Veitch Penny LLP - Exeter | Crediton, Devon

Case

International Packaging Corporation (UK) Ltd v Balfour & others - Employment Appeal Tribunal (January 2003)

Issues

(1) Contracts of employment
(2) Terms of employment: hours of work
(3) Remuneration

Facts

Balfour and his fellow employees made a complaint to the Employment Tribunal under s.13 (1) of the Employment Rights Act 1996, after they had found themselves subject to their employers unilaterally introducing short-term working. Its introduction, due to falling orders, led to a reduction in their wages. The complaint stated that the effect of the change amounted to an unauthorised deduction from their wages. The Act states that an employer may not make a deduction from any wages for any worker employed by him or alternatively, receive a payment from a worker unless:

a) it is required or authorised by virtue of any statutory provision or any relevant provision of the worker's contract; or
b) the worker has previously signified in writing his agreement or consent to it.

There was no express term in their contracts to allow for this, but there was provision for a basic working week of 39 hours, with the employees obliged to work to a specific pattern. The pattern could only be changed by agreement with the USDAW union.

At the hearing, the Chairman found for the applicants, due to the absence of an express term in their contracts that allowed for the change. However, the Chairman felt that a term could be implied by custom and practice. Despite the funding, it was held that the deductions were unauthorised because the employers had not written to the applicants to inform them of the effect of the term, as they were required to do.

The employers appealed the decision, stating there was no deduction because the employees were receiving proper payment for the hours they worked. The employees cross-appealed on the grounds that they finding of an implied term was incorrect.

Decision

The Appeal Tribunal dismissed the appeal and allowed the cross-appeal, in effect agreeing with the previous Tribunal, albeit on a different reasoning. It found that the unilateral introduction of short-time working did amount to an unauthorised deduction. Any actual deduction of wages, whether following a reduction in working hours or not, can only take place following agreement, as it is a variation of a contract of employment. It may occur following an express clause or allowed by implication within those terms. It may occur following an express clause or allowed by implication within those terms.

There was no evidence to show there was an implied term. It was submitted that in the past their had been agreements to vary hours of work (to which the employees had reluctantly agreed), but it was held that this was not sufficient to create the power to actually vary the hours in this instance. Likewise there was nothing to suggest there was an open-ended obligation to accept shorter hours and lesser wages whenever the employer chose to. Without any such power to deduct hours, therefore pay, the deductions can only be described as unlawful.

Comments

This case serves to highlight the importance of a contract of employment in the continuing employer/employer relationship. It is the core document to revisit each time there is an alteration in that relationship.