UK: Employment Briefing June 2011

Last Updated: 29 June 2011
Article by Brian Gegg and Jesper Christensen

Identity of potential transferee not necessary for TUPE The EAT in Spaceright Europe Ltd v Ballavoine and another has followed the EAT's decision in Harrison Bowden v Bowden in deciding that it was not necessary to identify a particular transferee in order to find that an employee had been automatically unfairly dismissed in the context of a TUPE transfer. It declined to follow the opposing EAT decision in Ibex Trading Co Ltd (in administration) v Walton and others which found that it was necessary that there should be an actual transferee in mind at the time of dismissal.

Mr Ballavoine was chief executive of Ultralon Holdings Limited which was placed into administration on 23 May 2008. Mr Ballavoine was dismissed the same day. On 25 June the business and assets of Ultralon were sold as a going concern to Spaceright. This sale constituted a 'relevant transfer' under TUPE. The EAT upheld the tribunal's decision that Mr Ballavoine had been unfairly dismissed and that the sole or principal reason for his dismissal was a reason connected with the transfer which was not an economic, technical or organisational reason entailing changes in the workforce. The EAT considered the conflicting EAT decisions in Harrison Bowden and Ibex but preferred that in Harrison Bowden. It agreed with the EAT in that case that it is not of importance whether the transferee has actually been identified at or before the moment of dismissal.

Curiously, the EAT in this case appears to have indicated that it would be wrong to follow the Ibex decision even though one EAT decision cannot trump another. However, it is likely that, given that other cases have followed the reasoning in Harrison Bowden, this is the correct approach to follow.

Article 6 and disciplinary proceedings

The High Court has considered again the applicability of Article 6 of the European Convention on Human Rights (the right to a fair and public hearing by an independent and impartial tribunal) in the context of disciplinary proceedings. In R (Puri) v Bradford Teaching Hospitals NHS Foundation Trust, the High Court found that, in circumstances where a consultant urologist was at risk of dismissal for bullying behaviour and inappropriate contact with potential witnesses, Article 6 did not apply since Mr Puri was not at risk of losing the right to practise his profession. His ability to work again as a urologist would not be impaired by any dismissal. The key test was whether the outcome of disciplinary proceedings would have 'a substantial influence or effect' on his right to practise and this test was not satisfied.

Mr Puri had complained that the composition of the internal appeal panel would prejudice the outcome since it did not contain any members from outside the Trust. The High Court held that, in any event, Mr Puri had failed to establish that the composition of the panel was not 'independent or impartial' and there was no need for members of the panel to come from outside the Trust. The High Court also disposed of Mr Puri's claim that the disciplinary proceedings affected his right to reputation. It held that the law recognises no general right to a good reputation.

Fiduciary duties and account of profits

Senior employees and directors owe fiduciary duties to their employer which require them not to make secret profits from their employer. A breach of such a duty may entitle the employer to claim for an account of the profits made by the employee with no requirement on the employer to show that it has suffered loss.

In Samsung Semiconductor Europe Ltd v Docherty and another, the Outer House of the Scottish Court of Session set out useful guidance on the circumstances in which an employee may be in a position to owe fiduciary duties to his employer. In this case Mr Docherty was employed as a quality assurance manager for SSEL, responsible for managing and overseeing the relationship with key clients and handling a large budget. The court found that Mr Docherty had assumed fiduciary duties by virtue of the nature of his role. Mr Docherty also held a 50% shareholding in DKV, a fact he did not disclose to his employer. SSEL contracted with DKV to provide engineering and quality control services and for a number of years Mr Docherty took steps to ensure that SSEL continued to work with DKV and gave misleading information to SSEL about DKV's competitors to ensure the work remained with DKV.

When SSEL became aware of Mr Docherty's interest in DKV it issued proceedings for an account of profits that he had received arising out of his interest in DKV. The court, having found that Mr Docherty owed fiduciary duties to SSEL, further found that there was a clear conflict between these duties and his interest in DKV. He was ordered to account for £340,808.

Social media and gross misconduct

In Preece v JD Wetherspoons plc an employment tribunal considered the use of social media (in this case, Facebook) in the context of gross misconduct. Wetherspoons have an email, internet and intranet policy which includes a provision that that the company could take disciplinary action should the contents of any blog lower the reputation of the organisation, staff or customers.

Ms Preece, a pub manager, was subject to a torrent of abuse by two drunken customers and was eventually able, with the help of another employee, to escort the customers from the premises. Shortly afterwards the customers' daughter repeatedly telephoned the pub to continue to abuse and threaten Ms Preece. Whilst still on duty Ms Preece engaged in a conversation about the incident on Facebook with another colleague. She referred to the customers in derogatory tones and made light banter about the incident. Unfortunately for Ms Preece, the customers' daughter accessed the site and read the comments. She complained to Wetherspoons who invited Ms Preece to a disciplinary hearing and dismissed her for gross misconduct.

The tribunal, whilst noting that it probably would not have imposed such a harsh sanction upon Ms Preece, found that the requisite tests in BHS v Burchell were satisfied and the investigation and hearing were fair and the dismissal was within the range of reasonable responses by Wetherspoons. Ms Preece's argument that she had a right to freedom of expression under Article 10 of the European Convention of Human Rights failed since her activities were in the public domain.

EAT uphold ET decision on maternity and redundancy scoring

The EAT has upheld the employment tribunal's finding in Eversheds Legal Services Ltd v De Belin that Eversheds discriminated against a male employee on the ground of his sex when it artificially inflated a female employee's score to credit her with maximum points whilst she was on maternity leave in the context of a redundancy scoring exercise.

Mr De Belin had been placed in a pool selected for potential redundancy along with his colleague Ms Reinholz. One of the criteria applied for was 'lock up' which measures the time between completing work and receiving payment for it. Mr De Belin was given his actual score whereas Ms Reinholz, who was on maternity leave, was awarded the notional maximum score so as not to disadvantage her.

The EAT agreed with the tribunal that Mr De Belin had been discriminated against and noted that employees on maternity leave cannot be favoured more than is reasonably necessary to compensate them for the disadvantages caused by their pregnancy/ being on maternity leave. 'Special treatment' must be a proportionate means of achieving the legitimate aim of ensuring that a woman on maternity leave does not suffer a disadvantage. Eversheds should have used other, less discriminatory, means of removing Ms Reinholz's disadvantage. It could have measured lock-up at the date of Ms Reinholz's last day at work, therefore using periods when the staff in the pool were actually at work.

This poses a conundrum for employers who are accustomed to taking measures to ensure employees on maternity leave suffer no disadvantage. Are the steps taken to achieve this 'proportionate' and could alternative measures be taken?

Illegal contracts and discrimination

If an employee works under an illegal contract, he is unlikely to be able to pursue contractual and statutory employment claims. However, the question of whether a discrimination complaint may be pursued is a rather more grey area. In Allen v Hounga and another the EAT considered that, on the extreme facts before them, Ms Hounga was able to proceed with her race discrimination complaint even though she was knowingly illegally employed in the UK.

The court held that Ms Hounga was lured from Nigeria to the UK by the Allen family to work as a housekeeper. She expected to be schooled and have an opportunity of a better life and, to this end, she complied with the Allens' request that she lie to the authorities that she had been invited to the UK by her grandmother. She was granted a six month visa which expired, after which she stayed on in the UK. The court also stated that Ms Hounga was treated appallingly by the Allen family who finally dismissed her and threw her out of their house. Ms Hounga brought claims for unfair dismissal and discrimination.

Ms Hounga's unfair dismissal complaint was dismissed on the basis that the law was clear that she could not pursue an unfair dismissal complaint in circumstances where her contract was illegal. However, with regard to race discrimination, the tribunal held that she was not barred from pursuing this claim and that the Allens would not have treated a hypothetical comparator in the same way. She was entitled to recover £6000 for injury to feelings. The EAT agreed with the tribunal and distinguished the case of Vakante v Addey and Stanhope School (where an employee who had lied about his immigration status to get a job could not pursue a discrimination complaint) since in that case, the employer had no knowledge of the illegality.

It is difficult to see where the line should be drawn between the decisions in Vakante and this case and it is tempting to conclude that, given the extremely sad facts in Allen v Hounga, that the EAT strained to distinguish Vakante in order to leave Ms Hounga with some form of compensation.

And Finally...

Agency Workers Regulations: Guidance

The Agency Workers Regulations Final Guidance was published on 6 May 2011. The Guidance provides useful assistance in applying the Regulations and gives clarity to the question of who falls within or outside the scope of the Regulations. The Guidance also clearly explains the two tranches of rights for agency workers:

  • day 1 rights for which qualifying service is not required and which entitle the agency worker to access to facilities and information on job vacancies; and
  • rights accruing after 12 weeks' service to equal treatment in respect of pay and working conditions.

The Regulations come into force on 1 October 2011 and will not have retrospective effect. For workers already on assignment, the 12 week qualifying period will start from 1 October 2011.

Extra Statutory Concession for legal fees

Last month (May '11) we looked at the concerns raised by practitioners about the new Extra Statutory Concessions Order 2011 (SI 2011/1037) which enacts ESC A81 exempting legal fees from tax where these are paid as part of a termination agreement and are paid directly to the employee's solicitor. As drafted, the exemption seemed narrower in scope than previously. HMRC had indicated that it would review, and if necessary amend, the Order. However, HMRC have now stated that no changes will be made.

As drafted, the Order seems now to limit the concession to compromise agreements. Previously, COT3 agreements were also covered but since COT3 agreements, by their very nature, do not usually contain all the provisions necessary to satisfy the requirements of a compromise agreement, they may fall outside the scope of the extra statutory concession unless they are now drafted in the form of a compromise agreement.

National Minimum Wage increase

As from 1 October 2011, the hourly national minimum wage rates have increased as follows:

  • Standard (adult) rate will rise to £6.08
  • Development rate will rise to £4.98
  • Young workers' rate will rise to £3.68

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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