HEPWORTH HEATING LTD v MR J AKERS & OTHERS [2003] UKEAT 13_02_2101

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2003] UKEAT 13_02_2101

Case No Appeal No. EAT/13/02/MAA EAT/846/02

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

HEPWORTH HEATING LTDAPPELLANT

MR J AKERS & OTHERSRESPONDENT

Before

His Honour Judge J McMullen

Date 21 January 2003

[1]APPEARANCES For the Appellant MR M FODDER (of Counsel) Instructed by: Messrs Shoosmiths Solicitors Lock House Castle Meadow Road Nottingham NG2 1AG For the Respondents MR S GORTON (of Counsel) Instructed by: Messrs Edwards Abrams Doherty Solicitors 125-131 Picton Road Wavertree Liverpool L15 4LG HIS HONOUR JUDGE J McMULLEN QC This case is about unfair dismissal and changes to contracts of employment relating to the method of payment. We will continue to refer to the parties as Applicants and Respondent. It is an appeal by the Respondent in those proceedings against a Decision of an Employment Tribunal promulgated on 18 June and 31 October 2001, held at Nottingham, Chairman Mr S Keevash. The Applicants were represented by Mr Gorton of Counsel, who appears today, the Respondent by a solicitor on each occasion, and today by Mr Fodder of Counsel. Introduction

[2]The Tribunal decided that it would consider a claim of unfair dismissal and take a preliminary point as to whether there was indeed a dismissal. It was also required to make a decision about whether the claims were in time. Logically, the jurisdiction point about time should have come first, but we can well understand that the Tribunal decided to take two days to hear evidence about whether and, if so when, there was a dismissal in law, before deciding whether claims had been made timeously, following such dismissal.

[3]The Tribunal decided that one group of Applicants called Category A were dismissed unfairly by the Respondent and another group, Category B, were not dismissed at all and their claims were dismissed. The Tribunal decided then that all claims had been presented outside the primary time period in section 111 of the Employment Rights Act (three months), but it not being reasonably practicable to meet the primary period, that it was reasonable to hear their complaints as being presented in a reasonable time thereafter. In the Originating Applications the employees complained that they had been dismissed by reason of actions of their employer. Facts

[4]At the material time, the Respondent employed 400 operatives who were paid weekly. 120 were paid by direct transfer, 180 were paid in cash. The remaining 100 authorised the Respondent to deduct part of their wages in order to make a credit transfer on their behalf; the remainder of those wages were paid in cash. The Respondent calculated that it would make a saving of 60 pence per employee per week if it moved to cashless pay. Cashless pay, as anyone engaged in this field over the last twenty years knows, involves considerable changes in the way in which employees approach their compensation. It is regarded by many as a serious issue and certainly generates a lot of feeling. It is common ground in this case that the Respondent had valid reasons for moving towards cashless pay: it saved money, avoided security risks and was based upon a movement away from what the Respondent described as an archaic system.

[5]Similarly, it is acknowledged by the Respondent that genuine grievances were felt by the Applicants at being required to take their money through a cashless method. There were risks in attending cashpoints; banks, as it was put, "ripped off their customers", and it took time for employees to go to various places for cash which were inconvenient for them. There were risks for, in particular, women having to attend cashpoints at difficult times of the day. Suffice it to say that there were strong arguments on both sides.

[6]During the course of consultations initiated by the Respondent in 1999, these proposals were put to the trade union representing the workforce. After a number of meetings, no agreement was reached, so that on 7 January 2000, the Respondent wrote to the Applicants as follows:

"We were disappointed that you did not return the form sent to you regarding the move to cashless pay. We have been discussing the issue throughout 1999 culminating in my letter to you on 10 th December, 1999. Your lack of response leaves me no alternative but to give you formal notice of the Company's intention to cease paying wages in cash on 31 st March, 2000. You will be required to provide the Personnel Department with details of an appropriate bank account by March 17 th latest but preferably earlier. If you do not have an account or wish to discuss the matter further with either someone from Personnel or a Bank employee please return the enclosed form or contact us immediately, we will try to help. However, there will be no facility to pay you cash beyond March 31 st and without an acceptance of the change your existing employment contract to pay in cash will cease. Please be assured we are sympathetic to the inconvenience this may cause you but the majority of employees of Hepworth Heating are paid by credit transfer and are now fully conversant with the banking facilities and the many advantages they offer. Other companies along with unemployment benefit and company pensions have all long since ceased cash payment. Whilst we are sympathetic we have to end our archaic practice of handling cash on site and discussions have to end sometime - that time is March 31 st as previously stated. Your co-operation in this matter is preferred as termination of employment on this issue would be undesirable,"

[7]The reference to a previous letter and to the discussions includes a minute of a meeting which enclosed the following note:

"If bank detail forms were not returned, ultimately the Company would probably have to give 12 weeks notice."

It will be clear that twelve weeks is the duration between the letter and 31 March. All of the employees who received this had been engaged by the Respondent for twelve or more years, and thus were entitled by Employment Rights Act 1996 section 86 to 12 weeks' notice to terminate their contract of employment.

[8]During the course of the next two months, all of the relevant employees returned forms. The form requires the employee to give details of a bank account. It says:

"I hereby agree to payment of my wages into …[Account name]"

It also says:

"I understand that I will be given at least one week's notice of the actual date of payments to the above account will start"

There is then a line that says:

"Employees Authorisation" and each one is signed. There is also a box which says this: "

OR CONFIDENTIAL to Personnel Department I am unable to agree to cashless payments at this time because (give reasons). [and then a place for a signature] The employees in Category B completed the form without any indication that they objected. The Applicants in Category A, the subject of the appeal today, indicated by the addition of the words "under duress" against their signature, that they were opposed to the change.

[9]Two particular employees appeared to be in Category A; Mr Durand, who had signed the "Confidential" box, but had also filled out the form, and Mr Haynes, who was the subject of an express finding by the Tribunal on the time point, filled in the "Confidential" box indicating that he objected. No specific reference was made to these individuals in the Notice of Appeal, but they have caused us some consideration here. Our view is that they have answered the question "yes and no", rather than unequivocally "yes" or "no", and we see no reason for treating them differently today from the way in which the Tribunal treated them, that is to lump them with the others who had signified an objection under the headline "under duress". The employees therefore had all, by the end of March, agreed to go on to cashless pay. All had carried on working; all went on to cashless pay the following week after their form had been processed. The Decision

[10]The Employment Tribunal decided that it would consider the Applicants altogether and heard what might be described as representative evidence. The Tribunal drew the distinction, which we have cited above, between the "A" and the "B" categories. The Tribunal decided that the case turned upon the proper meaning of the letter, which we have cited; it said this:

"The Applicants' contracts of employment were not going to terminate until at the latest the time when the first credit transfer was paid on or after 31 March 2000."

The Tribunal decided that the old contracts of employment contain a condition that the employee would be paid in cash, and thus was able to conclude that the old contracts were brought to an end when the Respondent made its first payment of cashless pay to that individual employee.

[11]As to Category B, the Tribunal decided that these employees did agree to the change and, in the circumstances, they were not dismissed. The Category A employees did not agree because they had been subjected to duress. The Tribunal:

"… drew a distinction between those applicants who agreed to the introduction of cashless pay under duress and those who merely agreed to the introduction without expressing any reservation."

The Tribunal did not set out what it was that constituted the duress; obviously that matter that would required individuation, but for practical reasons, which we wholly support, the Tribunal took a broad view of the collective approach to this litigation, and thus it is possible to divine that the duress which the Tribunal was referring to was the termination of the employment contracts if the employees did not accept the change. The time point

[12]The Tribunal then went on to consider in its second Decision whether or not claims were in time. It was conceded that all of the Applicants had submitted Originating Applications outside the primary limitation period of three months. Some were four days later, some were almost two months later. The Tribunal decided that the Category A employees had been dismissed, as we have said, at the time when the payment of cashless pay was entered electronically into their accounts, on various dates, the earliest being 28 January 2000, and the latest being 24 March 2000.

[13]The first jurisdiction issue for the Tribunal to decide, therefore, was whether a claim had been made in time and whether it was reasonably practicable to submit a claim in time, see section 111 of the Employment Rights Act . The Tribunal decided that the employees had all been under the mistaken impression that the effective date of termination was 31 March 2000. It noted that the Applicants were not ignorant of their rights or of the time limits. The Applicants had relied upon the trade union and its solicitors; the Originating Applications were interpreted by the Employment Tribunal as indicating a termination on 31 March 2000 without dissent in terms by the Respondent, although it is clear that the Respondent disputed dismissal in any event.

[14]The Tribunal said that the error, as it put it, only came to light following a two-day hearing when the Tribunal announced its decision on date. The Tribunal found this was a complex issue and its decision was reached after a careful analysis of the facts and consideration of the relevant legal principles. Neither the Applicants, the union, nor their advisers, could be properly accused of substantial fault. The Tribunal found there was a genuine and reasonable misapprehension as to the effective date of termination and therefore decided that, as a matter of fact, it was not reasonably practicable to present the Originating Applications within time. That is an issue of fact for the Tribunal to determine. We agree that the issue before it was a complex one, and, on the basis of the letter sent by the Respondent and all the circumstances, indicating 31 March 2000, the Tribunal could come to the conclusion that the Applicants had a reasonable misapprehension of their rights. No error of law appears to us to have been made in that decision.

[15]Mr Fodder, for the Respondent, therefore trained his sights upon the secondary limitation period, which is to extend the jurisdiction to allow all of the claims to be put in. He contended that the Tribunal's reasoning was flawed; it said this:

"the applications were presented together with NUDAGO's solicitors with a genuine and reasonable belief that they were in time. The delay was not great and had little or no effect because even if the earliest complaints had been presented in time, they would have been consolidated with the later complaints."

Mr Fodder's contention is that this is "coat tails justification" in that those who presented their claim very late could not ride on the coat tails of those who presented their claims only slightly late: each case is to be treated one by one.

[16]There is force in that submission, but we consider that the Tribunal in its global approach to these matters was correct to accept the submission that Mr Mitchell, a Category A employee and former trade union representative, gave evidence on behalf of all of the Applicants. It is recorded that the solicitor representing the Respondent at the time confirmed that if his complaint was successful, the remaining complaints would also be. Thus it was that when Mr Mitchell was found to be only four days late, all the others came in with him. We see no error in taking that approach, given that no argument was addressed to the Tribunal, contrary to extending time. We hold that the appreciation of what is a reasonable period of time to wait is entirely a matter of fact for an Employment Tribunal, and it has weighed that matter properly and we see no error. Unfair dismissal

[17]The jurisdiction point having been decided in favour of the Applicants, we went on to hear the substance. The primary task is to determine the nature of the letter. In our judgment, the Applicants' submissions are correct. The letter of 7 January 2000 is a notice; it provides for termination of the contract of employment on 31 March, unless something else had happened. The fact that termination can be avoided by the Applicants' acceding to the requirements does not diminish the power of the letter as being a notice of dismissal. That is certainly how the individual employees saw it and there is sufficient minatory language in the letter. and affirmative treatment of dates, to indicate that the Respondent's intention was to dismiss those employees on 31 March. The Tribunal makes a finding which is slightly at variance from that which we have given, but since this a matter of construction, we consider that we are not bound by the Tribunal's approach. The Tribunal announced, it will be recalled from our citation above, that there was to be a termination not earlier than 31 March, or when the first credit transfer was paid thereafter.

[18]In our judgment, the correct construction of the letter, in the circumstances in which it was sent and received, indicate that this was a notice of termination. What then became important was to see whether or not the letter was taken into effect. We do not know what would have happened if no employee had accepted the invitation to go on to cashless pay. Certainly the employers could have stood by their notice, as we have held it to be. Alternatively, the employees could have stayed on, turned up for work and decided what to do when they were given either no pay or pay in the form of a negotiable instrument. We do not know. We must concern ourselves with the facts.

[19]The facts are that throughout January-March, these Applicants accepted the change, and the only distinction between those dismissed and not dismissed, is the addition of the words "under duress" in their letters. This requires an analysis of what "under duress" means. Sadly, the Tribunal has not provided us with its thinking on this matter. We have, however, been referred to a number of authorities, relating to "duress" and we cannot underline more strongly the distinction in the Tribunal's mind which these words, added to the reply forms, evoked in this case.

[20]Mr Fodder submitted to us that there was no "duress" in the legal sense here. He recalled that we are dealing with strict legal principles. In the course of his oral argument, but not in his Skeleton, he submitted to us that a threat to do that which you are lawfully entitled to do cannot be "duress". He cited Leyland Daf

[1994] 1 BCLC 245

and that proposition was accepted as common ground on behalf of the Applicants. The threat, which we divined to be the "duress" described by the Applicants, is the threat that the employer will carry out its decision to terminate the contracts on 31 March. Since that is the period of notice of all of the employees, that is not an unlawful act and cannot be "duress" in the legal sense.

[21]A number of other authorities were cited, in particular Hennessey -v- Craigmyle & Co Ltd

[1986] ICR 461

CA at 468, where Sir John Donaldson M.R. emphasised that economic duress is far from easy to establish and explained the test. He said this:

"In Pao On & Others -v- Lau Yiu Long [1980] AC 614 at 635, Lord Scarman added at 636 "

It must be shown that the payment made or the contract entered into was not a voluntary act." This led Counsel for the employee who was seeking to avoid a compromise agreement to argue that the applicant was forced to agree to the settlement. To use a phrase beloved of politicians and trade union officials, "There was no alternative." As is the norm when that phrase is used, in fact there was a very clear alternative, namely, to complain to an industrial tribunal and to draw social security meanwhile. It may have been a highly unattractive alternative, but nevertheless it was a real alternative. Economic duress can only provide a basis for avoiding a contract if there was no real alternative. With the benefit of hindsight, Lord Scarman's meaning might have been better expressed if he had said:

"It must be shown that the payment made, or the contract entered into, was an involuntary act."

[22]Taking that proposition, which was not disputed on behalf of the Applicants by Mr Gorton, Mr Fodder submitted that the Applicants had real alternatives. They could declare their view unambiguously that they had been dismissed and claim unfair dismissal, or leave, or make clear that they were accepting the change under protest and sue for damages for breach. The last was precisely the approach taken by certain union members in Rigby -v- Ferodo Ltd

[1988] ICR 29

who, faced with a wage cut without proper notice to terminate the contract being given by their employers, worked on and sued for the balance of the wages due and succeeded. The House of Lords, in a speech given by Lord Oliver, with whom all the other Law Lords agreed, said this: "One thing that is clear in this case is that the appellant had no intention whatever of terminating the contracts of employment with its workforce except by compelling the acceptance of new contractual terms which Mr Rigby and his fellow CSEU members were, as they made it quite clear, unwilling to accept and which they never did accept. Faced with that situation the appellant could have chosen to terminate their contracts on proper notice. It chose not to do so. It could have dismissed them out of hand and faced the consequences. It chose not to do so. It continued to employ them, week by week, under contracts which entitled them to a certain level of wages but withheld from them a part of that entitlement. I can, in these circumstances, see no answer at all to Mr Rigby's claim and the trial judge and the Court of Appeal were, in my judgment, plainly right in the conclusions at which they arrived." (see page 35) So, in the instant case, the remedy for the employees was to carry on working and sue for any damages suffered, for example, extra costs in travelling to an ATM to get money, or set up a bank account and so on.

[23]One significant principle has been much in play in this case, and this is the stream of authorities which leads from Hogg -v- Dover College

[1990] ICR 39

, followed by Alcan Extrusions -v- Yates

[1996] IRLR 327

. Both of these cases deal with the circumstances of an employee faced with a peremptory decision by an employer in breach of contract to change, very substantially, the terms of an employment contract, either by offering a completely new job or the job on completely reduced conditions.

[24]The holding in each of these cases is that the employee in such circumstances has been dismissed pursuant to Employment Rights Act section 95(1)(a), a direct dismissal, as Mr

Justice Garland, sitting in the EAT says at page 41 of the Hogg decision:

"It is to be noted that his IT1 is dated 19 October 1987, setting out, very clearly, his contention that he had been dismissed. Such dismissal can be looked at in two ways; that either the letter of 31 July was a summary dismissal there and then, or that it laid the ground for a constructive dismissal by constituting a repudiation of fundamental terms of the contract of employment which he accepted by his solicitors' letter and by issuing the IT1."

He went on to say, at page 42:

"It seems to us, both as a matter of law and common sense, that he was being told that his former contract was from that moment gone. There was no question of any continued performance of it. It is suggested, on behalf of the employers that there was a variation, but again, it seems to us quite elementary, that you can vary by consent terms of a contract but you simply cannot hold a pistol to someone's head and say: "henceforth you are to be employed on wholly different terms which are in fact less than 50 per cent of your previous contract."

[25]Similar language was used in Alcan where the judgment of the EAT was given by His Honour Judge Smith QC. This was a case of actual rather than constructive dismissal. The EAT said this:

"It does not follow from that that very substantial departures by an employer from the terms of an existing contract can only qualify as a potential dismissal under s.55(2)(c). In our judgment, the departure may, in a given case, be so substantial as to amount to the withdrawal of the whole contract. In our judgment, with respect to him, the learned judge in Hogg was quite correct in saying that whether a letter or letters or other conduct of an employer has such an effect is a matter of degree and, we would hold accordingly, a question of fact for the industrial tribunal to decide. We fully accept that in many cases to construe letters or other conduct on the part of an employer which puts forward no more than variations in a contract of employment as amounting to termination or withdrawal of such a contract would be quite inappropriate and wrong. But in our judgment, counsel for the appellants was driven to the untenable position, as we believe it to be, that even very substantial departures from an original contract of employment could never amount, on an objective construction, to the termination of the original contract and its replacement by the offer of a different and inferior contract of employment but must always be characterised as breaches of the original contract."

It seems to us that the assessment of the quality of the change is therefore relevant when making a claim based on the principle set out above in Hogg and Alcan .

[26]The changes in both of those cases were very substantial and very significant. On appeal, we should not be taking a view of matters of substance which are essentially for the Employment Tribunal, but compared with the facts in both of those cases, the change by the Respondent in this case cannot be categorised in the same way. It thus seems to us that those cases are not relevant not only for the reason that there is no breach of contract here, twelve weeks' notice having been given, but also if we are entitled to make this judgment, that there is no change of substance of anything like the same scale as appeared in those cases. We hold that Hogg and Alcan have no application to the present decision making process.

[27]We have decided that the Employment Tribunal thus committed an error in categorising the distinction between Category A and B as based upon the addition of the words "under duress". We would normally be minded to send this back to the Tribunal, or a differently constituted Tribunal, so that it could make findings, following our directions about what it meant by "duress". But since there has been no argument put before it or us other than that the employees' contracts would come to an end pursuant to proper notice, we do not consider that constitutes unlawful duress.

[28]In any event, the effect of such duress would be to make the contract voidable. What contract would it be? Mr Fodder submitted that it would be the agreement, under duress, to vary or exchange the term relating to pay in cash. But we accept the proposition set out in Chitty on Contracts 28 th edition, volume 1, 7/039 as follows:

"It now seems clearly established that a contract entered into under duress is voidable and not void, consequently a person who has entered into a contract under duress may either affirm or avoid such contract after the duress has ceased, and if he has voluntarily acted under it with the full knowledge of all the circumstances, he may be held bound on the ground of ratification, or if, after escaping from the duress, he takes no steps to set aside the transaction, he may be found to have affirmed it"

There is some force in what Mr Fodder submits about what would be the effect of the duress, which is to replace the cashless contract with the original contract, in which case there would be no dismissal. That is not an essential part of our thinking for the purposes of this judgment. We do not consider the correct analysis of this case was that the notice was brought forward as was held in Tunnel Holdings -v- Woolf

[1976] ICR 387

[29]We therefore hold that the Tribunal erred in law in the way we have defined it above and we will reverse its Decision that these employees were dismissed. They agreed, absent relevant legal duress, to the changes and it is not necessary for us to say whether they instituted entirely new contracts or simply a variation. The Tribunal's view of such matters was, in respect of the Category B people who accepted, that they were not dismissed; they agreed to the change. We think that that is the common sense approach to take to all. Changes occur from day to day, following negotiations at workplace level without there being a wholly new contract instituted, and thus by parity or reasoning with the Category B employees, we hold that a change was agreed with each employee in Category A to cashless pay on the date when each person gave effect to the electronic transfer.

[30]An application to appeal to the Court of Appeal is made on the basis that the correct analysis of this case was that the notice was brought forward citing Tunnel Holdings -v- Woolf . We consider that that is not reasonably arguable with a prospect of success and we reject the application.