Lawfulness of an Employment Contract by yak12997

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									Sunderland Polytechnic v. Evans

Employment Appeal Tribunal (EAT)
Wood J., Mrs. T. Marsland and Mr. T. C. Thomas

 WOOD J.
The following judgment of the appeal tribunal was handed down.
      This appeal raises a short but difficult point of law namely the proper
 construction of section 1(5)(e) of the Wages Act 1986. It will also require us to
 consider our reasoning in Home Office v. Ayres [1992] I.C.R. 175 *394 . Since the
 decision in that case the House of Lords has given guidance on the approach which
 can be utilised in seeking to discover the true intent of Parliament in passing a
 particular statutory provision: see Pepper v. Hart [1993] I.C.R. 291. We have had
 our attention drawn to passages in Hansard which indicate that some of the
 reasoning in Home Office v. Ayres is no longer correct.
      The applicant, Mrs. Ann Evans, is a barrister and a principal lecturer in law in
 the School of Business Studies at the Sunderland Polytechnic. She was employed on
 a full-time basis. She teaches a maximum of 10 sessions per week and undertakes
 many other responsible duties. She is a member of the National Association of
 Teachers in Further and Higher Education ("the trade union"). On 28 October 1990
 that trade union told the polytechnic that its members intended to take part in a
 series of one-day strikes.
      By a letter of 2 November 1990 the director of the polytechnic wrote to all
 members of staff pointing out that participation in the industrial action, whether for
 a day or a less period, would constitute a serious breach of the contract of
 employment and that the polytechnic was not prepared to pay the contractual salary
 to a member of staff who participated. Participation for less than a day would
 constitute partial performance which was not acceptable and in those circumstances
 a full day's salary would be deducted. Any work done for part of a strike day would
 be regarded as undertaken on a purely gratuitous basis and would not merit pay.
      On 6 November 1990 the trade union called a half-day stoppage. Prior to that
 stoppage Dr. Wilson, the applicant's supervisor, had written to her and to others
 asking whether or not she proposed to join in the stoppage. She did not reply.
      On 6 November the applicant spent from 8.45 a.m. to approximately noon on the
 picket line distributing leaflets. After that she resumed her duties on a self-managed
 basis and finished work at 5 p.m. On 7 November she informed Dr. Wilson of her
 activities. There is no issue but that she was taking part in industrial action.
 Approximately 152 other members of staff had taken similar action. At first two of
 them had not suffered any deduction, but this mistake was subsequently rectified.
 Nothing turns on this. The sum of £63.99 was deducted from the applicant's salary,
 being one three hundred and sixty-fifth of her annual salary. She claimed that only
 one seven hundred and thirtieth, i.e. half a day, should have been deducted. She
 initiated the grievance procedure, but for some reason, which is not apparent, this
 was not dealt with appropriately.
      The applicant, who appeared on her own behalf before the industrial tribunal,
 submitted that the polytechnic was wrong in looking at the working day as
 indivisible and asked for a declaration to that effect. Alternatively, she submitted
 that the "proper" deduction would have been half a day's salary, i.e., £31.99. Before
the industrial tribunal, counsel for the polytechnic argued that the only remedy open
to the applicant was to sue in the county court as, by section 1(5)(e) of the Wages
Act 1986, the provisions of section 1 of that Act did not apply.
    *395 An industrial tribunal sitting at Newcastle upon Tyne on 12 December
1991 under the chairmanship of Mr. Tavroges heard this matter and gave its
unanimous decision that:
         "the complaint of the applicant that the [polytechnic] had made a
         deduction from her wages in contravention of section 1(1) of the
         Wages Act 1986 is to be further examined to determine whether or
         not the deduction was lawful and if so whether or not the amount of
         the deduction was incorrect."
    After the hearing the industrial tribunal became aware of Home Office v. Ayres
[1992] I.C.R. 175, which had only been decided on 11 October 1991. The reasoning
of the tribunal at the end of its judgment is as follows:
         "After the hearing the tribunal became aware of the decision of the
         Employment Appeal Tribunal in Home Office v. Ayres on 11
         October 1991 and briefly reported in [1991] 42 L.S.Gaz. 32. In the
         light of that decision the tribunal has decided that it has a duty to
         examine the lawfulness of the deduction in the instant case. The
         tribunal considers that the judgment of the Employment Appeal
         Tribunal, that the true intention of Parliament was best achieved by
         reading section 1(5)(a) of the Wages Act 1986 as if the word ' lawful'
         were inserted in the opening phrase 'to any deduction' and before the
         word 'reimbursement,' applies equally to section 1(5)(e) of the Wages
         Act 1986 and that, as the [polytechnic] in the instant case have relied
         on section 1(5)(e) of the Wages Act 1986 by way of a defence to the
         applicant's claim under section 1(1) of the Wages Act 1986, the
         applicant must be able to raise her argument that the deduction was in
         whole or in part contrary to the general law."
    The polytechnic appeal. The relevant provisions of the Wages Act 1986 are:

"1. --

           (1) An employer shall not make any deduction from any
           wages of any worker employed by him unless the deduction
           satisfies one of the following conditions, namely --
           (a) it is required or authorised to be made by virtue of any
           statutory provision or any relevant provision of the worker's
           contract; or
           (b) the worker has previously signified in writing his
           agreement or consent to the making of it ....
           (5) Nothing in this section applies --
           (a) to any deduction from a worker's wages made by his
           employer, or any payment received from a worker by his
           employer, where the purpose of the deduction or payment is
           the reimbursement of the employer in respect of --
           (i) any overpayment of wages, or
          (ii) any overpayment in respect of expenses incurred by the
          worker in carrying out his employment, made (for any reason)
          by the employer to the worker;
          (b) to any deduction from a worker's wages made by his
          employer, or any payment received from a worker by his
          employer, in consequence of any disciplinary proceedings if
          those proceedings were held by virtue of any statutory
          provision;
          (c) to any deduction from a worker's wages made by his
          employer in pursuance of any requirement imposed on the
          employer by any *396 statutory provision to deduct and pay
          over to a public authority amounts determined by that
          authority as being due to it from the worker, if the deduction
          is made in accordance with the relevant determination of that
          authority;
          (d) to any deduction from a worker's wages made by his
          employer in pursuance of any arrangements which have been
          established --
          (i) in accordance with any relevant provision of his contract to
          whose inclusion in the contract the worker has signified his
          agreement or consent in writing or,
          (ii) otherwise with the prior agreement or consent of the
          worker signified in writing, and under which the employer is
          to deduct and pay over to a third person amounts notified to
          the employer by that person as being due to him from the
          worker, if the deduction is made in accordance with the
          relevant notification by that person;
          (e) to any deduction from a worker's wages made by his
          employer, or any payment received from a worker by his
          employer, where the worker has taken part in a strike or other
          industrial action and the deduction is made, or the payment
          has been required, by the employer on account of the worker's
          having taken part in that strike or other action; or
          (f) to any deduction from a worker's wages made by his
          employer with his prior agreement or consent signified in
          writing, or any payment received from a worker by his
          employer, where the purpose of the deduction or payment is
          the satisfaction (whether wholly or in part) of an order of a
          court or tribunal requiring the payment of any amount by the
          worker to the employer."
   There is also a provision, in section 5(7), whereby any deductions illegally and
wrongfully made are irrecoverable:
      "Where a tribunal has under subsection (4)(a) or (b) ordered an
      employer to pay or repay to a worker any amount in respect of a
      particular deduction or payment falling within subsection (1)(a) to (d)
      ('the relevant amount') the amount which the employer shall be
      entitled to recover (by whatever means) in respect of the matter in
      respect of which the deduction or payment was originally made or
      received shall be treated as reduced by the relevant amount."
     It is common ground that section 1(5) must be read as a whole. In Home Office
v. Ayres [1992] I.C.R. 175 we decided that the word "lawful" should be read into
section 1(5)(a) before the word "deduction." If the reasoning in that case is to stand,
then "lawful" must be read into each of the paragraphs (a) to (f) inclusive.
     In each of those paragraphs (a) to (f) the structure of the clause is a reference,
first, to "any deduction from a worker's wages;" secondly, to some connecting
words, for instance, "where the purpose of" or, "in consequence of" or "on account
of;" and then, thirdly, what has been termed during submissions as the "trigger" or
the operative words.
     Mr. White for the applicant submits that an industrial tribunal must be allowed
to make some inquiry or test to satisfy itself that the deduction is linked to the
"trigger", and that in the present case it could look to see whether the deduction of a
whole day's pay was linked to the industrial action. The calculation of the amount is
not in issue nor *397 that participation in industrial action took place. It would
follow that if £31.99 only was deductible then the remainder of the sum making up
the total of £63.99 was illegally deducted.
     Mr. Elias for the polytechnic submits, first, that paragraphs (b), (c), (d) and (f)
all deal with third party issues and the amount in each case will be known. Thus, if
an industrial tribunal were allowed to investigate the issue of the lawfulness of the
amount, it might decide that there had been an error in the third party, for instance,
an incorrect coding by the Inland Revenue. In that case, under section 5(7) of the
Act of 1986, the additional sum would be irrecoverable by the employer from the
employee. Thus, for instance, if under paragraph (d) an employer had deducted
certain dues by way of "check off", which were subsequently found to have been
excessive, the employer would be unable to recover that amount either from the
employee or from the trade union. He submitted, therefore, that the word "lawful"
could not properly be read into any of those clauses.
     Secondly, Mr. Elias submits that, although once the Act "bites" an industrial
tribunal can in its investigation apply common law principles: see Fairfield Ltd. v.
Skinner [1992] I.C.R. 836, this case is to be distinguished in that the issue is whether
the Act bites at all and not what an industrial tribunal is entitled to do after the
proceedings before it are within the Act. In carrying out the various tests within
section 1(5) the purpose is not to question the amount of the deduction but the cause
of the deduction. It may be that once the Act "bites" the mischief is to ensure that the
deduction is lawful, but section 1(5) is dealing with exceptions, and the issue is:
does the industrial tribunal have any jurisdiction in this case?
     Thirdly, Mr. Elias submits that, if Parliament had intended to give industrial
tribunals jurisdiction to investigate the issue involved, the word "lawful" could have
been inserted and it was not. He submitted that, as we were construing an exception,
it should be construed strictly and that we should not look for a purposive
construction. He drew our attention to a passage in the speech of Lord Diplock in
Jones v. Wrotham Park Settled Estates [1980] A.C. 74, 105-106:
          "My Lords, I am not reluctant to adopt a purposive construction
          where to apply the literal meaning of the legislative language used
          would lead to results which would clearly defeat the purposes of the
          Act. But in doing so the task on which a court of justice is engaged
          remains one of construction; even where this involves reading into
          the Act words which are not expressly included in it. Kammins
          Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] A.C.
        850 provides an instance of this; but in that case the three conditions
        that must be fulfilled in order to justify this course were satisfied.
        First, it was possible to determine from a consideration of the
        provisions of the Act read as a whole precisely what the mischief was
        that it was the purpose of the Act to remedy; secondly, it was
        apparent that the draftsman and Parliament had by inadvertence
        overlooked, and so omitted to deal with, an eventuality that required
        to be dealt with if the purpose of the Act was to be *398 achieved;
        and thirdly, it was possible to state with certainty what were the
        additional words that would have been inserted by the draftsman and
        approved by Parliament had their attention been drawn to the
        omission before the Bill passed into law. Unless this third condition
        is fulfilled any attempt by a court of justice to repair the omission in
        the Act cannot be justified as an exercise of its jurisdiction to
        determine what is the meaning of a written law which Parliament has
        passed. Such an attempt crosses the boundary between construction
        and legislation. It becomes a usurpation of a function which under the
        constitution of this country is vested in the legislature to the
        exclusion of the courts."
    One of the problems, in cases such as the present, is for an applicant who may
well be acting in person to know in which jurisdiction to bring a claim, whether in
the county court or before an industrial tribunal. We have long since suggested that
the jurisdiction should be co-ordinated and it may be that this is soon to take place
as a result of amendments in the Trade Union Reform and Employment Rights Bill
now before Parliament. However, until that Bill becomes an Act we must take the
law as it exists. Our decision in Home Office v. Ayres [1992] I.C.R. 175 was
perhaps affected by an enthusiasm to save multiple litigation.
    Lastly, he submits that, if the wording of section 1(5) is not thought to be
sufficiently clear on its face, and he submits that it is, then he relies on Pepper v.
Hart [1993] I.C.R. 291 and he placed before us excerpts from Hansard, which in his
submission put the intention of Parliament beyond doubt. Before we are entitled to
have regard to the contents of Hansard we must look to the advice given by the
House of Lords in Pepper v. Hart. We refer only to the speech of Lord Browne-
Wilkinson, at p. 317:
        "My Lords, I have come to the conclusion that, as a matter of law,
        there are sound reasons for making a limited modification to the
        existing rule (subject to strict safeguards) unless there are
        constitutional or practical reasons which outweigh them. In my
        judgment, subject to the questions of the privileges of the House of
        Commons, reference to Parliamentary material should be permitted
        as an aid to the construction of legislation which is ambiguous or
        obscure or the literal meaning of which leads to an absurdity. Even in
        such cases references in court to Parliamentary material should only
        be permitted where such material clearly discloses the mischief
        aimed at or the legislative intention lying behind the ambiguous or
        obscure words. In the case of statements made in Parliament, as at
        present advised, I cannot foresee that any statement other than the
        statement of the Minister or other promoter of the Bill is likely to
        meet these criteria."
    And he says, at p. 323:
         "I therefore reach the conclusion, subject to any question of
         Parliamentary privilege, that the exclusionary rule should be relaxed
         so as to permit reference to Parliamentary materials where (a)
         legislation is ambiguous or obscure, or leads to an absurdity; (b) the
         *399 material relied upon consists of one or more statements by a
         Minister or other promoter of the Bill together if necessary with such
         other Parliamentary material as is necessary to understand such
         statements and their effect; (c) the statements relied upon are clear."
    As can be understood from the submissions which have been made to us the
construction of this legislation leaves the position somewhat obscure. If we are
wrong and it is not obscure and section 1(5) must be read literally, then the appeal
must succeed. However, in order to satisfy ourselves that this is the proper approach
in the light of the reasoning which persuaded us in Home Office v. Ayres [1992]
I.C.R. 175, we feel this is an occasion where we should look at Hansard for
guidance. It was not seriously argued to the contrary. Indeed, Mr. White asked us to
look at a passage from the debate in the House of Lords.
    We have been referred to two passages from Hansard. The first is a report of
Standing Committee K on 27 February 1986 when clause 1 was being debated. The
relevant minister was the Parliamentary Under Secretary of State for Employment,
Mr. David Trippier. The relevant passage is, Hansard (H.C. Debates), 27 February
1986, cols. 124-125:
         "Mr. Trippier: I ask the committee to accept the need for an
         amendment to clause 1(6). There is concern about the possible
         implications of the Bill for industrial tribunals. If a worker is
         involved in a go slow or similar industrial action where he stays at
         work but deliberately hampers production, the employer is often
         entitled to make a deduction from his wages. There may be an
         express term in the contract that allows for such an eventuality, but
         more often there is an implied term in the contract that the worker
         does not behave in that way. However, if the worker does behave in
         that way, his employer is not obliged to pay his wages in full. The
         worker can go to a civil court and argue that the employer is in
         breach of contract in making such a deduction. There have been a
         number of such cases, and where courts have disagreed with the
         employer's interpretation of the implied term, an award has been
         made to the worker. The amendment seeks to leave unchanged the
         situation relating to deductions made because of the worker's part in
         industrial action ....
         "Clause 1 will not apply to tax deductions. If the worker believes that
         a deduction is not contractually authorised, his means of redress is
         the civil court for breach of contract, rather than an industrial
         tribunal. Such contentious and difficult problems where, as the
         Committee knows, emotions occasionally run high are best dealt with
         by the courts, not industrial tribunals. Therefore, deductions made as
         a result of industrial action should be separated from those
         deductions about which a complaint may be made to an industrial
         tribunal. That would not alter the right of workers to claim back
         deductions not authorised by the contract, but the avenue of redress
         would be changed. Complaints of breach of *400 contract would be
         to the courts, not to a tribunal. I ask the Committee to support the
         amendment."
    The other passage is from the debate in the House of Lords on the Wages Bill on
24 June 1986, where the Minister for Employment, Lord Trefgarne, gives an
indication to the same effect. We need only refer to two paragraphs from his speech,
Hansard (H.L. Debates), 24 June 1986, col. 205:
         "Lord Trefgarne: Perhaps I may just swiftly explain the objective of
         clause 1(5)(e). If a worker is involved in industrial action, for
         example, in a go-slow or other similar action in which the worker
         stays at work but deliberately hampers production, the employer is
         often entitled to deduct something from his wages. There may be an
         express term in the contract that allows for that, but more often there
         will be an implied term in the contract that the worker does not
         behave in that way and that, if he does, the employer is not obliged to
         pay him his wages in full. The worker can of course go to the civil
         court and argue that the employer is in breach of the contract in
         making such a deduction. There are a number of cases where a
         worker has taken an employer to court and, in some instances, the
         courts have disagreed with the employer's interpretation of the
         implied term of the contract and have made an award to the worker."
    These passages clearly support the submissions placed before us by Mr. Elias.
    It follows from what we have said above that some of the reasoning of the
appeal tribunal in Home Office v. Ayres [1992] I.C.R. 175 can no longer stand. We
allow the appeal and find that the industrial tribunal in the present case had no
jurisdiction to hear the applicant's claim.

Appeal allowed. Leave to appeal.

								
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