APPEARANCES
| For the Appellant |
MR D WORKMAN
(Representative) |
| For the Respondent |
MR P MIZENER
(The Respondent in Person) |
SUMMARY
CONTRACT OF EMPLOYMENT
Notice and Pay in Lieu
REDUNDANCY
Payment of 'money in lieu' on dismissal of Claimant could not be "ascribed"/"appropriated" to an unpaid redundancy payment.
THE HONOURABLE MR JUSTICE UNDERHILL
- This is an appeal against the decision of an Employment Tribunal sitting at Aberdeen, comprising Employment Judge Hosie sitting alone, requiring the Appellant company to pay the Claimant, who is the Respondent before me, the sum of £739.70 as the balance of a redundancy payment due under Part XI of the Employment Rights Act 1996. Both before the Employment Judge and before me the Claimant appeared in person and the Appellant by one of its directors, Mr David Workman. Having heard Mr Workman's submissions, which were very clear and frank, I did not find it necessary to hear from the Claimant.
The Facts
- At the material time, the Appellant company owned and operated The Halo restaurant in Aberdeen. It also had another restaurant in Aberdeen called The Square. The Claimant was employed at the restaurant and was its longest serving employee. On 24 July 2008 Mr Workman told the staff at The Halo that the restaurant was closing down and that they would be made redundant. It was due to close for business on 28 July though there would be work for the Claimant until 1 August in helping to wind up its affairs.
- It is common ground that by reason of that redundancy the Claimant was entitled to a statutory redundancy payment of £990. It is also common ground that the Claimant was entitled under his contract of employment to four weeks notice of termination of the contract. In practice that gave the Appellant a choice between two options. The first option was to continue to employ the Claimant until the expiry of the four-week period, that is to 22 August, and to pay him his wages for that period. On that basis it would in principle have been entitled to require him to work during that period, if it had work for him to do which was within the scope of his contract: there was obviously no such work at The Halo after 1 August, but it appears to have been accepted by both parties before the Tribunal that the Appellant was entitled to require the Claimant to work out his notice at The Square. The second option was that it could have terminated the employment on 1 August and paid the Claimant so-called money in lieu. Strictly speaking, money in lieu is damages for dismissal with short notice and it can in principle come out at less than the wages that would have been due for the relevant period if the employee obtains other work during the notice period. It is however very normal practice for employers simply to pay it as an unreduced lump sum.
- Against that background the Appellant made a proposal to the Claimant in the form of a letter dated 24 July 2008, that is the same day as the announcement of the redundancy, which the Claimant accepted by signing a copy of the letter. The letter reads as follows:
"Following the briefing note issued on 24 July 2008 indicating our intent to cease trading at Halo this letter lays out the terms of your redundancy.
Redundancy legislation provides for a three-week redundancy payment at a maximum level of £330 a week. However, given the nature of the closure of Halo we propose to provide you with your contracted four week notice period (commencing 24th July) on the basis that you will remain working during the closure activities in the week commencing 28 July.
We feel this is an appropriate course of action given your efforts on behalf of the business and while legally we could restrict the payment to three weeks of redundancy we have decided to honour the terms of your contract. Please indicate that you wish us to take this course of action by signing one copy of this letter.
Under our proposal your last day of employment will be 22 August and you will be paid all money due to you up to that date and your P45 will be issued in due course. Your last day of operation of employment will be August 1 when we will have 'mothballed' the premises at Halo. This will leave you free to pursue other job opportunities over a three week period.
Katie and I are both very disappointed that the operations at Halo have not been a success and this redundancy is not what any of us would have wished for the business. However, we thank you for your hard work and wish you well for the future."
- The effect of that letter is unfortunately not very clear. The middle paragraph appears to say that the Appellant would be entitled simply to pay the Claimant his redundancy payment and nothing at all under the contract, although generously "we have decided to honour the terms of your contract". That is, with respect, wrong, and I daresay it is not really what Mr Workman meant. The Appellant, as I have said, had two obligations - one statutory, to make a redundancy payment - and one under the contract, to pay wages for a further four weeks or money in lieu. It was obliged to honour both of those obligations: even if it terminated the contract forthwith or on 1 August, it would still have been obliged to pay money in lieu for the remaining period.
- That being so, it is not entirely clear what the proposal really was. It seems however, that the Appellant's intention was that it would retain the Claimant as an employee for the full four weeks and pay him for that period but that it would not pay the redundancy payment. It was assumed at that stage, Mr Workman tells me, that four weeks pay would come out at more than three weeks redundancy payment. That might seem a very bad deal from the Claimant's point of view, but the Appellant saw it as a good deal because it did not intend to require him to work for the three weeks after 1 August.
- The Claimant was clearly still in some doubt as to what the position was intended to be. He sent an email to Mr Workman on 31 July asking among other things:
"… can I have it in writing what I will be receiving in terms of pay and also that I will not be expected to do shifts at The Square as discussed earlier this week."
Mr Workman replied:
"You are an employee until 22nd August and we are honouring our contract commitment to you. Consequently you will be paid as such under your existing contract and these payments will be processed through payroll as normal. Any 'over/under' on vacation etc will of course be taken into account in that payment.
My expectation is that you will make yourself available to answer queries in regard to our Halo activities, suppliers, customer contacts, invoicing and any queries re contracts. I don't anticipate that this will involve anything other than the occasional phone call although it is possible that a meeting may be required but I think that it is unlikely.
There will be no need for you to work at The Square."
- In reliance on that email, the Claimant in fact went abroad for a week in the middle of August. He did not do any work for the Appellant after 1 August. Sometime at the end of August the Appellant paid the Claimant the sum of £781.50. Mr Workman has confirmed - what I would in any event have inferred from the email which I have just set out - that that payment was calculated as representing the wages due to the Claimant up to the end of his employment on 22 August, in accordance with the arrangement which he understood them to have made. He says in fact that it was an erroneous calculation, but that was what it was intended to represent; and that is certainly what the Claimant would have understood it to represent.
- The Claimant accepted that payment as a payment of wages but he believed that he was still entitled to a statutory redundancy payment. After some correspondence in the course of September, he issued the present proceedings claiming his statutory redundancy payment of £990. In the meantime, the Appellant had been considering the position and appreciated that it would have to pay at least the amount of the redundancy pay – having, as I have said, assumed that the four weeks pay which it intended to pay would be more than the amount of the redundancy payment. Some calculations were done; and on 16 October, three days after the present proceedings were started, a further payment of £250.30 was made. That, taken with the payment already made, totalled £990. The arithmetic may seem wrong but the calculation is affected by an amount due by way of tax credit of £41.80.
The Tribunal's Decision
- The case was apparently argued before the Tribunal, or at least the Judge so understood it, on the basis that the Claimant had, by the agreement recorded in the letter of 24 July, "waived" his right to a redundancy payment in return for being retained in employment but not being required to work for the period from 2 to 22 August. I have some difficulty with that argument for reasons to which I will return, not least that under section 203 of the 1996 Act any attempt to contract out of the right to a statutory redundancy payment is ineffective; but in any event the Judge held that the letter of 24 July did not, on its true construction, constitute a waiver of the right to a statutory redundancy payment, and indeed that, although it was very ambiguously worded, it tended to support the Claimant's understanding that he would receive both pay for the period to 22 August and a redundancy payment. Arguably the issue should have depended entirely on the construction of the letter, but the Judge also heard oral evidence about what the parties had said and understood, and he preferred the Claimant's evidence that he understood that he would receive both kinds of payment. He also accepted the Claimant's evidence that Mr Workman had said that he did not want the Claimant to work at The Square because it would be bad for morale. On that basis the Judge awarded the Claimant the sum of £990 originally claimed, less the £250.30 paid on 16 October. That gives the figure of £739.70 to which I refer at the beginning of this judgment.
The Appellant's Case and My Decision
- The grounds of appeal in the Appellant's Notice of Appeal read as follows:
"7) The grounds upon which we bring this appeal are that the tribunal erred in law in that the Judgement of the tribunal whilst referring to a requirement for the appellant to make a redundancy payment to the claimant this judgement ignores the undisputed fact that the Redundancy entitlement had been paid. In such circumstances where the claimant has raised an action alleging non payment of redundancy pay and this is proved unfounded then the only possible judgement would appear to be to dismiss the case as raised. The claimant raised a case against the appellant stating that he was due redundancy payment. In the course of the hearing this claim was disproved (and not disputed by the claimant) - the tribunal then proceeded to consider a further and completely separate claim for payment in lieu of notice. We feel that the original claim as stated should have been dismissed and that it is then for the claimant to raise a further specific claim for payment in lieu of notice giving the appellant suitable opportunity to defend that claim."
What, in effect, that means is that the Appellant says that the £990 which everyone agrees was paid - that is to say, the initial £781.50 plus the balance paid in October - satisfied the Claimant's entitlement to a statutory redundancy payment. In other words, it accepts that he was entitled to that amount but says it has been paid. What the Appellant says is that the Claimant's true claim, if any, is to receive pay for the last four weeks of his employment, which is not the basis on which the claim was brought.
- The Tribunal does not address the argument in that form but I cannot be confident that it is a new point because in fairness to the Appellant, it said in terms in its ET3:
"Mr Mizener has been paid three weeks redundancy pay of £990 (in addition to certain balancing tax credits). This was paid in two tranches of £781.50 and £250.30."
It is impossible for me to reconstruct how it came about that that way of putting the case was not explicitly addressed by the Tribunal; but I must assume in the Appellant's favour that that is the way, or part of the way, in which the case was argued before the Tribunal, and I must therefore decide whether it is right.
- The starting point is to consider what sums were in fact owing. In my view I must proceed on the basis that the Appellant, as at 22 August, owed the Claimant both (a) a statutory redundancy payment and (b) pay for the period up to 22 August - subject, no doubt in the latter case, to any lawful deductions. There is no question about (a): as I have already observed, the statutory redundancy payment is agreed and cannot be contracted out of.
- As to (b), the position is that the Claimant was entitled to that sum since it is common ground that his employment continued over that period, and if an employee is employed he is entitled to have wages. In principle, it would indeed have been possible for the Claimant to agree to waive that sum in return for not being required to work, but the Judge has held that no such agreement was made and I can see no error of law in that conclusion. Indeed, I agree with him that the letter of 24 July, insofar as sense can be made of it, appears to support the Claimant's case. The only basis on which the Appellant could claim to be being generous to the Claimant on account of his comparatively long and loyal service, as the letter says (I refer to the phrase "given your efforts on behalf of the business") is that they were paying him without insisting on his working. Therefore, the position was that the Appellant owed both sums.
- That being so we have a situation where the Appellant as at 22 August owed two amounts and has since paid, or part-paid, only one of them. The law is that in such a case it is open to the debtor at the time of payment expressly or by necessary implication to ascribe (that being the Scottish term: in English law it is described as "appropriate") the debt to one obligation rather than the other; but that if he fails to do so, the creditor may make the ascription or association - see Wilson on The Scottish Law of Debt 2nd ed. para 12.5 (cf in English law, Chitty on Contract 30th ed. paras 21-059- 061). There was no evidence before the Tribunal that the payment of the £781.50 made in August was ascribed by the Appellant to its obligation to pay the redundancy payment, and in fact, it is common ground before me that the position was the reverse: the Appellant intended it to be a payment of outstanding wages. That being so, the Claimant was fully entitled to regard it as such and to regard nothing as having been paid towards the redundancy payment at the time that he issued his proceedings.
- The position is different as regards the £250.30. That was regarded by the Judge as being explicitly paid towards the redundancy payment, and that is the basis on which he deducted it from the sum claimed. There is no cross appeal against that deduction.
- In my judgment, therefore, the Judge's decision was plainly correct, even though I differ from him as to the details of his reasoning. This appeal is accordingly dismissed.
