UK: Employment Essentials: 5 Lessons From June 2018

1. 'Mutuality of obligation' and employment status - what does it matter?

At one end of the employment status spectrum are 'employees' who are afforded the greatest level of protection. At the other end of the spectrum are the self-employed who are not entitled to any employment protection rights. Somewhere in the middle are 'workers' who are entitled to some valuable employment rights including National Minimum wage; holiday pay; discrimination and whistleblowing protection' and don't forget pension auto-enrolment. But precisely where an individual lies within the spectrum is not always easy to determine - is mutuality of obligation the key?

'Worker' status

The 'worker v independent contractor' debate has been a topic of great debate in recent years with a number of high profile cases against transport and courier companies. But it's not just drivers and riders. The Supreme Court in Pimlico Plumbers Ltd v Smith, has upheld the decision of an employment tribunal that a plumber who was self-employed for tax purposes was nevertheless a 'worker' under employment legislation enabling him to pursue claims for unpaid holiday pay and disability discrimination.

Following the Supreme Court judgment, the importance of a right of substitution has been decreased. A limited right to substitute another Pimlico contracted plumber on a job did not cancel out the obligation of personal performance... The dominant feature of the contract remained personal service. Integration in the business appears to be a factor of increasing importance. What the current wave of worker status cases have in common are businesses which operate a business model under which operatives are intended to appear to clients of the business as part of the business (and heavily marketed as such), but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client and independent contractor, rather than employer and worker.

For more on the Supreme Court judgment in Pimlico Plumbers, see our earlier alert, The Worker's Evolution: Who is a 'worker' in modern workplaces?

However, there is a significant unanswered question left by the Supreme Court's judgment in the Pimlico Plumber's case on the issue of 'mutuality of obligation. In Pimlico, the tribunal found there was an umbrella contract between the parties meaning Mr Smith had a continuing obligation to make himself available for work in between jobs. The Supreme Court accepted this was a legitimate finding in that case. But as it was not challenged on appeal, the Supreme Court declined to determine whether and to what extent 'mutuality of obligation' between assignments was relevant to a person's status during assignments.

'Mutuality of obligation has traditionally been a very important factor to establish 'employee' status, but is it required and if so, to what extent, for establishing 'worker' status? Back in 2016 the Court of Appeal in Windle v Secretary of State for Justice, held that the ultimate question must be the nature of the relationship during the period that the work is being done. But it does not follow that the absence of mutuality of obligation outside that period may not influence, or shed light on, the character of the relationship within it. So it may influence, but is it required at all for establishing 'worker' status? As the Supreme Court said there is not an easy answer to this question and it will have to await appraisal on another occasion.

While Pimlico Plumbers has now exhausted the court appeal process, other 'seamless customer service' businesses continue to fight on. The Court of Appeal is due to hear Uber's high profile appeal on 30 October 2018. A similar appeal in relation to Addison Lee drivers was recently heard by the Employment Appeal Tribunal (EAT), with judgment awaited. Perhaps these appeals will provide the needed occasion to address this unanswered question?

'Employee' status

While the role, if any, that the concept of mutuality of obligation plays in establishing 'worker' status remains a grey area, the EAT in Hafal Ltd v Lane-Angell reminds us that for 'employee' status mutuality of obligation remains an 'irreducible minimum'.

This case concerned an individual engaged on a "bank basis" as a paid "Appropriate Adult" (AA), providing support to vulnerable people in police custody. Under her letter of appointment, she had no guaranteed hours and Hafal would only use her services if required and if she was available. AAs confirmed their availability in advance, based upon which Hafal prepared a rota. If placed on the rota, the AA might or might not be called out, depending on demand; however, if called, they were expected to work. AAs who failed to respond to callouts during periods when they had agreed to be on the rota would be removed from the rota under a three-strike rule. When Ms Lane-Angell was removed from the bank list for failing to respond during periods when she had agreed to be on the rota, she brought a claim for unfair dismissal for which she needed to establish she had been an 'employee' with two year's continuous service.

The EAT held that the appointment letter indicated there was no mutuality of obligation. However, that was not the end of the analysis. You have to consider how the arrangement operated in practice. Looking at how the arrangement worked, the EAT agreed there was an expectation that AAs would be able to provide work, but an expectation that AAs would provide work is not the same as an obligation to do so. As regards the three-strike rule, it was only applicable to those who had expressed their availability and had been placed on the rota. An obligation whilst on the rota did not mean there was an overarching or umbrella contract of employment.

It remains that for 'employee' status mutuality of obligation is an irreducible minimum.

2. Whistleblowing: what amounts to disclosure of 'information'

For a disclosure to amount to a 'qualifying disclosure' attracting whistleblowing protection, there must be a disclosure of 'information' which in the reasonable belief of the person making the disclosure is in the public interest and tends to show one of the six types of 'relevant failure', for example breach of a legal obligation.

But what amounts to 'information'? Back in 2010, the EAT in Cavendish Munro Professional Risks Management Ltd v Geduld said there must be a disclosure of information, not a matter of opinion or an allegation.

This month, the Court of Appeal in Kilraine v LB of Wandsworth, agreed that an employee did not make qualifying disclosures in the course of two complaints to her employer relating to alleged bullying and harassment and a lack of managerial support, as the complaints did not disclose information.

In this case, Ms Kilraine was a manager employed by the education authority. She was suspended on full pay pending disciplinary investigation for having raised unfounded allegations against a number of colleagues on a number of occasions. While still suspended, her employment was terminated for redundancy.

Ms Kilraine claimed to have made protected disclosures and to have suffered both detriment (her suspension) and dismissal as a consequence. The alleged disclosures included:

  • A letter of 10 December 2009 to the Assistant Director of Children's Services which stated that the Council was failing in its legal obligations towards her in respect of bullying and harassment and, in particular "numerous incidents of inappropriate behaviour towards me".
  • An email of 21 June 2010 to a Human Resources Officer stating that at a meeting, her line manager had failed to support her when she raised a safeguarding issue.

Her unfair dismissal claim was rejected by the tribunal as her dismissal was found to have been a genuine redundancy unrelated to her alleged disclosures. As regards her detriment claim, the disclosures were found to be allegations rather than disclosures of information. In reaching this decision, the tribunal relied on the principle in Cavendish and found that the two disclosures were not qualifying disclosures because they merely raised allegations and did not provide information that tended to show a relevant failure.

On the question of what amounts to 'information', the Court of Appeal held tribunals should not be seduced into asking whether the disclosure was of 'information' or an 'allegation', since the two terms are not mutually exclusive. In practice, information and allegations are often intertwined. The question is whether the disclosure has a 'sufficient factual content and specificity' such as is capable of tending to show one of the six relevant failures.

In the Court's view, a statement which merely took the form, 'you are not complying with health and safety requirements', would be so general and devoid of specific factual content that it could not be said to amount to a disclosure tending to show a relevant failure.

As regards the two alleged disclosures in this case, the letter complaining of inappropriate behaviour did not disclose any information which tended to show a breach of a legal obligation or any of the other relevant failures Likewise, the email complaining of a lack of support from her line manager had not disclosed information tending to show a breach. To say that an individual officer of the Council might have been unsupportive on one particular occasion in responding in relation to a safeguarding issue was not indicative of a failure by the Council to make appropriate general arrangements in accordance with safeguarding legislation.

Lessons for spotting a qualifying disclosure of information:

  • 'Allegation' and 'information' are not mutually exclusive terms. An allegation can contain information.
  • Words that are too general and devoid of factual content capable of tending to show one of the relevant factors will not amount to information, but...
  • Words that would otherwise fall short can be boosted by context or surrounding communications. For example, the words "You have failed to comply with health and safety requirements" fall short on their own, but may constitute information if accompanied by a gesture of pointing at sharp implements lying on a hospital ward floor.

Also remember:

  • It is not necessary that the information must be unknown to the recipient.
  • Several communications can cumulatively amount to a qualifying disclosure, even though each individual communication is not such a disclosure on its own.
  • A disclosure of information can be made in writing or verbally.

3. Dismissing an employee for failing to prove a continued right to work and the right to appeal

It is unlawful to employ an individual who does not have the right to work in the UK or who is working in breach of their conditions of stay in the UK. Increased measures over recent years to combat illegal working mean that employers in breach of their obligations may now be liable for a large civil penalty (up to £20,000 for each individual) and commit a criminal offence.

Where an employee makes an application for continued leave to remain prior to the expiry of their current visa, then they will continue to have the right to remain in the UK under the terms of the old visa once it expires, provided that the application has not been decided, withdrawn and/or an appeal remains outstanding in respect of a refusal. Employers are often put in a difficult positon of navigating Home Office rules to ensure they are not exposed to civil and criminal penalties.

In Afzal v East London Pizza Ltd, Mr Afzal, who is from Pakistan, was employed from October 2009. In 2011 he married an EU national. He had time-limited leave to work in the UK, which expired on 12 August 2016. From 15 July 2016, he was eligible to apply for permanent residence status that would continue his right to work. So long as he applied by the expiry of his current leave to work (12 August 2016), he was entitled to work while his permanent residency application was pending before the Home Office.

In both June and July 2016, the employer reminded Mr Afzal to provide evidence that he had made an in-time application and to do so before 11 August to avoid last minute problems. On 12 August, Mr Afzal sent his employer an e-mail which he said attached evidence of the application. Unfortunately, the attachments were in a form that could not be opened by the employer. Concerned about exposure to criminal or civil penalties Mr Afzal was immediately dismissed with no right of appeal. Following his dismissal, when satisfactory evidence of Mr Afzal's right to work was presented, the employer offered to re-engage him but as a new starter. This meant Mr Afzal's continuous employment with the employer would be broken and he would receive no back pay for the period between dismissal and re-engagement. Mr Afzal claimed unfair dismissal.

The tribunal found his dismissal was fair. It was both reasonable for the employer to believe Mr Afzal no longer had the right to work in the UK (given the lack of evidence in this regard) and for it to act decisively on 12 August for fear of exposure to criminal and civil penalties. As regards the lack of a right to appeal, there was 'nothing to appeal against'. His dismissal was held to be fair for 'some other substantial reason' (SOSR) - that it reasonably believed Mr Afzal no longer had the right to work.

The EAT has now overturned the tribunal to find the dismissal was unfair. While the employer was justified in urgently dismissing the employee when it did, since it had a genuine belief that his employment was by then illegal, if evidence had been produced upon appeal that the employee was entitled to work at all material times, the employer could immediately have rescinded the dismissal without fear of prosecution or penalty. Affording an appeal allows matters of this kind to be considered again 'rather more calmly than can be done as the time limit expires'.

In this case, the employer while entitled to believe on 12 August, that the employee did not have the continued right to work, it could have quickly established his right to work shortly thereafter, as indeed was the case. On the question of remedy, the case will now go back to the tribunal to consider issues such as contributory fault - Mr Afzal had been repeatedly reminded to get his evidence in by 11 August at the latest.

Mr Azfal's case does not mean that a dismissal due to the employer's genuine and reasonable belief that the employee was not permitted to work in the UK will always be unfair. In Nayak v Royal Mail Ltd [2016], the EAT upheld a tribunal's decision that an employer's genuine and reasonable belief that an employee was no longer permitted to work in the UK was sufficient to show that a subsequent dismissal was for SOSR and was both substantively and procedurally fair. In that case, there was ample evidence demonstrating the employer's attempts to establish the employee's immigration status over a period of several years and the employee's persistent failure to co-operate. As ever, each case will be fact sensitive.

Lessons for employers:

  • Whether a dismissal is unfair is judged on the whole process, including any right of appeal.
  • As the EAT pointed out, 'there is no doubt that in modern employment relations practice the provision of an appeal is virtually universal'. Failure to provide a right to appeal will very rarely be fair.

It is also useful to note, that when classifying the fair reason for the dismissal, claims such as in the cases of Mr Afzal and Mr Nayak fall under SOSR. If classed as a statutory restriction, an employer's actual knowledge that continued employment would breach a statutory enactment is required. By contrast, for a SOSR dismissal, the employer's reasonable and genuine belief that it would do so can be sufficient.

4. Suspensions and zero-hour contracts: avoid an own goal

Where an employee is to be investigated for misconduct, an employer may wish to suspend the employee during the investigation. Suspension should never be a knee-jerk reaction, but needs even more thought when the employee is on a zero hours contract.

A shopping mall food outlet employing a student on a zero hours contract made a £4,000 unforced error when not following three basic rules on suspension:

  1. Suspension is a serious step and thought should be given to whether it can be avoided.
  2. The period of suspension should be as short as possible and the suspension decision should be kept under regular review.
  3. Unless there is a clear contractual right to do so (unusual), an employer will not be entitled to suspend without pay. Accordingly a suspended employee should normally continue receiving their normal pay and benefits.

In Obi v Rice Shack Ltd, a college student started working in December 2015 front of house at the employer's restaurant under a zero hours contract. This enabled her to work shifts to fit around her studies. It was common ground that she regularly worked on average 15 and a half hours a week. On 6 March 2016 she was suspended after an altercation at work pending a disciplinary investigation.

After an initial failed attempt to organise a disciplinary hearing, the matter was just left to hang with Miss Obi remaining off future rosters. Mistake number one: failing to deal with the disciplinary investigation swiftly.

On 23 May 2016, Miss Obi raised a grievance about her continued suspension and failure to be paid while suspended, but her grievance was left unanswered - mistake number two. On 26 July 2016 she issued a tribunal claim.

While not addressing the unpaid wages during the suspension or the unresolved disciplinary and grievance hearings, Rice Shack did offer Miss Obi some shifts on 13 December 2016, which she declined, due to the unresolved issues. Mistake three, pretending nothing happened.

The employer's fourth mistake was not to realise that during the suspension, Miss Obi was entitled to be paid. It did not have a contractual right to suspend without pay. Although she worked under a zero-hours contract, during the suspension period her pay should have been based on her previous average working hours.

In a slight twist, during the course of the tribunal proceedings, it transpired that Miss Obi had obtained a full-time call centre job on 22 August 2016 after completing her college studies. The employer then accepted liability for unpaid wages during the suspension for the period 6 March to 22 August 2016. However, it denied it was liable for the period from 22 August to 13 December 2016.

Mistake number five: while such a mitigation of loss argument may work in some circumstances, in this case Miss Obi had a zero hours contract under which she was free to accept other employment without any obligation to notify Rice Shack. Indeed many of the staff had other jobs. Just as Miss Obi had previously worked shifts around her college studies, she may too have accepted shifts around her new job.

In the words of the EAT, "the unforced error made in respect of the continuation of the disciplinary suspension may not have been intended...but is the real explanation for why the claimant 's claim succeeded". Lessons for employers:

  • When questioned by a tribunal for the reasons for the delays, repeatedly saying 'no comment' is not going to win over the tribunal.
  • Just because a suspended employee works under a zero-hours contract does not mean they can be suspended on no pay, without a contractual right to do so.
  • Even if there had been a contractual right to suspend on no pay, a failure to limit the suspension to as short a period as possible and keep it under review, could still have resulted in a claim for breach of the implied duty of mutual trust and confidence.

Suspending and then not dealing with the disciplinary investigation or reviewing the suspension was the real mistake and one that will arise not only when dealing with staff who have regular hours but also those on zero hours contracts.

5. Misconduct does need to necessarily amount to gross misconduct for a fair dismissal

In Quintiles Commercial UK Ltd v Barongo, the EAT has confirmed that an employment tribunal was wrong to assume that a dismissal without prior warning for 'serious' misconduct, as distinct from gross misconduct, could not be fair. A dismissal without warning is not rendered automatically unfair if the conduct properly falls to be categorised as something less than gross misconduct: it is capable of being a fair dismissal provided simply it is for a reason relating to the employee's conduct.

As for the test of reasonableness under section 98(4) of the Employment Rights Act 1996, reasonableness depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating the conduct as a sufficient reason for dismissing the employee. In other words, was the decision to dismiss within the range of reasonable responses that a reasonable employer in those circumstances and in that business might have adopted.

The legislation does not lay down any rule that, absent earlier disciplinary warnings, a conduct dismissal for something less than gross misconduct must be unfair. It may be that in many cases a tribunal will find that a dismissal without notice for misconduct not amounting to gross misconduct falls outside the band of reasonable responses but it should be careful not to simply assume this is so.

Lesson: there is no magic in labelling something as gross misconduct rather than as serious misconduct in an unfair dismissal case. As ever, each case will be fact specific to determine whether the employer acted reasonably in treating that reason for dismissal as sufficient to justify dismissal.

Read the original article on GowlingWLG.com

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