UK: Employment Briefing May 2011

Last Updated: 23 May 2011
Article by Brian Gegg, Jesper Christensen and Marc Meryon

When does an employment contract terminate?

The Court of Appeal has revisited the thorny question of the point at which an employment contract terminates for common law purposes. In Societe Generale v Geys the Court overturned the High Court's decision that termination of employment only became effective when the employee had knowledge of it. The Court held that notification to the employee was irrelevant. This was a contractual issue and the termination was effective when notice monies were paid into the employee's bank account. It should be noted that for statutory purposes, the effective date of termination is the date on which the employee becomes aware his employment has terminated. For policy reasons, the employee's knowledge is also critical because that is the date from which time runs when calculating the tight statutory timelines for bringing an employment tribunal claim.

Mr Geys was Managing Director of Societe Generale's European Fixed Income Sales when, on 29 November 2007, he was told that the bank had decided to terminate his contract with immediate effect. He was told to clear his desk and leave. Mr Geys's solicitors reserved his rights and requested information about his contractual termination payment (which was stated to be payable if the bank terminated without cause). On 18 December 2007 the bank paid the termination monies direct into Mr Geys's bank account without informing him. Mr Geys's solicitors wrote to affirm his contract and the bank responded on 4 January 2008 that they had terminated in accordance with the contract and properly paid the termination sum.

The High Court found that Mr Geys's contract terminated on 4 January when the bank advised him that termination monies had been paid. Further, it was open to Mr Geys to affirm the contract rather than accept the breach. The Court of Appeal disagreed with the termination date, finding that the payment of the termination monies on 18 December was effective to bring the contract to an end. All that the employer needed to do was to comply with the terms of the contract, which it did by 18 December.

Whilst this decision applies commonsense contractual principles it fails to address the problems with regard to uncertainty arising where an employee is not aware that his employment has properly terminated. The decision has application to contractual issues arising out of the termination date but, as outlined above, knowledge will still be vital for determining the termination date for statutory claims.

Belief in anti fox hunting falls within 'philosophical belief' protection

An employment tribunal has allowed a claim for discrimination to proceed on the basis that a gardener's belief in anti fox hunting constituted, on the facts, a philosophical belief capable of protection under the Employment Equality (Religion or Belief) Regulations 2003.

In Hashman v Milton Park (Dorset) Ltd t/a Orchard Park, Mr Hashman was dismissed as a gardener from a garden centre, allegedly because the majority shareholders of Orchard Park, who were keen hunters, became aware of his animal rights activism. Mr Hashman (curiously represented at tribunal by a Mr Hare) described his belief system as: 'people should live their lives with mindful respect for animals and we all have a moral obligation to live in a way which is kind to each other, our environment and our fellow creatures'. The tribunal accepted that his beliefs fell within his general commitment to the sanctity of life.

It is noteworthy that the courts are taking a liberal approach to the interpretation of 'philosophical belief' in the Regulations whereas the final EHRC Code was narrowed down from its earlier draft. However, the tribunal judge emphasised that this case very much turned on its facts and not every case of anti-fox hunting/ animal rights activism will fall within the ambit of philosophical belief.

Entire agreement clauses under scrutiny

It is common in employment contracts to include an 'entire agreement' clause which provides that the employment contract constitutes the entire understanding between employer and employee in relation to the employment. The Court of Appeal in AXA Sun Life Services plc v Campbell Martin Ltd and others considered the enforceability and breadth of such entire agreement statements contained in agreements between AXA and agents appointed to sell its financial products. On the particular wording of the statement under consideration the Court held that it was ineffective to exclude misrepresentations and terms implied to give the agreement business efficacy. However it was effective to exclude collateral warranties and other implied terms. Whilst the Court's decision turned on the wording of the particular statement, it underlines the fact that broad statements are unlikely to cover misrepresentation and business efficacy implied terms. Such clauses are not 'boilerplate' and should be tailored to the particular circumstances. If it is intended to exclude liability for misrepresentation then that should be specifically included in the wording. Further, an employer will not always wish to exclude business efficacy implied terms since these may be equally beneficial to the employer as to the employee.

Employee dismissed for sending offensive email from home computer

In Gosden v Lifeline Project Ltd a tribunal held that Mr Gosden had been fairly dismissed when he sent a racist and sexist email from his home computer to the home computer of a colleague.

The email was a chain email which was headed 'It is your duty to pass this on!' and the recipient of the email then forwarded it to another colleague and it thereby entered Mr Gosden's workplace. He was dismissed for gross misconduct for carrying out an act which might damage his employer's reputation. The tribunal found that Mr Gosden had been fairly dismissed since the email was intended for wider circulation and this therefore took it out of the protection of right to a private life under the Human Rights Act (Article 8).

Minor breach of absence policy

The EAT in Sakharkar v Northern Foods Grocery Group Ltd t/a Fox's biscuits issued a reminder that the larger an organisation is and the better resourced it is, the more closely it will be expected to abide by its own contractual procedures. In this case, Mr Sakharkar had prolonged periods of absence from work. Northern Food's contractual absence policy contained four stages, the first three being 'reviews' which were triggered by a certain level of absence. The third stage was a final review which arose when the employee had two periods of absence within twelve months of the second review and the fourth stage was dismissal.

Following three reviews Mr Sakharkar was dismissed. He claimed unfair dismissal. At a pre hearing review the tribunal noted that the second of Mr Sakharkar's two days of absence which triggered the final review fell outside the twelve month period. Despite the error the tribunal found that Mr Sakharkar had been fairly dismissed. The EAT disagreed. Whilst it was correct that Mr Sakharkar had been dismissed for 'some other substantial reason' the key question was whether, given the size and administrative resources of the employer, it had acted reasonably in treating the failure to comply with the absence policy as a sufficient reason for dismissal. The EAT noted that Northern Foods' personnel department had express responsibility for monitoring absence and attending final review and dismissal hearings. Since it was able to deploy a personnel specialist to support fair and consistent application of the policy, the failure to abide by it was key even if the breach was minor. The EAT substituted a finding of unfair dismissal.

Consultation on Takeover Code

The Takeover Panel has published a consultation paper on proposed changes to the Takeover Code which applies to takeovers of UK listed companies. The objective is to provide greater security and information for staff in the context of a proposed takeover. The changes require the offeror to state its intentions with regard to the employment of staff and any material changes it intends, its strategic plans for the offeree and likely repercussions on staff. Statements must be adhered to for at least 12 months from the date on which the offer becomes unconditional.

And finally... April 2011 Employment Law changes

From 6 April, the default retirement age was abolished with transitional arrangements in place.

The right to additional paternity leave and pay came into force for parents of babies due on or after 3 April 2011.

The extension of the right to request flexible working for parents of children under 18 (from the age of 17) has not come into force after the government changed its mind.

In the government's budget and its document 'Plan for Growth' the government set out the following measures:

  • The exemption of start up businesses and employers of fewer than 10 employees from compliance with new laws for three years
  • Not to bring into force the dual discrimination provisions in the Equality Act 2010
  • To consult on the proposed removal of the third party harassment provisions in the Equality Act 2010

Legal fees tax concession on termination agreements

Employees have historically enjoyed the benefit of a tax concession which allows his or her legal fees to be paid by the employer and to escape tax when they are paid as part of a settlement agreement. The concession is being amended, and the revised tax concession is being formally enacted by Regulation 10 of the Enactment of Extra-Statutory Concessions Order 2011 and will affect payments made on or after 6 April 2011.

Previously the tax concession applied to legal costs ordered by a court or tribunal or costs paid direct to a lawyer under a settlement agreement, including compromise agreements and COT3 agreements. However, there have been problems with the drafting of the Order which as drafted would now exclude COT3 agreements and compromise agreements which refer only to the Equality Act 2010 (as opposed to the ERA 1996). HMRC has confirmed that it is reviewing the Order and that the Extra Statutory Concessions Order can continue to be used for compromise agreements under the Equality Act 2010 pending amending legislation. It will also look into the issue of the current exclusion of COT3s and other settlement agreements and, if necessary, amend the legislation.

Weddings and holidays

Did your staff enjoy the day off for the Royal Wedding? Whether or not you were obliged to grant a day's leave will, of course, have turned on the wording in your contracts of employment. The Working Time Regulations provide that the annual minimum statutory leave is 28 days which includes bank and public holidays. If a contract provides for a set number of days 'plus all bank and public holidays' then additional public holidays, such as that for the Royal Wedding, will be allowed. If bank and public holidays are wrapped up in a total number of days then no additional day's leave will accrue.

Equality Act Codes of Practice

The EHRC's statutory codes of practice on the Equality Act 2010 took effect on 6 April 2011.

Bribery Act guidance

The Ministry of Justice published its guidance on Bribery Act procedures for commercial organisations on 30 March together with a non statutory quick start guide for small businesses. The Bribery Act comes into force on 1 July 2011. The guidance underlines that the objective of making a commercial organisation liable for acts of bribery by a person associated with it is not to bring criminal proceedings in isolated cases where an organisation has effective procedures in place. Further, an organisation's willingness to cooperate with an investigation and to make full disclosure will be taken into account.

The guidance makes two changes to the six guiding principles set out in the previous draft guidance. In place of 'Clear, practical and accessible policies' is 'Proportionate procedures' and in place of 'Effective implementation' is 'Communication'.

The guidance encourages a risk based approach, ie assessing the risks to a particular organisation and ensuring its policies and procedures are proportionate to that risk.

The Serious Fraud Office has also published guidance on how it intends to exercise its prosecutorial discretion under the Bribery Act. Prosecutors must be satisfied that they have sufficient evidence that a prosecution has a reasonable chance of success and that it is in the public interest to bring a prosecution.

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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