D Tydeman & Anor. v Oyster Yachts Ltd & Ors.

In assessing compensation for unfair dismissal, a tribunal must distinguish between a predictive Polkey assessment and reductions based on the claimant’s actual conduct. A Polkey reduction requires an assessment of what the actual employer would probably have done had it acted fairly, including whether any future dismissal would have been fair and whether it would have been with notice.

Reductions under sections 122(2) and 123(1) of the Employment Rights Act 1996 require clear findings about the claimant’s conduct and why a reduction is just and equitable. Section 123(6) applies only where conduct caused or contributed to the dismissal which actually occurred. Serious allegations, especially those suggesting dishonesty, require sufficiently clear and reasoned findings.

The claimants were senior executives of a yacht-building business which entered administration. Its trade and assets were subsequently transferred to the first respondent. The Employment Tribunal held that the transfer engaged the relevant transfer protections and that the claimants had been automatically unfairly dismissed for a transfer-connected reason.

When addressing remedy, the Tribunal held that there was a 100% chance of later redundancy dismissal, a 90% chance of later dismissal for gross misconduct without notice, and 70% contributory conduct. The claimants appealed the remedy findings. The central issue was whether those conclusions were open to the Tribunal and sufficiently reasoned within the statutory framework for unfair-dismissal compensation.

1. Appeal allowed in part. Grounds concerning the prospective redundancy dismissal and the findings about the banking covenant, an accelerated stage payment, financial forecasts and turnover succeeded. The Tribunal’s remedy conclusions were unsafe and were remitted to the same Tribunal.

2. The future-redundancy case had not been properly pleaded, included in the agreed list of issues, or advanced in closing submissions. It was not open to the Tribunal to introduce that possible reason for dismissal itself. The respondent may not advance a future fair redundancy dismissal on remission.

3. “Gross misconduct” is a common-law contractual concept concerned with entitlement to dismiss without notice. It is not itself the statutory test for unfair-dismissal compensation. In a Polkey assessment, the Tribunal must predict whether the actual employer would have fairly dismissed the employee, and may need to decide whether dismissal would have been with or without notice. A formal gross-misconduct finding is strictly required only for a wrongful-dismissal claim for notice pay.

4. The Tribunal had to keep distinct: reductions to the basic award under section 122(2); just and equitable reductions to the compensatory award under section 123(1); and contributory-conduct reductions under section 123(6) of the Employment Rights Act 1996. Section 123(6) was unavailable because the actual dismissals had been found to be transfer-connected; the asserted conduct had not caused or contributed to them.

5. The findings did not state with sufficient clarity what each claimant had done, whether the conduct was carelessness or serious culpable conduct, what the employer would have concluded after a fair process, or whether individual or cumulative allegations supported the stated probabilities and reductions. That deficiency was material where the allegations included potential dishonesty. The pay-rise and bonus issue was not remitted, as the associated appeal ground had not proceeded.

6. On remission, the Tribunal must identify separately for each claimant the alleged conduct, the prospect and timing of a fair dismissal, whether dismissal would have been with or without notice, and any just and equitable reductions. Remittal to the same Tribunal was appropriate because many factual findings remained intact and the original defects were insufficient reasoning rather than total flaw.

• Employment Appeal Tribunal: Allowed the appeal in part and remitted all outstanding remedy issues to the same Employment Tribunal.
• Employment Tribunal, Southampton: Held that the claimants had been automatically unfairly dismissed for a transfer-connected reason, then made prospective dismissal and compensation-reduction findings which were set aside insofar as challenged successfully.