Reynolds v Cornwall County Council [1996] UKEAT 1189_95_0603

EAT
Reynolds v Cornwall County Council
[1996] UKEAT 1189_95_0603 · 1996-03-06
MR JUSTICE MUMMERY (PRESIDENT) : This is the preliminary hearing of an appeal from the Chairman of the Industrial Tribunal sitting alone at Truro on 11 September 1995. The Chairman dismissed an application by Mr Kenneth Reynolds under the Wages Act 1986 in which he complained of an unlawful deduction from wages by the Respondent, Cornwall County Council, his employers at the relevant time.Extended reasons for the decision were sent to the parties on 20 September. Mr Reynolds served a Notice of Appeal dated 29 October. The case was listed for a preliminary hearing to decide whether the grounds of appeal raise a question of law that is reasonably arguable. If there is no question of law that is reasonably arguable, then this Tribunal has no jurisdiction to entertain the appeal, because its jurisdiction is limited to questions of law arising in decisions of, or in proceedings before, an Industrial Tribunal.Mr Reynolds was represented in the Tribunal and today by Professor Stone, who has repeated the interesting argument unsuccessfully advanced to the Chairman in Truro last September. In order to see whether the Chairman was legally correct in rejecting the arguments, it is necessary to examine the factual background to the proceedings in which the issues arise.The proceedings started in June 1995, when Mr Reynolds presented an application to the Industrial Tribunal. His complaint was deduction from wages. In box 5 of the IT1 he gave particulars of the name and address of his employer, against whom the complaint was brought and details of the place where he worked. He named, as his employer, Cornwall County Council and gave their address: County Hall, Truro, Cornwall. Then, lower down in the same box, when asked to give the place where he worked and the name of the employer/organisation or person, he gave these details: Cornwall Careers Services, Carnon Building, Wilson Way, Pool, Redruth.His job was a Development Officer in the Careers Service. He gave details of his basic earnings. In box 12 he gave details of his complaint:
"At the beginning of March [1995] the Child Support Agency served a Deduction from Earnings Order on my then employer, Cornwall County Council, for alleged arrears in maintenance payments. These allegations are completely groundless and I wrote immediately to the Magistrates' Courts to lodge an appeal and to Mr P. Davies, Director of Human Resources at Cornwall County Council, asking him not to comply with the Order.
The CSA withdrew the Order in April, admitting that it was defective, but by then Cornwall County Council had - without consulting me or replying to my letter - deducted £612.30 from my March salary. ..."He said that the deduction had been made under a defective Order. He understood that, even if the order had been valid, that deduction would have been unlawful under Article 119 of The Treaty of Rome .The Council contested the case. They said that they had not made a wrongful deduction. They had received the order from the Child Support Agency dated 1 March 1995. Under that order they were required to make periodical deductions from his earnings in accordance with Child Support law. Failure to do so would have constituted an offence by them under the Act and might have resulted in prosecution. The Council abided by the order to deduct £612.30 every month with effect from the next pay day. In fact, in April, Mr Reynolds ceased to be an employee of the Council and became an employee of a company called Cornwall and Devon Careers Limited.They set out other matters in support of their allegation that they had acted in good faith. They mention how the agency had failed to reimburse the Applicant with the appropriate sum which Mr Reynolds claimed had been wrongly deducted under a Defective Order.The Council completed its submissions:
"If the County Council has acted in breach of any relevant legislation by acting unknowingly upon a defective order, or the Child Support Act conflicts with the Treaty of Rome, the Council contends that the proper respondent should be the Child Support Agency. For this reason, the County Council believes it entirely proper to join the Secretary of State for Social Security into the proceedings."
The Tribunal set out the facts which they found. They were not in dispute. They referred to a letter of 1 March, of which we have been shown a copy. The letter was sent by the Child Support Agency to the Payroll Administrator, Director of Finance and Administration, County Hall, Truro. That enclosed a Deduction from Earnings Order issued by the Secretary of State for Social Security, "in respect of Mr Reynolds who is currently employed by you". It stated that this Deduction from Earnings Order was to be implemented in accordance with the procedures stated in the order. There were directions that, if the Council was unable to implement the Deduction from Earnings Order for a reason other than the employee's level of earnings, details were to be given on a proforma annexed and returned as soon as possible.The order has given rise to legal argument in the Industrial Tribunal and on this appeal. We should therefore refer to the details. It is headed "Deduction from Earnings Order", a reference number is given; then the name of Mr Kenneth Reynolds as employee. An address is given for him in Redruth in Cornwall. Details are given of his National Insurance number. In a crucial part of the order it states:

"The Area Careers Centre

Camon Building

Wilson Way

Pool Redruth."

That is the same address as set out in the IT1. The description of the employer, the Areas Careers Centre, differs from the name of the employer given for the Redruth address, stated in the IT1 as "Cornwall Careers Service". The occupation is stated to be "Development Officer", as also stated by Mr Reynolds in his IT1.The extended reasons for the decision refer to the events following the service of that order. Mr Reynolds wrote to the Director of Human Resources on 7 March, to inform him that he was appealing against the order to the Magistrates Court, seeking legal support from his union, and saying that there were no grounds for the Council to comply with the order. That letter went astray. It is not clear, they said, whether it arrived at all, but, if it had, the view of the Director of Human Resources was that he would have had no option but to confirm the deduction in compliance with the order.On 26 April 1995, the Area Lawyer for the Solicitor's Office of the Department of Social Security, wrote to Mr Reynolds saying:
"It has been noticed from the Deduction from Earnings Order made in respect of yourself is incorrect in respect of the assessment. I apologise for this, and it has now been decided to withdraw the DEO.
Accordingly there would be no need for you to attend Court on 24th May 1995.However, it would be the intention of the Agency to issue a new order, and you will of course have the right to appeal against the new DEO."Meantime, the first deduction had been made from the March salary paid at the end of that month. It was that amount which Mr Reynolds claimed was illegally deducted.The points on the case are in three parts: the first is that the Tribunal should not have acted on the order, because it was defective on the face of it; defective because it did not comply with the statutory requirements of Section 31 of the Child Support Act 1991 .The second argument is that, quite apart from that, the order and the statutory provisions under which it was made constituted a breach of the principle of equal pay in the provisions of Article 119 of the Treaty of Rome and in the Equal Pay Directive . They were therefore incompatible with European Community law and, by reason of the European Community Act 1972 , were ineffective. Thirdly, there should be a reference of certain questions to the European Court of Justice.We will deal with each argument in turn. The Chairman of the Tribunal rejected all the arguments.The argument to the Chairman of the Tribunal was that Mr Reynolds's complaint was under Section 1 of the Wages Act 1986 . Section 1 places a general restriction on deductions made by an employer from wages. It provides:
"(1) An employer shall not make any deduction from any wages of any worker employed by him ..."
That prohibition was breached by the Council making the deduction in March.

(a) ):

"(1)(a) it is required or authorised to be made by virtue of any statutory provision ..."
"Statutory provision" is defined in Section 8 of the Act, as meaning a provision contained in, or having effect under, any enactment.The Council's case was that they were protected from the complaint of unlawful deduction, because they had acted as they were required to act by virtue of an order made under the 1991 Child Support Act . Professor Stone argued, on behalf of Mr Reynolds, that they could not rely on that as a defence, because the order was not in a form which complied with the provisions of the 1991 Act. It was not a valid order because the provisions of Section 31(4)(a) require that a Deduction from Earnings Order shall "be expressed to be directed at a person ("the employer") who has the liable person in his employment". The liable person is defined in Section 31(1) as the person who is liable to make payments of child support maintenance. Section 31(2) confers the power on the Secretary of State to make "(a deduction from earnings order) against a liable person to secure the payment of any amount due under the maintenance assessment in question".Professor Stone's argument was that Section 31(4)(a) had not been complied with, because the order, on a printed form, stated against the word "employer" the words "The Area Careers Centre". That centre was not the employer of Mr Reynolds. His employer was the Cornwall County Council.There was also a question as to whether the order had been correctly served, because Section 31(6) provides that:
"31(6) The Secretary of State shall serve a copy of any deduction from earnings order which he makes under this section on - (a) the person who appears to the Secretary of State to have the liable person in question in his employment; ..."
Service of the order had been addressed not to the County Council, who had Mr Reynolds in their employment, but to the Payroll Administrator, Director of Finance and Admin, County Hall, Truro.The conclusions of the Chairman in these arguments was stated in paragraph 14 in these terms:
"14 In my judgment the document headed `Deduction from earnings Order' is valid. I consider that section 31 has been observed because it sufficiently identifies the employer as the Area's Careers Centre (where the applicant was employed at the time) and it is addressed by its covering letter to the Director of Finance and Administration at County Hall."
In coming to that conclusion, the Chairman said:
"16 I have to have regard to the purpose for which the Act was passed. That was for the collection of maintenance by attaching the earnings of an employee. I do not consider that an error in the identification is material provided that the document is sufficiently clear and is served in practice on the correct person as is the case. It cannot be served on the whole of Cornwall County Council and the receipt of it of the appropriate officer is in my judgment sufficient."
He added that the Council had made out the defence under Section 1(1)(a), because they had received a document from the Secretary of State, which appeared to be a valid deduction from Earnings Order and had acted accordingly. That was sufficient to satisfy the requirements of Section 1. He did not consider that the Council was obliged to consider the validity of what appeared to be a correct document. The Wages Act governed relations between employer and employee and breaches of it are brought to the Industrial Tribunal. He said in paragraph 17:
"17 ... It is unrealistic to expect employers to explore the question of whether the person is liable to make payments at all. Section 31(1) provides for a deduction of earnings order only where the person is liable to make payments of child support maintenance. I do not consider that an Industrial Tribunal in these circumstances is expected, nor can it, review the question of liability. If the order was incorrectly made that is a matter which should be taken up with the Child Support Agency."
On that point we ask what is legally wrong with it? The first ground of appeal is that:
"1 The Tribunal erred in law in that it misconstrued s.1 of the Wages Act 1986 and/or s.31 of the Child Support Act 1991 , in holding that under these provisions an employer is bound or entitled to comply with a document purporting to be a deduction from earnings order, under the said 1991 Act, even though the purported order does not accurately name the said employer."
Professor Stone amplified that argument in his submissions. It really came down to this, that, on the face of it, the order was defective, because it stated as the employer, not the Cornwall County Council, who were in the fact the employer, but the Area's Careers Centre, who were not the employer. This error alone was enough to invalidate the order and prevent it from being an authority on which the Cornwall County Council could rely for the deduction which it had made. In his skeleton argument he pointed out that the order had been sent to the Payroll Administrator. It had specified as the employer the Area's Careers Centre. That did not remotely comply with Section 31, read with Regulation 8(2) of the Child Support, Collection and Enforcement Regulations 1992. At the very minimum the employer's name must be accurately stated on the order. The Tribunal had erred in holding that the Council were entitled to rely on the defence of statutory authority in Section 1(1)(a).We have reached the conclusion that there is no arguable error of law in the decision of the Chairman of the Industrial Tribunal on that question. It is clear from the decision, which is commendable for its thoroughness and lucidity, that he correctly construed the provisions both of Section 1 of the Wages Act and Section 31 of the Child Support Act .It is clear that Section 1(1)(a) gave to the Council the defence that the deduction was required by virtue of the statutory provision. The deduction was required by virtue of the statutory provision in Section 31 of the 1991 Act. We agree with the Chairman that it can never have been intended in relation to this defence under the Wages Act that an employer should have to consider whether the employee was, in fact, correctly held liable for the deduction. The employer is entitled to act on the order served on him. If there is a dispute about liability under that order, that is not a matter between the employer and the employee; it is a matter for the employee to take up with the relevant authority which made a decision on the liability.As for the alleged failure to comply with Section 31 we agree with the Chairman that there has been compliance with Section 31(4)(a). Professor Stone made the point that the provisions of Section 31 should be strictly construed. On a strict reading it had not been complied with, because the person named was not the employer.It is clear, however, that on the materials before the Chairman, that Deduction of Earnings Order was directed at the person who had Mr Reynolds in their employment. Although it did not identify Cornwall County Council by name, it appeared from Mr Reynolds's own details in his IT1 that he regarded himself as working in the Career Service, at the address given in the Deduction from Earnings Order. The Area's Career Service was a name attached to an area of the activities of the Cornwall County Council. Mr Reynolds was employed by the County Council in those activities, which the County Council carried out from that address in Redruth under that name.It is sufficiently clear from the Deduction of Earnings Order that the order is directed at the County Council, even though they are not named as "Cornwall County Council".There was also proper service in compliance with Section 31(6)(a). The order was served on the relevant person, the Payroll Administrator at the address of the County Council. That person was the relevant one because, he was responsible for dealing with any deductions that would have to be made.We reject the first point. The second and third points, that is the European argument and the question of a reference to the European Court of Justice under Article 177 can be taken together. We have reached the conclusion that there is no doubt about the correct answer to the question of European Community law. No occasion arises for making a reference to the European Court. Under Article 177 of the Treaty, it is provided that:
"Where such a question [on the interpretation of the Treaty and the same would apply to the interpretation of a Directive] is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court of Justice to give a ruling thereon."
We have a discretion, just as the Industrial Tribunal had a discretion, whether we refer a question. That discretion can only be exercised if the Tribunal considers that it is necessary to obtain a decision on a question of interpretation to enable us to give judgment. We do not think that it is necessary to obtain a ruling of the European Court of Justice on a question of interpretation of Article 119 or of the Equal Pay Directive to enable us to decide this case.The argument is that the provisions in the Child Support Act 1991 , relating to Deduction from Earnings, are contrary to Article 119, which enjoys primacy over domestic legislation by virtue of the provisions of Section 2 of the European Community Act 1972 .Professor Stone submitted that Article 119 enshrines the principle of Equal Pay for Equal Work. The scope of that is not altered by the Equal Pay Directive . The County Council are affected by the Directive, because they are an emanation of the State. There has been here a breach of the principle of equal pay, because there has been indirect discrimination, in the operation of the provisions of the Child Support Agency, against men. The indirect discrimination arises because more men are subject to orders than women.A provision, such as the Child Agency Deduction of Earnings Order, is a condition of remuneration, which is, in effect, "negative pay". The principle of equal pay applies and has been breached.The conclusion of the Chairman was that this was not a correct contention. He rejected the argument that a deduction under such an order was "negative pay" and therefore, came to the conclusion that the case did not come within the principle of equal pay for equal work. He said in paragraph 28:
"28 The equality legislation is concerned to establish that men and women are treated equally in respect of their overall pay package. I do not accept that a deduction made in respect of child maintenance or any other debt can properly be taken into account in measuring the value of remuneration paid by an employer. The deduction is something which occurs after the pay has become payable and the sum deducted is nevertheless part of the pay package but is a payment made in respect of the employee's liability to maintain his children. The sum deducted is credited to the employee and as such still represents a payment made by the employer to the employee."
He continued in paragraph 30:
"30 Provided that there is a statutory requirement, and the employer observes it, that is a defence to any action for breach of the Act. I do not accept that there is an obligation on an employer to challenge the validity of the statute. ..."
He gave an example of possibly discriminatory income tax legislation. He pointed out that:
"31 An employer has no control over statutory deductions and if different considerations as to statutory deductions apply as between men and women, provided that the employers gross pay package before deductions is not discriminatory, in my judgment the employer has no liability. ..."
He stated his conclusion on this point as follows:
"32 For those reasons I do not accept: (i) ...
(ii) that the Child Support Act 1991 is contrary to the Treaty of Rome and/or the Equal Treatment Directive but if it is, an employer may nevertheless rely upon it as a defence to an action under section 1 of the Wages Act 1986 . The provisions of the Child Support Act 1991 do not affect the gross pay package provided initially by the employer but simply divert part of the pay elsewhere once it has become payable by the employer. The deduction is a payment on behalf of the employee."We ask "Is this legally wrong and if so, why"? If there is a reasonable argument that it is, we would direct this matter to go to a full hearing.The grounds of appeal attack the decision on two fronts. First, that there was an error of law in holding that the 1991 Act, taken together with the regulations made under it, are incompatible with directly effective legislation of the European Community, in particular, Article 119 and the Directives on Equal Pay and Equal Treatment.The second error is the connected one relating to a reference.
"The Tribunal erred in law in refusing without adequate grounds the appellant's [Mr Reynolds's] request ... questions be referred to the European Court of Justice for a preliminary ruling under Art 177 of the EC Treaty :[and those questions relate to]
(1) In the case of an `absent parent' who is an employee, does an obligation having the characteristics and purposes of the obligation of an `absent parent' to pay child support maintenance under the UK Child Support Act 1991 fall within the scope of any (and if so, which) of the following Community provisions: [Article 119 and Directives].This question should be referred:
"(ii) Where national legislation indirectly discriminates between men and women and falls within the scope of any of the aforesaid Community provisions, then, in determining whether it is justifiable and proportionate in view of a social policy which it pursues, must regard be had to the provisions of the European Human Rights Convention, especially Articles 8 and 14, and to the jurisprudence of the European Human Rights Court thereunder?"
Professor Stone repeated the point that the 1991 Act, or at the very least, the provisions in it relating to Deduction from Earnings Order, contravene Article 119 and the Directives. They have the effect of intercepting pay with the consequence that there is gender discrimination of the same kind that was held to be unlawful in relation to part-time workers. It is indirect discrimination and is not justifiable.The argument continues on these lines:
"(a) In the case of an `absent parent' who is an employee, an assessment of child support maintenance under the 1991 Act, and/or a deduction from earnings order under that Act, constitutes an aspect or condition of, or a negative element (analogous to income tax) in, his pay or remuneration, within the meaning and scope of Art 119 of the Treaty and Art 1 of Directive 75/117; or in the alternative constitutes a working condition, within the meaning and scope of Directive 76/207. (b) There is indirect discrimination between men and women, since the overwhelming majority of such assessments and deduction orders are made against absent fathers, rather than absent mothers. (c) In so far as the relevant UK provisions pursue a social policy which is not in itself incompatible with European Community law, they are excessive or disproportionate in relation to any such legitimate purpose."
In our view, it is not necessary to examine the details of the argument about justification, since we have arrived at the conclusion that there is no breach of Article 119, or of the Directives in relation to deductions made by an employer pursuant to a Deduction from Earnings Order made under the 1991 Act.Our conclusion can be briefly stated as follows. There is no breach of the principle of equal pay and no breach of the Wages Act 1986 , in an employer making a mandatory deduction in accordance with an order made under a statutory provision enacted for the purpose of securing the discharge of a liability of an employee by a deduction payment made by the employer.There is no breach because the principle of equal pay is not offended. The gross pay, payable to the employee, whether a man or woman, is not affected by the deduction. We are influenced by the consideration that all that the employer is doing, when acting on these orders, is to make a payment pursuant to an order which the employee is himself personally liable to make out of the pay which he receives from the employer.This is, in fact, explained in Section 31(2) of the 1991 Act, when it provides that:
"31(2) The Secretary of State may make an order (`a deduction from earnings order') against a liable person to secure the payment of any amount due under the maintenance assessment in question."
The maintenance assessment is, so far as the employer is concerned, due from the person who is liable and is employed by him. The 1991 Act imposes a machinery to secure that payment is made. If it is not paid directly by the person who is liable to pay it, it is paid indirectly, on his behalf, by the machinery of a Deduction from Earnings Order.In those circumstances, we are of the view that Article 119 and the Directives, do not impinge in any way on the orders made under the 1991 Act.For those reasons, we reject the arguments on European law and we do not exercise a discretion under Article 177 to make a reference. The case is not reasonably arguable. We dismiss the appeal.