In this case, the EAT upheld an appeal against a tribunal's decision to make a 100% Polkey reduction in compensation for a dismissal where capability was assessed against readiness for promotion and where the tribunal had failed to engage with the statutory test for disability which undermined both the tribunal's discrimination findings and its Polkey assessment.
Background
Where an employee succeeds in an unfair dismissal claim, but it is determined that there is a likelihood, or certainty, that they would still have been dismissed had their employer acted fairly, the employment tribunal may make a reduction to the employee's compensatory award. This is known as a Polkey reduction. The case of Hill v Governing Body of Great Tey Primary School ([2013] ICR 691) made clear that the Polkey assessment is a predictive exercise centred on the question: could the employer have fairly dismissed and, if so, what were the chances that the employer would have done so?
Facts
Ms Pal started employment with Accenture in August 2009. She was dismissed ten years later for underperformance on the basis that she was not ready for promotion under Accenture's progression based performance model. This "up or elsewhere" approach expected employees to demonstrate readiness for promotion to the next level of seniority. Having been promoted to Manager in September 2013, Ms Pal was being assessed against promotion to Senior Manager which would ordinarily have been expected within three to four years. At her August 2018 and March 2019 performance reviews, Ms Pal was assessed as "Not progressing". She was dismissed on 3 July 2019 following a meeting about her performance. Her internal appeal against dismissal was unsuccessful. At the point of her dismissal Ms Pal was suffering with debilitating symptoms of endometriosis. She raised this at her appeal but HR did not investigate further or engage with Occupational Health.
An employment tribunal found that the reason for dismissal was capability, but Ms Pal's dismissal was unfair due to procedural failures. In particular, Accenture did not comply with its Disciplinary and Appeals policy (which was tailored to misconduct dismissals but was also stated to apply to performance issues). The tribunal found there had been two material breaches of the policy – namely, failure to carry out an investigation, and having a decision-maker and HR advisor run the dismissal meeting who had previously been involved with managing Ms Pal. The tribunal found that the non-alignment of the process with the terms of the policy was unreasonable and made the dismissal unfair.
However, the tribunal decided to make a 100% Polkey reduction to Ms Pal's compensatory award, on the basis that if Accenture had adopted a fair process the outcome would have been the same. The tribunal also rejected Ms Pal's disability discrimination claims, finding she was not disabled within the meaning of the Equality Act 2010.
Ms Pal appealed successfully to the Employment Appeal Tribunal on three grounds: i) that the tribunal had erred in making a 100% Polkey reduction, ii) that dismissing using a progression-based performance model may not sit within the capability ground for dismissal because it is not a dismissal for work of the kind the employee was employed to do under their contract of employment, and iii) the dismissal of her disability claim. Key to upholding Ms Pal's appeal and the EAT's decision to remit the case to a differently constituted tribunal was:
- On the Polkey reduction, rather than look at the counterfactual situation of what would have happened had Accenture complied with its Disciplinary and Appeals procedure the tribunal substituted its own view and assumed that Accenture would have introduced a new policy mirroring the process it had in fact applied to Ms Pal without any such evidence from Accenture. This was an error of law.
- The tribunal should have focused on what would or might have happened had Accenture complied with the requirements under its Disciplinary and Appeals Policy to undertake an investigation and have independent decision makers.
- In terms of Accenture's progression-based performance model, the fair reason for dismissal of capability should be assessed in relation to the work the employee is employed to do under their contract of employment. If Ms Pal was performing in her current role, her dismissal for lack of readiness for promotion to the next level may not be a dismissal under the potentially fair reason of capability. The fair reason of "some other substantial reason" may also be relevant.
- The tribunal's reasoning on Ms Pal's disability claims was "wholly inadequate". The tribunal formed an overly adverse view of Ms Pal's credibility and failed to engage with her disability impact statement although there was supporting medical evidence.
- When assessing whether Ms Pal met the definition of disability, the tribunal had not considered the likelihood of recurrence of her endometriosis. It also failed to consider whether Ms Pal's condition would have continued to have a substantial adverse effect if she did not have medical treatment.
- The tribunal had also failed properly to consider whether Accenture had actual or constructive knowledge of Ms Pal's disability. Ms Pal had taken time off sick, had surgery and been on a phased return to work following input from Occupational Health. Had Accenture followed its own policies, further investigation would have taken place during which Ms Pal's condition would have been explored.
- The tribunal had failed to carry out the careful balancing act of whether the discriminatory impact on Ms Pal of Accenture pursuing its legitimate aims under its progression based performance model was proportionate.
- The failures on the analysis of the disability claims undermined both the Polkey assessment and the discrimination findings.
What does this mean for employers?
This case reinforces that making Polkey reductions is a predictive exercise. Employers seeking Polkey reductions must provide evidence of what a counterfactual fair process would have involved and why any ensuing dismissal would have been fair so the tribunal can properly assess what the employer would have done. The tribunal cannot make assumptions favourable to employers. It must assess the actions of the employer that is before it – not decide what the tribunal itself, or a hypothetical fair employer, would have done. This will involve witness evidence, contemporary documents setting out the intended process, and an explanation of how matters were addressed to enable a tribunal to conclude a fair dismissal would have been inevitable.
The case is also a reminder that employers need to carefully consider the statutory language of the potentially fair reasons for dismissal in deciding which reason is relevant.
Finally, the case shows that where an employee has been off sick and had surgery they may still have a long term condition for the purposes of the definition of disability, and that where medical conditions are raised on appeal employers need to consider the medical evidence and impact of the conditions carefully.
