UK: Employment Briefing - April 2010

Last Updated: 30 September 2010
Article by Brian Gegg, Jesper Christensen and Marc Meryon

Originally published April 2010

Employee's Prior Breach Prevents Argument of Constructive Dismissal

The EAT confirmed in Aberdeen City Council v McNeill that where an employee commits a prior breach of the implied duty of trust and confidence he cannot rely on an employer's later breaches to claim constructive dismissal.

Mr McNeill had worked for Aberdeen City Council for around 21 years in their leisure department. He was suspended in 2005 on allegations of financial and other misconduct and an investigation was carried out. At this stage Mr McNeill raised an allegation that two senior members of staff had been involved in sexual conduct whilst in the course of their employment. He had not raised this previously nor had he disciplined or taken any action in relation to either of the two staff involved. He pursued these allegations and the female member of staff involved claimed that she was being bullied and harassed by Mr McNeill.

Further matters arose in the course of the investigation into Mr McNeill's activities, namely the bullying and intimidation of female staff; failure to procure supplies properly; being drunk at work; and uncooperativeness.

Mr McNeill claimed that he was being subjected to a witch hunt and he finally resigned stating that he had no trust in the Council, he had been unfairly treated and his health and reputation had been damaged.

At the employment tribunal hearing it was found that Mr McNeill had resigned on account of the Council's conduct which was calculated to destroy any relationship of trust and confidence as the investigatory procedure was oppressive. The EAT considered whether, on the facts, Mr McNeill had been in prior repudiatory breach of contract when he resigned and was therefore not dismissed. The EAT found that the tribunal had not considered together (as it should have done) all the allegations against Mr McNeill and had not considered whether they amounted to a breach of the implied duty of trust and confidence. Overturning the tribunal's decision, the EAT found that Mr McNeill was in material breach of this duty. He was, accordingly, not entitled to terminate his contract of employment by reason of the Council's conduct.

Repudiatory Breach Cannot Be Cured

In another constructive dismissal case, the Court of Appeal in Buckland v Bournemouth University Higher Education Corporation considered whether the University had been able to cure its fundamental breach of contract, and held that it could not do so before the other party had decided whether or not to accept the breach.

Professor Buckland held the chair of environmental archaeology at the University. One of his annual tasks was to mark students' examination papers. In 2006, there was unusually high number of resits, of which 14 were failed by Professor Buckland. A re-marking exercise was carried out by the University without Professor Buckland's knowledge or authority which largely validated Professor Buckland's markings. Professor Buckland protested and an inquiry was set up, chaired by Professor Vinney. The report vindicated Professor Buckland and made clear that his findings should have been final. Professor Buckland remained angry and resigned claiming unfair constructive dismissal.

The Court of Appeal considered two questions:

  • Whether an employer's alleged fundamental breach of contract should be assessed objectively or by a 'range of reasonable responses' test;
  • Whether a party can cure a repudiatory breach of contract before acceptance.

The Court of Appeal found that the test for whether there is a repudiatory breach must be an objective one. Where the reasonableness of the employer's conduct may play a part is through the statutory additions to the law of contract. The Court also held that an actual (as opposed to an anticipatory) fundamental breach was not capable of being cured before acceptance. If it could be cured, it would be necessary in each case to consider whether the amends were adequate.

Contractual Right to Vary Terms

In Bateman v Asda Stores Ltd the EAT held that a contractual unilateral right to alter terms and conditions of employment which was contained in a company handbook can allow an employer to change contractual terms such as rates of pay and hours of work.

Asda wished to harmonise the pay and work structure upon which all its staff worked and to this end sought to rely on a clause in the staff handbook which provided that it 'reserved the right to review, revise, amend or replace the contents of this handbook, and introduce new policies from time to time reflecting the changing needs of the business'. After consultation, a number of employees agreed to the proposed change but 8,700 refused and Asda sought to impose the change without their consent.

A tribunal held that Asda was able to rely on the clause in the handbook to force through the change without consent. On appeal, the EAT was asked to consider the point that a number of the staff were barely literate or were ill educated and low waged and could not be expected to have understood the import of the clause. The EAT held that it could not consider this point as it had not been raised at tribunal and no evidence had been adduced to support it. Similarly, it could not consider an argument of breach of trust and confidence since the employees had conceded at tribunal that there was no issue in this respect. Turning to the question of construction, the EAT found that the words used showed clearly that Asda was entitled to unilaterally change the contents of the handbook.

Whilst this case is certainly helpful for employers seeking to rely on contractual rights to make far reaching changes, it should be treated with caution since the breach of trust and confidence argument was not properly run at tribunal and could not therefore be considered on appeal. Where an employer acts in a high handed way and where employees suffer loss as a result of changes forced through, a trust and confidence argument should carry significant weight.

Company Not Liable For Discriminatory Comments Made by Agency Worker

In May & Baker Ltd v Okerago the EAT were asked to consider whether May & Baker were liable for a racially offensive comment made by Ms Dower, a worker supplied to them by an employment agency, to Mrs Okerago, an employee. The EAT held that May & Baker did not employ Ms Dower nor was she their agent under section 32 of the Race Relations Act 1976 and therefore they could not be liable for her actions under that section. Simply because Ms Dower had worked for a number of years for May & Baker and was treated like an employee did not mean she was their employee. Nor did liability attach under section 33 (where a person can be fixed with liability where he knowingly aids another to do an unlawful act under the RRA) since whatever May & Baker did or failed to do after the alleged act of discrimination could not be said to have aided it.

The EAT, overturning the tribunal's original decision, held that when considering liability under section 33, there was nothing that May & Baker did or didn't do which could be said to have aided Ms Dower's discriminatory act. Merely allowing an environment where particular conduct could take place did not amount to aiding that conduct. It does not amount to the required relationship of 'cooperation or collaboration'.

This case underlines how hard it now is to attach liability for an agency worker's actions to a company to whom he supplies his services. The argument that where an employer has sufficient control over a third party it may be liable for that party's actions has been disapproved in Pearce v Governing Body of Mayfield Secondary School. This case shows how difficult it is to show that an employer has endorsed a discriminatory act.

TUPE and Transfers of Administrative Functions

At the end of 2010 the Legal Complaints Service (LCS, which was set up by the Law Society to deal with complaints about solicitors) will be replaced by a new independent statutory body, the Office for Legal Complaints (OLC). The parties involved disagreed over whether TUPE 2006 would apply to the transfer. The Law Society argued that it would as TUPE is stated to apply to public and private undertakings engaged in economic activities whether or not operating for gain. The Law Society applied to the High Court seeking declarations on whether TUPE would apply or whether the transfer fell within regulation 3(5) which provides that a reorganisation of a public administration or the transfer of administrative functions between public administrations is not a relevant transfer.

The High Court, in Law Society v Secretary of State for Justice and Office for Legal Complaints, held that for the purposes of TUPE, LCS was an undertaking and an economic entity but that there would be no transfer of an undertaking as no tangible or intangible assets and none of the existing case load would transfer to OLC. Further, LCS would not retain its identity within OLC as OLC's independence, wider range of powers and obligations meant that its culture and approach would be distinct from that of LCS. Having decided this, it was unnecessary to rule on whether regulation 3(5) applied, but the court nonetheless held that this would be a transfer of an administrative function since LCS is a 'public body whose functions involve the exercise of public authority'. It also found that the regulatory activity carried out by LCS was an administrative function which was being transferred to OLC.

Collective Consultation

The EAT in Shanahan Engineering Ltd v UNITE considered an appeal against a tribunal decision that Shanahan was in breach of its duty to consult employees in the context of a collective redundancy situation.

Shanahan is an engineering construction contractor which won a contract for work carried out by contractors Alstom on a power station involving the simultaneous construction of two heat recovery steam generators. UNITE was recognised in respect of the 145 Shanahan employees working on the contract.

Problems were caused on site by congestion and ground conditions which resulted in an instruction from Alstom to Shanahan that they wanted one generator to be constructed after the other and that Shanahan should reschedule their remaining works immediately and reduce labour accordingly. Shanahan decided how many employees should be made redundant and selected them in accordance with a method previously agreed with UNITE. About 50 employees were made immediately redundant.

UNITE argued that Shanahan should have collectively consulted under section 188 Trade Union Labour Relations (Consolidation) Act 1992 and Shanahan sought to rely on the 'special circumstances' defence in section 188(7). The tribunal held that the special circumstances defence did not mean that Shanahan was excused from the obligation to consult at all. The fact that a sudden situation arises may or may not amount to special circumstances relieving the employer to consult, either entirely or in part. However the situation was not such that Shanahan had to dispense with the services of the employees as quickly as it did. The tribunal awarded the maximum 90 days protective award, noting that the award was punitive not compensatory.

The EAT upheld the tribunal's decision. The instructions given by Alstom made it inevitable that the workforce would have to be reduced but it remained for Shanahan to decide whether employees should be dismissed for redundancy, how many should be dismissed, when they should be dismissed and what, if anything, could be done to mitigate the consequences of dismissal. These were proper matters for consultation. However they disagreed with the tribunal's imposition of a maximum 90 days' protective award and said that the mitigating circumstances of Alsom's sudden instruction to cease work should have been taken into account when calculating the award. The case was remitted to the tribunal to consider the amount in light of this guidance.

And Finally...

Additional Paternity Leave and Pay

Six draft sets of regulations have been published to introduce additional paternity leave and pay. These regulations came into force on 6 April 2010 and will apply to parents of babies born on or after 3 April 2011 or to adoptive parents who are notified of a match with a child on or after that date.

Anti Blacklisting

The Anti Blacklisting regulations referred to in Employment Briefing March 10 came into force on 2 March 2010.

Challenge to Scope of Agency Workers Regulations

The Agency Workers Regulations were laid before Parliament on 21 January 2010 and are due to come into force on 1 October 2011. The Association of Recruitment Consultancies has indicated that certain aspects of the draft regulations go beyond that required under the Agency Workers Directive, questioning the inclusion of workers employed through intermediaries or umbrella companies.

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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