Former workers at the Rosyth Dockyard in Fife have been awarded thousands of pounds at an employment tribunal after they received incorrect redundancy payments.
Unite, one of the unions that brought the legal action on behalf of the staff, estimated that the total compensation bill for shipyard operator Babcock International could reach £1.5m, as up to 400 workers could benefit from the decision.
The employees made claims for breach of contract, arguing that they had not received the redundancy payments they were entitled to.
The dispute centered on a collective agreement that was reached in 1997, which introduced new redundancy terms to be phased in until 2006. The agreement entitled staff to statutory redundancy pay that was enhanced by two elements: a lump sum of £1,500 and one day’s basic pay for each six months’ service up to a maximum of 90 days.
In 1997 the majority of the employees worked a 37 hour week over five days, which meant staff were working 7.4 hours a day on average, but in 2002 the company introduced a four-day working week, with weekly working hours remaining the same and staff working 9.25 hours per day on average.
Calculating redundancy pay
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In 2005, the Prospect union sought clarification over how the organisation was calculating a day’s pay. The firm’s head of HR verified that one day’s pay constituted 9.25 hours.
An employee who works a four day week working pattern is also required to book off 9.25 hours to take one day’s leave.
A number of restructuring exercises were carried out between 2006 and 2018, which resulted in redundancies. On all of those occasions the firm calculated a day’s pay as annual salary divided by 52 then divided by 5, which resulted in a day’s pay being considered 7.4 hours.
The chairman of the Dockyard Industrial Joint Committee – a group comprised of Unite and GMB union reps at the shipyard – challenged the calculation. In April 2019, he was told that the organisation had consistently calculated redundancy payments for the previous 13 years using 7.4 hours representing a day’s pay and that it would not be making any changes to that calculation.
Forty-eight former Babcock staff who were made redundant brought an employment tribunal claim for breach of contract.
The organisation argued that its method of calculation was fixed depending on the circumstances when the redundancy terms were agreed in 1997. However, the claimants argued that the agreement reflected what constituted a day’s pay at whatever time in the future the scheme operated.
The tribunal preferred the evidence of the claimants, with judge Russell Bradley stating: “In my view the more obvious meaning of ‘one day’s pay’ in 1997 when it cast forward about nine years in the future and thereafter is what a day’s pay is at that future time.
In my view the more obvious meaning of ‘one day’s pay’ in 1997 when it cast forward about nine years in the future and thereafter is what a day’s pay is at that future time” – Judge Russell Bradley
“On my analysis the words in dispute, ‘a day’s pay’ are dynamic. They do not have a fixed meaning. That being so, they could not then by implication have become fixed. An implied term fixing the meaning as a fifth of weekly pay would be inconsistent with its dynamism.”
The company also argued that it had applied a reasonable, notorious and uniform method to redundancy pay calculation that had been a “well established practice” by the time the claimants were made redundant.
However, the judge said the clarification made to the Prospect union in 2005 “suggests that there is no uniformity and there is no agreement on the calculation of a day’s pay”.
A Babcock spokesperson said it was “surprised” by the tribunal’s ruling: “We have been notified by Employment Tribunals (Scotland) that the claims relating to legacy enhanced redundancy payments at Rosyth have been successful. We are surprised by this judgment, however we acknowledge it and have since settled these payments with the relevant parties”.
Bob MacGregor, Unite industrial officer, said: “The facts are that Rosyth Dockyard treated workers unfairly and they will now have to pay the costs associated with this botched process.
“The employment tribunal ruling affirms that those workers who have left the company and not part of the claim are also legally entitled to payments because it was a contractual breach.
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“Up to 400 workers could benefit from the decision and it could ultimately cost £1.5m.”
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