Garside And Laycock Ltd v Booth

For dismissal for some other substantial reason, establishing a substantial reason under section 98(1)(b) does not determine whether dismissal is fair. The tribunal must separately assess under section 98(4) whether the employer acted reasonably in treating that reason as sufficient for dismissal. The question is not whether it was reasonable for the employee to reject changed terms.

There is no requirement that proposed reductions in pay be essential to the survival of the business. Relevant considerations may include the employer’s business reasons, the distribution of the burden, consultation and procedure, industrial harmony, and the equity and substantial merits of the case. The appeal was allowed and the complaint remitted for rehearing by a fresh tribunal.

The respondent, a welding maintenance worker, was dismissed after refusing a proposed five per cent reduction in pay introduced during the employer’s trading difficulties. The Manchester Employment Tribunal accepted that the employer had shown some other substantial reason, but held the dismissal unfair. It relied on an interpretation of Catamaran Cruisers Ltd v Williams and Others [1994] IRLR 386 which treated business necessity as requiring circumstances approaching desperation. It also asked whether it was reasonable for the employee to maintain his existing terms.

The employer appealed, contending that the tribunal had applied the wrong legal tests and that the appeal tribunal should determine fairness itself. The central issues were the proper approach under section 98(4) and whether the existing findings were sufficient for a substituted decision.

1. Appeal allowed; remitted. The tribunal’s decision could not stand. The case was remitted to a fresh Employment Tribunal for rehearing, beginning on the basis that some other substantial reason had been established. The remaining issue was whether dismissal was fair under section 98(4).
2. The tribunal had misunderstood Catamaran Cruisers Ltd v Williams and Others [1994] IRLR 386. That decision rejected, rather than adopted, the proposition that less favourable contractual terms could be offered only where acceptance was vital to the survival of the business. A sound business reason, including a serious effect on the business falling short of its survival being at stake, could constitute a substantial reason.
3. The tribunal had asked the wrong question under section 98(4). The statutory focus is whether the employer acted reasonably or unreasonably in treating the reason as sufficient for dismissal. The tribunal must focus on the employer’s reasoning and decision. The employee’s view may be relevant, but the fairness question does not depend on what it was reasonable for the employee to do. Chubb Fire Security Ltd v Harper [1983] IRLR 311 supported that distinction.
4. The reference to lack of cogency was unexplained and did not, on the accepted facts, show that seeking cost reductions or common pay scales was inherently unreasonable.
5. In assessing fairness in wage-reduction cases, the tribunal may consider the distribution of the reductions, fair dealing, the adequacy and appropriateness of consultation, the reasons influencing workforce support, industrial harmony, and other available cost-saving measures. These were identified as possible considerations, not mandatory requirements in every case.
6. The appeal tribunal declined to substitute its own decision because the errors were comprehensive and created insufficient confidence that all facts relevant to reasonableness had been found. A fresh tribunal was required to decide the matter uninfluenced by the earlier errors.

• Employment Appeal Tribunal: allowed the employer’s appeal against the Manchester Employment Tribunal’s finding of unfair dismissal and remitted the case to a fresh tribunal.
• Manchester Employment Tribunal: found the dismissal unfair, having accepted that the employer had established some other substantial reason but applying erroneous approaches to business necessity and the statutory fairness question.