Joe Anderson, full-time elected mayor of Liverpool and former Labour leader of Liverpool City Council, has failed to overturn an employment tribunal finding relating to the termination of his employment with Chesterfield High School. There he had been paid from public funds ‘for which he provided, and was not expected to provide, any service’. The mayoral position apparently attracts an annual allowance of almost £80,000.

But while the tribunal found that he had been unfairly dismissed, in the particular circumstances he would be entitled only to a basic award (section 119 of the Employment Rights Act 1996) subject to a 100% Polkey deduction and 25% deduction under section 122(2) of the act. There would be no compensatory award. Anderson v Chesterfield High School UKEAT/0206/14/MC – was a decision of HH Judge Serota QC in the Employment Appeal Tribunal (EAT) on 14 April.

A Polkey deduction (following Polkey v AE Dayton Services Ltd [1987] IRLR 503) is one made where although the dismissal was unfair, nevertheless the award should be reduced to reflect the fact that the dismissal could have been fair had it been conducted correctly. In Polkey, Lord Mackay of Clashfern had approved the following dicta of Browne-Wilkinson J in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 (paragraph 92): ‘Where, in the circumstances known at the time of dismissal, it was not reasonable for the employer to dismiss without giving an opportunity to explain but facts subsequently discovered or proved before the industrial tribunal show that the dismissal was in fact merited, compensation would be reduced to nil. Such an approach ensures that an employee who could have been fairly dismissed does not get compensation.’

Section 122(2) of the act provides that: ‘Where the tribunal considers that any conduct of the complainant before the dismissal… was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly.’

A compensatory award (per section 123(1) of the act) is ‘… such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer’.

Background

The EAT noted that before his election as mayor, Anderson had been employed by a neighbouring local authority, Sefton Metropolitan Borough Council (Sefton) at Chesterfield High School (the school). Although once elected leader of Liverpool City Council he had ceased to work at the school, Anderson and Sefton had nevertheless agreed that he should continue as an employee. This was, however, on the basis that he would be paid the maximum allowed as paid leave to enable employees to hold public office by section 10 of the Local Government and Housing Act 1989 (208 hours per annum).

Anderson’s post was consequently held open and Sefton also continued to pay pension contributions despite the fact that he had done no work for the school since May 2010. When the school achieved academy status and independence from Sefton, Anderson’s employment transferred to the school under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006 as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014).

In the circumstances, the school was concerned that the arrangement with Anderson was ‘inequitable’. This was principally because, although the school was paying some £4,500 per annum to Anderson, the pupils at the school received no benefit from this.  The school accordingly terminated the arrangement.

As noted above, the dismissal process was found to be unfair but any compensation was subject to the deductions mentioned. The employment tribunal had noted that an award can only be reduced for contributory fault if the conduct in question was culpable, blameworthy and therefore unreasonable. Furthermore, a reduction was appropriate only if the tribunal was satisfied the conduct in question contributed to the dismissal and that it would be just and equitable to reduce the award.  

In the circumstances, the tribunal had considered that it was culpable and blameworthy on the part of the claimant not to have made any contact with the school about standing for mayor. For this was a different post from that of leader and not simply a different title for the same role. Furthermore, ‘… the election as mayor was effectively a commitment for the next four years, whereas that as leader might be said to run from year to year’.  

So, in those circumstances the tribunal had ‘concluded that it was seriously remiss of the claimant not to have bothered to contact the school to have ascertained whether this made any difference to its position on paid leave, particularly because he was aware that the school was no longer maintained by Sefton but was a freestanding academy. We considered this to be unreasonable conduct which could properly be characterised as culpable and blameworthy within the context of this case’.

The employment tribunal concluded that it was 100% likely that the respondent would have ended the employment altogether following a proper and fair consultation. Particularly given that the school could realistically expect no service at all from Anderson for the remainder of the mayoral term and given that the school had already had no service from him since April 2010.

In the course of setting out the background facts, the EAT questioned the role of Liverpool City Council’s legal department in giving Anderson personal legal assistance. The judge commented: ‘It is unclear to me why the legal department of Liverpool should have been acting on behalf of the claimant in his private capacity’.

EAT decision

The EAT agreed. In the judge’s view: ‘The employment tribunal’s conclusions on the Polkey deduction and deduction for contribution were conclusions to which it was entitled to come. Its conclusion that the claimant was party to a misuse of public funds was certainly within the range of reasonable responses of a reasonable employer. Further, the claimant’s conduct can reasonably be regarded as culpable or blameworthy. The finding that the claimant would have been dismissed in any event had a “fair” dismissal procedure been followed is unassailable as a finding of fact that the employment tribunal was entitled to make. I am unable to see how consultation would have made any difference’.

Furthermore, Anderson had ‘simply not given sufficient attention as to how the arrangement he made with Sefton and so continued with… [the school]… might look to outsiders’. It could, said the EAT ‘have been a public relations disaster for the school’. Although Anderson: ‘… was entitled to receive almost £80,000 per annum from Liverpool for his role as elected mayor, yet [he] also procured a payment (albeit modest) from public funds for which he provided, and was not expected to provide, any service.  It was, more likely, considered to be a reverse form for a zero hours contract, whereby… [the school]… was bound to make payment of salary but… [Anderson]… was not bound to provide any services. It is certainly fairly arguable that this arrangement may strike members of the public as constituting a misapplication of public monies’.

And although the judge had enquired on several occasions what benefits there might be to the school for the payments and for preserving Anderson’s post for an indeterminate period, the only answer he received ‘was that it gave “kudos” to the school to be associated with the mayor of Liverpool’. Opinions are likely to differ on this

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