Appeal No.	EAT/1333/97

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 February 1998

Before
HIS HONOUR JUDGE C SMITH QC
MR P DAWSON OBE
MRS J M MATTHIAS

MR M T COX	APPELLANT

SCARBOROUGH BOROUGH COUNCIL	RESPONDENTS

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING 

Revised

	APPEARANCES

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

	JUDGE C SMITH QC:     This is an application by Mr Malcolm Cox for leave to proceed to a full hearing of his appeal against the decision of an Industrial Tribunal sitting at Leeds on 14 August 1997 (the Chairman sitting alone) of which extended reasons were sent to the parties on 17 October 1997, by which the Industrial Tribunal decided that there had been no unlawful deduction of wages and dismissed the Applicant’s claim under Part II of the Employment Rights Act 1996.

	We have had the benefit today of hearing a careful argument on behalf of the Applicant by Mr Stewart, who has put the matter clearly and persuasively, and his submission to us, in a nutshell, is that on the proper construction of the relevant handbook, which is the National Joint Council for Local Authorities Services (Manual Workers) Handbook, the learned Chairman arguably misconstrued certain provisions in that particular handbook and arguably, on the proper construction of, particularly paragraph 7 of appendix A, the Chairman should have construed that paragraph, and the heading in relation to that paragraph, as being words which were apt to apply to the particular scheme, namely a Performance Management Productivity Scheme, to which this Applicant was subject under his contract of employment.  Accordingly, the Industrial Tribunal, at least arguably, erred in that way, so it is submitted, so that the Industrial Tribunal should have held that the rate of bonus, as defined in paragraph 7(i) of Appendix A, should have been the applicable rate of bonus to the particular scheme under which he was employed, in which case, we shall assume, that there would be a very substantial claim going back over many years for an additional bonus, calculated in accordance with that paragraph, as compared with the way in which the bonus was in fact calculated under the scheme and, the way in which the Applicant has in fact been paid under the scheme.  

	The submission is that the Industrial Tribunal went about the matter in a somewhat “back to front way” and failed to appreciate, further and alternatively, that a Directly Proportional and Stabilised Incentive Scheme was not just a description of one scheme but could apply to a number of different schemes, some of which were Directly Proportional and some of which were Stabilised Incentive Schemes, so that in that way it is sought to challenge the alleged finding of fact.  The way the matter is put is that that was not really a finding of fact but rather it was a misconstruction in law of paragraph 7 and so in that way, it is submitted, there are arguable points here that should go to a full appeal.  

	It is pointed out, in addition, that in the specification of the particular scheme, the word “stabilised” does appear, in particular under paragraph 4 of the Principles of Scheme Operation:

“4.1.  Earnings will be directly related to a measured work performance index locally agreed and calculated weekly, but stabilised by averaging four weeks and monitored in accordance with paragraphs 3.8. to 3.10.”

	So it is submitted that that is an indication that this particular scheme under which the Applicant was working was, indeed, a Stabilised Scheme or, arguably, a Stabilised Scheme.

	So those are the submissions that are made.  We have taken those very carefully into account and we have reminded ourselves that there only has to be an arguable ground of law, so it is against those submissions that we go on to summarise the findings of the Industrial Tribunal.

	The Chairman found that the Applicant had been employed as a manual worker by the Respondent, Scarborough Borough Council, since 8 March 1988.  The Council had in place a Performance Managed Productivity Scheme that had been specifically developed for the Direct Labour Organisation, as the Industrial Tribunal found, and it had been properly approved at provincial level, and on their findings (and there is no challenge to it) came into effect in 1987.  

	The basis of the scheme and the effect of the scheme was to make additional bonus payments in five separate pay bands linked directly to the level of performance of individual employees, so that it was, in our judgment, unarguably correctly described by the Industrial Tribunal, as a Stepped Pay Band Productivity Scheme.  It was in fact revised in 1990 and again in 1992 but it is to be noted, as the Chairman remarked, that the bands had not changed apparently, with regard to the amounts of the bonus from 1992 and, no doubt, it was for that reason that the Applicant, as the Industrial Tribunal found, and other employees were aggrieved because of the fact that the bands and the appropriate payments had not been changed at any time since 1992, as the Industrial Tribunal found:

“5.  ...It is not at all surprising that he and other employees are aggrieved that they are, in real terms, being paid substantially less for their work, in 1997, than they were in 1992.”

	Now that led the Chairman to have to examine the particular contractual provisions, which were incorporated within the Applicant’s contract, because there was a submission made to the Industrial Tribunal by the Applicant that he was entitled to have his bonus calculated in accordance with paragraph 7(i) of the Appendix A of the National Joint Council Handbook.

	So the Chairman set about analysing the contractual position.  The Chairman found that the Applicant had been given terms and particulars of employment in 1996 and he noted that those stated that his contractual entitlements, inter alia, no doubt, in reference to this scheme, fell to be defined by the National Joint Council for Local Authority Services Manual Workers and as locally agreed, and that led him to construe the revised handbook, the 1988 handbook, and he set about construing the handbook.  That led him to a consideration of Appendix A which is headed “The Code of Guiding Principles and Practice for Work Study Based Incentives Schemes for Local Authority Services Manual Workers”.  He noted that paragraph 6 of Appendix A applied to all work study based incentive schemes as it stated, since paragraph 6 of the Code of Guiding Principles applies to all work study based incentive schemes.  That, in turn, refers to a work specification and refers to Appendix 1 for the contents of the specification.  Appendix 1 provides:

“PART 1 - SPECIFICATION
This part of the work specification describes the general conditions relating to all incentive bonus schemes based on work study techniques and should refer to the following subjects:”

	And the first subject that is listed there is the “Relationship of pay to performance” and that refers back to the Code, Appendix A, paragraph 7.  So there is there a reference back to paragraph 7 of Appendix A.  Paragraph 7 of Appendix A is headed “Relationship of pay to performance for Directly Proportional and Stabilised Incentive Schemes” and, as the Tribunal set out in the Chairman’s reasoning at paragraph 9, by sub-paragraph (i) of paragraph 7, it is provided that the rate of bonus for a standard performance, which appears to us to mean for a bonus starting performance shall be equivalent to one third of the basic rate of pay as defined.

	The legal position is however, as the Chairman held, that paragraph 7 of Appendix A, clearly in our judgment, does not apply to all incentive schemes.  It is headed “Relationship of Pay to Performance for Directly Proportional and Stabilised Incentive Schemes”.  The argument for the Applicant before the Industrial Tribunal was that this scheme, a particular scheme which the Respondents were putting into effect, was either a Directly Proportional or a Stabilised Incentive Scheme.  However, in our judgment, the Chairman was right and unarguably right to conclude that this particular scheme, which the Applicant was working under, which was a Stepped Pay Band Productivity Scheme, was not either a Directly Proportional Scheme or a Stabilised Incentive Scheme.

	In our judgment, it is clear from the definitions in the relevant British Standard, which apply as a result of paragraph 3 of the Code of Guidance in Appendix A, because they are the definitions which are to apply to all the terms used in the definition of the terms used in the National Joint Council Handbook, that this particular scheme was a Banded Scheme, as defined by the British Standard and not either a Directly Proportional Scheme or a Stabilised Incentive Scheme.  There is all the difference in the world between such schemes so that in our judgment the Chairman’s finding in paragraph 14 of his decision is unarguably right.

	We echo the Chairman’s view that it is very unfortunate that Appendix 1, which lays down the specification for Incentive Bonus Schemes based on Work Study techniques, clearly applies on its face to all such schemes and requires reference to, amongst other subjects, a subject headed “Relationship of Pay to Performance” which drives the person attempting to construe the handbook to paragraph 7 of Appendix A where one finds, beyond any argument in our judgment, that Regulation 7 does not apply to all Incentive Bonus Schemes at all, but only applies to certain category of schemes, namely Directly Proportional and/or Stabilised Incentive Schemes.

	This is an unfortunate contradiction between Appendix 1 and Appendix A, but in our judgment the Industrial Tribunal was clearly right to say that the general must give way to the particular, as a matter of ordinary statutory construction, and, in our judgment, for those reasons we are unanimously of the view that the Industrial Tribunal correctly construed these difficult regulations and provisions and the Chairman rightly concluded that the Applicant’s claim failed and for those reasons this application must be dismissed.