Luke v Stoke-On-Trent City Council

The question is whether the employment tribunal was wrong in law to dismiss the claim by Mrs Beryl Luke that her employer, the Stoke-on-Trent City Council (the Council), made unauthorised deductions from her salary contrary to section 13 of the Employment Rights Act 1996 (the 1996 Act).

In 1996 Mrs Luke was employed by the Council as a special needs teacher in English at the Assessing Continuing Education (ACE) Pupil Referral Unit. According to her contract, as evidenced in the Written Statement of Particulars of Terms of Employment dated 28 November 1997, her service was at “The Pupil Referral Unit” which was subsequently re-named and is hereafter referred to as the ACE Centre. No further details of her place of work were contained in the Written Statement. The ACE Contract, as I shall call it, did not contain a clause expressly reserving to the Council the power to require her to work outside the ACE Centre.

The ACE Contract referred to general terms and conditions of employment in the School Teachers’ Pay & Conditions Document, to various local agreements between the Council and the recognised trade unions and to documents relating to “Grievance and Disciplinary Procedures.” The parties did not produce any of these documents in evidence in the employment tribunal nor were they included in the appeal bundle prepared for the hearing in the Employment Appeal Tribunal (the EAT) or in this court.

The basic legal principles are not in dispute. Mrs Luke’s claim turns on the content of the employment relationship subsisting between her and the Council. That depends on the construction of her contract of employment, as evidenced by the Written Statement. The ACE Contract has to be construed as a whole and in the context of the surrounding circumstances. Terms can only be implied into the ACE Contract if it is necessary to do so for the purposes of “business efficacy.” A term cannot be implied if it would be inconsistent with an express term.

The origins of the dispute go back to October 2002 when Mrs Luke went off sick with stress and complaints about bullying and harassment. Matters came to a head on 11 February 2004 when the Council stopped paying her salary because she had stopped performing work under the ACE Contract: “no work, no pay.”

Mrs Luke took the Council to the employment tribunal in Originating Applications presented in May and August 2004. She advanced a range of claims, some of which were out of time, but they included a claim for non-payment of salary that was in time. This is the only claim pursued on this appeal from the order of the EAT dated 18 December 2006. Mrs Luke’s appeal from the employment tribunal’s rejection of her salary claim was dismissed, but permission to appeal was granted.

In its judgment sent to the parties on 3 August 2005 the employment tribunal had held that the Council was entitled to stop paying Mrs Luke’s salary under the ACE Contract and that it had not made an unauthorised deduction from it contrary to section 13 of the 1996 Act. The particular circumstances in which Mrs Luke stopped work and the Council stopped pay are at the core of the case. I turn to the relevant findings of the employment tribunal.

There was trouble at the ACE Centre. Mrs Luke said that she was the victim of bullying and harassment involving her Head Teacher, Mrs Chambers, who had raised a number of potential disciplinary issues against Mrs Luke. Mrs Luke was off sick with stress between October 2002 and April 2003. It was agreed that she would not return to the ACE Centre until her allegations had been investigated.

The Council did all that it reasonably could to investigate the allegations, utilising the services of an external investigator, Mrs Carol Chadwick. It deferred the disciplinary procedure issues until after the investigation. Mrs Chadwick delivered her report on 23 April 2003 (the Chadwick Report). She upheld one of Mrs Luke’s complaints and dismissed the remaining 32. The Chadwick Report contained “an Action Plan” involving the use of a mediator designed to get Mrs Luke back into work at the ACE Centre.

The Council was willing to implement the Action Plan consistent with its duties to Mrs Luke and her colleagues. Over the next 10 months the Council, through its officials Mr Penny and Mr Cartlidge (Assistant Director of Support Services), tried to find a solution. The problem was that, although Mrs Luke said that she was willing to follow the Action Plan, she also said that she was not willing to accept the substance of the Chadwick Report, which she felt undermined her in a number of respects. The tribunal stated that

A Disciplinary meeting was fixed, but it was adjourned at Mrs Luke’s request. The Council did not wish to resolve the matter by pursuing the disciplinary issues with Mrs Luke, if it could avoid it. Mrs Luke had also raised a grievance, but this was not pursued She did not appeal against the findings of the Chadwick Report. She pursued a grievance instead. There was a difference of opinion between the parties as to the appropriate procedure to follow. She did not want to resign and the Council did not want to dismiss her.

The Council tried to break the deadlock by suggesting that Mrs Luke’s return to the ACE Centre should be deferred still further and that possibly she would be found equivalent hours doing similar work in other parts of the Authority without suffering detriment in terms of salary or status. Further meetings took place. Mrs Luke made it clear that she was not willing to agree to the Council’s proposals. She was intent on a return to the Ace Centre, but without accepting the Chadwick Report.

This put the Council in a difficult position. Mr Penny and the line managers took the view that a return to the ACE Centre was not possible without the implementation of the Action Plan, which was not possible without acceptance of the Chadwick Report. Mrs Luke did not accept it. The Council made proposals for “temporary redeployment and interim redeployment.” This would not involve withdrawing Mrs Luke’s ACE contract. The Council wanted her to work in some capacity in order to earn the salary that she was still being paid under the ACE Contract. Mrs Luke declined all approaches of additional work without ever allowing the discussions to get as far as a specific offer. She repeatedly put obstacles in the way, saying that she was entitled to return to the ACE Centre. She did not return to work for the Council either at or outside the ACE Centre apart from some temporary work as a Home Tutor between May and July 2003. Those were the circumstances in which on 11 February 2004 the Council stopped paying Mrs Luke’s salary under the ACE Contract.

Mrs Luke’s case was that she was ready, willing and able to attend to do her work at the ACE Centre. In fact she insisted that she should be able to return to the ACE Centre, but without accepting Mrs Chadwick’s Report and without entertaining any proposal by the Council to perform work for it outside the ACE Centre. In her forceful submissions Ms Catherine O’Donnell, who appeared for Mrs Luke on the appeal, contended that, as Mrs Luke was offering her services to the Council, she is entitled to be paid under the ACE Contract, in the absence of an express term to the contrary: Beveridge v. KLM UK Ltd [2000] IRLR 765.

As for working for the Council outside the ACE Centre, Ms O’Donnell argued that that was not possible under the ACE Contract, which contained no express term that the Council could require Mrs Luke to work outside the ACE Centre either at a different place or doing different work. There was no agreed variation of the terms of the ACE Contract; nor, as a matter of necessity, was it legally permissible to imply “a mobility term” (see Liverpool CC v. Irwin [1977] AC 239 on the test of necessity to give “business efficacy” to the contract as the test for implication of contractual terms). In the ACE Contract it was expressly agreed that her work was as a special needs teacher at the ACE Centre. A variation of the ACE Contract, such as by a transfer to different duties outside the ACE Centre, even on a temporary basis, would not be within the terms of the contract. It could not be done without the consent of Mrs Luke, which was not forthcoming. The ACE Contract must stand and with it Mrs Luke’s entitlement to be paid her salary.

The Council’s position was that it could not go on paying Mrs Luke for not doing any work for it. Mrs Luke was not working at the ACE Centre. She refused to accept the Chadwick Report. This refusal prevented the implementation of the Action Plan, which the Council believed was the only basis likely to be workable on her return to work. She refused to contemplate work outside the ACE Centre.

Entitlement to salary under the ACE Contract carried with it a reciprocal and fundamental obligation to work, or to be willing to work, for the Council. Mrs Luke was not doing work for the Council. On the contrary, she was refusing to do the work that she was employed to do. As for her refusal to accept the Chadwick Report, the employment tribunal found that the Council was reasonable in its decision that, unless she accepted the Report, she could not return to work at the ACE Centre.

As for implied terms, Ms Sophie Garner, who appeared for the Council, contended that it was necessary to imply a term into the ACE Contract under which Mrs Luke could be required to work outside the ACE Centre.

As I shall explain, the tribunals below accepted the implied term approach on which the case was argued, but they did not agree on the term to be implied. The decisions below and the submissions on this appeal concentrated on the law relating to implied terms in employment contracts and on the features of this case relevant to implied terms. However, I am not convinced that it is necessary to consider implied terms at all. It is possible, and I think preferable, to find a solution to this case in the employment relationship itself as created by the ACE Contract and without the need to resort to an implied term.

The decision of the employment tribunal dealt in detail with the breakdown of relationships at the ACE Centre, with the efforts of the Council’s officers to find work for Mrs Luke outside the ACE Centre and on the implication of a term into the ACE Contract entitling the Council to require her to do work elsewhere, even if only on a temporary basis.

The employment tribunal reached this conclusion on the implication of a term into the contract of employment-

In brief, the employment tribunal accepted the Council’s submission that, by virtue of an implied term, it was entitled reasonably to require Mrs Luke to work outside the ACE Centre. As she refused to do work, or even to consider doing work that was reasonably required outside the ACE Centre, the Council was no obligation to continue to pay her salary.

The Employment Appeal Tribunal (the EAT) upheld the decision that the Council was entitled to stop Mrs Luke’s salary under the ACE Contract. Although it based its decision on findings of the employment tribunal and by the implication of a term, it did not imply the same term as the employment tribunal.

The judgment given by Underhill J for the EAT analysed the Courtaulds judgment in detail and held that it did not provide the answer in this case. The Appeal Tribunal cited two earlier decisions of the EAT- Jones v. Associated Tunnelling Co Ltd [1981] IRLR 477 and Millbrook Furnishing Industries Ltd v. McIntosh [1981] IRLR 309- which had not been drawn to the attention of the employment tribunal.On the basis of those authorities the EAT implied a term that, in the exceptional circumstances of the case, the Council was entitled to require Mrs Luke to work temporarily outside the ACE Centre.

The decisions below were based on the implied term doctrine because that was the way in which the case was argued on each side at first instance and on appeal. In my judgment, however, it was not necessary to imply any further term in order decide Mrs Luke’s claim. The answer to her claim for arrears of salary is in the employment relationship itself, which is governed by the express contract.

The key findings of the employment tribunal were that Mrs Luke would not accept the Chadwick Report; that the Council took a “reasonable standpoint” in deciding that, unless she accepted the Report, the Action Plan for her return to work at the ACE Centre could not be implemented; and that Mrs Luke would not even consider performing work under the ACE Contract outside the ACE Centre. Mrs Luke would not perform work for the Council under the ACE Contract except on her terms i.e. non-acceptance of the Chadwick Report. The Council’s “reasonable standpoint” in response to this was that the Action Plan could not be implemented.

Ms O’Donnell argued that Mrs Luke was willing to return to work at the ACE Centre, but was prevented by the Council’s stance that she could not return to work at the ACE Centre without accepting the Chadwick Report. There were, she said, other ways in which the Council could and should have handled the situation without proposing to redeploy Mrs Luke outside the ACE Centre or stopping her salary: for example, the Council could have continued with the disciplinary issues or the grievance procedure, or, presumably, not taken the stance that she should accept the Chadwick Report. What the Council was not entitled to do was to require Mrs Luke to work at a different institution than the ACE Centre doing a different kind of work to that required by the ACE Contract. The employment tribunal erred in law in implying a term on the basis of the Courtaulds judgment. The EAT erred in law in implying a different term on the basis of obiter dicta in the cases mentioned in the previous paragraph of this judgment and in a manner that was not part of the case advanced by the Council before the employment tribunal. Neither form of implied term was necessary to the circumstances of the employment relationship and each contradicted the express terms of the ACE Contract.

I agree that it is unnecessary to imply a term into Mrs Luke’s contract of employment. There are reciprocal obligations in the employment relationship subsisting between Mrs Luke and the Council. As an employee of the Council Mrs Luke’s duty was to comply with the Council’s reasonable requirements, whether they took the form of instructions or management decisions, as long as they fell within the scope of the employment contract.

The employment tribunal found that the Council’s stance that there was no point in her returning to the ACE Centre if she did not accept the Chadwick Report was reasonable. The decision whether or not to return to the ACE Centre was within Mrs Luke’s power. If she accepted the Report, she could return. She chose not to accept it, so that she did not return to work at the ACE Centre, and she would not consider working outside the ACE Centre. There was nothing in the contract of employment or in the employment relationship created by it that entitled Mrs Luke, in these circumstances, to set the terms on which she would return to teach at the ACE Centre, which she was employed to do, or to continued receipt of a salary for not teaching at the ACE Centre, as reasonably required by the Council within the scope of the ACE Contract.

This was a straightforward case of “no work, no pay”: no work at the ACE Centre, no pay under the ACE Contract. It was not necessary for the employment tribunal or for the EAT to imply a further term into the ACE Contract to cover this situation. The ACE Contract covered the situation at the ACE Centre. It did not cease to cover the situation by reason of the Council’s efforts to find her work outside the ACE Centre, while she was not teaching there.

I do not agree with Ms O’Donnell’s submission that the consequence is that employment tribunal erred in law and that the appeal should be allowed with judgment for Mrs Luke on her claim, alternatively that the matter should be remitted to a different employment tribunal to re-determine the matter on the basis of the ACE Contract without an implied term.

In my judgment, the “no work, no pay” response to Mrs Luke’s claim is not a new point of law nor does it require any further evidence or investigation of the facts. It is true that, as pointed out by the EAT (paragraph 4) the case was not argued before it or the employment tribunal on the basis that Mrs Luke’s refusal to accept the Chadwick Report undermined or impugned her expression of willingness to work at the ACE Centre. The “no work, no pay” point was, however, present all the time in the expressed concerns of the Council about continuing to pay Mrs Luke, while she was not teaching either at or outside the ACE Centre. The point was so amply covered by the findings of fact by the employment tribunal that no further evidence is required. The tribunals’ excursion into the area of implied terms was an unnecessary and irrelevant extra, which did not undermine the findings of fact relating to the content of the employment relationship under the ACE Contract and its application to the situation regarding Mrs Luke’s return to work at the ACE Centre.

I would add that I agree with the EAT that this case was not covered by the ratio in Courtaulds, an unsuccessful unfair dismissal claim relating to the transfer of a lorry driver’s place of work to a different transport depot a mile away at a different geographical location than that specified in the contract of employment. This case was one of employment as a particular kind of teacher at a particular type of educational institution, the ACE Centre, an unusual, even unique, institution run by the Council, rather than at a particular geographical location. The real question on an implied term, if one were necessary at all, would be whether the Council was entitled to require Mrs Luke to work at a different unit outside the ACE Centre: see the EAT judgment at paragraph 6. After reviewing the further authorities mentioned in paragraph 24 above the EAT concluded (paragraphs 8 and 9) that, in the exceptional circumstances of this case, Mrs Luke could be obliged by the Council to perform duties which went beyond or were different from those expressly required by the ACE Contract, or to perform them at a different workplace outside the ACE Centre. It was justifiable on the part of the Council to want Mrs Luke to earn her salary by doing other (suitable) work during the interval while a solution was looked for. The Council was not insisting on permanent re-deployment, but Mrs Luke was not even prepared to entertain any proposal for a return to work save at the Ace Centre. It was plain that she was not prepared to comply with a requirement for temporary re-deployment.

The EAT added that this was not a case in which Mrs Luke was ready and willing to comply with her full contractual obligations and pointed out that

In my judgment, it was unnecessary for the EAT to pursue the implied term route followed by the employment tribunal. If, contrary to my views, a term should be implied, I am reluctant to express a concluded view on whether the EAT was correct in its formulation of an implied term. It is not necessary to do so in order to dispose of this appeal. Controversial questions can arise on the scope of the employment, about the mobility, transferability and re-deployment of work forces and the possible implication of a term enabling an employer to make changes in the work to be done under a contract of employment or in requiring an employee to adapt to changed circumstances affecting his work or the location of it, or to co-operate in effecting changes to working duties and new methods of work: see, for example, Cresswell v. Board of Inland Revenue [1984] ICR 508 (on the impact of computerisation on the duties of inland revenue staff).

To sum up, whether a term should be implied along the lines favoured by the employment tribunal or along the lines preferred by the EAT was irrelevant in this case. It was apparent from the findings of the employment tribunal that, without the implication of any term, the Council was not obliged to continue to pay Mrs Luke for not working at the ACE Centre. She was not performing any work for the Council under the ACE Contract. Contrary to the reasonable stance taken by the Council she would not accept the Chadwick Report. Had she chosen to comply with the Council’s reasonable position she could have returned to the ACE Centre and the Action Plan could have been implemented. She would have been back at work and there has never been any dispute that she would then have been entitled to be paid for her work.

I would dismiss the appeal. The outcome is that Mrs Luke’s claim against the Council for arrears of salary under the ACE Contract fails.

I agree.

I also agree.