Slade v TNT Ltd

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Overview

An employer didn’t act unfairly when, after failing to negotiate changes to terms and conditions (which included an offer to ‘buy out’ the bonus scheme), it terminated employee contracts and offered to re-employ the staff on new terms which didn’t include the buy-out payment. The employer had acted in the reasonable and honest belief that this approach would achieve the legitimate and reasonable aim of cutting costs.

Mr Slade and three others were test cases for nearly 200 cases altogether. TNT needed to cut costs and one of the ways of achieving this was to discontinue bonuses paid to certain employees, loading bay operatives who enjoyed an ‘end of sort’ (EOS) bonus. TNT started negotiating with the union and offered to buy out the EOS payment but warned that if the offer was rejected, existing contracts would be terminated and an offer of re-employment made. The talks eventually failed and TNT gave formal notice of termination to each of the affected employees, coupled with an offer of immediate re-engagement on the same terms as before - but excluding the bonus. Each of those who had been dismissed accepted re-engagement on the new terms but did so under protest and reserved their right to claim for unfair dismissal.TNT settled the prospective unfair dismissal claims for all but 183 of the employees, by means of a payment which was greater than the ‘buy-out’ payment which had been offered in negotiations with the union. The 183 employees pursued their claims for unfair dismissal.

The tribunal held that it was a wholly reasonable response on the part of TNT to terminate the employees’ contract and offer re-engagement. There was ‘some other substantial reason’ (SOSR) for the resultant dismissals and TNT had acted fairly. Mr Slade and his colleagues were not entitled to the settlement payment because they had not agreed to compromise their potential unfair dismissal claims in return for an offered sum of money unlike most of the employees. Mr Slade appealed.

The EAT dismissed the appeal. The dismissals were for SOSR and were fair. The tribunal had correctly focused on the reasonableness of TNT’s decision, balancing the advantages to the business with the effect on the affected staff. There was no obligation on TNT as a reasonable employer to include the settlement payment in the terms of re-engagement it was offering in the aftermath of dismissal where it was not going to achieve any of the benefit of an agreement for which the payment had been offered. It was entitled to take the view that it would hold back the payment in order to remove the risks of litigation by way of settlement, which was in fact what happened in the majority of cases.

James Davies from the Global Employment Group at Salans LLP, comments: ‘This decision will be welcomed by employers facing the task of persuading employees to accept revised terms of employment and demonstrates that SOSR dismissals and compromise agreements are useful tools when negotiation fails. Employers should not forgot that where there is a proposal to make 20 or more employees at one establishment redundant within 90 days, which would include the SOSR-type dismissals in this case, the employer must inform and consult the employees’ representatives under the Trade Unions and Labour Relations (Consolidation) Act 1992. Failure to do so may lead to awards of up to 90 days’ uncapped pay for each employee’.

Slade v TNT Ltd

See also ‘Changing Terms and Conditions of Employment’.