Back to all articles & webinars

Restitution claims in the ET

18.02.22

Jeremy Lewis considers the EAT’s decision in Abellio East Midlands v Thomas, whether it was rightly decided and the light it shines on the unsatisfactory limits on the jurisdiction of ETs to resolve worker’s remuneration claims. 

In April 2020 the Law Commission proposed important changes to the jurisdiction of ETs to deal with contractual claims[1].  The need for reform has long been recognised.  Twenty years ago, in Delaney v Staples [1992] 1 AC 687 (at 698A-B), Lord Brown-Wilkinson said that the absence of contractual jurisdiction relating to dismissals brought the law “into disrepute”.  He noted how unsatisfactory it was that employees were forced either to proceed in the ordinary courts of to bring two sets of proceedings even for small sums of money.

Two years later the ETs were given some jurisdiction over contractual claims[2].  However, this was subject to a £25,000 cap, and is only available upon termination of the contract. The response to the problem was inadequate at the time. The position is still worse today since there has been no increase in the £25,000 cap to take into account inflation.  The limit on jurisdiction looks all the more anomalous when tribunals have the power to make sometimes very large awards when dealing with uncapped compensation for discrimination and whistleblowing. Whilst Lord Brown-Wilkinson’s comments were directed at wrongful dismissal claims, a similar problem arises with other contractual claims. Where the claim is framed in the alternative, either as an express term or in the alternative based on damages for relating to the exercise of discretion, part of the claim may only be justiciable in the ordinary courts, subject to sometimes contentious arguments as to whether it can be squeezed within the scope of an unlawful deductions claim.

Acknowledging these difficulties, the Law Commission recommended in its 2020 report that the ET’s contractual jurisdiction be extended so as to apply to workers, that for both workers’ claims and employer counterclaims the requirement for the employment to have terminated and for the claim to have arisen by the time of termination be removed and that the cap be increased to £100,000, which should thereafter continue to track the threshold for the requirement for a claim in the High Court[3].  It remains to be seen whether the recommendations will be taken up.  However, if it is, the EAT’s decision in Abellio East Midlands Ltd v Thomas [2022] EAT 20 points to a further type of claim to be considered to enable tribunals to address worker remuneration claims in the round: quantum meruit claims based on unjust enrichment as a fall back in the absence of a contractual entitlement to pay for work done.

The Facts in Abellio

The Claimant was employed as an Area Manager for Leicester at a salary of £42,000. He agreed to move to a new position as Area Manager for Nottingham which was the biggest and most complex station in the franchise network.  He was told his salary would be increased to reflect the greater responsibilities in that role. He began to take on that role in March 2020. In May 2020 he agreed with senior management that his salary for the new role would be £52,000, subject to HR approval. However, the approval was not given. There were a series of other offers including at one point proposing that the increase to £52,000 would follow only after a probationary period, which he rejected. He was then dismissed with effect from 12 November 2020 when he indicated that he planned to raise a grievance. The ET found there was no oral agreement to the increased salary of £52,000 because the Claimant was aware that the salary had to be ratified by HR and that it never was. Nor was there any agreement to the other increases offered by Abellio because in each case he had rejected the offers. However, it upheld a quantum meruit claim based on a salary of £52,000.

EAT decision

The EAT (Michael Ford QC) accepted that there was a valid quantum meruit claim for the value of the benefit conferred on Abellio by the work done. The relevant elements for such a claim are (1) that the respondent has been enriched, (2) this was at the claimant’s expense (or through the services provided), (3) the enrichment was unjust, and (4) there are no defences available[4]. Where there is a contractual relationship with the respondent that will usually exclude the claim on the basis that the contract allocates the risk between the parties[5]. Typically, if the contract does not provide expressly or by necessary or obvious implication for additional payment for services that is the end of the matter. However, the EAT (at 28(5)) noted that there are exceptions for the provision of services (a) which go beyond the scope of those provided for in the existing contract or (b) in anticipation of a contract which does not materialise (thought there would need to have been a contract for there to be a worker relationship). The first of those exceptions was found to apply here because the ET concluded that the new role was “entirely different” and the remuneration in the previous role did not cover the work under it.

However, the EAT concluded that a quantum meruit claim could not be brought by way of unlawful deduction of wages (and nor had it been brought as a contractual claim). The EAT acknowledged several factors that could point to such claims falling with the unlawful deductions jurisdiction.  It was accepted that the unlawful deduction provisions should be given a broad and inclusive interpretation (para 33). Further (at para 23), a quantum meruit award is akin to wages in the sense that it compensates a worker for work done for which the worker has been paid nothing or too little. It also arises from a legal entitlement albeit not under the contract, and the sums would be paid “in connection with … employment”, as required by s.27 ERA, because the payment must have been to a worker and in that capacity.  However, Michael Ford QC concluded that several factors which influenced the finding in Delaney that notice pay claims could not be brought by way of deduction of wages (save where the notice is worked out) also told against quantum meruit claims being covered.

EAT’s reasoning for excluding quantum meruit claims

The EAT first noted that in its view the quantum meruit claim fell outside the core concept of wages identified in Delaney (at 692A-C) as being payments referable to an obligation under a subsisting contract of employment to render services. Here the claims did not arise under a contract since the basis for the quantum meruit claim was that the sums claimed were for work which fell outside the scope of the contract. Nor did the claim appear similar to any of the other specific categories of wages listed in s.27 ERA (paras 46-47). The EAT considered that this was reinforced by the fact that it would often be difficult to identify the “occasion” on which such were properly payable, as required to identify from when time began to run for bringing a claim.

Second, the starting point for determining the amount to be paid as a non-contractual quantum meruit is the objective value of the services to someone in the shoes of the recipient at the time they were provided (Benedetti v Sawiris [2014] AC 988 (SC)). Evidence would often be required of the market value. As such it would typically be difficult to identify any quantifiable sum which was properly payable prior to quantification by the tribunal based on ex post facto evidence (para 49).

Third the EAT QC doubted that Parliament could have intended or contemplated that such claims would be covered since it would take tribunals into “unchartered waters” involving much case law and may require expert evidence (para 50).

 Much of this reasoning is open to question:

1. As the EAT acknowledged, there is no requirement under s.27 ERA that the source of payment be contractual. Section 27(1)(a) expressly provides that it covers an emolument referable to employment whether payable under the contract or otherwise. The key consideration in Delaney was that the notice payment was not made for work done under the contract, but payment in respect of termination of it. By contrast here the essence of the payment was indeed that it was in respects of the services provided.
2. There need not be an insuperable difficulty in identifying the “occasion” on which sums were properly payable. The cause of action accrues at the point where there has been unjust enrichment. In other contexts it has been said that is when the service or benefit has been provided[6]. But there may be scope to construe this in context as being at the point when payment would ordinarily be made under the contract for services provided. In Abellio that would be the payment date, at which time the Claimant was only paid at the rate for his previous role.
3. There is force in the point as to difficulty of quantifying the value of the services. However, the EAT acknowledged (at [44]) that the distinction between what is or is not “quantifiable” is “elusive”. The fact that factual issues need to be resolved in order to quantify the claim is not of itself a bar: see Lucy v British Airways Plc UKEAT/0033/08/LA, 13 January 2009.  Nor is it a bar that there is more than one method of quantifying the claim. In Lucy the statutory test of a weeks’ pay was found to be an acceptable approach without necessarily being the only approach that could be used. The particular difficulty in Delaney was that for damages claims it would not be known on summary dismissal how much was due because of the need to take into account mitigation.  By contrast, a quantum meruit claim based on unjust enrichment requires a determination of the value of the services at the time they were provided (Benedetti).
4. Neither the need to engage with substantial case law nor the need for expert evidence provides a convincing rationale. Both are matters well within the experience of ETs, and any error of law can be addressed on appeal.
5. The issues identified are not unique to non-contractual claims. Indeed, the claim in Abellio might have been better analysed as being a contractual claim on the basis that there was agreement to the provision of the services, and implied term that remuneration would be such sum as reasonable in all the circumstances. As Lord Clarke noted in Benedetti (at para 9) that would be the normal term to apply where there is a contractual relationship, and the claim is sometimes referred to as a quantum meruit.[7]
6. The EAT proceeded on the basis that it was dealing with a “novel question” that had not previously been raised at appellate level. There was however contrary authority, to which the EAT was not referred, in Smith v Chelsea Football Club Plc [2010] EWHC 1168.  There, having failed in a deduction of wages claim in the tribunal, the Claimant brought a High Court claim which was put in the alternative either on the basis of an implied term to reasonable remuneration or a quantum meruit for work done during employment. It was argued that there should be no issue estoppel because these were not claims that could have been brought by way of deduction of wages claims, and instead arose from the tribunal’s decision rejecting the case based on express agreement to remuneration.  Cox J rejecting this, relying upon Lucy as showing that difficulties of quantification which could be resolved by findings of the tribunal did not prevent a deduction of wages claim. As such, in the light of the findings as to the limits of the entitlement under the contract, the claim in the High Court was barred by issue estoppel.

Concluding

The decision in Abellio may therefore not be the last word on whether there can be a quantum meruit claim by way of deduction of wages. In practice though the issue will rarely arise in the form it did in Abellio. The contract will ordinarily be determinative of what remuneration can be claimed. If there is some aspect which is found not to be within the scope of what was agreed, the more usual approach will be an implied term that the Claimant will be paid remuneration which is objectively reasonable.  The key issue is likely to be not as to the form of the claim (whether or not under contract) but as to whether the difficulties in quantification prevent it being a deduction of wages claim. There are good policy reasons, given the complications in such claims, for not squeezing them into the framework of deduction of wages, with its limited scope for cross-claims and penalty elements where payment has not made (s.25(4) ERA).  The need to try to fit claims within an unlawful deduction of wages framework only arises because of the current limits on the scope for contractual claims. The reforms proposed by the Law Commission cannot come soon enough

 

[1] Law Commission, “Employment Law Hearing Structures: Report” Law Com No 390 (April 2020).

[2] Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 CI 1994/1623.

[3] Recommendations 4 to 7 and 11.  It was also recommended that tribunals should have power to hear unlawful deduction of wages claims that relate to unquantified sums (Recommendation 13).

[4] Abellio at [27]

[5] Abellio [28(4)]

[6] Sixteenth Ocean GmbH & Co KG v Societe Generale [2018] EWHC 1731 (Comm).

[7] See also eg Barton v Gwyn-Jones and others [202] 2 All ER (Comm) 652 where Davis LJ argument that the correct analysis in that case should have been on the basis of an implied terms rather than an unjust enrichment claim.  The basis of valuation would then be different as in a contractual claim the focus is on intention of the parties objectively ascertained rather than the value of the benefit conferred (see per Asplin LJ in Barton at [42, 52], although in Barton it led to the same conclusion