United Kingdom Employment Appeal Tribunal

APPEARANCES

 

 

For the Appellant	Mr J Peoples, Queen's Counsel Instructed by- Messrs Digby Brown Solicitors Employment Unit The Savoy Tower 77 Renfrew Street GLASGOW G2 3BZ
For the Respondent	Mr B Napier, Queen's Counsel Instructed by- Messrs Maclay Murray & Spens Solicitors 151 St Vincent Street GLASGOW G1 5NJ

SUMMARY
CONTRACT OF EMPLOYMENT

Written Particulars

The issue was whether or not the employers were bound to fix those dates so as to accord with local public holidays. It fell to be determined by interpreting contracts of employment which included the terms of a collective agreement, which did not require that the employers do so.


 


THE HONOURABLE LADY SMITH:

1. This case concerns the interpretation of the claimants' contracts of employment in the context of claims by them that they have been subjected to unlawful deductions from their wages.
2. This judgment represents the views of all three members who have pre-read the relevant papers.
3. We will refer to the parties as claimants and respondents.
4. This is an appeal by the claimants against a decision of the Employment Tribunal sitting at Edinburgh registered on 28 June 2004. The Chairman was Mr K J McGowan. The claimants were represented there by Ms M Gribbon, solicitor and before us by Mr J.Peoples QC. The respondents were represented there by Mr C Phillips, solicitor and before us by Mr B. Napier QC.
5. The respondents are a company that is involved in the production, distribution and marketing of a wide collection of spirits, wines and beers and they employ some 4000 people in Scotland, which is one of its largest supply centres. The claimants' contracts of employment all entitled them to nine days "statutory/occasional holidays" in addition to their normal annual leave.
6. The trigger for these complaints was the respondents' decision to effect, in certain cases, a shift away from a prior practice of allocating dates for "occasional holidays" so as to accord with public holidays fixed by local authorities and, in the case of their Shieldhall plant, the Glasgow Chamber of Commerce, to one whereby some of these holidays would be fixed for other dates, for example, a date during the Christmas and New Year period. The practical effect for the claimants was that, since by the time of the change, plants were liable to be operating on local public holidays but not during the Christmas and New Year period, they would thereby be deprived of the opportunity to earn enhanced pay if they worked on a local public holiday, something to which they would have been entitled if that holiday had been fixed by the respondents as one of the "occasional holidays".

The Employment Tribunal

7. Before the Employment Tribunal, the claimants contended that, on a proper interpretation of their contracts of employment, the respondents were bound to fix occasional holidays in accordance with local public holidays. The respondents, on the other hand, contended that they were entitled to fix occasional holidays for dates of their choosing.
8. The essential issue, as defined by the Employment Tribunal was whether the terms of the contracts of employment were such as to allow the respondents to fix occasional holidays for dates other than local public holidays. The Employment Tribunal decided that they were. It was argued before them, on behalf of the claimants, that custom and practice required to be used as an aid to construction because the contracts in question included the terms of a collective agreement and that custom and practice implied a term into the contracts that occasional holidays were local public holidays. On behalf of the respondents, it was argued that the contracts were not such as to bind them to use local public holidays which had not, in any event, been used in the case of every plant in the past. If parties had intended to restrict occasional holidays to local public holidays, they could have expressly done so. There was no need to resort to custom and practice. The Employment Tribunal accepted that it had been customary for the respondents to use local public holidays in the past but found that no term had been implied into the contracts that that would always be so. They held that the respondents had the right to fix occasional holidays at dates of their choosing.

The Present Appeal

9. The claimants appeal against that decision of the Employment Tribunal.
10. The relevant terms of the contracts of employment are to be found two places. Firstly, there are provisions in each employee's contract of employment which set out their holiday entitlement. Secondly, following on negotiations between the respondents and various trade unions in the mid 1990's, a composite agreement was reached which came into force in October 1995 and was known as the "Positive Partnership Agreement" ('PPA'). It was agreed between parties that it was a collective agreement within the meaning of s.178 of the Trade Union and Labour Relations Act 1992 and that it was incorporated into the claimants' contracts of employment.

The Contractual Terms

11. The statements of conditions of employment issued to employees by the respondents prior to the PPA contained the following:

"Set out below are the particulars of employment which form part of your contract of employment.

Your main terms and conditions of employment are contained in this statement and the Employee Reference File which includes the Company/Union Agreement. Changes may take place from time to time and you will be notified of these.

Statutory/Occasional Holidays

You will be entitled to 9 statutory/occasional holidays a year as determined by the Company.

Annual Holidays

You will be entitled to 25 working days' holiday a year or on a proportional basis in the first twelve months of your employment.

•                         Your annual holidays must be taken by agreement with the Company. In the event of failure to agree mutually convenient dates, the Company reserves the right to fixed holiday dates.

•                         Your holiday entitlement on leaving the Company will be related to service in the holiday year.

More details about holidays are contained in the Employment Reference File."

The PPA included, at D.3, the following:

"Occasional Holidays

All employees are entitled to nine Occasional Holidays during each calendar year. The dates of these will be established according to local circumstances, and notified to employees at the start of each year."

The statements of terms of employment issued after the PPA came into force included the following:

"Set out below are the particulars of employment which form part of your contract of employment.

Your main terms and conditions of employment are contained in this statement, the Employee Information pack, the Personnel Policy Manual and the Union Agreement negotiated with the AEEU on behalf of the Craft bargaining group. These terms and conditions may be subject to change and you will be notified of any changes which affect you.

Statutory/Occasional Holidays

You will be entitled to 9 statutory/occasional holidays a year. Where service is less than one year, you will be entitled to those which fall within your period of employment within that year. The dates of such holidays will be determined by United Distillers locally."

The Claimants' Submissions

12. Senior counsel for the claimants submitted that the Employment Tribunal had erred in law in its construction of the contract. He submitted that it was necessary to take account of the factual background to the contract: Investors Compensation Scheme v West Bromwich Building Society [1998] 1AER 114; Adams v British Airways plc [1996] IRLR 574; Bank of Scotland v Dunedin Property Investment Company Ltd [1998] SC 657. It was, accordingly, relevant to take account of the custom and practice of fixing occasional holidays in accordance with local public holidays both before and after the PPA: Dunlop Tyres Ltd v Blows and ors [2001] IRLR 629. The Employment Tribunal had focussed too narrowly on the words used in the contracts.
13. It was submitted that the parties to the PPA could not be taken to have ever intended to confer on the employers an unfettered discretion to fix, as the employees' entitlement, any nine days of their choosing without them having any relation to recognised statutory holidays and local public holidays. That would mean that the respondents could fail to provide for a holiday on Christmas Day, for instance. The continuation after the PPA of what had been a long established practice was a clear indication that the parties to the PPA did not intend that agreement to alter the status quo.
14. It was not submitted on behalf of the claimants that the terms of the contracts were ambiguous although senior counsel did, at one point, observe that their terms were not as unambiguous as the Employment Tribunal said that they were. The thrust of his submissions was, though, not related to any submission that there was ambiguity in the contracts. Rather it was that the factual background was such as to indicate that parties had intended that local public holidays should be followed when occasional holidays were fixed.
15. Reference was also made to the case of Hain Steamship Company Limited v Sociedad Anonima Comercial de Exportacion Y Importacion & c 1932 Times LR 363 where it had been determined that the interpretation of a reference in a charterparty to 'holidays' was a question of fact.

Submissions for the Respondents

16. Senior counsel for the respondents submitted that the issue for determination was one of construction of the contracts of employment. The Employment Tribunal had, it was submitted, interpreted it correctly .The alteration, for commercial reasons related to production, in the dates at which "statutory/occasional holidays" were taken, was not unlawful.
17. In considering the interpretation of a collective agreement, it was appropriate to look at the factual context: Adams v British Airways plc [1996] IRLR 574. That was, in this case, the circumstances of the pre PPA contracts and the extent to which any change was brought about by the terms of the PPA. Regarding the claimants' reliance on practice, it was submitted that repetition by an employer of a practice which is seen as favourable by the employee does not give rise to a contractual entitlement if the employer retains the right to change it: Quinn v Calder Industrial Materials Ltd [1996] IRLR 126; McGowan v Readman and Richie, unrepd OH 2^nd March 2000; Pellowe v Pendragon plc EAT 804/98; Rank Xerox Ltd v Churchill [1988] IRLR 280. The proper approach was to begin by considering the terms of the collective agreement and see whether their prima facie meaning was displaced by specific circumstances: McGowan. Where a collective agreement is silent on a matter it is usually for good reason and it is not for the courts to rush to fill any gap by way of an implied term: Ali v Christian Salvesen Food Services Ltd [1997] IRLR 17. Further, implied terms could not be used to displace express terms covering the same ground.
18. It was submitted that there was no ambiguity in the terms used and, accordingly, the reference to the case of Dunlop was misplaced. There was, in the absence of ambiguity, no scope for any implied term whether based on custom, practice or anything else, to produce an effect contrary to the clear express terms in this case.
19. What had occurred in this case was that the PPA came into force against a background of statutory/occasional holidays being determined as to the date when they fell at the discretion of management and whilst there had been a long-standing practice of those holidays generally following local trade/public holidays, that practice was neither uniform nor consistent nor, importantly, did it represent a policy that was communicated to employees.
20. Even if it were relevant to consider custom and practice, it could, it was submitted, only be of any assistance if reasonable, notorious and certain: Solectron Scotland Ltd v Roper and ors [2004] IRLR 4. That could not be said of the circumstances of the present case which included that the fixing of holiday dates of workers was a matter of importance to management in a workplace that involves a complex production process so that it was, it was submitted, clear that the ability to fix such dates as were convenient to them would not be given up easily.

Decision:

21. We are satisfied that the terms of the claimants' contracts of employment regarding holidays are to be found in both the statements of terms of employment issued to them by the respondents and in the PPA. It is clear, in our view, from those terms, that employees are entitled to nine "statutory/occasional holidays", that the dates of those holidays will be determined by the respondents and that those dates will be so determined "according to local circumstances". That is what is provided in the PPA and although the wording in the statement of terms of employment issued thereafter are slightly different, they amount, in our view, to no more than a gloss on what had been agreed in the PPA. Certainly, neither party submitted that the statement of terms of employment amended or innovated on the agreement contained in the PPA.
22. We do not consider that any ambiguity arises whether within the provision contained in the PPA, within the relevant term of the statement of terms of employment or as between the two. We do not, accordingly, approach the task before us on the basis that this is a contract containing any ambiguity that requires to be resolved using reference to extrinsic evidence as an aid to interpretation. Nor do we find any assistance in the decision of the Court of Appeal in the case of Dunlop which, whilst setting out the approach that was to be adopted in the interpretation of a collective agreement, concerned an agreement which was said to be "truly ambiguous" and it is evident from the decision that the guidance given as to the proper approach was confined to that context. We note that no positive submission was made on behalf of the claimants that the contracts in the present case did contain ambiguity. The submission to the effect that the terms were not as ambiguous as the Employment Tribunal had stated was not developed and it rather seemed that it was recognised that no positive submission to the effect that the contract was ambiguous could be advanced.
23. We turn then to the question of what is meant by the provision that statutory/occasional holidays are to be as established according to local circumstances. Does that fall to be read as meaning that, so far as occasional holidays are concerned, they can only be established as being on dates which have been set by the relevant local authority as public holidays?
24. Firstly, we have considered the wording. We do not see that the language used whereby occasional holidays are to be established according to local circumstances is such that, if given its ordinary meaning, the dates require to coincide with dates fixed by local authorities as public holidays. The reference to 'occasional' in conjunction with 'statutory' seems to us to mean no more than that the holidays are to be non-statutory holidays of an irregular or infrequent nature. The term 'according to local circumstances' imports the idea, as a matter of language, that the person who fixes the dates, the respondents, must take account of facts and circumstances pertaining to the locality of each plant. As a matter of language, there is no indication that the only such circumstance will always be that the local authority has fixed particular dates as public holidays.
25. The question then arises as to whether, taking account of all the principles of interpretation, which go beyond looking purely at the language used, the interpretation of the reference to local circumstances is limited in the manner argued for by the claimants. A number of other factors arise for our consideration.
26. We note that, correctly in our view, parties were at one in submitting that in interpreting the collective agreement, it was appropriate to look at the factual context to decide its meaning. That that is the proper approach is borne out by what was said in both the Investors Compensation Scheme and Adams cases. It is, though, important to remember that the purpose in adopting that approach is not to investigate the subjective intentions of the parties but to ascertain what, testing the matter objectively, were their objective intentions. This is reflected in the approach taken in the case of Adams, where what was under consideration was the meaning of a collective agreement. The Master of the Rolls said, at para. 22:

"A collective agreement has special characteristics being made between an employer or employers' organisation on one side and a trade union or trade unions representative of employees on the other, usually following a negotiation. Thus it represents an industrial bargain, and probably represents a compromise between the conflicting aims of the parties …..But despite these special characteristics, a collective agreement must be construed like any other, giving a fair meaning to the words used in the factual context (known to the parties) which gave rise to the agreement."

Where parties parted company in their approach was in their view of how the factual background was to be characterised and what it evidenced as to their intentions. The claimants' approach seemed to be to the effect that because the norm, both before and after the PPA, had been that the respondents opted to fix occasional holidays in accordance with dates fixed by the relevant local authority as public holidays, that showed that there was a contractual obligation to do so. We are not satisfied that that is so.

27. Firstly, we note that the PPA provision reads as indicating that all local circumstances will be taken into account which would cover matters going beyond the dates of local public holidays. The context is such as to cover matters local in the sense of pertaining to the operation of a particular plant and in the sense of relating to circumstances in that geographical locality whether the dates of local public holidays or the dates when a local football team has an important fixture, for instance.
28. Secondly, we note that the practice of doing so prior to the PPA was in the context of a contractual term that made no reference to local circumstances at all and there was no suggestion that it had, for instance, been intimated to employees that that was the respondents' decided policy or that they had in some other way clearly departed from their express entitlement to fix the dates without reference to local circumstances at all. To put it another way, we do not consider that the respondents' actings go beyond the repetition of a practice which the employees no doubt felt favoured them but did not go as far as showing that the respondents had given up or lost their entitlement to depart from it.
29. Thirdly, we note that although the time when the PPA was entered into was an obvious occasion on which to state expressly that occasional holidays were to be fixed in accordance with local authority public holidays if that was what the parties contract had come to be, that was not done. As the Master of Rolls commented in Adams, collective agreements normally represent compromises or industrial bargains and we have no reason to think that the PPA was not a carefully negotiated compromise that could have so provided if that was what the parties intended at that time regarding what we accept must have been an important matter from the point of the view of the respondents' ability to manage their plants efficiently and effectively. We note the approach of the Court of Appeal in the case of Ali to the effect that where a collective agreement negotiated on a broad front for a substantial labour force (which was what appears to have happened in the present case) leaves any topic uncovered, the inference is not that there has been an omission so obvious as to require judicial correction but that the topic was omitted advisedly. Whilst we would hesitate before going so far as to infer that the omission of reference to holidays fixed by local authorities was done advisedly in the present case, we are of the view that the fact that a topic or detail is not covered does not immediately give rise to the need for judicial correction or supplementation.
30. Fourthly, we considered whether what occurred after the PPA was entered into was such as to indicate that what parties intended when it was entered into was that the term should operate as the claimants argued for. We do not see that it did. The problem for the claimants is, as we see it, that the practice adopted after the PPA was no different to that which had been adopted under the pre PPA contract at a time when there was no mention of local circumstances in the contract at all. The actings of the respondents were wholly consistent with their approach continuing to be that they had a discretion as to whether or not to opt for the local authority dates.
31. Fifthly, we considered whether the circumstances of the case were such as to show that the respondents' policy had achieved the status of a contractual term. Some assistance can be gained from the decision of the Employment Appeal Tribunal in Quinn where, on a similar issue, it was commented:

"In a case such as the present, the factors to which Browne-Wilkinson J referred are likely to be among the most important circumstances to be taken into account, but they have to be taken into account along with all the other circumstances of the case. Thus, for example, in our view, the question is not whether the period for which a policy has been followed is 'substantial' in some abstract sense, but whether, in relation to the other circumstances, it is sufficient to support the inference that that policy has achieved the status of a contractual term. Again, with regard to communication, the question seems to us to be not so much whether the policy has been made or become known directly to the employees or through intermediaries, but whether the circumstances in which it was made or has become known support the inference that the employers intended to become contractually bound by it."

In a similar vein, the recent decision of Elias J in the Solectron case includes the following comments:

"A custom or established practice applied with sufficient regularity may eventually become the source of an implied contractual term. That occurs where the point is reached when the courts are able to infer from the regular application of the practice that the parties must be taken to have accepted that the practice has crystallised into contractual rights. The parties must be shown to be applying the term because there is a sense of legal obligation to do so. That will often be a difficult matter to prove. For example, if a practice is adopted because a party does so as a matter of policy rather than out of a sense of legal obligation then it will not confer contractual rights: see Young v Canadian Northern Railway Company [1931] AC 32 (PC). Again the practice must be 'reasonable, notorious and certain': see Devonald v Rosser & Sons [1916] 2 KB 728 @743 per Farwell J. ……………It is neither reasonable nor certain because it is precarious depending on the will of the master."

32. We do not see that there is anything in the factual material that leads to the conclusion that the respondents' actings had undergone the passage from policy to contractual obligation. Whilst the PPA represented an inroad into their hitherto unfettered freedom to set dates to the extent that they required to be fixed according to local circumstances, the wording did not go further than that and we do not see that anything said or done by parties indicated that they had in fact at some stage, reached a consensus that it should.
33. We are, in summary, not satisfied that the facts and circumstances of the case are such as to displace the straightforward interpretation that the language of the parties agreement naturally bears so as to require the respondents to close their minds to all local circumstances apart from the dates set for local public holidays by the relevant local authority. The appeal falls to be dismissed.