UK: Employment Briefing, August 2010 - Retraction of Dismissal Only in Exceptional Cases

Last Updated: 26 August 2010
Article by Bircham Dyson Bell

In Willoughby v CF Capital plc the EAT found that an attempted retraction of a dismissal by CF Capital plc of Ms Willoughby following discussions with her about changing her employment status was not valid.

CF Capital plc had presumed that Ms Willoughby had accepted a move to being self employed and wrote to her confirming this change and terminating her employment. When it realised that Ms Willoughby did not accept the change it explained that there had been a misunderstanding and sought to retract the termination and return to the status quo. Ms Willoughby did not accept the attempted withdrawal of the termination and instead brought proceedings for unfair and wrongful dismissal. At first instance a tribunal found that there were special circumstances (the genuine misunderstanding) which entitled CF Capital to withdraw its termination letter. The EAT disagreed, holding that the dismissal did not fall into the very narrow 'special circumstances' exceptions and that the dismissal was in unambiguous terms. Ms Willoughby had been entitled to regard the letter dismissing her as a clear intention to terminate her employment.

Transferred collective agreements incorporate legislative changes

The EAT in Worrall and others v Willmott Dixon Partnership Ltd and another considered the effect of the decision in Parkwood Leisure Ltd v Alemo-Herron and others, that only the terms of a collective agreement in force at the point of a TUPE transfer would bind a transferee and subsequent changes to the collective agreement would not bind it. This has become known as the 'static' interpretation.

The issue in this case concerned a collectively negotiated agreement which provided that in the case of voluntary redundancy, the Council (Mr Worrall's then employer) would, in exercising its discretion, award at least 5 added years. Mr Worrall's employment was then transferred under TUPE first to Serviceteam, then Morrison plc and finally to Willmott Dixon Partnership.

In 2008 Mr Worrall applied for and was given voluntary redundancy. Wilmott Dixon did not credit Mr Worrall with added years arguing that the right to award added years had been removed by the Local Government (Early Termination of Employment)(Discretionary Compensation)(England and Wales) Regulations 2006 which replaced the right to award added years with the power to award a lump sum payment.

Mr Worrall claimed that Willmott should have credited him (and 46 others) with the added years, relying on Parkwood v Alemo-Herron and noting that any changes subsequent to his transfer to Serviceteam should be ignored. The EAT disagreed and stated that the effect of Parkwood v Alemo-Herron was limited to 'future changes to collective agreements', which should be ignored. Statutory changes, however, such as the Local Government Regulations involved, should continue to bind future transferees. In other words, the static interpretation of the effect of collectively agreed terms is modified in respect only of legislative changes.

ECJ rules on pay during maternity suspension

The issue of pregnant workers' loss of supplementary allowances during maternity suspension and alternative work was considered by the ECJ in Gassmayr v Bundesminister fur Wissenschaft und Forschung and Parviainen v Finnair Oyj.

In Gassmayr, a pregnant junior hospital doctor in Austria lost her on call allowances when she was put on maternity health suspension. Her employer argued that these payments were related to services actually rendered and so were not payable during maternity suspension. In Parviainen the employee worked as an air hostess for Finnair receiving a substantial amount (around 40%) of her overall pay by way of supplementary allowances. Due to her pregnancy she was temporarily transferred to ground work.

The issue before the ECJ in both cases was whether an employee who is either suspended or temporarily transferred to another post by reason of her pregnancy is entitled to the same remunerative package, on average, as that she received before she went on maternity suspension/undertook alternative duties.

The ECJ noted that in the case of an employee carrying out different duties, European law (the Pregnant Workers Directive) only provided that pay should be at least as good as sick pay in the relevant country. However, such a worker is not entitled to receive all the remuneration she previously received by way of additional allowances. Payment must not undermine the objective of the Pregnant Workers Directive of protecting health and safety and should not be less than that of others carrying out that job but there is no requirement to continue to pay allowances that depend on the performance of specific functions.

With regard to Gassmayr, ECJ reiterated that the components of pay which depend on the performance of particular functions need not be paid when the employee is on maternity suspension. Whilst national measures should not undermine the objective of safeguarding the health and safety of pregnant workers it was not unlawful in this case to deny the payment of the on call allowance during maternity suspension.

Under UK domestic legislation, section 67 of the Employment Rights Act 1996 provides that terms and conditions for alternative work must be 'not substantiallyless favourable' than the worker's existing terms and case law (British Airways Ltd v Moore) has held that denial of flying allowances to air stewardesses breached this requirement. This goes further than the ECJ ruling.

With regard to maternity suspension, an employee in the UK must receive a week's pay which, according to the method of calculation, should meet the Gassmayr requirements.

Cap on overperformance bonus

The Court of Appeal in GX Networks Ltd v Greenland has issued a timely reminder to employers to take care when drafting bonus schemes. The clause at issue stated 'the sales director has the discretion to cap an individual's Q4 bonus at 100% if required although such cases will be by exception only and require HR and Finance agreement'.

Ms Greenland was a sales executive who achieved 305% of her sales target, entitling her to a bonus of approximately 4.5 times her salary. GX argued that it should be subject to a cap as if she had achieved 130%. The Court of Appeal dismissed GX's argument that the way to control overperformance was to apply the exceptional method of a cap. The court held that 'by exception' must mean exceptional circumstances which were not present in this case. Exceptional performance could not be an exceptional circumstance. Employers should take note from this case when drafting bonus or similar schemes. Any ambiguity or vagueness in drafting will be construed against the party who drafted it. Bonus schemes and targets should be regularly reviewed to ensure that the scheme satisfies the employer's requirements from time to time.

Breach of ICE Regulations

The EAT has applied a penalty of £20,000 to G4 Security for its failure to take steps to reach a negotiated settlement following a valid employee request under the Information and Consultation of Employees Regulations 2004. The EAT noted that G4's breach had not been technical and that whilst G4 had asked for its financial circumstances to be taken into account it had failed to adduce any evidence of financial hardship.

Applicable law for construing contract

The High Court has applied the Rome Convention to ascertain the applicable law in Chunilal v Merrill Lynch International Incorporated. In this case, Mr Chunilal was a UK national who was resident in Hong Kong and who worked for a Delaware incorporated company under a contract negotiated in New York. The contract was silent as to applicable law but Mr Chunilal sought to argue that the UK courts were the appropriate forum to hear his claim. In accordance with the Convention, the High Court asked whether Mr Chunilal could demonstrate that English law was chosen with reasonable certainty (by referring to the facts or the terms of the contract). It also asked what was the law of the country where Mr Chunilal habitually worked. There were no facts or terms which indicated that English law had been chosen and it was not therefore the appropriate forum.

And finally...

European Commission requests UK to strengthen ICO's powers

The European Commission has requested that the UK strengthen the Information Commissioner's Office so that it complies with the EU's Data Protection Directive. At present the ICO cannot monitor whether third countries' data protection is adequate nor can it perform random checks on people using or processing personal data. Further, UK courts can refuse the right to have personal data rectified or erased. These powers and rights are protected under the Data Protection Directive. The matter has been referred by the ICO to the Ministry of Justice.

Equality Act implementation confirmed and Agency Workers regulations under review

The government has confirmed that the main provisions of the Equality Act will come into force on 1 October 2010. The Government Equalities Office has published some guidance and more will follow.

On 5 July 2010 BIS advised that the Agency Workers Regulations (due to come into force on 1 October 2011) are being reviewed.

Vetting and Barring under review

The government has announced that the vetting and barring scheme is being reviewed and there is no longer a requirement for individuals working with children or vulnerable adults to register with the Independent Safeguarding Authority. It will still be a criminal offence to employ barred individuals and two lists will still be maintained by the ISA.

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.

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