British Telecommunications plc v Sheridan; Tydeman v Oyster Yachts Limited

The Employment Appeal Tribunal allowed the appeal in part and remitted issues of remedy to the same employment tribunal because the tribunal's determination of compensation issues in an automatic unfair dismissal case was insufficiently reasoned and therefore unsafe. The EAT held that the first-instance tribunal had correctly found a transfer of an undertaking and that the claimants were dismissed for a reason connected with the transfer, but that the tribunal had erred in treating future redundancy as a properly pleaded alternative to dismissal for misconduct and in failing to give sufficient, clear reasoning for findings of serious culpable conduct, including alleged manipulation of a banking covenant, overstated forecasts and allegedly triggering stage payments.

Key statutory provisions considered included the test for fair dismissal under section 98 of the Employment Rights Act 1996 and the rules on reduction of awards under sections 122 and 123 ERA (including the distinction between Polkey-type predictive reductions and reductions for contributory or just-and-equitable conduct under sections 123(1) and 123(6)). The EAT concluded that grounds 1(b), 6, 7, 9 and 10 of the appeal succeeded and directed that remedy issues be reconsidered, but that the respondent may still pursue reductions on Polkey and just-and-equitable grounds (other than redundancy and section 123(6) contributory reductions related to the actual transfer-dismissal).

Background and parties: The claimants were senior executives (chief executive officer and group finance director) of an entity that entered administration. The purchaser of the business took on the undertaking and subsequently dismissed the claimants. The employment tribunal found an automatic unfair dismissal related to a transfer of undertaking and then addressed hypothetical questions about what would have happened had the claimants been treated fairly after the transfer.

Nature of the claim and relief sought: The proceedings concerned claims of unfair dismissal and the assessment of compensation. The respondents advanced alternative cases that the claimants would in any event have been dismissed subsequently either for misconduct, for gross misconduct (without notice) or by reason of redundancy, and invited reductions to compensation on Polkey and just-and-equitable grounds under the Employment Rights Act 1996.

Procedural posture: The tribunal hearing (Southampton ET, Employment Judge Rayner) took place 2–5 September 2019; a judgment with corrections followed in March 2020. The claimants appealed to the EAT. Permission was sifted by Linden J and a preliminary hearing before HHJ Auerbach permitted certain grounds of appeal to proceed. The EAT heard the appeal on 7–8 June 2022 and handed down judgment on 8 June 2022.

Issues framed:

• Whether the respondent had properly pleaded and could rely on future redundancy as a basis for a Polkey deduction;
• whether the tribunal had properly identified and explained the specific misconduct (including alleged falsification of build progress, manipulation of a banking covenant, misleading forecasts and triggering stage payments) that would have justified fair dismissal with or without notice;
• whether the tribunal's findings of culpable conduct and the assessment of 70% contribution and a 90–100% chance of dismissal were supported by adequate reasoning; and
• the correct application of sections 122 and 123 ERA to reductions of awards and the distinction between predictive Polkey reductions and reductions for contributory conduct.

Court's reasoning and conclusions: The EAT reviewed the relevant authorities on appellate scope and reasons, reiterated the statutory framework governing reductions of awards (sections 122 and 123 ERA) and explained the distinction between predictive Polkey deductions and reductions for contributory or just-and-equitable conduct. The tribunal had been under significant time pressure, and the EAT found a number of drafting and reasoning failures. The EAT concluded that the tribunal had not sufficiently explained what specific acts of misconduct it found, how the respondent would have fairly characterised them, and why they warranted dismissal without notice or a particular degree of reduction of compensation. The EAT held that redundancy was not properly pleaded as a future reason and that the tribunal therefore erred in treating it as an available alternative. Grounds 1(b), 6, 7, 9 and 10 of the appeal succeeded. The matter was remitted to the same employment tribunal to determine all outstanding remedy issues (with guidance as to issues to be addressed on remission), although redundancy and s.123(6) contributory reductions tied to the actual transfer-dismissal were excluded from the respondent's case on remission.

Practical outcome: Remedy was to be reconsidered, with focused case management, clarification of the precise conduct relied on and separate analysis for each claimant on whether dismissal would have occurred, whether with or without notice, and whether reductions under sections 122 and/or 123 were just and equitable.

Appeal allowed in part. The EAT concluded that the employment tribunal's reasoning on remedial issues (likelihood of dismissal in any event, characterisation of alleged misconduct, and consequent reductions under sections 122 and 123 ERA) was insufficient and unsafe in respect of several grounds; it allowed grounds 1(b), 6, 7, 9 and 10, disallowed the remainder, and remitted the remedy issues to the same employment tribunal for reconsideration with directions on legal principles and pleaded scope.

The claim was heard at first instance by Employment Judge Rayner at the Southampton Employment Tribunal (hearing 2–5 September 2019; initial judgment signed 23 October 2019; judgment on reconsideration and corrections 19 March 2020). The appellants sought permission to appeal to the Employment Appeal Tribunal; permission was sifted by Linden J and a preliminary hearing was conducted by HHJ Auerbach, who permitted specified grounds of appeal to proceed. The appeal was then heard in the EAT and judgment given on 8 June 2022. Neutral citation: [2022] EAT 115.