UK: Employment Law Bulletin - January 2011

Last Updated: 23 June 2011


The government is considering an 'Employer's Charter', ostensibly ignited by the surge in employment tribunal claims in 2010. Last year 236,000 claims were made, a considerable increase from the low of 86,000 in 2004. An HR Director for a small charity, speaking on the Today programme on Radio 4 earlier this month said "the flood of new legislation is where it started going wrong, with case law getting more complicated". She also blamed the previous government for "gold plating" European legislation when it was introduced in the UK. This is on the back of a Times article in which another charity described tribunals as "legalised extortion" and "clogged up by claims of little merit".

The proposals include increasing the qualifying period for unfair dismissal from one year to two years, introducing a fee for starting tribunal cases, and possibly exempting small employers from some employment laws. Although we welcome these proposals, we do not think they go far enough. Taking employees outside the unfair dismissal regime will simply encourage them to claim discrimination or whistleblowing, which do not require minimum service periods and which tend to be far more expensive claims to defend.

An issue fee will undoubtedly be paid by a union (where unions are backing the claim), or become part of the overheads of no-win, no-fee solicitors, and therefore will not provide any real barrier to a claim. We think the government should introduce financial penalties for unions who back a high proportion of claims which ultimately fail, and that employers should be more willing to contest weak claims in order to undermine the culture where employees know they will be handed a cheque for a few thousand pounds simply by lodging a claim.

Royal wedding - public holiday

The government has announced a public holiday on 29 April 2011 to mark the Royal Wedding of Prince William and Kate Middleton. Many employees assume that, as it will be a bank holiday, they will be entitled to take this day as paid leave. In fact, employees do not have an automatic right to paid leave on bank holidays and it will depend on the wording of their employment contract.

The only legal obligation on an employer is to allow their workers the minimum annual leave laid down in the Working Time Regulations 1998 (28 days for a full-time worker). Where an employment contract provides for "twenty days holiday plus bank holidays", then the employee will be entitled to the royal wedding bank holiday in addition to the usual eight bank holidays. Where the employment contract simply states that the employee is entitled to "twenty eight days holiday per year", there will be no such contractual entitlement. This will also be the position where contracts of employment specify particular bank holiday dates.

Whilst some employers might be willing to grant staff an additional day's holiday, others might struggle to do so for financial, organisational or practical reasons so they would be wise to check employees' contracts of employment.

New compensation limits and increase in cap for a 'week's pay'

The maximum compensatory award for unfair dismissal will increase from £65,300 to £68,400 with effect from 1 February 2011. This increased award will only apply to claims where the effective date of termination is on or after 1 February 2011.

In addition, the current maximum limit of a week's pay will increase from £380 to £400 (also from 1 February 2011). This will also be the new limit to be used in redundancy calculations.

Serial litigants at risk of paying costs

This is a useful decision for employers facing claims from serial litigants. Mr Berry (a man in his 50s) scoured the internet for job adverts calling for a 'recent school leaver' or similar requirements. He then brought discrimination claims in the employment tribunal on the basis that he was excluded from applying for the job on the grounds of his age, and then offered to settle for a few thousand pounds to avoid litigation.

The Employment Appeal Tribunal (EAT) dismissed four appeals by the serial litigant, who had made 50 similar applications. The EAT concentrated on one of the four appeals, which concerned a recruitment agency which had advertised a job that indicated that it would be suitable for a school-leaver or A-level student. Mr Berry's age discrimination claim had been dismissed by the employment tribunal, because he had not actually applied for the job. Mr Berry appealed.

The EAT said that an employer was only liable for age discrimination if the claimant had been affected in some way and that was not the case here as Mr Berry had not applied for the job. The EAT also noted number of similar applications made by Mr Berry and said that the discrimination laws are not intended to provide a "source of income" for those who complain of arguably discriminatory job vacancies which they have no intention to fill. The EAT also emphasised that those who seek to exploit discrimination legislation for financial gain are liable to find themselves facing a liability for costs.

Misconduct – dismissal procedure

The recent employment tribunal case of Henshaw v Touch Tanning Ltd re-iterated the importance of following the ACAS Code of Conduct, wherever possible, when dealing with disciplinary matters. A family-run business was described as having one person act as "judge, jury and executioner" in its disciplinary process.

A receptionist in a tanning salon failed to follow a procedure whereby new customers were required to fill in a form to determine how many minutes they could spend on a sun bed. The form was accompanied with information explaining the risks of using sun beds, together with a disclaimer. The receptionist admitted that she knew she was supposed to follow this process and she described her failure to do so as a "one-off incident", explaining that she felt tired and lethargic and that the customer seemed to know what she wanted. A director of the Company instructed her daughter (not an employee of the Company) to investigate the matter.

An investigatory meeting was held (which the director also attended), where it was decided that the employee was required to attend a formal disciplinary hearing, to be chaired by the director's daughter. The employee refused to attend the hearing and was dismissed for gross misconduct in her absence. The employee did not appeal the decision.

An unfair dismissal complaint was made and the employment tribunal found that the Company had breached the ACAS Code of Practice on Disciplinary and Grievance Procedures, as well as taking into account a number of other procedural failings. It concluded that the daughter should not have investigated and dealt with the formal hearing. It also had no doubt that, had the employee appealed, she would have dealt with that hearing too. This was also in breach of the Company's own disciplinary procedure. There was no reason why the employee's line manager could not have conducted the investigatory stage. Nevertheless the employment tribunal went on to find that the employee had contributed to her dismissal, so her compensation was therefore reduced to zero.

The lesson for employers is that tribunals expect them, if it is practicable, to have a separate investigator to the person who hears the disciplinary.

Agency workers

Some good news for employers – the courts are continuing to hold that workers engaged through an employment agency are not 'employees' and thus cannot claim unfair dismissal. In the case of Tilson v Alstom Transport, an employment tribunal found that, despite providing his services through a separate limited company wherein he billed on an hourly basis, as well as being paid through a designated separate payroll company, Mr Tilson was, in fact, an employee of Alstom Transport and, as such, was entitled to claim unfair dismissal against the Company.

He successfully argued that, despite paying his own income tax and National Insurance contributions, the way in which his work was structured, and the manner in which he worked for Alstom (together with the tasks he performed on the Company's behalf), were the real indicator as to his employment status.

However, the Court of Appeal has decided that a significant degree of integration of an agency worker into an organisation is not inconsistent with an agency relationship. In this case there was no contract of employment between Alstom (the end user) and Mr Tilson and, indeed, there was a lack of intention to form an employment contract. The Court of Appeal also held that the need to apply to a line manager before taking annual leave was not enough to justify the implication of a contract.

Dismissal extinguishes right to guaranteed bonus

In the case of Locke v Candy & Candy, the Court of Appeal has provided important confirmation that where a contractual bonus clause states that an employee has to be "employed by the company in order to receive the bonus", employees are not entitled to any bonus if they are not employed at the time the bonus becomes payable.

In this case the employee was summarily dismissed under a payment in lieu of notice (PILON) clause shortly before the bonus became payable. The Claimant, having been given 6 months payment in lieu of notice in accordance with his contract, sought to recover a guaranteed annual bonus of £160,000, which only became payable after 12 months employment. He had been dismissed with immediate effect around ten days short of this under a contractual clause permitting the company to make a payment in lieu of notice. Had he been asked to work his notice rather than being paid in lieu, he would have received his bonus entitlement.

The Court of Appeal held that the PILON did not allow the Claimant to receive all the benefits that he would have been entitled to had he remained in employment with the company and, because the contract required him to be employed in order to receive the bonus, he was not entitled to the bonus.

And finally...

Employers might like to ponder on news in this week's Belfast Telegraph that Pagan prisoners will be entitled to four days off work next year to celebrate their own particular festivals.

Prisoners will be allowed to choose four days from the eight recognised Pagan holidays, which include (and make a note of these for your diaries) "Yule", the winter solstice on 21 December; "Imbolc", the festival of lactating sheep, which marks the beginning of Spring on 1 February; and, best of all, "Beltane", which marks the arrival of summer on 1 May.

Will it be long before employers are required to ensure that their workforce can celebrate festivals of their choosing? Beltane is described in Old Celtic traditions as 'a time of unabashed sexuality and promiscuity'. Too many workplace issues to contemplate...

The contents of this brochure are intended as guidelines for clients and other readers. It is not a substitute for considered advice on specific issues. Consequently, we cannot accept any responsibility for this information or for any errors or omissions.

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