2018 Jan 15
The claimants were employed on the maintenance of a railway public transport system operated by the appellant company and were known as “red book staff”. Their pay structure included rates for basic pay, a productivity bonus, a shift allowance calculated as basic pay plus a percentage according to the particular shift, overtime payments and a small bonus known as a red book bonus. In 2012 a pay settlement negotiated with the trade union against a background of government guidelines on austerity divided basic pay into two elements, one being an amalgamation of basic pay and the red book bonus on which sum the shift allowance was calculated, and the other consolidating the productivity bonus with basic salary from which the shift allowance was excluded. The claimants alleged that that change had resulted in a shortfall in the shift allowance with a resulting underpayment of holiday pay and they made complaints to an employment tribunal of unauthorised deductions from their wages, contrary to section 13 of the Employment Rights Act 1996, contending that the shift allowance should have been calculated on both elements of basic pay. An employment judge, adopting the perspective of the “official bystander”, found that the wording of the contractual provision was unambiguous and there was no need to imply any terms into the contract to clarify its meaning, that the shift allowance should have been calculated by applying the appropriate percentage multiplier to the sum of the previous basic pay and the red book and productivity bonuses, unless there had been an agreement between the company and the union that the former productivity bonus should be excluded from the calculation of the shift allowance, and that, accordingly, the claimants succeeded in their claims.
On an appeal by the appellant company, and on the issue whether an employment tribunal had jurisdiction to construe the terms of a contract in relation to claims concerning the protection of wages under Part 11 of the Employment Rights Act 1996—
Held, appeal dismissed. (1) There was a difference of view as to the jurisdiction of employment tribunals in claims of an unlawful deduction of wages under Part 11 of the Employment Rights Act 1996, where the parties did not agree about the meaning of contractual provisions. Whereas there was judicial authority that the function of the employment tribunal in exercising its jurisdiction under Part 1 of the Act was confined to identifying the terms of a contract, and did not extend to interpreting its terms which was a matter for the civil courts, that principle did not extend to decisions under Part 11 which had different antecedents and aims. In order to decide whether there had been an unauthorised deduction of the claimants’ wages in section 13, which was within Part 11 of the Act, it was necessary to determine any dispute by considering the terms of the contract as a whole and the employment tribunal was correct to decide that it had jurisdiction to do so (paras 31–82).
(2) The perspective of the officious bystander was relevant to decisions as to whether it was necessary to imply a term into a contract. However, the essential question in the instant case was as to the meaning of the existing contractual language to be judged by considering what a reasonable person having the background knowledge available to the parties would have understood the parties to have meant. Although the employment judge had used the wrong test he had reached the right result in his construction of the contract against the facts found and, accordingly, his decision would be upheld (paras 93–102).
Lucy Bone (instructed by Addleshaw Goddard llp, Manchester) for the company.
Richard Stubbs (instructed by Thompsons, Newcastle upon Tyne) for the claimants.