Industrial Tribunals Northern Ireland Decisions

THE INDUSTRIAL TRIBUNALS

 

 

CASE REF: 2940/17

 

 

CLAIMANT: William Thomas McShane

 

 

RESPONDENT: A & S Donaldson (Northern Ireland) Limited

 

 

 

DECISION

 

The decision of the tribunal is as follows:-

 

The claimant's claims of breach of contract are not well-founded. T he tribunal dismisses the claim for damages in the sum of £1,625.31 .

 

 

 

Constitution of Tribunal:

 

Employment Judge (sitting alone): Employment Judge Sheehan

 

 

 

Appearances:

 

The claimant appeared and represented himself.

 

The respondent appeared and was represented by Ms K Moore of the Engineering Employers' Federation Northern Ireland.

 

 

REASONS

 

1. By claim dated and received in the Office of Industrial Tribunal and Fair Employment Tribunal (OITFET) 31 May 2017, the claimant made a claim against the respondent of breach of contract, namely in regard to their action in paying earned commission on gross sales at a rate of 10% when the contract allegedly required commission to be paid at a rate of 15%. The claimant did not submit a claim under the Employment Rights (Northern Ireland) Order 1996 alleging unlawful deductions of wages. The respondent presented a response to the tribunal on 5 July 2017, in which the respondent denied that they had not discharged any liability in full for wages accruing from the 1 October 2016 until the claimant's employment was terminated with effect on 2 March 2017. It was not in dispute between the parties that the alleged shortfall of salary arose from a meeting on 8 August 2016 when the specific terms of salary agreed at the outset of the contractual relationship between the respondent and the claimant were varied. The dispute concerns the express variation of the terms of remuneration for the claimant's second year of employment agreed between the claimant and the representative of the respondent present at the meeting and whether any valid consideration passed between the parties for the agreed variation.

 

2. The tribunal heard oral evidence from the claimant and from two of the respondent's Directors, Mr Ronnie Hill, Director of Technical Operations and Mr Barry Marshall, Director of Finance and Human Resources. At the outset of the hearing there was an agreed bundle of relevant documents provided to the tribunal which was 52 pages and allocated the exhibit reference A. A copy email dated 16 February 2017 with an attachment was attributed the exhibit reference B. In consequence of the oral and documentary evidence adduced at hearing, the tribunal made the following findings of fact, upon the balance of probabilities:-

 

3. The claimant was employed from 31 August 2015 as a Technology Sales Executive until he gave notice of termination of his employment in February 2017 due to having obtained alternative employment with a new employer. The claimant's employment with the respondent was permanent upon satisfactory completion of a twelve month probation period. At the material time his contractual hours per week were 36.25 hours with wages being paid monthly in arrears.

 

3.1 It was not disputed that the claimant had been provided with a written contractual agreement operating also as the Statement of Main Terms and Conditions of employment for the claimant and signed by both parties on 1 September 2015. The agreement included a number of relevant contractual terms concerning remuneration. There was also a provision concerning the respondent's right to make changes to the terms and conditions as well as identification that the law of Northern Ireland was to govern and determine any construction of the terms and conditions contained in the agreement. The agreement entitled Contract of Employment contained the following paragraph:-

 

"6. Remuneration

 

6.1 Your salary from 31 August will be £22,000 per annum. You will be paid by equal monthly instalments in arrears on the second last banking day of each month by credit transfer directly into your bank account.

 

6.2 You will receive an annual payment of £100 for each completed years' service as calculated on 1 ^st October annually. This will be paid on the second last banking day of October annually.

 

6.3 At the Company's discretion, it will review your salary not less than once each year, usually April of each year, when the Company may increase your salary or make no change to it...

 

6.7 You will have no contractual entitlement to any payment of benefit, which is not provided for in this Agreement.

3.2 The document also contained the paragraph:-

 

"7 Salary Plan

 

7.1 Any bonus scheme in place from time to time may be varied or terminated by the Company in its absolute discretion. Participation in any bonus scheme or schemes in any year does not oblige the Company to extend or repeat that participation thereafter.

 

7.2 Please refer to your individual salary plan for further details of any bonus to which you may be entitled."

 

3.3 The claimant received a letter dated 28 July 2015 which was a letter of offer of employment "for the role of IT sales with Asdon Group." The letter "detailed an outline salary plan and terms" which included details of the salary for year 1 and year 2. The details included figures for a basic salary for each year and details of when and to what level commission would be paid on "gross profit". The letter included details of financial reward for achieving a specific sales target per quarter under the heading "Quarterly bonus" as well as specific bonuses tied to achievement of a particular level of sales under Annual bonus. There was also included in the letter a section titled "Benefits package". The benefits package included details of a company car, company mobile phone or monthly allowance, fixed sum contribution to home broadband, enrolment in a health scheme, normal working hours and annual holiday entitlement. Upon acceptance of the offer of employment a document was created by Mr Marshall which reflected the salary details outlined in the letter dated 28 July 2015 entitled "Asdon Salary Plan 31 August 2015 to 30 September 2016". This document appeared at page 36 in Bundle A. While it referred to only one year in the heading, it contained details of Year 1 and Year 2 salary. It also included quarterly and annual bonus details as well as the benefits package detailed in the letter of offer. This document had a designated area for the date and signature by the employee and by a representative of the respondent company. However the document was not produced to the claimant to sign either during his first year of employment or when his salary terms were varied in August 2016, with effect from 1 October 2016.

 

3.4 The agreement also contained the paragraph:-

 

"21 Changes to Terms and Conditions

 

21.1 The Company reserves the right to make reasonable changes to any of your terms and conditions of employment to reflect the changing needs of the business or to comply with new legislation. You will be notified of this within one month of the variation."

 

No variation to the terms and conditions of employment was issued during the claimant's employment with the respondent.

 

3.5 It was not in dispute that the claimant met with the Director of the respondent company who had responsibility for sales, Mr Ronnie Hill, on 8 August 2016. The meeting was initiated by the claimant as he wished to discuss his concerns regarding his prospective salary from October 2016 onwards. By July 2016 the claimant's end of July sales were running at £23,000. The claimant was concerned that he could not achieve the sales target for the second year of his employment with the respondent in light of his current rate of performance. The claimant was concerned the target for the second year of £80,000.00 was too high. He was also concerned that this would result in a serious loss of predicted income for the second year of employment as his basic salary was due to revert from £30,000.00 to £22,000.00 being the figure in the letter of offer of employment and the figure at paragraph 6.1 in the contractual agreement dated 31 August 2015.

 

3.6 There was agreement between Mr Hill and the claimant that the remuneration arrangements recorded at the outset of the employment relationship were varied during the 8 August 2016 meeting so that the claimant would have a "little more salary protection" in the second year of employment. The dispute between the claimant and the respondent concerned what was agreed regarding the rate of commission on sales. The claimant contended that there was an agreement reached to reduce his sales target to £60,000 and that the rate of commission on sales was to remain unchanged from that detailed in his letter of offer, namely, "15 % of all gross profit". Mr Hill contended that the remuneration for the first two years of employment in particular the first year salary included an element of income protection in year 1. This was reflecting the respondent's recognition that it takes time for sales personnel to build up their business. In the second year of employment a greater element of remuneration was linked to performance to incentivise staff. Mr Hill contended that in an effort to be flexible while he was prepared to increase the basic to more than £22,000.00 but not as high as the figure during the first year of employment. It was the respondent's case that while Mr Hill, on behalf of the respondent, was prepared to vary the manner in which salary would be paid to provide some greater element of salary protection as the claimant developed his sales performance, but the commission structure also had to be amended to fund the financial gap the variation could create for the overall sales department. Mr Hill contended that in an effort to maintain the same projected spend on salary, he reflected the increased basic by reducing the rate commission would be paid from 15% to 10%. The claimant gave evidence that when he proposed to Mr Hill that £60,000.00 was a realistic sales target for the second year; Mr Hill had said he couldn't do the same as the previous year. Mr Hill agreed with this evidence and contended no change was made to the sales target for the second year. Mr Hill refuted the claimant's suggestion, during cross examination, that the sales target for the second year was lowered from £80,000 to £60,000 as well as no variation in commission rate. In summary, the claimant contended the agreement was to place him on an increased basic wage to £26,000.00, a reduced sales target of £60,000 and a removal of the agreed bonus structure. The claimant accepted in cross examination that the increase from £22,000.00 basic salary to £26,000.00 was not an insignificant increase or variation of the contractual terms which he initially agreed.

 

3.7 Mr Hill relied on paragraph 6.3 of the Agreement contained within the bundle of documents at page 26 which referred to a basic level of pay of £22,000.00. This was the basic level of pay for sales personnel within the respondent company. Incentivising of employees to achieve sales is an aim of the respondent. This is reflected in the fact that commission in the second year for the claimant was to be earned on all gross profit, unlike the first year when commission was to be accrued on gross profit over £30,000 worth of sales. Mr Hill gave evidence which was accepted by the tribunal that while he was prepared to restructure remuneration arrangements for the second year to give the claimant a little more salary protection, but not as much as in the first year, he still was required to include elements which would incentivise the claimant. Both parties agreed there was to be an increase in the basic salary from 1 October 2016 to £26,000. The dispute between the claimant and the respondent concerns what agreement, if any, was made concerning the accrual and payment of commission.

 

3.8 Neither party to this claim made any written record of the discussions or issued written confirmation to each other confirming what was agreed regarding alternative remuneration arrangements for the second year of the claimant's employment.

 

3.9 The only evidence provided was of a hearsay nature from Mr Marshall. There was produced to the tribunal an undated and unsigned Adson salary plan document at page 36 of the agreed Bundle which showed for year 2 the figure £22,000 basic salary crossed out and the figure £26,000 written beside it. The same document also recorded in print the figure 15% commission on all gross profit. The figure of 15% was crossed out and replaced in the margin beside that figure with 10% in handwriting. There were no amendments made or notated on the document in respect of the targets set for quarterly or annual bonus. There was a document at page 38 of the agreed bundle which showed that for the year October 2015- September 2016 inclusive, the total gross profit accrued by the claimant was £54,556.67, with £24,526.57 being credited in September 2016 alone.

 

3.10 Mr Marshall was the Finance and Human Resources Director for the respondent company. At some point in August 2016 Mr Hill verbally communicated to Mr Marshall that he had agreed a variation of the claimant's salary terms for year 2. This was communicated to Mr Marshall in his office as a result of which Mr Marshall made a handwritten record of the changes. The normal process within the respondent company was for Mr Marshall to issue new terms and conditions to the employee or have a new salary plan issued to the employee for signature. This process was usually followed when the salary review date occurred which was, as set out in paragraph 6.3 of the contract of employment, "usually April of each year, when the company may increase your salary or make no change to it". The claimant had not had a review in April 2016 as he had been issued with a two year salary plan. Mr Marshall accepted it was unfortunate that he had not noted the date of the changes when he was notating the variation of salary terms on the document. Mr Marshall claimed it was an oversight on his part that no written document recording the amended remuneration arrangements was issued to the claimant. The normal time for issuing salary plans is post the salary reviews that are timed to occur for end of the company's financial year and they are normally issued on an annual basis.

 

3.11 Mr Marshall also is responsible for inputting pay data on the computerised pay roll system as well as the management of various sales analysis reports and the production of monthly commission statements which are placed in employee's pay packets with their wages slip. At the relevant time of the claimant's employment the respondent company consisted of 3 Directors and another 25 to 26 employees. In the sales IT department under Ronnie Hill there were 3 persons reporting to Mr Hill including the claimant. At the end of the trading year 2015/2016, the respondent company conducted a reorganisation of the analytics element of the computerised programming operated by the respondent. This created certain pressures on Mr Marshall while this transition was being conducted as it included variations being made to the back office system. The changes made to the system related to being able to obtain deeper analysis of sales breakdown but no change was made to the system which enabled obtaining the top profit line for employees. The difficulty for Mr Marshall during the transition from one system to another was that data from one system had to be manually transferred to obtain a more detailed breakdown of monthly sales analysis against the various products sold by the respondent.

 

3.12 Mr Marshall's tasks included the preparation and furnishing of monthly commission statements for about 14 of the respondent's employees. The purpose of the statement was twofold: to allow Mr Marshall to calculate the amount of commission which was paid through the pay roll as well as providing evidence to employees what figure of sales the commission detailed on the payslip represents in gross profit terms. The last of the monthly commission statements issued to the claimant was upon the end of his employment in March 2017. This document was included at page 37 of the agreed bundle. The document was an accrual document which provided details not only of the monthly sales or contracts upon which commission was accrued but also showed the total level of sales or contracts for the months already passed in the sales year. It was Mr Marshall who placed a copy of such a document for the relevant employees, which included the claimant, in the monthly pay packets with the relevant pay slip.

3.13 The claimant alleged both in emails from February 2017 to April 2017 that the accrual sales/commission to be paid document was not included with the relevant pay slips for the months October 2016 until the February 2017 pay packet. The claimant accepted that he had received such a document throughout the first year of his employment. The claimant produced a document which the tribunal marked as exhibit "B" which was an email dated 16 February 2017 from Mr Marshall to the claimant titled "January 2017 sales analysis". It read:

 

"Apologies for the delay in providing these figures, some of the reporting parameters changed on Bluesky and it has been a little bit of a struggle to sort them out."

 

3.14 Attached to the email was a sales analysis document showing the value of sales and contracts of various types falling within the claimant's responsibilities for the months October, November, December, all within 2016 and January 2017. The total accrued of gross sales was £20,038.34. It was not disputed by the respondent that the sales analysis document was normally provided monthly and by email. The claimant alleged that from October 2016 until February 2017 he received no monthly sales analysis breakdown by email. Mr Marshall agreed that there was a period, during the transition from one system to the other, that he was not able physically to produce the sales analysis breakdown on a monthly basis. The sales analysis document had six value elements while the personal bonus commission document had only 2 value elements. Mr Marshall did not dispute that the claimant alleged to him, at a meeting on 2 March 2017, that he had not received the monthly commission breakdown sheet but Mr Marshall contended that he responded to the claimant that they were provided in the monthly pay slips. Mr Marshall also advised the claimant at the same meeting that any issue about the rate of commission would have to be clarified with Mr Hill. Mr Marshall accepted he did not show to the claimant at this meeting the hand written changes made to the unsigned and undated salary plan document at page 36 of Bundle A referred to at paragraph 3.9 above.

 

3.15 There was acceptance by the claimant that salary accruing in the second year with a target of £60,000 sales and commission accruing at 15% would result in a commission payment of £9,000. On the basis of a basic salary of £22,000.00 this would produce a total salary of £31,000.00. Equally if the claimant's target sales figure was to remain at £80,000.00 at 15% on gross sales, with a basic salary of £22,000.00, the total salary potential (not including quarterly bonuses for hitting specified targets) would be £34,000.00. Equally a target of £80,000.00 with 10% commission on gross sales, with a basic of £26,000.00, resulted in £34,000.00. The claimant's contention that salary was varied to £26,000 together with a reduced sales target of £60,000.00 with commission remaining unchanged at 15% on all gross sales resulted in a potential salary (not including quarterly bonuses for achieving specified targets) of £35,000.00.

3.16 The claimant gave notice of termination of his employment because he was offered a better job in terms of remuneration as account manager with Agnew Corporate. He gave notice on 2 February 2017. The email exchange which followed notice of termination culminated in an email exchange dated 19 April and 25 April 2017. The tribunal found it noteworthy that the claimant recorded in his email of 19 April 2017 that "we had discussed increasing my basic salary for year 2 starting October 2016 to £26k due to the fact that the 2 ^nd year target we agreed was set too high". The claimant also recorded that he "was unaware that my commission stated on each payslip from Oct 16 was being paid at 10% instead of the 15% that was stated in my letter of offer and agreed when I joined the company." In response Mr Hill advised by email 25 April 2017 that "the information you refer to in your letter of offer became void when we renegotiated your terms in August 2016. You have been paid the correct salary and commission levels since 1 October 2016 and the company maintains you were given an itemised breakdown of this on a monthly basis".

 

3.17 The tribunal does not need to make any other findings of fact for the purposes of reaching a decision in the case.

 

THE APPLICABLE LAW

 

4. Breach of Contract

 

The Industrial Tribunals Extension of Jurisdiction Order (Northern Ireland) 1994 confers jurisdiction on industrial tribunals to hear claims for breach of contract and Article 3(c) provides as follows: -

 

"Proceedings may be brought before an industrial tribunal in respect of a claim of an employee for the recovery of damages or any other sum (other than a claim for damages, or for sum due in respect of personal injuries) if - ...

 

(c) the claim arises or is outstanding on the termination of the employee's employment."

 

4.1 Generally, English law has denied the possibility that valid consideration can be found in the performance by a contracting party of something it is already (legally or contractually) bound to do. This rule, the so-called "existing duty rule", is explained by the fact that such a performance cannot be of any "value in the eye of the law". Halston "Contract law" at page 329 records that:

 

"Until recently a contractual adjustment was said to be unsupported by consideration if the only promise given in return for it was to perform a pre-existing legal duty created by the original contract. A distinction is sometimes drawn between two different definitions of consideration: factual and legal. A factual definition emphasises the fact of benefit or detriment; a legal definition recognises as consideration only those acts which the promisor was not already under a legal obligation to perform. However the earlier cases from Stilk v Myrick to Hartley v Ponsonby (1857) - while some jurisdictions have moved away from a requirement for consideration in relation to a promise seeking to modify an existing as opposed to create a new contractual obligation but in New Zealand case Antons Trawling Co Ltd v Smith [2003] NSWLR 723 Braagwanath J said "consideration is ...a valuable signal that the parties intend to be bound by their agreement...Where the parties who have already made such intention clear by entering legal relations have acted upon an agreement to a variation, in the absence of policy reasons to the contrary, they should be bound by their agreement. ..In truth there has been a continuing trend to side step the artificial results of a strict doctrine of consideration. It could be evaded in the English courts by two techniques: the finding of a rescission followed immediately by the conclusion of a new contract or the discovery of some, perhaps nominal, fresh consideration. An investigation into these evasion techniques is instructive". The rescission and new contract device used in Raggou v Scougall (1915) 31TLR 564 was used to enforce a contractual modification that reduced the contract price".

 

4.2 Consideration is traditionally defined in terms of either a benefit to the promisee or a detriment to the promisor. The courts have identified two ways in which new consideration may arise and so avoid the conclusion that a contractual modification is unenforceable for want of consideration. The first way is to find "legal" consideration. Such a finding takes the case out of the ambit of the pre-existing duty rule. It is a device critiqued by many as creating a "considerable" risk that it will be introduced into the modification by a well advised opportunist to disguise his extortion as a bargain. It seems the force of this argument was recognised by the Court of Appeal in an important case which opens up a second way in which the court may find new consideration and so avoid the conclusion that a contractual modification is unenforceable for want of consideration. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 534 12 - where Glidewell J first formulated the principle of factual consideration, introduced by the case, in a defensive way which limited it to the context of contractual modifications. In summary, his Lordship recognised that if, in the context of a promise of additional payment under a contract, the promisor, as a result of the promise, obtained "in practice a benefit" (or obviated a disbenefit) that benefit would, in principle, be capable of amounting to good consideration for the purpose of enforcing the promise.

 

4.3 Santow J helpfully reformulated the principles stated by Glidewell LJ in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 - if A has entered into a contract with B to do work for B ... in return for the payment by B, and at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or be able to complete his side of the bargain, and B thereupon promises A an additional payment or other concession (such as reducing A's original obligation) in return for A's promise to perform this contractual obligation at the time, and as a result of giving his promise B obtains in practice a benefit or obviates a disbenefit provided A's performance is worth more to B than any likely remedy against A, or as a result of giving his promise A suffers a detriment provided that A is foregoing the opportunity of not performing the original contract, where such non-performance, taking into account B's likely remedy against A ... capable of being viewed by A as worth more to A than performing that contract, in the absence of B's promised payment or concession to A. B's promise must not be given as a result of any economic duress or fraud or undue influence, unconscionable conduct or unfair pressure on part of A. If so the benefit to B or the detriment to A is capable of being consideration for B's promise to that the promise will be legally binding.

 

4.4 One possible application of the rule in this country has so far been firmly rejected by the courts in relation to the part payment of debts - see Re Selectmove [1995] 1WLR 474. In that case the Court of Appeal refused the argument that rescheduling of payments with Her Majesty's Revenue and Customs was valid consideration for the agreement, because the Revenue received a practical benefit via the likelihood of it recovering more than it would have done by putting the company into liquidation. Peter Gibson LJ stated that 'it is clear ... that a practical benefit of that nature is not good consideration in law'. As his Lordship put it, in forceful language,

 

"the principle of Williams v Roffey Bros Ltd is to be extended to an obligation to make payment, it would in effect leave the principle in Foakes v Beer without any application. When a creditor and a debtor who are at arm's length reach agreement on the payment of the debt b instalments to accommodate the debtor, the creditor will no doubt always see a practical benefit to himself in so doing. In the absence of authority there would be much to be said for the enforceability of such a contract. But that was a matter expressly considered in Foakes v Beer yet held not to constitute good consideration in law. Foakes v Beer was not even referred to in Williams v Roffey Bros Ltd, and it is in my judgement impossible, consistently with the doctrine of precedent, for this court to extend the principle of William's case to any circumstances governed by the principle of Foakes v Beer. If that extension is to be made, it must be by the House of Lords or, perhaps, even more appropriately, by Parliament after consideration by the Law Commission."

 

4.5 The House of Lords in Foakes v Beer [1884] UKHL 1 held that the creditor despite reaching agreement with the debtor for a lesser sum was entitled, once the lesser sum was paid, to obtain the interest claimed and her costs, as the promise not to take any action to enforce the debt was unenforceable for want of consideration. Thus Foakes confirmed the rule in Pinnel's Case (1602) 5 Co rep 117 where it was recognised that such a promise was unenforceable because "payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole".

 

4.6 The decision of the Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [ 2016] EWCA Civ 553 is important for its treatment of two fundamental principles of contract law. First, the court confirmed that a contractual "non-oral variation" clause, that is, a clause limiting contractual variations to a prescribed written form, is not binding in terms and thus does not preclude an oral variation. In so holding, the court applied the recent reasoning of a differently constituted Court of Appeal in Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA 396. Secondly, the court in MWB confirmed that, in some circumstances, a practical benefit obtained by a creditor in promising to accept a part payment of a debt is capable of amounting to good consideration-”a result hitherto thought precluded by the rule in Foakes v Beer. Arden LJ in MWB distinguished the earlier authority Re Selectmove Ltd. Thus, Arden LJ determined having Rock continue its occupation of premises leased from MWB elevated the nature of the benefit above and beyond a benefit that comprised the mere fact of the receipt of some payment as a lesser sum. In other words, it mattered that MWB had agreed the revised payment schedule for reasons of its own interests, namely to "avoid a void", and this critical feature enabled the finding of a practical benefit and good consideration. In contrast, any benefit in Re Selectmove amounted to no more than the promise to pay part of the debt, which, being what the debtor was already bound to do, could not be valid consideration.

 

4.7 These, and other principles of contract law, apply to contracts of employment. However, the courts recognise that employment contracts differ in some respects from commercial contracts: the inequality of bargaining power between the parties in the employment context being perhaps the most obvious example, as strikingly illustrated by the recent decision of respectively the Court of Appeal and the Supreme Court in Autoclenz v Belcher [2011] UKSC 41 . In relation to the obligation to use clear words to reserve a power of unilateral variation, the obiter observations of Lord Woolf (expressed to be by way of 'general guidance' only) in Wandsworth LBC v D'Silva (CA) [1998] IRLR 193, para 31 are well-known. Having pointed out that usually contracts of employment can only be varied by agreement, Lord Woolf went on to say that:

 

"employer or for that matter an employee can reserve the ability to change a particular aspect of the contract unilaterally by notifying the other party as part of the contract this is the situation ... [ in which case ] clear language is required to reserve to one party an unusual power of this sort ."

 

And he added that where certain rights of employees (e.g., right of appeal in disciplinary matters) may be adversely affected, a clause empowering the employer to vary terms unilaterally should not be construed in a way as ' could produce an unreasonable result'.

 

4.8 Other examples of relevant principles can be found in Lee v GEC Plessey Telecommunications [1993] IRLR 383 where an employer agreeing collectively negotiated severance terms with redundant employees may disclose factual consideration. The court identified that there may be a practical benefit to the employer from the continued performance of the employee's contract and there might also be an avoidance of detriment in the form of harmonious industrial relations at a difficult time. Where an express variation clause is restricted to one particular aspect of the contract and is expressed in unambiguous terms it is likely to be upheld by the court: Wandsworth LBC v D'Silva [1998] IRLR 193 and Central RC v B [1985] S.L.T 413. Where a variation is beneficial to an employee the courts are more ready to infer acceptance from the fact that the employee has continued to discharge his/her contractual obligations without requiring more by way of acceptance: Hershaw v Sheffield City Council [2014] ICR 1120. In summary the review of the case law on valid consideration leads to the conclusion that to the extent that a factual rather than a legal definition of consideration is more easily satisfied it is the presence or absence of pressure amounting to economic duress which ultimately will determine the enforceability of a modification.

 

THE TRIBUNAL'S DETERMINATION

 

5. In this case, the tribunal must determine the issue between the parties solely in accordance with the law of contract. A breach of contract claim will depend on the specific terms of the contract. For the claimant to succeed in this claim it will be necessary for the claimant to demonstrate (a) a contractual entitlement to the disputed pay, (b) that such entitlement has been breached; (c) that the breach has not been accepted, and (d) that the loss flowing from the breach is the sum of £1,625.31.

 

5.1 Accordingly, the tribunal had to determine whether the respondent unilaterally reduced the percentage rate commission could accrue on sales attributed to the claimant during the second year of employment while at the same time increasing by over 18% the basic salary from £22,000 to £26,000 and identify what consideration, if any, the claimant provided to the respondent for the agreed variation.

 

5.2 T he claimant solely brought a breach of contract claim under the 1994 Order. The claimant expressly made no claim under Article 45 of the Employment Rights (Northern Ireland) Order 1996 - unlawful deduction of wages - where the respondent's failure to issue confirmation of the variation in writing may have been relevant to the determination of that claim. However the issue before this tribunal has to be determined solely in accordance with the law of contract. Undoubtedly the contractual relationship is governed by the express terms of the contract which are mainly in writing. The tribunal was satisfied that the agreement dated 31 August 2015 was a contract of employment between the claimant and the respondent. The consent of the employee is the key to determining whether any of the express terms have been varied. Consent can arise from express or implied agreement, or from a variation clause in the contract of employment. Consent can be given orally or in writing. Implied consent raises specific difficulties particularly if there is an absence of protest from the employee in respect of the variation of the contractual terms. Neither party contended that this was a situation of implied consent. The tribunal is satisfied, on the evidence available, that the claimant sought the variation of the initial salary terms agreed between the parties.

 

5.3 It is well recognised that the contract creates the rights and duties of the parties; and if a document is held to be a written contract it is difficult to persuade a court that the terms are otherwise than stated in that document. The document signed by both parties to this dispute is headed Contract of Employment. It also reads as an agreement made between the respondent and the claimant on 31 August 2015. As with any terms of contract once agreed, a change to the terms can only be effected by both parties agreeing to the variation. In respect of pay this is normally done as part of the general round of pay negotiations. It is clear from the terms of the contract of employment particularly paragraph 7 entitled "Salary plan" that any individual salary plan issued to an employee is intended to be incorporated into the terms of the contract. It is clear that other than for the offer of employment which set out the salary plan for the first two years of the claimant's employment with the respondent the claimant's annual basic salary would have been £22,000.00.

 

5.4 While much of the case law establishing the relevant principles of contract law governing the variation of terms of a contract have occurred in situations involving debtor and creditor, the established principles regarding the need for "valid" consideration to enforce such a variation is clear and equally applies in the context of a contract of employment. The tribunal considered the facts of this case against the most recent restatement and interpretation of the relevant contractual law by the Court of Appeal for England and Wales in MWB Business Exchange Centres Ltd v Rock Advertising Ltd, with a view to identifying either a practical benefit obtained by the respondent or whether the claimant obtained the variation simply to perform a pre-existing legal duty created by the original contract.

 

5.5 The respondent in this case has not helped themselves by failing to issue an amended copy of the salary plan once a variation of terms was agreed. Equally it appears to the tribunal that the claimant could have confirmed the agreed variation to Mr Hill, either in an email or other written document, if as alleged he sought confirmation in writing without a response from Mr Hill. While there is no mention in the specific terms of the Contract of Employment to commission payments, the document by referring to the salary plan as well as the practice of the company satisfy the tribunal that there was a clear element of commission included in the wages or salary of the claimant. The claimant in that respect was in the same position as a number of other employees of the respondent company. In order to determine the issues in this case the tribunal had to consider the enforceability of any alleged breach of contract in respect of the variation of the 2015 two year salary plan made in August 2016.

 

5.6 The tribunal considered carefully the evidence provided including the email exchanges as the employment relationship came to an end. Performance related pay, particularly in respect of sales representatives is a regular feature or practice in today's economy. This was a difficult case to resolve between the parties as no single witness was clearly less credible than the others. However it was clearly for the claimant to satisfy the tribunal on the balance of probabilities that the initial salary terms had been varied exactly on the terms he contended, in effect, a £4,000.00 increase to his agreed basic salary of £22,000.00 and a decrease of his sales target without change to the percentage rate that commission would accrue. This had to be considered in the context of the established position during the first year of employment, when commission accrued only on gross sales over the agreed enhanced basic salary provided as a protection to the generic basic salary of £22,000.00 normally applied to all sales personnel.

 

5.7 The tribunal found the statement in the email from the claimant on 19 April 2017 that "we had discussed increasing my basic salary for year 2 starting October 2016 to £26k due to the fact that the 2 ^nd year target we agreed was set too high" was at odds with the evidence of the claimant during this hearing. The tribunal gave considerable weight to the disclosure by the claimant in his evidence that Mr Hill had indicated during the meeting in August 2016 that he could not do exactly the same as what had occurred in the first year of the claimant's employment. There was no evidence of threat from the claimant that he would leave his employment without the salary arrangements being revised. The tribunal was also not satisfied, on the balance of probabilities that Mr Marshall had not inserted with pay slips a breakdown of the personal commission accrued for a period of four months running from October 2016. The tribunal closely scrutinised the variety of outcomes that could result from the variation of terms where the initial second year target remained unchanged, the salary was changed only in terms of basic, or salary was changed with a change in the terms of percentage of commission. It was difficult for the tribunal, having heard and seen Mr Hill give evidence to be satisfied on the balance of probabilities that he would agree to provide improved terms and conditions to the claimant which would potentially result in less commercial benefit to the respondent. The claimant's alleged variation would also undermine the purpose of a salary arrangement based on an element of incentive linked to performance. T he tribunal could not identify any legal or factual consideration offered by the claimant to the respondent for the variation of the salary terms agreed in 2015 between the parties. This tribunal is not satisfied that the claimant has established an entitlement to the disputed pay, namely, commission at 15% on gross sales from October 2016. In the alternative the tribunal being unable to identify any legal or factual consideration having been provided by the claimant in August 2016 are compelled to the conclusion that any contractual modification made in August 2016, with effect from October 2016, is unenforceable for want of consideration.

 

6. The tribunal finds the claimant's claim in respect of breach of contract unsuccessfully made out. The tribunal dismisses the claim.

 

 

 

 

 

Employment Judge:

 

 

Date and place of hearing: 17 October 2017, Belfast.

 

 

Date decision recorded in register and issued to parties: