Industrial Tribunals Northern Ireland Decisions

THE INDUSTRIAL TRIBUNALS

 

CASE REF: 2674/14

 

 

 

CLAIMANT:            Mark Hammond

 

 

RESPONDENT:      Dunnes Stores (Bangor) Ltd

 

DECISION

 

The claimant has not suffered an unauthorised deduction from wages and the claimant’s claim is dismissed.

 

 

Constitution of Tribunal:

 

Employment Judge (sitting alone):      Employment Judge Bell

 

 

Appearances:

 

The claimant appeared in person.

 

The respondent was represented by Mr Sean Doherty, Barrister-at-Law, instructed by Mills Selig, Solicitors.

 

 

THE CLAIM AND RESPONSE

 

1.               The claimant complained in his claim that he had suffered an unlawful deduction from wages following him giving to the respondent notice of his resignation after which the respondent gave all its managers a backdated pay rise but excluded the claimant despite him still being employed at that time and conversations he had with the respondent regarding pay rises in August 2014.  

 

2.               The respondent in its response resisted the claimant’s claims.  It contended that the claimant had not received any pay rise since 2008 and had not raised any complaint or grievance, there was no contractual right to a pay rise, an increase was not discussed or agreed with the claimant, a decision on pay rises had not been made when the claimant resigned, and its decision not to award a rise to the claimant was not done out of malice but was made in accordance with company policy because he had resigned.

 

3.               In the event of an award to the claimant, the respondent sought by way of set off and counterclaim £3,733.36 advance car allowance payment repayable by the claimant, which it had out of good will written off by way of allocation of a £3,000.00 bonus.

 

ISSUES

 

4.               The issue before the tribunal was:-

 

          Has the claimant suffered an unauthorised deduction from wages arising from non-payment of a quantifiable pay rise in September 2014 backdated to February 2014?

 

That is,

 

          – Was there a legal entitlement to a discretionary pay rise?

 

          If so,

 

-        Was that discretion properly exercised?

-        If that discretion was not properly exercised, what sum was properly payable?

 

EVIDENCE

 

5.       The tribunal considered the claim, response, agreed bundles of documentation and additional documentation handed in at hearing, witness statements and sworn oral testimony from Mr Stephen Clawson, the respondent’s regional manager and from the claimant.

 

FINDINGS OF FACT

 

6.               The claimant was employed by the respondent from 6 June 2000 until termination of his notice of resignation on 3 October 2014; he was initially employed as a trainee store manager and ultimately promoted to grocery store manager. 

 

7.               The claimant’s written statement of terms of employment in the respondent’s offer of employment to him dated 15 May 2000 set out his initial annual salary to be paid to him on a monthly basis, no provision was made therein for pay rises or bonus payments.  No revised terms were issued to the claimant by the respondent during his employment.

 

8.               The claimant received pay rises from the respondent during each year of his employment up until the year ending March 2010.  No pay rises were received by the claimant from April 2010 onwards and no complaint or grievance was raised by the claimant in respect thereof.  As per the claimant’s evidence, he considered himself to be lucky to have a job in the economic climate at that time and accepted that there was nothing that could be done to change the minds of the directors of the respondent company not to award pay increases.

 

9.               From 2007 until 2013 the claimant was paid each year by the respondent a bonus for the previous year’s performance.

 

10.           The respondent carried out a food operations store audit in respect of the claimant’s store on 19 March 2014 for which a score of at least 85% was required to pass, the result was recorded as a fail at 77%.  A subsequent repeated audit on 10 June 2014 was passed with a score of 87%.

 

11.           In mid-Summer 2014 Mr Clawson was given responsibility by Mr John McNiffe, his manager, for reviewing the managers working under him with a view to considering whether pay rises would be awarded.  Factors considered by Mr Clawson included store audit results which he considered gave a comprehensive overview of performance.

 

12.           In an email sent on 19 July 2014 to Mr McNiffe, Mr Clawson commented in respect of the claimant, ‘works hard/ needs coaching to get results.’

 

13.           In or around mid-July 2014 Mr Clawson had a telephone conversation with the claimant to go through proposed pay increases for the claimant’s under managers, during which he discussed his proposals to see if there were any particular issues that needed to be taken into account. 3% was the guideline pay rise used by Mr Clawson except in exceptional circumstances.

 

14.           In an email dated 21 July 2014 to Mr McNiffe, Mr Clawson set out his recommended percentage increases for each manager, stating beside the claimant’s name ‘3%’.
Mr Clawson subsequently used a paper copy of his email of 21 July 2014 to make handwritten notes thereon relating to managers’ length of service, salary and other benefits; he did not send this to Mr McNiffe. 

 

15.           On 12 August 2014 Mr McNiffe confirmed in an email to staff that the respondent was going to reschedule store managers’ reviews and it would be the end of
September 2014 before they would be completed.

 

16.           On balance the claimant’s evidence is accepted that in or around the end of August 2014 Mr Clawson discussed with him his staff and the level of pay rise that the claimant considered would be appropriate for them, also that Mr Clawson asked the claimant what he thought he himself was worth, in response to which the claimant suggested the figure of £6,000.00, albeit that Mr Clawson’s could not recollect this conversation.

 

17.           On 9 September 2014 the claimant informed Mr Clawson by telephone that he had been offered and accepted another job as a Sales Operations Manager and would formalise his four weeks’ notice in writing.  When asked by Mr Clawson if anything could be done to change the claimant’s mind, the claimant said no as there were progression opportunities with the new employer that the respondent could not offer him.  The claimant was offered the option of leaving straight away but wished to work his notice and was required to do so at a different store than where he had been based.  The claimant in a letter dated 10 September 2014 gave the respondent four weeks’ notice of his resignation to terminate on 4 October 2014.

 

18.           By email dated 15 September 2014 to Mr McNiffe, Mr Clawson set out suggested pay rises for managers, these included a number of recommendations for a ‘salary hold’, and in respect of the claimant no pay rise recommendation was made, just a note stating, ‘Mark Hammond (4 weeks notice)’.  Mr Clawson did not recommend a pay rise for the claimant because he had given notice to terminate his employment.  The respondent’s evidence is accepted that it was the respondent’s practice not to award pay rises to staff that it was aware were leaving and that employees who left in September and October 2014 did not receive pay rises save those who had already been awarded a rise in July 2014 before the respondent was aware they were leaving.

 

19.           By email dated 16 September 2014 Mr McNiffe confirmed to Mr Clawson and others in respect of salary increases that he had been through their proposals with Shareholders which had now been approved and that these along with bonuses would be in the bank for the month end.

 

20.           On 23 September 2014 the claimant received his usual pay for September, he later became aware that his colleagues had on 23 September 2014 received pay rises backdated to February 2014 and bonuses for performance in 2013, whereas he had not.  All managers in the respondent’s Northern Ireland stores save the claimant and two other managers, one of whom was absent on leave and the other a new start, were awarded backdated pay rises for 2014.

 

21.           Following the claimant querying with the respondent non-payment of a backdated pay rise and bonus to him, the respondent reallocated £3,733.36 in respect of advance car allowance repayable to it by the claimant, as a £3,000.00 bonus.

 

22.           The claimant’s last day at work and effective date of termination was 3 October 2014.

 

23.           The claimant by letter of 21 November 2014 to Mrs Margaret Heffernan, the respondent’s managing director, raised his disappointment at his treatment by the respondent in not including him in the back dated pay increases received by other managers on 23 September 2014.

 

24.           The claimant presented his claim to the Office of The Industrial Tribunals on
27 November 2014.

 

THE LAW

 

25.           Article 45 of the Employment Rights (Northern Ireland) Order 1996 provides for a worker’s right not to suffer unauthorised deductions from wages by his employer.  A deduction occurs when the employer pays less than the amount properly payable on any given occasion and includes a failure to make any payment.  Under Article 59 (1) (a) ‘Wages’ mean any sums payable to the worker in connection with his employment including any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise.  

 

26.           Harvey on Industrial Relations and Employment Law, Division B1 Pay, 7. Deductions from Wages, F. The meaning of wages and deductions sets out at:

 

(1)(f)    The meaning of wages—Discretionary payments

 

‘[353]

[…] Initially the courts took the view that the statutory definition did embrace payments which were characterised in the contract as being discretionary and ex-gratia, provided there was a reasonable expectation that they would be paid.

'Kent Management Services Ltd v Butterfield [1992] IRLR 394, [1992] ICR 272, EAT: […]’

      

‘[356]

However, the full ambit of the proposition adopted by the EAT in Butterfield regarding the definition of wages was challenged by the decision of the Court of Appeal in New Century Cleaning Co Ltd v Church [2000] IRLR 27.  In Church the Court of Appeal had to consider whether the worker had to show an actual legal entitlement to the relevant payment in order to fall within the definition of wages for the purposes of the Act.  By a majority (Sedley LJ dissenting) the court held that there did have to be such a legal entitlement (whether that be a contractual entitlement or some other legal entitlement).  In the circumstances the broader proposition of the EAT in Butterfield to the effect that a reasonable expectation would be sufficient would not appear to be enough to fall within the ambit of the provision.’

 

(1)(h)   The meaning of wages—The need for a legal entitlement to the sum

 

‘[361]

Although the definition of wages is a broad one it is not limitless.  This is illustrated by the decision of the Court of Appeal in New Century Cleaning Co Ltd v Church [2000] IRLR 27 (discussed in the context of discretionary bonuses at para [356] ff above).  In Church a majority of the Court of Appeal held that in order for a payment to fall within the definition of wages for the purposes of ERA 1996 it was necessary for there to be some legal entitlement to the sum in question although the entitlement need not necessarily arise in contract.  It was in this sense that the phrase 'whether payable under his contract or otherwise' in ERA 1996 s 27(1) had to be construed.  Accordingly, for the majority of the Court of Appeal at least, there had been no deduction for the purposes of the Act when an employer had unilaterally reduced the price offered for window cleaning jobs in the context of a team working with a leading hand who apportioned the price between the various workers.  There was no contractual entitlement to work on the same jobs at the same price and accordingly no legal entitlement could be established.’

 

 

 

‘[362]

In his dissenting judgment Sedley LJ took a far broader approach to the construction of section 27(1) and said that the provision was sufficiently broad to go beyond the lawyer's contract and to require a consideration of the underlying industrial reality.  The payment system had to be looked at over time in order to ascertain what sums were properly payable.’

 

‘[363]

It is respectfully submitted that the majority of the Court of Appeal are right on this question.  If Parliament had intended to create a new legal right to enforce the payment of sums which were not otherwise legally due it would have been expected to do so in very clear terms and it is difficult to see precisely how s27(1) of the ERA 1996 can satisfy this demanding requirement.’

 

(2)(b)   The meaning of deductions—The scope of the tribunal's enquiry

‘[365]

The words 'properly payable' in ERA 1996 s13(3) refer to a legal, but not necessarily a contractual, entitlement on the part of the employee to the payment (New Century Cleaning Co Ltd v Church [2000] IRLR 27, CA discussed at para [361]).  Therefore, the preliminary stage is to consider first whether there is a sum legally payable in accordance with s 13(3) and, only if the answer is in the affirmative, should consideration then be given as to whether there is a deduction from that sum within s 13(1) and 13(2) (Hellewell v Axa Services UKEAT/0084/11, [2011] ICR D29).’

 

APPLICATION OF LAW TO THE FACTS

 

27.                     It was the claimant’s contention that the respondent had a legal obligation to give him a discretionary pay rise implied by virtue of a custom & practice of doing so annually until suspended on implementation of pay freezes during the recession, that he was duly considered for a pay rise and an amount assessed for a discretionary pay rise to be given to him but that this was withdrawn after he gave notice of his resignation, despite his continuing employment when the rise was implemented for his colleagues which was perverse and contrary to the respondent’s obligation to exercise its discretion rationally fairly and in good faith and was done out of malice due to his decision to leave.

 

28.                     Mr Doherty submitted that wages need to be properly payable and there be an entitlement to receive the payment/obligation on the employer to make the payment. Referring to New Century Cleaning Company Limited V Church Mr Doherty contended it was clear there was no obligation on the respondent to award pay rises.

 

29.           On balance, whilst the claimant may have had an expectation of receiving a pay rise, I do not consider overall that the claimant was legally entitled to a discretionary pay rise based upon the following:

 

30.                     There was no written contractual obligation for the respondent to give the claimant a pay rise.  There is no evidence of an agreement to resume annual pay rises post-recession and the former practice of giving the claimant an annual discretionary pay rise was not a certain one, giving rise to a legal obligation to do so by virtue of custom and practice, none having been given in the four years since 2010, and as was acknowledged by the claimant in his evidence there being nothing he could do to make the respondent do otherwise.  Whilst the claimant may have suggested to Mr Clawson during a discussion in summer 2014 that he considered himself worth a £6,000.00 pay rise there was no agreement with the claimant to award same.  Furthermore it is accepted that it was the respondent’s practice not to award pay rises to employees whom it was aware were leaving and the claimant gave notice of his resignation to the respondent before discretionary pay rises were approved by the directors/ shareholders of the respondent company.

 

31.                     I find that the claimant was not legally entitled to receive a discretionary pay rise in September 2014 and wages claimed by the claimant as having been unlawfully deducted were not properly payable to the claimant and he has not suffered an unlawful deduction from his wages.

 

CONCLUSION

 

32.     The claimant has not suffered an authorised deduction from wages and the claimant’s complaint is dismissed.

 

 

 

 

 

Employment Judge:

 

 

Date and place of hearing:         5 February 2015, Belfast.

 

 

Date decision recorded in register and issued to parties: