Appeal No. EAT/327/90

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 12th January 1993

	Before

	THE HONOURABLE MR JUSTICE WOOD MC (P)

	MS B DEAN

	MR T THOMAS CBE

DISCOUNT TOBACCO & CONFECTIONARY LTD	APPELLANTS

MR J F WILLIAMSON	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR M WEST
(Personnel Consultant)
Peninsula Business Services
Stamford House
362/365 Chapel Street
Manchester
M3 5JY

For the Respondent	NO APPEARANCE BY OR 
REPRESENTATION ON BEHALF OF THE RESPONDENT

	MR JUSTICE WOOD (PRESIDENT):  On the 20th November 1989 an Industrial Tribunal sitting at Newcastle upon Tyne under the Chairmanship of Mr Goodall, unanimously decided that a complaint by Mr Williamson that unlawful deductions had been made under the Wages Act 1986, was well founded and Ordered his employers, Discount Tobacco and Confectionary Limited, to pay to him the sum of £812.  The Company now appeal.

	The issue in this appeal is the correct interpretation and construction of subsection (4) of Section 1 of the Wages Act 1986. 

	The facts of the case can be stated quite shortly.  Mr Williamson presented his own case.  He was in fact a Manager of one of the 59 retail outlets of the Company.  Stocktaking had taken place in December 1988 where the deficiency was said to be £250;  February 1989 when the deficiency was over £3,400 and again in May 1989 when there was a deficiency of some £1,000.  On the 18th May Mr Williamson was dismissed and was told that he was being dismissed for serious stock deficiencies.  He was told that all the monies due to him were £632 and that they were being retained since the claim by the Company was in excess of that figure.  The make up of the sum of £632 was as to £125, a week's wages in lieu of notice and the remainder were wages and holiday pay.  The £125 was therefore included in the sum ordered of £812.  

	Since the hearing of the Industrial Tribunal the House of Lords has decided in a case of Delaney v. Staples [1992] ICR 483, that "wages" do not include the sum payable in lieu of notice.  Therefore, Mr West today, asks that that sum should be excluded from any calculation we make.  That point is not taken in the Notice of Appeal and the Solicitors acting for Mr Williamson are not properly aware of it as an issue in this appeal, we shall therefore not permit that point to be taken at this late juncture.

	We therefore approach this matter on the basis that the deductions have been made on account of the stock losses.  What happened was that there was a provision for a deductions procedure in the handbook, published by the Company;  Mr Williamson did not have a written contract of employment, nor had he been supplied with written particulars of the terms of employment.  It was not until late April 1989 the Solicitors who were advising him received a copy of that handbook.  The handbook contained some procedures for deductions, but the Tribunal found that those procedures in any event, even if they were sufficiently to be considered as part of his contract of employment, with which there seems to be considerable doubt, were not complied with. 

	The only point therefore is that on the 14th March 1989, before his dismissal, Mr Williamson signed a document it had his name on the top, Store No. 60 and it reads:
"I hereby give permission for Discount Tobacco Concessions Ltd, to deduct the amount of £3,500 at the rate of £20.00 per week, for the 175 weeks.

Repayments due to stock shrinkages."

He signed that and it was witnessed by a Mr Boyle, who had been interviewing him in connection with this matter.  Mr Boyle was a retired Police Officer and for nearly two years Security Manager.

	The issue therefore, comes to this, deductions were made after the signing of that document of 14th March 1989, but in respect of losses which had occurred before that date.  The learned Chairman of the Tribunal considered subsection (4) of Section 1 and found that the authorisation of 14th March 1989 was not such as to render the deductions legal. 

	Those are the facts and it is necessary to look at the Wages Act 1986.  The preamble to the Act shows that the first purpose of the Act is to make fresh provision with respect to the protection of workers in relation to the payment of wages.  The whole of the first part of that Act deal with the protection of workers in relation to the payment of wages.  Section 1 is the prohibition section in respect of deductions made or payments received by employers.  Subsection (1) reads as follows:
"An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one the following conditions, namely -

(a)it is required or authorised to be made by virtue of any statutory provision or any relevant provision of the worker's contract;  or

(b)the worker has previously signified in writing his agreement or consent to the making of it."

That therefore is the general prohibition against any deduction from any wages of any worker unless one of those two conditions is satisfied.  Then subsection (2) deals with any payment from any worker employed, and that might be in respect for instance, under Section 3 of cash shortages, but it applies the same two conditions.  Subsection (3) deals with the phrase "relevant provision" that is the relevant provision of the contract, and it reads thus:
"In this section `relevant provision,' in relation to a worker's contract, means any provision of the contract comprised -

(a)in one or more written terms of the contract of which the employer has given the worker a copy on any occasion prior to the employer making the deduction in question, or (where subsection (1)(a) applies for the purposes of subsection (2)) prior to his receiving the payment in question, or

(b)in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) whose existence and effect, or (as the case may be) combined effect, in relation to the worker the employer has notified to the worker in writing on any such occasion."

Those last words refer to any occasion prior to the making of the deductions in question.  So that it is quite clear there that the variation or statutory provision or the contractual provision or the agreement, so far as Section 1(1)(a) is concerned, must be prior to the deduction.

	We omit subsection (4) for the moment.  Subsection (5) deals with exceptions and they are clearly set out.  Subsection (4) then reads as follows:
"For the purposes of this section -

(a)any relevant provision of a worker's contract having effect by virtue of any variation of the contract, or

(b)any agreement or consent signified by a worker as mentioned in subsection (1)(b),"

pausing there, if in fact the term was in the original contract it would not be relevant to refer to any variation, therefore, the timing refers there, by implication, not to the original contract which is not specifically mentioned but to any variation which is mentioned, or to any agreement or consent under Section 1(1)(b) which is mentioned, but they are all encompassed in that phraseology.  Then to return to the subsection:
"shall not operate to authorise the making of any deduction, or the receipt of any payment, on account of any conduct of the worker, or any other event occurring, before the variation took effect or (as the case may be) the agreement or consent was signified."

	The submission made by Mr Martin West, for the Appellants, is that in respect of "(b) any agreement or consent signified by a worker as mentioned in subsection 1(b)" is legal if it is made after the conduct or other event but before any deduction, that renders the deduction legal. He submits therefore, that the purpose of the subsection is to allow an employee to agree to a deduction after the conduct or event has occurred giving rise to the basis upon which the deduction is made.

	This subsection was considered perhaps somewhat collaterally in a decision of this Tribunal in York City & District Travel Ltd v. Smith [1990] ICR 344, it was a "Reserved" decision of this Tribunal, a Division over which I presided and the Industrial Members were Mr John Daly and Mr Alec Scott.  The facts were that in March 1988 the employers, the bus company, York City & District Travel Limited negotiated an agreement with the trade union varying their employees contracts of employment so as to provide that the employers were entitled to deduct any cash shortages from the wages of staff handling cash.  On the 10th June 1988 minutes of the Union Committee Meeting recorded receipt of the agreement and that it would be duly signed.  On the 9th September an agreement in identical form was signed by the Union and the employers.  Between the 10th June and the 9th September, namely, on the 9th August 1988 Mr Smith, who was the Applicant, and was employed as a Travel Office Clerk, was found to have been responsible for takings which were missing.  The issues that arose in that appeal related to the phraseology and the way in which the full reasons had been drafted, but indirectly, it also considered the timing and the time-table of the various agreements and the various conduct and reduction.  It is noticeable that this Court had the assistance of Counsel, experienced in this branch of the law.  On page 346 of the judgment this Tribunal was considering the phrase "any relevant provision of the worker's contract and Section 1(1)(a) and it looked at a clause in the collective agreement with the Trade Union, we then go on to say this, and I am reading from page 346F:
"It is clear - indeed not argued to the contrary - that by section 1(3)(b) a variation of the original contract of employment may be oral, but that any such variation must be notified to the employee in writing prior to the date of the deduction.  That is not the end of the matter because by section 1(4) the variation must have been agreed before the conduct or event on account of which the deduction is made.  Thus to apply those principles to the present case the variation must have been agreed before 9 August and the notification in writing of the variation must have been given to the employee by the employers before 8 December 1988."

That passage that the view of this Tribunal when looking at Section 1(4) of the 1986 Act was that any variation under Section 1(4)(a) must come into effect before the conduct of the worker or other event occurring.

	The issue therefore, that arises under this appeal is whether:
"(b)any agreement or consent signified by a worker as mentioned in subsection (1)(b)"

is to be treated differently.

	The submission of Mr West we have already referred to.  It seems to us that when one looks at the construction of the Section and in particular of Section 1(4) then (a) and (b) are to be read together; the effective wording thereafter applies either to (a) or to (b).  We would therefore be minded to follow the previous decision in York Travel Ltd v. Smith unless we saw any valid reason for taking a contrary view in this appeal.  This Tribunal is not, in fact, bound by its previous earlier decisions but we see no reason to disagree.  Indeed the purpose of this subsection, as it appears to us, is in order to prevent any pressure being placed on an employee to agree to deductions, of whatever nature, and that can only be obviated if the agreement or the variation or the consent is made before the happening of the event which is the cause of the dispute between the employee and the worker and his employer.

	Once again, it is apparent from this case that the importance of clear terms and conditions of employment being not only agreed but also served and presented early in the employment is as important as ever it was, because if there is a clear power, and indeed it may be entirely right in situations such as the present, that there should be such a power to deduct, then it is agreed and clarified before any event or conduct takes place and therefore it obviates any pressure on either side which is clearly undesirable in the best interests of good industrial relations.

	For the reasons which we have given we dismiss this appeal and we make no order on the issue of the £125.