United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 224_94_0505

Appeal No. EAT/224/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 5 May 1995

THE HONOURABLE MR JUSTICE J MORISON

MR A C BLYGHTON

MR J H GALBRAITH

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MRS G BARRIE & OTHERS          APPELLANTS

ROCHDALE METROPOLITAN BOROUGH COUNCIL          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR ALAN FRASER

(of Counsel)

Mr Bruce Piper

UNISON

1 Mabledon Place

London WC1H 9AJ

For the Respondents MR TIMOTHY HORLOCK

(of Counsel)

Rochdale MBC

PO Box 15

Town Hall

Rochdale OL16 1AB


 


MR JUSTICE MORISON: The issue raised by this appeal relates to the proper construction of the Wages Act 1986 and, in particular, of the provisions of subsections (1) and (2) of s.7. We accede to the Appellant's submission that in construing the Act we should look at the words closely and consider the factual implications of our construction.

All the Appellants are employees of the Rochdale Metropolitan Borough Council. All of them use their cars in circumstances which entitle them to an allowance, part of which is paid by reference to a fixed monthly payment and part by reference to a fixed mileage allowance, depending on the number of miles that are travelled.

There are two categories of user: an employee in respect of whom it is desirable that a car should be available for the performance of his duties when required (a casual user) and an employee in respect of whom the use of a car for the performance of his duties was essential (an essential user). The allowance was related to the engine capacity of the car which the employers had specified as suitable to particular grades of employee.

On 11 October 1993 the Council decided to implement a new allowance scheme, which reduced the engine capacities and thus the allowances for each of the Appellants in this case. This decision was implemented by the Council so that employees received less allowance in their pay packets than had previously been the case. It is common ground between the parties that the non-payment of the difference is to be treated as a deduction to which the Wages Act is capable of applying. The question is whether the car allowances which the Council pays are wages for the purposes of s.7(1) of the Act and, if they are, whether the deductions were authorised under the Appellants' contracts of employment, so that they are not unlawful; s.1(1)(a) of the Act. In an admirably succinct decision, the Industrial Tribunal held that the allowances were paid to each of the Appellants in direct consideration of the provision and use of a car to facilitate the performance of the recipients' duties under his or her contract of employment. That was the position whether or not the amount paid to the employees was taxable in part or exceeded the actual cost incurred by the employee. The Industrial Tribunal, therefore, did not need to and did not consider the second question. Were we to conclude that the allowances were wages, the matter would then have to be remitted back to the Industrial Tribunal to hear and determine the second question, as to which there would be a need for evidence.

The relevant provisions of the Act are as follows:

"1(1) An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one of the following conditions, namely -

(a) it is required or authorised to be made by virtue of any statutory provision or any relevant provision of the worker's contract; or

(b) the worker has previously signified in writing his agreement or consent to the making of it."

"Relevant provision" is defined in subsection (3).

Section 7 provides, so far as is relevant:

"(1) In this Part 'wages', in relation to a worker, means any sums payable to the worker by his employer 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;

...

but excluding any payments falling within subsection (2).

(2) Those payments are -

...

(b) any payment in respect of expenses incurred by the worker in carrying out his employment;"

Where an employee believes that an unlawful deduction has been made from his wages he may present a complaint to an Industrial Tribunal, s.6 of the Act. Where a complaint, as here, of an unlawful deduction contrary to s.1, is found by the Tribunal to be well-founded

"5(4)(b) ... the Tribunal shall order the employer to pay ... to the worker any amount" [of any deduction]."

Subsection (5) of s.5 provides:

"Where ... a Tribunal finds that, although neither of the conditions set out in s.1(1)(a) and (b) was satisfied with respect to the whole amount of a deduction ..., one of those conditions was satisfied with respect to any lesser amount, the amount of the deduction ... shall for the purposes of subsection (4)(a) be treated as reduced by the amount with respect to which that condition was satisfied."

It seems to us (1) Parliament has given a wide definition to wages, thus s7(1) applies to all sums payable in connection with his employment. The further subparagraphs are simply specific examples of the general, as they are preceded by the words "in particular", whereas the exceptions in subsection (2) are specifically defined: "those are". (2) Although Parliament has enabled Tribunals to order that part of the deduction only should be repaid, it seems to us important to note that a deduction can only be apportioned in circumstances where part was covered by the contract of employment or otherwise agreed to and part was not. There is nothing in the Act which permits a Tribunal to say that a particular deduction was partly in respect of wages in s.7(1) and partly in respect of expenses in s.7(2). In our view, in this case, the Tribunal had to determine whether the deduction was either wholly within s.7(1) or wholly within s.7(2). Whilst there may be cases, although we cannot think of an example, where it may be possible to say effectively that there have been two deductions, one to wages and the other in relation to expenses, this is not such a case. Neither party has put forward a sensible method of splitting the sums involved in this case into wages and reimbursement of expenses. No evidence was provided to the Industrial Tribunal to suggest that there was any profit element in the allowances. No evidence was provided in the IT1s to suggest that there was a profit element in the allowances that were paid. The Appellants contend, nonetheless, that at least part of the allowances was by way of a profit or windfall and, therefore, does not fall within s.7(2)(a) but Counsel was unable to indicate to us or to the Industrial Tribunal what that part was or might be. It seems to us that the basis for the suggestion that there must be a windfall element is simply a misunderstanding of the taxation provision. It arises in this way: part of the monies paid to the employees of the Council under the allowance scheme is taxable. It seems to us, that the law which determines whether an expense is recognized as legitimate, so as to be capable of being deducted from wages in revenue terms, is not the same as the test which is set out in s.7(2)(b). It is, therefore, not in the least bit surprising that some expenses which are covered by s.7(2)(b) should nonetheless be taxable because the provisions are not intended to be construed the same way and are not identically worded. To give an example, if an employee uses his car to get to his place of work from his home and then to return to it at the end of his working day, that would not be an expense which the Revenue would accept as being a proper expense incurred by him wholly and necessary in connection with his employment. Nonetheless, it seems to us that if an employer pays an allowance to his employees, which takes into account the use which he makes of his car to make such a journey from his home to his place of work, then it falls within s.7(2)(b), whose words are wide enough to cover such an expense, that is, any payment in respect of expenses incurred by the worker in carrying out his employment. He is incurring an expense in going to work and incurring it in going back from work at the end of the day.

Accordingly, it seems to us wholly misconceived that the Appellants should seek to argue that these allowances contain some unspecified profit or windfall element, merely on the basis that the Inland Revenue taxes some of the payments made.

That being so, we turn to the decision of the Industrial Tribunal and ask ourselves whether any error of law has been disclosed. It seems to us that the succinct decision, as we have described it, of the Industrial Tribunal cannot be faulted. They have concluded and were entitled to conclude that these allowances could not be described as wages within the wide definition contained in s.7(1) but were to be treated as falling within s.7(2). It seems to us that was a decision which they were fully entitled to arrive at. We agree with it. Accordingly, this appeal will be dismissed because in our judgment, there are no grounds for believing that there has been any misdirection in law by the Industrial Tribunal.

Accordingly, this appeal is dismissed.