Appeal No.	 EAT/1256/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 16 January 2002

Before
MR RECORDER BURKE QC
MR B GIBBS
DR D GRIEVES CBE

HOME SHOPPING NETWORK (UK) LIMITED	APPELLANT

(1) MRS P NIXON  
(2) MRS J MCELROY	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR RICHARD BRADLEY
(of Counsel)
Messrs Mace & Jones
Solicitor
Drury House
19 Water Street
Liverpool
L2 0RP	
For the Respondents	MR DAMIAN BROWN
(of Counsel)
USDAW
188 Wilmslow Road
Falowfield
Manchester
M14 6LJ	

MR RECORDER BURKE QC

1	This is an appeal by the employers, Home Shopping Network (UK) Limited, against the decision of the Employment Tribunal sitting at Manchester chaired by Mr Casket and promulgated with Extended Reasons on 25 August 2000 in favour of two ex-employees of the employer upon their claims that they were owed monies by the employers under the terms of contractually binding redundancy payment agreements.  The Tribunal had originally promulgated its decision in the form of Summary Reasons on 13 July having reserved their decision from the date of the hearing which had been some two weeks or so earlier.

2	The employers are part of the Littlewoods organisation.  The employees worked as Operations Room Controllers at Earl Mill Oldham.  Mrs Nixon had been employed by the employers from 1978.  Mrs McElroy had been employed by the employers from 1988.  They had been both promoted to the position of Operations Room Controllers in 1996 and 1994 respectively.  Mrs Nixon originally worked part-time but had gone full-time in June 1998.  In those positions which they held, both of them were graded employees i.e. management employees.  In the autumn of 1999 the employers ceased operations at Earl Mill and both employees were eventually dismissed on the grounds of redundancy; they thus became entitled to redundancy payments.  

3	Some time in the late 1970’s or early 1980’s Littlewoods entered into a collective agreement on behalf of all its employing companies (including the employers of the two employees in this case) with the relevant trade unions representing at least employees of the grades at which Mrs Nixon and Mrs McElroy were.  Among, no doubt, many other things, the collective agreement included provision for redundancy payments to be made in the case of employees who were made redundant which payments constituted substantial improvements upon statutory redundancy payments under the 1965 Redundancy Payments Act and its statutory successors.  We do not know how wide was the embrace of the employees who were included within the collective agreement; but there is no doubt that it included employees such as the two Applicants.  To use language commonly used to describe this situation, the collective agreement provided for enhanced redundancy payments terms in their cases and in the cases of others covered by the agreement.

4	It was not in dispute that the terms of the collective agreement became incorporated into the individual contracts of employment of the two employees.  Therefore the employees were entitled, when made redundant by the employers, to whatever was the appropriate enhanced redundancy payment payable in each case pursuant to the terms of the collective agreement.  Those terms provided for the calculation of contractual redundancy payments, as opposed, of course, to statutory redundancy payments, to be made on the basis of various multiples of weeks’ pay.  Paragraph 6.2.2 sub-paragraph (f) of Section Three, Appendix 1 of the collective agreement defined a week’s pay in these terms:

“A week’s pay will be calculated on the normal average weekly earnings (excluding overtime) for the 13 weeks prior to the leaving date….”

There are other words in the provision which it is unnecessary for present purposes to set out.  Each of the employees under her contract of employment was, therefore, entitled at the date of the redundancy to a contractual redundancy payment pursuant to the provisions which we have outlined.  Each was paid at the date of the redundancy, and prior to it, a basic salary which was paid in respect of 37 hours work per week.  In addition each was entitled to what was described as a guaranteed overtime payment, which amounted to the equivalent of 6.75 hours work bringing the total pay in each week to the equivalent of 43.75 hours work.  It needs to be stated however, that the additional 6.75 hours guaranteed overtime payment was paid at the rate of time and a half, rather than at ordinary time.  The employees were also entitled to a shift allowance; and they received, when, additionally to the 6.75 hours they occasionally did further work, to overtime payments in respect of such further work as they performed on an ad hoc basis.  

5	The Tribunal were told by the employees, and the employers presented no contrary evidence, that this so called guaranteed overtime payment was made irrespective of whether the extra 6.75 hours were actually worked.  Very often they were worked, as the Tribunal found; but sometimes they were not; and sometimes, because of a need for ad hoc or casual overtime, more hours were worked.  Whether or not the 6.75 hours were worked in an ordinary week, the guaranteed overtime payment was made.  It was made, for example, in weeks of holidays, ordinary or statutory.  The employees did not suggest that ad hoc or casual overtime was anything other than overtime for the purposes of the definition of a week’s pay in the collective agreement which we have set out; but it was their case that the guaranteed overtime payment should be treated as falling within the words ‘normal average weekly earnings’ in the relevant provision and should not be regarded as overtime properly so called and thus should not be excluded from calculation when the contractual redundancy payments were calculated.  The employers contended the contrary.  The Tribunal decided in favour of the employees and awarded compensation accordingly.

6	No question as to the mathematics of the calculation arose; the issue was purely one of principle.  Was the guaranteed overtime payment part of normal average weekly earnings, in which case it would be included within a week’s pay for the purposes of contractual redundancy pay, or was it to be excluded as overtime?  This was an issue which had to be decided on construction of the terms of the relevant agreement.  

7	The Tribunal, at paragraph 6 of the Extended Reasons, set out what they describe as their findings of initial material facts.  We have already summarised those findings insofar as it is necessary to do so for present purposes.  At paragraph 7 the Tribunal set out the relevant provision of the collective agreement.  At paragraph 8 the Tribunal set out the issue, which they said was not a simple issue, and recorded the employees’ submissions on that issue.  They said:

“The issue, however, was not simple.  What was the real overtime for the purposes of this calculation?  Both applicants’ hours of work had varied.  But both had, as per their letters of appointment, received a “Guaranteed Overtime Payment” equating approximately to 6.75 hours of work.  They contended that this guaranteed overtime payment had become and was part of their average weekly earnings.
The applicants accepted that such overtime as they occasionally worked over and above these additional 6.75 hours was the true overtime which would not be included in the calculations.  The additional payment which they always received and was included in their normal weekly earnings should have been included also in the redundancy calculation.  To this extent, the Agreement relating to the Redundancy payments had been varied.”

We shall return later to the last sentence in that passage.

8	In paragraph 9 the Tribunal criticised the employers for not providing any oral evidence.  Mr Bradley, on behalf of the employers in this appeal, has contended that that criticism was unfair and thus created a factor which the Tribunal should not have taken into consideration in its decision because the issue was one of construction.  But the Tribunal were entitled to comment on the lack of evidential input from the employers on the factual background to the agreement and on the way in which the agreement had been operated, particularly because it was part of the employees’ case that, in cases of other employees who had been made redundant, the guaranteed overtime payment had been treated as part of the normal average weekly earnings.  The Tribunal was entitled, as appears from the decision of the Court of Appeal in Stevedoring Haulage Services v Fuller [2001] IRLR 227, in considering an issue such as that which arose in this case, to look at the conduct of the parties subsequent to the agreement to see to what extent inferences could be drawn as to the parties’ intention.  It is not necessary to quote from the judgment; it is sufficient to refer to paragraph 9 in that report in the judgement of Lord Justice Tuckey.  

9	In paragraph 10 of the decision the Tribunal made the point that the employers in their IT3s accepted that the basic salary of the employees, as they claimed in their Originating Applications, included the guaranteed overtime payments.  That was plainly an error on the Tribunal’s part.  In neither case had the employers failed to make it clear that they disputed that the guaranteed overtime payments were part of normal average weekly earnings.  Mr Brown, on behalf of the employees, submits that that factor was irrelevant in that the Tribunal appears to have come to its conclusion independently of their erroneous perception on this point.  We do not believe that the decision is couched in such terms as to demonstrate that that erroneous perception had no influence on the Tribunal; but the point is perhaps a small one; and there are more important points to which we must turn.

10	The Tribunal went on to consider in paragraphs 11 and 12 the evidence as to payments made in the case of redundancy of other employees, and in particular, drivers and other graded employees.  The evidence is not set out in any detail on this potentially important issue; it probably was not given in very great detail.  The employers suggested that the drivers fell within a different agreement and that the other graded employees had been dealt with mistakenly; but they gave no evidence to support these assertions.  When, how many, and in what circumstances, payments, which included guaranteed overtime payments, were made by way of redundancy payments to other employees, is not at all clear and was not fully investigated.

11	At paragraphs 13 to 14 of the decision the Tribunal looked at what would have been the position had the claim been one for a statutory redundancy payment act payment under the provisions of the Redundancy under Section 234 of the Employment Rights Act as illustrated by the decision of the Court of Appeal under the same provisions then in the Contract of Employment Act 1963 in Tarmac Roadstone Holdings Limited v Peacock [1973] 2 AER 84-85.  Mr Bradley submits that the Tribunal should not have considered these matters at all because it was not dealing with a statutory payment; it was dealing with a contractual payment, the amount of which turned entirely on the proper construction of the contract.  While not decisive, we do not believe it to be right to say that the Tribunal could not look at or consider how a similar problem would have been dealt with in the case of a statutory calculation.  Nor do we accept the submission that the Tribunal regarded this factor as decisive.  It does not appear to have been any more than one of the factors which the Tribunal considered.

12	In paragraph 15 the Tribunal said this:

“The applicants always received this additional payment.  It was indeed part of their normal weekly wage.  It was paid on all occasions to them – for normal holidays and statutory holidays as well.  In Mrs McElroy’s wage slips, the payment had been expressed as “Supplement” and not called overtime and there was no explanation whatsoever from the respondents for this.  Clearly, certain other staff had had their redundancy payments calculated inclusive of the guaranteed overtime payment.”

13	In their Summary Reasons at paragraphs 8, 9 and 10, having expressed themselves similarly to the way in which they expressed themselves in paragraph 15 of the Extended Reasons, the Tribunal proceeded without further explanation to decide the construction issue in favour of the employees.  However, in the Extended Reasons the Tribunal appears on the face of it to have taken a different course, or at least to have enlarged on the Summary Reasons so as to show how they reached their conclusion as expressed in the last paragraph of the Summary Reasons.  In paragraph 16 of the Extended Reasons the Tribunal said that it considered that the agreement, to the extent of any doubt or lack of certainty or clarity in it, should be interpreted against the company who had created the original agreement and:

“…confused the circumstances”

14	Mr Bradley submits that there was no material from which the Tribunal could conclude either that the company had proffered the agreement as opposed to the agreement emerging from the ordinary course of negotiations between trade unions and employers and that the words ‘confused the circumstances’ simply were unexplained and inexplicable.  There is, in our judgment, some force in those submissions.  Whether they would be enough, standing on their own, to invalidate the decision which this Tribunal reached, we need not say, because the real difficulty with this decision emerges from paragraph 17 of the Extended Reasons.  

15	The Tribunal, as we have indicated, had to decide, on the proper construction of the collective agreement, having regard to the factual matrix and other factual material which was relevant, whether the guaranteed overtime payments were properly to be described as overtime or were properly to be described as normal average weekly earnings.  That was a straightforward, albeit, perhaps, not simple or easy, issue of construction.  However, in paragraph 17 of the Extended Reasons the Tribunal said this:

“In all the circumstances, the Tribunal found the Agreement had been varied and the respondents were in breach of the Agreement as varied.  The Tribunal therefore found there had been a breach of contract by the respondents and the applicants were each entitled to enhanced redundancy payments.”

16	In our judgment there was no basis for the conclusion that the agreement had been varied.  The employees’ case did not involve any submission that the collective agreement, or the individual terms of their contracts of employment had been varied at all.  We have already recited the reference in paragraph 8 of the Tribunal’s Extended Reasons to what appears to have been a submission that the agreement had been varied; but we accept, as Mr Bradley tells us, that no such submission was actually made.  If one compares paragraph 8 of the Extended Reasons with paragraph 6 of the Summary Reasons we can see that the Tribunal have used the word ‘varied’ to mean ‘dishonoured’ or some equivalent word.  Some terminological inexactitude has plainly occurred; we do not regard paragraph 8 as recording, or correctly recording, that it had been any part of the Applicant’s case that there had been a variation of any relevant agreement.  

17	Furthermore the decision does not set out which of the two possible agreements the collective agreement or the individual contracts of employment, was or were the subject of variation.  Nor does it set out how the variation occurred, whether it occurred orally, in writing, by conduct, nor when, nor by whom.  It is clear to us that it does not do so because there had been no argument on the point and there was no material to support the point.

18	Mr Brown, very fairly, does not seek to support paragraph 17; and our conclusion is that it is indeed not open to support.  It constitutes, in our judgment, an error on the part of the Tribunal.  What Mr Brown submits is that paragraph 15 (which we have set out above) of the Extended Reasons amounts to a conclusion on the correct question namely, on the proper construction of the contract, absent any variation.  We are entirely satisfied that paragraph 15 does not perform the function that Mr Brown would like it to perform.  It is no more than a recitation of some of the evidence in favour of the conclusion which Mr Brown submits the Tribunal reached.  It does not constitutes any conclusion in itself on the vital issue.  The Tribunal simply do not appear to have reached a conclusion on the construction issue; instead it headed off into error by analysing the situation in terms of variation when there was no sound basis on which it could do so.

19	For these reasons we are entirely satisfied that the decision in favour of the employees cannot stand.  To that extent this appeal must succeed.  What now should happen?  Each party has submitted that this Appeal Tribunal has the jurisdiction to resolve the construction issue itself if we are confident that all the necessary evidence was addressed by the Tribunal and all the necessary findings of fact were made - although, of course, each side presses us, if we are prepared to reach a conclusion ourselves, to reach a conclusion which is that which that side would wish us to reach.  Tempted though we are to avoid further expense and inconvenience to the parties, we are unanimously of the view that we cannot make this decision ourselves on the material which is before us.  

20	We are not confident that all the necessary evidence was considered by the Tribunal and that all the necessary findings of fact were made by the Tribunal.  In particular, firstly, we are surprised the Tribunal did not have in front of it the definition of overtime in the contractual handbook at page 6 and did not therefore investigate whether, having regard to the provisions of that definition, the way in which the extra 6.75 hours and the guaranteed overtime payments operated in practice was indicative of whether the overtime was properly overtime within the terms of the collective agreement or not.  Secondly, we have a considerable degree of unhappiness about the extent to which the factual background to the agreement and the history of its operation in redundancy cases other than those of the two Applicant employees was fully investigated by, and fully recorded by, the Tribunal in its decision.  While we make no criticism, this somewhat cloudy picture was not assisted by the fact that the employers chose to give no evidence to the Tribunal.  Whether, if there is another hearing, they choose to take a different course, is of course entirely a matter for them.  Thirdly, we do not know whether there might be some record of negotiations between unions and management, either at the time of the agreement or subsequently, which might clarify the original intentions of the parties.  If we had been asked to resolve this question sitting as an industrial jury ourselves, we would have asked questions about that and might or might not have discovered some helpful answers.  Fourthly, the Tribunal did not appear to take into account the fact that the guaranteed overtime payments were paid at the rate of time and a half rather than at ordinary time.  Whether that is or is not of any significance is not in the circumstances for us to say but it is simply something which is not reflected in any way in the decision.  We do not know what the Tribunal thought about it.

21	All these matters persuade us that, much as we would like to be able to resolve this issue ourselves, it would be quite improper for us to attempt to do so.  For those reasons the appeal will be allowed to the extent that the applications will be remitted.  They will be remitted to a different Tribunal for rehearing.