Lancaster & Duke Ltd v Wileman

It is not correct to treat the statutory deeming provision for the effective date of termination as automatically displacing the subsection that preserves the employer's right to dismiss without notice. Section 97(2) imports the whole of section 86 and so the deeming of a later effective date is subject to the operation of section 86(6). Separately, the possibility of a Polkey reduction under section 123 is not confined to cases of purely procedural unfairness. Tribunals must consider the just and equitable reduction in all cases where there is a risk the employment might have ended fairly at a later date.

The appellant employer appealed from a reserved judgment of the Leicester Employment Tribunal that upheld an unfair dismissal claim and treated the effective date of termination as extended by statutory notice. The ET declined to apply a Polkey reduction and found sufficient qualifying service for the claim. The EAT considered two issues: whether the deeming in section 97(2) of the Employment Rights Act 1996 imports section 86(6) so as to prevent an extension where the employer could lawfully dismiss without notice; and whether a Polkey-type reduction under section 123 can apply where dismissal is described as substantively unfair. The EAT allowed the appeal on both points and remitted the matters to the ET for determination.

(1) Overall disposition: Appeal allowed. The matter is remitted to the Employment Tribunal for further findings and any consequential reconsideration of compensation.

1. On qualifying service and the effective date of termination: the court held that by referring to "the notice required by section 86" section 97(2) of the Employment Rights Act 1996 imports section 86 in its entirety, including subsection (6). Section 86(6) preserves the right to treat the contract as terminable without notice. Therefore the statutory deeming of a later effective date is subject to the employer's right under s.86(6) to dismiss without notice. The ET's contrary approach was an error of law.
2. Practical consequence and remittal: because the ET did not make an express contractual/gross-misconduct finding required to engage s.86(6), the question whether the employer could lawfully terminate without notice is one for the ET to decide. The error is therefore material and the tribunal must determine that question on remittal.
3. On Polkey reductions: the court held that a reduction under s.123(1) is an exercise of the tribunal's discretion to award "such amount as the tribunal considers just and equitable". The possibility of a Polkey reduction is not limited to cases of purely procedural unfairness. The ET erred by stating that a finding of substantive unfairness rendered any Polkey analysis unnecessary. The matter must be reconsidered on remittal.
4. Orders: Appeal allowed. The case is remitted to the Employment Tribunal for determination of (a) whether s.86(6) applies so as to prevent the deemed extension of the effective date of termination, and (b) whether and to what extent any reduction under s.123(1) should be made. The parties are to make representations on the precise terms of remittal within 14 days.

• Employment Appeal Tribunal: appeal from a Reserved Judgment of the Leicester Employment Tribunal (Employment Judge Clark) allowing the unfair dismissal claim; Employment Tribunal decision sent 15 July 2017; this judgment delivered 4 July 2018. The EAT allowed the appeal and remitted issues for determination by the ET.