leaned heavily in favour of the employees.
342. We, having taken all of the above points into account, asked ourselves whether the respondent acted reasonably in treating the business reason as a sufficient reason to dismiss the claimants. We decided that the decision of the respondent to dismiss the claimants for some other substantial reason fell outside the range of reasonable responses which a reasonable employer might adopt. We concluded that no other reasonable employer would, without consultation, explanation and realising the effect of their actions, have dismissed the claimants for refusing to agree a variation of their contracts of employment which had the effect of removing their guaranteed payment and changing their status from employee to that of worker."
The decision of the EAT
Constructive dismissal
[9] The EAT struck out the appellants' case based on the implied duty of trust and confidence on the ground that there was no fair notice of it in...
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