Appeal No. UKEAT/0085/13/DM
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX
At
the Tribunal
On
19 July 2013
Before
HIS
HONOUR JUDGE PETER CLARK
(SITTING ALONE)
TONI
& GUYS (ST PAUL’S) LTD APPELLANT
MRS M GEORGIOU RESPONDENT
Transcript of Proceedings
JUDGMENT
SUMMARY
UNFAIR DISMISSAL – Compensation
Correct method of calculating a week’s pay for the purposes of
(a) basic award and (b) compensatory award for unfair dismissal.
Appeal allowed in part; distinction drawn between the statutory
regime applying to a week’s pay for the basic award under Part XIV, Chapter II Employment
Rights Act 1996 and the greater discretion granted under s.123(1) ERA in
respect of the compensatory award.
HIS HONOUR JUDGE PETER
CLARK
1.
This appeal raises questions as to the proper calculation of a week’s
pay for the purposes of both the basic and compensatory awards following a
finding of unfair dismissal. The parties before the London Central Employment
Tribunal were Mrs Georgiou (the Claimant) and Toni & Guys (St Paul’s) Ltd (the Respondent). The factual background is that in 2002 the
Claimant founded the Respondent company, a franchisee providing hairdressing
services at 123‑124 Newgate Street, London EC1. In early
January 2011 the Claimant sold the shares in the Respondent to
Ms Law; the two were then on good terms. It was a term of the sale
agreement that the Claimant would be employed in the business as a
hairstylist. Her remuneration was expressed in her statement of terms and
conditions to be as follows:
“Remuneration
Your earnings are variable and are on a commission only basis
and you will receive 34% all your net takings payable monthly in arrears by
cheque/credit transfer as detailed on your pay statement. We, however
guarantee that your earnings will not fall short of the current minimum wage in
force for the hours worked.”
2.
Other stylists employed at the establishment earned commission on a
similar basis but at a lower rate, typically between 25 per cent and
30 per cent.
3.
Following the sale, relations between the Claimant and Ms Law
deteriorated, culminating in the Claimant’s dismissal on 24 June 2011.
She brought a complaint of unfair dismissal before the Tribunal. That claim
was fully defended and came on for hearing before
Employment Judge Burns on 14 and 15 May 2012. By
a Judgment with Reasons dated 18 June the complaint was upheld without
deduction for contributory conduct on the Claimant’s behalf. The Judge then
went on to assess compensation. Without reference to any relevant statutory
provisions as to remedy, as opposed to liability (see paragraphs 37‑41),
the Judge dealt with the figures for gross and net pay at paragraph 56,
where he said this:
“There was a dispute as to what the Claimants [sic] average
weekly pay was, or should be assessed at. Her actual earnings as per the
July 2011 payslip which in fact related to only the first 24 days of
June 2011 was £741.57 net. This suggests a net rate of pay of about £220
per week. However the Claimant complains that her earnings during this period
was [sic] artificially low because the Respondent had previously suspended her
for two lengthy periods, during which she had her name blackened and lost
goodwill with her own personal clients, and also as a result of the fact that
work had been diverted away from her. I accept these complaints and the
Claimant’s contention that, absent these unfair factors, she would have been
earning £265 net per week and £294 gross per week. In reaching this conclusion
I have had regard to the figures produced by the Respondent showing the
financial performance of other stylists in January, February and
March 2012. During her employment the Claimant was the most senior and
highly paid stylist and should have earned at a significantly higher rate than
these comparables.”
The appeal
4.
It is necessary to consider separately the statutory regimes that
dictate the proper assessment of a week’s pay (gross) for the purpose of
calculating the basic award and the compensatory award payable following a
finding of unfair dismissal. I shall consider each in turn.
Basic award
5.
The calculation of a week’s pay for this purpose is circumscribed by
Part XIV Chapter II of the Employment Rights Act 1996
(ERA). Section 220 provides:
“The amount of a week’s pay of an employee shall be calculated
for the purposes of this Act in accordance with this Chapter.”
6.
Material for present purposes are section 221(3), which provides:
“Subject to section 222, if the employee’s remuneration for
employment in normal working hours […] does vary with the amount of work done
in the period, the amount of a week’s pay is the amount of remuneration for the
number of normal working hours in a week calculated at the average hourly rate
of remuneration payable by the employer to the employee in respect of the
period of 12 weeks ending—
(a) where the calculation date is the
last day of a week with that week, and
(b) otherwise, for the last complete
week before the calculation date.”
7.
And by section 223(1):
“For the purposes of section 221 and 222 in arriving at the
average hourly rate of remuneration, only—
(a) the hours when the employee was
working, and
(b) the remuneration payable for or
apportionable to those hours,
shall be brought in.”
8.
Based on those provisions, Mr Rees submits that in this case, where
the Claimant’s remuneration under her contract of employment is dependent on
commission earned at the agreed rate of 34 per cent, the position is both
clear and mandatory. The Claimant’s actual earnings during the relevant pre‑termination
12‑week period are to be ascertained and averaged out. That gives a
week’s pay for the purpose of the basic award. No variation from that formula
is permitted. What is impermissible is the speculative figure adopted by the
Judge based on what she might have earned had Ms Law not suspended her,
blackened her name, caused her to lose the goodwill of her clients and diverted
work away from her, as the Judge found she had done.
9.
In response, Mr Bishop submits that in essence the Judge found a
breach of the implied term of mutual trust and confidence on the part of the
Respondent and that, but for that breach, the Claimant would have been
remunerated on the basis found by the Judge. That was therefore the
remuneration to which the Claimant was contractually entitled.
10.
Attractively as the argument was put by Mr Bishop, I am unable to
accept it on the basis of the Judge’s findings; in particular, far from finding
a breach, the Judge made clear first at paragraph 9 that in the contract
collateral to the same agreement the Claimant was given no express assurance as
to security of employment, nor was she guaranteed a minimum amount of work (I
pause to observe that is plainly true of the express term as to remuneration in
the Claimant’s statement of terms and conditions of employment). Secondly, at
paragraph 11 the Judge held that in deliberately restricting work going to
the Claimant Ms Law breached the spirit, if not the letter, of the share
sale agreement. There is no finding of a breach of the implied term of the
contract of employment.
11.
These facts seem to me to be distinguishable from those in Kinzley
v Minories Finance Ltd [1988] ICR 113, on which Mr Bishop
relied, where the EAT remitted a case to the then Industrial Tribunal to
determine whether the claimant was right in asserting an assurance given by her
employer as to a higher level of salary for the purposes of calculating the
compensatory award under what is now section 123(1) ERA. In these circumstances,
given the clear formula set out in Chapter II of Part XIV ERA, I am
driven to conclude that the Judge fell into error in his assessment of a week’s
pay for the purposes of calculating the basic award, and I uphold Mr Rees’
submission on this part of the appeal. I shall hear the parties later on how
that translates in terms of the basic award made below.
Compensatory award
12.
There is no equivalent provision for ascertaining the level of net pay
for the purpose of assessing loss of earnings as part of the compensatory
award, although in practice it will normally be the netted‑down weekly
gross pay caculated for the purposes of the basic award (see my observation in Whelan v Richardson
[1998] IRLR 114, paragraph 43, and the approach of HHJ Birtles in Contract
Security Services v Adebayo UKEAT/0192/12,
11 December 2012, paragraph 24). Relying on that approach,
Mr Rees submits that the net weekly pay for the purposes of a compensatory
award should simply be the gross pay properly assessed for the purpose of the
basic award netted down. However, the Tribunal’s discretion in calculating the
compensatory award is expressed in section 123(1) ERA in this way:
“The amount of the compensatory award shall be such amount as
the Tribunal considers just and equitable, having regard to the loss sustained
by the complainant in consequence of the dismissal in so far as that loss is
attributable to action taken by the employer.”
13.
That wide discretion, in my judgment, covers the Judge’s approach to the
calculation of the compensatory award in this case. I am not here concerned
with the manner of dismissal of itself, which is not to be separately
compensated, rather with the loss sustained by the Claimant as a result of her
dismissal attributable to action taken by the Respondent. Here, the action
taken by the Respondent as found by the Judge included capriciously diverting
away from the Claimant work on which she would have earned additional
commission. In these circumstances, as Mr Bishop put it, it would not be
just and equitable to permit the Respondent to benefit from behaviour that
formed a part of the unfairness of the dismissal. In order to correct that
injustice, it seems to me that the Judge was entitled to compensate the
Claimant for her lost earnings post‑dismissal on the basis of what she
would have earned but for her unfair dismissal. That is a quite different
assessment from the prescribed calculation of a week’s pay for the purposes of
the basic award. It follows, therefore, that in relation to the compensatory
award this appeal fails and is dismissed.
Conclusion
14.
The appeal is allowed in part. The basic award is to be reassessed on
remission to the Employment Tribunal unless within 14 days of this order the
parties provide an agreed variation in writing to the EAT.
