UK: Employment Briefing - December 2010

Last Updated: 8 December 2010
Article by Brian Gegg, Jesper Christensen and Marc Meryon

Acquired Rights Directive and Service Company Transfers

The ECJ has ruled in Albron Catering BV v FNV Bondgenoten and another that where employees of a service company (A) are permanently assigned to another group company (B) the Acquired Rights Directive will treat the 'non contractual' employer, B, as the transferor. Article 3(1) of the ARD provides that 'the transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee'. The ECJ held that this wording (and in particular the concept of 'an employment relationship') suggests that there need not be a contractual nexus between the transferor and the employees in order for the provisions of the ARD to bite.

Under UK legislation, the Transfer of Undertakings (Protection of Employment) Regulations 2006 implement the ARD but do not reflect the wording of a non contractual relationship. Regulation 4 states that there will be an automatic transfer of rights and obligations under or in connection with the contract of employment of any person 'employed by the transferor' and assigned to the organised grouping of transferring employees. This narrower wording appears to exclude the interpretation given by the ECJ in Albron. However, public sector workers can rely directly on the ARD and therefore apply the Albron decision. Further, in the context of private sector employers, courts and tribunals are under a duty to interpret domestic legislation purposively with the ARD and may if necessary add words into domestic law to make it read consistently with the Directive. We must wait to see how the courts address this issue.

Union Acceptance of Collective Redundancy Procedure Results in Reduction of Protective Award

In Lancaster University v The University and College Union the EAT held that where a union had accepted a flawed notification and consultation procedure for university staff on fixed term contracts over a period of twelve years, a tribunal was correct in reducing protective awards from 90 days' pay to 60 days. There was a significant mitigating factor in that the union had effectively condoned the practice (which failed to include consultation with the union over ways of avoiding the dismissals, reducing numbers to be dismissed and mitigating the consequences of dismissals) over a long period of time.

Date of Termination of Employment is the Date the Dismissal Letter is Read

In Gisda Cyf v Barratt [2010] the Supreme Court upheld the EAT's decision that notification of dismissal sent in a letter by recorded delivery was received by the Claimant when she opened and read the letter, not when it arrived at home.

Ms Barratt had been suspended from work after behaving inappropriately at a private party. A disciplinary hearing had been held and she was aware the outcome might be dismissal. She was told a letter would be sent to her advising her of the outcome. She was then absent from home visiting her sister's new baby when the dismissal letter arrived and it was signed for by her stepson. When she arrived home a couple of days later she asked whether a letter had arrived. Her stepson produced it and she did not open it until the following morning. In order to present a claim of unfair dismissal, Ms Barratt needed to present her claim within three months of the effective date of termination (EDT) and therefore ascertaining the EDT was crucial. Gisda Cyf argued that Ms Barratt's claim was out of time and that she had had a reasonable opportunity to discover the contents of the letter.

The Supreme Court agreed with the Court of Appeal that it was not unreasonable for Ms Barratt to want to read the letter herself rather than ask her stepson to read it over the telephone. The Supreme Court endorsed the decision in Brown v Southall & Knight that where dismissal is communicated by letter, the contract of employment does not terminate until the employee has actually read the letter or has had a reasonable opportunity of reading it. It was not enough to show the employer intended to dismiss or had sent a letter dismissing. If however an employee deliberately refused to open the letter or went away to avoid reading it, he may be debarred from arguing that notice of dismissal had not been given. On the facts in this case it was reasonable for Ms Barratt to have been away from home and not to have asked her stepson to read the contents of the letter to her. In the circimstances her EDT was the date she actually read the letter herself.


Frustration of contracts is rare. In Atwal v Rochester [2010] EWHC the High Court found on the facts that a contract had been frustrated and the contractor was entitled to a just sum for work carried out under the contract before frustration. Note that this case did not involve a contract of employment.

This case deals with a construction contract but the principles can be applied to any contract where a consultant or sole trader is engaged. Mr and Mrs Atwal engaged Mr Rochester, a sole trader, to carry out extensive building works to their home. They chose Mr Rochester because his quote was substantially lower than the quotes of other building firms. After completing the majority of the works, Mr Rochester suffered a heart attack and was advised not to work again. At that stage the work was incomplete. Mr and Mrs Atwal were obliged to engage new builders to complete the works at a substantially higher cost than Mr Rochester's quote. They argued that Mr Rochester was in repudiatory breach of contract and asked the High Court for damages. Mr Rochester argued that as he was unable to complete the contract, it was frustrated and he was entitled to a just sum due for work carried out under the contract.

The High Court preferred Mr Rochester's argument. Frustration takes place when a supervening event, without default of either party, so significantly changes the nature of the outstanding rights and obligations from that which the parties could reasonably have contemplated at the time they made the contract that it would be unjust to hold them to the contract. The High Court held that this was the case here. It was unrealistic to expect Mr Rochester to continue working after his heart attack. As a sole trader he could not engage other members of a team to carry out that work for him. The Court awarded Mr Rochester damages for work carried out but as yet unpaid for and dismissed the Atwals' claim for damages.

PHI and Holiday Pay

In Souter v Royal College of Nursing a tribunal in Scotland held that Ms Souter was not entitled to sick pay for previous years when her employer had paid her in lieu of her final year's holiday entitlement on termination of her employment. The tribunal also considered the relationship between PHI benefits and statutory holiday pay.

Ms Souter was an administrative assistant for the RCN. She commenced long term sickness absence on 7 November 2001 and remained off sick until her retirement in 2010. By that time she had been receiving benefits under the RCN's permanent health insurance scheme. At no time during her sickness absence did Ms Souter ask to take annual leave or request holiday pay prior to the termination of her employment. On her retirement RCN paid Ms Souter a sum in respect of holiday pay for the last part year of her employment. Ms Souter brought a claim for unlawful deduction from wages in respect of statutory holiday pay in respect of her whole period of absence.

The tribunal held that as the RCN had paid her last year's holiday pay on termination of employment Ms Souter was out of time to bring a claim in respect of the earlier deductions. The tribunal also held that Ms Souter had suffered no loss in any event since she had been paid throughout her period of sickness, first through the RCN sick pay scheme and thereafter by way of PHI benefits. From the time she started receiving these benefits, there was an effective variation in her contract of employment. The variation was that the sum she was entitled to by way of payment was the lower PHI sum not full pay.

As a tribunal decision this is not binding on other tribunals and it will be interesting to see whether other tribunals decide similarly.

And Finally...

Quango Cuts

The Government has announced a substantial reform of non departmental public bodies. It proposes to cull 192 quangos, merge 118 and reform 171.

The Equality and Human Rights Commission will be reformed to refocus 'on its core functions of regulating equality and anti-discrimination law in Great Britain, of fulfilling EU equality requirements and of being a National Human Rights Institution'. Some of the EHRC's functions or services may be transferred to other organisations or private contractors.

Small Business Exemption from Right to Request Training

The Government has confirmed that companies with less than 50 employees will be exempted from the right for employees to request time off to train.

Theresa May Drops Socio Economic Duty

The Home Secretary, Theresa May, has announced that the socio economic duty, which was created as part of the Equality Act 2010, is to be scrapped.

Discrimination and Equal Pay Questionnaires

The Government Equalities Office has published final versions of discrimination and equal pay questionnaires to be used by claimant or respondent in relation to claims under the Equality Act 2010. It is not obligatory to use the prescribed forms but they are a useful template.

Claim that Belief in Animal Rights is a Philosophical Belief

A gardener, Mr Hashman, is bringing a claim that he was dismissed because of his anti-hunting and environmental beliefs which, he claims, amount to a philosophical belief protectable in law. Mr Hashman's undercover filming helped to convict chef Clarissa Dickson Wright of illegal hare coursing and the following day he was dismissed by his employers who were keen supporters of hunting.

Extension of Flexible Working Rights

The Government has signalled its intention to consult over the proposal to extend the right to request flexible working to parents of children up to the age of 18 (at present, it extends to parents of children up to the age of 17). BIS has published an impact assessment.

Data Sharing Code of Practice

The Information Commissioner's Office has published a draft code of practice on data sharing which sets out good practice for public, private and third sector organisations when data sharing. The Code is the ICO's interpretation of what the Data Protection Act requires when sharing personal data. The Code will be admissible in any legal proceedings, not just proceedings under the Data Protection Act.

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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