The claimant worked as a restaurant manager. He did not receive a contract of employment until 7 months after starting employment. The contract stated that extra time worked would be unpaid and should be recovered by taking time off in lieu. The claimant then resigned but was off sick for much of his 3 month notice period and was thus unable to take the extra time he had worked in lieu of payment. He claimed unlawful deductions from wages at the ET and won. The respondent appealed.

The EAT allowed the appeal. The EJ had drawn no conclusions as to the terms of the employment contract and there was a general paucity of findings and analysis.

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Appeal No. UKEAT/0230/12/KN

EMPLOYMENT APPEAL TRIBUNAL

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

At the Tribunal

On 9 October 2012

Before

HIS HONOUR JUDGE HAND QC (SITTING ALONE)

LTRS ESTATES LTD T/A ORWELLS (APPELLANT)

HAMILTON (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR BERNARD WATSON (Representative)

Peninsula Business Services Ltd
The Peninsula
2 Cheetham Hill Road
Manchester
M4 4FB

For the Respondent
MR ANDREW WATSON (Representative)

(Free Representation Unit)

UNLAWFUL DEDUCTION FROM WAGES

Appeal allowed from the Judgment of Employment Judge John Warren, whereby he held that there had been an unlawful deduction from the wages of a restaurant manager by not paying him in respect of Bank Holidays and overtime, because of a paucity of factual findings and analysis. Remitted for a complete re-hearing before a different Employment Judge.

1. This is an appeal by the Respondent below against the Judgment of Employment Judge Warren, sitting at Reading, on 19 August 2011, his Judgment and written reasons having been sent to the parties on 3 October 2011. The Judgment appears at pages 1 to 5A of the hearing bundle. There is a postscript, because Employment Judge Warren was asked in a letter sent by this Tribunal on 12 July to give his comments, and he did so in a letter sent on 20 August 2012, which is at pages 89 and 90 and which must also be considered alongside his reserved Judgment.

1. In that Judgment the Respondent, the Claimant below, Mr Hamilton, succeeded on his claim for unlawful deduction from wages to a limited extent. In short, he succeeded on two points, first in respect of six Bank Holidays and a Monday on which he had worked and for which he had not been paid; in respect of those the Appellant was ordered to pay £678.29. He also succeeded on his further claim that he ought to have been paid for 38 half days that he had worked and not been paid for; in respect of that, he was awarded £1,841.08. The total amount was therefore £2,519.37. This was therefore not a case that involved an enormous amount of money, but it was nevertheless a case of importance to both parties, and as the appeal has developed it has raised issues that justify the comment that was made at the rule 3(10) hearing of this case by HHJ Peter Clark when he said, "There may be more to this little case than meets the eye"; that was a most prescient comment.

1. The reserved reasons of the Employment Tribunal, to be found at page 2 of the hearing bundle, start with a synopsis of the claims and indicate that the Employment Tribunal heard evidence. There then follows under the subheading "The Facts", from paragraphs 3 to 21, a collection of findings that present some picture, but only a partial picture, of the factual matrix of this case.

1. The Claimant was employed as a restaurant manager by the Respondent. Where he worked may not be material, but it is not clear from paragraphs 3 to 21 what his location actually was. He had resigned over a period of time by various methods of communication, including at least one telephone conversation and one letter. As a result of those communications, he had confirmed that he was happy to work out three months' notice, although he would be prepared to go earlier. The Appellant indicated that it was not prepared to pay any money in lieu of notice and that the Claimant could either work out his notice or leave with immediate effect.

1. These communications took place against the factual background of the Claimant being absent through illness. The Appellant's position appears to have been that were the Claimant to produce a medical certificate, he would be paid sick pay, but if he was absent without certification, he would receive no pay. He produced certificates until mid April and was paid; thereafter, he was not paid. It was agreed that his effective date of termination would be 15 May 2011, and Employment Judge Warren found that there was an agreement between the parties to that effect. Further, the Employment Judge concluded that there was no entitlement to notice pay because the Claimant had been absent through illness, either being paid sick pay or being absent whilst uncertificated and thus not paid (see paragraph 22.1 of the Judgment).

1. Those issues that had led to claims by the Claimant and were all dismissed by Employment Judge Warren. On the other hand, the learned Judge accepted the claim in respect of additional pay for working Bank Holidays; this is dealt with at paragraph 22.2 of the Judgment. The Claimant also succeeded in his claim that he had not been paid for 38 half days when he should have been; this is dealt with at paragraph 22.3, the Employment Judge, summarising his reasoning as being "the same reasons as above". The "reasons above", at paragraph 22.2, are these:

"The Claimant had waited some seven months to obtain his contract of employment, which provided that extra time worked, including bank holidays should be recovered as taking time off in lieu. It is quite clear from the evidence of the Claimant and indeed from the Respondent's response that the Claimant would only have known about that once he received his contract and the handbook, which was the end of December 2010; he had been ill during March and resigned at the end of March; he did not have the opportunity to take the time off in lieu. Introducing the clause when the contract was produced some seven months after the Claimant commenced employment cannot deprive the claim to his full entitlement to be paid. I therefore find in his favour and his claim for working the 6 bank holidays and the Monday near to the Valentines Day succeeds."

1. It is that reasoning that apparently Employment Judge Warren regarded as capable of transmission into the second issue, relating to the 38 half days. It is not obvious to me, in terms of reasoning, how one makes that translation from one to the other.

1. In his letter sent on 20 August 2012 (see pages 89 and 90) Employment Judge Warren was answering an enquiry about what had been referred to as "the gentlemen's agreement". At paragraph 1 at page 89 Employment Judge Warren says:

"[…] the only reference to Gentlemen's Agreement is the reference in the Claimant's witness statement on page 85. There was no cross examination."

1. The reference to "page 85" is in fact a reference to the Claimant's letter at page 87 of the bundle. The letter is dated 7 July 2011. The penultimate paragraph on page 87 reads as follows:

"I am aware of our contractual agreement but must stress that I waited nearly 7 (seven) Months for my contract and was told that due to the nature of my senior role that time owed would be honoured by a Gentlemens [sic] Agreement, I took this as honourable as surely waiting 7 Months constituted a relationship of trust between us both, especially from my part. Due to the nature of the hours regarding not taking time owed within the 3 Month limit would too fall under our Gentlemens Agreement."

1. There had been no reference to any gentlemen's agreement in the Judgment, and paragraph 1 of the letter from Employment Judge Warren sent on 20 August, but dated 20 July, does not enable the reader to know what has actually been accepted by the Employment Tribunal in relation to this or indeed whether it was of any significance. It seems likely that this evidence was disputed at the Employment Tribunal, and it is impossible to know exactly what the sentence "there was no cross examination" in paragraph 1 of Employment Judge Warren's letter means. Mr Bernard Watson, who appears on behalf of the Appellant, is not able to say exactly what happened. It is asserted, however, in the Notice of Appeal that there was evidence from another ex employee that extra hours were often worked without extra pay.

1. Employment Judge Warren did record accurately, however, the general position of the Respondent at paragraph 15, the last sentence of which reads:

"As for the extra hours worked, the company pointed out that they do not pay for in lieu days, which had to be taken within 3 months of the extra time worked or forfeited."

1. At paragraph 2 of the letter of 20 July 2012 sent on 20 August 2012 from Employment Judge Warren he explains the conclusions in the Judgment as follows:

"2.1 I arrived at the conclusion that the Claimant should be paid for the extra hours worked as I found on the evidence that the Claimant was employed to work 48 hours per week. I found as a fact that the Claimant worked and was pressurised to work far more than 48 hours per week.

2.2 Bank Holidays and the half days for which the Claimant claimed were days when he was not scheduled to work. He was required to work.

2.3 The pressure on the Claimant to work was so great that not only could he not take his normal days off, but there was no hope of taking off 'time in lieu' where he had worked previous days off.

2.4 There was never any opportunity for the Claimant to take time in lieu because of the Respondent's pressure on him.

2.5 I found that the Claimant had worked hours which should have been his days off. Therefore he was entitled to be paid for those hours.

2.6 It is totally unjust and unfair to provide that excess hours work can be rewarded by taking time off in lieu and then not allowing the employee to take that time off in lieu. Put simply, the Claimant worked hours outside of his contractual obligation. He worked those hours at the request, at the pressure, of the Respondent. There was an expectation that he be paid and in my view he was entitled to be paid."

1. I entirely understand that this was a relatively small claim even in terms of the general jurisdiction of the Employment Tribunal, that the Claimant was unrepresented, that it is the overriding objective of Employment Tribunals to dispose of cases justly and that one of the key factors set out in Regulation 3 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 is to deal with cases in a way that is proportionate to their complexity and/or to the importance of the issues, to ensure that the case is dealt with expeditiously and fairly and to save expense (see Regulation 3(2)(b), (c) and (d)). Nevertheless, in order to deal with a case justly it seems to me that it is necessary to set out the facts in sufficient detail as to form a basis for the legal analysis that leads to the conclusions reached.

1. Mr Bernard Watson, on behalf of the Appellant, submits that this decision falls well short of a rational analysis and that it is a case in which the conclusions expressed in terms of paragraph 2.6 at page 90 of the bundle, whilst they might satisfy a general arbitration upon the basis of doing what is reasonable, are by no means a proper analysis of either the factual matrix or the applicable law, or the conclusions to be drawn from a synthesis of both.

1. Mr Andrew Watson, who appears, under the auspices of the Free Representation Unit, on behalf of the Respondent, does not dispute that there are, as he puts it in his skeleton argument, "problems with the ET's Judgment". Indeed, he does not seek to uphold the Employment Tribunal's Judgment as set out at pages 1 5A of the bundle, nor does he seek to support the reasoning set out in the letter at pages 89 and 90. Instead, he submits that there is in the Judgment a minimum of factual material that entitles him to present an argument that the result reached by Employment Judge Warren can be supported on the very different grounds, not advanced before him, that there should be implied into the contract in this case two terms that, if implied, would justify the conclusions reached. Those two terms are described by Mr Andrew Watson as "standardised terms". They are, firstly:

"[…] where an employee is required to take a day off in lieu within a certain period, but does not have a reasonable opportunity to do so, they are entitled to be paid a reasonable sum for working that day."

and secondly:

"In a contract which specifies the number of hours and days to be worked per week, and which contains a provision that an employee may be requested to work overtime, there is an implied term that this provision does not extend to the employee working, without remuneration, a regular period of overtime which has the effect of increasing the number of days per week worked over that specified in the contract."

1. There is no need, Mr Andrew Watson submits, for this case to go back to the Employment Tribunal; the factual findings are sufficient for me to substitute my own conclusions, reaching, indeed, the same end result but by the very different route of implying terms into the contract of employment.

1. I cannot accept that argument. It seems to me that there exists in this case no clear finding as to what the contract comprised of at the outset. There is a recognition that the terms and particulars were only proffered seven months after the contract had started, but there is a very imperfect exploration of what that amounted to, and no conclusions are drawn as to the terms of the contract, save that at paragraph 15 of the Judgment there is an acknowledgement that the company have pointed out what their stance is. It is quite clear that at pages 89 90 Employment Judge Warren is setting out what he believes to be the position in law, but it is very unclear from what that derives. Is it from a construction of the contract; is it, with a degree of foresight, an anticipation of the fuller argument mounted by Mr Andrew Watson today; or is it simply a suggestion of what might in broad and general terms be regarded as "just"? It is impossible to know.

1. Moreover, Mr Bernard Watson has submitted that were the Appellant to have been faced with these arguments at the Employment Tribunal it might have wanted to deploy more evidence, different evidence, or both. I do not accept Mr Andrew Watson's submission that there is here a sufficient factual platform for me to start now on this appeal to construct an alternative view as to how the Claimant's case might be sustained.

1. I have come to the conclusion that it would be best if I said nothing as to Mr Andrew Watson's arguments in terms of my view as to their merits. At one point he submitted that I could make findings in principle about the applicability of such terms and then the matter could go back for a factual investigation. Without any discourtesy to him, I must say that strikes me as having the cart and the horse in entirely the wrong order. First of all, there must be findings of fact as to what the parties agreed, what the contract was and how the parties conducted themselves in relation to the contract. The latter is not always a key or even an admissible factor in construing the contract, but frequently it is important to know what actually happened.

1. In my judgment, this appeal should be allowed, because the Employment Judge has neither set out completely the terms of the contract, the basis on which he finds the terms of the contract nor how the contract was operated. His Judgment contains elements of all three, but the picture presented is incomplete and imperfect. For those reasons, this appeal will be allowed, and the matter will be remitted for a re-hearing. The case will start afresh, the parties will be at liberty to call what evidence they like and to make whatever submissions they wish both as to fact and law. In the well known case of Sinclair Roche & Temperley v Heard [2004] IRLR 763, which is one of the familiar authorities in the familiar authorities bundle of this Tribunal, a division of this Tribunal presided over by Burton J, the then President, amongst many other aspects of the case, considered the terms upon which cases should be remitted to an Employment Tribunal for a re-hearing. These are to be found at paragraph 46 of the Judgment on page 23 of the electronic version of the report that is in the familiar authorities bundle and on page 774 of the IRLR.

1. This is, in my judgment, a totally flawed decision (see paragraph 46.4) and would be a case in which a remission to the same tribunal would allow for what Burton J called, so aptly, a "second bite at the cherry". The Tribunal has already made up its mind as to this, and there may be a real risk of an appearance of pre judgment or bias if the Tribunal is asked to do this all over again. Accordingly, this matter will be remitted for a complete re-hearing to a differently constituted Tribunal; that is to say, an Employment Judge other than Employment Judge Warren, to be chosen by the Regional Employment Judge for the relevant area.