Legal Updates

Employment Law – Unlawful Deduction – Difference between Entitlement of an Employee to a Salary and Payment to an Employee only on performance of specific tasks

The recent case of Lucy and Others v British Airways Plc [2009] involved a dispute relating to the unlawful deduction of wages. According to s.27 of the Employment Rights Act 1996 (“the Act”):

“(1) In this Part "wages", in relation to a worker, means any sums payable to the worker in connection with his employment, including:

(a) Any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise,

(b) Statutory sick pay under Part XI of the Social Security Contributions and Benefits Act 1992,

(c) Statutory maternity pay under Part XII of that Act,

[(ca) Statutory paternity pay [ordinary statutory paternity pay or additional statutory paternity pay] under Part 12ZA of that Act, (cb) Statutory adoption pay under Part 12ZB of that Act,]

(d) A guarantee payment (under section 28 of this Act),

(e) Any payment for time off under Part VI of this Act or section 169 of the Trade Union and Labour Relations (Consolidation) Act 1992 (payment for time off for carrying out trade union duties etc),

(f) Remuneration on suspension on medical grounds under section 64 of this Act and remuneration on suspension on maternity grounds under section 68 of this Act,

(g) Any sum payable in pursuance of an order for reinstatement or re-engagement under section 113 of this Act,

(h) Any sum payable in pursuance of an order for the continuation of a contract of employment under section 130 of this Act or section 164 of the Trade Union and Labour Relations (Consolidation) Act 1992, and

(j) Remuneration under a protective award under section 189 of that Act ...”.

The 78 employees in this case were employed as cabin crew based at Manchester Airport. They were entitled to receive a basic salary and a number of allowances (“Flying Allowances”). The Flying Allowances only became due in certain circumstances. Only some of the Flying Allowances were taxable. The Flying Allowances included the following:

§       Meal allowances;

§       Night stop incidental allowances; and

§       Long day payments.

The Flying Allowances were only due to be paid in the event that the cabin crew were scheduled to fly and therefore were carrying out their duties in relation to the flights to which they were assigned.

The Flying Allowances also had qualifying criteria which had to be met. If the qualifying criteria were not satisfied, the Flying Allowance in respect of a particular duty would not be granted. Typically, the Flying Allowance was not payable for days when the employees were not scheduled to fly.

The employer elected to close its base at Manchester Airport on the 29th of October 2006. However, the employees were not made redundant and their employment contracts continued. Although they were still employed, the decision to close the base at Manchester Airport meant that the employees were not scheduled to fly for varying periods of time. Therefore, the employees received only their basic pay. They did not receive any Flying Allowances that would have become due in the event they were scheduled to fly and any relevant qualifying criteria had been met.

Accordingly, the employees duly presented their originating application to the employment tribunal. The employees made complaints that the failure to pay them the Flying Allowances that they were entitled to, amounted to an unlawful deduction of wages contrary to s.13 of the Act.

Subsequently, the employer questioned the tribunal's jurisdiction to hear the claims brought by the employees. It presented the argument that the claims did not fall within the tribunal’s jurisdiction under Part II of the Act. Instead, the employer claimed that the claims were for damages for breach of contract, which could not be brought before the tribunal during the employees' employment by reason of the effect of Article 3 of the Employment Tribunal's Extension of Jurisdiction (England and Wales) Order 1994, SI 1994/1623 (“the 1994 Order”).

The employer therefore maintained that the claims could only be heard before the county court while the employees’ employment continued.

The tribunal found in favour of the employer's objection, and the employees duly appealed against that decision.

On appeal, the issue that had to be determined was whether the Flying Allowances claimed by the employees were wages within the definition as stipulated in s.27(1)(a) of the Act.

The appeal was dismissed.

It was held that there was both an obvious and a fundamental difference between employees’ periodically payable salary or basic wages to an employee who worked (or was ready, willing and able to work if no work was provided) and received remuneration on the basis that it was only earned if specific tasks were carried out (such as commission from sales, allowances for flying or allowances for overnight stays).

The latter form of pay could only become payable to the employees if the applicable task was carried out. Therefore, in this case, once the Manchester base had been closed, the employees had not carried out any flying duties. As no flying duties had been carried out, it was held that they had not earned the Flying Allowances. This meant that the employees' claims were not claims for wages, but for damages for loss of the opportunity to earn the Flying Allowances claimed or for the chance of earning them. These damages could only be claimed by the employees in the event they could establish that the closure of the Manchester base and/or the failure to roster them for flying duties amounted to a breach of contract by the employer.

Accordingly, the employees' claim could not be pursued before the tribunal due to the jurisdiction restriction imposed by Article 3 of the 1994 Order.

If you require further information please contact us at [email protected] or Visit http://www.rtcoopers.com/practice_employment.php.

• To obtain further information on redundancy - http://www.rtcoopers.com/faq-redundancyemployee.php
• A video on compromise agreements - http://www.employmentlawyersinlondon.com/video.php
• A website dealing specifically with compromise agreements-  http://www.employmentlawyersinlondon.com
• A blog on compromise agreements http://www.adviceoncompromiseagreements.com .

© RT COOPERS, 2009. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.