Langley v Burlo
| Jurisdiction | England & Wales |
| Judge | Lady Justice Smith,Lord Justice Leveson,Lord Justice Mummery,LADY JUSTICE SMITH |
| Judgment Date | 21 December 2006 |
| Neutral Citation | [2006] EWCA Civ 1778,[2006] EWCA Civ 1858 |
| Docket Number | A2/2006/0610,Case No: A2/2006/0610 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 2006 |
[2006] EWCA Civ 1778
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOPYMENT APPEAL TRIBUNAL
MR JUSTICE ELIAS (PRESIDENT)
UKEAT/0572/05/ZT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lady Justice Smith and
Lord Justice Leveson
Case No: A2/2006/0610
Mr Ayoade Elesinnla (instructed by Messrs J R Jones) for the Appellant
Ms Sarah Wilkinson (instructed by Messrs Ashurst) for the Respondent
Introduction
This appeal raises a point of some general importance in relation to the assessment of compensatory awards for unfair dismissal under section 123 of the Employment Rights Act 1996 ( ERA). So far as relevant, section 123 provides:
"(1) Subject to the provisions of this section ….. the amount of the compensatory award shall 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.
(2) The loss referred to in subsection (1) shall be taken to include-
(a) any expenses reasonably incurred by the complainant in consequence of the dismissal, and
(b) subject to subsection (3) , loss of any benefit which he might reasonably be expected to have had but for the dismissal.
(3) ….
(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland"
History of the Litigation
Ms Ana Burlo worked as a nanny for Mr Langley and Ms Carter (whom I shall describe as the employers) . Her employment began in 1999. It was subject to a written contract which provided for 8 weeks notice of termination on either side. The contract also provided that, during periods of sickness, the employers would pay 'sickness benefit in accordance with government statutory sick pay legislation'.
On Tuesday 2 nd March 2004, there was an argument about money between Ms Burlo and Mr Langley. Ms Burlo threatened to resign and Mr Langley said that she would be required to work her notice. Ms Burlo continued at work but on the morning of Friday 5 th March, she had a car accident. Later that day she went to hospital. Soon afterwards, her GP provided a sick note to say that she would be off work until 29 th March. By Monday 8 th March, the employers had engaged another nanny and wrote saying that they would not now require Ms Burlo to work out her notice. In the event, the employee was unfit for work following her car accident until 12 th July 2004.
Ms Burlo brought a number of claims in the Employment Tribunal (ET) , including claims for wrongful and unfair dismissal. Both these claims succeeded. The ET assessed damages for wrongful dismissal at £3,440 which appears to have been 8 weeks pay at the normal weekly wage. The ET did not explain why they held that the damages should be based on the normal weekly wage rather than on the statutory sick pay (SSP) to which the employee would have been entitled under her contract of employment. The ET then assessed compensation for unfair dismissal. They made a basic award and a compensatory award of £5,736. No part of that sum related to the period of notice because that had been covered in the award for wrongful dismissal.
The Appeal and Cross Appeal in the EAT
The employers appealed to the Employment Appeal Tribunal (EAT) , presided over by Elias J, the President of the EAT, contending that the ET had erred in basing the damages for wrongful dismissal on the normal weekly wage. The damages should have been based on SSP. However, Ms Burlo put in a cross-appeal which would be pursued only if the appeal succeeded.
In argument on the appeal, it was accepted on Ms Burlo's behalf that, under her contract, she was entitled only to SSP while off sick. However, it was submitted that the effect of sections 86 to 88 of the ERA was that she was entitled to full or normal pay for the whole of the notice period notwithstanding that she was unfit for work throughout the relevant period. These sections deal with an employee's entitlement to a minimum period of notice and his/her rights during that period. Section 86 fixes the minimum periods of notice to which an employee is entitled, by reference to length of service. Section 88 provides that, in cases to which the section applies, if an employee who has normal working hours is off sick for all or part of his/her period of notice, s/he will be entitled to receive payment during the minimum notice period at the average hourly rate of remuneration. However, by section 87(4) this provision does not apply to employees whose contract of employment provides for a notice period longer by at least one week than the minimum period stipulated by the statute. In Ms Burlo's case, the minimum period of notice under the statute was 4 weeks and the contractual period of notice was 8 weeks, so the EAT held that section 88 did not apply. It followed that the contractual provision was effective and the employee was only entitled to receive SSP during the notice period. The EAT allowed the appeal. Damages for wrongful dismissal were reduced to eight weeks SSP, the amount to be agreed between the parties.
7. Accordingly, the cross appeal came into play. In this, Ms Burlo contended that, for unfair dismissal, under section 123 of the ERA, she was entitled to receive compensation for the 8 week notice period at the normal weekly wage. Mr Elesinnla, who appeared for Ms Burlo at the EAT and before this court, relied on the principle enunciated in Norton Tool v Tewson [1972] ICR 501, that it was good industrial relations practice for an employer who dismisses an employee without notice to make a payment in lieu of notice. Where such sums are paid, no credit has to be given by the employee for monies earned from other employers during the notice period. That, contended Mr Elesinnla, meant that the employee in this case was entitled to full pay, not just SSP, during her notice period. Mr Elesinnla submitted further that Norton Tool had been followed and approved by the Court of Appeal in Addison vBabcock FATA Ltd [1987] ICR 805 and so was binding on the EAT.
Miss Wilkinson, who appeared for the employers at the EAT and before us, submitted that Norton Tool was no longer good law and no longer provided a legitimate basis for awarding full compensation for the notice period. She relied in particular on the decision of the House of Lords in Dunnachie v Kingston upon Hull City Council [2005] 1AC 226; [2004] ICR 1052. She also relied on two recent decisions of the EAT (presided over by Burton J, then President of the EAT) to the effect that there is no room for the proposition that good industrial relations practice can be relied on to increase the amount of compensation so that more is awarded than the true loss incurred as a consequence of the dismissal. These were Hardy v Polk (Leeds) Ltd [2005] ICR 557 and Morgans v Alpha Plus Security Ltd [2005] ICR 525.
In the judgment, the EAT set out the relevant authorities at some length. They then stated that there were two issues for decision. The first was whether it was good industrial practice for an employer who dismissed an employee to pay wages in lieu of notice at the normal rate of pay notwithstanding that the employee was unfit for work through sickness during that period. Does good practice require that the employer should pay 'up front' only what it is anticipated that the employee will earn during the notice period, or does it require payment of full pay even though the employee might not have received that sum if s/he had been at work during that period?
At paragraph 35 of their decision, the EAT answered that question thus:
"The view of the lay members (with which the President agrees) is that good industrial relations would require payment in full, at least in circumstances where (as here) the notice period is not unduly long and there is no clear indication at the time of dismissal whether the illness will last for the whole of the notice period."
The second issue was whether, assuming that it is good industrial relations practice to make the payment in lieu of notice, the principle established in Norton Tool remained good law. On this issue, the EAT was divided.
12. The majority view, held by the President and one lay member, was that Norton Tool was no longer good law. Briefly stated, the reasoning of the majority was as follows. Application of the principle in Norton Tool could result in the making of a compensatory award greater than the loss actually suffered by the employee in consequence of the (unfair) dismissal. That result would be contrary to the intention of Parliament in section 123 of ERA. That was the point that had been recognised by the two decisions of Burton J. But, Norton Tool had been affirmed by the Court of Appeal in Babcock and was therefore binding on the EAT. However, the effect of the House of Lords' decision in Dunnachie undermined both Norton Tool and Babcock. The majority recognised that the House of Lords had not been directly concerned with the principle in Norton Tool; rather it was concerned with the question of whether compensation under section 123 could include injury to feelings. However, the decision was based on the premise that compensation for unfair dismissal must comply with section 123. The words 'just and equitable' in...
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