United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR NAPIER (of Counsel) Messrs Pinsent Curtis Solicitors 41 Park Square Leeds LS1 2NS
For the Respondent	THE RESPONDENT IN PERSON


 


MR JUSTICE KEENE: This is an appeal against a decision of an Industrial Tribunal sitting at Middlesborough that the appellants had failed to pay the respondent £2,152 unpaid wages in lieu of holidays contrary to the Wages Act 1986. The tribunal adjourned the calculation of an adjusted lump sum and pension entitlement consequential to its earlier finding.

The respondent was a local government officer who had been employed by the appellants since 1979. In 1982 he became their chief technical officer. The tribunal found that towards the end of 1994 the Council found itself in a difficult financial position due to cutbacks in central government grants and to tighter controls that were imposed upon their spending. Those severe controls required them to effect savings and they decided that these would take the form either of voluntary early retirements or compulsory redundancies. With that in mind, a voluntary retirement scheme was circulated by the chief executive of the appellants in July 1995 and on 30th August 1995 the respondent, Mr Dodds, applied for early retirement.

There had for many years been in existence a scheme under which additional leave would be granted to retiring officers of the appellant Council. The Council's staff handbook contained the following paragraph:

"Annual leave equal to half basic annual leave entitlement will be granted to retiring officers to be taken during the 12 months service immediately prior to retirement."

There is no dispute that that formed one of the terms of the respondent's contract of employment. Furthermore, it is agreed that the amount of annual leave referred to there was to be additional to the normal annual leave and any other leave to which such an officer was entitled.

The sequence of events after the respondent had applied for early retirement is set out, succinctly, in the tribunal's decision at paragraph 6 to 8. They read as follows:

"6 After Mr Dodds had applied for his early retirement the Tribunal finds that the Council of the respondents met on 21 September 1995 and agreed to accept his retirement. Mr Dodds was told of this by letter dated 22 September 1995 and had a meeting with Mr Tabiner on 27 September 1995 to determine the precise date and practical implications relating to his actual retirement. At that meeting it was agreed that Mr Dodds would be entitled to cease working at the end of November. This was subsequently changed to 1 December. At the same time Mr Dodds submitted details to Mr Tabiner of outstanding leave to which he felt that he was entitled on the basis of a combination of outstanding holiday entitlement and leave he was entitled to in lieu of having attended evening meetings of the Council. This total leave was agreed to, and the practical effect of this was to extend Mr Dodds' employment to the middle of February 1996.

7 The Tribunal finds Mr Dodds spoke to Mr Tabiner on 14 November and at that time was informed by Mr Tabiner that the Council did not feel that they had to honour any obligation towards him to pay him any retirement leave. The Tribunal finds a meeting of the Council was held on 24 November 1995 and that meeting resolved that no retirement leave would be paid to Mr Dodds.

8 The terms for Mr Dodds' retirement were set out in a letter he received from Mr Tabiner dated 27 November 1995. The effective date of Mr Dodds' termination of employment was 14 February 1996, although the last date that he worked for the respondents was 1 December 1995."

The tribunal found that the respondent's contractual entitlement to retirement leave could not be varied unilaterally by the appellants, and that he was indeed entitled under his contract of employment to that leave. It found that, had retirement leave been included within his termination package, the effect would have been to have extended the termination of his employment to 14th March 1996, and that by terminating his employment on 14th February, the appellants had been in breach of contract. The tribunal concluded that non-payment of that leave entitlement was equivalent to non-payment of holiday pay due under the Wages Act 1986.

It calculated the net wages due to him to be £2,152, and it also found that if the effective date of termination of his employment had been extended to the middle of March 1996, he would also have benefited in the amount of pension to which he was entitled, plus an increase in the amount of the lump sum that he received from the superannuation fund on retirement.

On behalf of the appellants today Mr Napier attacks the tribunal's decision on three grounds. First of all he contends that the tribunal failed to take account of s.7(2)(c) of the Wages Act 1986 which excludes "any payment by way of an allowance in connection with the worker's retirement" from the definition of wages. As such the payment while on such retirement leave or in lieu of such leave would, it is said, not come within the definition of wages. S.7(1) of the Wages Act 1986 defines "wages" as meaning any sums payable to the worker by his employer in connection with his employment including certain specified items. However, the final words of subsection (1) exclude any payment falling within subsection (2). S.7(2) of that Act identifies those excluded payments and paragraph (c) reads:

"(c)any payment by way of a pension, allowance or gratuity in connection with the worker's retirement or as compensation for loss of office."

It is not suggested that money due while on retirement leave would come within the term "pension" or the term "gratuity", but as we have already indicated it is submitted that it does fall within the expression "allowance". Mr Napier argues that the expression "allowance" is wide enough to encompass such a payment, and that the words "in connection with" are also of a wide import. He submits that, unlike the word "pension", the word "allowance" can properly mean a payment to be made before the retirement itself. There is, he says, and neither party seeks to contradict this, no authority to assist this tribunal in interpreting that expression within s.7(2)(c) of the Wages Act 1986 but the submission is made on what it is suggested is the plain meaning of the words.

We can see the force of that argument. The retirement leave and any payment in respect of such a period of leave was, in our view, in connection with the respondent's retirement and would not otherwise have operated. It seems to us that "allowance" could admit of a meaning broad enough to cover such monies. We conclude that it was inappropriate for the tribunal below to rely upon the Wages Act as the basis for its award. However, that is not the end of the matter.

The respondent had not claimed under the Wages Act in his originating application. In his IT1 he had simply claimed that the appellants were in breach of his contract by not having allowed him such leave or having paid the salary in respect thereof. That is plainly a contractual claim. If the money was properly due the award could and should have been made under s.131 of the then applicable Employment Protection (Consolidation) Act 1978 and the Industrial Tribunals Extension of Jurisdiction Order 1994 Article 3. Paragraph (a) of that Article provides for awards of sums payable by way of damages for breach of a contract of employment, and to be comprehensive about it, paragraph (b) makes like provision for sums due under a contract of employment. It seems to us to matter little which of those two provisions an award is made under, but on balance it would see that the former is the more appropriate; and if the respondent was properly entitled to such an award this appeal tribunal can and would substitute an award under the 1994 Order. Indeed, Mr Napier accepts that this appeal tribunal could substitute such an award under s.131 of the 1978 Act and 1994 Order. We shall therefore adopt that course if we find that Mr Dodds was entitled to retirement leave.

We turn therefore to ground two, which constitutes the main plank of the appellants' case. It is contended that the tribunal below wrongly construed the relevant term in the respondent's contract. It is submitted by Mr Napier that such interpretation of an express term is a matter of law and therefore something properly within the purview of this appeal tribunal. He relies for that proposition on the decision of the Court of Appeal in Pederson v Camden London Borough Council [1981] ICR 674 at page 678A. We agree with that proposition.

His argument then is that on a correct construction of the term to which we have referred, no entitlement to retirement leave arises in respect of someone who is in the respondent's position, that is to say someone who did not have 12 months service remaining before retirement. In support of that construction, it is argued first of all that the wording of that term or clause expressly refers to the additional leave being taken "during the 12 months service immediately prior to retirement". Therefore, it is said, this indicates that the benefit of that additional leave is only available to those persons who have such a period of service still to run before their known date of retirement. In further support of that argument it is said, and there is some evidence to this effect, that the additional leave was granted to allow for such employees to wind down and prepare for their retirement, and that if they had less than 12 months that purpose would not be fulfilled.

We say straightaway that we do not accept that that is the correct interpretation of that clause. The term in question does not state that "annual leave will be granted to those retiring officers who have 12 months service remaining", far less does it say that it will only be granted to such officers. It states that such leave will be granted to retiring officers. That does not exclude the case of someone taking voluntary early retirement. The clause does then indeed go on to deal with when that additional leave may be taken, which is during the 12 months immediately prior to retirement. In our view, that latter part of the term is not defining entitlement to such leave, it is dealing with the enjoyment of it and the timing of that enjoyment. In other words, it does not qualify the category of officers entitled to such leave, it only deals with when they must take that leave. Moreover, as Mr Napier accepted in argument, the purpose of the provision dealing with when it is to be taken seems to be to prevent such leave being taken earlier than the final 12 months. That provides no reason why someone who has, say, six months remaining of his service should not take it at that stage. The term does not require the leave to be taken at any particular time during the last 12 months; it could be taken during the last month and still meet the requirements of that clause. Why, therefore, should a retiring officer only be seen as eligible if he has 12 months or more of service to run?

Mr Napier acknowledges that in the past additional leave has, on occasions, been extended to those with less than a year to run before retirement, but he contends that this had been done as a matter of concession rather than as a matter of contractual entitlement. Whether that was so or not, Mr Dodds who has appeared on his own behalf today, has pointed out that the tribunal noted that this clause originated in a scheme passed by the appellant Council on 16th June 1981 and that that resolution begins with the following words:

"That the policy of the Council as recorded at Minute JC6 (26th June, 1979), and as set out hereunder be applied in all cases of Officers taking advantage of the Council's voluntary early retirement scheme."

On that basis, Mr Dodds argues the intention was that retirement leave would be granted to all retiring officers including those taking voluntary early retirement.

We take his point, but at the end of the day it is the wording of the clause itself which leads us to conclude that Mr Dodds was entitled to such retirement leave. We find the wording of that clause quite clear and unambiguous.

Mr Napier contends that if it had been the intention of the parties to extend such benefit to those with less than 12 months service remaining, then one would have expected to find express provision to that effect in the handbook, bearing in mind that it must be seen as a carefully drawn document; and he relies in support of that approach on the decision in Ali v Christian Salvesen Ltd [1997] ICR 25.

The answer to that is that there was no need for express provision to be made in the wording for those taking voluntary early retirement, because the wording on the face of it applies to all officers retiring, including those who came into that particular category. It provides for no exceptions. So far as Ali v Christian Salvesen Ltd case is concerned, the nub of that decision was that the court there found that there was no justification for reading an implied term into that particular contract of employment. That is wholly different from the present case. No implied term is needed to cater for the situation of officers taking voluntary early retirement in the present case because, as we have indicated, their position is covered by the omnibus provision in clear terms of the clause to which we have been referring. We consequently find that the tribunal was right in its construction of this term in the respondent's contract, and that he was entitled to the stipulated retirement leave.

The third and final point raised on this appeal relates to the tribunal's finding that if retirement leave had been allowed for, it would have extended the respondent's employment to 14th March 1996 and not 14th February 1996. That has consequential effects in terms of pension provision. It is submitted on behalf of the appellants that if the respondent was entitled to such leave, then the appellants were entitled to meet their obligations in full by making a payment equivalent to his salary for the period of entitlement. In those circumstances, it would be reasonable to assume, it is said, that this is what the appellants would have done, and thus the tribunal was wrong to hold that the contract of employment did not end on 14th February 1996.

We approach that matter in the following way. If the appellants had fulfilled their obligations under the contract the respondent would have continued in their employment until 14th March 1996. That is the way in which both parties approached the solution to ensuring that the respondent did obtain such leave as it was agreed he was entitled to. He would have been paid his salary for that additional time, although he would have been on leave during it. This would also have had some beneficial effects on his pension position. The appellants, as we have found, did not fulfil their obligations. They broke their contract, and the damages for that breach must cover the respondent's losses flowing from the breach. Those would include the pension benefits which he would otherwise have obtained. The argument that the appellants would have chosen simply to pay him his salary for the relevant period ignores the fact that he was entitled first and foremost to the leave itself, that is to say for a period of employment during which he is paid but is not required to work. The appellants cannot escape from the financial implications of that in their entirety by choosing to pay money in lieu of such leave and pay simply the wages which he would have received during that time. We therefore do not see force in the third ground of appeal which is advanced by the appellants.

We therefore propose to allow this appeal only to the extent of substituting an award of damages for breach of contract under Article 3 of the Industrial Tribunals Extension of Jurisdiction Order 1994 in place of the Wages Act declaration made by the Industrial Tribunal. The award will be for £2,152 together with any other sums which have been or are agreed or awarded in respect of the lump sum and pension entitlement. Subject only to that, this appeal is dismissed.

We would simply add that we have framed the award in that way because it is not clear to us on the documents what has happened to the matter of the lump sum and pension entitlement referred to by the tribunal below at the end of its decision.