London Underground Ltd v Amissah & Ors

Although we are primarily concerned with the remedy decision I need to summarise the key findings from the liability decision.

The Employment Judge identified the issues at paras. 1-4 of the Reasons. The only claim with which we are now concerned is a claim to equalisation of pay under regulation 5; but there were also claims in relation to equalisation of annual leave entitlements (also under regulation 5) and travel benefits (under regulation 12) and a claim of unlawful detriment contrary to regulation 17.

At paras. 19-32 of the Reasons the Employment Judge analysed the structure of the Regulations. I have already indicated that I respectfully disagree with his conclusion on one important aspect, and this to some extent impacts on other points that he makes; but I would wish to pay tribute to the thought and care that he put into the exercise.

The Judge’s findings of primary fact are at paras. 40-83. Those that are relevant I summarise in my account below of his reasoning on the issues with which we are concerned. At paras. 84-111 he deals with a number of issues which are not material to this appeal.

At paras. 112-118 the Employment Judge addresses the issue of whether the Claimants could “establish any actionable breach of regs 5 (1) and/or 12 (1) and/or 17 (2)”. At para. 112 he says that his earlier conclusions necessarily mean that “TP was in breach of reg 5 (1) in relation to hourly rates until about 15 October 2012” (Footnote: ⁶ ) . There is no challenge to that finding in this appeal. The following paragraphs are concerned with the claims under regulations 12 and 17 and are not relevant for our purposes.

Having thus established that the Claimants were under-paid in breach of regulation 5 (1) the Judge next addresses the question whether LUL was “responsible” for that breach to any extent so as to be liable for it under regulation 14 (2). As to that, the relevant facts, as found earlier in the Reasons but incorporating also some further findings in paras. 119-121, can be summarised as follows:

At para. 122 of the Reasons the Judge noted that Ms Seymour relied “in mitigation” (that is not here a reference to mitigation in the compensation context) on LUL’s attempts to get TP “to pay the Claimants what was owing to them”; but he held that those attempts were irrelevant to the issue of its liability under regulation 14. He continued, at para. 133:

“I remind myself of the broad terms of reg 14 (1) and (2). They call on me to perform a rough and ready assessment. I hold TP entirely responsible for the fact that the process of engaging with the requirements of [the Regulations] did not begin until much too late. I hold LUL very largely responsible for the inordinate delay in remedying the breach. Had they given the matter the attention and urgency it merited, I consider that the breach would have been remedied in about half the time it actually occupied. Doing the best I can, I apportion liability for the breach in respect of pay evenly between the parties.”

That is the decision that translates into paragraph (3) of the formal judgment which I set out at para. 4 above.

At paras. 130-132 of the Reasons the Employment Judge summarised the effect of his decision and discussed what issues remained to be decided. He directed a further hearing (if the parties were unable to reach a compromise). One of the issues at that hearing would be when each of the Claimants first qualified for the right under regulation 5 (1). The other would be “remedy”. As to the latter, he said, at para. 131:

“The claimants have secured a finding against TP on the annual leave claim and against both respondents on pay. In this long and bitter litigation, they are entitled to regard that as a partial vindication of their position. But compensation is another matter. … [I]njuries to feelings are not compensable. By reg 18 (10), any award must be in such a sum as is ‘just and equitable in all the circumstances having regard to … the infringement or breach ... and … any loss which is attributable to the infringement’. The substantial loss suffered by the Claimants results, as a matter of practical reality, from the liquidation of TP in November 2013, over a year after the breach relating to the pay was remedied. That was the moment at which their contractual right to recover the back pay owing to them becomes illusory. It will be for them to show (a) that the substantial losses claimed are attributable to the breach of reg 5 (1) and (b) that an award of compensation against LUL for those losses or any part of them would be just and equitable. I have not heard the matter argued and have formed no view, but to state that the Claimants face formidable challenges is, it seems to me, to state the obvious.”

It is convenient to say at this stage that I regard the analysis in that passage, focusing as it does not on the original underpayments but on the failure to recover from TP before its insolvency, as wrong; and it is carried over into the remedy decision. I return to this later.

LUL did not appeal against the liability decision. Accordingly the finding of 50% liability against LUL stands.

In the first part of the remedy decision the Employment Judge dealt with the qualifying period issue and with a limitation point that had been raised in the case of one of the two lead Claimants.

Paras. 26-38 are headed “Remedies”. At para. 30 the Judge recorded that the Claimants were seeking compensation under regulation 18 (8) (b), so that paragraphs (9) and (10) applied. At para. 31 he accepted a submission from Ms Seymour that

“… regs 18 (9) and (10) are correctly applied by asking three questions. First, what is the relevant infringement? Secondly, what loss, if any, is attributable to the infringement? Thirdly, where there are two or more respondents, what proportion of the compensation award above is it just and equitable for each to pay having regard to its responsibility for the infringement?”

He proceeded to address those questions in turn.

As to the first, at para. 32 he identified the infringement, on the basis of his liability decision, as “the failure by TP, [up to …] 15 October 2012, to accord or extend to the Claimants terms as to pay equal to those of their comparators”. Read in isolation, that seems unexceptionable, but it is clear from his analysis in the liability decision (see para. 39 above) that the phrase “accord or extend terms as to pay” does not mean “failure to pay”.

As to the second question, his reasoning is to be found in paras. 33-34. He started by considering the meaning of “attributable to”: plainly that is a term importing causation, but he refers to authority to the effect that formal analysis in terms of foreseeability and remoteness may in this context be inappropriate. At para. 34 he said:

“In my judgment it cannot sensibly be said that the loss of the back pay (or any associated expenditure (Footnote: ⁷ ) ) is ‘attributable’ to the failure (by TP, contributed to by LUL) timeously to equalise pay terms. I am satisfied that the loss for which Mr Mitchell sought compensation is entirely attributable to the facts that (a) in circumstances suggestive (as I held in my initial reasons …) of fraud, TP did not pay the Claimants what, by October 2012, they admittedly owed them (despite receiving, by May 2013 (not that their liability to pay the Claimants depended upon it), a greater sum from LUL); and (b) the Claimants did not (despite having the benefit of professional legal advice) enforce their rights to recover the sums due; and (c) ultimately, through the liquidation of TP some 13 months after the debt crystallised, they lost the chance of doing so. In reaching this view I do not resort to common law reasoning. The concepts of remoteness and foreseeability forged and refined over centuries are not applicable. Nor is a ‘but for’ test appropriate. My task is simply to interpret and apply the straightforward language of reg 18 (10) in a manner which accords with practical reality and common sense.”

In short, he held that the Claimants could not recover for the under-payments prior to 15 October 2012 because they were not attributable to the breaches of regulation 5 but to the three subsequently-occurring factors which he identifies as (a)-(c). I note in particular his finding that TP’s failure to pass on to the Claimants the payments that it had received from LUL appeared to be deliberate and dishonest.

That conclusion meant that the third question did not arise, but the Judge went on at para. 35 to deal with it in case he was wrong. He said:

“In my first judgment I held that, having regard to their responsibility for the breach of reg 5 in relation to pay rates, LUL were equally liable with TP under reg 14 (2). It might be thought that the inevitable consequence would be that compensation under reg 18 must be shared in the same proportions, but reg 18 (9) does not say that. Plainly, in any but the most exceptional case, the apportionment under reg 18 (9) will correspond with that under reg 14 (2). The two provisions are framed in very similar language. It seems to me, however, that the requirements for the award against any respondent to be ‘just and equitable’ dictates a discretionary assessment which takes account of all relevant circumstances. The circumstances of the instant case are, in my view, exceptional and justice and equity require them all (not just the responsibility of the individual respondents for the infringement) to be taken into account. The additional points of particular importance have already been referred to. They are: (a) the fact that LUL paid to TP more than they owed to the Claimants; and (b) the fact that the Claimants failed (despite having the benefit of legal advice) to enforce their right to back pay against TP; and (c) owing to TP’s insolvency, the fact that they lost that right. The logic of the Claimant’s case is that LUL must pay twice in respect of the back pay. I do not accept that a proper application of [the Regulations] dictates that bizarre outcome.”

In other words, even if the under-payments prior to 15 October 2012 were attributable to the infringement found, for which LUL had been held 50% liable, it would not be just and equitable to require LUL to compensate the Claimants for them.

The Claimants appealed to the EAT. I need not set out their grounds of appeal. I can pick up the judgment of Mitting J at para. 8, where he sets out what he says is the correct approach to the assessment of compensation for a breach of the Regulations:

“The approach that the Tribunal is required to take in assessing compensation is in principle straightforward:

(1)

It must identify the infringement. In this case, the infringement was of Regulation 5(1) and (2)(a).

(2)

It must identify the responsibility of the hirer and the temporary work agency for the infringement. Under Regulation 14(1) and

(2):

‘(1) … a temporary work agency shall be liable for any breach of regulation 5, to the extent that it is responsible for that breach.

(2)

… The hirer shall be liable for any breach of regulation 5, to the extent that it is responsible for that breach.’

(3)

It must decide whether to order either the temporary work agency or the hirer to pay compensation (see Regulation 18(8)(b)).

(4)

When it does, it must determine what amount of compensation it would be just and equitable to award. It must have regard to (a) the infringement and (b) the loss attributable to the infringement. That loss should be taken to include the loss of any benefit that the Claimant might reasonably be expected to have had but for the infringement (see Regulation 18(10) and (11)(b)).”

That is a helpful overall framework for the analysis, though it is not designed itself to address the difficulties raised by some of those questions. Mitting J continues, at para. 9:

“Applying those principles to the facts, the infringement here as found by the Employment Tribunal was the failure of TP to include in the Claimant's terms and conditions of employment the basic working and employment conditions enjoyed by LUL's directly employed comparable staff. The loss attributable to that infringement includes the benefit of the payment of wages at the higher level enjoyed by LUL's directly employed comparable staff. The Employment Tribunal would then have to ask what compensation it would be just and equitable to require LUL to pay to the Claimants having regard to that loss. It is only at that point once the amount of compensation that LUL should pay to the Claimants is known that they would have a directly enforceable right to payment of any sum against LUL. Until that time their right was to the payment of wages by their employer. The claim for compensation against LUL is not therefore in principle a claim for wages or for unlawful deduction from wages but a claim for statutory compensation.”

I agree with the last sentence in that passage – see para. 29 above; and I note that the Claimants’ pleaded claim was, correctly, for “compensation” and was not advanced under Part II of the 1996 Act. However, for the reasons given at para. 25 I cannot accept Mitting J’s characterisation of the infringement in the first sentence.

Mitting J then goes on at para. 10 of his judgment to summarise the circumstances that resulted in the Claimants never being paid the arrears due for the period prior to 15 October 2012. He says, at para. 11:

“On those unusual facts, the starting point for the calculation of the loss for which LUL are liable must be the traditional one, namely to ask what would have happened but for the infringement for which LUL was responsible. What would have happened but for that infringement is that TP should have, and may well have, issued compliant terms and conditions of employment to the Claimants on or very soon after 24 December 2011.”

He proceeds at para. 12 to identify a number of particular factual questions about what might have happened if TP had indeed issued compliant terms and which the ET had not addressed. I need not set them out, but they essentially concern whether TP, established to be an unscrupulous employer, would in fact have paid up in accordance with those terms; and, if not, whether the Claimants would have brought proceedings to enforce payment in time to recover from TP itself before it went into liquidation (or against the Secretary of State under Part XII of the 1996 Act). At para. 13 he rejects a submission by Ms Seymour that if such an enquiry had been carried out the result would necessarily be the same because on any view the loss was caused entirely by TP’s (apparently fraudulent) failure to pay the arrears even when they were in funds to do so. At paras. 14-15 he criticises the Employment Judge for starting the assessment of loss “at the end” rather than going back to the moment of breach and asking what would have happened if it had not occurred.

It followed from that analysis that, the Employment Judge having failed to address the essential question, the issue would have to be remitted for re-hearing, subject to the Judge’s alternative finding under regulation 18 (9). As to that, Mitting J accepts (at para. 17) that “[t]he fact that LUL have paid TP at [sic] the amount that is owing to the Claimants by TP is plainly an important factor” in determining the amount of compensation that it was just and equitable that LUL should pay; but he goes on (see paras. 17-19) on to identify four “counter-balancing factors”, namely:

I have to say that I am not sure that the way that Mitting J expresses his reasoning on this issue justifies the course that he took. I do not see how the error in the Employment Judge’s conclusion about compensation was relevant to his conclusion about how, if (contrary to his view) the Claimants did in fact fall to be compensated, payment of that compensation should be apportioned. The only basis on which his decision could properly be set aside was if the conclusion that he reached was not reasonably open to him on the facts.

The pleaded grounds of appeal focus on the reasoning of the EAT, which is not always helpful in a case of this kind, and they do not fully reflect the underlying issues. It is also the case that some of the arguments advanced by Mr Linden ought to have been the subject of a Respondent’s Notice. But this was a complicated case about legislation which has not previously been the subject of judicial consideration, and I do not think it would be right to take a narrow approach to the issues, which were fully explored in the oral submissions.

In broad terms the issues are (a) whether the Employment Judge was right to find that the Claimants were not entitled to compensation for the reasons given in para. 34 of the Reasons; and (b) whether, if not, he was entitled to find nevertheless that it was not just and equitable that any part of that compensation should be payable by LUL for the reasons given at para. 35. The particular arguments are best identified in the course of my consideration of those issues.

As already trailed, I believe that the approaches of both the ET and the EAT to the assessment of compensation were wrong. The correct analysis is in my view as follows.

The starting-point is that on each pay day between 24 December 2011 and 15 October 2012 the Claimants were entitled to be paid at equalised rates: see paras. 25-26 above. It follows that on each occasion when they were paid at less than those rates a breach, or infringement, occurred in respect of which they were entitled to compensation. As already discussed, that was not the approach of the Employment Judge, and Mitting J likewise treated the infringement as being a failure to “issue compliant terms and conditions of employment” (see para. 48 above). For the reasons I have already given, that is a mischaracterisation: the Claimants’ entitlement was not to be “issued with” terms, in the sense of being given some formal written acknowledgment of their equalised entitlements, but to be paid the correct amounts.

The parties liable for that infringement – or, more accurately, those infringements – were established by the ET’s liability decision. LUL is liable as to 50%.

The next step is to identify the loss attributable to that breach/infringement (paragraph (10) (b)). On ordinary common law principles the loss would be the difference between the payment actually received and that which would have been received but for the breach, namely payment at the equalised rate, and compensation should be assessed in the amount of that difference. But the same result is achieved by applying the language of paragraph (11) (b): indeed the Claimants might not only have “reasonably … expected” to have the benefit of payment at the equalised rates, they were positively entitled to it. In short, compensation should be assessed as, pound-for-pound, the amount of the underpayments.

So far so good. But both the Employment Judge and Mitting J believed that it was necessary to take into account what happened, or did not happen, subsequent to the initial underpayment(s). I accept that in assessing compensation it will not always be right to draw a line as at the date of the breach: if, for example, the Claimants had been paid the arrears in full a week after they occurred they would not have suffered any loss requiring compensation. The real question is whether the particular subsequent matters to which the ET and the EAT had regard were material. I take the two decisions in turn.

As for the ET, the Judge found that it could not sensibly be said that “the loss of the back pay was ‘attributable’ to the failure … timeously to equalise pay terms” but rather that it was attributable to a combination of TP’s dishonest failure to pass on the amounts paid to it by LUL and the Claimants’ failure to pursue TP until too late: see para. 44 above. In my view that conclusion is unsustainable. The Judge treats the Claimants’ loss as occurring, in effect, only at the moment when TP went into liquidation: indeed he says so in terms at para. 131 of the Reasons for the liability decision (see para. 39 above), which foreshadows the reasoning in the remedy decision. That ignores the fact that the breach first occurred at the moment of each underpayment, and it is not right to treat it as occurring only when it became definitively irrecoverable from TP: that is what Mitting J meant by saying that the Judge had “started at the end”. The fact that TP failed to pay even when put in funds to do so and eventually became insolvent does not break any connection with the original breach: it simply meant that it continued. The same goes for the fact that the Claimants did not pursue TP timeously.

As for the EAT, Mitting J’s belief that it was necessary to conduct an enquiry into what would have happened if TP had “issued compliant terms” is based on what I have already said is a mischaracterisation of the infringement. The actual infringement was the failure to pay the equalised payments, and the fact that the Claimants may have been slow in pursuing TP for them cannot affect their right to be compensated for that nonpayment.

In the tribunals below there was considerable debate about the correct approach to “attributability”, and in her grounds of appeal Ms Seymour submitted that the EAT had wrongly applied a “but for” test rather than the more flexible approach taken by the ET. In that context we were referred to the recent decision of this Court in Roberts v Wilsons Solicitors LLP [2018] EWCA Civ 52, [2018] ICR 1092. But on the analysis which I adopt above no such issue arises. If the infringement consisted in the failure to pay the equalised rates the loss of the enhanced pay was obviously attributable to that infringement: they are two sides of the same coin. Potential causation issues only arise if the loss is regarded – wrongly, as I would hold – as occurring only when TP became insolvent.

I accordingly believe that the compensation payable under regulation 18 (10) is the full amount of the underpayments prior to 15 October 2012, and that the only issue that needs to be determined on remittal to the ET is the calculation of the amounts in question.

That leaves the question of how much of that compensation LUL has to pay. The finding under regulation 14 (1) that liability for the breach of regulation 5 (1) “is apportioned as to 50% to [LUL]” means that it is it is not liable to pay more than half; but the question is whether regulation 18 (9) justifies some greater discount.

As I have already noted, there appears to be at least a substantial overlap between the exercises required by regulation 14 and by regulation 18 (9) in the case of a breach/infringement (Footnote: ⁸ ) of regulation 5. The language is not identical, but both provisions require the tribunal to assess “the extent” to which the agency and the hirer are “responsible” for the breach, and it is inconceivable that the exercise of assessing relative responsibility can be different as between the two regulations. It is true that the purpose of the exercise under regulation 14 is to decide the extent of “liability”, whereas under regulation 18 (9) it is to guide the assessment of what part of the compensation it is just and equitable should be payable by each party. But that would appear to be a distinction without a difference. I do not see what the purpose of apportioning “liability” under regulation 14 could be except to apportion the amount of compensation that each of the two responsible parties has to pay.

If the overlap were total it would follow that the ET’s (unappealed) apportionment of 50% liability to LUL under regulation 14 would necessarily apply equally to the exercise under regulation 18 (9), with the result that it was not open to it to hold, as it did, that no compensation was payable by LUL. But both the ET and the EAT proceeded on the basis that the reference in paragraph (9) to “justice and equity” (which does not appear in regulation 14) allowed the tribunal, in an appropriate case, to have regard to matters going beyond the relative responsibility of the parties. Mr Linden submitted that they were wrong to do so and that that language did no more than indicate that a broad and flexible approach could be taken in applying the criterion of relative “responsibility”: he referred us to Sir John Donaldson’s observations in Norton Tool v Tewson about the substantially similar wording of the provisions relating to compensation for unfair dismissal (see para. 30 above).

I agree with Mr Linden that we should approach the use of the “just and equitable having regard to” formula in regulation 18 (9) in the same way as in the provisions governing the assessment of compensation. I do not agree that that excludes in principle the possibility of a finding that it would be just and equitable to require a respondent to pay a claimant less than the amount of compensation for which it is “responsible”, since, as noted at para. 30 above, such an outcome is recognised as possible in cases of the Devis v Atkins type. But I certainly accept that such cases will be exceptional and it is hard to conceive of them arising except in the context of some serious misconduct by the claimant.

On that basis the question is whether it was open to the Employment Judge, in all the circumstances found by him, to hold that justice and equity required that LUL should not pay the Claimants any compensation in respect of the arrears notwithstanding that it was 50% responsible for them not being paid at equalised rates up to mid-October 2012. I do not believe that it was. The finding that LUL was 50% responsible reflected findings by the Judge that it culpably contributed to the fact that the Claimants’ pay was not equalised many months sooner than it was. It is true that it did the right thing thereafter by funding TP to pay the arrears, and I can understand why the Judge baulked at the idea that it should have to “pay twice”. But I cannot accept that that circumstance, regrettable though it is, renders it just and equitable to deprive the Claimants of the compensation otherwise due. There is no question of any misconduct on their part. They have been underpaid wages for reasons which have nothing whatever to do with them and were (partly) LUL’s fault: LUL chose to deal with TP and it should in my view be it, and not the Claimants, who should bear the burden of TP’s dishonesty. That basic inequity is elaborated by Mitting J in the four “counter-balancing factors” which he identifies in his judgment (see para. 49 above), and I differ from him only in believing that they render the ET’s decision not only “open to question” but positively wrong. (I should mention one point made in Ms Seymour’s skeleton argument, though not developed by her orally. She pointed out that LUL did not initially choose to contract with TP but inherited the contract from Silverlink. That overlooks the fact that a new contract was entered into between LUL and TP in January 2011 (see para. 1 above); but the point is not in any event central to the inequity which I regard as decisive.)

The only criticism of the Claimants advanced by the Employment Judge is that they did not bring proceedings as soon as they could have and so lost (perhaps) the chance to recover against TP. I do not see how that is a material criticism. As a result of the finding on apportionment under regulation 14 they could only have recovered 50% of the arrears from TP in any event: this claim is for LUL’s half. But in any case it does not seem to me the kind of criticism that would justify relieving LUL of any part of what would otherwise be its obligation to pay compensation.

I accordingly see no need for the case to be remitted on this issue and would hold straightforwardly that the amount of compensation payable by LUL under regulation 18 (9) is 50% of the compensation to which the Claimants will, following assessment by the ET on remittal, be entitled under regulation 18 (10).

I would add by way of coda that I am far from sure that the draftsman really thought through the relationship of regulations 14 and 18 (9) or, therefore, that their near-total overlap was deliberate. I note that regulation 18 (9) applies to compensation for infringement of the rights under regulations 12, 13 and 17, to which the apportionment provisions of regulation 14 do not apply, and it is possible that the overlap in the case of rights under regulation 5 was simply overlooked. But although it is clumsy to have formally to consider both provisions in a regulation 5 case it should not cause any real problems.

I would dismiss the appeal, save that the remittal to the ET should be for the purpose only of assessing compensation under regulation 18 (10), 50% of which will be payable to the Claimants by LUL. Given the much more limited purpose of the remittal, my strong provisional view is that it would be better if the case were remitted to Employment Judge Snelson, if available. He has a very good grasp of the background, and I have already paid tribute to the thoroughness of his previous decisions: it would be wasteful to require a different judge to start again from scratch. The nature of the errors which I believe he made are not such as to give any ground for suspicion of his ability to determine the remaining issues fairly.

It may in fact be that, now that the issues of principle have been decided, the parties can reach agreement as to the sums payable, and that would obviously be highly desirable if it can be achieved. I appreciate that there may be some issues which go

I agree.

I also agree.