Case No: 3401288/2016, 3347385 & 3347386/2016, 3347375/2016, 3347497 & 3347498/2016, 3323817/2017, 3347366/2016

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JB1

EMPLOYMENT TRIBUNALS

Claimant: Ms P Jenkins & Others Respondent: Tesco Stores Limited Heard at: London Central On: 13,14,15,16,17,20,21 November 2017; 22-24 November 2017 & 17 January 2018 (In Chambers) Before: Employment Judge Pearl Members: Ms C McLellan Ms L Moreton Representation Claimant: Mr A Ohringer, Counsel Respondent: Mr T Linden, QC

JUDGMENT The unanimous Judgment of the Tribunal is as follows:-

1 The claims for unauthorised deductions from wages fail.

2 The claims of indirect age discrimination fail.

3 Other issues the tribunal has been asked to determine are resolved, as set out in paragraphs 49 to 86 of the Reasons.

RESERVED REASONS

1. These are test cases that, with one exception, Ms Element, are brought by groups of employees of Tesco. Other than those Claimants in the group led by Mr Stokes, they are all hourly paid employees. The claims all arise from the pay settlement that was negotiated between Tesco and the recognised union, USDAW, in 2015 – 2016, effective from 3 July 2016. Premium rates of pay for Sunday and Bank Holiday working were reduced, in the case of long standing employees only, from double time to time and a half. The claims that are made are for unauthorised deductions from wages and indirect age discrimination.

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2. Various lines of defence are asserted by the Respondent, but the principal contention concerning the hourly paid employees is that these changes resulted from a lawful collective bargaining process and that the agreements and arrangements for the collective bargaining were properly incorporated into the contracts of employment of all hourly paid employees. 3. There is an agreed ‘composite’ list of issues. This is attached as Annex A. It should be noted that the square brackets indicate issues that the Respondent contends are either misconceived and/or objects to being determined and/or in respect of which it reserves its position. In resolving these issues we have heard evidence from the Claimants Ms Griffiths, Mrs Ponto-Farr, Mr French, Mr Stokes, Ms Smith, Ms Jenkins and Ms Element; and from Mr Baillie and Mr Hunt. Ms Scriven’s witness statement was admitted but she did not come to give evidence. We have studied bundles of documents extending to something over 3,000 pages in six volumes. Facts 4. Almost the entirety of the necessary factual matrix is agreed. That has not removed the need for detailed cross examination of the witnesses, but we do not intend setting out the facts in exhaustive detail. What follow are the necessary findings in relation to the issues. 5. At this point we only deal with the hourly paid Claimants and we will turn to the managers in the Stokes group in due course. All these Claimants commenced employment before 4 July 1999. That is a relevant date because from that date new employees joining Tesco would be paid time and a half for hours worked on a Sunday (whether contracted or overtime hours.) The hourly paid Claimants all began before this date and therefore continued to be paid at double time for their Sunday working. The same general point applies to work (which would always be voluntary) carried out on a Bank Holiday. Here, the operative date is 4 September 2000, after which new employees were paid time and a half. For employees employed before that date, they continued to be paid double time. 6. At 1:270 is a standard terms and conditions of employment document which it is agreed applied in the case of hourly paid employees at the time of the change to premium rates in 2016. There are earlier versions in the bundles. The evidence is that employees would, from time to time, be given new contracts to sign as changes occurred in their employment, for example a move of department or a change of role. We will refer to any changes in the relevant wording below, but at this point we start with the later terms and conditions at 1: 270. 7. The document begins by stating: “This statement sets out the main particulars of the terms and conditions of employment …” It is not, therefore, intended to be an exhaustive statement of all of the terms. This is also picked up in the caption that employees signed, which referred to their acceptance of the terms and conditions “as outlined.” It is clearly intended to comply with section 1 of the 1996 Act.

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8. Dealing with such matters as date of employment, job title, location and hours, the document has a heading “pay” and it continues: “Your total rate of pay will be £x per week. Details of the elements making up your total pay can be found in your initial offer letter and on your itemised payslip.” Further on there is a heading and text as follows:- “COLLECTIVE PARTNERSHIP AGREEMENT Your terms and conditions include those contained in the Partnership Agreements, Retail Division, Parts One and Two negotiated between Tesco Stores Limited and USDAW.” 9. In earlier versions, and the text seems to have disappeared in 2014, there is an additional sentence that reads: “These apply whether or not you are a member of USDAW.” 10. There is then a heading as follows:- “CHANGES TO YOUR TERMS AND CONDITIONS OF EMPLOYMENT Any changes to the details provided in this document will be communicated to you in writing, within one month after the change. If the Company needs to change your contract of employment, we will always consult with you for a minimum of four weeks and give you notice of the change(s) taking place.” 11. The final paragraph states:- “SUMMARY This statement, together with your Offer Letter, Staff Handbook and any other document referred to, forms part of your terms and conditions of employment. These terms and conditions replace those in any previous documents you may have received.” 12. Before 1998, the Collective Partnership Agreement paragraph was in very similar terms but, referred to Joint Agreements Retail Division Parts One and Two. We find that when the terms and conditions were updated the reference to Parts One and Two was retained in error. 13. We next note that in standard letters of offer of employment (such as at 6:2300 to Mr French in September 1994) premiums paid on Saturdays and Sundays and shift premiums are said in a footnote to be payments “made according to hours worked and the eligibility rules.” 14. About 60% of the 250,000-odd employees at Tesco are members of USDAW, the recognised Union. There are about 5,000 USDAW representatives or shop stewards and a typical large store may have in the order of 4 of them. Going back in time, this had been a closed shop employer. In any event, the evidence is that collective bargaining with USDAW goes back very many years. An example of an old collective agreement dating back to 1990 is at page 1302D(a) and this referred to USDAW as being the sole representative and negotiating union for all grades of staff up to and including the level of

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departmental heads. Even at that point it was recited that the company and union relationship had developed over many years and had resulted in full recognition, procedural and negotiating arrangements. 15. Up to 1998, the pay negotiations would produce an agreed settlement with the union and that was then put to the members in a ballot. After 1998 this changed (and the change followed a ballot of members.) The new structure was as follows. All employees, whether or not Union members, elect the representatives to sit on the Store Forum. That forum will elect representatives to attend the Store Director Forum. This is a regional structure. That body elects members to sit on the National Forum, which has about 50 members. There is no reason why a non-union member cannot sit on the National Forum. However, there is a 12-strong Pay Review Team on the National Forum and this can only comprise USDAW members. It is this body that negotiates pursuant to the collective agreement. 16. The Partnership Agreement is in eight sections and the last of them deals with pay review as well as other matters relating to pay, including the current premiums paid for Sunday and Bank Holiday working (see page 1:382). At 1:388 is stated the following: “The employment package is reviewed annually and changed in agreement with USDAW. Therefore, the 12 National Forum Reps that sit on the Pay Review Team will be USDAW members. The Pay Review Team takes accountability for reaching agreement through a process of negotiation with Tesco and continual consultation with their colleagues on the National Forum. The decision-making process involves all the National Forum Reps working together on behalf of store colleagues. The proposals will be voted on by USDAW members on the National Forum and if accepted by a majority of them, these proposals will form the final agreement.” 17. The Staff Handbook, which was referred to in the standard terms and conditions above, is at 1:271 and following. This provides under the heading of Pay Review: “Our pay rates are subject to review annually through consultation with USDAW for all colleagues, Team Leaders, and Section Managers.” 18. The evidence about the pay negotiation and agreement process comes principally from Mr Baillie, Head of Reward – Centre of Expertise. There is no challenge to his evidence about the machinery of pay bargaining and this is set out between paragraphs 20-47 in considerable detail. In November each year the Union sends a pay claim to the Reward Team of Tesco and this is based on feedback on the previous year’s Pay Review. USDAW present their written pay claim at a proposal meeting. The Reward Team then goes away to analyse matters and, in due course, Tesco’s proposals emerge. These are presented in February of the next year. USDAW then takes the matter back to the National Forum and a Joint Agenda Meeting is arranged in March, with pay negotiations taking place during April over a period of 2 weeks, typically. In due course, assuming successful negotiations, a Joint Statement is produced. The USDAW members on the National Forum then vote on it and if it is passed “the deal becomes binding on all colleagues covered by the pay review process.” (If it is rejected the negotiations continue).

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19. There are then provisions for the communication of the outcome to colleagues and we are not concerned with any of the detail. This is the collective bargaining process for the determination of annual pay that is challenged by all the Claimants. One of the points of challenge is that the process did not, historically, implement adverse changes to the pay of employees. This is not wholly correct. There were some changes that took place some years ago that were adverse but, more relevant for these purposes, are the changes that were agreed in 2013 when a bonus structure for employees in Express stores was discontinued. Under that scheme, the bonuses typically amounted to about 10% of the pay of employees and we agree that they were, therefore, relatively valuable. Tesco took the view that the scheme had become unworkable or impracticable and the relevant employees were moved to the same rates of pay as employees in all other Tesco Store formats: see page 3:1420. As this would result in Express employees losing some part of their overall pay, in many cases, a transitional or ‘cushion’ arrangement was put into place so that 18 months worth of loss was paid by way of a lump sum. The calculation was carried out by looking back at the earnings the employees had received over the preceding 12 months. 20. The background to the 2015/2016 pay negotiations is set out by Mr Ballie at paragraphs 74-108. Alighting upon some of the salient points, we note that the business had encountered difficulties, at least by 2012 when the first profit warning was announced. Things became worse thereafter and there was an accounting scandal in 2013/2014. In September 2014, Mr Lewis came in as the new Chief Executive with a mandate to turn the business around and this was shortly after Mr Stewart had come in from Marks & Spencer as CFO. 21. In terms of reward, Mr Baillie recites, and this is not challenged, that Tesco had always been the market leader on base hourly rates compared with other supermarkets. This was a key corporate aim. It was the first supermarket to pay £7 an hour, for example. By April 2013 the Reward Team had set out four ‘Reward Principles’ which were summarised in the formula “simple, fair, competitive and sustainable.” It was expanded upon in the annual report and financial statement for 2013 at 5:2158.

22. We find that Mr Baillie is accurate in setting out in paragraph 77 of his statement that Tesco’s strategy developed over time. It moved towards one of ‘total reward’ and this was in part a response to the way in which the discount supermarkets Aldi and Lidl had increased their base hourly rates. These were higher than Tesco’s. Accordingly, the strategy of being the market leader was under threat. Given the crisis in the business, Mr Baillie states that it became clear to the Reward Team that it would not be possible to continue to be market leaders on hourly pay and the strategy that evolved was to ensure that the overall pay package should be in the upper quartile for the market. 23. Many of these factors were later reflected in the USDAW briefing for its representatives which was prepared in December 2015. This provided (2:1042) that the negotiations were being conducted against a backdrop of “low levels of inflation, food deflation, high levels of company debt, the company’s credit rating being at junk status, falling profit, falling market share and cut throat pricing and competition.” It is a detailed brief running to 31 pages and records among many other things that the proposed settlement kept Tesco’s hourly rates of pay ahead

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of many of their competitors: see page 1049. It is also noted that when the negotiations had begun in July 2015, the average of three analyses of median settlements in the sector for the 3 months up to that date was 2.1%, ie, less than the 3.1% that we will turn to presently. 24. This briefing also dealt with the premium payments that are the subject of these claims. At page 1062 it is stated that: “In view of the discussions around the transformation of pay and benefits, and the considerable amount of payroll that is invested in premiums, the Pay Team had to consider amending the current and historical premiums – but did so only on the basis that any savings were re-invested into the hourly rate of pay for all staff.” (Emphasis in original.) The text then goes on to note that the Pay Team itself and many members of the National Forum were impacted by the changes and that eight of the twelve members on the team currently enjoyed double time premiums. “However, they accepted that this was the best deal that could be negotiated for the majority of the staff and they also believed that it was the best way to secure a financial cushion to help staff make the transition. The National Forum came to the same conclusion.” (Emphasis in original.) This was the rationale for agreeing a reduction in the Sunday and Bank Holiday premiums from double time to time and a half for those employees who were currently on double time; and for agreeing the transitional payments. 25. We also note that the Union at this point in the document recorded that 86% of current staff were paid time and a half for Sunday working and that 84% current staff were paid at the same rate for Bank Holidays. It was, therefore, their assessment that about 234,000 staff would see their pay improve as a result of the settlement but that 36,000 would potentially be affected by the changes to premiums. There would be a net financial loss for a minority of staff. We will come to some further statistics in due course. 26. A further point to be added at this stage is that the previous year’s pay negotiations had begun in November 2014, but had not reached any agreement by the summer of 2015. There is no need to recite the detailed evidence, but we note the chronology set out by Mr Baillie between paragraphs 111 and 220. Dealing with the period around the summer of 2015, it was clear by mid-August that agreement could not be reached. The parties had been negotiating among other things about the premium rates, or legacy rates as they are sometimes called. No changes would be agreed by USDAW unless something was “put on the table.” Their stance was that “we had to agree a base rate increase for the following year and effectively begin negotiations on the basis of a 2 year deal.” (Paragraph 186 of Mr Baillie’s statement.) This was an important development in the negotiations and it was decided by Tesco that the talks had to be adjourned, not least because it was necessary to put to the Leadership Team proposals that might be taken forward in the next pay round. 27. After the half yearly results were announced, the decision emerged from the Respondent that the negotiations could proceed on the basis of (a) equalising premium rates across the workforce, which we understand would release sufficient money for a 1.6% overall pay increase, and (b) an additional 1.5% on top. This alone provided an extra 46 million pounds. The Respondent’s view was that this was as far as it could go and there was absolutely nothing else that could be offered.

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28. The negotiations resumed in early November and the evidence suggests that the extra 1.5% increase unlocked the impasse. Some consideration was given to removing premium rates entirely but this was rejected. In any event, by 5 November 2015, the Union made the proposal outlined by Mr Baillie at paragraph 215 of his witness statement and this included time and a half on Sundays and time and a half on all Bank Holidays. There was to be 5 months notice before the changes were implemented, as well as a transitional or cushion payment of 18 months financial support for the affected employees. This was calculated on the basis of earnings over the previous 12 months. In other words, the proposals that formed the basis of the ultimate deal originated in part from the Union side. They were eventually signed off and the proposals were taken to the National Forum for the required ballot on 2 December 2015. The documents show that there was “overwhelming” acceptance of the proposal. 29. We should record at this point that neither in the narrative that we have summarised nor in the detailed evidence is there any ground for impugning the agreed pay settlement that emerged from these negotiations. All due procedures were complied with and, subject to the Claimants’ various arguments that the settlement is of no legal effect in their cases, it would not otherwise be open to challenge. 30. We now turn to the individual Claimants and would preface our findings by noting that in all cases there were some significant responses given in cross examination that either qualified or, in some cases, contradicted what is stated in the witness statements. Ms Griffiths worked from 1985 to 1995 and she rejoined Tesco towards the end of 1996. Since 2012 she has worked 9.75 hours on Sundays. She is aged 54 and in her witness statement she estimates that the pay settlement of 2016 left her about £30 a week worse off, net. She accepted that she received a new Handbook in 2010 and also that everybody, she believed, received a Handbook in 2014. She understood the basis of the pay deal that had been agreed in 2016 and she also understood that there would be a new approach to holiday pay. This is a reference to the Respondent accepting as part of the deal that it would calculate holiday pay on the basis of the previous 12 weeks, taking into account all supplements and premium payments in the calculation. This meant that holiday pay should for many employees have been higher than it would have been in the previous year. 31. Ms Griffiths accepted that the transitional payment made up for 18 months of loss and in her case it amounted to £447. Ms Griffiths also received a turnaround bonus, as it was called, of £700 in June 2016. This was paid to employees to recognise recent improvements in the business. In common with other Claimants, she applied for a second privilege card which was something that a household member could use and which was part of the pay agreement. She did raise a grievance that complained about the reduction in premium rate for Sunday working, the impact on her pension contributions and also said that there was discrimination against people who started before 5 July 1999. She said that people over 32 were affected and that these tended to be either people with young families or more mature colleagues who were approaching retirement. The response of 26 February 2016 from Mr Richardson, People Manager, was that he could not change the decision and would not hold a full hearing.

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32 She did eventually sign a new contract on 11 January 2017 and we accept her evidence that this was only after she had earlier refused to do so. Her case is that she only signed because she was told that if she did not, she would be dismissed. In evidence she was less confident that she had been told this by the store Manager and she left open the possibility that it may have been a union representative or other colleague who had told her this. The evidence is not so clear as to support a finding that the Claimant only signed the contract because of this threat. If, for example, the threat had come via a union representative, it may well have referred to the hypothetical possibility of being dismissed and offered fresh terms of employment, but this is a matter of speculation. In Ms Griffiths’s case the contract she signed has written on it as an annotation: “not to be trained on check outs”. She told us that this referred to a concern that she had at the time, relating to some loss of hearing, that she might have to undergo new training on the tills. It is therefore clear that some incentive to sign the contract was being offered by way of an apparent concession by the manager that she would not have to undergo such training. This further dilutes the generalised allegation that she signed because of the threat of dismissal. She was signing over 10 months after the conclusion of the grievance and at a point when she had been working for 6 months under the 2016 agreement. 33 Mrs Ponto-Farr joined Tesco in 1988 and in about 1998 she moved to the Milford Haven Store. She is 48 years old. She remains a member of USDAW. She received the turnaround bonus of £429 and the transition payment of £1,396. She raised no grievance. 34 She accepted that after the pay settlement she volunteered to work on Bank Holidays and did so on the basis of the new rates, i.e. time and a half. She also signed a new contract on 14 July 2016 but endorsed it as follows: “not happy with my monthly pay cut, nearly £80 a month less. Only signing as I have no option …”. She told us that she had been told by a union representative that if she did not sign she would be dismissed. At a later point, in about October 2016, she then signed what is known as a flexi contract, which contained no endorsement of reservation or protest. The flexi contract enabled her to increase her earnings, as such an employee would be given preference for overtime. She understood that she would be paid on the new rates and she worked for over a year on this contract of employment. She maintained, with some justification, that there was still a detriment to her because she was working contracted hours rather than voluntary overtime in order to make up her pay. She says that she signed under duress. 35 Mr French started working for Tesco in September 1994 and has never been a member of USDAW. He knew that there was an agreement about pay reached between the Union and his employer on an annual basis. He discovered about the pay settlement in 2016 via an employees’ blog and we note that other employees discovered it through articles in the press, following a leak. He did a large amount of voluntary overtime on Sundays and his transition payment was £1,436. He received a turnaround bonus of £909. His manager offered him extra work to make up some of the loss and he accepted, although he regarded this as utterly unfair. He raised no grievance and he signed a new contract of employment on 24 July 2016. He considered that the transition payment was in the region of £500 too low but he has not taken that matter further and it is no

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part of this claim. He did accept in cross examination that if a manager had a choice available, he or she might want have wanted to use a person for overtime on time and a half rather than somebody on double time. He says that he had experienced this and that he had been passed over for overtime and had accordingly lost double time work on a Sunday. (There is some corroboration of this in the blog evidence we were shown.) In July 2017 he resigned from the Respondent. 36 Ms Smith is aged 56 and began with Tesco in 1997. She has always worked on Sundays. She resigned her union membership after this pay settlement. Although she stated in her witness statement that she was not aware of the Partnership Agreement until 2016, she told us in evidence that the Partnership Agreement was talked about. It was known that USDAW would collectively negotiate over pay rises and she was quite happy about that. She also said that she had no reason to query the Partnership Agreement and that she knew that it was a collective bargaining agreement, i.e. a partnership between Tesco and USDAW. Further, she had no reason to look at its terms and if she had needed to she could have asked HR. 37 She received a turnaround bonus of £520 and a transition payment of £2,526. Her witness statement says that her pay fell dramatically after July 2016 and that she has to work extra hours of a night. The position is a little more nuanced and was only fully explained in cross examination. She stopped doing the overtime after the pay review and the reason was that she would lose too much in tax, taking into account the transitional payment. She accepted that there was no financial loss until 2018. She defends the way her witness statement was constructed by saying that her focus was on the longer term, i.e. after the end of 2017. 38 She raised a grievance to USDAW and after she received the response, with which she was unhappy, she sent a grievance to Tesco. The Union in response to the grievance said on 5 April 2016 that the deal had been collectively agreed and that the National Forum had overwhelmingly voted to accept it. The National Forum was the democratically elected body to represent staff concerning pay and terms and conditions of employment. It was also said that the pay review process was the same as it had been in the previous 16 years. The response from Tesco was dealt with eventually by Ms Parry, Group People Manager. She held two meetings with Ms Smith. Before these the store Manager told Ms Smith that she could not stop the deal and nothing was going to change. The formal response to the grievance came on 21 July 2016: pages 3:1243-1244. Ms Smith signed a fresh contract on 10 January 2017. 39 Ms Jenkins is aged 57 and joined Tesco in 1991. By the time of the 2016 pay agreement her 24 contracted hours each week included 12 hours worked on Sunday. She was an USDAW member. As with all the other hourly paid employees who gave evidence, she accepted that she had received a standard offer letter and also a standard contract of employment. The latter was periodically renewed. She also received a handbook although she could not remember receiving an updated version in 2014.

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40 She received a turnaround bonus of £843 and a transition payment of £4,212. She accepted that she knew that the Respondent and the union collectively reviewed pay each year. There is no doubt that Ms Jenkins was upset and angry when she heard of the changes in 2016 and, in this respect, her evidence mirrors that of the other claimants. Some of the reaction described in her witness statement was, she accepted, over-stated. Nevertheless she was undoubtedly aggrieved and this is demonstrated by her evidence, accepted by the Respondent, that after she signed a new contract she returned to the office to tippex out her signature, thereby removing her agreement. This probably happened in mid-July 2016, after she had raised a grievance. That grievance alleged indirect discrimination among other matters. The response from the store manager was in broadly the same terms that other employees were given and the last paragraph reads as follows. “… the changes have been changed through collective agreement. Individual consultation and agreement is not required, and this is set out in your terms and conditions of employment. Therefore, there are no grounds for a grievance in respect of these changes and any grievances regarding the change will not be supported.” On 18 November 2016 she signed a new contract because she needed to increase her hours in order to preserve her income and the increase was from 24 to 30.5 hours per week. 41 Ms Element is not being treated as a lead Claimant and Mr Ohringer accepts this. Nevertheless, it has been agreed that her case is heard and, in giving her evidence, it was further agreed that paragraphs 48 to 54 inclusive of her witness statement would be deleted. She is aged 56 and joined Tesco in 1994. She was a member the union until the announcement of the pay agreement 2016. She qualified her witness statement when she told us that she did not understand that pay could be cut by virtue of the Partnership Agreement. We do not understand her to be saying that she did not realise there was a well-established system of collective bargaining in place. 42 There is no doubt that she was concerned about how these changes to pay rates would affect her personal position. She is disabled and receives state benefits including Working Tax Credits. In June 2016 she entered into correspondence with the union and her main concern at this point was that she would lose some element of state benefit or tax credit as a consequence of receiving the transition payment as a lump sum (and that payment in her case was £3,971.) The lump sum would also potentially trigger repayments of her student loan. 43 There was intricate evidence concerning the sequence of events that led to Ms Element signing a new contract. She first signed on a date between 5 and 8 July 2016 and after Ms Taylor, the People Manager in the store, had intimated to her that if she did not sign she would be sacked. She annotated the contract to the effect, inter alia, that it was being signed under protest; that she had not agreed the collective partnership agreement; and that if she did not sign she had been told that she will be dismissed. She said of the Partnership Agreement that it had never been made explicit (these being her handwritten words on the contract) and she also said that it "was not made explicit in my original contract - 1994.” However, it was drawn to her attention that she had signed previous contracts with a similar reference to the Partnership Agreement. It was this that led to her in due course to sign the contract later on 15 July, although she had

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already raised a grievance on the 5th. This grievance focused on the consequences of receiving a lump sum and also stated that she did not believe that she had seen the clause relating to the Partnership Agreement before. She very fairly accepted in evidence that the reference to the Partnership Agreement had appeared in earlier contracts back to 2011, at least. She accepted that there was such a Partnership Agreement that had the capacity to decrease her pay; and she reiterated that her concern was with the consequences of the transitional payment. She signed a new contract without any manuscript annotations or reservations on 19 August 2016. 44 We turn now to the one lead Claimant who is representative of store managers, Mr Stokes. Managers are at a level within Tesco that is beyond and outside the Partnership Agreement, therefore none of the arguments concerning collective bargaining apply to this group of claimants. They were paid salaries and were subject to performance-related pay reviews. In the case of Mr Stokes (and most managers) Sunday and Bank Holiday working was voluntary and attracted the premium pay rate. It is agreed that his pay was unilaterally varied and the argument centres on whether or not he accepted this by conduct. It was always the joint intention of Tesco and USDAW that managers’ pay would be varied in line with the changes made for the hourly paid employees. Managers were notified by letter of 3 July 2016 of the changes. He joined Tesco in 1993 and he is now aged 44. In due course, in June 2017, he accepted voluntary redundancy. He accepted that he knew that there was a collective agreement and he also says that he realised that Staff Handbooks were key documents. 45 Mr Stokes’s oral evidence was to some extent at variance with his witness statement, which appears to the tribunal to have been written in terms of some exaggeration. He accepted that he did realise that he and other managers had since 2007 been assessed annually on their performance. Although there was confusion in what he told us, he seemed to come to accept that he realised that thereafter USDAW had no influence on his pay in terms of collective bargaining. 46 He did not raise a grievance and maintains that his store manager told him that such grievances would fail and that there was no hope of winning; so there was nothing that he felt he could do. He took part in briefing employees on the changes. He received a transitional payment of £531 and a turnaround bonus of £883. The transitional payment for managers was for 13 months, to reflect the fact that they retained the higher rate of pay for 5 months longer than the other employees. He was offered and accepted overtime hours after the change in 2016, on the basis of the new rates. He also indicated to the tribunal that he may have moved jobs in 2017 in any event and regardless of the outcome of the pay round. He had various issues with Tesco, one of which was the unrelated upset that he felt about what he perceived as a lack of support after he had experienced a robbery at his previous store. 47 As to the statistical evidence, we include a summary of some of the relevant statistics in Appendix B. This is for the hourly paid employees. Although various statistics have been produced, they have not occupied a prominent place in the parties’ submissions.

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Submissions and Law 48 We are grateful for the opening and closing written submissions and the oral arguments that were advanced. As with the relevant law, we will make further reference to them below. Conclusions Incorporation of the collective agreement – Issue 1 49 The Claimants’ argument is that the terms of the Partnership Agreement are either not incorporated into individuals’ contract of employment; alternatively, they are incorporated only in so far as annual increases or improvements in pay or conditions resulted. The Respondent’s argument is that the collective bargaining procedures and the outcome of the process is incorporated into the contracts of employment of the hourly paid employees. Both parties have submitted that the contractual term that an individual will be bound by a collective agreement can be either express or implied/inferred. 50 Both counsel have referred to Alexander v. Standard Telephones & Cables Ltd [1991] IRLR 286. It is, we agree, a useful authority and the issue in that case was whether redundancy selection procedures in a collective agreement had been incorporated into contracts of employment. Hobhouse J reviewed the applicable law and we will cite part of the headnote: “The principles to be applied in determining whether a part of a collective agreement is incorporated into individual contracts of employment can be summarised as follows: the relevant contract is that between the individual employee and his employer; it is the contractual intention of those two parties which must be ascertained. In so far as that intention is to be found in a written document, that document must be construed on ordinary contractual principles. In so far as there is no such document or that document is not complete or conclusive, their contractual intention has to be ascertained by inference from the other available material including collective agreements. The fact that another document is not itself contractual does not prevent it from being incorporated into the contract if that intention is shown as between the employer and the individual employee. Where a document is expressly incorporated by general words it is still necessary to consider, in conjunction with the words of incorporation, whether any particular part of that document is apt to be a term of the contract; if it is inapt, the correct construction may be that it is not a term of the contract. Where it is not a case of express incorporation, but a matter of inferring the contractual intent, the character of the document and the relevant part of it and whether it is apt to form part of the individual contract is central to the decision whether or not the inference should be drawn.” 51 These principles have been subsequently approved. The leading case on the interpretation of contracts in writing is Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. Lord Hoffmann stated:

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“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) … Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent … (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax … (5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously … ‘If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense’.” 52 Mr Ohringer accepts that the contracts expressly incorporated the Staff Handbook: paragraph 57 of his closing submission. The Handbook, as we have found above, referred to annual pay review through consultation with the union. However, the contracts also expressly incorporated the Partnership Agreement, although there was an historic and erroneous reference to parts one and two. In our view, this provision has to be given a commonsensical interpretation and we have no doubt that the reasonable employee would have realised that the up-to-date Partnership Agreement was being referred to. It is in this regard that Mr Linden places strong reliance on the history of annual pay negotiations going back many years. This has always been conducted by the union under the terms of the collective agreement and the evidence from the Claimants establishes that they realised that this was so. Indeed, when some of them resigned from the union in 2016, it was precisely because they believed that the union had let them down. In all previous years the collective agreements were implemented or incorporated without any need to obtain the consent of individual employees. 53 Our principal criticism of the analysis put forward by Mr Ohringer is that it is highly artificial and ignores the reality that we have set out above. Starting with the rate of pay in the statement of terms and conditions, he says that there is no reference there to variations in any collective agreement. He maintains that there is only a mere mention of the collective agreement and the mention is to an obsolete agreement. He next submits that only provisions in the collective

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agreement outside the topics covered in the statement of terms and conditions can be incorporated. He relies upon the Handbook only referring to consultation with the Union (as opposed to negotiation.) 54 We regard these arguments as inherently weak when set against (a) the incorporation of the Handbook and the Partnership Agreement and (b) the detailed history of annual pay negotiations. We conclude that there is no good reason arising from the facts why the Partnership Agreement should not be incorporated, including the provisions regarding collective bargaining. Those provisions cannot and should not be severed from other provisions in the Partnership Agreement. Booklet 8 is entitled “Terms and Conditions” and it starts by describing the various types of contracts upon which people can be employed. They are all explained and there is then a section on page 6 entitled “Pay”. This includes the current premiums for Sundays and bank holidays and it is after these sections that, on page 14, there is the section entitled “Pay Review.” Further on is a section about bank holiday entitlement; and booklet 8 runs in total to 33 pages. It defies a sensible conclusion, in our view, to hold that this section, together with the clear references to annual pay bargaining, is not incorporated into employees’ contracts of employment. Issues 2/3, 4 55 This asks if the collective agreement could have the effect of reducing employees’ pay. Here, the Claimants principally rely on the topic of the 3rd issue, namely agency, and the contention that USDAW did not have apparent or ostensible authority to decrease pay. We will deal with this first. 56 Mr Linden’s principal answer to the point is that if the contractual basis of the pay change, which may be downwards, is a collective agreement that has been properly incorporated, agency is irrelevant. We agree. As the Harvey extract makes clear, agency is only rarely relied on. We accept that in the normal situation, the union negotiates as principal and not as agent. That there are two distinct routes for validating the process can be seen from Alexander. In paragraph 23 it is recorded that the Plaintiffs’ contention was not based on an allegation of agency, but rather that relevant parts of a collective agreement had been incorporated into contracts of employment. We agree that the Claimants’ argument here is misconceived. 57 Mr Ohringer submits that if the collective agreement is incorporated, “then plainly the union would be acting as agent for all the employees.” This is, in our view, the opposite of the true position and an impossible result to arrive at, whether or not individual members were or were not members of USDAW. We reject Mr Ohringer’s contention in oral argument that agency principles apply in all cases where there is a collective agreement. We consider that this also disposes of Issue 4. 58 Mr Ohringer then raises a series of arguments which we would summarise as follows. (1) Clear words are required to give an employer a right to reduce pay unilaterally.

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(2) The Partnership Agreement does not expressly allow for a reduction in pay. (3) The Policies for Our People document seems to require agreement by individuals to alterations in their terms and conditions. (4) The position of the Stokes claimants points to the Partnership Agreement being ineffective to reduce pay. (5) There is an implied term that a pay review can only be upwards. (6) That any different interpretation or result breaches the Claimants’ human rights. (7) By custom and practice any negotiated pay settlement had never been used to decrease pay. (8) To do so would be irrational and the power cannot be exercised irrationally. (9) The Respondent had no reason to believe that the union had authority to agree to pay cuts. 59 We deal with these points as follows. (1)/(2) Both Griffiths v Salisbury and Wandsworth LBC v D’Silva are against the Claimants’ submissions. The first involved the endorsement by the Court of Appeal of a collectively negotiated regrading exercise resulting in a loss of salary. It was not a case of unilateral variation of contractual terms: see paragraph 16. Nor, in our view, is the Tesco situation a case of unilateral variation for the hourly paid employees. The second case concerned non-pay terms and they were held not to be contractual; and did not arise from collective agreement. The two cases do not assist the claimants. Khatria [2000] IRLR 715 is a case about a guaranteed bonus that replaced a discretionary bonus. It turned on the construction of the term relating to the new bonus and there is no relevance to the Tesco employees. (3) This document does not assist the Claimants because the evidence we accept is that it was intended to deal with changes to individuals’ work patterns or arrangements for work. It was in a manual that provided guidance for managers. The terms of page 1927 are not at variance with the collective bargaining process about pay that took place each year. It could never be regarded by a reasonably informed employee or outsider as having anything to do with collective pay bargaining. (4) This is a logical fallacy. The Stokes claimants were not within the Partnership Agreement. The hourly paid employees were within its scope. (5)/(7) the answer to the fifth point is that the basis for such an implication is not made out. It is not obvious to the tribunal why such a term should be implied and we note that neither party to the collective agreement thought that the implication now contended for applied. However, in that custom and practice is also relied on, the claimants are factually incorrect because, as set out above, the Respondent did decrease pay for Express store employees in 2013 with a similar ‘cushion’ arrangement. (6) Human rights are not, in our opinion, relevant to the adjudication we must make. It is said that the Respondent’s argument breaches the right of employees to refuse to join the union because they would have to join in order to influence

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discussions and agreements about rates of pay. On this basis, the collective agreement for wage bargaining has always been unlawful and this is a surprising conclusion to reach. In any event the Partnership Agreement and the Forum structure allowed non-union members the same rights as unionists, at least until one of them came to sit on the National Forum. There was and is no compulsion to join the union. (8) We see no basis for an argument based on any concept of irrationality. (9) This harks back to the agency argument and fails for the same reasons. Issue 6 60 These are the various points which arise only if we were wrong in our conclusion about the 2016 pay terms being incorporated. Mr Ohringer mainly deals with these questions at paragraphs 86 to 105 of the closing submission and Mr Linden’s contrary submissions are at paragraphs 70 to 86. It is not necessary to repeat here the various factual findings that we have made about the individual claimants. 61 We find the arguments advanced by Mr Linden to be persuasive and we conclude that on these alternative grounds (save for estoppel by convention) there has in each case been a valid acceptance of the new terms by conduct. This is his principal argument. He adds that all of the claimants, other than Mr Stokes and Ms Jenkins, signed new contracts of employment. 62 The acceptance of the new terms is said to be conduct which is unequivocal acceptance of the proffered or varied terms. He submits as follows. “Where a change in terms is adverse to the employee, silence will not readily be taken to denote consent where that change does not have an immediate effect on the employee. Thus, for example, where an employee does not take action in relation to changes in terms which would only apply on termination this is not necessarily an indication that the changes are accepted. Where, however, the changes have an immediate impact and the employee continues to work to the new terms, the position is different. If an employee turns up to work knowing that she will be paid a given rate for that work it will be difficult for her to argue that, although she did the work, she did not agree that she should be paid the rate in question. This will be the case where the employee does the work she was contracted to do, but the position will be even clearer where she volunteers or agrees to do work which he was not obliged to do and she does so knowing the rates which the employer said it will pay for that work.” We accept that this is a submission that applies to these cases. 63 Mr Linden cites Solectron Scotland Ltd v Roper [2004] IRLR 4, as does Mr Ohringer. Elias J said the following in a passage that has subsequently been approved by the Court of Appeal. “The fundamental question is this: is the employee’s conduct, by continuing to work, only referable to his having accepted the new terms imposed by the employer? That may sometimes be the case. For example, if an employer varies the contractual terms by, for example, changing the wage or perhaps altering job duties and the employees go along with that without protest, then in those circumstances it may be possible to infer that they have by their conduct after a period of time accepted the change in terms and

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conditions. If they reject the change they must either refuse to implement it or make it plain that, by acceding to it, they are doing so without prejudice to their contractual rights. But sometimes the alleged variation does not require any response from the employee at all. In such a case if the employee does nothing, his conduct is entirely consistent with the original contract continuing; it is not only referable to his having accepted the new terms. Accordingly, he cannot be taken to have accepted the variation by conduct.” 64 We agree that reluctant acceptance by employees is an insufficient basis for saying that there has been no acceptance. We also agree that it must be clear to the employer that the employee is seeking to preserve previous contractual rights if acceptance by conduct is not to be found. The factual basis for Mr Linden’s argument is that: all the new changes were properly explained to employees; after 3 July 2016 the changes were implemented; all the claimants worked their contracted hours in full knowledge of the rates that were being paid; additionally, they took the benefits of the 2016 agreement. One of those benefits was acceptance of the transitional payment. Another was pay for annual leave being calculated on the new basis. Further, they all but one volunteered to work overtime and they knew when doing so that they would be paid at the new rates. We do not need to consider the use of the additional privilege card, which probably does not assist Mr Linden. There are, however, sufficient grounds for upholding his submission, as we have indicated, and it can only be strengthened in the case of claimants who also at a later date accepted a new contract. For completeness, we accept his additional submissions in relation to the individual claimants. Another way of putting matters is that in no case is there sufficient evidence of a protest such as to negative acceptance of the new terms. Even Ms Element, who did have an objection to the transitional payment scheme, was solely concerned with the tax consequences of being paid a lump sum and was not asserting her earlier contractual rights before the 2016 agreement. 65 While it is true that Mr Stokes did not signify his acceptance in express terms, he volunteered for overtime after 3 July 2016 on the terms that were then being offered. He is in the same position, in our view, as the other Claimants so far as acceptance by conduct is concerned. 66 Mr Ohringer has contended that Ms Griffiths and Mrs Ponto-Farr can take advantage of the doctrine of economic duress. He suggests that they were subject to illegitimate economic pressure that was a significant cause inducing them to enter into a new or varied contract and that the practical effect of the pressure was that the two employees were compelled to agree or were deprived of any practical choice in the matter. He submits that the agreement was caused by duress in these cases and that the illegitimate pressure need not always be a threat to carry out an unlawful act. He asserts that there were threats to dismiss these employees if they did not agree or sign new contracts. 67 We conclude that Mr Linden has in his submissions met these various arguments conclusively. First, even if we assume that some threat of dismissal was made to these two employees and, for good measure to Ms Element as well, the context clearly shows that the cases are outside that category of instances where economic duress can be found. The reason is that employers are at liberty to propose adverse changes in terms of conditions and employees are free to accept or reject these changes. Where they do not accept, the employer

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may accept that the status quo obtains, or may seek to terminate the existing contract and offer new employment on revised or different terms. This is described by Mr Linden as something which “for decades … has been a recognised mechanism for changing terms and conditions where an employee does not consent.” What he says is that there is an alternative available to employees, and this is to refuse to accept the changes, or resign. We agree. It is, therefore, our conclusion that the acceptance of varied terms in this case does not amount to an agreement that can be vitiated on the basis of economic duress. We assume that the argument is only advanced in the alternative to the incorporation terms and that it is not being suggested that, where the terms are validly incorporated, economic duress could apply. 68 In any event, the evidence falls short for the three claimants who might be affected by this argument. Ms Griffiths signed a new contract in circumstances we have set out in paragraphs 32 above. These factual findings could not support economic duress. Mrs Ponto-Farr was told by a union representative that she could be dismissed if she did not sign. In our view this does not support economic duress. She signified that she was unhappy about signing and she later entered into a flexi contract. At this point she did not annotate any protest or reservation: see paragraph 34 above. It is clear that she was agreeing to the new arrangements in order to maximise the overtime that would enable her to replace some of her lost earnings. In our view, this falls short of economic duress. Ms Element was principally concerned about the taxation of the lump sum as we have indicated above and this, in context, does not amount to economic duress. Therefore, we find these alternative pleas fail, whether they are being advanced for two employees or three. Issue 5 69 This refers to the estoppel by convention argument. The textbook extracts from Chitty do not support the Respondent’s submission. If this estoppel requires both parties to the contract acting on an assumed state of facts or law, we cannot see how this can apply as between the employer and the individual employees. The cases appear to cover assumptions made (or acquiesced in) which were mistaken. The Respondent is not submitting that there was such a mistake. If the argument is relied on as an alternative, should incorporation be decided against them, it is hard to see how the claimants could be fixed with the mistaken assumption of the union, a non-party party to the claims. Issues 7, 8 70 We have dealt with these under 6, above. Issues 16 to 21: Indirect age discrimination 71 Section 19 provides that “(1) a person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B’s (2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B’s if –

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(a) A applies, or would apply, it to persons with whom B does not share the characteristic, (b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it, (c) it puts, or would put, B at that disadvantage, and (d) A cannot show it to be a proportionate means of achieving a legitimate aim.” Section 23(1) provides that: “On a comparison of case for the purposes of section 13 … or 19 there must be no material difference between the circumstances relating to each case.” 72 The argument for the Claimants specifies two PCPs. The first is the implementation of the 2016/17 pay tables and the second (which is said to be more specific) is the implementation of the provision within those tables that premium paid for work on Sundays and bank holidays would be reduced to time and a half. For all practical purposes, we do not consider that there is any difference between these two PCPs. The argument for the Claimants is straightforward. The changes to these rates of pay only affected employees on ‘legacy’ contracts and could therefore only impact on employees over the age of 31. Nobody under 31 was adversely affected but some of those over 31 were. The older age bracket happens to be 31 to 90. Therefore, the PCP was applied to the whole workforce, but put these Claimants and all others in the 31 to 90 age bracket at a disadvantage when compared with the 16 to 31 age bracket. In the younger bracket, no employee would lose pay, i.e. suffer the disadvantage that applied to a proportion of the older age cohort. On this basis, the only matter requiring adjudication is the ‘justification’ defence. 73 Mr Linden submits that this is an incorrect analysis and that an indirect age discrimination claim cannot even get off the ground. He queries whether an age range of 31 to 90 could be an age group within the meaning of section 5. Section 19 requires the reference to a relevant protected characteristic of B to be read as a reference to “a person of a particular age group.” Those who share the characteristic are said by section 5(1)(b) to be people of the same age group. Mr Linden makes a submission which is, in essence, based on policy, that an age range of 31 to 90 is too broad to satisfy the statutory provisions. We disagree as we see no reason why the age group cannot be drawn howsoever an individual Claimant wishes. 74 He then moves on to submit that there is no relevant PCP in play in this case. In our view, there are a number of disparate arguments advanced in support of this proposition but we do not find any of them compelling. For example, it seems to us irrelevant that the PCP contended for only affected the older age group. That ought not, in our view, to prevent the Claimant’s mounting a claim of indirect discrimination, indeed it is the gist of the claim. Nor does the fact that no employee was compelled to do overtime affect matters. The observation that all employees would now be paid the same rate seems to us also to be beside the point. Mr Linden sees the case that has been advanced by the claimants as “highly artificial” but we do not recognise any artificiality that takes the facts outside the scope of section 19. Accordingly, we do not uphold his objections to the claims going forward. We can see no reason why the claims cannot be advanced on the basis set out by Mr Ohringer.

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75 Turning to the particular disadvantage that must be shown by the claimants, it seems to us to be no answer to say that most employees in each age category were better off after the changes; or that there is no particular age category above the age of 31 that was particularly adversely affected. It is accepted that, for the hourly paid employees, the average impact of a reduction of pay for Sunday working (both contracted and overtime hours) was 6.48%. The figure resulting from the changes affecting bank holiday work was 0.65%. The corresponding figures for managers were 2.7% and 0.5%. 76 At one point during the submissions the tribunal mentioned to the parties that it was possible that the case of Rutherford might pose a problem for the Claimants. Having reconsidered that case in chambers, we are not of this view. The Claimants there ought to have been complaining of direct age discrimination, but that statutory claim was not available to them at that time. The case was therefore presented as one of indirect sex discrimination, in large part because the disadvantaged group contained more males than females. For reasons set out in different ways in the judgements, these claims failed. We do not consider that there is any parallel with this case. Therefore, we have concluded that the Claimants are able to bring the facts within the statutory wording and that the changes to pay were prima facie indirect discrimination. The real issue here is justification within the meaning of the statute. 77 The aims of the changes are set out by Mr Baillie and, for both Sunday and bank holiday working, five aims are specified. (a) Employees working alongside each other, doing the same job, were being paid at different rates and this was regarded as unfair. (b) The consequent savings were to be reinvested to improve the basic hourly rate of all employees, something that otherwise could not be done. (c) To meet market trends, as competitors had already significantly reduced premium rates to single time. The Respondent would be able to remain competitive. (d) To simplify the pay model. (e) To eliminate the incentive to managers to save money in their budgets by allocating overtime to lower paid employees, rather on a first come, first served basis. 78 We would also refer again to the Reward Principles that were formulated in 2013: see paragraph 21 above. These are consistent with the five aims referred to immediately above. The aims we have specified at (a) and (e), for example, fit under the Fairness Principle. Again, aim (c) expressly reflects the Competitive Principle that includes setting reward “with reference to external market practice …” The Sustainable Principle refers to business strategy and also affordability. 79 Mr Linden points out that the existing pay arrangements were indirectly discriminatory to younger employees. We consider this to be an accurate and important submission. (If challenged those arrangements would have needed to be justified.) He makes two further arguments of relevance. (a) The subjective motivation of the employer at the time is irrelevant. (b) To portray the changes as a cost saving measure is inaccurate, as there was a considerable cost incurred in making these changes. (Mr Baillie at paragraph 208 seems to put the cost at £116m including the transitional payments.)

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80 We consider these aims, summarised in paragraph 77, to be established in evidence and to be legitimate. We agree with Mr Linden’s submissions and we see no answer to the point that the existing arrangements were prima facie indirectly discriminatory to the ‘younger’ employees who constituted about 85% of the workforce. 81 On the issue of whether the PCP was a proportionate means of achieving a legitimate aim, proportionality must, on the authorities, involve balancing the discriminatory consequence of the PCP with the aims and needs of the employer’s business. (Mr Ohringer cites Hampson in 1989, CA, for this proposition and it is not controversial.) Second, Mr Linden points to Seldon v Clarkson Wright & Jakes [2012] ICR 716, SC, at 736, paragraphs 64 to 66, to make a point that we consider relevant. It is that legitimate aims typically can be achieved only by the application of general policies. That was how the Court of Appeal put it and Baroness Hale accepted that “where it is justified to have a general rule, then the existence of that rule will usually justify the treatment which results from it.” (This citation from paragraph 65 also goes on to say that in European jurisprudence it may be relevant that the rule arises from collective bargaining.) In other words, submits the Respondent, we must look at the impact of the 2016 agreement on the hourly paid workforce as a whole, when considering proportionality. It is of some relevance to this submission that Mr Linden relies on paragraphs 43 to 48 of Buchanan v Police [2016] IRLR 918, because in those paragraphs HHJ Richardson cited Seldon to the same effect, in order to then draw an important distinction with disability claims under section 115. As he put it: “ In cases of indirect discrimination, the whole basis of claim depends on the application to the claimant and his group of a policy, criterion or practice which causes comparative disadvantage. It is therefore not surprising that in such cases it is the PCP which must be justified: see section 19(2)(d). Harrod, upon which Miss Joffe relied, was such a case.” 82 The Harrod case went to the Court of Appeal after Buchanan’s case was heard in the EAT and Mr Linden cites it for the principle that proportionality should be measured against the actual aims being pursued; and that it is incorrect to suggest other ways in which modified or different aims could have been achieved with less of an adverse impact. Underhill LJ said at paragraph 41 that the error identified in earlier case law would be for a tribunal to “reject a justification case on the basis that the respondent should have pursued a different aim which would have had a less discriminatory impact.” Having said this, it is difficult to see what a different aim could be in this case, beyond leaving the existing pay arrangements undisturbed or increasing the premium rates for everyone. 83 Mr Linden’s scheme of argument then moves through a number of further principles derived from the cases. (a) We are concerned with aims, means and outcomes, rather than procedural matters. (b) That the impugned measure comes from collective bargaining is a relevant factor. (c) Mitigating measures are relevant to the decision. Applying all of these principles, he submits that equalising the arrangements for premium pay was proportionate. In particular, paying everyone at the enhanced rates would have made reinvestment impossible, caused basic rates of pay to be cut, ruled out other beneficial changes, have been against the trend of the market and would have been “deeply foolish.” This last point is made because the Respondent would have

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been competing with the other main retailers on the basis that employees get paid less, save for Sundays and bank holidays. These are, in our view, sound arguments. If we add to them the fact that the Union endorsed the changes in the clearest of terms, the employees were given 5 months’ notice and then were awarded 18 months’ worth of compensation, the arguments on proportionality fall decisively in favour of the Respondent. The business needs of the employer have been accurately set out. The aim of these changes was not, on the evidence, to reduce cost, as the Claimants have argued. The elimination of the 25% pay anomaly and potential age discrimination was a legitimate aim. The changes were accompanied by mitigating factors. They aligned wage rates with market norms. Finally, we acknowledge the statistical impact. The workforce numbered about 251,800. 79% (ie 204,000 employees) were better off after the changes. Of the 53,707 employees adversely affected, 42,935 would lose under £500 pa, 10,516 would lose up to £100 pa. Of those worse affected, 0.1% of the total stood to lose £3,500 pa. The average transition payment across the board was £401. These figures support our conclusion that the changes were a proportionate means of achieving legitimate aims. 84 In the light of our conclusions, s145 of the Act does not arise (Issue 22). Nor is any adjudication required under Issues 25 to 27. 85 We are asked to give a decision on Issues 23 and 24. The effect of our above decision is that there was no deduction from wages for work performed after 3 July 2016. We accept that in the case of voluntary overtime, this was accepted and paid for on the basis of the new rates of pay. 86 Issue 24 is moot, given that we have held the pay terms to have been varied. We see no reason in principle why the words of the statute could not apply to the transitional payments. Section 25(3) provides that no repayment can be ordered of “… any amount in respect of a deduction or payment or in respect of any combination of deductions or payments, in so far as it appears to the tribunal that he has already paid or repaid any such amount to the worker.” The submission we accept is that the transition payment did pay for Sunday or bank holiday hours of work. The payments should be brought into account. We are not persuaded that the transition payments are within section 14(1) as “overpayments of wages”. Even if they are, we are unsure that we can identify “deduction[s] … where the purpose of the deduction is the reimbursement of … an overpayment …” This alternative argument appears to be overly strained and outside the statutory wording relied on. 87 In summary, the claims fail for both groups of Claimants, for the reasons we have given.

Employment Judge Pearl on 16 March 2018