Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> Orr v Herdmans Limited [2010] NIIT 02012_10IT (10 February 2011)
URL: http://www.bailii.org/nie/cases/NIIT/2011/02012_10IT.html
Cite as: [2010] NIIT 02012_10IT, [2010] NIIT 2012_10IT
[New search] [Printable RTF version] [Help]
THE INDUSTRIAL TRIBUNALS
CASE REF: 2012/10
CLAIMANT: Thomas Neville Orr
RESPONDENTS: 1. Herdmans Limited
2. Herdmans Holdings Limited
DECISION
The decision of the tribunal is that the claimant is entitled to an award of £148,479.20 in respect of a redundancy payment, notice pay, holiday pay and unauthorised deduction of wages.
Constitution of Tribunal:
Chairman (sitting alone): Mr I Wimpress
Appearances:
The claimant was represented by Ms Esme Hamilton of Copeland McCaffrey, Solicitors.
The respondents did not appear and were not represented.
The Claim and the Response
1. In a claim form dated 19 August 2010, the claimant brought claims in respect of breach of contract, a redundancy payment, unauthorised deduction of wages and holiday pay. Although it was not specified, it is clear that the breach of contract claim embraced a claim in respect of notice pay. The claim form also included claims in respect of the claimant’s pension entitlement and a company car. These latter claims were not pursued at the hearing. Responses on behalf of both named respondents were filed on 9 September 2010. Both were signed by Mr James Herdman, the Chairman of the Board of Directors of Herdmans Holdings Limited, and stated at paragraph 5.2 that the respondents did not intend to resist the claim. Mr Herdman also wrote to the tribunal office on 26 October 2010 and stated that Herdmans did not intend to send a representative to the hearing and that it should proceed in its absence.
Sources of Evidence
2. The tribunal heard oral evidence from the claimant and received a bundle of documents which included his contract of employment, pay slips and tax forms.
Preliminary issue
3. As appears from the title to the proceedings two limited companies are named as respondents. It is therefore necessary at the outset to identify the correct respondent. The claimant took up employment with Herdmans Limited in April 1979. The claimant’s most recent P45 and P60 name Herdmans Limited as his employer. On 22 December 1998 the claimant entered into a contract of employment in which his employer was named as Herdmans Holdings PLC. Both respondents were listed as active in the Companies Register. The first respondent’s business was given as an electricity producer. The second respondent’s business was given as a holding company including a head office. The latter is consistent with the claimant’s role. In addition, all of the correspondence exchanged between the parties and sent to the tribunal office has been issued in the name of the second named respondent. While the evidence as to the identity of the claimant’s employer is by no means consistent I am satisfied on balance that at the material time the claimant was employed by the second named respondent.
The Facts
4. The claimant’s date of birth is 9 April 1950. Herdmans were for many years a leading textile firm in Northern Ireland and beyond. The claimant was first employed as a financial accountant in April 1979 but rose rapidly through the ranks and was made Managing Director in 1990. The claimant’s most recent terms and conditions of employment were contained in a contract of employment with the second named respondent dated 22 December 1998. At clause 4.1 the claimant’s starting salary was given as £85,633 per annum and clause 4.3 made provision for an annual pay rise in October each year based on the Retail Price Index. Clause 4.2 made provision for an annual bonus which would be payable if the profits of the companies and its subsidiaries exceeded £1,000,000 for the relevant period. At no time did the claimant become eligible for the annual bonus. Clause 2 made contractual provision in respect of notice and read as follows:
“2.1 The employment of the Director in accordance with the terms of this Agreement shall be deemed to have commenced on the date hereof and shall continue (subject to earlier termination provided below) until terminated by the Company giving to the Director not less than 18 calendar months prior notice in writing or by the Director giving to the Company not less than 6 calendar months prior notice in writing.
2.2 The Company shall be entitled to terminate this Agreement at any time by paying to the Director his basic salary in lieu of notice.”
Accordingly the respondent was obliged to give the claimant 18 months advance warning if it no longer wished to continue to employ the claimant in accordance with the terms of the Agreement. At first blush
this might be construed as entitling the claimant to 18 months paid
notice but this would be inconsistent with clause 2.2 which entitled the respondent to terminate the Agreement by paying the claimant his basic annual salary. The better view is therefore that the claimant is contractually entitled to 12 months paid notice.
5. In addition to his salary and the annual bonus scheme described above the directors of the second named respondent approved a bonus payment to the claimant in 2005. On 10 June 2005 Mr Herdman wrote to the claimant regarding the payment of a bonus of £200,000 to him in recognition of his dedication and commitment to the company both in Northern Ireland and South Africa. Mr Herdman listed a number of major challenges and tasks that the company faced in the coming months and concluded the letter as follows:
“Therefore, subject to consultation with the Company’s lawyers and Bankers and within the constraints imposed by cash flow, we are pleased to award you two hundred thousand pounds payable in ten equal monthly instalments. Having regard to your exceptional efforts and achievements to date the first five payments are unconditional, approval of the remainder will be subject to an informal review of the outcome of the tasks listed above.”
According to the claimant the Board of Directors passed a resolution each year up to 2009 to the effect that this payment was due to the claimant on the basis of recommendations made by the auditors to the Board. The claimant did not receive any payment in respect of this bonus and there no informal review took place.
6. Due to unfavourable market conditions the respondent business contracted substantially in recent years. As a result the claimant was not paid his full salary and did not receive the bonus that had been approved. During the tax years of 2008/2009 and 2009/2010 and from 1 April 2010 to 31 July 2010 the claimant was due to receive £265,363.00 in salary but only received £70,331.75.
7. On 16 July 2010, the claimant wrote to Mr Herdman setting out his concerns about his employment and the fact that he had not been paid his full salary. He requested payment of his outstanding salary and a redundancy payment if the second named respondent could no longer employ him.
8. On 20 July 2010, Mr Herdman replied and advised the claimant that the second named respondent was not in a position to pay the claimant’s unpaid salary or offer him continuing employment. Mr Herdman further advised that the claimant’s role of Managing Director had effectively disappeared and that his post was redundant. Mr Herdman also informed the claimant that the second named respondent could not make a redundancy payment at that time and that the claimant was free to take up alternative employment.
9. On 21 July 2010 the claimant responded and formally requested a redundancy payment. The claimant also provided Mr Herdman with a calculation of his redundancy entitlement based on his age and years of service.
10. The claimant did not receive a response to this letter. Nor did he receive his unpaid salary, notice pay or a redundancy payment.
11. The claimant was entitled to 42 days annual leave. The holiday year ran from 1 July to 30 June. The claimant had availed of 30 holiday days during the 2009/2010 leave. As a result the claimant had 12 days accrued holiday pay owing.
The Law
Redundancy Payment
12. The relevant statutory provisions are found in Articles 170,174,197,198 and 199 of the Employment Rights (Northern Ireland) Order 1996
[ “ERO 1996”].
170. (1) An employer shall pay a redundancy payment to any employee of his if the employee:-
(a) is dismissed by the employer by reason of redundancy, or...
174. (1) For the purposes of this order an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:-
(a) the fact that his employer has ceased or intends to cease:-
(i) to carry on the business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed by him, or
(b) the fact that the requirements of that business:-
(i) for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the
employee was employed by the employer, have ceased or diminished or are expected to cease or diminish.
(6) In Paragraph (1) “cease” and “diminish” mean cease and diminish either permanently or temporarily and for whatever reason.
197. (1) The amount of a redundancy payment shall be calculated by:-
(a) determining the period, ending with the relevant date, during which the employee has been continuously employed,
(b) reckoning backwards from the end of that period the number of years of employment falling within that period, and
(c) allowing the appropriate amount for each of those years of employment.
(2) In paragraph (1)(c) “the appropriate amount” means:-
(a) one and a half weeks' pay for a year of employment in which the employee was not below the age of forty-one,
(b) one week's pay for a year of employment (not within sub-paragraph (a) in which he was not below the age of twenty-two, and
(c) half a week's pay for each year of employment not within sub-paragraph (a) or (b).
198. (1) Any question arising under this Part as to:-
(a) the right of an employee to a redundancy payment, or
(b) the amount of a redundancy payment, shall be referred to and determined by an industrial tribunal.
(2) For the purposes of any such reference, an employee who has been dismissed by his employer shall, unless the contrary is proved, be presumed to have been so dismissed by reason of redundancy.
199. (1) An employee does not have any right to a redundancy payment unless, before the end of the period of six months beginning with the relevant date:-
(a) the payment has been agreed and paid,
(b) the employee has made a claim for the payment by notice in writing given to the employer,
(c) a question as to the employee's right to, or the amount of, the payment has been referred to an industrial tribunal, or
(d) a complaint relating to his dismissal has been presented by the employee under Article 145.
(2) An employee is not deprived of his right to a redundancy payment by paragraph (1) if, during the period of six months immediately following the period mentioned in that paragraph, the employee:-
(a) makes a claim for the payment by notice in writing given to the employer,
(b) refers to an industrial tribunal a question as to his right to, or the amount of, the payment, or
(c) presents a complaint relating to his dismissal under Article 145, and it appears to the tribunal to be just and equitable that the employee should receive a redundancy payment.
(3) In determining under paragraph (2) whether it is just and equitable that an employee should receive a redundancy payment an industrial tribunal shall have regard to:-
(a) the reason shown by the employee for his failure to take any such step as is referred to in paragraph (2) within the period mentioned in paragraph (1), and
(b) all the other relevant circumstances.
13. Accordingly, in order to succeed in his claim for a redundancy payment it is necessary for the claimant to demonstrate that he or she has complied with Article 199 of the ERO 1996. In the present case the claimant has complied with Article 199 (1) (c) by referring the matter to an industrial tribunal on 7 April 2010 which is within six months of the relevant date namely 25 November 2009 being the date on which the claimant’s employment terminated.
Notice Pay
14. An employee’s entitlement to notice pay falls within the tribunal’s breach of contract jurisdiction. The Industrial Tribunal Extension of Jurisdiction (Northern Ireland) Order 1994 confers jurisdiction on industrial tribunals to hear claims for breach of contract that either arise or are outstanding on the termination of a contract of employment. The financial limit of the jurisdiction conferred on industrial tribunals is £25,000.
Holiday Pay
15. Accrued holiday pay may be viewed either under the Working Time Regulations or as a contractual matter depending upon the amount involved. In the present case it is clear that this aspect of the claim is based on breach of contract. No claim was made under the Working Time Regulations.
Unlawful Deduction from Wages
16. Article 45 of ERO 1996 provides as follows:-
“(1) An employer shall not make a deduction from wages of a worker employed by him unless—
(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or
(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.
(2) In this Article “relevant provision”, in relation to a worker's contract, means a provision of the contract comprised—
(a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or
(b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion.
(3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction
made by the employer from the worker's wages on that occasion.
(4) Paragraph (3) does not apply in so far as the deficiency is attributable to an error of any description on the part of the employer affecting the computation by him of the gross amount of the wages properly payable by him to the worker on that occasion.
(5) For the purposes of this Article a relevant provision of a worker's contract having effect by virtue of a variation of the contract does not operate to authorise the making of a deduction on account of any conduct of the worker, or any other event occurring, before the variation took effect.
(6) For the purposes of this Article an agreement or consent signified by a worker does not operate to authorise the making of a deduction on account of any conduct of the worker, or any other event occurring, before the agreement or consent was signified.
(7) This Article does not affect any other statutory provision by virtue of which a sum payable to a worker by his employer but not constituting “wages” within the meaning of this Part is not to be subject to a deduction at the instance of the employer.”
17. Article 59(1) provides that for the purposes of a claim under Article 45,
““wages”, in relation to a worker, means any sums payable to the worker in connection with his employment, including - (a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise[…]”
18. The time limit for complaints to industrial tribunals is dealt with in Article 55 as follows:
“55. — (1) A worker may present a complaint to an industrial tribunal—
(a) that his employer has made a deduction from his wages in contravention of Article 45 (including a deduction made in contravention of that Article as it applies by virtue of Article 50( 2)),
(b) that his employer has received from him a payment in contravention of Article 47 (including a payment received in contravention of that Article as it applies by virtue of Article 52(1)),
(c) that his employer has recovered from his wages by means of one or more deductions falling within Article 50(1) an amount or aggregate amount exceeding the limit applying to the deduction or deductions under that provision, or
(d) that his employer has received from him in pursuance of one or more demands for payment made (in accordance with Article 52) on a particular pay day, a payment or payments of an amount or aggregate amount exceeding the limit applying to the demand or demands under Article 53(1).
(2) Subject to paragraph (4), an industrial tribunal shall not consider a complaint under this Article unless it is presented before the end of the period of three months beginning with—
(a) in the case of a complaint relating to a deduction by the employer, the date of payment of the wages from which the deduction was made, or
(b) in the case of a complaint relating to a payment received by the employer, the date when the payment was received.
(3) Where a complaint is brought under this Article in respect of —
(a) a series of deductions or payments, or
(b) a number of payments falling within paragraph (1)(d) and made in pursuance of demands for payment subject to the same limit under Article 53(1) but received by the employer on different dates,
the references in paragraph (2) to the deduction or payment are to the last deduction or payment in the series or to the last of the payments so received.
(4) Where the industrial tribunal is satisfied that it was not reasonably practicable for a complaint under this Article to be presented before the end of the relevant period of three months, the tribunal may consider the complaint if it is presented within such further period as the tribunal considers reasonable.”
Submissions and Conclusions
19. The main legal issues that arise are whether the claimant’s claim in respect of unpaid wages and a substantial bonus properly falls within the remit of an unlawful deduction from wages claim and if so whether these claims were brought within time. Ms Hamilton drew attention to the definition of wages in ERO 1996 which expressly includes any bonuses that are payable but did not seek to rely on any case-law. The tribunal considered the relevant case-law which is summarised in Harvey at paragraphs 324 to 370. The authors of Harvey refer specifically to the case of Coors Brewers Ltd v Adcock [2007] IRLR 440 in which Walls LJ stated that the mechanics of the English equivalent of Article 45 should operate as follows:
“The employee complains that there has been an unlawful deduction from his wages. He has not been paid an identified sum. He makes a claim under Part II. The employer may have a number of defences. Those defences may raise issues of fact. Those issues will be for the Tribunal to determine. But the underlying premise on which the case is brought is that the employee is owed a specific sum of money by way of wages which he asserts has not been paid to him. That, it seems to me, is the proper context both of Delaney v Staples and [Part IV of ERO 1996],
[Part IV of ERO 1996], as I read it, is essentially designed for straightforward claims where the employee can point to a quantified loss. It was designed to be a swift and summary procedure. Of course such claims would throw up issues of fact. The example canvassed in argument was of an employee being paid piece work, and asserting that his employer had deducted sums properly payable to him for work undertaken on the grounds that some of the items produced by the employee were defective. Delaney v Staples provides another example. Such a dispute would not take the case outside [Part IV of ERO 1996]. I also accept that [Part IV] is capable of expansion along Farrell Matthews and Weir v Hansen lines as envisaged by [ERO 1996, s.59(3)]. “
20. In New Century Cleaning Co. Ltd v Church [2000] IRLR 27, the Court of Appeal per Morritt LJ put the applicable test as follows:
“the question, in terms of [Article 45(3)], is: what was the wage properly payable to Mr Church on the first payday thereafter? The word 'payable' clearly connotes some legal entitlement. The adverb 'properly' is also consistent with a legal requirement, but is not necessarily limited to a contractual entitlement. This is confirmed by the provisions of s.27(1)(a), which show that the wages 'properly payable' may not be due under the contract of employment. But the words 'or otherwise' do not, in my view, extend the ambit of 'the sums payable to the worker in connection with his employment' beyond those to which he has some legal entitlement.”(paragraph 43)
Beldam LJ also observed:
“For wages to be 'properly payable' by an employer, he must be rendered liable to pay, either under the contract of employment or in some other way. [Article 59] contains some examples of sums which may be payable, either under contract or because for some other reason the employer is liable to make payment as an addition or supplement to 'wages'. An example of a sum properly payable otherwise than under contract would be a minimum wage payable by order of a wages council. Nor is it difficult to see how a
fee, bonus, commission, holiday pay or other emolument referable to employment may be payable otherwise than under the contract of employment. Such payments may be customary or required by collective agreements without express provision being made in a contract of employment.” (paragraph 62)
21. Having regard to these authorities I am satisfied that both the failure to pay the claimant his full wages and the bonus awarded to him properly fall to be considered as unauthorised deductions from wages. As the sums in question are both quantifiable and quantified they fall squarely within the relevant provisions. Although the sums are large and might be said to sit uneasily with the thinking behind the enactment of the original statutory provisions there is no reason in principle for excluding them from a claim of this nature.
22. The next matter to be considered is whether these aspects of the claim were brought within time. The failure to pay the claimant his full salary continued until 31 July 2010. The claimant issued proceedings on 19 August 2010. This claim is therefore well within the three month time limit.
- The position in relation to the bonus is not so straightforward. The claimant’s entitlement to a bonus of £200,000 arises from Mr Herdman’s letter of 10 June 2005. This bonus was payable in ten equal monthly instalments. No date for payment of all or any of the instalments was given but it is reasonable to infer that these would have been paid over the following 10 months. The claimant’s case was that the failure to pay the claimant his bonus was a continuing failure and this element of the claim was therefore not out of time. The question arises however as to what jurisdiction the tribunal has in respect of a continuing failure. Article 55 (2) of ERO 1996 is couched in terms of the 3 month time limit running from the date on which the last deduction was made. In the case of a series of deductions within the meaning of Article 55 (3) (b) time runs from the last deduction in the series. There is no reference in Article 55 to the concept of a continuing failure. However, the annual resolution that this bonus was due to the claimant is potentially of significance as to when the last failure to pay the bonus occurred. The claimant’s evidence was that the resolution was passed each year up to 2009. Assuming in the claimant’s favour that the last resolution was passed late in 2009 this is still some distance from 19 August 2010, the date on which the claim form was filed, and is well outside time. It was not suggested that it would not have been reasonably practicable for the claimant to have
issued proceedings within three months of the final resolution. Accordingly the claim in respect of unauthorised deduction from wages in relation to the unpaid bonus of £200,000 cannot succeed as it was brought out of time. It may however be capable of constituting a breach of contract and as such could have been dealt with by the tribunal were it not for the £25,000 limit on such claims. The claimant
may wish to consider bringing proceedings in the civil courts to recover this amount, if so advised.
24. The claimant has complied with the requirements of Article 199 (1) in respect of his claim for a redundancy payment in particular by sending
his letter of 21 July 2010. Nor is there any question of the breach of contract claim being out of time as proceedings were issued within three months of the termination of the claimant’s employment.
25. As the claimant’s entitlement to accrued holiday pay is founded on breach of contract it is subject to the same financial limitation as notice pay. I consider that the best approach is to award the claimant the full amount of holiday pay claimed and to reduce the notice pay element in order to keep the breach of contract claim within the tribunal’s jurisdiction.
Award
26. On the basis of the claimant’s oral and documentary evidence I am satisfied that his claim for a redundancy payment has been made out. Based on the claimant’s age at the time when he was made redundant the claimant is entitled to a redundancy payment as follows:
|
1. |
Redundancy Payment |
|
|
|
|
|
Date of birth: 09/04/1950 Commenced employment: 01/04/1979 Employment ended: 20/07/2010 Continuous years of employment: 31 years Max. continuous years of employment: 20 years |
|
|
Gross weekly wage |
- £2,187.06 |
|
|
Max weekly wage |
- £380 |
|
|
19 years service 41+ |
= 19 x 1.5 x 380 |
|
|
|
= £10,830.00 |
|
|
+ 1 year service 22-40 |
= 1 x 1 x 380 |
|
|
|
= £380.00 |
|
|
Total Redundancy |
= £11,210.00 |
|
|
|
|
|
2. |
Notice Pay |
|
|
|
|
|
12 months @ £6,038.53 = £ 72,462.36 |
|
|
|
|
|
|
|
|
Payment owed in lieu of notice Breach of Contract - Maximum Tribunal Award - £25,000.00 (less £912.00 holiday pay) |
= £72,462.36
= £24,088.00 |
|
3. |
Holiday Pay |
|
|
|
|
|
|
|
Accrued holiday days |
= 42 days |
|
|
Total holidays not taken |
= 12 days |
|
|
(380 (maximum) ÷ 5) x 12 |
= £912.00
|
|
|
Holiday pay |
= £912.00 |
|
|
|
|
|
4. |
Unlawful Deduction of Wages |
|
|
|
|
|
Reduced salary between 1 June 2008 and 31 July 2010 = 25 months |
|
|
Net wage payable |
= £150,963.25 |
|
|
Amount Actually Paid |
= £38,694.05 |
|
|
Balance Owed |
= £112,269.20 |
|
|
|
= £112,269.20 |
|
|
|
|
Total Award = £148,479.20
27. This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.
Chairman:
Date and place of hearing: 16 December 2010, Belfast.
Date decision recorded in register and issued to parties: