Ralston v Liverpool City Council [1997] UKEAT 1024_96_2101

EAT
Ralston v Liverpool City Council
[1997] UKEAT 1024_96_2101 · 1997-01-21

JUDGE PETER CLARK :

The issue in this case is whether the employer, Liverpool City Council, made unlawful deductions from its employee, Mr Ralston's wages. That question in turn required the Industrial Tribunal Chairman who heard this complaint, sitting alone at Liverpool on 1st July 1996, to decide whether or not the Council had underpaid the employee's salary in breach of the terms of the contract of employment. He decided that the Council was not in breach and accordingly dismissed the complaint for the reasons which are contained in a decision dated 22nd July 1996. Against that decision the employee now appeals.The material facts are these. The employee commenced employment with the Council in 1979. Prior to 1st December 1990 he held the position of production assistant in the Council's Maintenance and Building Works Department. In that position he was obliged to perform five hours contractual overtime work over and above his basic 35 hour week. Such overtime was paid at time and a half.He applied successfully for the post of Temporary Surveyor (Scale 5/6) within the Department. By a letter of appointment dated 30th November 1990 he was appointed to the post of temporary surveyor at a salary of £13,176 p.a.. The letter continued:
"With regard to the term of your appointment. You will continue to be engaged under your existing conditions of service (including 35 F.W.H [ Flexible Working Hours ] arrangement), however, you will not be required to work 5 hours contractual overtime, per week . Your earnings in this regard, have been incorporated into your starting salary."
He was asked to formally confirm his acceptance of that offer of appointment, which he did by letter dated 5th December 1990.In April 1991 the Council ran into financial difficulties in producing a lawful budget for the year 1991-2. It decided that cuts had to be made in the wage bill. Accordingly a standard form letter dated 12th April 1991 was sent to individual members of staff, including the employee. The letter contained this paragraph:
"My purpose in writing to you is to advise you that in view of the Council's current difficulties and in order to achieve the budget requirements of the City Council referred to above, I must terminate your existing contract of employment with effect from 7 July 1991. By this letter a new contract of employment is offered to you to commence on Monday 8 July 1991. Your new contract will comprise your existing terms and conditions of service with the Council with the exception of those features mentioned below, viz:-

contractual overtime payments."

It is conceded on behalf of the employee that he accepted the new contract and he remained in the employment.On 22nd July 1991 the Council wrote to the employee again in these terms:
"I would advice you that as there is no longer a requirement for you to work contractual overtime as a production assistant, it has become necessary to review your current rate of pay whilst you are undertaking the duties of a temporary surveyor. This is due to the fact that initially the spinal column point you were allocated took into account the requirement for you to work contractual overtime and as this requirement has now ceased your salary must therefore be reviewed"
The letter concluded by informing him that with effect from 6th July 1991 his pay would be at the rate of £11,241 p.a., which reflected the removal of the contractual overtime payment element from his previous salary.The employee objected to this pay cut. He raised a grievance which went through the various stages of procedure. The grievance was rejected. He complained to the Industrial Tribunal. His complaint was dismissed.The basis of the employee's case before the tribunal and before us was that the letter of 12th April 1991, which purported to vary his terms and conditions of employment, did not affect his basic pay of £13,176 p.a.. He never consented to the unilateral variation which the Council sought to impose by its letter of 22nd July; therefore the underpayment of salary from July 1991 constituted an unlawful deduction contrary to the then Wages Act 1986 .In his Notice of Appeal Mr Ryder attacks what he identifies as three different bases on which the Industrial Tribunal Chairman founded his decision. However, it is common ground between Counsel that our task is to discern the meaning of the contractual document.We have reached the conclusion that the basis of the employee's claim was and is flawed as a matter of law and fact. Our reasoning is as follows.The letter of 12th April 1991 did not purport to vary the employee's existing terms and conditions. It constituted a lawful notice of termination of the existing contract, coupled with an offer of re-engagement under a new contract commencing on termination of the old contract. Compare Rigby v Ferodo [1988] ICR 29 .The real question is, what were the terms of the new contract which was accepted by the employee?In our judgment the answer is self-evident. He was offered a new contract on the same terms and conditions, save that he was no longer entitled to contractual overtime payments.We return to the earlier letter of appointment to the post of temporary surveyor. That letter, dated 30th November 1990, preserved his previous terms and conditions as a production assistant save that he would no longer be required to perform five hours contractual overtime per week, but he would continue to receive contractual overtime payments which would be incorporated into his new basic salary of £13,176 p.a.. He continued to receive the payment, but did not have to work the overtime.What the letter of 12th April 1991 did was to offer a new contract without the contractual overtime payment which was subsumed in his basic salary with effect from his appointment to the temporary surveyor post. It was upon these term that he accepted the new contract on termination of the old contract.The letter of 22nd July 1991 did not constitute a unilateral variation of the new contract, to which the employee could object, it merely informed him of the effect in money terms which the new terms and conditions had on his basic salary.For these reasons we conclude that the Chairman was right to dismiss this complaint. The appeal is dismissed.