This case concerned pay protection consequent on the implementation of a single status agreement by a local authority. The dispute related to whether or not there was a contract between employer and employee that a person who would receive lower wages as a result of the employer's plan to root out sex discrimination would have pay protected for a period. The claimant's position was that there was such a contract, and that as he had not been paid pay protection there had been unlawful deductions from his wages contrary to the Employment Right Act 1996 (ERA) sections 13 and 27. The ET dismissed the claim. A collective agreement was entered into by the respondents and other local authorities on one side and recognised trade unions on the other. Those parties also entered into an implementation agreement in which clause 19 made provision for pay protection in respect of bonus payments. It was in the following terms:–

"Protection
19. Protection at assimilation onto the new spinal column for all employees including bonus earners will be for 3 years on a cash conserved basis.  This timescale has regard to the increased potential for equal pay claims should protection be allowed to extend beyond that period."

The question which the EJ answered was whether or not that clause had been incorporated into the contract of employment under which the claimant worked for the respondent. He came to the view that it had not; he therefore came to the view that there had been no unlawful deduction from wages. The claimant appealed.

The EAT dismissed the appeal. The Employment Judge was entitled to find that the new contract had no term, express or implied in any way that pay protection would be paid.

___________

Appeal No. UKEATS/0006/13/BI

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH, EH3 7HF

At the Tribunal

On 9 July 2013

Before

THE HONOURABLE LADY STACEY

(SITTING ALONE)

MR BLAIR AND OTHERS (APPELLANTS)

MIDLOTHIAN COUNCIL (RESPONDENT)

JUDGMENT

For the Appellants
MR JAMIE MORGAN (Counsel)
Instructed by:
Thompsons Solicitors
Berkeley House
285 Bath Street
Glasgow
G2 4HQ

For the Respondent
MS LYNNE MARR (Solicitor)
Brodies LLP Solicitors
15 Atholl Crescent
Edinburgh
EH3 8HA

JURISDICTIONAL POINTS

CONTRACT OF EMPLOYMENT – Incorporation into contract

Deductions from wages under Employment Rights Act 1996, sections 13 and 27.

The Claimant contended that unlawful deductions had been made from his wages following the Respondent issuing and the Claimant accepting a new contract of employment. The Respondent issued the contract in furtherance of a strategy to eradicate discrimination in pay. The Claimant argued that he was entitled to pay protection in respect of a bonus which had been paid under the original contract but was not paid under the new contract. Held: the Employment Judge was entitled to find that the new contract had no term, express or implied in any way that pay protection would be paid. Appeal dismissed.

1. Firstly I apologise for delay in providing this decision.

1. This is an appeal by the Claimant against a decision of the Employment Tribunal in a pre-hearing review (PHR) in which the judgment with reasons was sent to parties on 18 December 2012. The ET comprised Mr J G d'Inverno sitting alone. The hearing took place on 21 and 22 May and 31 July 2012. There are over 100 cases lodged and the Claimant's case has been taken as a lead case. At the Tribunal the Claimant was represented by Mr Morgan, counsel, who also appeared at the EAT. The Respondent was represented at the Tribunal by Ms Johnston, solicitor and at the EAT by Ms Marr, solicitor. The case is about pay protection consequent on the implementation of a single status agreement by a local authority. The dispute relates to whether or not there was a contract between employer and employee that a person who would receive lower wages as a result of the employer's plan to root out sex discrimination would have pay protected for a period. The Claimant's position was that there was such a contract, and that as he had not been paid pay protection there had been unlawful deductions from his wages contrary to the Employment Right Act 1996 (ERA) sections 13 and 27.

1. The reasons for the decision of the ET comprise 102 pages; the EJ helpfully provided an index. At the hearing before me, it seemed that there had been an element of confusion at the hearing before the ET. Some documents had not been lodged until the end of the hearing. After listening to representations and considering carefully all that I heard together with the grounds of appeal, the response to those grounds, and the judgment, I found the case confused and confusing; the fog has not entirely lifted. No doubt the fault is mine, but I regret to say that the submissions made by counsel and solicitor on behalf of Claimant and Respondent were at times difficult to follow. A supplementary bundle had been lodged at fairly short notice. There was one skeleton argument, but no written submissions. This is a case which might have benefited from fairly full written arguments.

1. The judgment would have benefited from careful proof-reading and while some of the typing errors are of no consequence it may be helpful if I state that I have come to the view that the following errors, which could have been material, have been made and I have read the judgment as though those errors have been corrected. The first is at paragraph 4.3, last line, where the word "cancellation" should be "calculation". The second is in the penultimate line of paragraph 9.3 on page 75 where the word "inconsistent" should be "consistent". There remains a question as to whether the EJ made an error of the pen on the date of assimilation. I have come to the view that he may have done so. I explain fully the position I take below.

1. The ET made the following decision:–

"(First) That the Tribunal's jurisdiction in terms of Part II, Sections 13 and 27 of the Employment Rights Act 1996 extends to the incidental but necessary investigation, consideration and determination of whether there exists some legal entitlement of the type envisaged in the statute, (including an entitlement said to arise in contract) to the payment said to have been deducted;

(Second) That the Tribunal does not have jurisdiction to hear the Claimant's claims on the separate grounds that the claims are not claims for unlawful deduction from wages, by reason of the fact that no relevant entitlement to wages, of the type and by the mechanisms contended for, as is required under the Employment Rights Act 1996, is established in the particular circumstances presented."

1. The EJ gave a Summary of Disposal at paragraph 37 onwards. He endeavoured to cover everything put before him and according to the parties certain things that were not put before him. The EJ has written a judgment which considers all possible variants of the arguments that were put to him. He was correct to do so, but it has resulted in a judgment which is extremely long and at times difficult to understand. It may be helpful to comprehension of my decision if I quote paragraph 37 in full as follows: –

"In summary, I have disposed of parties' contentions as follows:–

(1) I have held that claims such as these claims do potentially fall properly within the Tribunal's jurisdiction in terms of Part II and Sections 13 and 27 of the Employment Rights Act 1996 in that, that jurisdiction implies an incidental but necessary investigation, consideration and determination of whether or not some legal entitlement (including one arising in contract) to the payment in question exists; but have ultimately held, in relation to what the Claimants' contend for, that the Tribunal does not have jurisdiction to hear the claims on the separate ground that the claims are not claims for unlawful deduction from wages, by reason of the fact that no relevant entitlement to wages, vis-a-vis what is contended for, but as is required under the Employment Rights Act 1996, is established in the particular circumstances of this case;

(2) That the Claimants, in the absence of a relevant provision in their own contract, were not entitled to rely directly upon i.e.to enforce (the provisions of clause 19 of the Single Status and Collective Agreement 1999), a matter ultimately held by concession of the Claimants' Council (sic);

(3) That it is competent both at common law and in terms of section 1(4) (c) of the Employment Rights Act 1996 for parties to incorporate by reference words or terms contained in or described in Collective Agreements notwithstanding the fact that those Collective Agreements may not be enforceable between the parties to them and further notwithstanding the fact that the parties to the instant contract might not be entitled to directly enforce those Collective Agreements;

(4) That the terms of Clause 19 of the Single Status Collective Agreement of 30 June 1999, along with clauses 10, 11, 13, 14, 15 and 21 of that Agreement were Apt for Incorporation in the Claimants' contracts of employment; that to the extent, if any, that Clause 19 of the Single Status Implementation Agreement of 30 June 1999 had been incorporated by reference into the Claimants' post assimilation terms and conditions of service varied as at 29 June 2009, the effect of any such incorporation was not to extend "Protection Against Loss Of Remuneration" to the discontinuance of the Claimants' historic right to bonus payments, for a three-year period measured from 29 June 2009 same because;

(a) What had been incorporated if anything with the contents of and as modified by the document expressly referred to in the contract itself namely the 'Modernising Midlothian Project' implemented under the Single Status Agreement 1999; that is to say the Respondent's version of the Single Status Agreement ultimately implemented by them, which version not only failed to include but expressly excluded historic bonus payments from post-29 June 2009; pay protection; and

(b) Separately, and in any event, let it be assumed that the terms of clause 19 of the 1999 Single Status Agreement had been incorporated without such modification or qualification, clause 19 on its proper construction in law in the context of the Single Status Agreement and its acknowledged commercial purpose, did not confer upon bonus earners such as the Claimants'(sic) protection against variation or extinction of the right to contractual bonus payment beyond a three-year period measured from 30 June 1999, in circumstances where to do so would result in 'The Increased Potential for Equal Pay Claims.'

(5) That if it be the case that the terms of the 1999 Single Status Agreement, unmodified by the Modernising Midlothian Project implemented under the Single Status Agreement had been impliedly incorporated into the post assimilation contracts, on their proper construction in law the terms of Clause 19, if so impliedly incorporated, did not give rise to a post assimilation right to protection against loss of remuneration arising from discontinuance of historic bonus payments. (See paragraph 4 above). The same because in the context of the surrounding circumstances, and standing parties' respective knowledge of each other's positions, as at the time of entering into the post assimilation contracts, the Claimants could not reasonably conclude that the Respondents against whom they seek to enforce such a condition both knew of their particular construction of the condition (see the Grievance dated 1 April 2009 A 210– 220 at 213) and accepted that construction as applicable.

(6) That, let it be assumed that there was ambiguity in the description of the version 2 of the Single Status Agreement set out by the Respondents in the variation of post assimilation terms and conditions and that thus that description should be construed Contra proferentum (sic) with the effect that the unmodified provisions of Clause 19 of the 1999 Single Status Agreement should be held as incorporated, that those terms which were terms jointly arrived at by trade union and management side and thus following out with the scope of the contra proferentm rule do not, under proper construction in law give rise, in contract, to the legal right contended for by the Claimants.

(7) That the Claimants' historic right to receive bonus payments was terminated by the Respondent prior to the assimilation date of 29 June 2009 by mechanism of written reasonable notice of termination; and, separately and in any event let it be assumed that it was not so terminated, it was terminated and discontinued prior to the assimilation date by reason of parties intervening written consensual variation to their terms and conditions of contract, concluded between the Respondents and each of the Claimants prior to the date of assimilation, and which intervening variation superseded such notice, insofar as the same was, as at the date of assimilation not yet effective.

(8) Let it be assumed that the determination of the Claimants' historic contractual right to bonus payment did not affect their status as "bonus earners" for the purposes of post assimilation continuing protection against loss of remuneration for the 'purposes of Clause 19 of the Single Status Implementation Agreement of 1999; and further, let it be assumed that the terms of that Clause were incorporated in the post assimilation contracts unmodified by 'Modernising Midlothian', the same do not in proper construction in law give rise, on the part of the Claimants to a legal entitlement, in contract, to protection against loss of remuneration arising from discontinuance of bonus for a three-year period from 29 June 2009 on proper see paragraphs (4) and (5) above. (Sic)

(9) Let it be assumed that the historic bonus element of the Claimants' remuneration had, following its being fixed that are non-formulaic percentage of the Claimants' basic pay become, in effect, part of their "pay" and fell to be regarded as the same; and further let it be assumed that the unmodified terms of Clause 19 of the 1999 Single Status Agreement had been incorporated into the post assimilation contract,

* The effect would not be to give rise to a legal entitlement, on the part of the Claimants, to protection against loss of remuneration through non-continuance of entitlement to bonus payment beyond the date of assimilation. (See paragraphs (4) and (5) above) and further,

* The same because that element of the Claimants' pay, let it be assumed it had fell to be regarded in law as pay, rather than bonus, was an element of pay which if continued per se, or by way of pay protection, beyond 3 years measured from the date of the single status agreement that is 3 years from 30 June 2009 would result in increased potential for Equal Pay Claims, remained identifiable on the face of the Claimants' detailed written pay statements up to the date of last payment, namely 30 April 2009, and,

* On a proper construction of the obligations contained in the post assimilation contracts all in the context of the relevant surrounding circumstances, including parties' knowledge prior to and at the time of entering into the post assimilation variation, the Claimants could not reasonably have understood the Respondents to have been consenting to the extension of a protection to the loss of bonus payments that is to say to that particular discriminatory, or potentially discriminatory element of 'pay' or 'bonus by another name'.

(10) Let it be assumed that some or other of the Respondent's terminations of the right to bonus payment had been in breach of prior contractual provisions, which the Tribunal has not find in fact to be the case, that the legal entitlement to which such conduct would have given rise was an entitlement to advance of complaint of damages for breach of contract, in all probability limited to the balance of any notice period, which claim would fall outwith the Tribunal's Unlawful Deductions Jurisdiction;

(11) Let it be assumed that the Respondent's failure to expressly included in the post assimilation contract provisions extending the protection against loss of remuneration to that arising from the termination of a historic contractual right to bonus payments was a failing which in itself constituted a breach of contract, that is to say that the Respondent should have included such a provision in the post assimilation variation but did not, which the Tribunal has not find in fact to be the case, the legal entitlement to which such a course of conduct would give rise would be an entitlement to pursue a complaint of breach of contract and damages for loss of opportunity; the same being an entitlement and claim which would not fall within the Tribunal's Unauthorised Deductions Jurisdiction.

(12) That the methodology employed by the Respondents for the purposes of fixing the level of 'cash to be conserved' for the purposes of pay protection, and which involved looking at the level of protected element received in a rolling 12 month reverse period measured from the date of assimilation, was not a methodology which fell to be extended to the receipt of historic bonus payments in that twelve month period, bonus payments being an element of remuneration which, in terms of the consensually varied post assimilation terms conditions of contract was not included in (was excluded from) pay protection.

(13) That the Claimants' contention that they issued no prior written agreement to making of the deduction (that is to the non-payment of Pay protection in respect of historic bonus payments) for the purposes of Section 13(1) of the Employment Rights Act 1996, and that their right to bonus payments had not been the subject of a section 203 ERA 1996 Compromise Agreement, did not preclude their consensual relinquishing of the right to receive, either bonus payments and/ or payments in protection against loss of the remuneration arising from discontinuance of the right to bonus payments, in the manner in which they had done, namely through written consensual variation to post assimilation terms and conditions of employment, which the Tribunal has found in fact that they did;

(14) Separately, and in any event, the Claimants:–

* By reason of their unqualified acceptance of the consensually varied terms and conditions of employment, in circumstances in which the Respondent had made clear that these were the only conditions upon which they were prepared to continue to contract with the Claimants, including materially the cessation of a contractual right to bonus payment and the non-extension of pay protection provisions and thus the exclusion from them, of loss of remuneration resulting from that cessation, and,

* By the acceptance and retention by them of capital sums tendered by the Respondents and ascribed by them to 'buyout' of the contractual right to bonus payment and in consideration of the exclusion of loss of remuneration arising from the same from the post assimilation Pay Protection Provisions,

* Have, by their conduct justified the Respondents in believing that a certain state of facts exists, (albeit contrary to the Respondent's awareness that the Claimants' aspiration was that, that state of fact not exist) and,

* The Respondents having altered their position upon such belief by not dismissing the Claimants, the Claimants are separately and in any event not permitted to affirm, that is to say are in the circumstances personally barred from affirming against the Respondent, that a different state of facts existed at the same time that is to say at the time in which they accepted, on an unqualified basis, the Respondent's written offer to vary their terms and conditions of contract to that effect. Notwithstanding, the same the Tribunal makes clear that its determination of matters proceeds upon the Claimants' failure to establish an entitlement in law to the payments which they contend were properly due to them, for the purposes of Section 13, and not on the basis of the Claimants being personally barred from seeking to enforce such an entitlement, which had otherwise been established."

1. Thus, in paragraph 37 the EJ found that the claim potentially fell within his jurisdiction in terms of Part II and sections 13 and 27 of the Employment Rights Act 1996 as he has jurisdiction to carry out the necessary investigation to discover whether or not some legal entitlement to the payment in question exists. He found that the Tribunal did not have jurisdiction to hear the claims on the separate ground that the claims are not claims for unlawful deduction from wages because there is no relevant entitlement to the wages contended for. In subparagraph (2) he found that the Claimant was not entitled to rely directly upon clause 19 of the Single Status Collective agreement 1999, a point which he states was ultimately conceded by counsel for the Claimant. The EJ found it competent for parties to incorporate by reference words or terms contained in a collective agreement and at subparagraph (4) he found that clause 19 of the collective agreement was "apt for incorporation". He found that the term had not been incorporated but he went on to say that even if it had been, in subparagraph (4) (b), that clause 19 on its proper construction did not confer upon bonus earners such as the Claimant protection against variation or extinction of the right to contractual bonus payment beyond a three-year period measured from 30 June 1999, in circumstances where to do so would result in "the increased potential for equal pay claims."

1. This matter caused some difficulty in that it is not plain whether the EJ was finding that the date of assimilation was 30 June 1999. I do not think he can have been as it was agreed before him that the date of assimilation was 29 June 2009. It seems that from the terms of subparagraph 7 that the EJ understood that as he stated the following:–

"That the Claimants' historic right to receive bonus payments was terminated by the Respondent prior to the assimilation date of 29th June 2009 by mechanism of written reasonable notice of termination; and, separately and in any event let it be assumed that it was not so terminated, it was terminated and discontinued prior to the assimilation date by reason of parties intervening written consensual variation to their terms and conditions of contract, concluded between the Respondents and each of the Claimants prior to the date of assimilation, and which intervening variation superseded such notice, insofar as the same was, as at the date of assimilation not yet effective."

1. At subparagraph (10) the EJ found that if the Respondent had terminated the right to bonus payment in breach of prior contractual provisions, the legal entitlement to which such conduct could give rise would be a complaint of damages for breach of contract which would fall outwith the Tribunal's unlawful deductions jurisdiction. Similarly, in paragraph (11) the EJ found that if the Respondent had acted in breach of contract by not incorporating a term into the post assimilation contract to the effect that bonus payments would be protected, then any legal entitlement which the Claimant had to seek a remedy would not be in the unauthorised deductions jurisdiction.

1. Subparagraph (13) deals with a subsidiary claim made by the Claimants that they had not entered into a compromise agreement in terms of section 203 of the Employment Rights Act 1996. The EJ found that notwithstanding the lack of any compromise agreement the parties could effect a variation by consent.

1. In subparagraph (14) the EJ found that the Claimant had, by unqualified acceptance of the consensual varied terms and conditions of employment and by acceptance and retention of the capital sum tendered by the Respondents, justified the Respondent in believing that a certain state of facts existed and as the Respondent had altered its position upon such belief by not dismissing the Claimant, the Claimant was separately not permitted to affirm that a different state of facts existed. The EJ went on to state that while the finding is made as outlined above, the determination of matters proceeds upon the Claimant's failure to establish an entitlement in law to the payments which they assert are properly due to them for the purposes of section 13, and not on the basis of personal bar.

1. The reasons begin with a section entitled "Procedural History and Overview" in which the EJ helpfully sets out a long and complicated history, over a period of almost 3 years and taking approximately 16 pages to do so. He then stated, at page 23 that there had had been a Case Management Discussion conducted at the outset of the hearing before him, which resulted in the issues being identified and confirmed as follows:–

"(1) That the issues involved which were focused as being in dispute between the parties in the lead case ... at the instance of Mr Blair against the Respondent Midlothian Council were the same issues as between all of the Claimants in the case as set out in their schedule attached to the ET 1 on the one hand (some 111) and the Respondents on the other. Issues as to quantum however might vary as between one Claimant and another.

(2) That the Tribunal was not asked to determine any question of remedy at this juncture in proceedings.

(3) That the Judgment of the Tribunal at Pre-Hearing Review was accordingly envisaged to be a judgment that would be regarded as determinative of those issues across all 111 claims;

(4) That some of the Claimants listed in the Schedule might, in the event, be found not to have had entitlement to receive bonus payments under their pre-assimilation terms and conditions of contract and thus their claims may be withdrawn vis-a-vis this aspect at least at some future point;

(5) That the claims presented in the cases … notwithstanding any wording in the paper apart to the form ET 1 which might suggest the contrary were claims which the Claimants presented as complaints of unlawful deduction from wages in terms of Sections 13 and 27 of and Part II of the Employment Rights Act 1996. That that was the only jurisdiction under which the claims had been registered by the Tribunal and it was upon the basis that the claims were so presented that the Tribunal was asked to adjudicate upon the issues focused for Pre-Hearing Review;

(6) That, notwithstanding the terms of the Respondents' representative's original application for PHR and the terms of the subsequent orders appointing the case to PHR, the Respondents did not, at this stage in proceedings in any event, insist upon the application for strike out of the claims.

[Albeit that one plank of the Respondents' challenge at PHR was that the claims presented did not fall to be regarded as falling within the scope of Part II of the ERA.]

(7) That additionally there were a number of material and relevant facts contained in chronology of events, with 5 supporting appendices which were likewise to be regarded as viz (sic) binding upon the Tribunal for the purposes of the PHR.

* Appendix 1 – table of the Claimants showing the case number; what bonus scheme they belonged to; when they accepted the post modernising Midlothian Employment Contract; and terms and conditions both before and after the implementation of modernising Midlothian;

* Appendix 2 – the bonus scheme applicable to the Claimants who are not a member of the Waste Roads Bonus Schemes;

* Appendix 3 – a complete copy of the pre-modernising Midlothian offer letter (to replace the incomplete copy at page 78 of the bundle);

* Appendix 4 – the pre-modernising Midlothian Employment Contract (a duplicate of pages 79 to 85 of the bundle); and

* Appendix 5 – a complete copy of the Employment Contract in place after Modernising Midlothian was implemented which comprises a Part I (reproduced at pages 199 – 201) and a Part II which had not previously been included in the bundle; all of which had been set down in a 'Agreed Minute of Fact and Chronology' which parties' representatives were agreed should be binding upon the Tribunal for the purposes of Pre-Hearing Review and which are referred to for their terms the terms of which are herein incorporated for the purposes of brevity."

1. The EJ noted that it was now conceded by the Respondents that if the Claimant had some legal entitlement to protection of his historic bonus payment such as to constitute a sum "properly payable" in accordance with section 13 (3) of the 1996 Act, the sums were liquid and ascertainable in the sense of being capable of being quantified. The Tribunal was not being asked to consider the question of remedy but rather to focus on whether "some legal entitlement to payment" did or did not exist. He also noted that the claims were not claims in respect of which the Claimant sought to argue that the Tribunal's additional contractual jurisdiction which arises on termination of contracts of employment was relied on. It was accepted that while notice of termination of employment effective as at 28 June 2009 was served upon the Claimant by the Respondent, it was asserted by the Respondent that the terms and conditions of the employment contract were varied by consent before notice expired and thus the contract of employment was not terminated but rather the employment continued without a break, on materially different terms.

1. The EJ then noted the issues to be decided in on pages 26 and 27 paragraph 3.1 and 3.2 as follows:–

"3.1 (first) Whether the claims, which were presented by the Claimants as complaints of unlawful deduction from wages in terms of Sections 13 and 27 and Part II of the Employment Rights Act 1996 properly fell, on their objective consideration, to be regarded as such, falling within Part II of the Act and thus the Tribunal's jurisdiction thereunder; or alternatively as was asserted by the Respondent who relies upon the decision of the English Court of Appeal in Coors Brewers Ltd v Adcock [2007] IRLR 440, that the scope of Part II was designed to be restricted to straightforward claims susceptible to a swift and summary procedure on the one hand whereas the Claimants' claims on the other hand, as appeared to be suggested by the wording used in the Paper Apart to the Initiating Applications as 1st presented, properly fell to be regarded as "an action of declarator and damages for breach of contract" falling outwith both the scope of Part II of the 1996 Act, the same in circumstances where the contracts of employment had not been terminated and the Tribunal's superimposed contractual jurisdiction arising under Section 3 (2) of the Employment Tribunal's Act 1996 was not awakened; and thus that the Tribunal did not have jurisdiction to consider the claims."

3.2 (second) Whether, upon a proper construction of the whole express terms of their contracts of employment, as varied by the parties as at 29 June, 2009 ('The date of Assimilation') and any admissible surrounding circumstances, the Claimants were entitled beyond 29 June 2009 to protection from loss of remuneration of the type envisaged in 1999 by the Scottish Employers and Trade Unions and sides, being the parties to the 'Scottish Single Status Collective Agreement' and as described in clauses 12.2 of the Implementation Agreement Section of the Scottish Single Status Collective Agreement; and not only in relation to loss of remuneration resulting from reduction in basic pay but also particularly in relation to loss of remuneration resulting from non-continuance and absence, in the Claimants' post assimilation varied terms and conditions of employment, of what had been an historic contractual right to receive fixed bonus payments."

1. It was not entirely clear to me that the assertion above that the Respondents conceded that the sums, if they were due, were capable of being quantified, sat well with the description under the alternative to paragraph 3.1 of the first of the issues. The question was not pursued and I say no more about it.

1. It is however at least tolerably clear that the matters that were argued before the EJ related to the attempts by the Respondent to vary the terms and conditions of the Claimant's contract of employment by removing any right to bonus payments and by declining to pay any "pay protection" in respect of that loss. Instead, the Respondents paid a lump sum, on the basis that they sought to vary the terms and conditions under which the Claimant worked, and in respect of that were prepared to pay a lump sum. This was set out by the parties in a document produced at page 23 of the supplementary bundle before me. It is headed up "Agreed Minute of Fact and Chronology" and is in the following terms, so far as relevant:-

"Agreed Minute of Fact

* Save as where contrary terms were agreed with the Claimants and/or lawfully varied by the Respondent, the Pre-Modernising Midlothian employment contract (at pages 79 – 85) applied to the Claimants up to and including 28 June 2009. The terms (at pages 79 – 85) applied in addition to any terms set out in the Claimants' offer letters.

* The template Pre-Modernising Midlothian offer letter is at page 78…

* In relation to bonus the Claimants' contract stated under clause 7 ("Pay") (page 82): –

'A bonus scheme is in operation in respect of your post and an outline of the bonus scheme is available from the divisional office. Your hourly rate of pay for the calculation of bonus is £*

* This contract also stated under clause 5(a) (page 81):

'National Terms and Conditions of Employment

In respect of national terms and conditions of employment these are covered by existing collective agreements negotiated and agreed with specific trade union or trade unions recognised nationally for collective bargaining purposes in respect of the employment group to which you belong. These collective agreements are embodied in the scheme of Conditions of Service agreed by the National Joint Council for Local Authorities' Services (Scottish Council) as adapted by Midlothian Council.'

* The bonus schemes relevant to the Claimants were: –

The Lothian Highways Inroads scheme…

* The Claimants were not paid bonus in respect of work done after 30th of April 2009. The last time that the Claimants receive bonus pay was 14th of May 2009 (in respect of weekly paid employees) and 21st May 2009 (in respect of monthly paid employees).

* Modernising Midlothian was the approach adopted by the Respondent to implementing the Single Status Agreement.

* As part of the implementation of Modernising Midlothian, the Claimants were offered new employment contracts by letter dated 5 March 2009.

* Prior to 29 June 2009, the Claimants accepted the new employment contract would apply with effect from 29 June 2009 by completing an acceptance pro-forma.

* The date of 'assimilation' for the purposes of paragraph 19 of the implementation agreement (part of the Single Status Agreement) was 29 June 2009.

* From 29 June 2009 onwards, the Claimants' employment contract was that set out by the template at page 199–201 and example contract at pages 204 – 206."

1. From the table attached to that document it can be seen that the single status agreement was negotiated between the National Joint Council for local authorities and the trade unions on 1 April 1999. The EJ made various findings in fact. In August 2008 the Respondent wrote to the Claimant saying they wished to enter into a formal period of consultation on the implementation of single status. On 15 January 2009 the Respondent wrote to the Claimants to inform them that it intended to cease bonus payments and that they would make available a cash buy-out to staff currently receiving bonus payments. On 2 February 2009 the Respondent wrote once more to staff concerning the offer of a cash payment to buy out those currently in receipt of bonus and stated "bonus payments will not be protected moving forward into the new pay and grading system." On 13 February 2009 a further letter was sent stating that there would be no further compensation if the cash buy-out was not accepted. On 25 February the Respondent wrote to the Claimants stating that the bonus payments would cease with effect from the end of April 2009. On 5 March 2009 the Respondent wrote to the Claimants enclosing the new post modernising Midlothian employment contracts and advised them that the implementation date was 29 June 2009. The Respondent imposed a deadline of 30 March 2009 for voluntary sign-up to the new contract, and on 31 March sent notices of dismissal and re-engagement to those who declined to accept the new terms and conditions. On 1 April 2009 a collective grievance was raised on behalf of the Claimants by the trade union. On 14 May 2009 weekly paid employees were paid the cash payment for buyout of bonus and on 21 May monthly paid employees were paid the cash payment. 28 June 2009 was the effective date of termination of contracts of employees who did not voluntarily accept the new terms and conditions. 29 June 2009 was the date of assimilation and the start date of the post- implementation of Modernising Midlothian employment contracts.

1. The question then was whether or not the wages paid thereafter suffered deductions contrary to section 13 and 27. All of this arose in the context of equal pay. A collective agreement, referred to above was entered into by the Respondents and other local authorities on one side and recognised trade unions on the other. That agreement was dated 1999. Those parties also entered into an implementation agreement in which clause 19 made provision for pay protection in respect of bonus payments. It was in the following terms:–

"Protection

19. Protection at assimilation onto the new spinal column for all employees including bonus earners will be for 3 years on a cash conserved basis. This timescale has regard to the increased potential for equal pay claims should protection be allowed to extend beyond that period."

1. The question which the EJ answered was whether or not that clause had been incorporated into the contract of employment under which the Claimant worked for the Respondent. He came to the view that it had not; he therefore came to the view that there had been no unlawful deduction from wages.

1. The EJ set out his findings in fact in paragraph 4. He found that "Modernising Midlothian" was the approach adopted by the Respondent to implementing the Single Status Agreement and it is described as the strategy and changes in terms and conditions of employment by which the Respondent ultimately implemented the single status agreement, as at the date of assimilation, which in paragraph 4.9 the EJ found to be 29 June 2009. The EJ found at paragraph 4.8 that as part of the implementation of Modernising Midlothian the Claimants were offered new employment contracts and that each Claimant accepted the new contract which would apply with effect from 29 June 2009.

1. He went on to consider the single status agreement noting that under the heading "Pay and Grading" the following appeared:–

"5.1 The pay and grading of jobs must be fair and non-discriminatory, complying with equal pay legislation and associated Codes of Practice and it is recommended that the job evaluation scheme which has been developed for Scottish Councils be used

5.2 The basic pay of each employee will consist of either a point or points on the new Scottish pay spine. If a common system for all employees is not adopted locally there needs to be objective justification for any distinction between those jobs paid on scales and those which are paid on single pay points…"

1. He noted paragraph 19 of the implementation agreement as quoted above. He found at paragraph 4.13 that the single status agreement was negotiated between the "trade union side" and "Management side". He noted that the statement of written particulars produced by the Respondent referred to the agreement thus:–

"In accordance with the Modernising Midlothian Project implemented under the Single Status Agreement 1999. The details contained in both Parts 1 and 2 supersede any pre-existing local agreements that operated in the Council prior to the implementation of Single Status and any Historic National Agreements that are not contained in the current National terms and conditions."

1. At paragraph 4.15 the EJ gave his view as to the situation if it were to be assumed that the terms of clause 19 had been incorporated into the Claimant's terms and conditions of employment. He said that the time for inspection of it is at and immediately prior to the time of the conclusion of the collective agreement, that is 30 June 1999. As I understood them, both counsel for the Claimant and that the solicitor for the Respondent argued that the EJ was in error in this paragraph. The error is repeated in paragraph 4.17 where the EJ found that "the right to protection on a cash conserved basis from loss of remuneration resulting from discontinuance of bonus payments would not extend beyond 3 years measured from 30 June 1999." On any view of it, they argued, the meaning of clause 19 was that protection would last for 3 years from assimilation and it was agreed that assimilation did not happen until 2009. It seems to me that they are correct in that. I have however decided that any error made by the EJ in this matter does not affect the rest of the judgment. It is plain from the rest of his judgment that the EJ understood that assimilation did not happen until 2009.

1. The EJ found at paragraph 4.22 that at a meeting on 8 January 2009 between the Respondent and trade unions the Respondent advised that the topic of pay protection had been discussed at a Council Meeting on 23 December but it had been agreed not to protect bonus going forward. In paragraph 4.24 the EJ found that the Respondent sent a letter to the Claimant dated 15 January 2009 in the following terms: –

"The Council require to implement a system that is free of discrimination and equitable for all, and have, after careful consideration, concluded that to protect bonus payments moving forward would not be conducive to this end goal. On this basis it is the intention of the Council to cease to pay bonus payments within the old system … The Council appreciate that this is a current contractual term, and on this basis it is desirable to compensate individuals in receipt of bonus in order to terminate this condition. Individuals should understand that the Council cannot protect bonus in any form following implementation of the new system as the Council believe that to do so moving forward could result in potential indirect discrimination… My purpose in writing to you is to make you aware of this approach, and I will write to you again in due course with more details about the cash sum being made available to you."

1. The EJ found that that letter constituted notice of an intention on the part of the Respondents to exclude bonus payments from the post assimilation protection provisions to be applied from the single status Agreement, and of an intention to withdraw the contractual right to receive bonus statements. In paragraphs 4.27 the EJ set out the terms of an explanation in a letter dated 2 February 2009 from the Respondent in the following terms: –

"I am writing following my initial correspondence, which confirmed the Council's intention to offer those currently in receipt of bonus a cash payment to buy out this contractual term, prior to implementation of Modernising Midlothian … I would like to clarify the following points. Cash buyout is a one off payment, it is not a retention payment (golden handcuffs), i.e. you do not require to repay the Council if you leave or move post within the organisation. This is, therefore, more attractive than a protection payment which is made on a pro rata basis over the next 3 years of your employment, ceasing if you leave the Council's employment, if you are promoted, or move to a different position within the Council… I would reiterate that the Council have to implement a system free of discrimination and equitable for all, and have, after careful consideration concluded that to protect bonus payments moving forward would not be conducive to this aim. Therefore, bonus payments will not be protected moving into the new pay and grading system…"

1. He found at paragraph 4.28 that the letter, objectively construed, constituted notice of intention to terminate the existing contractual right to bonus payments prior to assimilation and to exclude historic bonus payments from the scope of the pay protection to be delivered at assimilation. He found at paragraph 4.29 that in the same letter the Respondent also stated: –

"It is important to stress that the Counsel have to implement a pay and grading system free of discrimination and equitable for all, and have concluded that to protect bonus payments moving forward would not be conducive to this aim. Other Council's (sic) have considered simply terminating bonus arrangements with the dismissal of the old contract without offering a 'buyout' payment. However Midlothian Council feel that this would not be conducive to good staff – employer relations or in the current financial climate tenable for those that are currently contractually in receipt of bonus … The council hope to be in a position in March to provide you with details regarding the Cash buyout payment amount applicable for your post. Around this time you should also have been sent the detailed contractual documentation for your post for consideration. Should you chose (sic) not to accept the Cash buyout you need to be aware that there will be no further compensation offered and bonus payments will not be protected moving forward from the point of the offer of cash buy out."

1. The EJ found that the letter of 2 February constituted notice of intention to discontinue the contractual right to bonus payments prior to the date of assimilation. He noted that by letter dated 25 February 2009 the Respondent wrote further to the Claimants advising them that their bonus payments would cease with effect from the end of April 2009. He quoted the following parts of the letter: –

"Buyout of (Bonus) Contractual Term

As previously advised Midlothian Council cannot continue payment of bonus following implementation of new Modernising Midlothian pay and grading scheme as this would result in indirect sex discrimination and the Council could continue to be litigated against. This leaves the Council in an untenable position with the option to simply stop bonus payments on dismissal of the old contracts on the basis of this discrimination. However, the Council also appreciates the impact that this action could have on current bonus earners, like you…

On this basis the council has instead decided to buy out the bonus from your current contract, effective from the end of April 2009. We believe in the interest of both good industrial relations and the potential impact on individuals affected this is the most reasonable and affordable course of action … It is anticipated that a formal offer on this basis will be made during March 2009 … No pay protection will be offered on the bonus pay element when the new contract is introduced, so it is the council's belief that acceptance is in the best interest of all bonus earners."

1. The EJ found at paragraph 4.31 that that letter constituted notice on the part of the Respondents of termination of the Claimant's then contractual entitlement to receive bonus payments and to exclude historic bonus payments from the scope of the pay protection to be delivered at assimilation.

1. At paragraph 4.32 to the EJ found that the Respondent sent a letter on 5 March 2009 which included the following:–

"This letter tells you how the new terms and conditions will affect your post … Your contract of employment will change as all existing pay and conditions schemes (including bonus schemes) under the former A P & C and Manual Worker national schemes of pay and conditions of employment (as amended locally by Midlothian Council) will be replaced …"

1. A statement of written particulars was enclosed with the letter which contained the following preamble:–

"This Statement sets out the written particulars of your employment as required by the Employment Rights Act 1996 (as amended) and in accordance with the Modernising Midlothian Project Implemented under the Single Status Agreement 1999. The details contained in both Parts 1 and 2 supersede any pre-existing local agreements that operated in the Council prior to the implementation of Single Status and any historic national agreements that are not contained in the current national terms and conditions."

1. Employees were invited to accept the variation. Those who did not were written to by the Respondent on 31 March 2009 in the following terms:–

"As you are aware the Council recently wrote to you offering the opportunity to vary your terms and conditions by voluntary agreement … The Council have not received the signed agreement from you.

As indicated in previous correspondence, the Council is required to introduce an affordable pay and grading system that meets equalities Legislation. In the absence of a collective agreement with the Joint Trades Unions and your voluntary acceptance of the new terms and conditions, the Council has no option but to proceed to implement change through a process of dismissal of your current contract and offer to re- engage you on the new terms and conditions. The detailed reasons for this have been explained to you in previous correspondence.

The Council is serving you with notice in excess of the statutory maximum 12 weeks notice of dismissal of your current contract of employment. The current contract will therefore be dismissed with effect from 11.59 p.m. on 28 June 2009 … You have already been offered new contractual terms and conditions (amended as appropriate) which commenced at 00.00 am on 29 June 2009 and will supersede all previous contractual terms.

These new terms are deemed a suitable alternative to dismissal by reason of redundancy from the council …"

1. On 1 April 2009 a collective grievance was raised on behalf of the Claimants by Unison.

1. The grievance contained amongst other things the following contention:–

"Bonus Buyout

We believe that that the Council's position on bonus is unreasonable. To ask workers to abandon existing contractual earnings immediately, without notice or protection is unreasonable. To do so under threat of dismissal is particularly unreasonable. All net losses should be protected and that protection should include bonus losses calculated with reference to the principles in Bainbridge. Bonus earners were originally told their pay would be protected. Then they were told that bonus would be withdrawn and a buyout offer would be made prior to the 31 March deadline for voluntary signup. No such offer was forthcoming. While Unison never endorsed the buyout option we say the following – from an individual member's perspective it is unreasonable for the Council to threaten dismissal and re-engagement under a promise to make an offer to buy out a contractual term and then fail to deliver on that promise. Our members have a reasonable expectation that they would receive a formal offer in relation to bonus prior to the deadline. Many were confused and angry to face the threat of dismissal when no offer was on the table.

We ask that the dismissal and re-engagement process be suspended until such times as the issue of bonus is resolved."

1. The grievance was determined so far as relating to protection arrangements and bonus buyout on the basis that the Council required to stop making bonus payments in order to comply with the law. An appeal was lodged against that determination. A second collective grievance was lodged on 26 June 2009. It was agreed that the appeal and the second grievance would be dealt with at the same time.

1. By letter dated 6 May 2009 the Respondent wrote to the Claimants advising that they had now revised upwards the value of the capital bonus buyout. The actual amount payable to each person was stated. As stated above, payments were made on 14 and 21 May. At paragraph 4.43 the EJ found that the payments were broadly equivalent to 18 months' worth of the value of historic bonus entitlement. As clause 19 had referred to payment of bonus for 3 years post assimilation the amount was approximately one half of what was due if clause 19 was effective.

1. The EJ set out the contentions for the Claimant in his paragraph 5. The primary contention was that the Claimant had suffered a deduction from wages in respect of the money previously paid under the bonus scheme and as he had a right to that money he could make a claim under section 13 of ERA 1996. It was argued that it was competent for parties to incorporate by reference words or terms contained and described in collective agreements even though the collective agreement itself was not directly enforceable. It was argued that clause 19 had been incorporated and that there was therefore a contractual right on the part of Claimants to cash protection in respect of the discontinuance of bonus payments. It was argued that if there was ambiguity as to whether the provisions had been expressly incorporated by reference, then they had been incorporated by implication. It was further argued that if there was an ambiguity as to the meaning of the provisions of the clauses it should be construed contra proferentem on the basis that they had been drafted by the Respondent. It was argued that the payment of bonus was not a severable part of the key assimilation contracts and so was not capable of termination other than by termination of the contract of employment in which it existed. It was said that the remuneration paid to the Claimants in the name of bonus had become a consolidated part of their wages because the rate of bonus payment had become a fixed and permanent rate which did not depend on measurement.

1. A separate argument is noted at paragraph 6.6 in which it was argued that the termination clause founded on by the Respondents required 3 months' notice which had not been given, being two days short. The EJ reminded himself at paragraph 6.10 and 6.11 that the Claimant did not argue that his bonus payment should continue or that it had been unlawfully deducted from him. Rather, he argued that his bonus protection payment had been unlawfully deducted. It was noted at paragraph 6.11 that the Claimants did not seek to recover in terms of section 13 deductions of bonus payments but rather a payment in respect of bonus protection.

1. The EJ set out the Respondent's position before him, which was broadly to the effect that the Claimant's right to historic bonus pay ceased on either 28 or 29 June 2009, as at the date of assimilation. It was argued that the single status agreement did not have direct contractual effect and could not be founded on directly and that paragraph 19 of that agreement had not been incorporated into the Claimant's terms and conditions of employment, as at the date of assimilation. Thus there was no contract to extend "protection against loss of remuneration" from the date of discontinuance of the Claimant's historic right to bonus. It was argued that the Respondents had effectively terminated the Claimant's bonus schemes and entitlement to receive bonus payments prior to 29 June 2009 and therefore even if paragraph 19 of the Single Status Agreement had been incorporated it was not effective in setting up the bonus protection as the Claimant at that date was not a bonus earner. The other argument was to the effect that all the Claimants had agreed to a consensual variation of the terms and conditions of employment and had accepted on either 14 or 21 May 2009 cash payments made to them by the Respondents which had been described at the time of making as a "buyout" payment, in respect of the contractual element of bonus which was to be discontinued after assimilation. Thus the Claimants waived any right that they might have had to make the claim they sought to make.

1. The EJ recorded that an argument was put up that paragraph 19 of the single status agreement was not apt for incorporation into the Claimant's employment contract. As a fall-back position, if it was incorporated it could not have the effect of protecting against the loss of bonus payments for 3 years from the date of assimilation, because such an effect would be contrary to the principles and forming the introduction of the single status agreement, which were those of ensuring that pay and grading of jobs was fair and non-discriminatory. It was argued that any reference to the contents of the single status agreement made it clear that the agreement was to be applied "in accordance with Modernising Midlothian" and that was a reference to the version of the single status agreement which the Respondent ultimately opted to adopt, that is a single status agreement which did not include pay protection.

1. The EJ set out the Respondent's position to the effect that the Respondent had given notice, by letter dated 15 January 2009 that the scheme which involve bonus payments was terminated. If that was not accepted then it was argued that the contractual right to bonus protection did not exist as the Respondent made it plain that it was not prepared to pay bonus protection. Lastly, it was noted (page 61) that the Respondent submitted that the true nature of the claim was an action for declarator and damages for breach of contract which did not fall within the jurisdiction of the ET.

1. On page 61, paragraph 8, the EJ began his discussion of the law. He correctly directed himself on the terms of sections 13 and 27 of the Employment Rights Act 1996. He made reference to the case of Delaney v Staples [1991] ICR 331 and directed himself that the terms of section 13 protect a worker, not only in a situation where an employer has made an unlawful deduction from a sum which the employer admits was due, but also where the employer is denying that it owes the worker the sum claimed. He found at paragraph 8.15 that he had jurisdiction to consider whether or not there was a legal entitlement to the sum in question. He stated in terms that he required to consider "what both parties agreed the Claimants were contending, namely that they had contractual entitlement to protection, on a cash conserved basis, for a three-year period from the date of assimilation 29 June 2009, from the loss of remuneration resulting from non-continuance and absence, in their varied terms and conditions of what had been an historic contractual right to receive fixed bonus payments, was capable of constituting "wages properly payable by the Respondents to the Claimants" for the purposes of section 13 (3) of the 1996 Act, unless the need to do so was precluded by a prior determination of some ante matter".

1. The EJ spent some time discussing whether or not the sums where ascertainable but noted at paragraph 8.20 that in the instant case it was a matter of concession and agreement between the parties that if the Claimants had some legal entitlement to protection of the historic bonus payment, then the sums were liquid and ascertainable. He then set out the issue which required determination, which was whether there existed some legal entitlement on the part of the Claimants to protection of historic bonus payments after the date of assimilation being 29 June 2009. He decided, at paragraph 8.23, that if the Claimants were unable to prove the existence of an actual contractual entitlement to payment subsisting beyond 29 June 2009 and were only able to argue that the Respondents, in omitting such an entitlement in the contract, omitted something which they should have included, then their claims would fall outwith the unlawful deductions jurisdiction. He decided that would be so because the claims would be for breach of contract and damages rather than for unlawful deductions. It appears clear from this and the preceding paragraph that the EJ was aware that the date of assimilation was 29 June 2009.

1. In his paragraph 9, the EJ discussed whether a contractual right to payment could be established. He correctly directed himself that such a right might be found either as an express term of the contract of employment, an implied term of the contract or attempt to be implied by custom and practice. He found at paragraph 9.4 and 9.5 that the Respondent was entitled in law to terminate payment of bonus on giving appropriate notice. He found that the notice given was appropriate. He found at paragraph 10.8 that he was satisfied that there was no contractual right on the part of the Claimants to receive bonus payments beyond the date of assimilation. He then turned his attention to the claim that was actually before him, that was for pay protection rather than for bonus payments. At page 81, he quoted the vital clause of the agreement as follows:–

"19. Protection at assimilation onto the new spinal column for all employees including bonus earners will be for 3 years on a cash conserved basis. This timescale has regard to the increased potential for equal pay claims should protection be allowed to extend beyond that period".

He went on to consider whether that term had been expressly incorporated into the contract. He found, by reference to the correspondence in which the Respondents advised employees of their intentions, that the term was not incorporated into the contracts. He took full notice of the case of Agnew v North Lanarkshire Council UKEATS/0029/09/BI in which it was decided that an identical clause was apt for incorporation. He considered, however, that it had not been incorporated. He noted at paragraph 21 that that was a question of fact. He considered the case of Robert Barry & Co v Doyle [1988] SLT 1238, and decided that the Respondent had made it perfectly plain that pay protection would not be paid beyond the date of assimilation.

1. He then went on to consider the case of McCutcheon v David MacBrayne Ltd [1964] SC (HL) 28. He found at paragraph 24 that the Respondent had rejected in the correspondence, the payment of pay protection. At paragraph 25 the EJ stated as follows:–

"25. On an objective construction, the contract intention at the tempus inspiciendum of 30 June 1999, was to extend such protection from a period of 3 years from that date and not beyond it because of the increased potential for equal pay claims; such an intention is one entirely consistent. One of the core purposes of the single status collective agreement, namely the eradication of pay differentials with the workforce which were discriminatory in terms of sex; and further, because that the Respondent expressly exclude bonus from the Pay Protection list in the contract document itself". (Sic)

1. The EJ then went on to consider whether, if an ambiguity arose was it might be possible to look at prior communing is between the parties, not to obtain gloss on the terms of the contract but to establish the knowledge of the circumstances in which the words in the contract were used. He made reference to the case of Inglis v Buttery (1877) 5 R 58. He also made reference to the terms of the Contract (Scotland) 1997 (sic). He noted the statement in the case of Prenn v Simmonds (1971) HL 1 WLR 1381 that contracts are not made in a vacuum and the court should know the commercial purpose of the contract. He also made reference to the case of Whitworth Street Estates Limited v Miller [1970] AC 583. He made reference to the principle of construction of a contract that it should be construed by considering the whole express terms of the contract.

1. At paragraph 31 he gave his view in applying the various principles he had set out. He found that the anticipated right to pay protection was one primarily intended to extend a three-year period from 30 of June 1999 and was one which would not extend beyond that period, if the result of doing so would be to increased potential for equal pay claims. At paragraph 32 there is a typing error in the date when the judge refers to 29 June 2012; I think he must mean 29 June 2009. He finds in that paragraph that no matter what aspiration the Claimant might have to pay protection, there could be no reasonable belief on his part that the Respondent was prepared to agree to that. He then went on at paragraph 34 to note that while the doctrine of personal bar had not been pled before him, he took the view that it might arise in the particular circumstances of the case. He found that the employees returning the acceptances of the Respondent's offer of continued employment, on materially varied terms and conditions, caused the Respondents to alter their position by not serving notice of termination of employment. Some employees did not return the acceptance and notice was served on them, but it was withdrawn when they did make an unqualified acceptance of the variation. The EJ was of the view that the Claimants were personally barred. He made it clear that he did not base his decision on that, it not having been pled before him.

1. The grounds of appeal for the Claimant were that the Tribunal had erred in law/or in any event had reached perverse conclusions. These grounds were amplified and the Claimant accepted that he (and the other Claimants) had entered into new contract of employment on 29 June 2009. It was accepted that the new contract implemented the single status agreement locally under what was labelled Modernising Midlothian. It was asserted that the EJ had erred in not deciding that the terms of clause 19 were incorporated in the contract offered to the Claimants by letter of 5 March 2009. No further specification of the error is given. It is then asserted that the Tribunal erred in considering pre-contractual negotiations in reaching a conclusion as to the construction/interpretation of the Claimants' contracts post 29 June 2009. It is stated that the Tribunal erred in law by considering pre-contractual correspondence. Further, it is stated that the Tribunal erred in reaching an impermissible conclusion as regards the construction of the pre-contractual negotiations, as the pre - offer negotiations did not expressly and/or definitively exclude the protection of bonuses. That assertion is repeated in a slightly different form in a further ground of appeal where once again it refers to the pay protection not being expressly excluded. It is averred that the Tribunal erred by finding that the new contract was agreed between the Claimant's union and the Respondent, because the offers of employment were made under threat of dismissal. It is suggested that the EJ erred by not construing the contract contra proferentem.

1. Ground 2 of the grounds of appeal relates to the EJ finding that the single status agreement should be construed as applying pay protection from 30 June 1999. This is said to be an error as the agreement between parties expressly records that the date of assimilation is 29 June 2009 and it is not in dispute that the clause indicates that protection applies from assimilation. It is also argued that the judge erred by relying on personal bar or waiver. It is said that this was not raised before him. In any event it is argued that the judge erred by finding that personal bar would apply because the Claimants had retained sums paid to them. It is stated that there was no evidence of any agreement that those sums were in respect of payment protection compensation. It is argued that the judge erred in finding that the claims had been validly compromised under section 203 ERA 1996.

1. Ground of appeal 3 relates to the EJ's finding that bonuses had not become fixed and were capable of termination. It is stated that the evidence, from Mr Livingston, was to the effect that payments were fixed and were to be paid forever.

1. I found the submissions from Mr Morgan, counsel for the Claimant, difficult to follow. His primary submission was that the ET reached a conclusion which was a perverse decision, as in the case of Yeboah v Crofton [2002] IRLR 634. He argued that there had been a misunderstanding of the evidence leading to decisions which did not have facts to support them. His argument was that the ET erred in deciding that the Clause 19 was not incorporated in the employment contracts. The facts were largely undisputed. He referred to the supplementary bundle at pages 23 to 71. He said that one matter was agreed by the parties but was not agreed by the judge. That could be seen at page 24 where it was agreed by the parties that assimilation took place on 29 June 2009. The judge thought that it was in 1999, which would lead to protected pay ending in 2001. The EJ was wrong about the date of assimilation. He referred to the letter from the Respondent dated 5 March 2009, which was the crystallised or finalised offer that the council made to the workers. He referred to paragraph 4 and paragraph 5 (to be found at page 215 of the supplementary bundle) and noted that the contract was to supersede all previous contracts. It was governed by the single status agreement and could be varied by agreement with the trade union or by agreements in future. There is not and never has been a single document called "Modernising Midlothian" negotiated with the unions or anybody else. Mr Morgan agreed that the word "incorporated" is not in the letter referring either to the single status or to the Modernising Midlothian documents. At page 215 the document is said to be "governed by single status". What has to be construed, he argued, are the words "governed" and "implemented".

1. He argued that it was not an issue whether clause 19 is apt for incorporation as that was decided in the case of Agnew. His submission was that the construction is a matter of law, to be accomplished by considering the documents. There was nothing in the documents that excluded the matter of the bonus.

1. Mr Morgan submitted that the contract offered to the Claimant is said to be governed by the single status agreement. He anticipated that the Respondent would argue that Modernising Midlothian is what is incorporated.

1. The error in law, according to Mr Morgan was that weight was placed on pre-contractual letters. He argued that the consultation period which took place was in fact a period of negotiation; he argued that 'consultation' was a euphemism for negotiation. That being so, the position taken by parties in negotiation was not to be used in construing the contract they eventually reached. Pay negotiations started at the beginning of 2008 and continued until 2009. He then turned to the case of Prenn v Simmons. He made reference to page 240 where Lord Wilberforce stated:-

"The reason for not admitting evidence of these exchanges is not a technical one … It is simply that such evidence is unhelpful. By the nature of things, where negotiations are difficult, the parties' positions, with each passing letter are changing and until the final agreement, although converging still divergent. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used, nothing is gained by looking back; indeed something may be lost since the relevant surrounding circumstances may be different. And at this stage there is no consensus of the parties to appeal to. It may be said that previous documents may be looked at to explain the aims of the parties. In a limited sense this may be true; the commercial, or business object of the transaction objectively ascertained may be a surrounding fact … But beyond that it may be difficult to go; it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention; the parties indeed may be pursuing the intention with differing emphasis and hoping to achieve it to an extent which may differ and in different ways."

1. Mr Morgan argued that the EJ, at page 90 of his reasons showed that he had misunderstood the case of Robert Barry & Co v Doyle. He argued that in the present case the matters which the EJ thought relevant were in fact negotiations, and so should not have been used as aids to construction. He then referred to the case of Inglis v Buttery &Co **to show that the House of Lords had come to the same conclusion as the Court of Session but had not approved of its reasoning. He argued that the decision was to the effect that negotiations should not be considered.

1. The fall back position argued by Mr Morgan was that bonus protection was not excluded. So far as I understood his submission, he argued that a party's intent was not the same as what that party achieved; so expressions of intent had to be taken with the caveat that they were merely expressions of intent.

1. Mr Morgan submitted that the EJ had plainly erred if he decided that the pay protection starting date was 1999. This error he argued permeated the whole judgment. He made reference to pages 94, 97 and 98 of his judgment and in particular paragraphs 31 and 32.

1. He then turned to paragraphs 33 and 34 which are concerned with personal bar. He said that this was neither argued nor pled. He submitted that even though the EJ said that he had not relied on the doctrine of personal bar in making the decision the judge nevertheless had fallen into error. He made reference to the case of Miller & Partners v Whitworth Street Estates (Manchester) Ltd.

1. Counsel argued that the EJ had ignored evidence from two witnesses, Miss Kali and Mr Livingston. Mr Livingston's evidence had been led, for reasons which remained unexplained to me, after the Claimant's case had closed. Counsel stated that the documents at pages 70, 71 and 71A of the supplementary bundle had been put before the EJ but he had made no findings about them. These documents are part of the written statement of employment particulars. Mr Morgan's position was that what was important was what was not said in these documents. Pay protection was not excluded.

1. The documents at those pages were lodged with the EJ after the case had been heard. Ms Marr, solicitor for the Respondent, frankly told me that that had happened because they had been overlooked. This seemed to me to be a strange state of affairs which may have led to some of the confusion in the case. The document at page 70 is in the following terms:

"Midlothian

EMPLOYEE PERSONAL PROTECTION POLICY MODERNISING MIDLOTHIAN

With effect from the date of implementation of modernising Midlothian, employees whose grade immediately prior to this date is above the maximum point of the new evaluated grade for their job will remain protected on their contractual pay (basic pay and contractual overtime where appropriate will be consolidated to give a figure for pay protection). This is termed as 'red-circling'. This protection will be on a cash conserved basis which means that their earnings will be conserved at the current level for a maximum of 3 years or until such time as the effect of nationally negotiated pay awards applied to the maximum point of the new evaluated grade overtake the cash conserved amount, whichever is the earlier. Employees remaining protected at the end of the 3 year period will be assimilated to the maximum point of the evaluated grade for their job. Cost of living increases during the period of protection will not apply to those employees remaining red circled….."

Page 71(a) is in the following terms:

"AGREED POSITION IN RELATION TO THE DOCUMENT ENTITLED 'EMPLOYEE PERSONAL PROTECTION POLICY MODERNISING MIDLOTHIAN'

(a) Witness evidence was concluded on 31 May 2012, in particular the witness evidence of the Respondent's witness Miss Kali was concluded on this date;

(b) The document entitled 'Employee Personal Protection Policy Modernising Midlothian' was disclosed to the Claimants under email dated 26 July 2012;

(c) The document was put before the Employment Tribunal as part of the agreed statement of fact; and

(d) Oral submissions were made on the document by the parties at the hearing of 31 July 2012 though no evidence was led in this document from the witnesses of either party".

According to Ms Marr, the "statement of written particulars" given to employees was in two parts. The first part, which was produced at page 216 of the supplementary bundle was before the EJ. It was then noticed that there was a second part, and that was produced after all of the evidence as page 70.

1. Mr Morgan submitted that the document which is the second part of the statement, as set out in the preceding paragraph did not exclude pay protection for bonuses.

1. Mr Morgan referred to Mr Livingston's evidence in which Mr Livingston had explained that at one time bonuses had been paid as a result of measurement by the Respondent. That had been altered and bonuses were paid without measurement on a contract agreed collectively whereby the worker got the same amount of money every week although part of it was called in his pay packet a bonus. Mr Morgan sought to argue that because such bonuses were called "permanent" or "fixed" they were indeed permanent and could not be stopped. He pointed out that some of the bonuses were as much as 33% of wages. He sought support in Miss Kali's evidence for this. He said that in her evidence one could deduce that the bonuses were contractual and therefore continued in payment. His secondary submission was that the bonuses had not been stopped by the employer and therefore bonus earners were entitled to payment for them after the new contract came in.

1. Ms Marr, solicitor for the Respondent, lodged a skeleton argument. Her oral submissions in supplement of it dealt with the submissions made by Mr Morgan. She submitted that the decision of the EJ was not perverse as understood in the case of Yeboah v Crofton. Nor were there any errors of law as set out in the cases of British Telecommunications plc v Sheridan [1990] IRLR 27 and Brent LB Council v Fuller [2011] ICR 806. She explained that the background to the dispute was that the Single Status Agreement was a collective agreement entered into between the Scottish Joint Council, which was a body representing employer councils in Scotland and the Trade Unions. Thus it was not a contract of employment; she accepted terms in it could be incorporated into a contract of employment if they were apt for incorporation and if they actually were incorporated. The purpose of the collective agreement was to introduce equality of pay and conditions and to do so councils had to review their terms and conditions. Each council required to consider matters for itself and implement such changes as they decided were required. The Respondent had devised a strategy which it called "Modernising Midlothian". That was the name used to describe the Respondent's approach to implementation of the single status agreement. The EJ had understood this and had set it out at paragraphs 4.12 to 4.14 and 4.19 of his written reasons. The dispute between the parties was whether clause 19 of part 1 of the single status agreement was incorporated into the contracts of employment or not. She understood the Claimant to argue that it was incorporated by reference, because the letter dated 5 March 2009 from employer to employee stated 'Please note that the new contract of employment is governed by the Single Status Agreement' and the Statement of Written Particulars (at page 61 of the supplementary bundle) given to employees stated 'This statement sets out the written particulars of your employment as required by the Employment Rights Act 1996 (as amended) and in accordance with the Modernising Midlothian Project implemented under the Single Status Agreement 1999.' Thus, at the ET, the Claimant's counsel had argued that the terms of clause 19 had been incorporated. The Respondent's position had been and remained that clause 19 was not incorporated. It was a part of the collective agreement, but was not part of "Modernising Midlothian".

1. Ms Marr submitted that the EJ had not erred in law. He had directed himself appropriately on the law on construction of contracts. He recognised the need to separate negotiation from the completed contract. He appreciated that clause 19 could have been incorporated, under the authority of the case of Agnew, but found that as a matter of fact it had not been. She argued that the EJ had correctly applied proper principles of construction. She made reference to the book by Professor McBryde "The Law of Contract in Scotland" 3rd edition, chapter 8. She argued that it was not the correct function of a court to consider only the literal meaning of words. Rather, the court had to construe the whole contract, bearing in mind the circumstances in which it was made. She argued that Professor McBryde was correct at paragraph 8.22 of his book, to state:–

"Contracts do not exist in isolation from the rest of the world and it would be foolish for a court to ignore the circumstances in which the contract was created."

1. Ms Marr agreed with the submission made by Mr Morgan that it is not permissible to look at prior negotiations as an aid to construction, but she argued that it can be difficult to draw the line between what is a matter of negotiation in which parties take up positions, which do not represent the final position, and what is admissible as evidence of surrounding circumstances. She argued that the EJ had correctly summarised the principles of construction and had applied them.

1. According to Ms Marr's argument, it was clear that there had been negotiation between the parties but no agreement was reached about the buying out of bonus. That being so, the Respondent determined on a course of action which was to terminate the bonus schemes and to offer to buy out the schemes as an incentive to the employees to accept the new contract on offer. She argued that the EJ was correct to find that the employer was not seeking to negotiate on the version of the Single Status Agreement, known as Modernising Midlothian; rather the employer was stating the terms that it was offering to the employees. She argued that the conclusion reached by the EJ, which was that the employer made it clear that it was offering to buy out the bonus, and that it would not pay in respect of protection of the previous pay, was a conclusion which he was entitled to reach.

1. Ms Marr described Modernising Midlothian as a suite of policies and not a contract. She agreed that there was no express term in which the bonus protection was taken out. She referred to the written reasons at paragraph 17 and noted that the EJ held that clause 19 was capable of being incorporated, but he found as a fact that it had not been.

1. With regard to the documents at 70, 71 and 71A, Ms Marr stated that they added little. She accepted that the EJ had not made a finding in fact about them but said that they were not sufficiently weighty for him to do so.

1. As regards Mr Livingston's evidence she argued that he did not say that the bonus could never be terminated but rather that it was always to be the same amount of money every week. She did not accept that Miss Kali had given any evidence to the effect that the bonuses could not be terminated.

1. Ms Marr's position was that the correspondence, which the EJ was entitled to look at, was correctly interpreted by him as being entirely clear in that it excluded bonus protection.

1. The EJ at least on one view of it appeared to find that the date of assimilation was 1999. In her skeleton argument Ms Marr stated that while nobody contended for that she would accept it. I did not understand that submission. It seemed to me that Ms Marr's position must be that it had been agreed between parties that the date of assimilation was 29 June 2009. While there was a good deal of confusion about this it did seem to me that the EJ was in fact aware of that.

1. Ms Marr argued that the personal bar part of the case was not something on which the EJ relied and that no further submission on it was needed. With reference to the statutory compromise of agreements referred to in the appellant's note of appeal, Ms Marr argued that this turned on a misunderstanding in paragraph 6.9 of the judge's position. He had not found that there had been any compromise. Ms Marr argued that the EJ had not made a finding that the claims had been compromised under section 203 of ERA. Rather he had found that the Claimants had agreed to relinquish bonus payments in exchange for the buyout through a consensual variation.

1. Ms Marr summed up her position regarding the documents which were sent to the EJ after the hearing was completed as being that it was clear that he knew about them because he did refer to the appendices, where they were located. She argued that the Claimants were over-analysing the written reasons and that when they were looked at properly, that is when they were taken as a whole it was obvious that the EJ was entitled to conclude that the bonus was not to be protected.

1. Mr Morgan had made an argument before the EJ that the clause 19, if it was thought to be ambiguous, should be construed against the Respondent. Ms Marr argued that it was not in any way ambiguous but in any event that the clause had been arrived at by mutual agreement between parties who were on an equal footing, being the Scottish Council employers on one side and trade unions on the other. She made reference to Professor McBryde in his book at paragraph 8.39.

1. Ms Marr explained that the parties did not eat lead oral evidence on the document, at the Employment Tribunal. No written submissions were made on it. Although oral submissions were made. Anticipating the argument that the EJ had failed to deal with this in his written reasons, Ms Marr stated that it was clear that the EJ knew about it because he referred to the appendices. He decided that the correspondence from the employer made it very clear that the bonus would not be protected. She argued that the Claimants were overanalysing the written reasons and that when they were looked at properly, that is when they were taken as a whole, it was obvious that the EJ did look correctly at the circumstances in which the parties entered into the contract and made a conclusion that he was entitled to reach, that the bonus was not to be protected.

1. Ms Marr argued that the Claimant's argument about the contra proferentem rule was a misunderstanding. She referred once again to Professor McBryde's book in which he defined the rule. At paragraph 8.38 as follows: –

"An ambiguous expression is construed against the interests of the party who has drafted it."

1. The EJ had found that the Single Status Agreement was arrived at by mutual agreement between parties who were on an equal footing, being the Scottish Council employers on one side and the trade unions on the other. She submitted that, therefore, the rule does not apply, making reference to Professor McBryde's remarks at paragraph 8.39 and his reference to the opinion given in the older authority of Gloag.

1. Ms Marr argued that it was not disputed that there were on-going grievances or that contracts were offered under the new terms under threat of dismissal throughout June 2009, which was obvious from the correspondence at which the EJ had looked. She argued that all of that was irrelevant as it was clear that the judge was entitled to find that the offer by the employers did not incorporate clause 19.

1. If the Claimant was arguing that the EJ had reached a perverse decision, which according to Ms Marr was not entirely clear from his grounds of appeal, she argued that the high test set out in the case law had not been met. She argued that there was no way in which the EJ's decision could be said to be irrational or certainly wrong. As I understood her, Ms Marr argued that even if the EJ had made an error about the date of assimilation, that should not vitiate his judgment as it was clear from the judgment that he had used different dates. She accepted that it had been agreed between the parties that the date of assimilation was 29 June 2009. It was clear, as outlined above, that while the judge had used different dates he did understand that the date of assimilation was 29 June 2009.

1. As regards personal bar, Ms Marr submitted that paragraph 35 of the judgment was not an operative part of the judgment. The judge had made it clear that he intended to address all matters put before him but he had also addressed this matter, which had not been put before him. She noted however that he said that he "observed" that the rule of personal bar may arise and she argued that showed that he was not making his decision on the basis of that doctrine but was merely making an observation. She went on to submit that if the Tribunal did decide the case on personal bar, then it was correct so to do under authority of the case of Gatty v MacLaine (1920) SC 441 and under reference to Professor McBryde at chapter 25, paragraphs 8-14. She argued that the EJ did not err when he found that the Claimants had given up their right to protection of bonus payments by accepting the new contract. Any grievances extant at the time were not relevant, as they were collective grievances lodged by the union.

1. In relation to the evidence which had been led from Mr Livingston and Miss Kali, it was argued in behalf of the Respondents that there was a dispute over the evidence given by Mr Livingston. The Claimant wanted to argue that Mr Livingston's evidence was that the bonuses had become permanent and that payment of them could not be stopped. The Respondent argued that Mr Livingston's evidence was that the bonuses were fixed, which meant that the same amount was paid every week under the name of a bonus. That was in contrast to an old previous practice when work had been measured and bonus paid as a result of that measurement. In order to resolve the dispute about the evidence, the judge's notes had been recovered. Ms Marr argued that the interpretation sought by the Respondent was the correct interpretation as could be seen from the notes. Mr Livingston had said that the bonus would be permanent and it would not be lost, if for example the worker was off sick or on holiday, as it would be a fixed percentage, although would be slightly less than the maximum that could be achieved under the measurement scheme. Ms Marr argued that when the witness said that the bonus was fixed and permanent he meant that it would always be the same and the amount would not vary. Ms Marr argued that the EJ was correct to admit Mr Livingston's evidence, but argued that even if he should not have done so, it would make no difference. The EJ had indicated that paragraph 3.6 that Mr Livingston's evidence may not add anything to the evidence already before him.

1. There was also a dispute about Miss Kali's evidence. It was argued by the Claimant that her evidence was that the bonuses were fixed and could only be terminated either by agreement or by the end of the contract. The Respondent argued that Miss Kali's evidence was that the employer had the right to end the bonus scheme on notice. She did refer to a "twin track" approach being adopted by the Council and according to Ms Marr by that she was indicating that when the letter 15 January 2009 was issued to the employees advising that if the new terms and conditions were not accepted that employment would be terminated, that there were invitations to the union to negotiate in an attempt to get an agreement. Ms Marr argued that while the employer was prepared to negotiate with the unions, there was no evidence that they could not stop paying the bonus if they took that decision. There was discussion about whether the ending of the bonus would happen along with a buyout or whether there would be termination of existing contracts, no cash buyout and offers of re-engagement. In summary, on this part of the argument, Ms Marr argued that there was no error in law asserted by the Claimant; still less was there any argument that the EJ had reached any decision that he was not entitled to make. Ms Marr argued that the appeal should be dismissed.

1. Mr Morgan sought a right of reply. He wished to make clear that the EJ had misunderstood him if he thought that he had submitted that clause 19 was ambiguous.

1. I have decided that no error in law has been identified by the Claimant. There is no relevant factor which the EJ has failed to take into account. I do not accept Mr Morgan's argument that he took irrelevant factors into account when he looked at correspondence from the Respondent to the employees. I do not agree that such correspondence must be categorised as negotiation. The EJ decided that it was correspondence in which the Respondent set out clearly what it had decided to do. He found that the Respondent decided to offer employees a lump sum as a buy out of the employees' rights to bonus payments. He found that the Respondent did so by telling employees that failure to accept that offer would lead to dismissal, as the contract in force, under which bonus payments were made, was not one that the Respondent was prepared to continue. The EJ found that all of the employees eventually accepted that offer, and were paid the lump sum. Their employment continued, under new terms and conditions.

1. The submissions about the contra proferentem rule were in my opinion misconceived. It seemed to me that the EJ was entitled to hold that the contract was not ambiguous and that there was no basis on which to apply the rule.

1. I do not find that the EJ made findings which were perverse. There was material before him, in the correspondence, from which he was entitled to make the findings in fact which he made. I agree with Ms Marr that there is no way in which it can be said that those findings were unsupported by evidence, were inconsistent, or were plainly wrong. In my opinion he was entitled to find that the evidence of Mr Livingston and Miss Kali did not show that the bonuses were permanent in the sense of their being payable for ever. In any event, even if the contract did provide for permanent bonuses, the EJ was entitled to find as a matter of law that such a contract could be ended by notice, or ultimately breached. Variation by notice would not result in any claim, and breach would not result in a claim under section 13 of ERA 1996. The primary front on which this case was argued was whether the Claimants can argue that clause 19 was incorporated in their new contract. In my opinion the EJ made no error in law in finding it was not. There was no clear basis on which it was argued that the term was implied.

1. The materials which Mr Morgan and Ms Marr had to work with appear to me to have been confusing, and I understand from submissions made that not all of the materials were fully considered before the case opened at the ET. I suspect that the EJ was presented with a complicated situation. While the fault is no doubt mine, I am conscious that I found the submissions hard to understand, and I have to say the EJ's written reasons are such that I had to read them many times to attempt to understand the points he made. I am still in some difficulty in understanding his decision on the date of assimilation which seems to have been undisputed before him, but on which he gave opinions which at least on the face of it are contradictory. I have considered carefully whether error on that matter, real or apparent, is such as to require the appeal to be upheld. I have decided that is not necessary. It is at least tolerably clear that the EJ has given clear reasons for his decision in the matter raised before him.

1. I have considered whether or not there is any need to remit the case to the EJ for clarification or to remit to another Tribunal. I have decided that that is not necessary. While I have decided the case on the basis that the EJ was entitled to make the findings that he did, I am also of the view that if I am wrong in that it is plain from the papers and the arguments before me that the contentions of the Claimant, that the Respondent was bound to pay pay protection for 3 years from the date of assimilation are not well founded. It seems to me clear that the Respondent decided that in order to implement the single status agreement it required to protect basic pay and contractual overtime only, and that is what it stated in the Part 2 of the statement of terms and conditions referred to above. As all of the Claimants signed the acceptance and continued to work on the new contract, I am of the view that the claim cannot succeed.

1. The appeal is refused.