TEES AND HARTLEPOOL PORT AUTHORITY LTD v MR T P FREER [2001] UKEAT 1476_99_1101

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 1476_99_1101Case No Appeal No. EAT/1476/99Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
TEES AND HARTLEPOOL PORT AUTHORITY LTDAPPELLANTMR T P FREERRESPONDENT
Before
His Honour Judge P CollinsDate 11 January 2001
[1]APPEARANCES For the Appellant MR ANDREW CLARKE One of Her Majesty's Counsel Instructed by: Messrs Jacksons Solicitors Yarm Road Stockton on Tees TS18 3TN For the Respondent MS MELANIE TETHER (of Counsel) Instructed by: Mr A Cook Messrs Russell Jones & Walker Solicitors Minerva House 29 East Parade Leeds LS1 5PS JUDGE COLLINS This case has been well argued on both sides and we are grateful to Counsel for the assistance which they have given in their interesting and forceful arguments. It is an appeal by employers, Tees and Hartlepool Port Authority Ltd, from the unanimous decision of an Employment Tribunal sitting at Thornaby on Tees whose decision was promulgated on 2 December 1999.[2]The Tribunal's decision was that the Port Authority had made unlawful deductions from the wages of Mr Freer, contrary to section 13 of the Employment Rights Act 1996 in respect of 45 hours when he had been sick on 13 - 18 April 1998.[3]Essentially the subject matter of this appeal is the construction of a collective agreement which is in our papers. The copy in our papers is unsigned and undated, but the argument has proceeded on the basis of clause 2 which provides that the agreement is to apply from 1 March 1999. It says that it is to be reviewed on 1 April 2000, and whether that has happened in relation to the matter with which we are concerned, appears unclear.[4]Now, the agreement applies to clerical staff covered by collective bargaining agreements and it is an agreement between the Port Authority and the Transport Salaried Staffs' Association in respect of salaries and conditions of employment for clerical staff. We are told today that there are 22 of such staff, and 80 dock operatives who are covered by a separate but similar agreement, so that the case is one of some general importance for employer and employees in the Port Authority.[5]The essential difference between the arrangements before 1 March 1999 and the arrangements after 1 March 1999 is that the earlier arrangements were based on a core shift pattern of working, while the new arrangements were designed to give total flexibility, so far as is possible, to the employer, bearing in mind the varying demands of the Port Authority because of the need for staff on a particular day. The flexibility is acknowledged in paragraphs 11 - 14 of the agreement which says, so far as is possible, how it is to be operated in practice, and the salary arrangements are set out in clauses 19 - 22.[6]What happened in the present case was that, as the Tribunal found, and its relevant findings are set out in paragraphs 4 - 18 of their decision, Mr Freer was rostered to work between 13 and 18 April 1999 and they held, in paragraph 14:
"We are satisfied that if he had not been sick he would have been at work on these days and would have been paid for them."
[7]The way it was dealt with by the employers is set out in paragraph 16 of the decision. During April 1999 Mr Freer worked a total of 186.5 hours and he was sick for 45 hours, making a total of 231.5 hours.[8]Prior to the operation of this agreement, and in March 1999, with which I will deal separately, he would have received 162½ hours basic rate and 69 hours at overtime, but the employers contended that the new agreement meant that he was to be paid 162½ hours at the basic rate, and only 25 hours at overtime rate.[9]Now whether the employers were entitled to take that position or not, is what the case was about. The Tribunal held, for the reasons which they gave, that the construction placed upon the agreement by the employee was correct and that there had been unlawful deductions. I therefore have to turn to the agreement to see what the relevant provisions are; in clause 11:
"11 The Company is conscious of the potential consequences on social and domestic arrangements of employees which will be taken into account by local Management Teams when determining departmental operational requirements. 12 As much advance notice as is practicable of expected hours of attendance will be given on a day to day basis. An element of inconvenience is unavoidable on occasion because of operating and emergency reasons and employees accept they will, therefore, continue to cooperate and participate in the operation of flexible normal working hours as demanded by business requirements."
I will not set out clauses 13 and 14, which deal with meal breaks. "15 Standard hours of work will be 162.5 hours per month, excluding meal breaks. Management will allocate periods of attendance as required to meet business needs within fully flexible work arrangements. 16 Any period of attendance, whether in normal working hours or in overtime, may need to be extended for operational reasons ."[10]And I pause there to note that, as Ms Tether pointed out, there is no provision there for a period of attendance to be limited or reduced for operational reasons, only extended. "19 The basic salary is inclusive for working as required within fully flexible work arrangements. 21 The Basic Salary applies is respect of the first 162.5 hours actually worked in the Pay Period, being the month concerned, excluding meal breaks. These will be designated as Standard Hours of Work. As appropriate, these will include periods of Annual Leave and Statutory Holidays. 22 Basic Salary will be paid irrespective of whether the Company provides sufficient work to utilise all Standard Hours in the month's Pay Period. Standard Hours under utilised will not be carried over into subsequent Pay Periods. 24. Time worked in excess of Standard Hours in any monthly Pay Period will be paid as overtime at the premium rate of time plus one-third regardless of when such overtime work arose.-"[11]Clause 26 indicates that there is an element of compulsion in the overtime requirement and clauses 41 - 43, which have been at the heart of the discussion before us, deal with sick pay. "41 The Company standard sick pay arrangements are shown in Appendix 4. 42 For shift clerical staff an absence, subject to rules of the Sick Pay Procedure, will be recorded in respect of any allocated attendance for normal hours for which an employee does not report to work. 43 For shift clerical staff qualifying days for SSP [Statutory Sick Pay purposes] will be all seven days of the week (Sunday to Saturday inclusive). And Appendix 4 is headed "Sick Pay Arrangements": "1 This document tells you what to do if, on any occasion, you are absent from work through sickness or injury. 2 To qualify for Statutory Sick Pay (SSP) and any THPAL [Port Authority] sick pay to which you may be entitled, you must adhere to the following rules" and the rules are set out.[12]Preliminary observations about the way in which this agreement had been construed may be mentioned very briefly. Mr Clarke drew our attention to the principles as to the construction of contract, set out by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society" reported at 1998 1 WLR 896 , the relevant passage appearing at page 912 F - 913E. 1 will not read those principles out, merely say that we follow them.[13]Mr Clarke objects to three approaches as to construction which the Tribunal adopted. Firstly, the Tribunal relied on a draft statement of terms and conditions. Secondly, the fact that in March 1999, payment of sick pay to clerical workers followed the old regime, not the regime which the employers now seek to adopt. Thirdly, the Tribunal regarded the custom and practice under the old agreement as being a guide to practice under the new agreement, in other words, indicating that their view was that some substantial and plain reason should be shown for a significant change in the arrangements for sick pay. We accept the thrust of Mr Clarke's submissions in relation to this approach. It falls within ordinary canons of construction that negotiating drafts are not to be regarded as a guide to the construction of a final concluded agreement.[14]Second, it is the fact that a new agreement was also being negotiated in relation to the dock workers; that did not come into force until 1 April and we regard the fact that sick pay was made under the old arrangements to clerical staff in March 1999 as being neutral, so far as the interpretation of the agreement is concerned. Also, we have said enough in the course of this judgment to indicate that the whole working basis for clerical staff was being fundamentally changed under the new arrangements, and therefore it does not seem to us that the mere fact that there were old arrangements, means that those arrangements ought to be taken as giving a guide to the new, unless the contrary is clearly demonstrated. What it means is that we must approach the construction of the new collective agreement in the light of the principles enunciated by Lord Hoffmann in the West Bromwich Building Society case, having regard to the facts, which should have been reasonably available to the parties: " which would have affected the way in which the language of the document would have been understood by a reasonable man." per Lord Hoffmann.[15]It has been substantially accepted during the course of argument, as was found by the Tribunal, that there was no specific discussion between the parties as to what the sick pay arrangements were intended to result in, when this agreement was being negotiated. If there had been any evidence as to what they had intended, it would have been inadmissible, the parties' subjective beliefs being no guide to the meaning of the document, in the absence of a claim for rectification.[16]The case depends upon attempting to read a coherent scheme into this agreement without doing violence to the language, and both parties have accepted that the agreement is one which is inadequately drafted and does not have regard to the implications which have been fully ventilated during the course of the argument. At one point we considered whether or not we ought simply to throw our hands up and say "This agreement is so opaquely drafted that we cannot give it any intelligible meaning at all". We do not find ourselves driven to that counsel of despair. This is an agreement which has existed now for nearly two years, on the basis of which parties have been working and companies have been operating business, and we feel that it is incumbent upon us to attribute a meaning to it if it is possible to do so. We think the agreement is clearly capable of bearing a meaning, either that contended for by the Appellants, or that contended for by the Respondent; we shall endeavour to establish that meaning. It may well be that whatever conclusion we reach will be found to be an unhappy result for the purposes of industrial relations and the economic working of this business, in which case the parties might wish to avail themselves of the statement of intent set out in paragraph 5, namely that, if there are problems they can be resolved by joint negotiations between the parties.[17]The essential question is what clause 42 means. Attention has been concentrated on the meaning of three phrases in that clause: 1) Allocated attendance 2) Normal hours 3) Recorded The expression "allocated attendance" may be found in clause 15, which gives the management power to allocate periods of attendance as required. Nowhere in the agreement, nor in the evidence is there any indication of what formal process, if any, is required for the purposes of allocation, but since, for the purposes of clause 42, the employee's entitlement to sick pay is dependent on an allocation for the purposes of attendance, it is therefore of essential and fundamental importance to decide what the expression "allocation", in that context, means. The Tribunal grappled with this problem at paragraph 32:
"32 It seems to us quite clear that the intention of the parties was that the management would have the right to say when they needed people to come to work, subject to the management giving appropriate consideration to the employee's social and domestic arrangements. That is what is meant by the phrase "allocated periods of attendance". "
And we refer back to clause 12, where it said that 12 As much advanced notice as is practicable of expected hours of attendance will be given on a day to day basis."[18]This must have the only sensible meaning that irrespective of informal or even formal rostering arrangements, management in the context of a completely flexible work scheme were able on a day to day basis, having regard to the operating and emergency exigencies of their undertaking, to say to an employee, whether rostered or not:
"You will, or you will not attend on the following day"
. But we do not accept Mr Clarke's submission that clause 12, or any other provision in the agreement, entitles the employer to make that decision on a shorter than day to day basis.[19]It does not seem to us that there is any provision in the agreement from which we can derive any significant discord between the expression in clause 15 "allocate periods of attendance as required" and the expression in clause 12 of giving advanced notice 'on a day to day basis'. In the absence of any precise machinery set out in the agreement, defining the word "allocation" more precisely, we have to look at clause 12, which is the only other help which the agreement gives. And we therefore conclude that the expression "allocate periods of attendance as required" in clause 15 is to be given the same practical effect as the opening sentence of clause 12.[20]That leads me to deal with the expression "normal hours" and here it may well be that the drafting of the agreement, although it was intended to be a new agreement, was subconsciously affected by the long experience of the draftsmen and the negotiators as to what an ordinary working day was expected to consist of. So far as we can gather from the evidence, even under the new regime, a rostered day would basically be 7½ hours, just as it was before 1 March 1999. I have already drawn attention to clause 16, which gives the employer the right to extend what is described as "a period of attendance" but not to restrict it. That clause is meaningless unless everybody knew what was understood by the expression "a period of attendance" and, it seems to us, the agreement is predicated on the basis that a normal shift, even within a flexible regime, was a shift of 7½ hours, which the employers were entitled to extend but not reduce. That would mean, in effect, that if the employers called staff in and sent them home at lunchtime, they would have to pay them for the whole day, and could not expect them to take the rest of the day off and carry it forward towards their total of 162½ hours. That stems from clause 12 which says that they have the right to allocate, as we take it, on a day to day basis, and we accept that that is what the expression "normal hours" is in that context.[21]Now, another problem with clause 42 is centred on the word "recorded". It does not say recorded for what purpose. Mr Clarke submits, that taken together with Appendix 4, it simply means recorded as an absence for that purpose. Clause 2 of Appendix 4 refers to any sick pay to which the employee may be entitled, but the entitlement derives from clause 42. There are no express words in clause 42 which state that the employee is to be paid for periods of absence which are so recorded during ill health, but since clauses 41, 42 and 43 all appear under the rubric of "Sick Pay" it is quite clear that these clauses have the effect of providing when it is that an employee is to be paid, even though he is sick. In those circumstances, it seems to us that the ordinary words of the agreement, in this context, and excluding the inadmissible approach to construction which the Tribunal adopted, were nevertheless, as the Tribunal found. It is our unanimous judgment that the intention of clause 42, as objectively derived from its words in their context, is that if work has been allocated on a day to day basis, but the employee is unable to attend that shift because of ill health, he is entitled to be paid for that shift, as if he had worked it.[22]The alternative contention, for which Mr Clarke contends, effectively for most practical purposes, relegates clause 42 to having very little effect at all. Mr Clarke's contention has been that clause 21 is the operative clause. An employee only gets paid for the time that he actually works and clause 42 would only come into operation in a comparatively limited class of case; we think that would do very substantial violence towards what is difficult language to understand.[23]We quite see the attractiveness of Mr Clarke's argument that it would be logically desirable for the employer, having regard to the flexible arrangements which were envisaged under this agreement, to have the sick pay consequences for which he contends. However, in our judgment, it is simply not recorded in the language the parties chose to use.[24]For those reasons our view is that the Tribunal was correct in its conclusion and we dismiss the appeal. (Ms Tether) Sir, I would wish to take on one submission in relation to that - that is …..this applicant was de-allocated and[them] the time to do that was at the first hearing which was the hearing on liability. It has never been suggested at any stage, until now, that steps were taken to cancel the allocation… Mr Clarke, very understandably, has asked us to deal with one legal issue which may turn out to be relevant. It is plain from the observations which I have made, that our judgment has proceeded on the basis that the interpretation of clause 15 has to be established by reading it in conjunction with clause 12. That leaves open the possibility that an employee who may be rostered for work, under either formal or informal arrangements, may be told on a day to day basis that he is not required. Now Ms Tether's argument would be that that can only be done for operational or emergency reasons and not because of the employee's ill health. Mr Clarke would seek to argue, on the basis of the observations which we made during the course of the judgment, that the employer may, for any reason, which appears to the employer to be a good one, presuming, no doubt, that the employer acts in good faith, may be a ground for indicating on a day to day basis to an employee, whether rostered or not, that he is or is not required. The relevance of it is, as far as this case is concerned, that there is a remedies hearing coming up. Mr Clarke is unable to say whether or not it will be asserted as a matter of fact at that hearing, that the Respondent was informed, after his first day, or perhaps second day's illness, that he would not be required to attend on the day for which he was rostered, and he would like us to give a ruling as to what the legal position would be if that had been done. We do not think that we ought to do that; the reasons are these: Firstly it is not a point which is raised directly in this appeal. Secondly, it is hypothetical because it may be either(a) that the question of "de-allocation", if I may use that shorthand, is not raised, or(b) that if it is raised, that a Tribunal finds it as a matter of fact that it did not occur. Therefore so as this Respondent is concerned, and this case is concerned, the question may never arise for a legal determination, and for those reasons we do not think it would be right to rule on it. (Mr Clarke) Sir .. if you could make a statement so that the second matter is - this is a matter of some consequence - it is a point of law and has been hotly argued and I would in those circumstances ask permission for an appeal. It is a pure issue of law. (Ms Tether) Well, sir I say that …the actual meaning of the words used by the Employment Tribunal ….. Well this is a case where I think it is obvious, from the observations that the problems that have been thrown up require an industrial solution, and we would like to urge the parties as soon as possible to get together to attempt to achieve, if they have not already attempted, pending this appeal, to achieve a commercial resolution to this problem which will be acceptable to both side. That being said, we have dealt with this case on the basis that it is a legal question, the construction of the document; the case has not been free from difficulty and we would find it impossible to say that the Appellants have no reasonable prospect of success, and therefore for that reason we think we ought to grant permission to appeal. (Mr Clarke) Sir, I would add that I will pass the message on .. But it may be just that everything has been hanging fire, pending this appeal, I do not know. (Mr Clark) Neither do I, but I have no instructions …. Well, thank you both very much.