UK: Employment Law Watch - UK Case Law Update

It has been a busy few weeks with several new interesting employment cases being reported – here is a quick round up of a few that caught our eye: 

There is yet another warning to employers on the importance of getting that contract drafting just right, as Blackburn Rovers found out to their cost (that cost being £2.25 million). And victimisation has been a hot topic in the last few weeks – we look at three new important victimisation cases below. 

Beware clear contractual wording (it might just do exactly what it says on the tin!)

Recently we reported on the problems that employers may face if the drafting of contractual documents is not clear – the London Fire and Emergency Planning Authority case found that Tribunals will be prepared to interpret unclear drafting to ensure the agreement makes business sense, even if this means adding significant wording to the clause. The same is not true where the drafting of a clause is clear – the Tribunals will not interfere simply to rescue one of the parties from a 'bad deal', as was the case in Berg v Blackburn Rovers Football Club & Athletic plc.

Henning Berg was employed as Blackburn Rovers' club manager, under a fixed-term contract of slightly less than three years. If the club chose to terminate the contract early, the contract required Blackburn Rovers to pay Mr Berg the salary that he would have received for the remainder of the fixed-period.

The club did in fact choose to terminate early (after a mere 57 days), and so Mr Berg claimed the salary for the unexpired period of his contract – a not insignificant sum of £2.25 million. Blackburn Rovers did initially accept such amount was due, but then at the last minute tried to run two counter-arguments (neither of which the High Court agreed with). These arguments were as follows:

  1. Firstly, that the clause was unenforceable because it amounted to a penalty clause (i.e. a clause which provides for a set amount to be payable upon breach of a contract, that is not a genuine pre-estimate of loss incurred by the breach); and
  2. Secondly, that the person who signed the service agreement (Derek Shaw, the club's Managing Director), did not have authority to bind the club in such a way.

The Court rejected both arguments: it held that, of course, this was not a penalty clause; penalty clauses are only relevant when there has been a breach of contract. Here there was no breach of contract – the club had merely terminated the engagement early, as the contract permitted it to do. The clause in question merely set out what sums Mr Berg would be entitled to if the club chose to terminate lawfully in this way. This clause was enforceable. 

The club's second argument failed too – the Court did not accept that the Managing Director did not have at least implied authority to sign contracts. The Court found that it was entirely usual in the football world for employees of Mr Shaw's seniority to have authority to sign such agreements, and there was no reason why Mr Berg would or should have questioned this. Further, even if the owners of the club had placed limits on Mr Shaw's authority to negotiate (permitting him to agree to pay Mr Berg no more than 12 months' salary on termination, for example), this would not assist if there were no reason why Mr Berg would know about such limits. The contract was enforceable.   

The moral of the tale for employers must be this: that it will be extremely difficult, if not impossible, to avoid the ramifications of a clearly-drafted clause allowing for payment of large sums on early termination. Draft such clauses with care, considering all possible future scenarios, and always ensure that the manager negotiating such contracts is clear on the limits of his authority.

Victimisation – three recent cases

Victimisation cases seem to be like buses at the moment, with three coming along at once over the last few weeks.

1 - It's victimisation – not breach of trust

In Bouabdillah v Commerzbank AG, the Claimant was dismissed after her employer found out that she had brought an Employment Tribunal claim against her previous employer (for sex discrimination and equal pay). 

Commerzbank argued that the dismissal did not amount to victimisation – it said that it had not dismissed the Claimant because she had brought a discrimination claim, but rather because she had not been honest about it and had tried to hide the litigation from her employer. It argued that it was this 'question mark over her honesty', and the consequent breakdown in trust, which led to her dismissal. 

The Employment Tribunal did not agree. Dismissal was a knee-jerk reaction by Commerzbank, it found, and in any event Ms Bouabdillah had not actually been dishonest - the fact that she did not give entirely full answers regarding any previous litigation was not sufficient to amount to a lack of honesty or trust. The Tribunal found that the real reason for Ms Bouabdillah's dismissal, therefore, was that she had brought discrimination proceedings against her previous employer. This amounted to victimisation. 

This case shows that employers cannot simply and automatically use "lack of trust and confidence" as a default justification for dismissal – the Tribunals will look to all the facts to establish whether the 'real' reason for dismissal is an unlawful one.

2 – Post-employment victimisation IS actionable (contrary to recent case law)

Meanwhile, the case of Onu v Akwikuhas considered the apparent lacuna of the Equality Act 2010 – namely that victimisation does not seem to be prohibited if it occurs after the employment relationship has ended. 

This question has been considered by the Tribunals before and, as recently as March 2013, the EAT found that victimisation post-employment was not prohibited by the Equality Act (Rowstock Ltd & Davis v Jessemey). 

The EAT in the current case of Onu v Akwiku, however, found that the decision in Jessemey was wrong. It found that the proper interpretation of section 108 of the Equality Act 2010 means that victimisation post-employment is prohibited. It did not need to go on to consider the requirements of European law therefore, but found that the Equal Treatment Directive would support this interpretation of the Equality Act in any event. 

This means of course that we now have two conflicting cases – Jessemey and Akwiku – both at EAT level, and so we await the outcome of any appeal to the Court of Appeal for final resolution on this point. In the meantime, employers should be aware that Tribunals may well follow Akwiku, holding that victimisation post-employment is still actionable, particularly as it follows the principle of the Equal Treatment Directive. 

3 – No precise complaint of race discrimination, so no claim for victimisation

In Durrani v London Borough of Ealing, the EAT considered whether a general complaint of "discrimination" was enough to form the basis of a victimisation claim.

Shortly before being made redundant the Claimant, Mr Durrani, raised a lengthy grievance alleging bullying and harassment. Although his grievance mentioned the word "discrimination", he did not specifically refer to race. Further, it was clear on questioning that Mr Durrani did not in fact mean race discrimination, but just meant that he felt he had been unfairly treated generally.  

The EAT found that such a complaint was not enough to trigger a victimisation claim. Although it is not necessary that such a complaint refers to race using that very word, the EAT held that "there must be something sufficient about the complaint to show that it is a complaint to which at least potentially the [Equality] Act applies". In this case there was no evidence that the Claimant had complained of being racially discriminated against, and so he had no victimisation claim. 

This case does not mean that every complaint which only mentions general "discrimination" (and nothing more specific) will not trigger a victimisation claim – each case will turn on its facts. It is important, therefore, to ensure that all complaints of discrimination are treated properly and fairly, and the complainants should be questioned to find out precisely what is the basis of their grievance. 

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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