MR D S JONES v LIBERATA LIFE PENSIONS INVESTMENTS LTD [2004] UKEAT 0897_03_0602

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2004] UKEAT 0897_03_0602Case No Appeal No. UKEAT/0897/03Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR D S JONESAPPELLANTLIBERATA LIFE PENSIONS INVESTMENTS LTDRESPONDENT
Before
His Honour Judge Ansell Mr P DawsonDate 6 February 2004
[1]APPEARANCES For the Appellant MR D S JONES (the Appellant in Person) For the Respondent MR T LINDEN (of Counsel) Instructed by: Liberata Life Pensions Investments Ltd – Human Resources St James's House 27-43 Eastern Road Romford RM1 3NH HIS HONOUR JUDGE ANSELL This is an appeal from a preliminary ruling of an Employment Tribunal sitting at Stratford, London on 25 July 2003 who in a decision promulgated to the parties on 26 August 2003 held that the Barclays Sharesave/Saye Scheme did not fall within the scope of Section 1 of the Employment Rights Act 1996 and in particular did not fall within the meaning of "Remuneration" as provided for by Section 1 (4) (a) of the said Act. Leave for this hearing was given by Lord Johnston in chambers on 12 November 2003.[2]At the outset of the hearing Mr Linden for the employers properly brought to our attention that he had previously met one of the lay members, Mr Stanworth, when advising the public company of which Mr Stanworth is a director, those meetings taking place some years ago. Mr Stanworth had no personal recollection of the meeting but obviously accepted that Mr Linden was correct.[3]We raise the issue with Mr Jones to allow him to make objection if he so wanted to Mr Stanworth's continuing as part of the court but Mr Jones made it abundantly clear to us that he had no objection to Mr Stanworth continuing.[4]The background facts to the case are not in dispute and in the main emerge from the Tribunal decision, although not always with the greatest clarity that we would have wished. Both parties were helpfully able to supplement the detail given by the Tribunal from the documents on the bundle that were both before the Tribunal and before us; and although at the outset Mr Jones was seeking as part of his appeal to have a rehearing so that more detail might emerge in relation to the Saye/Sharesave Scheme and its funding, by the conclusion of the case, particularly in the light of concessions made by Mr Linden, an agreed set of facts had emerged.[5]Before referring in detail to the facts we set out the route by which this matter came before an Employment Tribunal.[6]Section 1 of the Employment Rights Act 1996 provides that: 1 " Statement of initial employment particulars(1) Where an employee begins employment with an employer, the employer shall give to the employee a written statement of particulars of employment.(2) The statement may (subject to section 2 (4)) be given in instalments and (whether or not give in instalments) shall be given not later than two months after the beginning of the employment.(3) The statement shall contain particulars of – (a) the names of the employer and employee, (b) the date when the employment began, and (c) the date on which the employee's period of continuous employment began (taking into account any employment with a previous employer which counts towards that period).(4) The statement shall also contain particulars, as at a specified date not more than seven days before the statement (or the instalment containing them) is given, of – (a) the scale or the rate of remuneration or the method of calculating remuneration, (b) the intervals at which remuneration is paid (that is, weekly, monthly or other specified intervals), (c) any terms and conditions relating to hours of work (including any terms and conditions relating to normal working hours), (d) any terms and conditions relating to any of the following – (i) entitlement to holidays, including public holidays, and holiday pay (the particulars given being sufficient to enable the employee' entitlement, including any entitlement to accrued holiday pay on the termination of employment, to be precisely calculated), (ii) incapacity for work due to sickness or injury, including any prevision for sick pay, and (iii) pensions and pension schemes. (e) the length of notice which the employee is obliged to give and entitled to receive to terminate his contract of employment. (f) the title of the job which the employee is employed to do or a brief description of the work for which he is employed. (g) where the employment is not intended to be permanent, the period for which it is expected to continue or, if it is for a fixed term, the date when it is to end. (h) either the place of work or, where the employee is required or permitted to work at various places, an indication of that and of the address of the employer. (j) any collective agreements which directly affect the terms and conditions of the employment including, where the employer is not a party, the person by whom they were made, and (k) where the employee is required to work outside the United Kingdom for a period of more than one month – (i) the period for which he is to work outside the United Kingdom, (ii) the currency in which remuneration is to be paid while he is working outside the United Kingdom, (iii) any additional remuneration payable to him, and any benefits to be provided to or in respect of him, by reason of his being required to work outside the United Kingdom, and (iv) any terms and conditions relating to his return to the United Kingdom." Section 11 (1) of the Act provides that: 11 (1) "Where an employer does not give an employee a statement as required by section 1, 4 or 8 (either because he gives him no statement or because the statement he gives does not comply with what is required), the employee may require a reference to be made to an employment tribunal to determine what particulars ought to have been included or referred to in a statement so as to comply with the requirements of the section concerned."[7]Mr Jones' case before the Employment Tribunal was that as an employee of Barclays Bank Plc he had been a member of their Sharesave/Saye Scheme which was available to employees of the Barclays Group. With effect from 1 November 2002 his employment had been transferred to the Respondent pursuant to the Transfer of Undertaking (Protection of Employment) Regulations 1981 , but the Respondent had not put any equivalent scheme in place. Mr Jones therefore sought a declaration before the Tribunal that Barclay's Saye Scheme had been transferred and formed part of his terms and conditions of employment with the Respondent.[8]It was agreed before the Tribunal that whilst still in employment there is no general power for a Tribunal to declare what particular terms and conditions of employment would have been transferred to the Respondent pursuant to the TUPE Regulations 1981 . Section 11 ERA 1996 only permits the Tribunal to determine which particulars ought to have been included or referred to in a statement so as to comply with the requirements of Part I of the Act. This required consideration of what particulars an employer would be required to give under the relevant sections and in particular under section 1 of the Act.[9]The employers argued that the subject matter of the employee's complaint, i.e. rights, if any, under the Sharesave Scheme, did not fall within any of the categories set out in section 1 (4) of ERA 1996 . The employee's case was that the Sharesave Scheme fell within the definition of remuneration under section 1 and in particular because his employers were making a contribution towards the operation of the Scheme and he contended that that contribution should be considered as part of his remuneration package. Facts[10]As stated above, at all material times prior to 1 November 2002 Mr Jones was employed by Barclays Bank Plc, part of the Barclays Group, whose parent company is Barclays Plc. As part of that employment he was eligible to participate in certain share option schemes which were introduced from time to time and in particular on an annual basis over the last few years. If his application for participation in a scheme was accepted Mr Jones authorised the employers to make deductions from his salary and to pay them into a savings account with Barclays Bank Trust Company Ltd, also known as the Qualifying Employee Share Ownership Trust ("Quest"). The schemes would require monthly contributions up to a maximum of £250 per month and were for periods of either 3, 5 or 7 years.[11]At the conclusion of those periods bonuses were added to the amount saved. On a three-year scheme the bonuses were equivalent to three further monthly payments. On a five-year scheme they were equivalent to 9 further monthly payments and on a seven-year scheme they were equivalent to 18 further monthly payments; and were paid tax free.[12]Further, at the end of each savings period the employee then had the opportunity to purchase shares in Barclays Plc, the parent company. That option had been granted at the commencement of the savings period at a price discounted from market value. The documents that we have seen suggested that the discounted price was 10% although Mr Jones contended that in other years the discount was 20%. If the employee wished to remove the savings before the maturity period then he would receive back the amount of his repayments plus interest accrued.[13]The Group accounts for the year ended 31 December 2002 indicated that the Barclays Group of companies had contributed £48 million to Quest and the accounts contained the following:
"In 1998 the Group established a qualifying employee share ownership trust for the purposes of delivering shares on the exercise of options under the Saye. During 2002 the Group received from the trustees of Quest £122 million on the issue of shares in respect of the exercise of options awarded under Saye. Of the amount received from the trustees, employees paid £76 million and the balance of £46 million comprised contribution to the Quest from the Group companies."
[14]Mr Linden was unable to specifically identify whether the Group contributions were to cover the cost of the bonuses or the discounted shares or both. He also conceded that some of that sum would have come from Mr Jones' former employers, Barclays Bank Plc, but makes a point that this was a general contribution to the operation of Quest rather than a direct contribution to Mr Jones' individual fund, a point made by the Tribunal in paragraph 17 of their decision.[15]In S & U Stores Ltd v Wilkes [1974] ICR 645 Sir John Donaldson on behalf of the National Industrial Relations Court defined "average weekly rate of remuneration" as follows. For the purposes of what is now section 224 (2) of the 1996 Act:(1) "Any sum which is paid as a wage or salary without qualification is part of the employee's remuneration.(2) The value of any benefit in kind (e.g. free accommodation) or paid in cash by someone other than the employer (e.g. the Easter offering) is to be disregarded as not forming part of the remuneration.(3) Any sum which is agreed to be paid by way of reimbursement or on account of expenditure incurred by the employee has to be examined to see whether in broad terms the whole or any part of the sum represents a profit or surplus in the hands of the employee to the extent that it does represent such a profit or surplus as is part of the employee's remuneration."[16]Before us Mr Jones argues that the Scheme could not be categorised as a benefit in kind since he argues that a benefit in kind is by its very definition a taxable benefit which the Saye Scheme is not. He also argues that the employer's contribution to the operation of Quest amounts to a profit in the hands of the employee since it funds the discount in the share price and the enhanced bonus.[17]In Keiller v Lothian, Borders & Angus Co-Operative Society Ltd (EAT/199/02) the EAT in Scotland, Lord Johnston presiding, had to consider whether the benefits under the Tesco Saye Sharesave Scheme were to be regarded as remuneration within terms of section 1 ERA 1996 . On the facts of that case there was no evidence that Tesco made any contribution either to the discounted share price or to the bonus which was added to the monies paid in by the employee.[18]The Employment Tribunal had dismissed the employee's claims for a declaration and at paragraph 5 of the EAT decision Lord Johnston said this: 5 "It is the self-evident starting point in considering what constitutes employees' remuneration in the context of employment, that the money in question must stem or flow from the employer. Thereafter, it has to be categorised as profit, as opposed to expenses if that is the relevant test. 6 Having studied the scheme, we are entirely satisfied that no money emanates from the employer with regard to the fixing of the option price and, equally, that they do not provide the interest upon the accumulated money that may be set aside by the employee. We entirely agree with the approach adopted by the Chairman of the Tribunal that the one and only source of money in relation to this scheme is of the employee. Obviously, the employer makes a scheme available but, beyond that, makes no financial contribution. Mr Truscott invited us to consider whether in fact the artificial share price represented a payment by the employer, but we can find no basis for such a conclusion. 7 Mr Truscott invited us to consider the matter in the wider context of European legislation but we do not consider this to be necessary or adding anything since it is again concerned with the definition of "remuneration". We consider that the Tribunal Chairman was more than justified to focus on the single issue of remuneration and, furthermore, we conclude that he reached the correct decision, for the reasons he gives."[19]Mr Jones seeks to distinguish that decision on the grounds that in this case there is evidence that Barclays Bank Plc do make a contribution, albeit indirectly and through Quest, to the operation of the Scheme.[20]For the Respondents Mr Linden firstly makes a point that Mr Jones in his IT1 was seeking a declaration that the Saye Scheme had been transferred and formed part of his terms and conditions of employment with the Respondent; but in order to invoke the jurisdiction of an Employment Tribunal he was driven to reduce the issue to the somewhat narrow and artificial contention that his remuneration included contributions allegedly made by his former employers to the scheme. He concedes that while Mr Jones may well have a strong argument in relation to whether membership of a sharesave scheme was part of his current terms of employment, that was an issue which did not lie within the jurisdiction of an Employment Tribunal, certainly whilst he remained employed. He also reminded us that any payments that could be regarded as profit in the hands of the employee, i.e. the share discount and bonus, were made by Quest to the particular employee, even though the Bank may have made some contribution to the general operation of the trust fund.[21]He then invited us to look at section 1 ERA 1996 to see how remuneration is defined and made the following points:(i) Section 1 (4) (b) clearly contemplates that remuneration is something which is paid by the employer on a regular basis when it speaks of "the intervals at which remuneration is paid (that is weekly, monthly or other specified intervals)".(ii) Section 1 (4) (k) (ii) also contemplates remuneration as something which is paid by the employer when it refers to "the currency in which remuneration must be paid while he is working outside the United Kingdom".(iii) Section 1 (4) (k) (iii) clearly draws distinction between remuneration and benefits in referring to "any additional remuneration payable to him, and any benefits to be provided to or in respect of him, by reason of his being required to work outside the United Kingdom".(iv) Section 2 (4) of the 1996 Act requires that particulars falling within section 1 (4) (a) to be included in a single document. Mr Linden argues that this clearly indicates that Parliament did not contemplate that section 1 (4) (a) would require an employer to declare the detailed rights and obligations between employer and employee under or in connection with an Saye scheme or any other scheme since it would not be practicable to provide the relevant particulars in a single document. By contrast Parliament did recognise that for example sick pay schemes or pension schemes may be incorporated by reference – see section 2 (2).[22]Mr Linden also invites us to consider the EU origins of section 1 (4) (a) which lie in Council Directive 91/533/EEC. Article 1 of this Directive requires the member states to require employers to notify employees of "the essential aspects of the contract or employment relationship" and Article 2 provides, so far as material, as follows: 2 "The information referred to in paragraph 1 shall cover at least the following - … (h) the initial basic amount, the other component elements and the frequency of payment of the remuneration to which the employee is entitled."[23]He argues that the EU requirement which section 1 ERA 1996 seeks to implement is a requirement to specify payments of remuneration to which the employee is entitled from the employer.[24]Further, he refers us to sections 221 to 224 of the 1996 Act which seek to define the amount of a week's pay of an employee where the concepts of remuneration and pay are regarded as interchangeable concepts. For example, section 222 (2): (2) "The amount of a week's pay is the amount of remuneration for the average number of weekly normal working hours at the average hourly rate of remuneration."[25]In terms of the case law he argues that with regard to Sir John Donaldson's definition in S & U Stores the Scheme does not fall within his definition of remuneration since it is not a sum which is paid by way of wages or salary, nor is it reimbursement of amounts incurred by an employee which contain a profit element and he argues the Scheme is no more than a benefit in kind.[26]He argues that there is nothing to distinguish this Scheme from that set out by Lord Johnston in the Keiller case since the monies or benefit received by Mr Jones flow not from the Bank but from Quest and any monies paid by the Bank towards the operation of the Scheme cannot be directly attributed to this particular employee. We agree with his submissions on all these issues.[27]The Tribunal's conclusions in the matter were set out as follows: 16 "We are satisfied that the Scheme does not fall within the scope of Section 1 of the Employment Rights Act 1996. In particular it does not fall within the meaning of Remuneration as it appears at Section 1 (4) of the Act. We accept the Respondent's argument that, in context, this term refers to payments made the employer to the employee and that the Scheme itself cannot be said to fall within such a use of the term. The term does not admit of a different meaning elsewhere in the Act, indeed, it admits of the same meaning. 17 If we are wrong about that, namely that we have adopted an unduly restrictive use of the term "remuneration", then we are not satisfied that payments flowed from the employer under the Scheme such that there was profit in the hands of the Applicant. Whilst it is clear that the Applicant could in a general sense "profit" from the Scheme, indeed his complaint is that his enforced premature exclusion from the Scheme effectively reduced this profit, that still does not bring the operation of the Scheme within the criteria identified in the Keiller case. The source of the Fund was that part of the Applicant's wages (itself properly categorised as "remuneration") plus the interest thereon over the Term. The interest was paid by Quest and not by the employer and we are satisfied that Quest, albeit connected to Barclays, was not the Applicant's employer. Obviously Barclays Plc made the Scheme available to the Applicant but it made no direct financial contribution to the Applicant's Fund. For these reasons we are satisfied that the Applicant is not entitled to a Section 1 Declaration in respect of the Scheme."[28]We can find no fault in the Tribunal's conclusions. There were no regular or periodic sums being paid by the Bank to or for the benefit of this particular employee such as to create a profit in his hands which flowed directly from his employer. Any profit or benefit that he received with regards the operation of this Scheme would come from Quest at the time of the maturity of the particular scheme when bonuses were paid and the share option exercised, the Bank making no direct financial contribution to this employee's particular fund.[29]For these reasons the appeal will be dismissed.

Cited in 1 later judgment