In this case, the Employment Appeal Tribunal ("EAT") dismissed a finding by the Employment Tribunal ("ET") that there was an implied term in the Claimant’s employment contract that he would be paid for all additional hours worked above the average number of hours intended in the employment contract.
The Claimant was employed by the Respondent as a lorry driver. The employment contract required 5 shifts per week, with an average of 9 hours per shift (later varied to 9.4 hours). However, the contract also provided that the Claimant was required to work such hours as were necessary for the proper performance of his duties. Overtime was contractually payable to drivers only if an additional half shift (of 4.5 hours) or full shift was worked. On occasion, however, ad hoc payments were provided for additional delivery rounds during regular shifts, and on one occasion, time off in lieu had been given. If the Claimant's allocated delivery rounds simply took longer than expected, no additional payment was made. The latter scenario formed the basis of the Claimant's claim.
The Claimant claimed unpaid wages on the basis that he had worked for more than his contracted weekly hours and was entitled to pro rata payments based upon his annual salary for those additional hours (rather than overtime payments).
The ET decided that the contract was silent as to what would happen if the Claimant's average working week ended up being longer than 47 hours (excluding additional shifts) or if his average shift ended up being in excess of 9.4 hours. The ET concluded that the contract provided for an "averaging out" of the Claimant's working hours, and that this implied a term into the contract that if no such averaging out took place within a reasonable period, the Claimant would be paid for all additional hours worked above the intended average. Additional time worked as a normal shift was not overtime for the purposes of the contract, which expressly provided that overtime rates did not apply when normal shifts were extended. Consequently, the ET decided that the additional work undertaken was properly payable at the Claimant’s basic pay rate and ordered the Respondent to pay the Claimant that amount. The Respondent appealed.
The EAT upheld the appeal. It assessed the tests for implied terms, which require that the implication of the term must be necessary to give: (i) business efficacy to the contract and/or (ii) effect to the obvious but unexpressed intention of the parties and concluded that neither principle was satisfied in this case. The contract did not explain over what period of time weekly hours would be averaged, and the effect of the contractual provisions was that weekly hours for drivers were not fixed and might fluctuate from week to week. The EAT therefore decided that whilst the ET correctly concluded that the contract provided a mechanism for flexibility, it was not correct to elevate that flexibility into an enforceable contractual obligation which gave rise to an entitlement to additional pay. The "averaging out" approach did not necessitate an implied term. In any event, neither business efficacy nor the unexpressed intention of the parties justified implying a term that the Claimant would be paid for hours worked in excess of his intended normal working hours, other than when the express overtime provisions applicable to drivers were engaged.
This case highlights the high threshold to imply a term into a contract and the need for clear drafting in employment contracts, particularly for roles that are more likely to have variable working hours and overtime entitlements. It is important therefore to ensure that contracts clearly state whether additional payment is due when employees consistently work beyond their average hours and where fluctuation of hours is common.