Small Lots (Mix-It) Ltd v MacFarlane [1998] UKEAT 1256_98_1012

EAT
Small Lots (Mix-It) Ltd v MacFarlane
[1998] UKEAT 1256_98_1012 · 1998-12-10

JUDGE J ALTMAN :

This is an appeal from the Industrial Tribunal sitting at Reading on 30 July 1998. The Respondents appeal against the finding that, by failing to pay a contractual entitlement to bonus, the Respondents unlawfully deducted the sum of that bonus from the remuneration of the employee.The matter comes before us by way of preliminary hearing to determine whether there is an arguable point of law such as to merit the case proceeding to be heard in full by the Employment Appeal Tribunal. We have been greatly assisted by the concise and full arguments of Mr Goodlad in this case, on behalf of the Appellants.The background to the decision of the Tribunal was that the employee was a Depot Foreman in charge of their Newbury depot and, as part of his remuneration, he received a bonus of about £7,000 per annum given to him, it appears, because he was in charge of the depot as part of his work.In April 1997 he was off work through ill-health. In September 1997 another person was put into the Applicant's position at the Newbury depot and the Applicant was told that he would be transferred to become the Depot Foreman at Beaconsfield. Whilst his job description and most of his duties remained intact, he was then to be in effect second in command and it was pointed out that it was intended by the employers to terminate, for that reason, his entitlement to bonus.The employee protested but the employers did not change their intentions. It is true that he attended work at Beaconsfield and has worked there since, but clearly did so under protest. Indeed, within a matter of days he applied, while still in employment, to the Industrial Tribunal, the decision of which was the culmination of that application.The decision of the Tribunal was that in effect the Respondents had sought to impose a unilateral variation of contract by reducing remuneration very substantially and that the Applicant employee had refused to accept that variation and that accordingly, the variation had not been accomplished.It appears that the Respondents before the Industrial Tribunal put the argument on two grounds. First, that there was not a unilateral variation, rather an application of the provision for flexibility and variation contained within the existing contract of employment, or secondly, that if they were wrong about that, not only was this a unilateral variation of contact, it was so draconian as in effect to amount to a complete dismissal and offer of engagement on completely different terms. They argued the two extremes and the Tribunal in effect opted for the middle course.In paragraph 3 of the standard conditions of the Appellants' employer's handbook, they had the right, after consultation with the employee:
"To redeploy that employee from one work place to another, from department to department, or to other duties to meet the changing needs of the business."
And it is pointed out that paragraph 5 provided that "salaries reflect the nature and content of the job, and the experience and overall performance of the individual", and the argument of Mr Goodlad is that, having found that those were terms of the contract, the Industrial Tribunal should have found that the redeployment in this case and the change of duties by deleting overall responsibility for the depot from the employee's duties, was simply performance by the employers of their entitlement under that paragraph 3 and that, accordingly, the Tribunal erred in law in not finding in consequence that the reduction of pay went along with it. Of course there is no reference to such reduction in the agreement itself.In their Extended Reasons the Tribunal also set out paragraph 31 of the standard conditions which provides for the right to make reasonable changes to any terms and conditions of employment, minor ones to be notified and to take effect from the date of the notice:"You will be given not less than one month's written notice of any significant changes which may be given by way of an individual notice or a general notice to all employees. Such changes will be deemed to be accepted unless you notify the company of any objection in writing before the expiry of the notice period".Accordingly, on Mr Goodlad's argument, there was a competing provision and the question before the Tribunal was whether this was simply flexibility within the terms or a change inviting objection by the employee.The Industrial Tribunal set out in helpful and meticulous detail the background to this matter to which I have already alluded. The Applicant went eventually to Beaconsfield but he had used the Respondents' grievance procedure and, having received a letter following the grievance procedure on 26 May, within days he had instructed solicitors and come to the Tribunal, as I said.In Paragraph 4 of their Extended Reasons the Tribunal set out the arguments that were addressed to them about the employer's right to make a change, together with the relationship of the bonus to the fact of being in charge of a depot and about having been an acceptance of the variation by the employee. The Tribunal in paragraph 6 of its Decision, having considered the authorities and considered the facts, said this:
"6. ... those provisions in the handbook do not give the respondents the right to make a substantial reduction in the applicant's remuneration. Those provisions do permit the respondents to transfer the applicant to a different place of work, in this case Beaconsfield, but the provisions are that any other variation must be reasonable. ..."
They point out that paragraph 3 makes no reference to varying a term such as remuneration and that paragraph 5 gives no right to substantially reduce remuneration. They consider paragraph 31 to be potentially more relevant and they find as follows:
"The clear intention of the clause must be that significant changes can only be implemented if accepted either expressly or by deemed acceptance following no objection being raised."
It seems to us therefore quite clear that the Tribunal considered the very argument that has been addressed to us and reached a conclusion upon it; that they erred in law in so doing is argued upon the basis of the decision of Hassman Manufacturing Ltd v Weir [1998] IRLR 288. In that case there was a move of one employee from one shift to another shift and, remuneration being based on shifts, he received a reduction in pay appropriate to that transfer and in that decision Lord Johnston gave the judgment of the Employment Appeal Tribunal as follows:
"... the fact that the consequence of a permitted or lawful act may have an economic impact upon the earnings of the employee does not in itself render that impact, if it constitutes a drop in income, an unauthorised deduction in terms of the legislation. In our opinion, the wages properly payable for the employee, once he has moved lawfully in terms of his contract, albeit under protest to the back shift were those payable to all persons working on the back shift, and we accept the proposition that to continue in force payments to him to reflect what he received on the night shift would be perverse, and contrary to sound industrial practice. It could well also lead to equal pay claims from persons who already were on the back shift. ..."
Of course, that decision reflecting established industrial practice and the general understanding of what happens when people move from one shift to another. It rejects the proposition that simply to look at the consequence of a permitted move as just giving rise to an entitlement to maintain original pay, rather than follow the reduction in pay that may follow, is not a tenable argument. We agree. Just because a person moves from one post to another within the terms of the contract of employment and may suffer a reduction in pay does not necessarily of itself mean that there has been an unauthorised deduction in terms of the legislation and clearly the Employment Appeal Tribunal was very influenced in their decision by the facts of that case.In this case the Tribunal drew attention to the fact of how big a reduction in remuneration was involved, almost a third of income, and clearly they based their decision, to some extent, upon that finding. Having found the contractual terms, and having found what happened, it was open on those facts, it seems to us, for the Tribunal to conclude that what happened was not within the existing terms of the contract of employment. It seems to us that no arguable point of law arises from that whatsoever.The next question that arose was whether the contractual change imposed was so great that it should be viewed as a termination of the existing contract with the simultaneous offer of a new contract and in this context reference was made to Alcan Extrusions v Yates [1996] IRLR 327. In that case it was held that
"Where an employer unilaterally imposes radically different terms of employment, applying the principle in Hogg v Dover College, there is a dismissal ... if, on an objective construction of the relevant letters or other conduct on the part of the employer, there is a removal or withdrawal of the old contract."
What is suggested is that there is the requirement of an objective construction of the relevant letters or other conduct and what is suggested here is that, in their decision the Industrial Tribunal looked at the subjective intention of the parties as to what happened and came to the conclusion that there was a continuation of the old contract, rather than looking at the draconian nature of the changes, which should have led them to come to the conclusion that there was a new contract. The matter was deal with at paragraph 8 of the Industrial Tribunal's Decision:
"8 The Tribunal considered whether the contractual change imposed was so great that it should be viewed as a termination of the existing contract with the simultaneous offer of a new contract. The Tribunal is, however, satisfied that did not occur in the circumstances of this case where all the evidence, including the correspondence before the Tribunal, makes it clear that the respondents were only seeking to vary the existing contract rather than imposing a new one."
That wording is perhaps, on the face of it, a little deceptive in that it refers to what the Respondents were seeking to do. Mr Goodlad relies upon that and says that the Tribunal were saying that what the Respondents were intending or "seeking" is determinative and therefore the Tribunal was looking at the subjective intention of the Respondents instead of the objective facts. But the Tribunal specify that they looked at all the evidence. They looked at the correspondence before the Tribunal as well as considering the oral evidence and they, it seems to us, looked at the process of what was happening. The process was a "seeking to vary" and they have so defined it. They are not saying that the Respondents, from their point of view, thought that they were seeking to vary, they were simply defining what happened as the process of the Respondents seeking to vary the existing contract and they find that it came within that definition.That does seem to us to be an objective view of objective evidence because often objective evidence may require an examination of what the parties were doing or were trying to do. Indeed, if you take away from this case what the Respondents were seeking to do, there is actually not much evidence left as to what happened. The Tribunal must be regarded as having looked at the objective evidence in the case.Accordingly, whilst we can understand from the wording of the Tribunal how the submission came to be framed before us, together with that ground of appeal, when we examine the words and the very careful analysis of all the issues by the Tribunal, we are driven to the conclusion that there cannot be any argument in law to undermine that finding of the Industrial Tribunal.The other finding of the Tribunal that there was a unilateral variation which was not accepted and that therefore the old contract subsists, has not been in itself subject to attack. It is the third conclusion of the three to which I referred at the outset of the case, the one adopted by the Industrial Tribunal. This contract continues on its own terms.Mr Goodlad suggested to us that the way this matter should have been dealt with was for the employee to say he was not accepting it and was leaving, or else to carry on with it. It seems to us, however, that an employer who wishes to change a contract and who is faced with an employee who does not accept that change, himself bears the burden of making the decision, "Am I going to retain this employee on the existing contract or not". It is the employer's decision to change. He must assess, it seems to us, what he is to do. This appeal must be dismissed at this preliminary stage.