Polkey v A. E. Dayton Services Ltd

The appellant was employed by the respondents ("the employers") from 19 June 1978 until 27 August 1982 as a van driver. On that date he was dismissed as redundant. On 8 November 1982 he applied to an industrial tribunal to hold that he had been unfairly dismissed. On 23 February 1983 the industrial tribunal dismissed the application. It was accepted on behalf of the appellant before the industrial tribunal that at the time of his dimissal it was urgently necessary for the employers to reduce their overheads in their undertaking and that, in consequence, it was necessary to make certain of their van drivers redundant. They had three male van drivers and one female van driver and it was decided that for the future only two van salesmen should be appointed. The manager immediately responsible for the appellant decided that none of the three male van drivers was capable of performing the task of a van salesman but that the female van driver was so capable. Some four weeks after the appellant's dismissal a second van salesman was appointed from outside the employers' work-force. On 20 August the appellant's branch manager informed his superior of his decision and without any consultation with employees or their representative or earlier warning to the appellant his branch manager called him into his office on the afternoon of 27 August told him quite out of the blue that he was redundant and handed to him his redundancy letter. The appellant was immediately driven home by a fellow employee. The industrial tribunal characterised this aspect of the appellant's dismissal by saying: "There could be no more heartless disregard of the provisions of the code of practice than that." The code of practice referred to is the statutory code presently in force under the Employment Protection Act 1975, Schedule 17, paragraph 4 in which paragraph 46 provides:

"If redundancy becomes necessary, management in consultation, as appropriate, with employees or their representatives, should: (i) give as much warning as practicable to the employees concerned …; (iii) establish which employees are to be made redundant and the order of discharge; …"

The industrial tribunal further found: "There is nothing that excuses their failure to consult but" - this is the matter that gives rise to the point of principle in the present appeal -

"at the end of the day we have no alternative but to find that in this case had they acted in accordance with the code of practice, as interpreted in the recent case [ Williams v. Compair Maxam Ltd [1982] I.C.R. 156], the result would not have been any different, and we have therefore unhappily to reject this application."

The appellant appealed to the Employment Appeal Tribunal but on his behalf it was conceded that the appeal tribunal was bound by authority to dimiss the appeal. The only question the Employment Appeal Tribunal had to consider was whether to give leave to appeal which they did. The Court of Appeal, Neill and Nicholls L.JJ. and Sir George Waller [1987] 1 W.L.R. 1147, dismissed the appeal, held that they were bound by authority to do so, and granted leave to the appellant to appeal to this House.

This appeal raises an important question in the law of unfair dismissal. Where an industrial tribunal has found that the reason for an applicant's dismissal was a reason of a kind such as could justify the dismissal and has found that there has been a failure to consult or warn the applicant in accordance with the code of practice, should the tribunal consider whether, if the employee had been consulted or warned before dismissal was decided upon, he would nevertheless have been dismissed? The answer depends upon the application to this situation of section 57(3) of the Employment Protection (Consolidation) Act 1978 as amended, which is in these terms:

"Where the employer has fulfilled the requirements of subsection (1), then, subject to subsections 58 to 62, the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend 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 that question shall be determined in accordance with equity and the substantial merits of the case."

Where there is no issue raised by sections 58 to 62 the subject matter for the tribunal's consideration is the employer's action in treating the reason as a sufficient reason for dismissing the employee. It is that action and that action only that the tribunal is required to characterise as reasonable or unreasonable. That leaves no scope for the tribunal considering whether, if the employer had acted differently, he might have dismissed the employee. It is what the employer did that is to be judged, not what he might have done. On the other hand, in judging whether what the employer did was reasonable it is right to consider what a reasonable employer would have had in mind at the time he decided to dismiss as the consequence of not consulting or not warning.

If the employer could reasonably have concluded in the light of the circumstances known to him at the time of dismissal that consultation or warning would be utterly useless he might well act reasonably even if he did not observe the provisions of the code. Failure to observe the requirement of the code relating to consultation or warning will not necessarily render a dismissal unfair. Whether in any particular case it did so is a matter for the industrial tribunal to consider in the light of the circumstances known to the employer at the time he dismissed the employee.

I turn to consider how these views accord with the decided cases. Very early in the history of this legislation and its statutory predecessors Sir John Donaldson in Earl v. Slater & Wheeler (Airlyne) Ltd. [1973] 1 W.L.R. 51, 57 said:

"With respect to the tribunal, we think that it erred in holding that an unfair procedure which led to no injustice is incapable of rendering unfair a dismissal which would otherwise be fair. The question in every case is whether the employer acted reasonably or unreasonably in treating the reason as sufficient for dismissing the employee and it has to be answered with reference to the circumstances known to the employer at the moment of dismissal. If an employer thinks that his accountant may be taking the firm's money, but has no real grounds for so thinking and dismisses him for this reason, he acts wholly unreasonably and commits the unfair industrial practice of unfair dismissal, notwithstanding that it is later proved that the accountant had in fact been guilty of embezzlement. Proof of the embezzlement affects the amount of the compensation, but not the issue of fair or unfair dismissal."

Again in Vokes Ltd. v. Bear [1974] I.C.R. 1, 5 Sir Hugh Griffiths, referring to the statutory predecessor of this section, said:

"We are unable to accept the submission that 'the circumstances' are limited to those directly affecting the ground of dismissal, in the sense submitted by [counsel for the employers]. 'The circumstances' embrace all relevant matters that should weigh with a good employer when deciding at a given moment in time whether or not he should dismiss his employee. The subsection [section 24(6) of the Industrial Relations Act 1971] is focusing the tribunal's attention upon 'the dismissal', that is, the dismissal on March 2. The question they have to ask themselves is whether on March 2 the employers were acting reasonably in treating redundancy as a sufficient reason for dismissing the employee on that date. The tribunal are entitled to take into account all the circumstances affecting both the employers and the employee at the time of the dismissal. In the present case, no doubt the time would have come when the employers would have to dismiss the employee for redundancy for the good of the company as a whole, but the tribunal were fully entitled to take the view that that moment had not yet arrived by March 2. The employers had not yet done that which in all fairness and reason they should do, namely, to make the obvious attempt to see if the employee could be placed somewhere else within this large group. The position is somewhat analogous to the case of a warning. An employer may have good grounds for thinking that a man is not capable of doing his job properly, but in the general run of cases it will not be reasonable for him to regard that lack of capability as a sufficient reason for dismissing him until he is given a warning so that the man has a chance to show if he can do better. So in this case there was a redundancy situation but there was no compelling reason why the axe should fall until the employers had done their best to help the employee. It is therefore with satisfaction that we find that there is nothing in the wording of section 24(6) of the Act of 1971 which compels us to take the view that behaviour which we think most people would consider manifestly unfair is nevertheless to be deemed fair under the Act. If the employers had made all reasonable attempts to place the employee in the group and had failed, then the time might have come when it would be reasonable for them to regard the redundancy as a sufficient reason for the dismissal, but until that moment had come the tribunal were entitled to take the view that it was not reasonable to dismiss for redundancy and accordingly that it was unfair."

This approach to the...