UK Employment Law Update, Summer 2013 - Employee Rights/ Labour Relations

Welcome to the latest issue of the Steptoe Employment Law Update.

The Employment Law Updates are aimed at providing snapshot information on recent developments in UK employment law and also a brief practical insight in managing workplace issues on a proactive basis.

1. ALL CHANGE – EMPLOYMENT LAW REFORM

Fees for employment tribunal and employment appeal tribunal claims are now in force with effect from 29 July 2013 for all new claims. Tribunal fees will be charged in two stages, the first at the issue of the claim and the second prior to the Hearing. The introduction of fees is currently the subject of a judicial review challenge by Unison, which Hearing will take place in October 2013.
The Government has recently published a factsheet giving guidance on fees. Click here for factsheet. The Issue and Hearing fees of £250 and £950 respectively for ordinary detriment/dismissal claims are payable by the Claimant but with a remission scheme in place for those who cannot afford the fee, a Respondent employer may not be aware that a claim has been issued for some time after the limitation period has expired. The Tribunal will reject a claim if it is not accompanied by a Tribunal fee or a remission application. If the Claimant does not pay the relevant fee by the specified date, the claim will be dismissed without further order. This could leave a Respondent unaware that the Hearing will not be effective creating considerable uncertainty. The fee for judicial mediation is now £600 and is payable by the Respondent employer. There is no provision for the Tribunal to refund the fee once it is paid. However, if a claim is settled before the Hearing the Respondent employer may end up being asked to pay for the fees paid as part of a compensation package.
New rules are also in place for the revised Tribunal procedure with effect from 29 July 2013. Among other changes the new rules combine case management discussions and pre-hearing reviews into one preliminary hearing and introduce an initial paper sift. A new ET1 Claim Form is also introduced. The overriding objective remains that parties are on an equal footing, cases are dealt with proportionately to the complexity and importance of the issues, avoid unnecessary formalities, delays and save expense. With the new initial sift stage, an employment Judge will automatically review every case on paper once the claim and response forms have been submitted. Cases which have no reasonable prospect of success will be struck out, subject to an appeal. Case management directions will then be given if the claim is to proceed. The Respondent will now be able to apply for an extension of time either before or after the original 28 day deadline for filing the ET3. The draft ET3 should accompany any application for an extension where the deadline has passed.
Another significant change relates to unfair dismissal and the new cap on the compensatory award. For dismissals after 29 July 2013, the statutory limit on compensation is the lower of £74,200 (reviewed annually) or 52 x a week's pay of the Claimant, i.e. 1 year's salary. This may have a significant effect on the number of claims when coupled with the new costs regime for prospective Claimants. Claims may fall by as much as 25%.
Compromise Agreements are renamed Settlement Agreements with effect from 29 July 2013. From that date employers and employees will be able to enter into confidential discussions about termination of employment which will be inadmissible thereafter in ordinary unfair dismissal claims. ACAS has produced a statutory Code of Practice on settlement agreements, available from here, and a Guide to Settlement Agreements. This pre-termination negotiation can be initiated by either the employer or the employee as a means to ending the employment relationship before any formal dispute has arisen. If a settlement is not agreed, an employee may still bring a claim but he or she will not be entitled to include evidence about the termination discussions in the claim. Under the Code, as a general rule a minimum of 10 days should be allowed to the parties to consider the terms of agreement and to receive independent advice unless the parties agree otherwise. The protection from disclosure is limited to normal unfair dismissal claims and it will not apply to discrimination, whistleblowing or contract claims. Discussions will be discloseable if there has been any improper behaviour by either party such as bullying or undue pressure on the party during the discussions to accept the terms of settlement.
Interest on unpaid employment tribunal awards at 0.5% accrue from the day after the relevant decision day with effect from 29 July 2013 but no interest will be payable if the full amount of the award is paid within 14 days of the relevant decision day. Interest on unpaid discrimination awards for claims brought after 28 July 2013 has risen up from 0.5% to 8%.

2. EMPLOYEE SHAREHOLDER STATUS

This new type of employment status whereby employees give up some of their important employee rights in exchange for an award of shares worth at least £2,000 comes into effect on 1 September 2013. There are very detailed and complex tax requirements to be satisfied if the employee is to be given this special status. The Company is required to provide a written statement of the particulars of the status of the employee shareholder. The employee must obtain advice from an independent adviser as to the terms and effect of the written statement and there is a cooling off period of 7 days. The Company must also pay the reasonable costs of the employee in obtaining advice whether or not the employee becomes an employee shareholder. Apart from the complex tax issues, a number of significant issues remain unclear, such as buy back, forfeiture and leaver provisions so the practicality of this new status option may deter all but the most experienced employers.

3. DIRECTORS' PAY

The Government has published regulations setting out the information which should be included in the directors' remuneration report with effect from 1 October 2013. The remuneration report which the directors of a quoted company are required to prepare under the Companies Act 2006 should include a single total figure table of remuneration in respect of each person who was a director during the relevant financial year, payments made to directors for loss of office and a performance graph which sets out the total shareholder return of the company on equity share capital.

4. MANDATORY EARLY CONCILIATION

The Government has responded to the consultation on early conciliation which is intended to be introduced in April 2014. It has decided to impose a duty on the parties and ACAS to attempt early conciliation of employment disputes before most tribunal claims are issued. This will require individuals bringing a claim to first notify ACAS through an online form. This means conciliation will come at the beginning of the litigation process before costs begin to escalate. ACAS has secured funding ahead of the employment law changes to enable their participation. Prospective Claimants will remain responsible for ensuring they present claims to a Tribunal within the relevant statutory time limits. As the proposed rules of procedure will require Claimants to include the conciliation reference number given to them by ACAS on their ET1 form to demonstrate compliance with the requirement for early conciliation, if this is not done, the Tribunal will dismiss the claim. This reform may also have a significant impact on future claims made to a Tribunal after a failure to settle matters mutually.

5. DATA PROTECTION AND SUBJECT ACCESS REQUESTS

The Information Commissioner's Office has published new guidance for organisations to help them deal with requests for individuals for their data.

Under the Data Protection Act anyone has the right to find out what information an organisation holds about them by making subject access requests. Once received an organisation normally has 40 days to reply to the request. As part of the launch of the publication of the new code of practice the Information Commissioner's Office has published 10 simple steps which organisations should consider when responding to subject access requests:

Identify whether a request should be considered as a subject access request
Make sure there is enough information to be sure of the requester's identity
If more information is needed from the requester to find out what they want, then ask at an early stage
If a fee is to be charged, ask for it promptly
Check whether the information the requester wants is available
Do not be tempted to make changes to the records, even if they are inaccurate or embarrassing
But do consider whether the records contain information about other people
Consider whether any of the exemptions apply
If the information includes complex terms or codes, then make sure these are explained
Provide the response in a permanent form, where appropriate.

The code is available here.

6. CASTE LEGISLATION

The Government has published a timetable for introducing caste legislation under the Equality Act 2010. Caste will be included within the definition of the protected characteristic of "race". A public consultation is planned for spring 2014 with a final draft order to be introduced during the summer of 2015.

7. WORK EXPERIENCE AND HEALTH AND SAFETY

The Government has reduced and simplified health and safety requirements for young people being taken on as work experience students by employers. The Health & Safety Executive has issued revised guidance to employers on placements for young people. Employers do not have to take out special insurance policies to cover students on work experience and making it clearer and easier for employers and work experience organisers to check appropriate measures are in place. Employers with fewer than 5 employees do not need a written risk assessment and repeat assessments are not required for all new work experience students. The new HSE guidance is available here.

8. FREEZE ON RED TAPE FOR SMALL BUSINESSES

The Government has stated that the moratorium exempting businesses with fewer than 10 employees from new regulations will be extended to firms with up to 50 staff and will continue beyond 2014.

9. TERMINATION PAYMENTS – TAX REVIEW

In August 2013 the Office of Tax Simplification produced an interim report on the review of employee benefits and expenses. One of the areas to be prioritised for further review is termination payments. The report provides an interesting read for HR professionals and payroll providers, in particular the exemption for taxation of the first £30,000 of any termination payment and the tax treatment of PILONs. The Government is being urged to consider increasing the £30,000 tax free threshold which if adjusted for inflation would rise to £71,000 at today's value. The report is available here.

10. TAX FREE CHILDCARE

The Government has issued a consultation on the design and operation of tax free childcare. It is proposing to introduce a new scheme to replace the employer supported childcare capped at an annual limit of £1,200 per child. The new scheme will be phased in in Autumn 2015 when parents of children up to the age of 5 and disabled children under the age of 17 will be eligible. The existing childcare voucher scheme will remain open to new joiners until the new scheme is introduced. At that time members of the voucher scheme may choose to remain in that scheme or switch scheme.

11. HOLIDAY PAY TO INCLUDE VOLUNTARY OVERTIME

Neal v Freightliner Ltd 131532/2012

This is a first instance decision and therefore not binding on other tribunals but it is an interesting case. The Employment Judge held that Mr Neal's employer should have taken his overtime payments into account when calculating his holiday pay in respect of the minimum 4 weeks' statutory annual leave required by the Working Time Directive.

Statutory holiday pay is to be calculated using "a week's pay" provision in the Employment Rights Act 1996. In the 2011 British Airways case, the ECJ held that under EU law workers taking statutory holiday were entitled to receive their normal remuneration. This included not only basic salary but also remuneration intrinsically linked to the performance of their tasks that they were required to carry out under their contracts.

In this case Mr Neal had always worked more than his contractual 7 hour shifts, regularly working 8½ or 9 hours. When he complained about the calculation of his holiday pay entitlement Freightliner argued that he was only entitled to holiday pay calculated on the tasks under his 7 hour shift which he was required to carry out under his contract of employment and any overtime was voluntary so was not included. The Employment Judge disagreed. During his overtime periods he was performing tasks that he was required to do under his contract. Although he might have volunteered to perform those tasks this did not mean that they were not linked to the normal remuneration test. Where a worker's overtime varies from week to week so that he or she has no normal working hours, a week's holiday pay should be based on the worker's average weekly remuneration in the period of 12 weeks before the holiday.

Key point: For the time being until the matter is being considered further by the EAT employers should consider taking voluntary paid overtime into account when calculating holiday pay for the first 4 weeks of statutory leave but not for the additional 1.6 weeks' leave, distinguishing between the entitlement under the Working Time Regulations and the Working Time Directive which does not specify how holiday pay should be calculated.

12. SICKNESS AND HOLIDAY LEAVE CARRY OVER

Sood Enterprises v Healy UKEATS/0015/12

The EAT has confirmed that the Working Time Directive does not require the carryover of the additional 1.6 weeks' leave under Regulation 13A of the Working Time Regulations 1998 where a worker is prevented from taking holiday due to his long term sickness absence. The Working Time Regulations which provide for the additional 1.6 weeks' leave is a domestic provision only.

Mr Healy worked for Sood as a handyman and carwash worker. He was entitled to 28 days' statutory annual holiday. He suffered a stroke in July 2010 and was off work until he resigned in June 2011. His absence straddled two holiday years, but he had some untaken holiday leave in 2010 and a pro rata holiday entitlement for 2011. When he received no payment in lieu of accrued holiday leave he brought a claim for unpaid holiday pay. When he was successful Sood appealed. The EAT held that Mr Healy was entitled to carry over only the basic 4 weeks' holiday leave and not the additional 1.6 weeks' leave from 2010 as there was no relevant agreement between Mr Healy and Sood for carrying over this additional leave, under Regulation 13A(7).

Key point: An employee on long term sick leave is allowed to carry over the basic allowance of 4 weeks' annual leave that is guaranteed under the Directive automatically without the need to request this leave. Employers should be careful when calculating the number of carry over days or a payment in lieu of accrued but unused holiday where an employee has been on long term sick leave. If there is a limited contractual right to carry over the 5.6 weeks' holiday leave, under a relevant agreement under Regulation 13A(7) employees should be advised clearly of their right.

13. TUPE

- organised grouping

Ceva Freight (UK) Ltd v Seawell Ltd XA118/12

Mr Moffatt who did not take part in this appeal, was a logistics coordinator working for Ceva. He worked on Ceva's Seawell contract almost 100% of his time. The other 5 employees who worked on the contract spent only a small percentage of their time on it. When Seawell took the decision to bring the work carried out by Ceva in-house, Ceva claimed that TUPE applied so as to transfer Mr Moffatt's employment to Seawell, but Seawell disagreed and refused to take him on. Seawell claimed it had taken back in-house all of the work that had been carried out for them by Ceva not just those aspects of the work which had been carried out by Mr Moffatt. The conditions for a service provision change under Regulation 3 of TUPE had not therefore been met.

Before an employment tribunal Mr Moffatt claimed that he had been unfairly dismissed by either Ceva or Seawell. The Tribunal found that his employment had transferred to Seawell and that it was liable for his unfair dismissal. This was overturned on appeal where the Appeal Judges held that even though an "organised grouping" could be just a single employee it did not mean that if a single employee spends all of his time on work for a particular client he necessarily constitutes an organised grouping of the TUPE purposes.

Organised grouping connotes a deliberate putting together of a group of employees for the purpose of relevant client work. On a further appeal by Ceva the Inner House of the Court of Session upheld the EAT's judgment. Where the activities are carried out by a number of employees the reference in the definition to an organised grouping to a single employee does not warrant his or her isolation from that group. Mr Moffatt could not therefore be separated from others in the group and be held alone to have been transferred. He had therefore been unfairly dismissed by Ceva.

Key point: Although service provision change provisions will be repealed under the TUPE reforms this is still some time away so this case shall remain relevant. An employer cannot currently assume that an employee who spends 100% of his time on a particular contract will transfer when the activities are transferred to a new provider or back in house.

- dynamic interpretation concerning collective agreements

Alemo-Herron and others v Parkwood Leisure C-425/11

The ECJ considered in this case whether the Acquired Rights Directive allows national law to provide that transferees are to be bound by post-transfer collectively agreed terms even where they cannot be involved in the negotiation process. In contrast, Article 16 of the Charter of Fundamental Rights of the European Union an employer must have the right to conduct its business and assert its interests effectively in a contractual process to which it is party. This allows an employer to negotiate the process of determining changes in the working conditions of its employees with a view to its future economic activity. A dynamic interpretation of the Directive was therefore inconsistent with the Charter.

The issue before the European Court was whether the clauses in employment contracts which obliged a transferee employer to follow the future determination of a third party (such as a national negotiating body), in setting pay, were binding on the transferee employer.

Mr Alemo-Herron worked for the London Borough of Lewisham and was TUPE transferred to Parkwood Leisure, a private sector company which was not a member of the National Joint Council for local government services as Lewisham was. After the TUPE transfer Parkwood refused to pay him an increased pay rate later agreed by the NJC. He claimed that the construction of clause referring to the NJC bound Parkwood as a result of the TUPE transfer and that such a failure to pay the increased rate constituted an unlawful deduction from wages. A tribunal rejected his claim but the EAT allowed the appeal. The Court of Appeal then overturned it and Mr Alemo-Herron appealed to the Supreme Court who held that as Parkwood was unable to participate in the NJC it could not therefore assert its interests effectively under the Charter. Member States are therefore precluded from providing that dynamic clauses referring to collective agreements negotiated and adopted after the date of the TUPE transfer are enforceable against the transferee.

Key point: This judgment aims to restore a fair balance between the interests of the transferring employees and their new employer particularly in transfers from the public to the private sector.

14. EQUAL PAY – COMPARATORS AT DIFFERENT ESTABLISHMENTS

North and others v Dumfries and Galloway Council [2013] UKSC 45

After 6 years litigation the Supreme Court held that in this case 251 classroom assistants could bring equal pay claims citing as comparators employees who worked at different establishments under different terms and conditions. The classroom assistants compared themselves with a variety of manual workers employed by the local authority, namely groundsmen, refuse collectors, refuse drivers and a leisure attendant. The case will now proceed finally to a full merits hearing.

The Tribunal had originally decided that the Claimants were in the same employment and for an equal pay claim to proceed, a Claimant A and a comparator B must work for the same or an associated employer and either be employed in the same establishment or at establishments where common terms apply, either generally or as between A and B.

Key point: The issue is whether comparator B would remain on the same terms and conditions even if he were employed in the same establishment as Claimant A.

15. DISMISSAL AFTER MULTIPLE GRIEVANCES WAS VICTIMISATION

Woodhouse v West North West Homes Leeds Ltd [2013] UKEAT007/12

Mr Woodhouse was employed by West North West Homes. He complained that Mr Chapman of Leeds City Council with whom he had to work closely displayed a racist attitude towards him. His original grievance was rejected, but over a period of time he submitted at least 9 grievances complaining about matters at work, the underlying reason for which that he was being treated less favourably on the grounds of his race. All of his grievances were rejected and he brought 8 claims in the employment tribunal.

He was eventually dismissed by West North West Homes on the basis that trust and confidence in him had irretrievably broken down. He then brought claims in the tribunal alleging unfair dismissal, discrimination, victimisation and harassment. Although it was found that he had been unfairly dismissed his compensation was reduced by 90%. He further appealed that this dismissal was an act of victimisation and against the reduction in compensation to 10% of the full value of his claim. he EAT disagreed with the employment tribunal's finding that an employer who dismissed its employee because of the breakdown in trust and confidence was not victimisation. The EAT held that his grievances and tribunal claims were protected acts. He was dismissed because he made those protected acts and his victimisation claim was made out.

This case was not on all fours with the case of Martin v Devonshire Solicitors where Ms Martin was dismissed for making wholly false and highly disruptive allegations. The EAT held that Mr Woodhouse was acting entirely sincerely and not in bad faith so the reduction in compensation fell away as it was unsustainable.

Key point: Employers will find it very difficult to dismiss fairly employees in a similar situation where they fear future complaints of the same order. Martin is very much an exceptional case where the reasons for dismissal were genuinely separate from the protected acts. Employees in positions similar to Mr Woodhouse may have to be managed out with appropriate compensation under a settlement agreement.

16. REDUNDANCY

- collective consultation

USDAW v Ethel Austin Ltd (in administration) and USDAW v WW Realisation 1 and others EAT 0547/12

Both these cases concern section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. This section requires collective consultation where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days. The EAT in both the Woolworths and Ethel Austin cases held that the words "at one establishment" should be deleted from section 188 as it was more restrictive than the Collective Redundancies Directive 98/59/EC. It is understood the Secretary of State has applied to the EAT requesting permission to appeal the decision.

The effect of this significant decision is that an employer will need to consult collectively whenever it proposes to dismiss as redundant 20 or more employees within a 90 day period irrespective of where those employees are located.

When both the retail chains went into liquidation many employees lost their jobs. Union representatives brought claims for a failure by the administrators to inform collectively on the redundancies and the claims were upheld entitling the employees to a maximum protective award of 90 days' pay in respect of the Austin employees and 60 days' pay in the Woolwoorths employees. When assessing who was entitled to these payments the Tribunal took the view that each individual store constituted an establishment so the administrators were not required to inform or consult at those establishments where fewer than 20 employees were based. Some 4,400 workers were therefore not entitled to a protective award. The union successfully appealed. The EAT held that the limitation to dismissals at one establishment in section 188 was more restrictive than the Directive. The issue was then whether the EAT should give section 188 a purposive interpretation so as to be compliant with the Directive. It held that it was entitled to interpret section 188 so as to be compliant with the Directive and went on to find that the words "at one establishment" should be deleted.

Key point: This Judgment requires employers at least for the time being to consult collectively where 20 or more employees in aggregate are to be made redundant within a 90 day period across the business irrespective of where they work. The maximum protective award for failure to inform and consult remains at 90 days' pay, although the period is now a minimum period for consultation is 45 days where 100 or more employees are to be dismissed and 30 days where 20 to 99 employees are to be dismissed. For future redundancy exercises employers should note the significant change. Although an employer must look at the entire workforce to determine the number of redundancies, proposed consultation is still only required in respect of those employees who may be affected by the dismissals.

- bumping

Contract Bottling Ltd v Cave UKEAT/0525/12

Achieving the perfect pool for relevant employees in a redundancy exercise can be a headache for employers. In this case the employer decided to lump everyone together in one pool consisting of all of its employees of more than one kind and applied a generic scoring matrix. It decided to retain those who scored well in the matrix irrespective of their skills who it then would need to re-train. Ms Cave and Ms McNorton who were dismissed for redundancy brought claims. The tribunal held that the selection process was substantially unfair and that there was no meaningful consultation or consideration of alternatives to dismissal. An appeal by Contract Bottling was unsuccessful but the case was remitted to consider whether there should be a Polkey deduction.

The Tribunal had declined to reduce compensation and the Appeal Tribunal considered that the Tribunal's reason for not doing this was insufficiently dealt with. The Tribunal is therefore to consider afresh whether the compensation awards should reflect the fact that Ms Cave and Ms McNorton would have been dismissed, even if a fair procedure had been followed.

Key point: An employee may be dismissed for redundancy where the employee's own job remains but the needs of the business for different kinds of employees reduces. These dismissals were a form of bumping. There was a diminution in the requirement of Contract Bottling's business for work of several kinds, not just the individual's kind of work, so the test for redundancy was met.

- enhanced redundancy terms – whether contractually binding

Shumba and others v Park Cakes Ltd 2013 EWCA Civ974

The Claimants were employed in a business originally within the Northern Foods Group. In 2007 the business was sold to Vision Group and their employment transferred to Park Cakes Limited under TUPE. The case before the ET was that Northern Foods had operated a formal redundancy scheme under which enhanced terms and a lump sum were paid. Park Cakes claimed that the group-wide policy of paying enhanced redundancy terms was a matter of policy and not a contractual entitlement. This was accepted by the ET who held that the employees had been unfairly dismissed but they were unhappy that their claims for redundancy were rejected and their union appealed to the EAT who agreed with the Tribunal but the ET's reasoning on the redundancy policy was flawed. Park Cakes then appealed this issue to the Court of Appeal but were unsuccessful. The case was remitted to a fresh tribunal for a final determination.

The enhanced redundancy scheme was described in various internal documents and had been followed for several years but the tribunal was not clear that in its decision that although the enhanced payments policy had been followed without exception for several years why the policy should not apply to these Claimants and why the policy was not contractually binding.

The Court of Appeal provided useful guidance on the factors that should be taken into account when identifying whether an enhanced redundancy policy is contractual or not, namely:

On how many occasions, and over how long a period, the benefits in question have been paid
Whether the benefits are always the same
The extent to which the enhanced benefits are publicised generally
How the terms are described
What is said in the express contract
Equivocalness i.e. the matter is one of discretion

The object is to ascertain what the parties must have or must be taken to have understood from each other's conduct and words applying the ordinary contractual principles. The focus has to be on what the employer communicated to the employees. What the employers may have personally understood or intended was irrelevant except to the extent that the employees are or should reasonably have been aware of it.

Key point: This list is not exhaustive but it provides a helpful framework when considering the contractual status of redundancy enhancements. The Court found that the relevant factors listed in the Albion Automotive case of 2002 were not the last view on the proper approach to cases of this kind and/or applied without thought as to the kind of definitive checklist

17. DISABILITY DISCRIMINATION – WAIVER OF COMPETITIVE INTERVIEW NOT A REASONABLE ADJUSTMENT

Wade v Sheffield Hallam University UKEAT/0194/12

Mrs Wade was employed by the University between 1980 and January 2012 as a librarian. She became disabled and various adjustments were made to enable her to perform her role, including an arrangement for her to work at home. She was placed on garden leave from December 2005 until her dismissal in January 2012. She was interviewed for a vacancy which arose in July 2006 but was unsuccessful. When she was not appointed Mrs Wade complained about having to go through the competitive interview process. This was a provision criterion or practice which put her at a substantial disadvantage. She considered an adjustment should have been made given her disability and lengthy absence from work to waive this requirement. She alleged in her disability discrimination claims that the University had failed to make a reasonable adjustment in respect of the interview process.

Mrs Wade was unsuccessful before the ET who held that it would not have been reasonable for her employer to waive the interview requirement. She appealed to the EAT where she was also unsuccessful. The EAT found that the duty to make reasonable adjustments was engaged but the University had not breached its duty in this case. It was acting reasonably in insisting on the essential requirements of the job being met. It could not be a reasonable adjustment for the employer to appoint someone to a role where the person failed to meet the essential requirements of the job. The decision in the 2004 case of Archibald v Fife about waiving any competitive interview process is not authority that such an adjustment would be reasonable in every case.

Key point: Core competencies of a job should be met by any candidate and it is not reasonable adjustment for an employer to dilute them where the candidate is plainly not suitable for the role.

18. INSOLVENCY – RECOVERY OF ARREARS OF PAY

The Secretary of State for Business v McDonagh and others UKEAT/0207/12 and UKEAT/0312/12

In these two cases the employees started working for their respective employers after the employers had entered into a creditors voluntary arrangement. Both employees were unaware of this when they started work. Each company was eventually compulsorily wound up and the employees were dismissed. They brought claims for wages and holiday pay from the National Insurance Fund but this was refused on the basis that the companies were both insolvent when they entered into their CVAs and this was the appropriate date for the admissibility of the debts. The employees were successful in their claims for outstanding pay before the employment tribunal but the Secretary of State appealed which appeals were allowed. As the debts claimed by the two employees were not owed at the dates when the CVAs were approved, they could not be recovered. The EAT acknowledged this resulted in unfair consequences for the employees who were then left without a remedy. Nevertheless, it was for Parliament to decide whether this consequence should be reversed to mitigate against this loss of protection for debts arising after insolvency, not the EAT.

Key point: Employees may have to consider undertaking full due diligence on their employer if there is any doubt about its financial stability before they take up their employment.

19. 2012/2013 STATISTICS

The Tribunal Service has published its latest round of statistics for the year to March 2013. There has been a fall in of 39% in the number of claims for failure to inform and consult on TUPE but an equal and opposite rise of 39%in the claims for failure to inform and consult on redundancy. There is a 75% rise in the number of sex discrimination claims but a 24% fall in the number of age discrimination claims. The total number of claims was 191,541.

20. COSTS AWARD

Vaughan v London Borough of Lewisham UKEAT/0533/12/SM

Ms Vaughan brought 3 sets of proceedings against her employer Lewisham which culminated in a 20 day hearing following which the entirety of her claims were dismissed. She was ordered to pay 1/3 of Lewisham's costs which were claimed at some £260,000 so her liability for costs could be for those as high as £87,000. She challenged the costs award on the basis that she had no ability to meet these costs. She was unsuccessful.

It was held that the tribunal was not wrong in awarding Lewisham 1/3 of their costs. Although she was unemployed and would find it difficult to pay she was nevertheless obliged to satisfy the order in full in the fullness of time as there was a realistic prospect of her returning to employment and making a payment of costs. The tribunal found that her claims were unsustainable and misconceived from the outset. Neither the Tribunal nor Lewisham had given her any warning that her claims were regarded as misconceived or otherwise ill-advised but that did not matter. If a costs warning letter had been sent it was held that she would not have taken any notice of it.

Key point: Justice requires compensation and lay people are not immune from orders for costs.

21. COVERT SURVEILLANCE – WAS SUBSEQUENT DISMISSAL UNFAIR?

City and County of Swansea v Gayle UKEAT/0501/12

The Council engaged a private investigator to film Mr Gayle outside the sports centre when he should have been working. This was after he was seen earlier playing squash at the local sports centre when he should have been at work. The Council dismissed Mr Gayle for leaving work for his own personal reasons and claiming pay for the time he was not at work. Mr Gayle brought a claim for unfair dismissal in which he was successful but he was awarded no compensation on the basis of contributory fault. The tribunal concluded that the process by which the Council dismissed Mr Gayle involved an unjustified interference with his article 8 rights to a private life and the Council was in breach of its obligations under the Data Protection Act 1998. The Council appealed the finding of unfair dismissal.

The EAT held that the tribunal's criticisms of the Council for covertly filming Mr Gayle were irrelevant to the question of the fairness of his dismissal. There was no breach of article 8, he was a fraudster and as such he could have no reasonable expectation of privacy. The Employment Practices Code under the Data Protection Act states that it is rare for covert monitoring of workers to be justified. However, Mr Gayle was filmed in a public place where he had no reasonable expectation of privacy. Covert filming did not impact on the fairness of the dismissal save to confirm Mr Gayle's fraud. He was not unfairly dismissed.

Key point: The case does not suggest that covert surveillance as a part of a disciplinary investigation will always be proportionate or reasonable. Employers should always consider less intrusive ways of checking up on employees if fraud or malingering is suspected.

22. DISCLOSURE OF EMAILS

Fairstar Heavy Transport NV v Adkins and anor 2013 EWCA Civ 886

Mr Adkins was the former CEO of Fairstar. He had been contracted as a CEO by a separate company controlled by him and registered in Jersey. Following a hostile takeover of Fairstar it sought access to emails in his possession related to its business affairs. Surprisingly, the emails were stored on his personal computer while he was CEO, as correspondence sent to the Company email address were automatically forwarded to his personal email address and deleted from the Company server without copies being retained.

Adkins would not allow Fairstar access to inspect the emails and a High Court judge refused a formal application to inspect based on an unnecessary consideration of whether the content of the emails was "information". This was overturned in the Court of Appeal who held that the High Court Judge was wrong in not making an order for the inspection where Mr Adkins and Fairstar had been agent and principal. A principal is entitled to production by an agent of documents relating to the affairs of the principal. Documents in this context included information recorded, held or stored on a computer. The termination of the agency did not therefore terminate the duty on Mr Adkins to allow Fairstar to inspect the emails relating to its business as a result of the agency relationship. An inspection and copying remedy was ordered based on rights and duties incidental to the relationship that existed between the parties at a relevant time and it was not necessary to decide the property issue in order to make such an order.

The English court had jurisdiction to decide Fairstar's claim to inspect and obtain copies of the emails on the computer in England even though the English court had no jurisdiction on the contractual or company law matters in issue.

Key point: The question of property in emails remains an uncertain area as the content of emails is information and information is not recognised by law as property.

23. DEATH IN SERVICE BENEFIT RECOVERABLE

Fox v British Airways plc 2013 EWCA Civ 972

The Court of Appeal in this case upheld the EAT's decision that a father could claim compensation for the full value of a death in service pay out in unfair dismissal and discrimination proceedings brought on behalf of his deceased son. In the original claim the Tribunal found that the estate was only entitled to £350 to reflect the cost of life assurance.

Mr Fox was dismissed by BA due to his lack of fitness for work. Five days after he left he had surgery intending to make himself fit for work. However he died 20 days later aged 44. Had he not been dismissed his estate would have been entitled to a contractual death in service benefit of £85,000. The EAT considered that there was no reason for denying this compensation to his estate. The appropriate sum was £85,000 on the basis that it was inconceivable that the costs of providing for payment of the lump sum within such a short period would have been any less than the sum itself.

BA appealed unsuccessfully. The benefit in question formed part of Mr Fox's remuneration and its loss was a real pecuniary loss suffered by him. If the estate can establish that Mr Fox was unfairly or discriminatorily dismissed the estate will be entitled to recover the full sum by way of damages.

Key point: In ordinary cases the appropriate sum will be the cost of obtaining insurance to provide equivalent benefits. If that route is not available so that the Tribunal has to value the loss itself normally the loss will be less than a certainty and the exercise will be one of valuation of a lost chance.

24. BINDING AGREEMENT – NOT SUBJECT TO CONTRACT

Newbury v Sun Microsystems 2013 EWHC 2180

This case provides a salutary lesson for solicitors and their clients. The case concerned whether a claim and counterclaim had been compromised on the correspondence passing between the parties' solicitors and when a binding agreement was entered into.

An offer to settle was sent by the Defendants to the Claimant's solicitors on 3 June and it was accepted that evening just before the start of an 8 day trial. It was marked without prejudice save as to costs and at the settlement was to be recorded in a suitably worded agreement. The Claimants' solicitors forwarded a draft Tomlin order recording the terms agreed but these were not agreed. No other agreement was reached about the wording. The Defendants' case was that a concluded agreement was not reached save in principle only and it depended on the agreement on other matters, namely the execution of a suitably worded agreement. Until that agreement was reached there was no binding agreement between the parties.

Mr Justice Lewis in the Queen's Bench Division disagreed. The Judge found that on the construction of the correspondence the Defendants' offer letter was intended to be a binding offer capable of acceptance. Importantly, however, the letter was not expressed to be subject to contract. Had those words been used it would have been clear that the terms were not yet binding or agreed until a formal contract was agreed. The absence of those words indicated the letter was an offer of terms, capable of acceptance as it stood and was not intended to be subject to discussion on agreement on additional or different terms. The settlement was not conditional on the execution of a formal agreement. The offer and acceptance letters themselves constituted a binding agreement.

Key point: If a binding agreement is to be avoided until further terms and conditions have been agreed, then any offer should be marked "subject to contract".

25. EU LAW – FRANCE

France has put in place a new legal framework for employment law. The new measures include taxation and fixed term contracts, minimum working time for part-time jobs, internal and external mobility, measures aimed at anticipating economic difficulties, reform of mass redundancies and new rights for employers representatives bodies. Employers with interests in France should make themselves aware of these changes. Source: Jeantet et Associés.

26. AGE DISCRIMINATION

Engel v Transport and Environment Committee of London Councils ET2200472/12

Mr Engel was a parking adjudicator. He complained to an employment tribunal that he had been discriminated against on the grounds of age when his appointment was renewed in December 2011 for a shorter period than other younger adjudicators. The retirement age for adjudicators was set at 70 and when his appointment was renewed it was only to end on 10 May 2013, the date he turned 70.

The Committee admitted that its decision amounted to direct age discrimination but relied on the justification defence, that the unfavourable treatment was proportionate namely on the grounds of independence, resources and dignity. In short, a retirement age of 70 was a proportionate means of ensuring the competence of parking adjudicators without inter alia having to apply capability procedures to older adjudicators in order to remove them from office. 70 was consistent with the age for most Judges to retire.

Despite this, the tribunal found that the Committee had failed to demonstrate that the choice of 70 as an automatic retirement age was either appropriate or reasonably necessary to achieve any of its three legitimate aims. So Mr Engel was successful in his claim and he was awarded £6,000 for injury to feelings.

Key point: The case turned on its facts and the nature of the evidence. The hurdles an employer has to surmount to establish "legitimate aims" are high and providing sufficient evidence as well as argument is critical.

27. TERMINATION PAYMENTS AND COMPROMISE AGREEMENTS

Reid v HMRC 2012 UKFTT182 and Johnson v HMRC 2013 UKFTT242

These two cases concern compromise agreements and the dispute with HMRC about the amount of tax payable. Both Mr Reid and Mr Johnson joined RR Richardson as directors and had contracts of employment. They both resigned from the company in December 2007 and received termination payments under separate but materially identical compromise agreements. Both agreements provided that first the termination payments included the entitlement to statutory redundancy pay and secondly the company agreed not to make any deduction on the first £30,000 of the termination payment.

In their tax returns for the relevant years both Mr Reid and Mr Johnson subtracted £30,000 and a further £30,000 in respect of repayments of £30,000 which they had each paid into an enterprise management incentive option scheme ("EMI Scheme") when they joined the company. Accordingly they were to be taxed on the balance of their termination payments which amounted to their total termination payments less £60,000. HMRC demanded further tax of approximately £12,000 from each of them. This related to the further £30,000 omitted from both tax returns in relation to the EMI scheme repayments as HMRC could find nothing in the compromise Agreements to support the claims that £30,000 of the termination payments were repayments under the EMI scheme. There was evidence available which demonstrated that the £30,000 payments were repayments under the EMI scheme but HMRC refused to consider this evidence because of the entire agreement clause in the compromise agreement.

The question therefore for the FTT was whether the entire agreement clause prevented HMRC and/or FTT from considering the evidence when interpreting the compromise agreements.

In Reid, the FTT agreed with the HMRC so the FTT was unable to consider any extraneous evidence. Mr Reid was liable for the additional £12,000 tax. However, in Johnson the FTT found that HMRC could not rely on the entire agreement clause, because it was not a party to this compromise agreement. HMRC therefore was obliged to look at the surrounding circumstances to determine the nature of the termination payment. The FTT held Mr Johnson did not have to pay additional tax as the Reid case was not binding in the Johnson case. There are now two conflicting decisions. The Johnson view is probably fairer.

Key point: The decision highlights the importance when drafting settlement agreements to label clearly and accurately the constituent parts of any termination payment to minimise the risk of a dispute arising with HMRC.

28. HARASSMENT CLAIM – POST COMPROMISE

Hurst v Kelly UKEAT/0167/13

Ms Hurst was employed by PH Jones Limited at a call centre in Stevenage as was Mr Kelly who was her line manager. In September 2010 her employment ended and she entered into a compromise agreement which precluded her from bringing a claim against her employer arising out of her employment and its termination. In October 2010 Ms Hurst lodged a claim in the tribunal against Mr Kelly only alleging sexual harassment against him in March and July 2010 at work related functions under the Sex Discrimination Act 1975. Mr Kelly denied the allegations in his ET3.

The matter came on for a full tribunal hearing on 6 December 2012 when Mr Kelly did not appear. The tribunal identified a preliminary jurisdictional issue to be determined which was whether Ms Hurst could bring a claim against a fellow employee only where her former employer was not party to the proceedings. The tribunal decided it had no jurisdiction to hear the claim and it was dismissed. She appealed.

The tribunal was not referred to the judgment of the EAT in Barlow v Stone of 1 June 2012 in which it was held by the EAT that it was not necessary for a Claimant to bring a claim against a former employer in order to proceed against a fellow employee who is alleged to have discriminated against him/her by way of victimisation in the course of employment.

The case was therefore remitted to a fresh tribunal to determine Ms Hurst's claim on its merits. The Tribunal made the point that Mr Kelly put forward as a defence in his ET3 that he was not acting in the course of his employment, so his employer could not have been vicariously liable for his acts.

Key point: In similar circumstances employers should seek a release and discharge from any further claim against its employees in any settlement agreement.

29. ILLEGAL WORKING IN THE UK – CROATIAN NATIONALS

Guidance for employers on hiring Croatian nationals following Croatia's accession to the EU on 1 July 2013 has been issued by the Home Office. Croatians who wish to work in the UK will need permission to do so unless specifically exempt from this requirement and employers should undertake the necessary checks to ensure they have obtained permission. If employers do not carry out their duty in checking the documents and they employ a Croatian illegally a civil penalty of up to a maximum of £5,000 for each illegal Croatian worker can be imposed.

30. MISUSE OF CONFIDENTIAL INFORMATION

Whitmar Publications v Gamage 2013 EWHC 1881 Chancery Division

Whitmar is a publications company specialising in magazines for the printing industry. In May 2013 it commenced proceedings against several former employees for damages for breach of contract, an account of profits, damages for breach of fiduciary duties and a permanent injunction restraining the defendants from using and disclosing its confidential information obtained during their employment by Whitmar. The outcome of the application was a matter of life or death for the Defendants and any injunction granted would be likely to dispose of the action.

Whitmar submitted that there was a good arguable case against the Defendants that they had acted in breach of their contracts and their obligations as employees. Each was placed on garden leave upon resigning. It was claimed they had taken impermissible preparatory steps to complete with Whitmar by soliciting staff and business to compete with Whitmar they had also misappropriated and misused confidential information. The former employees had also allegedly taken away Whitmar's circulation database and customer database and business cards.

The Defendants denied liability of any competitive activity during the course of their employment and there were no restrictive covenants prohibiting any competition post termination. The Judge however concluded that they had taken more than just preparatory steps but active steps to compete. There were clear examples of the desire for secrecy as in one email the Defendants' emphasised that traces of their emails had been destroyed. There was a strong case that business cards did provide the Defendants with a competitive advantage and that springboard relief should be granted. The circulation database and customer database were Whitmar's confidential information. The Judge held that Whitmar had a very good chance of succeeding at trial and therefore a springboard injunction was granted until Trial to prevent the Defendants from making use of the advantages they had acquired in the interim.

Key point: Employers seeking injunctions of this nature are reminded that the outcome will depend on the Judge's assessment of the weight of the evidence including the employees' use of LinkedIn

groups, the setting up of a company by the employees and the secrecy of how they went about planning their activities pre post-employment.

31. SETTLEMENT AGREEMENT – SUM TO BE PAID NET OR GROSS OF TAX

Barden v Commodities Research Unit International 2013 EWHC 1633

Mr Barden and the Defendants reached an agreement during the course of a mediation that the Defendants would by 4pm on 11 November 2012 pay £1.35m by Telegraphic Transfer into the Claimant's solicitors' client account at HSBC Bank.

Under this agreement Mr Barden alleged that the Defendants were obliged to pay the full gross sum into this account and pay another identical sum by way of PAYE to HMRC. The Defendants contended that they were entitled and indeed obliged by law to pay only a net sum having deducted PAYE income tax. They paid £67,176.16 to HMRC and the balance into Mr Barden's solicitors' bank account. The Settlement Agreement was subject to a Tomlin Order and as a result when this dispute over the sums due arose an application notice was issued under the liberty to apply reserved in that Order. The issue to be determined was the true meaning of the settlement agreement.

Mr Barden claimed that he did not agree to settle his claims for £1.35m less the tax that would be deducted. The settlement came about as a result of a mediation late in the evening. The Defendants' case was that the agreed settlement sum was a gross figure which represented the totality of what the Defendants would have to pay. The Claimant wanted £1.35m as an all-inclusive figure. Mr Perlman the Chairman of the Defendants signed the Settlement Agreement at home at 12.30am. His only concern was that the Defendants did not have to pay more than the agreed sum of £1.35m. His understanding was that tax would have to be paid but tax was not discussed during the mediation. The Judge found that the fact that the Defendants' experienced advisers lost sight of the tax question when they drafted the settlement terms late in the evening, was irrelevant and was as a consequence of the not unusual situation of a settlement finally reached in the early morning when the parties had been sufficiently worn down by the day's negotiations eventually to show their hands.

The Judge found that any objective observer would, taking into account the relative factual matrix, irrespective of their subjective intentions in the course of their negotiations, have had no doubt that the Settlement Agreement meant that the sum of £1.35m agreed should be paid to Mr Barden net of any PAYE that was due from him to HMRC as a result of the payment. The construction advanced by Mr Barden that the Defendants were required to pay an additional £1.35m to HMRC was a commercial absurdity.

The common intention of the parties that the offer of £1.35m should be inclusive of costs and interest and tax continued up until the moment the Settlement Agreement was signed. Mr Barden's point that in making his offer "all in" did not include tax but that did not reflect the reality of what was discussed. The offer was made on the basis that the sum mentioned was to be the entire liability of the Defendant. As an alternative the Judge held that if he was wrong about the construction of the Settlement Agreement then the conditions for common mistake rectification were made out and he would have ordered rectification so as to read ".... the £1.35m, net of any PAYE due to HMRC....." In summary the Settlement Agreement was to be construed meaning that the payment of £1.35m due to Mr Barden should be paid net of any PAYE due to HMRC by him.

Key point: Parties should be very clear and careful about income tax and liability therefor which arises on any settlement sum. In most cases the payment to be made will be net of any tax liablity.

32. CHOICE OF COMPANIONS AT GRIEVANCE HEARING

Toal v GB Oils 2013 WL3450708

This case concerned whether the choice of a companion to accompany an employee at a grievance hearing must be reasonable.

The two applicants Mr Toal and Mr Hughes raised grievances with their employer. Each Claimant wished to be accompanied by Mr Lean who was an elected official of Unite. GB Oils declined to allow them to be accompanied by Mr Lean and they sought the assistance of a fellow worker Mr Hodgkin. They were unsatisfied with the result of the grievance hearings and they appealed. Mr Hodgkin was then replaced by another union official, a Mr Silkstone. Each Claimant complained about the refusal to allow Mr Lean to accompany them. The Tribunal found, however, that on Mr Lean being rejected they chose another companion and had therefore waived the potential breach by the Respondent when their grievances were concluded with their chosen representatives. Both Claimants appealed.

The EAT considered that there had been a breach by GB Oils and it remitted the case to the employment tribunal to determine the amount of compensation to be paid by each Defendant. It declined to make an order of compensation of £1,600 to each Claimant, being an amount not exceeding 2 weeks' pay. If there was no proven loss or detriment then only nominal compensation in the sum of £2 should be ordered. The EAT also rejected the guidance at paragraph 36 in the relevant ACAS Code of Practice relating to the reasonableness of the choice of companion as creating more problems than it solved. To exercise the right to be accompanied a worker must first make a reasonable request. What is reasonable will depend on circumstances of each individual case.

Key point: If a worker reasonably requests to be accompanied by a companion at a disciplinary or grievance hearing under section 10 of the Employment Relations Act 1999 that is an absolute right but the choice of a particular companion does not have to be reasonable. If an employee's first choice of companion is refused the employee will not waive the right to be accompanied by that companion if he then chooses another, but with little compensation for breach this right is practically valueless.

33. EMPLOYER PENSIONS CALCULATOR

An online pension calculator has been developed by the Association of Business Insurers and is available on The Pensions Advisory Service (TPAS) website here. It will assist employers in selecting the most suitable automatic enrolment scheme for their employees. The calculator is intended to form part of an employer's decision-making process independently or with the support of its adviser when it is selecting an automatic enrolment scheme.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

UK: UK Employment Law Update, Summer 2013