Case of the Week
We're heading back to 1987 this week, when Employment Tribunals were called Industrial Tribunals and when the Simpsons were first aired on the Tracey Ullman Show!
Polkey v A E Dayton Services Limited
This is a case about redundancy and is probably one of the most cited cases in Employment Law. Anybody appearing in employment tribunals will be very familiar with the case because it generally crops up at the end of the hearing, usually when an advocate is summing up his/her client’s case.
The facts of the case are relatively run of the mill. Mr Polkey was employed as a driver, his company wanted to restructure and make him redundant - the kind of situation which arises every week up and down the country (but probably not at the moment when we have an acute shortage of drivers!).
So what what makes this case so different?
A E Dayton Services decided to do away with any formal redundancy process. Out of the blue, Mr Polkey’s manager called him into his office and told him he was being made redundant. He was given a letter setting out his redundancy package and then asked to leave. So, no warning, no consultation, no redundancy process, no nothing. It still happens.
The Industrial Tribunal
It’s no surprise Mr Polkey headed straight off to the Industrial tribunal. Back in 1986 employers were bound by a code of practice, contained in the Employment Protection Act 1975. In their decision the Tribunal referred to the Code, specifically to Schedule 17, paragraph 4:
"If redundancy becomes necessary, management in
consultation, as appropriate, with employees or their
representatives, should: (i) give as much warning as
practicable to the employees concerned . . . ; (iii) establish
which employees are to be made redundant and the order of
discharge; . . ."
That’s fairly straightforward and puts an onus on the employer to consult before making any redundancies. We have the same principles today. (see ACAS - Redundancy) and generally in all dismissals (ACAS Code of Practice).
But the Industrial Tribunal also said;
There is nothing that excuses their failure to consult but - this is the matter that gives rise to the point of principle in the present appeal - at the end of the day we have no alternative but to find that in this case had they acted in accordance with the code of practice, as interpreted in the recent case [Williams v. Compair Maxam Ltd [1982] ICR 156], the result would not have been any different, and we have therefore unhappily to reject this application.
So Mr Polkey lost his claim. There then followed an appeal to the Employment Appeal Tribunal, the Court of Appeal and finally to the House of Lords.
House of Lords
The House of Lords held that; exceptionally a failure to follow a recognised procedure, may not be unfair, but where a dismissal is unfair for procedural reasons it will not be deemed to be fair simply because had a fair procedure been followed the result would have been the same.
But - and this is the important part - notwithstanding a dismissal will be unfair, the compensation awarded will be calculated by reference to the probability the Claimant would have remained in his job had a fair procedure been followed. If it was a certainty that he would be dismissed his compensation would be zero because he has suffered no loss.
The Lords overturned the previous decisions and held his dismissal was unfair, remitting the case back to a differently constituted tribunal to consider the issue of remedy.
‘Polkey deduction’
As I said at the start, most employment lawyers, if not all, are familiar with this phrase. It even has its own Wikipedia entry. At some point during a hearing advocates will either make submissions in respect of ‘Polkey’ or be invited to address the point by the Employment Judge.
It is not unusual for a tribunal to reduce the amount of compensation by 100% by way of a Polkey reduction.
By way of example, a case recently reported Ms E Campbell v The Trustees of the London Clinic Limited, held that Ms Campbell’s dismissal was unfair due to the inadequate appeal stage. The Tribunal said:
In our judgment the appeal was so awful that it renders the dismissal unfair. The appeal completely failed to address the Claimant’s concerns.
They went on,
To conclude our judgment, we are required to speculate as to what would have happened, had the appeal been conducted correctly.
Our conclusion is that a better appeal would not have resulted in the claimant accepting the change in terms and conditions and returning to her role, nor would it have resulted in the claimant accepting an alternative role. . . . . This means that although the dismissal is unfair, we have decided that a Polkey deduction of 100% is appropriate in this case.
This approach is more or less adopted on a daily basis in employment tribunals. The Employment Tribunal Presidential Guidance (which tribunals must follow) specifically refers to the Polkey case:
Submissions on Polkey and contributory fault
16. In an unfair dismissal claim, if an employee has been dismissed, but the employer has not followed a proper procedure (such as the ACAS Code), the Tribunal will follow the guidance in the case of Polkey v AE Dayton Services Limited and subsequent cases. The Tribunal will consider whether, if a fair procedure had been followed, the claimant might still have been fairly dismissed, either at all, or at some later time. This question is often referred to as the “Polkey” question or deduction.
Polkey is a useful negotiation tool and can help to settle cases before they get too far down the line, but one thing to remember, is that although the compensatory award may be cut entirely or drastically reduced, the Claimant may still be entitled to a basic award which is based on length of service. In Campbell v The Trustees of the London Clinic, Ms Campbell still walked away with over £6k by way of a basic award.