If a sixth form teacher goes on strike, how much of their pay can their employer withhold?
On 14 May 2015, the Court of Appeal handed down judgment in the case of Hartley & Others v King Edward VI College  EWCA Civ 455. The Court considered the amount that an employer is entitled to withhold from the salary of sixth form college teachers in respect of a day's strike action and the effect of the Apportionment Act 1870 ("the Act") on contracts of employment. The Court determined that the amount which the employer could withhold was 1/260 of the teacher’s annual salary. Whilst the case is of particular interest to the education sector, the decision is of potential relevance to all employment contracts where the contract does not explicitly provide for the amount that may be withheld for unauthorised absence.
Jane McNeill QC and Ben Cooper, both of Old Square Chambers, were instructed by Blake Morgan LLP (Susie Dryden the lead partner at Blake Morgan) to represent King Edward VI College ("the College") at the hearing in the Court of Appeal.
The parties were in agreement that a proportion of a sixth form teacher's pay could be withheld for each day of strike action in which s/he participated; the dispute was about the amount that could be deducted. The dispute arose because the teachers' employment contracts (which all incorporated the national collective agreement for sixth form teachers known as "the Red Book") do not explicitly set out the amount that could be withheld. The appeal was from a judgment entered into in the College's favour by consent in the County Court. The parties had agreed that the County Court was bound by the judgment of Jay J in Amey v Peter Symonds College  EWHC 2788; IRLR 206, (a case on very similar facts in which Blake Morgan and Ben Cooper again represented the Defendant college), in which it was held that 1/260 was the appropriate amount to be deducted for each strike day. The Appellant contended that the correct deduction was 1/365.
The amount in dispute in this particular case was small, but for the sector as a whole a finding in the teachers' favour would cost around £300,000 per strike day. It should be noted that this decision does not affect primary or secondary school teachers, whose contracts expressly provide for a deduction of 1/365 of annual salary in case of absence due to participation in a strike (under a different collective agreement known as the "Burgundy Book"). The Burgundy Book applies to all teachers in Local Authority maintained schools. Academies, on conversion, have the option to adopt the Burgundy Book but could, as Sixth Form Colleges’ did in 1993 on Incorporation, adopt an amended set of terms and conditions that removes the clause and is silent on strike pay. Sixth Form Colleges renegotiated their terms and conditions under the auspices of the Sixth Form Colleges Association, when Sixth Form Colleges were taken out of Local Authority control in 1993. Their new collective agreement is enshrined in the Red Book and Academies now would have the option of considering a new collective agreement on similar terms.
In delivering his leading judgment, Elias LJ dismissed the appeal. Permission to appeal has been refused by the Court of Appeal. It remains to be seen whether the Appellants will make a further application for permission to the Supreme Court.
Messrs Hartley, Monk and Panko ("the Teachers") are all sixth form college teachers employed by the College.
On 30 November 2011, the Teachers took part in a one-day national strike called by their Union. The College deducted from their monthly salary what it considered to be the appropriate amount in respect of the service which the Teachers had failed to provide that day – namely, 1/260 of their annual salary. That amount represented working days and days of paid holiday, but not weekends. The Teachers contended that too much had been deducted and that the correct deduction was 1/365, based on calendar days.
The Teachers' contracts of employment incorporated the terms of the Red Book.
The Red Book draws a distinction between directed and undirected time. Directed time is the time when teachers are required to be at school carrying out directed activities (principally teaching) and amounts to 1265 hours a year spread over 195 days (39 weeks x 5 days a week).
The pay of part-time college teachers is calculated by reference to directed time: if they are required to work half of the amount of directed time (632.5 hours a year), they are paid 50% of the full time salary. Further if college teachers are required to work additional days they are paid at a daily rate of 1/195 of their annual pay.
In addition to the tasks performed during directed time, teachers have to work in their own time in order to undertake a number of tasks, such as preparing lessons, marking papers and writing reports. Time spent on this work undertaken outside of directed time is termed 'undirected time'.
Neither the Teachers' employment contracts nor the Red Book specify when such undirected time should take place or in what amount. The relevant rule in the Red Book only states that teachers should work for "such reasonable additional hours as may be needed to discharge their duties effectively". Further, the Red Book does not explicitly detail how deductions from pay should be calculated in respect of any unauthorised absences.
The statutory provisions
Section 2 of the Act provides that:
All rents, annuities, dividends, and other periodical payments in the nature of income… shall, like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly.
Section 5 defines annuities and dividends:
The word “annuities” includes salaries and pensions.
The word “dividends” includes (besides dividends strictly so called) all payments made by the name of dividend, bonus, or otherwise out of the revenue of trading or other public companies, divisible between all or any of the members of such respective companies, whether such payments shall be usually made or declared at any fixed times or otherwise; and all such divisible revenue shall, for the purposes of this Act, be deemed to have accrued by equal daily increment during and within the period for or in respect of which the payment of the same revenue shall be declared or expressed to be made...
Section 7 provides for contracting out from the Act:
The provisions of this Act shall not extend to any case in which it is or shall be expressly stipulated that no apportionment shall take place.
Lord Justice Elias handed down the leading judgment in this matter, with which both Lord Justice Tomlinson and Lord Justice Sales agreed.
In analysing the true effect of the Act, Lord Justice Elias posed four questions:
1. Does the Act apply to employment relationships?
Elias LJ held that the Act applies to employment relationships where the common law principles pertaining to entire contracts and substantial performance would otherwise operate. His finding was in accordance with Item Software (UK) Ltd v Fassihi  EWCA Civ 1244, ACR 450. The Act does not apply to employment which is infinitely divisible, such as where pay is fixed at an hourly rate. There is an interesting suggestion in paragraph 47 of the judgment that the common law rules applicable to entire contracts may be susceptible to development in light of modern employment conditions and practice. This may indicate an area for possible future development of the law in this area, as it is probably true to say that under modern employment conditions neither employers nor employees generally operate on the basis that a salary is paid monthly or annually in return for substantial performance, but rather on the basis that both pay and work are linked and divisible. Moreover, modern employment rights legislation, in particular in relation to working time and paid annual leave, is also constructed on an implicit assumption of divisibility. If the common law rules regarding entire contracts were to be revisited in future, that might bring many more employment contracts into the category of those which are divisible and so avoid the application of the Act at all. But for present purposes, Elias LJ makes clear that the Act does apply to employment contracts where the rules relating to entire contracts would otherwise apply.
2. Does section 2 of the Act import the principle of equal daily accrual?
The Teachers contended that Section 2 of the Act applied so that their pay not only accrued daily but also at an even rate ("the principle of daily accrual"). Elias LJ was of the view that there is no reason to assume that the effect of Section 2 was to require that payment should accrue by regular and equal increments. To construe Section 2 as having that effect would create unfairness and the rigid application of a daily rate of 1/365 would create injustices.
In support of this position, Elias LJ highlighted the reference to "equal daily increment" in the definition of "dividend" in Section 5: if Section 2 of the Act automatically envisages that payments caught by the Act would be deemed to accrue by equal daily increments, these words would not have been required. Elias LJ also held that on its literal meaning Section 7 permits contracting out of apportionment but not contracting out of equal daily accrual. He concluded that it was more probable that this was because Section 2 did not stipulate equal daily accrual than because Parliament had intended the principle of equal daily accrual to be mandatory whenever the Act applied.
3. If Section 2 does import the principle of equal daily accrual, can this principle be excluded by Section 7 of the Act?
Elias LJ held that, if contrary to his view, the principle of equal daily accrual is implicit in Section 2, Parliament must surely have intended to allow contracting out from that principle, although he said that he could find no satisfactory way of doing so. Despite the difficulties he perceived in achieving this construction, Elias LJ nevertheless went on to conclude that the appeal failed not only on the ground that Section 2 does not imply equal daily accrual but also on the ground that if it did, that principle is excluded in this case pursuant to Section 7. It is therefore clear that he held that Section 7 could be construed so as to achieve that result and, although he did not spell out how that result was to be achieved, one relatively straightforward route would be simply to construe the reference in Section 7 to a provision stipulating “no apportionment” as being a reference to “no apportionment under Section 2”. Thus if, contrary to Elias LJ’s view, Section 2 does import the principle of equal daily accrual, a provision which excludes that principle would be effective pursuant to Section 7 so construed.
4. What constitutes an "express stipulation" within the meaning of Section 7 of the Act?
Elias LJ held that if, contrary to his primary analysis, Section 2 requires pay to accrue at an equal daily rate, the requirement of Section 7 for an "express stipulation” to exclude the application of that principle would be satisfied if there were a clear intention derived from the contract that the principle should not apply, even if the contract did not resolve precisely how pay is related to work performed.
Accordingly, the starting point is to look at the terms of the contract, and if those terms, by necessary implication, establish a relationship between work, time and pay which is inconsistent with equal accrual over each and every calendar day, Section 2 of the Act would be overridden by Section 7. In construing the contract in this case, Elias LJ accepted the Respondent's interpretation of the contract. There is, in the Red Book, a close link between directed hours and pay. Jay J was therefore right in Amey in saying that undirected work is ancillary to the directed work. Elias LJ summarised the point as follows:
"There is little point, and no value to the employer, in a teacher preparing for lessons which are not given."
As such, the terms of the Teachers' contracts cannot be reconciled with the principle of equal daily accrual. Pay is tied to the measurable part of a teacher's work, namely directed time. Elias LJ found further support for this conclusion in the manner in which part time teachers are paid – their salary is in proportion to the proportion of the full time directed hours they perform.
Accordingly, the Teachers' appeal failed on two alternative grounds: either on the basis, the principle of equal daily accrual is not implied into Section 2 of the Act; or in any event, that any such principle is excluded by the Teachers’ contracts pursuant to Section 7.
The Court of Appeal's judgment will be welcome news to Sixth Form Colleges and confirms the position taken by such institutions to date regarding the amount of teachers' pay that institutions have been withholding when they go on strike.
It also provides clarification in respect of the interpretation of the Act generally going forward which may be of assistance in other situations where the contract does not explicitly provide for the amount that may be withheld for periods of unauthorised absence.