Employment Judge CampbellMr J Aluya, lay (instructed by Representative) for claimantMr G Bathgate for respondentsolicitor, Allan for respondentMcdougall solicitors for respondentDate 10 January 2025
JUDGMENT
The claimant's complaints in respect of(i) unpaid wages,(ii) unpaid holiday pay and(iii) unpaid pay in lieu of notice are unsuccessful, and accordingly dismissed.
REASONS
Findings of fact
[1]This claim was raised by a former employee of a business which undertakes care services. The respondent terminated her employment after ETZ4(WR) she had completed just over two months of service, essentially as she had not satisfactorily completed a probationary period. The claimant alleged that she was not paid everything she was due in relation to the hours she had worked, her holidays accrued and her entitlement to notice.[2]The claimant was represented by Mr Aluya, who is not legally qualified but nevertheless capably presented her claim. The respondent was represented by Mr Bathgate, a solicitor. The parties' representatives are thanked for their assistance in focussing the issued which were in dispute.[3]On behalf of the claimant Mr Aluya applied at the commencement of the hearing to amend the claim to introduce a further complaint of unlawful deduction from wages, based on two deductions made from her final payslip, relating to disclosure checks and her uniform. For reasons given orally at the time the application was not granted.[4]A bundle of documents was prepared for the hearing, containing items provided by both parties. At the hearing I had an earlier, incomplete version of the bundle but was able to gain sight of the later complete bundle shortly after the hearing ended on the day. Documents in the bundle are referred to below in square brackets using the numbering they were given.[5]The hearing took place by video and the claimant gave evidence, including by way of cross-examination. No respondent witnesses were called.[6]On conclusion of the evidence Mr Aluya requested some time to prepare and provide closing submissions in writing, which I agreed was appropriate having regard to the tribunal's overriding objective. A written note was provided within the timescale ordered. The respondent was given the right of reply, and Mr Bathgate provided a note responding to the claimant's submissions where he considered necessary. The parties' submissions were considered along with the evidence before a decision was reached. Legal issues The claimant's legal complaints were as follows: 1. Did the respondent make an unlawful deduction from wages or breach the claimant's contract by failing to pay the claimant wages that she had earned before her contract was terminated on 3 July 2024? The claimant alleged that she should have been paid for that day, whereas the respondent argued that she should not. 2. Did the respondent make an unlawful deduction from wages or breach the claimant's contract by failing to pay the claimant in respect of her entitlement to one week's notice of termination of employment? The claimant argued in her claim form that no such payment was made; the respondent maintained that it was included in her final pay which was provided to her after she had raised her claim. 3. Did the respondent make an unlawful deduction from wages, breach the claimant's contract or breach the Working Time Regulations 1998 by failing to pay the claimant the value of her holidays accrued and untaken upon termination of her employment? The claimant argued that she should have accrued holidays in respect of her one week notice period despite not serving it, whereas the respondent's position was that holiday entitlement was only accrued up to the termination date itself. The difference between the parties' positions therefore was one week's worth of holiday accrual. Relevant law 1. By virtue of section 13 of the Employment Rights Act 1996 a worker is entitled not to have unauthorised deductions made from their wages. Therefore, subject to specific exceptions provided for in that part of the Act, there will have been an unauthorised deduction if the worker is paid less than they have earned, depending on how their earnings are calculated, or not paid at all for their work. The date of the deduction is deemed to be either the day when less is paid to them than they have earned, or when they would normally have been paid but were not. A complaint can be made about a series of deductions if the situation is repeated. 2. All employees have the right to be given notice of the termination of employment. Statutory minimum periods, based on length of continuous service, are calculated according to the provisions of sections 86 to 91 of the Employment Rights Act 1996. An employer and employee may agree that the notice entitlement may be more, but not less than that. An employer can agree with an employee that it may terminate the contract immediately rather than have the employee serve their notice period, provided that it pays the employee the same amount as would have been earned during that period, commonly referred to as 'pay in lieu of notice' and sometimes abbreviated to 'PILON'. By utilising such a term it will not be in breach of contract. 3. An employee is entitled to pay in lieu of unused annual leave on the termination of their employment, by virtue of Regulations 13 and 13A of the Working Time Regulations 1998. Their accrued leave will be taken as the proportion of their annual entitlement matching the proportion of the leave year worked by the time of termination, less any leave actually taken. Findings of fact The following facts were established, based on the evidence provided and to the extent necessary and relevant to deciding the legal issues in the claim.[1]The claimant was an employee of the respondent between the dates 30 April and 3 July 2024. The respondent operates a number of residential care homes in Scotland and the claimant was engaged as a Care Assistant at a home in Edinburgh.[2]The claimant's contract of employment was produced [1]. Among other things it set out that the first six months of the claimant's employment would be treated as a probationary period in which her performance and conduct would be assessed.[3]Under the contract, the claimant was entitled to receive one week's notice of termination of employment during her probationary period. The respondent was not obliged to provide any work after notice had been given, and it had the right to make payment in lieu of notice served.[4]The contract contained provisions allowing the respondent to make deductions from the claimant's pay. Those were contained in clause 9. The respondent was empowered to make deductions in relation to a range of sums including training costs incurred, recruitment costs, overpayments of wages, irregular expenses claims, damage to property and 'any other sum due to the [respondent].'[5]The claimant was paid on a monthly basis. She was paid on 16 June 2024 and accepted that she received the correct amount of pay then, and in previous months. She typically worked 44 hours per week according to a rota, for which she would be paid £528 before deductions.[6]The claimant worked as normal during the weeks commencing Monday 17 and Monday 24 June 2024.[7]A copy of rotas covering early July 2024 was produced. The claimant did not work on Monday 1 or Tuesday 2 July 2024. She was scheduled to start work on Wednesday 3 July 2024 at 7am. On arrival she was asked by a manager, Ms Brown, to attend a short meeting where Ms Brown told her that her employment was being terminated with immediate effect, and she should go home.[8]The decision was confirmed in a letter from Ms Brown dated the same day. It stated that the claimant would be paid for all shifts worked up to that date, together with accrued holidays. The claimant had taken no holidays since starting work with the respondent.[9]The claimant received her final pay on 25 July 2024. As she commenced ACAS Early Conciliation on 10 July and submitted her claim to the tribunal on 17 July 2024, this was paid to her after her claim was initiated, which went part of the way to explaining why it had been raised.[10]The net sum she received was £1,653.66. She was provided with a payslip [11] which showed she was paid as follows in gross terms:a.£1,056, equating to two weeks of normal pay,b. 43.90 hours' worth of holiday pay amounting to £526.80, andc. Pay in lieu of notice of a week – a payment of £528.00.[11]Itemised deductions were made at that time from her pay as follows:a.£34.00 for her uniform, andb.£59.00 for Disclosure checking.[12]The claimant did not raise with the respondent directly any of her complaints which are now before the tribunal. In evidence she said that Ms Brown was difficult to engage with and she believed she was using the 'right channel' by going first to ACAS and then the tribunal itself. Mr Bathgate argued in submissions that some or all of the claimant's complaints fell within the scope of the ACAS Code on disciplinary and grievance procedures, meaning that the claimant ought to have raised a grievance about them. He submitted that therefore by reason of not doing so, any award of compensation in the claimant's favour should be reduced by up to 25% as the Code suggests should occur. Discussion and decision Unpaid wages[13]Part of the claimant's case was that she should have been paid for her shift on 3 July 2024, the day she reported for work but was sent home by Ms Brown. However, the terms of her contract dictated that she would only be paid for shifts worked, and she did not work a shift on that day. She did not work for any time at all. It was unfortunate that she travelled to work only to be immediately sent home, but she had no contractual or other entitlement to be paid for work she did not carry out. Unpaid notice[14]The claimant was entitled to one week of notice at the point when she was dismissed, i.e. within her first six months of service. The contract permitted the respondent to terminate her contract immediately and make a payment equivalent to the wages she would have received by working her notice. It utilised that provision on 3 July 2024 by way of Ms Brown's meeting and subsequent letter the same day.[15]To an extent it is understandable why the claimant made a complaint in respect of her notice entitlement. She was not told anything in the meeting about it, and nor did the termination letter deal with the issue either. However, the claimant's final wages included a payment satisfying the requirement to pay her in lieu of her notice, and her payslip dated 25 July 2024 explained that this was the case. 'PILON' was clearly and separately itemised, along with the correct value of a week's pay. Accrued holidays[16]The difference between the parties over this issue arose out of the treatment of the claimant's notice entitlement. The claimant accepted that she was paid for holidays accrued up to her termination date, but not that additional week. Mr Aluya argued that the claimant should accrue leave for that week despite not being employed for it. Mr Bathgate argued the contrary. The claimant's final payslip set out a calculation based on omission of that week, which was £526.80.[17]By default, the correct approach to calculating accrued holidays is to count up to the termination date. There was no breach of contract in this instance, as the claimant's contract allowed the respondent to terminate it instantly. There were no provisions dictating that holidays would accrue beyond that point, and so they did not.[18]It follows that the claimant received the correct amount of money to compensate her for holidays accrued but not taken.
Conclusions
[19]The claimant has been unable to establish on the basis of the evidence that any of her complaints are well-founded, and so they must be dismissed.[20]It follows that it is not necessary to consider whether the ACAS Code applied to the claimant, or, if so, whether she failed to comply with it and whether any reduction in compensation should follow.
Background
[1]The claimant raised a claim against the respondent by way of an ET1 submitted on 17 July 2024. She sought payment of alleged(i) unpaid wages,(ii) unpaid holiday pay and(iii) unpaid pay in lieu of notice from the ETZ4(WR) respondent. The responded resisted all of her complaints and submitted a response form to that effect.[2]The claim was heard by way of a video full hearing on 27 September 2024. The claimant was represented by Mr Aluya, a lay representative. The respondent was represented by Mr Bathgate, a solicitor. Parties were permitted to provide closing submissions in writing and a reserved written judgment was issued on 29 October 2024. For reasons provided in the judgment, all of the claimant's complaints were refused.[3]On 5 November 2024, following the issuing of the judgment, Mr Bathgate applied by email for a wasted costs order under rule 80 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 (referred to hereafter as the 'Rules'), failing which an order for costs under rule 76 of the Rules (the 'application'). This attached a copy of an email he had sent to Mr Aluya on the morning of 25 September 2024 (the 'cost warning' email). That email said, in summary:a. An offer of £132 net of any deductions for tax and national insurance was being made in order to settle the claim. This was equivalent to a day's pay for the claimant;b. It was maintained that the claimant had been paid all sums she was entitled to receive from the respondent;c. The respondent was putting the claimant on notice that an application for costs would be made in respect of defending the claim at the full hearing should the offer not be accepted;d. The offer was described as being without prejudice, subject to costs.[4]Two points should be made here in relation to technical aspects of the application. The first is that the term 'costs' was used in the application, and so is used in the body of this judgment, although in Scotland the alternative term 'expenses' applies – see rule 2 of the Rules. Otherwise there is no difference to the matter. The second is that, as of 6 January 2025, the Employment Tribunal Procedure Rules 2024 (SI 2024/1155) replaced the Rules. The substance of the rules which are relevant to this application has not changed, but some of the rule numbers are different. Accordingly, the approach adopted in this judgment is to use references to the earlier Rules other than in the header, where it is necessary to make the order under the equivalent and newer version of the relevant rule.[5]The application email also stated that Mr Aluya in his capacity as representative of the claimant had acted unreasonably in refusing the settlement offer, given the restricted nature of the claim and the evidence which was in his possession before the hearing.[6]The cost to the respondent of Mr Bathgate preparing for, and appearing at, the full hearing on 27 September 2024 was quantified at £750 plus VAT, or £900 overall.[7]The application was made within the 28-day time limit set by rule 77.[8]By way of explanation an order for costs under rule 76 can be made against a party to a tribunal claim in circumstances where they, or their representative, act in a certain way as described.[9]By contrast, a wasted costs order under rule 80 can be made against a party's representative in similar circumstances, but only if that person is 'not acting in pursuit of profit with regard to the proceedings.' Rule 80 further explains that 'A person acting on a contingency or conditional fee arrangement is considered to be acting in pursuit of profit.'[10]The tribunal asked Mr Aluya for any comments on the application and he provided those on 12 November 2024 by way of a note. In summary he said that:a. Tribunals had to remain accessible to non-legally represented or trained parties;b. The claimant brought her claim in good faith and with a reasonable belief in its validity;c. Rather than act vexatiously, abusively, disruptively or otherwise unreasonably as phrased in the Rules, she had been co-operative and reasonable by, for example, engaging in Early Conciliation via ACAS and later narrowing the focus of her claim; andd. The payslip which clarified the details of deductions made for PVG clearance and her uniform was only disclosed two days before the hearing.[11]The parties were then asked to confirm whether they wished the application to be dealt with by way of a hearing, or via written submissions. They preferred the latter.[12]Mr Aluya provided a further note of submissions on 1 December 2024 and Mr Bathgate submitted further comments by email dated 5 December 2024.[13]Mr Aluya raised the question of financial means and ability to pay, and said that both he and the claimant would be unable to meet a costs award without significant hardship. He did not give any details about his or the claimant's circumstances beyond that. He also said that the respondent's financial offer did not address the full scope of the claim, particularly its nonmonetary value. He referred to(i) the fact that the respondent had refused to provide any references to a prospective employer of the claimant, and disclosed that she had been dismissed,(ii) the offer 'ignored broader claims' and(iii) the late disclosure of the payslip as referred to in his original note. He concluded by saying that the claimant's actions were reasonable, and any procedural delays were primarily caused by the respondent, that the settlement offer failed to address all relevant aspects of the claim, and that any award of costs would impose significant financial hardship.[14]Mr Aluya was asked to confirm whether he had acted within the relevant time on any basis which could fall within the term 'pursuit of profit' in rule 80. He confirmed by email of 7 January 2025 that he had not. The consequence of this is that a wasted costs order cannot be made against him. The application was therefore treated as one solely for the alternative which Mr Bathgate had requested – a costs order against the claimant herself under rule 76. Relevant law and legal principles[15]Although an award of costs in an employment tribunal claim will be the exception rather than the rule, and thus in effect the opposite of civil court litigation, the test of whether an order is appropriate is as set out in rule 76. That requires as a first step:a. That the party or their representative acted vexatiously, abusively, disruptively or otherwise unreasonably in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted; orb. The claim had no reasonable prospect of success; orc. A hearing was postponed less than seven days before it was due to start without good reason.[16]If one (or more) of the above three things has occurred then the tribunal must go on to consider:a. Whether a costs order should be made – because the power is discretionary; andb. If so, what amount the order should be for. Consideration of the application[17]Revisiting the particular complaints made in claim, I was not satisfied that as a whole they had 'no reasonable prospects of success' in terms of option (b) in paragraph 16 above. More specifically, it was at least arguable that the claimant was due some pay for her final day of employment, when she reported for work, attended a meeting with her manager Ms Brown, and then was sent home. The possibility that the tribunal cold make a finding to that effect appears to have been at least recognised if not actually conceded by the respondent in(i) making the settlement offer of a day's pay, and(ii) the closing arguments made on this point at the full hearing as an 'esto' case (i.e. a fall-back line of argument).[18]Similarly, at the point of raising her claim she had been told nothing about whether and how she would be compensated for her entitlement to a week's notice, either verbally by Ms Brown in the above meeting or in a letter issued a few days later confirming that her contract had been terminated.[19]It was also apparent that circumstance (c) in paragraph 16 above did not apply in this case. This left option (a) in terms of there being a proper basis for making a costs order.[20]Considering all of the circumstances deemed to be relevant, I reached the view that claimant had acted 'unreasonably' in proceeding with the full hearing upon receiving the cost warning email. Specifically:a. She had by that point received her final payslip which itemised the (correct) sums she had received for holiday pay and notice pay;b. The cost warning email offered her the equivalent of her pay for her last day of employment, even though she did not qualify for any pay on that day by virtue of not working all or part of a shift;c. The cost warning email also spelled out (if it were required) that the tribunal has the power to award costs in circumstances which it was said would apply if the offer was not accepted, and that such an order would be sought;d. She had the benefit of seeing the respondent's defence to the claim in its ET3/response form and, to the extent necessary, exploring (or having Mr Aluya explore) whether the position taken on each of the three complaints had a valid legal basis;e. There had been further correspondence between the parties, some of it copied to the tribunal, which discussed the details and merits of each party's position. This was a further opportunity for the claimant to evaluate and understand the respondent's arguments;f. Lastly, in the lead up to the hearing, during the hearing itself and even when replying to the application, Mr Aluya continued to put forward on the claimant's behalf that she had been seeking remedies which the tribunal had no power to grant, whether in her case (for example remedies in relation to unfair dismissal, since she had not attained the required length of service) or at all (such as restitution for stress or anxiety, and compensation for any effect on the claimant's future career through the respondent not providing a reference to a prospective employer).[21]I therefore was satisfied that the claimant had refused a reasonable offer of settlement, and in the circumstances and at the time that she did so, that constituted acting 'unreasonably'. I believe that this is so given the knowledge the claimant and her advisor had at the time the offer was made, and not merely with the benefit of hindsight after a judgment was issued.[22]Since the tribunal is not bound to issue an order for costs every time a party has acted unreasonably I next considered whether it was appropriate to do so in this case.[23]I considered the submissions made by Mr Aluya in reply to the application. I was not persuaded by them ultimately. I did not accept that the claimant had been particularly co-operative in narrowing down the scope of the claim, or assisting its progress towards a full hearing. If anything, the opposite was true. There had been a number of applications and communications by Mr Aluya which were irrelevant to the claim and in some cases looked to expand it beyond its realistic scope. As stated above, Mr Aluya also continued to suggest that the claimant was entitled to proceed with the hearing because the settlement offer did not fully compensate her for her clams, disregarding that the additional elements he referred to would not be within the tribunal's power to grant.[24]I noted the factors in paragraph 21 above and also the fact that the consequence was that the respondent had to instruct a solicitor to prepare for and appear at the full hearing on 27 September 2024. That would clearly have been avoided had the settlement offer been accepted.[25]I also considered that the cost warning email was sent at 11am two days before the hearing was scheduled to start, and did not set a deadline for acceptance of the offer. I took from this that the offer was open for acceptance up until the end of normal working hours on the day before the hearing, and that a consequence of this, given the relatively short amount of time left, was that Mr Bathgate would have to undertake at least some further preparation for the hearing at the same time as the claimant was being given time to consider the offer.[26]I also considered it likely, given the ultimately simple nature of the three complaints, and the respondent's position on them, that such additional preparation would have been relatively minimal, and that the majority of Mr Bathgate's time (and ultimately his fee to his client) would have related to the hearing on the day, which would have been entirely avoided if the settlement offer had been accepted.[27]I accepted at face value that the claimant would have some difficulty paying an award, but this did not outweigh the other relevant factors. It would presumably be possible for the parties to agree a payment plan over time.[28]In taking all of the above into account, my conclusions therefore were:a. The claimant acted unreasonably in refusing the respondent's settlement offer by 26 September 2024;b. In all of the circumstances it was appropriate to make an order for costs; andc. That the amount of the order should be slightly less than the whole sum incurred by the respondent in the period 25 to 27 September 2024.[29]My decision therefore is to issue an order for the payment of costs (expenses) in the sum of £500 plus VAT, or £600 in total. This will be under rule 73 of the Employment Tribunal Procedure Rules 2024 (SI 2024/1155) which is now the proper basis.