United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR THOMAS ROE (of Counsel) (Appearing under the Employment Law Appeal Advice Scheme)


 


SUMMARY

REDUNDANCY

There was no error in the application of s221 and Gilbert to the calculation of the Claimant's redundancy payment.


 


HIS HONOUR JUDGE McMULLEN QC

1. This case is about the calculation of redundancy pay by reference to section 221 of the Employment Rights Act 1996. I will refer to the parties as the Claimant and the Respondent.

Introduction

2. It is an appeal by the Claimant in those proceedings against a reserved judgment of Employment Judge Pearl sitting alone at London Central, sent with Reasons on 15 April 2010 after a one-day hearing. The Claimant represented herself. The Respondent was represented by its Deputy Head of HR. The Claimant sought a redundancy payment. She was awarded £1,739.04. The Claimant contended she should be paid £1,973.33, a difference of £234.29. The Claimant appealed.
3. The central issue for determination before the Judge and here is: what is the correct method of calculating a week's pay for the purpose of the redundancy payment which the Respondent acknowledges it was obliged to make? In Haritaki v South East England Development Agency [2008] IRLR 945 paragraphs 1 to 13, I gave my approach to hearings under rule 3 and it should be read as to with this judgment. Underhill P gave his view:

"In my view the Judge was unarguably right. The denominator must be the weeks for which the Appellant was paid – that is, both the weeks that she actually worked and her weeks of holiday entitlement. That is in fact clear from the very paragraph of Gilbert on which the Appellant relies, which refers not to 40 weeks but to 43/44 weeks."

4. This is explicable by reference to the sole authority relevant in this case, which is Gilbert, North and Bellwood v Barnsley MBC [2002] UKEAT/674/00, a judgment of Wall J and members. The question for me is whether there is a reasonable prospect of success on a question of law in the single point which is raised.

The legislation

5. Employment Rights Act 1996 section 221 provides as follows:

"221 General

(1) This section and sections 222 and 223 apply where there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.

(2) Subject to section 222, if the employee's remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week's pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week."

6. These provisions relate to the statutory construct of a week's pay because redundancy payment is based on length of service, age and the amount of a week's pay as made up in the statutory way. It is an artificial formula, but one which has been in place for 45 years.

The facts

7. The Claimant was a careers adviser at Westminster Kingsway College, a college of further education on Gray's Inn Road in central London, from March 2004 until November 2008, when she was dismissed by reason of redundancy. The sole provision of the contract which she had which is relevant is this:

"4 Working Hours

Your working week and the pattern of working hours are set out in the appropriate schedule. Your average working week will be 20 hours per week, 40 weeks per year."

8. The Employment Judge was faced with competing views as to how to calculate the Claimant's week's pay. Broadly speaking, it was to use 40 weeks or to use 45.3884, which I will simplify as being 45 in this judgment. That is because she was precluded from taking holiday during the college terms and had to take it at the year-end or out of term. She would then be regarded as being on holiday; that is, working for the employer but on holiday. Otherwise, the employer would be in breach of the Working Time Regulations in providing 40 weeks without any holiday.
9. The precise calculations were set out by the Judge in the following way, for the parties had agreed on the facts:

"2 The parties are agreed on the basic facts of the case. The Claimant worked for 40 weeks a year, during term time. She was not permitted to take holidays during term time. Her total annual salary was £13,155.39. Because of the terms of the contract and the other considerations I set out below, the Respondent's stance is that this figure should be divided by 45.3884 in order to ascertain the amount of a week's pay. This would produce a weekly amount for redundancy purposes of £289.84. When multiplied by six (agreed to be the correct multiplier in this case) the redundancy pay comes out at £1739.04. The Claimant starts from a total annual salary of £13,155.60, which is virtually the same gross annual figure. She arrives at the weekly pay by dividing this figure by 40 rather than any higher amount. This produces £328.88 which, when multiplied by six, comes to approximately £1973.33. Therefore, the difference in the method of calculation gives rise to a dispute which can be quantified at £234.29."

10. The Judge resolved the issue in favour of the denominator being 45 and not 40. He did so by applying Gilbert. He also made an alternative finding arriving at the same solution, for he said this:

"18 To go beyond this and add my own analysis to Gilbert is ill advised; but a postscript can be added. The result I have come to is calculated by dividing the higher gross annual pay by the total number of weeks paid, including the holiday entitlement. However, the same result is produced if the lower figure of £11,592.09 for the 40 weeks (see paragraph 8 above) is divided by 40. On one view of paragraphs 41 and 43 of Gilbert, this may have been in the mind of the EAT. It may explain why reference was made to section 223(1) which provides that for the average hourly rate calculation, only hours when the employee was working and remuneration payable for, or apportionable to, those hours are brought in. I mention this because the Claimant wants the denominator to be the actual hours she was obliged to work. To succeed, she would still have to make the numerator the higher figure, and this might provide a logical objection to her argument."

The Claimant's argument

11. There is only one argument advanced by Mr Roe and that is that the Claimant was entitled at the end of her 40 weeks to regard herself as unemployed, she was not working thereafter, and that Gilbert assists. In my judgment, this is wrong. The approach in Gilbert is on all fours with the approach adopted by the judgment in this case and is correct.
12. The EAT in Gilbert said this:

"39 Although the contracts of employment in this case are agreed to be annual contracts, we cannot lose sight of the reality, which seems to us to be at the heart of each of these contracts, namely that the Appellants were paid to work for a total of 43 or 44 weeks a year (including holiday periods) and that none of the Appellants was required to work, did work, or were paid to work in the remaining 8/9 week of the year. Mr Gilbert's contract of employment says in terms that he is employed 'in a term-time only capacity for 37 hours per week'. The contract goes on to make it clear that he was paid for 44 weeks a year, and that the actual working year is 38 weeks and 2 days, with the balance of 5 weeks and 3 days being a pro rata payment of annual and public holidays applicable to full time staff. In this context, it is difficult to regard the manner of payment 'in twelve equal instalments' as being anything other than an administrative convenience, and we cannot give it the weight which Mr. Cavanagh's submissions require it to assume.

[…]

43 A week's pay, in our judgment, must relate to a week's work. Since the Appellants were required to work, and were paid to work for only 43/44 weeks it seems to us just that their modest redundancy payments should be calculated on the basis of the weeks they actually worked, and not on the basis of a notional 52 week calculation which takes into account weeks they did not work and for which they were not paid to work."

13. The Judge's approach, therefore, was consistent with authority binding upon him. It is open to the EAT, if an arguable point arises, for it to find that a previous judgment was wrong and would not be followed, however delicately that is put. That is not the case here. Mr Roe says the point is arguable; with respect, that is not the test. It has to be reasonably arguable raising a question of law.
14. The question of law here has been resolved by Gilbert. For entirely the same reasons, I agree with the President in his approach that Gilbert is controlling. Thus, although a question of law arises, it is not reasonably arguable.
15. Alternatively, as a matter of arithmetic, the alternative approach adopted by the Judge is equally sound. If this matter for the small amount of money were to be determined at a full hearing, it would be equally open to the EAT to uphold the judgment on the basis of paragraph 18. I dismiss the application and effectively the appeal.