Appeal No. UKEAT/0236/12/ZT

EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

	At the Tribunal
	On 23 October 2012

Before
HIS HONOUR JUDGE HAND QC
(SITTING ALONE)

MR G DUTTON	APPELLANT

MR P JONES T/A LLANDOW METALS	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR MICHAEL FORD
(of Counsel)
Instructed by:
Thompsons Solicitors
Agincourt House
14-18 Newport Road
Cardiff
CF24 0SW
	
For the Respondent	No appearance or representation by or on behalf of the Respondent	

SUMMARY
Redundancy – Short-Time Working
The Employment Judge erred in respect of both “the calculation date” and the amount of “a week’s pay”. “The calculation date” should have been that stipulated by section 226(5) and (6) and not section 226(4), which was the date used by the Employment Judge.  “A week’s pay”, where there is short-time working on “the calculation date” should be that provided for by the original contract of employment, notwithstanding the short-time working. 

HIS HONOUR JUDGE HAND QC
Introduction
1.	This is an appeal from the judgment of Employment Judge Sharp sitting at Cardiff on 19 December 2011. To adopt the metaphor of the “road” in the poem by Robert Frost “The Road Not Taken” it involves “the one less travelled by” so far as redundancy payments are concerned because it concerns the entitlement to such a payment arising out of short time working.  It raises the question as to how such a payment is to be calculated when the employee has been on reduced wages because of short time working.  Employment Judge Sharp concluded that the Appellant in this case was entitled to £1440.00 as a redundancy payment, which sum the Appellant contends was a miscalculation resulting in a significant lower amount than his true entitlement, which he has always contended should be his entitlement based on a week’s pay when not on short time working, namely £7500.00.   There was also a claim in respect of unpaid annual leave, as to which there is no appeal.

2.	Mr Glyn Dutton, the Appellant, had worked for a long number of years for the Respondent, Mr Jones, who traded as Llandow Metals.  The latter was present at the Employment Tribunal but has neither appeared nor been represented here and I understood from Mr Michael Ford of counsel, who appeared on behalf of the Appellant, that any payment may well be made by the Secretary of State.

3.	How long the Appellant actually worked may not matter, although I think that the Employment Tribunal may have underestimated the overall length of service.  It was, if I have it correctly Mr Ford, probably about 31 years.  Mr Dutton was over 61 when the critical events in this case took place and had certainly been working for Llandow Metals for 20 years or more, and, as was recognised by Employment Judge Sharp at paragraph 16 of her judgment, consequently he was entitled to have a multiplier of one and a half applied to his “weeks pay” that would be one component in the calculation of any redundancy payment.  The alternative approach to calculation would be to apply that multiplier to the years of service.  Either way the same result is produced.  Employment Judge Sharp calculated a weeks pay to be £48.00; using her approach that became £72.00 when multiplied by 1.5 and £1440.00 when multiplied by the maximum 20 years service.   

Background
4.	The redundancy occurred because, due to the prevailing economic difficulties, the Respondent was unable to provide the Appellant with full‑time working.  He went onto short- time from the start of June 2011.  He was employed as a yard foreman, and he received £250.00 per week gross, as found at paragraph 5 of the judgment and reasons but on short-time working he went from a five‑day week to a one‑day week (see paragraph 2 of the judgment).  Mr Ford told me that it may be the Appellant worked a five‑and‑a‑half‑day week and that the £250.00 took account of a Saturday morning as part of his regular working hours.  I do not think that anything very much turns on that.

5.	The short-time working had been going on for the best part of three months when on 4 October 2011 the Appellant served a notice claiming a redundancy payment.  No counter‑notice was served, and the Appellant resigned, having given one week’s statutory notice, on 11 October 2011, the employment terminating on 18 October 2011.

6.	The right to a redundancy payment is of long standing; it was established by the Redundancy Payments Act 1965, and the statutory provisions are now to be found in Part XI Chapter II of the Employment Rights Act (the Act).  The familiar provisions are those at sections 135‑146.  They are followed by Chapter III of Part XI, which gives the right to payments in respect of lay‑off and short-time.  Like most of us, Employment Judge Sharp, had not travelled frequently over that part of the Act.  When she was faced with the Appellant’s claim for a redundancy payment there was, as she recorded at paragraph 9 of the judgment, discussion between her and those instructing Mr Ford.  In fact, as I understand it from paragraph 7 of the judgment, there had been a hiatus in the proceedings, and the enquiries and investigation referred to there may well have involved the Regional Employment Judge at Cardiff.  When the proceedings resumed, the discussion focussed on section 226(4) of the Act, which is set out at paragraph 9 of the Judgment; section 147(2) of the Act, set out at paragraph 10; and section 148(2), set out at paragraph 11.  At paragraph 13 the following appears:

“The Employment Judge took the view that due to the repeated references in 148(2) to the service of the employee notice claiming redundancy pay that the calculation date was the day before at least 4 consecutive weeks of short‑time working had expired.”

7.	At paragraph 14 Employment Judge Sharp bemoans the lack of decided authority on the topic, and then at paragraph 15 she says she:

“[…] has taken the view that the wording of Section 226(4) combined with Section 148(2), is that the calculation date must be 4 weeks before service of the employees notice of claiming a redundancy payment, which in this case is the 6th September 2011.”

8.	Paragraph 16 puts into effect the calculation that her interpretation of the statute produces.  Employment Judge Sharp calculated that the weekly pay was therefore £48 and that the multiplier was 1.5, and so she adjusted the multiplicand to £72.00, applied the 20‑year cap, and, by virtue of multiplying 72 by 20, arrived at a total of £1,440.00.

The Appeal
9.	It is submitted by Mr Ford that Employment Judge Sharp has misinterpreted the statutory regime.  I should say that the road “less travelled” is not an entirely clear pathway.  It was observed some considerable time ago by Lord McDonald that the statutory provisions “have been the despair of all who have been concerned with the interpretation of industrial legislation since the scheme of statutory entitlement to a redundancy payment was introduced in 1965” (Kenneth MacRae & Co Ltd v Dawson [1984] IRLR 5); Mr Ford pointed out that even the usually reliable IDS Employment Law Handbook on Redundancy has gone wrong at paragraph 6.13 on page 163 when it refers to only section 226(4) of the ERA as being applicable to the calculation of the amount of a redundancy payment in a case of short time working.  I do not think that Employment Judge Sharp can be blamed for having lost her way down this unfamiliar route, as I conclude she did. 
 
10.	In order to demonstrate what has gone wrong, I must myself set off through the provisions of Chapter III of Part XI of the ERA and also look at the week’s pay provisions set out from section 220 onwards in Chapter II of Part XIV, the interpretation part of the Act.

11.	Section 147 tells us what short-time and lay‑off are.  Subsection (2) reads:

“For the purposes of this Part an employee shall be taken to be kept on short time for a week if by reason of a diminution in the work provided for the employee by his employer (being work of a kind which under his contract the employee is employed to do) the employee’s remuneration for the week is less than half a week’s pay.”

Section 148 establishes that in some circumstances an employee who has been laid-off or is on short-time working is eligible for a redundancy payment.  Those circumstances are the giving of the requisite written notice (section 148(1)) when the employee has either been on short-time 
or laid-off (section 148(2)):

“(a) for four or more consecutive weeks of which the last before the service of the notice ended on, or not more than four weeks before, the date of service of the notice”.
 
Paragraph (b) deals with non-consecutive weeks and is not relevant for present purposes.

12.	Therefore in order to decide whether someone is on short‑time working for any particular week, a simple mathematical calculation has to be applied.  The employee’s remuneration for the week – that is to say, the money he is actually paid – must be less than half a week’s pay, which is a statutory concept.  How is that mathematical calculation to be undertaken?  The unknown quantity is a week’s pay.

13.	Chapter II of Part XIV of the Act contains provisions relative to the concept of a week’s pay.  Section 226, which is entitled “Rights on Termination”, provides dates at which a calculation must be made, and section 221(2) tells us about the amount of a week’s pay.  In the case of the Appellant, who I understand was employed in a situation where his remuneration did not vary with the amount of work done, by section 221(2):

“a week’s pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employer works throughout his normal working hours in a week.”

14.	Employment Judge Sharp was entirely correct to refer to section 226(4), as she did at paragraph 9 of her judgment, in order to ascertain whether or not the employee was on short‑time working (see section 147(2)).  He obviously was; he was being paid £48.00 and his normal week’s pay was £250.00.  But she also needed to ascertain a calculation date in order to enable her to decide what the amount of his redundancy payment would be pursuant to section 162 of the Act.  That calculation date is the one defined by section 226(5) and (6) of the Act.

15.	What the Employment Judge failed to understand about section 226(4), which reads:

“Where the calculation is for the purposes of section 147(2), the calculation date is the day immediately preceding the first of the four, or six, weeks referred to in section 148(2).”

was that the reference to section 147(2) makes section 226(4) relevant to the issue of whether or not there is short-time working.  She was concerned with not only that issue but also with the amount of any redundancy payment and for the latter she should have been considering the calculation date prescribed by section 226(5) and (6), so she was applying the wrong subsection.

16.	I diverge slightly to observe that, perhaps not surprisingly, because the provisions are not easily digestible, Employment Judge Sharp had some difficulty in making sense of the statutory regime. She referred to this at paragraphs 13 and 14 of her judgment (referred to above at paragraphs 5 and 6 of this judgment) and reached the conclusion at paragraph 15 (set out in full at paragraph 7 of this judgment – see above):

“… that the calculation date … in this case is the 6th September 2011.”

17.	I doubt, even if she had been following the right route, whether that was the correct date.  In order to reach that conclusion she must have interpreted the words “the first of the four” in section 226(4) as implying the first of the four weeks working back from the date when an employee’s notice was served.  To my mind that cannot be a correct reading of section 226(4); in my view it should be read so as to give effect to the concept set out in section 148(2) of four or more consecutive weeks.  In other words “the first of the four” should be read as the first of the four or more consecutive weeks rather than as four weeks before the notice was given, which is how it has been interpreted by Employment Judge Sharp.  All that is of course irrelevant to this appeal, and I mention it only in case it might help anyone else wandering around these byways.  

18.	In my judgment, for the purposes of calculating the amount of any redundancy payment Employment Judge Sharp should have paid attention not to section 226(4) but to section 226(5).  That subsection starts with the words “Where the calculation is for the purposes of section 162 […]”.  These are precisely the circumstance with which Employment Judge Sharp was dealing; this was an application for a redundancy payment and so the calculation would be for those purposes.  The calculation date was therefore clearly that stipulated by subsections (5) and (6) and not that stipulated by subsection (4), which relates to a calculation date for the purposes of ascertaining whether somebody was or was not on short-term working.

19.	The calculation date in this case for the purposes of subsection (5) is in fact, by subsection (5)(c), the date specified in subsection (6).    Subsection (6) reads:

“The date referred to in subsections (3)(c) and (5)(c) is the date on which notice would have been given had—
(a) the contract been terminable by notice and been terminated by the employer giving such notice as is required by section 86 to terminate the contract, and
(b) the notice expired on the effective date of termination or the relevant date 
(whether in fact those conditions were fulfilled).”

I refer to that because it demonstrates that the concept involved is that of a notional notice period.  

20.	The relevant date for the purposes of short‑time working and lay‑off triggered by having given notice under section 148(1)(a) is to be found in section 153(a) of the Act as being:

“in a case falling within paragraph (a) of subsection (2) of section 148, the date on which the last of the four or more consecutive weeks before the service of the notice came to an end […].”

This is the date needed for determining the period of continuous employment for the purposes of calculating the amount of a redundancy payment under section 162 of the Act and also the alternative date from which to ascertain the calculation date for the purposes of section 221(2) of the Act. 

21.	So for the purpose of calculating a redundancy payment in a short‑time working context, one starts with the end of the last week of consecutive short-time working before the notice given under section 148(1)(a) claiming a redundancy payment and works back from that date to a date when the statutory notice necessary to terminate the employee’s contract of employment would have been given, had it been given.

22.	On the facts of this case, that means, looking to the previous week before the notice claiming a redundancy payment was given on 4 October 2011; in practical terms that would be the previous Saturday, given my understanding that there was in fact Saturday working; otherwise it would be the previous Friday.  Going back from that date over the period of the notice that the employer would have had to give in order to terminate the employment on that date, which in the case of the Appellant would have been 12 weeks’ notice, I think one arrives at 9 July 2011, as the calculation date.  On 9 July 2011 the first issue under section 221(1) would have been whether: 

“… there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.”

23.	If so then his week’s pay would be calculated in accordance with the provisions of section 221(2).  That would have been the amount of money that he would have been paid had he been working his normal working hours.  Section 221(2) reads:

“Subject to section 222, if the employee’s remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week’s pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week.”

24.	In those circumstances, the question that had to be asked was: if the employee had been working for five‑and‑a‑half days in that week, what would he have been paid?  The answer would have been £250.00.  It would have been the same answer if he worked only five days a week.

25.	It will be noticed, however, that both on the date arrived at by Employment Judge Sharp and on the date I have postulated above, the Appellant was on short-time working.  Although she does not say so in terms, it seems to me implicit in the judgment that Employment Judge Sharp was treating the short-term working hours as the “normal working hours”.  If that was the correct approach it would not matter whether the calculation date was July or September because the result would be the same and her answer would be correct, even if her analysis was not.

26.	But in my judgment her approach was not only incorrect in relation to “the calculation date” but also in relation to “a week’s pay”.  Chapter II of Part XIV of the Act is entitled “A Week’s Pay” and it provides a comprehensive set of definitions and mechanisms to enable interested parties to make calculations so as to arrive at “a week’s pay” in any given situation.  In this respect it is broadly divided into two parts; cases where there are normal working hours (sections 221, 222 and 223) and those where there are no normal working hours (section 224).

27.	I do not think that Employment Judge Sharp was treating this case as one in which there were no normal working hours; she does not refer at all to section 224.  Rather, I think it is implicit in her judgment and reasons her analysis was that by September 2011 the Appellant’s short-time working hours had become his “normal working hours”, presumably by some variation to the contract of employment.

28.	In my view, Employment Judge Sharp erred in taking that approach.  In the context of short-time working there is no express parallel provision to that which applies in the context of guarantee payments where the possibility of a new or varied contract is contemplated by Parliament and if that is the case then the original contract is deemed to be still in force (see section 30(5) of the Act).  In my judgment, however, in the present context an employee, who goes on to short-time working, is not to be regarded as having accepted a permanent variation in his terms and conditions of employment involving a reduction in his or her “normal working hours”.  Consequently the “contract of employment in force on the calculation date” remains the original contract of employment even if there is short-time working on that date.  In order to avoid the unjust result, which the interpretation of section 221 by Employment Judge Sharp has brought about it is necessary to regard the consent to short time working as not varying the contract or waiving any rights to regard the original contract as still in force.

29.	It follows that Employment Judge Sharp miscalculated the amount of the redundancy payment in this case because she used the wrong week’s pay, having looked at the wrong subsection, and, had she arrived at the result contended for by Mr Ford on this appeal, the multiplicand would have been £250.00 when multiplied by 30 – that is to say, to take account of the one‑and‑a‑half weeks’ pay that should form the basis of the calculation – and the amount would have been £7,500.00.

Disposal
30.	I am conscious of the fact that the Respondent, Mr Jones, is not here and has not had an opportunity to say anything in relation to this matter.  I am therefore not going to substitute my own calculation; I am going to remit the matter to Employment Judge Sharp for a calculation to be made in accordance with what I have just said.  It seems to me that Mr Jones should be offered an opportunity to say what he wishes to say after he has seen this Judgment.  I will leave it to Employment Judge Sharp as to what directions are given and make only the observation that it might be sensible to deal with the matter by written representation from Mr Jones, if he wishes to make one, and then to dispose of this matter on paper so as to avoid the need for a further hearing and unnecessary expenditure on costs.