UK: Employment Briefing - January 2012

Last Updated: 30 January 2012
Article by Jesper Christensen

Wearing a poppy to work is not a philosophical belief

In Lisk v Shield Guardian Co Ltd and others an Employment Tribunal has held that an employee's belief that "we should pay our respects to those who have given their lives for us by wearing a poppy from All Souls' Day on 2 November to Remembrance Sunday" did not amount to a philosophical belief capable of protection under the Equality Act 2010.

Mr Lisk argued that denial of his right to wear a poppy at work during remembrance week amounted to direct discrimination and harassment because of his philosophical belief. He regarded 2 to 11 November as a period of mourning and remembrance, and equated it to the seriousness with which, as a Christian, he observed Lent. Being an ex-serviceman, he considered that he had an obligation to show respect for the sacrifice of others. Mr Lisk also argued that the wearing of a poppy is widespread in the UK and abroad, and worthy of respect in a democratic society.

The judge considered this issue using the test in Grainger plc v Nicholson which set out some limits to the definition of philosophical belief. He noted that Mr Lisk's belief appeared to be serious, genuinely held, and worthy of respect. However, it lacked the characteristics of cogency, cohesion and importance required by the Grainger case, and could not be described as being a belief "as to a weighty and substantial aspect of human life and behaviour". The judge concluded that, whilst it might be admirable, the belief that one should wear a poppy to show respect to servicemen was too narrow to be characterised as a philosophical belief. After a string of philosophical belief cases finding in favour of employees, this will be a welcome decision for employers. However, it also highlights the difficulties in assessing with any certainty whether a belief is capable of protection.

Weight Watchers leaders are employees for tax purposes

The guidelines for identifying whether a relationship is one of employment or selfemployment are well-established, dating from Ready Mixed Concrete (SE) Ltd v Minister of Pensions and National Insurance in 1968. This case identified three key tests: mutuality of obligation (ie the obligation to give work when it is available and to accept work when it is offered); control and whether other factors are consistent with a contract of service. The Supreme Court reconfirmed these tests recently in Autoclenz Ltd v Belcher, which also ruled that tribunals should look at the obligations of the parties in practice, not just at written terms which may fail to reflect the genuine position.

In Weight Watchers (UK) Ltd & Others v HMRC the tax tribunal held that "Leaders" engaged to arrange and conduct meetings of Weight Watchers' members were employees, despite detailed documentation describing them as independent contractors, and despite many years' prior practice of treating them as such. Weight Watchers and several Leaders appealed on the grounds that the three tests for employee status listed above had not been correctly applied. Their appeal was rejected on all points.

In relation to the mutuality of obligation test, there was considerable discussion on the right of substitution which appeared in the Leaders' agreements. Generally, an independent contractor will have the right to provide a substitute worker to perform his obligations, so that there is no real mutuality of obligation. In this case, although there was a substitution clause, the tribunal considered that it was fettered by fairly detailed alternative arrangements set out by Weight Watchers as to how meetings were to be conducted if a Leader was absent. In reality, therefore, the Leaders could not discharge their contractual obligations simply by providing another person. There was therefore sufficient mutuality of obligation for the relationship to be one of employment.

In relation to the control test, the Leaders' contracts stated that they had "absolute discretion" in conducting meetings. However, it was held that the various requirements and restrictions set out in contractual and other documentation, in addition to the practical realities of the relationship, meant that Weight Watchers had sufficient control for them to be classed as employees.

The appeal tribunal also confirmed that the third "other factors" test does not require a detailed balancing exercise but is a check to ensure there is nothing which points away from the conclusion reached as the result of the first two conditions being satisfied. Therefore it was not relevant in this case.

This case highlights the importance of ensuring that the practical realities of relationships with employees and independent contractors reflect all relevant documentation.

Employees on long-term sick leave do not accrue holiday indefinitely

The ECJ has confirmed that workers on long-term sickness absence cannot carry over their untaken statutory annual leave indefinitely. In KHS AG v Schulte, a German collective agreement stated that where annual leave could not be taken because of sickness, the usual carry over period was extended by 12 months. This meant that workers had 15 months from the end of the relevant leave year in which to take the leave. Broadly following the Advocate-General's opinion, the ECJ ruled that limiting carry-over of holiday by workers in this way is lawful under the European Working Time Directive. The carry-over period must be substantially longer than the usual leave year, but it must also protect the employer from the risk that a worker will accumulate extremely long holidays, and from the resulting organisational difficulties. Without that limit, annual leave would cease to have positive effect as a rest period. The 15 month carry-over period here was considered reasonable, despite being less than the 18 month guideline recommended in the Advocate General's opinion. In its ruling, the ECJ also highlighted the decision in Schultz-Hoff and Others which found that a sick worker must have actually had the opportunity to exercise the right to carry over leave.

Workers must take or request holiday to be entitled to holiday pay

The EAT has held that, contrary to the decisions in List Design v Douglas and Canada Life Ltd v Gray, workers are only entitled to statutory holiday pay under the Working Time Regulations if they take holiday or give notice that they wish to take holiday. In line with the ECJ's decision in Pereda, workers on long-term sick leave must also make an express request to carry over their statutory holiday to another leave year. In Fraser v South West London St George's Mental Health Trust, although Mrs Fraser had accrued the right to take holiday whilst on long term sick leave, she had not given the required notice to exercise that right. Her right to take statutory holiday, and her right to be paid in lieu for that entitlement, had therefore extinguished at the end of each leave year (other than in the final year of her employment). The EAT also held that there was no duty on an employer to advise workers of the requirement to give notice since it arose as a matter of general law rather than contract (based on Scally v Southern Health Board and Social Services Board).

This case conflicts with the EAT's decision in NHS Leeds v Larner which held that a sick worker's untaken statutory holiday entitlement can be carried over regardless of whether notice was given. However, Larner is due to be heard in the Court of Appeal. It is to be hoped that the Government's review of the Working Time Regulations, and the European Commission's review of the Working Time Directive will in due course bring some clarity to the current confusion over the relationship between sickness absence and statutory annual leave.

Different treatment of employees on dismissal may be justified

It is well established in case law that disparity of treatment between employees who have misbehaved in the same way may be grounds for unfair dismissal. However, in General Mills (Berwick) Ltd v Glowacki the EAT held that, in the particular circumstances of this case, the employer acted reasonably when it treated two employees differently, despite both having committed gross breaches of health and safety procedures.

Mr Glowacki was dismissed for infringing health and safety procedures whilst repairing machinery. The employment tribunal was satisfied that the dismissal was for a "fair" reason, and that dismissal was within the range of reasonable responses open to an employer. However, it held that the dismissal was unfair because the company had not summarily dismissed an employee (Mr Stevens) who, in 2009, had also been guilty of a gross breach of health and safety procedures in circumstances that were factually indistinguishable.

In an appeal by the employer, the EAT considered whether the employment tribunal had correctly determined that the company had failed to show a reasonable justification for the difference in treatment between the two cases. Crucially, the tribunal had itself found that Mr Stevens would also have been dismissed for gross misconduct, but for his absence through ill-health and his consequent inability to participate in a disciplinary investigation. The EAT held that it was therefore inconsistent for the tribunal to have found that the difference in treatment was not adequately explained. There was sufficient basis to find that any reasonable employer might have considered it appropriate to have treated the two employees differently, given the range of responses reasonably open to an employer faced with those facts.

Out of time equal pay tribunal claims can proceed in the High Court

Equal pay claims can be brought in the employment tribunal (subject to a six month time limit) or as a contract claim in the courts for breach of the implied contractual equality clause (subject to a limitation period of six years). In Birmingham City Council v Abdulla the Court of Appeal ruled that 174 employees who failed to present their tribunal claims for equal pay within the tribunal time limit could bring a claim in the High Court. Striking out these claims would have had the draconian effect of preventing them being heard at all. This means that employers may face equal pay claims brought in the High Court as a breach of contract claim even if a tribunal claim would be out of time.

Exercise of discretion in awarding costs

An employment tribunal has discretion to award costs where a party has acted vexatiously, abusively, disruptively or unreasonably, and the tribunal considers that it would be appropriate. In Barnsley Metropolitan Borough Council v Yerrakalva, the Court of Appeal considered the factors to be taken into account in the exercise of this discretion.

Mrs Yerrakalva brought race, sex, and disability claims against the Council, but later withdrew these allegations (whilst continuing with victimisation and unfair dismissal claims). At a subsequent costs hearing, the tribunal held that she had not been truthful about her injuries and her financial means, and that her actions amounted to an abuse of process. Mrs Yerrakalva was therefore ordered to pay the Council's costs (estimated at Ł92,500). However, the EAT set aside the costs order because the tribunal had failed to consider the actual effect of her conduct on the Council and, in particular, that the Council had suffered no loss as a result.

The Court of Appeal warned against adopting an over-analytical approach to the exercise of a broad discretion. In deciding whether to award costs, it is vital to look at the whole picture of what happened in the case and to ask whether there has been unreasonable conduct in bringing and conducting the case. This should include identifying the relevant conduct, what was unreasonable about it, and what its effects had been. The court noted that where, as in this case, there have been no findings on credibility, fact or liability, difficulties on costs applications are bound to arise.

The Court of Appeal found that Mrs Yerrakalva's conduct regarding her evidence was unreasonable so there was no error of law in the tribunal's finding of unreasonable conduct, which gave it jurisdiction to make an order for costs. However, since the tribunal had also criticised the Council's conduct in defending the case, and rejected some of the Council's criticisms of the Claimant, there was an error of law in the exercise of its discretion to order the Claimant to pay 100% of the costs. The Court of Appeal therefore restored the tribunal's costs order but reduced liability from 100% to 50% of the costs incurred by the Council in relation only to the pre-hearing review and the subsequent costs hearings in the employment tribunal.

Changes to employment law announced

The Government has announced many fundamental changes to employment law, although it has not yet published full details of how the changes will operate in practice. In brief, they include:

  • increasing the qualifying period for unfair dismissal from one to two years (from April 2012)
  • imposing a duty on ACAS to conciliate in disputes before a tribunal claim can be issued
  • introducing fees for bringing a tribunal claim (from 2013)
  • removing lay members from the Tribunal panel in unfair dismissal claims
  • introducing discretionary financial penalties for unsuccessful Respondents
  • increasing the use of workplace mediation
  • closing the loophole in whistleblowing legislation whereby a complaint about breach of contract can count as a qualifying disclosure.

The Government has also announced that it will undertake consultations on the use of protected conversations; on simplifying compromise agreements (which will be re-named "settlement agreements"), and on a rapid resolution scheme to decide straightforward, low-value claims without a full hearing. In addition, a fundamental review of employment tribunal rules is being undertaken by Mr Justice Underhill. It is possible that there will also be changes to TUPE and the collective redundancy legislation, depending on the outcome of the Government's call for evidence on the effectiveness of the current rules and any subsequent consultation.

Following a successful pilot in Manchester, employment tribunals in England and Wales have adopted a new judicial listing policy. Straightforward unfair dismissal claims and other "short-track" claims are being listed for a one-day hearing to be heard within 16 weeks of a claim being issued.

The CIPD has published statistics showing that in 2010/11 there were 277 tribunal claims concerning employers' alleged failure to comply with flexible working legislation. Of these, 48 claims went to a full hearing, and 10 were successful. An independent review, jointly sponsored by BIS and DWP, has set out radical proposals to improve management of sickness absence and its associated costs. These proposals include a new Independent Assessment Service staffed by health professionals, changes to the fit note system, abolition of the Percentage Threshold System and SSP record-keeping, and expert guidance on absence management for Employers.

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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