United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR D PRESTON (of Counsel) Instructed By: Messrs ASB Law Solicitors Stoneham House 17 Scarbrook Road Croydon Surrey CR0 4SQ
For the Respondent	MR A CHAUDHURY (of Counsel) Instructed By: Marks & Spencer Plc Legal Services Michael House 47-67 Baker Street London W1A 1DN


 


JUDGE WILKIE QC:

1. This is an appeal by Mrs Curr against the decision of the Employment Tribunal sitting at Ashford on 24 July 2000, which dismissed her application for a finding that there had been an unlawful deduction from her wages, namely a shortfall in statutory redundancy payment made by her erstwhile employer, Marks & Spencer Plc ("M & S").
2. The applicant was first employed by M & S on 3 March 1973. She was dismissed by reason of redundancy with effect from 17 July 1999. Her redundancy calculation was based on four years service between 24 August 1994 and 17 July 1999. The issue for the Tribunal was whether she had continuity of employment from 1973, or whether that continuity had been broken by reason of her taking part in the respondent's Child Break Scheme between November 1990 and 24 August 1994 when she recommenced full-time employment with them.
3. Mrs Curr became pregnant with her third child in July 1989 at which time she was working in the respondent's head office as management trainer. She commenced her maternity leave on 3 February 1990 and her date of return to work was expected to be 12 November 1990. Approximately one week before she was due to return to work, she telephoned the respondent's Personnel Department and spoke to Sue Johnstone to enquire about the arrangements for returning to work. At that time the respondent had just introduced a new Child Break Scheme which was a scheme designed to allow mothers to have a long break from work to enjoy time with their children. The benefit of the scheme for the employee was that at the end of the break the person would be guaranteed a management post if she wished to return to work. The scheme was only open to persons at a management level. There was no guarantee that there would be a return to the same post, but there would be every effort made to give the person a similar position, grade and salary.
4. The applicant had two telephone discussions with Sue Johnstone about the scheme prior to 12 November 1990. At that stage the respondent did not have any documentation concerning the scheme as it was in its very early stages. During the course of her two conversations it was not suggested to the applicant that she would have to resign or terminate her employment. Nor was there any discussion at all on the effect of the break upon her continuity of employment.
5. The applicant decided to take advantage of the scheme and did not return to work from maternity leave as had been planned on 12 November 1990. On 16 November 1990 she received in the post a letter which enclosed a further letter also dated 16 November. The first letter was to the effect that, following the applicant's decision to take a Child Break following maternity leave, the respondent was effecting her resignation on 10 November 1990 and would forward her P45 to her shortly. That letter went on to explain that the loan from the respondent which the applicant had been given had to be immediately repaid. This letter referred to the other letter of 16 November. That letter set out the terms and conditions of the Child Break Scheme.
6. The letter setting out the scheme confirmed that the company had accepted her on to that scheme for a period of four years commencing 12 November 1990 terminating on 12 November 1994. There were then set out 11 numbered terms. The first was that on completion of the maternity leave she would resign from the company and the normal administrative procedures for resignation would be followed. The second provided that the period of the Child Break would be unpaid. The third was that at the end of the break the company would undertake to offer re-employment in a management position, though not necessarily at the same level, or in the same function as her previous employment. Clause 4 provided for her return either before or after the agreed date, subject to the respondent's agreement, but in any event limited the extended period of the Child Break to five years maximum. Clause 5 indicated that prior to her return she would be required to pass a company medical. Clause 6 provided that for each year of the Child Break the applicant would be required to work for a minimum of two weeks full-time, or equivalent part-time at a mutually convenient time and pattern of hours. Clause 7 provided that contact would be maintained with the applicant throughout the Child Break, her Line/Personnel Manager would discuss the details with her. Clause 8 provided that she may not undertake any form of paid employment whilst on the Child Break without prior consultation with her Line/Personnel Manager. Clause 9 provided that if she wished to terminate the Child Break she must notify her Personnel Manager in writing. Clause 10: the respondent reserved the right to terminate the Child Break in a number of limited circumstances and Clause 11 provided that her Personnel Manager would discuss the effect her Child Break would have on her staff benefits. In fact, the Child Break caused the termination of all staff benefits.
7. Section 212 of the Employment Rights Act 1996 is the relevant statutory provision. Subsection (1) provides that

"(1) Any week during the whole or part of which an employee's relations with his employer are governed by a contract of employment counts in computing the employee's period of employment."

Subsection (3) provides that:

"(3) Subject to subsection (4) [which is irrelevant for our purposes] any week (not within subsection (1)) during the whole or part of which an employee is –

…

(c) absent from work in circumstances such that, by arrangement or custom, he is regarded as continuing in the employment of his employer for any purpose, ...

counts in computing the employee's period of employment."

8. The applicant put forward two arguments before the Employment Tribunal and before us. The first was that throughout the period of the Child Break Scheme her relations with her employer were governed by a contract of employment. The Employment Tribunal rejected that argument on the basis that there was an absence of mutuality of obligation. In our judgment the Tribunal did not err in law in that conclusion. Although there is an obligation upon the employee to perform a minimum of two weeks' work a year, if so required, there was no obligation on the respondent to offer a minimum of two weeks' work. Furthermore, the obligation upon the employee was only to arise if it were at a mutually convenient time and pattern of hours. In our judgment this falls considerably short of the requirement of mutuality of obligation in respect of the provision and performing of work, which is the necessary precondition for a contract of employment to arise. The fact that the document of 16 November 1990 contained other obligations imposed on one or other party, and accordingly did contain mutual obligations, does not in itself make it a contract of employment. The next question which the Employment Tribunal faced, was what is the nature of the scheme as evidenced by the letter of 16 November?
9. The applicant argued that it was an arrangement by which she was regarded as continuing in the employment of her employer for any purpose. If so, then it fell within section 212(3)(c) and preserved continuity of employment, notwithstanding the fact that throughout that period there was no contract of service in being.
10. We were referred to the decision of the Employment Appeal Tribunal in the case of Booth & United States of America [1999] IRLR 16 (as had been the Employment Tribunal). In particular to the passages at paragraphs 9 and 10 as follows:

"It seems to us that the expression 'by arrangement' at least requires that something was said or done by the employers such as to justify the conclusion that the parties regarded the employment relationship as continuing despite the termination of the contract of employment … We respectfully agree with what was said by the EAT in Letheby & Christopher v Bond [1988] ICR 480, at 486, where they said:

'What the tribunal have to look at is whether, when the absence from work takes place, the parties regard the employment as still continuing'.

… Thus, the statute will allow a break in employment not to break continuity if … some kind of arrangement was made that the employment should be treated as continuing for any purpose. … An arrangement requires there to have been some discussion or agreement in advance of the break. It would be reading more into the statute than was justified to say that a contract between the parties was required. The words of the statute give effect to the reality on the ground, namely that arrangements falling short of binding commitments often govern particular aspects of the relationship between employer and employee. In short, the word 'arrangement' is well known and its meaning does not become clearer from any attempt to redefine it or to find a synonym."

11. We have not found this an easy question and, indeed, have been divided upon the issue.
12. The majority has concluded that the Child Break Scheme did, as a matter of law, amount to an arrangement which fell within section 212(3)(c). The starting point is that section 212(3)(c) only bites where there is no contract of employment in existence. Thus, the fact that the applicant was required to, and had, resigned and had suffered all the incidents of the cessation of her contract of employment is not determinative. What we have to do is to look at the terms of the agreement, as evidenced by what was said and written at the time, as the primary source of evidence as to what the parties regarded as the case during the period when it was envisaged there would be no contract of employment in existence.
13. The view of the majority is that it is clear that the parties envisaged that there would be some relationship between them during that period. Furthermore, the relationship related to her employment at the end of the break. She was to keep her hand in by working at least two weeks a year for the respondent. She was to sustain her position of good faith towards them by not seeking alternative employment without first consulting them. The respondent undertook to continue to maintain contact with her throughout the break. Furthermore, throughout the break the agreement envisaged that the applicant would have allotted to her a Line or Personnel Manager, who would be available to discuss matters which might arise during the break. It seems clear to the majority that this set of arrangements had a purpose, namely to facilitate the smooth re-engagement of the applicant into a management role at the conclusion of the break. It is the judgment of the majority that these manifestations of continuing obligations and contacts can only sensibly be described as continuing the employment relationship throughout the period of the break for the purpose described, notwithstanding the fact that the relations between the parties were not governed by a contract of employment.
14. It therefore follows that the decision of the majority is that the tribunal, in concluding that the Child Break Scheme did not constitute such an arrangement as fell within section 212(3)(c), committed an error of law.
15. The minority member, however, is of the view that the fact that the scheme specifically requires the employee to resign and forego all her existing terms and conditions of employment, including the requirement to repay the loan and the loss of all staff discounts, coupled with the provision of her P45 and the requirement that she undergo a medical examination before being re-engaged at the end of the break, are very strong factors pointing to the fact that the parties did not regard the employment as continuing for any purpose. He regards the obligations to maintain contact as no more than good personnel practice applicable to those who have ceased to be employed, as much applicable to retirement as by virtue of a Child Break Scheme, and there is nothing in the obligations imposed on the employee in respect of a requirement to work two weeks a year, or not to seek alternative employment without consultation, which amounts to evidence supporting a conclusion that at least one of the parties regarded the employment as continuing. On the contrary, he regards the primary obligation that the contract of employment be terminated as being conclusive against such a view especially as the applicant received and accepted several documents which expressly refute continuity. In particular she formally signed on 25 November 1990 her acceptance of the unambiguous termination arrangements within the terms and conditions of the scheme and she also omitted to question or challenge the revised start dates for her continuous employment of which she had been formally notified in writing on more than one occasion.
16. That said, however, the view of the majority prevails and accordingly this appeal is upheld.