Mrs G Al-Naimi v Buildmaster Construction Services Ltd: 2300236/2023
EMPLOYMENT TRIBUNALS
Case No 2300236/2023
Between
Mrs G Al-NaimiClaimantBuildmaster Construction Services LtdRespondent
Before
Employment Judge Rice-BirchallIn person for claimantDate 7 July 2023
JUDGMENT
The Claimant has suffered unauthorised deductions from her wages and is awarded the sum of £12000 gross payable by the Respondent.
REASONS
[1]The claimant presented a claim to the Employment Tribunal on 14 January 2023 following a period of early conciliation between 2 and 6 January 2023. The claim raised a complaint of unauthorised deductions from wages contrary to section 13 of the Employment Rights Act 1996 (ERA) from the period between June 2022 and December 2022. The respondent denies the claim.[2]The claim is against the claimant’s employer, a limited company of which she is company secretary. Her husband, Mr Ahmad Al-Naimi is the sole director. 3.There is significant ill-feeling and hostility between Mr and Mrs Al-Naimi arising from their ongoing divorce and financial settlement proceedings. It was necessary for the Tribunal to clearly set out the parameters of the hearing and to remind the parties of the issues to be determined. Respondent requests to postpone/stay[4]The respondent sought a postponement request on 23 February 2023 and again before the hearing but these were refused by Employment Judge Perry and Acting Regional Employment Judge Balogun respectively.[5]In any event, the respondent made a further postponement request and/ or a request for the claim to be stayed at the outset of the hearing on the basis that the claimant’s previous claim, which was based on earlier deductions, and in which she had been successfully awarded arrears of pay under section 13 ERA, had been appealed to the Employment Appeal Tribunal.[6]The appeal had been rejected by Judge Susan Walker on the basis that the appeal disclosed no reasonable grounds for bringing the appeal. The respondent was therefore referring to an application under rule 3(10) of the EAT Rules.[7]The Tribunal explained to the parties that whether or not to stay proceedings in such circumstances was at its discretion. There is no automatic right to stay proceedings where a matter of law is appealed to the EAT.[8]In the circumstances, and considering the overriding objective to deal with claims fairly and justly and without undue delay, the Tribunal decided that the claim should not be stayed and that the hearing should proceed. Reasons were given orally to the parties during the hearing. Claimant’s application to amend[9]The claimant included, in correspondence dated 1 June 2023, an application to amend her claim to include deductions made between January and May 2023, May 2023 being the latest available payslip at the date of the hearing, these being subsequent moths in which she had suffered a deduction following her claim being submitted. The respondent objected to the application to amend on the basis that that there had been a new contract started with the claimant, albeit oral, and a “partial” dismissal and therefore the claim was out of time as it should have been made within three months of the partial dismissal. This point was not raised in the respondent’s defence.[10]The Tribunal allowed the amendment application on the basis that this was a series of deductions and so any new claim would not be out of time; that the respondent could not point to any prejudice in proceeding on that basis; and that to allow the amendment was likely to avoid a further Tribunal claim being submitted by the claimant. The Tribunal therefore considered that to allow the amendment application was in the interests of the overriding objective in that it avoided delay, was an efficient way to deal with proceedings and would save expense. Oral reasons were given at the hearing for this decision.
The issues
[11]The Tribunal explained the issues to the parties as follows: what was the agreement as to payment of wages; was it varied; what was the pay date; what is owed? More formally: what was properly payable to the Claimant, what was she paid, was there any shortfall between the two and did that amount to an unauthorised deduction from wages?
The evidence
[12]The Tribunal had the following documents: the claim and response; the claimant’s bundle of documents and her witness statement; the Respondent’s bundle formed of a main bundle and two supplementary bundles and Mr AlNaimi’s witness statement consisting of ten paragraphs which stated that he also relied on his previous witness statement dated 10 October 2022 which had been produced in relation to the previous hearing referred to above. The Tribunal also read that statement.[13]The Tribunal heard evidence from the claimant and Mr Al-Naimi on behalf of the Respondent, and oral submissions from both parties. Findings of fact on the balance of probability[14]The claimant is the wife of Mr Al-Naimi, who is the sole director of the respondent. Divorce proceedings are ongoing between the claimant and Mr AlNaimi.[15]The claimant has been employed since 2002 as a company secretary for the respondent. At present, she is suspended from that role as a result of allegations of gross misconduct. She does not have any written contract of employment or a statement of terms and conditions of employment.[16]The claimant was paid monthly in arrears on the last day of the month. The claimant’s position is that for the period of time that this claim is concerned about, that is June 2022 to May 2023, her basic salary was agreed to be £2,400 per month gross and that from June 2022 onwards it was paid at a reduced amount without her agreement. In fact, she had received reduced pay from October 2021, after furlough ended, but the alleged deductions prior to June 2022 were the subject of a previous employment tribunal claim.[17]The total amount the claimant should have received as salary during each month of the period in question was £2,400. In fact, she received £1,400 in each relevant pay period, leaving a shortfall of £1,000 per month and totalling a £12,000 shortfall over a twelve month period (June 2022 to May 2023). The respondent did not seek to deny that these were the payments made and that £2,400 had been the salary which had previously been paid.[18]There was no evidence before the Tribunal to indicate that the Claimant had, prior to the reduction in her salary, signified in writing her agreement or consent to the reductions, nor were there any written documents indicating that her entitlement to salary had been varied. Indeed, both parties agreed that there was nothing in writing as to the variation of salary.
The law
[19]Unauthorised deductions from wages are governed by Part II of the Employment Rights Act 1996 (“ERA”). Section 13 ERA prevents an employer from making any deduction from the wages of workers unless it is: a) authorised by statute. This enables the employer to deduct from wages the PAYE tax and National Insurance payments as required by law or payments following a court order; b) authorised by a “relevant provision in the contract”. There is no requirement that the term of the contract should be in writing, and the term in question can be an implied rather than express term. However, it is necessary for the employer to have notified the worker in writing of the existence of the term before making the deduction; or c) previously agreed in writing by the worker that the deduction may be made.[20]It is important to note that a), b) and c) set out above are the only methods by which a deduction from wages may be authorised. Specifically relevant to this case, this may be by agreement in writing or by variation of contract. Where the deduction is said to be authorised by an agreed variation of the contract, although that agreement does not need to be in writing, it must be communicated in writing to the employee.[21]Where the total amount of any wages that are paid by an employer to a worker is less than the total amount of the wages that are properly payable to the worker on that occasion, the amount of the deficiency will be treated as a deduction made by the employer from the worker’s wages.[22]Under section 23 ERA, a worker can make a claim to the Employment Tribunal asking for a declaration that the employer has made unauthorised deductions and an order that the employer repay the sums deducted. To decide whether there has been an unauthorised deduction, the Tribunal will have to consider the facts and, if necessary, decide what the contract meant. The Tribunal claim must be made within three months of the date of the deduction or, if the worker has made a payment to the employer, of the date when the payment was made, subject to allowance for the period of time that the matter is being dealt with by ACAS under the Early Conciliation process.[23]Under section 23(3) ERA, if the employer made a series of deductions, the time limit runs from the last deduction. In this situation, a claim could be made for deductions going back more than three months, eg for an ongoing reduction of wages which has not been agreed.
Conclusions
[24]The respondent’s position was that part of the claimant’s role was redundant, albeit that there had been no discussions around this, nor any paperwork to evidence that position. It was the claimant’s case that there had been no such discussions. The Tribunal found the claimant’s evidence to be credible in this regard as there was no contemporaneous documentation whatsoever to support the respondent’s position, and even according to its case, the claimant remained “partially” employed, and was suspended.[25]In the alternative, the respondent sought to argue that the claimant had not suffered any unauthorised deductions from her wages as she had not done any work and was therefore not entitled to any wages. The respondent confirmed however, that there was no contract which indicated that the claimant was only paid for the work done, and there was a clear and consistent pattern of the claimant having been paid £2,400 in the past. .[26]The respondent also sought to argue that the claimant was legally dismissed and she was re-employed on new terms and conditions which entitled her to lower pay. Again, none of this was evidenced by any documentation and the respondent sought to argue that it was a technical argument only. The argument lacked credibility and the claimant denied that there had been any conversations around such a change to her terms and conditions. In any event, there was nothing in writing to support this position.[27]Finally, in his October statement, Mr Al-Naimi sought to argue that the claimant’s gross misconduct had the effect of dismissing her from the respondent. Again, there was no documentary evidence to support this position and indeed the respondent had continued to pay the claimant, albeit at a lower rate of pay.[28]The Tribunal is satisfied that nothing about any alleged variation, or dismissal, or redundancy, was confirmed in writing. Therefore, the deduction was not authorised in terms of section 13 and the amount of the deduction is recoverable by the claimant.[29]Whether or not the claimant agreed to vary her contract, which she in any event denies, a verbal agreement would mean that the statutory conditions laid out in section 13 ERA would not be met and she would still be entitled to recover the difference in pay.[30]What was properly payable to the Claimant was £2,400 per month gross. During June 2022 to May 2023 she received less than was properly payable, as she received £1400 only. The reason for those deductions does not fall within section 13 ERA as set out above.[31]In the circumstances, the reduction of the Claimant’s wages during June 2022 to May 2023 amounts to a series of unauthorised deductions of £1000 gross per month and she is awarded the sum of £12,000 gross payable by the Respondent.
Conclusions
[1]Following a hearing on 21 June 2023, the Tribunal sent a reserved judgment with reasons on 20 July 2023 upholding the claimant’s claim that the respondent had unlawfully deducted £12000 from her wages.[2]By a letter dated 3 August 2023, the respondent made an application for reconsideration on the basis that the tribunal failed to consider the respondent’s argument that it was a unilateral decision made by the respondent to reduce the claimant’s pay and that the effect was the claimant being dismissed in October 2021 and reemployed on new terms, namely on a reduced wage of £1400 per month.[3]The respondent further alleges that the Tribunal erred in law by stating “whether or not the claimant agreed to vary her contract, which she in any event denies, a verbal agreement would mean that the statutory conditions laid out in section 13 ERA would not be met and she would still be entitled to recover the difference in pay.”[4]The application to reconsider refers to a number of cases including: Marriott v Oxford and District Cooperative Society (No 2) [1970] 1 QB 186; Hogg v Dover College [1990] ICR 39; Alcan Extrusions v Yates others [1996] IRLR 327, and Smith v Trafford Housing Trust [2013] IRLR 86 (HC). The respondent further sent to the Tribunal the authority of Miss Clare Jackson v The University Hospitals of North Midlands NHS Trust [2023] EAT 102. None of these authorities were drawn to the Tribunal’s attention during the hearing.[5]The claimant objected to the respondent’s reconsideration application by letter dated 6 August 2023.[6]The Tribunal considered that there was no need for a hearing. The respondent’s case before the Tribunal[7]The response states that it was agreed that the claimant’s salary would “be subject to workload and the profit made by” the respondent and that pay was reduced in line with that agreement. The respondent further asserts that it had to dismiss all of its employees post the pandemic as there was no work and reduced revenue and that the claimant’s position was “part-redundant”.[8]The evidence before the Tribunal at the hearing included a witness statement from Mr Ahmad Kamil Kadom Al Naimi, the sole witness for the respondent. In that witness statement, Mr Al-Naimi stated that it was agreed between the claimant and the respondent that her monthly payment would depend on the respondent’s income so it could rise and fall subject to workload and profit; the respondent had to reduce all wages to keep afloat; and that the claimant’s role was made “partredundant” due to a loss of customers and so no further wages are owed to her.[9]Neither the response nor the witness statement suggested that there was a unilateral decision to reduce the claimant’s pay and that the effect was the claimant being dismissed in October 2021 and reemployed on new terms.[10]However, at the outset of the hearing, the respondent did put forward an argument that the change in payment from £2400 to £1400 per month marked the end of the previous relationship and started a new relationship on new terms. It was suggested that there had been a unilateral change to terms and conditions which amounted to a dismissal.[11]It was put to the claimant in cross examination that she was redundant in October 2021: she said she was not made redundant. The respondent appeared to argue that the claimant was made redundant from part of her job. The respondent confirmed that the alleged redundancy was not confirmed in writing.[12]When asked why the claimant had been suspended if she had been made redundant, Mr Al Naimi answered that she was redundant until the business picked up, otherwise the respondent would have to fully dismiss her. He went on to say that the redundancy had happened automatically hence there had been no notice pay or statutory redundancy payment.[13]In submissions, the respondent argued that there was a genuine redundancy situation and that the claimant was legally dismissed and re-engaged on new terms, without any reference to case law.
The law
[14]Under Rule 70 of the ET Rules 2013, a tribunal has the power to reconsider a judgment where it is necessary in the interests of justice to do so. A central aspect of the interests of justice is that there should be finality in litigation. It is therefore unusual for a litigant to be allowed a ‘second bite of the cherry’ and the jurisdiction to reconsider should be exercised with caution.[15]Jackson states as follows: “The case of Hogg v. Dover College and its usual companion, Alcan Extrusions v. Yates [1996] IRLR 327, are familiar fare to employment lawyers when giving advice about the consequences of an employer’s decision to restructure its workforce. When an employer has neither sought nor achieved agreement with the affected employees, and when it does not wish to take the socalled “fire and re-hire” option, it may consider the risky option of unilaterally imposing a change to terms and conditions of employment. The options available to an employee in response are widely understood to comprise:(1) to resign and claim constructive unfair dismissal, subject to qualifying service and showing that the breach was repudiatory;(2) to waive any repudiatory breach/affirm the contract and agree to work under the new terms;(3) depending on the nature of the change, to refuse to work under the new terms and (in terms) dare the employer to dismiss;(4) to “stand and sue” by working under protest but bringing proceedings for breach of contract and/or any shortfall in wages (the classic case being Rigby v. Ferodo Ltd 1988 ICR 29 HL); and(5) to work under the new contract but assert dismissal from the old contract, which – subject again to qualifying service – can form the basis for a complaint of unfair dismissal. The fifth option is the Hogg dismissal.”[16]Alcan states as follows: “… it is only where, on an objective construction of the relevant letters or other conduct on the part of an employer, it is plain that an employer must be taken to be saying, ‘Your former contract has, from this moment, gone’ or ‘Your former contract is being wholly withdrawn from you’ that there can be a dismissal … other than, of course, in simple cases of direct termination of the contract of employment by such words as ‘You are sacked’ … However, in our judgment, it does not follow from that that very substantial departures by an employer from the terms of an existing contract can only qualify as a potential dismissal … In our judgment, the departure may, in a given case, be so substantial as to amount to the withdrawal of the whole contract…..whether a letter or letters or other conduct of an employer has such an effect is a matter of degree and a question of fact for the tribunal to decide. In many cases to construe letters or other conduct on the part of an employer which puts forward no more than variations in a contract of employment as amounting to a termination or withdrawal of such a contract would be quite inappropriate and wrong. Whether or not the action of an employer in imposing radically different terms has the effect of withdrawing and thus terminating the original contract is ultimately a matter of fact and degree for the tribunal to decide.”[17]In applying Hogg, the Tribunal must consider whether the claimant’s contract of employment had been terminated and replaced by another . The question is not whether employment in the broader sense had ended, but whether the old contract has been brought to an end.[18]Whether or not there is an intention by the respondent to dismiss the claimant is irrelevant. In a Hogg scenario, there will be no such intention almost by definition; an employer who purports to vary a contract is most unlikely to desire dismissal. In any case, intention is irrelevant. What matters is the consequence of the variation unilaterally imposed by the employer.[19]Of course, all of these cases turn on situations in which it is the employee who is seeking to argue that the contract has come to an end. In Jackson it was argued in order for the claimant to be entitled to a contractual redundancy payment. Can the same principle apply when it is the employer seeking to assert that there has been a dismissal?[20]That it can is demonstrated by Smith v Trafford Housing Trust [2013] IRLR 86. In that case, the High Court had to consider whether, despite remaining at work, Mr Smith was wrongfully dismissed from his former role. Mr Smith argued that he had not been dismissed, while the employer argued he had been. The High Court held that Mr Smith had been dismissed, despite remaining at work. Conclusions Unilateral variation of contract
Conclusions
[21]First, the argument that the claimant was dismissed by the unilateral variation of her contract was not raised either in the witness statement or in the response. It was put to her in cross examination that her role was “partly” redundant, which she denied on the basis that her work had remained the same throughout.[22]The respondent’s argument before the Tribunal was confused. It was argued that the claimant was “partly redundant” and that the remainder of her job continued. When asked about notice pay and redundancy pay, Mr Al Naimi said redundancy was “automatic” and suggested that the redundancy had taken place in September/October 2022.[23]The respondent says that the unilateral variation took place in October 2021 when the respondent first reduced the claimant’s salary (which deductions were the subject of a previous case brought by the claimant 2301785/2022). This case was only in relation to deductions from June 2022 to May 2023.[24]The respondent’s submission was that this was a genuine redundancy situation; that the claimant was not entitled to wages as she did not work and then added that its main submission was that the claimant was legally dismissed following the change in terms and conditions of employment.[25]Accordingly, the respondent did not put forward any clear argument about the unilateral variation and this reconsideration should not be an opportunity to have a second bite of the cherry and put the case more clearly. As stated above, none of the case law now referred to was referred to the Tribunal during the hearing.[26]Nonetheless, applying the case law, the Tribunal is satisfied that the claimant was not dismissed and reengaged on new terms when the respondent reduced the claimant’s wage in October 2021, post furlough. In contrast to Smith, although there was a reduction in salary, the claimant’s work did not change at all. Similarly in Hogg, the claimant had been a full time teacher and was told he would need to work part time on a substantially reduced salary, and that another teacher had been appointed to his role in his place.[27]In Smith, it was held that Mr Smith accepted that his original contract was at an end by agreeing to work in a different capacity and for a greatly reduced salary, thereby entering into a new contract. The High Court concluded that Mr Smith’s demotion amounted to a wrongful dismissal.[28]In this case, there was no demotion, just a fluctuating reduction in salary which followed on from furlough. It appears from the payslips that between October 2021 and February 2022 the claimant was paid £1050 gross, which figure increased in March 2022 to £1400. There are no relevant letters or communications with the claimant around that time as far as the Tribunal is aware. There was nothing to indicate to the claimant that this would be a continuing course of action or that it would not be resolved. In any event, given that salary fluctuated, there was no “new” contract capable of being accepted.[29]There is no conduct of which the Tribunal has been made aware which must be taken as saying to the claimant that her former contract had gone or was being withdrawn from her. In fact, the claimant received no communication from the respondent. It is relevant that the claimant’s wage was reduced at the same time as divorce proceedings resumed against Mr Al-Naimi. It is also relevant that the respondent appears to have believed that there was an agreement in place with the claimant that her salary would fluctuate (see below), that argument having been put forward in the response and Mr Al Naimi’s witness statement. On that basis, the respondent could not also believe that the reduction in salary would bring the old contract to an end, albeit that the respondent has indicated that this is a “legal” argument.[30]The question is whether the old contract was brought to an end by the respondent’s actions. The only action to be considered is the reduction in the claimant’s salary, which fluctuated over the following months, and which the claimant believed was because she had recommenced divorce proceedings. Everything else stayed the same.[31]Although it is not determinative, the claimant did not treat the reduction in pay as a dismissal. She chose to “stand and sue” and has brought these and other proceedings for the shortfall in her wages.[32]There is no evidence from which to consider that the reduction in pay amounted to a withdrawal of the claimant’s former contract. This case is different to the other cases referred to in which there were clear communications about the changing nature of the role, and salary, going forward. In those cases there was certainty of what the new contract looked like. Here, there was just a fluctuating reduction in pay.[33]Nonetheless, the reasons are amended as follows: paragraph 26 of the Judgment which currently reads: “The respondent also sought to argue that the claimant was legally dismissed and she was re-employed on new terms and conditions which entitled her to lower pay. Again, none of this was evidenced by any documentation and the respondent sought to argue that it was a technical argument only. The argument lacked credibility and the claimant denied that there had been any conversations around such a change to her terms and conditions. In any event, there was nothing in writing to support this position.” is amended to read: “The respondent also sought to argue that the claimant was legally dismissed and she was re-employed on new terms and conditions which entitled her to lower pay. Again, none of this was evidenced by any documentation and the respondent sought to argue that it was a legal argument only. Applying Hogg v Dover and the other authorities referred to, the Tribunal is satisfied that, on an objective view of the circumstances, the variation in the claimant’s pay back in October 2021 did not amount to the withdrawal of her original contract and create a Hogg dismissal: the only change was a fluctuating reduction in salary without more. The Tribunal could not objectively conclude that the claimant’s original contract of employment was at an end.” Agreement by the claimant that her pay should vary[34]The respondent’s position, for this reconsideration, is that it was agreed with the claimant that her wages varied according to the respondent’s income.[35]However, whilst the response and Mr Al Naimi’s witness statement asserted that it was agreed between the claimant and the respondent that her monthly payment would depend on the respondent’s income so it could rise and fall subject to workload and profit, it was not at any point suggested when this agreement was reached; and the argument was not raised in submissions, the respondent confirming that its main argument was that the claimant was legally dismissed when her wages were reduced, but also arguing that the claimant was redundant and that she was not entitled to any pay as she did not do any work.[36]If the respondent had such an agreement with the claimant then any reduction in pay could not be a unilateral variation which would result in dismissal, as the claimant would have agreed to fluctuating pay. The argument advanced by the respondent at the hearing was that there had been a unilateral variation to the contract, not that there had been any agreement that the claimant’s pay would fluctuate.[37]The reconsideration is not an opportunity to put new arguments to the Tribunal or to have a new opportunity to argue the case.[38]In any event, for the majority of time, the claimant’s salary remained static, being reduced around October 2021, since when it was £1050 for a few months and has then remained static again at £1400. The claimant asserted that her basic salary at the material time was £2,400 and the respondent did not dispute this. The claimant has claimed that the respondent has made unauthorized deductions from her salary in respect of each month in which her wage has fallen below £2400.[39]The Tribunal is satisfied that there was no agreement with the claimant that her pay would vary. No evidence was adduced to show that such an agreement had been made with the claimant, or when.[40]Nonetheless, the Tribunal accepts that there does not need to be an agreement in writing for the parties to agree that the claimant’s pay would vary and for that to be a valid term of the oral contract of employment (there was no written contract).[41]Accordingly, the Tribunal does consider that paragraphs 28 and 29 of the reasons should be amended.[42]Paragraph 28 currently reads: “The Tribunal is satisfied that nothing about any alleged variation, or dismissal, or redundancy, was confirmed in writing. Therefore, the deduction was not authorised in terms of section 13 and the amount of the deduction is recoverable by the claimant.” It should be amended to read as follows: “The Tribunal is satisfied that there was no agreement that the claimant’s pay would fluctuate and also that the claimant was not dismissed in October 2021 (or indeed at any other time as variously alleged by the respondent). Therefore, in the absence of any agreement to deductions being confirmed in writing, the deductions were not authorised in terms of section 13 and the amount of the deduction is recoverable by the claimant.”[43]Paragraph 29 currently reads: “Whether or not the claimant agreed to vary her contract, which she in any event denies, a verbal agreement would mean that the statutory conditions laid out in section 13 ERA would not be met and she would still be entitled to recover the difference in pay.” to “ As stated above, the Tribunal is satisfied that there was no agreement between the claimant and the respondent that the claimant’s contract was varied such that the claimant agreed to fluctuating pay depending on the respondent’s income or due to COVID. The Tribunal accepts that such a verbal agreement could mean that the claimant would not be due sums under the contract which could result in her claim for an unlawful deduction being unfounded. However, in this case, the Tribunal being satisfied that there was no such agreement, the claimant remains entitled to recover the difference in pay.”