United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR P TSAMADOS (Representative) Central London Law Centre 19 Whitcomb Street London WC2H 7HA
For the Respondents	NO APPEARANCE BY OR ON BEHALF OF THE RESPONDENTS


 


JUDGE PETER CLARK: The appellant, Mr Cambiero, was employed by the respondent company Sheenwalk Ltd as a cook at their premises at Dean Street, London W.1., known as Signor Zilli's Bar, from 7th March to 3rd June 1995.

During the employment he was paid £250 net per week. He never received a statement of terms and particulars of employment, nor did he receive any pay slips during the employment.

Following termination, on 7th June 1995, he was handed a cheque for £386.36, representing a week's pay in lieu of notice and three days holiday pay.

The appellant asked for a form P45 and pay slips covering the period of employment. He received a form P45, but was unable to obtain a form P60 or the outstanding pay slips.

On 18th July 1995 he presented an Originating Application based on the above facts, claiming a declaration and compensation under what was then s.11(8) of the Employment Protection (Consolidation) Act 1978 in respect of the respondent's failure to give the appellant pay statements in accordance with s.8 of the Act. Those provisions are now to be found, respectively, in ss.12(4) and 8 of the Employment Rights Act 1996, to which Act we shall hereafter refer.

The respondent entered a Notice of Appearance dated 25th August 1995. Attached to that Notice was a letter dated 18th July 1995, in response to a written request from the appellant dated 27th June, enclosing the pay slips relating to his employment. It follows that the respondent was in breach of s.8 of the Act by failing to provide a written itemised pay statement at or before the time at which his weekly wages were paid. The pay slips sent on 18th July show the gross weekly wage less tax and National Insurance deductions.

The Industrial Tribunal hearing

The matter came before an Industrial Tribunal sitting at London (North) under the chairmanship of Mr PRK Menon on 13th December 1995. The appellant attended, represented by Mr Tsamados of the Central London Law Centre. The respondent did not appear and was not represented. Indeed, when telephoned by a member of staff at the Industrial Tribunal it was made clear that the respondent had no intention of taking part in the proceedings. That, as the Chairman points out in a letter dated 11th November 1996, commenting on the grounds of appeal, is a matter for the respondent. The tribunal took into account the respondent's written representations contained in and attached to the form IT3.

The appellant complains that he was not permitted to give evidence and that the tribunal did not properly consider a bundle of documents put in on his behalf. The Chairman's response is that the tribunal accepted the facts outlined by Mr Tsamados, there being no respondent to dispute them, and that the tribunal considered the appellant's bundle. We shall proceed on the basis of the Chairman's account of what happened.

The Industrial Tribunal decision

The tribunal granted a declaration under s.12(4) that the respondent had contravened s.8 of the Act by not providing the appellant with itemised pay slips. However, if found that the appellant had now received all the relevant pay slips, save in respect of the final payment of £386.30.

As to compensation, the tribunal found that the respondent was in "technical (unintentional) breach of s.8". They continue, in paragraph 6 of their extended reasons dated 18th January 1996 as follows:

"6 ... Although the Respondent had prepared and sent the payslips to the Applicant, the Applicant did not receive them until copies of the same were sent to him or his representative after the commencement of these proceedings. The Tribunal has seen the payslips. They set out the Applicant's gross pay, the deductions made in respect of PAYE Income Tax and National Insurance contributions, and his net pay. The Applicant acknowledges the accuracy of the items set out in the payslips. No other deductions were made."

In paragraph 7 of the reasons it is recorded that the appellant asked, in addition to the declaration, for "restitution of all deductions made by the respondent". That was described as a bold submission, having the effect of penalising the respondent who had already made the deductions in respect of tax and National Insurance from the appellant's gross pay. It would effectively be paying twice; first to the Revenue and National Insurance Fund and again to the appellant. That, said the Industrial Tribunal, had no merit. The deductions were properly made by the respondent. There was no unlawful deduction made from the appellant's wages.

The Appeal

Mr Tsamados attacks the tribunal's findings in the following respects.

First, the tribunal's finding that the respondent was in "technical (unintentional) breach of s.8". We confess that we have difficulty with that finding and we shall return to this point later in this judgment.

Secondly, he submits the tribunal seem to have approached the case on the basis that there was no loss to the appellant because the respondent had made the necessary deductions for tax and National Insurance. It is clear that the deductions were made by the respondent, what was not clear was whether the respondent had properly accounted to the Revenue and National Insurance Fund in respect of those deductions. The correspondence between the appellant and the Inland Revenue contained in his bundle was inconclusive.

However the real point in this appeal concerns the circumstances in which an Industrial Tribunal may order compensation in a case of unnotified deductions. The breach lies in not notifying the employee of the deductions when they are made. It should not be confused with unauthorised deductions, a concept first introduced by the Wages Act 1986 and now to be found in Part II of the Employment Rights Act 1996.

In Scott v Creager [1979] IRLR 162 the Employment Appeal Tribunal, Arnold J presiding, considered the principles to be applied in determining what, if any, compensation should be awarded in a case of unnotified deductions.

In that case unnotified deductions had been made from the applicant's wages. It was calculated and agreed that she had not received a total of £53.91; the remaining deductions, although unnotified, could be accounted for.

It was argued on behalf of the employer that that sum represented the maximum which could be awarded to the applicant. The Industrial Tribunal disagreed with that proposition and the Employment Appeal Tribunal upheld that view.

Arnold J put the matter thus at paragraphs 7 to 10 of the judgment:

"They [that is the Industrial Tribunal] say:

'The further point is taken that these [unnotified deductions] are limited to the sums which the applicant ought to have been paid in excess of the sums actually paid.'

That, we know, was an aggregate of £53.91, and they say:

'We find that is wrong. There is no such limitation in the section.'

With that conclusion we wholeheartedly agree. They continue:

'So the maximum amount we could award is all the "unnotified deductions" for tax and NHI [that was £144.09]. This makes the section a penal one and we have had that point in mind when interpreting it.'

By 'penal' they plainly mean in the context 'a section which confers upon us a discretion to give the applicant more than that which she had financially lost.'"

Having correctly directed themselves in accordance with the law the Industrial Tribunal in Scott then went on to exercise their discretion in favour of not penalising the employer on the basis of the explanation which he advanced for his failure to notify the applicant of the deductions. That exercise of discretion was held by the Employment Appeal Tribunal to be a permissible option. The Industrial Tribunal was not perverse.

In this case we are not satisfied that the tribunal carried out a proper exercise of discretion. It took the view that it would be imposing a penalty if it ordered restitution to the appellant of deductions lawfully made. That amounts to a double-error.

(1) There was no evidence that the monies deducted had been accounted for to the Revenue, other than an assertion by the respondent's accountants in a letter dated 20th September 1995 that "PAYE has been operated properly". That was not confirmed by the Inland Revenue prior to the Industrial Tribunal hearing.

(2) Even if it had, no explanation for the failure to notify the appellant of the deductions timeously was put forward by the respondent. It is precisely where there is a breach of s.8 that the tribunal is empowered to impose a penalty. This tribunal did not consider it could do so. It therefore failed properly to exercise its discretion.

The possibility of an employer having to pay twice is not unknown in this area of statutory employment protection. We would draw attention to the decision of the Employment Appeal Tribunal in Kent Management Services Ltd v Butterfield [1992] ICR 272 (Wood J presiding). That was a Wages Act complaint. It was held that where an unlawful deduction from wages was made in respect of monies properly due to the employer, the employee may recover the sums unlawfully deducted, and the employer is then prevented by statute from recovering those monies due by other means, such as a County Court action.

Having identified an error of law in the tribunal's approach, and in the absence of representations before us on behalf of the respondent, which has chosen to take no part in these appeal proceedings, we have to decide what course we should take. There are three options:

(1) To remit the matter to a fresh Industrial Tribunal for rehearing.

(2) To find that on the facts the result is plainly and unarguably right, and allow the decision to stand. Dobie v Burns International [1984] ICR 812.

(3) To exercise the powers of an Industrial Tribunal under s.35 of the Industrial Tribunals Act 1996.

As to the first option, we think that we have before us all the material which would be before a new Industrial Tribunal to decide this case. Remission is unnecessary.

As to the second option, we have concluded that the tribunal's finding that this was a technical (unintentional) breach is perverse, in that there is no evidence to support such a finding. The respondent has put forward no explanation as to why he failed to notify the appellant of these deductions.

In the absence of such explanation; given the lengths to which the respondent had put the appellant to establish first the amounts deducted from his wages, and secondly, what happened to those deductions - a question still unresolved, we think that this is a proper case for penalising the respondent for his breach of s.8 to the full extent provided for in s.12(4), that is the total of the aggregate of the unnotified deductions over the 13 week period prior to the presentation of the Originating Application on 18th July 1995. We accept, in the absence of argument to the contrary, the calculation of those deductions prepared on behalf of the appellant and submitted to the Industrial Tribunal, deleting the first week's deductions in the employment which fell outside the statutory 13 week period. The total sum is £686.75, and we order the respondent to pay that amount to the appellant.

Accordingly, the appeal is allowed, and we order that compensation in addition to the declaration made by the Industrial Tribunal.