UK: HR Headlines - London Employment Update

Last Updated: 28 October 2009
Article by Mark Taylor and Lisa Mayhew


  • Default retirement age is lawful
  • Two ECJ decisions on collective redundancies
  • ECJ decision on holiday entitlement lost due to illness
  • Costs orders against dishonest litigants
  • News in brief

Default Retirement Age Is Lawful

The High Court has ruled that the UK's Default Retirement Age ("DRA") of 65 is not incompatible with the European Equal Treatment Framework Directive. However, it went on to say that there were "compelling" reasons for advancing the DRA beyond 65 in the future.

In The Queen on the application of Age UK v (i) Secretary of State for BIS and (ii) the EHRC, [2009] EWHC 2336, often referred to as the "Heyday case", the Claimant had argued that two core provisions of the Employment Equality (Age) Regulations 2006 (the "Age Regulations") were incompatible with European law and should be declared invalid. The relevant Regulations in dispute were:

  • Regulation 3, which permits employers to justify direct age discrimination; and
  • Regulation 30, which provides that it does not constitute unlawful discrimination for an employer to dismiss an employee on the grounds of retirement at age 65.

The Court found no illegality in the terms of Regulation 3, holding that its language merely replicated that used in the Directive itself and finding that in any event, the Government had demonstrated clear social policy concerns in protecting the integrity of the labour market.

Considering the legality of the UK's Default Retirement Age, the court said a distinction has to be made between a mandatory retirement age and a designated retirement age (the latter as provided for in Regulation 30). In comparison to a mandatory retirement age, it was noted that "a designated retirement age does not require the employer to dismiss on grounds of age or retirement, but merely enables it to do so when that age is reached without risk of violating the law and being vulnerable to damages claims. The idea of a DRA is not inherently arbitrary and illegitimately discriminatory but is the making of a social choice in the light of a number of social and economic factors".

The Court held that the principle of a DRA was both legitimate and proportionate. The judge said:

"A DRA is not a generalised statement of social worthlessness, but is a measure designed to give certainty and corresponding focus for planning purposes for employers and employees alike. It is a statement that a person is liable to be retired because they have reached the kind of age where it is generally considered appropriate for retirement issues to be addressed."

However, focussing on the question whether 65 was an appropriate age for the UK's DRA, the judge commented that "in the light of changed economic circumstances and the generally recognised problems that a longer living population creates for the social security system, the case for advancing the DRA beyond minimum age of 65 at least would seem to be compelling".

Conveniently, the Government had announced in the days leading up to the High Court hearing that a review of Regulation 30 would brought forward to early 2010. Most believe it is likely that the UK's DRA will be increased as a result of that review. For the moment, however, employers can still lawfully retire employees at 65. An estimated 800 employment tribunal cases for age discrimination that were awaiting the ruling will now be struck out.

Two ECJ Decisions On Collective Redundancies

Two recent ECJ decisions provide guidance for employers in collective redundancy situations. It is now clear that the ECJ expects collective consultation to begin when strategic decisions are taken resulting in the employer "contemplating" collective redundancies and that an individual is not permitted to bring a claim for failure to consult collectively on redundancy dismissals in circumstances where there are employee representatives who can bring this claim.

The European Court of Justice ("ECJ") has had to consider two issues in recent weeks relating to collective redundancies: (a) the stage at which the duty to start consultation arises in a collective redundancy scenario; and (b) whether the EU Collective Redundancies Directive permits an individual to bring a claim for failure to consult in circumstances where there are elected employee representatives in place.

(a) When does the duty to begin collective redundancy consultation arise?

The ECJ's decision in the Finnish case of Akavan Erityisalojen Keskusliitto AEK ry and others v Fujitsu Siemens Computers Oy, C-44/08, provides guidance for employers on when the duty to consult collectively on redundancy dismissals is triggered. The Court found that the duty arises when strategic decisions or changes of activities are taken which compel the employer to contemplate collective redundancies.

By contrast, under the UK's provisions in TULRCA, collective consultation obligations are triggered when the employer proposes dismissals of 20 of more individuals within a 90-day period.

It remains to be seen whether the concepts of "contemplation" or "proposal" differ materially such that TULRCA is incompatible with European law. Applying the ordinary meaning of the words, it would be arguable that a "proposal" is a more concrete notion than a "contemplation" and that the provisions of TULRCA require consultation to begin at a later stage in the decision-making process than that required in Akavan. Akavan does make it clear that the obligation to begin collective consultation is not dependant on the employer being able to supply all necessary information to employee representatives at the inception of the consultative process – the information may be supplied throughout the process as and when it becomes available.

The ECJ's guidance in Akavan states that the consultation process must be completed before the contracts of employees affected by the collective redundancies are terminated on notice.

Akavan also makes clear that where redundancies are contemplated within a group of companies, the consultation obligation falls upon the subsidiary in which headcount reductions are contemplated, even where the ultimate decision to effect redundancies rests with a parent company.

(b) Can an individual bring a claim for failure to consult collectively in circumstances where there are elected employee representatives in place?

In Mono Car Styling SA (in liquidation) v Odemis and others, C-12/08, the ECJ confirmed that an individual is not permitted to bring a claim for failure to consult collectively on redundancy dismissals in circumstances where there are elected employee representatives or trade union representatives in place. The ECJ held that the right to bring a claim for a failure to consult collectively is essentially a right that is collective in nature and therefore intended to be enforced by employee representatives rather than by employees themselves. The Court could see no reason to extend the right to individual employees in circumstances where the employee representatives are able to bring a claim.

ECJ Decision On Holiday Entitlement Lost Due To Illness

The ECJ has decided that where a worker falls ill before or during a planned period of paid annual leave, he should be given the right to take that portion of statutory annual leave at another time, even if this means carrying it forward into the next year.

In Pereda v Madrid Movilidad SA, C-277/08, the ECJ highlighted the need for employers to recognise a distinction between annual leave (enabling the employee to enjoy a period of relaxation and leisure), and sick leave (required for recovery from illness). Article 7 of the EC Working Time Directive ("WTD") provides workers with a basic right to 4 weeks' paid annual leave and this right can not be ignored in circumstances where the worker is sick.

The UK's Working Time Regulations ("WTR") are more generous than Article 7 of the WTD, providing workers with a right to 5.6 weeks' paid holiday per year. As drafted, however, the WTR do not presently allow for annual leave to be carried forward into a new holiday year. The ECJ's decision in Pereda will require amendment to be made to the WTR, though it is as yet unclear whether the right to carry holiday forward will be limited to the 4 weeks required under the WTD or the 5.6 weeks allowed for under the WTR. The Courts will no doubt have to decide on this at some future date.

Only public sector workers will immediately benefit from the Pereda decision. Private employers will be bound by the decision only once the WTR have been formally amended.

Costs Orders Against Dishonest Litigants

The Employment Appeal Tribunal ("EAT") has held that it was perverse for the Employment Tribunal not to make a costs order against a claimant who had made false allegations in her own claim.

The decision in Dunedin Canmore Housing Association v Donaldson, [2009] UKEAT/0014/09, will be a relief to employers faced with defending spurious, plainly untruthful allegations.

In this case, the parties had entered into a compromise agreement, though the employer had refused to pay the compensation due under it on the basis that it believed Mrs Donaldson had breached the confidentiality duty in the agreement by discussing its terms with a colleague and her partner. Mrs Donaldson sued for breach of contract, expressly claiming she had not breached the confidentiality clause.

The Tribunal at first instance found that the Claimant had indeed breached the confidentiality restriction, but costs were not awarded in favour of the employer, who then appealed that decision.

The EAT held that the Tribunal's refusal to make a costs order against the Claimant had been perverse. Given the finding of fact that the Claimant had lied in her claim, there was no basis for a view that the proceedings had been necessary. The fact that the Claimant was a lay person was held to be irrelevant - what mattered was whether she had, "in simple human terms, approached the facts that lay at the heart of her case honestly and reasonably".

Employers might wish to consider amending their standard compromise agreement wording to provide that the various waivers given by an employee in the agreement will subsist in the event that the employer withholds compensation where the employee has breached the contract.

News in Brief

Vento guidelines increased

The Employment Appeal Tribunal has held in Da'Bell v NSPCC (to be reported) that the three bands for Vento damages for injury to feelings in discrimination cases should be increased to reflect inflation. The new bands, which apply with immediate effect, are as follows:

  • Lower band (for less serious cases, such as one-off incidents): £500 - £6,000;
  • Middle band (for more serious cases not meriting an award within the highest band): £6000 - £18,000
  • Upper Band (for the most serious cases involving lengthy campaigns of harassment): £18,000 - £30,000.

Increase in the cap on a week's pay with effect from 1 October 2009

The maximum limit on a "week's pay" for the purposes of calculating an unfair dismissal basic award or a statutory redundancy payment will increase with effect from 1 October 2009 from £350 to £380. This will mean that the maximum statutory redundancy payment also increases to £11,400 (previously £10,500).

National Minimum Wage increased with effect from 1 October 2009

The standard adult hourly rate of NMW will increase to £5.80 (from £5.73) with effect from 1 October 2009.

Compensation for constructive dismissal

The Court of Appeal has held in Stuart Peters Ltd v Bell [2009] EWCA Civ 938 that allowances can be made for sums earned by an individual during what would have been their notice period in cases of constructive dismissal. This means that where an employee resigns and walks into new employment, successfully claiming they have been constructively unfairly dismissed by the former employer, compensation can be reduced to reflect monies earned since the resignation. This position is different to that in cases of unfair dismissal, where, according to the Norton Tool principle, no such allowances can be made

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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