Today's EAT review concerns Elaine Martin v Tesco Ireland Holdings Limited (UD 1455/2009) and looks at the alternative remedies open to the tribunal in unfair dismissal cases.

Case Name: Elaine Martin v Tesco Ireland Holdings Limited (UD 1455/2009)

Legislation: Unfair Dismissals Acts, 1997 TO 2007 (the “Acts”)

Jurisdictions/Subject Matter: Alternative remedies.


Facts

The Claimant’s employment as a till operator with the Respondent company commenced in October 1999 and was without incident until she went on sick leave in October 2007. The Company Sick Pay Scheme pays sick leave for eight weeks, after which the employee is considered to be on long term sick leave which is unpaid. Details of this Scheme are contained in the staff handbook.

Management are provided with a policy document relating to long term sick leave stating that a return to work should be sought within 12 months. Staff members are not provided with this document.

The policy stated that the length of long-term sick leave tolerated by the company depended on the service of the employee. This practice was not agreed with Trade Unions, employees were not informed of it and it was not detailed in the staff handbook or the contract of employment.

After 3 months on sick leave, employees are asked to attend the company doctor. The Claimant attended the company doctor 3 times and at the final appointment on 17 July 2008, the report stated that the Claimant was unlikely to return to work within a year. On foot of this report, the Claimant was invited by the Personnel Manager to discuss the situation and invited to bring any reports from her own doctor containing an alternative view to that of the company doctor to the meeting.

On 28 August 2008, a meeting took place between the Personnel Manager, the Claimant and her Trade Union Representative. The Occupational Health Manager’s report on behalf of the Company and the Claimant’s psychiatrist’s report were discussed. The Occupational Heath Manager’s report concluded that the Claimant was unfit for work for the foreseeable future and unlikely to return within the following year. The Claimant’s psychiatrist’s report stated that the Claimant would be unfit to return to work until January 2009. The return date in the psychiatrist’s report was not considered by the employer to be an exact date nor was it considered a reasonable time frame and, following this meeting, the Claimant’s employment was terminated on 26 September 2008. The Claimant was not afforded the opportunity to appeal the decision to terminate her position and the Store manager admitted that this was a breach of company procedures.

The claimant sought re-instatement and told the Tribunal that she had been out of work since her dismissal but was fit for work from January 2009.


Determination

The Tribunal was of the opinion that the Respondent did not give adequate regard to the psychiatrist’s report submitted by the Claimant, nor did they seek an alternative report to confirm or refute its content.

The Tribunal accepted that the Claimant was unaware of the policy correlating length of service with duration of sick leave and was given no indication as to what was defined as a “reasonable return date” to work by the Respondent.

In holding that the Claimant was unfairly dismissed under the Acts, the Tribunal ordered that the Claimant be re-instated by the Respondent in the position which she held immediately prior to termination and on the same terms and conditions. The re-instatement was to be deemed to have commenced on the day of dismissal and the Claimant entitled to receive remuneration from 1 February 2009.

Full decision:
http://bit.ly/dVz1xp


Legal Review: Capability Dismissal Remedies

In general, the EAT tend to require the employer to test any actual medical evidence before concluding that an employment relationship can be terminated. In the above case, the medical report contained a potential return date to work, and it is likely that the EAT would have been more disposed to consider that the employee could be dismissed on capability grounds if the employer had made an attempt to get an alternative, independent medical assessment confirming that the employer was in fact not fit to return to work within a reasonable period.

The above case also raises a number of other legal issues. Although not specifically referred to in the above case, the common law principle of “frustration” can sometimes be relevant.

Frustration of a contract (a common law principle utilised by the Courts in construing whether a contract has been terminated automatically) can occur in three circumstances:

1. where there has been a change in the circumstances so that the performance of the contract becomes unlawful;
2. where events make it physically impossible for the contract to be performed; or
3. where, although performance is physically possible, there has been such a change as to destroy the whole object of the contract and to make performance no longer commercially viable.

Examples of where the doctrine of frustration may apply in an employment situation include: where the employee’s place of work is destroyed for example by fire, natural disaster etc; the imprisonment of an employee; or where an employee suffers a serious accident or illness rendering the future performance of the employee's obligations impossible or radically different from that which was undertaken, as happened in the case above.

In the case of illness, if there is a prospect of the employee recovering from the illness, notwithstanding the fact that the employee has been absent for a lengthy period of time, the contract might not be frustrated. Clear evidence is likely to be required by the Court to demonstrate that the contract is impossible to perform. In declaring a contract to be frustrated, the Courts will consider all of the facts.

The EAT is reluctant to consider the common law principal of frustration and tend to want the employer to terminate the contract by reason of capability rather than consider the contract frustrated. However, if the employee can show that they will be returning to work at some point in the future, the EAT will be reluctant to accept that the employee was fairly dismissed for capability reasons.

The above case is slightly unusual in that re-instatement is the remedy given by the EAT, which although often expressed to be the EAT’s preferred remedy, is in fact not often the remedy given.

Section 7(1) of the Acts provides for three possible remedies in cases of Unfair Dismissal:

1. Re-instatement;
2. Re-engagement;
3. Compensation.


Re-instatement

Where an employee is successfully re-instated, as was the case in the circumstances above, it is to the position which the employee held immediately prior to dismissal and on the same terms and conditions as previously enjoyed.

The 1993 Act amended the legislation to provide that where other employees are employed by the same employer in similar positions, the re-instated employee is re-instated to those terms and conditions. If there are no similar employees, but the terms and conditions generally have improved, the re-instated employee is entitled to the terms and conditions on which those other employees are employed.

An employee who is re-instated is entitled to back pay for the period he/she was out of work and all other benefits owing and accruing to him/her. Also, the employee retains continuity of service if successfully re-instated. Re-instatement is not a widely used remedy.

Re-engagement

This remedy effectively means that the employee resumes work in the position held immediately prior to dismissal or in a different position on such terms and conditions as are reasonable having regard to all circumstances. Unlike re-instatement, re-engagement does not guarantee continuity of service and payment of lost salary and this remedy, whilst rarely used, is sometimes utilised where it is felt that the employee contributed to the dismissal, even though the actual dismissal was unfair. In practice the EAT usually orders that there be continuity of service, but no payment of back wages, as to end continuity of service would allow the employer to immediately terminate the employee without necessarily triggering the Unfair dismissals Acts.

Compensation

This is the most commonly awarded remedy but it is important to remember that compensation is only awarded in terms of financial loss. Recoverable remuneration is not limited to basic salary but extends to all other cash payments such as commissions, bonuses etc and other benefits such as a company car, share options, health insurance payments and arguably any other benefits provided to the employee at the expense of the employer. The legislation allows for a maximum of 104 weeks' gross remuneration to be awarded.

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Legal-Island would like to thank David Fagan, Partner, Employment Law Unit of Eversheds O’Donnell Sweeney for the main content of this email. More about David:
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Eversheds O’Donnell Sweeney Website:
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Legal-Island
16 February 2011