Industrial Tribunals Northern Ireland Decisions

THE INDUSTRIAL TRIBUNALS

 

CASE REF: 2283/16

CLAIMANT: Joseph William Shortt

 

RESPONDENT: Computer World (Ireland) Limited

 

 

 

DECISION

 

 

The decision of the tribunal is as follows:-

 

That the claimant was automatically unfairly dismissed and the respondent is hereby ordered to pay the claimant compensation of £4,303.08.

 

 

Constitution of Tribunal:

 

Employment Judge (sitting alone): Employment Judge Turkington

 

 

 

Appearances:

 

The claimant appeared and represented himself at the hearing.

The respondent did not appear at the hearing.

 

 

The Claim

 

1. The claim was a claim of unfair dismissal.

 

The Issues

 

2. The issues to be determined by the tribunal were:-

(a)           Whether the claimant was an employee of the respondent. In the claim form, the claimant had described himself as a Director of the respondent. The tribunal therefore sought evidence regarding the matters outlined in the Schedule to the Judgment of the Northern Ireland Court of Appeal in the case of Crawford and Dunlop v Department of Employment and Learning (2014) which the Court held were relevant to the question whether a director and shareholder of a company is also an employee.

 

(b)           If the claimant was found to be an employee, the tribunal then had to consider whether the respondent had complied with the statutory dismissal procedure pursuant to The Employment (Northern Ireland) Order 2003 and The Employment (Northern Ireland) Order 2003 (Dispute Resolution) Regulations (Northern Ireland) 2004 and therefore whether the dismissal of the claimant was automatically unfair; and, if appropriate;

 

(c)           the compensation to be awarded to the claimant.

Disposal of the claim in the absence of the respondent

 

3.           The respondent did not appear at the hearing. The respondent had not lodged a response form and, in accordance with rule 9 of the Industrial Tribunal Rules of Procedure, the respondent was therefore not entitled to take any part in the proceedings at the hearing. Accordingly, the tribunal decided that it was appropriate to proceed to hear the claim in the absence of the respondent.

 

Sources of Evidence

 

4.             The tribunal heard oral evidence from the claimant and considered documents submitted by the claimant. The tribunal also considered and took account of the content of the claim form submitted by the claimant.

 

Facts of the Case

 

5. Having considered the claim form submitted by the claimant, the claimant's evidence at the hearing and the documents submitted by the claimant, the tribunal found the following relevant facts:-

 

6. The claimant was initially employed by the respondent as an IT Engineer from September 2006. The claimant's job as an IT Engineer required him to be out on the road on a regular basis visiting customers' premises.

 

7.             In or about 2010, the claimant became a (minority) shareholder and director of the respondent company. However, on a day to day basis, the claimant continued to carry out substantially the same work as he had done previously. In particular, he continued to spend most of his working time out on the road assisting customers. The claimant did take on additional management responsibilities after he became a shareholder and director. For example, he looked after the other staff who were out on the road. From time to time, the claimant also attended meetings with the other directors regarding the performance of the company.

 

8.             The claimant viewed his fellow director and the majority shareholder Gerry McNally as being the "boss" of the respondent company. Mr McNally looked after the accounts and the wages for the respondent. Mr McNally did not go out on the road to customers' premises as the claimant did.

 

9.             More recently, Stephen Pollock also became a minority shareholder and director of the respondent company. His role and work was similar to that of the claimant. In recent years, Mr Gerry McNally sold his majority shareholding to his brother Mr Brendan McNally.

 

10.          After 2010, the claimant was paid a fixed salary of £13,000 per annum which was subject to tax on a PAYE basis. He also received dividends in respect of his shareholding in the respondent company. Dividends were usually paid every 3 months, depending on company profits. During his last year with the company, the claimant received dividends of approximately £8,000. These payments were not subject to tax on a PAYE basis. There was no shareholder agreement between the shareholders. There were no loans between the claimant and the respondent company.

 

11.          The fixed pay received by the claimant at all times exceeded the rate of the National Minimum Wage. The claimant's working hours were normally 40 hours per week and were always compliant with the requirements of the Working Time Regulations.

 

12.          The respondent company did not have any company pension scheme, so the claimant did not have access to a pension scheme. The claimant claimed out of pocked expenses such as for petrol and hotel bills when he had to travel in the course of his work. The claimant did not receive any benefits in kind.

 

13.          The claimant's base was the respondent's shop in Armagh. This was generally open Monday to Saturday. The claimant had an office on the premises. The claimant normally received around 3 weeks holiday per year along with Bank holidays when the shop was closed. On other bank holidays when the shop remained open, the directors often covered the shop to allow other staff to take the day off. There was no provision for company sick pay if the claimant was off sick. There was no formal performance review or appraisal for the claimant.

 

14.          When the claimant was initially employed, he received a statement of main terms and conditions of employment which was set out in the company handbook. The company handbook contained disciplinary and grievance procedures, although the claimant did not consider that these were applicable to him as a Director.

 

15.          Throughout the period when he worked for the respondent, the claimant had no other jobs.

 

16.          In the summer of 2016, the claimant was away on holiday. Around this time, there were some personal difficulties between the claimant and Mr Brendan McNally. The claimant sent a text to Mr McNally raising various concerns about the respondent company including in relation to cashflow.

 

17.          When the claimant arrived back to work on 2 August, he was invited to a meeting during which Mr McNally offered to buy him out of the company. The claimant asked for a week to consider this proposal. The claimant was inclined to accept this offer. The proposal was that the claimant would resign as a director, but stay on as an employee until such times as HMRC had approved the arrangement and written terms had been drawn up by the parties' solicitors.

 

18.          Shortly after this, the claimant received a P45 in the post. This P45 was produced to the tribunal. This shows the claimant's leaving date as 3 August 2016 and the form is dated 11 August 2016. The claimant also discovered that he had been removed as a director of the respondent company and when he attended for work, he discovered that the locks of the premises had been changed. Therefore, the claimant has been unable to access his office since early August 2016. The claimant has not received any pay since 3 August 2016.

 

19.        The claimant's P45 showed total pay for 4 months of £4550.40 and tax deducted to date of £176.00.

 

20.        After he finished working for the respondent, the claimant set up a new business which began trading near the end of August 2016. Since September 2016, the claimant's earnings from this new business have been comparable to his earnings with the respondent. The claimant therefore accepted that his loss of earnings was limited to 1 month's pay.

 

21.        The claimant has not claimed state benefits.

 

Statement of Law

 

22.        As noted above, the law in relation to the employment status of shareholders and directors was considered recently by the Northern Ireland Court of Appeal in the case of Crawford and Dunlop v Department of Employment and Learning (2014). In its judgement, the Court made it clear that a tribunal considering any such case must conduct an adequate inquiry as to the circumstances of the formation of any contracts of employment between the claimant and the company. Further, the tribunal must consider the terms and conditions of any such contract of employment and the conduct of the claimant in the performance of any duties under any claimed contract of employment.

 

23.        The Court invited counsel for the parties in the Crawford and Dunlop case to draw up a schedule which reflected the considerations which should be addressed by the tribunal in undertaking the necessary inquiries. This Schedule was approved by the Court (subject to some modifications which the court considered made the Schedule somewhat clearer) and effectively approved by the Court.

 

24.        The statutory dismissal procedure introduced by the Employment Rights (Northern Ireland) Order ("the 2003 Order") applies in this case. That procedure requires the following steps:-

 

Step 1 - written statement of grounds for action and invitation to meeting - the employer must set out in writing the grounds which lead the employer to contemplate dismissing the employee.

 

Step 2 - meeting - the meeting must take place before action is taken. The meeting must not take place unless -

 

(a)           the employer has informed the employee what the basis was for including in the statement the grounds given in it, and

 

(b)           the employee has had a reasonable opportunity to consider his response to that information.

 

After the meeting, the employer must inform the employee of his decision and notify him/her of the right to appeal against the decision.

 

Step 3 - appeal - if the employee informs the employer of his/her wish to appeal, the employer must invite him/her to attend a further meeting. After the appeal meeting, the employer must inform the employee of his final decision. The employee must be afforded the right to be accompanied at any meetings under the statutory dismissal procedure.

 

25. By article 130A (1) of the Employment Rights (Northern Ireland) Order 1996 ("the Order"), where the statutory dismissal procedure is applicable in any case and the employer is responsible for non-completion of that procedure, the dismissal is automatically unfair. A tribunal is required to consider whether the dismissal is automatically unfair under article 130A even where this issue has not been specifically raised by the claimant - see Venniri v Autodex Ltd (EAT 0436/07).

 

26. Pursuant to Article 17 of The Employment (Northern Ireland) 2003, where it appears to the tribunal that the non-completion of the statutory dismissal procedure was wholly or mainly attributable to the employer, it shall increase any compensatory award made to the employee by 10% and it may, if it considers it just and equitable in all the circumstances to do so, increase the award by a further amount up to 50%.

 

Conclusions

 

Employment Status

27.          In the course of this hearing, the tribunal took the claimant through the matters set out in the Schedule annexed to the Judgement in the Crawford and Dunlop case. The relevant facts found by the tribunal are set out above. In this case, the claimant had been employed by the respondent as an IT Engineer before buying into the company and becoming a shareholder and director. The claimant did receive a written statement of main terms and conditions of employment at the outset of his employment, but he was unable to produce this to the tribunal as he could not access his former office at the respondent's premises. It was clear from the claimant's evidence that, after he bought into the company, the claimant's day to day work for the respondent remained largely unchanged, save that he took on some additional management responsibilities.

 

28.          As far as his earnings were concerned, the claimant continued to earn a fixed amount each month, although he received in addition a share of profits by way of dividend payments in addition to his fixed income. The fixed earnings were taxed at source by way of PAYE deductions and this was confirmed by his P45.

 

29.          It was clear from the claimant's evidence that the claimant considered the majority shareholder to be the "boss" of the respondent company. The tribunal therefore considered that the claimant was subject to the overall control of Mr Gerry McNally and later Mr Brendan McNally.

 

30.          In light of the facts found, the tribunal was of the view that, after he became a shareholder and director, the claimant's employment with the respondent continued much as before, but with additional arrangements relating to his position as a shareholder and director. The tribunal considered that the facts of this case were entirely consistent with the usual indications of a contract of employment. It also appears that the respondent itself treated the claimant as an employee since a P45 was sent to the claimant purporting to confirm the termination of his employment.

 

31.          Accordingly, the tribunal had little hesitation in concluding that the claimant was an employee of the respondent at the date when his relationship with the respondent was terminated. The tribunal is therefore satisfied that the claimant is entitled to bring a claim of unfair dismissal.

 

Unfair dismissal

 

32.          In light of the facts found, it was clear that none of the requirements of the statutory dismissal procedure were complied with in this case. In effect, the claimant's employment was terminated by the respondent's actions, that is by sending the claimant a P45 and changing the locks on the premises so that the claimant could not attend for work together with the respondent's failure to pay the claimant's fixed pay after August 2016.

 

33.          This was a clear breach of the statutory dismissal procedure as described above. None of the requirements of the statutory dismissal procedure were complied with in this case. The tribunal was satisfied on the basis of the facts found that the non-completion of the statutory dismissal procedure was wholly attributable to the respondent. The tribunal therefore concluded that the dismissal of the claimant was automatically unfair. In the circumstances, it was not therefore necessary for the tribunal to consider whether the dismissal was fair in all the circumstances.

 

34. Accordingly, the decision of the tribunal is that the claimant was unfairly dismissed and that the claimant is entitled to compensation for such unfair dismissal.

 

Compensation for unfair dismissal

 

35. Having determined that the claimant was unfairly dismissed, the tribunal went on to consider the appropriate remedy. The claimant did not seek reinstatement or re-engagement. The tribunal therefore considered that the appropriate remedy was compensation.

 

36. The claimant was out of work and without income for the period between 3 August 2016, which was the date given by the respondent in the P45 as the claimant's leaving date, and the beginning of September 2016 when the claimant's new business began. The tribunal considered it appropriate to award the claimant his loss of earnings for a period of 1 month.

 

37. The tribunal considered the appropriate uplift to the compensatory award for unfair dismissal pursuant to article 17 of the 2003 Order as above. The respondent in this case failed to comply with any of the requirements of the statutory dismissal procedure. The claimant was effectively dismissed by the clear message sent by the respondent's actions. Accordingly, the tribunal considered that the respondent's non-compliance with the statutory dismissal procedure was extremely serious. The tribunal concluded that the uplift should be at the extreme higher end of the scale between 10 and 50%. Therefore, the tribunal determined that it was just and equitable in all the circumstances for the award to the claimant in respect of unfair dismissal to be increased by 50%.

 

38. The tribunal considers that the appropriate compensation in this case in accordance with article 152 to 158 of the Employment Rights (Northern Ireland) Order and article 17 of the Employment (Northern Ireland) Order is as follows:-

 

(A) Basic award

 

The claimant had been employed for

9 years at the date of his dismissal.

£262.52 (gross weekly wage) X 9 = £2362.68

 

(B) Compensatory award

 

Immediate loss to date of hearing:-

1 month x £1093.60 (net monthly wage) = £1093.60

 

Future loss of earnings:- NIL

 

Loss of statutory rights £300

Total compensatory award for unfair dismissal (B) = £1093.60 Increase in monetary award of 50% ADD £ 546.80

 

TOTAL compensatory award after increase = £1640.40

The tribunal considers that a reduction for contributory fault is not appropriate in this case.

 

Accordingly, the tribunal hereby orders the respondent to pay to the claimant compensation for unfair dismissal in the total sum of £4303.08.

 

39. This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.

 

 

 

 

Employment Judge:

 

 

Date and place of hearing: 27 January 2017, Belfast.

 

Date decision recorded in register and issued to parties: