UK: Employment Essentials: 5 Lessons From November 2019

Our monthly Employment Essentials insight is here. Whilst Parliament is dissolved and we're waiting for the General Election on 12 December 2019, November proved to be a bumper month just before the Christmas period. We had yet another landmark Supreme Court judgment on whistleblowing and a significant TUPE case, both of which have far reaching implications.

Gowling WLG's employment, labour & equalities experts bring you the latest top five employment law developments that may affect your business.

1. Whistleblowing: Manipulator's hidden reason for dismissal

A dismissal is unfair "if the reason (or if more than one reason, the principal reason) for the dismissal is that the employee made a protected disclosure (whistleblowing). In cases of automatically unfair dismissal (including whistleblowing), there is no qualifying period of employment required to bring a claim and there is no cap on the level of compensation.

The Supreme Court, in Royal Mail Group Ltd v Jhuti considered whether a dismissal was automatically unfair under section 103A Employment Rights Act 1996 (for a protected disclosure) where the dismissing officer was unaware of the protected disclosure because the dismissing officer was misled by the claimant's line manager (to whom the protected disclosure was made).

The Court of Appeal had previously decided that it is only the mental processes of the person or persons who was or were authorised to, and did, take the decision to dismiss that are relevant.

However, the Supreme Court has now unanimously confirmed that the employer is liable for the reasons of any manipulator in the "hierarchy of responsibility above the employee" even where that reason is hidden from the decision maker who did not know about it.

During her trial period of employment, Ms Jhuti made 'protected disclosures' under section 43A of the Employment Rights Act 1996, commonly described as whistleblowing. Ms Jhuti worked as a media specialist in a sales role and her concerns related to non-compliance with Ofcom and the company's own procedures. Her line manager's bonus was partly dependent upon the performance of his team. Following a meeting with her line manager, where he challenged her understanding of the rules and made Ms Jhuti fear her job was at risk if she did not retract the complaint, she withdrew her allegation.

Following the withdrawal of her allegation, her line manager's response was to pretend that her performance was inadequate. The line manager bullied, harassed and intimidated her and created, in emails and otherwise, a false picture of her performance over several months. The company monitored and managed her alleged underperformance aggressively, including instigating a performance improvement plan. She was being set up to fail.

The company ultimately appointed another employee to review the evidence (rather than investigate) and decide whether Ms Jhuti should be dismissed.

Ms Jhuti suffered alopecia and in the meantime had been signed off work for work-related stress, anxiety and depression and was unable to present her case to the decision-maker in meetings or otherwise.

The decision-maker was supplied with various emails, but not all of them, and did not have copies of her original disclosures or the emails Ms Jhuti sent to Human Resources (HR) which included her concern about her manager's conduct towards her being due to an issue she had raised previously and that she believed she was being managed out due to a grudge from the day she raised an issue.

In a subsequent email to the decision-maker, Ms Jhuti referred to being "sacked for telling the truth". The decision-maker asked the line manager to explain what she meant and accepted his explanation that Ms Jhuti had misunderstood what had occurred. However, the decision-maker had no reason to doubt the truthfulness of the material indicating Ms Jhuti's inadequate performance and decided that she should be dismissed for that reason.

Cleary, the evidence provided to the decision-maker was hugely tainted. The original employment tribunal noted that the email trail prepared by the line manager in the context of this case meant that it was inevitable that the decision-maker would dismiss Ms Jhuti.

Ms Jhuti claimed, firstly, that she had made protected disclosures and she had been subjected to detriments by the company on grounds of her whistleblowing and, secondly, automatic unfair dismissal.

The employment tribunal found that she had been subjected to detriments (including harassment and bullying) under section 47B of the Employment Rights Act 1996 but she had not been unfairly dismissed as the reason for her dismissal was her performance.

However, the Employment Appeal Tribunal (EAT) held that she had been automatically unfairly dismissed. Where a decision-maker is ignorant of the fact, and the decision had been manipulated by someone with managerial responsibility for the employee who knew the truth, the decision can be attributed to the company.

The Court of Appeal reversed this decision, on the ground that only the mental process of the employer's authorised decision-maker was relevant.

Ms Jhuti appealed to the Supreme Court that her dismissal was unfair under section 103A, which provides that a dismissal is unfair 'if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure'.

So, what was the reason for the dismissal? Was it the decision-maker's genuine belief that her performance had been inadequate or was the reason for dismissal that she made protected disclosures?

The reason for dismissal in an unfair dismissal claim can be something other than the reason given to the employee by the decision-maker.

The Supreme Court confirmed that in looking for the reason for dismissal, generally courts need only look at the reason given by the decision-maker. However, if the real reason is hidden from the decision-maker and an invented reason is presented, the court must penetrate through the invention. In this case, the reason for dismissal that was given in good faith "turns out to have been bogus". The real reason for the dismissal was the hidden reason. Parliament clearly intended that, where the real reason for dismissal was whistleblowing, the automatic consequence should be a finding of unfair dismissal.

If limited to a person placed by the employer "in the hierarchy of responsibility above the employee", the Supreme Court said there is no conceptual difficulty about attributing to the employer that person's state of mind rather than that of the deceived decision-maker.

The Supreme Court allowed the appeal and reinstated the Employment Appeal Tribunal's decision that Ms Jhuti had been unfairly dismissed for making protected disclosures.

Lessons for employers:

1. The issue is of wider importance and applies not just to dismissals for making a protected disclosure, because the wording under section 103A, which relates specifically to whistleblowing, also relates to general unfair dismissal under section 98 Employment Rights Act 1996.
2. However, the facts of this case are extreme. Instances of decisions to dismiss taken in good faith, not just for a wrong reason but for a reason which the employee's line manager has dishonestly constructed, will not be common.
3. The improper actions or motive of a manipulating line manager will be attributed to the company.
4. The manager making the decision and HR supporting them need to ensure that they have all the relevant information before making a decision and that this information is not tainted by an improper motive. In particular, care should be taken not to brush over allegations that disciplinary action is being taken in retribution or lacks good faith. It is important to identify any risk of a potential connection between allegations made by an employee and subsequent actions taken against them.
5. It is important that an employee can contribute to the decision-maker's inquiry, where at all possible. The employer will give a reason for the potential dismissal and the employee may dispute the reason or suggest an alternative reason for the employer's action. The decision-maker should address all rival versions of the reason for dismissal and identify the real reason for the dismissal.
6. Employers should review policies and training, especially for managers. Grievance, disciplinary and whistleblowing policies need to be strong and clear that retaliation for whistleblowing is not tolerated.
7. It is important that all managers receive training on implementing policies and procedures, including on investigations, hearings and dealing with allegations from an employee of any wrongdoing on behalf of the employer or a manager.
8. It is important that all managers know when to involve HR and that a "speak up" culture is openly supported by senior management.

2. Whistleblowing: Belief in the public interest need not form part of the worker's motivation.

In Ibrahim v HCA International Ltd, the Court of Appeal reminds us that, following the 2017 Court of Appeal guidance in Chesterton Global Ltd (t/a Chestertons) v Nurmohamed, the individual making a relevant disclosure only needs a belief that the disclosure is in the public interest. The particular reason why the worker believes that to be so are not of the essence. Also, while the worker must have a genuine and reasonable belief that the disclosure is in the public interest, that does not have to be their predominant motive for making it.

For a disclosure to be a qualifying disclosure under the whistleblowing legislative provisions, the worker must have:

1. a reasonable belief that the information disclosed tends to show one of the six potential 'relevant failures' (including is a 'breach of any legal obligation') has occurred, is occurring, or is likely to occur; and
2. a reasonable belief that 'it is made in the public interest'.

In Ibrahim, the EAT held that a hospital interpreter's complaint to HR that he was being defamed by rumours that he had breached patient confidentiality was capable of amounting to a qualifying disclosure under (a), as the reference to "legal obligation" is broad enough to include tortious duties, such as defamation, and breach of statutory duty, such as those contained in the Defamation Act 2013.

However, the tribunal and EAT held that Mr Ibrahim's complaint failed under (b) as on the facts of this case, it was clear that Mr Ibrahim's only concern was that the false rumours had been made about him, and the effect of those rumours on him. As such he did not have a reasonable belief that the disclosure was in the public interest.

On further appeal, the Court of Appeal held the tribunal's finding that the disclosures "were not made in the public interest, but rather with a view to the claimant clearing his name and re-establishing his reputation" deals with what Mr Ibrahim's motive was, but not with his subjective belief at the time. As such the case has been sent back to tribunal to determine whether he had a subjective belief that the disclosure was in the public interest. It is possible in cases such as this that it is reasonable to regard disclosure as being in the public interest as well as the personal interest motivation of the worker.

3. TUPE: Covers workers as well as employees

The definition of "employee" under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is different to the traditional definition used in employment law.

Under regulation 2 of TUPE, an employee means "any individual who works for another individual under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services."

In Dewhurst v Revisecatch Limited t/a Ecourier and City Sprint (UK) Limited, the employment tribunal considered whether TUPE covers workers as well as employees.

In the UK, there are broadly three main categories of employment status: employees, workers, and the self-employed. The rights and obligations, in relation to each category of individual, flow from their employment status.

At one end of the employment status spectrum are 'employees' who are afforded the greatest level of protection such as unfair dismissal, and redundancy pay. At the other end of the spectrum are the self-employed who are not entitled to employment protection rights such as those who are genuinely in business on their own account.

Somewhere in the middle are 'workers' who are entitled to some key employment rights including National Minimum wage, holiday pay and rest breaks, protection from detriment for whistleblowing and discrimination and pension auto-enrolment.

These so called "limb b) workers" are those who fall within the definition of worker found in s.230(3)(b) Employment Rights Act 1996 (ERA) and other legislation, such as the Working Time Regulations 1998.

The issue was whether "limb b) workers" fall within the definition of employee in regulation 2 of TUPE and benefitted from the rights and protections conferred by TUPE.

In Dewhurst v Revisecatch and City Sprint, the three claimants were cycle couriers claiming, holiday pay under the Working Time Regulations 1998 and failure to inform and consult under regulations 13 and 14 TUPE. The claimants were engaged by City Sprint as couriers until 31 January 2018 when City Sprint lost its contract to provide courier services to HCA Healthcare to Ecourier. Ecourier engaged the services of the claimants from 1 February 2018.

The case was a preliminary hearing purely on the question of interpretation of the term 'employee' under TUPE and the employment tribunal found that it does cover workers.

The Acquired Rights Directive, from which TUPE is derived, protects those whom domestic employment law recognises as employees. One of the Acquired Rights Directive's purposes is that rights should be preserved provided they arise from national employment/labour law.

Clearly, employees in the traditional sense of those employed under a contract of service would be covered by TUPE and those employees have the highest level of statutory rights. However, UK law also recognises "employees" of a different sort (although they are sometimes labelled as workers e.g. in the Employment Rights Act 1996 and the Working Time Regulations 1998). These workers benefit from some limited employment rights, largely derived from European law.

The tribunal found that these workers were included in the "employment relationship" in the Acquired Rights Directive irrespective of the label given to them under domestic legislation. The employment tribunal particularly considered Recital (3) of the Acquired Rights Directive which emphasises its purpose of ensuring rights are safeguarded.

The employment tribunal held that the words "or otherwise" included in the definition of employee under regulation 2 TUPE reflected the employment relationship covered by the Acquired Rights Directive, which includes workers.

The employment tribunal also considered the exclusion from protection in regulation 2(1) TUPE of persons providing services under "contracts for services". The tribunal decided that the exclusion only applied to independent contractors genuinely in business on their own account and does not exclude workers.

The tribunal said that if it was wrong that only independent contractors were excluded from TUPE protection then either:

1. TUPE had to be interpreted to include limb b) workers to give effect to the Acquired Rights Directive; or
2. if necessary, the words defining limb b) workers (in section 230(3)(b) Employment Rights Act 1996) should be implied into the regulation 2 TUPE exclusion so as to give effect to the Acquired Rights Directive.

Although this is only an employment tribunal judgement and not binding on other tribunals, it is an important case because there is no appeal level decision on this point. Employers failing to include workers in TUPE transfers may have significant employment risks and liabilities.

The case will now be listed for a case management hearing but may well be appealed given the significance of the principle and potential liabilities for employers. For example, the maximum award for failure to inform and consult under TUPE is 13 weeks' gross pay per employee and not including workers in the information and consultation exercise could add significantly to an employer's liability if there are several of them.

However, it is uncertain that an appeal would be successful as the tribunal thoroughly examined the domestic legislation, the Directives, European and domestic case law and gave alternative reasons for its decision. In any event, the decision should be taken into consideration in other tribunal cases. It also adds weight to a previous employment tribunal decision in McCririck v Channel 4 Television Corporation and IGM Media Limited (2013). At a pre-hearing review, the employment tribunal held that Mr McCririck, the well-known TV personality, was a worker and an employee for the purposes of TUPE. It also reflects the likely direction of travel in relation to "gig-economy" workers generally.

Lessons for employers:

If following this approach, in advance of any appeal decision on the point:

1. Ensure due diligence considers employment status generally and includes all workers.
2. Include details of workers on the Employee Liability Information required under TUPE.
3. Include workers in any elections for representatives and in the information and consultation process under TUPE.
4. Workers may automatically transfer under TUPE to the incoming employer. However, they will not be entitled to claim unfair dismissal.
5. Include workers in the risk assessment and quantification of potential employment related liabilities which transfer and consider whether any measures, such as changes to working arrangements, are envisaged in relation to workers.

4. Dismissing an employee on maternity leave

Employees on maternity leave are not exempt from being dismissed or selected for redundancy in a genuine redundancy situation where there is no suitable alternative vacancy.

Once the dismissal takes effect, the maternity leave period automatically comes to an end. However, employers should be aware that the right to receive statutory maternity pay (SMP) survives termination of the contract. Provided the employee fulfils the conditions for payment of SMP, she will be entitled to receive SMP regardless of her departure for any reason, including resignation, misconduct and redundancy.

This month the First Tier Tax Tribunal in NVCS Ltd v (1) Commissioners for HMRC (2) Dare (2019) remind employers that it is not possible to enter into a binding agreement in 'full and final settlement' of a claim for SMP even under the auspices of Acas unless the employer has actually paid the employee her entitlement to SMP.

In the case of Mrs Dare, a dispute arose over her performance when pregnant. Negotiations took place via Acas conciliation and eventually a settlement agreement was signed under which Mrs Dare's employment would be terminated and she received £10,000 in full and final settlement of all her claims against NVCS arising out of her employment and its termination. Mrs Dare later complained to HMRC that she had not been paid SMP to which she was entitled. The employer disputed this, claiming that her SMP entitlement of just under £8,000 was included within the £10,000 settlement payment.

The tax tribunal confirmed that a term of any agreement that purports to settle 'all claims' cannot compromise a claim to SMP - any agreement purporting to exclude or limit an employee's entitlement to SMP is void under the Social Security Contributions and Benefits Act 1992. The tax tribunal then went on to consider whether part of the £10,000 settlement paid to Mrs Dare under the Acas negotiated settlement agreement included her entitlement to SMP. The tax tribunal answered - no. The payment of SMP was not included in the £10,000 compensation as there was no express reference to SMP in the agreement.

Lessons for employers:

When negotiating a settlement agreement it is important to ensure either:

1. The agreement provides for the employer to continue to pay SMP weekly or monthly for the duration of the SMP period (or until the employee commences new employment or otherwise ceases to be entitled to SMP); or
2. The agreement clearly sets out the total remaining SMP entitlement and expressly provides for this to be paid as a lump sum on termination.

In choosing which option to take remember:

• The burden will be on the employer to show that it has paid SMP in full.
• The SMP payments (or lump sum) should be subject to deductions for income tax and National Insurance Contributions (NICs) in the usual way.
• If making a lump sum payment:
  • the employer and employee may end up paying slightly more national insurance than if SMP is paid on the normal pay day (because one large payment is being made).
  • the employer runs the risk of having overpaid if something changes during the SMP period to disqualify the employee from receiving it, for example, commencing employment with a new employer after giving birth.
  • if an employer has already recovered the lump sum from HMRC and the woman subsequently becomes disentitled to it, the employer will be required to repay to HMRC the amount wrongly recovered. Provision should be made for the former employee to notify the former employer if she ends her SMP period early.

For more details, please see our insight on Dismissing an employee & maternity pay: What employers need to know

5. Holiday carry over limited to four weeks in cases of sickness

Every worker is entitled to 5.6 weeks' (28 days') annual leave under the Working Time Regulations 1998 (WTR), pro-rated for part time workers. However, employers should be aware that this entitlement derives from two separate regulations.

The first four weeks (20 days) of this entitlement is set out under regulation 13 and gives effect to the Working Time Directive requirement. The additional 1.6 weeks (eight days) leave is covered by regulation 13A and is a matter of domestic law, being over and above the requirements of the Working Time Directive.

There is a general prohibition against carrying over holiday leave so the general starting point is that if a worker has not taken their full holiday entitlement during a leave year, it cannot be carried over. However, following much case law, exceptions apply regarding the carry over rule in relation to those on sickness absence, family related leave and those incorrectly classed by their employer as self-employed.

In TSN v Hyvinvointialan liitto & others, the Court of Justice of the European Union (CJEU) has confirmed that where a worker is on long term sickness and cannot take their holiday, only the minimum four weeks (20 days) leave under the Working Time Directive must be carried over. Any entitlement the worker has above this, whether under national legislation or under a more generous contract, does not have to be carried over unless there is a contractual right to carry over these extra days.

In TSN v Hyvinvointialan liitto & others, the CJEU considered two joined cases referred by Finland relating to two workers who were covered by a collective agreement which entitled them to more than the minimum four weeks' holiday under the Working Time Directive. However, their employer refused to allow them to carry over any holiday entitlement which was unused due to sickness over and above the four weeks. The CJEU confirmed this was permissible under EU law.

This latest CJEU case confirms a previous Scottish EAT decision, Sood Enterprises Ltd v Healy (2013) which found that the Working Time Directive does not require carry-over of the additional 1.6 weeks' leave under regulation 13A of the Working Time Regulations 1998 where a worker is prevented from taking holiday due to long-term sickness absence. The purpose of the Working Time Directive relates to health and safety requirements for workers and anything over the minimum is up to each member state to regulate.

Lessons for employers:

The case confirms that for workers on long term sick leave there is no requirement to carry over more than four weeks' holiday leave which is unused due to sickness unless there is a contractual right to do so. There is nothing to prevent an employer from treating all holiday entitlement (including the additional eight days' UK leave under regulation 13A) in the same way and allowing carry-over of the additional entitlement in its contract or policies. However, the worker cannot insist on this unless they have a contractual right to it.

As a general reminder it is also worth noting that:

1. Workers continue to accrue annual leave entitlement during sickness absence;
2. Workers can choose to take annual leave at the same time as being absent due to sickness;
3. Workers whose employment terminates in a year during which they have been away from work due to sickness are entitled to the same termination payment for untaken annual leave as any other worker; and
4. Workers who fall sick during scheduled annual leave can reschedule the annual leave within the same leave year or carry it over into the next leave year, if there is not enough time to take it in that leave year.

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