Birch v University of Liverpool

For the purposes of section 83(2)(a) of the Employment Protection (Consolidation) Act 1978, dismissal requires termination of the employment contract by the employer alone. A contract ended by the freely given mutual agreement of employer and employee is not so terminated, even where a reduction in the workforce is expected.

The tribunal must examine the substance of the transaction. An employee’s application for premature retirement and the employer’s acceptance may together amount to a consensual termination. The employer’s power to accept or refuse the application does not, without more, make its acceptance a dismissal.

Where the primary facts are undisputed, the statutory characterisation of the termination is a question of law. The Employment Appeal Tribunal may therefore correct an industrial tribunal’s legal misdirection.

Two university technicians applied under a premature retirement compensation scheme. The scheme stated that it was not a redundancy scheme and required agreement by both the University and the employee. Each applicant made a formal application to retire, which the University accepted. They later claimed redundancy payments.

The Industrial Tribunal held that the University’s acceptance letters dismissed them. In the alternative, it held that their agreement to retirement did not prevent dismissal in a redundancy situation. The Employment Appeal Tribunal, presided over by Nolan J, reversed that decision. It held that the contracts ended by mutual consent.

The employees appealed. The central issues were whether the Employment Appeal Tribunal had jurisdiction to intervene and whether the agreed premature retirements were dismissals within section 83(2)(a) of the Employment Protection (Consolidation) Act 1978.

1. The appeals were dismissed with costs. Lord Justice Ackner gave the principal judgment. Lord Justice Slade and Lord Justice Purchas each agreed and gave concurring reasons.

2. The Employment Appeal Tribunal had jurisdiction. Although the identity of the terminating party will commonly depend on findings of fact and degree, the present facts were undisputed and substantially documentary. Whether those facts amounted to termination by the employer within section 83(2)(a) was a question of statutory construction and law. The Industrial Tribunal had therefore misdirected itself if its conclusion could not legally follow from the agreed facts.

3. Section 83(2)(a) concerns a contract terminated by the employer alone. It does not cover a contract terminated by the employee or by the parties’ freely given mutual agreement. The proper inquiry is into the reality of the transaction, rather than merely its final formal step.

4. Here, the applications for premature retirement and the University’s acceptances jointly ended the contracts. The employees’ offers were conditional on acceptance and the scheme’s benefits, but fulfilment of those conditions did not convert their resignations into dismissals. The Industrial Tribunal’s conclusion that acceptance was the act which terminated employment was a legal non sequitur.

5. A redundancy situation does not make consensual termination legally impossible. Section 81(2) addresses the reason for a dismissal once dismissal has first been established. It does not turn a freely agreed retirement into dismissal merely because the employer expects reduced requirements for staff.

6. The court accepted that an employee’s willingness to be made redundant does not prevent a genuine unilateral dismissal. That principle did not assist these employees, because there was neither pressure nor a unilateral termination by the University. The materially different premature-retirement scheme in Lancashire County Council v Hallam was distinguishable.

• Court of Appeal: dismissed the employees’ appeals and affirmed the Employment Appeal Tribunal.
• Employment Appeal Tribunal: on 2 November 1983, reversed the Industrial Tribunal and held that the contracts had ended by mutual consent.
• Industrial Tribunal: on 8 March 1983, held that the University had dismissed the employees and that they were potentially eligible for redundancy payments.