In a recent Isle of Man appeal case, the Court had to consider as to whether an Employment Tribunal could insert a term into an employment contract, different to the term agreed and performed between the parties. The Appeal centred around the salary of the Tribunal Claimant Mrs Simpson throughout her employment with the Defendants Mr & Mrs Pearson. The parties had at the outset agreed a fixed monthly salary and the same was paid, without dispute, throughout the relationship. As Mrs Simpson was a national from outside the UK she required a visa and work permit in order for her to commence employment in the Island. The visa and work permit forms detailed her salary as being different to the agreed terms between the parties, and different on each form.

Mrs Simpson argued before the Tribunal that she was in fact entitled to the statutory Manx minimum wage throughout her employment, however the Tribunal rejected such argument as they considered she was treated as a member of the family and was therefore exempt from the minimum wage pursuant to Regulation 2(2)a) of the Minimum Wage Regulations 2001 ("the Regulations") of Tynwald.

The Tribunal considered the visa and work permit forms in deciding the contractual salary of Mrs Simpson as part of her claim and also heard evidence from all parties confirming the agreed amount to be paid. In its decision the Tribunal did not accept the salary was that as agreed between the parties and actually paid, but that Mrs Simpson was entitled to an amount specified on the visa forms. Mr & Mrs Pearson appealed such decision to the High Court on the grounds that the Tribunal erred in law by substituting an agreed contractual term for something different going further than they were required in light of the parties agreement on salary.

The Court allowed the Appeal and found that the correct salary was that as agreed between the parties and paid throughout the relationship and not as determined by the Tribunal. The Court considered that the decision of the Tribunal was one that no reasonable tribunal, properly directed, could have reached.

A Cross Appeal from Mrs Simpson, in respect of which Judgment was given on 19 March 2010, was brought on several grounds, however the main point was that Mrs Simpson was entitled to the minimum wage throughout her employment. The point was raised before the Tribunal and it was argued that the Regulations were ultra vires the Minimum Wage Act 2001. The Tribunal rejected the argument and further stated that they did not consider that they had the jurisdiction to determine the vires of the Regulations.

The Court in considering the Cross Appeal, which was defended by Mr & Mrs Pearson and also the Department of Trade and Industry, determined that whilst the Employment Tribunal was constrained in its powers and therefore could not make a declaration to the effect that the Regulations were ultra vires it could consider the vires of any secondary legislation, and particularly the Regulations in considering the case before it.

The Court following argument did not conclude that the Regulations were ultra vires and found that Mrs Simpson, as a matter of fact was treated as a member of the family pursuant to the test set out in the Regulations and therefore was not entitled to the minimum wage. Further it considered that the Regulations were approved by Tynwald and had been debated before being passed. The exclusions to the minimum wage did not discriminate and focused around tests that are non specific to particular sectors or areas of employment.

The Cross Appeal in itself was not wholly unsuccessful as one ground raised was in respect of the unlawful deduction of the cost of a flight ticket from Mrs Simpson's wage. At first instance the Tribunal had considered that this was not an unlawful deduction as although Mrs Simpson had not given written consent to the deduction (as she was illiterate) she had agreed to the same. The Cross Appeal was argued on the ground that the Tribunal erred in finding that the deduction was not unlawful pursuant to Section 13(1)b) of the Employment Act 1991 of Tynwald, which provides for deductions to be made in writing. Section 13(1)a) provides for such deduction to be made by consent of the parties without specifically requiring such consent to be in writing.

The Court whilst accepting that a term of a contract was not required to be made in writing and accepting further that Mrs Simpson had consented to the deduction, found that the provisions of the legislation and particularly Section 21(2)a) of the Employment Act 1991 (which specifies that before any deduction is made it must be notified in writing) had not been satisfied and accordingly the Tribunal erred in law in deciding that the deduction was properly authorised.

Contact for this article:

Victoria L Oates Associate vlo@mplegal.im

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