Mrs M Burns v South Ayrshire Council: 4106905/2019
EMPLOYMENT TRIBUNALS (SCOTLAND)
Case No 4106905/2019
Between
Mrs Margaret BurnsClaimantSouth Ayrshire CouncilRespondent
Before
Employment Judge Lucy WisemanMs A Young for claimantFriend for claimantMs C McMenamin (instructed by Solicitor) for respondentDate 12 December 2019
JUDGMENT
The claim was presented in time and will now proceed to be listed for a Hearing.
REASONS
[1]The claimant presented a claim on 14 May 2019 alleging there had been an unauthorised deduction from wages.[2]The respondent entered a response denying there had been an unauthorised deduction from wages and asserting the claim had not been brought within the applicable time limit. E.T. Z4 (WR)[3]The Preliminary Hearing today was arranged to determine the issue of timebar.[4]I heard submissions from each representative and I was referred to a small number of documents produced by the claimant’s representative. Claimant’s submissions[5]The claimant applied for voluntary severance and, by letter of the 9 July 2018, she was advised her application had been formally approved and that her employment would end by mutual agreement on the 18 October 2018.[6]The letter went on to advise the claimant she would have “immediate access to [your] pension benefits … In addition you will receive a Severance Payment of £27,242. You have previously received an illustration of benefits due to you and this agreement is based on your final benefits being the same or similar to those figures”.[7]The letter attached a document entitled “Voluntary Severance – Indicative Financial Implications”.[8]Ms Young submitted no-one from the employer informed the claimant at any time that the amount she received would not be increased as a result of the impending 2018/19 national pay settlement.[9]The claimant understood that the voluntary severance amount she was to receive was calculated based on her contractual weekly wage, which was shown in the illustration document, and subsequently confirmed by the Payroll Manager in an email dated 6 March 2019 (document 3).[10]Ms Young submitted the claimant’s contract had been in force up until the termination date of 18 October 2018, and states that her terms and conditions of employment are in accordance with the NJC collective agreements.[11]The Scottish National Joint Council agreed a 3.5% pay increase for the financial year 2018/19 on 3 March 2019. This was back-dated to 1 April 2018.[12]The claimant’s position is that her severance pay should be re-calculated and increased by £954.[13]The claimant wrote to the respondent on 5 March 2019 to request this payment be made.[14]The claimant was advised by email of 6 March 2019 (document 6) that “back pay won’t include a voluntary severance adjustment”. The email went on to explain that a severance payment was not a wage-related payment, and was not covered by the same rules as wage-related payments (such as weekly wages and holiday pay). The email confirmed that severance payment was based upon an employee’s contractual weekly rate of pay, as at the calculation date.[15]The Scottish National Joint Council pay award was implemented and back dated, and the claimant received a payment of wages and holiday pay into her bank account on 13 March 2019.[16]Ms Young submitted 13 March 2019 was the date the claimant knew she would not be paid the £954 increase in severance pay. Accordingly this was the date time started to run.[17]The claimant contacted ACAS on 29 March 2019 and received an Early Conciliation Certificate on the 22 April 2019. The claim was presented on 14 May. Respondent’s submissions[18]Ms McMenamin referred to the terms of section 23 of the Employment Rights Act, and the three month time limit for presenting a claim.[19]Ms McMenamin submitted this was a voluntary severance where the claimant had asked for figures to consider, and had been provided with them. The claimant accepted the figures offered. The calculation of the figures given to the claimant was based on a formula which included the contractual rate of pay.[20]Ms McMenamin referred the Tribunal to document 1 (being the letter of the 9 July 2018 sent to the claimant) where the claimant had been asked to sign the following: “I, Margaret Burns, agree that my employment with the Council will end on 18 October 2018 through mutual agreement with the Council on the terms outlined above”.[21]The respondent’s primary position was that the severance payment was not wages, or a contractual figure: it was a sum the parties had agreed on to end the contract. Accordingly the outcome of any collective bargaining was irrelevant.[22]Ms McMenamin submitted the claim was time barred and should not be allowed to proceed. Discussion and Decision[23]I had regard firstly to the terms of section 23 Employment Rights Act which provides that: “ an employment tribunal shall not consider a complaint under this section unless it is presented before the end of the period of three months beginning with:- (a) in the case of a complaint relating to a deduction by the employer, the date of payment of the wages from which the deduction was made ..” Where the employment tribunal is satisfied that it was not reasonably practicable for a complaint to be presented before the end of the period of three months, the tribunal may consider the complaint if it is presented within such further period as the tribunal considers necessary.”[24]I next had regard to the fact there was no dispute regarding the fact the claimant’s employment ended on 18 October 2018, and although there was information to suggest when the severance payment was paid to the claimant, I assumed it was made on that date.[25]The claimant’s case is that the subsequently agreed pay award for 2018/19 which was back dated to 1 April 2018, ought to have increased the calculation of her severance payment because the contractual weekly pay, which was the basis of the severance payment calculation, had increased.[26]The rights or wrongs of that position was not the issue before the Tribunal today. The issue for me to determine is whether the claim was presented in time.[27]I was satisfied, in terms of considering the time limit for bringing the claim, that the claimant expected to be paid the sum of £954 in March 2019, when she was paid the back dated increase to wages and holiday pay. The sum was not paid, and accordingly 13 March 2019 was the date when the alleged deduction occurred.[28]The claim was presented on 14 May. The claim was presented within three months of the date of payment from which the deduction was made.[29]This claim will now proceed to be listed for a Hearing.
Introduction
[30]Frank Fulton (Service Lead - Payroll, HR Business and Resourcing) also sent an email to the claimant on 6 March 2019 (C3). That email was in the following substantive terms:- “I have been passed your email seeking clarification of a couple of points I understand that in relation to the first two points concerning pension and the termination date. These have been responded to by Jane Murray. In relation to point 3 concerning the payment of your voluntary severance, I would make the following comments. As a former employee, you are duly entitled to any wage related payments, such as arrears of pay claims, which we will process and make payment to you on 13 March 2019. In relation to severance, this is a payment made to an employee who has lost their job by taking voluntary severance. This is not a wage related payment and is not covered by the same rules as wage related payments. Any severance payment is based upon the employee’s contractual weekly rate of pay as at the ‘calculation date’ for calculating severance payment. In this respect, you are unfortunately not due to have a recalculation done for your severance as you suggest.”[31]On 13 March 2019, the claimant was sent by email a soft copy payslip from the respondent for pay date 16 March 2019 (C5). That payslip showed certain payments and deductions, with a net pay figure to the claimant of £703.77. That payslip (C5) set out the following under the column ‘Payments’:- “Salary Retro 940.77 Pay Lieu Hol Retro 120.13 Severance Pay NT 954.10 Severance Pay NT -954.10 Severance Pay Tax 0.00 Total 1060.90[32]The claimant was then sent a paper payslip from the respondent for period ending 15 March 2019 (C6). That payslip showed certain payments and deductions, with a net pay figure to the claimant of £1,713.22. That payslip (C6) set out the following under the column ‘Payments’:- “Pay Lieu Hol Retro 120.13 PAYE Salary Retro 940.77 NI A Severance Pay NT Ret 954.10[33]The claimant believed from that payslip at C6 that a decision had been made by the respondent that she would receive payment in respect of the recalculation of her severance payment to take into account the back dated pay increase. The claimant sent an email to Jane Murray on 19 March 2019 in the following substantive terms:- “I received my payslip by post today thank you. Can you please let me know if I am due to receive another payment? It says on my payslip my net pay is £1713.22, however, I have only received £703.77 into my bank account (on 13th March).”[34]The claimant has not received any further payment from the respondent. The claimant has received payments from the respondent reflected the backdated pay increase for the period from 1/4/18 in respect of salary payments. The claimant’s severance payment has not been recalculated to take into account that pay increase. Observations on the Evidence[35]The claimant clearly felt aggrieved about what she perceived to be a lack of communication from the respondent, perceived lack of clarification of the sums she would receive following opting for voluntary severance and the sums received being lower than what the claimant had expected. I was satisfied on the evidence presented by the claimant, and it was not disputed by the respondent, that information from the Strathclyde Pension Fund with the claimant’s detailed illustration of pension benefits was not passed to the claimant timeously on receipt by the respondent. In so finding I attached weight to the timing of the emails at C11.1, as set out above.[36]I accepted that the letter at R1 & C1 is erroneously dated 9 July and could not have been issued to the claimant on that date because it reflects a changed termination date which was first requested by the claimant on 12 July 2018.[37]I observed that there appeared to be a lack of explanation given to the claimant in respect of the differences between the figures in option 1 and option 2 of the voluntary severance options.[38]I found both the claimant and John Dunne to be credible and reliable witnesses. The relevant material facts in this case are not materially in dispute. The issue before me comes to down to an interpretation of the relevant law to those facts.[39]There is dispute in respect of the claimant representative’s position in submissions that other local councils have paid recalculated severance pay to take into account the backdated pay increase for year 2018/19. I accepted the respondent’s representative’s position that no evidence was presented before me on that and therefore have not taken that particular submission into account, nor have I made any findings in fact in that respect.[40]Although the letter at R1 / C1 refers to “…the terms of the Council’s voluntary severance arrangements”. These were not before me.
Relevant Law
[41]The Employment Rights Act 1996 (‘the ERA’) at section 13 provides for the right of an employee not to suffer unauthorised deductions from wages. An unlawful deduction from wages claim may be brought before an Employment Tribunal in terms of that legislation. Section 13(3) states: ‘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.’[42]Section 27 sets out provisions with regard to meaning of wages, including at section 27(1)(a) ‘any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise.’ There are certain exclusions set out in section 27(2) and (5). A worker cannot seek recovery of those excluded payments by bringing an unlawful deduction from wages claim. Section 27(2)(c) excludes “any payment by way of a pension, allowance or gratuity in connection with the worker’s retirement or as compensation for loss of office.”[43]In Richmondshire Disrtict Council v Dodds EAT 1240/96, the EAT held that the section 27(2)(c) exclusion applied to a provision in a contract of employment entitled retiring employees to a period of extra paid leave in the year before they retired. The EAT held that that was an allowance in connection with retirement rather than wages and so was excluded by the provisions of section 27(2)(c).[44]In Webber v NHS Direct EAT 0627/11, the EAT held that a claim for protection payments following an employee’s redeployment to a lower salary post was not ‘compensation for loss of office’, but ‘wages’, and so was not excluded in terms of section 27(2)(c). Submissions[45]Neither party relied on any case law before me.[46]The claimant’s representative spoke to provided written submissions. Her position was that severance pay was wholly calculated based on weekly contractual wage as per the claimant’s contract of employment with the respondent. On that basis, the claimant sought recalculation of the severance payment to take into account the national SJC backdated annual increase, from the date of implementation of that increase to termination date of 18 October 2019. The claimant sought the sum of £953.10 in that respect.[47]The claimant’s representative relied on the letter at C1 in respect of the termination of employment being by mutual agreement, based on the indicative financial figures in that letter. Reliance was placed on that letter referring to the terms of final benefits being the ‘same or similar’. The claimant relied on the illustration document with the heading ‘Voluntary Severance - Indicative Financial Implications’ as inferring that the severance amount was subject to change.[48]The claimant’s representative relied on section 13(2) and section 27(1) of the ERA. Her position was that the severance payment was wages because it was a payment under the contract and related wholly to that. Reliance was placed on the contract of employment between the claimant and the respondent having a clear and unequivocal expressed term that those terms and conditions of employment are in accordance with the NJC (later SJC) collective agreement. Reliance was placed on Frank Fulton’s position in email at C3 that ‘any severance payment is based upon the employee’s contractual weekly rate of pay as at the calculation date.’ The claimant’s representative’s position was that the increase in salary effect and was backdated to 1 April 2018, as at the ‘calculation date’ the claimant’s weekly rate of pay had increased. Reliance was placed on the claimant’s understanding that the voluntary severance payment was calculated on contractual weekly wage as shown in the illustration document. Reliance was placed on the claimant having an expectation that the severance payment would be increased as a result of the backdated pay increase.[49]The claimant’s representative took into account that the calculation date must be before the claimant employment with the respondent terminated. Her position was that the severance pay should have been calculated on the basis of the increased weekly wage. Her position was that if the pay increase had been implemented before the termination date, the contractual weekly pay would have then increased, as effected by the backdated agreement, and the severance payment would then have been calculated based on the increased weekly wage.[50]Reliance was placed on the communications the claimant received from the respondent and in particular that at no time was the claimant told by or on behalf of the respondent that the severance payment would not be later recalculated to take into account and backdated pay increase. Reliance was placed on the claimant’s expectation that the severance payment would be recalculated with any such backdated pay increase. Reliance was placed on there being no reference at the time of the agreement to the payment of £27,242 being in full and final settlement, or being ‘final and not open to negotiation’ as is relied upon by the respondent in their ET3. Reliance was placed on lack of any documentary evidence to support the respondent’s position that the severance payment would not be increased in the circumstances. Reliance was placed on the calculation of the severance payment being done using the statutory redundancy tables and the employees’ weekly wage, and not being a figure ‘plucked out of the sky’.[51]The claimant relied on the documents before me at C1 – C11. Reliance was placed on the payslip showing severance pay due (C6). It was submitted that the documents show inconsistencies and lack of clarity within the respondent’s organisation.[52]The claimant’s representative submitted that the restructure program was not completed, and no conclusion had been reached, when the claimant decided to enquire about voluntary early release. It was on that basis that the claimant’s representative argued that the Severance Payment was not compensation for loss of office. Her submission was that there was a mutual termination. Her position was that the claimant had chosen to leave and had given no comment on the two job options which had been available to her (C8). Reliance was placed on the Local Government (Discretionary Payments and Injury Benefits) (Scotland) Regulations 1998. Her submission was that the pension the claimant received was triggered at the discretion of the respondent by way of the mutual termination of employment, and in the interests of efficiency and not loss of office. Reference was made to loss of office in the Companies Act 2006. It was submitted that this was not a payment referable to the claimant’s redundancy. Reliance was placed on the claimant not having been forced to leave and restructure not having been completed when the claimant signed her agreement to mutual termination of contract. It was submitted that loss of office is mainly referenced to directors of companies under the Companies Act 2006 and is additionally defined as where an employee is forced to leave the employment before the expiry of the contract. It was submitted that the claimant’s situation is not loss of office because the claimant signed for a mutual termination of employment, terminating on 18 October 2018 by mutual agreement. Reliance was placed on C1 / R1 stating that the claimant was not entitled to ‘statutory redundancy or any other severance payment’.[53]Reliance was placed on the delay in pension figures being provided to the claimant and the difference between the sums the claimant expected to receive and the lower figures she actually received.[54]In summary, it was the claimant’s representative’s position that: -• the claimant’s weekly wage from 1 April 2018 to 18 October 2019, had increased on implementation of the collective bargaining clause within the claimant’s contract of employment• the calculation of the voluntary severance payment was based on contractual wage as shown in the documents relied upon by the claimant• a payslip was provided to the claimant by the respondent showing that an increase in the voluntary severance payment was due on implementation of the collective bargaining clause• the voluntary severance payment was not a settlement agreement but was an amount paid unambiguously calculated using the claimant’s contractual weekly wage• the respondent did not tell the claimant that the severance payment would not be increased as a result of the national pay award, nor that the payment was in full and final settlement and the claimant had an expectation that the severance payment would be recalculated on implementation of the national pay award• the claimant did not suffer loss of office and was not made redundant• reliance was placed on the email correspondence between the claimant and the respondent.• the claimant seeks the sum of £954.10 in respect of recalculating the severance pay to take into account the back dated pay increase. This is relied upon as being a deduction of wages in respect of non-payment of the difference in the calculations.[55]In her submissions, the respondent’s representative asked that any matter referred to in the claimant’s representative’s submissions which was not based on evidence before the Tribunal should be treated with appropriate caution.[56]The respondent’s representative relied on this being a claim for unlawful deductions from wages. Her position was that recalculation of a voluntary severance payment to take into account a backdated pay increase was not wages. It was noted that there was little dispute between the parties on the evidence. Reliance was placed on the claimant having elected to apply for voluntary severance. It was submitted that there is an inference from the claimant’s completion of the form which is C8 that she did not wish to purse the options of the alternative employment options. Reliance was placed on the respondent having amended the claimant’s termination date to 18 October 2019, at her request and to her financial advantage.[57]Reliance was placed on R1 / C1 as setting out the terms on which the severance payment was made. It was accepted that on the evidence of the claimant and of Mr Dunne it is likely that that letter was sent out after 9 July 2018 (which is the date stated on that letter). It was accepted that as the claimant asked for the termination date to be changed on 12 July 2019, and R1 reflects that changed date, R1 must have been finally produced after 12 July, most likely from a template worked on on 9 July 2018. It was submitted that Mr Dunne had provided this reasonable explanation and that that should be accepted.[58]Reliance was placed on the claimant having signed R1 and so accepting that her employment with the respondent would end by mutual agreement on the terms set out in that letter, being that the claimant would(1) have immediate access to her pension(2) receive a severance payment of £27,242. Reliance was places on the illustrative benefits and the reference to ‘the same or similar’ being in relation to pension and lump sum figures, rather than to the severance payment figure. It was submitted that the agreement was predicated on the annual pension and lump sum being the same or similar to the figures in that letter. It was submitted that the severance figure was separate to those figures.[59]In respect of the calculation of the severance payment, the respondent’s representative referred to C11.1. It was not disputed that the formula used to calculate the severance payment was based on salary, similarly to the calculation of a statutory redundancy payment, as had been accepted by Mr Dunne in his evidence. The respondent’s representative submitted that the severance payment figure was calculated as at the calculation date and, as stated in R1, constitutes a mutual agreement between the parties. Reliance was placed on it being made clear in R1 that this was not a redundancy or other severance payment, and that there was no dismissal. It was submitted that the figure was an amount paid on mutual agreement to termination of employment and is an accommodation reached between the parties calculated with reference to salary as at the calculation date but from which no deductions were then made. Reliance was placed on Mr Dunne’s evidence that the severance payment is in effect compensation for loss of employment.[60]Reliance was placed on R1 as being the agreement signed by both parties and binding as at that date. It was submitted that if the arrangements had been different and there had subsequently been the case in salary, then the severance payment would not have been reduced. It was submitted that the figure set out in R1 is the agreed figure.[61]In respect of the claimant’s reliance on the email at C3, it was submitted that the references to payment on loss of jobs. It was submitted that this is not a wage -related payment it was convenient to the respondent to calculate the payment with reference to the employee’s wages.[62]It was submitted that the voluntary severance payment comes outside the definition of wages in the employment rights act because all the exclusion in section 27(2)(c) in respect of compensation for loss of office. Failing that it was submitted that the severance payment is a gratuity and there is no contractual entitlement to the payment.[63]With regard to the payslips relied upon by the claimant. It was submitted on behalf of the respondent that the inclusion of an amount in respect of the recalculation of the severance payment was ‘an unfortunate mistake’, bit was a mistake.[64]In respect of the claimant’s reliance on a delay in the respondent issuing to her details of her pension figures it was submitted that that was not relevant to the heart of the matter before this Tribunal.[65]In summary, it was submitted for the respondent that the claimant and the respondent entered into an agreement on 9 July 2018 that was accepted by the claimant when she signed the letter at R1.2 and that the claimant cannot claim for an amount in respect of the calculation of that amount because of the exception to the legislation set out in ERA s27(2)(c). On that basis the respondent submitted that the claim should be dismissed.[66]Section 27(2)(c) of the ERA excludes “any payment by way of a pension, allowance or gratuity in connection with the worker’s retirement or as compensation for loss of office.” In this case, the severance payment is a payment made to the claimant when her employment came to end by mutual agreement. Part of that mutual agreement was that the claimant receive pension payments. Pension payments are payable on retirement. In that sense then the severance payment here is a payment in connection with the worker’s retirement.[67]I did not accept the claimant’s representative’s submissions that the severance payment was not compensation for loss of office. The agreement came to effect because the claimant agreed to accept the severance payment as an alternative to continuing employment (in an alternative role). The severance payment was then compensation for loss of office. The provisions of section 27(2)(c) do not require loss of office to be enforced. These provisions include where there has been a mutual agreement to loss of office.[68]In so deciding, I followed the reasoning of the EAT in Richmondshire District Council v Dodds EAT 1240/96.[69]Had the exception in section 27(2)(c) not applied, I would have accepted the claimant’s reliance on there being no provision that the severance payment be in full and final settlement and would have accepted the claimant’s position that the implementation of the backdated pay increase ought to have had the effect of increasing the calculation of the severance pay with regard to the relevant period (from 1 April 2018 to 18 October 2018) because the severance pay was calculated with regard to the relevant weekly wage.[70]The Tribunal does not have jurisdiction to make an award to the claimant in respect of the recalculation of severance pay because the exception to section 13 ERA which is set out in section 27(2)(c) ERA applies. For that reason, the claim is dismissed.