UK: Employment Briefing - September 2011

Last Updated: 27 September 2011
Article by Brian Gegg and Jesper Christensen

Employees or self employed? Intention irrelevant

The Supreme Court in Autoclenz v Belcher upheld the Court of Appeal's decision that car valeters, described as self employed – and found to be self employed by the Inland Revenue – were, on the facts, actually employees of Autoclenz.

This case is interesting because the contractual documentation clearly pointed to self employment and the Inland Revenue had confirmed this status. In the two documents which comprised the contract of employment, the valeters signed a confirmation that they were self employed and that their tax affairs were handled under Schedule D. A substitution clause was later included so that if the valeter could not carry out the work, a substitute could be provided. The contract provided that valeters had to purchase from Autoclenz protective overalls which identified them as contractors of Autoclenz and had to provide their own cleaning materials. The documentation also stated ' you will not be obliged to provide your services on any particular occasion nor, in entering into such agreement, does Autoclenz undertake any obligation to engage your services on any particular occasion'.

The tribunal had made findings of fact which bound the higher courts. It found that Autoclenz had advertised for 'self employed people' as valeters. Payments were made to the valeters on a piecemeal basis and the valeters rendered weekly invoices. They undertook responsibility for payment of tax and NICs themselves on a self employed basis.

The valeters brought claims seeking a declaration that they were workers and entitled to the national minimum wage (NMW) and holiday pay. The Supreme Court agreed with the Court of Appeal (which had overturned the EAT) and found that in reality the valeters were employed under contracts of employment and therefore entitled to the NMW and holiday pay. The court emphasised that the real question was what was the true position between the parties, irrespective of what the contractual documentation pointed to? The relative bargaining power of the parties had to be taken into account in deciding whether the terms of any written agreement represented both what was agreed and the true position. All the circumstances of the case had to be looked at. The tribunal was entitled to find that the valeters in practice had to carry out the work offered to them and Autoclenz was obliged to offer work. No substitution was in reality allowed.

This case underlines that, irrespective of the tight drafting of an agreement to illustrate self employment, the court is entitled to look behind that agreement and find that the true facts indicate employment status, even if the Revenue has determined otherwise for tax purposes.

Territorial Scope: Serco applied

Since October 1999, there has been no defined statutory territorial scope for the application of the right to claim unfair dismissal under the Employment Rights Act 1996 (section 94(1)). When determining whether an employee working abroad is entitled to claim unfair dismissal the courts have had to apply the House of Lords decision in Serco Ltd v Lawson. This case identified three categories of employees working abroad who might receive unfair dismissal protection:

  • Employees working in Great Britain at the time they were dismissed
  • Peripatetic employees who were based in GB
  • Expatriate employees who worked or who were based abroad. In this case, only exceptional cases would qualify. These might include employees working for a British employer in an extra territorial political or social enclave; employees posted abroad for the purpose of a business in GB; or employees with a strong connection with GB and British employment law.

In the recent case of Duncombe v Secretary of State for Children, Schools and Families (DCSF) the Supreme Court applied Serco when determining whether Mr Duncombe was entitled to unfair dismissal protection. Mr Duncombe was a teacher employed by the DCSF to work in a European school in Germany. He was employed under successive fixed term contracts and his employment was not renewed when he reached the maximum 9 years employment under regulations limiting the length of employment of seconded staff in European schools.

The Supreme Court held that Mr Duncombe was entitled to claim unfair dismissal. His employer was not only based in GB but was part of the UK government. He was employed under a contract governed by English law, in an international enclave and had no particular connection to the country in which he was working.

The Supreme Court's approach in this case was expected and applies the principles in Serco in a commonsense way.

Advocate General's opinion on holiday entitlement

The Advocate General in KHS AG v Schulte gave her opinion that workers on long term sick leave do not have the right under European law to accrue unlimited periods of holiday leave or payments in lieu of such entitlement. In this case, a German law which provided that annual leave entitlement was extinguished after the expiry of 18 months from the end of the annual leave year was consistent with the intention of the Working Time Directive.

No need to request holiday leave for statutory entitlement

In NHS Leeds v Larner the EAT held that an employee who had been on sick leave throughout the holiday leave year was entitled to a payment representing accrued and unused statutory holiday entitlement on termination of her employment. NHS Leeds had argued that Mrs Larner should have given notice that she wished to take her holiday entitlement before the end of the leave year. It argued that the requirements of the Working Time Regulations in relation to the taking of holiday are mandatory. Mrs Larner's failure to give such notice, it argued, meant no holiday entitlement arose and therefore no right to claim holiday pay. The EAT disagreed. It held that the notice provisions are not mandatory. Further as Mrs Larner was ill throughout the leave year she did not have the opportunity to take her statutory holiday leave and so this was carried forward to the next year irrespective of any request for this to be carried forward. When her employment terminated, she was entitled to pay in lieu of accrued and unused statutory holiday.

Revelation of sexual orientation

The Court of Appeal in Grant v HM Land Registry held that an employee, Mr Grant, who had disclosed his homosexuality to his colleagues, could not later complain that the disclosure of that information to others constituted direct discrimination or harassment against him. The court noted that Mr Grant had not asked his colleagues to keep his sexuality secret. Further, with regard to the disclosures complained of, the court noted that the tribunal had found that there had been no intention to harass Mr Grant.

The court noted that whilst it was important for people to be able to disclose their sexuality confidentially, once that person had already disclosed that information, it could be treated differently. This is a rather controversial stance to take since many individuals would wish to retain control over the disclosure of their sexual orientation.

Some other substantial reason: pay cuts

The EAT in Garside and Laycock Ltd v Booth held that when deciding whether a dismissal was fair for 'some other substantial reason' in the context of a pay cut being imposed by an employer, a tribunal had to ask the question whether the employer's decision to impose the pay cut was reasonable.

In this case Mr Booth and other employees were asked to accept a 5% pay cut when Garside experienced trading difficulties. Garside held a number of meetings then issued voting papers to employees seeking their agreement to the change. Only two employees (including Mr Booth) opposed the change. Mr Booth's employment was terminated and he was offered fresh employment with the reduced salary level. At first instance the tribunal accepted Mr Booth's claim for unfair dismissal but the EAT allowed Garside's appeal noting the tribunal had wrongly asserted that the pay cut had to be crucial to the survival of the business. Further the tribunal had wrongly focused on the reasonableness of Mr Booth's refusal to accept the change rather than the reasonableness of the employer's decision to impose the change.

TUPE: transfer of care services

In Nottinghamshire Healthcare NHS Trust v Hamshaw the EAT held that where a residential care home for vulnerable adults which had been operated by the NHS closed and the residents were returned to their homes and care transferred to two private sector care providers, TUPE did not apply. The EAT upheld the tribunal's finding that there had been 'fundamental changes' in the ethos of the service and the manner of its provision. It changed from 'institution to home; from management to support'. There were differences in daily routines of the patients and a difference in staff duties. There had been a transfer of staff and residents but not of premise, equipment, resources and organisation.

The EAT agreed that for the purposes of TUPE, the economic entity did not retain its identity after the transfer and the services provided were not 'fundamentally or essentially the same' after the change (service provision transfer).

This decision will have important ramifications for both NHS employers and private companies taking over the care services from NHS bodies. If TUPE does not apply in these scenarios, NHS bodies will be left holding the tab for liabilities and dismissals which would otherwise have transferred to the new service providers.

And finally...


Transparency International UK published a consultation on the guidance on antibribery in the context of mergers, acquisitions and investment. The guidance encourages a best practice approach and sets out a number of fundamental principles. Consultation closed on 15 September.

In the meantime, a court clerk has been the first person to be prosecuted under the Bribery Act for offering to take money to influence a driving offence conviction.

Employment Tribunal Statistics

The Ministry of Justice has published its report on ET and EAT statistics for the period from April 2010 to March 2011.

218,000 claims were received last year and 122,800 were disposed of. Only 12% of these were successful, 29% were conciliated by Acas and 32% were withdrawn.

The average award for unfair dismissal was £8,924 and £8,515 for religious discrimination and £14,137 (disability discrimination). The average for age discrimination was highest at £30,289.

Social media guidance

Acas has published guidance for employers on managing social media in the workplace. It encourages employers to adopt a policy on social networking.

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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