CSC Computer Sciences Ltd v McAlinden and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Underhill,Lord Justice Tomlinson,Lord Chief Justice |
| Judgment Date | 13 November 2013 |
| Neutral Citation | [2013] EWCA Civ 1435 |
| Docket Number | Case No: A2/2013/0015 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 November 2013 |
[2013] EWCA Civ 1435
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
MR JUSTICE LANGSTAFF
UKEAT/0252/12/LA
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Chief Justice of England and Wales
Lord Justice Tomlinson
and
Lord Justice Underhill
Case No: A2/2013/0015
Simon Gorton QC (instructed by Clyde & Co) for the Appellant
Oliver Segal QC and Nicola Newbegin (instructed by Thompsons Solicitors) for the Respondents
INTRODUCTION
This is an appeal from a decision of the Employment Appeal Tribunal (Langstaff P presiding) upholding the decision of an Employment Tribunal sitting at Manchester (Employment Judge Robertson sitting alone) which held that the Appellant had made unlawful deductions from the wages of the Claimants contrary to Part II of the Employment Rights Act 1996.
In the ET and the EAT the Claimants were represented by Ms Nicola Newbegin of counsel and the Appellant ("CSC") by Mr Simon Gorton QC. Before us Mr Gorton again appears for the Appellant and Mr Oliver Segal QC, leading Ms Newbegin, for the Respondents.
THE FACTS IN OUTLINE AND THE NATURE OF THE CLAIM
There are 23 Claimants. They were until 1 April 2000 employed by a company called IT Services Ltd ("ITS"). On that date their employment was transferred to CSC as part of a group of about 200 under the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). CSC was a large business with an established workforce of its own.
The Claimants' contracts of employment with ITS provided for annual salary reviews. The relevant clause (36.9) reads as follows:
" Salary progression/review
Company rates of pay will be reviewed annual by the Executive of the company in consultation with representatives of the staff (the JCC). New pay rates will normally come into effect from 1 April each year. Annual salary increases will be in the form of an award comprising a global component applicable to all employees and a selective merit award reflecting the individual jobholder's performance and skills."
It was, as the Employment Judge found, CSC's understanding at the time of the transfer that ITS's practice had for a considerable period been to award annual pay increases in which the "global component" took the form of an increase in line at least with the increase in RPI (calculated as an average of the increase in the first three months of the year), subject to satisfactory performance; and that that practice had acquired contractual force. I will refer to such increases as "RPI increases". In making the finding that that was CSC's understanding the Judge referred in particular to three documents, which I can summarise as follows:
(1) An e-mail dated 21 September 2005 from a Ms Anderson, described as an HR adviser, to an ex-ITS employee, about a potential move to a "CSC contract". The e-mail notifies the employee that by signing the new contract "you would no longer receive a guaranteed RPI pay rise annually as per your current ITS contract". Mr Segal told us that all of the ex-ITS employees were in fact, at one point or another, offered the chance to go onto CSC terms and that several were sent an e-mail in these terms. That sounds not unlikely, and Mr Gorton did not contradict him. But there is no finding to this effect by the ET, and we must proceed on the basis that there is no evidence of any other such document — though that does not preclude inferences being drawn as to how the RPI increases may have been described in other communications.
(2) An e-mail dated 29 June 2006 from Ms Anderson to an unnamed colleague referring to "the RPI global element of the pay award for people on ITS terms and conditions".
(3) A briefing document issued by CSC to managers in the Northern Region giving them guidance for the purpose of pay review discussions in mid-2008. This sets out various "questions you may be asked". One was "Does CSC apply a 'cost of living increase'?", to which the answer was (in short) no; but there was a follow-up question "Are there any exceptions to this ?". The answer given is:
"The only exception to this is the ex-ITS group who are not on CSC terms and conditions and for whom a guaranteed minimum increase is awarded (subject to individual performance)."
Although that was an internal document, it is good evidence of CSC's contemporary understanding of the position; and of course it also reflects what managers would tell employees, at least if the question were raised.
On the basis of that understanding, CSC paid RPI increases (subject to some immaterial exceptions) to its " ex-ITS" employees for each year from 2001 to 2007: it did not do the same for its other employees.
In the 2008 pay round CSC agreed with Prospect, the trade union which it recognised for collective bargaining purposes, an increase for most of the ex-ITS employees of only 3%, which was acknowledged by both sides to be less than the increase in RPI (about 4%); and the increases paid were in line with that agreement. The confirmatory letter from CSC to Prospect said:
"We further recognised that future pay rounds needed to more closely align to normal CSC pay arrangements and we committed to discuss further in anticipation of the 2009 pay round."
In 2009 RPI was in fact negative and no pay increase occurred.
In 2010 CSC paid most of the ex-ITS employees an increase of 3%, as against an increase in RPI of 3.9%. Again, it understood that course to have been agreed with Prospect. Unfortunately both CSC and Prospect had overlooked the fact that Prospect was not recognised in respect of the ex-ITS employees; and it is now accepted that any agreement reached between the two of them in 2008 or 2010 about those employees was of no effect.
Although the Claimants had not protested at receiving a below-RPI increase in 2008, when the same thing occurred in 2010 they raised a formal grievance and in due course commenced the present proceedings. Precisely how they put their claim was at first unclear but it was eventually crystallised as a claim in the alternative, either (a) that their contracts of employment with ITS, which were binding on CSC by virtue of TUPE, expressly provided for an annual increase in salary corresponding to any increase in RPI; or (b) that such an entitlement, as the Employment Judge recorded it, "is to be implied into their contracts based on the custom and practice and/or the conduct of the parties". To anticipate, the Judge found for the Claimants on alternative (b). He rejected the case based on an express term and that case has not been pursued before us.
THE LAW
The correct approach in cases where employees seek to rely on terms to be implied on the basis of "custom and practice and/or the conduct of the parties" was very recently reviewed by this Court in Park Cakes Ltd v Shumba [2013] EWCA Civ 974, [2013] IRLR 800— see in particular paras. 26–36 (pp. 805–8); and although the term asserted in that case concerned enhanced redundancy benefits the same principles would apply in the present case. Since that decision was handed down after the argument before us we gave the parties the opportunity to submit further written submissions by reference to it. I see no point in reproducing in extenso here what was said in Park Cakes. But I would draw attention to the fact that the Court, following the lead given by Leveson LJ in Garratt v Mirror Group Newspapers Ltd [2011] EWCA Civ 425, [2011] ICR 880, focused less on the language of "custom and practice" and more on the essential question of what the employees will reasonably have understood from the employer's conduct and words, applying ordinary contractual principles.
THE REASONING OF THE ET AND THE EAT
The claims were heard by the Employment Judge over three days in August and December 2011. His Judgment and written Reasons, which are full and well-structured, were sent to the parties on 3 February 20They can be summarised as follows:
(1) Paras. 1–70 contain an introduction to the issue and the Judge's findings of primary fact. I will return later to such of those findings as are material for the purpose of the issues which we have to decide. Para. 71 refers to counsel's written submissions but does not set them out.
(2) Para. 72 states the issue which the Judge has to decide as follows:
"The succinct issue is whether the Claimants were contractually entitled by custom and practice or by conduct to the RPI increase, that is a guaranteed minimum pay increase from 1 April each year of the average increases in RPI over the first three months of the year."
(3) At paras. 73–79 the Judge considers the relevance of the express contractual term as to annual salary reviews which I have set out at para. 4 above. He rejects a submission on behalf of the Claimants that that term created a positive right to an annual pay increase, and also a submission on behalf of CSC that the implication of a term by reference to custom and practice, or by conduct, is inconsistent with the express terms of the contract. Neither point is pursued before us.
(4) At paras. 80–83 he summarises the relevant law as follows:
"80. In Solectron Scotland Limited v Roper [2004] IRLR 4 the Employment Appeal Tribunal summarised the basis for implying a term into a contract of employment by custom, practice or conduct. A custom or established practice applied with sufficient regularity may eventually become the source of an implied contractual term. This occurs when the courts are able to infer that...
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