The measure of success of any law of the termination of employment is the extent to which re-employment is attained where appropriate. By this measure, the law of both wrongful dismissal and unfair dismissal must be judged a failure. Discuss.
The measure of success of any law of the termination of employment is the extent to which re-employment is attained where appropriate. By this measure, the law of both wrongful dismissal and unfair dismissal must be judged a failure.
Critically discuss the above statements.
When the Industrial Relations Act 1971 introduced a right to claim unfair dismissal, it filled a sorry gap in the common law. Unlike civil law systems, the courts had not qualified the presumption in contracts of employment that an employer could dismiss an employee for any reason whatsoever, in any manner the employer chose, provided that reasonable notice was given. The Act permitted employees to challenge for the first time both the grounds and the manner of dismissal, and, if their challenge was successful, to receive 'just and equitable' compensation.
It is now found in Section 94 of EAR 1996 proclaims that, subject to exceptions - 'an employee shall have the right not to be unfairly dismissed by is employer'. The elaboration of this caused Phillips J to explain: 'It is narrowly and to some extent arbitrarily defined...it is a form of words which could be translated as being equivalent to dismissal contrary to statute and to which the label unfair dismissal has been given1.
Moreover, in some ways the statute does not adopt the most direct approach to the definition of an unfair dismissal. Once eligibility and dismissal have been established, the determination is twofold. First, the employer must prove the reason or principle reason for the dismissal. Secondly, for these potentially fair reasons to be actually fair in any particular case it must be reasonable in all the circumstances for the employer to treat the reason he has given as a reason to dismiss.
When an employment tribunal finds that a complaint of unfair dismissal is well founded, it may make an order for the reinstatement (this is to give back the old job on existing terms, including all back pay, with full continuity) or re-engagement (rehire but under a new contract) of the complainant, under sections 113 and 114 EAR 96, or an order for compensation. In practice, a successful complainant will in most cases receive an award of compensation, which is made up of a basic award and a compensatory award. Orders for reinstatement and re-engagement are rare.
The tribunal's first step on finding a dismissal to be unfair should be to explain to the employee the possibility of an order for reinstatement or re-engagement, and to ask him whether he wishes such an order to be made2(see also, Pirelli General Cable Works Ltd v Murray (1979)3. Although the tribunal's failure to ask the applicant whether he wishes to be reinstated or re-engaged does not render its decision on remedies a nullity, at least where the applicant was legally represented (Cowley v Manson Timber Ltd (1995)4), an appeal tribunal should be very ready to remit a case for further consideration of remedy in these circumstances (Constantine v McGregor Cory Ltd (2000)5). Even where an employer has offered to pay the maximum possible award of compensation, but has not admitted that the dismissal was unfair, the employee is entitled to proceed with his complaint (Telephone Information Services Ltd v Wilkinson (1991)6; see also NRG Victory Reinsurance Ltd v Alexander (1992)7).
For many years, there has been a debate about why the law on unfair dismissal has been unable to deliver re-employment as the primary remedy8. When the unfair dismissal legislation was first introduced re-employment constituted a higher proportion of conciliated settlements than it did of remedies obtained by applicants who succeeded at hearing. However, as the years passed the re-employment proportion of remedies at both stages declined.
A tribunal has a wide discretion in discretion in deciding whether either order (reinstatement or re-engagement) is appropriate. However, three factors on which the tribunal is likely to concentrate. Firstly, is the employee's wish to make such an order (s112)? Secondly, is the approach to practicability of complying with the orders?
The fact that practicability arises at the two separate stages led the EAT in Timex Corpn v Thomson (1981)9 to conclude that a tribunal could properly make an order for reinstatement or re-engagement even if it was not convinced that the order was necessarily practicable, provided it thought that it might succeed. The court, Browne-Wilkinson J presiding, said this:
'It is submitted that ... the [employment] tribunal failed to give effect to the requirements of [s 116(2)-(4)] of the Act which requires that the tribunal "shall take into account ... whether it is practicable for the employer to comply with an order for re-engagement". It was said that the only evidence before the tribunal indicated that re-engagement was not practicable and the tribunal had overlooked the difficulty apparent in re-employment a senior manager in the circumstances of this case. Again, we reject this argument. [Section 116(2)-(4)] only requires the tribunal to "have regard" to matters of practicability. In our judgment there is no need for a tribunal to reach a final conclusion that re-engagement is practicable before making any such order. If, having made an order for re-engagement, it proves not to be practicable to perform it there are no adverse consequences for the employer. If the employee asks for compensation by reasons of the failure of the employers to re-engage, no order for additional compensation can be made under [s.106], if the employer satisfies the tribunal that it was not practicable to comply with the order. Therefore, at that stage the tribunal will have to decide, looking at the matter in the knowledge of the actual facts which have occurred, whether or not it was practicable to carry out the order. At the stage when the order to re-engage is being made, it is not our judgment necessary for the tribunal to make a definite finding that the order for re-engagement was practicable. They must have regard to the question of practicability and if they are satisfied that it is unlikely to be effective, they will no doubt not make an order. The only strict requirement is that they should have regard to practicability'.
This analysis was adopted with approval by the Court of Appeal in Port of London Authority v Payne and others (1994)10 (also, Meridian Ltd v Gomersall and another (1977)11; Clancy v Cannock Chase Technical College (2001)12).
The meaning of practicability has been considered in a number of decisions (Port of London Authority v Payne and others (1994)13; Coleman v Magnet Joinery Ltd (1974)14), a differently worded predecessor of the current provision. In the Port of London case, Neill LJ said this:
'The standard must not be set too high. The employer cannot be expected to explore ...
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This analysis was adopted with approval by the Court of Appeal in Port of London Authority v Payne and others (1994)10 (also, Meridian Ltd v Gomersall and another (1977)11; Clancy v Cannock Chase Technical College (2001)12).
The meaning of practicability has been considered in a number of decisions (Port of London Authority v Payne and others (1994)13; Coleman v Magnet Joinery Ltd (1974)14), a differently worded predecessor of the current provision. In the Port of London case, Neill LJ said this:
'The standard must not be set too high. The employer cannot be expected to explore every possible avenue which ingenuity might suggest. The employer does not have to show that reinstatement or re-engagement was impossible. It is a matter of what is practicable in the circumstances of the employer's business at the relevant time'.
In the Coleman case, Stephenson LJ also emphasized that what was practicable was not to be equated with what was possible, and that it was necessary for the tribunal to consider the industrial relations of the situation. In that case, it was held not practicable to re-engage an employee where the consequences were likely to be serious industrial strife, although clearly it was possible for the employee to be re-engaged.
Other factors which have been thought relevant in justifying a tribunal refusing an order for reinstatement of re-engagement are: the fact that the atmosphere in the factory is poisoned (Meridian Ltd v Gomersall (1977)15; Coleman v Toleman's Delivery Service Ltd (1973)16; Schembri v Scot Bowyers Ltd (1973))17; the fact that the employee has shown that she distrusts or lacks confidence in her employer and would not be a satisfactory employee if reinstated (Nothman v London Borough of Barnet (No 2) (1980))18; where the job involves contact with the public and the employee could not be trusted with them (ILEA v Gravett (1988))19; where the dismissal arose out of a change in policy and reinstatement would involve a return to the discarded policy (Redbridge London Borough Council v Fishman (1978))20; also the fact that the employee would be insufficiently employed (Regional Council v McIntosh (1982))21; and, possible, in any situation where the parties are in a close personal relationship at work.
The last exception was suggested by Lord McDonald in Enessy Co SA t/a The Tulchan Estate v Minoprio and Minoprio (1978)22. The case concerned the employer's non-compliance with an order to reinstate a married couple who had been working as cooks in a hotel in the Scottish Highlands. Lord McDonald made the following comments, obiter, about the practicability of reinstatement:
'... It is not realistic to make an order of this nature in a case where the parties involved were in close personal relationship to each other such as they were in the present situation. It is one thing to make an order for reinstatement where the employee concerned works in a factory or other substantial organization; it is another to do so in the case of a small employer with a few staff... Where there must exist a close personal relationship as is the case here reinstatement can only be appropriate in exceptional circumstances.'
The last factor is whether the employee has caused or contributed to his dismissal. In Boots Co plc v Lees-Collier (1986)23, the EAT held that where a tribunal has found that the employee did not contribute to his dismissal so as to justify any reduction in his compensation, it could not properly conclude that he had so contributed when considering whether the remedies of reinstatement or re-engagement should be granted, i.e. the test of contributory fault was the same in both contexts. Furthermore, having determined this question in relation to compensation, it was not necessary to address the point again in terms when deciding whether reinstatement or re-engagement was appropriate. However, if a tribunal errs in law in its assessment of contributory fault, this may in turn provide a justification for interfering with an order it has made for reinstatement or re-engagement (Nairne v Highland and Islands Fire Brigade (1989)24).
It must therefore be asked why more employees are not re-employed when they have been unfairly dismissed. Firstly, it should be acknowledged that often employees simply will not want to go back to work for employers who have treated them badly. There has been some discussion over the role of ACAS conciliation officers in the question of re-employment. Conciliation officers are under a statutory duty to promote a settlement of a dispute, and seek to promote the reinstatement or re-engagement of the complainant by the employer, or by a successor of the employer or by an associated employer25. ACAS stressed in its 1994 annual report that the circumstances of many cases often cause the parties to feel that such a remedy is inappropriate.26 It goes on to stress that 're-employment is more likely to be a possibility if talks can commence with the parties soon after the dismissal has occurred'.
There have been a number of criticisms of ACAS and the tribunal system in the context of the low level of re-employment following unfair dismissal claims. The most comprehensive analysis of the issue was that carried out by Dickens et al.,27who demonstrated that there did appear to be a higher level of desire among applicants for reinstatement than was borne out by the percentage of applicants who were actually reinstated. They also demonstrated that the proportion of conciliated settlements that involve reinstatement has declined. The study also revealed that over a quarter of employers who made a settlement did so because they admitted that they had not followed the correct procedure, and there are strong arguments that there should be more orders of reinstatement or re-engagement. Nevertheless, if the law provides for reinstatement, why is the level of reinstatement and re-engagement so low unless the tribunals and others in the system are failing to take it seriously enough, or the law is not strong enough?
To some extent the nature of the problem was acknowledge in paragraph 3(4) of the Fairness at work White Paper28. This expressed the hope 'that the voluntary arbitration alternative provided by ACAS will create a change of culture so that individuals who have been dismissed unfairly are more likely to get their jobs back'. (The case of Wood Group Heavy Industrial Turbines Ltd v Crossan (1998)29, provides a salutary reminder of the vital role that the EAT can play in either promoting or inhibiting re-employment.)
The key issue in relation to bringing about re-employment, it is suggested that it is one of speed and time. The quicker an application comes before the tribunal or other ad judicatory body, the easier it will be for an employee to be re-employed. In another word, the quicker the application is determined the less likely it its that the employee will be looking for alternative work; the less the employee's skills and job familiarity will have diminished; and the less likely it is that the employer will have replaced the dismissed employee.
If the government is serious about a change of culture to re-employment, it will not enough to rely on the voluntary arbitration scheme or to put indirect pressure on employers by raising the limit on the compensatory award. David Lewis discussed four proposals30.
Firstly, it is sometimes suggested that re-employment must be speedily effected if it is to be worthwhile. One method of dealing with delays would be to extend the interim relief provisions (Sections 128-32 ERA 1996) to all cases where re-employment is sought. Secondly, one reason that both employers and employees may be reluctant to accept re-employment as an appropriate remedy is that they are unlikely to have had experience of it. A possible solution might be to introduce a system of trial period. Under such a system, consent to re-employment would be provisional in the sense that either party could apply to have compensation substituted before the end of the trial period. A third proposal would be to increase the size of the additional award under Section 117 ERA 1996. However, raising the cost of non-compliance will do nothing of itself to increase the number of re-employment orders made. Indeed, it might result in fewer orders it tribunals became more cautious about re-employment because of the more onerous consequences for recalcitrant employers.
A forth proposal would be to amend the criteria for assessing the appropriateness of re-employment. Currently, Section 116 ERA 1996 requires tribunals to be satisfied that it would be 'practicable for the employer to comply' before making a re-employment order. Not surprisingly, given this managerial perspective, tribunals have relied heavily on the assessments of employers. What is proposed is that tribunals would be required to order the reinstatement of any willing successful applicants who had not caused or contributed to their dismissal. Where the applicant was at fault to some extent, the discretion to order reinstatement, re-engagement, or neither, would remain. If the terms of an order are not fully complied with or re-employment does not take place, employers would be able to justify on-compliance on the ground of impracticability. In David Lewis's opinion31, if the objective is to create a culture of re-employment, employers must be required to provide convincing reasons why they should not restore what they have unlawfully taken away.
Hugh Collin in his book, Justice in Dismissal32, also debate about reinstatement.
If the overriding aim of the legislation is improving job security then Collins considers that this is better done by making dismissal an expensive option for an employer then by ordering reinstatement which, he argues, means that the employer has paid no more than she would have done anyway. This is why he favours punitive damages for his civil liberties cases and 'substantial' compensation for disciplinary dismissals.
He admits that if corrective justice is the aim, reinstatement looks like a better remedy than compensation because it most accurately returns the employee to the position that she would have been in but for the unfair dismissal. However, even if corrective justice were the aim - and he is not convinced that it is - there are three other considerations which he believes suggest that compensation rather than reinstatement. They are, firstly, proportionality. If the employee is partly to blame, then she should not get the full benefits of reinstatement: the compensation remedy is flexible enough to take account of that.
Secondly, minimizing social cost. If reinstatement is a probability the employee is discourages from mitigating her loss by trying to find alternative employment. It is likely that another hearing will be required, producing additional costs to the system.
Finally, managerial authority. Since in the end managerial authority can prevail, in that failure to comply with a reinstatement order simply results in a requirement to pay a not very large sum by way of additional award.
Now let us turn to look at the weak protections for employees dismissed in breach of contract.
As a remedy for wrongful dismissal, damages were generally limited to compensation for the loss of remuneration during the notice period which the employee had been wrongfully denied. (Addis v Gramophone (1909)33; Lavarack v Woods of Colchester Ltd (1967)34). In the case of fixed term contracts for higher paid employees, or employees with big salaries and long notice periods, the amounts could be considerable. (O'Laoire v Jackel International Ltd (No2) (1991)35). In most cases, however, the amount was and is measured in weeks, now regulated by the standard minima established by s 49 of EPCA 1978.
Damages for loss of reputation or to compensate for the distress caused by the manner of dismissal are rarely if ever obtained. (Bliss v South East Thames Regional Health Authority (1985)36; Marbe v George Edwards (Daly's Theatre) Ltd (1928)37) One exception that survives today is the case where an employee is deprived of a claim under statute law owing to a wrongful dismissal precluding eligibility because of the time limit. (Stapp v Shaftesbury Society (1982)38)
Finally, the courts have also placed defendants under a duty to mitigate their loss, by looking for a new employment even during the period corresponding to the notice entitlement. (Yetton v Eastwoods Froy Ltd (1966)39)
In recent years, the courts have indicated that they are prepared, in certain circumstances, to view the employer's repudiatory act as not automatically terminating the contract, but rather presenting employees with an option either to accept the employer's repudiatory conduct as terminating the contract, or to choose to keep certain terms, or the whole, of the contract on foot so as to enforce their contractual or statutory rights (Gunton v Richmond-upon-Thames London Borough Council (1981)40).
The first hint of a new remedy of specific performance was Hill v C A Parsons & Co Ltd41, in which the Court of Appeal held that in a case where the employer, reluctantly enforcing a closed shop arrangement, gave adequate notice of termination to a senior employee of long service, an injunction could be granted to the employee restraining the employer from terminating the employment contract. Nevertheless, it established an exception to the general rule that courts would not grant specific performance of contracts of service. Sachs LJ made the point that it was necessary for the plaintiffs to establish at trial that the employer's repudiation of the contract did not terminate the contract in the absence of it being accepted; and that the contract would continue to subsist until the end of the period or proper notice to which the employee was entitled.
Shortly afterwards, in Chappell v Times Newspaper Ltd (1975)42, this window for employee injunctions appeared to be closed again. As Lane LJ stated:
'Very rarely indeed will the court enforce, either by specific performance or by injunction, a contract for services; either at the behest of the employers or of the employee. The reason is obvious: if one party has no faith in the honesty or integrity or the loyalty of the other to force him to serve or to employ that other is a plain recipe for disaster.'
However, there are a number of injunctions were granted to employees whose contracts of employment had been repudiated by employers. (See, Jones v Lee (1980)43; Gunton v Richmond-upon-Thames London Borough Council (1981)44; R v BBC, ex p Lavelle (1983)45; Irani v Southampton and South West Hampshire Health Authority (1985)46; Robb v London Borough of Hammersmith and Fulham (1991)47; Hughes v London Borough of Southward (1988)48 and Powell v London Borough of Brent (1987)49)
What is clear is that, injunctions have hardly been granted to restrain dismissal, and there are no signs of them becoming anything more than a very exceptional remedy. Most wrongfully dismissed employees are left just with a claim for damages, limited to the period during which the contract could lawfully be terminated by the employer - the notice period. (Lavarack v Woods (1967)50). The minimum lengths of notice laid down by statute remain extremely short51; for many employee will not be entitled to damages for his or her reasonable expectation of continuing in the job perhaps until retirement. Nor can he or she recover for the humiliating manner of dismissal (Addis v Gramophone Co. Ltd (1909)52), or for any resulting stigma in the labour market (Malik v BCCI (1995)53).
With high levels of unemployment and improvements in information flows in the labour market, a worker wrongfully accused of misconduct or incompetence may be effectively debarred from working again.
At present, the courts are exceptionally prepared to add on the length of time it would have taken the employer to go through an agreed disciplinary procedure.54 But if the amount of damages is judged by reference to the legal rights of the parties independent of the purported reason for dismissal, damages should never exceed the notice period, for an employee has a maximum legal expectation of continued employment for the period of notice and no more. Only if weight is given to the breach of the procedure is there a justification for adding on the disciplinary period, as Buckley LJ considered was the case in Gunton v Richmond London Borough Council (1980)55.
Yet, once it is recognized that respect for contractual dismissal procedures is difficult to reconcile with a rule limiting damages to the notice period, it is hard to see why these damages should simply reflect the length of time it would take to go through that procedure. Rather, it seems that the court should go on to access the likelihood that, had the procedure been followed, the employee would not have been dismissed. For the exercise is no longer one of treating an employee as being legally vulnerable to dismissal on notice at any time; instead, it involves giving effect to the reasonable expectations of the employee in the circumstances of the particular dismissal. There is no reason why here, the courts cannot assess the value of the lost chance, an exercise that is often conducted in unfair dismissal cases.
It is hard to assess what effect higher levels of contractual damages would have on restraining dismissals; but those who consider how much workplace practice has altered because of personal injury litigation. Little has been said, though, of what to do for an employee who has actually been dismissed other than to give a right of action.
From the discussion above, we can know that despite the statute's emphasis on re-employment as the remedy for unfair dismissed workers and the strengthening of this remedy in 1976, tribunals have always been reluctant to award it. The industrial tribunals pay a lot of attention to the employers' view regarding the acceptability and practicability of re-employment and rarely award the remedy in the face of employer opposition. However, from the employer's definition of success, which is whether the applicant on return would make a satisfactory employee and cause no managerial problems rather than considering the employee interests which might be served by re-employment, is what tribunals do tend to adopt. Therefore, I do not think that by looking only at the re-employment rate will conclude that the law of both wrongful dismissal and unfair dismissal is a failure.
Bibliography:
* Steven D. Anderman, The Law of Unfair Dismissal, 3rd edition, Butterworths Law 2001
* Bowers & Honeyball, Textbook on Labour Law, 7th edition, Blackstone Press 2002
* Michael Jefferson, Principles of employment, 4th edition, Cavendish 2000
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* Aileen McColgan, The Future of Labour Law, A Cassell Imprint 1996
* Hugh Collins, Justice in Dismissal, Clarendon Press 1992
* R. Dworkin, Law's Empire, Harvard University Press 1986
* Richard Kidner, Blackstone's Statutes on Employment 2002-2003
* John McMallen & Ian Smith, Breach of the Employment Contract and Wrongful Dismissal, Butterworths 2002
* D.G. Cracknell, Employment Law, 2nd edition, Old Bailey Press 2002
* Richard Painter & Anne Holmes, Cases and Materials on Employment Law, 4th edition, Oxford University Press 2002
* Simon Dickens & Morris, Labour Law, 3rd edition, Butterworths 2001
* Michael Duggan, Unfair Dismissal, EMIS Professional Publishing 2000
* Gwyneth Pitt, Employment Law, 4th edition, Sweet & Maxwell 2000
* M. Rich & I. Edwards & H. Mead, Mead's Unfair dismissal, 5th edition, Sweet & Maxwell 1994
W. Devis & Sons Ltd v Atkins (1977)
2 ERA 1996, s 112(1)
3 IRLR 190 EAT
4 ICR 367
5 ICR 938
6 IRLR 148
7 ICR 675
8 Dickens et al, Dismissed: A Study of Unfair Dismissal and the Industrial Tribunal System, 1985
9 IRLR 522
0 IRLR 7 CA
1 IRLR 425 EAT
2 IRLR 331 EAT
3 IRLR 7 CA
4 IRLR 343 CA
5 IRLR 425 EAT
6 IRLR 67 EAT
7 IRLR 110 EAT
8 IRLR 65 CA
9 IRLR 497
20 IRLR 69
21 IRLR 272 EAT
22 IRLR 489 EAT
23 IRLR 485 EAT
24 IRLR 366 CS
25 S 134(2)(a) EP(C) A 1978
26 ACAS Annual Report 1994, p. 52
27 L. Dickens et al., Dismissed (1985)
28 Cm 3968, 1998
29 IRLR 680 EAT
30 The Aftermath of Tribunal Reinstatement and Re-engagement, Department of Employment, Research Paper 23, 1981
31 David Lewis, ILJ 1999.28 (183)
32 H Collins, Justice in Dismissal, Clarendon Press 1992
33 AC 488 HL
34 1 QB 278
35 IRLR 170 CA
36 IRLR 308
37 1 KB 269
38 IRLR 326 CA
39 3 All ER 353
40 Ch 448
41 (1972) Ch 305
42 IRLR 90 HC
43 IRLR 67 CA
44 Ch 448
45 1 All ER 241
46 IRLR 203 CA
47 IRLR 72 HC
48 IRLR 55 HC
49 IRLR 466 CA
50 2 QB 278
51 s. 49 Employment Protection (Consolidation) Act 1978
52 AC 483
53 IRLR 375 CA
54 The Court of Appeal in Boyo was reluctant to follow Gunton on this point
55 IRLR 321
