Appeal No.	 EAT/761/98

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 1 April 1999
Judgment delivered on 24 June 1999

Before
 THE HONOURABLE MR JUSTICE LINDSAY
MR D J JENKINS MBE
MR T C THOMAS CBE

MRS L HEALY & OTHERS	APPELLANTS

THE CORPORATION OF LONDON	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR J N GALBRAITH-MARTEN
(of Counsel)
Instructed by:
Mr Gluck
Legal Officer
UNISON
1 Mabledon Place
London
WC1H 9AJ
	
For the Respondents	MR T KEMPSTER
(of Counsel)
Instructed by:
Mr A J Colvin
The Comptroller & City Solicitor
The Corporation of London
PO Box 270
Guildhall
London
EC2P 2EJ	

	MR JUSTICE LINDSAY:	This is the appeal of Linda Healy and others, employees of the Corporation of London, in the matter of Healy and Others -v- The Corporation of London.   The appeal is against the decision of the Employment Tribunal at Stratford under the Chairmanship of Miss Lewzey, promulgated on the 15th April 1998.   

	Miss Healy had lodged her IT1 on the 7th December 1995.   It made two types of claim - “unlawful deduction of wages” and “breach of contract”.   As the Applicants below all continued to be employed by the Corporation the Corporation in its IT3, asserted:-

“It is contended by [the Corporation] that the Industrial Tribunal has no jurisdiction to consider the applicant’s claim for breach of her employment contract as alleged since the applicant remains in employment with the respondent”.

In the event the Employment Tribunal dealt only with the “unlawful deduction of wages” claim and there is no complaint either from the Corporation or from Miss Healy as to the Tribunal’s having dealt only with that claim.   In effect, therefore, the Corporation’s point as to “breach of contract” had succeeded. 

	So far as concerns the other claim, the decision, which was unanimous, was that the Applicants’ claims for unauthorised deduction from wages failed.   In broadest outline, the deductions which Miss Healy and the other claimants here assert to be unlawful arose because, although, in a package-deal negotiated between the Corporation and a certified Trade Union, the City of London Staff Association (“COLSA”) the claimants had obtained an overall pay increase, within that overall increase was a disadvantageous variation in the rate they had hitherto enjoyed of enhancement of basic pay for weekend working.   The claimants asserted that their contracts with the Corporation did not authorise that variation;  the Corporation’s case, successful below, was that consistent with a custom and practice observed over many years, the package-deal agreed with COLSA had become part of the claimants’ contracts and hence that the variation could not be complained of.  

	Before we go on to the facts it will be best to set out the statutory background.   The jurisdiction as to unlawful deductions is conferred by Section 13 of the Employment Rights Act 1996 which provides as follows:-

“13.	Right not to suffer from unauthorised deductions
(1)   An employer shall not make a deduction from wages of a worker employed by him unless -
(a)	the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract, or
(b)	the worker has previously signified in writing his agreement or consent to the making of the deduction.”

No statutory provision of the kind described in (a) above is relied upon, nor is it said that any Applicant had previously signified his or her agreement or consent to the making of “the deduction” (whatever that might be), either in writing or at all.   Thus the questions for the Employment Tribunal were, firstly, whether there had been one or more “deductions” within the meaning of the Act and, in relation to any such deductions then, secondly, whether it was or they were required or authorised to be made by virtue of “a relevant provision of the worker’s contract”?

	The question of what is such a “relevant provision” within Section 13 (1) (b) is dealt with in Section 13 (2) as follows:-

“(2)   In this section “relevant provision”, in relation to a worker’s contract, means a provision of the contract comprised -
(a)	in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or
(b)	in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion.”

Some parts, at least, of the Appellants’ contracts of employment were in writing but there is nothing in writing, as a matter of contract between employee and employer, in this matter such as both required or authorised the particular variation which is alleged to amount to a deduction and was such that the employer had, prior to making the alleged deduction, given the Appellants or any of them a copy.   Nor is there any provision requiring or authorising the alleged deduction the existence and the effect of which, in relation to the Appellants, the Corporation had notified the Appellants or any of them prior to its making the alleged deduction.   It follows that if there was a “deduction” within the meaning of Section 13 then it was inevitably unlawful.   But was there a “deduction”?

	“Wages” are defined in Section 27 of the Act which, so far as material provides:-

“(1)   In this Part “wages”, in relation to a worker, means any sums payable to the worker in connection with his employment, including -”

There then follows a series of lettered sub-paragraphs describing various payments which are expressly provided to be included within the definition of “wages”.   With that wide definition of “wages” in mind one returns to Section 13 (3), which provides:-

“(3)   Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker’s wages on that occasion.”

Mere errors are excluded from being “deductions” by Section 13 (4).   Recoupment of overpayments are excluded from the definition of “deductions” by the provisions of Section 14.   There are other provisions unnecessary to be read for our immediate purposes.   The frame of the statutory provisions is such that, in order to establish that there has been a “deduction”, one needs to establish, in relation to any particular occasion:-

(i)	The total amount of the wages properly payable by the employer to the worker on that occasion (after any proper deductions) and
(ii)	The amount of wages in fact paid by the employer to the worker on that occasion.
If (ii) is less than (i) there has been a deduction.   Nothing in the Act suggests that there can have been any deduction, lawful or unlawful, in relation to a particular occasion if (ii) is equal to or exceeds (i).

	How, then, does one find out what is “properly payable”?   For that one has to look to the employee’s contract of employment.

	Although there were disputes as to some aspects of the employees’ contracts (to which we will later refer) many elements of the contracts were undisputed.   Thus there had been and is still payable to the Appellants an enhancement for their weekend working.   Prior to a date in September 1995 that enhancement had been at the rate of 50% of basic pay.   At the date in September 1995 the percentage was reduced to 40% of basic pay.   That reduction was part of a package-deal, an alleged variation in the contractual terms offered by the employer to the employees.   The effect of the package offer overall would, if the offer was accepted, increase the Appellants’ salaries over what had been payable before.   On no occasion did the total amount paid after the alleged variation fall below what had been payable before the alleged variation in the Appellants’ contracts.   The variation offered had been described as “Details of package” by the Corporation when it sent out details to Heads of Department and it was in effect held by the Employment Tribunal to have been an offer of a “package” deal.   There is no hint anywhere in the Tribunal’s findings that the offer by the Corporation was such that separate parts as opposed to the whole unitary “package” had been on offer or that parts but not all could be accepted, nor was there any evidence that any Appellant had agreed with the Corporation that he or she had accepted parts only but not all of the package-deal.

	The employer’s case was that the offer, including the variation in enhancement for weekend working, although not individually accepted in terms by each Appellant, had been negotiated and agreed with the Corporation by COLSA, a certified Trade Union.   The Tribunal concluded, there had been a collective agreement as to which:-

“We find that there is an implied term incorporating the collective agreement into the contracts of employment of the applicants and other staff of the respondent arising from a custom and practice that has been going back for at least 20 years”

and, as the Employment Tribunal held a little later:-

“The terms changed were automatically included in the applicants’ contracts by virtue of the collective agreement.”

If that was right then there would seem to be no possible argument but that the Tribunal’s conclusion was correct, namely:-

“It is therefore our unanimous decision that the reduction in the enhancement to pay for weekend working from 50% to 40% was incorporated in the applicants’ contracts of employment and their claims of an unauthorised deduction from wages fail”.

In such a case the appeal would necessarily fail.

	But let it be assumed that that was wrong.   Let it be assumed, instead, that the variation offered by the Corporation had not been accepted by the Appellants, either by way of collective agreement negotiated by COLSA or individually.   In that case, as the offer had been a package and would, on that footing, have had to have been refused or not accepted in toto, each Appellant should have continued to have been paid as he or she had been paid under whatever contract he or she had had before September 1995.   There had been no evidence that the Appellants had been permitted to “cherry-pick” the benefits of the package deal or had in any other way managed to agree with the Corporation that they could become entitled to the new benefits of the package without accepting also whatever new disadvantages it contained.   That being so and given also that the Employment Tribunal found:-

“In relation to each [of the] applicants the net result in the change in the terms and conditions was an increase in their overall pay”,

our first reaction on hearing the appeal was that as the Appellants had been paid more than, even if their contentions as to their contracts were correct, would have been properly payable to them, there was nothing which, within Section 13, could have been a “deduction”.   Accordingly there could have been no unlawful “deduction”, even if their argument as to the terms of their contracts succeeded.   Our first reaction was thus to regard the Tribunal as having come to the correct conclusion, whether it had been right or wrong in its reasoning that the COLSA agreement bound the Appellants.   The appeal thus seemed to us an inappropriate vehicle for testing whether COLSA’s agreement with the Corporation as to the package had indeed bound the Appellants.   However, in exchanges with both Counsel at an early stage of the appeal it became clear that the Corporation had in effect disabled itself from taking the argument that we have just described because it had not taken the point below and because it had acceded, deliberately as it would seem, to using the case as something of a test case to establish whether or not the collective agreement with COLSA had individually bound the Appellants.   That being so, the appeal became, as Mr Galbraith-Marten had described it in his Skeleton Argument on behalf of the Appellants, one that turned upon a relatively narrow point of law, namely the proper construction of the Appellants’ contracts of employment in the events which had happened.  

	As the Tribunal held, COLSA had been set up in its present form in 1945.   In those days every member of the permanent or temporary administrative, technical professional and clerical staff of the Corporation had, ipso facto, been members of COLSA although there was a provision entitling a person to resign without prejudice to his or her position as a member of the staff.   That automatic membership was later dropped and membership became voluntary.   Each year, the Tribunal concluded, COLSA had negotiated a pay review with the Corporation.   It was a practice which had continued for at least 20 years.   All new employees of the Corporation were given a letter of 12th August 1986 from COLSA which was in standard form and stated:-

“The Corporation of London Staff Association is the recognised professional association within the Corporation of London and the Museum of London.   It has the legal authority to act for and on behalf of all Corporation staff.   Some 86% of Corporation staff, (administrative, professional, technical, clerical and ancillary, secretarial and miscellaneous grades) enjoy the benefits of Association membership which are now recognised as the best and most advantageous of any similar organisation.    Representation commences with salaries and all conditions of service, which are annually negotiated outside the parameters of the national wage bargaining and negotiating structures (the Association is totally independent in negotiations direct with the Court of Common Council and Corporation committees) and salaries are in the higher quartile of any comparable Local Municipal Government undertaking”.

It is difficult to see how COLSA could acquire “legal authority to act for and on behalf of all Corporation staff” simply by its assertion that such was the case, any more than an agent becomes an agent of a particular principal simply by his asserting that he is such.   Of course, the individual contracts of employment of employees could have made some provision in respect of COLSA’s position but the forms as laid before the Tribunal made none.   The “Particulars of Terms of Employment”, whilst plainly contemplating that there would or might be changes in terms and conditions over time, make no express provision for any role of COLSA in relation to such changes.   Nonetheless, before the Employment Tribunal the Corporation argued, successfully,  despite the absence of express words incorporating into the Appellants’ contracts of employment any variations of pay or other terms and conditions as agreed from time to time by COLSA and the Corporation, that there was an implied term of incorporation by virtue of custom and practice.   As to that custom and practice, the central finding by the Employment Tribunal is at its paragraph 11 (b) which, speaking of Ms Pobgee (the second applicant below and the only applicant who had attended to give evidence) and speaking also of Mr Key, the Branch Secretary of the Corporation of London UNISON branch, said as follows:-

“(b)Both Ms Pobgee and Mr Key accept that their salaries increased automatically.   Indeed Mr Key had been employed for 20 years and this was the case throughout.   He told us that he knew the [Corporation] consulted only with [COLSA] and that the staff were informed of the result and their pay varied accordingly and that this had been happening for 20 years.   In our view that is evidence of a custom or practice going back for at least 20 years”.

From that finding the Tribunal moved on to:-

“(c)  We recognise that by the letter of the 12th August 1986 [COLSA] had authority to represent staff in relation to salaries and all terms and conditions of service”.

We have already mentioned the weakness in that letter of the 12th August 1986;  one does not acquire authority simply by stating that one has it.   It is in his comments on these findings of the Employment Tribunal that Mr Galbraith-Marten comes to the core of his case.   He argues that habitual acceptance of the benefits of collective agreements does not, of itself, lead to a contractual obligation that collective agreements are binding.   He then takes us to authorities in the area.

	In Young -v- Canadian Northern Railway Co. [1931] A.C. 83 J.C.P.C. Mr Young had been engaged by the railway company.   Upon his dismissal some 7 years later he asserted that the dismissal had been in breach of what, at his engagement, had been and which all along had remained a collective agreement not between employer and employee but between the employer and the American Federation of Labour.   It was called “Wage Agreement No. 4”.   It was, he said, part of his contract of employment.   There had been no express importation of Wage Agreement No. 4 into Mr Young’s contract.   The Judicial Committee was prepared to assume in Mr Young’s favour that, if the Wages Agreement was within his contract with the railway company, it had been breached but it regarded the outstanding question as being whether the railway company was contractually bound by the Wages Agreement.   It had been shown in evidence that the railway company had, over a number of years, applied the terms of the Wages Agreement to all its employees within the relevant departments and thus to Mr Young.   The Judicial Committee continued, at page 88:-

“Their Lordships, however, are unable to treat these matters as establishing contractual liability by the railway company to the appellant.   The fact that the railway company applied the agreement to the appellant, is equally consistent with the view that it did so, not because it was bound contractually to apply it to him, but because as a matter of policy it deemed it expedient to apply it to all.   If the conduct of the railway company in applying the provisions of the agreement to the appellant could be explained only by the existence of a contractual obligation to the appellant so to do, it would have been not only permissible, but necessary to hold that the existence of the contractual obligation had been established.   In the circumstances, however, of the present case, their Lordships find themselves unable so to decide”.

That reasoning was there deployed in the employer’s favour but it is, of course, equally open to be deployed in favour of employees.   The fact that the Appellants, as employees of the Corporation, had, with their fellow employees, from time to time over a long period accepted changes in the terms and conditions of their employment as negotiated between COLSA and the Corporation is not, of itself, argues Mr Galbraith-Marten, indicative of the employees being bound in contract so to do.   It is equally consistent, he urges, with the employees having found it expedient so to do.   After all, each change had invariably represented a pay increase, described by the Employment Tribunal as “automatic”.   The Tribunal, he argues, should have looked to see whether there was anything which suggested something which went beyond expediency, something which showed that the employees had accepted as a legal obligation that they were bound by the terms of COLSA’s collective agreements with the Corporation.   We see the force of this argument.   The reasoning of the Employment Tribunal does suggest that it accepted the existence of a contractual obligation upon the employees to be bound by COLSA’s terms merely from the practice of those terms having been accepted, without any evident appreciation on the Tribunal’s part that such acceptance was equally consistent with mere expediency or convenience on the part of the employees.   It does seem that the Tribunal had failed to ask itself the crucial question of whether, by accepting the earlier or this September 1995 collectively-negotiated annual pay increase, the employees had thereby assumed the legal obligation to observe the September 1995 or any other collectively-negotiated terms.

	A further strength in the Appellants’ position emerged in argument.   The particular variation in issue, whilst leading to an overall pay increase in the case of each Appellant, nonetheless did, as we have mentioned, include an associated disadvantage, the reduction of the enhancement for weekend working from 50% to 40% of basic pay.   It was, moreover, a disadvantage that affected some only of the individuals within the classes on whose behalf COLSA described itself as acting.   The Corporation had, even before the hearing, been asked on the Appellants’ behalf whether in any earlier overall pay increase that COLSA had collectively agreed there had ever been any corresponding disadvantage.   Whilst we confess to being surprised at the answer (given the likelihood, as we would have thought it, that over the last 50 years or so some such disadvantage would be likely to have been incorporated at some stage) the answer given on behalf of the Corporation was that it had been able to find no such example.   Certainly no evidence of any such earlier disadvantage had been adduced at the hearing before the Employment Tribunal.   That led to the question of how could one ever establish a custom such that collective agreements bound employees (even as to such disadvantages to some or all employees as were within the agreements) from a practice in which at no time, over all the years, had any such disadvantage ever been included?   With all respect to Mr Kempster, the Corporation could provide no real answer to that question. 

	Mr Kempster argues that in concluding that there had been implied terms in the employees’ contracts deriving out of at least 20 years custom and practice the Employment Tribunal had directed itself to the central question and had given its answer which, he urged, involved no error of law.   But that approach overlooks that, as Meek -v- City of Birmingham District Council [1987] IRLR 250 makes clear, the parties are entitled to see from the decision itself how a conclusion has been arrived at and should be able to see that in at least sufficient clarity and detail to determine whether or not an error of law has been made.   Here, as Mr Galbraith-Marten urges, there is no visible indication of the Employment Tribunal having asked itself whether there were any features over all the years in which there had been pay increases agreed between COLSA and the Corporation - changes exclusively favourable to the employees and the acceptance of which by the employees was therefore equally consistent with expediency - that suggested acceptance by the employees of a legal obligation upon them to accept whatever terms COLSA might from time to time agree with the Corporation.   Were there, either, any features, as would be even more difficult on the facts here to show, to indicate acceptance of a legal obligation to be bound even by such collectively agreed variations as did not amount to a pay increase?   The Employment Tribunal does appear to have jumped from the finding of the practice to the conclusion of there being a legal obligation without noticing that the practice would not, of itself, support the existence of the alleged legal obligation.   The Employment Tribunal’s error of law was, in our view, either to have failed to recognise the force of the reasoning of the kind illustrated by Young supra or, if it did recognise that force, to have failed to have shown that it had done so in its decision in a way satisfying the Meek test.   In saying so we do not mean to be at all critical of the Employment Tribunal.   We have had the benefit of the citation of authority which, we are told, the Employment Tribunal did not have.   However, a due consideration of the propositions of law which we have derived from Young supra and Meek supra is, in our view, an essential prerequisite of a sound decision in this matter.   Their failure expressly to have cited such authorities below does not deny to the Appellants an ability to rely upon the reasoning in those cases in this appeal, although it does go a long way in bolstering our view that no criticism is  meant of the Employment Tribunal by our concluding as we do.

	In the circumstances we remit the case for a fresh hearing on the subject of “unauthorised deduction”.   As the remitted hearing can only be well over a year after the decision of the Employment Tribunal under appeal we think it best that the matter should be sent back to a fresh Tribunal.   We are conscious that the remission may prove pointless.    If, this next time round, the Corporation does take the point that there was no “deduction” within the meaning of Section 13 (given that each Appellant‑employee, even if not bound by the terms of COLSA’s new package-deal, was in any event receiving more than he or she was due under whatever earlier terms of contract, on that assumption, applied to him or her) then it may be that the Tribunal’s conclusion next time round can only be as it had been this time.   However, whether the Corporation wishes so to argue will be a matter for consideration by the Corporation, just as it will be a matter for the Appellants to decide whether it is contestable. The remission cannot be said to be inescapably futile.   Accordingly, we allow the appeal and, as we mentioned, we remit the complaint as to “unauthorised deduction” to a fresh Tribunal.