The Court of Appeal has handed down an important decision emphasising the wide discretion that an employment tribunal has to make a ‘Polkey reduction’ – a ruling that dismissal would have occurred, or would probably have occurred even if a fair procedure or proper investigation had been followed – in an unfair dismissal case.
It also opens up the idea that an employer may simply say that a dismissal would or probably would have occurred in any event for a different reason to that which prompted the dismissal decision in the first place.
The case of Gover v Property Care Ltd (2006) concerned a number of claimants whose commission scheme was unilaterally changed to their detriment, and without any proper consultation.
The employer’s approach was described by the tribunal as “reprehensible”. It found that the dismissals were unfair, but then went on to consider what would have happened had the employer carried out a reasonable consultation process and taken legal advice before deciding to take action.
The tribunal found that the employer would still have sought to impose new terms that, while not so poor as to give rise to a fundamental breach of contract, would still have been unattractive to the staff. The tribunal then decided that the claimants would not have felt able to accept these less onerous terms, so to dismiss them in those circumstances would have been fair.
The tribunal awarded each claimant four months’ salary to reflect the period during which a proper consultation would have taken place. In doing so, it applied the well-known case of Polkey v AE Dayton Services – in which it was first held that an employer could argue that a financial award could be reduced on the basis that a fair procedure would, or probably would, have resulted in a dismissal anyway.
The Court of Appeal emphasised that the tribunal should have a very wide discretion when deciding whether or not the claimant would have been dismissed in any event some time after the actual dismissal.
The following principles can be gleaned from Gover:
When dealing with how much to award the claimant, a tribunal is entitled to hypothesise about what would have happened had the employer behaved within the law (the Polkey principle).
It may not matter if the tribunal finds that the employer would have fairly dismissed the staff after the period of consultation for a different reason from the one it relied upon when it actually dismissed them. This means:
- a finding that the dismissal would have occurred in any event is a matter for the tribunal’s own judgment and impression, and not something that the appeal courts would easily interfere with;
- the key focus of tribunals should be the wording of the statute, which says that the tribunal should award what is “just and equitable”, which clearly covers the tribunal decision in Gover; and
- the Polkey principle can be applied where the employer unfairly dismisses the employee for one reason but argues that it would have been able to fairly dismiss them later for a different reason.
- An employee is dismissed because of a restructure of the business, but without a proper consultation. The tribunal finds this dismissal is unfair because the restructure was a sham, but also finds that the employee would have been fairly dismissed six weeks later because of a genuine redundancy.
- An employee is dismissed because the employer held an irrational hostility towards them. This obviously cannot be a fair reason for a dismissal. However, the tribunal finds that the employer would have fairly dismissed the claimant six weeks later for misconduct.
In each of these examples, the tribunal could award the claimant only six weeks’ loss of earnings, a basic award, and a small sum for loss of statutory rights.
The Court of Appeal’s Gover judgment accords with common sense. Why should an employee receive a windfall if they would not have remained in employment for very much longer anyway? However, we will have to wait to see how the case is applied by the tribunals in practice.
Suzanne McKie, barrister and deputy chair, Employment Lawyers Association