United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C WALKER (of Counsel) Instructed by: Messrs Wacks Caller Solicitors Steam Packet House 76 Cross Street Manchester M2 4JU
For the Respondent	THE RESPONDENT IN PERSON


 


SUMMARY

Contract frustrated: no implied term that employee would be paid if there was no work.

THE HONOURABLE MR JUSTICE BURTON (PRESIDENT)

1. This is the hearing of the appeal by Manpower UK Ltd, which was Respondent to a claim by the Applicant, Mr Lee Mulford, in the Employment Tribunal at Ashford. The Decision against which Manpower UK Ltd appeal was a unanimous Decision by the Tribunal, promulgated on 4 February 2003, that the Applicant had sufficient service to claim constructive dismissal, and that the Respondent had failed to pay to the Applicant wages, to which the Tribunal found the Applicant entitled, for the weeks 2 August 2002 and 9 August 2002, and there was an Order for payment of £500. The Tribunal, having concluded that there was jurisdiction, would have gone on to consider the merits of the Applicant's claim for unfair dismissal, but for this appeal.
2. Mr Mulford had been employed by a company called "Easiwipes Ltd" since 17 October 2000, as a warehousing and services controller. He remained so employed by Easiwipes until what was conceded before the Tribunal to be a transfer of undertaking governed by the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") on 5 April 2002. As a result of the TUPE transfer, the Applicant's employment was transferred to the Respondent, Manpower UK Ltd.
3. The legal position is that on a TUPE transfer, an employee ordinarily transfers from the transferor of the business to the transferee of the business on the same terms and conditions of employment as governed his employment by the transferor, and be so transferred. His employment by Easiwipes UK Ltd was governed by a contract of employment, which was not only in writing but was in an official and well set out form, which consisted, by the time he was transferred, of a principal statement of employment, with particulars, and a supplementary statement of employment, with particulars, and there were annexed to the back of both those two documents notes addressed to the employer and the employee which clarified the contents of those contracts.
4. His employment as a warehousing and services controller was on what one might call a fairly normal basis. The terms of his employment were for payment of a sum of £300 per week, described as basic pay, and his hours of work were described as "Flexible according to needs of job Basic hours 08.00 to 17.00 hrs". So far as his place of work was concerned, that was expressly prescribed as the address of Easiwipes Ltd, namely Bailey Drive, Gillingham Business Park, Gillingham, Kent, because there was an entry on the form "Place of work is the same as above address" and the answer "Yes".
5. Thus he was employed for the period until the transfer, and his evidence was that there was always work for him to do, on effectively what one might call a 9 to 5 job at a one premises company. Manpower have different terms and conditions for its employees. It is, of course, a well known and large group, and the terms of employment with Manpower, which company is in a position to place its employees in a large number of different premises where they are assigned to different clients, is that the employee is only paid when he or she has such a placement or assignment.
6. The terms of the Manpower contract in material part reads as follows:

"Manpower will, of course, make every effort to assign you at all times that you wish, however, this may not always be possible. You are, therefore, paid for all the hours actually worked during assignment as certified by the client on a work record. This means you are not paid if you do not actually have an assignment. Neither are you paid for time taken off for meals or any other purpose during assignments."

Because the Applicant was transferred under TUPE, although he was thereafter employed by Manpower, he was not employed on Manpower's terms and conditions, although that fact may have been forgotten by Manpower. He continued to be employed at his old premises, Easiwipes, but by Manpower, yet on Easiwipes' terms and conditions.

7. Unfortunately, and for reasons which were not explored before the Employment Tribunal and were not directly relevant to the matters before them or, consequently, before us, the Applicant appears to have lost favour with Easiwipes. Paragraph 14 of the Tribunal's Decision reads as follows:

"Mr Mulford continued to work at Easiwipes Ltd until 26 July 2002. Easiwipes Ltd then informed Mr O'Reilly"

[who was the relevant supervisor at the Respondent]

"that Mr Mulford should be removed from his assignment because of his high levels of absenteeism."

That meant that the Applicant could no longer work at Easiwipes, and Manpower could no longer place him at Easiwipes. The Tribunal recites the following in terms of facts in paragraph 15:

"Mr Mulford was then offered work for the Royal Mail."

[That is, of course, offered work by Manpower at the Royal Mail]

"It involved heavy mail bags, and Mr Mulford was unable to accept it, due to a back injury. He was offered a further assignment as Sainsbury's, beginning with a 12 hour shift at the weekend. He was unable to accept this assignment, as he had already made arrangements for the weekend. He was then offered a three week assignment, beginning on 12 August 2002 as a Fork Lift Operative. He accepted this assignment and worked for them until 30 August."

The Tribunal records that he was not paid for the week ending 2 August 2002, nor for the week ending 9 August 2002; of course, during that period, he was not in fact working. He declined, after 30 August 2002, to do any further work for Manpower, although Manpower were willing to offer him further assignments, and treated that resignation as constructive dismissal, and that forms the basis of his claim.

8. The issue of jurisdiction arose because the point was taken by Manpower that the Applicant did not have sufficient service to sue them for unfair dismissal, and the claim for non-payment of wages was resisted on the basis that he had not worked, and, in those circumstances, was not entitled to payment. The Tribunal, erroneously, recorded the following in paragraph 5 of its Decision:

"Mr Bains, on behalf of the company, conceded in correspondence prior to the hearing that there had been a transfer of an undertaking from Easiwipes Ltd to the company within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations. It follows that the preliminary issue was resolved, in that the Applicant did have one year's continuous service on the effective date of termination."

[which, as we have heard, was 30 August 2002].

9. That was erroneous because the concession had been made in respect of TUPE in circumstances that have not been explained, (as Manpower had pleaded that they did not accept that there had been a TUPE transfer, and by the time of the hearing that denial had been withdrawn) but the issue which was effectively before the Tribunal still remained one as to whether the Applicant had sufficient service with Manpower; because the issue was not whether the original Easiwipes terms continued after the transfer on 5 April 2002, but rather whether the Applicant continued to work for Manpower UK Ltd at all, after 26 July 2002.
10. The issue that was before the Tribunal and raised by Manpower, was that the contract which, on the basis of the TUPE Regulations, had been transferred to them since 5 April 2002, had come to an end on 26 July 2002, by frustration; the frustration being that the purpose of the contract had been rendered ineffective by the fact that he could no longer work at Easiwipes, which was the function of the Easiwipes contract, to which we have referred.
11. We deal first with the submissions which were made below, and which were repeated before us by Mr Walker, on Manpower's behalf, that the proper construction of what occurred in this case was frustration, once the Applicant, employed on the Easiwipes terms and conditions as he was, could no longer work at Easiwipes. The Respondent below was represented by a Mr Bains, a legal adviser, and the Applicant acted in person. The Tribunal, however, had the benefit of legal submissions by Mr Bains, and, in particular, Mr Bains relied for the proposition that there was frustration of the contract, on the closely analogous case of Stanley Wattam Ltd -v- Rippin, EAT/355/98 a decision of the Employment Appeal Tribunal per Judge Byrt QC, on 29 October 1998. That was a case in which Mrs Rippin was employed by the respondent company (the appellant before the EAT) as a chicken sexer; and on the facts of the case, she was no longer entitled to continue to work at the premises as a chicken sexer, because she was excluded from the hatchery. The finding of the employment tribunal in that case was summarised by Judge Byrt QC as follows at page 4A

"They felt that notwithstanding the fact that Mr Reader had taken the course of excluding Mrs Rippin from the hatchery, the contract of employment was still alive between Mrs Rippin and Wattam, for after all it was they who were her employers. It was felt there were other things Mr Wattam might have done to avoid frustration of the contract."

but the conclusion of the Employment Appeal Tribunal at page 6D was:-

"In all the circumstances, we think that this is a classic case of a frustrated contract. It led to Mrs Rippin's exclusion from the hatchery, led to a situation where the Respondents were unable to continue to employer her. As I have said it was not Wattam's fault nor arguably was it Mrs Rippin's fault. There were no alternative routes down which the employers were able to go in seeking ways of continuing Mrs Rippin's employment."

12. On its face that case was so closely similar to the present, in which Manpower were unable to continue to employ the Applicant at the Easiwipes premises, that the same conclusion, namely frustration of the contract, could well be compelled. It may be that the reason why the conclusion was not felt to be so compelling by the Employment Tribunal was that it is apparent from the correspondence that the position that was taken by the Applicant and the Respondent in the days and weeks after 26 July, was that both of them were contending that a contract of employment between the Applicant and Manpower continued.
13. The Applicant was asserting that he was still entitled to be employed by Manpower at Easiwipes Ltd, and was entitled to reject any alternative, and be paid nevertheless. Manpower, erroneously as was plainly the case, were asserting that the Applicant was employed on Manpower's terms and conditions, and that they were entitled, and indeed obliged, to offer him alternative employment, but that if he did not choose to accept that alternative employment, then he need not be paid, on the basis of the Manpower terms and conditions.
14. However, the doctrine of frustration does not depend upon the understanding or position-taking of the parties to the contract after it has been frustrated, if that is what has occurred. Frustration is an objective question. That much is clear from the decision of the Employment Appeal Tribunal in Sharp -v- Mcmillan [1998] IRLR 632, a case in which the contract of employment was frustrated by the applicant's permanent inability to carry out his work, but the parties had agreed to "keep the contract alive" without him working, so as to maximise his pension benefits.
15. The conclusion of the Employment Appeal Tribunal, per Lord Johnston, was that the contracts had been frustrated when the Applicant ceased to be in a position to work, and such was accepted, and that the arrangement that was thereafter made did not perpetuate the contract of employment. At paragraph 20 Lord Johnston said as follows:

"It respectfully seems to us that if a contract is frustrated by operation of law, there is nothing to revive and a nullity has to be declared. There is nothing to prevent parties entering into a new arrangement, but they must do so with a clear intention to achieve that result or else there is consensus ad idem. If the parties both think that what is in fact the case is that the previous contract is still subsisting, there is intention to create a new contract since there exists a mistaken belief on the part of both parties that the old contract is subsisting. The proper legal analysis of that position is that the contract is frustrated, is dead and nothing has taken its place. In our opinion, therefore, whatever be the legal relationship between the parties in this case after 3 December 1995, it was not regulated by a contract of employment properly understood."

16. If in fact this contract, on Easiwipes terms, was what one would call a normal contract of employment, working at Easiwipes for certain numbers of hours in return for remuneration, then the contract, once transferred to Manpower, was, in our judgment, plainly frustrated, once it could no longer be performed. But the Tribunal appears to have concluded that this was not such a normal contract, and that led them to the conclusion that the contract between Manpower and the Applicant continued, notwithstanding his inability to work at Easiwipes, and indeed, continued so that he should be paid wages for the weeks ending 2 and 9 August, even though he did not and was not in a position to work at Easiwipes, nor indeed worked at Manpower at all.
17. The basis upon which the Tribunal reached that conclusion can be gleaned from three paragraphs in the Decision.

"8. Mr Mulford began working for Easiwipes Ltd on 17 October 2000. His contract stated, with regard to hours of work, "hours worked flexible according to needs of job, basic hours 08.00 hours to 17.00 hours." There was no express term which dealt with the situation where no work was available. In practice. throughout Mr Mulford's employment by Easiwipes Ltd, there was work for him to do. The clear understanding, however, was that he would be paid even if there was no work for him in a particular week. "

We underline that last sentence. Paragraph 19 read as follows:

"19 The Tribunal concluded unanimously that the company had failed to pay Mr Mulford wages which he was due to be paid under his contract, under Easiwipes Ltd, he would have been paid even if no work was available. …

20. When the Easiwipes Ltd assignment ended, that did not change the Applicant's terms and conditions relating to payment when he was not given work. "

18. If indeed there was a term of the contract between the Applicant and Easiwipes entitling him to be paid, even if there was no work at Easiwipes, then (a) that would entitle him to be paid on the same terms by Manpower, and (b) it would mean that the contract was not, as we are satisfied it otherwise would be, frustrated.
19. It is noteworthy that the Tribunal does not use any contractual language in those paragraphs. It uses the words "the clear understanding". It would be necessary, in order to begin to get off its feet the case that the Tribunal appear to have found, for them to have concluded that there was an implied term of the contract of employment between the Applicant and Easiwipes Ltd that he would be paid even if there was no work available.
20. There are well established laws and rules about the incorporation into a contract of an implied term. The first requirement is that an implied term must not contradict an express term. The second requirement is that an implied term must be certain, that is there must be, because there is the difficulty that it is not written down anywhere, all the more need that everyone should understand what it says, and that it should be capable of being cogently and clearly expressed as an implied term, with all its ramifications and consequences. Thirdly, such an implied term will not in any event be incorporated into a contract unless one of the various tests are satisfied. A number of different tests have been used; the test of business efficacy is the usual one; the test of necessity; the test of implication as a result of it being obvious, either to the parties or sometimes to an informed third party, looking objectively as to what was in fact agreed. But all those ways of establishing an implied term emphasise that it is more difficult to prove and establish an implied term, than an express term which was either orally agreed or set out in writing.
21. We begin by noting again that this Tribunal has not used the words "implied term" and we conclude that the very fact that they baulked at the use of that word and rested their case on a so-called "clear understanding", perhaps evidences the difficulty that the Tribunal would have had in finding an implied term if it had set its mind to do so. But we shall deal in turn with each of the three requirements for the incorporation of an implied term, on the basis of assuming that instead of the words "a clear understanding" the Tribunal had used the words "we are satisfied that there was [on some basis or another] an implied term of the contract", that he would be paid even if there was no work for him in a particular week.
22. Inconsistency with express term We found it surprising that the basis on which the Tribunal come to its apparent conclusion as to clear understanding appeared nowhere in the Decision. The immediately preceding sentence in paragraph 8 records that in practice throughout Mr Mulford's employment by Easiwipes Ltd there was work for him to do; but it is apparent that that aspect is not the source of the conclusion as to the existence that the understanding or the implied term, because the sentence setting out the clear understanding incorporates the word "however" rather than the word "therefore", so that it does not appear that it is as a consequence of the fact that in practice there was work, that the clear understanding is said to arise. In any event, it would be wholly insufficient that there always was work to draw any inference or conclusion, as to what the position would be if there was no work. Indeed, it emphasises and suggests that there never was an occasion at which the parties had to turn their mind to such a question.
23. But because there was nothing in the Decision which appeared to show where this conclusion about clear understanding had come from - and on any basis, therefore, the Decision could be said to offend against the principles of Meek -v- City of Birmingham [1987] IRLR 200, that reasons for any material conclusion ought to be, if not actually set out, certainly apparent from the Decision - we sought to explore with the parties whether there was any evidence from which such a conclusion could be deduced.
24. It was apparent that there was no evidence given by anyone from Easiwipes, because no witness from Easiwipes was called, and Mr O'Reilly was the only witness called for the Respondent, who would have had no knowledge of the position, and is not suggested to have given any relevant evidence. There was, therefore, no oral evidence given by one side of the Easiwipes contract, from which any inference might have been drawn at all.
25. As to the other side of the contract, we explored with the Applicant, who has ably and courteously argued his case with the assistance of Mrs Mulford before us today, whether he gave any evidence from which any inference could be drawn, and he frankly accepted that there was none. The point that he and his wife made was that there was a document which was handed out to the Employment Tribunal which appeared to have been influential with, at any rate, one member of the Employment Tribunal, and that was what was described as being the "back page" of the contract of employment, to which we have referred, containing the Easiwipes terms and conditions.
26. Once the rest of the argument had been concluded, we allowed an adjournment while that back page was obtained. It was obvious from the front page, which referred to notes, that the back page was going to contain such notes, and the two back pages, when they were delivered, did indeed contain such notes. We were helpfully supplied with materially identical copies, which the Applicant and his wife managed to obtain from their home, being the document which was in fact, it seemed, handed up at the Employment Tribunal, and the Respondent's solicitors obtained a similar copy from Easiwipes, also by fax.
27. When we obtained those notes, it was apparent that, far from a clear understanding that the Applicant would be paid, even if there was no work for him in a particular week, the notes made clear that the reverse was the case. The notes read in material part as follows:

"In the event of work shortage or a circumstance beyond the control of the employer which prevents normal working, the employer reserves the right to lay employees off or impose short-time working. Payment during such periods will be at the employer's discretion and therefore payment may be withheld as appropriate."

If indeed the Employment Tribunal saw that document, as Mrs Mulford told us they did, it makes it not only the more surprising that they should have recited their view as to the clear understanding between Mr Mulford and Easiwipes, but even more astonishing that they should have said, in paragraph 8 that "there was no express term which dealt with the situation where no work was available". Be that as it may, the first requirement for the incorporation of an implied term, namely that it should not contradict anything that could be interpreted as being an express term, is not satisfied.

28. Secondly, the question of certainty. If there were an implied term that the Applicant would be paid by Easiwipes, even if there was no work for him, it would seem to us that that would be wholly insufficient, as an implied term of a contract. It would need, inevitably, to be accompanied by at least the following matters. First, how long was the employer to be bound to pay, even if there was no work. Secondly, how long was the employee to be bound to be required effectively to stay at home and moulder, and accept his employer paying him money, if such be the case?
29. Thirdly, was there to be, or would there be, a term, or part of such implied term, which would require or entitle the employee to be offered reasonable alternative employment by the employer. That would be an essential part of any such implied term, and might well be workable, for example in such a case as Stanley Wattam Ltd, but it would hardly appear workable in a case such as this, where Easiwipes Ltd were a one-premises company. Irrespective, however, as to whether in fact such a term might have been carried through, there is no sign in the Employment Tribunal's Decision as to what it was, or would have been, so as to be able to conclude that there was certainty in relation to what term was or would have been implied.
30. The third requirement, assuming that an implied term had surmounted the first two hurdles which, in our judgment, it plainly did not, would be as to a basis on which a term so enunciated could be implied, and it would appear to us not only that there is no such conclusion in the Employment Tribunal Decision, but that in any event, it would be difficult to see on what basis an implied term that the employer would be in some way bound, and/or that the employee would be in some way bound to accept no work for full pay, for any kind of period.
31. In those circumstances we are satisfied that, even if the Tribunal had expressed the 'clear understanding' as being an implied term, no such implied term is supportable or arguable. We are satisfied, therefore, that not only did the Employment Tribunal err in concluding that the preliminary issue was resolved by the TUPE concession, paragraph 5, but also that assuming, in its favour, that we conclude that the Tribunal had considered the same issues as it considered in relation to whether the Applicant was entitled to wages, under the heading of "Jurisdiction", and thus come to the same conclusion as it did, that there was this 'clear understanding' which entitled the Applicant to regard himself as still employed, that conclusion would have been unsupportable; and indeed that those errors cannot be made good by sending the matter back to another Employment Tribunal, because we are entirely satisfied that no reasonable Employment Tribunal could come to any other conclusion in relation to this case, but that the contract was frustrated, and there was no implied term, such as suggested, or possibly suggested, in paragraph 8 of the Employment Tribunal's Decision.
32. It is fortunate that, it seems, the Applicant has not lost a great deal as a result of his being unable to pursue his claim in the Employment Tribunal, and it is to be hoped indeed that the Respondent may still be willing to at least consider employing him again, as they were keen to do at the end of August 2002. However it is clear, in our judgment, that the Employment Tribunal's Decision must be quashed, and that the proper conclusion here is that the Applicant was no longer employed by Manpower UK Ltd after 26 July 2002, and that his contract with Manpower was then frustrated, and so there was no jurisdiction to claim constructive dismissal and no right to wages from that power in respect of the weeks ending 2 August and 9 August 2002, and consequently, this appeal is allowed and the order of the Employment Tribunal discharged.