Appeal No. UKEAT/0240/08/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 12 August 2008

Before
HIS HONOUR JUDGE PUGSLEY
(SITTING ALONE)

EUROPEAN CREDIT MANAGEMENT LIMITED	APPELLANT

MS A HOSSO (DEBARRED)	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR PAUL EPSTEIN
(One of Her Majesty’s Counsel)

and
MR OLIVER ISAACS
(of Counsel)

Instructed by:
Messrs Berry Smith Solicitors
1 Northumberland Avenue
Trafalgar Square
London  WC2N 5BW

For the Respondent	No appearance or representation by or on behalf of the Respondent	

SUMMARY
Practice and Procedure

The issue was whether the modified grievance procedure had been satisfied in relation to a claim for larger payments when no specific mention of such payment had been made in any of the grievance documentation.  A grievance letter was to be interpreted in an unsophisticated and more technical way and it was inappropriate to use as a yardstick of construction the judicial definition of pay in Degnan & Ors v Redcar & Cleveland Borough Council [2005] IRLR 615.

HIS HONOUR JUDGE PUGSLEY

1.	This is a case in which European Credit Management Ltd (the Respondents in the original matter) seek to appeal a decision by Employment Judge Sigsworth sitting on 7 April, who reached a decision on 26 April 2008, by which it was held that there was jurisdiction for the Tribunal to consider a claim in relation to bonus payments.  The appeal concerns the application of the statutory grievance procedure.  The Respondent is debarred but I have considered all written representations again on her behalf.

2.	Appeal hearings can have a degree of artificiality.  Often, as in this case, an appeal hearing is dealing with one aspect of a decision which was not the only issue with which the Tribunal had to deal.  The result is that what was often minor, or only one of many issues, now moves centre stage and I say right at the outset that the task of Employment Tribunal Employment Judges of first instance is often more demanding than that of those who have the leisure to reconsider matters and also have, in this case, the representation of the highest calibre.

3.	The Appellant has crystallised the argument quite rightly into the consideration of whether the Tribunal erred in law in holding that the modified grievance procedure had been satisfied for the bonus payment.

4.	The position can be most helpfully reviewed by looking at the actual decision of Employment Judge Sigsworth.  The case was listed for a pre-hearing review on two issues.  Firstly, whether the Claimant had made sufficient grievance with respect to the equal pay claim that related to discretionary cash bonuses.  It was accepted that the Claimant had made a grievance in respect of two other elements for an equal pay claim, namely her basic pay and the share options granted to employees.  Secondly, whether the Claimant made a sufficient statutory grievance to her employer before presenting a claim to the Tribunal in respect of the race discrimination complaint.  There was no issue that the Claimant had made a sufficient statutory grievance in respect of her constructive unfair dismissal complaint.  As I understand it, that is a matter yet to be heard by the Employment Tribunal.

5.	By a letter drafted by her solicitors dated 3 May 2007, the Claimant resigned claiming constructive unfair dismissal.  There is no reference in that letter to any complaint of race discrimination.  As far as the equal pay claim is concerned, the Claimant alleged that allocations of share options were grossly disproportionate to those made by her closest comparators within the company.  There is no reference to any complaint of any other constituent element of the complainant’s pay other than the share option scheme.

6.	In response to inquiries with the Respondent about her comparators the Claimant then sent a list of relative comparators with regard to each complaint claim, such list being forwarded by way of a matrix on 24 July.  That identified three male comparators listing share options as compared with the Claimant’s, and giving the Claimant’s basic salary but stating that the comparators’ basic pay was unknown.  There was no reference in that matrix to any bonus.

7.	Sent with the matrix was the Claimant’s statutory questionnaire under the Equal Pay Act 1970.  In that she complains that the share options awarded to her under the share option and her basic salary were substantially less than the three named and identified comparators.  When the Claimant asked whether the Respondent agreed that the Claimant received less pay than her comparators, the answer in the Respondent’s response was that: it was not accepted she received less pay than her comparators.  The basic salary was the same and as far as the difference in the allocation of share options was concerned, it was denied there was any differential which was the result of some discrimination and the material defence was relied upon.  Neither the Claimant nor the Respondent averted to any issue as to discretionary bonuses.  The parties agreed by 16 July 2007 that the grievance would be dealt with under the Modified Grievance Procedure.

8.	On 18 October 2007 the Claimant presented her claim form to the Tribunal.  At box 6.2 paragraph 4 of the claim form she said she was not in a position to assert prior to the necessary information being made available by the Respondent, whether in addition to the discriminatory manner in which the share option scheme was operated the Respondents also made disproportionate and discriminatory bonus and share awards to the three identified comparators, and she said that she reserved her position on that issue.

9.	It was the Claimant’s case that she was not aware in February 2008, just before the judicial mediation took place, that the discretionary bonus was less than that of her comparators.  The claim also contained a claim for race discrimination.  In their response the Respondent referred to the remuneration of employees including bonus and their grounds of resistance.  They said that other forms of remuneration, apart from the basic salary of £125,000 per annum, included share options, bonus and share awards with the discretion of the principals and were allocated in accordance with their judgment as to the performance and contribution of the individual and their worth to the company.

10.	It is unnecessary for me to go into the reasoning of the Tribunal in dismissing her claim to race discrimination.  The Tribunal considered that it did not come within the statutory requirements and that that claim should be struck out.  However, in relation to the equal pay claim, in that it concerned bonuses, the Tribunal took a different view and the nub of their decision is set out in paragraph 6.2 of the Tribunal’s decision and I quote there from:
“So far as the equal pay claim is concerned, then the complaint is about the Claimant’s pay generally, and she identified elements of her pay package she knew or thought were different from those of her comparators.  Her essential complaint is that she received less remuneration overall than her comparators.  The case of Degnan & Ors v Redcar & Cleveland Borough Council [2005] IRLR 615 is authority for the proposition that pay has to be looked at in aggregation, rather than being chopped up into constituent parts.  In other words, pay can be considered as one ‘term’ of the Claimant’s contract, ignoring any other terms, conditions and benefits, which avoids any cherry-picking or, as here, the artificial division of the employee’s pay by her employer to make it appear that she is not earning less in terms of, for example, basic pay.  If the Tribunal had regard simply to the Claimant’s basic pay in this case, then she would not succeed, because her basic pay was the same as that of her comparators.  It is the other elements of her pay, both the share option/awards and the discretionary bonus, that were different, but were nevertheless part of her remuneration or pay.  The Equal Pay Act 1970 is intended to result in the equalisation of a woman’s pay with that of her comparator.  If the Claimant is not allowed to pursue her claim in respect of discretionary bonus, the Tribunal will not be able to consider the full picture, and will have to ignore one important element of the pay of the Claimant and her comparators - this is not what the Equal Pay Act intended to happen.”

11.	The Tribunal went on to say this at paragraph 6.3:
“Further, the modified grievance procedure requires employees to set out the basis for their grievance in writing.  Essentially, the Tribunal concludes that the Claimant has done so, as far as she could at the time at the making of the grievance on the then state of her knowledge.  Her complaint was about the inequality of her pay overall, as compared with her comparators.  In contrast to the position in the case of Pratt, she identified her comparators …  The Respondent knew full well that the issue that the Claimant wanted resolved concerned her pay, compared with that of her comparators.  The purpose of the grievance procedure is to ensure that the Respondent knows what the complaint is about.  In this case, it was clear what the complaint was about, as indicated above - it identified male comparators were doing like work and being paid more than the Claimant.”

12.	The principal basis on which this appeal was put is that the Tribunal had misconstrued the letters of grievance of 3 May 2007 and they have not heeded the necessary requirements of the statutory procedure.  The grievance document dated 3 May 2007 is a solicitor’s letter.  It contains no allegations at all about the bonus payments.  I am told by Mr Issacs and I fully accept it, that the Claimant was herself in receipt of a bonus.  The question in issue:  was the substantial bonus she alleged others enjoyed, raised by the Claimant.  The matrix sent on 24 July was simply a table in which comparison was made with basic pay and had rows labelled aggregate share options and basic salary.  

13.	In particular what was said on behalf of the Appellant is that the Tribunal erred in finding an adequate grievance had been raised in respect of cash and bonuses.  The statutory provisions are s set out in s32 of the Employment Act 2002 which provides:
“(2) An employee shall not present a complaint to an employment tribunal under a jurisdiction to which this section applies if— 
(a) it concerns a matter in relation to which the requirement in paragraph 6 or 9 of Schedule 2 applies, and 
(b) the requirement has not been complied with.”

14.	Paragraph 9 of Schedule 2 provides as follows:
“The employee must (a) set out in writing (2) the grievance, and (3) the basis for it and send a copy to the employer.”

15.	Mr Epstein argues that there is a fundamental difference between the Standard Grievance Procedure (SGP) and the Modified Grievance Procedure (MGP).  Under the latter the Claimant is obliged to set out both the grievance and the basis for it.  Under the SGP the obligation is simply to set out the grievance.  As Lady Smith said in Clyde Valley Housing Association Ltd v MacAulay [2008] UKEATS/0045/07:
“So, unlike what happens in the standard procedure, where employer and employee must meet to discuss the grievance, the exchange between them in the case of the modified procedure is confined to writing.  The employer will have no opportunity to talk to the claimant face to face about his grievance.  Further, he must respond to it so he needs to know what the case is that he has to meet.  Under the modified procedure, the only way he can find out about it is by reading what is said in the claimant’s written grievance.”

16.	The statutory grievance procedure has been the subject of much litigation and I mention in deference to the arguments I have received such cases as Shergold v Fieldway Medical Centre [2006] IRLR 76, Canary Wharf Management Ltd v Edebi [2006] IRLR 416, Alexander & Anr v Brigden Enterprises Ltd [2006] IRLR 422 and the City of Bradford Metropolitan District Council v Ms E C Pratt [2007].  These are all cases to which I have been referred.  The judicial consensus is perhaps summed up by the President, Elias J, in Canary Wharf Management Ltd v Edebi in paragraph 15 when he pointed out that these are complex and not happily structured regulations; that the underlying purpose of the procedure is to seek to prevent the matter going to an Employment Tribunal if possible by providing the opportunity to resolve disputes at an early stage, and that one should seek to avoid undue technicality.  It is a requirement that the right to grievance is set out in writing and that in broad terms the matter should be set out in such a way that using unsophisticated and non-technical language the employer should know the basis upon which the grievance is being put.

17.	What is said on behalf of the Appellant is that on a fair reading of the grievance documentation the claim that there was an unfair allocation of bonus cannot be discerned.  It is said that the Tribunal erred in relying on the contents of the questionnaire, and since there is clear authority in Holc-Gale v Makers UK Ltd [2006] IRLR 178 and Regulation 14 of the Employment Act 2002 (Dispute Resolution) Regulations 2004 that a questionnaire cannot be said to be a grievance document within the meaning of the Act.  Be that as it may, the real gist of the Appellant’s argument is this: the statutory procedures must be approached in a non-technical unsophisticated way in order to determine whether grievance can fairly be raised as raising the complaint.  

18.	Before me the complaint has been made in very clear terms that the Tribunal misapplied in an inappropriate way the case of Degnan.  The case of Degnan was an equal pay case arising out of employment with a local authority.  I do not intend to go into great detail about the factual issues which arose in that case but to say that it is quite clear that that case did lead to results which could be said to be somewhat bizarre.  The Claimants in the case worked as a cleaner, a supervisory cleaner, a supervisory assistant in school and a home-help.  They brought equal pay claims comparing their work to that of gardeners, refuse workers, drivers and road workers.  All the male comparators were employed on work rated as equivalent and received the same basic hourly rate as the applicants.  However, the gardeners also received a fixed bonus of 40 per cent.  The refuse workers and drivers received a 36 per cent bonus and an attendance allowance of between £33.81 and £34.88 per week, and road workers received a fixed bonus of 33 per cent and an attendance allowance between £13.91 and £14.61 per week.

19.	The Tribunal at first instance held the terms related to basic pay and the bonus payments related to the same subject matter but the terms of the attendance allowance were separate.  As a result each of the Claimants was entitled to compare herself with the relevant male worker most advantageous to her for the purpose of the bonus element of pay and the most advantageous comparator for the purpose of attendance allowance.  Thus the Claimant, Mrs Johnson, was entitled to the gardeners’ terms as to bonus, which resulted in a 40 per cent increase, and was also entitled to the refuse workers’ attendance allowance at the rate of £33.81 per week.  As a result she received more total remuneration than any of the male comparators.  The EAT held that the term of the contract for the purpose of pay comparison can be defined as a monetary payment that the employee receives for the performance of the contract during normal working hours.  All monetary payments received by male comparators for normal working hours should be aggregated and divided by the number of hours of the working week to give an hourly rate.  That hourly rate should be compared with the women’s hourly rate; if it is greater, the women’s hourly rate should be increased to a limit to eliminate the difference.  The attendance allowance related to the same subject matter as basic hourly pay and a fixed bonus and was “an element of a distinct part of the contract and not itself a distinct part”.  It was part of the monetary payment for performance of the contract by attendance at work during normal hours. 

20.	The Court of Appeal upheld the decision of the EAT and held that the Employment Tribunal erred in finding functional conceptual differences between basic pay and the attendance allowance, and that they held the EAT’s approach was consistent with the decision in Haywood v Campbell Laird Ltd (a decision of the House of Lords) and that the EAT had rightly applied its collective mind to the reality of the contractual provisions on the facts of a particular case.

21.	There is, if I may say so, a fundamental fallacy in the way in which the Employment Tribunal (with the best of motives) construed the impact of Degnan.  What this grievance procedure requires is to flag up to an employer the basis of the complaint of the grievance.

22.	The word “pay” can have different meanings according to the context in which the word is used.  If I was to ask a member of the Civil Service what their pay was, I anticipate the answer will be given as to the gross or net pay.  Subsumed within the conditions of employment, of course, there are great advantages in the public sector in which one has an index linked pension.  A fair-minded and sophisticated civil servant might point out that he or she has generous pension entitlement.  But I do not consider it is appropriate to take a highly technical definition of “pay” as all remuneration and benefits from the employment received when the issue is raised in the context of asking about basic pay and allocation of shares.

23.	On any natural reading of the matters raised, the Claimant in this case, Ms Hosso, was saying that her basic pay was less and she did not have a fair and proportionate allocation of share options.  To suggest the grievance letter had subsumed within it an inquiry about all pay and benefits from employment is to impute to that simple inquiry a sophistication it lacks.  If the approach of the Employment Tribunal was correct, every time the employee who agreed to the Modified Grievance Procedure raised a general grievance about pay, the employer would be obliged on pain of otherwise being in breach of the procedure (which is the consequent effect of uplift of the awards) to consider every aspect of pay given its wider definition: overtime pay, sickness pay, pensions, holiday pay, unsocial hours and clothing allowance, standby payments, attendance allowance, performance related payments, productivity payments, health insurance, provision of company car and the like.  It would, I think, be perfectly adequate for this Claimant to have said, “I am being paid an inadequate amount of money compared with my comparators.  They have the benefit of a larger allocation of shares and because of that I suspect that there may be other differentials and I would like a full statement of all pay in the sense of every benefit an employee who is a comparator receives”.  I can see no objection to that as long as there were sufficient particulars to enable an employer to identify the essential nature of the complaint and the grievance was not in the vague terms of the claimant in the City of Bradford case. 

24.	But I do not think one can incorporate into any request made by this Claimant that requirement.  She did not mention bonus payments.  The bonus payments are only one of many facets of employment and I think to require the employer, when in receipt of the grievance letter such as this employer had, to then set out every benefit of employment is oppressive, when the expedient of adding the rider to which I have already adverted is available.  But I do not think one can impose on an employer that obligation without raising in specific terms that which you wish to know about, even though you do not have the information at that stage to justify your grievance but are only asking for an inference to be drawn and therefore that information to be given.  Quite simply, to construe pay according to the highly arcane and technical area of equal pay and equal value in the Degnan case as applying to any request about what pay people are receiving, is to take a definition from one case and apply it to a wholly different context and is an error of law.  

25.	I, therefore, allow the appeal and strike out consideration of bonus payments from the Employment Tribunal’s consideration because the way in which the matter was raised did not, in my view, on a proper construction of the documentation satisfy the statutory requirement.

26.	I go on to say a subsidiary issue has arisen, namely whether the Claimant could in any event, raise the issue of a bonus since it has not been pleaded.   There is an unfortunate dispute and no one is impugning the integrity of either the Employment Judge or Mr Issacs who appeared below and now appears with Mr Epstein.  Mr Epstein graciously accepts that in the light of the assertion by Employment Judge Sigsworth that the issue of pleading was not raised he has to persuade me that I have jurisdiction to look at the matter.  I do not intend to embark upon a judicial obstacle course in hacking my way through the various authorities such as Jones v Governing Body of Burdett Coutts School [1998] IRLR 521 as to whether or not I have jurisdiction because it seems to me somewhat unnecessary in the context of this case.  The Claimant says her position in this respect is reserved; no application to amend was made and the Respondent contends that this demonstrates no claim has been made in the ET1 for a bonus.  Thus it is said, even if it was not raised Glennie v Independent Magazines (UK) Ltd [1990] IRLR 521 and Jones v … Burdett Coutts School permit me to deal with this issue.  

27.	Accepting, as I do for the moment, that I do have such jurisdiction, in my view I cannot accept the argument it was not sufficiently raised in the ET1.  ET1s are to be read in a broad and robust way and I consider that applying that construction it can be said that the issue of bonus payments had been raised in the ET1 in sufficient way although there was a caveat and the Claimant was making it clear that that the issue of a bonus was a matter upon which she wished, if appropriate, to litigate.  I consider it would be applying a somewhat over-sophisticated view to say because the Claimant used words about reserving her position she was precluded at the hearing in raising that matter.  

28.	This matter is of somewhat academic significance and I allow the appeal for the reasons I have given on the principal argument before me, namely that I do not consider the statutory procedure was complied with in the letters of grievance.

29.	So, the order I shall make is the appeal is allowed and I strike out the claim in that it relates to bonus payments.