INTEGRITY FINANCIAL SOLUTIONS v MR D S HOPKINS [2002] UKEAT 0927_01_3004

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2002] UKEAT 0927_01_3004

Case No Appeal No. EAT/0927/01

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

INTEGRITY FINANCIAL SOLUTIONSAPPELLANT

MR D S HOPKINSRESPONDENT

Before

His Honour Judge J R Reid

Date 30 April 2002

[1]APPEARANCES For the Appellant MR P D BROOM (Solicitor) Messrs Blake Lapthorn Solicitors New Court 1 Barnes Wallis Road Segensworth Fareham Hampshire PO15 5UA For the Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT HIS HONOUR JUDGE J R REID QC This is an appeal from the decision of an Employment Tribunal held at Southampton. The decision was entered on the register on 18 June 2001. By its decision the Tribunal held that the Appellant here, Integrity Financial Solutions Ltd, had unlawfully deducted £2,221.49 from the remuneration of the Respondent here (the Applicant below) Mr D S Hopkins.

[2]Mr Hopkins had been employed as a Policy Price Negotiator by Integrity Financial from 24 April 2000. He was dismissed with effect from 16 December. The events leading to his dismissal took place on 16 November but he was then paid up until 16 December. The business of Integrity Financial was with the buying and selling of unwanted endowment policies. The procedure was that the company would be approached by the unwanted policy holder in the hope that the policy holder would receive more than the surrender value. Mr Hopkins, (or one of his fellow workers no doubt in other cases) on behalf of the Respondent would then try to obtain the best possible price from persons who wished to invest in such policies and go back to the prospective vendor of the policy hopefully with an offer which was acceptable. Integrity Financial would never actually buy the policies but would simply act as a go-between. Mr Hopkins, on behalf of Integrity Financial, would obtain a quote from a purchaser company and after calculating the appropriate profit, would offer a price to the person who was selling the policy. Integrity Financial was the receiver of its profit from the difference between the amount paid by the purchaser of the policy and the amount paid over to the person selling the policy.

[3]By his contract of employment, Mr Hopkins was entitled to a salary of £12,000 per year to be paid monthly in arrears in twelve equal instalments on the last working day. He was also entitled to a commission. The relevant parts of the contract of employment dealing with his commission are as follows:

"Subject to qualifying as eligible in accordance with rules from time to time in force you will be entitled to participate in the Commission Scheme, which is in addition to your basic salary."

There then followed various provisions, and under the heading 'Rules of the Scheme', rules 3 and 4 provide:

"3 If you leave the company for any reason other than dismissal, you will be paid what you are due under the scheme rules to your leave date. Uncompleted cases will be offset against target free cases allocated to date, with any balance paid and no claw back. 4 If you are dismissed, you will forfeit any payment not yet paid to you, regardless of the period to which the payment relates."

Rule 8 provides:

"Payments of commission will be made one month in arrears from the date of assessment."

As I have said, Mr Hopkins was dismissed with effect from 16 December. He was paid his salary to that date. He was paid holiday pay then due. He was not paid any commission.

[4]He applied to the Employment Tribunal in order to recover the commission which was payable on 30 November in respect of commission assessed at 30 October; that is a payment of commission to be made one month in arrears, of 30 October, in accordance with rule 8. The Tribunal found that £2,955 was due but £733.51 had been already paid and that therefore the balance due was £2,221.49. The employer argued that one should look at rule 4 of the commission scheme and that as a result of that Mr Hopkins, having been dismissed, was not entitled to anything.

[5]The Employment Tribunal dealt with the matter in this way, at paragraph 2(c) of the extended decision, they said:

"The part of the contract dealing with commission raises a number of issues. As we have said, we regard the contract as giving an entitlement to the applicant to commission. There are conditions of eligibility which the applicant clearly satisfied. There are then set out what are called the rules of the scheme, which in some respects seem contradictory. For example, rule 4 states that "

If you are dismissed, you will forfeit any payment not paid to you, regardless of the period to which the payment relates". On the other hand, rule 8 states that "payments of commission will be made one month in arrears from the date of assessment". Mrs McMillan argued that as the applicant had been dismissed, then he did not qualify for any commission not yet paid although the respondent had been extremely dilatory in paying commission and in spite of the contents of rule 8. We took the view that rule 8 clearly takes precedence over rule 4. If it does not, then logically if the respondent failed for whatever reason to pay any commission during the applicant's employment, he would not be entitled to any payment. In any event, certainly this was not the applicant's understanding from his initial discussions with Mr Kemp for the respondent with whom he dealt over the contract." Then in paragraph 3 they said this:

"Section 13 of the Employment Rights Act 1996 makes it unlawful for an employer to make deductions from a worker's wages unless authorised by the worker or unless the deduction is in discharge of a statutory obligation. Clearly, for the purposes of this section, the commission due to the applicant was part of his wages."

They then went on and dealt with quantum and said:

"This left a profit to the respondent for commission purposes of £29,545.58. The applicant was entitled to 10% of this sum ie £2,955. The applicant affirms that he has received all outstanding holiday pay and pay in lieu of notice and that he has received an additional sum of £733.51. The net unlawful deduction was therefore £2,221.49."

[6]On this appeal the Appellant took two points. The first of those, at paragraph 6.1 of the Notice of Appeal was in these terms:

"At paragraph 3 of the extended reasons the Tribunal sets out its reasons for finding that there is an unlawful deduction from wages. The Tribunal wrongly stated that "

Section 13 of the Employment Rights Act 1996 makes it unlawful for an employer to make deductions from a workers wages unless authorised by the worker or unless the deduction is in discharge of a statutory obligation". The Employment Rights Act Section 13(1) clearly states that a "deduction may also be required or authorised to be made by virtue of … a relevant provision of the workers contract." The Tribunal therefore misapplied the statute in failing to consider the full extend of the wording of S13(1)." In fact, the Notice of Appeal misquotes Section 13(1) which is in these terms:

"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 the worker's contract, or (b) the worker has previously signified in writing his agreement or consent to the making of the deduction."

The point is in any event a bad one because it is clear that what the Tribunal was doing was not seeking to set out verbatim the terms of Section 13(1) but setting out the gist of it and the words 'unless authorised by the worker' are apt to cover both the situation where the deduction is authorised by the contract and the situation where there has been a separate authorisation for a deduction. That ground of appeal is without substance.

[7]The second ground of appeal was, that as a matter of construction the Tribunal had erred in law in its construction of the contract, and in particular, in its construction of rule 4 in the light of rule 8. It was said that the wording was clear, that all possible parts of the contract should be given affect to, that when one read the contract as a whole it was clear that the Tribunal was wrong because it should not simply have taken rule 8 as taking precedence over rule 4 but should have read them together and that the effect of this was to disentitle Mr Hopkins to any part of his commission.

[8]In our view this argument seeks to construe the decision of the Tribunal as if it was a statute. What the Tribunal are clearly, and in our view rightly, saying, is that so far as a commission has fallen due for payment pursuant to rule 8 - rule 4 does not disentitle the agent from recovering it. The argument that appeared to be being advanced on behalf of the employer was that the employer could assess an amount of commission due, on, for example, 31 January, so that it fell due for payment on 28 February, in breach of contract failed to pay on 28 February, failed to pay again on 31 March, failed to pay again on 30 April, then in the course of May dismiss the agent and assert that the agent was disentitled from recovering the commission which was payable several months before. In our judgment that cannot have been the intention of the parties, nor is it a fair construction of the rules. What rule 4 is concerned with is non-payment of monies not yet due for payment.

[9]Thus, in the present case, Mr Hopkins is not entitled to, and indeed has not claimed, any commission earned in the course of November which had not at his dismissal been assessed as due to him. What, however, he was entitled to be paid, as he claimed and as the Employment Tribunal found, was the amount assessed due at the end of October which fell to be paid on the last working day of November. That money should then have been paid to him. He was then, incidentally, still an employee. We take the view that the Employment Tribunal was entirely right in holding that the employer was unable to escape from its obligation to pay because it failed to pay (as it should have done) on 30 November.

[10]In those circumstances, albeit another Tribunal might have expressed their reasoning slightly less tersely, we are quite satisfied that the decision of the Employment Tribunal was right and the appeal is dismissed.