Appeal No.	 EAT/776/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 18 January 2001

Before
HIS HONOUR JUDGE P COLLINS CBE
MR B V FITZGERALD MBE
MRS T A MARSLAND

PROFESSIONAL SELECTION & DEVELOPMENT LTD	APPELLANTS

ANGELA MACLEOD	RESPONDENT

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised

	APPEARANCES

For the Appellants	MR DANIEL TATTON BROWN
(of Counsel)
Instructed By:
Messrs Baker & McKenzie
100 New Bridge Street
London
EC4V 6JA	

JUDGE P COLLINS CBE:

1	This is the preliminary hearing of an appeal against the decision of an Employment Tribunal sitting at London (North).  The extended reasons were promulgated on 9 May 2000, after a hearing on 14 April before a chairman sitting alone.

2	The application before the tribunal was successful and was an application alleging that the appellants had unlawfully made deductions from the respondent’s wages.  She was an employment consultant and under the terms of what was described as “the appellants’ bonus scheme” she was prima facie entitled to payment of the sum of £2,380 for commission earned during October 1999, which under the terms of the scheme should have been paid on 31 January 2000.  It was on that date that the respondent left the appellants’ employment.  She had been employed since 1 June 1998 and gave notice on 4 January 2000 to take effect on 31 January 2000.

3	The case turned on the construction of the bonus scheme and it is to be noted that before the tribunal the applicant (the respondent to this appeal) appeared on her own behalf and the appellants were represented by a director.  We note that in her originating application the respondent raised fairly and squarely the allegation that the clause in question was unreasonable.

4	The tribunal did not consider the terms of the Unfair Contract Terms Act and Regulations in relation to that assertion.  It may be that, if the tribunal had considered the respondent’s assertion that the clause was unreasonable, the tribunal would have relied on that as an alternative or additional reason for its decision and if this case proceeds to a full hearing it may well be that the respondent will wish to raise, by notice of cross appeal, that question which she raised before the tribunal which was not dealt with by the chairman.

5	The clause in question is contained in what was described as “a bonus scheme” introduced under clause 5.2 of the respondent’s contract of employment.  Her current service agreement was dated 8 June 1999.  Clause 5.1 provides a basic salary and clause 5.2 provides an entitlement to participate in the company’s bonus scheme.

6	Mr Tatton Brown has conceded in the course of argument before us that the term “bonus scheme” is a misnomer in the employment consultancy business.  The extra remuneration which the employee earns, by reference to the amount of business they do, is properly described as commission and does not partake of the essentially ex gratia nature of what is normally understood by a bonus payment.

7	The bonus scheme in question was introduced by an agreement which the respondent signed on 10 February 1999.  It provides for advance payment to be made on account of commission (as I shall describe it) on the last day of the third month following the month in which the fees are booked, and it is in relation to that provision that the respondent made her claim.  But it also provides, understandably by clause 10, “An exact calculation of any bonus due to an employee cannot be made until the full invoice value has been paid by the client.  Bonus is not earned by an employee until the full invoice value has been paid” and there are provisions for claw back or recalculation of the bonus depending upon events which might occur.

8	The clause in question in the present case is clause 19:

“Subject to any provisions on payment of bonuses during garden leave in the employee’s contract of employment, bonuses (including bonuses in relation to NFI booked in previous months) will not accrue to, be earned by, or paid to employees under notice (whether given by PSD or the employee) or ex-employees.”

Basically, it was the company’s contention that this clause meant that they were entitled to withhold earned commission from their employees after they left their employment.

9	We find it very hard to accept that that can legally be the case.  It is so inconsistent with the fundamental obligation of the employer to pay the employee what the employee has earned, that we do not believe that in those bald terms it can have the legal effect contended for, but we have not heard full argument on the point and it would be wrong for us to express a concluded view.  

10	What we do think is that there is a reasonable argument in relation to the proposition that the clause entitles the employer to withhold payment of commission until such time as it is clearly established precisely what sum the employee is entitled to.

11	The way in which the chairman dealt with it is set out at page 6.3 and 6.4 of the reasons.  The chairman says, in our judgment quite correctly, that the words should be construed strictly against the employer and he says this:

“Construing the contract in those circumstances I would find that it was, at best, ambiguous.”

12	It is not quite clear wherein the ambiguity lies.  The words are, in our judgment, tolerably clear on the face of them.  The question is whether they are effective because of either the provisions of the Unfair Contract Terms Act or because of a basic difficulty in construing them alongside the employer’s obligation to pay the employee.

13	In our judgment it is reasonably arguable that the reasons given by the tribunal were incorrect.  It is reasonably arguable that the clause has the very limited effect which I have indicated and, bearing in mind that the respondent launched her application not long after the date of the termination of her employment, it may be factually that it was too early for it to be established precisely what sum she was entitled to.  Having said that, it is to be noted that in the Notice of Appearance, and we are told by Mr Tatton Brown, at the hearing before the tribunal, the employers did not take the point that had the respondent remained in their employment she would not have been entitled to the monies claimed on their proper calculation in the events which occurred.  But it does not seem to us, bearing in mind that the only point which was argued before the tribunal was the construction of the document, that we should make assumptions to the facts which may be unjustified.

14	So we direct that the matter proceed to a full hearing.  We strongly invite the respondent to give notice of cross appeal relating to the matters which I have indicated in the course of this judgment have given us concern. 

15	We shall direct that the matter be listed as Category C with a time estimate of two hours, skeleton arguments to be exchanged between the parties 14 days before the hearing.