Southern Cross Healthcare Co Ltd v Perkins & Ors

This appeal is concerned with the jurisdiction of employment tribunals. They have a remarkable history. They were first established for the rather mundane purpose of hearing appeals from assessments of industrial training levies pursuant to the Industrial Training Act 1964. Their subsequent and rapid jurisdictional growth embraced disputes about redundancy payments under the Redundancy Payments Act 1965, unfair dismissal under the Industrial Relations Act 1971 and the early discrimination legislation (Equal Pay Act 1970, Sex Discrimination Act 1975 and Race Relations Act 1976). Additional categories of discrimination followed in and since the 1990s and other jurisdictional extensions have resulted from European initiatives. Employment tribunals now deal with well over 100,000 cases per year and their jurisdiction relates to over fifty categories of employment rights. However, they are not all-purpose tribunals with jurisdiction to deal with any and every workplace dispute. They are statutory bodies and their jurisdiction is limited by the statutes which govern them.

As long ago as 1971, the Industrial Relations Act conferred upon the relevant Minister the power to make regulations to extend the jurisdiction of the employment tribunals to hear claims based on breach of contract. That gauntlet was not picked up until 1994 when the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 enabled the tribunals to hear specified breach of contract cases. The provision is now enshrined in the Employment Tribunals Act 1996, section 3, which also contains an up-to-date rule-making power which facilitates further extensions. However the current position is that the breach of contract jurisdiction is confined to claims arising or outstanding on the termination of employment. It is not available during the subsistence of the contract.

The present case is concerned with contractual holiday entitlements and with the statutory right of an employee to be provided with a written statement of particulars of employment (Employment Rights Act 1996, sections 1 and 4), including “any terms and conditions relating to … entitlement to holidays” (section 1(4)(d)(i)). Employment tribunals undoubtedly have jurisdiction in relation to some matters concerning written statements of particulars (sections 11 and 12). The question we have to consider is whether they have jurisdiction to construe contractual terms and conditions contained or referred to in written statements of particulars.

The respondents are employed by the appellant. In each case they were first employed by the appellant’s predecessor, Ashbourne Homes Limited (later Ashbourne Limited). They commenced employment on different dates between May 1994 and February 1995. Mr Perkins and Mr Johnson were employed pursuant to contracts of employment with express provisions regarding holiday entitlement – a basic entitlement of 20 working days per year, with an increase for long service of up to three additional days. In late 2000, Mr Perkins and Mr Johnson were issued with written statements of their terms and conditions of employment. Holiday entitlement was stated to be 4 working weeks per year with an uplift for long service up to a maximum of one working week. It is common ground that the contractual position of Mrs Johnson was the same.

In 2006, the appellant took over the business previously run by Ashbourne pursuant to a transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applied. On 13 June 2006, the appellant wrote letters to the respondents stating that they were each entitled to “4 weeks annual leave per annum”. On 5 July 2006 the appellant issued the respondents with a document which stated:

“This amendment form constitutes part of the written statement that the Employer is required to provide in terms of the Employment Rights Act 1996.”

As regards holidays, it stated:

“Your annual leave entitlement will be 4 weeks plus your long service leave accrued to date which is 5 days. This is frozen and protected.”

In 2007, amendments were made to the Working Time Regulations 1998. Regulation 13 continued to provide for an entitlement to four weeks’ annual leave. Regulation 13A now provides an additional entitlement. For present purposes, it provided for 4 days additional leave for leave years beginning before 1 April 2009 and 8 additional days for leave years beginning after that date. It seems that the uplift related to the way in which statutory bank holidays were previously treated in this country.

The amendment led the appellant to circulate a memorandum on 30 September 2007. It stated:

“From 1 October 2007, you must ensure that all Staff Members with a paid annual holiday of less than 4.8 weeks receive an increase to 4.8 weeks, pro rata for part-time Staff Members … Staff members currently entitled to 4 weeks annual leave, and who get paid days off on all eight public holidays, will not be entitled to any increase.”

A further memorandum was circulated on 30 September 2008 to reflect the additional days to take effect after 1 April 2009. It effectively increased statutory entitlement to 28 days.

The essential dispute between the parties is whether the increase in the statutory entitlement pursuant to the Working Time Regulations, which applies to all employees regardless of length of service, continues to attract the long-service uplift which was described as “frozen and protected” in the document of 5 July 2006. Put another way, the respondents claim to be contractually entitled to their five days’ long service uplift on top of their increased statutory entitlement of 28 days. They claim to retain the differential which they enjoyed as against employees who do not have long service but who, in the appellant’s case, now have the same 28 day entitlement as the respondents.

It is necessary to set out the material provisions of the Employment Rights Act 1996. Section 1 provides:

“(1)

Where an employee begins employment with an employer, the employer shall give to the employee a written statement of particulars of employment.

…

(3)

The statement shall contain particulars of –

(a)

the name of the employer and employee,

(b)

the date when the employment began, and

(c)

the date on which the employee’s period of continuous employment began …

(4)

The statement shall also contain particulars, as at a specific date not more than seven days before the statement … is given, of –

(a)

the scale or rate of remuneration

…

(d)

any terms and conditions relating to any of the following –

(i)

entitlement to holidays, including public holidays, and holiday pay … ”

It is apparent that particulars of some matters are mandatory, while others are only required if they are a matter of contractual provision. Holiday entitlement is in the latter category as a result of the word “any”. If there is a change in any of the listed matters, the employer is required to give to the employee a written statement containing particulars of the change (section 4).

Enforcement is dealt with in sections 11 and 12. Section 12 provides:

“(1)

Where an employer does not give an employee a statement as required by section 1, 4 or 8 (either because he gives him no statement or because the statement he gives does not comply with what is required), the employee may require a reference to be made to an employment tribunal to determine what particulars ought to have been included or referred to in a statement so as to comply with the requirements of the section concerned.

(2)

Where –

(a)

a statement purporting to be a statement under section 1 or 4 … has been given to an employee, and

(b)

a question arises as to the particulars which ought to have been included or referred to in the statement so as to comply with the requirements of this Part, either the employer or the employee may require the question to be referred to and determined by an employment tribunal …”

Section 12 provides for the powers of the employment tribunal. It states:

“(1)

Where, on a reference under section 11(1), an employment tribunal determines particulars as being those which ought to have been included or referred to in a statement given under section 1 or 4, the employer shall be deemed to have given to the employee a statement in which those particulars were included, or referred to, as specified in the decision of the tribunal.

(2)

On determining a reference under section 11(2) relating to a statement purporting to be a statement under section 1 or 4, an employment tribunal may –

(a)

confirm the particulars as included or referred to in the statement given by the employer,

(b)

amend those particulars, or

(c)

substitute other particulars for them, as the tribunal may determine to be appropriate and the statement shall be deemed to have been given by the employer to the employee in accordance with the decision of the tribunal.”

The three respondents each applied to the employment tribunal pursuant to ETI forms completed with trade union assistance. They left blank the sections for unfair dismissal, discrimination redundancy and “other payments” but completed the section headed “other complaints”. The material parts of their identical complaints stated:

“Because of my long service with Ashbourne my leave entitlement was the maximum 25 days. Under [TUPE] the above level was taken forward when Southern Cross bought out Ashbourne.

On account of the Government’s recent change in the law, forcing all employers to recognise 8 statutory paid bank holidays, Southern Cross have decided to deduct my 5 ‘long service’ days leave entitlement allowing only 28 days leave instead of the 33 days that I believe I am entitled to.”

At the hearing, the respondents represented themselves and the appellant was represented by counsel (not Mr David Reade QC).

The decision of the employment tribunal was expressed in these words:

“Under [the respondents’] contracts of employment they are entitled to five days long service holiday entitlement in addition to any statutory minimum.”

The extended reasoning shows that the analysis was based on a TUPE transfer and a process of construction of the document of 5 July 2006, in particular the words “frozen and protected”.

The final two paragraphs of the decision stated:

“20.

The Tribunal finds that the five days extra holiday entitlement for long service was a significant benefit to which the [respondents] were entitled at the date of transfer, and which transferred across to the [appellant] under the TUPE regulations and that it has been and would be a continuing breach of contract … not to observe that right. The [respondents] will have been entitled to 33 days paid holiday with effect from 1 October 2008 when the [appellant] introduced the statutory increase in holiday entitlement six months early.

21.

[Counsel] suggested that the [appellant] might refuse to give effect to the Tribunal’s judgment in favour of the [respondents] as the claim had been listed as ‘a claim for failure to provide written terms and conditions’ and not under the TUPE regulations or as a breach of contract claim. The Tribunal does not accept that argument either. The [appellant] came to the hearing knowing exactly what the issues were as their response and arguments showed. As continuing employees it would always be open to the [respondents] to bring further Tribunal proceedings for breach of contract to protect their position should it be necessary.”

The reference to the appellant’s “response” was probably a reference to the formal response in its ET3 which had argued the merits but had not mentioned any jurisdictional point. Employment Judge Sutton, who presided, was asked by this Court whether the appellant had raised the issue of jurisdiction to construe the contract. He replied:

“It would appear … that [counsel] … contended that the Tribunal only had jurisdiction to determine the terms of the … contracts of employment, but not to order that those terms should be put into effect … ”

This recollection was based on his contemporaneous note, which included the words “all Tribunal can do is say terms”.

The appellant’s grounds of appeal to the EAT, which were settled by counsel who had appeared in the employment tribunal, made no mention of jurisdiction but concentrated on the construction issue. However, in a later skeleton argument, submissions embraced both the construction issue and pleading/jurisdiction points. In a lucid judgment, the EAT (His Honour Judge Hand QC, Mr D Chadwick and Mr D Welch), UKEAT/0276/09/JOJ, held that the employment tribunal had had jurisdiction; that it had permissibly allowed the claims to proceed, notwithstanding the pleading deficiencies; and that it had correctly construed the contractual entitlement. Although the well-known authority on pleading and “new points” was cited (Chapman v Simon [1994] 1 RLR 124), none of the authorities on the powers of an employment tribunal under sections 11 and 12 of the Employment Rights Act 1996 were drawn to the attention of the EAT. Nor did they feature in the skeleton argument which supported the grounds of appeal to this Court and which were settled by Mr Reade’s predecessor.

The appellant now appeals to this Court pursuant to grounds which embrace both the construction issue and the jurisdiction issue. When Miss Ling produced her skeleton argument in response, she very properly referred to Mears v Safecar Security Limited [1982] 1RLR 83. It is the centrepiece of the line of authorities upon which we have received detailed submissions. If it leads to the conclusion that the employment tribunal did not have jurisdiction, it is unnecessary, indeed it would be wrong, for us to address the construction issue. If the employment tribunal and the EAT had no jurisdiction to entertain it, neither have we when exercising our jurisdiction on appeal from the EAT.

Before considering Mears, I should mention two earlier EAT cases. In Leighton v Construction Industry Training Board [1978] ICR 577 the employer and the employee disagreed as to the components of his remuneration. The employer included its version in the written statement of particulars. The employee persuaded the employment tribunal to amend the particulars by substituting his version. The employer’s appeal to the EAT was allowed. Kilner Brown J said (at page 581):

“It was a case of the parties not being of the same mind as to the application of the words ‘basic’ and ‘supplementary’. In effect the … tribunal was exercising the power of the civil courts to declare what a contract meant or to rectify an error manifest in an otherwise binding contract. We are unanimously of the opinion that the words of the statute do not mean and were not intended to mean that an industrial tribunal could rewrite or amend a binding contract which had one small area of misunderstanding between the parties.”

The application had been made under a predecessor of section 11(2) of the 1996 Act, but the statutory language was the same.

Brown v Stuart Scott & Co [1981] ICR 166 was concerned with the different context of a request for a written statement giving particulars of the reason for a dismissal (now section 92 of the Employment Rights Act 1996). The employer provided a statement while denying that there had been a dismissal. The powers of the tribunal under section 93 include that power to declare what it finds were the true reasons for the dismissal. This is clearly different from a process of stating what the contractual terms were. Its significance to the present case is simply that (at page 169), Waterhouse J approved the passage in Leighton set out above.

I now turn to Mears. I have to say that I find the judgment of Stephenson LJ (with whom O’Connor LJ and Sir Stanley Rees agreed) somewhat opaque. The case concerned sick pay, another non-mandatory item set out in (now) section 1(4)(d) of the Employment Rights Act 1996. The written terms of employment made no reference to it. The employee applied for a determination of what particulars relating to payment of wages during sick leave ought to have been included in the written particulars. The industrial tribunal considered that there was an implied term as to entitlement of wages less state sickness benefits received and that the written particulars ought to have included it. The EAT and the Court of Appeal disagreed with that and rejected the implied term found by the industrial tribunal. They considered that there was an implied term of no sick pay and that such a term ought to have been in the written terms of employment. I take two points from the judgment of Stephenson LJ. The first is that it expressed approval of Leighton and Brown (at page 72B). The second is that it stated in terms (at page 72C):

“Section 11 [of the Employment Protection (Consolidation) Act 1978, now rejigged in sections 11 and 12 of the Employment rights Act 1996] gives the industrial tribunal no power to interpret particulars which have been given.”

That passage was obiter because the case did not concern particulars of sick pay which had been given. None had been. There is a later passage in the judgment (at page 80H), deliberately expressed as obiter, in which Stephenson LJ contemplated a duty on the part of the tribunal “to find the specified terms, and in the last resort invent them for the purpose of literally writing them into the contract”. That passage has been the subject of consistent criticism. It was given its quietus in Eagland v British Telecommunications PLC [1993] ICR 644 where, again in the context of non-mandatory terms, Parker LJ said (at page 652G):

“The wording of the section makes it perfectly plain, as indeed must be the case at common law, that there may be no such terms and there is nothing in any section of the Act which empowers or requires the tribunal to impose upon the parties terms which had not been agreed when the statute recognises that it may be the case that no such terms have been agreed.”

See also Leggat LJ (at page 653F).

Although the present case does not concern the invention of a term, I have included these passages because it seems to me that they stem from the same doctrinal strand as Stephenson LJ’s earlier passage (which has not been criticised) on the lack of a power to interpret particulars which have been given.

Since the hearing of this appeal, I have had the opportunity to consider the treatment of this issue in Harvey on Industrial Relations and Employment Law, Division AII, paragraphs [119]-[135]. The exposition and analysis is unequivocally supportive of the doctrinal strand to which I have just referred. For example (at paragraph [120]:

“The tribunal has no jurisdiction to interpret the agreement – that is a matter for the ordinary courts. Still less does the tribunal have jurisdiction to amend the agreement. It can only amend the statutory statement to ensure that it corresponds with the agreement.”

In other words, the reference in section 11(1) to a determination of “what particulars ought to have been included”, is not an invitation to judicial creativity, even under the rubric of “construction”.

In my judgment this approach is both established and correct. The alternative, expansive approach would open the door to a multitude of cases advanced on a contractual basis in a manner totally at variance with the consistent reluctance to enlarge the breach of contract jurisdiction of employment tribunals to embrace workplace disputes during the currency of a contract of employment. This may be regrettable but it is, as regards both law and policy, well settled.

It is first necessary to deal with some procedural issues. One of the points taken on behalf of the appellant in the EAT was that the employment tribunal had been wrong to allow the claims to be treated as claims under sections 11 and 12 of the Employment Rights Act when their formulation in the ETIs had not put the case in that way. I do not think that the employment tribunal did treat the claims in that way. Although the administrative listing seems to have referred to “a claim for failure to provide written terms and conditions”, there is no reference to sections 11 and 12 in the decision. The employment tribunal seems to have treated the case as turning on TUPE and breach of contract. It was the EAT that treated it as a case about sections 11 and 12. It did so because it took the view that, whatever the pleading deficiencies, this was not a Chapman v Simon case because the factual case remained unchanged. It was simply subjected to a different judicial analysis in circumstances which caused no prejudice to the appellant. For my part, I am content to deal with the matter on the basis that, subject to jurisdiction, it was appropriate for the EAT to treat the case as one under sections 11 and 12.

It is then submitted on behalf of the respondents that the EAT and we ought not to be concerned with the jurisdiction issue because it was not raised in the employment tribunal. Miss Ling relies on Lipscombe v Forestry Commission [2007] EWCA Civ 428. However, Waller LJ recognised there that the EAT “might take a slightly less vigorous approach when applying the general principle where the point in issue was jurisdiction” (paragraph 45). I do not consider that the EAT erred in law in the present case when it permitted the appellant to take the jurisdiction point. I am satisfied that it is now properly before this Court, notwithstanding the circuitous and chequered history of the litigation.

It was common ground before the EAT that the “frozen and protected” document of 5 July 2006 constituted a statement containing changed particulars pursuant to section 4. The EAT then embarked on a process of construction. It observed that “its meaning became disputed” (paragraph 56, emphasis added). It considered that it is “inevitable that employment tribunals will be called upon to construe contracts of employment when adjudicating on the issues raised by questions arising in the context of section 11(2)” (paragraph 58). To the extent that an employment tribunal will have to identify the terms of the contract in order to see that the statutory statement correctly reflects them, that is true. Here, however, what the employment tribunal and the EAT proceeded to do was to construe the terms of the statutory statement. Paragraphs 61-63 of the EAT judgment is neither more nor less than a detailed textual exegesis of the document of 5 July. The construction issue was resolved in favour of the respondents.

As I observed earlier, the EAT was not referred to the authorities to which we have been referred. If it had been, I am in no doubt that it would have been driven to the opposite conclusion on the jurisdiction issue, notwithstanding Miss Ling’s ingenious and tenacious submissions to the contrary. It would have concluded that the employment tribunal had no jurisdiction to construe the document of 5 July 2006 so as to resolve the rival cases in relation to it. In my judgment, the only forum with jurisdiction in relation to the construction issue was and is the ordinary civil court. That may be regrettable but it is the consequence of sections 11 and 12, coupled with the unwillingness of successive governments to broaden the contractual jurisdiction of employment tribunals. Accordingly I consider that we are compelled as a matter of law to allow the appeal on the jurisdiction issue. In this situation it is inappropriate to say anything about the construction issue.

Miss Ling seeks to extricate the respondents from defeat on the jurisdiction issue by advancing an alternative case which was not raised in either the employment tribunal or the EAT. It is founded on the further increase in statutory entitlement which arose on 1 April 2008 by reason of regulation 13A(2)(c) and (d) of the Working Time Regulations. Miss Ling submits that the respondents were entitled to receive written statements of the change within one month after 1 April 2008 pursuant to section 4. They received no such statements and so they have a claim under section 11(1) for a determination of what particulars ought to have been included or referred to in a statement so as to comply with section 4.

There are two answers to this submission. The first is that it relates to an event almost a year before the commencement of proceedings in the employment tribunal but no complaint was made about the alleged omission either at the employment tribunal or at the EAT (by which time the respondents had their current expert representation). It would be stretching things too far to expect this Court, the jurisdiction of which is confined to appeals to rectify errors of law made by the EAT, to act as a first instance tribunal under section 11 in this case. The second is that, as Mr Reade points out, entitlements under the Working Time Regulations are statutory rights rather than contractual ones. Regulations 13 and 13A are expressed in terms that a worker “is entitled to” the prescribed amounts of annual leave and additional leave. Regulation 26A provides that regulation 13A “does not apply” where the employer, by virtue of a relevant agreement, provides the worker with the regulation 13 and 13A prescribed leave. In other words, if there is an agreed entitlement to 28 days, regulation 13A plays no part. That was the position here on 1 April 2008. There was therefore no “change” in the terms and conditions requiring a statement under section 4. Accordingly, I do not consider that Miss Ling’s alternative case can succeed.

For all these reasons, I would allow this appeal and quash the decisions of the employment tribunal and the EAT for want of jurisdiction. Unfortunately, that does not resolve the dispute between the parties which remains justiciable in the ordinary civil courts where the longer limitation period will apply.

I agree.

I also agree.