Grayson v Paycare

Where a redundancy dismissal is procedurally unfair, a Polkey reduction requires an evidence-based assessment of the chance that the employee would have been dismissed if a fair procedure had been followed. The employer bears the burden of satisfying the tribunal about that chance, but the tribunal must consider all relevant evidence. It must distinguish the period for which employment would have continued absent dismissal from the separate chance that a fair process would later have resulted in dismissal. The hypothetical process must be conducted in good faith and with an open mind. A conclusion that the chance was 100 per cent cannot rest merely on the absence of an alternative role or on the balance-of-probabilities standard. The tribunal must explain its evaluation. The issue may be remitted to the original tribunal where a fresh tribunal would be confined largely to the papers.

An Employment Tribunal found that Paycare had dismissed Mr Grayson by reason of redundancy without genuine consultation and that the dismissal was unfair. It nevertheless made no compensatory award, deciding that he would have been dismissed by the same date even if a fair procedure had been followed.

Mr Grayson appealed against the 100 per cent Polkey reduction. The finding that the dismissal was unfair was not challenged by cross-appeal. The central issue was whether the Tribunal had properly evaluated, on evidence and with the burden on the employer, the chance that a fair consultation process would have avoided or delayed dismissal.

1. Appeal allowed in relation to compensation. The finding that the dismissal was unfair was not open to challenge on this appeal. The Tribunal’s conclusion that a fair procedure would have produced dismissal by the same date was legally unsustainable.
2. Under section 123(1) of the Employment Rights Act 1996, a compensatory award must reflect loss attributable to the employer’s action. In a Polkey case, the employer must satisfy the Tribunal that there was a chance of future dismissal if fair procedures had been followed. This is not a burden to prove a fact on the balance of probabilities. The percentage represents the chance of the relevant future event, and there is no all-or-nothing choice.
3. The Tribunal must keep separate the period for which employment would have continued absent the dismissal, the question whether fair procedures might have resulted in dismissal, the reliability of the evidence, and the percentage chance and timing of that event. In a redundancy case, full loss may be awarded for the period a fair consultation would have taken, followed by a percentage reduction for the later chance of fair selection.
4. The hypothetical consultation must be conducted with an open mind. The Tribunal therefore had to assess what consideration of volunteers, restructuring, commission arrangements and redeployment might have produced. The absence of previous non-sales experience did not establish a 100 per cent chance of dismissal. The Tribunal had not evaluated the relevant alternatives or explained its conclusion, and its reasoning was not Meek-compliant.
5. The Polkey issue alone was remitted to the same Tribunal. A newly constituted Tribunal would have been largely confined to a paper exercise, and the employer could not call evidence which could reasonably have been called at the original hearing, applying Ladd v Marshall and Kingston.

• Employment Tribunal: found the dismissal unfair for failure to consult, but reduced the compensatory award by 100 per cent.
• Employment Appeal Tribunal: allowed the appeal on the compensatory award issue and remitted the Polkey issue to the same Tribunal.