International Packaging Corporation (UK) Ltd v Balfour [2003] 11
In an economic downturn some employers choose to introduce measures like short time working to try and save jobs and weather the economic storm. If as a result workers are paid less than their contractual pay is there consequently an unauthorised deduction from wages which the workers are entitled to recover?
This question was considered in the case of International Packaging Corporation v Balfour and the EAT in Scotland answered the question with an emphatic "Yes". Mr Balfour and his co-workers were employed for a basic 39 hour week. There were falling orders and the company introduced short time working without agreement. They paid the workers for only the short hours they worked. The workers, supported by their union took claims to an Employment Tribunal complaining of unauthorised deductions from their wages.
The workers won their case at the tribunal and their employer appealed saying that the workers were being properly paid for the hours they were actually working. The EAT confirmed the decision of the Employment Tribunal that the unilateral introduction of short time working by the employer amounted to an unauthorised deduction from wages. A reduction in hours to be worked under a contract is a variation of that contract. Unless such a variation is allowed for either expressly or by implication in the contract, any actual deduction of wages will not be authorised by statute or by the contract. Any such variation and consequential reduction in pay could only be achieved by agreement either on an individual basis or where a trade union is recognised, collectively.
In this case there had in the past been collective agreements between the workers' trade union and management for short term working. The EAT was not prepared to find that these past agreements could lead to a finding that their was an implied term that the employer could impose short time working unilaterally. There was no power in the contract to enable the employer to unilaterally vary hours so wages had been wrongly deducted.
The lesson of this for advisers, is always to carefully check express terms in contracts permitting variations in hours and pay. In collective negotiations, such unilateral powers should be strenuously resisted. No doubt many employers' lawyers will already be redrafting contracts to give as wide powers possible to their clients.
It is also important to remember that a failure to object to a change of contract such as occurred here, can be deemed to amount to acceptance of the change. It is important to object to such a change and commence unauthorised deduction claims promptly so as not to be accused of affirming the breach of contract.