United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 1188_95_2604

Appeal No. EAT/1188/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 26th April 1996

THE HONOURABLE MR JUSTICE MUMMERY (P)

MS S R CORBY

MISS C HOLROYD

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MID ANGLIA TRAINING          APPELLANTS

MRS D C HARRIS          RESPONDENT

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Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING - EX PARTE

Revised


 


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APPEARANCES

For the Appellants MR J TAYLOR

(Chairman)


 


MR JUSTICE MUMMERY (PRESIDENT): This is the preliminary hearing of an appeal against the decision of the Industrial Tribunal held at Leicester on 28th June and 1st August 1995.

The tribunal heard a claim brought by a training co-ordinator formerly employed by Mid Anglia Training, Mrs Debra Harris, under the Wages Act 1986. Her complaint was of non-payment of a bonus. That complaint was made in her originating application dated 3rd October 1994.

Mrs Harris's case was that her salary was made up of a basic wage plus a staff incentive bonus scheme and that there had been a breach of duty on the part of her employers in failing to pay her what she calculated to be due to her as a bonus payment under that scheme.

The case was contested by Mid Anglia Training. Their case is clearly stated in the notice of appearance dated 20th October 1994. They resisted the claim on this basis that:

"For Mrs Harris to qualify for bonus payments, certain basic criteria had to be met, which was outlined to her, as to all staff, in writing. These basic requirements are a condition under the scheme rules for the Training for Work programmes which are government funded.

To discover that attendance records, training plans and quarterly reviews of trainees' progress had not been completed correctly, [which was Mrs Harris's duty as a co-ordinator to deal with properly] or at all, then our total funding was seriously jeopardised. Mrs Harris knew of the problems being experienced with her course paperwork procedures, and we consider that the pressure put on her to correct those records was a major factor in her deciding to leave."

They denied Mrs Harris's allegation that it was a question of procrastinating. They were still receiving complaints about her actions while she was a co-ordinator and were sorting out and rectifying them at great expense. That is a clear statement of the issues which the tribunal had to decide.

The tribunal unanimously decided that Mid Anglia Training were liable under the Wages Act to pay to Mrs Harris the sum of £2,430. The full reasons for that decision were notified to the parties on 20th September 1995. Mid Anglia Training appealed by Notice of Appeal served at end of October 1995.

On the preliminary hearing of this appeal, Mr Taylor, Chairman of Mid Anglia Training, presented the arguments with some assistance from Mrs Hendy of the ELAAS scheme. We are grateful to both of them for help in the resolving of this appeal.

We have to decide today whether this appeal has a reasonable prospect of succeeding. It only has a reasonable prospect of succeeding if it raises a question of law that is reasonably arguable. We have explained to Mr Taylor that this is not a re-hearing of the case that Mrs Harris brought against Mid Anglia Training. This tribunal has no jurisdiction to re-decide the facts in the case. Mr Taylor appreciated this, and said that he had got a point of law on the construction of the scheme, under which the bonuses were payable.

The correct approach to this case is first to look at the Wages Act. The 1986 Act provides in Section 1 that:

"(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, [neither of those conditions are satisfied here]"

Section 5 empowers a worker, who has a complaint under the Act about a deduction from his wages in contravention of Section 1, to present a complaint to an Industrial Tribunal. Mrs Harris did that in this case.

The definition of wages has to be considered. Under Section 7(1):

"(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."

It expressly includes in sub-paragraph (a):

"(a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise."

Finally, Section 8(3) contains a definition of a deduction. That provides:

" (3) Where the total amount of any wages that are paid on any occasion by an employer to any worker employed by him is less than the total amount of the wages that are properly payable by him to the worker on that occasion (after deductions) then, except in so far as the deficiency is attributable to an error of computation, 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."

The importance of that section is that it identifies the true question in this case: what was properly payable to Mrs Harris as a worker? Mrs Harris said that the bonus was properly payable to her under the scheme. Paying her less than what was properly payable to her was therefore to be treated as a deduction in breach of the Act. Mr Taylor said that the bonus was not properly payable to her, because, on the proper interpretation of the scheme, she did not satisfy the requirements set out in the scheme in order to qualify for a bonus payment.

It is next necessary to consider the staff incentive bonus scheme, which began on 28th March 1994. Mr Taylor has helpfully produced that as one of the key documents in the case. Paragraph 1 of the scheme is relevant to this case. The scheme is introduced with these words:

"To qualify for Bonus payments, the following requirements must be met, concerning all courses:

1 Trainee administration properly completed as per our contractual agreement with Tecs, including:

a) 4 weekly attendance records properly completed, for each day, to include evidence for days noted as absent ie Holiday, Sickness etc, and produced within 3 weeks of end of each period.

b) Individual Training plans for each trainee completed within 4 days of start date, plus relevant trainee paperwork.

c) Reviews carried out the intervals stipulated and ITPs updated where necessary, and any amendments notified to the relevant Tec."

Mr Taylor submitted that the Industrial Tribunal were wrong in holding that there had been a deduction in this case. Mrs Harris did not satisfy the requirements for getting a bonus under that scheme. The scheme had been drafted, explained and agreed with her. Each side was bound to observe the rules. Mid Anglia's case was that an external audit revealed that Mrs Harris was not observing the rules of the scheme, and that resulted in the bonus payments to her being suspended.

It was discovered by the audit team that Mrs Harris had not conformed to proper record keeping. She was given an opportunity to comply with the rules of the scheme by making the necessary corrections and having them verified by trainees. However, she found alternative employment and left.

The case put forward by Mr Taylor on this appeal was that the tribunal made an error of law, first, in interpreting the scheme in such a way that resulted in a finding that Mrs Harris was entitled to be paid a bonus when she had not satisfied the requirements; secondly, in basing their decision on what he says is an irrelevant consideration, namely that the paper work was a matter for the company alone. Mrs Harris's contractual obligations were to keep accurate and complete records. Unless she did that, she was not entitled to the bonus. It was for her to satisfy the tribunal that the claim for bonus payments was one she was entitled to. For that purpose she had to demonstrate that she complied with rules of the scheme. She had not done that.

We have taken those points into consideration in examining the decision. Our conclusion is that there is no legal error in the way that the tribunal have interpreted this scheme. It is quite right, as Mr Taylor submits, that the scheme opens with the statement that certain requirements have to be met to qualify for bonus payments. But it does not say in the scheme, that if you fail to do the work properly, you are not entitled to the bonus. That is the essence of Mr Taylor's argument, that the work that Mrs Taylor, as a co-ordinator, should have done, was not properly done. It is impossible to find any express statement in this scheme, or to imply any statement into the scheme, that,if work is not properly done and completed, you do not qualify for the bonus payments. That does not mean, however, that the employer is without a remedy if the company establishes a breach of contract on the part of an employee, such as Mrs Harris, in failing to do work competently. An employee is under a contractual obligation to do work competently. If there is a breach of contract by the employee of that term, the employer may be entitled to claim for loss suffered as a result of the employee's breach of contract. The tribunal pointed out that in fact no counter claim had been made in this case. Mr Taylor's firm had simply withheld the whole of the bonus payment. It was not a case of saying "We owe you the bonus payment, but you owe us money for all the loss we have suffered as a result of you not performing your side of the contract." The general principle of law, as stated in Harvey on Industrial Relations and Employment Law Volume I at Section B paragraph 26, is that, if a worker has not performed his work so as to comply with the contract, he is entitled to full wages, but is subject to the employer's right to set off, by way of counter-claim, any damages suffered by reason of the worker's breach of contract. In this case there was no counter-claim.

We are of the view that the tribunal came to legally correct conclusions on the interpretation and operation of this scheme as set out in their extended reasons.

They set out their findings of fact prefaced by a note that, although the matter had been listed as unfair dismissal, it was not an unfair dismissal. It was only a case under the Wages Act. They made findings of fact in paragraph 3 on the description of the work that Mrs Harris was employed to do from January 1992 until her resignation on 18th August 1994. They set out the basis of her remuneration. That was the basic salary basis at the outset. That was supplemented by the bonus scheme which started in April 1993, and was revised in March 1994. They refer to the terms and conditions on which bonus payments became payable. They said this expressly in paragraph 3e.:

"e. The applicant was recruited by Mrs Floyd. At no stage during the applicant's employment was her work criticised, nor was it ever indicated to her that her paperwork was at fault. At one stage it was noted by the respondent that the applicant's paperwork was behind because of the volume of trainees with which she was dealing. Some extra help was offered."

They then referred to the audit, already mentioned. That revealed defects in the paperwork. They found as a fact that all the co-ordinators were involved in that, not just Mrs Harris. They referred to the suspension of the bonus scheme which affected all the training co-ordinators pending compliance with the auditor's requirements.

They considered the rival submissions. They said this in paragraph 5:

"5. The responsibility for ensuring that all paperwork is correct is that of the respondent. The bonus scheme was introduced to avoid paying an increase in salary. After the audit in May 1994 the Co-ordinators were told simply that the bonus payments were suspended. They have never been terminated nor has the bonus scheme. The letters to the applicant respectively dated 5 August and 25 August 1994 previously referred to assured the applicant that the payments would be made. The audit had taken place in May 1994 some 3 months before the applicant's resignation. At no time during that period had any indication been given to the applicant that her bonus payments would not be met."

In paragraph 6 they explained why they had halted Mr Taylor in his cross-examination of Mrs Harris about the shortcomings in her paperwork in the case of individual trainees. The tribunal said:

"In so far as the allegation of bad paperwork was concerned had been made but it was not a line of argument which the Tribunal was going to accept for the reasons previously stated."

They referred to their statement that the responsibility for proper supervision was that of Mid Anglia Training.

It was on that basis that the tribunal said that this was clearly a case of wages within Section 7(1)(a) and of a deduction in breach of the Act by reference to Sections 1(1) and 8(3).

Our view, having considered Mr Taylor's submissions, is that there was no error in the conclusion of the tribunal. The scheme was construed by them. The construction which they put on the scheme was correct, in the absence, of any express or implied term saying that bonus payments would not be payable at all in the case of work which was not done to the requisite standard. It may be, as Mrs Hendy observed in her assistance to Mr Taylor, that an amendment to this scheme would prevent Mr Taylor from having the sort of problem encountered in this case arise again. We have to apply the scheme as it stands. As it stands, we are of the view that Mrs Harris did qualify for the bonus payments. It was a breach of the Wages Act to withhold those payments.

For those reasons, this case is not arguable in law. The appeal will be dismissed.