THE INDUSTRIAL TRIBUNALS
CASE REFS:	451/05
465/05

CLAIMANTS:		Martin Bradley
				Thomas Burke

RESPONDENT:		Cathal J Begley Decorators

DECISION
The unanimous decision of the tribunal is that the claimants claims for unfair dismissal and notice pay are upheld.   Accordingly the tribunal orders the respondent to pay £420.00 to the first-named claimant and £420.00 to the second-named claimant.  The tribunal also orders the respondent to pay £303.00 to the first-named claimant and £301.00 to the                        second-named claimant for payment in lieu of notice.

Constitution of Tribunal:
Chairman:		Ms Sheils
Members:		Mr Mitchell
			Mr Kane
Appearances:
The claimants were represented by Mr Eamon McCann, of Derry Trades Council.
The respondent was represented by Mrs Anne-Marie Begley.

The claims and the defence
1.	Both claimants claimed that they had been unfairly dismissed.  The respondent indicated that while the claimants were dismissed this was because the respondent could no longer afford to pay the employer costs for five men and that he had made the claimants redundant.

2.	The claimants also claimed notice pay and holiday pay.  However at the hearing the respondent accepted that the claimants were entitled to receive notice pay.  Also, the claimants accepted that the question of holiday pay did not arise

Sources of Evidence

3.	The tribunal heard from the respondent, his wife, Mrs Anne Marie Begley, and two men currently working for the respondent, Gavin McDevitt and Kevin Ward.  The tribunal also heard from the claimants and saw correspondence to the claimants from the respondent dated 16 March 2005.   
 
Issues

4.	The issues for the tribunal to decide were: - 

(i)	Whether the reason for the claimants’ dismissal was redundancy.

(ii)	Whether the respondent acted reasonably in treating it as a sufficient reason for dismissing the claimants.

(iii)	Whether the dismissal for that reason was fair.

Findings of Fact

5.	The respondent owned a small painting and decorating business. Up until February 2005 he employed five full-time painters and decorators.  The respondent had employed the first-named claimant, Mr. Martin Bradley, since February 2004.  The respondent had employed the second-named claimant, Mr. Thomas Burke, since September 2003.

6.	Each of the claimants received his P45 in the envelope with his wage cheque on 25 February 2005.  This was the first indication either man had that he was going to be paid off or made redundant.

7.	The respondent had employed five employees since February 2004 and had employed four men from September 2003.  The respondent’s wife, Mrs Anne Marie Begley did the books.  It was stated by Mrs. Begley, and not challenged, that the men used to receive pay-slips but that this practice had discontinued because the men ripped them up or did not want them.  However Mrs. Begley stated that there was nothing underhand in this and that all PAYE and other records were up-to-date.  Mrs. Begley also stated that no employees were paid in cash ‘off the books’.

8.	The men met every morning at approximately 7.50 am.  At this meeting the work was discussed and divided up amongst them and people were assigned to jobs.  This meeting took place in the car park of Rafters’ Restaurant.  The restaurant was not open at that time.  The men met at the vans.  The work was discussed and there was general chitchat amongst them.

9.	The men were paid weekly.  This took place either at the morning meeting or, failing this, the respondent left their wages at Johnsons’ paint shop were he bought his stock.

10.	In 2004 an employee of the respondent had an accident at work and made a claim against the respondent’s insurance.  As a result of this claim the respondent found that his insurance costs almost quadrupled.  As a consequence of this the respondent stated that he felt that he could no longer afford the costs of employing five men and that he was going to have to make cutbacks.  The respondent stated that there was plenty of work and that he had secured a big contract just before Christmas.  However the respondent stated that it would not be viable for him to do the work if he had to pay the employer costs of five employees. 

11.	The respondent decided to reduce his workload and pay off two men.  He stated that he operated a ‘last in, first out’ policy and he chose to pay off the men he had most recently employed, the claimants.  The claimants did not challenge their selection for redundancy.  It was accepted that the respondent had not taken on any more employees since the date of the dismissal of the claimants.     

12.	This was the only evidence given in relation to the respondent’s financial position. The respondent did not adduce any documentary evidence about his financial position. Nor did he adduce any documentary evidence to sustain his contention that although there was plenty of work it would not be viable for him to do it and to continue to pay the employer costs of five employees.  

13.	The respondent stated that he did not tell his employees about his financial difficulties. He felt that it would not be proper to do so. However the respondent stated that his employees were aware of his financial difficulties because he gave off ‘vibes’ that would have made it clear to them that things were not going well.

14.	Neither of the claimants picked up on any such ‘vibes’ about the respondent’s financial position.  The second-named claimant did not hear about any financial difficulties from any of his colleagues while he was on sick leave.  The tribunal noted that the respondent’s witnesses also did not pick up on these ‘vibes’.  

15.	The respondent stated that he had openly stated his anxieties to his employees in January 2005 at one of the morning meetings.  The respondent stated that both the claimants and Mr. McDevitt and Mr. Ward, the respondent’s witnesses, were present at this meeting.  The respondent said that he had given a general indication of his financial difficulties and that he had not flagged up any specific concern that those difficulties might have for the employees.  The claimants denied that the respondent had made any comments of this sort at this stage.  Further, the respondent’s witnesses did not refer to this conversation either.

16.	The respondent stated that at a morning meeting two weeks before 25 February 2005 he had explained his financial difficulties to his employees more fully.  The                    first-named claimant was there at the time; the second-named claimant was on sick leave.  The respondent’s witnesses, Mr. Gavin McDevitt and Mr. Kevin Ward, were present.

17.	The respondent stated that at this meeting he had made it clear that his financial difficulties were such that there would be pay-offs.  The respondent stated that, as the man who was last into the firm, the first-named claimant, should have appreciated that the respondent was thereby giving the first-named claimant notice that he was soon to be paid off.

18.	The first-named claimant stated that he heard the respondent complain about financial difficulties.  However he disputed that the respondent had said anything about pay-offs and he did not pick up on any serious implications these financial difficulties could have in general nor specifically regarding his own job.  The first-named claimant said that there was some chat amongst the men about the respondent’s remarks but that no one had taken them particularly seriously and that he had certainly not felt that he had been put on any or two weeks notice.

19.	The witnesses for the respondent both gave evidence about this meeting in early February 2005.  Mr Ward was the respondent’s foreman but this role was limited to driving men to jobs, collecting stock, tools as needed and the Health and Safety aspects of the work, mostly accident reporting.  Mr Ward stated that the respondent had not discussed his financial difficulties with him or the prospect of possible pay-offs or who might have to go. 

20.	Both witnesses for the respondent stated that the respondent had mentioned at this second meeting that there would be pay-offs.  However both these witnesses also stated that the remarks were general and were not directed to any man in particular and indeed both agreed that no one had been given any notice.  Both stated that no one at the meeting took the remarks very seriously and that they did not pay much heed to them.

21.	The respondent accepted during the hearing that the claimants had not been given any notice of any pay-offs or that they were to be paid off.  This was on the basis that it was now clear to the respondent that he had not made it clear enough to the two men at the second meeting that they were to be paid off and that the respondent was actually putting them on notice to that effect.

22.	On 25 February 2005, the first-named claimant went to Rafters’ Restaurant in the morning as usual.  He had been working with the respondent himself that week but on the Friday the respondent directed him to go on a different job with the other men.  The first-named claimant thought that this was strange but changed jobs anyway. That evening the first-named claimant collected his wages from Johnsons’ paint shop.  In the envelope were his wage cheque and his P45.  The first-named claimant stated that there was a blank P45 in his colleagues’ wage envelopes, which he believed had been put there to make him believe that everyone was being paid off.  The first-named claimant stated that the respondent had changed his job that morning so that he would not have to tell the first-named claimant the news himself.  The respondent did not challenge this evidence. 

23.	The first-named claimant was very shocked to receive his P45 at all and was particularly annoyed at the way in which he was paid off.  He felt aggrieved that the respondent had not told him the news himself and that he had gone as far as changing him onto a different job to avoid having to break the news to him himself. 

24.	The first-named claimant also felt annoyed that the respondent had put blank P45s into the other wage envelopes so that the first-named claimant would think that the others were being made redundant too.  The first-named claimant felt that the respondent had tried to insult his intelligence and felt that the respondent had treated him very shabbily.

25.	On 25 February 2005 the second-named claimant’s brother-in-law collected the    second-named claimant’s wage envelope for him from Johnson’s paint shop.  He received his envelope and his P45 that evening.  He said that the news made him feel sick, gutted. The second-named claimant said that he had no reason to believe that his employment with the respondent would not have continued.

26.	The tribunal accepted that when each of the claimants received his P45 on 25 February 2005 that this was the first indication either man had that he was going to be paid off.

27.	Each of the claimants sought out the respondent to ask him for an explanation of the situation.  The first-named claimant rang the respondent that weekend and contacted him on the Saturday.  The respondent explained that he had difficulties with tax, PAYE and insurance.  The call ended at that. 

28.	The first-named claimant then approached the respondent on the Monday at a work site.  The respondent told the first-named claimant that he had plenty of work that he could offer him.  There was a discussion between the two men about this work.  The first-named claimant stated that the respondent said that he had plenty of work for him but that he would have to be responsible for his own insurance and tax and work for the respondent ‘off the books’.  The first-named claimant refused this offer.  Instead he offered to continue to work for the respondent on the basis that the respondent would deduct 18% tax at source.  The respondent refused to do this.

29.	The respondent stated that he had told the first-named claimant that there was a chance that he could get him work with some of his own longstanding clients but that he had only made this offer to him to soften the blow of his being out of work. 

30.	The first-named claimant told the tribunal that there were men employed from time to time on a casual basis, ‘off the books’.  He told the tribunal that he had seen these men being paid in cash.  The first-named claimant told the tribunal that when the respondent used men like this he would say, “don’t tell the wife I’m doing this”. 

31.	The respondent initially stated that he had previously used the odd bit of casual labour but not recently.  The respondent later expanded on this and stated that he had only paid another friend in cash as a sort of sub-contractor who would supply him with labour but that he did not pay the men supplied directly.

32.	The first-named claimant signed on for work on 25 February 2005.  He did not qualify for benefits as his wife was working.  He signed off in April 2005 as he got work on 19 April 2005.  He was out of work for six weeks.  The tribunal found that he had worked during that period but only for a couple days.

33.	The second-named claimant went to see the respondent at his house on the Sunday 27 February 2005.  They had a brief conversation, as the second-named claimant was too ill to continue it.  In this conversation the respondent told the                        second-named claimant that he had nothing to worry about as he had plenty of work, if he wanted to go down the road of paying his own tax etc.  The second-named claimant asked the respondent if he could work for him and the respondent could deduct 18% tax at source.  The respondent refused.

34.	The second-named claimant was off sick until May 2005.  He started working again in June 2005, two to three weeks after his sick leave ended.  He denied working during March and April and this allegation, made at the hearing only and not in the response, was not robustly pursued by the respondent.

The Law

35.	Under Article 127 of the same Order an employee is dismissed by his employer if:-

	(a)	the contract under which he is employed is terminated by the employer (whether with or without notice).

Under Article 130(1) and (4) of that Order to establish the fairness of the reason for the dismissal indicate that it is for the employer to show:-

(a)	the reason for the dismissal;

		and

(b)	that it is either a reason falling within Paragraph (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.

The reason for the dismissal must be one in Paragraph (2) which relates to:-

	(a)	the capability or qualifications of the employee for performing work of the kind which he was employed to do relates to the conduct of the employee;

(b)	is that the employee was redundant; or

(c)	is that the employee could not continue to work in a position which he held without contravention of a duty or restriction imposed by or under a statutory position.

	and

Where the employer has fulfilled the requirements of Paragraph 1, the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer):-

	(a)	depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee; and

	(b)		shall be determined in accordance with equity and the substantial merits of the case.

Under The Employment Rights (Northern Ireland) Order 1996, Article 118, an employee’s notice entitlement is set out thus: -

(1)	The notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for a month or more:-

(a)	is not less than one week’s notice if his period of continuous employment is less than two years,

is not less than one week’s notice for each year of continuous employment if his period of continuous employment is two years or more but less than 12 years  …

The tribunal’s conclusions

36.	The tribunal accepted that the respondent had financial difficulties towards the end of 2004.  On the other hand he still had plenty of work in hand and had secured a big contract just before Christmas 2004.  Notwithstanding this contract it was not viable for him to do this work and to continue to pay the employer costs of five employees.  Accordingly the respondent decided to reduce his workload and pay off two of his employees in February 2005.  In light of this finding the tribunal concluded that the claimants had been dismissed by reason of redundancy. 

The Tribunal found that the respondent did not follow any procedure for making redundancies. There was no prior indication of redundancy, no consultation, no consideration of alternative employment with the respondent and ultimately no notice given of the redundancies to the claimants.  
 
37.	The tribunal found that the respondent had not mentioned the possibility of there being any pay-offs at any meeting at Rafters’ Restaurant.

38.	The tribunal found that the first indication that either of the claimants got of their being paid off was when each received his wage envelope with his P45 in it on 25 February 2005. 

39.	The respondent accepted at the hearing that news of that significance ought to have been put in writing and given to the two claimants as the individuals to be affected by his decision to reduce his workload. The tribunal found that the respondent had treated both men very callously by not putting them on notice that their jobs were under threat. 

40.	In light of tribunal’s finding and the acceptance by the respondent that the claimants had not been given any or any proper notice of their redundancy the tribunal concludes that the claimants’ dismissal by reason of redundancy was unfair. 

Compensation

41.	Entitlement to compensation on a finding of unfair dismissal is set out in the Employment Rights (Northern Ireland) Order 1996, at Article 146.  What makes up that compensation is a combination of the statutory provisions at Article 152 of the same Order onwards and relevant case law.

At Article 152 it states:-

Where a tribunal makes an award of compensation for unfair dismissal … the award shall consist of:-

(a)	a basic award; and

(b)	a compensatory award.

The basic awards for the claimants as set out below are calculated in accordance with the provisions of the Order and are thus:-

First-named claimant, Mr Bradley – Basic Award

(i)	Complete years of service at effective date of termination 		 1
(ii)	Age at dismissal								45
(iii)	Years of service in which not below 41				    	  1
(iv)	Week’s pay (gross) (statutory max)				             £280.00

Accordingly basic award =1 ½  x £280.00 =				 £420.00

The second-named claimant, Mr Burke – Basic claim

(i)	Complete years of service						         1

(ii)	Age at dismissal 							        48
(iii)	Weeks’ pay (gross) (statutory max )				  	£280.00
(iv)	Years in which not below 41 years                                                        1

Accordingly basic award = 1 ½ x £280.00 =				£420.00

Compensatory Award

42.	In assessing compensatory award the tribunal must take into account the provision of the statute and of relevant case law.  In this case the tribunal is bound to consider and apply the principles set out in the case Polkey v AE Dayton Services Ltd [1987] IRLR 503.  This case applies where , if the action taken by the employer in dismissing the claimants (for redundancy, as here) had been done properly and the claimants would have been made redundant any way, then, for the purposes of the compensatory award that fact is to be reflected in the compensatory award made.  In Polkey, Lord Bridges said:-

“If it is held that taking the appropriate steps which the employer failed to take before dismissing the employee would not have affected the outcome, this will often lead to the result that the employee, though unfairly dismissed, will recover no compensation…”  

In that case Lord Bridges also relied on in an earlier case (Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 EAT]) where Browne-Wilkinson J said:-

“If the Industrial Tribunal thinks there is a doubt whether or nor the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment.”

In this case the tribunal decided that if proper notice and other proper procedures had been followed, there was a probability that the claimants’ dismissal by way of redundancy would have been fair. In assessing the extent of that probability the tribunal noted its findings that the claimants did not challenge that there was a redundancy situation nor did they challenge their selection for redundancy. Accordingly the tribunal applied the principles of Polkey and reduced the compensation award to nil.

Loss of Statutory Rights

On the basis of its finding that the claimants’ would, on the balance of probabilities, have been made redundant in the event, this award does not arise. 

Notice Pay

The first-named claimant, Mr Bradley	One week’s pay (net) = £303.00

The second-named claimant, Mr. Burke	 One week’s pay (net) = £301.00

Neither claimant received benefits so the issue of recoupment does not arise.

43.	This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1996.

Chairman:

Date and place of hearing: 	24 May 2006, Londonderry 

Date decision recorded in register and issued to parties: