Coors Brewers Ltd v SP Adcock & Ors

An unlawful-deduction claim under Part II of the Employment Rights Act 1996 requires a legal entitlement to an identifiable sum of wages properly payable on the relevant pay date. A tribunal may resolve a genuine dispute about that sum, but it cannot assess unliquidated contractual damages under that procedure.

Where an employer was obliged only to establish and fairly operate a substitute discretionary bonus scheme capable of replicating a former benefit, failure to do so may found a claim for contractual damages. It does not establish that a particular sum was unpaid wages. An employee who remains employed must pursue that damages claim in the county court.

The claimants were representative employees of Coors Brewers Ltd. They alleged that the employer had unlawfully deducted 4% of their gross income by making no payment under its 2003 incentive scheme. They relied on the earlier Bass Employee Profit Share Scheme and on an asserted obligation to provide an equivalent replacement.

The Employment Tribunal upheld the claims. The Employment Appeal Tribunal set that decision aside because its reasons were inadequate, but remitted the claims to a fresh tribunal. Coors appealed against the remittal, contending that the claims were unliquidated contractual claims outside Part II of the Employment Rights Act 1996.

The central issue was whether the asserted failure to provide a proper replacement bonus scheme amounted to an unlawful deduction from wages, or only to a claim for damages for breach of contract.

1. Appeal allowed unanimously on jurisdiction. The claims, as advanced in the Employment Tribunal, were dismissed. Wall LJ gave the principal judgment. Chadwick LJ gave concurring substantive reasons and Wilson LJ agreed with both judgments.

2. Part II of the Employment Rights Act 1996 applies where an employee can identify a sum of wages properly payable on a particular occasion which has not been paid. The tribunal may determine disputes bearing on that amount. That does not convert an unquantified claim for contractual damages into a wage-deduction claim. The Court applied the approach illustrated by Delaney v Staples [1991] ICR 331.

3. Assuming that the employer was contractually obliged to introduce a substitute scheme capable, if properly and fairly operated, of replicating the former profit-share benefits, that obligation was not a promise to produce equivalent benefits in every outcome. Several combinations of targets and incentives could satisfy it, provided they were based on a realistic prediction of future performance. Accordingly, even if the 2003 scheme breached the obligation, it could not be said what additional sum would have been properly payable to any claimant on the payment date.

4. The possible claim was therefore one for damages, including compensation for loss of a chance, rather than for an identified wage shortfall under sections 13(1) and 13(3). The Employment Tribunal lacked jurisdiction while the claimants remained employed. The Employment Appeal Tribunal was wrong to remit the claims.

5. The Court declined to determine whether a county-court claim for breach of contract would succeed. There were no such proceedings before it and the available evidence did not justify prejudging whether the bonus targets had been set or operated in breach of contract.

• Court of Appeal (Civil Division) — allowed Coors’ appeal on the jurisdiction issue and set aside the remittal. The claims as brought under Part II of the Employment Rights Act 1996 were dismissed: [2007] EWCA Civ 19.
• Employment Appeal Tribunal — allowed Coors’ appeal because the Employment Tribunal’s reasons were inadequate, set aside its decision, and remitted the claims to a differently constituted tribunal. No citation was stated in the judgment.
• Employment Tribunal, Leicester — upheld the representative claims and declared that Coors had unlawfully deducted 4% of gross income for 2003, payable in 2004.