London Underground Ltd v Jaeger [1997] UKEAT 805_97_2711

EAT
London Underground Ltd v Jaeger
[1997] UKEAT 805_97_2711 · 1997-11-12

JUDGE HARGROVE QC :

On 15th May 1997 the Industrial Tribunal held that the Appellant was in breach of Employment Rights Act 1996 Part II in that the Respondent's sick pay was withheld from him.The Respondent had been employed by the Appellant since 1985. On 2nd May 1996 the Respondent went to work, he booked off sick and produced a medical certificate signing him off for seven days. He returned to work on 10th May. He was referred to the employer's doctor who ran tests which the Respondent did not complete and the Respondent's medical practitioner signed him off for four weeks with a "wrist injury".His terms and conditions of employment incorporated by reference a sick pay scheme in the following terms:
"You will be eligible for sick pay in accordance with the Company's Sick Pay Scheme, as detailed in Appendix 2 of this Statement of Main Terms and Conditions of Employment. This does not affect the right of the Company to terminate your contract prior to the expiry of the maximum sick pay period.

Working while in receipt of Company Sick Pay is absolutely prohibited."

The scheme itself contained the following terms:

"2. CONDITIONS UPON WHICH SICK LEAVE, AND COMPANY SICK PAY, WILL BE GRANTED

Employees will be granted sick leave subject to complying with departmental requirements regarding prompt notification of absence and provision of self-certificates and doctor's statements. Subject to entitlement qualification, in respect of each rostered day/shift for which sick leave is granted an employee will be paid Company Sick Pay in substitution for contractual pay.3. FORFEITURE OF SICK LEAVE AND SICK PAYi) Employees who are absent through sickness of injury, and who fail to comply with departmental requirements regarding prompt notification of absence or provision of Self-Certificates and Doctor's Statements to the best of their ability, will not be granted sick leave and will forfeit any right to receive Company Sick Pay during such absence.ii) Employees absent from duty through sickness or injury attributable to intemperance, drug abuse or misconduct forfeit the right to be granted sick leave, and the right to receive Company Sick Pay during such absence.4. PERIOD OF PAYMENT OF SICK PAYThe period to which Company Sick Pay will be payable will be determined according to the employee's length of service at the end of the payroll week in which the sickness commences."There are then set out various scales, and scheme continues:
"Entitlement to Company Sick Pay will normally cease at the end of the appropriate period reached above. In exceptional circumstances, an extension to the entitlement may be granted at management's discretion.
However, the Company reserved the right to withdraw Company Sick Pay at the management's discretion."The Respondent on 26th June attended the Company's premises in order to display union notices and because he was off sick he was excluded from the Company's premises. He protested at this by a letter of 27th June 1996 and he further indicated that he was not able to complete the counselling course, and cancelled an appointment for 13.00 hours on 28th June; and he further indicated that he could not discuss a report of a Mr Beech of the Medical Services until such time as he was permitted to return to the Appellant's premises. On the same day, 27th June, the Respondent appeared on a picket line as part of the ASLEF strike picket at White City.By a letter of 28th June Mr Daintree, the Train Crew Manager at White City, replied to the Respondent's letter of 27th June indicating that he was not prepared to accept that the Respondent continue as the Local Depot Representative while on sick leave; secondly, expressing his concern that the Respondent had cancelled his appointment with Employee Assistance since that would not assist the Respondent's recovery and return to work. More important, there occurred this paragraph which is at the heart of the dispute:
"Finally, I was disappointed to see that you were part of the ASLEF strike picket at White City on June 27, given that you are at the present time on sick leave. In my view, I feel that if you are fit to do this, then you are fit to be at work. As a result, you will not receive company sick pay from June 27 1996; you will receive statutory sick pay only, until further notice."
The Respondent's sick pay was stopped; he raised a grievance, and as a result, his sick pay was restored from 9th September 1996. He remained without sick pay from 27th June until 9th September.The Respondent claimed before the Industrial Tribunal on the basis that the failure to pay sick pay amounted to a deduction under s.13 of the Employment Rights Act 1996 , that section provides:
"(1) An employer shall not make a deduction from wages of a worker employed by him unless- (a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of a worker's contract, or (b) the worker has previously signified in writing his agreement or consent to the making of the deduction.
(2) In this section "relevant provision", in relation to a worker's contract, means a provision of the contract comprised-(a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or(b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion.(3) 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 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."The Industrial Tribunal by reasons dated 15th May 1997 dealt with the matter as follows:"6 Mr Jaeger's claim under the provisions of the Employment Rights Act 1996 Part II is therefore in respect of company sick pay withheld for the period 28 June to 8 September. The Respondents' case is that the Sick Pay Scheme did not constitute part of Mr Jaeger's contract of employment, but was a wholly discretionary scheme, and they seek in support of that argument to rely on the last sentence in section 4 of the Sick Pay Scheme, " However, the Company reserves the right to withdraw Company Sick Pay at the management's discretion." Furthermore, they have argued that management's discretion is not subject to any test of reasonableness, and with that proposition the Tribunal is entirely in agreement.7 However, the argument that the Respondents sought to rely on section 4 of the Scheme is not supported by the Respondents' evidence, nor by the way in which the Respondents dealt with Mr Jaeger's grievance. Mr Daintree gave evidence of the circumstances in which he decided to suspend company sick pay. He stated that when he saw Mr Jaeger on the picket line on the morning of 27 June he formed the view that Mr Jaeger was guilty of misconduct within section 3 ii) of the Sick Pay Scheme and should forfeit his entitlement to company sick pay. At no time did he think he was making decisions within paragraph 4 of the Sick Pay Scheme. He thought that if Mr Jaeger was on the picket line he was not using his best endeavours to regain his health and that he was exacerbating his wrist injury in helping to erect union banners. He was also of the view that the heading on Mr Jaeger's letter to him on 27 June, headed "Repetitive Strain Injury" was simply an indication that Mr Jaeger was, in Mr Daintree's own words, "jumping on a bandwagon". Furthermore, he was concerned that union employees who took part in the one-day strikes would forfeit a day's payment on each occasion whereas Mr Jaeger would remain in receipt of company sick pay. He did not take any medical advice, either from the London Underground medical staff or from Mr Jaeger's own doctor about the effect, in medical terms, which Mr Jaeger's participation in strike activity have on his likely recovery from his injury. He did not dispute that the forfeiture of company sick pay had been the subject of a grievance, and that he had later decided to reinstate the company sick pay to Mr Jaeger."The first bone of contention is the finding of the Tribunal that the discretion which is incorporated in paragraph 4 gave the Company the right to withdraw the whole scheme at its discretion, but it did not apply to withdrawing the benefits of the scheme from the individual employee.We have considered carefully the terms of the scheme and the way in which paragraph 4 is drafted. It may well be that some would prefer to see the 'discretion paragraph' more clearly illuminated by placing it in the forefront of the scheme rather than as an additional clause as in its present position. Unfortunately, we do not consider that there is any limitation such as the Industrial Tribunal indicated upon the discretion to withdraw the scheme. There is nothing in the wording to indicate such a limitation, and it is difficult to imagine circumstances where it would be of assistance to either employer or employee to have a discretion limited to the revocation of a scheme effecting the entire workforce. We make no comment upon the desirability or otherwise for a general discretion to revoke sick pay in this manner, we are only concerned with the interpretation of the scheme itself.The Appellants contend that it makes no difference what Mr Daintree said at the Tribunal, or, for that matter, what the Tribunal found as Mr Daintree's view of whether he is was exercising rights under paragraph 3 or paragraph 4. The question is purely one of contract. It does not matter, according to the Appellants, that when Mr Daintree wrote the letter of 28th June, he believed he was exercising a right under paragraph 3. All that was necessary was that he should make a decision. That decision would be one which the Company would be entitled to take under the terms of the scheme, and once that occurred, the withholding of sick pay because it was a legitimate withholding, could not constitute a deduction from the purposes of s.13, because it is an authorised deduction. In other words, whether a deduction is authorised or not, is an objective test based upon the contractual obligations set forth in the sick pay scheme.It is further urged that there is no magic in the expression "discretion", all that was needed was a decision to withhold the sick pay; consider the position of the employee; why it was considered necessary to withdraw the scheme in relation to the employee; and the date of the withdrawal and the amount to be withdrawn. All these matters, says the Appellant, were dealt with in the letter from Mr Daintree of 28th June. Furthermore, the Appellants are entitled to rely upon clause 4 even though it did not enter Mr Daintree's mind at the time that he wrote the letter (if that was the case).Reliance is placed upon Boston Deep Sea Fishing and Ice Company v. Ansell [1888] Vol. 39 ChDiv. 339 , where an employer having dismissed an employee later learnt of the employee's fraud and it was held that the employer was entitled to rely upon the fraud in answer to a claim for wrongful dismissal. To that the Respondent's reply is that that is a totally different position from the Appellant's situation, because the Appellant knew of the existence of paragraph 4, and accordingly the case of Panchaud Freres S.A. v. Etablissement General Grain Co. [1970] 1 Lloyd's Rep. 53 applies. Where the Court of Appeal said:
"If a man, who is entitled to reject goods on a certain ground, so conducts himself as to lead the other to believe that he is not relying on that ground, then he cannot afterwards set it up as a ground of rejection, when it would be unfair or unjust to allow him to do so."
The difficulty with that case, is that there seems little in the instant case to justify the doctrine of either of waiver or estoppel being applied.On behalf of the Respondent, it is contended that paragraph 4 only applied to revocation of the entire scheme. For reasons that we have set forth above, we do not consider that that is a valid construction to place upon paragraph 4.The Respondent avers that in any event the Tribunal's decision can be upheld on the basis that there has in fact been no exercise of discretion under paragraph 4. There has been an attempt to exercise a discretion under paragraph 3, and that it cannot be said that Mr Daintree did not know of the sick pay scheme and its terms, and has therefore decided to proceed along the route of paragraph 3 ii). It is further claimed that a discretion in any event cannot be exercised capriciously and in bad faith. Reliance is placed upon Clark v. BET plc [1997] IRLR 348 which indicates that if a discretion is exercised capriciously or in bad faith then it amounts to a breach of contract. The Respondent points to the use of the expression that
"10 ... he [ Mr Daintree ] took an arbitrary and uninformed decision as to whether Mr Jaeger's conduct in attending the picket line had prevented his returning to health and therefore his return to work."
amounted to a finding that Mr Daintree acted capriciously and in bad faith.In our view, all the Tribunal was doing at that stage was to indicate the degree of research Mr Daintree had carried out in respect of what he believed to be the conduct of the Respondent in relation to paragraph 3. We do not accept that there was any finding that Mr Daintree was capricious or not acting in good faith.It has assisted us in reaching our conclusion by asking the question "what would the reasonable bystander have concluded had he been at Mr Daintree's elbow when the letter of 28th June was written, and enquired by what authority Mr Daintree was ordering the withdrawal of sick pay"? We have no doubt that the reply would have been that the withdrawal was under paragraph 3 and that accordingly that would have been a withdrawal which the employer was not entitled to make. We do not accept that the employer having decided to follow one route which involves allegations of misconduct and impropriety on the part of the employee, can at a much later date fall back upon a discretion which at the time it was never suggested was being utilised. The exercise of a discretion is something more than invoking the right at a later stage having initially made allegations which fail through lack of research and investigation. The exercise of a discretion must precede or be contemporaneous with the act to be justifiable, particularly where a discretion, as in this case, has no element of reasonableness attached to it.We therefore conclude that the Tribunal reached the correct decision and this appeal is dismissed.