UK: Employment Newsletter - September 2012

Last Updated: 15 October 2012
Article by Brian Gegg

SICKNESS AND ANNUAL LEAVE

The Court of Appeal has upheld the EAT’s decision in NHS Leeds v Larner that a worker who was absent due to sickness for a whole leave year was entitled to payment for that year’s unused statutory holiday entitlement when her employment terminated.

Mrs Larner was off sick from January 2009 until her dismissal in April 2010 on grounds of capability. On termination, NHS Leeds refused to pay her in respect of holiday accrued but not taken for the 2009/10 holiday year, arguing that she had not asked to take any of her annual leave, nor requested to carry it forward into the following leave year.

Taking into account the recent string of European cases on this issue, the Court of Appeal rejected the employer’s argument. Mrs Larner had a right to take at a later date the holiday she could not take whilst sick. She was also under no legal obligation to request annual leave whilst off sick, or to request to carry it forward to another leave year. Therefore, on termination of her employment, she was entitled to payment in lieu of her untaken holiday.

We are still awaiting confirmation from the Government of the detailed amendments to the Working Time Regulations to take account of judicial decisions in this area. One reason for this may be the delayed negotiations at European level on changes to the Working Time Directive. Issues to be clarified include the limit on how long employees on sick leave can carry over untaken holiday, and whether the right to carry over holiday applies to the extra 1.6 weeks’ leave provided by the UK Working Time Regulations (on top of the four weeks’ leave provided by the EU Working Time Directive). In the meantime, employers are advised to ensure that their sickness and holiday policies are as robust as possible, in order to limit potentially large claims by sick employees for accrued but untaken holiday.

A MARKET RESEARCHER WORKING ON SUCCESSIVE ASSIGNMENTS COULD BE AN EMPLOYEE

The case of Drake v Ipsos Mori UK Ltd is another reminder of the difficulties involved in determining the employment status of casual workers.

Mr Drake worked for five years as a market researcher under a succession of individual assignments. He had no contract of employment, and was free to accept or reject work offered to him. Ipsos Mori was under no obligation to offer him work. When Ipsos Mori removed him from its interviewing panel, Mr Drake claimed that he was an employee and was therefore eligible to bring an unfair dismissal claim.

The employment tribunal concluded that Mr Drake could not be an employee because there was no mutuality of obligation between the parties during an assignment and from one assignment to another. In particular, assignments could be terminated by either party before they had been completed. Having reached this conclusion, the tribunal did not go on to look at other tests for employment status.

The EAT overturned the tribunal’s decision, finding that there was sufficient mutuality of obligation at least during each assignment to give rise to a contract of employment. Crucially, the company’s handbook stated that assignments were verbal contracts once they had been accepted, which had to be completed within a specified timeframe. In the EAT’s view, the fact that either party could terminate the contract at will was not inconsistent with the existence of an employment contract. However, the EAT has not ruled on Mr Drake’s actual employment status. The case has been remitted to the tribunal to look at the other tests for employment status, for example, the degree of control exercised by Ipsos Mori. Another key issue for the tribunal will be to determine whether there was an ‘umbrella contract’ in place linking each assignment in order to give Mr Drake sufficient continuity of service to bring an unfair dismissal claim.

ROMAN CATHOLIC BISHOP COULD BE VICARIOUSLY LIABLE FOR THE ACTS OF A PRIEST IN HIS DIOCESE

It is well established that an employer can be vicariously liable for an employee’s actions if those actions are closely connected with the employee’s employment.

However, it is less clear whether this liability can extend to other relationships where the individual is not regarded as an employee. In JGE v The Portsmouth Roman Catholic Diocesan Trust, the Court of Appeal considered a claim by JGE that she had been sexually abused as a child by a priest, Father Baldwin (who is now deceased). She alleged that the Bishop of Portsmouth was vicariously liable for these assaults. The central issue in this case was whether the relationship between a Catholic bishop and a priest within his diocese is sufficiently similar in character to an employer/employee relationship that it is just and fair to impose vicarious liability on the bishop.

The priest’s relationship with the church was in many ways inconsistent with an employment relationship. He had no contract with the church and there were no terms of appointment or other conditions other than those imposed by the Catholic Church’s canon law. The priest received no pay or financial support from the diocese, nor was he subject to the kind of managerial supervision or control normally exercised by an employer.

The Court of Appeal identified the following key factors for establishing whether an individual is in a relationship which is ‘akin to employment’: the degree of control exercised over the individual; how far the individual’s activities are central to the objectives of the ‘business’; and the extent to which the individual’s activities are integrated into the structure of the organisation. Consideration should also be given to whether the individual could be better described as an entrepreneur working as an independent contractor. Applying these tests, the Court of Appeal held that the priest’s relationship with the Bishop was sufficiently close to an employment relationship, even if it did not match every facet of being an employee. The priest was sufficiently accountable to the Bishop, particularly when things went wrong, and was central to the church’s objective of spreading the word of God. In addition, the priest was wholly integrated into the organisational structure of the church.

The Court of Appeal stressed that the concept of vicarious liability is not ‘infinitely expandable’. However, this judgment confirms that organisations may be vicariously liable for individuals who are not employees, for example, agency workers, casual workers and secondees.

DIRECTORS WITH A STRATEGIC ROLE WERE NOT ‘ASSIGNED’ TO AN ORGANISED GROUPING OF EMPLOYEES

When a client takes a contract in-house, TUPE may apply if there is an ‘organised grouping of employees’ whose principal purpose is carrying out the relevant activities on behalf of that client.

The transferring employees will be those who are ‘assigned’ to the organised grouping. In Edinburgh Home-Link Partnership v City of Edinburgh Council, the EAT considered whether two directors of Home-Link were sufficiently assigned to an organised grouping of employees for them to transfer under TUPE in a service provision change.

Home-Link assisted with housing matters for vulnerable people, largely for one client, Edinburgh Council. When the Council took the activities in-house, it was not disputed that TUPE applied to an organised grouping of about 40 employees who were directly engaged on those activities. However, there was disagreement about whether the two directors were assigned to that organised grouping.

The directors argued that in a case where an organisation was providing only one service, everyone employed by that organisation should be regarded as being assigned to the organised grouping. The EAT disagreed, holding that there was a distinction between the provision of the services and the maintenance of the corporate entity. It was clear that the directors’ role was largely strategic, involving, for example, preparing tenders, liaising with the Care Commission and dealing with the trustees. They had no direct involvement with delivery of the services to the Council. In these circumstances, the EAT held that they were therefore not assigned to the transferring group of employees.

This case highlights the risk of assuming that every employee who can be linked in some way to the relevant client work will transfer under TUPE. Employees whose role is largely strategic, with responsibility for the survival and maintenance of the business, may not be sufficiently assigned to the organised grouping and could be excluded from the transfer.

NON-SOLICITATION COVENANT ENFORCED DESPITE ITS WIDE SCOPE

A restrictive covenant will only be enforceable if an employer can show that it has a legitimate interest to protect, and that the covenant is reasonable in scope.

Generally, this means that a non-solicitation covenant will need to be limited to customers and clients known to the employee during a specified period before termination of employment. However, in Safetynet Security Ltd v Coppage, the Mercantile Court has enforced a six month restrictive covenant which sought to prevent a director from soliciting anyone who had been a customer of Safetynet at any time during his employment.

Mr Coppage was the Business Development Director of Safetynet, a relatively small company providing security services, with one branch and around 90 customers. He had been recruited specifically to be the face of Safetynet, and was personally known by most of the customers. Safetynet brought a claim for breach of the non-solicitation covenant when five of their customers moved to Mr Coppage’s new company shortly after his resignation. In the context of Mr Coppage’s key role in Safetynet’s business, the court considered the covenant to be both necessary and reasonable in order to protect its customer base and goodwill. The outcome would probably have been different if Safetynet had been larger, and if Mr Coppage had not known all of its clients.

GOVERNMENT CONSULTS ON ‘ENDING THE EMPLOYMENT RELATIONSHIP’

The Government has issued consultation on various issues relating to ending employment relationships, covering settlement agreements (the new name for compromise agreements), protected conversations and unfair dismissal compensation.

Proposals include:

  • Making offers of settlement inadmissible in unfair dismissal claims;

  • Introducing a standard settlement agreement;

  • A guideline tariff to assist settlement negotiations;

  • A statutory Code of Practice setting out the broad principles governing a settlement; and

  • A cap on the unfair dismissal compensatory award of 12 months’ pay.

  • Consultation closes on 23 November 2012.

TRIBUNAL FEES TO BE INTRODUCED IN 2013

The Government has issued its response to the consultation on charging fees in the Employment Tribunal. From the summer of 2013, it proposes to implement a two-stage fee structure.

The first stage will be an ‘issue fee’, to be paid by claimants on submission of their claim. The second stage will be a ‘hearing fee’, to be paid by claimants four to six weeks prior to a hearing. Fees will depend on the type of claim. Straightforward and lower value claims (such as redundancy payments or unpaid wages) will be designated ‘Level 1’. At present the issue fee for Level 1 claims has been set at £160 and the hearing fee at £230. More complex claims such as unfair dismissal or discrimination will be ‘Level 2’, for which the issue fee is £250 and the hearing fee is £950. Where there are multiple claimants, the fee amount will depend on the number of claimants.

Fees will also be introduced in the Employment Appeal Tribunal. The fee for issuing an appeal will be £400 and the hearing fee will be £1,200. Other fees will be payable for tribunal applications, such as an application to set aside a default judgment. Employers will have to pay a fee of £160 when they submit a counter-claim in a breach of contract case, and £600 for an application for judicial mediation.

The fee remission scheme currently operating in the civil courts will be extended to tribunals for claimants who cannot afford the fees. Although judges will have the power to order an unsuccessful party to reimburse fees paid by the successful party, this will be at the judge’s discretion. It is clear that tribunal fees will become another area for negotiation in any settlement, and an additional tactical issue for both parties.

AND FINALLY...

The Enterprise and Regulatory Reform Bill currently being debated in Parliament now contains draft clauses which would amend the Companies Act 2006 in relation to disclosure and governance of directors’ remuneration for quoted companies.

These provisions would give shareholders a binding vote at least every three years on future remuneration policy, including details of the company’s approach to exit payments, as well as an annual advisory vote on the implementation of current remuneration policy. There are also proposals to claw back any remuneration or termination payments which are made in breach of these policies.

The Department for Business Innovation and Skills is evaluating responses to its recent consultation on the introduction of a statutory right for employees to request consideration of an employee ownership proposal. This follows a recommendation in the Nuttall Review of Employee Ownership.

Following Justice Underhill’s review of the employment tribunal rules, the Government has now issued its consultation on changes to tribunal procedure. Proposals include an initial ‘sift stage’ of all claims by a judge, tighter timetables for hearings, and revised ET1 and ET3 forms. Consultation will close on 23rd November 2012.

From 1st October 2012 the national minimum wage rate will increase from £6.08 to £6.19 for workers aged 21 and over, and from £2.60 to £2.65 for apprentices.

Pensions auto-enrolment comes into force on 1st October 2012. Implementation will be phased in over the next six years, starting with large employers. Staging dates are based on the number of workers in an employer’s PAYE scheme on 1 April 2012.

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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