United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR B CARR (of Counsel) Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE
For the Respondent	MR D GRIFFITH-JONES (one of Her Majesty's Counsel) Messrs Olswang Solicitors 90 Long Acre London WC3E 9TT


 


JUDGE PETER CLARK:

1. The principal issue in this appeal is one of construction of the material term of the Appellant's contracts of employment with the Respondent, IBC Vehicles Ltd.

The Facts

2. The 923 Appellants were at the relevant times employed by the Respondent at their Luton factory. They were engaged in the production of the Frontera motor vehicle. Incorporated into their individual contracts of employment was a collectively negotiated agreement. The relevant term for present purposes is to be found at section 17.8, which provides;

"17.8 Security of Earnings Provision

17.8.1 the Company endeavours to ensure work for its employees during the basic working hours of each week. In the event of work not being available for the whole or part of those hours, Employees will be paid for their annual salary for the basic hours, subject to the following conditions being met:

(i) the Employee is willing, capable and available for work.

(ii) the non-availability of work is not due to industrial action by Employees of the Company.

(iii) the Employee is not participating in industrial action.

(iv) the Employee is willing to undertake any alternative work required by the Company.

(v) the Employee is not otherwise disentitled from payment.

(vi) the Company has not suspended the Security of Earnings provision in accordance with section 17.8.2 below.

17.8.2 If the Company is unable to provide work by reason of strike of industrial action (other than by the Company's own Employees), failure of supplies, decline in demand for the Company's products, recession of trade or any other cause beyond its control, two weeks notice of suspension of the Security of Earnings Provision may be given. During the notice period, the security of earnings payments and conditions stated in section 17.8.1 above will continue to apply and every effort will be made to provide work to avoid lay off and to mitigate the effect on individuals.

17.8.3 Payments made under the Security of Earnings Provision will incorporate any obligation for statutory guarantee payments that may arise under the terms of the Employment protection (Consolidation) Act 1978.

17.8.4 Maximum entitlement will be six weeks in any Calendar year."

3. An Employment Tribunal sitting at Bedford and hearing the Appellant's complaints of unlawful deductions of wages found as fact that in autumn 1999 discussions took place between the Respondent and General Motors (GM), for whom the Frontera was manufactured, as to their production requirements for the following year. GM wished to reduce the 1999 figure of 35,000 vehicles to 31,000. As a result it would be necessary for the Respondent to significantly reduce production volume during the coming year.
4. On 28 January 2000 the Respondent informed their employees that it intended to reduce production by 4000 vehicles; that equated to 5 weeks production. At that time, the Tribunal found, there was a decline in demand for the Respondent's product within the meaning of clause 17.8.2.
5. On 3 February 2000 the Respondent gave 2 weeks notice to the employees suspending the Security of Earnings Provision. During the week commencing 21 February 2000 the employees were not required to attend work and received no wages other than the statutory guarantee payments. It is in the respect of the shortfall in wages for that week that these claims are brought.

The Tribunal Decision

6. Having found that there was a decline in demand for the Respondent's product, a factual issue in dispute between the parties, the Tribunal, by their decision with extended reasons promulgated on 29 January 2001, resolved what we shall call the construction point in favour of the Respondent.
7. The issue was whether, on 3 February 2000, the Respondent was contractually entitled to give 2 weeks notice of suspension of the Security of Earnings Provision. Put shortly, it was the Appellants contention that notice can only be given once the event described in paragraph 17.8.2 had arisen, that is that the Company is unable to provide work by reason of a decline in demand for the Company's products. They submitted that notice had not been properly given; the Respondent that it had. Having considered the detailed arguments presented by counsel now appearing before us the Respondent's construction was accepted by the Tribunal.

The Appeal

8. Two points are taken. The first is the construction point. As both counsel agree, we are in as good a position to determine the point as was the Tribunal, no further findings of fact being necessary. Secondly, Mr Carr takes a point on the adequacy of the Tribunal's reasons. That seems to us to be academic; either we are with Mr Carr on the construction point or we are not. If the former, we shall reverse the Tribunal's decision, if not we shall uphold it. However, we accept this criticism of the Tribunal's reasons made by Mr Carr. We have a less clear view of the Tribunal's reasoning process in arriving at their conclusion where the arguments of counsel, in part, are set out and the Tribunal merely state their preference for one set of arguments over the other than had they set out their own analysis of the problem, having listened to and considered the rival contentions. That is the approach we propose to take.
9. Both counsel invite us to look at the purpose of the security of earnings provision (SEP). Having done so, it appears to us to be this. The Company endeavours to ensure work for the employees during their basic working hours. Normally it does so. Not only that, but there is scope for overtime working; and certain shifts such as the night shift attract premium rates. Thus, in a normal production week the employees can expect to earn what we shall call their basic pay; they may earn more (optimum pay). Similarly, the Company is fulfilling its commercial purpose, producing motor vehicles for sale.
10. SEP is designed to deal with the situation where production requirements fall below the basic working hours in a week. What is then to happen? The SEP balances the pain between employer and employee. The employer does not wish to pay basic pay for no or less than basic working hours worked by the employees. The employees do not wish to be laid off with no more than the statutory guarantee payment. A compromise is reached. What is that compromise? That leads us to our construction of section 17.8.
11. SEP only arises in the event of work not being available for the whole or part of the working hours of the relevant week or weeks. It will be paid subject to six conditions. The first five, it is common ground, are met. The issue is whether the condition at section 17.8.1 (vi) has been met by the Company. The question on the facts of this case is whether, on 21 February 2000 the Company had suspended the SEP in accordance with Clause 17.8.2, by giving two weeks notice of suspension of security of earning of SEP on 3 February. In our view it had not. The notice was invalid for the following reasons;

(1) At the time when notice was given the Company is not unable to provide work. It did provide work normally throughout the notice period. The tense is the present, not the future. To accept Mr Griffith-Jones QC construction would require us to insert the words "or will be" between the actual words used "is unable"

(2) The notice is notice of the suspension of security of earnings provision and in particular payments, not notice of layoff. SEP provides for basic pay, which only becomes payable under Clause 17.8.1 in the event of a full or partial layoff.

(3) That construction, contended for by Mr Carr, is wholly consistent with the provision in Clause 17.8.2 that

"During the notice period, the security of earnings payments and conditions stated in section 17.8.1 above will continue to apply."

Those payments, subject to those conditions, only arise during a period when work is not available for the whole or part of the basic working hours in a week. It follows that the notice period covers a period when the basic workings hours work is unavailable, not when normal production is in progress, as was the case during the notice period here.

(4) Further support for this construction may be derived from the final words of section 17.8.2

"and every effort will be made to provide work and avoid layoff and to mitigate the effect on individuals."

What is here envisaged is that the employees will enjoy a two week breathing space during which they will receive their basic pay although there is no or a reduced amount of work for them to do. During that two week period the company will make every effort to provide work to avoid layoff, ideally to bring it to an end before the two weeks is up or failing that, at the end of the notice period. Only if those efforts fail and the layoff continues, will the employees go down to the statutory guarantee payment for the remainder of the lay-off period. As protection for the employer, there is a six week cap on the basic pay provision during lay-off or reduced working in any one calendar year.

(5) Finally, if Mr Griffith-Jones' construction is correct, then in the events which occurred on the facts of this case the SEP is illusory. Take these facts. The Company has to 'lose' a total of five weeks production in the year. On the Respondent's construction of section 17.8 it need only organise its future production schedule so as to serve two weeks notice during normal production time to expire at the beginning of a planned week of lay-off. In these circumstances the security of earnings payment will never be made. That cannot, in our judgment, have been the intention of these contracting parties.

12. For these reasons we shall allow this appeal, reverse the decision of the Employment Tribunal and substitute a declaration that the complaints are well-founded and that the Appellant suffered an unlawful deduction from their wages for the week commencing 21 February 2000. They are entitled to payment of the difference between their basic pay under SEP and any guarantee payment made by the Respondent. It is to be hoped that the precise calculation of the claims can be agreed between the parties, failing which that assessment will be remitted to a fresh Employment Tribunal.