UK: Employment newsletter - August 2013

Last Updated: 11 September 2013
Article by Brian Gegg

Decision In Woolworths Redundancy Case Brings An End To 'Establishment' Test

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) states that collective consultation obligations apply where an employer is proposing to dismiss as redundant 20 or more employees 'at one establishment' (Section 188).

This provision implements the EU Collective Redundancies Directive. However, the Directive applies even where employees are employed at different establishments, so the words 'at one establishment' in TULRCA are incompatible with that Directive. The EAT has recently considered this discrepancy when it had to decide whether the duty to inform and consult was triggered in relation to former Woolworths' staff who worked at stores with fewer than 20 employees.

In order to limit their obligation to consult on a collective basis, the administrators of Woolworths argued that each store was a separate establishment. This argument was successful in the Employment Tribunal, which meant that 3,233 employees (out of a total workforce of 4,400) were not entitled to a protective award because they were employed at stores with fewer than 20 employees. On the other hand, employees who worked at the larger stores with 20 or more employees received a protective award. USDAW challenged this decision on the basis that limiting the definition of establishment in this way is contrary to EU law.

The EAT agreed with the union's challenge and overturned the Tribunal's decision. It ruled that, because of its obligation to apply the relevant EU law, the words 'at one establishment' should be deleted from Section 188 of TULRCA. This means that collective consultation will be required whenever an employer proposes to make 20 or more employees redundant, regardless of where those employees are located or how the workforce is organised.

Since Woolworths is insolvent, the EAT's judgment means that protective awards of up to 90 days' gross pay could be payable by the Secretary of State to all affected Woolworths employees. The Government has applied for permission to appeal the EAT's decision. For now, it is vital that employers review any redundancy exercise they are contemplating or currently carrying out in order to ensure compliance with the revised TULRCA wording. As this case shows, failing to comply with the requirement to inform and consult on a collective redundancy can be extremely costly.

Race Discrimination And Victimisation

Under the Equality Act 2010, it is unlawful for an employer to dismiss an employee or subject him to a detriment because he has done or may do a 'protected act' (Section 27). A 'protected act' includes making allegations of discrimination or bringing Employment Tribunal proceedings for discrimination.

The recent case of Woodhouse v West North West Homes Leeds Ltd concerned an employee who had made at least nine grievances and nine Employment Tribunal claims over a number of years. Initially, Mr Woodhouse had complained of race discrimination by one of his colleagues. He then submitted a series of grievances, appeals and claims in relation to the handling and outcomes of his complaints, some involving allegations of discrimination. The company eventually dismissed Mr Woodhouse, claiming that the repeated grievances and Tribunal claims had led to a breakdown in their working relationship. Mr Woodhouse claimed that he had been unfairly dismissed and that his dismissal amounted to victimisation.

The Employment Tribunal upheld Mr Woodhouse's claim for unfair dismissal but rejected his claims of discrimination and victimisation. It considered that although his first grievances had some substance, subsequent grievances were unfounded. The reason for dismissal was the breakdown in the working relationship, not the allegations of race discrimination. However, it was unfair because Mr Woodhouse had not been warned that if he continued to raise grievances, he might be dismissed.

In a disappointing decision for employers, the EAT has now overturned the Tribunal's ruling. The EAT held that Mr Woodhouse was dismissed because he had raised a number of complaints and claims about race discrimination. Although most of his allegations were false, there was no evidence that they had not been made in good faith. Since these complaints were protected acts, his dismissal amounted to victimisation.

This case illustrates how difficult it is to deal with an employee who is making repeated allegations of discrimination. Unless the employee is acting in bad faith, less favourable treatment could amount to victimisation even if the allegations are untrue.

Conflicting EAT Decisions On Post-Employment Victimisation

Two recent EAT decisions have reached opposite conclusions on whether the Equality Act 2010 covers victimisation after an employee has left employment. This aspect of discrimination law has given rise to some confusion because the Equality Act specifically excludes the right to bring post-employment victimisation claims. It appears that this is a drafting error, since prior to the Equality Act, victimisation taking place after employment ended was clearly covered by UK discrimination law. It is also a requirement of EU law.

In the first case, Rowstock Ltd v Jessemey, Mr Jessemey was dismissed by reason of retirement. He subsequently brought age discrimination and unfair dismissal claims. Rowstock then provided a poor reference about Mr Jessemey to an employment agency, after which he brought a further claim for post-employment victimisation. The EAT agreed that he had been given the poor reference because he had brought a discrimination claim but held that, on a literal interpretation, the Equality Act did not protect post-employment victimisation. Whilst acknowledging that this was probably a drafting error, the EAT said that it was not legally possible to rule in his favour.

By contrast, in the later case of Onu v Akwiwu, the EAT held that individuals are protected against post-employment victimisation. Ms Onu, a Nigerian domestic servant, brought various Tribunal claims against her former employer, including a race discrimination claim. The employer later telephoned Ms Onu's sister, threatening that if the Tribunal proceedings did not stop, Ms Onu 'would suffer'. Ms Onu then brought an additional claim of post-employment victimisation based on this threat which was unsuccessful in the Employment Tribunal. However, in a rather creative judgment, the EAT overturned this decision, ruling that protection from victimisation was clearly intended to apply both during and after employment despite the wording in the Equality Act stating otherwise. It also held that because of the ambiguity in the legislation, the Equality Act should be read in line with the spirit of the underlying EU Directive which requires post-employment discrimination to be prohibited.

This issue should be clarified following Mr Jessemey's appeal to the Court of Appeal which is being backed by the Equalities and Human Rights Commission. In the meantime, it is prudent to assume that post-employment victimisation is protected when dealing with former employees.

Key Employment Law Reforms Now In Force

We have reported on the Government's wide-ranging employment law reforms in recent bulletins. Now that many of these reforms have come into force, amendments may need to be made to precedents, policies, and procedures. By way of reminder, the key changes are listed below.

Changes in force from 25 June 2013

  • Removal of the qualifying period for unfair dismissal where the reason for the dismissal is the employee's political opinions or affiliation.
  • Fundamental changes to whistleblowing legislation. A disclosure will now only be protected where an employee reasonably believes that the disclosure is made in the public interest. The requirement for a disclosure to be made in good faith has been removed, although compensation can be reduced by up to 25% where a disclosure is not made in good faith. In addition, employers will be vicariously liable where a worker is subjected to a detriment by a colleague because they have made a protected disclosure, unless the employer has taken all reasonable steps to prevent the detriment.
  • The abolition of the Agricultural Wages Board.

Changes in force from 29 July 2013

  • Compromise agreements have been renamed 'settlement agreements'.
  • Discussions with employees about proposed settlement terms will be prevented from being referred to in evidence in ordinary unfair dismissal proceedings, unless there has been improper behaviour by either party. ACAS has produced a statutory Code of Practice to accompany these new provisions (see below).
  • New procedural rules now apply to most claims in the Employment Tribunal, regardless of when they were lodged.
  • Revised ET1 and ET3 forms have been introduced.
  • For the first time, fees are payable in the Employment Tribunal and the EAT. Claimants will be required to pay an issue fee and a hearing fee unless they are eligible for remission. The level of the fees depends on the complexity of the case.
  • The compensatory award for unfair dismissal has been capped at the lower of one year's pay or £74,200. This change will apply to cases where the effective date of termination of employment is on or after 30 July 2013.

ACAS Publishes Final Draft 'Code Of Practice On Settlement Agreements'

ACAS has published a revised final draft of the statutory 'Code of Practice on Settlement Agreements' which accompanies the new provisions making pre-termination settlement negotiations inadmissible in ordinary unfair dismissal proceedings, unless there has been improper behaviour by one of the parties.

These provisions will run alongside the existing 'without prejudice' rule. The final version of the Code includes various changes arising from comments received in the recent consultation process:

  • the recommendation for initial settlement offers to be in writing has been removed but the final agreement must still be in writing;
  • template settlement offer letters will be included in non-statutory guidance rather than the statutory Code;
  • the minimum recommended period for considering offers has been increased from 7 to 10 days, but the parties can agree on a different time limit;
  • the Code includes a recommendation that employees should be accompanied at settlement agreement discussions by a work colleague or trade union representative, but this is not a legal entitlement;
  • the examples of 'improper behaviour' which will result in the negotiations being admissible have been expanded;
  • additional non-statutory guidance will be provided by ACAS on settlement agreements. This will cover best practice, template offer letters and a model settlement agreement.

And Finally

The Government is proposing to introduce regulations which will provide that breach of health and safety duties will not give rise to civil liability unless there has been negligence on the part of the employer. This is a fundamental change to the current strict liability approach. However, the Government has recently completed consultation on a proposal that strict liability will remain in relation to pregnant women and new mothers.

UNISON has been given permission to seek a judicial review of the Government's decision to introduce fees for claims in the Employment Tribunal and the EAT from 29 July 2013. The union is arguing that the imposition of fees is a breach of EU law, indirectly discriminatory against women, and unfair because no fees are payable in other tribunals of a similar level in the judicial hierarchy. If the union's challenge is successful, any fees paid will be refunded.

BIS has announced that the current freeze exempting businesses with fewer than 10 employees from burdensome new regulations will be extended to firms with up to 50 staff. The new 'Small and Micro Business Assessment' builds on the current 'Micro Business Moratorium' which was introduced in 2011. New proposals for regulations will undergo an impact assessment to check whether they could result in unnecessary burdens that might impede the growth of smaller businesses.

The Government has launched the 'Offshore Intermediaries Consultation' which sets out plans to tackle the growing practice of hiring employees through offshore intermediaries in order to avoid paying income tax and National Insurance Contributions. It is anticipated that the new measures imposing income tax and National Insurance Charges on offshore intermediaries will come into force in April 2014. In case of default, liability will pass to the party contracting directly with the end client, or to the end client. The consultation closes on 8 August 2013.

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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