Appeal No. EAT/473/93

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 4th February 1994
	Judgment delivered on 14th March 1994

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (PRESIDENT)

	MR P DAWSON OBE

	DR D GRIEVES CBE 

MR V E BERNETTE	APPELLANT

LONDON BOROUGH OF BARNET	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR PAUL EPSTEIN
(of Counsel)
Messrs Bruce Piper & Co
Solicitors
1 Mabledon Place
LONDON WC1H 9A

For the Respondents	MR ANGUS MOON
(of Counsel)
Controller of Legal Services
London Borough of Barnet
The Town Hall
The Burroughs
HENDON
LONDON NW4 4BG

MR JUSTICE MUMMERY (PRESIDENT)      Introduction     This appeal is concerned with the interpretation and application of the Wages Act 1986 ("the 1986 Act") in the context of redeployment procedures negotiated by a local authority with the relevant Trade Unions.  The point arises in proceedings brought before the Industrial Tribunal under the 1986 Act by Mr Bernette complaining of unlawful deductions from his wages by his employer, the London Borough of Barnet ("the Council").  After a three day hearing last year the Industrial Tribunal, sitting at London (North), dismissed the application.  Mr Bernette appeals and the Council cross-appeals against the decision.

The Facts

	The factual background to the proceedings may be summarised as follows:-

	(1)  Mr Bernette was employed by the Council as a building surveyor in the Directorate of Technical Services from 1st August 1988.  The statement of employment particulars issued on 16th June 1988 stated that Mr Bernette's appointment was "subject to termination by two months' notice in writing on either side." (Clause 14).  Clause 6 provided that his terms and conditions of service were governed by various agreements negotiated with Trade Unions recognised for collective bargaining purposes.

	(2)  The redeployment procedures applicable at the time of Mr Bernette's engagement were set out in a document dated August 1987.  The document stated that a procedure had been agreed with the Barnet branch of the National and Local Government Officers Association (NALGO).  It was stated that -

		"The Council has a policy of "no redundancy".  However, circumstances arise where  displacement of staff is unavoidable, and in these cases it is the Council's policy to avoid redundancy dismissals by such means as redeployment and retraining.  The following procedure ensures that any employees who are displaced from their existing jobs are treated fairly and consistently.

		 Nothing in this document is intended to restrict an employee's rights under the Employment Protection (Consolidation) Act 1978, to complain to an industrial tribunal that he has been unfairly dismissed or that he has not received a redundancy payment to which he believes he is entitled."

	The next section of the document states general principles.  The first two paragraphs are relevant for present purposes.

	"1  Suitable alternative employment"

	Any employees who are displaced from their existing jobs will, wherever possible, be made one or more offers of suitable alternative employment.  By this it is meant that the new job will provide for similar levels of pay, conditions and status as the previous job, and will take the employee's personal and domestic circumstances into account.  The Chief Personnel Officer should be consulted in all cases."

	"2  Protection

	 Where it is only possible to offer a job with a lower grade or rate of pay, the employee's existing grade will be protected.  Existing annual leave entitlement will be protected.  Protection of other conditions of service and allowances will be considered in each individual case, having regard to the definition of "suitable alternative employment" (see para. 1).  If redeployment involves a transfer to another Department, the additional cost of protection will be borne by the receiving Department."	   

	(3)  In 1991 the Council decided that, because of economic circumstances, it was necessary to reduce staff, so that certain employees would have to be made redundant or redeployed.  Mr Bernette's post as building surveyor was one of the posts that was going to go.  On 14th August 1991 the Council wrote a letter to Mr Bernette headed "Redundancy Situation, Architecture and Building Practice".  The letter referred to an interview which he had attended on the previous day to determine selection for redundancy,
		"... this situation being necessary due to the required reduction in the number surveying posts as a result of the cuts in the salaries budget for the Architecture and Building Practice".
He was informed that he had not been selected for any of the posts for which he was under consideration.  This meant that he would be issued "notice of dismissal on the grounds of redundancy".  The letter continued:
		"You are entitled to two months' notice, and the notice period commences on Monday 19 August 1991.  I am, therefore, writing to issue you with formal notice that your employment with this Authority will terminate on Sunday 20 October 1991."
That period was later extended by agreement to 28th October 1991.  It was stated that during the notice period "every effort will be made to assist you in securing suitable alternative employment within the Authority."  The letter concluded with calculations of the redundancy payments to which he would be entitled and a statement that the Director of Technical Services was seeking agreement to offer Mr Bernette redundancy payments based on the Voluntary Severance Scheme.

	(4)  Negotiations took place between Mr Bernette, assisted by the local NALGO District Officer and the Council, in relation to his redeployment.  On 23rd September 1991 and 8th October 1991, letters were written to Mr Bernette by the Council offering the post of a Needs Officer (Housing Services) in the Community Services Directorate with a four week trial period with effect from a date to be agreed.  The grade attached to the post was Scale 4.  It was confirmed that his period of salary protection would begin on 21st October and continue for a maximum period of 11/2 years.  For the first six months of this period his grade related earnings would be protected at the current maximum salary attached to Grade Scale 6.  On 14th October 1991 the NALGO District Officer wrote to the Council referring to the 1987 redeployment procedures and stating that Mr Bernette was in a redeployment situation and that he had been offered a post at a lower grade and rate of pay.  It was pointed out that "according to the procedures, his grade and leave should be protected... I look forward to receiving confirmation of this protection."  The Council replied on 28th October stating that it was understood that Mr Bernette had agreed to commence his four week trial period in the post of Needs Officer commencing on 28th October 1991.  The Council declined to make any further improvements in the employment terms and conditions offered to Mr Bernette in the letter of 8th October.  As regards the redeployment procedure, it was pointed out that the job for which Mr Bernette applied was "clearly not suitable alternative employment" in that context and that, if it had been offered as such by management, Mr Bernette would have retained the right to reject it as unsuitable and elect to take a redundancy payment.

	(5)  Mr Bernette started his four week trial period as a Needs Officer on 28th October 1991.  It was common ground before the Industrial Tribunal that, although Mr Bernette took up that job, he "has never accepted that (a) it was not a redeployment post and (b) that he should receive the salary set out in the letter of offer." (para 6 of the decision).

	(6)  The Council negotiated new redeployment procedures with the Unions which came into force on either 20th or 21st November 1991 ie while Mr Bernette was in the course of his trial period as a Needs Officer.  The new procedures for redeployment differed from the old procedures.  It is unnecessary to dwell on the details of the differences.  All that need be noted is that condition (3) of the Scheme for Protection provided:
		"The protection period begins from the date immediately following successful completion of the four week trial period.  If the trial period began or continued after termination of the employee's previous contract, protection of grade related earnings will be given in accordance with this scheme, and will not be offset against the entitlement set out in paragraph 9."

The Proceedings
	On 25th November 1991 Mr Bernette presented a complaint to the Industrial Tribunal that unlawful deductions had been made from his salary contrary to S.1 of the 1986 Act.  He stated in his complaint that, due to reorganisation of the architects and surveyors in the Directorate of Technical Services, he was redeployed as a Needs Officer in the Directorate of Community Services.  He claimed that the Council had unlawfully deducted the difference between the amount of the salary which he was paid in his previous post as a building surveyor and the salary which he was paid in his new post as a Needs Officer.  He contended that the failure of the Council to make up that difference contravened the 1986 Act and the Council's Redeployment Procedures.  In its Notice of Appearance entered on 13th December 1991 the Council asserted that Mr Bernette was not redeployed by the Council.  His post became redundant.  The Council had no suitable alternative employment to offer him.  It offered him a post of a Needs Officer in the Directorate of Community Services.  That offer was not made under the Council's redeployment procedure which only applied where offers of suitable alternative employment are made.  The job offered was the post of a Needs Officer which was entirely different from his previous post and paid considerably less.  The Council contended that Mr Bernette took up the offer of the post.  He began working in it and accepted the terms and conditions on which it was offered.  In the circumstances the Council denied that there was any unlawful deduction of wages.  According to the statement of employment particulars issued by the Council to Mr Bernette on 20th February 1992 he commenced employment as a Needs Officer on 2nd December 1991 (that is, after the expiration of the trial period).  Clause 8 stated that the terms and conditions of service were governed by various agreements, as amended from time-to-time.  Clause 9 dealt with rates of pay.  His post was graded Scale 4.  A period of salary protection began on 28th October 1991 and would continue for a maximum period of 11/2 years.  For the first six months of the period his grade related earnings would be protected at the maximum point of SO1 and with effect from 28th April 1992 his grade related earnings would be protected at the current maximum salary attached to grade Scale 6.  There were further provisions relating to the period from 28th April 1991.

	On the basis of its findings of fact, the relevant documents and the statutory provisions the Industrial Tribunal came to the following conclusions and dismissed the claims:
	(1)  It accepted the Council's contention that Mr Bernette's contract with the Council as a building surveyor terminated on 28th October 1991 and a new contract was made between him and the Council for the new post of Needs Officer.  The Council had given notice of termination of the contract to employ Mr Bernette as a building surveyor.  The notice expired.  That contract came to an end.  A new contract was made with him in relation to the post of Needs Officer.
	            
	(2)  The Industrial Tribunal rejected the Council's contention that the redeployment procedure did not, in those circumstances, apply.  In the view of the Industrial Tribunal the fact that Mr Bernette served a trial period as Needs Officer indicated that Mr Bernette was being redeployed by the Council.

	(3)  The Tribunal rejected Mr Bernette's contention that he was entitled to the protection of the old redeployment procedures.  The Tribunal held that the new procedure, which came into force on 20th or 21st November 1991, applied to him as he was still serving his trial period in the new post when the new procedures came into effect.

	(4)  The Tribunal added that, if, as Mr Bernette contended, the old procedure applied, then the Council would have made a deduction from his salary contrary to S.1 of the 1986 Act, because Mr Bernette would have been entitled to be protected at his old salary as a building surveyor.

The Appeal
	Mr Bernette appealed against the dismissal of his claim under the 1986 Act on the ground that the Tribunal had erred in law in holding that the new redeployment procedure applied to a post of Needs Officer which he was offered and which he started on 28th October 1991, before the new procedure came into force.  The Council cross-appealed from the decision of the Industrial Tribunal that, although the Tribunal had held that Mr Bernette's contract as a building surveyor had been brought to an end by notice on 28th October 1991, the redeployment procedure applied.  In its grounds of cross-appeal the Council contended that under his new contract Mr Bernette was entitled to be paid at the rate appropriate to his new job as a Needs Officer.  As his previous contract had been brought to an end, he was not entitled to continue to work at the same rate of pay as was payable under the previous employment.  In any event, there was no "deduction" by the Council within the meaning of the 1986 Act.

	With the agreement of counsel, this Tribunal decided to hear the cross-appeal first.  In dealing with the cross-appeal it is important to identify the issue for decision.  The issue is: has the Council made an unauthorised deduction from Mr Bernette's wages contrary to S.1 of the 1986 Act?  In order to answer that question it is necessary, first, to analyse the contractual position between Mr Bernette and the Council; secondly, to interpret the relevant provisions of the 1986 Act; and, thirdly, to apply those provisions, so construed, to the contractual position, as analysed, and to the other facts found by the Tribunal.  This Tribunal emphasises that its only function on this appeal is to decide whether the Industrial Tribunal made an error of law in the way in which it answered this question.  It is not the function of this Tribunal to decide whether Mr Bernette has any other claim or right against the Council arising out of the dispute.  In this connection it should be noted that it emerged during the course of the appeal that, unknown to counsel appearing for Mr Bernette, there were other proceedings arising out of this dispute.  On 11th December 1991, Mr Bernette presented an application to the Industrial Tribunal complaining of unfair selection for redundancy by the Council and of racial discrimination.  The details of his complaint included allegations relating to "the unfair selection for redundancy process".

	Those complaints were heard by the Industrial Tribunal held at London (North) for three days in July 1993.  For reasons notified to the parties on 27th August 1993 that Industrial Tribunal unanimously decided that Mr Bernette was not unfairly dismissed and that the Council did not unlawfully discriminate against him on the grounds of his race.  In paragraph 4(f) of the decision the Tribunal made the following finding of fact.
		"On 13 August the Respondent (the Council) gave the Applicant (Mr Bernette) notice of dismissal for redundancy which was due to expire on 20 October.  This was extended until 28th October to allow the completion of certain disciplinary procedures in which the Applicant was involved.  The Applicant has, however, continued to work for the Respondent as a Needs Officer, since his dismissal."
The Tribunal went on to hold that Mr Bernette was fairly selected for redundancy against identified criteria.

The Law
	The 1986 Act made "fresh provision with respect to the protection of workers in relation to the payment of wages."  The relevant provisions are contained in Part I.

	Section 1(1) contains general restrictions on deductions made 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 ..."
"Wages" are defined, for the purposes of Part I of the Act, in S.7 as meaning, in relation to a worker,
		"Any sums payable to the worker by his employer in connection with his employment",
but excluding any payments falling within subsection (2).

	That definition has recently been considered by the House of Lords in Delaney v. Staples [1992] 1 AC 687.  In his speech, with which the other members of the Appellate Committee agreed, Lord Browne-Wilkinson considered the special definition of "wages" in S.7 against the background of the normal meaning of that word.  He said at p.692B that,
		"... the essential characteristic of wages is that they are consideration for work done or to be done under a contract of employment.  If a payment is not referable to an obligation on the employee under a subsisting contract of employment to render his services it does not in my judgment fall within the ordinary meaning of the word "wages".  It follows that if an employer terminates the employment (whether lawfully or not) any payment in respect of the period after the date of such termination is not a payment of wages (in the ordinary meaning of that word) since the employee is not under obligation to render services during that period."
At p.697E he returned to "the basic concept of wages" as being payments in respect of the rendering of services during the employment, so as to exclude all payments in respect of the termination of the contract save to the extent that such latter payments are expressly included in the definition in S.7(1).   He concluded that, save for cases expressly included in the definitions in sub-paragraphs (a) and (f) of S.7(1), payments relating to the termination of employment are not wages as they do not relate to the provision of services under the employment.

	It is next necessary to look at payments which are excluded from the definition of wages by the combined operation of S.7(1) and 7(2).  The excluded payments listed in S.7(2) include -
		"(d)  any payment referable to the worker's redundancy."

	Finally, the general interpretation provisions in S.8 include subsection (3) in relation to deductions.
		"(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."

The Legal Position
	On the cross-appeal the Tribunal had the benefit of full legal argument by Mr Moon, on behalf of the Council, and by Mr Epstein, on behalf of Mr Bernette.  The oral arguments were supported by typed outline submissions submitted late in the day, but still useful in identifying the points of dispute.

	The conclusion of this Tribunal is that the Industrial Tribunal was right to dismiss Mr Bernette's claim.   His appeal will, therefore, be dismissed.  The reasoning of the Tribunal in its decision does, however, disclose an error of law which entitles the Council to succeed on its cross-appeal that the Tribunal's decision should be affirmed on different grounds.

	In our judgment, the legal position concerning Mr Bernette's claim under the 1986 Act can be stated quite shortly.

	(1)  Down to 28th October 1991 Mr Bernette was employed by the Council as a building surveyor.  He was paid all the wages for the services rendered while that contract was subsisting.  It is not claimed by Mr Bernette that any arrears of wages are due to him under that contract.  His claim in respect of that contract is that he was entitled to the benefit of the redeployment procedures negotiated with the Trade Unions and incorporated or assimilated into his contract as a building surveyor by virtue of Clause 6 of the Statement of Particulars of his employment.

	(2)  The contract for the employment of Mr Bernette as a building surveyor came to an end on the expiration of the notice period, as extended, on 28th October 1991.  He ceased to render services with the Council as a building surveyor and the Council ceased to pay wages to him as a building surveyor.

	(3)  Mr Bernette and the Council entered into a new contract under which he was employed as a Needs Officer at a rate of pay specified in Clause 9 of the Statement of his employment particulars as a Needs Officers.  In that new post Mr Bernette has rendered services to the Council as a Needs Officer.  He has been paid wages at the rate provided for in that contract.  That new contract also makes provision in Clause 8 for him to have the benefit of payments negotiated with the Trade Unions.  Those agreements confer on him, in his post as a Needs Officer, the benefit of the appropriate redeployment procedures.

	(4)  Mr Bernette does not claim that the Council has paid him less than the total amount of wages payable to him at the rate provided for in Clause 9 of his Particulars of Employment.  The essence of Mr Bernette's claim is a different one.  His contention is that, by reason of the redeployment procedures in force at the time when his contract as a building surveyor was terminated, he is entitled to be paid, in his post as a Needs Officer, wages at the rate applicable to his former employment as a building surveyor.  The claim advanced on his behalf by Mr Epstein has been put in two ways.   First, it is argued that Mr Bernette's contract of employment as a building surveyor has never come to an end: the contract, including, by incorporation, the term relating to redeployment procedures, has simply been varied by changing his post.  We are unable to accept that submission.  The Industrial Tribunal found as a fact that the contract of employment as a building surveyor came to an end as a result of the expiration of the period of notice.  That is a finding of fact against which there is no appeal.  It is, in any case, the only finding which the Tribunal could make on the documents and evidence before it.  Mr Epstein argued, secondly, that if the contract of employment as a building surveyor came to an end, and there was a new contract of employment of Mr Bernette as a Needs Officer, the effect of the redeployment procedure incorporated in the first contract was to entitle Mr Bernette to continue to be paid wages at the same level in the second contract.  The difficulty with this submission is that there is no express term in the second contract making provision for wages at that level.  A different rate of pay is specified.  The reference to agreements with Trade Unions which include redeployment procedures does not assist, since those procedures would be applicable to the new post, not to the post held under the previous contract.  Further, it is not possible to imply into the new contract provisions relating to rates of pay which are inconsistent with the express provisions.

	(5)  The position is that the Council is not, by failing to pay Mr Bernette wages at the level of a building surveyor, making a "deduction" from Mr Bernette's wages as a Needs Officer.  The sums payable to Mr Bernette by the Council in connection with his employment as a Needs Officer are those set out in the Particulars of Employment relating to that post.  It is unnecessary and inappropriate for us to express any view on the question whether Mr Bernette has any other form of claim (for example, damages) against the Council in respect of any alleged breach of contract under the contract of employment of him as a building surveyor and the relevant redeployment procedures incorporated in it.  All that it is necessary for us to decide is that, on the proper construction of the 1986 Act in the circumstances of this case, he has not established that the Council have made any unauthorised deduction from the wages payable to him by the Council in connection with his employment as a Needs Officer.

	(6)  The Council advanced a further argument that, even if Mr Bernette could establish that the sums payable to him by the Council in connection with his employment as a Needs Officer included the difference between the rate of pay specified in his contract as a Needs Officer and the level of wages previously paid to him as building surveyor, they were excluded payments under S.7(2)(d) of the 1986 Act.  Mr Moon, on behalf of the Council, submitted that any further sums for which Mr Bernette claimed payment were based by him on the redeployment procedure.  The redeployment procedure was, in effect, the way in which the Council provided for redundancy situations.  The sums payable to Mr Bernette by the Council under the redeployment procedure were therefore to be regarded as payments "referable to the worker's redundancy" within the meaning of S.7(2)(d).  This is an interesting argument, but we do not find it necessary to express a view on it, since it is sufficient for the purposes of this appeal to hold that, on the true construction of the 1986 Act, the Council has not made any deduction from the wages of Mr Bernette in connection with his employment as a Needs Officer.

	For those reasons, Mr Bernette's appeal is dismissed and the Council's cross-appeal is allowed.