The claimants' individual contracts of employment expressly incorporated terms and conditions collectively agreed between the respondent and the union, including a right to PRP which was incorporated in 2001. The claimants received increases in line with the PRP scheme until 2008, when, following the global banking crisis, the respondent met with the union in order to discuss possible alterations to the remuneration of staff. In essence it was agreed that PRP increases previously paid on 1 January each year, would be deferred to 1 July 2009 for that year, and the respondent reserved the right to discuss issues relating to payments of increments in 2010 as circumstances developed. The claimants were sent a memo in December 2009 saying that no pay increases would be made in 2010. No agreement was reached as to any future payment of the PRP and the claimants took their case to the ET claiming unlawful deductions from wages and were successful, the EJ upholding the simple proposition that in the absence of a collective agreement as to 2010, the 2001 Agreement PRP scheme incorporated into the individual contracts would continue to apply. The respondent appealed.

The EAT dismissed the appeal. The fact that there was no agreement between the respondent and the union as to what payments would be made in 2010 meant that, under the express terms of the contract of employment, the status quo remained. There was no consensual variation of the PRP term for 2010.
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Appeal No. UKEAT/0394/12/KN

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

At the Tribunal

On 8 February 2013

Before

HIS HONOUR JUDGE PETER CLARK (SITTING ALONE)

AIB GROUP (UK) PLC (APPELLANT)

(1) FLETCHER; (2) MORIARTY; (3) STEWART (RESPONDENTS)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR PAUL NICHOLLS (One of Her Majesty's Counsel)

Instructed by:
Messrs Parker & Co Solicitors
28 Austin Friars
London
EC2N 2QQ

For the Respondents
MS CATHERINE RAYNER (of Counsel)

Instructed by:
Thompsons Solicitors
Congress House
Great Russell Street
London
WC1B 3LW

UNLAWFUL DEDUCTION FROM WAGES

CONTRACT OF EMPLOYMENT – Incorporation into contract

Term as to performance pay in collective agreement incorporated into individual contracts of employment. Whether varied by subsequent agreement. It was not. Employment Judge's analysis upheld. Employer's appeal dismissed.

1. This is an appeal by AIB Group (UK) Plc, the Respondent before the London Central Employment Tribunal against the judgment of Employment Judge Grewal, promulgated with Reasons dated 22 March 2012 upholding the Claimants, Mr Fletcher and others, complaints of unauthorised deductions from wages in relation to a failure to pay performance related pay (PRP) increases in 2010.

1. The Respondent trades under the style Allied Irish Bank. The Claimants were at the relevant time employed by the Bank. The Bank recognises the Irish Bank Officials Association (IBOA) ("the Union") for collective bargaining purposes. The Claimants' individual contracts of employment expressly incorporate terms and conditions collectively agreed between the Bank and the Union.

1. In 2001 a system of PRP payments was incorporated into the individual contracts of employment, following a recommendation by a mediator, Mr Shepherd, adopted by the Bank and the Union.

1. Between 2001 and January 2008 employees, including during their employment these Claimants, who opted into the PRP scheme after joining the Bank received salary increases in line with the rules of the PRP scheme. The formula is set out at paragraph 22 of the Reasons. It did not allow for any element of discretion in ascertaining the relevant increase which depended on an employee's position in the salary range and his or her performance rating under three headings.

1. Following the collapse of Lehman Brothers in September 2008 and the global banking crisis which followed the Bank, among others, required the support of the Irish Government. In those difficult times the Bank met with the Union in order to discuss possible alterations to the remuneration structure for staff. The upshot of the negotiations, following assistance given by both ACAS and its Irish equivalent, the LRC, in May 2009, is set out at paragraph 28 of the Judge's Reasons. In essence it was agreed that PRP increases previously paid on 1 January each year, would be deferred to 1 July 2009 for that year, and the Bank reserved the right to discuss issues relating to payments of increments in 2010 as circumstances develop.

1. On 2 December 2009 Mr Doherty, Group Managing Director, sent a message to all staff setting out the difficulties faced by the Bank and stating that there could be no pay increases in 2010.

1. At meeting on 21 January 2010 the Union expressed their disagreement over the issue of pay. On 11 March the Union asserted that elements of the remuneration package were contractual and legal action may be necessary. On 23 April the Union raised a collective grievance in respect of their affected members, complaining that non-payment of PRP due in 2010 amounted to an unlawful deduction from wages. Following a meeting on 18 May and a further meeting held on 18 June 2010 the Respondent noted the Union's position but reiterated its position that a pay increase was neither sustainable nor warranted.

1. Deadlock having been reached, the Claimants presented a claim form ET1 to the Tribunal complaining of unlawful deductions in respect of failure to implement the 2010 PRP merit increases.

1. In answer the Bank contended in its response Form ET3, settled by solicitors, that Mr Doherty's memo to staff of 2 December 2009 amounted to a unilateral variation or a variation that the Claimants accepted as a result of their acquiescence to it.

1. When the matter came before Employment Judge Grewal, the argument advanced by Mr Paul Nicholls QC on behalf of the Bank differed from the line taken in the Form ET3.

1. It was not disputed that the PRP system, collectively agreed in 2001, had been incorporated into the individual contracts of employment of the Claimants and that payments had been made in accordance with the agreed PRP formula between 2001 and 2008. The sole issue identified by the Judge was whether that contractual entitlement to PRP had been varied by a subsequent collective agreement in July 2009 which superseded and replaced the 2001 scheme.

1. It was the Respondent's case that agreement had been reached not simply in relation to the deferred payment of PRP in 2009. The effect of the Union agreeing to the Bank reserving the right to discuss issues relating to the payment of increments in 2010, on top of the deferred payments in 2009, was that the 2001 Agreement was no longer in force; the staff, including the Claimants, would be entitled to whatever increases were agreed between the Bank and the Union for 2010. Since no agreement was reached they were not contractually entitled to PRP payments or any pay increases for that year.

1. The Judge considered that submission and rejected it, upholding the simple proposition advanced by Ms Catherine Rayner for the Claimants, paragraph 49, that in the absence of collective agreement as to 2010, the 2001 Agreement PRP scheme incorporated into the individual contracts would continue to apply; see paragraphs 50-53.

1. In advancing the appeal on behalf of the Respondents Mr Nicholls rightly focuses on the meaning and effect of the ACAS/LRC proposal in May 2009, subsequently agreed by the Bank and the Union in July.

1. I take the relevant passages from the LRC document dated 11 May 2009; bundle pages 71 to 72. The pre-amble recites that the writer, Mr Foley, is setting out a path to further engagement on those matters which require further exploration and dialogue. Paragraph 1 of the proposal reads:

"That the parties agree that the application date for payments under Career Framework in 2009 will be 1st October 2009. All other decisions on annual pay reviews (e.g PRP and career paths) will be similarly deferred (i.e. by six months). Similarly, increments due on 1st January 2009 will be applied with effect from 1st July 2009.

I note that payments under Career Framework (and all other annual pay review arrangements) also fall due in 2010. I note that the Bank reserves the right to review this matter in partnership with the IBOA in advance of that date against the background of circumstances facing the Bank at that time. The Bank similarly reserves the right to discuss issues relating to payment of increments in 2010 as circumstances develop."

1. And at paragraph 5:

"That the parties agree that the full agenda raised at conciliation as outlined in the 'Cassells Report' will continue to be engaged with in line with Partnership principles and that the parties will continue to avail of procedures, including conciliation where and when appropriate, to bring these matters to a conclusion by December 2009."

1. Mr Nicholls submits that what is there agreed between the Bank and Union is that the 2001 Agreement relating to PRP has been superseded by a variation mutually agreed whereby entitlement to PRP will depend upon the agreement reached between the negotiating parties. Absent agreement by December 2009, there will be no PRP in 2010.

1. I have had a full opportunity to explore that proposition with Mr Nicholls in discussion. At the end of it I am wholly unpersuaded that it is correct.

1. My analysis is that the PRP regime, collectively agreed in 2001, was incorporated into the individual contracts of employment. That term could only be varied by agreement between the Bank and the Union, there being no suggestion of a variation agreed between the individual Claimant employees and their employer. That position maintained between 2001 and 2008. A variation was duly agreed in relation to timing, but not the amount, of PRP paid in 2009; see paragraph 1 of the proposal.

1. As to 2010, no agreement was reached in July 2009. Instead, the Bank reserved the right, already provided for in the original 1982 Agreement, to meet with the Union to discuss issues relating to payment of increments in 2010; see paragraph 1. For that purpose the parties, that is the Bank and the Union, would continue to avail themselves of the established procedures in order to bring those discussions to a conclusion by December 2009.

1. Failing agreement, as turned out to be the case, as a matter of the individual contracts of employment, the existing term as to PRP expressly incorporated via the 2001 collective agreement remained in place. The position is not dissimilar in my view from that in Robertson v British Gas [1985] ICR 351 where the employer terminated the relevant collective agreement made with the trade union, the terms of which had been expressly incorporated into the individual contracts of employment. Terminating the collective agreement did not alter the incorporated term of the individual contracts.

1. I apply the Court of Appeal's approach in that case to the facts of this case and the difference is that here the Bank did not purport to terminate the 2001 Agreement, although that is the effect, says Mr Nicholls, of the agreement reached in July 2009. I disagree. No agreement between the bank and the Union as to what payments would be made in 2010 meant under the express terms of the contract of employment that the status quo remained. There was no consensual variation of the PRP term for 2010.

1. I have been addressed as to the law of implied terms. In my judgment it simply does not arise in this case.

1. Ms Rayner acknowledged that she could not improve by her submissions on the analysis, reasoning and conclusions of the Employment Judge. Neither can I. Her judgment was plainly correct. This appeal fails and is dismissed.