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[1994] UKSSCSC CIS_743_1992 (17 June 1994)

R(IS) 9/95

Mr. M. J. Goodman CIS/743/1992

Income - guarantee payment - whether "earnings"

The claimant received a guarantee payment under section 12 of the Employment Protection (Consolidation) Act 1978. Income support was calculated on the basis that the payment was a retainer and fell to be treated as earnings under regulation 35(1)(e) of the Income Support (General) Regulations 1987. The tribunal allowed the claimant's appeal on the ground that the payment could not be considered as a retainer because the claimant undertook no additional commitment which did not already exist under his contract of employment. The adjudication officer appealed.

Held that:

(1) under section 13(4) of the Employment Protection (Consolidation) Act 1978, the employee is obliged to hold himself available for work for the employer on the days for which the guarantee payment is made and is also obliged to accept alternative work which is reasonable for him, even if under his contract of employment he is not obliged to do that work. Those obligations of the employee are a condition of receiving a statutory guarantee payment and clearly indicate that the payment is "by way of a retainer" falling within regulation 35(1)(e) of the Income Support (General) Regulations 1987. RI/80 (UB) was distinguishable (paras. 11 to 14);

(2) payments not falling within paragraphs (a)-(i) of regulation 35(1) of those regulations could nevertheless be earnings as the list set out in those paragraphs was not exhaustive (para. 15).

DECISION OF THE SOCIAL SECURITY COMMISSIONER

I allow the adjudication officer's appeal against the decision of the social security appeal tribunal dated 30 July 1992 as that decision is erroneous in law and I set it aside. I give the decision which the tribunal should have given namely that to the computation of the amount (if any) of income support payable to the claimant for the inclusive period from 13 April 1992 to 26 April 1992 the statutory guarantee payment by the claimant to his employer for the days 13, 14, 15 and 16 April 1992 and 21 April 1992 is to be taken into account as employed earner's earnings of the claimant, Social Security Administration Act 1992, section 23; Income Support (General) Regulations 1987, SI 1987 No. 1967, regulation 35(1)(e) and Schedule 8, paragraph 9.

This is an appeal to the Commissioner by the adjudication officer against the unanimous decision of a social security appeal tribunal dated 30 July 1992, which allowed the appeal of the claimant (a man born on 21 January 1960) against the decision of the local adjudication officer issued on 15 May 1992 as follows:

"The claimant is entitled to income support of £13.20 for the period 13 April 1992 to 16 April 1992 and £52.50 for the period 21 April 1992 to 24 April 1992 [should be period from 13 April 1992 to 26 April 1992]. This is because he received a guarantee payment of £70.50 for 13 April 1992 to 16 April 1992 and 21 April 1992."

The tribunal substituted as its decision:

"[The claimant] is entitled to income support calculated on the basis that the guarantee payment of £70.50 received should not be treated as earnings".

The appeal was the subject of an oral hearing before me on 25 May 1994 in which the claimant did not appear and was not represented. The adjudication officer was represented by Mr. L. Scoon of the Office of the Solicitor to the Departments of Health and Social Security, to whom I am indebted for his arguments.

The guarantee payment of £70.50 paid to the claimant for the days 13 to 16 April and 21 April 1992 was paid to the claimant by his employers in the following circumstances, as documented in the chairman's note of evidence:

"[The claimant] gave evidence that he had been employed by [an engineering company] for something over five years. He had a written contract of employment which was in a form common to the workforce. There was nothing in the contract so far as he was aware dealing with the making of a guarantee payment under section 12 of the Employment Protection (Consolidation) Act 1978 or the payment of a retainer. There was an interruption of work in April 1992 resulting from the recession when the employers had no work to offer the workforce. There was a meeting of the workforce with representatives of the management and an information officer from DSS. The information officer indicated that guarantee payments made under the [Employment Protection Consolidation Act 1978] would not be treated as earnings for the purposes of calculating the entitlement to individual employees to income support. On this basis an agreement was reached between the employees and management under which guarantee payments would be made. The agreement contemplated [the claimant] would not be suspended from his employment but would receive the guarantee payment. In the event in common with many others he resumed work after the relevant week. No additional commitment was accepted by him as consideration for the guaranteed payment."

I should observe at this point that the fact that, as it now turns out, the information given by the information officer of the DSS was inaccurate is in no way decisive of this appeal, neither is the fact that the claimant states that fellow employees in the areas of other local offices of the department were differently treated. I have to apply the law as it is and there can be no question of any "estoppel" as a result of the information officer's statement or decisions of other adjudication officers.

The tribunal gave as its reasons for decision:

"The members of the tribunal did not agree at all with the proposition that a guarantee payment made by employers under the Employment Protection Act 1978 was included within the phraseology "any payment by way of a retainer". The tribunal took the view that a retainer was only paid as consideration for a commitment or obligation of some sort. In the present case there is clearly no additional commitment undertaken by [the claimant] which did not already exist under his contract of employment. A guarantee payment therefore, as defined by the Employment Protection Act 1978, is a very different creature to a retainer as traditionally understood and which it was noted would normally be paid in exchange for some commitment and most probably at a time when there were no contractual relations between the parties concerned."

The reference to "any payment by way of a retainer" is a reference to regulation 31(1)(e) of the Income Support (General) Regulations 1987, SI 1987 No. 1967, which reads as follows:

"Earnings of Employed Earners

35(l) ... 'earnings' means in the case of employment as an employed earner, any remuneration or profit derived from that employment and includes-

(a)-(d) ...............................................

(e) any payment by way of a retainer;"

If the statutory guarantee payment to the claimant by his employer amounted to "any payment by way of a retainer" then it had to be taken into account, even if the claimant's employment had been interrupted (see the exception to the disregard for payments in respect of interrupted employment in paragraph 1 of Schedule 8 to the 1987 Regs.). I have therefore to consider first whether a statutory guarantee payment under section 12 of the Employment Protection (Consolidation) Act 1978 can be said to be "any payment by way of a retainer". It should be noted that the word "retainer" is not defined either in the Income Support (General) Regulations 1987 or elsewhere in the legislation. It may be paid separately from any contract of employment (see Suffolk County Council v. Secretary of State for the Environment [1984] ICR 882, HL) but in my view is not confined to that situation.

It is necessary to look at the provisions of the Employment Protection (Consolidation) Act 1978 as to guarantee payments to ascertain the nature of those payments. Guarantee payments are provided for by sections 12 to 18 inclusive of the 1978 Act and come under Part II of that Act, headed "Rights arising in course of employment". The other rights under Part II of the 1978 Act relate to "suspension from work on medical grounds", "right not to suffer detriment in health and safety cases" and "time off work". They are all statutory rights superimposed upon the contract of employment. If a guarantee payment is not paid it is not to be recovered by Court action, but by a complaint to an industrial tribunal (1978 Act, section 17).

The adjudication officer has drawn attention to a decision of a Commissioner in Northern Ireland, reported as Rl/80 (UB), where the Commissioner held that, where a claimant had received guarantee payments under the relevant Northern Irish legislation, the days in respect of which the payments were made were not days of employment for full extent normal purposes. The Commissioner distinguished statutory guarantee payments from contractual guarantee payments in this regard. However, the Commissioner was therefore of course dealing only with the "full extent normal" rule (to be found in this country in regulation 7(1)(e) of the Social Security (Unemployment, Sickness and Invalidity Benefit) Regulations 1983, SI 1983 No. 1598). Although I appreciate that a statutory guarantee payment may well have a different nature from a contractual guarantee payment for the purposes of the full extent normal rule, in my view a statutory guarantee payment is nevertheless "earnings" in the hands of a claimant and must potentially therefore be taken into account when calculating the amount of his entitlement to income support. I give my reasons below.

Section 12 of the Employment Protection (Consolidation) Act 1978 provides as follows:

"Right to guarantee payment

12(1) Where an employee throughout a day during any part of which he would normally be required to work in accordance with his contract of employment is not provided with work by his employer by reason of-

(a) a diminution in the requirements of the employer's business for work of the kind which the employee is employed to do,

(b) any other occurrence affecting the normal working of the employer's business in relation to work of the kind which the employee is employed to do, he shall, subject to the following provisions of this Act, be entitled to be paid by his employer a payment referred to in this Act as a guarantee payment, in respect of that day, and in this section and in sections 13 and 16-

(i) such a day is referred to as a 'workless day', and

(ii) 'workless' period has a corresponding meaning".

The tribunal held that, because the claimant was under no additional obligation as a result of the payment of the guaranteed payment, that payment could not be said to be "by way of a retainer". However, subsection (4) of section 13 (general exclusions from right under section 12) does not appear to have been cited to the tribunal. Subsection (4) provides as follows:

"13(4) An employee shall not be entitled to a guarantee payment in respect of a workless day if-

(a) his employer has offered to provide alternative work for that day which is suitable in all the circumstances whether or not work which the employee is under his contract employed to perform, and the employee has unreasonably refused that offer; or

(b) he does not comply with reasonable requirements imposed by his employer with a view to ensuring his services are available."

Those two obligations of the employee are a condition of receiving a statutory guarantee payment. They clearly indicate in my view that the payment is "by way of a retainer". The employee is obliged to hold himself available for work for the employer on the days for which the guarantee payment is made and is also obliged to accept alternative work which is reasonable for him, even if under his contract he is not obliged to do that work. In my view that clearly makes the guarantee payment a payment by way of a retainer. It therefore falls with regulation 31(1)(e) of the Income Support (General) Regulations 1987 and the amount thereof (less the normal disregard of £5 per week, under paragraph 9 of Schedule 8 to the 1987 Regs.) must be taken into account as earnings.

I ought perhaps to observe at this point that, even if a guarantee payment were not to be regarded as "by way of a retainer", the cases in paragraphs (a)-(i) of regulation 35(1) of the 1987 Regulations are only examples and are not exhaustive. They are introduced by the word "includes" which does not preclude there being other possible types of payment having the characteristic of earnings. In my view a statutory guarantee payment is "derived from … employment" (reg. 35(1)(e)) and has the characteristic of "earnings" generally.

It would perhaps be helpful if I added something about the position as to unemployment benefit for days in respect of which guarantee payments are made under section 12 of the 1978 Act. Unemployment benefit cannot be paid in respect of such days because of the provision of regulation 7(1)(k)(i) of the Social Security (Unemployment, Sickness and Invalidity Benefit) Regulations 1983, SI 1983 No. 1598, that a day in respect of which there is payable to any person a guarantee payment under section 12 of the 1978 Act etc. is not to be regarded as a day of unemployment. This provision appears not to have been referred to by the learned Commissioner who decided RI/80 (UB) although there was a similar provision in this country in the precursor regulation in force at the time of that decision (regulation 7(1)(1) of the 1975 Regulations, SI 1975 No. 564, as added by regulation 2 of SI 1976 No. 328). It would appear, with respect, therefore that, if there was a similar provision in the Northern Irish legislation, that an actual award of unemployment benefit for days of guarantee payments should not have been made in that case. I am indebted to Mr. Scoon for drawing this particular matter to my attention.

Date: 17 June 1994 (signed) Mr. M. J. Goodman Commissioner