The Employment Appeal Tribunal (EAT) has held that where an employer had sought to change the terms of employment and had made an offer to "buy out" some of the existing terms and warned that refusal would result in dismissal with an offer of re-engagement on new terms, the employer had not acted unfairly when it terminated the existing contracts and offered re-engagement on terms that did not include the "buy out" payment. In the case of Slade v TNT (UK), TNT provided "end of sort" bonuses to various employees. TNT sought to discontinue the bonus by negotiating with the Trade Union and making a formal offer of a "buy out". The Union conducted a ballot and by a narrow majority the employees rejected the offer. In response to the rejection TNT gave a formal notice of termination of employment, together with an offer of immediate re-engagement on the same terms excluding the bonus. Each of those dismissed accepted re-engagement under the new terms, but reserved their right to claim unfair dismissal.
183 employees made claims and four were heard as test cases at Tribunal. These were claims by two Loading Bay Operatives (LBOs) a traffic clerk and a shunter driver (the "non LBOs"). The Tribunal noted that the bonus represented approximately 18 percent of the Claimant’s salaries and that a reduction of pay in this amount caused "considerable hardship".
However, the Tribunal balanced hardship against the TNT’s reasons for varying the employment terms. It held that TNT did not act unfairly by dismissing the employees or by not including the "buy out" in the new terms of employment it offered.
At appeal the EAT upheld the Tribunal’s decision that TNT had not dismissed unfairly. The EAT considered the issue to be "wholly fact sensitive" but affirmed the conditions that the Tribunal had applied to reach their decision.
- Some other substantial reason for the dismissal - the recession caused TNT’s business "acute pressure" and a dramatic fall in operating profit (from £68.5m in 2007/8 to £11.9m by 2009). The long term viability of the business was at risk and a number of other cost cutting measures were implemented in addition to the removal of the bonus. In this context TNT’s actions were reasonable.
- Fairness of dismissal - TNT had an honest and reasonable belief that taking the proposed steps would achieve cost reduction. TNT acted reasonably because it did consider its employee’s reduction in earnings and the potential hardship and responded within the "band of reasonable responses".
- Fair procedure followed for dismissal. TNT had met and negotiated with employees over several months. There was no evidence to support the Claimant’s allegation that the employees’ representative’s proposals had been ignored.
There was no obligation for TNT to include a "buy out" in the new offer.
This case highlights the EAT’s desire to balance the impact of the varied terms and conditions on the Claimant against the commercial needs of the Respondent. Ultimately, the Tribunal will look to whether the Respondent has acted reasonably in respect of the reason for the dismissal and whether a fair procedure was followed.
As the removal of the bonus impacted more severely on the non LBOs, the EAT considered their claims separately and returned these to the Tribunal to provide more detailed reasoning.