Gascol Conversions Ltd v Mercer

For redundancy-payment purposes, overtime forms part of an employee’s normal working hours only where the employer is obliged to provide the fixed overtime and the employee is obliged to work it. Overtime that is voluntary, or compulsory only if offered by the employer, does not count. Where the parties have reduced the employment contract to writing, the written terms govern their relations. Continued work beyond the stated normal week, with overtime pay, does not by itself prove a later variation or waiver if it is consistent with the written terms.

Mr Mercer was employed as an inspector in work converting houses for North Sea gas. He worked substantially more than the 40-hour week stated in a later written contract and was dismissed as redundant in July 1972. The industrial tribunal found that 54¼ hours were his contractual hours. The Industrial Court upheld that approach, treating the written contract as not altering the reality of the working arrangement.

Gascol appealed. The central issue was whether redundancy payments should be calculated by reference to 54¼ hours or to the 40-hour normal working week stated in the signed contract, and whether later conduct, collective agreements or local arrangements had varied or waived that contract.

1. Appeal allowed with costs. The redundancy payments were to be calculated by reference to a 40-hour normal working week.
2. Applying the rule in Tarmac Roadstone Holdings Ltd. vs. Peacock & Others (1973) 8 I.TR. 300, overtime counts as normal working hours only where it is obligatory on both sides. The employer must be obliged to provide the fixed overtime and the employee obliged to work it. The national agreement fixed a 40-hour week and merely expected employees to work further hours where necessary. It imposed no obligation on Gascol to provide those hours and no obligation on Mercer to work them.
3. The local 1971 notes did not alter that conclusion. They were stated to bind the parties in honour only, and the national agreement took precedence over inconsistent local arrangements. Lord Denning MR referred to Loman & Henderson vs. Merseyside Transport Services Ltd. (1968) 3 I.T.R. 108, but regarded it as unnecessary to decide the point because of the later written contract.
4. Schedule 2, Part II of the Industrial Relations Act 1971 required a written statement of terms relating to hours of work. Mercer signed and accepted the new contract. It was an effective binding contract, and the written terms governed the parties’ relations. The contract stated that the normal working week was 40 hours and that further work was overtime.
5. Mercer’s continued work for 54 hours, and his receipt of overtime pay, did not establish variation or waiver. That conduct was consistent with the written contract. The tribunal’s finding that management was bound to provide 54 hours therefore could not stand. Lord Denning MR recorded that the tribunal had been influenced by Armstrong Whitworth Rolls Ltd. vs. Mustard (1971) 6 I.T.R. 79, which had subsequently been said to be erroneous. Orr LJ agreed with the Master of the Rolls. Lawton LJ agreed in the result and added that the effect of national agreements on individual contracts depends on the circumstances. The appeal was allowed unanimously.

1. Court of Appeal (Civil Division): allowed Gascol’s appeal with costs and held that the redundancy payments were to be calculated on the basis of 40 normal working hours per week.
2. Industrial Court: held that the industrial tribunal was entitled to consider the reality of the working arrangement and uphold a mutual obligation to provide and work 54 hours.
3. Industrial tribunal: found that management had bound itself to provide 54 hours and had required the men to work those hours.