Employers, listen up – some good news from the legal coalface, for once! A recent EAT decision has robustly affirmed the right of employers to make key business decisions without interference.

In the case of Scott & Co v Richardson, the Employment Appeal Tribunal considered the dismissal of an employee who refused to accept new terms of employment. The employer, Scott & Co, were a Scottish firm of debt collectors who wanted to change their employees’ working patterns, so that they would visit defaulting debtors during the evening rather than the day. Previously, evening work had attracted an overtime payment but this would no longer be the case.

Mr Richardson refused to accept the changes and said that, while he was happy to work evenings, this should continue to attract overtime payments. Scott & Co tried for seven months to persuade Mr Richardson to change his mind but Mr Richardson refused, ultimately issuing an ultimatum that his employer should either accept his position or dismiss him. So they dismissed him.

In the Tribunal, Scott & Co argued that they needed to make the changes to terms so that they could plan work more effectively and at a lower cost. The market practices for debt collection had changed and Scott & Co needed to change with them. In response, Mr Richardson argued that they had failed to prove that there were advantages to the new working arrangements and that the real reason for the changes was to save money in overtime payments. At first instance, Mr Richardson succeeded in his claim for unfair dismissal, as the Tribunal concluded that:

“it did not appear to us that the imposition of the shift system was of such discernible advantage that … the only reasonable thing to do was to terminate the employee’s contract unless he would agree to the new arrangement.”

However, on appeal the EAT overturned this decision and made it clear that the Tribunal should not “second guess” an employer’s business decision. The correct approach was to evaluate whether dismissal was due to the employer’s reasonable belief that the contract changes had advantages. The employer did not need to prove that those advantages objectively exist. This is consistent with the approach taken in redundancy cases, where it is not open to the Tribunal to overrule an employer’s genuinely held belief that redundancies are commercially necessary.

This is a robust, sensible decision and clearly is good news for employers, who can rely on the principle that the tribunal must respect their commercial decisions in assessing whether a fair reason for dismissal has been shown. Even so, without wanting to be a wet blanket, a few caveats are necessary:

  • While the tribunal generally will not re-open the commercial decisions of an employer’s management, a reason which is genuinely held but is trivial or unworthy or whimsical will mean that the dismissal is unfair;
  • Employers must remember that, having shown a fair reason, there is a second hurdle to establishing the overall fairness of a dismissal. They must show that, in all the circumstances, it was reasonable to treat that reason as sufficient to justify dismissal. This assessment will involve (i) balancing the detriment of the new contract to the employee against the advantage gained by the employer and (ii) considering whether a fair process of consultation was followed prior to dismissal. Changes intended to make an already profitable business more profitable at the expense of employees are unlikely to justify dismissals; and
  • In this case, Mr Richardson was one of only three employees who refused to accept the new terms and this was a key part of the EAT’s reasoning in considering whether the dismissal was reasonable. While widespread refusals will not rule out a fair dismissal, they will be evidence that it is not reasonable to push through the change, and employers will need to show that the perceived advantages for the change were all the greater.

Despite these caveats, employers should take heart from the business-minded approach taken in this case. Provided that care is taken, changes to terms which are supported by sound commercial reasons can be pushed through and this can only be good news for business.

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