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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> ISS Mediclean Ltd v Elesina (Unlawful Deduction from Wages) [2012] UKEAT 0427_11_2501 (25 January 2012) URL: http://www.bailii.org/uk/cases/UKEAT/2012/0427_11_2501.html Cite as: [2012] UKEAT 0427_11_2501, [2012] UKEAT 427_11_2501

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APPEARANCES

 

For the Appellant	MS L HATCH (of Counsel) Instructed by: Abbey Legal Services 2nd Floor Corinthian House 17 Lansdowne Road Croydon Surrey CR0 2BX
For the Respondent	MRS O ELESINA (The Respondent in Person)


 


SUMMARY

UNLAWFUL DEDUCTION FROM WAGES

CONTRACT OF EMPLOYMENT – Implied term/variation/construction of term

Was the Employment Tribunal correct to find that the Claimant was entitled, under her contract, to enhanced pay rates for working unsocial hours and that the Respondent had made unlawful deductions from her wages in not paying those enhanced rates? The Claimant was employed not directly in the NHS but by a private company providing facility services to hospital trusts. On a correct construction of her contract the Claimant's entitlement was contingent upon the Respondent receiving funds for unsocial hours rates from the NHS Trust where she worked. Appeal allowed.

THE HONOURABLE MRS JUSTICE COX

Introduction

1. This is an appeal by ISS Mediclean Ltd, the Respondent below, against a judgment of the London South Employment Tribunal promulgated with reasons on 11 May 2011. Employment Judge Baron, sitting alone, concluded that the Respondent had made unlawful deductions from the Claimant's wages. The Respondent contends that he erred in law in arriving at that conclusion. Ms Hatch, appearing for the Respondent, submits that the appeal should be allowed and that the EAT should substitute a finding that there was no unlawful deduction. The Claimant, Mrs Elesina, appears in person and relies on the reasoning of the Employment Judge in resisting the appeal. I should add that in the Employment Tribunal Mrs Elesina had the assistance of an interpreter, but she has assured me today that she is happy to proceed without one, and the hearing did indeed proceed, with helpful submissions from Mrs Elesina in person.
2. The key issue in this appeal is the correct construction of the Claimant's contract.

The facts

3. The relevant facts are as follows. The Respondent is a private company providing facility services to a number of hospitals situated throughout the UK, including Kingston Hospital Trust. The Claimant is employed by the Respondent as a catering assistant, working in the staff canteen at Kingston hospital.
4. In her ET1, presented on 27 July 2010, she claimed that she was entitled under her employment contract to be paid enhanced rates for working unsocial hours, namely time plus 50 per cent for any time on Saturday and any weekday after 8.00pm, and double time for Sundays and public holidays. She claimed that she had worked more than 250 unsocial hours since 27 April 2010, a period of some 13 weeks, but that she had not been paid at these enhanced rates. The Claimant, who was acting in person, did not herself identify the statutory provisions underpinning her claim, but the Tribunal treated it as being a claim for unlawful deductions from wages under Part II of the Employment Rights Act 1996. The relevant provisions are section 13(1) and section 13(3) which provide as follows:

"(1) An employer shall not make a deduction from wages of a worker employed by him unless—

(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.

(3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion."

5. Section 27 defines "wages", so far as material, as follows:

"(1) In this Part 'wages', in relation to a worker, means any sums payable to the worker in connection with his employment, including—

(a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise, […]"

6. Pursuant to section 23(1)(a), an employee can bring a claim to an Employment Tribunal complaining that her employer has made a deduction from wages contrary to the provisions of section 13.
7. In this case the central issue was whether the Claimant was entitled, under the terms of her contract, to the enhanced rates claimed for working unsocial hours. As the Employment Judge stated, he had to find what sum was "properly payable" on any particular occasion and whether there had been a deduction from that sum. What was properly payable, he held, depended on the construction of the contract. The Claimant claimed a contractual entitlement to the enhanced rates. The Respondent contended that such entitlement was contingent upon the Respondent reaching agreement with the NHS Trust for additional funds to be provided to the Respondent to fund the enhanced payments to its staff.
8. As the Employment Judge found, the Claimant's original statement of terms and conditions of employment was dated 10 May 2007. It provided for a flat, hourly rate of pay irrespective of the days or hours worked. The same hourly rate of £5.88 per hour was applied to basic rate, attendance bonus, nights, overtime, Saturdays and Sundays.
9. On 4 March 2009 the Claimant signed a new contract. The new statement of main terms and conditions of employment referred to a basic salary of £12,538.50 per annum (that is, £6.43 per hour, the Claimant's contracted hours still being 37.5 hours per week), and an allowance of £3,256.50 per annum (that is, £1.67 per hour). This new statement made no reference to payments for working unsocial hours. However, the Employment Judge found that this new contract incorporated the provisions of a handbook, which included the phrase "Agenda for Change" in its title. At paragraph 14 of his reasons the Employment Judge set out a section from the introduction to the handbook which, as Ms Hatch points out, appears in a slightly different format in the handbook itself. The relevant sentence, following immediately below the heading, is as follows:

"INTRODUCTION

This document sets out the terms and conditions of service which apply to the Company's service contracts for so-called 'Soft FM' services within the National Health Service where the relevant NHS Trust client has agreed to provide the Company with such funding as is necessary to implement and maintain the provisions contained herein…."

10. The relevant NHS Trust client in the Claimant's case was Kingston Hospital. The question of funding, as I have already indicated, was an important aspect of the Respondent's defence to the Claimant's claim to a contractual entitlement to enhanced rates.
11. As is now well known, "Agenda for Change" was the name given to the new pay and grading scales agreed for all, non-medical NHS staff in December 2004, which sought to harmonise both pay scales and career progression across what were historically separate, occupational groups directly employed within the NHS. As a private company providing facility services to hospitals, the Respondent was not bound by Agenda for Change. The agreement did not directly affect the staff employed by contractors such as this Respondent.
12. However, it was recognised that employees of contractors, such as this Claimant, working in hospitals throughout the UK should not be forgotten in the process. The Employment Judge referred to the fact that, on 6 October 2005, the Department of Health, NHS employers, the CBI, The Business Services Association and trades unions connected with third-party contractors working in the NHS issued a joint statement, encouraging and recommending NHS contracting authorities, contractors and staff-side representatives to adopt and implement the statements of good practice set out in that statement, in effect to implement "Agenda for Change" terms within the private sector.
13. Further, in January 2007 the Department of Health issued a "Best Practice Guide", which referred to it being good HR practice to treat non-NHS or "soft FM" staff in similar ways to directly employed NHS staff, and making specific reference to cleaning and catering staff.
14. As Ms Hatch points out, whilst these were powerful statements of exhortation, neither the joint statement of 6 October 2005 nor the Best Practice Guide of January 2007 were binding on the Respondent, or on the NHS Trusts with whom they contracted to provide soft facilities management (soft FM) services.
15. However, an Agreement was reached on 19 September 2007, between this Respondent (then Mediclean) and three trade unions (Unison, GMB and Unite), the purpose of which was to set out the approach of the parties to the "Agenda for Change" process and to establish a framework for them to work together. Under the heading "Implementation", the Agreement stated as follows:

"It is recognised that Mediclean will need and be obliged to negotiate with each of its Hospital Trust clients in relation to obtaining funding and agreements to terms and conditions before local contract implementation of 'AfC' can commence. Each of these elements will involve a contract variation between Mediclean and the relevant Hospital Trust. It is understood by all parties to this agreement that funding has already been made available to all Hospital Trusts and that this funding has come from central government. It is also recognised that it is within the individual Trust's control to release these funds to Mediclean, and that without funds being released no 'AfC' or other terms and conditions can be offered to our employees. Mediclean commits to actively seek retrospective funding in order to back date the implementation of 'AfC' to 1 October 2006."

Ms Hatch submits that this agreement set out a commitment to implement the principles of "Agenda for Change" wherever funding was provided by the relevant NHS Trust.

16. At the hearing below Chris Feeney, senior HR manager with the Respondent, said at paragraph 11 of his first witness statement:

"ISS has implemented AfC agreements in all but 3 of its 43 clients, who encompass NHS Trust Hospitals and other NHS bodies. Most of the NHS Trusts have agreed to facilitate the implementation of the full provisions of AfC to ISS employees and have provided full funding enabling the company to do so. A small number have confirmed that they are unable to fully fund implementation either immediately or at all, and have agreed to provide either partial funding or have agreed to release funds on a staged basis."

17. In relation to unsocial hours the 2007 Agreement contained the following paragraph:

"The parties to this agreement acknowledge that there are further National negotiations due to take place on the subject between the Department of Health, NHS employers, Contractors and Trades Unions. These negotiations are due to be concluded during 2007. The parties to this agreement will meet shortly after the negotiations are concluded in order to discuss and agree the terms which will apply to this agreement. In the meantime staff will continue to be paid for unsocial hours in line with their current contract of employment."

18. The evidence before the Employment Judge was that Kingston Hospital Trust had not funded payments for working unsocial hours at Kingston Hospital. The Respondent's employees working at that hospital had therefore not been paid the enhanced rates for working unsocial hours. At paragraph 13 of his reasons the Employment Judge referred to a Memo, dated 4 July 2008, issued to all the Respondent's staff at Kingston Hospital which, after summarising the "Agenda for Change" background, stated as follows in relation to unsocial hours:

"3.3 Unsocial Hours

Kingston Hospital is eligible for unsocial hours enhanced rates of pay. There has been recent guidance on this element of Agenda for Change that could impact on the rates applied. Once we have confirmation we will communicate this to staff.

Current enhancement rates will continue until agreed. However, if you currently do not accrue unsocial hours, then current rates of pay will be applied. Once the rates are agreed there is money owing to you then it will be backdated to 14^th July 2008."

19. By a further Memo, dated 22 November 2010, the Respondent informed "All Colleagues" that:

"ISS and Kingston Trust continue to negotiate funding for the changes in Unsocial Hours payments; we will keep you informed of our discussions."

20. At paragraph 17 the Employment Judge found as follows:

"For reasons which are not material, no agreement has yet been reached between the Respondent and the NHS Trust and new FM contractor over revised terms for payment of the Respondent's staff. It is hoped and expected that such agreement will be reached, and Mr Feeney confirmed that when that had been done the Claimant and all others in her position would be entitled to the extra rates for unsocial hours referred to above from 1 October 2006."

21. The Employment Judge found on the evidence that the Claimant's normal shift started at 5 pm and was for eight hours, with one half-hour break. Thus the working time for which she was to be paid was 7.5 hours. Subject to her establishing entitlement, the unsocial hours enhanced rate became payable from 8 pm on weekdays.
22. In support of her case, and although the new contract signed on 4 March 2009 did not mention them, the Claimant sought to rely on the provisions in the handbook dealing with unsocial hours. Subject to the provisions set out in the Introduction, to which I have already referred in paragraph 9 above, the handbook provided as follows in respect of unsocial hours:

"Work carried out, between the hours of 8.00pm and 6.00am Monday to Friday, at weekends and/or on bank holidays is deemed to be work carried out in unsocial hours. Work carried out during these hours is compensated as follows for completed hours worked, as follows."

There then followed, in tabular form, the time plus 50 per cent and double time rates that had been set out by the Claimant in her ET1.

23. In paragraph 10 of his second witness statement Chris Feeney stated that the Claimant was:

"… one of 350 hourly-paid employees employed on site who are potentially eligible to receive payments for work undertaken in unsocial hours under AfC when same has been agreed by the Trust."

No such agreement, however, has yet been reached.

The Tribunal's Decision

24. The Employment Judge rightly stated that the issue in this case turned on the correct construction of the Claimant's contract. However, whilst he referred to some matters of general principle in his conclusions, he did not refer to any authorities. It is unclear, because he makes no mention of it and Ms Hatch did not appear below, whether he was referred to the decision in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. Certainly, the skeleton argument submitted by counsel then representing the Respondent makes no reference to it, which is unfortunate because in this case the House of Lords set out the principles governing contractual interpretation. Lord Hoffmann summarised them as follows, at 912H to 913E:

"1. Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties in the situation in which they were at the time of the contract.

2. The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is if anything an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and, to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

3. The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy, and in this respect only legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear, but this is not the occasion on which to explore them.

4. The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous, but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749)

5. The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Co Neviera SA v Salen Rederierna AB [1985] AC 191, 201: '… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense'."

25. After noting that neither the statement of 6 October 2005 nor the 2007 Agreement were of any contractual effect, the Employment Judge set out his conclusions at paragraphs 24-28 as follows:

"24. If there had not been any other provisions which may be relevant I find that the provision as to payment for unsocial hours in the contract of employment of 4 March 2009 is quite clear, and would entitle the Claimant to be paid at the premium rate which she claims. However, Miss Shaw placed reliance upon the preliminary text in the handbook, the provisions of which were incorporated into the contract. That text requires a careful analysis. It is apparent that more thought could have gone into the drafting of the document and more care could have been lavished on the exact wording.

25. The first sentence sets out the scope of the application of the document. In my judgment the natural reading of that sentence is that there is an inference that the NHS client, Kingston Hospital in this case, had agreed to fund the Respondent. The sentence is in the form of a recital setting out the circumstances in which this particular handbook applied.

26. Miss Shaw argued that the sentence contained a condition precedent to the obligation to pay the enhanced rates. However, the sentence is not limited to that point. It refers to the whole of the handbook which also includes provisions as to the place of work and holidays. If the sentence were to be construed as including a condition precedent, and that condition had not been satisfied, then all the provisions of the handbook would not apply. That would contradict the statement in the form containing the statement of main terms and conditions that the terms of the handbook were accepted by the employee. The employee would be accepting nothing. That in my view is not an attractive interpretation to place on the documentation.

27. The main statement form simply states that the employee accepts the terms in the statement in the handbook. It does not say that the incorporation of the handbook is contingent upon agreement being reached with the NHS Trust, and pending such agreement being reached some other provisions would apply.

28. I conclude that the first sentence does not have the meaning contended for it by Miss Shaw so as to override the clear provisions as entitlement to enhanced pay rates. In coming to that conclusion, and insofar as there could be said to be any ambiguity, I have applied the contra proferentem rule."

26. The Judge went on to find that the NHS handbook referred to was "wholly irrelevant to this claim". He then concluded as follows, having regard to "the overall context of the entering into of the new contract":

"31. I have no doubt that the management of the Respondent knew exactly what the financial position was and that their business model required reimbursement of staff costs ultimately from the NHS Trust. That was the background from the Respondent's point of view. The Claimant was not in the same position of knowledge. She had not been involved with any of the detailed documentation to which I have referred above. There was no document before me to demonstrate that the Claimant and her colleagues were kept informed of the position with Kingston Hospital, so that it would have been common ground that the new contract of employment was being entered into under those specific circumstances.

32. For those reasons I find that the amounts properly payable should be calculated at the enhanced rates set out in the contract of employment of 4 March 2009."

The appeal

27. Ms Hatch's main challenge is to the Employment Judge's construction of the Claimant's contract of 4 March. She submits essentially that he erred in construing it to include what he found to be an express term, contained in the handbook, that the Respondent would make enhanced payments to the Claimant in respect of work carried out in unsocial hours.
28. In my judgment this submission is correct. The unchallenged evidence of Mr Feeney was that Kingston Hospital had refused to agree to facilitate the implementation of the provisions of "Agenda for Change" for the Respondent's employees, in relation to unsocial hours, and had failed to provide funding enabling the Respondent to pay enhanced rates. This was an important element of the background knowledge available to the parties, or the "matrix of fact" in this case. The Employment Judge clearly accepted this evidence and made a finding of fact, at paragraph 17, that no agreement had yet been reached between the Respondent, Kingston Hospital and the new FM contractor over revised terms for payment of the Respondent's employees.
29. The Judge's subsequent finding, at paragraph 25, that a natural reading of the first sentence of the Introduction to the handbook is that there is an inference that Kingston Hospital had agreed to fund the Respondent, is inconsistent with his earlier finding at paragraph 17 and, in my judgment, was arrived at in error. In rejecting the Respondent's submission as to the correct construction of that sentence the Employment Judge stated that he found it an unattractive interpretation to place upon the documentation but, as Ms Hatch correctly points out, that is not the test to be applied.
30. Nor does the Employment Judge explain the ambiguity to which he refers at paragraph 28. Whilst indicating that, to the extent that there is ambiguity, he has applied the contra preferentem rule, he does not identify the ambiguous words in this contract to which he is referring. I am unable to identify any.
31. Further, at paragraph 31 he appears to be applying, erroneously, a subjective test to construction by looking at what the Claimant herself actually knew about the background. The correct test to be applied is that set out in the West Bromwich case above.
32. Applying that test, I accept Ms Hatch's submission that a reasonable person in possession of all the background knowledge that was reasonably available would not have understood the first, introductory sentence of the handbook, read in the context of the 4 March contract as a whole, to mean that an inference could be drawn that Kingston Hospital had agreed to fund the Respondent.
33. I also accept Ms Hatch's submission that, when construing the 4 March contract, the Employment Judge failed to take into account the Memo to staff of 4 July 2008 and the Agreement between the Respondent and the three Trade Unions in September 2007. The Memo, to which the Employment Judge referred at paragraph 13, seems to contradict the finding he made at paragraph 31. So far as the Agreement is concerned, the Introduction to the conditions of service of 4 March stated expressly that, in setting out the terms and conditions of service, reference had been made to that Agreement, which stated,

"It is recognised that Mediclean will need and be obliged to negotiate with each of its Hospital Trust clients in relation to obtaining funding and agreements to terms and conditions before local contract implementation of 'AfC' can commence. Each of these elements will involve a contract variation between Mediclean and the relevant Hospital Trust. It is understood by all parties to this agreement that funding has already been made available to all Hospital Trusts and that this funding has come from central government. It is also recognised that it is within the individual Trust's control to release these funds to Mediclean, and that without funds being released no 'AfC' or other terms and conditions can be offered to our employees…."

34. Both of these documents, as it seems to me, were clearly part of the factual matrix relevant to construction of the 4 March contract. In my judgment, the reasonable person having regard to the entirety of the background knowledge reasonably available would not have construed the 4 March contract to include an express term, contained in the handbook, that the Respondent would pay enhanced rates to the Claimant for work carried out in unsocial hours.
35. For these reasons this appeal is allowed. In the circumstances, I accept the Respondent's submission and substitute a finding that in this case there has been no unlawful deduction from the Claimant's wages.