UK: Employment Newsletter - August 2012

Last Updated: 30 August 2012
Article by Brian Gegg

Workers who fall ill during holiday can reschedule leave

The ECJ has already ruled that where a worker falls sick before a prearranged holiday, that leave may be rescheduled, including, if necessary, to the next leave year (Pereda v Madrid Movilidad SA).

However, until recently, the ECJ had not dealt specifically with the situation where a worker falls ill during pre-arranged holiday. This has now been clarified in Asociacion Nacional de Grandes Empresas de Distribucion (ANGED) v Federacion de Asociaciones Sindicales (FASGA) and others. In this case, several Spanish trade unions brought an action challenging collective agreements which did not allow workers to reschedule holiday if they became ill whilst on annual leave. The ECJ has now confirmed that if a worker falls ill during a holiday, the days on which they were ill can be taken as holiday at a later date. This gives effect to the underlying purpose of the annual leave provisions of the European Working Time Directive to give workers rest, relaxation and leisure time.

In its consultation on amending the Working Time Regulations, the Government has already proposed that workers can reschedule annual leave if they fall ill during holiday, including if necessary, carrying it over to the next leave year. It should be noted that this proposal, and the ECJ's decision, only apply to the four weeks' minimum holiday entitlement provided by the European Directive (the UK's statutory provision is 5.6 weeks). Employers should check that their holiday provisions require employees to provide notification and evidence of sickness whilst on holiday.

EAT considers whether TUPE applies to transfer of bar lease

In LOM Management Ltd v Sweeney, the EAT held that TUPE will only apply to the assignment of a commercial lease where that assignment is intrinsically linked to the transfer of an identifiable economic entity.

Miss Sweeney was employed part-time in her father's bar as Duty Manager. While she was away on holiday, the lease of the bar premises was assigned to LOM Management Ltd. On her return, she discovered from LOM Management Ltd that she no longer had a job. The fact that there had been a transfer of a commercial lease led the employment tribunal to conclude that TUPE applied.

The EAT held that the tribunal had not applied the law correctly. It should have considered whether an economic entity existed which was intrinsically linked to the property, which transferred in whole or part to LOM Management Ltd and which retained its identity after the assignation of the lease. This involved looking at all relevant arrangements, agreements and circumstances. The only relevant fact found here was that there was an assignation of a lease, which was an insufficient basis to establish that TUPE applied.

No service provision change where there is a change in client

There will be a service provision change under TUPE where activities cease to be carried out by a contractor on a client's behalf and are reassigned to a subsequent contractor to carry out those activities on the client's behalf (Regulation 3(1)(b)(ii)).

In Taurus Group Ltd v Crofts, the EAT held that the activities carried out by the different contractors before and after a transfer must be carried out for the same client.

Mr Crofts was employed by Reliance Security Services Ltd as a security officer at a student accommodation building. When the building owner went into administration, Reliance lost the contract to provide security services to Taurus Group Ltd. At the same time, there was a change in ownership of the building. Reliance told Mr Crofts that he would be automatically transferred to Taurus under TUPE. However, Taurus disagreed and Mr Crofts brought a claim for unfair dismissal.

The employment tribunal held that Mr Crofts' employment had automatically transferred to Taurus, reasoning that employees would otherwise lose the protection of TUPE every time there was a change in ownership of a building, managing company or managing agents. However, since this tribunal decision, the EAT held (in Hunter v McCarrick) that there cannot be a service provision change where there is not only a change in the contractor providing the services, but also a change in the client. Applying Hunter v McCarrick, the EAT therefore held in Taurus Group Ltd v Crofts that TUPE did not apply since Taurus was not providing the security services to the same client.

These decisions mean that employees may lose the protection of TUPE on some commercial property transactions, and unfair dismissal and other employment costs could remain with the transferor. In some cases, however, it might be possible to bring the transaction under the more general definition of a business transfer, provided that there is an economic entity which retains its identity before and after the transfer.

There is probably more to come on this issue. The Government is due to publish consultation on the TUPE Regulations, including the amendment or removal of clauses relating to service provision changes. In addition, Hunter v McCarrick is due to be heard by the Court of Appeal in October 2012.

Reduction in hours can be redundancy

In the case of Aylward v Glamorgan Holiday Homes (2003), the EAT held that a reduction in the number of employees performing work of a particular kind was necessary for a redundancy situation. This decision was widely criticised, and has now been rejected in Packman t/a Packman Lucas Associates v Fauchon.

Ms Fauchon was employed as a bookkeeper. Due to a downturn in business and the introduction of new software, Packman requested that Ms Fauchon reduce her weekly hours. Following her refusal to do so, she was dismissed. In her subsequent tribunal claim for unfair dismissal, there was a dispute over the reason for her dismissal. Packman contended that it was not a redundancy because there was no reduction in headcount. However, the tribunal held that the proper test is whether there has been a reduction in the need for employees to carry out work of a particular kind. On this basis, Ms Fauchon had been dismissed for redundancy.

The EAT confirmed this approach, emphasising that a reduction in headcount is not necessary for there to be a redundancy situation, provided that the employee is dismissed because the employer's requirement for particular work to be carried out has ceased or diminished. Employers should note, however, that defining a redundancy situation will still depend on the particular circumstances of each case.

EAT approves use of subjective redundancy selection criteria

Employers must be able to demonstrate that they have followed a fair selection procedure in order to show that a redundancy dismissal is fair. In Mitchells of Lancaster (Brewers) Ltd v Tattersall, the EAT considered whether it was fair to base redundancy selection on the views of the Board of Directors.

Having decided that it needed to cut its senior management costs, the Board of Directors of Mitchells discussed each of its five senior managers. It concluded that eliminating Mr Tattersall's role of property manager would have the least detrimental impact on the business because it was the only position that did not generate revenue. The employment tribunal held that he had been unfairly dismissed. Amongst other reasons, it found that the criteria used were unacceptable as they were wholly subjective and based solely on the views of the directors.

Although the EAT agreed with most of the employment tribunal's findings on procedural unfairness, it did not agree that the selection criteria were inappropriate. The EAT held that some judgement was inevitably involved in deciding the criteria, and the Board's exercising its subjective judgement was not inherently, unfair. Limiting selection criteria to purely objective factors which could be scored would reduce the procedure to a box-ticking exercise. Although it seems that employers can apply subjective criteria in certain circumstances, it should be noted that the EAT's comments here were made in the context of a relatively small employer which was in serious financial difficulties, and this approach should not be taken as suported by the EAT generally.

Proposals for new collective redundancy rules published

The Government has published its proposals for changes to the rules on collective redundancy consultation. There are three main areas for consideration:

  • the minimum 90 day consultation period for redundancies of 100 or more employees should be reduced to either a 30 day minimum period for all collective redundancies, or a 45 day minimum period for redundancies of 100 or more employees;
  • a new, non-statutory Code of Practice will address a number of key issues including the requirements of good consultation and help for employers dealing with the most contentious issues;
  • improved government guidance will be issued for employers and employees.

The consultation period for these proposals closes on 19 September 2012.

Consultation opens on revised remuneration reporting regulations

The Department for Business Innovation and Skills (BIS) has published consultation and draft regulations on revised executive remuneration reporting requirements.

Shareholders will get an annual binding vote on remuneration policy unless companies choose to leave their pay policy unchanged, in which case there must be a vote as a minimum every three years. Under the proposed regulations, the directors' remuneration report would contain two elements:

  • a policy report, where there is to be a shareholder vote on remuneration policy. This would cover all elements of remuneration policy and the key factors taken into account in setting the policy, for example information on service agreements, exit payments and directors' incentives; and
  • an annual report showing how the policy was implemented in the last year, setting out actual payments made to directors and details on the link between company performance and pay.

This will include exit payments made during the year, the total remuneration figure for each director and information about who has advised the remuneration committee. Consultation will close on 26 September 2012.

Enterprise and Regulatory Reform Bill

Further details of the employment proposals in the Enterprise and Regulatory Reform Bill are emerging as the Bill is debated in Parliament. The following details have been announced:

  • draft templates, model letters and 'principles of guidance' will be published for employers and employees to use when negotiating settlement agreements (the new term for 'compromise agreements');
  • employers will be able to offer a settlement agreement before a formal dispute has arisen and be legally protected from this offer being used as evidence in tribunal proceedings;
  • offers made and discussions held in the context of negotiating termination of employment will not be admissible during tribunal proceedings in cases of unfair dismissal. However, tribunals will have the discretion to override this rule where they consider that anything said or done was 'improper'. This form of 'protected conversation' will not apply in cases of automatic unfair dismissal, discrimination and breach of contract.

It has also been confirmed that the much-publicised concept of 'compensated no fault dismissals' will not be pursued.

And finally....

  • BIS has issued a call for evidence on recent proposals from the European Commission for a Posting of Workers Enforcement Directive. These proposals include improving enforcement mechanisms, introducing joint and several liability for contractors in the construction sector, and clarifying which situations class as a 'posting'. Responses must be submitted by 26 July 2012.
  • BIS has also issued a call for evidence on apprenticeships as part of an independent review which will establish core principles and priorities for on-the-job vocational training. This comes after concerns were expressed in Parliament about the current cost, length and quality of apprenticeships. The closing date for responses is 7 September 2012.
  • Currently workers who earn up to Ł13,000 can claim working tax credits to top up their income if they lose pay due to taking part in industrial action. The Government has announced that under the new system of Universal Credit to be introduced in 2013, there will be no corresponding increase in benefit if workers' income drops as a result of taking part in industrial action.

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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