Employment Essentials: 5 Lessons from October 2019

11 November 2019

October has brought a plentiful harvest of interesting employment law cases. Gowling WLG's employment, labour & equalities experts bring you the latest top five employment law developments that may affect your business:

  1. Disciplinary investigations- the role of the investigating officer
  2. Legal advice privilege and the limited scope of the iniquity exception
  3. Harassment related to third party conduct
  4. Employee inventions of outstanding employer benefit
  5. Right to privacy and covert surveillance




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1.Disciplinary investigations - the role of the investigating officer

In misconduct cases, for any subsequent dismissal to be fair, an employer should first carry out an adequate investigation into the employee's conduct to determine whether there are grounds for disciplinary action to be taken.

Once a decision has been taken that an investigation is necessary, the employer should consider who should conduct the investigation and who should conduct the disciplinary hearing. The statutory ACAS Code of Practice states "where practicable, different people should carry out the investigation and disciplinary hearing". For small organisations this may not always be practicable.

The role of the investigator will usually be confined to investigating the allegations and making relevant findings of fact, based on the available evidence. The investigator will not generally be required to make recommendations about what should happen next or what a disciplinary outcome should be. As clearly stated in the non-statutory Acas Guide on discipline and grievances at work:

"It is common for an investigator to be asked to make a recommendation. However, an investigator should restrict their recommendations to only suggesting whether any further action may be necessary or beneficial. In most circumstances an investigator should recommend formal action, informal action or no further action.

An investigator should not suggest a possible sanction or prejudge what the outcome to a grievance or disciplinary hearing will be."

The Acas Guide also states:

"The report should reflect the investigator's own conclusions. While an investigator may seek advice from a third party such as HR, the conclusions should be their own."

This month, the Employment Appeal Tribunal (EAT) in Dronsfield v The University of Reading has held that the removal of evaluative conclusions from a draft investigation report did not render dismissal unfair. It was not unfair that the investigator altered his report on the recommendation of the employer's in-house solicitor. The investigator had accepted the solicitor's advice to remove his evaluative conclusions of whether the employee's conduct amounted to misconduct as defined by the employer's rules. It was appropriate for the solicitor to advise that the investigation report should be restricted to factual findings and a conclusion as to whether there was a prima facie case to answer. It was for the disciplinary panel to make an evaluative judgment on whether the conduct amounted to misconduct under the employer's disciplinary rules.

Lessons for employers:

1. When appointing an investigating officer, it is important to set out the terms of reference which act as a guide for investigators containing points of best practice. The investigator should focus on the facts and report the evidence in an unbiased way. Making evaluative judgments on the seriousness of an employee's conduct should usually be left to the disciplinary officer or panel.

2. Suggesting that an investigator amends their report to remove evaluative conclusions will not necessarily render any subsequent dismissal unfair. However, ensure that any advice does not overstep the mark. Where evaluative conclusions are being included in line with an employer's policy, investigators should not be placed under pressure to alter their report.

2. Legal advice privilege and the limited scope of the iniquity exception

Legal advice privilege (LAP) protects confidential communications between client and lawyer, made for the dominant purpose of seeking or giving legal advice. The public policy underlying LAP is that when a client consults a lawyer, the client must be confident that what passes between them will never be revealed without the client's consent.

However, LAP protection is not absolute. LAP may be lost under the "the iniquity principle" where a communication or document comes into being for the purpose of furthering a criminal or fraudulent design. But just how wide is "the iniquity principle"?

In Curless v Shell International Ltd (previously known as X v Y Ltd), the Court of Appeal (CA) considered whether LAP applied to a leaked email concerning the possibility of dismissing an employee who had brought a disability discrimination claim under an unrelated redundancy exercise.

In this case, from 2011, Shell had ongoing concerns about Mr Curless' performance. In August 2015, Mr Curless brought a tribunal claim for disability discrimination based on the measures Shell had taken regarding his performance.

In April 2016, Shell commenced a group wide reorganisation and redundancy process. Mr Curless was dismissed by reason of redundancy at the end of January 2017.

In October 2016, Mr Curless was sent anonymously an email dated 29 April 2016, which was marked "Legally privileged and confidential". The email was between one of Shell's senior lawyers and a lawyer seconded to Shell. The email contained legal advice on how the redundancy exercise could apply "across the board to the UK legal population including [Mr Curless]" if done with "appropriate safeguards and in the right circumstances, while there is always a risk he would argue unfairness/discrimination, there is at least a wider reorganisation and process at play that we could put this into the context of". The email ended: "Otherwise we risk impasse and proceedings with ongoing employment with no obvious resolution."

Mr Curless argued the leaked 29 April email was not covered by LAP. He claimed it fell within the iniquity principle alleging it contained advice on how to cloak an act of unlawful victimisation by using the redundancy programme to dismiss him. His interpretation was influenced by a conversation he had overheard between two professionally dressed women in a pub in May 2016, one of whom said that she was dealing with a complaint of disability discrimination by a senior lawyer at Shell whose "days [were] numbered".

While the Employment Judge disagreed with Mr Curless, on appeal, the EAT considered the advice set out in the email crossed the high bar for establishing a strong prima facie case of iniquity capable of excluding the privilege that would normally apply.

However, the CA has now overturned the EAT and held that the leaked 29 April email is covered by LAP. The CA viewed the email as the type of advice employment lawyers give "day in, day out" in cases where an employer wishes to consider for redundancy an employee who is regarded as underperforming. The client was seeking advice on whether the employee might be either offered voluntary severance or dismissed on the grounds of redundancy in the course of a genuine ongoing reorganisation. Advice was being given on how this could be done "with appropriate safeguards and in the right circumstances". As such, the CA disagreed with the EAT's interpretation that this was advice to act in an underhand or iniquitous way by cloaking a discriminatory dismissal as a redundancy. The iniquity principle was not engaged. The CA was also unwilling to allow a conversation the employee overheard in a pub to taint the advice recorded in the email.

What does this mean for employers?

The CA confirms that the threshold for waiving LAP is high. It reinforces the notion that the principle of protecting legal advice is not something which can be easily circumvented. It is grounded in the public policy which allows clients to feel confident that what passes between them and their lawyer will not be revealed without the client's consent. Invoking any exception to this principle is only permitted in exceptional circumstances.

3. Harassment related to third party conduct

Up until 1 October 2013, employers were potentially liable for the harassment of their employees by third parties, such as customers or visitors, in prescribed circumstances under section 40 Equality Act 2010. Following the 2013 repeal of section 40, it is still open to an employee to argue that under section 26 (harassment), an employer's failure to act in relation to third party harassment itself may amount to unwanted conduct (harassment can be committed by inaction as well as action).

The EAT in Bessong v Pennine Care NHS Foundation Trust reminds us that an employer will only be liable for action or inaction related to third-party harassment of an employee where the employer's action or inaction is itself because of the relevant protected characteristic.

In this case, a mental health nurse was seriously assaulted by a patient on racial grounds. The tribunal found that as a result of various failures on the part of the employer, including a failure to ensure that all incidents of racial abuse were reported, Mr Bessong had been indirectly discriminated against. The tribunal also found that the failure to create a culture in which all racist incidents were formally reported contributed to an environment in which racial abuse from patients was more likely to occur. This amounted to unwanted conduct for the purposes of harassment. However, the employer's failings were not themselves related to race. The tribunal found that the fact that the abuse was racial in nature played no part in the mental processes of management in failing to ensure that such matters were properly reported on the incident reporting system.

On appeal, the EAT agreed with the tribunal that an employer will only be liable for the third-party harassment of an employee where the employer's related action or inaction is itself because of the relevant protected characteristic.

Future return of employer liability for third part harassment?

The removal of the third-party harassment provisions in section 40 was controversial at the time and remains so, particularly in light of the extent of third-party sexual harassment at work. The Equality and Human Rights Commission and the Women and Equalities Select Committee have both called repeatedly for third-party harassment provisions to be reinstated in the Equality Act 2010.

A Government consultation on whether new third-party harassment provisions should be introduced and, if so, when an employer should become liable, ran from 11 July to 2 October 2019. The consultation sought views on whether the reasonable steps defence should apply and whether an employer's constructive knowledge of the harassment will be sufficient for it to be liable. The outcome is awaited.

4. Employee Inventions of Outstanding Employer Benefit

The Patent Act provides for employee inventors to be paid additional compensation in the event that their patent/invention is of 'outstanding benefit' to their employer. In assessing whether or not such a benefit is "outstanding", regard should be had to the size and nature of the employer's undertaking. It must also be 'just' in the circumstances that the employee receives compensation and such compensation should be a 'fair share'. But, just how high is the hurdle for employee inventors to show 'outstanding benefit'?

The long-running case of Shanks v Unilever PLC concerning employee inventor compensation and what constitutes 'an outstanding benefit' to the employer under the Patents Act 1977 has finally reached its conclusion.

The Supreme Court, overturning the Court of Appeal, has awarded an employee inventor (Professor Shanks), whose inventions led to patents that were of 'outstanding benefit' to his employer (Unilever), compensation of £2 million as a 'fair share' of that benefit.

For the overwhelming majority of patents, inventors and employers of inventors, the Supreme Court's judgment will not represent a change to the status quo in the UK. The bar for establishing 'outstanding benefit' is still set high, albeit slightly lower than set by the Court of Appeal. In the occasional case, it may make a difference. However, since the Supreme Court's guidance indicates that the statutory compensation regime will be engaged in 'stand out' cases only, proactive employer engagement with key inventors - for example appropriate recognition and sensitive reward for technical advancements, enabling a positive relationship to be maintained - may avoid the statutory regime ever being invoked.

For more detail on this important employee inventor case see our insight - Inventing employee wins £2 million compensation for outstanding benefit of patents in UK Supreme Court.

5. Right to privacy and covert surveillance

Under article 8 of the European Convention on Human Rights (ECHR) everyone has the right to respect for their private and family life, their home and their correspondence.

Last year in the long-running case of Barbulescu v Romania, the European Court of Human Rights (ECtHR) reminded employers that workplace communications as well as personal communications may be covered by the notions of 'private life' and 'correspondence'. A reasonable expectation of privacy is a significant, although not necessarily conclusive factor. In Barbulescu, the individual's article 8 rights had been infringed, partly on grounds that he had not been given notice that the content of his communications sent via a work account would be monitored by his employer.

This month we have the judgment of the Grand Chamber of the ECtHR in López Ribalda and others v Spain on article 8 rights in connection with the use of covert surveillance cameras used in connection with theft detection.

In its judgment the Grand Chamber provides guidance on the principles to be applied to the use of covert video surveillance:

  1. Notification - whether the employee has been notified of the possibility of video-surveillance measures being adopted by the employer and of the implementation of such measures;
  2. Extent - the extent of the surveillance by the employer and the degree of intrusion into the employee's privacy;
  3. Justified legitimate reason - whether the employer has provided legitimate reasons to justify covert video-surveillance and the extent thereof;
  4. Less intrusive alternatives - whether it would have been possible to set up a surveillance system based on less intrusive methods and measures;
  5. Consequences - the consequences of the surveillance for the employee subjected to it; and
  6. Safeguards - whether the employee has been provided with appropriate safeguards, especially where the employer's surveillance operations are of an intrusive nature.

Applying the above principles to the facts of the case, and assessing the legality of the approach taken by the Spanish courts, the Grand Chamber held:

"The Spanish courts had found that the employers had legitimate reasons for the video surveillance, namely the suspicion of theft, based on significant losses recorded over several months, and had a legitimate interest in discovering and punishing those responsible - principle 3 ü.

The monitoring took place in an area that was open to the public and involved permanent contact with customers. Employees' expectation of privacy was therefore lower than in places that are private by nature, such as a cloakroom or toilet, where a complete ban on video surveillance might be justified - principle 2 ü.

Although the employer had not set a maximum duration of the video surveillance beforehand, it only lasted for ten days and stopped as soon as the culprits were identified. The duration was therefore not excessive in itself - principle 2 ü.

Only the supermarket manager, the company's legal representative and the union representative viewed the recordings before disciplinary action was taken - principle 2 ü.

The Spanish court had found that there were no other means by which to fulfil the aims pursued and that the measure should therefore be regarded as "necessary". The extent of the losses suggested that a number of individuals had been involved and the provision of information to any staff member might well have defeated the purpose of the video surveillance - principles 1, 4, 5 & 6 ü."

The Grand Chamber observed that the Spanish data protection rules generally require individuals to be informed clearly in advance of data collection. However, the provision of information is just one of the criteria to be taken into account in assessing proportionality under Article 8. If such information is lacking, the safeguards deriving from the other criteria above will be all the more important.

The Grand Chamber concluded, having regard to the factors above, that the domestic courts were able, without overstepping the State's margin of appreciation, to take the view that the covert surveillance was proportionate. While "the slightest suspicion" of wrongdoing would not be sufficient to justify the covert nature of the surveillance, a reasonable suspicion of serious misconduct, combined with the extent of the losses, appeared to constitute weighty justification, all the more so given the suspicion of concerted wrongdoing by several employees.

Lessons for employers

The judgment is by no means a green light to blanket surveillance, but rather that use of covert video recording will not breach Article 8 in certain circumstances and subject to the six principles set out.

As regards the impact of data protection rights owed by an employer to an employee, they are relevant when assessing whether or not there has been a breach of article 8, but they are just one of the many factors to take into account rather than being necessarily determinative of the issue.

In the UK, guidance published by the Information Commissioner's Office states that it will be rare for covert monitoring of employees to be justified and that it should only be done in exceptional circumstances, for example as part of a specific investigation into suspected criminal activity. Supplementary guidance explains that covert monitoring will only be justified in a particular case if openness would be likely to prejudice the prevention or detection of crime or equivalent malpractice, or the apprehension or prosecution of offenders. It is therefore important to make a considered and realistic assessment of whether such prejudice is likely. The guidance also states that the implications of covert monitoring are such that senior management authorisation ought to be a prerequisite.

It is advisable for employers to maintain a policy that covert video surveillance will only be carried out in exceptional circumstances where the employer reasonably believes that there is no less intrusive way of tackling the issue. Where covert monitoring is undertaken, it should be done for the shortest possible period and affect as few individuals as possible.


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