Appeal No. UKEAT/0265/11/LA

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

	At the Tribunal
	On 19 July 2012
	   Judgment handed down on 3 August 2012

Before
THE HONOURABLE MR JUSTICE SUPPERSTONE
MR A HARRIS
MR J MALLENDER

MR T MASSON	APPELLANT

MEGGITT AVIONICS LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR T MASSON
(The Appellant in Person)	
For the Respondent	MR GAVIN MANSFIELD 
(of Counsel)
Instructed by: 
EEF Ltd 
Legal Services
Broadway House
Tothill Street
London
SW1H 9NQ

SUMMARY
UNFAIR DISMISSAL
Dismissal for lack of capability
Automatic unfair dismissal

Appeal against decision of Employment Tribunal that R did not unfairly dismiss A for lack of capability.  No finding made by ET as to whether R contemplated dismissing A before 5 April 2009 and therefore whether Employment Rights Act 1996, s.98A applied.  Further, no express finding made by ET as to whether R had reasonable ground for belief in A’s lack of capability.  

Held, allowing the appeal: 
(1) ET erred in failing to find whether Employment Rights Act 1996, s.98A applied.  EAT not satisfied that had ET considered the matter it could only have concluded that there had been no failure by R to comply with the statutory procedure. 

(2) The ET erred in failing the make a finding as to whether R had reasonable grounds for belief in A’s lack of capability. 

Claim for unfair dismissal remitted to the Employment Tribunal.  

THE HONOURABLE MR JUSTICE SUPPERSTONE

1.	This is an appeal against the decision of an Employment Tribunal sitting at Southampton and sent to the parties on 4 November 2010 in respect of the finding by the Tribunal that the Respondent did not unfairly dismiss the Appellant (who we shall refer to as “the Claimant”).  

2.	There is no appeal against the Tribunal’s decision that the Respondent did not discriminate against the Claimant on the grounds of sex.  

3.	The Claimant started work at the Respondent on 13 March 2000 and was employed as an electronic hardware design engineer specialising in designs for use in flight safety critical avionics equipment.  

4.	By letter dated 4 February 2009 the Claimant was informed he was being placed on the Respondent’s formal capability procedure.  The letter, in so far as is material, states: 

“CAPABILITY POLICY – STAGE ONE – INITIAL INTERVIEW
Further to your recent meeting with Jerome Evans, Engineering Capability Manager, I can confirm that your performance is not to the level expected by the Company.  
As discussed in order to help you improve, Jerome will hold a Stage One meeting with you on Monday 9 February 2009 … to commence formal Performance Management under the Capability Policy….  At this meeting, the process for reviewing and monitoring your progress against performance objectives will be outlined. …
You have the right to be accompanied at this meeting by a fellow employee or an accredited trade union representative, should you wish.  
You will be expected to reach the required standard of performance by a specific date which will be discussed in this meeting.  At the end of this period the Company will review the situation and you must be aware that if your performance does not improve to the required standard by the specified date then the Company will proceed to Stage Two of the Capability Policy. 
You must also be aware that should your performance continue to not meet the standard required then it could ultimately lead to redeployment to an alternative position or if this is not possible, termination of your contract.”

5.	At the meeting the Claimant was informed that he would be expected to reach the required standard of performance by 9 May 2009.  By letter dated 11 June 2009 the Claimant was informed that his performance was still not to the level expected by the Respondent and therefore the Respondent would proceed to Stage Two of the Capability Policy.  On 3 August 2009 he was told, as was confirmed in a letter dated 4 August 2009, that the Respondent had concluded that his performance had again not improved to the required standard and therefore the Respondent would proceed to Stage Three of the Capability Policy.  During the course of the process the Claimant both appealed the Respondent’s decisions and raised grievances.  

6.	On 25 August 2009 the Respondent wrote to the Claimant as follows: 

“Capability Stage 3 meeting – Dismissal 
This letter is to confirm the outcome of the Stage 3 Capability meeting on 25 August 2009.  
You were told following this meeting that consideration had been given to your discussions during the meeting and to the Capability procedure which commenced on 9 February 2009.  As you failed to satisfactorily make the performance improvements required in each stage of the Capability procedure, I can confirm that it was decided that your contract be terminated with effect from 25 August 2009.”

7.	The Claimant’s appeal against that decision was dismissed on 8 September 2009. 

8.	The Tribunal directed themselves at paragraph 15 in these terms: 

“15. The Tribunal reminds itself that in considering a capability dismissal it is for the Respondent to show that the reason for dismissal is capability, which in this case the Respondent did.  It must then show that the lack of capability complained of was honestly believed by the Respondent and the grounds for such belief were reasonable following a fair investigation.”

9.	At paragraphs 16 and 17 the Tribunal proceeded as follows: 

“16. The Tribunal is satisfied the Respondent genuinely believed in the Claimant’s lack of capability to be able to perform properly his employment duties following a thorough investigation by Mr Evans who gave the Claimant many opportunities to identify and appreciate what was required of him in order to meet the standard sought.  The first stage consisted of ten review meetings extending over three months and the second stage took a further six weeks.  The Claimant was given every opportunity to demonstrate he could meet the Respondent’s requirements and the Tribunal is satisfied the Respondent genuinely believed he did not and was unable to meet these requirements.  The Claimant was given an opportunity to appeal at each stage, which he exercised, and the Tribunal is satisfied those appeals were conducted properly and fairly.  The Tribunal therefore concludes the procedure was fair and that the Respondent’s decision to dismiss the Claimant fell within a band of reasonable responses by a reasonable employer. 
17. It follows that the Tribunal finds the Claimant was fairly dismissed.”

10.	The Claimant, who appears in person, challenges the decision of the Tribunal before us on two grounds.  First, he submits that he was automatically unfairly dismissed contrary to s.98A of the Employment Rights Act 1996.  Second he submits that the Tribunal failed to follow their own self-direction at paragraph 15 of their decision and did not decide whether the Respondent had reasonable grounds for their belief in the Claimant’s lack of capability.  

Ground 1: the applicability of the Employment Rights Act 1996, s.98A
11.	S.98A provides, so far as is material: 

“(1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if—
(a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal.  
(2) Subject to sub-section (1), failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by itself making the employer’s action unreasonable if he shows that he would have decided to dismiss the employee if he had followed the procedure.”

12.	By s.29 of the Employment Act 2002 the Statutory Dispute Resolution Procedures set out in Schedule 2 have effect.  Schedule 2 provided for a Standard Procedure (paragraphs 1-3 of Schedule 2).  By Regulation 3 of the Employment Act 2002 (Dispute Resolution) Regulations 2004 (“the Regulations”) the Standard Procedure applies when an employer contemplates dismissing or taking relevant disciplinary action against an employee.  

13.	The material parts of the Standard Procedure set out in Part 1 of Schedule 2 are as follows: 

“1. Step 1: statement of grounds for action and invitation to meeting 
(1) The employer must set out in writing the employee’s alleged conduct or characteristics, or other circumstances, which lead him to contemplate dismissing or taking disciplinary action against the employee.  
(2) The employer must send the statement or a copy of it to the employee and invite the employee to attend a meeting to discuss the matter.  
2. Step 2: meeting 
(1) The meeting must take place before action is taken, except in the case where the disciplinary action consists of suspension.  
(2) The meeting must not take place unless—
(a) the employer has informed the employee what the basis was for including in the statement under paragraph 1(1) the ground or grounds given in it, and 
(b) the employee has had a reasonable opportunity to consider his response to that information.”

14.	S.98A was repealed with effect from 5 April 2009 by the Employment Act 2008, subject to transitional provisions contained in the Employment Act 2008 (Commencement No.1, Transitional Provisions and Savings) Order.  By paragraph 2(1) of Part 1 to the Schedule to the Order the repeal of s.98A shall not have effect where on or before 5 April 2009 the standard dismissal and disciplinary procedures apply by virtue of Regulation 3 of the Regulations and on or before that date the employer has complied with the requirements of paragraph 1 or 2 of Schedule 2 to the 2002 Act.  

15.	Mr Masson relies on the letter of 4 February 2009 as constituting a step one letter for the purpose of the standard procedure, being an action taken before 5 April 2009.  In response, Mr Mansfield, for the Respondent, submits that the dismissal took place on 25 August 2009, some four months after s.98A was repealed and there was no issue raised as to the applicability of the standard procedure in the Claim Form or before the Tribunal.  

16.	Further Mr Mansfield submits that as at the date of the letter of 4 February 2009 the Respondent was only contemplating taking stage one action which may result in a decision to move to stage two (which decision would in itself be subject to appeal).  That, he submits, is confirmed by the terms of the letter dated 18 February 2009, written after the stage one capability meeting, which makes no mention of termination of contract.  Mr Mansfield submits that “contemplating” dismissal requires an employer to have an intention that there may be a dismissal, albeit that intention may be one of a range of possible courses of action an employer may take.  That is a distinct, narrower concept, he submits, to merely informing an employee that one possible consequence at the end of a multi-stage process is dismissal.  

17.	Mr Mansfield, tentatively (as he himself said) referred us to the line of authority on the issue as to when an employer is taken to be contemplating redundancies in the context of collective redundancy consultation under s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992.  He submits that although the state of the law is unclear, the earliest that an employer is taken to be contemplating redundancies is where there are clear, albeit provisional proposals, that if implemented, will almost inevitably result in redundancies (see, in particular, Akavon Erityisalojen Keskusliitto (AEK)ry v Fujitsu Siemens Computers Oy [2010] ICR 444 and United States of America v Nolan [2011] IRLR 40.  

18.	We do not think that consideration of when action is taken to be contemplated in the very different statutory context of collective redundancy consultation is of assistance.  There is rather more force in Mr Mansfield’s submission that under the Respondent’s Capability Policy it is not until Stage Three, or at the earliest Stage Two, that step 1 under the standard procedure commences; only then is there a letter in relation to the dismissal of an employee.  However we consider that the express reference to the possibility of termination of the Claimant’s contract in the letter of 4 February 2009 indicates that in this case at Stage One the Respondent was contemplating the Claimant’s dismissal.  

19.	In Venniri v Autodex Ltd UKEAT/0436/07 HHJ David Richardson stated at paragraph 34: 

“In our judgment s.98A(1) of the Employment Rights Act 1996 is part of the essential fabric of unfair dismissal law as presently enacted by Parliament.  Whether there is an applicable procedure, whether there has been ‘non-completion’ of that procedure, and whether that non-completion is wholly or mainly attributable to failure by the employer to comply with its requirements, are matters which the Tribunal should have in mind in every unfair dismissal case.  It is not necessary for a claimant to raise s.98A(1) explicitly; the Tribunal should have the matter in mind as an issue.” 

20.	We agree.  This remains the position under the transitional provisions that are applicable in the present case.  The Claimant, like Mr Venniri, appeared in person.  There is an issue between the parties as to whether or not the Claimant alleged that he had been automatically unfairly dismissed.  The Claimant says he did.  HHJ Hand QC noted in his judgment at the preliminary hearing that Mrs Butlin, who then appeared on his behalf, said that “he had raised explicitly the matter in the course of closing submissions and been told that Schedule 2 and the regulations made under the Employment Act 2002 did not apply.” (Para 10).  Mr Mansfield at paragraph 15 of his skeleton argument states: “During submissions Mr Masson made reference to the 2004 ACAS Code, and was told by the Employment Judge that the procedure referred to in that Code was not applicable… .  The provisions of the Code relied on did not specifically indicate that it was being asserted that a SDDP applied nor that there had been a failure to complete such a procedure.”  The Tribunal in its decision does not consider the transitional provisions.  In our judgment on the facts of the present case and, in particular, in the light of the terms of the letter of 4 February 2009 it had an obligation to do so.  

21.	In the alternative, Mr Mansfield submits, that in fact all the statutory requirements had been complied with.  

22.	Paragraph 16 of the Amended Notice of Appeal sets out the Claimant’s case that the evidence before the Tribunal showed that the Standard Procedure had not been complied with:
(a)	“The Appellant specifically queried the basis for the process at a meeting on 9 February 2009; 

(b)	In the Appellant’s appeal against the move from stage 1 to stage 2 of the process, he stated that matters were still vague, he was unclear about the basis for the process and that the goalposts kept moving; 

(c)	The Respondent accepted in the outcome of the stage 1 appeal that the initial meeting ‘needed more structure and examples of poor performance should have been given’; 

(d)	The Appellant repeated his complaint as to lack of clarity for the basis of the process in his appeal against the move from stage 2 to stage 3 of the process.”

23.	In response Mr Mansfield submits that each of the requirements of the standard procedure were complied with by the Respondent: 
(a)	First, on the Claimant’s own case, there was a step one letter on 4 February 2009.  Subsequent letters in respect of the outcome of stage one and the stage two and three letters make clear the grounds upon which the Claimant was being subjected to the capability procedure.  

(b)	The Claimant was invited to attend, and did attend, meetings on 9 February, 8 May, 12 June, 3 August, 13 August and 25 August, at each of which the concerns about capability were explained to him and he was given an opportunity to respond to those concerns.  Any of those meetings could be regarded as a step two meeting.  

(c)	It is clear from the Tribunal’s decision (in particular at paragraph 5-6, 8, 11, 13 and 16) that the Claimant was informed that the capability policy was being followed due to the Claimant’s performance, the detailed issues of performance were discussed with the Claimant and he was given specific targets and objectives which he failed to meet.  The Tribunal found that the Claimant was given many opportunities to identify and appreciate what was required of him in order to meet the standards sought, over the course of ten review meetings at the first stage and a further six weeks of second stage review.  

(d)	The Claimant had a right of appeal, which he exercised.    

24.	We have had regard to the observations of Elias J (P) in Alexander v Brigden Enterprises Ltd [2006] IRLR 422 at paragraphs 34-39 as to the purpose of the statutory procedures.  At para 37 the learned judge observed: 

“It must be emphasised that the statutory dismissal procedures are not concerned with the reasonableness of the employer’s grounds, nor the basis of those grounds, in themselves.  It may be that the basis for a dismissal is quite misconceived or unjustified, or that the employer has adapted inappropriate or vague criteria, or acted unreasonably in insisting on dismissing in the light of the employee’s response.  These are of course highly relevant to whether the dismissal is unfair, but it is irrelevant to the issue whether the statutory procedures have been complied with.  The duty on the employer is to provide the ground for dismissal and the reasons why he is relying on that ground.  At this stage, the focus is on what he is proposing to do and why he [is] proposing to do it, rather than how reasonable it is for him to be doing it at all.”  

25.	We are not satisfied that the Respondent did inform the Claimant before the Step 2 meeting “what the basis was for including in the statement under paragraph 1(1) the ground or grounds given in it” (para 2(2)(a)).  

26.	The focus of the Tribunal’s decision is on the process that was adopted; the decision does not set out the factual background or explain why the Claimant’s performance was not to the level expected by the Respondent so as to justify the applicability of the capability policy in the first place.  

27.	There is no evidence that there had been any criticism of the Claimant’s performance from the commencement of his employment in March 2000 until 15 January 2009 when he was informed of a 0% pay rise.  On 20 January 2009, according to a chronology prepared by the Claimant, he received a letter informing him “of new manager (Mr Evans), new job description and new job title of Senior Engineer”.  Two weeks later, on 4 February 2009, following a meeting with Mr Evans, the Claimant received the letter starting the process which led to his dismissal on 25 August 2009.  

28.	The Tribunal note at paragraph 3 of the Reasons: 

“Mr Evans decided to invoke the Respondent’s capability procedure as a result of the Claimant receiving a nil pay rise, which was regarded as raising a serious issue about performance entitling the Respondent to invoke its formal procedure.” 

29.	The Claimant repeated to us what he said he had told the Respondent from the outset, namely that he had not been told what it was about his performance that amounted to a serious issue entitling the Respondent to invoke its formal procedure.  The Tribunal’s decision contains no findings of the Tribunal as to why the Claimant received a nil pay rise, why that raised a serious issue about his performance which warranted the adoption of a formal procedure, what he was told by Mr Evans at the meeting prior to the letter of 4 February 2009 or the basis on which Mr Evans concluded that it was appropriate to move from Stage One to Stage Two.  

30.	We are not satisfied that the Tribunal, had it considered the matter, could only have concluded that there had been no failure by the Respondent to comply with the statutory requirements.  

Ground 2: whether the Respondent had reasonable grounds for belief in Claimant’s lack of capability 
31.	The Claimant accepts that the Tribunal dealt with the question as to whether there was an honest belief in his lack of capability, but submits that on the face of paragraph 16 of its decision the Tribunal did not deal with the issue as to whether there were reasonable grounds for such a belief following a thorough investigation.  

32.	Mr Mansfield submits that reading the judgment of the Tribunal as a whole, the only conclusion that can be reached is that the Tribunal did find that the Respondent had reasonable grounds for its belief.  He referred to paragraph 15 where the Tribunal expressly directed itself as to the question whether there were reasonable grounds for belief in lack of capability.  In the immediately following paragraph, paragraph 16, the Tribunal set out a number of features derived from the facts and concluded that the Respondent’s belief was genuine, that the procedure was fair and that the dismissal was within a band of reasonable responses by a reasonable employer.  In paragraph 17, the Tribunal finds that it follows that the Claimant was fairly dismissed.  Mr Mansfield submits that it is inconceivable, reading those three paragraphs as a whole, that the Tribunal did not direct itself to the question of whether the Respondent’s genuine belief was reasonable.

33.	In the absence of material findings of fact by the Tribunal as to why the Claimant’s performance entitled the Respondent to invoke its formal procedure in the first place or as to the need to proceed to Stage Two, we cannot be satisfied that the Tribunal did find that the grounds for the Respondent’s belief in the Claimant’s lack of capability were reasonable, nor can we be satisfied that the Tribunal would have been entitled so to find.  

Conclusion 
34.	Accordingly, for the reasons we have given, this appeal is allowed.  We remit the claim for unfair dismissal for hearing by the same Tribunal, if this be practicable; if not, then by a newly constituted Tribunal.