United Kingdom Employment Appeal Tribunal

APPEARANCES

 

 

For the Appellant	Mr R McCreadie, Advocate Instructed by- Messrs Burnside Kemp Fraser Solicitors 48 Queens Road ABERDEEN AB15 4YE
For the Respondents	Mr B Napier, Queen's Counsel Instructed by- Aberdeenshire Council Woodhill House Westburn Road ABERDEEN AB16 5GB


 


LORD JOHNSTON:

1. This is an appeal at the instance of the applicant against the decision of the Employment Tribunal denying him a claim for unlawful deduction of wages on two grounds, either one of which would have been sufficient for the claim to succeed.
2. The background to the matter is local government organisation in the mid-nineties which resulted in the respondent council coming into being absorbing, amongst others, the functions of Banff and Buchan District Council, in whose employment the appellant had been, in the capacity of a Depute Director in the Housing and Technical Department. After the local government re-organisation, the appellant was taken on by the respondents as a Building Control Officer for their north division. By letter dated 11 April 1996, the respondents allegedly wrote to the appellant, setting out his new position and new salary which was considerably less than his salary while with his previous employer. That made reference to the fact that he would qualify for detriment compensation for a period of three years which had the result of maintaining his salary at the previous employment level for that time, the period in question expiring in April 1999.
3. Unfortunately, the appellant maintains he never received that letter. That fact, while not agreed to by the respondents, was not disputed.
4.                  Subsequently, the appellant did receive a letter dated 11 November 1997 (production No 10) which informed him that an exercise had been carried out by the employer on assessment, with regard to his position, the result of which being that the job on transfer, as far as the appellant was concerned, was regarded as substantially different from the previous employment which resulted accordingly in the detriment regulations continuing to apply because the salary that was being awarded was lower. The appellant took immediate action to complain against this finding and wrote a formal letter dated 8 December 1997 intimating an appeal against the decision in question, confirming that he had not received the previous letter. Thereafter, the appellant upon receiving the decision in respect of the detriment position, appealed that and, thereafter again, took the matter to an Employment Tribunal who refused the application as being incompetent by reason of the fact that at the material time the appellant had not in fact suffered any loss in wages because the period up to April 1999 had not expired. Subsequently, he raised the present application, the IT1 being dated 4 May 1999.
5. The two issues that were raised initially in the grounds of appeal, related to whether or not the Tribunal was justified in holding that the appellant had consented to a reduction in salary in his contract, and, secondly, quite separately, whether or not assuming there had been a variation in his contract, it was invalid by reason of the fact that it was caused by, or related to, the transfer of employment. This was admitted by both parties to be a relevant transfer in terms of the Transfer of Undertaking (Protection of Employment) Regulations 1981. (TUPE)
6. With regard to the first issue, the decision of the Tribunal is as follows:-

"I first considered, therefore, whether there had been a variation of the Contract of Employment which the applicant had with Banff & Buchan District Council (A1). The applicant's Solicitor referred me in particular, to clauses 7 and 12 which allowed the Council to prescribe his duties and add or vary the conditions of his appointment. He maintained that the job title was immaterial and that the applicant had continued to carry out his duties in accordance with that contract. He maintained that this contract had not been terminated, that it had continued after the transfer date and that it remained in force.

However, immediately prior to Local Government reorganisation on 1 April 1996 the applicant was employed by Banff & Buchan District Council in the post of Depute Director (Technical) Housing & Technical Services and the job he was doing was in accordance with a Job Description which was prepared in May 1994 (R4). It was significant, to my mind, that on 20 June 1997, after Local Government reorganisation, he signed a different job description for the post of Divisional Building Control Officer with Aberdeenshire Council (R7) and as the respondents' Counsel pointed out he did not do so "under protest" or say that he was " reserving his rights", features which applied in both Arshad and Hill.

Further, in his letter of 8 December 1996 to the Council the applicant makes reference to "accepting the post of Divisional Officer" (R8); in his application for the position of Building Control Manager, which he submitted on 14 November 2000, he states "since reorganisation in 1996 I have held the post of Divisional Building Control Officer (R15 Page 5); and in September 1998 when he presented a job evaluation appeal he did so on the basis that he was in the post of Divisional Control Officer (R16).

While I was mindful that the applicant did protest, in a sense, by presenting an Employment Tribunal Application in June 1998 complaining that the respondents' Detriment Appeal Committee had erred in refusing his appeal against the respondents' decision to end his detriment payment, that is not the same as challenging a contractual acceptance of his new post and was quite different, for example, from the position in McCredie and Kemp v. Fife Council (Case nos. S/401161/00 and S/401661/00) where the applicants accepted their posts "without prejudice to rely upon TUPE and ARD protecting my current terms and conditions in transfer and thereafter, until such time as any change is mutually agreed between the parties", refused to sign a written Statement of Particulars and never sought a regrading of their posts.

I arrived at the view, therefore, that the submission by the respondents' Counsel in this regard was well founded and that Mr Lorimer's contract of employment had been varied so that its terms were no longer the same as those which had transferred in 1996.

7.                  With regard to the second matter, the Tribunal's decision is as follows:-

"Any provision of any agreement (whether a contract of employment or not) shall be void in so far as it purports to exclude or limit the operation of Regulation 5, 8 or 10 above or to preclude any person from presenting a complaint to an [employment tribunal] under Regulation 11 above".

The applicant's solicitor referred in particular to Regulation 5, in particular, and expressed his position in the following terms at Page 5 of his written submission:-

"My concern is with Regulation 5 which states that the transfer shall not operate so as to terminate the Contract of Employment which shall have effect after transfer as if originally made between the Applicant and Respondents in the present circumstances, and Regulation 5(2) which states that 'all rights, powers, duties and liabilities under the Contract of Employment A1 shall be transferred to the Respondents'. These terms are prescriptive, and the Respondents' position cannot be consistent with them".

It was made clear by the House of Lords in Wilson that a dismissal for a transfer – related reason is legally effective even if it is not for an economic, technical or organisational reason and the view of the Court of Appeal that such a dismissal was a legal nullity was rejected. However, in the present case I was dealing not with a dismissal situation but rather a variation of the Contract of Employment. According to Lord Slynn in Wilson a variation to the terms and conditions which go across with the transfer, which is "due to the transfer and for no other reason" is invalid, but there can be a valid variation of the terms for reasons which are not due to the transfer. He put it this way at Page 716, Paragraph 93:-

"But I add that, although on a transfer, the employees rights previously existing against the transferor are enforceable against the transferee and cannot be amended by the transfer itself, it does not follow there cannot be a variation of the terms of the contract for reasons which are not due to the transfer either on or after the transfer of the undertaking. It may be difficult to decide whether the variation is due to the transfer or attributable to some separate cause. If, however, the variation is not due to the transfer it can, in my opinion, on the basis of the authorities to which I have referred, validly be made".

He also said at page 715 paragraph 90:-

"I do not accept the argument that the variation is only invalid if it is agreed on or as part of the transfer itself. The variation may still be due to the transfer for no other reason even if it comes later. However, it seems that there must, or at least may, come a time when a link with the transfer is broken or can be treated as no longer effective".

On the basis of Wilson and the other authorities to which I was referred, such as Ralton v. Havering College of Further and Higher Education [2001] IRLR 738 the issue which I had to consider was whether the transfer was the sole reason for the variation, or, put another way, whether the variation was due to the transfer or attributable to some separate cause. I am bound to say that I was considerably exercised by this question which I found extremely difficult to answer, particularly, as my reading of the cases to which I was referred, and in particular Wilson, was that the only definite way for a transferee to change terms and conditions of a transferring employee is to dismiss and re-engage on new terms and conditions which of course will give rise to an unfair dismissal claim.

In considering this issue I found the cases of Ralton and Carlton Care Ltd v. Rooney and Others (EAT/112/00) particularly helpful. In Ralton the EAT held that the Employment Tribunal had correctly concluded that variations to the applicants' Contracts of Employment were not "because" of the transfer and that the transfer had only provided "the general setting for the variation". In Carlton I was referred, to the following passages from the Judgement of the Employment Appeal Tribunal in which Lord Johnston explained the principles to be applied (paras 5, 6 and 7, pages 2 and 3):-

"It has however, to be noted that the Regulations exist to protect employees in the context of a transfer which is relevant but generally should not have the effect of improving their position as between before and after the transfer. It therefore must be the case in our view that where certain relevant circumstances, principally economic, are prevalent before a transfer which could result in legally valid variations of the contract taking place, if such take place after the transfer, the transfer itself is not causally linked to the fact of the variations in the contracts of employment. However, it also has to be said that while the authorities such as they are and in particular, Daddy's Dance Hall supra and Wilson supra support this proposition in particular where the variations are validly imposed by national law, the fact that they are so validly imposed is not enough to establish an immediate link with an admitted transfer of undertaking in terms of the Regulations. Such must be established upon the evidence.

6. This last proposition seems to us to be the critical factor in this case since at the end of the day the parties were not really divided on the legal principles. There was some discussion as to whether the onus of establishing a relevant transfer rested with the respondents since they brought the original claim for unlawful deduction to establish such a causal link or with the appellants to establish there was no causal link.

7. We would not consider it advisable to decide this case at this level on any question of onus nor do we think it appropriate to raise to the level of presumption in law that a variation in a contract of employment after a transfer, establishes, until it is rebutted, a causal link between the two. Rather we prefer to approach the matter on the simple evidential basis but posing the question, "was there evidence before the Tribunal to entitle it to reach the decision it did that there was a causal link in this case." (my emphasis)

Remaining mindful that I was required to interpret the Regulations in a "purposive" manner I arrived at the view, albeit with a considerable degree of hesitation, as the position with regard to post transfer variations are not at all clear from the cases to which I was referred and in particular Wilson, that the transfer itself was not causally linked to the variation in Mr Lorimer's contract of employment. In arriving at this view I was mindful of the manner in which the contract had been varied, the acceptance of the job description by the applicant on 20 June 1997 (R7) without protest and the other matters detailed above which I had regard to in arriving at my view that the contract had been varied. I accepted the submission by the respondents' Counsel that the transfer in the present case simply provided the "occasion" for the change rather than being the reason for the variation. Accordingly the variation of the contract was valid under TUPE and there was no unlawful deduction from the applicant's wages in contravention of Section 13 of the Employment Rights Act 1996.

8. Before taking the matter any further, it requires to be stated that Mr McCreadie, appearing for the appellant, in the course of amending his grounds of appeal, sought to introduce as a matter of competency the position arising under section 4(5) of the Employment Rights Act 1996 with regard to the duties incumbent upon a Chairman intending to sit alone, the issue turning upon whether or not, if that subsection applied, the Chairman was obliged to state that he had considered the matter and exercised his discretion or, at least, discussed the matter with parties. This issue, which Mr Napier, appearing for the respondents, accepted, could be competently taken since it was an issue going essentially to jurisdiction, has been the subject of a number of diverse decisions.
9. In the English EAT (Sogbetun v Hackney London Borough Council [1998] ICR 1264) the then President held that the duty imposed by subsection (5) was mandatory and could not be waived or consented to. The failure of the Chairman to exercise the relevant discretion amounted to a nullity.
10. This Tribunal followed that decision in Harman v Town & Country Veterinary Group EAT/71/01 (unreported) and James Dressel v Partnership Housing Ltd EATS/0048/02 (unreported). However, in the meantime, the subsequent President of the EAT, in the Morgan & Another v Brith Gof Cyf [2001] ICR 978 held that Sogbetun went too far and the matter was not so much to be regarded as a nullity but a mere irregularity which admitted greater flexibility as to what the EAT might be in a position to do in this type of situation. This decision conformed to the views of another EAT decision in England, Post Office v Howell [2000] IRLR 224.
11. While the latter case was referred to this Tribunal in its decisions, the more important decision of Morgan was not. Accordingly, on the face of the record, there is a diversity of authority between Scotland and England on this point, in what should be a national jurisdiction.
12. In this state of affairs this Tribunal considers that it is inappropriate for such diversity to exist and having regard to the fact that Morgan has overruled Sogbetun, it seems appropriate that this Tribunal should follow that line. Accordingly, insofar as in Dressel, we stated that there was a mandatory duty on the part of the Chairman to exercise his discretion and he if failed manifestly to do so, the matter was a nullity. That approach should be varied to the lower threshold that there is a duty on the Tribunal Chairman so to exercise his discretion and raise the matter with parties but it is not an absolute one in a sense of resulting in a nullity if it is not performed.
13. We note that in Howell, the EAT sent the matter back to a Tribunal consisting of three persons but we do not, with respect, see how this can competently be done. However, we note in Morgan, that the EAT is prepared to look in a flexible way at the particular circumstances, and, in that particular case, it allowed the matter to proceed on the basis that the Chairman sitting alone, although irregular, did not nullify the whole proceedings. While we would emphasise, or repeat what we said in Dressel about what Chairmen are required to do, we are prepared in this case to follow the same line as taken in Morgan. This case has a long history. It has an unfortunate procedural history and it would be extremely unfortunate if what are points which are eminently decidable by a Chairman sitting alone, should not now be dealt with, simply because the discretion was manifestly not exercised, notwithstanding the fact that both parties consented.
14. In these circumstances and for these particular reasons in this particular case, we will entertain the appeal.
15.              Mr McCreadie, in opening his submissions, amended his grounds of appeal to some material extent at least in one respect.
16. His first submission was to the effect that while there might be evidence before the Tribunal to warrant acquiescence in the overall change of job as far as the appellant was concerned, there was no evidence that the appellant had actual knowledge of the reduction in salary and until the issue of detriment was brought to his attention in late 1997. This submission was, of course, predicated on the assertion which requires to be accepted that he had not received the original letter of 11 April 1996. Mr McCreadie developed this point to the extent that he maintained that the subsequent actions by the appellant were all consistent with him not accepting the drop in salary once he knew about it, albeit, they were concentrated on the issue of detriment and job regrading. Accordingly, upon the evidence, he submitted, it could not be affirmed that he had consented to or acquiesced in the term of the contract dealing with the reduction in salary. The Tribunal Chairman had gone too far in dealing with the matter generally as a variation of contract. There required to be an express acceptance by the appellant whether by act or deed that he accepted the salary reduction and this he had never done. This proposition was of course predicated on the general proposition of law that a variation to a contract could only be lawfully made if it was consented to by the other party. There are many ways in which such consent could be either expressed or implied but it must be present (Burdett-Coutts and Others v Hertfordshire County Council [1984] IRLR 9).
17. Mr Napier, Q.C., appearing for the respondents, dealt with this branch of the case by basing his assertions on the fact that, at no time had the appellant ever expressly stated that he was not accepting the salary reduction, nor did he properly protest it once he must have known about it, at least, when the question of detriment was first raised with him in late 1997. In any event, he submitted, by March 1998 when the issue had been settled, there was clear knowledge that the salary was being reduced and, yet, submitted Mr Napier, the only steps taken by the appellant were to go to an Employment Tribunal challenging the issue of detriment and nothing else. The question of unlawful deduction of wages was only raised in the present application for the first time. Accordingly the decision of the Tribunal was legitimate in inferring that there had been variation of the contractual term relating to salary accepted by the actings of the appellant or, at least acquiesced in, it was submitted, by the limited action that he took. He could have expressly protested or rejected the lower salary. Mr Napier also reminded us of the consequences of a finding in favour of the appellant inasmuch that he would be entitled to continue to claim his pre-employment salary indefinitely for a job that was no longer rated fit for it.
18. We are conscious that the argument now presented to us in this respect, differs in some material respects from that presented to the Tribunal, although the Tribunal does note the limited action taken by the employee. It does not, however, take into account, the fact that the letter of 11 April was not received.
19. Be that as it may, we are of the opinion, that the actions taken by the employee appellant, as soon as he was aware of the reduced salary position, namely, the appeal and the subsequent application to the Employment Tribunal which failed, are all indicative of a protest and a non-acceptance of the reduced salary and are not consistent with acquiescence or acceptance of that position. While we recognise that it is a question of fact, we consider that, through no fault of its own, the Tribunal did not properly address the issue of consent against the background of the non-receipt of the letter of 11 April, nor are we persuaded that even if the action taken by the appellant could be described as limited, it is sufficient to infer an overall consent to the salary reduction. He was challenging the whole issue of grading and the corresponding effect that detriment compensation would have on his salary in the long term. We therefore consider that this Tribunal is entitled to draw the inference against the background of a misdirection by the Tribunal below that the actions on the admitted facts taken by the appellant did not amount to a consent or acceptance of the lower salary. That being so, we do not consider that a variation of the contract in relation to the term regarding salary was competently effected. Consent of the applicant is of the essence and we do not consider it to have been present, however unfortunate the consequences may be for the employer.
20. In these circumstances we will allow this branch of the appeal, quash the decision in that respect and make a finding that the appellant has suffered an unlawful deduction of wages representing the difference between the previous employment's salary and the present one from 1 April 1996. If this matter is not taken further, we presume the figures can be agreed.
21. In these circumstances the second issue becomes redundant but it is necessary nevertheless that we deal with the matter in any event. The law recognises that a purported variation of an employee's contract to which TUPE applies in the context of a relevant transfer, is invalid if it is due to the transfer itself. The law also recognises that there can be a number of other reasons unrelated to the transfer or not sufficiently related to the transfer to defeat that proposition (Wilson & Others v St Helens Borough Council) and (British Fuels Ltd v Baxendale and Meade [1998] IRLR 706), a decision of the House of Lords and Ralton & Others v Havering College of Further & Higher Education [2001] IRLR 735.
22. This Tribunal endeavoured to set out the tests to be applied at this level with regard to the determination of the issue thus stated in Carlton Care Ltd v Mrs Patricia Rooney & Others EAT/112/00.
23. The Tribunal, in its decision, followed that approach, which we need not repeat, as indeed did both Counsel. Essentially, Mr McCreadie submitted that the Tribunal had erred in determining that there was no connection or link by referring again to the same factors upon which it had based its decision as regards the existence of a variation in the contract by consent That, he said, was the reason apparently that the Tribunal put forward but the proper test should be whether the causal link existed on the basis of a "but for" test. He submitted that the question was to be determined against a background of whether or not if the transfer had not taken place there would not have been the purported variation. He further submitted that an agreement to such a variation which thus affected a variation could not be another reason because, if that was the case, no variation, properly understood, of a contract which required consent, could ever be invalidated by the regulations which were designed to protect employees against the effect of the transfer on his or her previous employment conditions.
24. Mr Napier's position on this matter, was the direct converse, namely, that the agreement which by definition was established if the variation had been competently effected was the real reason and was unconnected with the transfer.
25. We recognise that the "but for" test might have some relevance, in the sense that without the existence of the transfer, the issue does not arise but that is as far as we consider that aspect goes. For a causal link not to be established there must be evidence which supports a wholly separate cause unrelated to it. The transfer can thus be the background or, indeed, the occasion (Ralton) but not directly related to the reasons for the variation.
26. We are persuaded that to define the agreement relating to a variation of a contract as a reason separate from the transfer when no other reason is being advanced for the variation other than the transfer, is to overstate the matter if not to misunderstand the position. The very fact that a variation requires consent, in our opinion, means that for a variation to come into play on the question of causal link with a transfer, it must have been otherwise validly established. By definition, if it was not validly established, the issue would not arise and that is precisely why, upon our view of things, it does not arise now in this case.
27. However, while we have therefore reached the view that the Tribunal misdirected itself on this aspect of the matter, we would not ourselves have been inclined to enter a contrary finding. If the appeal before us turned on this matter, we would have remitted the case back for a further consideration by the same Chairman as to whether or not there was a reason other than the transfer existing as the cause of the variation, not being the agreement leading to the variation.
28. In these circumstances we will allow the appeal to the extent of making the finding which we have set out and make no further order.