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In times of redundancies/restructuring/re-engineering or downsizing (pick a term defendant on your age) employers often seek to show “some other substantial reason for dismissal” namely the need to re-arrange terms and conditions of employees’ contracts.

This is a complex area of law and perhaps unsurprisingly, a recent case (Docherty & Anor v S W Global Resourcing Ltd) the employer claimed ignorance of the law and ignorance of impact on the employees and won on a technical issue.

However, the Docherty case does help us to read the current thinking on some other substantial reason for dismissal.

Background

The stated case for this is St John of God (Care Services) Ltd v Brooks  (recently confirmed in Docherty & Anor v S W Global Resourcing Ltd [2013] CSIH 72).

In the St John of God judgement, at para 6(4) of its decision: “We [also] accept that the case law on some other substantial reasons and changes in terms and conditions is adequately summarised in the text book Harvey on Employment Law II 1030 thus:

(a) Management have a right to reorganise a business in a manner which they consider advantageous but

 (i) it is for management to show that the reorganisation has discernible advantages and

 (ii) more importantly, the interests of the employees cannot be ignored while evaluating whether the employer has acted reasonably under section 57(3)

(b) Occasionally an employee may act reasonably in refusing to accept new terms and yet the employer may equally be acting reasonably in dismissing the employee

(c) Thus it does not follow that if one party is acting reasonably the other is acting unreasonably. The sole question is not whether the advantages to the employer outweigh the disadvantages to the employee

(d) The crucial question is whether the terms offered were those which a reasonable employer could offer.”

So, does this mean that the employee can turn down a reasonable offer?

This area of dispute is effectively limited to the question whether or not para. 6(4)(d) quoted above was a correct statement of case law. The case law being derived from the decision in Richmond Precision Engineering Ltd v. Pearce [1985] I.R.L.R.179. In that case the employee Mr Pearce was dismissed when he declined to accept new terms and conditions which his employers proposed in order to bring into line the terms and conditions of employees in their original business with those of employees, among whom Mr Pearce was numbered, of another business taken over by the employers. The proposed new terms were financially and otherwise to Mr Pearce’s detriment as compared with those he had theretofore enjoyed.

The Industrial Tribunal (now termed employment tribunal) held there had been an unfair dismissal holding in reliance on Chubb Fire Security Ltd v. Harper [1983] I.R.L.R. 311 that the question which fell to be considered was: “whether the respondents were acting reasonably in deciding that the advantages to them of implementing the proposed reorganisation outweighed any disadvantage which they should have contemplated that the applicant might suffer.” The Industrial Tribunal’s conclusion was stated as follows: “The offer as made to the applicant was unduly disadvantageous to him as compared with any advantage to the respondents . . . no matter how one looks at it he was worse off under the offered terms and he was entitled to reject them.”

The Employment Appeal Tribunal allowed an appeal by the employer in Pearce para.23 of the judgment reads:

“The Industrial Tribunal had erred in holding that the appellants had acted unreasonably in dismissing the respondent for refusing to accept changes in his terms and conditions of employment which would bring him into line with existing employees holding similar positions, on the grounds that he would be worse off under the new terms. The Industrial Tribunal had misdirected themselves in law in interpreting the EAT’s decision in Chubb Fire Security v. Harper as indicating that the sole question to be answered was whether the appellants had acted reasonably in deciding that the advantages to them of implementing the proposed changes outweighed any disadvantages which they should have contemplated that the respondent might suffer.”

“It does not follow that because there are disadvantages to the employee, the employer acted unreasonably in treating his refusal to accept the changes as a reason for dismissing him.”

The test is therefore, apply the principles from Pearce and take from Chubb the position that ‘whether the terms offered are, from the employer’s point of view, ones which a reasonable employer could offer in the circumstances.’

It is also useful to remind ourselves that it is not for a Tribunal to substitute it’s own views for those of the parties.  As stated in St John of God (Care Services) Ltd v Brooks. 

Current thinking

In Docherty & Anor v S W Global Resourcing Ltd [2013] CSIH 72 it can be said with reasonable certainty that if an employer takes action against an employee which amounts to a dismissal, and does so without having considered the legal consequences, or does so on a mistaken view of what those consequences would be, the dismissal may nonetheless be held to be fair; but the fact that the employer took the action in such circumstances will not ipso facto make the dismissal fair.

In the Docherty case the relevance of the respondent’s ignorance of the legal implications depended, at least in part, on the question whether it should have taken professional advice. That might depend on a multiplicity of factors; for example, the size and the administrative resources of the respondent (1996 Act, s 94(4)(a)).

On the other hand, the radical nature of the change might be held, in itself, to have put the respondent on notice of the possibility of there being a legal problem.

These are the sort of questions that were pre-eminently for the ET to decide and they must draw a conclusion when considering fairness question overall.

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