MR M FENTEM v OUTFORM EMEA LIMITED

Part X Employment Rights Act 1996 concerns unfair dismissal. Within Chapter 1 section 94 sets out the right not to be unfairly dismissed. Section 95 then provides as follows:

In the present case the contract of employment of the claimant in the employment tribunal included the following provisions:

The claimant’s employment came to an end following a change in ownership of the business. How this came about was described by the tribunal in the following passage:

The tribunal had to decide whether, for the purposes of his unfair dismissal claim, the claimant was dismissed. The judge, EJ Dyal, recorded at [25] that counsel for the respondent, Mr Hodge, “accepts as a general proposition that where an employee resigns on notice and the employer unilaterally brings forward the date of termination, that will ordinarily amount to a dismissal”. But Mr Hodge submitted that where there is a term of the contract “that permits the employer to terminate the contract and make payment in lieu of the remainder of the notice period” the position is different and there is, in law, no dismissal. For that proposition he relied upon the decision of the EAT in Marshall (Cambridge) Limited v Hamblin [1994] IRLR 260. Counsel for the claimant, Mr Jackson, argued that Marshall v Hamblin did not so decide. He submitted that the EAT in that case had regarding it as involving the employee merely effectively being placed on garden leave until the end of the period of notice that he had given, so that, for that reason, there was no dismissal.

EJ Dyal, however, concluded that the EAT in Marshall v Hamblin had not analysed that case in that way. Rather, it had concluded that the employer had used a contractual term permitting it to “waive or shorten the period of notice which the employee had given”, the effect of which was to “bring forward” the date of termination; and that, in those circumstances, as a matter of law, the termination remained one by reason of resignation.The employment judge then considered three other authorities of the EAT which, it was suggested, were inconsistent with Marshall v Hamblin. But he concluded, upon analysis of each, that none provided him with a basis on which to depart from it. He was therefore bound to follow Marshall v Hamblin, and therefore bound to conclude that the claimant in the present case was not dismissed. So he dismissed his claim of unfair dismissal.

The claimant appealed. Mr Jackson appeared again for him. Mr Solomon QC now led Mr Hodge. I shall continue to refer to the parties as they were below, as claimant and respondent.

Mr Jackson confirmed at the outset of the hearing of the appeal, that he did not seek to rerun his contention in the employment tribunal that Marshall v Hamblin should be distinguished, on the basis that it was regarded, factually, as being a garden leave case. However, the foundation of his case on appeal was that I can, and should, not follow Marshall v Hamblin. The foundation of the resistance to the appeal was that it was not open to me so to do.

Before I turn to the actual decision in Marshall v Hamblin, I should note that at the time the definition of dismissal for the purposes of an unfair dismissal claim was found in the predecessor or section 95(1) of the 1996 Act, section 55(2) Employment Protection (Consolidation) Act 1978. The wording of section 55(2)(a) was as follows:

In Marshall v Hamblin the employee (the Respondent to that appeal) was a salesman, earning basic pay and substantial commission. How the employment ended, the relevant contractual provisions, and the analysis of the tribunal below, were described by the EAT in the following passage:

By a majority the EAT allowed the appeal. Their reasons, in full, were as follows:

In British Gas Trading v Lock [2016] ICR 503 the EAT (Singh J as he then was) reviewed earlier authorities which had considered in what circumstances the EAT will depart from its own previous decisions. Drawing the threads together at [75] he said this:

He added, at [77] and [78]:

In that case the EAT was invited to depart from its previous decision in Bear Scotland Limited v Fulton [2015] ICR 221, which Singh J declined to do. He observed:

Mr Jackson submitted that, with reference to the five categories identified in Lock at [75], categories (1), (2) and (4) applied here.

As to category (1) he submitted that Marshall v Hamblin was per incuriamWest Midlands Co-Operative Society v Tipton [1986] ICR 192. He relied in particular on Lord Brandon’s citation from Post Office v Crouch [1974] 1 WLR 89, in which Lord Reid stated that the legislation conferring the right not to be unfairly dismissed, should be “construed in a broad and reasonable way so that legal technicalities shall not prevail against industrial realities and common sense”. This, he suggested, prefigured the discussion in Uber BV v Aslam [2021] UKSC 5 of the purposive approach to be taken to legislation conferring rights upon workers. Had the EAT in Marshall v Hamblin had its attention drawn to Tipton the outcome might well have been different.

However, I do not consider that Marshall v Hamblin was decided per incuriam the decision in Tipton. As is well established, the per incuriam principle only applies where the decision under scrutiny has overlooked an earlier inconsistent decision in light of which it is apparent that its reasoning was “demonstrably wrong”: Morelle v Wakeling [1955] 2 QB 379, 406. That requires the earlier decision to be directly concerned with the specific point at issue, which Tipton, which concerned the significance, or not, of a right of appeal, to the fairness of a dismissal, was not.

As to Lock category (3), Mr Jackson now relied on only one prior decision of the EAT as inconsistent: McLoughlin v Sutcliffe Catering (UK) Limited [2002] UKEAT/0932/01. However, while not abandoning the point he told me that he was making no oral submission about it.

I note that in McLoughlin, at [13], the EAT suggested that the passage in Hamblin which refers to the commentary in Harvey “may have been too sweeping”. But it said no more than that; and the appeal in hand was decided on the basis that, on a correct analysis of the facts of that case, there had been no early termination imposed by the employer prior to the expiry of the employee’s notice. At best for the present claimant the EAT’s observations on this passage from Hamblin were obiter. In agreement with EJ Dyal, I conclude that McLoughlin is not an inconsistent authority, and I do not regard it as providing a basis to depart from Marshall v Hamblin.

Mr Jackson’s principal contention was that Marshall v Hamblin is manifestly wrong. In summary, the principal strands of his case were as follows.

First, what was then section 55 of the 1978 Act and is now section 95 of the 1996 Act, sets out a clear, exhaustive, description of the circumstances in which, for the purposes of an unfair dismissal claim, an employee is treated as having been dismissed. The starting point is that, for there to be a dismissal, the case must fall into one of the categories at section 95(1)(a), (b) or (c), subject only to the limited additional provision in the circumstances set out in section 95(2).

By virtue of section 95(1)(a), where the contract is “terminated by the employer” there is a dismissal. It expressly provides that this is so whether that termination is with or without notice. There is no proviso or qualification. Section 95(1)(a) applies in any and every case in which the contract is terminated by the employer, regardless of any other factual or legal feature of the case.

If, during the currency of a period of notice that has been given by the employee, the employer does something to bring the contract to an end on a sooner date, which pre-empts the employee’s notice taking effect, that is then a termination of the contract by the employer. The analysis is no different where, following the resignation, the employer does so by invoking a clause in the contract itself, of the present type. The fact that the employer has acted in a manner that is permitted by, and compliant with, the contract is irrelevant. It does not affect the fact that it is still the conduct of the employer which actually brings the employment to an end on that earlier date. So there is still a termination by the employer and section 95(1)(a) applies.

Mr Jackson submitted that what was being contended for was, in effect, an exception or qualification to the application of section 95(1)(a) to such a case. But, whereas section 95(2) created a limited specific exception to section 95(1)(b), there are no exceptions to section 95(1)(a). He also prayed in aid again in this context his arguments about the approach to the construction of employment protection legislation, drawing on Tipton and Uber BV v Aslam, as supporting the conclusion that Marshall v Hamblin was manifestly wrong, because it would entail a significant undermining of the protection against unfair dismissal that Parliament plainly intended that employees, who are generally in a vulnerable and subordinate position, should have.

Mr Jackson also submitted that the reasoning of the majority in Marshall v Hamblin was fundamentally flawed. They had allowed themselves to be distracted by an irrelevant analysis of the discussion in Delaney v Staples [1992] ICR 483 of the different meanings of “payment in lieu of notice”, and a mistaken analysis of the case in hand as involving a waiver by the employer of its right to notice. They had failed to cite, or apply, the words of section 55(2)(a), and engage with the question which they needed to focus on, being whether there was a termination by the employer, and hence a dismissal. Had they done so, the answer would have been clear.

Mr Solomon reminded me of what was said in Lock at [77] and [104]. The circumstances in which the EAT may depart from one of its own previous decisions are tightly circumscribed, so as to avoid the instability and uncertainty of inconsistent decisions, and the repeated revisiting of the same point, at the same level. He acknowledged that Marshall v Hamblin had been questioned and criticised in various quarters. But even if I might conclude that, if free to do so, I would have decided the point of law the other way, that would not be sufficient. It could not be said that Marshall v Hamblin was obviously wrongly decided. Indeed, contended Mr Solomon, it was rightly decided.

Mr Solomon argued that in Marshall v Hamblin the parties had agreed, by the employment contract, that, following notice having been given by the employee, the employer could then choose to bring forward the date of termination. Where the employer avails itself of such a mechanism, that does not alter the fact the mode of termination remains resignation. It is only the date that is affected. The decision to terminate, and the alteration, in an agreed way, of the date, are separate things. The majority therefore rightly concluded that the resignation was not converted into a dismissal.

Mr Solomon submitted that this analysis goes with the grain of a body of authority to the effect that, where an employer has given notice, it is possible for the date of termination then to be brought forward without affecting the fact that there is still a dismissal. He referred me to the discussion in Harvey at DI[266] and following. This shows, he said, that the analysis where the context is one in which one party has already given notice, may be materially different, and that, in such a context, the date of termination can be altered without the mode of termination changing.

Mr Solomon also contended that the argument drawing on Uber BV v Aslam was not to the point in a case where the employee has freely resigned and does not claim to have been constructively dismissed. Such an employee could not be viewed as vulnerable or the sort of person who unfair dismissal legislation was designed to protect. There was no issue in a case such as this about the contractual provision in question truly reflecting the parties’ genuine agreement.

The majority in Marshall v Hamblin had identified that the case was different from Delaney category two, because the employee had given notice. Their observation about section 49(3) was not part of the ratio and took matters no further. They had addressed in terms the question of whether there was a dismissal, concluding expressly that there was. They had come to the right conclusion.

Mr Solomon stressed again that in any event it could not be said that the majority decision in Marshall v Hamblin was obviously wrong. He suggested that the reasoning of the minority in that case was itself in places wrong. The fact that Mr Jackson had advanced a policy-based argument in support of his case was also a sign that the majority decision was not obviously, manifestly, wrong.

If Marshall v Hamblin could not be said to be manifestly wrong, I could not depart from it. Indeed, like Singh J in Lock, I should resist the temptation to descend into the detail of the doctrinal arguments. Any such exercise must be left to the Court of Appeal. On that point Mr Jackson responded that I could not judge whether Marshall v Hamblin was manifestly wrong, without examining what, in principle, I considered the right analysis of the underlying legal issue to be. He referred me to Jhuti v Royal Mail Group Limited [2018] ICR 1077 in which Simler P, as she then was, was also invited to depart from a previous EAT decision on a particular point, and began with an analysis of the underlying statutory framework pertinent to the issue. Mr Solomon responded that Jhuti does not add to, or gloss, the guidance given by Singh J in Lock; and in the event, on the point at issue in Jhuti, it was concluded that the relevant part of the previous decision was obiter.

At its broadest level, the legal issue raised by this appeal is one of statutory interpretation. Section 95, like its predecessors, sets out an exhaustive definition of the circumstances in which an employee will be deemed to have been dismissed, for the purposes of an unfair dismissal claim. However, within that framework, elements of the definition use common-law contract-law building blocks, or have been interpreted as doing so.

As a starting point what is clear, I think, is that the statute provides that, in any and every case in which the contract of employment is terminated by the employer, there is a dismissal. Section 95(1)(a) so provides, without qualification. Accordingly, focussing in a little closer, the issue raised is concerned with the concept, for these purposes, of the contract being “terminated by the employer”.

As a matter of general contract-law analysis, contracts of employment may be terminated in conceptually distinct different ways: by the employer; by the employee; by agreement; by the occurrence of a limiting event; or, occasionally, by operation of law. Section 95 of the 1996 Act uses these distinctions to identify the sub-set of cases in which there will be a dismissal for the purposes of this statutory right: those of termination by the employer, termination by a limiting event (being one of the kinds of event set out in section 235(2B)), and certain cases of termination by the employee. A termination by agreement does not, however, fall within this definition of dismissal.

Treading a little further, conduct of the employer or employee which terminates the contract is conduct by that party which brings the contract to an end on a particular date. The date need not be expressly stated, as long as it is unambiguously ascertainable. There may be an issue in the given case as to whether the factual conduct relied upon meets that test. There is a sub-body of authority which offers guidance. But the underlying statement of legal principle is not, I think, controversial.

With that legal framework in mind, I turn to consider what legal proposition emerges from the majority decision in Marshall v Hamblin. This requires a little elucidation.

First, we need to consider what understanding the majority proceeded on, as to factually what had occurred in that case. As to that I note that, in coming to their conclusion at [15], they referred to the employer having paid wages, but not commission, “until the expiry of the notice”. Those words read alone might suggest that they understood the case to be one in which the employment still ended on the date given in the employee’s notice. But, as EJ Dyal discussed, reading the decision as a whole, the majority appear to have regarded the case as one in which, factually, the employer used a term of the contract to bring the employment to an end on a date earlier than the date on which the employee’s notice would otherwise have expired. On that reading, the phrase “until the expiry of the notice” was a loose compression that perhaps meant, more precisely, something like: “ in the amount that would have been due in the period remaining until the expiry of the notice.” In all events, as I have noted, Mr Jackson did not pursue on appeal the argument that the case was viewed by the majority as factually one in which the original termination date did not change.

Proceeding from that understanding of the facts of the case, in his skeleton argument for this appeal, Mr Solomon described Marshall v Hamblin as “authority for the proposition that there is no dismissal when, following an employee’s resignation, the employer exercises a contractual right to bring forward the effective date of termination”. I observe that the learned editors of IDS Brief and Harvey refer to it in similar terms. As I have noted, before me Mr Jackson conceded that, if I am bound to follow Marshall v Hamblin, then it points to the conclusion that there was no dismissal in the present case, because it is one in which, following a resignation, the employer invoked a contractual clause enabling it to cause the employment to terminate on an earlier date.

But to understand with just a little more precision the point at issue, it is helpful to identify some propositions of law about which counsel before me did not disagree. First, Mr Solomon of course accepted that the mere fact, in a given case, that the employer’s conduct is compliant with the contract does not, without more, mean that its conduct is not a termination by it, and hence a dismissal. Thus, the mere fact that, in a given case, the employer has given the period of notice required by the contract, means that there is no wrongful dismissal, but there is still a dismissal. Though trite, restating this point helps us to narrow down, more precisely, the issue between the parties.

Secondly, it was common ground that, where an employee resigns on notice, and, during the currency of that notice, the employer then unilaterally acts to cause the contract of employment to end on an earlier date, that will generally amount to a termination by the employer, and hence a dismissal by it, which takes effect before the employee’s resignation has the chance to do so. Mr Solomon confirmed in oral submissions that he did not resile from the concession to that effect which Mr Hodge made to the tribunal on the respondent’s behalf, as recorded by it at [25].

What Mr Solomon contended makes the difference, doctrinally, to the analysis, in a case such as Marshall v Hamblin, and such as the present, is the combination of two factual features. The first is that the context is one in which the employee has first given notice of resignation (in circumstances which are not contended, or found, to amount to constructive dismissal). The second is that the employer has then invoked a clause of the contract, which specifically permits it, where the employee has given notice of resignation, thereafter to cause the employment to end on an earlier date, by making a prescribed payment by reference to the balance of the notice period which the employee’s resignation has set in train. It is that combination which, he submits, means that, in law, the employer’s conduct only alters the date on which the prior resignation takes effect.

That is, I think, the proposition of law that Mr Jackson accepts emerges from Marshall v Hamblin, but which he submits is manifestly wrong. The nub of his case, in short, is that it is plainly and obviously wrong to suggest that this combination of features makes any difference. The position, in such a case, remains that it is the unilateral conduct of the employer that has caused the employment to end on the earlier date, and so that must be a termination by the employer, regardless of the fact that it is parasitic upon a resignation, and was carried out in a manner permitted by the contract.

It does appear that the majority in Marshall v Hamblin considered that the sentence included in the contract in that case: “Payments in lieu of notice are at the discretion of the company” meant that the employer was entitled, by making a payment referrable to the unexpired balance of the notice period given by the employee, to cause the employment to end earlier, without that giving rise either to a breach of contract or to a dismissal. They stated: “The employer is entitled to utilise a term of that contract to bring the employment to an end at an earlier date than the date of expiry of the employee’s notice.” But they also concluded that there “was no dismissal in this case”, adding that the employee resigned, and the employer then made that payment “within the terms of the contract.”

However, I am bound, with great respect, to say that I cannot see how anything in the reasoning along the way supported their “no dismissal” conclusion. Delaney was concerned with how “payment in lieu of notice” can describe payments falling into different categories: sometimes of wages, sometimes not, sometimes in compliance with the contract and sometimes by way of damages for breach. The majority concluded that the case had the same attributes as Delaney category (2) save that the employee had first given notice. But, even if they were right to say that, they did not consider whether that would have any bearing on whether there was still a dismissal.

I also agree with Mr Jackson that the majority were wrong to regard the case as involving a waiver by the employer, and wrong to see section 49 as a source of comfort. The employer did not accede to a request by the employee to release him early. The majority’s discussion under the heading “commission” also seems to me have cast no light on whether there was a termination by the employer in that case; nor did the proposition that the EAT was not bound by the employer’s concession of wrongful dismissal; nor did the proposition (though true, as such) that it is not the case that any (that is to say, every) termination during a period of the employee’s notice will amount to a dismissal.

I have thought it right to set out these observations about the reasoning adopted by the majority in Marshall v Hamblin, because I was, in light of this aspect, initially strongly inclined to the view that the decision is not merely wrong, but manifestly wrong. My misgivings about the majority’s view of the meaning of the clause relied upon, and the relevance of their reasoning process to the question of whether there was a dismissal (even if not in breach) by the employer, caused me initially to doubt whether the legal outcome on this point could reasonably be defended as correct.

However, ultimately, it is indeed the outcome, or proposition of law, for which the decision stands, that must be the focus of consideration. If there is a line of analysis that can reasonably arguably be advanced in defence of the outcome, that is not itself obviously, manifestly, wrong (and even if there is also a line of analysis that can reasonably be advanced against that proposition), then the legal outcome cannot be said to be manifestly wrong, even though the majority who decided the case itself did not reason the matter out in that way.

As to that, two aspects of Mr Solomon’s submissions have given me pause. The first concerns the body of authority discussed in the passage in Harvey to which he referred me. Mr Jackson is right, I think, that the cases discussed there all concerned a scenario in which an employer dismissed on notice, the employee then evinced a wish to leave sooner, the employer agreed in principle to that happening, and, one way or another, that was then brought about. The same can be said of another case on which Mr Jackson relied for illustrative purposes, Palfrey v Transco plc [2004] IRLR 916, although there the dismissal was found to have been “brought forward” by a fresh employer’s notice, with the adverse consequence for the employee that his tribunal claim was out of time.

Mr Jackson argued that, as they all involved the date of a dismissal being “brought forward” in accordance with the employee’s wishes expressed following the dismissal, these authorities were simply of no relevance to a scenario in which the employee has resigned on notice, and then the employer acts unilaterally to cause the employment to end earlier, without the employee, following the resignation, having specifically agreed to that. However, I am not sure that it can be said that it is obvious that there is nothing in the discussion in any of these authorities that might inform the approach to the issue at hand. It would, I think, require some consideration or analysis of them, to come to a firm conclusion about that.

The second point is that, even leaving aside whether that particular body of authority arguably has any relevant insights to offer, I do not, ultimately, think that I can say that it is simply not reasonably arguable that a provision of the contract itself could provide, or have the legal effect, that, following a resignation, the employer can, without also needing the post-resignation agreement of the employee, cause the employment to end sooner than the date given by the employee, by making the employee a contractually-prescribed payment, by reference to the unexpired period of the employee’s notice, in a way that only alters how and when the resignation takes effect.

Having, after considerable reflection, come to the conclusion that I cannot say that these points are obviously not reasonably arguable, I am driven to the conclusion, despite my misgivings about the substantive reasoning in the decision itself, that the proposition of law which, it was common ground before me, emerges from Marshall v Hamblin, is not one that I can say is manifestly wrong. I have therefore concluded that I cannot depart from it on this point; and I will therefore refrain from considering these lines of argument any further, or indicating how I would have decided the point had I considered myself free to do so. Resolution of it must be left to the Court of Appeal.

Ultimately, I have concluded that, like the employment tribunal, I am bound to follow Marshall v Hamblin. For that reason the appeal is dismissed.