UK: HR Bytes - July & August 2011

Last Updated: 8 August 2011


As it's the holiday season, we're combining our July and August editions this month and will return to our regular monthly service in September. In the meantime, fingers crossed for a sunny summer holiday!

What with phone-hacking scandals, allegations of police bribery, the Prime Minister's apparent failure to conduct appropriate background checks on Andy Coulson and the finals of The Apprentice, it has been a slightly uncomfortable month for certain HR professionals out there! We've got further comment on this, below.

And, as usual, we also have a round-up of this month's key cases and news items.

What's new this month?

Legal Developments

  • Can an employee be harassed about their sexual orientation if they are openly gay at work?
  • What is an "ex gratia" payment?
  • Disability discrimination and redundancies – reasonable adjustments to selection criteria.
  • What does "non-solicitation" actually mean?
  • Elections for employee representatives in a collective redundancy situation

Other news

  • Take-up of longer paternity leave entitlements.
  • "Exceptionally talented" migration category brought into force.
  • Proposal to integrate income tax and national insurance contributions.


  • Some musings on the employment law issues surrounding the closure of the News of the World.

What's coming up

  • Autumn programme of events.

Legal developments

Can an employee be harassed about their sexual orientation if they are openly gay at work?

In Grant v HM Land Registry [2011] EWCA Civ 769, Mr Grant alleged that he had been harassed about his sexual orientation by his line manager at work when she asked him about his male partner in front of colleagues on a work night out and made a "limp wrist" gesture towards him. The Court of Appeal found that Mr Grant had "come out" at work (although at a different office/location to the one he worked at when the discrimination occurred) and had therefore risked that information being discussed between colleagues. It found that the line manager had not intended to violate his dignity or create an intimidating, hostile, degrading, humiliating or offensive environment for him when she had made reference to his sexual orientation and therefore the line manager's actions did not amount to discrimination or harassment, in spite of the fact that Mr Grant had felt uncomfortable and had been upset by the actions.

One of the interesting aspects of the case is the extent to which it considers the intentions of the alleged perpetrator rather than the feelings of the victim – traditionally, courts have assessed harassment allegations much more from the perspective of the victim. Whether this is part of a sea change in the courts' approach to harassment, however, remains to be seen.

What is an "ex gratia" payment?

In Publicis Consultants UK Ltd v O'Farrell UKEAT/0430/10, Ms O'Farrell was dismissed on less than her contractual notice period of three months. However, she received a severance payment which included a payment described in her termination letter as an "ex gratia payment equivalent to three months' salary". She then brought a breach of contract claim in relation to the failure to give her her contractual notice.

The Employment Appeal Tribunal found that the payment was truly "ex gratia" and did not represent pay in lieu of her notice. It noted that Ms O'Farrell's contract of employment did not include a right for the employer to make a payment in lieu of notice and the court found that the words that the parties had used were clear – nothing suggested that the company was obliged to make the payment or that any other construction of the words should be applied in the circumstances. She was therefore entitled to bring a claim for a further three months' pay in lieu of her notice period.

This is a useful reminder that the courts and Tribunals apply what is known as the "contra preferentem" rule – namely that terms are construed against the person who imposed them (i.e. the company in this instance). Employers should not say that a payment is "ex gratia" unless it is genuinely "a gift".

Disability discrimination and redundancies – reasonable adjustments to selection criteria

In Lancaster v TBWA Manchester UKEAT/0460/10 the Claimant was at risk of redundancy and had a disability. The Claimant was pooled with other staff for the purposes of selection for redundancy. During the consultation process, the Claimant argued that the employer should remove one of the proposed selection criteria as he claimed he was unfairly disadvantaged by it as a result of his disability. The employer did not do so. The employee was selected for redundancy and subsequently claimed that the employer had failed to make reasonable adjustments, as required by the Disability Discrimination Act 1995.

The EAT held that the Claimant's suggested adjustments (namely the removal of the selection criterion altogether) were not reasonable, because (even if the criterion had been removed) this would not have prevented the employee from being selected for redundancy, as he still scored lowest even after removal of this criterion. The EAT therefore found that the employer had not breached its duty to make reasonable adjustments under the Disability Discrimination Act 1995.

The key point to note here is that the Equalities and Human Rights Commission's statutory code of practice puts forward adjustments of selection criteria as a reasonable adjustment which an employer might make. However, the EAT in this case emphasises that an adjustment which only gives the disabled employee a "chance" to avoid being selected for redundancy will not necessarily be reasonable. Caution should be applied though, as not all situations will be as black and white as the facts in this case.

What does "non-solicitation" actually mean?

Although this case is in the context of a commercial transaction, rather than an employment relationship, the High Court in Baldwins (Ashby) Ltd v Maidstone [2011] EWHC B12 (Mercantile) has given some useful guidance on the meaning of "canvassing or soliciting" in a restrictive covenant.

Maidstone had sold his accountancy business to Baldwins and, as part of the sale documentation, had agreed to a three year restriction on "canvassing, soliciting or endeavouring to entice away" clients from the accountancy business.

The High Court held that both canvassing and soliciting involved an approach to customers with a view to appropriating the customer's business or custom, and enticing away had to be interpreted similarly. There had to be an active component and a positive intention, and the approach to the customer had to involve some direct or targeted behaviour.

The implication of this finding is that some types of contact with customers will not breach non-solicitation etc clauses. The finding also serves to highlight the importance of including non-dealing provisions as well as non-solicitation covenants, as any contact with a client will fall foul of a non-dealing clause, without having to prove that there was a positive intention or that the approach was direct or targeted.

Elections for employee representatives in a collective redundancy situation

The EAT has given some useful guidance to employers undertaking collective redundancies, in the case of Phillips v Xtera Communications Ltd UKEAT/0244/10.

Xtera was undertaking a redundancy programme which triggered collective consultation. As you may be aware, if an employer does not recognise a trade union and does not have a body of elected employee representatives already in place with which to consult, TULR(C)A 1992 requires that the employer must hold elections for employee representatives.

The EAT held in this case that if the number of candidates who put themselves forward for election as employee representatives exactly matches the number of vacancies, the employer can treat the candidates as elected without having to hold a ballot – there is no requirement for an election to be held where it is uncontested.

Other News

Take-up of longer paternity leave entitlements

A survey by the think tank Demos has shown that only one in ten fathers would consider taking the longer paternity leave entitlements (of up to six months) which were introduced in April 2011. As it is, only half of all men take the full 2 week entitlement which applied before April 2011. Demos found that this was largely because statutory paternity pay typically covered only Ľ of a father's pay.

"Exceptionally talented" migration category brought into force

On 9 August 2011, the UK Border Agency will bring into force the new "Exceptional Talent" category under Tier 1 of the points based immigration system. The Exceptional Talent category will be limited to 1,000 individuals in the first year. It facilitates migration for those who have been recognised, or have the potential to be recognised, as leaders in the fields of science, humanities, engineering and the arts.

The category will be overseen by world-renowned 'competent bodies': the Royal Society; Arts Council England; the Royal Academy of Engineering; and the British Academy.

Proposal to integrate income tax and national insurance contributions

The Office for Tax Simplification has suggested that the government should consider merging income tax and national insurance contributions into a single tax. HMRC has asked for evidence from employers and payroll providers about the proposal, including: (a) the administrative difficulties of operating income tax and NICs for employers, payroll software providers and payroll administrators; and (b) how the proposed collection of PAYE data on a real time basis (which was proposed earlier in the year) may affect the integration of income tax and NICs. The responses will feed into the government's reform proposals, which will be published for consultation in autumn 2011.


Some musings on the employment law issues surrounding the closure of the News of the World

Unless you've been hiding in a cave for the last few weeks, you will know that the News of the World ("NOTW") announced on Thursday 7 July that its last edition would be published on Sunday 10 July. As you might expect, there are various potential employment law consequences arising out of the closure.

Redundancy consultation?

James Murdoch announced the closure to staff on 7 July and said "I can understand how unfair these decisions may feel. Particularly for colleagues who will leave the Company. Of course, we will communicate next steps in detail and begin appropriate consultations."

In our view, these actions are almost certain to lead to claims for failure to collectively consult about the redundancies under TULR(C)A 1992. Any consultation process which is now undertaken is likely to be seen as a sham, as the decision has already been made - what is there left to consult about? That's a penalty of 90 days' pay per affected employee, unless NOTW is able to plead the "special circumstances" defence (which is extremely rare).

A spokeswoman for News International on 7 July refused to say whether the News of the World's 200 employees would be made redundant and said that they would be invited to apply for other jobs in the company. This, at a time when print media is facing a tremendous struggle for survival and papers are surviving on skeleton staff, following huge redundancy programmes in recent years. It seems unlikely that News International is carrying a large number of vacancies unless...

Application of TUPE?

...the Sun decides to print a Sunday edition. In which case, it may be possible for the NOTW employees to claim that their employment has transferred automatically by operation of law from NOTW to The Sun, under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). This will largely depend on the length of time between the closure of NOTW and the start-up of a "Sunday Sun" and whether there is a genuine transfer of an economic undertaking which retains its identity following the transfer. Factors which will help to determine this include whether goodwill (or lack thereof, in this case, perhaps?!) has been transferred; whether stock, buildings and other tangible assets are transferred; and the extent of disruption of the activities, amongst other matters. This remains to be seen!

Stigma damages?

One final point is that, if the NOTW staff bring claims of unfair dismissal, they may well be eligible for "stigma damages" under the principle set out in the case of Malik v BCCI 1997. BCCI was a financial institution which collapsed in the 1990's following allegations of money laundering and other financial irregularities. In the Malik case, a former employee of the bank brought an unfair dismissal claim. The House of Lords held that the bank's corrupt and fraudulent practices so tainted the employees who had worked there at the time (even if they were not involved in the fraud/malpractice themselves) that their future employability was adversely affected and they were entitled to additional damages above and beyond the usual compensation for unfair dismissal, to reflect the fact that it would be much harder for them to find a new job in future.

It does not take a huge leap of the imagination to conceive of former NOTW employees making similar allegations, although they would need to demonstrate more than mere incompetence on the part of the employer and show dishonest and corrupt conduct.

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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