LAW REPORT; Decision to make redundancy payments was correctly made

WHERE THE Secretary of State for Trade and Industry had correctly decided in 1988, in the light of the law at that time, to make redundancy payments under section 107 of the Employment Protection (Consolidation) Act 1978 to employees of a company which had become insolvent, the employees were not entitled to claim, on the basis of a subsequent change in the law, that they had not in fact been dismissed in 1988, but that their employment had continued on the transfer of the employer's business to another company.

The Court of Appeal allowed the appeal of the Secretary of State for Trade and Industry against a decision of the Employment Appeal Tribunal as to the basis on which redundancy payments under section 167 of the Employment Rights Act 1996 should be calculated.

The respondents had all been employed by Rotaprint plc for periods varying between five and 25 years when a receiver was appointed. On 31 March 1988 notice of redundancy was given to the respondents. On 5 April they were re-employed by Pan Graphics Industries Ltd, which had bought the business of Rotaprint as a going concern. Rotaprint was insolvent and unable to meet its liabilities or to make statutory redundancy payments under section 81 of the Employment Protection (Consolidation) Act 1978. Accordingly the respondents applied to the Secretary of State for payment under section 106 of the 1978 Act (now section 166 of the Employment Rights Act 1996). Payments were made of sums calculated for the periods of the respondents' employment up to 31 March 1988.

The respondents continued to be employed by Pan Graphics until 1995, when it also went into receivership and became insolvent. The respondents applied once more to the Secretary of State for redundancy payments. Payments were made of sums calculated on the basis that in each case the period of service had begun on 5 April 1988. The respondents appealed to an industrial tribunal, submitting that the Secretary of State should have calculated the payments from the dates on which they first entered the service of Rotaprint, on the ground that the transfer of the business of Rotaprint to Pan Graphics did not break the continuity of their service.

The industrial tribunal concluded that as the Secretary of State had paid a sum to the employees in respect of a redundancy payment, it operated to break the continuity of employment, and accordingly the respondents were not entitled to any payments beyond those already made. The respondents appealed to the Employment Appeal Tribunal, which held that the payments made by the Secretary of State in 1988 were not made in respect of dismissal because the respondents' employment had continued by reason of the transfer of Rotaprint's undertaking to Pan Graphics. The Secretary of State appealed, submitting, inter alia, that on the basis of the law as it had been interpreted in 1988 the claimants had indeed been dismissed.

Bruce Carr (Treasury Solicitor) for the Secretary of State; Dinah Rose (Treasury Solicitor) as amicus curiae.

Lord Justice Beldam said that the Secretary of State had directed himself correctly on the facts of the present case in the light of the law in 1988. Redundancy payments had been introduced by the Redundancy Payments Act 1965, which created an obligation on employers to make redundancy payments to employees who had been dismissed because there was no longer any work for them or who had been laid off or kept on short time.

The object of the Redundancy Fund set up by section 26 of that Act was to enable the Secretary of State to make the appropriate payment for an insolvent employer.

Redundancy payments were intended to provide income for an employee while he was seeking new employment or was on short time. The Secretary of State could properly have concluded in 1988 that the claimants were not employed immediately before the transfer of undertaking, and that consequently they were entitled to redundancy payments.

Parliament required the Secretary of State to be satisfied that an employee was entitled to an employer's payment by taking a view of the facts and the law which, acting in good faith, he could reasonably entertain. On that basis his decision was not to be set aside simply because thereafter someone thought his view was wrong. It would be an unreasonable construction which required the Secretary of State, every time he was called upon to act under section 167, to gaze into a crystal ball and to foretell future developments in employment law.

Kate O'Hanlon, Barrister

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