Wragge Lawrence Graham & Co's employment experts bring you the latest employment law issues and provide action points to help you and your organisation.
Mandatory retirement age upheld
Seldon v Clarkson Wright and Jakes 2014
The Employment Appeal Tribunal (EAT) has upheld the tribunal's decision that a law firm's imposition of a mandatory retirement age at 65 years was a fair means of achieving the aim of sustainable workforce planning. The retirement age was deemed objectively justified and did not directly discriminate against Mr Seldon, a partner at the time.
There is a long history to this case.
2007 - Mr Seldon complained that he had been discriminated against on the grounds of age as a result of the mandatory age discrimination provisions in the partnership agreement. His case was rejected by the employment tribunal.
2008 - the case went to appeal in the EAT and the tribunal's decision was upheld. An appeal was then made direct to the Court of Appeal (CoA).
2011 - the CoA rejected Seldon's view that the firm was not justified in compulsorily dismissing him on his 65th birthday. He argued that automatic retirement, in his case, would not instantly benefit an associate who may otherwise have been unable to make partner, and accordingly, the aim of sustainable workforce planning would not be met.
The CoA's decision was made on the basis that any exceptions to the rule (i.e. retaining Seldon beyond his 65th birthday) would undermine the very purpose the clause was designed to achieve - building a sustainable workforce, and could render the clause redundant. The CoA also gave weight to the fact that the partners had agreed to include a compulsory retirement age in their partnership agreement as they presumably believed it to be in their collective interest.
2012 - the Supreme Court upheld the decision of the CoA on the grounds that the first two aims of the compulsory retirement age, (i) staff retention; and (ii) workforce planning, were directly related to the aim of sharing professional employment opportunities. The third aim, limiting the need to expel partners by way of performance management, was justified on the wider policy ground of preserving dignity in employment relationships.
2013 - The case was remitted back to employment tribunal to consider, whether, on the facts of the case, the mandatory retirement age was justified. The tribunal decided that the mandatory retirement age of 65 was justified and did not discriminate against Seldon. A further appeal to the EAT was then made.
The decision in 2014
During EAT pleadings, Seldon argued a different age should be used, such as 68 or 70, as it would be less discriminatory. The EAT emphasised a balance must be struck stating: "there has to be a balance between the needs of the firm and of the partners and of the associates."
The EAT determined there were only a "narrow range" of ages which would achieve this, within which the age of 65 was included, and accordingly, the retirement provision was justified and enforceable.
Employers wishing to rely on a defence of justification must be careful to document (with the inclusion of precise aims and objectives) their business case for the enforcement of retirement at a particular age in the event any challenge is made.
The comments made in the Supreme Court judgment would still indicate that justification will be hard to demonstrate in practice and employers and partnerships (including LLPs) should not view this case as indicating any easing of age discrimination legislation in relation to retirement.
Courts should not add words to a covenant in order to give effect to what would otherwise be a useless covenant
In the case of Prophet PLC v Huggett earlier this year, the High Court implied the words "or similar to" into a post-contract clause which otherwise did not make sense. It justified this as necessary to produce a commercially sensitive and effective result.
The Claimant, Prophet, was the only supplier of its products and the court found, therefore, that a clause preventing the Claimant from developing and supplying its own software products for a competitor was pointless. In the judge's view, it was clear "something had gone wrong" with the drafting of the clause. To construe it in the way intended, it was necessary to add the implied words in order to give the employer meaningful protection.
This case demonstrated a high watermark in the current trend of the courts towards adopting a purposive interpretation in order to give effect to restrictive covenants.
The Court of Appeal has now considered the case and overturned the original judgment. The Court of Appeal's decision suggests the High Court has gone a step too far and indicates there are limits on the court's power to interpret covenants purposively in order to protect employers.
The employee argued that while the courts might be justified in certain cases to amend a covenant (eg to delete provisions which offend public policy), it is a step too far to interpret more widely a covenant that looks too narrow in order to give a party effective protection.
He also argued that the wording of the restriction was clear and was not useless, in that it was intended to prevent him from working in a competing firm in connection with products of a type which he previously had not been involved with. Adding the words "or similar to" was more than was necessary to give the employer the protection intended by the original drafting.
The Court of Appeal said that the meaning of the words of the covenant was clear. Even though the court acknowledged that the employer's intention was most likely to prevent the Claimant from developing and supplying software products for competitors, the wording of the covenant was not ambiguous and it was therefore not necessary to imply words into the covenant.
The real issue was that the employer had made a bad bargain and it is not a job for the courts to remake the parties' bargain. The court said "Prophet made its… bed and must now lie in it."
This decision is in line with the courts' traditional approach to interpretation and enforcement of covenants, in which the onus was on the employer drafting a covenant to get it right. It perhaps also suggests a retreat from a period in which the High Court has looked ever more willing to assist employers in gaining protection against the competitive actions of departing employees.
The case serves as a reminder that restrictive covenants must be carefully thought through and drafted to ensure they achieve the result intended.
Obesity and disability update
The Advocate General of the Court of Justice of the European Union (CJEU) in the case of Karsten Kaltoft v Municipality of Billund has issued an opinion on the question of whether obesity might qualify as a disability, which we covered initially on 17 July.
If it does, then an obligation to make reasonable adjustments to an individual's working arrangements would arise along with obligations not to subject an individual to detriment at recruitment stage and more generally during employment.
The Advocate General concluded that obesity, in isolation, is not automatically to be regarded as a disability and therefore discrimination on the grounds of obesity is not automatically precluded by EU law.
Mr Kaltoft worked for a number of years as a childminder. His body mass index measured at 54, which is regarded as extreme obesity. He was able to demonstrate a number of physical limitations resulting from his condition, relating to reduced mobility and other related symptoms.
The Advocate General considered a number of issues. In particular, he noted that the fact that an individual was not entirely hindered from effective participation in professional life and was in fact able to carry out some work, did not preclude a finding that he had a disability.
While the particular role he carried out may not have been impossible for him, he may nevertheless properly be regarded as facing obstacles or handicaps in the workplace. This is clearly correct, as many individuals who plainly have a disability do continue successfully to work.
He concluded that in cases where the condition of obesity has reached a degree that it, in interaction with attitudes, role and environmental barriers, plainly hinders full participation in work, it can be considered to be a disability and so attract protection. However, mere obesity is insufficient to amount to disability.
Of more general application, the Advocate General notes that the Directive imposes no obligation to maintain in employment an individual who is not competent to perform the essential functions of his post. However, this is without prejudice to the obligation for reasonable accommodation to be provided in order to guarantee compliance with the principle of equal treatment of persons with disabilities.
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 that 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.
The UK Employment Tribunal considered this issue recently and reached a similar conclusion. It is unlikely to be long before an individual succeeds in a claim relating to medical conditions which might be regarded as having their roots in obesity.
Employers should be aware now that such claims will succeed if consideration is not given to adjustments which could be made, or if an appropriate assessment is not made of an individual's ability to perform the tasks required for the role in question.
Can employers increase sanctions on appeal?
In McMillan v Airedale NHS Foundation Trust, the Court of Appeal upheld an injunction preventing the employer from changing a final written warning to a dismissal on appeal.
Its contractual disciplinary procedure did not include a specific right to increase a sanction on appeal. The right of appeal was for the employee's benefit; it could not be right that an employee could face a tougher sanction but have no right to appeal it.
In this case, Elizabeth McMillan (McMillan) was employed as a consultant obstetrician and gynaecologist by Airedale NHS Foundation Trust (the Trust). The Trust initiated disciplinary proceedings in 2010 and issued a final written warning. Her solicitors appealed.
The Trust proposed that the appeal panel would consider the evidence and would be determine its own outcome "in terms of the sanction applied" (effectively a full re-hearing). The appeal was held and both parties were invited to make written submissions on sanction. A few days prior to the sanctions hearing, the panel forwarded the argument of the Trust (effectively calling for her dismissal) to McMillan.
McMillan's solicitors said they would refuse to further discuss sanctions in front of the panel as constituted and threatened to withdraw her appeal and sue for breach of contract unless a fresh panel was convened. The panel declined, so McMillan's solicitors applied for an injunction seeking to restrain the Trust from reconsidering the sanction.
The High Court issued a permanent injunction restraining the Trust. The Trust appealed to the Court of Appeal, which found that the Trust could not increase the sanction on appeal in the absence of a contractual provision entitling it to do so. This was particularly the case in circumstances where the policy provided for no secondary right to appeal: it could leave an employee facing a more serious sanction (dismissal in this case) without any further right to appeal.
In practice, employers should check whether their internal disciplinary policy makes it expressly clear that a higher sanction may be imposed on appeal. If not, employers should make that amendment or prepare to be challenged if such a decision is made. Equally, where an increased sanction is applied on appeal, it may be less open to challenge if the employee has, in turn, also been granted a further right to appeal.