Appeal No.	 EAT/186/89

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 3 September 1991
	Judgment delivered on 11 October 1991

Before
THE HONOURABLE MR JUSTICE WOOD MC (P)

MR L D COWAN

MR J D DALY

C V McCREE	APPELLANTS

THE LONDON BOROUGH OF TOWER HAMLETS	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR JEREMY McMULLEN
(of Counsel)
Messrs Pattison & Brewer
30 Great James Street
LONDON WC1V 3HA
	
For the Respondent	Ms TESS GILL
(of Counsel)
London Borough of Tower Hamlets
Patriot Square
LONDON E2 9LN

	MR JUSTICE WOOD  (PRESIDENT):   At all relevant times the Applicant (Appellant) was and is an employee of the London Borough of Tower Hamlets (Tower Hamlets) as a labourer and is a shop steward with the Transport and General Workers' Union.  On 24th April 1988 he filed an Originating Application alleging "unilateral alteration of my contract of employment; unreasonable harassment; misfeasance and racial discrimination".  His case was heard on 12th and 13th January 1989 by an Industrial Tribunal sitting at London (North) under the Chairmanship of the Honourable F R Davies who found that his complaint under the Wages Act 1986 and of racial discrimination both failed.  The Decision was entered on 1st February 1989.

	At that hearing the Applicant appeared in person and the major part of the evidence seems to have been concerned with matters of racial discrimination.  He is represented before us by solicitors and Counsel instructed by his Trade Union.  He appeals only against the dismissal of his claim under the Wages Act.  Although the facts fell within a small compass,  the issue raised is said to be of wide effect and substantial in financial terms.

	During 1985 property, in the sense of housing, was being transferred from the Greater London Council (GLC) to the London boroughs.  It was part of the breaking up of the GLC also being transferred to the London boroughs.

	The Applicant was transferred for this reason.  A very few months before his transfer he, with many others, had been granted a London non-cash pay supplement of £6.00 per week in return for agreeing to be paid by credit transfer through his bank as opposed to his right to cash under the Truck Acts.

	As the industrial members know from their own experience the abolition of the Truck Acts had been a topic of discussion in industry since the early 1980s, and there was undoubtedly a financial benefit to an employer to be able to use the transfer credit system.  This variation in the contract terms was usually, but not always, met by the payment of a lump sum of the order of £100.
 
	They therefore find themselves somewhat surprised that the agreement made by the GLC with its workforce was that payment of this supplement was to be increased on a formula and even more surprised that on the face of the agreement it continues throughout the employee's employment, which could in many cases constitute a substantial number of years.

	This London Borough - we would have thought many others - complained that this constituted an additional financial burden upon them but to no avail.

	The Truck Acts - hence the right of an employee to be paid in cash - were repealed by the Wages Act 1986 which received the Royal Assent on 21st July of that year.  By February 1986 it had at least been laid before Parliament as a Bill.

	In September 1986 the Staff Side of the Council and Staff Joint Committee asked that this non-cash supplement should be added to the pay of all Tower Hamlets employees so as to bring them into line with the GLC transferees.  Tower Hamlets refused and pointed out the effect of the Wages Act.  They indicated however that they were considering a new overall bonus scheme and would not reach a final decision until they had considered this.

	Further discussions took place and by November 1987 Tower Hamlets had decided that the non-cash supplement which was by then £6.70 per week should be absorbed gradually into an overall increase in bonus, so that eventually all employees would be on the same basis of pay.

	This is recorded in the Minutes of a meeting of 24th November 1987.  The Staff Side were not prepared to agree.  They were told that they had a right of appeal but did not do so.  The proposed scheme was carried out and the picture presented to the industrial members is that the Staff Side saw the commonsense of the proposals but were not prepared to be seen actually to agree.  The position is not so clear that we can be satisfied that there was tacit agreement.

	The terms of the Applicant's contract of employment were therefore altered unilaterally by the Respondents and his non-cash supplement was being gradually eroded when he made his application to the Industrial Tribunal.

	Tower Hamlets had been advised that they could make this change pursuant to the powers given to them by the "London Government - The Greater London Council Housing(Staff Transfer and Protection) Order 1979 - (1979 No.1737)".

The relevant provisions of the Wages Act 1986 are S.1 -
		"1	General restrictions on deductions made, or payments received, by employers

			(1)  An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one of the following conditions, namely -

				(a) ...

				(b)  the worker has previously signified in writing his agreement or consent to the making of it."
and
		"S.8	  General interpretation of Part I

			(1)  ...
			(2)  ...

			(3)  Where the total amount of any wages that are paid on any occasion by an employer to any worker employed by him is less than the total amount of the wages that are properly payable by him to the worker on that occasion (after deductions) then, except in so far as the deficiency is attributable to an error of computation, 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.

			(4)  ...
			(5)  ..."

Once one has discovered "the total amount of the wages that are properly payable by him to the worker on that occasion" it is easy to see whether or not there has been a deduction.

	The reasoning of the Industrial Tribunal is to be found in the latter part of paragraph 5 of its decision where it says -
		"... We find that the deduction was not agreed to by the applicant and we find that it was not required by any statutory provision or by any relevant provision of the applicant's contract.  The question arises whether the deduction was authorised by any statutory provision or by any relevant provision of the applicant's contract.  The contract of employment expressly incorporates the greater London Council Housing (Staff Transfer and Protection ) Order 1979 (1979 S.I. No. 1737) and so it is to that Order that we must address ourselves.  The Order is a Statutory Instrument, and its provisions are, therefore, statutory provisions.  The Order was made under the London Government Act 1963.  Section 85 of that Act requires that any transfer Order shall secure that any new terms and conditions are such that the scale of the salary or remuneration of a person transferred and the other terms and conditions of his employment are not less favourable than those he enjoyed before the date of transfer.  Article 7 of the 1979 Order provides accordingly.  We have come to the conclusion that if the amount of the remuneration package as a whole is not less than its amount before the transfer there is no breach of the 1979 Order.  Thus the deduction made from the non-cash pay supplement was authorised by the 1979 Order, and there was no breach of the Wages Act 1986.  The applicant's complaint under the Wages Act fails."

	The Applicant appeals and Mr McMullen is no doubt taking points not taken before the Industrial Tribunal, but Miss Gill raises no objection.  This is an important point.

	Now that the right to be paid in cash no longer exists commonsense indicates that the supplement should cease and it is possible to take a cynical view of the action of the GLC, but we must look beyond the merits and decide the position based upon the Regulations.

	There is no cross-appeal by the Respondents arguing that any contractual term for the payment of such a non-cash supplement must be the subject of an implied term as to its continuation. 

	We therefore turn to the Regulations.

	Regulations are made by the Secretary of State for the Environment in the exercise of powers under Ss.84 and 85 of the London Government Act 1963.  Section 85(3) reads -
		"The provision required by sub-section (1) and (2) of this section or by paragraph 6 of schedule 3 to the Town and Country Planning Act 1971 shall include such provision with respect to any person who is transferred under this Act (or, as the case may be, in pursuance of any agreement under the said paragraph 6) from the employment of one authority to that of another as to secure that -

			(a)  so long as he continues in the employment of that other authority by virtue of the transfer and until he is served with a statement in writing of new terms and conditions of employment, he enjoys terms and conditions of employment not less favourable than those he enjoyed immediately before the date of transfer; and

			(b)  the said new terms and conditions are such that -

			  (i)  so long as he is engaged in duties reasonably comparable to those in which he was engaged immediately before the date of transfer, the scale of his salary or remuneration, and
			 (ii)  the other terms and conditions of his employment

		are not less favourable than those he enjoyed immediately before the date of transfer."

This subsection seems to us to be addressing two periods of time; the first from the date of transfer until the service of the new terms and conditions of employment; the second is thereafter during the continuation of the contract of employment in duties reasonably comparable to those in which the employee was previously engaged.
	
	The relevant Regulations are Regulations 7(1), (3), and (5).
	
	Protection of officers transferred

	7.	(1)  Every officer transferred by or under article 6 to the employment of a transferee authority shall -

			(a)  so long as he continues in that employment by virtue of the transfer, and

			(b)  until he is served with a statement in writing referring to this order and specifying new terms and conditions of employment

		enjoy terms and conditions of employment not less favourable than those which he enjoyed immediately before his transfer.

		(2)  ...

		(3)  A statement of new terms and conditions of employment shall state the date upon which it is to become operative, which date shall not be earlier than the expiry of three months after -

			(a)  the date the statement is served, or

			(b)  the appointed day,

		whichever is the later.

		(4)  ...

		(5)  The new terms and conditions of employment shall be such that

			(a)  so long as the officer is engaged in duties reasonably comparable to those in which he was engaged immediately before his transfer the scale of salary or remuneration, and

			(b)  the other terms and conditions of his employment,

		are not less favourable than those he enjoyed immediately before his transfer. 
As one would expect the Regulations address the same periods of time as the enabling statutory provisions. 

	What then are the purposes of these Regulations made under that Act?  The first, is to protect the personal position of those transferred.  The second, to recognise that the new employer will wish to envelope all the transferees within its own work structure and in particular so far as the terms and conditions of employment are concerned.

	For these reasons therefore the Regulations gave to the new employer a right within 6 months of transfer [(Regulation 7(2)] to introduce or apply new terms or conditions of employment provided that the "terms and conditions of employment were not less favourable than those which he enjoyed immediately before his transfer".

	Once that statement of new terms and conditions had come into force and had not been the subject of appeal under the Regulations there was a new situation which would continue under the ordinary provisions of the common law or the Employment Protection (Consolidation) Act 1978.  We can find no power within the Regulations which allows the new employer to continue to make unilateral changes in the contract of employment of a transferee after that initial power to produce new terms and conditions of employment.

	It is important therefore to turn to the statement of the new terms and conditions given to the Applicant by Tower Hamlets after his transfer.  The transfer was on 1st July 1985 and the date on which particulars were given as shown on the document itself was 1st November 1985.  In that document, without setting it out in full, the non-cash supplement is identified quite clearly as a London Allowance of £6.  In fact it had increased by then to £6.31, but no point is taken on that matter during submissions .  It follows therefore that unless there was a power to vary within the contract of employment we can find no right in Tower Hamlets unilaterally to abolish that supplement.

	Miss Gill has pointed to a number of references within that statement of employment which she argues gives the right of Tower Hamlets to amend the terms and conditions of employment from time to time.  We find ourselves unable to accept that submission.  The references to amendment are made specifically to the records which were kept and to the amendments as to subsequent particulars which were altered either by agreement or as a result of some contractual or statutory right.  It does not, as indeed one would not expect, give a right to Tower Hamlets to make a unilateral alteration to the rates of pay or other terms and conditions of service.

	Two matters remain outstanding for comment.  It is clear that Tower Hamlets were acting carefully and bona fide in that they were acting on the advice of a central body before taking the course which it did.  That cannot affect us in our interpretation of powers given under the Regulations.

	Secondly, it is said that the Notes for Guidance produced at the same time as the Regulations indicate that there is a general power to vary from time to time.  Here again we cannot allow our own view of the law to be affected by those Notes of Guidance.

	It seems to us that it would be an extraordinary position if once the statement of the new terms and conditions of employment had been made that thereafter alterations could be made outside the normal negotiating and contractual situation.  It is readily understandable that there should be the right to make the initial change so as to bring the new employees into line with the existing work force but not that there should be a power thereafter to make unilateral alterations.  Insofar as this decision may thought to create difficulties over a wide field, in our judgment the matter is most sensibly dealt with by considering the implication of a term as to the duration of the supplement for non-cash payments.

	It follows from the above that with respect to them, we take a view which differs from that of the Industrial Tribunal as to the powers of the Local Authority under the Regulations.  It may very well be that the Tribunal thought that there was no merit in the claim and that common sense required the abolition of the supplement; if so, then with regret we do not share their view that it can be done in the way in which it was suggested.

	It follows therefore that this appeal must be allowed.

	Leave to appeal.