United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MS H PELHAM (of Counsel) Instructed By: Messrs Lauristons Solicitors 84 Borough Road Middlesborough TS1 2PF
For the Respondent	MR G MANSFIELD (of Counsel) Instructed By: Messrs Jacksons Solicitors Innovation House Yarm Road Stockton-on-Tees Cleveland TS18 3TN


 


JUDGE PETER CLARK:

1. This is an appeal by Mr Campbell, the Applicant before an Employment Tribunal sitting at Thornaby on 9 October 2000, against that Tribunal's decision, promulgated with extended reasons on 17 January 2001, dismissing his complaint of breach of contract, alternatively unauthorised deductions from wages, brought against his former employer, Union Carbide Ltd (UCL).

The Facts

2. The Appellant commenced employment with ICI Plc at their Wilton Works as a chemical plant operator in April 1977. On 1 February 1995 that part of ICI's business in which he was employed was transferred to UCL in circumstances where, it is common ground, the provisions of TUPE apply, that is to say, his employment continued with UCL on the same terms and conditions as with ICI, save as to pension arrangements with which we are not directly concerned
3. In July 1991 ICI entered into a collective agreement with the recognised trade unions (The Agreement). Two provisions in the Agreement, (Part 2 Guideline 7) command attention:

(3) Terminal Payments in Redundancy Cases

The Employees Redundancy Payment Scheme (ERPS) was "incorporated on a legally binding basis" with effect from 14 June 1991 in the existing contracts of all eligible employees.

4. On that date Mr Allan, ICI's Teeside Personnel Manager, wrote to all staff stating that the ICI redundancy scheme (more favourable to employees than the statutory formula) would henceforth be incorporated into the individual contracts of employment. He also referred to a contractual scheme to compensate employees who were constructively dismissed. Absent from that letter was any reference to:

(4) Discretionary Severance in Non-Redundancy Cases

Under this scheme, all employees who are recommended to receive a discretionary severance payment where a terminal payment would not otherwise arise under the Company ERPS will receive a discretionary service payment calculated in accordance with the formula set out in the Agreement.

5. One of the 'non-redundancy cases' provided for in the Agreement (Part 2 Guideline 1 paragraph 3.3.3) related to staff with continuous absence of 26 weeks for ill-health. In these circumstances, employment may be terminated and the employee given the Company's severance payment on the basis of the arrangement set out in Part 2 Guideline 7.
6. The Tribunal accepted evidence given by Mrs Warrior, a personnel officer with ICI since 1988, that in all cases of which she was aware employees whose employment was terminated by reason of lengthy sickness absence received an ex-gratia payment under Part 2 Guideline 7 clause 4 of the Agreement.
7. Following 6 months sick leave the Appellant was given Notice of Termination on 20 July 1999 to take effect on 2 November 1999. He claimed, in these circumstances, to be entitled to the payment under Part 2 'Guideline' 7 clause 4 of the Agreement (the relevant payment). UCL declined to make the relevant payment, contending that they were not contractually bound to do so. The Appellant enlisted the assistance of his trade union but UCL maintained their position. Hence his complaint to the Employment Tribunal.

The Complaint

8. In his particulars of complaint as originally drafted by him, the Appellant contended that, whilst accepting that the relevant payment was ex-gratia and not contractual with ICI, he believed it to be custom and practice and ought to be paid.
9. By a letter dated 17 March 2000 to the Tribunal, having taken legal advice, the Appellant formulated his case in this way:

"I contend my contract of employment was transferred from ICI plc to the Respondents in 1995. I further contend that my claim is one of Breach of Contract. I contend that "the scheme" transferred in accordance with the TUPE Regulations and I am entitled to payment. Further or alternatively, I contend that the fact that ICI plc paid out ex-gratia payments know as "benefit 3" to all employees who retired on ill-health grounds means that a term was implied into my contract by custom and practice. I hope this clarifies the situation."

The Tribunal Decision

10. On those facts the Tribunal found

(1) that the Agreement was not legally binding between the parties to it, that is ICI and the trade unions. That is correct but, as Ms Pelham points out, nothing to the point. The question is whether the ICI ill-health scheme was incorporated into the Appellant's contract of employment either expressly or by implication, particularly by custom and usage.

(2) they found that there was no express incorporation of the ill-health scheme, compared with the ERPS, and at paragraph 9(a) of their reasons they say this:

"The letter to the Applicant dated 14 June had expressly referred to the former [ERPS], but had been silent on the latter, thus leaving (sic) the Tribunal to the inevitable conclusion that it was not intended by the parties that the latter should be incorporated."

(3) they concluded that the Appellant had no contractual claim for the relevant payment and went on to find that the claim did not fall within the term "or otherwise" in section 27(1)(a) Employment Rights Act 1996, the definition of wages for the purposes of the unlawful deduction provisions in section 13; apparently because no right had passed under the TUPE provisions.

The Appeal

Breach of Contract

11. Ms Pelham submits, first, that the Tribunal misdirected themselves as to the law by holding that the ill-health scheme could only be incorporated into the Appellant's contract of employment expressly; they did not consider on the face of their reasons whether such a term could be implied, particularly by custom and usage.
12. It is true that the Tribunal, at paragraph 9 of their reasons, appears to have thought that the fact that the Agreement was not legally enforceable within the meaning of section 179 Trade Union Labour Relations Consolidation Act 1992 as between ICI and the trade unions somehow bore on the question of incorporation into the individual contract. It did not.
13. However, at the beginning of paragraph 9 they set out a correct statement of the position taken from Harvey on Industrial Relations and Employment Law, section Q414. Further, we are told that they were referred to (although no mention is made in their reasons) the relevant authorities, particularly Quinn v. Calder Industrial Materials Ltd [1996] IRLR 126; Duke v. Reliance Systems [1982] IRLR 347, considered in Quinn, and Pellowe v. Pendragon plc (EAT 804/98, 17 June 1999 unreported) in which I considered both of those earlier cases.
14. In these circumstances we are not persuaded that the Tribunal overlooked correct test, but even if we are wrong about that we are satisfied that their conclusion was plainly and unarguably right, and not perverse as Ms Pelham submits. It is common ground between counsel that all necessary findings of fact were made by the Employment Tribunal.
15. The question is, what was the intention of the parties to the contract of employment? In the context of this case, the fact that the employer ICI, omitted the relevant payment from the letter of 14 June 1991, is not a mere oversight when viewed in the overall factual matrix. In the Agreement, whereas the ERPS and constructive dismissal payments were expressed to be contractual, Clause 8.7 of Part 2, Guideline 7 of the Agreement stated that the relevant payment was ex-gratia and not contractual. That distinction was also made in the ICI Leavers Handbook issued to staff in relation to the relevant payment on the one hand and ERPS on the other.
16. The fact that the relevant payment was always made as Mrs Warrior told the Tribunal, does not, of itself, give rise to the implication of a term of the contract by custom and practice. Although relevant factors, the ultimate question is whether it can be inferred that both parties intended the ill-health retirement payment to form a term of the contract. In our judgment and apparently that of the Employment Tribunal it did not, given the documentation to which we have referred. That the payment was always made by ICI is consistent with good industrial relation practice, it does not of itself indicate an intention on the part of the employer to be bound contractually to make such a payment. See Young v. Canadian National Railway [1931] AC 83.
17. Accordingly we uphold the Employment Tribunal's conclusion that in failing to make the relevant payment UCL was not in breach of its contractual obligations owed to the Appellant.

Unauthorised Deductions from Wages

18. Ms Pelham seeks to contend that the Tribunal ought to have found that nevertheless the Appellant was entitled to succeed on this alternative claim on the basis of the definition of wages contained in section 27(1)(a) Employment Rights Act, which provides:

"(1) In this part "wages", in relation to a worker, means any sums payable to the worker 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"

19. She relies on the EAT's decision in Kent Management Services Ltd. v. Butterfield [1992] IRLR 394. We think that there are two difficulties with that submission. First, the expression "or otherwise" requires a legal obligation to make the payment. See New Century Cleaning Co. Ltd. v. Church [2000] IRLR 27 (CA). In this case that obligation could only arise under that contract of employment. Secondly, the definition of wages in section 27(1) is expressly subject to the exclusions contained in section 27(2). Section 27(2)(c) provides for

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

20. We are quite satisfied that the relevant payment falls within that definition. It is a gratuity in connection with the workers retirement; alternatively compensation for loss of office. Accordingly, we uphold the Tribunal's decision to dismiss the unauthorised deduction claim.

Conclusion

21. For these reasons, it follows that this appeal must be dismissed.