Lambe v 186K Ltd.

Factual and Procedural Background

The Appellant, an accountant employed by Company A from May 2000 to February 2002 as a corporate finance manager, was dismissed on grounds of redundancy. The redundancy arose due to a downturn in the telecommunications industry leading to workforce reductions. The Appellant was offered an alternative role in the Financial Control Department, which he declined, resulting in his formal redundancy.

The Employment Tribunal (ET) found the dismissal was for redundancy but procedurally unfair due to inadequate consultation, awarding compensation equivalent to seven weeks' salary plus statutory loss. The Appellant appealed to the Employment Appeal Tribunal (EAT), which dismissed his appeal at a preliminary hearing, finding no arguable point of law. The Appellant then obtained permission to appeal to this court.

Legal Issues Presented

1. Whether the Appellant's dismissal was a genuine redundancy within the meaning of section 139 of the Employment Rights Act 1996.
2. Whether the procedural unfairness in the redundancy process limited the Appellant's compensation to the seven weeks' pay awarded by the Tribunal.
3. Whether the Appellant was misled by the Respondent regarding his pension rights upon dismissal.

Arguments of the Parties

Appellant's Arguments

• The redundancy was not genuine but a pretext to replace him with another employee.
• The alternative role offered was unsuitable and amounted to a demotion.
• The redundancy process was substantively and procedurally unfair, including flawed selection criteria and inadequate consultation.
• The Tribunal failed to properly apply statutory provisions and relevant case law, including section 139 ERA 1996 and the guidance in King v Eaton (No 2).
• The Tribunal's reasoning was inadequate, leaving the Appellant uncertain why he lost on key issues.
• The Appellant was misled about his pension rights, particularly regarding the impact of taking pay in lieu of notice on pension entitlement.

Respondent's Arguments

• The dismissal was a genuine redundancy due to a downturn requiring workforce reduction.
• The Appellant was the last of three corporate finance managers, and the role was legitimately replaced by a senior manager from another department.
• The Respondent conceded procedural unfairness due to insufficient consultation but argued that the outcome would have been the same even with proper consultation, justifying limited compensation.
• The Tribunal was entitled to reconstruct what would have happened had the proper procedure been followed, consistent with Polkey v AE Dayton Services Ltd.
• The Appellant was advised about the pension implications and was encouraged to seek independent pension advice.
• The Respondent disputed that the pension issue raised a legal point warranting further compensation under unfair dismissal law, suggesting negligence proceedings instead.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first examined whether the dismissal was a genuine redundancy. It agreed with the Tribunal and EAT that the Appellant's role was diminished due to business downsizing and the replacement by a differently skilled senior manager, fitting within the statutory definition of redundancy under ERA 1996 section 139(1)(b). The court rejected the Appellant's arguments that the redundancy was a pretext or that the Tribunal's findings were perverse.

Regarding procedural fairness, the Respondent conceded that consultation was inadequate. The Tribunal found that a reasonable consultation period would have been seven weeks, but even with such consultation, the Appellant would not have secured alternative employment within the company or its group and would have left regardless. The court endorsed this finding, applying the principles from Polkey, which limit compensation if the dismissal outcome was inevitable despite procedural defects.

The court analyzed the Appellant's criticisms of the Tribunal's reasoning and found that the Tribunal provided sufficient reasons for its conclusions, enabling the Appellant to understand why he lost. The court also discussed the relevance of the distinction between procedural and substantive unfairness and endorsed the approach of O'Dea and a modified King v Eaton, which discourage rigid categorization and focus on the practical effect of the employer's conduct.

On the pension issue, the court found that the Tribunal failed properly to identify and address whether the Appellant was misled about his pension rights. The EAT also inadequately dealt with this matter, incorrectly treating it as a judgment call without legal significance. The court held that any loss of pension entitlement attributable to the unfair dismissal falls within the compensatory award under ERA 1996 section 123(1). Consequently, the court remitted this issue to the Tribunal for re-hearing on its merits.

Finally, the court addressed a procedural dispute about whether the appeal should be remitted to the EAT for a full hearing or decided by this court. It distinguished the present case from authorities cited by the Respondent, noting that the EAT had fully adjudicated the appeal and dismissed it. The court concluded that the appeal should be heard on its merits by this court, remitting only the pension issue to the Tribunal.

Holding and Implications

The court ALLOWED THE APPEAL to the limited extent of remitting the pension issue to the Employment Tribunal for re-hearing on its merits.

The court upheld the Tribunal's findings on the genuineness of the redundancy and the limitation of compensation for procedural unfairness to seven weeks' pay. The decision clarifies the application of Polkey and King v Eaton principles regarding compensation where dismissal would have been inevitable despite procedural defects. No new precedent was established beyond confirming existing legal principles. The direct effect is that the pension issue requires further consideration by the Tribunal, while all other aspects of the dismissal decision remain affirmed.