Candler & Ors v ICL System Services [1995] UKEAT 1136_94_1212

EAT
Candler & Ors v ICL System Services
[1995] UKEAT 1136_94_1212 · 1995-12-12

JUDGE CLARK :

This is an appeal by fourteen employees of the Respondent against a unanimous decision of the Reading Industrial Tribunal (Chairman Mr N Jenkinson). There is a cross-appeal by the Respondent. The Tribunal's extended reasons for their decision are dated 17th October 1994 ["the reasons"].All fourteen Appellants were employed by the Respondent as Customer Service Engineers. They fall into two geographical groups. Six, Messrs Candler, Ash, Sisson, Emery, Harrington and Cryer were employed in the Midland Branch ["the Midland employees"]. The remaining eight were based in London ["the London employees"].By originating applications presented to the Industrial Tribunal each Appellant complained of unlawful deductions from his wages contrary to the Wages Act 1986 . Each complaint turned on the true construction of the individual terms and conditions of employment.Details of the individual contractual histories are set out at paragraphs 8 and 9 of the reasons. The relevant documentation in each case begins with a letter of appointment, followed by General Conditions of Employment and is completed by a document headed Conditions of Employment UK Salaried employees (Special Conditions of Service - ["SCS"]). Most were long-serving employees and each was entitled to 26 weeks notice of termination of employment by the employer.We shall take the case of Mr G M Jones, a London employee, by way of example. His letter of appointment to Field Engineering was dated 17th July 1964. It set out his salary at the time. He signed a set of General Conditions of Employment on 8th August 1964. Clause 10 of the General Conditions provided:"10. The foregoing conditions and those contained in the letter of offer of employment are subject to variation from time to time but the notice of such variation will be not less than the length of notice required to terminate your employment" ["The General Variation Clause"]Each Appellant had an identical General Variation Clause in his contract, save in the cases of Mr Cooper and Mr Telford. The general variation clauses in their contracts read:
"16. Changes. These conditions and those contained in the letter of offer of employment are subject to variation from time to time ... individual or general notice. Notice of such variation will be normally not less than the length of notice required to be given by the Company to terminate your employment. Changes may, however, be introduced at lesser notice either by mutual agreement (e.g. on promotion) or by tacit agreement (e.g. on salary increase or change in Death Benefit Scheme."
It is accepted by Mr McCahill, on behalf of the Respondent, that there is no material difference between the General Variation Clause and the contracts of Messrs Cooper and Telford as compared with the other Appellants. In particular, he attaches no significance to the word "normally" used in their "Changes" clause.The SCS for Customer Service Engineers deal with a number of operational matters. One such is Telephone Standby duties (TSB). This system, as its name suggests, involved Customer Service engineers being on standby for call out. It was a voluntary scheme, but each of the Appellants had engaged in such duties for many years. Indeed we were told by Mr McCahill that approximately 505 out of 597 Customer Service engineers throughout the company volunteered for this duty.The contractual position is to be found in the SCS. The following SCS terms are material:

"2. DURATION AND ORGANISATION OF THE WORKING WEEK

...2.2 The arrangement of working hours for CS Engineers is dictated by the need to meet the requirements of our customers. This may require that engineers work shift patterns ......2.3 The defined working hours and patterns will be recorded on the "Work Schedule". In certain circumstances such as the application of particular shift systems the basic 37 hours may be exceeded as is current practice....2.4 In the event of an engineer being required to work a shift pattern, the following conditions will apply unless agreed by exception with the engineers concerned....2.4.2 The number of attendances for Schedules work, (excluding scheduled TSB) shall not be more than 20 per four week period, ......2.5 Hours worked on Telephone Standby duties will not be included as normal Scheduled hours. ...2.6 Should there be any proposal to change a defined Work Schedule the individual concerned will receive four weeks notice of the proposed change unless by agreement in exceptional circumstances. Consultation will take place about any proposed changes....3. PAYMENTS FOR UNSOCIAL HOURS WORKING AND OVERTIME3.1 Unsocial Hours PolicyIn all cases of shift working, overtime working, standby and call-out, the provisions of the Company Unsocial Hours Policy (UHP) (27.9.79) will apply with the exception of 3.2 below.3.2. Telephone Standby Minimum FallbackThe pay for Telephone Standby Duties over and above scheduled hours will be:3.2.1 Weekdays and weeknights - £2.62 per hour or 33% of the appropriate rate whichever is the greater.3.2.2 Weekends - 33% of the appropriate rate....4. TELEPHONE STANDBY, CALL OUT, AND REST PERIOD4.1 Engineers may be requested to work telephone standby duties. ...4.2 The pay for Telephone Standby duties, will be in accordance with the Unsocial Hours Policy subject to the TSB minimum fallback in 3.2 above. ...4.3 Scheduled TSB Commitment4.3.1 Where Telephone Standby patterns of work can be scheduled over a period of time by the Company, Engineers may be requested to commit to a planned schedule of TSB.The scheduled TSB hours will be defined and will depend upon the customer base and the nature and type of cover provided.4.3.2 If the Company request an Engineer or a group of engineers to commit to a scheduled pattern of TSB and the Engineer or Engineers agree, the Company would give four weeks notice (except by agreement) in the event of termination of the TSB.4.3.3 If the Company is unable to give four weeks' notice, then the Standby premium which the engineer would have earned (excluding any Call-Out) will be paid in lieu for any outstanding weeks.4.3.4 In return, once committed to a schedule of TSB, the Company would require 4 weeks notice from the Engineer (except by agreement), in the event of that Engineer wishing to cease to TSB working.4.3.5 TSB will not be scheduled as part of basic hours. Engineers who work TSB, whether it be scheduled or casual, will still be required to work their normal 37 hour week."

Background

The tribunal record in paragraph 18 of the reasons the Respondent's evidence as to the background to the change in conditions relating to pay for TSB which became the focal point in these complaints. In 1992 management reviewed the terms and conditions relating to TSB. They found that the Respondent was paying higher rates than the competition. Accordingly during the week commencing 18th January 1993 managers briefed their staff with a view to introducing charges in the rate of pay with effect from 4th February 1993. The intention was to introduce a flat rate of £2.50 a week and £4.25 at weekends. This represented a reduction in the rates set out in Section 3.2 of the SCS.However, the Personnel Manager, Miss Harper, was unhappy with the time-scale proposed. She advised that a period of consultation should take place. Allowing time for feedback from the Customer Service Engineers involved management settled on a 13 week notice period, to incorporate the four week period mentioned in Section 4.3.2 of the SCS.The first notification of the change was to the Customer Service Engineers was contained in letters to the Midland employees dated 23rd February 1993 and the London employees dated 12th March 1993, setting out the need to reduce costs in order to remain competitive and advising the employees that as from 22nd April 1993 fixed payments for all hours of standby would be introduced, namely:

£2.62 per hour weekdays

£4.25 per hour weekends and public holidays.Each employee was asked to acknowledge receipt of the letter.The Company's proposal was not well-received by these Appellants. As the tribunal found in paragraphs 20-23 of the reasons; each of the Appellants, with one exception, agreed in writing to continue TSB under protest. They accused the Company of breaching the Unsocial Hours Policy set out in Section 3 of the SCS. The exception was Mr Waight. He declined to volunteer for further TSB in future "due to the company attempting to break negotiated agreements."Discussions then took place and on 8th April 1993 management wrote again to the Customer Service Engineers, indicating improved rates of pay on those set out in the letters of 23rd February and 12th March 1993, to be implemented on 22nd April 1993. These rates still fell short of the rates provided for in Section 3 of the SCS.The Appellants case before the Industrial Tribunal was that such a variation could only take place on that notice which was required under the General Variation clauses of their contracts, that is, the equivalent of the notice required to terminate their contracts of employment, 26 weeks. Instead, they claim, they had received only two weeks' notice, taken from the final letter before implementation dated 8th April 1993. Accordingly there had been a unlawful deduction from their wages amounting to 22 weeks at the difference between the pay rates contained in Section 3 of the SCS and the rates paid in accordance with the letter of 8th April 1993.The Respondents countered that only four weeks notice of variation was required under Section 4 of the SCS, and that more than four weeks notice had been given by the letters dated, at latest, 23rd February and 12th March 1993.The tribunal's findings in relation to this dispute are contained in paragraphs 39 and 40 of the reasons:
"39 Those special conditions clearly differentiate between the basic working week, terms of which are specified at paragraphs 2.1 to 2.4 and hours worked on telephone stand-by duties as specified at 2.5. The Tribunal concludes that those special conditions of service form a separate contract within the applicant's normal contract of service. The TSB work is voluntary and the provisions as to termination specified in paragraph 4.3 have separate application to the voluntary arrangement, worked as it was on a rota. If the principle contractual terms binding the applicants and the respondents were intended to alter special TSB terms, in the view of the Tribunal they would have said so.
40 It therefore follows that the appropriate notice of four weeks required from either party to terminate the voluntary arrangement is also applicable to a notice altering the terms of it. The six each received two weeks' notice only. They are entitled to two weeks' pay at the "old rate". They must give credit for TSB payments received at the new rate for the two week period."The Tribunal made a similar finding in relation to the eight London employees.

The Appeal

Mr Segal, on behalf of the Appellants, submits that in finding that the contractual notice for varying the rates of pay for TSB was 4 weeks the Industrial Tribunal has erred in law. It is common ground between Counsel that the construction of the written contracts of employment is a pure question of law. See also Davies v Presbyterian Church of Wales [1986] ICR 280 .He contends that:(1) The SCS relate to a number of aspects of the Appellant's employment, including rates of pay, sickness and holidays, as well as TSB. They do not constitute a separate contract, as the Industrial Tribunal found.(2) Section 4.3 of the SCS provides for four weeks notice of termination of a scheduled pattern of TSB. However, that notice period is not referable to the rates of pay for TSB, which are separately to be found in Sections 4.2 and 3.2 of SCS.(3) The only power in the contract to unilaterally vary those rates is that contained in the general variation clause, namely, in these cases, 26 weeks.(4) Without the power in the general variation clause there would be a continuing claim, since TSB continued to be operated by these Appellants (save for Mr Waight) under protest. The TSB scheme was not terminated on notice, coupled with an offer of TSB duties on the new rates of pay. He nevertheless accepts that before the Industrial Tribunal the Appellants limited their claim to 26 weeks notice, and he cannot now go behind that concession.(5) The term of four weeks notice which the Respondent seeks to imply into Section 4.2 of the SCS does not pass any of the recognised tests for implying a term. It is not necessary for business efficacy; it is not a term so obvious as to cause the officious bystander to be met with a testy "of course it is a term of the contract". In any event, a term cannot be implied where it conflicts with an express term, the general variation clause.(6) In reliance on the tribunal's finding in paragraph 30 of the reasons, the Appellants did not waive any breach of the notice provision.In answer, Mr McCahill summarised his argument under three broad headings:

(1) Voluntary, not compulsory

(2) The greater includes the lesser

(3) They knew what they would receive.He developed the argument in this way.First, he pointed out that TSB was optional. As such, it was open to either the employer or employee to cease operating and working the system, respectively. TSB was a discreet scheme with its own rules. The general variation clause did not apply.Secondly, although there was no express term allowing the employer to vary TSB rates of pay without consent, a term should be implied into Section 4.2, and that should be a term of four weeks notice in line with Section 4.3.2-4 of SCS. That term was necessary to fill the gap in Section 4.2.Thirdly, he referred to the new TSB rotas which, for most Appellants, commenced on 22nd April 1993. Before that time the employees knew what rates of pay applied from that date. Accordingly they acquiesced in the new arrangements by volunteering for TSB duties on and after that date. The start of a new rota could be viewed as the start of a new TSB contract.As a matter of construction we prefer the submissions advanced by Mr Segal. In our judgment the tribunal was wrong to regard SCS as a separate contract. There was only one contract of employment, of which SCS formed a part. Mr McCahill accepted that if the employer wished to reduce the rates of pay for the standard 37 hour working week, it would be necessary to give 26 weeks notice. We see no material difference between rates of pay agreed for the basic working week and those agreed for TSB, or indeed any additional work, such as overtime. The scheme of Section 4 of SCS envisages that if the employer wishes to alter or even abolish a scheduled pattern of TSB, it must give four weeks notice of intent. Similarly, an engineer must give four weeks notice of his intention to withdraw from TSB duties. The purpose of these provisions is to ensure an orderly system of covering TSB duties. However, pay for such duties when undertaken is quite different. The fact that the scheme is "voluntary" is immaterial. If TSB duties are performed, then the rate of pay will be as prescribed in Sections 4.2 and 3.2 of SCS. If those rates are to be varied without consent (and none was given in these cases, on the Industrial Tribunal's findings in paragraph 20 of the reasons) the only power to do so under the contract was by virtue of the general variation clause. In light of the concession made on behalf of the Appellants before the Industrial Tribunal that such power did exist under the general variation clause it is unnecessary for us to construe it. Finally, as to the new rota argument, we are satisfied that the new arrangements related only to the hours during which individuals were on TSB; these Appellants had made their position clear as to the new rates of pay; they protested. We think that the employer could have terminated the scheme on four weeks notice and offered a new scheme based on different rates of pay. It would then be open to each engineer to accept or reject the new package. However, that did not happen.Accordingly, we have concluded that the TSB rates of pay could only be varied without consent on the employer giving 26 weeks notice of the changes.

Cross-appeal

The main point taken in the cross-appeal is that the Industrial Tribunal was wrong to conclude that only two weeks notice of the change in TSB pay rates had been given.It is again common ground between Counsel that this appeal tribunal may only interfere with that finding if it can be characterised as "perverse" in any of the senses identified by this tribunal in Stewart v Cleveland Guest (Engineering) Ltd [1994] IRLR 440 .Mr McCahill submits that on the evidence the tribunal were bound to conclude that sufficient notice was given by the employer's letters dated 23rd February and 12th March 1993, since those letters identified the date, 22nd April 1993, as being the date on which the changes would come into effect. The fact that further alterations were subsequently made to those rates, revising them upwards, as appear in the final letter dated 8th April 1993, does not affect the original notice.We cannot accept that submission. It was, in our view, open to the Industrial Tribunal to conclude that notice under the contract was not given until the new rates had been finalised. That is by the letter of 8th April 1993. We do not therefore propose to interfere with that finding.Secondly, Mr Waight. He made clear that he would not work TSB from 22nd April 1993, and we see from the schedule (R2) that he was as good as his word. It follows, in his case, that there could be no unlawful deduction, since he never worked TSB at the lower rates.In the result these appeals, with the exception of Mr Waight, will be allowed. We shall substitute a declaration in each of those 13 cases that each appellant is entitled to 22 weeks pay at the old rate for TSB, giving credit for payments received at the new rate for that 22 week period, commencing on 22nd April 1993. In the case of Mr Waight the cross-appeal succeeds. His application under the Wages Act is dismissed.