LORD JUSTICE NEILL:
1. Introduction
This appeal is concerned with events which took place in the Port of London following the abolition of the Dock Labour Scheme by the Dock Work Act 1989. In particular we are concerned with the port of Tilbury which is a thousand acre site on the north bank of the river Thames.
Before the introduction of the Dock Labour Scheme in 1947 most workers in the dock were employed on a casual basis. Men were chosen to work as and when work was available and they were only paid when working on a ship.
The Dock Labour Scheme was introduced in order to give some security to the largely casual labour force. A register of men was established and the Scheme prohibited the employment of men not on the register unless special permission was given. The registered men became entitled to receive certain minimum payments, whether actually working or not. The Scheme was administered by the National Dock Labour Board with local Dock Labour Boards in each port. The National Board was jointly controlled by the two sides of industry and financed by a levy made on employers as a percentage of their wages bill. In addition there was a national Joint Council and a local Joint Council in each port which had the task of settling any industrial issues which arose between the two sides.
As time went by, however, increases in mechanisation led to a reduction in the demand for men. At the same time the work at the port fell away. Some employers went out of business, and for a period after 1972 it was the practice that (in accordance with the Jones Aldington agreement) if an employer went out of business the local Dock Labour Board allocated the men to other employers on the river. But the requirement to employ these additional men, who might not be needed, led to further difficulties.
The Port of London Authority (the PLA) was incorporated in 1908 and is regulated by the Port of London Act 1968. The duties of the PLA include a duty to provide, maintain, operate and improve such port and harbour services and facilities in, or in the vicinity of the Thames, as it considers necessary and desirable. For some time before the abolition of the Dock Labour Scheme in 1989 the PLA had made itself responsible for employing dock workers who had become unattached because their previous employers had been forced out of business. It had been found that the allocation which had been provided for in the Jones Aldington agreement had placed an insupportable burden on other employers. In time, however, the PLA itself found that the cost of employing these extra dock workers on its own payroll as an "employer of last resort" was becoming too great a burden.
For some years before 1989 industrial relations at Tilbury were unsatisfactory. The PLA wanted change and the abolition of the Dock Labour Scheme and the introduction of local negotiations on pay and conditions. On the other hand the Transport and General Workers Union (the T & G), which was the trade union recognised by the PLA, wanted the Dock Labour Scheme to be preserved.
On 6 April 1989 the Secretary of State for Employment announced the introduction of a Bill for the abolition of the National Dock Labour Scheme. This move to abolish the Dock Labour Scheme led to industrial action. An account of part of this action is to be found in the report of the court proceedings which ensued: see ASSOCIATED BRITISH PORTS v. TRANSPORT and GENERAL WORKERS UNION [1989] ICR 557. For the purpose of the present appeal, however, it is unnecessary to investigate this aspect of the matter any further.
The abolition of the Dock Labour Scheme led to major changes in the port of Tilbury. In June 1989 the total work force at Tilbury was 1731 of whom 1122 were registered dock workers, all being members of the T & G. As a result of the changes introduced later in the summer of 1989, however, the number of men employed at Tilbury was much reduced. The total number of redundancies including voluntary and non-registered workers was 680. Among the registered dock workers who were made redundant were 17 shop stewards. These 17 registered shop stewards who were made redundant (together with two other men Mr. Desmond and Mr. Nicholson) were the applicants in the present proceedings.
A further change introduced following the abolition of the Dock Labour Scheme was that the PLA ceased to be an employer of dock labour. The men are now employed by wholly owned subsidiaries of the PLA. Furthermore, the terms and conditions of service of employees of the three subsidiary companies have greatly reduced the role for an independent trade union. No trade union is recognised by the PLA except to this limited extent, that a member of the workforce is entitled to be represented by a trade union in relation to discipline and grievance procedures.
Following the termination of their employment on the ground of redundancy, the 19 applicants instituted proceedings before an Industrial Tribunal seeking findings that they had been unfairly dismissed and orders that they be reinstated. The applications were heard together and occupied the Industrial Tribunal for 197 days. The hearings continued intermittently between 23 October 1989 and 21 February 1992. Shortly after the beginning of the hearing Mr. Mills, a member of the tribunal, died and the parties agreed to proceed thereafter before a tribunal of two. The Industrial Tribunal decided to split the hearing of the application into sections. As a result it gave four separate written decisions. It will be convenient to refer to these four decisions as follows:
(a) The decision dated 21 August 1991 as the Liability
decision.
(b) The decision dated 20 December 1991 as the Remedies Decision.
(c) The decision dated 21 February 1992 as the Practicability Decision.
(d) The decision dated 27 February 1992 as the Compensation Decision.
All four decisions formed the subject matter of an appeal to the Employment Appeal Tribunal. The appeal was heard on various dates in February, March and May 1992. Judgment was delivered on 9 July 1992.
By its Liability Decision the Industrial Tribunal decided unanimously that the PLA had unfairly dismissed all the individual applicants in that it had selected them for dismissal for redundancy for a reason falling within section 58(1)(b) of the Employment Protection (Consolidation) Act 1978 (the 1978 Act). The Industrial Tribunal set out the Full Reasons for its decision in a comprehensive document extending over 275 pages. I would like to pay tribute to the care and attention to detail with which this document was prepared.
The appeal on liability was dismissed by the Employment Appeal Tribunal. On this aspect of the case there is no further appeal to this court.
The second decision reached by the Industrial Tribunal was the Remedies Decision. By this decision the Industrial Tribunal decided unanimously that the PLA should be ordered to re-engage twelve of the nineteen applicants. The terms on which they were to be re-engaged were set out in respect of each applicant at Annexe 4 to the Decision.
By the Practicability Decision dated 21 February 1992 the Industrial Tribunal decided unanimously that the PLA had failed to show that it was not practicable for it to comply with the orders for re-engagement dated 20 December 1991. The Tribunal further decided that the applicants were entitled to a basic award, a compensatory award and a special award to be calculated in accordance with sections 73, 74, 75 and 75A(2) of the 1978 Act.
The Employment Appeal Tribunal heard the appeals by the PLA against the Remedies Decision and the Practicability Decision together. It was argued on behalf of the PLA before the Employment Appeal Tribunal that the Industrial Tribunal had erred in concluding that section 69 of the 1978 Act gave the Tribunal a general discretion whether or not to make an order for re-engagement. It was further argued that the Industrial Tribunal had erred in failing to determine the issue of practicability before deciding to make the re-engagement orders. In substance the Employment Appeal Tribunal accepted these arguments, and held that the Industrial Tribunal had erred in law in that it had failed to determine before making any orders for re-engagement under section 69, whether it was practicable for the PLA to comply with such orders. The Employment Appeal Tribunal accordingly set the Remedies Decision aside and ordered that the matter should be remitted for a rehearing.
Despite its conclusion on the Remedies Decision, however, the Employment Appeal Tribunal went on to consider the Practicability Decision in case they had been in error on the second appeal. The Employment Appeal Tribunal concluded that in reaching its Remedies Decision the Industrial Tribunal had substituted its own commercial judgment for that of the employer and had failed adequately to take into account the question of finance in its criticism of the PLA's failure to seek voluntary severance.
By the Compensation Decision dated 27 February 1992 the Industrial Tribunal decided unanimously that the applicants should receive special awards. In the case of the seven applicants in respect of whom no order for re-engagement had been made the special award was ordered to be calculated on the basis of a week's pay multiplied by 104, subject to a maximum in the case of each applicant of £25,040. In the case of the twelve applicants in respect of whom orders of re-engagement had been made it was ordered that the special award should be calculated on the basis of a week's pay multiplied by 156. No maximum figures were stated for these special awards.
The appeal by the PLA against the Compensation Decision was dismissed by the Employment Appeal Tribunal.
II. The Issues on the Appeal.
The appeal to this court raises three main issues:
(1) Were the orders for re-engagement valid orders?
(2) Did the PLA satisfy the test of "not practicable" set out in section 75A of the 1978 Act?
(3) Is it possible, having regard to the terms of Schedule 14 of the 1978 Act, to calculate "a week's pay" for the purposes of section 75A(1)(a) or section 75A(2)(a) of that Act?
III. The Legislation.
Part V of the 1978 Act confers statutory rights on an employee against unfair dismissal. Thus section 54 provides:
"(1) In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by his employer."
This statutory right was first conferred by the Industrial Relations Act 1971 (now repealed). The statutory right is to be distinguished from the common law right to claim damages at common law for wrongful dismissal.
In the present proceedings the applicants claimed that their dismissals were unfair because the reason for which they were selected for dismissal on the grounds of redundancy was that they had taken part in the activities of an independent trade union. They relied on section 59 of the 1978 Act which is in these terms:
"Where the reason or principal reason for the dismissal of an employee was that he was redundant, but it is shown that the circumstances constituting the redundancy applied equally to one or more other employees employed in the same undertaking who held positions similar to that held by him and who have not been dismissed by the employer, and either -
(a) That the reason (or, if more than one, the principal reason) for which he was selected for dismissal was one of those specified in section 58(1);
..............
then, for the purposes of this Part, the dismissal shall be regarded as unfair."
One of the reasons specified in Section 58(1) is that the employee "had taken part, or proposed to take part, in the activities of an independent trade union at an appropriate time": see s.58(1)(b)
There is now no appeal by the PLA against the decision of the Industrial Tribunal (which was affirmed by the Employment Appeal Tribunal) that the applicants were selected for redundancy because they had taken part in the activities of an independent trade union and had therefore been unfairly dismissed. This decision constituted the Liability Decision.
It is therefore necessary to consider the statutory remedies available to an employee who has been unfairly dismissed. By section 67(1) it is provided that a complaint may be presented to an Industrial Tribunal against an employer by any person who claims he was unfairly dismissed by the employer. Section 68 and the succeeding sections are concerned with remedies. Section 68 is in these terms:
"(1)Where on a complaint under section 67 an Industrial Tribunal finds that the grounds of complaint are well founded, it shall explain to the complainant what orders for reinstatement or re-engagement may be made under section 69 and in what circumstances they may be made, and shall ask him whether he wishes the Tribunal to make such an order, and if he does express such a wish the Tribunal may make an order under section 69.
(2) If on a complaint under section 67 the Tribunal finds that the grounds of the complaint are well-founded and no order is made under section 69, the Tribunal shall make an award of compensation for unfair dismissal, calculated in accordance with sections 72 to 76, to be paid by the employer to the employee."
It will be remembered that in the present case the applicants sought orders for reinstatement. It is therefore necessary to turn next to section 69 of the 1978 Act, which provides:
"(1) An order under this section may be an order for reinstatement (in accordance with subsections (2) and (3) or an order for re-engagement in accordance with subsection (4), as the industrial tribunal may decide, and in the latter case may be on such terms as the tribunal may decide.
(2) An order for reinstatement is an order that the employer shall treat the complainant in all respects as if he had not been dismissed, and on making such an order the tribunal shall specify -
(a) any amount payable by the employer in respect of any benefit which the complainant might reasonably be expected to have had but for the dismissal, including arrears of pay, for the period between the date of termination of employment and the date of reinstatement;
(b) any rights and privileges, including seniority and pension rights, which must be restored to the employee; and
(c) the date by which the order must be complied with.
(3) Without prejudice to the generality of subsection (2), if the complainant would have benefited from an improvement in his terms and conditions of employment had he not been dismissed, an order for reinstatement shall require him to be treated as if he had benefited from that improvement from the date on which he would have done so but for being dismissed.
(4) An order for re-engagement is an order that the complainant be engaged by the employer, or by a successor of the employer or by an associated employer, in employment comparable to that from which he was dismissed or other suitable employment, and on making such an order the tribunal shall specify the terms on which re-engagement is to take place including -
(a) the identity of the employer;
(b) the nature of the employment;
(c) the remuneration for the employment;
(d) any amount payable by the employer in respect of any benefit which the complainant might reasonably be expected to have had but for the dismissal, including arrears of pay, for the period between the date of termination of employment and the date of re-engagement;
(e) any rights and privileges, including seniority and pension rights, which must be restored to the employee; and
(f) the date by which the order must be complied with.
(5) In exercising its discretion under this section the tribunal shall first consider whether to make an order for reinstatement and in so doing shall take into account the following considerations, that is to say -
(a) whether the complainant wishes to be reinstated;
(b) whether it is practicable for the employer to comply with an order for reinstatement;
(c) where the complainant caused or contributed to some extent to the dismissal whether it would be just to order his reinstatement.
(6) If the tribunal decides not to make an order for reinstatement it shall then consider whether to make an order for re-engagement and if so on what terms. and in so doing the tribunal shall take into account the following considerations, that is to say -
(a) any wish expressed by the complainant as to the nature of the order to be made;
(b) whether it is practicable for the employer or, as the case may be, a successor or associated employer to comply with an order for re-engagement;
(c) where the complainant caused or contributed to some extent to the dismissal, whether it would be just to order his re-engagement and if so on what terms;
and except in a case where the tribunal takes into account contributory fault under paragraph (c) it shall, if it orders re-engagement, do so on terms which are, so far as is reasonably practicable, as favourable as an order for reinstatement."
Section 70 contains supplementary provisions relating to section 69. Section 70(1) is in these terms:
"(1) Where in any case an employer has engaged a permanent replacement for a dismissed employee, the tribunal shall not take that fact into account in determining, for the purposes of subsection (5)(b) or (6)(b) of section 69, whether it is practicable to comply with an order for reinstatement or re-engagement unless the employer shows -
(a) that it was not practicable for him to arrange for the dismissed employee's work to done without engaging a permanent replacement; or
(b) that he engaged the replacement after the lapse of a reasonable period without having heard from the dismissed employee that he wished to be reinstated or re-engaged, and that when the employer engaged the replacement it was no longer reasonable for him to arrange for the dismissed employee's work to be done except by a permanent replacement."
Section 71 of the 1978 Act contains provisions relating to the enforcement of an order made under section 69 and relating to compensation. It is only necessary to refer to part of section 71. Section 71(2) provides:
"(2) Subject to subsection (1), if an order under section 69 is made but the complainant is not reinstated or, as the case may be, re-engaged in accordance with the order -
(a) the tribunal shall make an award of compensation for unfair dismissal calculated in accordance with sections 72 to 76, to be paid by the employer to the employee; and
(b) except in a case in which the dismissal is to be regarded as unfair by virtue of section 58 or 59(a) or in which the employer satisfies the tribunal that it was not practicable to comply with the order, the tribunal shall make an additional award of compensation to be paid by the employer to the employee of an amount -
(i) where the dismissal is of a description referred to in subsection (3), not less than twenty six nor more than fifty two week's pay or,
(ii) in any other case, not less than thirteen nor more than twenty six week's pay.
It may be noted that section 71(3) makes provision for a "higher additional award" in cases where the dismissal constituted an act of discrimination within the meaning of the Sex Discrimination Act 1975 or the Race Relations Act 1976.
The general provisions relating to compensation for unfair dismissal are contained in section 72 of the 1978 Act. This section provides:
"Where a tribunal makes an award of compensation for unfair dismissal under section 68(2) or 71(2)(a) the award shall consist of -
(a) a basic award (calculated in accordance with section 73), and
(b) a compensatory award (calculated in accordance with section 74), and
(c) where the dismissal is to be regarded as unfair by virtue of section 58 or 59(a), a special award (calculated in accordance with section 75A);
but paragraph (c) shall not apply unless the complainant requested the tribunal to make an order under section 69, and shall not in any event apply in a case within section 73(2)."
It is not necessary in the present case to make any reference to section 73 of the 1978 Act (which is concerned with the calculation of the basic award), nor to section 74 (which is concerned with the calculation of the compensatory award), nor to section 75 which imposes a limit on the amount of a compensatory award. It is necessary, however, to set out part of section 75A. Section 75A was inserted into the 1978 Act by the Employment Act 1982 section 5(3) and , so far as is relevant, is in these terms:
(1) Subject to the following provisions of this section, the amount of the special award shall be -
(a) one week's pay multiplied by 104 or,
(b) £12,550,
whichever is the greater, but shall not exceed £25,040.
(2) If the award of compensation is made under section 71(2((a) then, unless the employer satisfies the tribunal that it was not practicable to comply with the preceding order under section 69, the amount of the special award shall be increased to -
(a) one week's pay multiplied by 156, or
(b) £18,795,
whichever is the greater, subject to the following provisions of this section."
It may be noted that by section 75A(7) the Secretary of State may by order increase any of the sums specified in subsections (1) and (2).
I shall have to return later to the statutory provisions relating to the calculation of a week's pay.
In the present case the applicants sought orders for reinstatement. Orders for reinstatement were not made but instead orders for re-engagement were made in respect of twelve of these applicants. If these orders for re-engagement were validly made, it is common ground that they were not complied with.
I shall deal first with the question whether the re-engagement orders made on 20 December 1991 were valid.
IV. The Validity of the Re-Engagement Orders made on 20 December 1991.
It will be seen that where an Industrial Tribunal finds that the grounds of the complaint under section 67 are well founded it is under a statutory duty in accordance with section 68(1) to explain to the complainant what orders for reinstatement or re-engagement may be made and in what circumstances. The Tribunal is then required to ask the applicant whether he wishes to make such an order. If he does express such a wish the Tribunal is then empowered to make an order under section 69.
In the present case we are concerned only with orders for re-engagement. I shall therefore refer again to section 69(6) which provides as follows:
"(6) If the tribunal decides not to make an order for reinstatement it shall then consider whether to make an order for re-engagement and if so on what terms; and in so doing the tribunal shall take into account the following considerations, that is to say -
(a) any wish expressed by the complainant as to the nature of the order to be made;
(b) whether it is practicable for the employer or, as the case may be, a successor or associated employer to comply with an order for re-engagement;
(c) where the complainant caused or contributed to some extent to the dismissal, whether it would be just to order his re-engagement and if so on what terms;
and except in a case where the tribunal takes into account contributory fault under paragraph (c) it shall, if it orders re-engagement, do so on terms which are, so far as is reasonably practicable, as favourable as an order for reinstatement."
It is clear that in a case where an order for re-engagement is made but is not complied with by the employer the question of the practicability of re-engagement may have to be considered by the Industrial Tribunal at two stages. The consideration at stage 1 is before any order is made and is made necessary by reason of the terms of section 69(6)(b). If an order is made but not complied with the Industrial Tribunal may have to take the question of practicability into account again at stage 2 because it may affect the size of the special award. Thus whereas under section 75A(1)(a) the amount of a special award is, subject to a statutory maximum, two years pay, the amount of the special award will be to three years pay if the award of compensation is made under section 71(2)(a) "unless the employer satisfies the tribunal that it was not practicable to comply with the preceding order under section 69." An award of compensation is made under s.71(2)(a) where a section 69 order has not been complied with.
There is an issue between the parties as to the nature of the task to be carried out at stage 1 before a re-engagement order is made. It was argued on behalf of the PLA that the Industrial Tribunal has to determine the issue of practicability before an order for re-engagement can be made. The PLA further contended that the Industrial Tribunal does not have a general discretion under section 69(6) but can only take into account the three factors set out in paragraphs (a), (b) and (c). It was therefore submitted that the Industrial Tribunal erred in law because it failed to reach a final conclusion on practicability before making the orders for re-engagement on 20 December 1991. It may be noted that the Employment Appeal Tribunal rejected the argument that the Industrial Tribunal did not have a general discretion, but upheld the submission that the Industrial Tribunal had erred in law in failing to make a final determination as to practicability before making orders under section 69. It is therefore necessary to turn to passages in the Remedies Decision.
In Part 4 of the Remedies Decision the Industrial Tribunal considered the law relating to remedies for unfair dismissal. In paragraph 1 of Part 4 the tribunal set out the terms of section 69 and continued (586):
"From those provisions it seems to us that reinstatement is intended to be the primary remedy for unfair dismissal but that if the tribunal decides not to make such an order it must consider ordering re-engagement and only if it decides against that does it go on to award compensation in accordance with sections 72 to 76. From the terms of the legislation it is clear that we have a general discretion to make orders for reinstatement/re-engagement but in exercising that discretion we must take into account the three matters specified in items (a), (b) and (c) of section 69(5) and (6). We reject the PLA submission that items (a), (b) and (c) are exhaustive of the matters which we may take into account."
A little later the Industrial Tribunal referred to the decisions of the Employment Appeal Tribunal in Timex Corporation v. Thomson [1981] IRLR 522 and Freeman v. Flynn [1984] IRLR 487. I shall have to return to the Timex Corporation case in a moment. The Industrial Tribunal then continued:
"The facts of Freeman v. Flynn shows the importance of remembering that the question of practicability of compliance by the employer is a matter to be taken into account rather than a fact to be found before an order is made."
In part 7 of the Remedies Decision the Industrial Tribunal made certain findings of fact which were described as Facts of General Relevance relating to the issues of reinstatement and re-engagement and also to mitigation. In part 8 they made additional findings of fact in relation to each of the applicants as an individual. At page 623 the Industrial Tribunal said:
"We make assessments as to the future based on all the evidence before the tribunal."
In part 9 the Industrial Tribunal applied the law to the facts.
In the light of the argument that the Industrial Tribunal erred in its approach it is necessary to set out some paragraphs from Part 9. The Industrial Tribunal said (646):
"We have given the most anxious consideration to this part of the case. It has been necessary to look at all the facts we have found, our assessments in relation to each individual applicant and to consider whether we should make an order for reinstatement/re-engagement.
................
In exercising our discretion as to whether to make an order for reinstatement or re-engagement, the tribunal has taken into account all the facts found in Parts 6, 7 and 8 of this Remedies Decision; all the facts found in paragraphs 4 to 12 of the Decision on Liability; and our assessment of each individual. We have had regard to the applicant's wishes, to whether it would be just to make an order bearing in mind each applicant's contribution to his dismissal and to the practicability of the PLA's complying with any order. We have had particular regard to the post-scheme world at Tilbury and to the need to re-create a satisfactory employee/employer relationship. Accordingly, we have had regard to the attitude of the individual applicants to the PLA, its managers, the new companies, the new terms and conditions of service, the new methods of working and the likely contact between any of the applicants and Mr. McNab, Mr. Farrow or other managers with whom there might be difficult relations. We have had regard to the applicants' past behaviour in so far as it throws light on their likely future relationship with the PLA and its subsidiaries. We have considered the possibility of problems in the shape of recriminations between a returning applicant and existing employees. We have considered whether the re-engagement of any applicant is likely to lead to disruption. We have considered the applicants' ages in relation to the PLA's efforts to reduce the average age of the workforce. We have considered the question of vacancies, the successive redundancies at Tilbury and the size of the employer companies. We have considered the applicants' skills, their use and whether they may be revived with re-training. In dealing with each applicant we have mentioned some of these matters specifically: we have considered them all in every case and no inference is to be drawn by our failure to mention each every time or from the order in which matters are mentioned or from differences of expression."
In paragraph 4 of Part 9 the Industrial Tribunal dealt with the question of reinstatement and stated that it was firmly of the view that it was not practicable for the PLA to comply with an order for reinstatement of any of the applicants. In paragraph 5 the Industrial Tribunal considered the question of re-engagement: (647)
"In relation to re-engagement, we consider that in no case does the age of the applicant mean that it is not practicable for the PLA or its subsidiary companies to comply with an order for re-engagement. In so deciding, we have regard to the PLA's policy of balancing the workforce as described. We turn now to the individuals."
The Industrial Tribunal then considered the individual applicants in turn. In some cases the Industrial Tribunal decided not to make orders for re-engagement. There were various reasons for its decision including the state of health of the applicant and the likelihood of a good employer/employee relationship between the applicant and the employer in the future. In twelve cases the Industrial Tribunal made orders for re-engagement.
The Employment Appeal Tribunal came to the conclusion that the Industrial Tribunal had erred in law in failing to decide the issue of practicability before it made the orders for re-engagement. In my judgment this conclusion does less than justice to the careful assessment which the Industrial Tribunal made in the case of each applicant before ordering or declining to order re-engagement.
It is quite true that at stage 1, that is, before an order for re-engagement is made, the Industrial Tribunal must make a determination on the evidence before it whether it is practicable for the employer to comply with an order for re-engagement. In my judgment the necessity for such a determination is apparent from the wording of section 70(1) which provides that save in specified circumstances the fact that a permanent replacement for a dismissed employee has been engaged is not to be taken into account "in determining, for the purposes of subsection (5)(b) of (6)(b) of section 69" whether it is practicable to comply with an order for re-engagement. Furthermore an employer who wishes to take advantage of the exception specified in paragraph (a) of section 70(1) has to show that it was not practicable for him to arrange for a dismissed employee's work to be done without engaging a permanent replacement. The language of section 70(1) seems to me to be only consistent with a requirement that at stage 1 a determination as to practicability has to be made. But the determination that is made at stage 1 is a provisional determination or assessment. It is not a final determination in the sense that it creates an estoppel or limits an employer at stage 2 so that he can only rely on facts which have occurred after the order for re-engagement was made.
The conclusion that the determination at stage 1 is provisional accords with common sense and is supported by several authorities of the Employment Appeal Tribunal. In Timex Corporation v. Thomson [1981] IRLR 522 Browne-Wilkinson J. explained the process to be carried out at stage 1 as follows:
"Section 69(6) only requires the Industrial Tribunal to have regard to the matters of practicability. In our judgment there is no need for an Industrial Tribunal to reach a final conclusion that re-engagement is practicable before making any such order. If, having made an order for re-engagement, it proves not to be practicable to perform it there are no adverse consequences for the employer. If the employee asks for compensation by reason of the failure of the employers not to re-engage, no order for additional compensation can be made under Section [75A(2)] if the employer satisfies the tribunal that it was not practicable to comply with the order. Therefore at that stage the Industrial Tribunal will have to decide, looking at the matter in the knowledge of the actual facts which have occurred, whether or not it was practicable to carry out the order. At the stage when the order to re-engage is being made, it is not in our judgment necessary for the Industrial Tribunal, looking at future possible events, to make a definite finding that the order for re-engagement was practicable. They must have regard to the question of practicability and if they are satisfied that it is unlikely to be effective, they will no doubt not make an order. The only strict requirement is that they should have regard to practicability."
The reasoning in Timex was followed by a division of the Employment Appeal Tribunal presided over by Waite J., who succeeded Sir Nicholas Browne-Wilkinson as President: see Freemans v. Flynn [1984] ICR 874 at 879. Further support is to be found in the judgment of Hutchison J. in Boots Co. PLC v. Lees-Collier [1986] ICR 728 at 734 and in the judgment of Knox J. in Mabirizi v. National Hospital for Nervous Diseases [1990] ICR 281 at 286, where Knox J described the two processes at section 69(5) and section 71(2)(b) respectively as follows:
"One process looks forward, the other looks back and although it may be that a cherry that is rejected at the first bite will be likely to be regarded as indigestible at the second, there is in our view no doubt at all that two bites are allowed."
In addition our attention was drawn to the judgment of Tucker J in Cold Drawn Tubes Ltd. v. Middleton [1992] ICR 318 and to the guidance given by Wood J. himself in Rao v. Civil Aviation Authority [1992] ICR 503 where he gave the following summary at 513:
"We extract from these cases the following principles.
(a) Orders for reinstatement or re-engagement under section 69 are primary remedies for unfair dismissal.
(b) Such orders are discretionary: see sections 68(1) and 69(1).
(c) The only fetter on that wide discretion is that a tribunal must `take into account' the considerations set out respectively in section 69(5) and (6).
(d) In both subsections the word `practicable', is used. It is not `possible'; it is not `capable'.
At that stage an Industrial Tribunal is not required to reach a conclusion on practicability - whether it is or it is not practicable - that need only be decided if the provisions of section 71 become relevant, but the Act specifically requires that the Industrial Tribunal shall take into account practicability for the employer to comply with the order. An Industrial Tribunal must use its experience and commonsense, looking at what has happened in the past and what can reasonably be anticipated for the future, always maintaining a fair balance, that which is, in all the circumstances, fair, just and reasonable between the parties. It is always unwise to seek to define rules for different factual situations, but factors which have influenced decisions in the past are: the fact that the atmosphere in the factory is poisoned: ..... ; the fact that the employee has displayed her distrust and lack of confidence in her employers and would not be a satisfactory employee on reinstatement: ... ; a change in policy which reinstatement would undermine: .... ; insufficient employment for the employee: ...; and possibly where parties are in close relationships at work: .... ."
I consider that in some of the passages I have referred to the Employment Appeal Tribunal has failed to stress sufficiently that some determination has to be made at Stage 1. But the determination or assessment is of necessity provisional. The final conclusion as to practicability is made when the employer finds whether he can comply with the order within the period prescribed for reinstatement or re-engagement. At this second stage the burden of proof rests firmly on the employer.
It is always necessary to remember that in this court we are concerned primarily with the decision of the Industrial Tribunal. Sir John Donaldson M.R. explained the role of a second-tier appellate court in these words in Hennessy v. Craigmyle & Co Ltd. [1986] ICR 461 at 479:
"It is too often forgotten that, in the context of appeals from the Employment Appeal Tribunal, this court is a second-tier appellate court. It may, and usually does, obtain considerable assistance from the judgment of the Employment Appeal Tribunal, but its concern is whether the decision of the Industrial Tribunal was right, not with whether the Employment Appeal Tribunal was right."
I have looked again at the Remedies Decision and in particular at Parts 8 and 9. In Part 9 the Industrial Tribunal applied the law to the facts and considered separately the position of each of the applicants. In paragraphs 1 to 4 of Part 9 (646 - 7) the Industrial Tribunal explained how it had approached the task of considering whether or not to make an order for reinstatement or re-engagement. I have come to the clear conclusion that if one reads these paragraphs in the context of the rest of the Remedies Decision the Industrial Tribunal complied properly with the duty imposed on it under section 69(6) of the 1978 Act. They made a sufficient determination or assessment on the evidence before it. It weighed the relevant circumstances and in my view the Remedies Decision of the Industrial Tribunal should be upheld.
V. The Practicability Decision.
The orders for re-engagement dated 20 December 1991 required that the twelve named applicants should be re-engaged by the 15 January 1992 on the terms set out in the orders. The PLA failed to comply with these orders and contended that it was not practicable for them to do so. It was therefore argued that the special award to be ordered under section 75A of the 1978 Act should not be increased to the amount specified in section 75A(2). It will be remembered that section 75A (2) of the 1978 Act is in these terms:
"If the award of compensation is made under section 71(2)(a) then, unless the employer satisfies the tribunal that it was not practicable to comply with the preceding order under section 69, the amount of the special award shall be increased to -
(a) one weeks pay multiplied by 155, or
(b) £18,795,
whichever is the greater, but subject to the following provisions of this section."
The case for the PLA before the Industrial Tribunal was summarised in the Practicability Decision as follows in paragraph 24 (709):
"The PLA had not complied with the tribunal's orders because in the circumstances of successive waves of redundancy it would not have been practicable to do so. The new recruits were not to be regarded as permanent replacements of the applicants. The wording of section 75A(2) was objective and what had been in the employers' mind was irrelevant. Provided an employer had genuinely examined the circumstances, had done his work properly to see if he could comply with the tribunal's orders and there were no vacancies and none foreseeable, that was enough to show that it was not practicable to comply. Freemans v. Flynn (supra) showed that the employer was not under a duty to find work for the employee nor to carry out the enquiries demanded by the applicants. The only duty was to see whether vacancies had arisen in the ordinary course of events. It had not been practicable to carry out a further selection exercise. The tribunal was not entitled to second-guess the commercial judgement of the employer and should accept management's assertion that there was no room."
The Industrial Tribunal accepted the submission that the question of practicability was a question of objective fact and that the tribunal should not substitute its commercial judgment as to such things as the optimum size of a workforce for that of the employer. The Industrial Tribunal continued however, in paragraph 31:
"... this does not mean that a tribunal must necessarily accept an employer's bare assertions as to non-practicability of compliance with its orders. The burden of proof is to be discharged by evidence in the ordinary way and the employer must satisfy the tribunal on the balance of probabilities."
At the end of the Decision the Industrial Tribunal stated their findings as follows:
"35. We have regard to the law and to the facts which we have found and we bear in mind particularly that the burden of proof on the balance of probabilities is on the PLA. It is the PLA who is in charge of the operation and which has to investigate the practicability. It is the PLA that has the records, the facts and the figures which can be put before the tribunal to show exactly what is the position.
36. At the time Mr. Farrow (the Director of Port Services) asked Mr. Hills (the Director and General Manager of Tilbury Cargo Handling Ltd.) whether he could re-engage the applicants, Mr. Hills was satisfied with the existing size of the workforce. The only enquiry Mr. Hills made was to consider whether he could justify the taking on of a group of twelve men in addition to the 271 cargo operatives which he had already. Mr. Hills knew through the staff consultancy council .... that some members of the workforce might want to apply for severance if it were offered. He did not know who they were or whether they were persons who were usually allocated to do particular duties (as described). On Mr. Hills' own evidence he did not consider whether a way of complying with any of the re-engagement orders would be to enquire who (if any) of the existing workforce really wished to volunteer for severance with a view to seeing whether any one of the applicants might be sufficiently well-qualified to fill the resultant vacancy or vacancies. In the absence of evidence, the tribunal does not accept Mr. Pardoe's submission that such an enquiry of the workforce or at least of Mr. "B" would have been too onerous or that to offer severance to other employees too expensive. There was no evidence that severance would be too expensive in a case where an applicant was re-engaged in substitution and the severance pay made to him in 1989 repaid to the PLA (as it would have to be). Nor do we accept that enquiries as to whether anyone wished to volunteer for severance would have been too upsetting for the existing workforce.
37. ..... the PLA's failure to consider whether the tribunal's orders (or some of them) could be complied with by substituting any of the applicants for those men casts serious doubts on the assertion that it was not practicable to comply with any of the tribunal's orders. That doubt is not dispelled by Mr. Hills' assertion that in effect he was happy with the workforce as it was and did not want to disturb that situation to re-engage the applicants however unfairly dismissed. Further, in a situation where there was a likelihood that there might be one or more vacancies, Mr. Hills' consideration of the applicants not as individuals but only as a group of twelve which he could in no way accommodate also casts doubt on whether it was really impracticable to comply with any of the tribunal's orders. .....
38. The tribunal is not clairvoyant. They are not managers of a port nor are we in a position to second-guess them. We can only decide on the evidence which we have before us in accordance with the statutory provisions. We cannot say it was practicable for the PLA to re-engage the applicants but on the other hand on the evidence we are not satisfied on the balance of probabilities that it was not practicable for the PLA to comply with the re-engagement orders."
The Employment Appeal Tribunal allowed the PLA's appeal against the practicability decision on the ground that the Industrial Tribunal had erred in law in that whichever is the greater, but subject to the following provisions of this section."
By section 75A(7) the Secretary of State is empowered to increase any of the sums of £12,550, £25,040 and £18,795 specified in subsections (1) and (2).
In the light of my conclusions on the Practicability issue we are now concerned only with section 75A(1).
The question which arises for consideration on this part of the appeal is whether it is possible to make a calculation of one week's pay under section 75A(1)(a) and (2)(a) having regard to the other provisions of the 1978 Act.
Section 152 provides:
"Schedule 14 shall have effect for the purposes of this Act for calculating the normal working hours and the amount of a week's pay of any employee."
One turns next to schedule 14. Part II of schedule 14 contains provisions relating to the calculation of a week's pay. Paragraphs 3 to 5 contain provisions relating to employments for which there are normal working hours and paragraph 6 contains provisions for employments for which there are no normal working hours. I should set out the terms of paragraph 3(1) and 6(1). Paragraph 3(1) provides:
"This paragraph and paragraph 4 shall apply if there are normal working hours for an employee when employed under the contract of employment in force on the calculation date."
Paragraph 6(1) provides:
"This paragraph shall apply if there are no normal working hours for an employee when employed under the contract of employment in force on the calculation date."
It will be seen that in both 3(1) and 6(1) there is a reference to "the contract of employment in force on the calculation date". Paragraph 7 of schedule 14 identifies the calculation date for different purposes of the 1978 Act. Thus paragraph 7(1)(f) provides that "where the calculation is for the purposes of section 53 or 71(2)(b) and the dismissal was with notice, [the calculation date is] the date on which the employer's notice was given". Paragraph 7(1)(g) provides that "where the calculation is for the purposes of section 53 or 71(2)(b) but sub paragraph (f) does not apply, [the calculation date is] the effective date of termination".
Section 71(2)(b), however, is concerned with an additional award of compensation and not with a special award. Furthermore, there is no reference to section 75A in paragraph 7 of Schedule 14. It is clear therefore that there is no specific provision in the 1978 Act identifying "the calculation date" where one week's pay has to be calculated for the purposes of section 75A, though it may be noted that paragraph 12 of schedule 14 provides that the Secretary of State may by regulations provide that in prescribed cases the amount of a week's pay shall be calculated in such manner as the regulations may prescribe. But it is common ground that the Secretary of State has not made any regulations under this paragraph.
In these circumstances it has been the consistent case for the PLA that in the absence of any provision in the 1978 Act or in any regulations made under it determining the calculation date for the purposes of section 75A it is impossible to calculate a week's pay for the purposes of a special award and that therefore the maximum sum which can be awarded is that prescribed in section 75A(1)(b) or (2)(b) as the case may be.
The Industrial Tribunal rejected this argument. In paragraph 13 of the Decision dated 27 February 1992 it was stated (725):
"It is a fallacy to suggest that if there is no provision for a calculation date a tribunal cannot calculate a `week's pay'. We reject Mr. Pardoe's submission that the failure to provide for a calculation date in paragraph 7 of schedule 14 together with the Minister's failure to make regulations under paragraph 12 of schedule 14 means that we can ignore `whichever is the greater' in sections 75A and must award £12,550 or £18,795. It would not be right for such a reason to ignore the clear legislative provisions and fail to carry out our duty as directed by section 71(2)(a). It seems to us that in default of a statutory method of calculating a week's pay, the matter is at large and we have to do the best we can in the circumstances by applying our knowledge of industry and commonsense to give effect to the statutory provisions for remedy in the case of trade union dismissals.
..................
14. It seems to us that the ordinary meaning of a `week's pay' is the amount to which an employee is entitled to receive under his contract of employment; that is, the gross amount before the deduction of tax and national insurance contributions. Where, as here, that amount varied because the employee was entitled to bonus on his contract, then arriving at an amount for the purposes of calculating the special award it would be right to take an average over a fairly long period: we think that period should be twelve weeks before the effective date of termination, not counting strike, sick and holiday weeks. Payment for overtime work should not be included because a man is entitled not to work just as an employer is entitled not to provide work in overtime. Payments made by the employer to a pension fund on the applicant's behalf should not be counted as part of the week's pay."
The Industrial Tribunal therefore adjourned for later consideration the precise amounts of the special awards but directed (721) that the amount was to be calculated by means of the following rules:
(a) The week's basic pay is the average hourly rate multiplied by the number of hours in a week for which an applicant was obliged to work under the relevant collective agreement;
(b) A week's pay does not include the employer's contributions to the pension fund or payments for overtime;
(c) The average weekly pay is to be calculated in each case by taking a twelve week average of the basic pay and bonus;
(d) The twelve weeks are to be twelve weeks ending with the Friday before the effective date of termination but excluding any week in which the applicant was on holiday, off sick or on strike.
The PLA appealed against this decision but the Employment Appeal Tribunal dismissed the appeal.
The Employment Appeal Tribunal concluded that Parliament plainly intended that in appropriate circumstances a special award should be calculated by reference to a week's pay. If it were necessary that section 75A had to be referred to in paragraph 7 of Schedule 14 then its omission was an oversight. The Employment Appeal Tribunal considered that in the circumstances it was sufficient to use the figure of a week's pay which, in accordance with section 72, would have to be calculated for the purposes of the basic award. It was true that by reason of paragraph 8(1)(b) of Schedule 14 a basic award of compensation could not exceed the statutory maximum, but this limit did not prevent the calculation of the multiplicand even though it might have to be capped. Nor did it matter that the amount of the basic award might be reduced by the amount of a redundancy payment in accordance with section 73(9).
One of the difficulties about the approach by the Employment Appeal Tribunal is that section 73 is mentioned specifically in paragraphs 7(1)(h) and 7(1)(i) of Schedule 14. Nevertheless I respectfully agree with the Employment Appeal Tribunal that the omission of section 75A from paragraph 7 of Schedule 14 appears to have been an oversight.
The problem seems to have arisen when the Employment Act 1982 introduced special provisions for what may be called trade union dismissals. Before that date applicants in the position of the present applicants might have been eligible for an additional award.
Section 75A of the 1978 Act was repealed by section 300(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 and was replaced by section 158 of the 1992 Act. At that stage, however, Schedule 14 of the 1978 Act was not amended and it was not until the enactment of the Trade Union Reform and Employment Rights Act 1993 that the lacuna in paragraph 7 was cured by the insertion after paragraph (i) of two new paragraphs dealing specifically with section 75A: see paragraph 32 of Schedule 8 to the 1993 Act.
It was argued on behalf of the PLA that as it was not possible to calculate a week's pay for the purposes of section 75A(1)(a) or (2)(a) the applicants' awards should be limited to the figures specified in section 75A(1)(b) and (2)(b). It was further submitted that paragraph 12 of Schedule 14 provided the machinery whereby section 75A cases could have been dealt with but that the Secretary of State had made no regulations under paragraph 12.
In my judgment paragraph 12 does not provide the answer. I consider that the Industrial Tribunal were justified in approaching the matter on the basis that Parliament intended that a special award could be calculated by reference to a week's pay. It seems to me that sufficient guidance can be obtained from paragraphs 3 and 7 of Schedule 14 to the 1978 Act to enable the necessary calculations to be made. Accordingly subject to any question which may arise as to the figures, I would dismiss the PLA's cross appeal on this point.
LORD JUSTICE STAUGHTON: I agree.
LORD JUSTICE NOLAN: I also agree.
Order:PLA to have 50 per cent of their costs of the hearing. No separate Order on the cross-appeal.
