Kuehne & Nagel Drinks Logistics Ltd v Deadkin & Ors (Contract of Employment : Implied Term or Variation or Construction of Term) [2011] UKEAT 0030_11_1705

EAT
Kuehne & Nagel Drinks Logistics Ltd v Deadkin & Ors (Contract of Employment : Implied Term or Variation or Construction of Term)
[2011] UKEAT 0030_11_1705 · 2011-05-17
[1]This is an appeal by the Respondent from the decision of the Employment Tribunal at Liverpool, presided over by Employment Judge Ryan, who sat alone, which was sent to the parties on 29 October 2010. The Employment Judge found in favour of the Claimant and 83 fellow employees in similar circumstances to those of the Claimant, and held that the Respondent had made unlawful deductions from their wages. The matter was referred to a full hearing by me on 19 January 2011. The factual background[2]This case concerns a construction of an agreement contained in an agreement known as Supply Chain North 2; an agreement negotiated between an employer’s association and various trade unions. I am told that the agreement had been in force for some considerable time. It is not in dispute that the agreement formed a contractual document as concern both the Claimants and the Respondent.[3]The Claimants are drivers. I think they would describe themselves as draymen, and they had become employees of the Respondent through a succession of TUPE transfers. I have been told today that there are hundreds of other potential claims in addition to the 84 which I am dealing with today.[4]The Respondent is a logistics company predominantly supplying the drinks market and the licensed trade. It is agreed that Supply Chain North 2, which I think I can refer to as “the agreement”, covered various aspects of the working arrangements, including the planned and actual hours, including rest periods and breaks to give effect to statutory regulations dealing with working time drivers’ hours and health and safety requirements. Adherence to the conditions is mandatory; non‑compliance constituted a disciplinary matter; and drivers’ records were regularly analysed and enforcement action taken for non‑compliance in relation to breaks in working time.[5]I was told that the agreement was intended to comply with, but did not mirror, the statutory regulations, including in particular the working time regulations. I understand there are special regulations relating to drivers. The regulations impose unpaid breaks as does the agreement.[6]The agreement has been in effect, I was told, since February 2003 and this is the first claim that has been made under it.

(c) :

“c) Breaks From Work Drivers will at all times comply with all legal requirements contained in the Drivers’ Hours Regulations with particular reference to breaks and maximum driving hours. Where an operator’s day/shift is planned to be up to six hours there will be no compulsory break planned into the shift. Where an operator’s day/shift is planned to be between 6 hours and 9 hours an unpaid break of 30 minutes will be planned into the day/shift. Where the day/shift is planned to be in excess of 9 hours the unpaid break time will be 45 minutes. Where the day/shift consists of two or more trips the break will, where possible and practicable, be planned between trips at the distribution centre. Where an operator’s day/shift is planned to consist of one trip only it is deemed the responsibility of that individual operator to ensure that break time of 30 or 45 minutes as appropriate is taken within the working day. All break time will be taken account of and deducted when calculating actual hours worked.”
[7]The effect of these terms is that there is no compulsory planned break for a planned working day under 6 hours; a planned working day of between 6 and 9 hours will provide for a planned 30‑minute break (the time when the break is to be taken is not specified but the extent of it is; it is left to the driver to decided when to take it); where the planned working day exceeds 9 hours the plan will provide for a 45‑minute break. The break time is inbuilt into the shift time as planned, so a drayman with a shift of 5 hours 55 minutes will have 5 hours 55 minutes of planned work, but a drayman working a 6‑hour and 5‑minute shift will in fact be required to do 5 hours and 35 minutes of work - or it is planned that he would do that - together with his 30‑minute unpaid break.[8]Although it is not relevant to the construction of the agreement, it is common ground that the agreement has not been applied according to what the Respondent would say is its proper construction. The Respondent would say in fact that it has been implemented or applied by the Respondent in a way that is favourable to the Claimants. The Claimants, I think, might dispute this.[9]The Claimants’ daily routine entails receiving a manifest on reporting for work. This will show the planned duration of the working schedule and specifies the planned breaks according to the time allotted for performing the scheduled tasks. After completing the work the driver will report with his record to a debriefing clerk and a record is made of the time actually worked. It is accepted that the plans are not prescriptive; flexibility is needed having regard to such matters as fluctuating traffic conditions and I assume late customer requirements and variations of their orders. The clerk will record the hours worked and bank them. If over 43 hours are worked in a week overtime is payable.[10]The Respondent’s practice is to calculate the duration of the time spent working on and, therefore, for which payment is allowed, not on the basis of planned hours under the planned working day on the manifest or the actual hours worked, but on the basis of what are described as attended hours, which is not defined in the agreement but is in essence time spent working plus the time on break. The Supply Chain North 2 agreement does not provide for pay to be calculated by reference to attended hours but by reference to the time worked.[11]In his skeleton argument at paragraph 16 the counsel for the Respondent, Mr Bryant, explains the way in which the times are actually calculated and this is also explained - although not as clearly - in paragraph 2.15 of the decision of the Employment Tribunal:
“The Respondent has adopted a practice of calculating the duration of a shift, time spent working and therefore payment not on the planned hours under the manifest or the actual worked hours but on what it calls “attended hours”
. This is not defined in N2. By “attended hours” the Respondent refers to the time that is spent working plus time spent on break periods. It follows from this practice that the attended hours on which payment is calculated includes non‑working time for which no payment is due. The Respondent calculates the working day by reference to the attended hours; in establishing whether or not a shift is 6 hours, 9 hours or some other duration it will include the unpaid break periods in calculating the length of day “attended”.”[12]I hasten to add that although it is a matter of interest as to how the Respondent actually applied the agreement, this has no bearing at all on its true construction. There is no argument in the present case that the terms of the contract were somehow varied by custom and practice, so I need not concern myself beyond looking at the matter for the purposes of curiosity as to how the agreement worked in practice.[13]I now turn to the decision of the Employment Tribunal. The Employment Tribunal set out the facts and the relevant provisions of the agreement largely as I have set them out. The Employment Judge referred himself to s.13 of the Employment Rights Act 1996 relating to unauthorised deductions:
“13 Right not to suffer unauthorised deductions (1) 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. (2) In this section, “relevant provision”, in relation to a worker’s contract, means a provision of the contract comprised - (a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction on question, or (b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion. (3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deduction), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker’s wages on that occasion. (4) Subsection (3) does not apply in so far as the deficiency is attributable to an error of any description on the part of the employer affecting the computation by him of the gross amount of the wages properly payables by him to the worker on that occasion. (5)For the purposes of this section a relevant provision of a worker’s contract having effect by virtue of a variation of the contract does not operate to authorise the making of a deduction on account of any conduct of the worker, or any other event occurring, before the variation took effect. (6) For the purposes of this section an agreement or consent signified by a worker does not operate to authorise the making of a deduction on account of any conduct of the worker, or any other event occurring, before the agreement or consent was signified. (7) This section does not affect any other statutory provision by virtue of which a sum payable to a worker by his employer but not constituting “wages” within the meaning of this Part is not to be subject to a deduction at the instance of the employer.”
[14]The Employment Judge considered that the contractual provision should be interpreted purposively and he should not imply a term unless it was a purposive interpretation of the agreement and the agreement should take effect accordingly. He did consider, I think - although he did not make this clear - that he needed to give some purposive interpretation for the agreement.[15]At paragraphs 4.1 to 4.5 he commented on the reference to attended hours. He considered that the calculation of pay by reference to attended hours was not essential for the Claimant to carry on its business or for the contract of employment to work. He considered that what was essential was the time spent on performing the work and the work that was performed:
“4.2 In this instance unpaid time spent in break periods was being added to time that was worked and paid for, so as to enforce an additional, arguably unneeded, break, whether or not it was taken. This amounted to an unjustified deduction of 15 minutes in all shifts that exceeded 8½ hours actual working time, that is time in which duties were performed. 4.3 The Claimant did not consent in writing to what was in effect a deduction of pay for 45 minutes on those shifts where he might only work slightly over 8½ hours (which with a 30‑minute break equates to in excess of 9 hours “attended time”); by virtue of N2 he consented to a deduction of 30 minutes in respect of an unpaid break in respect of shifts of between 6 and 9 hours actually worked. He consented to deductions in respect of 45‑minute breaks in any period of actual work that exceeded 9 hours (what the Claimant might attended time exceeding 9 hours 45 minutes). 4.4 The Respondent’s practice required that in addition to his 8½ hours actually worked he must have a break of 30 minutes duration thus making his attended hours of 9 hours duration; any further work would trigger an assumed additional 15‑minute unpaid break. 15 minutes pay was therefore taken from the Claimant’s wages for that period of assumed break. 4.5 N2 was the only written documentation concerning these provisions relating to break periods and payment. That agreement provided that unworked hours, the rest break periods, should not be taken into account when calculating pay. Clearly the 30 minutes break taken during the 9 hours “attended” was being taken into account by the Respondent and served to reduce the Claimant’s pay on the assumption that after 9 hours attended work the Claimant had an additional 15‑minute unpaid break. The Respondent should have measured the actual time worked and only required 45 minutes total break when the total number of worked hours, excluding break periods, exceeded to 9 hours. That would be in accordance with the strict application of N2 and makes more sense in the context of the working time directive, drivers’ hour’s regulations and health and safety requirements. It does not make sense to impose an additional break for rest purposes on the basis in part of time already spent not working but resting.”
[16]I note that in paragraph 4.5 the Employment Judge held that the Respondent should have measured the actual time worked and only required 45 minutes total break when the total number of hours, excluding break periods, exceeded 9 hours. I quote again when he said:
“That would be in accordance with the strict application of N2.”
I pause to note that, if anything, it would be inconsistent with rather than in accordance with the strict application of N2.[17]As the construction placed on the agreement by the Employment Judge was not altogether clear, I invited Mr Allen to make his submissions as to what he considered to be the true construction so Mr Bryant could reply. Mr Allen and Mr Bryant kindly agreed this suggestion.[18]The main point that has been made, and is a point that was clearly made to the Employment Tribunal with some force by Mr Allen, is that the way in which the agreement is said to work by the Respondent and has been applied by them is anomalous. For example, if a drayman has a planned shift of 5 hours and 55 minutes or 8 hours and 55 minutes he will be paid more than if his planned shift is for 6 hours and 5 minutes or 9 hours and 5 minutes as the case may be. Mr Allen has provided a helpful table in his skeleton argument that I understand was also provided to the Employment Tribunal which shows what is suggested was an anomaly.[19]It is also suggested that there has been no written agreement to make deduction from wages because he submits, does Mr Allen, that here there has been a deduction from wages because the Claimants should have been entitled to be paid for the hours they actually worked as opposed to those that they were notionally expected to work. He submitted it would be absurd and no driver would agree to work more hours for less pay in accordance with the examples that I have referred to and those suggested by Mr Allen.[20]He also submits that break time should be deemed to be taken at the end of the six or nine‑hour period, as the case may be, that triggers the compulsory break so that if a shift was planned to last for six hours and five minutes, only five minutes of the break time would be taken into account as in determining the hours of work. Similarly, if a shift was planned for nine hours and ten minutes, only ten minutes should be deducted - the time for deduction not starting until the nine hours had elapsed.[21]Mr Bryant submitted that the reasoning of the Employment Tribunal was unclear. It appears to have implied terms but what terms are by no means clear. Mr Bryant relied on what he submitted was the unambiguous wording of the agreement, but he countered this suggestion that there was an anomaly, as I have described it earlier, that somebody who worked less than six hours or nine hours, as the case may be, might be paid more than someone who was scheduled to work for just over the six or nine‑hour period. There was, he submitted, no anomaly because the agreement provides that the break time is built in so the work time for somebody working a 5‑hour 55‑minute shift would be more than the work time built in to someone who was scheduled to work, say, for 6 hours and 5 minutes. So, although the shift appears longer, the actual work time provided for, because it also includes a break, is less.[22]Accordingly, submitted Mr Bryant, as the break is built in, if the Claimants failed to take the break, as they are required to do, they are not entitled to be paid for it. There was further no deduction made in this case because the deemed hours are what the Claimants are to be paid for. If they are paid for 6 hours work then they are required to take a 30‑minute break in a shift. If their shift was 6 hours and 5 minutes and only the last 5 minutes was to be deducted, they would have a double benefit because not only would they receive payment for the 5 minutes over the 6 hours, but they would not have had to work the complete scheduled work component of the shift (6 hours), and would have failed to take the mandatory 30 minute break. The deduction, effectively, would already have been built in.[23]I am unable to accept that the last part of s.2(1)(c), that is break time taken into account of and deducted when calculating actual hours work, requires that the deduction should only take place on the basis that it is added only when the initial trigger period has elapsed. It was submitted by Mr Allen, as I have said, that the deduction was to be made immediately after that time had elapsed.[24]Mr Bryant pointed out that there is nothing in the agreement apart from the provision, which I have just referred to, that deals with how hours are to be calculated. I do not consider myself that an agreement as to how hours are to be calculated can amount to an agreed deduction from wages. The employees are only entitled to be paid according to the terms of their agreement for the hours that they have agreed should be treated as having been worked. I agree with what Mr Bryant has set out in paragraphs 10 and 11 of his skeleton argument, namely that there is no deduction because the agreement relates to how the hours worked are to be calculated and does not refer simply to the hours that are actually worked, regardless of breaks, whether taken or not.[25]I prefer Mr Bryant’s submissions. I do not consider there is any unfairness or anomaly because the hours planned will have included the break time which the draymen were bound to take and which were not deemed to be working hours. I can see no reason, therefore, not to follow the literal meaning of the agreement. The planned hours would determine the hours to be paid for, regardless of whether the break is taken actually or not. The agreement, in relation to deeming the hours, does not trigger the provisions in relation to unlawful deductions. There have been no deductions. The Claimants are paid according to the hours they have worked as defined in the agreement.[26]As this has been an extempore Judgment which I have given today in order to accommodate the parties, I am conscious that I may not have dealt with matters as completely and fully as I might otherwise have done, but I would invite counsel to draw my attention to any obvious errors or omissions and I would like to thank them both very much for their helpful submissions and skeleton arguments.[27]Accordingly, I will allow this appeal.