Gordons Legal Employment Update – 30 March 2017

This week’s update covers two recent cases and confirms the increases to statutory payments in April 2017.

ET had no jurisdiction to construe the Claimant’s contract for the purpose of a wages claim

In the case of Agarwal v Cardiff University and anor, the EAT was asked to determine whether an Employment Tribunal had the jurisdiction to construe the Claimant’s contract for the purpose of a claim for unlawful deductions from wages.

The Claimant was a Urological Surgeon.  Her role was split between carrying out lecturing duties for the University and clinical duties for a local health board.  She was paid by the University, but the health board paid the University for the services she provided to them.  Following a period of sickness absence, the University determined that the Claimant was unable to return to her clinical duties, but she could return to her lecturing duties.  The University only paid her half of her salary on that basis.

The Claimant complained to the Employment Tribunal that she had monies unlawfully deducted from her wages.  The Tribunal Judge said that he had no jurisdiction to hear the claim as it raised issues of contractual construction – including whether there were implied terms that University would only pay for clinical duties when the health board had provided funds and whether the health board was obliged to provide the funds when the Claimant was willing to work.

The Claimant then appealed to the EAT who held:

• The parties had correctly agreed that if the Claimant’s entitlement to wages depended upon the construction of the contract, that it would fall outside the ET’s jurisdiction.  This is on the basis that a breach of contract claim can only be considered once an employee’s employment has come to an end;
• That the ET’s power in an unlawful deductions from wages claim was limited to determining the total amount of wages that would be properly payable, which would be ascertained from the Claimant’s written particulars of employment; and
• An unlawful deduction from wages claim which requires a decision on an implied term falls outside of the Tribunal’s jurisdiction.

Comment: It is not possible for an employee to bring a breach of contract claim in the Employment Tribunal whilst their employment is continuing, however, it is possible to bring an unlawful deduction from wages. Sometimes the line is somewhat blurred as to what might amount to a breach of contract and/or an unlawful deduction claim because the level of pay is usually determined by the contract. This case is therefore useful in that it shows the limit of the contractual element of an unlawful deduction from wages and confirms that if the contractual provision is uncertain the Employment Tribunal does not have jurisdiction to make a finding on what the contract should say.

Employee Liability Information

In the case of Born London Limited v Spire Production Services Limited, the EAT was asked to determine whether an incorrect statement that a Christmas bonus was non-contractual breached Regulation 11.  If so, did it give rise to a compensation claim?

By way of background, on 1 January 2015, 32 employees transferred from Spire to Born under a service provision change.  In accordance with Regulation 11, Spire provided Born with employee liability information.  However, Spire listed the transferring employees’ terms under contract and non-contractual headings.  Born discovered after the transfer that a Christmas bonus that was specified under the non-contractual heading was in fact contractual.  Subsequently, Born brought a claim in the Employment Tribunal for breach of Regulation 11.

The Employment Tribunal concluded that the Claimant’s claim had no reasonable prospects of success.  Regulation 11 required the Respondent to provide particulars of employment as defined under Section 1 of the Employment Rights Act 1996.  There is no requirement to comment on whether the particulars were contractual or non-contractual.

The EAT held that there was no breach of Regulation 11 and purely stating that the bonus was non-contractual did not fall within the Regulation 11 requirement.

Comment: This is an example of “buyer beware” and shows that there are limits on the regulation 11 duty for sellers / transferors to provide employee information to buyers / transferees. We do, of course, recommend that due diligence is carried out thoroughly during any corporate transaction and that questions as to the contractual nature of particular schemes and policies are put and responded to. In the event that a seller / transferor is unwilling / unable to answer such a question, or incorrectly answers it as in this case, the legal paperwork should contain sufficient indemnities and warranties to protect the buyer.

April 2017 – annual increase to statutory payments

 As of 1 April 2017:

• The apprenticeship rate increases to £3.50 per hour;
• The rate for 16 to 17 year-olds increases to £4.05 per hour;
• The rate for 18 to 20-year-olds increases to £5.60 per hour;
• The rate for workers aged 21 to 24 increases to £7.05 per hour;
• The national living wage for workers aged 25 and over increases to £7.50 per hour;
• The accommodation offset increases to £6.40 per day.

As of 2 April 2017:

• Statutory Maternity Pay (‘SMP’), Statutory Paternity Pay (‘SPP’), Statutory Adoption Pay (‘SAP’), Statutory Shared Parental Pay (‘SSPP’) will increase to £140.98 per week; and
• Statutory Sick Pay (‘SSP’) will increase to £89.35 per week.

If you require any further information on the above developments please do not hesitate to get in contact with a member of the Employment Team, on the following number 0113 227 0100.