United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR N GIFFIN (of Counsel) Mr M Walker (Solicitor) London Borough of Wandsworth Town Hall Wandswotth High Street London SW18 2PU
For the Respondents	MR C CIUMEI (of Counsel) UNISON 1 Mabledon Place London WC1H 9AJ


 


JUDGE LEVY QC:

INTRODUCTION

Section 1 ["the Section"] of the Employment Rights Act 1996 ["the 1996 Act"] provides for statements of initial employment particulars to be given to employees. It contains provisions formerly found in the Employment Protection (Consolidation) Act 1978 as amended. Subsection (4) of the section inter alia provides that:

"The statement shall ... contain particulars ... of-

...

(d) any terms and conditions relating to any of the following-

(i) entitlement to holidays, including public holidays, and holiday pay (the particulars given being sufficient to enable the employee's entitlement, including any entitlement to accrued holiday pay on the termination of employment, to be precisely calculated),

(ii) incapacity for work due to sickness or injury, including any provision for sick pay, and

(iii) pensions and pension schemes."

This appeal raises questions as to whether parts of the document headed "Code of Practice on Staff Sickness" ["the 1988 Sickness Code"] and introduced by Wandsworth London Borough Council ["the Council"] in 1988 are enforceable terms and conditions of contracts of employment made by the Council with its employees.

BACKGROUND TO THE APPEAL

At least since 1984, when commencing employment with the Council in accordance with the section (or its predecessor) an employee has been given a contract of employment and a number of documents including two booklets. One of these booklets is entitled "Code of Practice on Staff Sickness", the other entitled "Employees' Disciplinary Code" ["the Disciplinary Code"]. In June 1995 the Council introduced a revised sickness code ["the revised code"] Certain provisions of the revised code were less favourable to employees than the provisions which they replaced. Two employees, Dion D'Silva ["Mr D'Silva"] and Francis Lawn ["Mr Lawn"] [together "the Employees"], maintained that their contracts of employment prevented the Council from unilaterally changing the 1988 Sickness Code in this manner. In October 1995, the Employees, in what were understood to be test cases, made Originating Applications to an Industrial Tribunal seeking, in effect, declarations that their contracts of employment incorporated the paragraphs of the 1988 Sickness Code which the Council were not entitled unilaterally to change. The Employees' complaints were set out accurately, graphically and shortly in their applications:

"1. In June 1995 I received an updated document (hereinafter referred to as the document) purporting to amend the respondent's sickness provisions.

2. Until this time I was eligible for up to nine working days' sickness per year, or more than this provided not more than two spells were involved, before becoming subject to scrutiny which could lead to penalties. The document contains a new limit of five spells even where these entail less than ten working days per year.

3. Previously I was eligible for a total of twelve months long term sickness before becoming subject to the scrutiny of a Director which could lead to dismissal. The document contains a new limit of six months, to include circumstances where no clear prognosis exists.

4. I responded to the document in a letter dated indicating that I did not agree to change my existing terms and conditions.

5. On the grounds that these are matters properly covered by Schedule 4 1(3)(d)(ii) of The Trade Union Reform and Employment Rights Act 1993, I seek a declaration under Section 11 of the Employment Protection (Consolidation) Act 1978 as to my written particulars in these respects."

The Council entered Notices of Appearance dated 30th October 1995 in respect of each Employee. They read:

"1) The Respondent has a Code of Practice on Staff Sickness. In about May or June 1995 the Respondent gave its staff, including the Applicant, notice of certain changes to the Code of Practice. Staff were asked to acknowledge notification of the changes. The Applicant responded by stating that he did not agree to "any changes in my terms and conditions in relation to the Sickness Code".

2) The Code of Practice is not a contractual document. It is merely a statement of the policies and practice currently adopted by the Respondent. It is intended as a framework within which managers and staff may approach questions of absence through sickness, and aims to promote good and consistent practice across the Council's departments rather than to impose legal rights and duties. It therefore follows that:

(i) Because the Code of Practice is merely a statement of current policy and practice, and not a contractual document, the Respondent is entitled to change it unilaterally and without the consent of employees;

(ii) The provisions of the Code of Practice are not "terms and conditions relating to ... incapacity for work due to sickness or injury" within the meaning of EP(C)A 1978 Section 1(3)(d)(ii). That is because the phrase "terms and conditions" in that context refers only to stipulations forming part of the contract of employment and having contractual force.

3) Even if (contrary to the above) the provisions of the Code of Practice are of contractual force in the Applicant's case, the Respondent will rely upon paragraph 4 of the Applicant's contract of employment dated March 1988.

4) Accordingly, even if (which is denied) the contents of the Code of Practice are "terms and conditions" within the meaning of EP(C)A 1978 Section 1(3)(d)(ii), the proper particulars to be included in the statutory statement of employment particulars are those of the Code of Practice as it stood following the changes made in about May or June 1995."

Paragraph 4 likewise refers to the predecessors of the Section.

The applications were heard together by an Industrial Tribunal at London (South) in March 1996. The Tribunal's decision, sent to the parties with Extended Reasons on 3rd April 1996, was in favour of the Employees, albeit that the declaration made needs an amount of elongation to be comprehensible:

"It is the unanimous decision of the Tribunal is that it declares:

The second sentence of Clause C 1-1.1 and C - 3.3.3 are part of the Applicants Terms and Conditions of Employment within the meaning of Section 1 Employment Protection (Consolidation) Act 1978."

The references in the Declaration are to the parts of the clauses in the 1988 Sickness Code which the Council were held not entitled unilaterally to vary. Section C of the 1988 Sickness Code has a heading "Procedure for Different Categories of Absence". Section C 1 has a heading "HIGH INCIDENCES OF SHORT-TERM ABSENCE". Clause 1.2 of the section has a heading "Monitoring and Review - Preliminary Stages" and reads:

"Employees incurring absences of 3 or more days per month to a regular pattern should be reviewed as soon as it is fair to say that a pattern has been established. Also, where an employee has had a total of 10 days short-term sickness absence on 3 or more occasions within any period of one year the attendance record should be reviewed as soon as practicable. [Our emphasis] Where formal action is not proposed, informal discussion should take place between the supervisor and the employee, to review the position and check that appropriate assistance is being obtained."

Section C 3 has a heading "LONG-TERM ABSENCE CASES". Paragraph 3.3 of section C 3 has a heading "Future Employment Capability". Paragraph 3.3.3 within the section reads:

"Alternatively, if a period of twelve months sickness absence has elapsed (either continuously or as a total during, for example, an eighteen month period) and there is still no clear indication either of a return to work or that the employee is permanently unfit, an assessment shall be undertaken by the Occupational Health Physician. The case shall then be referred to the employing Director in accordance with Section E2 (page 14)" [Our emphasis]

The passages italicised by us are those which the Industrial Tribunal determined were parts of the respective contracts of employment of the Employees.

From this decision, the Council appeal by notice dated 30th April 1996.

ISSUES ON APPEAL

Mr Griffin, who appeared for the Council before the Industrial Tribunal as well as appearing for it on this appeal, submits that there are two discreet issues to be decided on the appeal. They are:

(a) whether the 1988 Sickness Code, or at any rate the sentence on which the Industrial Tribunal founded its decision, has contractual effect at all, as opposed to being a mere statement of the Council's current policy and practice; and

(b) if the Code (or the relevant provisions) were part of the contract of employment, whether the Council had power unilaterally to vary the code having regard to the provisions of Clause 4 of the respective contracts of employment of the Employees.

While Mr Ciumei agreed with Mr Griffin that these were the issues which arose for decision, there was a disagreement between Counsel as to the approach of this tribunal to the appeal. Mr Griffin submitted that both questions in the Appeal were questions of law arising on construction of the contracts of employment of the Employees to be construed on well-known and accepted principles of the Law of Contract. By analogy with the dicta of Lord Templeman in Davies v Presbyterian Church [1986] ICR 280 at 288H, he submitted that if the Industrial Tribunal erred in their decision on the questions of law (as he submitted they had here), their decision had to be reversed.

Against this, Mr Ciumei submitted that there were important findings of fact by the Industrial Tribunal which, as an appellate tribunal, the Employment Appeal Tribunal was not entitled to disregard unless it concluded that there was no evidence to support a finding or it was perverse. In particular he submitted that paragraph 30 of the Extended Reasons contained findings of fact. The paragraph reads:

"30. On the critical issue of whether this type of obligation is "apt" to be a term of the contract within the words of Mr Justice Hobhouse in the Alexander decision at paragraph 31, it is our conclusion that it is one of those terms which may be "apt" to be term of the contract depending on all the particular circumstances in question. On the facts before us we have come to the conclusion at the present time that these particular provisions are to be included as part of the contract of employment of the two Applicants before us."

The reference to Alexander is to reference to Alexander v Standard Telephone & Cables Ltd [1991] IRLR 286, a decision of Hobhouse J. sitting in the Queen's Bench Division, to which we were not specifically referred but to which we must refer in the light of Mr Ciumei's submission. Two actions were consolidated. Mr Alexander and another were employees of the Defendant who were made redundant. They claimed that if provisions in a collective agreement had been applied the axe of redundancy would have fallen on others and not them. Hobhouse J. had to consider the extent to which the collective agreement had been incorporated into the contracts of the employees. The paragraph of the judgment to which the Industrial Tribunal referred reads:

"The principles to be applied can therefore be summarised. The relevant contract is that between the individual employee and his employer; it is the contractual intention of those two parties which must be ascertained. In so far as that intention is to be found in a written document, that document must be construed on ordinary contractual principles. In so far as there is no such document or that document is not complete or conclusive, their contractual intention has to be ascertained by inference from the other available material including collective agreements. The fact that another document is not itself contractual does not prevent it from being incorporated into the contract if that intention is shown as between the employer and the individual employee. Where a document is expressly incorporated by general words of incorporation, whether any particular part of that document is apt to be a term of the contract; if it is inapt, the correct construction of the contract may be that it is not a term of the contract. Where it is not a case of express incorporation, but a matter of inferring the contractual intent, the character of the document and the relevant part of it and whether it is apt to from part of the individual contract is central to the decision whether or not the inference should be drawn.

Mr Ciumei submitted that the final sentence of paragraph 30 of the Extended Reasons was a finding of fact binding on us.

In our judgment Mr Giffen's submission is clearly right on the approach to the construction which we must take. The conclusion drawn by the Industrial Tribunal is one of mixed fact and law and as such is open to review on appeal. However, the issue here is not about redundancy (as it was in Alexander) but about absence through sickness and the aptness of sick codes to be incorporated into contracts. In Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd and Others [1991] ICR 524 Browne-Wilkinson V-C said "Pension benefits are part of the consideration an employee receives in return for the rendering of his services". Holidays and holiday pay, incapacity for work due to sickness or injury and pensions and pension schemes all merit separate and special mention in subsection (d) of the Section. We can well understand why the Industrial Tribunal, addressed as they were on Alexander, thought it apt in the context of paragraph 31 of that decision to reach the conclusion reached in paragraph 30 of theirs. As here, the tribunal was composed of two lay representatives with knowledge of industry from different perspectives sitting with a legally qualified chairman. Clearly, as they were entitled to, they used their knowledge of industry and industrial conditions to reach the conclusion they did. If the lay members here had been the passengers on the peculiarly apt Clapham Omnibus and had been asked at the relevant time whether the two material sentences in the 1988 Sickness Code were intended to have contractual effect, they, like the members of the Industrial Tribunal, would have answered emphatically "yes". This answer is not to be ignored unless erroneous.

The issues raised must be considered in the context of the two contracts of employment set against the factual background in which they were made. In fact, the Industrial Tribunal heard little oral evidence of the factual background to the contracts of employment of the Employees against which the issues before them and before us have to be considered. However, we, like them, have been provided with copy documents from which the background emerges, as well as the terms and conditions of the two contracts of employment.

Mr D'Silva's Contract

Mr D'Silva signed a Statement of Particulars on two sheets and dated it 23rd March 1988 to signify his assent to the contract of employment offered by the Council. The statement, which shows that his employment commenced on 1st April 1988, contains 23 numbered particulars, to the whole or part of four of which particular attention was drawn. Particulars 4 provided:

"The terms and conditions relating to your employment with the Corporation are in accordance with the provisions of the agreements of the National Joint Council of Local Authorities' Administrative, Professional, Technical and Clerical Services, as adopted by the Corporation and supplemented by its rules and other conditions as may be determined by the authority. Copies of the documents embodying your conditions of employment will be maintained and available for reference in your employing department. From time to time variations in your terms and conditions of employment will occur, and these will be separately notified to you or otherwise incorporated in the documents to which you have reference. The authority undertakes to ensure that such changes will be entered in the appropriate documents within 28 days of the change.

The provisions of certain of these conditions are explained in the following paragraphs."

Counsel told us that that the agreements of the National Joint Council to which reference is made are colloquially known as "the Purple Book". Particulars 9 in part provided:

"Trade Union membership. The policy of the Wandsworth Corporation is wholehearted support for collective negotiation and joint consultation between employer and employee, as it is firmly of the opinion that the establishment and operation of these procedures is mutually advantageous to both parties, and in the public interest."

Particulars 12 provided:

"Sickness. Officers are required on the first day of absence through sickness or injury to complete and sent the appropriate (G.11) to the Director of Finance and, not later than the fourth day of absence, submit a medical certificate issued by their own doctor to the office or establishment to which they normally report for work.

Unless otherwise requested by the sender, official National Insurance certificates used for this purpose will be copied and forwarded to the appropriate office of the Department of Health and Social Security. The Corporation cannot, however, accept responsibility of any consequent loss or delay. Private certificates will be retained by the Corporation. Certificates may be submitted for weekly or longer periods as decided by the examining doctor, or otherwise specified by the Corporation, throughout the period of sickness.

Sick pay will be paid by the Corporation at rates specified in the National Agreement and the Council rules, less all National Insurance benefits receivable which are to be claimed by the officer. Forms received from the Department of Health and Social Security notifying rates of benefit are to be sent to the Director of Finance.

A medical certificate of fitness is to be submitted on resuming work.

Full details of the sick pay scheme are available in your administrative office or depot."

Particulars 20 provided:

"Discipline. All officers who have completed a probationary period of service are subject to the Employees' Disciplinary Code, a copy of which will be given to each new entrant at the time of engagement. Copies of this code are displayed at all Corporation establishments and a further copy may be examined or supplied on request. The code also contains details concerning the rights of appeal against disciplinary decisions."

The supplementary bundle included some documents of the Council which predated 1988 and from which it was apparent that the staff sickness absence scheme referred to in Particulars 12 had been the subject of discussion in 1983 in the Joint Works Committee, the Joint Staff Committee and the Established Committees of the Council prior to 15th December 1983 when the Assistant Director (Administration) for the Director of Technical Services wrote a memorandum given a very wide circulation. The first two paragraphs of this memorandum under the heading "Revised Staff Codes of Practice" provided as follows:

"1. As you may know, the Establishment Committee recently approved new Codes of Practice covering 'Discipline', 'Grievance', 'Sickness' and 'Poor Performance'. Each code contains important changes, the most significant of which is that the power of dismissal now rests with the Director of each Department, with provision for appeal to the Staff Management Committee.

2. In view of their importance an envelope containing a copy of each code is to be distributed to every employee. Attached are sufficient for the staff in your section; please ensure that every individual receives the envelope and Codes, including those currently absent for any reason. The envelope also contains a summary of the changes incorporated in the Codes."

It seems probable that a copy of that code was given to Mr D'Silva when he commenced his employment but no copy of this code was produced during the hearing before us or before the Industrial Tribunal.

The supplementary bundle also included some documents from which it was apparent that the staff sickness absence scheme was amended in 1988 after discussions in the Joint Works Committee, the Joint Staff Committee and the Establishment Committees of the Council. Thereafter the 1988 Sickness Code was distributed to staff.

Mr Lawn's Contract of Employment

With a letter dated 12th March 1993 from the Director of Social Services of the Council, Mr Lawn was sent a Statement of Particulars, now three pages in length, with the words "Revised May 1988" on the third sheet. The document is not signed but it was common ground that it was to be treated as Mr Lawn's Contract of Employment. Particulars 4 provided:

"The terms and conditions relating to your employment with this Council are in accordance with the provisions of the agreements of the National Joint Council for Local Authorities' Administrative, Professional, Technical and Clerical Services as adopted by the Council and supplemented by its rules and other conditions as may be determined by the authority. Copies of the documents incorporated into your conditions of employment will be maintained and made available for reference in your employing department. From time to time variations in your terms and conditions of employment will occur, and these will be separately notified to you or otherwise incorporated in the documents to which you have reference. The Council undertakes to ensure that such changes will be entered in the appropriate documents within 28 days of the change."

Counsel drew attention to the differences between the Particulars 4 in Mr D'Silva's Contract, but did not suggest that the difference altered their submissions. Particular 9 contained a paragraph additional to that in Mr D'Silva's Contract, but again Counsel did not suggest that the additional paragraph altered their submissions.

The five paragraphs of Particulars 12 found in Mr D'Silva's document had been condensed to one in the document presented to Mr Lawn:

"Sickness. Employees are required to comply with the Council's reporting instructions for sickness absence and self-certification procedures. Sick pay will be paid by the Council at rates specified in the National Agreement and the Council's rules. All details of the sick pay scheme and reporting instructions are available in your administrative office. Failure to comply with these requirements without good reason may affect your entitlement to payment for such absences. Each new employee is given a copy of the 'Code of Practice' for staff sickness on appointment."

Particulars 20 were unchanged.

As Mr Giffen did not contend that the different wordings of their respective Particulars led to a different conclusion on either issue, we will consider the first issue by reference to Mr Lawn's contract.

As Mr Giffen accepted, when Mr Lawn was offered employment by the Council in 1991, he was offered a contract in standard terms, which he had to accept if he wanted employment with the Council. There is no evidence that he knew when he was offered employment of either the background to the negotiations of the Sickness Code in 1983 or how the 1988 Sickness Code came into being. Except in so far as the history of the Code can be found within the four corners of the documents offered to Mr Lawn, Mr Giffen accepted that the history of the variations in the sickness code was not relevant in finding the answer to the first point in the appeal to which we now turn.

THE FIRST POINT IN THE APPEAL: does the code (or the relevant provisions) have contractual effect?

Mr Giffen accepted that the parties intended the provisions of the 1988 Sickness Code to be the effective procedures for covering sickness absence. He also accepted that in the abstract procedures for dealing with sickness absence were capable of being either contractual or non-contractual. However, he submitted that the subjective intentions of the parties were irrelevant and that there were many indicia the Code of Practice which suggested that code was not intended to have contractual effect. By way of example he pointed to the title itself, to the concluding sentence of the first paragraph of section A "USE OF THIS CODE" which reads:

"This code has been compiled to give managers and staff a framework within which to approach such matters." [Emphasis added]

Within part C of the code headed "PROCEDURES FOR DIFFERENT CATEGORIES OF ABSENCES", he pointed to subjective and imprecise phrases, for instance in the Introduction paragraph of C 1, the second paragraph of clause 1.1.1 reads:

"Where the level of absence is unsatisfactory the appropriate action to be taken will depend on the individual circumstances of the case ..." [Emphasis added]

He pointed to the first sentence of Clause 1.2; and drew attention in Clause 3.3.3 of Clause 3 (dealing with long term absence) which made reference to a "clear indication". All these he submitted were more akin to directions by the Council to its managers and nothing to do with the contract between the Council and the Employee.

As did the Industrial Tribunal, we see the force of the submission. The passages certainly demonstrate that the whole Code of Practice cannot be contractual but for our part we cannot see why the parties should not have intended the particular passages in the Code identified by the Industrial Tribunal to have contractual effect.

Mr Ciumei referred us to the finding of fact contained in paragraph 29 of the Extended Reasons:

"... this mutual obligation we find as a matter of fact has existed for a number of years and has been viewed by both staff and management as binding on each side."

Mr Giffen reminded us that the intentions of the parties are not to be found from what they did but we accept Mr Ciumei's submission that were the man on the Clapham Omnibus to have looked over the parties' shoulders and asked whether these sentences were intended to have a contractual effect, both parties would have answered "yes". We therefore agree with the decision of the Industrial Tribunal on this issue.

THE SECOND ISSUE: does Clause 4 permit the Council unilaterally to vary the parts of the Code which have contractual effect?

There is no dispute between Counsel that (1) parties to a contract cannot vary its terms without the consent of the other party; and (2) parties to a contract can agree to a term which gives one party a unilateral right to vary terms without the agreement of the other party.

Based on these two agreed principles. Mr Ciumei submitted that the second principle is an exception to the first and that a term relied on permitting unilateral variation should accordingly be strictly construed. He also submitted that the court should bear in mind that an employee's choice in the context of considering an offer of employment from a body such as a Council is limited; he cannot realistically negotiate to vary standard terms and accordingly, any ambiguity in the contract should be construed against the Council as the party proffering the contract. He submitted that there were ambiguities in Particulars 4 of each of the Employees' contracts.

Mr Giffen submitted that there were clear words in Particulars 4 of the contracts which provide the right to the Council to effect unilateral variation. He stressed at the end of the first sentence "supplemented by its rules and other conditions as may be determined by the authority" and the third sentence, particularly the opening words.

He carefully took us through the decision of the Court of Session in Cadoux v Central Regional Council [1986] IRLR 131, where the issue was whether the Council (defendant) was unilaterally allowed to withdraw a non-contributory life assurance scheme which, subject to conditions, existed for the benefit of its employees. The form and content of the employee's contract there had many similarities with that of the Employees here; in a very careful judgment Lord Ross analysed the contentions of each counsel as contained in pleadings and as argued before him, before concluding in paragraph 24:

"In my opinion, the reference to the authorities' rules as amended from time to time shows that it was in the contemplation of the parties that the defenders' rules might be altered. The rules contain no express provision regarding amendment, and the clear inference from the fact that they are the defenders' rules is that the defenders have power to alter them, the only obligation being to enter the amendments in the rules or otherwise record them for the pursuer to refer to within a stipulated period."

Mr Ciumei submitted that that decision had no relevance because it concerned a different clause and a different set of facts. He also pointed out many points of distinction and stressed the difference between the withdrawal of a gratuitous non-contributory life assurance scheme and the provision of a comprehensible and comprehensive sickness code which was a core provision of the contract of employment of Mr D'Silva and Mr Lawn.

After much consideration and despite the words in Particulars 4 which point to a discretion in the Council to make a unilateral change, in the context of a sickness code, we have concluded that the submissions of Mr Ciumei are to be preferred to those of Mr Giffen.

Accordingly we come to the same conclusion as did the Industrial Tribunal and dismiss this appeal.