Blair & Ors v Midlothian Council (Jurisdictional Points)

An Employment Tribunal considering an unlawful-deduction complaint under sections 13 and 27 of the Employment Rights Act 1996 may determine incidentally whether the worker has a contractual entitlement to the payment claimed. The complaint fails where no subsisting entitlement to wages is established.

A collective-agreement term may be apt for contractual incorporation, but incorporation depends on the particular employment contract. Clear correspondence and accepted replacement terms may show that a proposed protection was excluded. A claim that an employer should have included a contractual entitlement sounds in damages for breach of contract and does not become an unlawful-deduction claim.

The claimants were council employees whose former contracts included bonus arrangements. The council implemented a single-status pay scheme intended to remove discriminatory pay differentials. It offered new contracts, paid a lump-sum bonus buyout, and stated that historic bonus payments would not receive pay protection.

The claimants accepted the new contracts effective from 29 June 2009. They contended that clause 19 of the 1999 Single Status Implementation Agreement had been incorporated and protected their lost bonus remuneration for three years. They brought complaints of unlawful deductions under sections 13 and 27 of the Employment Rights Act 1996.

At a pre-hearing review, the Employment Tribunal held that it could investigate the alleged contractual entitlement but found that none existed. The claimants appealed, principally challenging incorporation, construction, the treatment of correspondence, and findings concerning the permanence of the bonus.

1. Appeal dismissed. The Employment Judge was entitled to find that the post-assimilation contract contained no express or implied term requiring protection for the discontinued historic bonus payments.

2. The Tribunal had jurisdiction under sections 13 and 27 of the Employment Rights Act 1996 to make the incidental and necessary inquiry whether a contractual entitlement to the alleged wages existed. However, absence of such an entitlement meant that the complaint was not one for unlawful deduction from wages.

3. Although clause 19 of the collective agreement was capable of incorporation, incorporation was a question of fact and construction in the particular contractual setting. The Employment Judge was entitled to rely on the council's correspondence as statements of the terms it had decided to offer, rather than impermissible evidence of negotiations. That correspondence made clear that bonus payments and protection for their loss were excluded, while a lump sum was offered as a buyout.

4. The Employment Judge was also entitled to find that the evidence did not establish a bonus payable permanently or incapable of termination. Even if the bonus term had been permanent, it could be ended by notice; a breach would sound in damages rather than create a claim under section 13.

5. The Employment Judge's references to 1999 as the assimilation date were erroneous or potentially contradictory. They did not require reversal because the reasons, read as a whole, showed that he understood assimilation occurred on 29 June 2009 and gave adequate reasons for the dispositive finding. Remittal was unnecessary. In any event, the accepted new terms protected only basic pay and contractual overtime, not historic bonus.

• Employment Appeal Tribunal: Appeal dismissed: [2013] UKEAT 0006_13_0907.
• Employment Tribunal: At a pre-hearing review, held that it could investigate the claimed contractual entitlement under sections 13 and 27 of the Employment Rights Act 1996, but found no entitlement to bonus-related pay protection. Reasons were sent to the parties on 18 December 2012.