Employment update - October 2014

24 minute read
02 October 2014

Fuller v United Healthcare Services: Employment Appeal Tribunal (EAT) decides territorial scope of UK employment law does not extend to a US employee who spends 49% of his time in the UK

The Employment Appeal Tribunal has upheld a decision of the Employment Tribunal that an employee who worked almost 50% of the time in the UK was not entitled to bring claims for unfair dismissal and discrimination during their tribunal.

The claimant was a US national employed by a US company. He accepted an "international rotation assignment" under which he became managing director of a UK subsidiary, focusing on business in the UK, Europe and the Middle East. He was in London for just under half the time, and when in London lived in rented accommodation paid for by the employer. He continued to be paid in US dollars. He left his furniture and home effects in his Texas home where he and his partner lived.

He was told his expatriate assignment was being terminated due to budget issues. Following a short period in which he unsuccessfully sought another role within the company, he was dismissed. The claimant made claims for unfair dismissal, sexual orientation discrimination and automatic unfair dismissal in respect of protected disclosures ("Whistleblower" claims).

The Employment Tribunal held that it did not have jurisdiction. It noted that 'the claimant was in the obverse situation from claimants in the leading cases in that he was not "working abroad" and seeking to invoke UK employment legislation; rather he was seeking to invoke UK legislation because he was present in the UK, on business, for much of his time.'

The claimant argued that this decision eroded protection for people working on an expatriate basis in the UK and would leave them with nowhere to seek redress if discriminated against or unfairly dismissed. He also argued that the general rule set out in the earlier case of Lawson v Serco (that an employee working in Great Britain is the paradigm case of an employee who is entitled to protection from unfair dismissal) meant that he fulfilled the territorial requirements to bring his claims.

He argued that ordinarily working in the UK at the time of his dismissal was the strongest possible indication that he should fall within UK employment law and that his rights under EU law required that he be able to enforce his employment rights in the UK.

The EAT, however, concluded that, "Overwhelmingly the strongest connection, both in the deliberate intention of both parties to the employment relationship, as contractually expressed, and in the factual outworkings of that contract was to the United States."

The EAT acknowledged that it might be argued a person working in this country should have the benefit of protection from discrimination but did not accept the claimant's argument that the claimant had rights under EU law since the employment relationship was an American relationship and so not subject to EU law.

The case makes clear that a strong connection to another jurisdiction can override any connection to UK employment law arising from carrying out work in the UK. It is clear that claimants will not be able to bring tribunal claims in the UK solely as a result of having worked part of their time here and that the tribunal is entitled to consider the strength of the connection to the UK in comparison to any other jurisdiction.

In assessing the risk of UK-based claims succeeding from internationally mobile workers, employers will have to carry out a full assessment of the relationship, both contractual and organisational, as well as consider the individual's pattern of work.

Relocating the workforce following a TUPE transfer

The recent case of Cetinsoy v London United Busways Limited (UKEAT/0042/14/LA) serves as a useful reminder to employers that the relocation of employees for TUPE transfer can be difficult to manage because of the protection given to employees under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

If an employee can establish that relocation is a 'substantial' change in working conditions to his or her material detriment, any resulting resignation will be treated as a dismissal, giving rise to scope for unfair dismissal claims. There is no need for the relocation to amount to a breach of the employment contract by the employer.

TUPE potentially provides protection for a transferring employee, even where the employment contract includes a mobility clause which would otherwise permit the employer to relocate the employees as proposed. Employers should be aware that the concept of 'material detriment' is subjective, and determined on the basis of the individual's particular circumstances. However, the tribunals will take a practical approach when deciding whether a transfer constitutes material detriment.


The case concerns four bus drivers whose depot was relocated 3.5 miles across London following a TUPE transfer. Following the transfer, all resigned and claimed that they had been dismissed, either because the relocation was a fundamental breach of contract entitling them to resign and claim constructive dismissal, or because it amounted to a substantial change to working conditions which was to their material detriment.

The relocation was not covered by the mobility clause in the employment contracts and in a previous case a group of bus drivers had successfully claimed that a similar relocation was a substantial change to working conditions and to their detriment.


The tribunal (subsequently upheld by the EAT), concluded that in this case, the change in location did not entitle the employees to treat themselves as having been dismissed. It concluded that the relocation was not a 'substantial' change: the increase in travelling time did not exceed one hour per day for any employee and so the relocation of the depot was not a serious enough breach to give rise to a dismissal claim.

While upholding the tribunal's decision, the EAT did offer some useful guidance on the correct approach to be taken. In particular, it confirmed that a subjective test should be applied in assessing whether the change made could be described as material. The issue will therefore be viewed very much from the employee's perspective and not that of the employer.

The EAT agreed with the tribunal that in this case there was no substantial change to working conditions and therefore no fundamental breach of contract by the Employer, although it was clearly not entirely happy with the way the case had been approached by the tribunal.

The EAT was at pains to emphasise that the question of whether there is a fundamental breach of contract or a substantial change to the material detriment of an employee are issues which must be determined on the facts of each case. This can make it difficult in for employers to find certainty about what will be acceptable in practice.

Practical Issues

Employers should keep in mind that the test is subjective and that if employees can make a reasoned case for objecting to a change, they will generally be upheld in doing so, even if in this case it appears that the employer benefitted from a favourable decision.

The amended TUPE Regulations?

The transfer in Cetinsoy took place prior to 31 January 2014 and so was decided on the basis of the previous version of the Regulations.

Since January 2014, the Regulations have expressly provided that a transfer-related relocation of employees can be an economic, technical or organisational reason (an 'ETO') under TUPE.

Where the sole or principal reason for dismissal (including resignations for fundamental breach of contract and substantial change to the material detriment of an employee) is an ETO reason, dismissal as a result of refusal to accept relocation may now be fair. Employers will still need to consider the operation of mobility clauses and normal contractual principles but, in a case where employees resign following the transfer, the dismissal may now be fair.

Unfortunately, it is common for employees to resign in advance of the transfer, especially where the proposed new location will add considerably to travel time or cost.

That scenario still causes a problem. In such a case, the proposed relocation by the transferee will not amount to an ETO reason. This is because the ETO reason must be a reason relating to the dismissing employer. In the case of a pre-transfer resignation, it is the transferor who is deemed to have dismissed the employee.

As the law stands, the transferor cannot rely on the future transferee's ETO reason for requiring changes such as relocation and so a dismissal will be automatically unfair. Employers must therefore continue to consider options carefully where changes are proposed and to weigh up the likely risk of claims being made, before any communication is made to staff.

Equal pay

Before the last election, addressing the issue of the gender pay gap was on all of the main parties' agendas. Despite equal pay legislation being in force since the 1970s, the gap persisted stubbornly. It still does.

As at June this year, the full-time gender pay gap was on average 10%, almost doubling at 19.7% for the whole workforce (full and part time). The government's chosen response is to introduce new powers for employment tribunals to order equal pay audits to be carried out by employers who lose equal pay claims.

The new power only applies to claims lodged on or after 1 October 2014, so it will be several months before we see any orders actually being made. There are exemptions for micro-businesses (employing fewer than 10 employees, calculated unusually on the basis of full-time equivalent employees rather than headcount) and for new businesses for which there is a complex definition.

The order will specify the scope of the audit and as well as identifying gender-related differences, it must include the reasons for any potential equal pay breach and what the employer plans to do about it. (Nothing is unlikely to be an acceptable answer!) There is a fairly detailed procedure specified for how the tribunal will police compliance and also for publication of the results once the tribunal is satisfied the audit has been done properly. The sanction for failing to do so is £5,000 for each default on an order relating to the audit, taking into account the employer's ability to pay.

The government is hoping that this new potential sanction will encourage more employers to carry out voluntary equal pay audits and then take action to address any gender pay inequalities that are revealed. How effective this is in practice remains to be seen as relatively few equal pay claims make it all the way through to a final judgment, with many settling before then.

Also, there are a number of situations in which a tribunal must not order an audit even if an employer has lost a claim - e.g. the breach involved in the successful claim doesn't suggest there is a more widespread problem or where the disadvantages of an audit would outweigh its benefits. The latter is bound to result in a test case at some point.

However, there is no doubt that the possibility of securing an order for an audit will cause unions and employees to take a closer interest in pursuing claims, which while still individual in nature could now produce an outcome that benefits a wider section of the workforce.

New right for fathers to take time off for antenatal appointments

From 1 October 2014, fathers will have the right to unpaid time off to accompany their spouse or partner to antenatal appointments. The new right applies to employees and also to some agency workers.

Who is entitled?

The baby's father, the expectant mother's spouse, her civil partner, or partner (of either sex) in an enduring relationship, are all entitled to exercise the new right and of course it is possible that more than one person may claim an entitlement. The intended parents of a child in a surrogacy arrangement are also entitled to the time off, if they expect to be entitled to and intend to apply for a parental order in respect of that child.

Adoptive parents will also acquire a right to attend meetings in advance of a child being placed with them for adoption, but this right does not come into force until 5 April 2015.

How much time can an employee take off?

An employee will be permitted to take unpaid leave for one or two antenatal appointments with a maximum of six and a half hours per appointment in relation to each child. An employer can of course allow time off for additional appointments at its discretion.

What evidence can the employer require the employee to produce?

Prior to the appointment, an employer can request an employee to provide a signed declaration stating:

  1. that the employee has a qualifying relationship with a pregnant woman or her expected child;
  2. that the employee's purpose in taking time off is to accompany a pregnant woman to an antenatal appointment;
  3. that the appointment in question is made on the advice of a registered medical practitioner, registered midwife or registered nurse; and
  4. the date and time of the appointment.

Is there a right to pay for time off?

There is no express right for an employee to be paid for the time taken off to attend an appointment, so any payment for the time off will be discretionary, unless an employer has chosen to create a contractual right for this time off.

Can an employer refuse a request for time off?

Yes. An employer may refuse an employee time off to accompany a woman to an antenatal appointment where it is reasonable to do so. So far there is no guidance as to when it would be reasonable to refuse such a request, but it is reasonable to suppose that appointments of which the employer is made aware at very short notice and pressing business deadlines would count as reasonable grounds to refuse a request.

Consequences of refusal

An employee or agency worker who is unreasonably refused time off may bring a claim in an employment tribunal for compensation which, if awarded, will be of an amount equal to twice the hourly rate for the period of time off requested.

A useful guide on the right has been published by the Department of Business, Innovation and Skills.

Enhanced pay for parental leave?

In our September briefing, we explained the new system of shared parental leave (SPL) coming into force in October for couples with babies due on or after 5 April 2015. One of the key questions that employers will face under the 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 recent case of Shuter v Ford Motor Company is a timely reminder of some of the factors that employers will need to consider when making this decision.

In Shuter, the tribunal decided that Ford was entitled to pay enhanced maternity pay to women on maternity leave while only paying statutory paternity pay to men on APL such as Mr Shuter. He took five months' APL paid at the statutory rate in accordance with Ford's policy and claimed that Ford's failure to pay him enhanced APL equivalent to the enhanced maternity pay it paid his female colleagues on maternity leave constituted direct and indirect sex discrimination. Mr Shuter lost on both counts.

The tribunal rejected the direct sex discrimination claim because Mr Shuter's comparator for the purposes of the claim was not a female colleague on maternity leave but a female colleague who, like him, was a spouse (or civil partner) taking APL. As a female colleague on APL would also have received only statutory minimum pay, there was no direct gender discrimination.

Key to Ford's defence of the indirect discrimination claim was the fact that Ford was able to provide clear and cogent evidence of its decision-making process when APL came in. Mr Shuter had argued that Ford's policy was discriminatory towards men. Ford accepted that men as a group were likely to suffer a disadvantage because of its policy, because statistically there are likely to be more male than female spouses or female civil partners within the group eligible for APL and this was reflected in Ford's workforce.

However, Ford had statistical evidence going back to 1999 that it considered when reviewing its policies when APL came in, which showed that its workforce was "overwhelmingly male". Those statistics also showed that while its enhanced maternity pay policy appeared to have had some success in helping attract women to the business, as the number of women in the workforce had increased since the policy had been introduced, the need to continue to attract and retain female staff by a generous approach to maternity pay remained.

The Tribunal agreed that Ford's approach could be justified as it pursued a legitimate aim (recruiting and retaining more women) and was proportionate.

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.

Whether this will succeed is likely to depend on both the industry - while the automotive sector is generally male dominated, this is not the case for other sectors - and the circumstances of the particular employer.

Labour to scrap the employment tribunal system?

Labour's Shadow Business Secretary, Chuka Umunna, has told the TUC Congress that the next Labour government will scrap the employment tribunal system and replace it with a "fairer system to ensure that affordability is not a barrier to employees seeking redress in the workplace."

Labour's main target appears to be the introduction of fees for employment tribunal claims last year, which, for an individual claimant, range between £160 and £250 to issue a claim, and a further sum between £230 and £950 if the claim goes to a hearing. Mr Umuna stated that he agreed with the trade unions that the fee system is a barrier to justice which deters the poorest and most vulnerable employees from upholding their rights.

The tribunal fees system was introduced in part to dissuade what some saw as spurious employment claims being brought against employers. Recent Ministry of Justice figures show a decrease of 70% in the number of tribunal claims being brought for the period April to June 2014 compared with the same period last year. Supporters of the introduction of fees say that they are having the desired effect in reducing unmeritorious claims.

However, Mr Umunna said Labour's initiatives would go further than employment tribunal fees alone. If elected in 2015, Labour would look to abolish the current employment tribunal system itself and introduce one 'which ensures all workers have proper access to justice'.

Further details were not forthcoming, so what an abolition of the current system would look like and what would replace it remains unclear, as does the question whether, if tribunal fees are scrapped and perceived access to justice issues are resolved, Labour would still push ahead and reform or replace employment tribunals.

Although employers are used to the current system (which has been in place in various iterations since the 1970s) most would welcome a faster system. However, the length of time taken to hear employment claims results as much from resourcing and funding issues in HM Courts and Tribunals Service as from the structural make-up of the tribunal system.

Initiatives to maximise the involvement of the Advisory Conciliation and Arbitration Service (ACAS) so as to promote early resolution of claims are already in place, so it is difficult to anticipate what may be envisaged as a new regime. More detail may arise in the period leading to the next General Election in May 2015 as the main parties publish their manifestos.

Employment law reform update

Employment law reform featured heavily in the Coalition Government's legislative programme. We have already seen changes in relation to unfair dismissal claims and compensation, collective redundancy consultation, whistleblowing protection, TUPE, flexible working requests and tribunal reform, including the introduction of tribunal fees.

Further changes are coming. We are on the eve of the new shared parental leave regulations and the Government has announced plans to tackle misuse of zero hour contracts. Further changes anticipated are set out below.

Autumn 2014

1 October

  • Right for fathers to attend antenatal appointments
  • National minimum wage rises to £6.50 per hour
  • Tribunals' power to order equal pay audits

October (staged implementation begins)

  • Sickness absence: new independent assessment service

1 December

  • Shared parental leave in force for babies due on or after 5 April 2015

Spring 2015

5 April

  • Shared parental leave fully in force and abolition of Additional Paternity Leave
  • Right for those proposing to adopt to attend 'adoption appointments'
  • Removal of a six-month qualifying period for adoption leave
  • Revision of Statutory Adoption Pay to mirror Statutory Maternity Pay
  • Extension of adoption leave and pay to surrogacy and 'foster to adopt' arrangements

Autumn 2015

  • 'Caste' to be a specific aspect of race discrimination
  • Employer-supported childcare voucher schemes closed to new participants

Sometime in 2015

  • Regulation of zero-hour contracts including exclusivity clauses become unenforceable
  • Whistleblowing: annual reporting by 'prescribed persons'
  • Limited tribunal reform and penalties for non-payment of tribunal awards
  • Increased penalty for underpayment of national minimum wage
  • Repayment of public sector exit payments by those quickly re-employed
  • Repeal power to make recommendations for the wider workforce in discrimination cases
  • Apprenticeship simplification

Jane Fielding and Yvonne Gallagher

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