Evans v Malley Organization Ltd (t/a First Business Support)

Factual and Procedural Background

This appeal concerns a decision by the Employment Appeal Tribunal ("EAT") reversing an Employment Tribunal ("ET") decision regarding claims of unauthorised deductions from wages and unfair dismissal. The ET had found that the Defendant (Malley Organisation Ltd trading as First Business Support) had not made unauthorised deductions from the wages of the Plaintiff and that the Plaintiff was not unfairly dismissed. The appeal to the EAT challenged only the finding on unauthorised deductions related to holiday pay calculation and pay during suspension.

The Plaintiff, employed as a sales representative from March 1998 to March 2000, claimed that holiday pay and pay during an 11-day suspension were calculated incorrectly, being based only on basic salary rather than including commission. The Plaintiff resigned and took employment with a competitor on the same day, having been suspended due to alleged conspiracy to leave simultaneously with other staff.

The Plaintiff's contract provided for a basic salary plus commission (25% of contract value), with commission payable only after the client paid 25% of the contract sum, typically nine months after the contract was secured. Holiday pay was stated as payable at the "normal basic rate." The dispute centered on whether holiday pay and suspension pay should include average commission earnings rather than just basic salary.

Legal Issues Presented

1. Whether the Plaintiff's holiday pay should be calculated based on average earnings including commission, or solely on basic salary, under the Working Time Regulations 1998 and section 221 of the Employment Rights Act 1996.
2. Whether pay during suspension should include commission or be limited to basic salary.
3. Whether the Employment Appeal Tribunal was correct in its interpretation of section 221(2), (3), and (4) of the Employment Rights Act 1996 concerning remuneration varying with the amount of work done.
4. Whether a claim under Regulation 14 of the Working Time Regulations 1998 could be considered at this stage.
5. Whether limitation provisions under Regulation 30 of the Working Time Regulations 1998 barred the claim.

Arguments of the Parties

Appellant's Arguments

• The claim under Regulations 13 and 16 regarding holiday pay was defeated by limitation as no complaint was made within three months of the right arising.
• The Plaintiff’s contract fell within section 221(2) of the Employment Rights Act 1996, meaning remuneration did not vary with the amount of work done, so holiday pay should be based on basic salary only.
• The claim under Regulation 14 was not made before the ET and thus should not be considered on appeal.
• Pay during suspension should be calculated on basic salary only, as the contract was silent on the meaning of "pay" during suspension and there was no evidence of custom or practice to the contrary.

Respondent's Arguments

• Holiday pay should be calculated at the full normal rate including commission, representing average earnings over the relevant period.
• The contract fell within section 221(3) of the Employment Rights Act 1996, as remuneration varied with the amount of work done, justifying the averaging method including commission.
• Pay during suspension should include average earnings, not just basic salary.
• Failure to raise limitation earlier deprived the Plaintiff of an opportunity to seek an extension of time under Regulation 30(2)(b).

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court focused primarily on the interpretation of section 221 of the Employment Rights Act 1996, which distinguishes between remuneration that does or does not vary with the amount of work done during normal working hours. The Employment Tribunal had held that the Plaintiff’s remuneration did not vary with the amount of work done (section 221(2)), while the Employment Appeal Tribunal had reversed this, placing the contract under section 221(3), applying an averaging method including commission.

The court analyzed the statutory language and legislative history, concluding that "amount of work done" refers to the quantity of tasks performed, not the success or results of that work. The Plaintiff’s commission depended on successful contracts, which were outcomes of work done earlier, and thus did not vary with the amount of work done in the relevant period.

Section 221(4), which includes commission as part of remuneration where remuneration varies with work done, was held not to override the primary distinction between subsections (2) and (3). The court found that commission payments related to success achieved, not the quantity of work performed, and therefore the contract fell within subsection (2), not subsection (3).

The court rejected the argument that Regulation 14 of the Working Time Regulations 1998 was applicable, as no such claim had been made before the Employment Tribunal.

Regarding pay during suspension, the court agreed with the Employment Tribunal that the contract’s silence on the meaning of "pay" during suspension and absence of evidence of custom or practice justified calculating pay during suspension on the basic salary only. The court declined to remit the issue for further evidence, emphasizing finality and that relevant evidence should have been presented earlier.

Holding and Implications

The court ALLOWED THE APPEAL and reinstated the Employment Tribunal’s original decision.

The direct effect is that the Plaintiff’s holiday pay and pay during suspension are to be calculated based on basic salary only, excluding commission. The court clarified the interpretation of section 221 of the Employment Rights Act 1996 in this context but did not establish new precedent beyond the facts of this case. The claim under Regulation 14 was not entertained due to procedural grounds, and limitation issues were not decided as the appeal was determined on the merits.

The court awarded the Appellants 90% of their costs for the appeal, noting that the Appellants lost on the procedural point concerning the late amendment but succeeded on substantive issues.