Another eventful year (nearly) over and we are fast approaching the next General Election. Time to reflect on what the last full year under the current Coalition Government has brought in employment law terms.
We began the year with the long-trailed changes to employee protection on business transfers and end it with the reshaping of family-friendly leave. Throughout 2014, we have begun to see the impact of last year's historic introduction of tribunal fees and early conciliation, the growing debate over zero-hours contracts, unions flexing their muscles in areas such as collective redundancy consultation and the current hot topic of holiday pay, to name but a few highlights.
For now we sit back and reflect on our pick of the 2014 legislative and case law highlights. And, of course, our 2014 awards.
Annual Leave: the 'Holiday Pay' ghosts
As the 'Ghost of Holiday Past' (sickness absence) begins to fade, in 2014 the 'Ghost of Holiday Pay Present' (normal remuneration) emerges into full sight and we start to catch glimpses of the 'Ghost of Holiday Pay Future' (who is a worker).
The normal remuneration conundrum
Chapter 1: 'Normal pay'
The hot topic for 2014 has been what constitutes 'normal remuneration' for calculating holiday pay.
Every worker is entitled to holiday pay, paid at the rate of a week's pay for a week's leave. But what does this include?
In 2012 the Court of Justice of the European Union (CJEU) and Supreme Court judgments in British Airways plc v Williams established that a worker must be no worse off financially during annual leave than if he/she had continued working. This means that workers are entitled to receive their normal remuneration when taking their statutory holiday leave.
Last year we had a number of tribunal decisions exploring the limits of this ruling. This year we have further European guidance in relation to commission payments (Lock v British Gas) and Employment Appeal Tribunal (EAT) guidance in relation to overtime (the combined cases of Fulton v Bear Scotland, Wood v Hertel and Laws v Amec).
So what is and isn't included according to the cases so far?
- Commission that is regularly earned, but not that which is irregular and erratic (Lock).
- Standby/call-out payments and radius/ travel time allowances, but not expenses (e.g. train fares/petrol) (Fulton).
- Contractually-guaranteed overtime, overtime which is non-guaranteed but compulsory for workers and overtime which is non-guaranteed and voluntary to the extent that it cannot be unreasonably refused by workers (Fulton).
- Overtime which is non-guaranteed and voluntary but regularly/consistently worked by the worker as opposed to irregular and erratic (Neal - tribunal-leveldecision which settled before reaching the EAT).
As the EAT state in Fulton, the answer is simple: "normal pay is that which is normally received". Focusing on whether overtime is or isn't 'voluntary' is unhelpful. The key is regular receipt.
Chapter 2: 'Regulation 13 v 13A'
Every worker has the statutory right to 5.6 weeks' holiday each year. However, it is only the first four weeks of leave under regulation 13 that derives from the European law. The additional 1.6 weeks under regulation 13A is a matter of UK law only.
The wider definition to 'normal pay' formulated by the CJEU in Williams and Lock only applies to regulation 13 leave (the first four weeks) and does not apply to regulation 13A leave (Fulton). This means workers, as in the cases before the EAT, may be entitled to a higher rate of holiday pay for the first four weeks of annual leave and a lower rate for the remaining 1.6 weeks of statutory leave and any additional contractual entitlement. This has an important knock-on effect in relation to potential back claims.
Chapter 3: 'Back claims'
Does underpayment of holiday pay over a number of years constitute an unbroken "series of deductions of wages"?
Significantly, the EAT in Fulton has now severely limited the risk of a worker being able to establish a long series of deductions. With a bit of judicial innovation, the EAT concluded that workers cannot claim any consequent holiday underpayment as forming part of a series where more than three months has elapsed between the "deductions". Add to this the distinction between regulation 13 and 13A leave and the risk factor is further reduced. The chances of a worker having a long (if any) series of untaken regulation 13 leave is still possible but unlikely.
I'm a worker - give me holiday pay
It is not only employees who are entitled to statutory paid holiday leave, but also the wider category of "workers". For individuals pursuing claims to establish worker status, a valuable part of that claim may be for unpaid holiday.
What is the position of an individual where the employer has wrongly insisted for years that they are an independent contractor not entitled to holiday pay? If found by a tribunal to be a worker, on termination do they have a claim for unpaid holiday pay and, if so, how far back can they go?
In Sash Window Workshop v King, the EAT states tribunals need to consider, where holiday leave was not taken, the following:
- Was the worker unable, for reasons beyond his control, to take his holiday entitlement? This will be a question of fact. Unhelpfully, the EAT did not express a view on the impact of an employer's unwillingness to provide holiday pay.
- As the individual continued to work and receive pay rather than take holiday leave, what is the loss? The answer is not wages, but rather the health and welfare of taking annual leave. On that basis, the loss was compensation for refusal to permit the exercise of rights, not that of wages, capable of forming an unlawful deduction of wages claim.
- In relation to periods where the individual took some unpaid holiday leave:
- Failure to provide holiday pay can amount to unlawful deductions. Following Fulton, the tribunal will need to consider any three-month gaps in the taking of unpaid holiday leave.
- We wait to see how tribunals will address these issues.
Family-friendly: caring is sharing
The reshaping of family-friendly leave has begun this year! Just as family life can be, "it's complicated" with a plethora of detailed regulations needed to bring in all the changes.
Flexibility for all
On 30 June, the right to request flexible working was extended to all employees with 26 weeks' qualifying service and the old statutory procedure replaced by an Advisory, Conciliation and Arbitration Service (ACAS) code of practice and guidance.
The extension of this right will bring new opportunities and challenges for employers seeking to manage staff. What should an employer faced with requests do? Be... FLEXIBLE:
- Follow the ACAS code and guidance
- Line managers will be key - training needed
- Engage with your staff and communicate the changes
- X-amine (we cheated) your current flexible working policy against the needs of your business
- Insurance - do your policies need review?
- Benefits - are they fit for purpose with an increased flexible workforce?
- Lateral - think around the wider issues in addressing the request
- Exits and succession planning - how will you handle them?
On the case law front, the EAT reminded employees that where a flexible working arrangement has been agreed for a fixed period, the employer is not required to review or consult further about the ending of the fixed period. The contractual position will simply revert to the original working arrangement at the end of the agreed fixed period (Smith-Twigger v Abbey Protection Group).
An employee could, of course, request a further flexible working arrangement provided it was more than 12 months since the previous request. However, the onus is on the employee and not the employer to initiate and follow through with a new request.
Share and share alike
On 1 December, the new Shared Parental Leave Regulations came into force to encourage the sharing of "family" leave between working parents. Employees can opt into the new system of shared parental leave (SPL) for children due to be born/placed for adoption on or after 5 April 2015. Given that the new system relates to an expected due date and taking into account the age old dilemma of pinpointing precisely when a baby will make its entrance into the world, there is a real possibility of parents of premature babies being able to opt into this system ahead of April.
In essence, mothers and adopters can choose to curtail maternity and adoption leave and opt in to shared parental leave. Shared parental leave doesn't replace existing maternity and adoption leave rights. Instead it enables mothers/adopters to elect to convert a portion of that leave so that up to 50 weeks' leave and 37 weeks' pay can be shared between both parents.
The timing for taking of this leave will also be more flexible. Parents can apply for periods of leave which they can take at the same time or separately up to the child's first birthday/anniversary of placement. The fun and games to be had under the new system relate to the very complex notification requirements. They make the most complex of all self-assembly nursery furniture instructions look like a piece of cake!
Enhanced contractual pay
One of the key questions that employers will face under the new SPL scheme is whether to match pay for anyone taking SPL with any enhanced maternity pay that is currently offered.
Although it relates to additional paternity leave (APL), which will be abolished when SPL comes in, the tribunal decision this year in Shuter v Ford Motor Company has been a timely reminder of some of the factors that employers will need to consider when making this decision.
Legal commentators have been debating for some time the relationship between maternity and paternity policies, enhanced pay and discrimination. In the Shuter case, the tribunal rejected claims for direct and indirect sex discrimination. It held the employer was entitled to pay full pay for 12 months to women on maternity leave while only paying statutory paternity pay to men on APL.
Key to the defence of the indirect discrimination claim was justification. Ford established that it had a legitimate aim of recruiting and retaining women in its male-dominated workforce. It was able to provide clear, detailed and cogent evidence of its decision-making process at the time the full maternity pay policy was approved to support the case that the measure was a proportionate means for achieving that aim.
Although Shuter is a tribunal decision and so not binding, it does show the importance of understanding the interrelationship between your various family-friendly policies and what you are trying to achieve with them. While it doesn't give employers the green light to pay SPL and maternity leave at different rates, it does demonstrate the sort of evidence that will be needed to justify any different treatment.
Finally, since 1 October, fathers have the right to unpaid time off to attend up to two antenatal appointments.
Tribunal reform: Gold, frankincense and a stir!
The cost of justice
Last year we saw the dawn of a new era with the introduction of tribunal fees,a historic change to the system previously free for end-users. Nearly 18 months on, has the historic change had an equally historic impact? The answer has been a resounding yes, with a sharp fall in the number of tribunal claims.
Between October 2013 and March 2014 there was a 73% drop on the same period the previous year. The latest statistics for the period April-June reveal a 70% drop on the same period last year. Research published by Citizens Advice found that in more than half the cases fees or costs were the main reason why people chose not to pursue their claim.
Even before fees were introduced, Unison launched a judicial challenge to the legality of tribunal fees, which was heard in October 2013. In February, the High Court rejected challenge number one, in essence as having been presented prematurely, preferring an attitude of "let's wait and see what the impact proves to be".
While the initial challenge was rejected, the High Court clearly opened the door to a fresh challenge based on statistical evidence. By an odd coincidence, judicial review number two was heard by the High Court in October, exactly one year to the day after the first challenge. We eagerly await the outcome.
When tribunal fees were introduced there was no stated presumption that an employer would be ordered to reimburse fees in the event that a claimant was successful.
During the course of the Unison challenge number one, the Lord Chancellor conceded that a successful claimant should generally expect to recover the fees they have paid from the respondent and the Government guidance was amended accordingly. Following cases such as Portnykh v Nomura and Horizon Security v Ndeze, the EAT confirmed that the general expectation must be that a successful party will be entitled to recover fees paid.
While recovery of fees by a successful party is the general position, this is not inevitably the case. The issue may not be so clear-cut where, for example, the party has only been partly successful. In cases such as Old v Palace Fields Primary Academy and Sefton BC v Wainwright only a partial recovery of EAT fees paid was allowed as the appeals had only been partly successful.
In the case of Look Ahead Housing v Chetty, the President of the EAT observed that where an appeal is partly successful, whether any repayment is ordered will depend on the particular facts. The main question is "whether it was necessary to incur the expense in order to bring the appeal". If reasonable steps could have been taken to avoid having to bring the appeal, such as by applying for reconsideration or by seeking the agreement of the other party, it may not have been reasonable. As to amount, it will depend on whether the claim/appeal has largely succeeded or largely failed.
On 6 May 2014, ACAS Early Conciliation (EC) became mandatory for the majority of employment tribunal claims. Before claimants can lodge proceedings, they must submit a form to ACAS or telephone them.
While a claimant does not actually have to engage in conciliation, what is mandatory is that they contact ACAS and obtain an early conciliation certificate number. Without it, they will not be able to present a tribunal claim.
A crucial element of the process to understand is the so-called 'stop the clock' mechanism. Once a prospective claimant has contacted ACAS, the time limit for presenting a claim will be extended to take account of the conciliation period.
In practice, however, this is not as simple as it sounds. The period beginning with the day when the claimant contacts ACAS (Day A) and ending on the day when they receive the EC certificate (Day B) will 'stop the clock'. It is not, however, as simple as adding this 'pause' period to the end of the limitation period. This is because the actual extension triggered will depend upon when Day A and Day B actually fall in relation to the limitation period.
As ACAS will not advise on time limits, and given the complexity of the 'stop the clock' mechanism, it is not surprising that reports abound of time limit confusion at the tribunals. So far we have learnt that tribunal staff accepting and serving a claim does not mean the claim is valid:
- In Thomas v Nationwide Building Society, the tribunal had issued a claim where the claimant had incorrectly completed the ET1, claiming to be exempt from early conciliation. As the claim was subject to early conciliation, the defect could be rectified by completing the EC procedure (and so a fresh issue fee avoided). However, this will result in the claim being treated as "presented" on the date the defect was rectified. As this is likely to be several weeks later, the claim is likely to be out of time.
- Where there is more than one respondent, the claimant must complete separate EC processes for each and obtain individual EC certificate numbers. This can result in different limitation dates for different respondents in respect of the same claim. In Beadle v Addaction, the claimant undertook EC on different dates (several weeks apart) in relation to two potential respondents. The claimant waited until both processes were completed before deciding to bring a claim against the first potential respondent only.
The tribunal issued and served the claim as a valid EC certificate number was provided. However, the respondent was able to challenge the claim as out of time. Rejecting the claim, the employment tribunal found that a misunderstanding of the early conciliation rules could not assist the claimant in establishing that it was "not reasonably practicable" to present the claim in time.
Lesson: Always worth checking that a claim has been validly served in time!
Discrimination: peace and goodwill to all
Disability & sickness absence
Managing sickness absence is a notoriously tricky area for employers, particularly when dealing with disabled employees, who may require more time off than others. The application, without modification, of an employer's sickness absence policy to a disabled employee may give rise to a discrimination claim, but to what extent are employers obliged to make adjustments to sickness absence procedures?
This year we have learnt:
- Employers will not usually be required to modify trigger points contained within an absence management policy simply because the employee is disabled (Griffiths v DWP). Note: this case concerned trigger points rather than a sanction taken under the absence management policy.
- Ignoring a carefully considered final written warning for sickness absence is not a reasonable adjustment (Carranza v General Dynamics).
The Court of Appeal has confirmed that employers are not obliged to make reasonable adjustments for non-disabled employees associated with disabled people. The focus of the reasonable adjustments duty is for employers to make provision for disabled employees, job applicants and trainees, not for a non-disabled employee who is in some way associated with a disabled person (Hainsworth v MoD).
Obesity potentially a disability?
Obesity is a growing problem in modern society. For the first time, the CJEU is considering issues concerning obesity-based discrimination. Can obesity be classified as a 'disability' under the Equal Treatment Directive?
In the Danish case of case of Kaltoft, the Advocate General who advises the CJEU concludes that obesity, in isolation, is not automatically to be regarded as a disability. However, morbid obesity may come within the meaning of 'disability' if it is of such a degree as to hinder full participation in professional life on an equal footing with other employees. The judgment of the full court is, at the time of writing, still awaited.
On the face of it, discrimination purely on the grounds of obesity is not prohibited. However, in practice, any employer dealing with an apparently severely obese candidate or employee must be on notice that other medical conditions commonly found alongside obesity, such as diabetes, respiratory and mobility problems may amount, when taken together, to a disability.
It is important to be alive to the risks of dealing in stereotypes and making assumptions about individuals based on their appearance. If an employer wishes to refuse employment to an individual on the grounds of their apparent obesity, then it should take steps to establish whether the individual will not be able to perform the requirements of the job and not simply assume that this is the case, based solely on apparent obesity.
Does the Equality Act 2010 protect individuals from post-employment victimisation? For example, can an individual bring a victimisation claim after receiving an unfavourable reference from their former employer as a result of a prior discrimination claim?
This has been debated since the Equality Act came into force. On the face of the statutory wording, described by the Equality and Human Rights Commission as a 'legislative blunder', it appeared that it may not be covered.
Faced with conflicting EAT decisions, we finally have welcome clarification from the Court of Appeal. As we suspected, there was a clear drafting error (why the legislative draftsmen have been so reluctant to put their hands up and make the necessary amendment when the error was pointed out back in 2010 is beyond the writer!). As to fixing the drafting blunder, the Court of Appeal has taken the simplest course by judicially inserting words into the Act, making it clear that post-termination victimisation is covered.
The scope of race discrimination
Under the Equality Act 2010, the definition of race includes colour, nationality and ethnic or national origin. But what is the scope of this non-exhaustive list?
Government plans to explicitly categorise 'caste' as an aspect of "race" continue, but at a snail's pace. In the meantime, the tribunals have considered whether "caste" is already an aspect of "race" and therefore covered. In Tirkey v Chandok a tribunal found "ethnic origin" is a term wide enough to encompass caste. The EAT has recently heard an appeal in this case, judgment awaited.
What about vulnerable migrant workers? The Court of Appeal has confirmed that unfavourable treatment on the ground of vulnerability for reasons including immigration status does not constitute race discrimination. While a worker's immigration status may contribute to their vulnerability, it was not the reason itself for the treatment (Taiwo v Olaigbe and Onu v Akwiwu).
The EAT decision in Hall v Xerox provides comfort to employers who offer insured benefits to their employees. Employers will not necessarily be responsible for potentially discriminatory terms in an underlying insurance policy where the terms are determined by the insurance company.
In this case, the less favourable treatment of a fixed-term employee excluded from an income protection scheme was not caused by the employer but rather by the terms of the insurer's policy. As such, the employer had not breached the Fixed-Term Employees Regulations.
Although the employer was not liable in this case, caution should be exercised by employers when choosing an insurer. Employers should investigate products that are available in the insurance market and document their reasons for choosing a particular insurer in order to justify any potential discrimination. Employers should also ensure that the employment contract makes it clear that the insurance benefit is subject to the rules of the relevant insurance policy in relation to eligibility, cover and payments.
The Purple Parking case provides a clear example of what not to do. Purple Parking dismissed some of its drivers (who provided airport parking, bus shuttle and car chauffeuring services) for being too old and not falling within the terms of its insurance provision. Purple Parking's insurance policy for its drivers did not cover drivers over the age of 67, a clause which was introduced as a change to the original policy.
It emerged at the tribunal that Purple Parking had requested an upper age limit on the policy for its drivers, a request which the insurers described as 'unusual'. The term and policy was also not applied across the board - Purple Parking asked the insurer to exclude directors and their wives from the policy - a move which presumably did not improve the strength of their defence, to say the least. On production of this information, Purple Parking admitted liability for age discrimination and discontinued its defence of the claim!
Whistleblowing: go tell it on the mountain
A cultural change
Public interest disclosures continue to make headlines, especially in cases concerning the NHS and financial institutions. Last summer marked a shift in emphasis away from the whistleblower's motivation towards the importance of public interest. Now we have a new 'public interest' requirement, removal of the good faith requirement (though still relevant to compensation awarded), vicarious liability for employers and a wider definition of 'worker'.
In addition to last year's extensive changes, this year the Government considered making further significant changes. However, the latest call for evidence has resulted in a light-touch approach to further reform: a call for cultural change rather than intervention through more legislation. Notably, the suggestion of introducing US-style financial incentives to encourage whistleblowing will not be pursued. The promised Government-model whistleblowing policy remains elusive.
On the case law front, this year the EAT reminded us:
- Separate correspondence taken cumulatively can amount to a qualifying disclosure. This remains the case, even though the recipient may not be the same where the earlier correspondence is clearly embedded in it. In Norbrook Laboratories v Shaw, two earlier e-mails to the employer's health and safety manager were found to be 'embedded' in a later e-mail to a HR manager.
- A reminder that there must be causal link between the protected disclosure and the alleged detriment or dismissal. In Panayiotou v Kernaghan, the EAT held that the whistlebower had been fairly dismissed. He had not been dismissed for having made the disclosures, but for the difficult manner in which he conducted himself when unhappy with how the subject of his disclosure had been dealt with.
- Whistleblowing protection extends to a wider definition of those classed as a 'worker' than for many other employment rights. The wider definition includes agency workers who contracted via a personal service company (Keppel Seghers v Hinds).
National minimum wage: silent night
Treatment of "on-call" time for national minimum wage (NMW) purposes is an area that can often cause confusion. Where a care worker is required to work a number of 'sleep-in' night shifts at the employer's premises, and be available in case of an emergency, does the night shift constitute 'time work' for the purposes of the NMW? Is the worker entitled to be paid simply for being on the premises, regardless of whether she worked or not or whether she carried out her regular duties?
In Esparon v Slavikovska, the EAT recognised that it is 'very difficult' to distinguish between cases where the worker was 'at work', being paid to be on the employer's premises 'just in case', and where the worker was 'on call' and not deemed to be working the whole time. But, an important consideration is why the employer requires the worker's presence. In this case, the employer had a legal obligation, under regulations relating to care homes, to have staff available on the premises at all times. It was essential for the employer that staff be present even if they did nothing.
Accordingly, the worker was doing 'time work' and entitled to be paid the NMW simply for being on the premises, regardless of whether they were allowed to sleep on shift.
The Government is cracking down on employers who fail to meet their obligations under the NMW. On 7 March, the maximum financial penalty for employers who flout the NMW doubled from £10,000 to £20,000 per notice, with plans to further increase this to £20,000 per worker covered by a notice.
Collectivism: a merry ding dong
Collective redundancy consultation trigger - numbers
Does UK law correctly implement the European Collective Redundancies Directive? Is the duty triggered where the employer is proposing to dismiss as redundant 20 or more employees 'at one establishment', as provided in section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992? Or is it triggered when proposing to dismiss 20 or more employees across the employer's business as a whole, as held by the EAT?
In the historic and controversial decision last year in the so-called Woolworths litigation, the EAT held that section 188 does not correctly implement the underlying EU Directive. The words 'at one establishment' are to be disregarded for the purposes of any collective redundancy involving 20 or more employees. This means that employers will have to consult employee representatives in many more situations.
Despite a reference on the same issue from the Northern Ireland Industrial Tribunal in Lyttle v Bluebird already pending before the CJEU, in February the Court of Appeal ordered a fresh reference. So now we have two pending references - why? In seeking guidance from the CJEU, how the question is posed can be crucial. To get the answer needed you need to ask the right questions.
The wording of the questions in the Woolworths litigation raises a broader issue in relation to the meaning of 'establishment'. They also raise the issue of 'vertical direct effect' - can employers rely on the State's failure to implement the directive correctly?
The law in this area is uncertain and not likely to be resolved in the near future. We await the CJEU's opinion on what the Directive means and whether the UK law is compliant. Until such time as we get an answer, not expected until next year, the EAT decision still stands. In the meantime, employers will want to think twice before they rely upon the 'at one establishment' limitation within the definition of collective redundancies in section 188.
Collective redundancy consultation trigger - meaning of 'proposing'
When is the duty to collectively consult triggered? The obligation is triggered when the employer first proposes that redundancies be made. But when does an employer first propose to make redundancies? In particular, if an employer is proposing to close a particular site, which will inevitably result in job losses, is the consultation obligation triggered before the decision to close the site is made?
Regular readers of our annual review will recognise the case of The United States of America v Nolan. This case has held the potential promise of providing an answer to this very grey area for a number of years. Are we any closer to an answer? Unfortunately not, the answer is still some way off.
The story so far in 20 seconds: the employment tribunal (2007) and EAT (2009) say the trigger is the proposal to close the site. However, in 2010 the Court of Appeal said, 'wait a minute, not so sure' and referred to the CJEU. The CJEU held on for 18 months before coming up with the less-than-illuminating answer that 'this one is outside our jurisdiction'.
Back to the Court of Appeal this year, who say, 'well, it is in our jurisdiction so let's proceed to a full merits hearing'. 'Not so fast' says the USA, with a further jurisdictional appeal now pending before the Supreme Court.
We can but dream that one day we will have an answer!
Employers with recognised trade unions are seeing more pressure coming their way in relation to, on the one hand, job security, and on the other to improved terms and conditions. Throw in the possibility of outsourcing, near- and off-shoring as well and you have the possibility of serious industrial action.
If you, as an employer, are not a party to a trade dispute then the law outlaws action taken against you by someone else's employees. This ban on secondary strike action is often referred to as "sympathy" or "solidarity" action.
This is intended to prevent unions protesting at sites operated by customers and interested parties. Unsurprisingly, unions do not like this ban. This year the European Court of Human Rights rejected the long-running challenge to the ban on secondary action by the RMT union. A further complaint that UK law on the organisation of strike ballots was too strict was rejected as inadmissible.
A trade union may apply to the Central Arbitration Committee (CAC) for statutory recognition in respect of a group of workers. For a recognition application to be admissible, the CAC must be satisfied that there is not already a collective agreement in force entitling a different recognised trade union to conduct collective bargaining on behalf of any of the workers in the proposed bargaining unit.
In R (on the application of Boots Management Services Ltd) v CAC, an existing agreement with a union to collectively consult over facilities for union officials and consultation machinery blocked another union's application for statutory recognition. It made no difference that the existing agreement expressly excluded bargaining on matters to do with working conditions, terms of employment, hours, pay and holiday.
Termination: for auld lang syne
Use of external consultant
Once the decision is taken that a disciplinary investigation for potential misconduct is required, the employer needs to consider who should conduct the investigation. In some cases, it may be advisable for a small employer to bring in outside help to run a disciplinary process. The decision to dismiss ultimately remains that of the employer. This year we have learned:
- Where an external consultant is used to carry out an investigation, it is what is in the mind of the employer at the time the decision to dismiss is made, not the time the employer decided to bring an outside consultant in to investigate that is important (GM Packaging v Haslem).
- An employer who has outsourced an appeal process will not always be bound to implement the external panel's recommendation. Where the original investigation has been reasonable and the appeal panel failed to consider further information coming to light during the appeal, the employer's decision to dismiss may on the facts still be fair (Kisoka v Ratnpiinotip).
Constructive dismissal - delay?
Where an employee resigns in circumstances where he is entitled to terminate his contract of employment by reason of the employer's conduct, this is known as a "constructive dismissal". Although the employee resigns, it is the employer's conduct which terminates (repudiates) the contract.
Crucially, the employee must not delay too long in resigning. If the employee continues to report to work he is likely to be deemed to have waived the alleged breach of contract affirming the continuation of the contract. In many cases, the employee will resign and leave immediately. However, an employee can still claim constructive dismissal where they give contractual notice without being deemed to have accepted the breach.
Two EAT decisions this year considered the question of delay, from which we learn:
- Lesson 1: Excessive notice
An employee who gives notice considerably in excess of his contractual notice purely for his own financial gain will be deemed to have affirmed his contract waiving his right to claim constructive dismissal (Cockram v Air Products)
- Lesson 2: Sickness absence
Delay in resigning, in and of itself, is not determinative. The test is one of conduct, not time. Inferences cannot be drawn so easily from an employee's delay in resigning when they are on sick leave (Chindove v William Morrisons).
Constructive dismissal - two wrongs?
Does an employee's prior breach of contract prevent the employee from relying on their employer's subsequent breach? What is the relevance of a later discovered prior repudiatory breach of contract by an employee claiming constructive unfair dismissal?
In an effort to reconcile previous conflicting case law, the EAT in Atkinson v Community Gateway held that an employee was not barred by his own prior breaches of contract from claiming constructive unfair dismissal. However, the EAT noted that if the employer can establish that it would have fairly dismissed the employee, had it known about the employee's original breach of contract, compensation could be reduced by up to 100%.
In many cases, an employer may dismiss an employee fairly for an instance of gross misconduct, especially where the employee admits that he did in fact commit gross misconduct. But this is employment law and nothing is ever straightforward!
This year we have had reminders that simply because conduct is classed as gross misconduct, dismissal will not be automatically justified:
- Conduct classed as gross misconduct may not justify summary dismissal where the breach was not deliberate (Robert Bates Wrekin Landscapes Ltd v Knight).
- Culpability for misconduct is not clear-cut where the employee is mentally ill. Gross misconduct requires culpability on the part of the employee (Burdett v Aviva Employment Services Ltd).
Redundancy: no room at the inn
As all HR professionals know, dealing with a business reorganisation is complex, especially when involving potential redundancies. This year we have had two lessons concerning suitable alternative vacancies.
Lesson 1: Suitable alternative vacancies & maternity leave
The duty to offer a woman on maternity leave a suitable alternative vacancy in priority to other potentially redundant employees arises when the employer becomes aware that her role is redundant.
In the context of a business reorganisation, once the decision is taken to remove existing posts and introduce a new post instead, it is at that point that the new post becomes a suitable alternative vacancy. It is not at a later point after the reorganisation is completed and the employer knows who was slotted into the existing/newly created posts.
In Sefton BC v Wainwright, the EAT confirmed that where two roles were being replaced by a single new role and, importantly, no other suitable alternative roles were available, the woman on maternity leave should have been offered the new post without undergoing an interview.
Lesson 2: Suitable alternative vacancies & agency workers
The Agency Workers Regulations 2010 provide that from the first day of their assignment, agency workers are entitled to information about vacancies in the hirer's organisation to give them the same opportunity as other workers to find permanent employment.
What is the scope of this obligation? An employment tribunal in Coles v MoD found that the requirement is to provide agency workers with information about relevant vacancies. This does not extend to equality of opportunity during the selection process with internal applicants who are permanent employees.
In this case concerning a large scale reorganisation, the employer was entitled to favour a potentially redundant permanent employee with the required qualifications over an agency worker already working in the post for the employer, even where that meant the end of the agency worker's assignment.
Contract: angels we have heard on high
Choose your words carefully
This year we have two examples reminding employers to think carefully about their words.
- In Hershaw v Sheffield CC, an HR consultant's letter to employees informing them of the outcome of their grievance regarding grading and consequent pay was capable of creating a contractual right to higher pay.
- In Prophet v Huggett, the Court of Appeal reminded us that a poorly drafted restrictive covenant cannot be saved by judicial creative interpretation. The courts cannot add words to a restrictive covenant in order to give commercial effect to an otherwise useless covenant.
No power to increase penalty on appeal
The Court of Appeal reminds us that where an employer has a contractual disciplinary procedure, it will be bound by the terms of that procedure.
In McMillan v Airedale NHS foundation Trust, a contractual disciplinary procedure prevented the employer from increasing the sanction from written warning to dismissal on appeal. The contractual policy was silent on this issue. Such a power could not be implied, to do so would be inconsistent with the right to appeal intended as a benefit to employees.
Show us the money
Contract law requires a variation to a contract to be supported by consideration. An employer needs to show some benefit that has passed to the employee in consideration for a change which has been made to their contract.
When an employee's contract is varied to include new restrictive covenants, the employer will need to be able to point to the consideration given for the restrictions to be enforceable. Where the contractual variation accompanies a promotion, it may be that the promotion with enhanced benefits would be the consideration. Alternatively, continued employment may, in some cases, amount to consideration.
In Re-use Collections v Sendall & May Glass Recycling, an employee signed a new contract including restrictive covenants following the change of control in the employer. Shortly afterwards, the employee left to join a competitor.
The High Court refused to enforce the restrictive covenants as the employee had not received "some real monetary or other benefit" for the variation of contract. His continued employment did not amount to consideration in this case as there had been no suggestion he would have been dismissed if he refused to sign the new contract.
TUPE: a new dawn
TUPE's new look
We began the year with the long-trailed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) which largely came into force on 31 January.
While less radical than originally proposed, the changes allow for a bit more flexibility, removing some legal obstacles to the everyday operation of TUPE, such as possible pre-transfer collective redundancy consultation.
We also now have clarity that post-transfer changes to location can amount to an "economic, technical or organisational reason entailing changes in the workforce" (an ETO reason). Other changes include:
- clarification that for there to be a 'service provision change' (SPC) the services must be 'fundamentally' the same as those carried out before the transfer;
- new tests for making fair dismissals or valid contractual changes;
- transferees are able to change terms derived from collective agreements by agreement one year after the transfer, provided that the overall change is no less favourable to the employee;
- clarification that there is a static approach to the transfer of any terms derived from collective agreements; and
- the transferor must provide employee liability information 28 days (rather than the previous 14 days) before the transfer (since 1 May).
An employer is required to carry out its own immigration checks where employees are inherited following a TUPE transfer. Under a revised code of practice on preventing illegal working published by the Home Office on 16 May, the grace period given to the new employer to carry out the check has been increased from 28 days to 60 days.
The EAT reminds us that a transaction which was structured as a share purchase, to which TUPE would not apply, could nevertheless give rise to a TUPE transfer as a result of the subsequent actions of the new owner of the Company (Jackson Lloyd v Smith).
Following the share purchase, the new owner replaced the Board of the employer company with its own nominees, told employees they would be embarking on a period of integration into the new owner's business and brought in an integration team overseen by a consultant who reported directly to the parent company CEO.
The tribunal found that, in reality, the operation of the business in which the staff were employed, and all decision making relating to it, had transferred to the parent company and this was sufficient to give rise to a transfer of all employment contracts under TUPE.
Where employers wish to retain employees within companies they have acquired, this case suggests that a level of care and planning will be necessary to ensure a TUPE transfer is not unintentionally triggered.
Fundamentally same activities
In Qlog v O'Brien, the EAT remind us that on a SPC, when identifying the activities pre and post transfer, the contract is powerful evidence of the client's intention.
In this case, the outsourced activity both pre and post transfer was the transportation of the client's goods from its premises to its customers. The fact that the new service provider sub-contracted the actual driving rather than employing drivers directly made no difference. The new contractor remained responsible for the entirety of the transportation of the goods under the contract with the client. While the mode of carrying out the activity post transfer was very different, the activity the new provider agreed to provide remained the same.
Who is the client?
The client, before and after transfer, must be the same for a SPC to occur under TUPE. In Horizon Security Services v Ndeze, the EAT considered whether this requirement was satisfied, in the context of a change in security providers at a business centre on a local authority owned site.
The managing services company, which contracted with the original security provider, was found on the facts to be the client rather than the local authority. This meant there was no SPC in relation to the security services when the local authority contracted directly with a new provider to undertake security services at the centre pending its demolition.
A hope and a wish
The scope of the SPC's short-term duration exemption continues to be explored. In Robert Sage v O'Connell, the EAT remind us of its limited scope. A "hope and a wish" by a client that activities will be in connection with a task of short duration is not the same as an "intention". In this case, the length of time the task would last was beyond the control of the client and so the exemption could not be relied on.
ETO or no ETO
The case of Manchester College v Hazel highlights the difficulties employers face when seeking to make efficiency savings where they have employees who have transferred across under TUPE.
In this case, six months after a TUPE transfer and as a result of the difficult economic situation facing the higher education sector, the employer undertook a redundancy exercise together with a separate exercise to change terms for the remaining staff to avoid further redundancies. The employees who failed to agree the contractual changes were dismissed. Was this one on-going exercise of economic changes or two separate exercises?
The Court of Appeal has now upheld the tribunal's decision that, because the redundancy process was completed before the contractual changes, they were two separate processes. Although the dismissals were potentially for an economic, technical or organisational reason, they did not entail changes in workforce numbers or functions (the numbers had already been cut before the contractual changes exercise completed). This meant those transferred employees who refused to sign new contracts were automatically unfairly dismissed.
TUPE requires the transferor to provide the transferee with certain information about the transferring employees, known as the "employee liability information" (ELI) at least 28 days before the transfer. ELI includes "any court or tribunal case, claim or action that the transferor has reasonable grounds to believe that an employee may bring against the transferee, arising out of the employee's employment with the transferor".
In Eville & Jones v Grants Veterinary Services, the outgoing contractor was in financial difficulties. Leading up to the transfer, it knew it would not be able to pay its employees' salaries for the month, but failed to pass that information on to the transferee. The tribunal found the outgoing contractor had breached the ELI obligations in failing to provide information as to unpaid wages claims. The outgoing contractor was ordered to pay compensation of £65,500, representing £500 per transferred employee.
The 2014 awards (drum roll please)...
The 'Not so plain English' Award
And the winner is....The Department for Business Innovation & Skills
...for its sterling effort in making the wording and cross referencing of the eligibility and notification requirements for shared parental leave as convoluted as possible!
The 'Fond Farewell' Award
And the winner is.... His Honour Jeremy McMullen QC
...for his post-script to his judgment in North Essex Partnership NHS v Bone: " It may seem fitting that the very last case I hear as a judge relates to a trade union activist and relies on legislation dating from 40 years ago when I started in this field. Unusually, I go out with my last word in Latin: Valete!"
The 'Innovator' Award
And the winner is....The Honourable Mr Justice Langstaff
...for the creative solution to the holiday pay back claims issue in Fulton v Bear Scotland.
The 'Bill Clinton' Award
And the winner is....claimant, Mr Haslem
...for Haslem v GM Packaging (UK) Ltd. If you are going to make a Bill Clintonesque style denial about having 'relations' with a colleague on office premises,
- pick an office that does not have a glass panel wall; and
- if you are going to make derogatory comments about your boss while engaging in such relations, don't accidently turn on a Dictaphone machine recording your indiscretions!
The 'Nice Try' Award
And the winner is...claimant, Mr Atkinson
...for Atkinson v Community Gateway Association. A valiant attempt to argue that he had an expectation of privacy over inappropriate e-mails sent from the employer's e-mail system which he did not mark as personal/private. The employer's policy stated: "e-mail communications, in general, cannot be guaranteed to be private/ confidential and should not be treated as such. However, e-mails marked PERSONAL/PRIVATE will not be opened unless in accordance with the E-mail Protocol and with the direct authority of the Director of Resources." Any guesses as to author of the policy? You got it Mr Atkinson himself as Director of Resources!
And finally...some sporting Inspiration
On 4 December, the "Three Inspirational Days" report was published hailing this summer's 'Tour de France Grand Depart' (English stages) a smash hit. The direct economic impact on the 'host regions' was £128 million. 4.8 million people lined the route for the three English stages, with 2 million of them feeling inspired to cycle more frequently. What other inspiration can we take from one of 2014's greatest sporting events? Here we leave you with our top five Le Tour De France inspired management tips:
- Motivate your staff by making the highest performers wear bright and gaudy special outfits. To go the extra kilometre decorate their workstation to match.
- Support leaders by having their direct reports carry their water and food for them all day long.
- Engage said direct reports by giving them catchy labels such as 'domestiques' or 'servants'. Promote the best to 'super servants'.
- Respect your competitors. When they suffer an unfortunate issue that sets them back (such as an 'industrial' or a 'commercial') hold back until they catch up. Unless you are at the point of the financial year when you can call it 'racing'. Then it's allez allez!
- Wellbeing - make sure your staff on the frontline have all they need in terms of nutrition, food, 'medicine' and massages to keep going. No matter what physical or mental trauma they have suffered.