England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEALS TRIBUNAL

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 26 October 2001

Peter Gibson L.J.:

1. This appeal relates to the terms of employment of some 250 baggage handlers ("the Employees") employed by the Appellant, Gatwick Handling Ltd. ("GHL"), at Gatwick Airport. They work a 12-hour shift on a 4 days on, 4 days off roster. That equates to an average of some 42 hours per week. Under most of their contracts of employment their hours of employment are 40 hours a week. On each shift they are entitled to two 30-minute meal breaks. It is not in dispute that one meal break counts as part of the hours of paid employment. What is in dispute is whether the second meal break is also part of the hours of paid employment. Since 1972 baggage handlers have not been paid for four meal breaks in each roster, and that accounts for the difference of 2 hours between the 42 hours per week comprised in the roster and the 40 hours per week stipulated in the normal contract of employment.
2. By s. 13 (1) Employment Relations Act 1996 an employer is prohibited from making deductions from wages save in certain circumstances not material to this case. By s. 13 (3) where the total amount of wages paid on any occasion by an employer to an employee is less than the total amount of the wages properly payable to the employee on that occasion the amount of the deficiency is to be treated as a deduction made by the employer from the employee's wages. S. 23 gives an employee complaining of such a deduction the right to bring the complaint to an Employment Tribunal.
3. The Employees on 5 June 1998 presented their complaint to the Tribunal. They claimed wages for an additional 2 hours per week at overtime rates. GHL resisted that application. There was a 3-day hearing before the Tribunal sitting at London (South) of the complaints of 8 of the Employees who were selected as typical of all the Employees. By a decision promulgated on 25 May 1999 the Tribunal held that all those claims failed. The Employees appealed to the Employment Appeal Tribunal. Their appeal was allowed on 9 October 2000. GHL now appeals to this court with the permission of Mummery L.J.
4. I must now set out the facts in greater detail. The ground services operation at Gatwick Airport prior to 1972 was dealt with by Dan-Air Ltd. ("DanAir") and another company. They formed GHL in 1971 or 1972 to take over the operation. At about that time a new system of shifts was introduced. Whereas previously staff had worked shifts of 8 hours with a single half-hour meal break, the 12-hour shift on a 4 days on, 4 days off roster was instituted at the request of those then employed, as is apparent from the minutes ("the Minutes") of a meeting on 13 December 1971 between those representing the unnamed employer and those representing the employees. That meeting had been called to discuss a number of administrative problems arising out of the introduction of 12-hour shifts in an agreement which was about to be concluded with the Transport and General Workers Union ("the TGWU"). A TGWU official was in attendance at the meeting, as is noted in the Minutes. The Minutes record a statement that management had accepted the new roster for 1 January 1972 which would consist of 4 12-hour shifts on and 4 days off over a 16-week cycle subject to the clearance of the administrative problems.
5. Under "Hours of Work" the Minutes record:

"Staff expressed the view that as the new shift system would produce over a 16 week cycle a total of 672 hours as opposed to 16 weeks of 40 hours (640 hours), that the 32 hours excess would be given to the Management in exchange for maintaining the present meal breaks system (paid meal breaks). Management agreed that this was acceptable to them and also that they recognised that there would [be] a necessity for two meal breaks during the 12 hour shifts which would not total more than one hour in all. It was recognised that the second meal break was solely due to the staff requesting a 12 hour shift pattern and that this amounted to 2 hours a week extra mealtime which the company would not expect to pay when working an 8 hour system."

6. Under "Annual Holidays" the Minutes record agreement on how annual holidays were to be lined up with a 12-hour shift system by the use of "a condensed hours holiday system".
7. The Agreement ("the 1972 Agreement") between Dan-Air Services Ltd. (which the Tribunal treated as the same as DanAir) and the TGWU was completed on 21 January 1972 but expressed to take effect from 1 January. It provided that the Agreement was not to be legally binding. It was expressed to apply to staff employed on goods handling at Gatwick Airport. Under "Shift Working Hours" it was provided that the working week should be 40 hours per week and that shift rosters would be agreed at a local level. Under "Meal Intervals" it was provided that meal intervals should be the subject of local discussions and arrangements to suit operating conditions, that should an employee be required to work through his meal interval, an alternative meal interval would be allowed immediately before or after and that, failing that, an employee would be entitled to payment of overtime rates for the time worked during his meal interval. A number of Appendices were referred to in the Agreement. They included Appendix A relating to the scales of pay, including shift payments, and Appendix C relating to holiday entitlement. This contained the following reference to the meeting to which the Minutes relate:

"Leave entitlement will be adjusted to conform to the operation of 12 hour shifts and will be condensed in line with the discussion held at a meeting on the 13^th December, 1971."

8. The Tribunal in its decision referred to the Minutes as "attached" to the 1972 Agreement, as were the Appendices, though it did not state when or by whom the Minutes were so attached or for what purpose or purposes. It also referred to the Minutes as "circulated" with the Agreement, but again not stating any further details of such circulation, no doubt because it was no more than an inference from the reference to the Minutes in Appendix C.
9. The Employees commenced their employment at different times. 3 were employed by DanAir prior to 1972 and presumably became employed by GHL when it commenced operating some time after 1 January 1972, GHL by novation stepping into the shoes of DanAir in respect of each contract of employment, though the Tribunal makes no finding on that. 52 commenced employment between 1972 and 1979, 138 in the 1980s and 43 in the 1990s. We are not told the commencement dates of the others.
10. Each of the Employees has a written contract of employment from GHL but the contracts are not identical. Three forms of contract for weekly paid staff have been identified.
11. The form which applies to most of the Employees has been called "the Gaskins contract", by reference to the name of one of the Employees. Mr. Gaskins' contract dated 12 October 1986 contains the following material provisions:

"1. This document sets out the terms on which the Company has offered to employ the employee, and which the employee has accepted in writing by his signature at the end hereof.

2. The employee agrees and affirms that he has not been induced to accept this offer of employment by any representation, assurance or warranty made to him by any servant or agent of the Company as to any matter not expresed in this agreement.

3. This agreement constitutes a written contract of employment for the purposes of Section 5 of the Employment Protection (Consolidation) Act, 1978 and the Employment Act 1980.

4. The terms of this contract will not be varied otherwise than by notice in writing from the Company to the employee."

In the contract, "the Company" is defined to mean GHL. Pausing there, I would observe that those paragraphs serve to make clear that the contract is an entire contract all the terms of which are to be found expressly stated in the written contract and which cannot be varied save by written notice.

12. However an exception is then provided for in clause 6:

"6. This Contract is subject to the terms of the agreements between the Company and the [TGWU] relating to weekly paid staff in force at the date hereof."

That exception is therefore limited by two conditions: the agreements in question are between GHL and the TGWU, and they must subsist at the date of the contract.

13. Further in clause 7 provision is made as to the priority to be accorded as between the contract and an agreement incorporated by clause 6:

"7. In the event of a conflict between a term of this Contract and the terms of an agreement incorporated by Clause 6, this Contract shall prevail over any such term as is in force at the date hereof."

14. Under "Hours of Employment" the following are the material clauses in section D of the contract:

"17. The hours of employment are Forty hours per week. The employee will be issued with a shift pattern on the completion of training. This shift pattern is subject to change by the Company in line with operational requirements at any time during the period of employment.

….

19. The employee will work reasonable overtime when required. While every effort will be made to give reasonable notice of overtime, no minimum period of notice is guaranteed by the Company. The Company does not guarantee to provide overtime working."

20. Two meal breaks will be provided during the course of any 12 hour shift. Whilst the Company will offer as much flexibility with regard to meal breaks as possible, any employee not offered a meal break to commence between 1200 hours – 1500 hours will be paid an half hour overtime in lieu of the meal break not being offered."

15. Thus the effect of the contract appears to be that if the hours of employment exceed 40 hours per week, the excess will be overtime, and that when a meal break is not offered in the three hours commencing at noon, half an hour's overtime will be paid. That would not appear to derogate from the entitlement of the employee to two meal breaks in a 12-hour shift, so that if the meal break was taken shortly before or after the specified 3-hour period the employee would still be entitled to the overtime payment. Again on the face of the contract there is nothing to distinguish between the two meal breaks which GHL is obliged to provide during the course of any 12-hour shift. Both appear to fall under the heading of the section, "Hours of Employment".
16. Under section E the remuneration is specified by reference to a weekly basic salary plus shift pay, and provision is made for overtime.
17. Under section M relating to "Employee's General Obligations", by clause 48 the employee is obliged at all times while in the course of his employment or by virtue of the fact of wearing company uniform to maintain a neat and tidy appearance and dress in a respectable and sober fashion and is forbidden from consuming alcohol whilst on duty or in company uniform. No doubt these provisions are intended to apply to the employee during both meal breaks.
18. Another form of contract is what has been referred to as "the Stoner contract", Mr. Stoner's contract being dated 18 November 1985. It contains two variations from the Gaskins contract. Clause 6 provides that the contract is subject to the terms of the agreements in force at the date thereof between GHL and the TGWU, but the clause continues:

"and shall continue to be so subject, notwithstanding that the said agreements or any of them shall cease to have effect through expiry, termination, non-renewal or otherwise."

By clause 8:

"This Contract is subject to the terms of any agreement which may in future be made between [GHL] and the [TGWU] relating to weekly paid staff, and any such terms shall prevail over the terms of this Contract in the event of a conflict between them."

Otherwise the terms of the Stoner contract are the same as those of the Gaskins contract.

19. A third form of contract is what has been called "the Craigen contract", Mr. Craigen's contract being dated 30 September 1981. This is in terms similar to the Stoner contract save that clause 19 provides that the weekly hours of employment are 42. We have been told that Mr. Craigen is not alone among the Employees in having this form of contract.
20. There are no findings as to why the forms of contract differ nor as to the order in which GHL used the three forms. The Tribunal made a finding that when the agreement recorded in the Minutes was made there was no other shift system covering sufficient hours to justify the provision of two rest periods. But it made no other finding as to what other shifts were operated at the various times when the Employees' contracts with GHL were made save to say that subsequently to 13 December 1971 a 10-hour shift system was introduced which included two paid meal breaks. We are told that this was on a 4 days on, 3 days off roster. We have also been told by Mr. Thompson for the Employees that there were 3 further shift patterns worked at various dates after 1972, each including a paid meal break, and that all this was in evidence before the Tribunal. But the Tribunal makes no finding on them or the prevalence of the various shifts.
21. To return to the 12-hour shift, the Tribunal found (in para. 28) that most employees would not have been told anything about that shift in their induction course because the course would only have discussed the shift on which new employees were immediately to be engaged, and such employees would very rarely go immediately on to "this highly desirable twelve hour shift". There is therefore nothing inevitably inconsistent in the Gaskins and Stoner contracts between the provision in clause 17 for a 40-hour week and the provision in clause 19 that overtime was not guaranteed if the 12-hour shift, when worked, includes two paid meal breaks. The Craigen contract might have been thought to be deliberately in line with the 12-hour shift system by providing for a 42-hour week. But there is no evidence to support that supposition.
22. None of the forms of contract refers expressly to what was recorded in the Minutes as having been agreed in respect of the 12-hour shift. All the Employees have worked the 12-hour shifts on the 4 days on, 4 days off roster and have not been paid for the two hours representing 4 second meal breaks.
23. In 1996, in response to the queries of some of the Employees as to whether they should be paid two hours' overtime per week in respect of the second meal break, the TGWU presented a claim to GHL for that overtime. GHL's response was that if it was the general wish of staff to be paid that overtime, GHL would withdraw the 4 days on, 4 days off roster and introduce one producing a 40-hour week. The TGWU held a ballot among GHL's employees to ascertain their wishes and a majority voted in favour of the existing roster.
24. The Employees nevertheless proceeded with their claim in the Tribunal with the results thus far which I have indicated.
25. The Tribunal heard evidence from a number of the Employees that they knew nothing of the 1972 Agreement, that they had been told in varying ways either in induction courses or by hearsay from colleagues that 48 hours' work in 8 days averaged 40 hours a week over a period of 16 weeks, that they had accepted this statement at face value and had not thought to perform the simple mathematical exercise necessary to find out that the period worked would average out at slightly over 42 hours per week, and that they had no indication that they were working 42 hours a week until they became aware that employees of another company at Gatwick had made a similar claim in respect of a 12-hour shift and had negotiated compensation for the extra hours worked. The Tribunal accepted that evidence in preference to GHL's evidence that employees had been informed of the existence of a provision not to pay for a second meal break. The Tribunal's findings on knowledge, although to my mind surprising, have not been challenged by GHL.
26. In para. 18 of its decision the Tribunal said:

"the Tribunal accepts, as a matter of fact, that there was a collective agreement made in 1971 that in return for providing the twelve hour shift pattern which had been requested by staff at that time the second meal break, made necessary by the length of working time, would not be paid."

27. One of the many difficulties in this case is that the Tribunal does not appear to have recognised that the agreement referred to in the Minutes was not a collective agreement in the ordinary sense of an agreement between the employer and a recognised trade union. The TGWU had an official in attendance on 13 December 1971, but what was then agreed was not between representatives of the employer (which was not identified but I assume to have been DanAir) and representatives of the staff. It appears to have been an informal workplace agreement by which a solution to a number of administrative problems was negotiated before the 1972 Agreement, which plainly was a collective agreement between DanAir and the TGWU.
28. Moreover the Tribunal appears to have assumed that the whole of the agreement in the Minutes was somehow incorporated into the 1972 Agreement, it seems because the Minutes were "attached" to or "circulated" with the 1972 Agreement as has been mentioned. But whilst the Minutes are relevant to that part of the 1972 Agreement which deals with holidays in that leave entitlement was to be adjusted to conform to the operation of 12-hour shifts and to be condensed as set out in para. 4 of the Minutes, I see nothing in the 1972 Agreement to incorporate any other part of the Minutes or of what was recorded as agreed in the Minutes into the 1972 Agreement. If such incorporation had been intended, one would have expected reference to them to have been made in the clause relating to shift working hours or the clause relating to meal intervals. Yet the Tribunal refers indifferently to "the collective agreement" as meaning the whole of what was recorded in the Minutes as agreed between the management and staff representatives of DanAir on 13 December 1971, and "the 1972 collective agreement" between DanAir and the TGWU.
29. The significance of the purportedly factual finding in para. 18 of the Tribunal's decision is something which troubled the EAT and to which I must return later.
30. In para. 19 the Tribunal said that it found it unnecessary to consider the question of estoppel. No issue of estoppel by convention or any other form of estoppel was raised by GHL before the EAT or this court.
31. Before the Tribunal the Employees had been placed into 3 categories, although the selection of the 8 Employees by the parties as representing all the Employees was made without reference to such categorisation. One category was of those whose contracts of employment dated from before 1972 (though not, it seems, with the relevant employer, GHL, until by novation GHL became bound). A second was of those whose contracts incorporated collective agreements existing at the time of their contracts. A third was of those whose contracts referred to future collective agreements. The Tribunal did not find the distinctions by which the Employees were placed in different categories to be of significance, saying:

"The view the Tribunal has reached upon the question of incorporation of the collective agreement however, is that the terms of that agreement may be incorporated into contracts of employment either by express reference in the contract or by the normal expectation of those within a bargaining unit that they will be affected by agreements made between the employer and their bargaining agent."

32. On that basis the Tribunal felt able to treat what it regarded as a collective agreement as incorporated in a contract of employment even if such incorporation fell outside the contract's express conditions for incorporation, and so the Tribunal found it unnecessary to distinguish between the three categories.
33. The Tribunal considered that it mattered not that the 1972 Agreement was made with an employer other than GHL, saying in para. 21:

"There is no reason why [GHL] should not, by agreement with the union, continue collective agreements which have been made with previous employers. It might be contended that there is no evidence that any such continuation was agreed. The Tribunal accepts that there is no evidence of formal agreement but, in its view, the law has always recognised a wide range of informality in the operation of collective agreements in United Kingdom industrial relations …. In the view of the Tribunal it would be contrary to common sense to suggest that where an employer and a union obviously operated on the understanding that a situation derived from agreement with a previous employer was to continue there was no agreement to that effect."

34. What the Tribunal calls its "core decision" is to be found in paras. 24ff. I must cite the material passages.

"24. …. The basis of our decision is the existence of a collective agreement.

25. There is no doubt in our minds that the paragraphs we have quoted from the 1971 minutes express an agreement. In the view of the Tribunal, within the United Kingdom system of industrial relations there is no requirement that valid collective agreements should be written or, indeed, be made in any form at all. This tribunal takes the view that wherever an employer agrees with a recognised trade union some term or condition of work, or some procedural provision, that constitutes a collective agreement. It should be noted, however, that the agreement, whether formal or informal, implemented in 1972 was not made with the Respondent. In the view of the Tribunal the evidence indicates that it was made with a view to the formation of the Respondent Company and the transfer of that aspect of Danair's undertaking to the Respondent company. The Transfer of Undertakings Regulations did not, or course, operate at that time. Nevertheless the Tribunal finds as a fact that it was the intention of those negotiating that the agreed term should apply to employment by the Respondent. Even had this not been so the Tribunal find as a fact that the Transport and General Workers Union has always accepted that the agreement implemented in 1972 applied to the Respondent's undertaking. Without such acceptance there would have been no applicable collective agreement and it is inconceivable that a recognised trade union would have accepted such a position. As late as 21 July 1998 the Respondent's Personnel Manager wrote to the Regional Officer of the Union referring to this agreement. The Regional Secretary replied to that letter on 21 August 1998 (document R308 to 309) expressly accepting the existence of that agreement. His letter contains the sentence,

"Having examined this matter we agreed that you were currently acting within the spirit and the letter of that Agreement."

The Tribunal concludes that the minutes of the meeting which we have quoted constitute a collective agreement."

35. It is not apparent from the Tribunal's decision what was the evidence on which the Tribunal found the intention of those negotiating in 1971 or 1972. We are told by Mr. Thompson (Mr. Burgher who appears with him for the Employees represented them at the Tribunal hearing) that there was no evidence given to the Tribunal by anyone who took part in those negotiations. That is hardly surprising, given the passage of time. It would appear that this finding of fact was an inference drawn by the Tribunal, which two sentences earlier had expressed a similar view.
36. In para. 27 the Tribunal referred to the 1972 Agreement as including "the statement of agreement upon the twelve hour shift working", the Minutes recording an agreement between the TGWU and DanAir. The Tribunal said that it was clear from the evidence it had received that DanAir's successor, GHL, and the TGWU had regarded that agreement as applicable to their working relationship. The Tribunal continued:

"We consider that this argument is strengthened by the fact that the agreement was made with the specific intention that it would apply to the present Respondents when they took over the ground operations at Gatwick. But if we are wrong in this we would consider it clear that that agreement had been adopted, similarly by agreement, by both the present Respondent and the Union, in relation to its dealings with the present Respondent.

28. The minute recording that agreement is at document 294 and we have quoted it in our statement of facts. We accept that minute as accurately recording the terms of the agreement. It is clear that that minute was circulated with the formal agreement because it is actually expressly referred to in document 292, which is unquestionably a schedule attached to the agreement. As we have already noted, the existence of that agreement is referred to in a letter from the Respondent's Personnel Manager submitted to the Tribunal as extra evidence by the Applicant and numbered A4. As we have also noted, the Union acknowledged the existence and effect of that agreement, in relation to the twelve hour shift, in document R308. We find as a fact that the working arrangement set out in that minute in relation to the twelve hour shift was consistently applied by management to employees working that shift."

37. Document 294, referred to in para. 28 of the Tribunal's decision, is the Minutes and document 292 is Appendix C to the 1972 Agreement. Document A4 is a letter dated 21 July 1998 from GHL's Personnel Manager, Ms. Lympany. Document R308-9 is a letter dated 21 August 1998 from the TGWU's Regional Industrial Organiser/Trade Group Secretary, Mr. McDermott. In it he referred to a meeting with Ms. Lympany three days earlier to discuss the issue of the 4 days on, 4 days off shift system and the 42-hour week. He continued:

"At the commencement of the meeting you drew to our attention the Panel Minutes of the 13 December 1971 and specifically Item 2 – Hours of Work, where the existing 4 on 4 off 12 hour day shift pattern was initially agreed, culminating in an Agreement signed in 1972.

You specifically referred to the following paragraph [the first sentence of the passage from the Minutes cited in para. 5 above].

Having examined this matter we agreed that you were currently acting within the spirit and the letter of the Agreement."

38. The Tribunal therefore found that the agreement in the Minutes on the 12-hour shift was incorporated into each subsequent contract of employment. It explained in para. 29 that its decision on the second category of employees was based upon clause 6 and upon "the present state of the law upon implied incorporation", repeating as the basis for this "the common expectation of employees covered by a bargaining structure that agreements arising from the proper procedures in that bargaining structure applied to their terms and conditions of employment."
39. The Tribunal in para. 38 referred to its understanding of what was agreed by the Minutes.

"The terms of the minutes of the meeting in 1971 appear to us to make it quite clear that the employer, in return for acceding to the employees' request for a 12 hour shift, was imposing the condition that the second meal break, made necessary by that spread of time, should not be paid. The purpose of this condition must have been to maintain payment for a 40 hour week. Whatever subsequent employees say they have failed to realise it is clear from that minute that the parties realised the shift would produce a time spread in excess of 40 hours. The employer would have derived no advantage from the condition if it meant that instead of paying for a half hour meal break in each shift at normal rates he paid for it as overtime. We think it was clearly the intention of the employer, accepted by the employees' representatives, that the 12 hour shift pattern should not disturb the 40 hour week. In our view clause 20 of the contract was inserted to make that clear."

40. In para. 40 the Tribunal said that it was unnecessary to consider whether the working pattern accepted between 1972 and 1996 was implied into the contract by custom and practice and accepted that a working practice could not displace a contrary provision in the contract. However it continued:

"If we are right to say, however, that "hours of employment" in clause 17 is to be construed not to include the only unpaid meal break in the entire working system it is our view that 24 years of unbroken practice would imply the existing situation in which that meal break was not counted as part of the working hours."

41. In para. 41 the Tribunal said that "by expressly providing that half an hour in each shift would not be paid [GHL] has reduced the hours of employment, as that term is used in the contracts, by an average of two hours per week." Had GHL expressly so provided in the contracts of employment, the difficulties which arise in the present case would have been avoided. The Tribunal must be taken to be referring to the agreement on the 12-hour shift recorded in the Minutes and to be treating that as made by GHL. The Tribunal said that that conformed with the meaning of clause 17 as correctly interpreted and that this was confirmed by clause 20. The Tribunal acknowledged that its conclusion did not square with GHL's practice of deducting a full 12 hours' pay when an employee is absent from work without leave, nor did it accord with the treatment by GHL of the single shift as 12 hours of employment for sickness and holiday provision. It acknowledged that that "may be a contractually incorrect conclusion by [GHL]". With respect, there can be no doubt but that if the Tribunal is right, GHL was applying the contract incorrectly. But the Tribunal did not consider the discrepancies in any way sufficient to justify the conclusion that the unpaid half hour was a period of employment. It therefore concluded that the agreement in the Minutes relating to the 12-hour shift was not in conflict with any provision of the contract of employment.
42. Like the EAT, I have very great difficulty with the way in which the Tribunal reached its conclusion. I readily acknowledge the force of the common sense point taken by the Tribunal that because GHL has consistently treated the contracts of employment of its employees over so many years as providing that those who work the 4 days on, 4 days off roster are entitled to be paid for only 40 hours of employment, that practice must be founded on a legal right. But it based its conclusion solely on the contracts of employment and on the collective agreements expressly or implicitly to be treated as included in the contracts of employment and, as I have already pointed out, GHL has not sought to support the Tribunal's conclusion on any other basis. Mr. Andrew Stafford Q.C., for GHL, made plain that his primary contention was founded on the Tribunal's alternative holding in the final sentence of para. 27 of the Tribunal's decision that the agreement recorded in the Minutes on the 4 day on, 4 day off roster was adopted by GHL and the TGWU and so incorporated into each contract of employment. Thereby, as it seemed to me, he was realistically acknowledging the difficulties in the primary way in which the Tribunal had decided the case.
43. Four main issues arise:

(1) Is the agreement recorded in the Minutes an agreement that the employer, in return for acceding to its employees' request for a 12 hour shift 4 days on, 4 days off system, would not have to pay for the second meal break in each shift?

(2) If so, was what was agreed an agreement within clause 6 of the Gaskins contract, or clauses 6 and 8 of the Stoner and Craigen contracts?

(3) If not, did it become such an agreement by adoption by GHL and the TGWU?

(4) If the answer to (2) or (3) is in the affirmative, did the terms of the agreement conflict with a term of the contracts of employment?

(1) The Minutes

44. I start with the agreement recorded in the Minutes, as it is an essential step in the reasoning of the Tribunal and in Mr. Stafford's primary contention that what was agreed at the meeting and recorded in the Minutes was that the employer in return for acceding to its employees' request for the new shift would not have to pay for the second meal break in each shift. The only direct evidence of what was agreed was that which the Minutes record. I have well in mind that the Minutes were not drafted by lawyers and that they should be given the meaning which the ordinary reasonable man in the position of the parties attending that meeting would give to them. However, I am not able to give the Minutes the meaning which the Tribunal attributed to them.
45. Consider the first sentence of the passage in question from the Minutes. Undoubtedly there is a recognition that the new system would result in 32 extra hours over a 16-week cycle. There is also the statement that those hours would be "given" to management. But it is then made plain that there was to be consideration moving from the employer, viz. "in exchange for maintaining the present meal break system", and the relevant feature of the present system was spelled out: "(paid meal breaks)". That that feature was to be maintained is hardly consistent with agreement on a new system under which half the agreed meal breaks would be unpaid and not count as hours of employment. But that is said to be the effect of the third sentence in the passage where, following the recognition that the need for a second meal break was due to the staff's request for the new shift pattern the Minutes record that "this amounted to two hours a week extra meal time which the Company would not expect to pay when working an eight hour system." The Tribunal's construction, which Mr. Stafford supported, involved ignoring the last six words, and treating the Company as not being liable to pay those two hours of meal time whether or not an 8–hour system was being worked. In my judgment that entails rewriting what was recorded as agreed. I do not see how that can possibly be justified as a matter of construction. I respectfully agree with the EAT which arrived at the same conclusion. If I were wrong in finding that the Minutes clearly do not mean what GHL says they mean and if they are ambiguous, then in my judgment such ambiguity must be resolved against GHL which seeks to rely on the Minutes.
46. Mr. Stafford criticised the EAT for not taking into account the Tribunal's findings as to the intention of the parties to the meeting. But the intention of the parties is to be found in the language of what they are recorded as having agreed, the Minutes being signed by both the employer's and the staff representatives. The subjective intentions of the parties are not relevant (see, for example, Adams v British Airways plc [1999] IRLR 574 at pp. 583, 4 para. 21). Further the Tribunal did not receive direct evidence of those parties' subjective intentions, even if that had been admissible. What the Tribunal appears to have done is to draw inferences from subsequent events. It was understandably influenced by the long-standing practice of GHL in paying its employees working the 12-hour shift system for only 40 hours a week. Being unable to find that any of the Employees had the requisite knowledge to have agreed or acquiesced in that practice, it has found acceptance on behalf of the Employees in the conduct of the TGWU. The Tribunal accepted the evidence of Ms. Lympany that the TGWU knew of the 1972 Agreement, accepted it and operated within it. The Tribunal made no further finding as to the period of the TGWU's knowledge, acceptance and operation to which Ms. Lympany could properly speak (we are not told for how long she had been Personnel Manager), but we do know that in August 1998 she drew the attention of Mr. McDermott to the Minutes and that they agreed that at that time GHL was acting within the spirit and letter of the 1972 Agreement, which they appear to have treated as incorporating the Minutes. I will come back to whether this signifies an adoption by GHL and the TGWU of what is recorded in the Minutes as agreed, but I am unable to see how any of this justifies the inferences drawn by the Tribunal or that such inferences can alter what was agreed as so recorded. It might have provided some basis for an agreement that a meaning other than the true meaning had been adopted by the parties so that a party would be estopped by convention from asserting the true meaning. But that was not the basis of the Tribunal's decision, nor has GHL sought to take such a point before the EAT or this court.
47. The EAT held that it was not bound by the purported finding of fact by the Tribunal in para. 18 of its decision that there was a collective agreement made in 1971 that in return for providing the 12-hour shift pattern requested by staff, the second meal break made necessary by the length of working time would not be paid. The EAT said that the conclusion of the Tribunal was arrived at not as a matter of fact but of law, being arrived at as a matter of construction of the Minutes without evidence that the Minutes did not record the totality of what was then agreed. In so holding the EAT plainly had regard to the decision of the House of Lords in Carmichael v National Power plc [1999] ICR 1226 to which it had earlier made reference. I agree with the EAT on this point. It is unfortunate that the Tribunal in its decision treated indifferently findings of primary fact, of which the Tribunal is the sole arbiter and with which no appellate tribunal can interfere if there was evidence supporting those findings, inferences from primary facts, which may give rise to an error of law if the primary facts from which the inferences are drawn are not found by the Tribunal or are inadequate to support those findings (see Chapman v Simon [1994] IRLR 124), and a conclusion as to the meaning of an agreement evidenced in minutes, which also may, and in this case did, betray an error of law. I would add that in that purported factual finding the Tribunal wrongly characterised the agreement in the Minutes as a collective agreement (see para. 27 above).

(2) Agreements within clause 6 of the Gaskins contract (or clauses 6 and 8 of the Stoner and Craigen contracts)

48. I shall consider this and the subsequent issues, as we have heard full argument on them. The Tribunal has found that the agreement recorded in the Minutes was an agreement to which the contracts of employment were subject either by reason of clause 6 or by implied incorporation. That calls for consideration of the contractual terms, which, it is not in dispute, must be construed in their factual setting as known to the parties at the time. The relevant contractual terms are those of the individual contracts of employment and the factual setting must be considered at the time of those contracts, not the time of the agreement in the Minutes. The fact that GHL was only paying for 40 hours of the 42-hour week being worked by those on 12-hour shifts was not known to the Employees. The Tribunal's finding on this was supported by findings that the Employees were told either on their induction course or by colleagues that 48 hours' work in a period of 8 days averaged 40 hours per week over a period of 16 weeks and that they accepted that statement at face value. Further, the Employees would not have started with a 12-hour shift system save with very rare exceptions and every other shift system incorporated meal breaks within the hours of paid employment.
49. It is plain from the terms of each contract of employment that the employee is required to work 40 (or, in the case of an employee with a Craigen contract, 42) hours a week and that any further hours of employment would qualify as overtime. It is also plain that each employee working a 12-hour shift is entitled to two half-hour meal breaks. It will be recalled that section D of each contract of employment is headed "Hours of Employment". It contains nothing to distinguish between the two breaks, save for the special provision relating to the entitlement to overtime pay in the event that the employer fails to offer a meal break between noon and 3p.m. On the face of the contract the whole of the 12-hour shift constituted hours of employment for which the employee was entitled to be paid. The Tribunal was wrong to find assistance from clause 20 in construing clause 17 as excluding one of the two meal breaks from the hours of employment. On the contrary, the very fact that clause 20 refers to the obligation to provide two meal breaks in a 12-hour shift but does not say that only one counts as part of the hours of paid employment is a clear pointer that both are intended to count as paid employment. Clause 17 is similarly silent on the point when one would expect express words, if GHL is right, to exclude one of two meal breaks in a 12-hour shift from the hours of employment.
50. The fact that clause 6 (or, in the case of the Stoner and Craigen contracts, clauses 6 and 8) specifies the other agreements to which the contract of employment is subject necessarily means that unless an agreement falls within that specification its terms are not relevant to the contract of employment. Of course if GHL and an employee subsequently agree that another agreement not within that specification should apply to the contract of employment, effect would be given to that agreement. But that is not the case here. It is to my mind plain that any agreement in the Minutes between the employers and the staff representatives is not an agreement between GHL and the TGWU, unless made the subject of a further agreement between those persons. Further even if, contrary to my view, the Minutes were incorporated in the 1972 Agreement, that agreement is not an agreement between GHL and the TGWU, and the intention which the Tribunal purported to find that it was to apply to GHL, even if a valid finding, does not bring it within the specification of clause 6 of the Gaskins contract, or clauses 6 and 8 of the Stoner and Craigen contracts. The Tribunal was not entitled to rewrite that specification. Nor for the same reason can I accept that if those clauses did not apply there was an implied incorporation through the normal expectation of employees, given that the parties to the contracts of employment have limited by that specification the agreements to which the contracts of employment are subject. Again I respectfully agree with the EAT on this point.

(3) Agreement by adoption

51. The primary way in which GHL now puts its case is that there was an adoption by agreement by GHL and the TGWU of the agreement in the Minutes. Mr. Stafford submits that this was a finding ignored by the EAT and that the adoption agreement fell within the express terms of clause 6. The fact that the EAT does not deal with the point may well reflect the way the case was argued before it as well as the brevity and absence of detail with which the Tribunal expressed its conclusion on the point in para. 27 of its decision. The Tribunal purported to find that such adoption was "by agreement". If there was such an agreement between GHL and the TGWU, then by reason of clause 6 in the case of those with Gaskins contracts it becomes important to know precisely when the agreement was reached. If the agreement was reached after the date of the contract of employment it would not fall within clause 6. But the Tribunal does not make any finding about this. Earlier in para. 21 it had accepted that there was no formal agreement. But in para. 25 it had purported to find as a fact that the TGWU "has always accepted that the agreement implemented in 1972 applied to [GHL's] undertaking." That does not indicate an agreement between GHL and the TGWU to adopt the agreement in the Minutes. It is an inference from two matters. One is the absence of an applicable collective agreement, if the position were otherwise, a point which seems to me to lack cogency. Second, it is an inference from the letter from Mr. McDermott of 21 August 1998, which strongly suggests that but for Ms. Lympany drawing attention to the Minutes, the TGWU officials did not know of them. Further, the letter merely records Mr. McDermott's agreement with Ms. Lympany that GHL was currently acting within the spirit and letter of the agreement recorded in the Minutes. That hardly supports the existence of a specific agreement made at some previous time to adopt an agreement in the Minutes. I am therefore unable to accept that the Tribunal could properly find that an adoption agreement falling with clause 6 of the Gaskins contract or clauses 6 and 8 of the Stoner and Craigen contracts was concluded between GHL and the TGWU.

(4) Clause 7 of the contract of employment

52. If there had been an agreement in the sense contended for by GHL to which the contracts of employment were subject so that the second meal break was not part of the hours of paid employment, in my judgment, because of my construction of clauses 17 and 20 of the contracts of employment (see para. 49 above), the terms of the agreement did conflict with the terms of the contract of employment. I would add that I find it surprising that a substantial employer like GHL, employing hundreds of employees, should seek to rely on a provision of obvious importance to its employees, going as it does to the hours of paid employment, without an express statement in the contract of employment of the inclusion and effect of that provision. Employees are entitled to be told in the clearest terms in writing what are their hours of paid employment. It is a striking feature of the Tribunal's decision that the Employees were held bound by an agreement of which they knew nothing, and whilst I accept that an employee may be bound by such an agreement if the contract of employment clearly so requires, in my view Tribunals should be extremely cautious before accepting that the contract of employment does so require.
53. For these reasons, despite Mr. Stafford's able submissions, I would dismiss this appeal.

Robert Walker L.J.

54. I agree.

Keene L.J.

55. I also agree.
Order: Appeal dismissed with costs. The final paragraph of the EAT judgment will be enforced. Permission to appeal to the House of Lords refused. (Order not part of approved judgment)