United States: UK Employment Law Update, October 2013

Last Updated: November 4 2013
Article by Alison Wallace

Welcome to the latest issue of the Steptoe & Johnson UK Employment Law Update.

These Employment Law Updates are aimed at providing information on recent developments and what the regulatory changes mean for you in practice, in managing workplace issues on a proactive basis.

To achieve our objectives and to continuously improve the Updates, we would be pleased to receive feedback from you. Please e-mail any comments or suggestions which you may have relating to the Updates to employmentgroup@steptoe.com. We look forward to hearing from you.

1. Update on law reform

  • Fees for employment tribunal appeal tribunal claims came into effect on 29 July 2013 but following an application for judicial review brought by UNISON in the High Court a hearing took place on 22 and 23 October 2013 as to the lawfulness of the introduction. UNISON has confirmed that the hearing went part-heard and will resume on 4 November 2013. The Ministry of Justice has undertaken to re-fund any tribunal fees paid if the fee scheme is found to be unlawful.
  • A new fee remission structure came into force on 7 October 2013. In order to qualify for fee remission an applicant will need to be in receipt of certain state benefits or have a low gross household monthly income. In addition, a new disposable capital test is being introduced. Those over 61 will not be required to pay any fee if their disposal capital is now less than £16,000 and they meet the low income test. Those under 61 with £8,000 or more disposable capital will be required to spend up to half their disposable capital on fees. This system will apply across all courts and tribunals.
  • With the abolition of third party harassment, with effect from 1 October 2013, under the Enterprise and Regulatory Form Act 2013, Claimants who are harassed by third parties will no longer be able to rely on the protections from harassment under section 40 of the Equality 2010 Act and will have to rely on the general liability for discrimination and normal harassment provisions in the Act. Employees who suffered third party harassment before 1 October 2013 were able to pursue their employer who could be held liable if the harassment had happened on at least two previous occasions and their employer knew about it and had not taken reasonable steps to prevent it. Employees will therefore still have a remedy where their employer knowingly places the employee in a situation in which they are subjected to sexual, racial, homophobic or other harassment because of a protected characteristic. The most straightforward ways are for an employee to bring a claim for harassment or a claim for direct detrimental treatment or indirect discrimination. The abolition of the three strike rule may therefore make it easier rather than harder for employees to sue.

2. National minimum wage

The National Minimum Wage rate has increased for workers aged 21 and over with effect from 1 October 2013. The rate is now £6.31 an hour.

Employers failing to pay the National Minimum Wage can be publicly named with effect from 1 October under the revised enforcement scheme, in an attempt to prevent businesses from underpaying workers. Coupled with the strengthened enforcement scheme the BIS has produced guidance on calculating the minimum wage to remind employers of their legal obligations. You can find that here.

3. Business immigration

Key changes take effect from 1 October 2013:

  • Holders of Tier 2 intercompany transfer visas will no longer have to meet an English language requirement if they are extending their visas beyond 3 years.
  • Tier 2 general migrants who earn more than £152,100 per annum will be permitted to hold more than 10% of their shares in their UK sponsor or its overseas group.
  • The list of permitted business visitor activities will be expanded to allow visitors to carry out internal audits for group companies and attend corporate training. The audit must be conducted on a short term one-off visit and the training has to be for the purpose of the visitor's employment overseas.
  • Tier 4 students who have completed UK degrees will be permitted to undertake a corporate internship which directly relates to their degree for up to 12 months under the Tier 5 government authorised exchange category.

UK Visas and Immigration in partnership with the Greater London Authority has launched a 3 month pilot with effect from 23 September 2013 to provide online support to SMEs who need to recruit skilled international employees to help build their business. A toolkit of information has been made available through the GLA website.

4. Directors' remuneration reporting

From 1 October 2013 the way in which directors of public companies should seek shareholder approval of their remuneration policy and loss of office payments to directors has changed. These measures will only apply to quoted companies and not AIM listed companies or foreign companies registered in the UK. These will apply to financial years ending on or after 1 October 2013. The key changes are that shareholder approval of the remuneration policy will be binding on the Company and will provide increased oversight. At least once every three years the directors' remuneration reports must contain a forward looking policy on director remuneration which will be subject to a vote at the AGM and which must be passed in order to become effective.

On 2 October 2013 the Financial Reporting Council published a consultation document seeking views on whether, in light of the new directors reporting and voting framework, changes to the UK Corporate Governance Code are required. Feedback is sought on extending the clawback provisions and what happens when a significant minority of shareholders vote against the directors' remuneration report. The deadline for responding to the consultation is 6 December 2013.

5. Employee shareholders

The Government has produced guidance on employee shareholder status which came into force in September 2013. The guidance sets out the issues, rights and actions, the need for independent legal advice and the effect of an employee shareholder's agreement. Guidance has also been published by HMRC on the CGT and income tax treatment of employee shareholder shares. Copies of the guidance are available here and here.

There is little evidence of this scheme being much used so far.

6. Health and Safety

As from 1 October 2013 the Health and Safety (First Aid) Regulations 1991 were amended to remove the requirement for HSE to approve first aid training and qualifications. Guidance has been provided on the regulations to help businesses put in place appropriate arrangements for the provision of first aid. Copies of the guidance are available here

The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013 (RIDDOR) also came into force on 1 October 2013. This relates to the notification, record keeping of work related deaths, serious accidents, industrial disease and near misses. Under the new regulations employers are required to notify incidents to the HSE "by the quickest practical means without delay" and send a report within 10 days of the incident. See the HSE website here.

7. Looking ahead

The Government has announced that section 16 of the Enterprise and Regulatory Reform Act 2013 will come into effect in April 2014. This gives the tribunals the power to order an employer who loses before a Tribunal to pay a financial penalty of up to £5,000 to the Secretary of State where the employer's breach has aggravating features. The fee is halved if it is paid within 21 days. The minimum threshold for a penalty will be £100.

It is intended to encourage businesses to have greater regard to what is required of them in law. Aggravating features will include malice or negligence. It will be for the Tribunal to decide whether to impose a penalty taking into account any factors it considers relevant.

8. Proposed changes to TUPE 2006

The Government has responded to the consultation on TUPE and the proposed changes are likely to come into force in January 2014. These proposed changes have not yet been published but are expected to include:

  • allowing the renegotiation of terms derived from collective agreements up to one year after the transfer provided the change is no less favourable to the employee.
  • a static approach to the transfer of terms derived from collective agreements. (See note on the Alemo-Herron case at item 12).
  • allowing changes in the location of the workforce following a transfer to fall within the scope of an ETO reason to prevent genuine change of place of work redundancies from being automatically unfair.
  • allowing consultation which begins pre-transfer to count for the purposes of complying with collective redundancy rules provided the parties agree and where the transferee has carried out meaningful consultation.
  • allowing microbusinesses to inform and consult directly with affected employees where there is no recognised independent trade union nor any existing appropriate representatives.
  • bringing forward the deadline by which employee liability information has to be provided to 28 days before the transfer.

The Government decided not to do away with the service provision change rules but the activities carried on after the change in service provision must be "fundamentally or essentially the same" as those carried on before for the service provision change to be caught by TUPE.

There will be transitional and saving provisions to allow employers a lead-in period to plan future transfers in line with the new rules.

9. International Jurisdiction of the Tribunals

- Brussels 1 Regulation

Powell v OMV Exploration & Production Ltd [2013] WL 5336117

Mr Powell worked for OMV 3 weeks in 4 in Dubai, spending the fourth week as "rest time" at his home in the UK. His contract with OMV was subject to Manx law. OMV had no place of business in the UK and it was administered from Austria. The Tribunal Judge held that OMV was domiciled in Austria and as Mr Powell did not habitually work in any other Member State he could only sue OMV in Austria. The EAT agreed. The Judge also found that his claim was outside the territorial scope of the Employment Rights Act 1996 as under the principles in the Serco and Ravat cases he had no close connection or sufficiently strong connection with the UK to overcome the general rule that the place of work is decisive. To give the Tribunal jurisdiction, the test is whether the connection with the UK was "sufficiently strong" to enable it to be said that Parliament would have regarded it as appropriate for the Tribunal to deal with the claims. Although the Claimant resided in the UK, was domiciled here and paid tax here, this was insufficient. His employer was not a British company and he worked abroad by agreement.

Key point: Where an employer is domiciled in a Member State of the EU the question of which court has jurisdiction is to be determined by the rules of the Brussels 1 Regulations under Article 19.

- Rome Convention

Schlecker v Boedeker C-64/12

Under the Rome Convention, the parties to an employment contract can choose the country whose laws will apply to the contract.

In this European Court of Justice case the Court held that the governing law of an employment contract under Article 6 of the Rome Convention may be decided by the national court and it will not always be where the employee works. Article 6 specifies the factors to be taken into account in determining the governing law, absent an express choice.

Mrs Boedeker who had worked for a long and uninterrupted period in the Netherlands for a German company with managed benefits, lived in Germany, was paid in German marks/euros and paid taxes in Germany. This meant that her contract was more closely connected with Germany than the Netherlands. This was so even though as the Netherlands Supreme Court had noted the Netherlands offered her greater employment protection than under German law. The ECJ considered that the significant and indicative factors included the country in which she paid her tax and where she was covered by social security benefits, pension, sickness, insurance and invalidity schemes. Mrs Boedeker had brought proceedings against Schlecker in the Netherlands. The Regional Court of Appeal held that under Article 6(2)(a) of the Rome Convention her employment contract was governed by the law of the Netherlands. Schlecker appealed arguing German law was the applicable law and were successful.

Key point: Although the case was decided on its facts in the absence of an express choice by the parties the applicable law of the employment contract may not be where the employee works. To avoid such difficulties an employment contract should always specify the governing law particularly where this might be different to the country whose mandatory rules apply.

10. Ignorance of the law may still amount to a fair dismissal

Docherty and anor v SW Global Resourcing Ltd [2013] CSIH 72

In this well publicised Scottish case, the court held that where an employer takes action against an employee which amounts to a dismissal, and does so without having regard to or having considered the legal consequences, or on a mistaken view about what the consequences would be, that dismissal may be fair. The fact that the employer took the action in such circumstances will not of itself make the dismissal fair.

SW gave its employees notice in June 2010 that to avoid redundancies, reduce labour costs and offer more competitive tenders they would no longer receive a guaranteed weekly salary and they would be instead engaged on zero hours contracts. If they had not had work for 2 months then they would be given their P45s. Two welders employed by SW resigned and complained of constructive dismissal when they were to be employed on an ad hoc basis from 1 October. The Employment Tribunal held that the claimants had been unfairly dismissed. The EAT overturned that decision finding that the employees had been fairly dismissed for some other substantial reason and the employees appealed to the Inner House Court of Session. It allowed the appeal but remitted the case to the Tribunal to determine the issue of fairness. It held the Tribunal had failed to consider whether SW's ignorance of the law was excusable and if it was whether that was a decisive consideration or one which was outweighed by other factors.

It is for the Tribunal balancing the needs of both the employer and the employee to assess these factors and to determine whether having regard to the equity and substantial merits of the case the dismissal was fair in the circumstances. Tribunals are not entitled to substitute their own views.

Key point: A small employer might find it easier to persuade a Tribunal that it was not feasible to obtain specific legal advice before making changes to its employees' contracts but this will be a rare case.

11. Consultation on zero hours contract

Vince Cable has announced that the Government is to launch a consultation on tackling the abuse of zero hours contracts. This is to ensure that workers are getting a fair deal. Details of the consultation and its launch date will be confirmed later in the year. There are 4 key areas of concern:

  • Exclusivity
  • Lack of transparency
  • Uncertainty of earnings; and
  • The balance of power in the employment relationship.

Many workers however rely on zero hour contracts which fit in with their lifestyle and the banning of these contracts would not necessarily be in their best interests.

12. TUPE

- Agreement mirroring transferor's terms applied indefinitely

Visteon Engineering Services Ltd v Oliphant and others UKEAT/0010/13

The EAT held in this case that a mirrored terms agreement entered into prior to a TUPE transfer between the transferor and its Works Council, which stated that for the duration of their employment, terms and conditions of existing Ford employees who transferred to Newco would mirror Ford conditions including discretionary pension payment increases, was not limited in time and therefore it entitled the transferring employees to parity with the transferor's employees for their working lifetime including in relation to pay increases.

The fact that the agreement provided that the collective bargaining arrangements would continue for 6 years after the transfer after which Newco would be required to establish its own collective bargaining arrangements did not affect the duration of the obligation to mirror the pay of the transferor's employees. That entitlement was incorporated into the transferring employees' contracts and entitled them to protection. Claims were brought when Visteon refused to honour a 3 year pay agreement which Ford reached in 2008.

The onerous consequences of this agreement for Visteon were not sufficient to justify a different interpretation This decision seriously impedes Visteon's contractual freedom and adversely affects its ability to conduct its business but this case was heard prior to the ECJ's Judgment being released in the Alemo-Herron case.

In Alemo-Herron v Parkwood Leisure (see Bulletin issue 60) the ECJ held that as Parkwood was unable to participate in the national joint council negotiations it could not therefore assert its interests effectively under the Charter of Fundamental Rights of the EU which provides that an employer must have the right to conduct its business and assert its interests effectively in the contractual process to which it is party. Therefore the "static" approach to the transferred terms was the cornerstone.

Visteon, on the other hand, had freely bound itself to pay a particular rate of pay after the transfer and it was a case of pure contractual interpretation. It is not known if Visteon will now appeal.

Key point: Employers must review carefully TUPE'd terms which are not limited in time during due diligence.

- Service provision changeover

Lorne Stewart plc v Hyde, Carillion & Ors [2013] UKEAT/0408/12

Carillion had a contract with Cornwall Council under which it provided services in connection with the Council's boiler installations and ancillary equipment. Mr Hyde and a colleague were employed by Carillion and worked mostly on the Council's heating and boiler installations. In April 2011 the contract with the Council and Carillion came to an end and was replaced by a contract between the Council and Lorne. A number of Carillion's employees transferred to Lorne but in respect of Mr Hyde and his colleague Lorne disputed that their employment had transferred and when they turned up for duty they were turned away.

It was common ground that they had both been unfairly dismissed but Carillion and Lorne each asserted that the other had dismissed them. The employment Judge held that they had transferred and Lorne had unfairly dismissed them. Its appeal was unsuccessful. Both employees had been engaged in activities which had been carried on by Carillion for the Council before the transfer and which were intending to be or would be, when the need arose, carried out instead by Lorne. Once those findings had been made the existence of an organised group of employees which had as its purpose the carrying out of activities the dispute was resolved in favour of Carillion. The fact that there had been no work for those employees going on at the time of the transfer and none was guaranteed was irrelevant.

Key point: It is always essential to consider whether in practice or on the facts there is a service provision change. The fact that the type of work was not guaranteed under the new contract may not mean that relevant employees are outside the scope of the transfer. The case provides helpful guidance for employers when considering whether a particular employee should transfer under the SPC provisions of TUPE, by not simply focusing on the contract terms.

13. Managing Sickness Absence

HMRC v Whiteley UKEAT/0581/12/MC

HMRC issued a warning to Ms Whiteley when her absence for her asthma ailment exceeded the 10 day threshold under its sickness absence policy by 5 days. Mrs Whiteley then brought a claim against HMRC claiming it had failed to make reasonable adjustments to its policy given that as an asthmatic she would be more prone to greater sickness absence due to her chest infections.

The Tribunal agreed on the medical evidence and held that HMRC had failed to make reasonable adjustments to its policy. On appeal the EAT agreed with HMRC and the case was remitted to a different Tribunal to be heard afresh. The EAT accepted that it is possible that someone with a disability could still be absent for so long a period that he or she cannot perform his or her duties and therefore has to be dismissed if he or she cannot be redeployed in a role where his or her attendance levels would be acceptable. The alternative is for an employer to proceed knowing what adjustments should be made for disabled employees who may require more time off than others and how to analyse precisely what time off was attributable to the disability and what was not.

Key point: A sickness absence policy amounts to a provision criterion or practice and therefore the strict application of the policy will potentially amount to disability discrimination unless there are reasonable adjustments which will always be fact sensitive.

14. Constructive dismissal

Wright v North Ayrshire Council [2013] UKEAT0017/13

Mrs Wright was employed as a care home assistant from December 2003 until her resignation in November 2010. She had raised 3 grievances when her employer had not reorganised her working pattern to enable her to cope with her sudden difficult personal circumstances. The Tribunal was satisfied that she had been treated very badly throughout by management but that she had resigned because of her own personal circumstances and not because her grievances had not been properly answered. Accordingly, she had not been constructively dismissed. On appeal, the EAT held that to answer the question of what was the effective cause of her resignation the proper approach was whether the employee accepted her employer's repudiation by treating the contract of employment as at an end. That is whether her employer's contractual breaches were serious enough to amount to a repudiatory breach which played a part in the dismissal. The case was remitted to the same tribunal for it to determine whether the Council's repudiatory breaches played such a part.

Key point: The breach must be an effective cause of resignation, not the effective cause.

15. Forced dismissal of HIV positive employee was a breach of human rights

IB v Greece

The European Court of Human Rights found there was a breach of Article 8 and Article 14, the right to a private life and prohibition on discrimination respectively, where an HIV positive employee was dismissed in response to pressure from his colleagues. IB was employed by a jewellery manufacturer. In 2005 he told 3 of his colleagues that he thought he had contracted HIV which he had. IB was eventually dismissed by his employer for ill health to appease his colleagues and to allow the Company's smooth functioning. Although the Court had to carefully balance the employer's interests against the need to protect the employee as the weaker party and held that the dismissal was not wrongful. The Court had accepted the employees' subjective and erroneous perception of what was required for a harmonious working environement.

IB appealed to the European Court of Human Rights. It held that IB had suffered a breach of his Article 8 and 14 rights and he was awarded €15,339 for pecuniary and non-pecuniary damage. His employer's interests had not outweighed his and the Court had not stuck the right balance.

16. Breach of the contractual duty of fidelity

Thomson Ecology Ltd and another v APEM Ltd and others HC13A00219

Mr Hall was a biologist at Unicomarine. He did not have a formal contract of employment nor any post termination restrictions. When he resigned in November 2012, he was placed on garden leave by TEL, Unicomarine's parent company. TEL and Unicomarine brought claims against Mr Hall when he started work for a competitor of Unicomarine, APEM in January 2013. After he joined APEM, 17 biologists left Unicomarine for APEM and it was apparent that Mr Hall had been planning to transplant Unicomarine's business to his new employer.

TEL and Unicomarine brought claims against Mr Hall for breach of his contractual duty of fidelity – a duty owed by all employees to serve their employer with good faith. Based on admissions made in his defence, Unicomarine and TEL applied for summary judgment and the delivery up of computers and other devices which contained confidential information. The Court found that Mr Hall had no reasonable prospect of successfully defending the claim that he broke his duty of fidelity during his employment. He should have reported the threat to the business of the employees' plans. Summary judgment was therefore granted because if the parties had to wait to the trial for a judgment it would be too late to have any commercial effect.

TEL and Unicomarine had sought an injunction to require access to computers, devices and email accounts by which Mr Hall had sent or copied their information, but the High Court found this injunction was too "broad brush", it was merely a fishing expedition for evidence and as such it was impermissible and refused.

Although preparing to compete is generally lawful provided it is carried out in the employee's own time, the case shows how useful implied terms can be in protecting an employer's business, especially where employees are engaged in competitive activity during their employment. Mr Hall clearly overstepped the line by not only encouraging but facilitating his colleagues to join him in leaving their employer and engaging in competition. The question of whether he had broken his fiduciary duty was held over to trial.

Key point: Protecting a business from competition without imposing adequate and clear restrictive covenants on senior staff well before they depart will remain very difficult.

17. Striking out claim due to ill health

Riley v Crown Prosecution Service [2013] EWCA Civ 951

Mrs Riley, a senior Crown Prosecutor was dismissed in September 2010 for misconduct for making false allegations against her colleagues. She submitted four claims in the Employment Tribunal which were listed for a full week's hearing commencing in May 2011. A few days before the hearing commenced in May 2011 the tribunal was informed that she was unable to attend because of ill health. Her doctor provided a report which said she was mentally and physically unfit at the present time to attend the court hearing. The Respondent's medical expert also prepared a report in which it agreed with her doctor's assessment that her depression was disabling her from moving on and that she felt stuck until she received justice. He concluded that her recovery would be unlikely until after she received justice.

The employment judge considered not only the request for an adjournment but if Mrs Riley would not be fit to attend the hearing in 12 months' time and on the balance of probabilities not before the end of 2 years whether the claims would be struck out. Since there was no prognosis of when, if ever, she would be well enough to take part in the proceedings the judge concluded a fair trial was not possible and struck out her claims.

On appeal to the EAT Mrs Riley was unsuccessful. Two medical experts had agreed that even after 2 years she would not be well enough to participate in the hearing. The overriding objective requires tribunals to deals with cases justly and expeditiously. The tribunal has to balance fairness between the parties, determine disputes promptly and allow other litigants to have their cases heard. If the doctors could not provide any realistic prognosis of sufficient improvement within a reasonable time striking out must remain an available but rare option and the right one in the circumstances of this case.

Key point: The right to a fair trial has to apply to both parties and the Tribunal must balance the fairness to both.

18. Data breaches

- 24hr deadline for notification

New rules requiring the notification of personal data breaches within 24 hours came into force on 25 August 2013. Providers have a duty to notify the relevant competent national authority no later than 24hrs after the breach is detected. In the UK this is the Information Commissioner's Office. Guidance on the new rules has been published on the ICO website.

The ICO can impose fines of £1,000 for failure to comply with the breach of notifications.

- Damages for breach of Data Protection Act 1998

Halliday v Creation Consumer Finance Limited [2013] EWCA Civ 333

Mr Halliday was awarded £750 for distress by the Court of Appeal in his action under the Data Protection Act 1998.

The credit company Creation had wrongly notified a credit reference agency that Mr Halliday had a sum owing to them without an authorised credit limit. This was in breach of the Act and an earlier order of the County Court. As he had not suffered any direct financial loss he was awarded only nominal damages of £1. The breach arose from a mechanical error and did not lead to loss of credit or reputation even though there was an incorrect entry on his credit record. However, he was also entitled to compensation for distress.

Key point: Whilst the sum may be modest the case shows that a successful remedy for distress can be pursued.

19. Gross misconduct dismissals

Brito-Babapulle v Ealing Hospital NHS Trust UKEAT/0358/12

Ms Brito-Babapulle was a hospital consultant. While she was on sick leave for intermittent ill health from Ealing Hospital she was treating her private patients. The disciplinary panel decided that her actions constituted fraud and she was dismissed for gross misconduct. Her unfair dismissal claim was unsuccessful. She appealed, arguing that the Tribunal had failed to give any consideration to her mitigating factors.

The EAT allowed her appeal remitting the case for the Tribunal to consider whether dismissing her for gross misconduct fell within the range of reasonable responses open to Ealing Hospital. The Tribunal should have had regard to whether her long experience and the consequences of dismissal having had a previously unblemished record might have played a part in the decision to dismiss. So although the misconduct was gross and dismissal almost inevitable mitigating factors might mean that the dismissal was not reasonable.

Key point: It is necessary for an employer to consider whether there are any extenuating circumstances that would render summary dismissal an unreasonable sanction in a gross misconduct case.

Carmelli Bakeries Ltd v Benali UKEAT/0616/12

Carmelli Bakeries was ordered to pay Mr Benali compensation of £35,567 for unfair dismissal including a year's loss of earnings and a further £14,000 for injury to feelings for victimisation. Carmelli was a family run bakery licensed to sell kosher food. Mr Benali worked for them as a pastry chef. He brought proceedings for disability discrimination over a dispute concerning adjustments to his duties following a long absence due to sciatica. Although those proceedings were settled he continued to make requests for adjustments. In June 2011, an issue arose about the use of jam bought from Tesco which was not kosher. He was dismissed without Carmelli investigating his defence.

He claimed that he had sent the cleaner to buy it, and one of the owners had authorised it. On appeal by Carmelli it was held the Tribunal should have considered a reduction to the unfair dismissal award for contributory conduct and the case was remitted for that purpose. It was open to the Tribunal to conclude that the dismissal was an act of victimisation. In this case Carmelli was caught out by their failure to carry out any proper investigation. The Tribunal had concluded that the main reason behind the dismissal was because he was a troublesome employee and had brought a disability discrimination claim i.e. victimisation and not because he had introduced non-kosher jam onto the premises.

Key point: Failure to investigate and document properly the reasons for a dismissal will inevitably lead to difficulties in establishing sufficient evidence before a Tribunal to result in a fair dismissal finding.

20. Termination by mutual agreement can be a dismissal

Francis v Pertemps Recruitment Partnership Ltd UK EATS/0003/13/B1

Mr Francis worked for Pertemps, a recruitment business. His employment contract specified that he would work for one particular client. When his services were no longer required by the client, Pertemps offered him either two weeks' notice pay and they would look for another position for him or he would be given notice pay and redundancy. He appealed his dismissal but his termination was confirmed and he then brought a claim for unfair dismissal. The Tribunal rejected his claim finding that the parties had mutually terminated the contract and there was no dismissal. He had ultimately chosen to terminate his employment by choosing the redundancy payment route. He appealed and the EAT upheld his appeal. Pertemps intended his dismissal and it had been without Mr Francis' consent. The case was remitted to a different Tribunal with a recommendation that the parties consider mediation. There was no suggestion by either party of frustration of the contract.

Key point: Tribunals are generally reluctant to find there has been a mutual termination and therefore no dismissal unless there is clear evidence of the employee having a proper choice.

21. Token payment in lieu of statutory holiday leave not permissible

Podlasiak v Edinburgh Woollen Mill Ltd ET/2701291/13

The Working Time Regulations 1998 entitle workers to 4 weeks' paid annual leave and where on termination some of that leave is untaken the worker is entitled to a payment in lieu. Regulation 14(3) allows this payment to be as provided for in a relevant agreement or the amount the worker should normally be entitled to as paid leave. On a literal reading of Regulation 14(3) it is permissible for a relevant agreement which in this case was Ms Podlasiak's employment contract, to provide for a token payment for untaken leave.

Ms Podlasiak was employed on a zero hours contract which provided that on termination she would be paid £1 in lieu of any untaken holiday. When she left her employment she had 3 days untaken leave for which she could have been paid £176 net but she was not. The Tribunal considered that Regulation 14(3) is to be construed in accordance with the EU law which requires payments in lieu of untaken holiday to be made which put the worker in a comparable position as if she had taken holiday during her employment. On this basis the Tribunal found that the token payment of £1 in lieu was impermissible under the Regulations. Ms Podlasiak's employer was ordered to pay her £176 in lieu.

Key point: This is a first instance decision and therefore is not binding on other courts or Tribunals. However, until decided otherwise by a higher Court employers should consider paying employees the same rate for untaken statutory holiday at termination as would equate to the payment they would have received if they had taken the holiday whilst still employed.

22. Age discrimination

- Redundancy because of age

Shiret v Credit Suisse Securities (Europe) Ltd ET 3202676/11

Mr Shiret was 54 when he was considered for redundancy. In the redundancy scoring he received a 4 and a 5 for skills and competencies and experience but only a 1 for performance and potential. There was no evidence to support these low scores. His employer decided before this that Mr Shiret should be dismissed when his colleague threatened to resign in February 2011. After 3 consultation meetings Mr Shiret was made redundant in May 2011. Mr Shiret complained of direct and indirect age discrimination and unfair dismissal.

The Tribunal held that it had seen sufficient material from which it could infer that the reason Credit Suisse had dismissed him was his age. He was significantly older than the other employees in the pool, being the only employee over 50 and it had failed to provide a non-discriminatory explanation for his dismissal. The Tribunal upheld his unfair dismissal claim as Credit Suisse had decided to dismiss him before the consultation process had even started. His compensation was nevertheless reduced by 30% to reflect the possibility that had a fair procedure been followed there was a chance he would have been dismissed in any event.

Key point: This is a rare case were there was ample email evidence of the inference of direct age discrimination and his less favourable treatment because of his age. When an employer cannot provide a non-discriminatory explanation for a dismissal the defence will be doomed unless by way of example direct age discrimination can be objectively justified.

- PHI benefits ceasing at 55

Whitham v Capita Insurance Services Case No 2506448/12

Mr Whitham had been in receipts of PHI benefits from Capita under a scheme arranged between Capita and its insurance provider McLaren UNUM. Payment stopped when he turned 55. Mr Whitham had not been able to join a more favourable Capita PHI scheme which would have entitled him to receive PHI payments until he turned 65 as he was entitled to, in 2002, because he was not actively at work at the time and therefore not eligible. Once UNUM ceased to indemnify Capita it did not pay Mr Whitham on the grounds of cost.

On the facts he was entitled to a contractual right to receive his PHI payments until the age of 65. Capita could not rely on its discretionary right to vary clause to reinstate the provision that benefits would cease on him reaching 55 on the grounds of his ineligibility, as he was already in receipt of benefits. The Tribunal held that Capita had discriminated against him because of age and this could not be objectively justified. The "activity of work" criterion was a PCP and he had suffered indirect age discrimination as employees over a certain age were put at a particular disadvantage by this and it could not be objectively justified. The variation was also unenforceable by reason of section 142 of the Equality Act 2010.

Key point: Although this is only a first instance Tribunal case and not binding it is a useful reminder about insurance benefits and cover and how they may be discriminatory due to age limits.

- Shambolic redundancy scoring not age discrimination

Osoba v Hertfordshire Police [2013] UK EAT/0055/13

On a staff reorganisation the officer responsible for the creation of the points based matrix to determine which employees would be dismissed had made such a mess of it that the Tribunal described it as "at its best inconsistent, shambolic in places and lacking in competence". However, it held that the officer's actions were not discriminatory. The Tribunal accepted her explanations as an honest attempt to be fair in scoring the employees. The Tribunal did not accept the Claimant's case that it had been manipulated as he was due to retire. There was no unconscious discrimination and nothing discriminatory could be inferred by Mr Osoba being asked whether he had made a firm decision in respect of his retirement as he was bumping on the ceiling of retirement.

The Claimant appealed his unsuccessful age discrimination claim but to no avail.

- Pay protection scheme discriminatory of the over 65s

Dansk Jurist– og Okonomforbund v Indenrigs- og Sundhedsministeriet [2013] EUECJ C-546/11

The ECJ in this Danish case ruled that a law which excluded civil servants over the age of 65 from a generous pay protection scheme after being made redundant could not be objectively justified on the basis that those individuals would become eligible to draw a pension at that age so were in less need of such protection. At 65 Danish civil servants are entitled to draw their civil service pension although they are not obliged to retire until they are 70. They can also defer drawing their pension until 70. Mr Toftgoard was dismissed in 2006 when his role had become redundant. At the time he was 65 and because he was not available for special pay he brought a claim that this was age discriminatory. The ECJ agreed and held the practice was contrary to Article 6 of the Equal Treatment Framework.

Key point: The availability of alternative income at a particular age does not necessarily mean that that age can be justified as a "cut-off point".

- Enhanced redundancy payment

Lockwood v DWP 2013 EWCA Civ 1995

Ms Lockwood commenced employment with the DWP at 18. In 2007 when she was 26 her position was declared surplus and in accordance with the Civil Service compensation scheme for redundancy she was entitled to a payment of approximately £10,900. However, had she been over 35 at the time of leaving with the identical length of service, she would have received a further sum of £17,700 under the same rules. She brought a claim for age discrimination.

The Tribunal rejected her claim as did the EAT and the Court of Appeal. Although she had been treated less favourably than any comparator over the age of 35 there had been an objective justification for that treatment. The legitimate aim of the scheme was to produce a financial cushion until alternative employment was found or to act as a bridge to retirement and the receipt of a pension. The means of doing this by way of staged payments in a banding process was a proportionate means of achieving that aim. So although she was paid substantially less money than someone whose position was identical – age apart – her claim was unsuccessful. The Court of Appeal accepted that the disparate treatment was a proportionate means of achieving the aim under the scheme and the employer had a limited pot of money from which DWP could meet the differing needs of former employees at different ages even though this involved disparate treatment between employees.

Key point: Enhanced redundancy payments for older workers did not constitute age discrimination on the facts.

23. Maternity leave

- Surrogacy

Z v A Government Department and the Board of Management of a Community School C-363/12

In the Advocate General's opinion an intended mother who has her genetic child via a surrogacy arrangement does not have the right to maternity leave under the Pregnant Workers Directive. It was also not sex discrimination under the Equal Treatment Directive for an intended mother's employer to deny her the right to paid leave on her child's birth.

Z's employer offered her only unpaid leave. Although her contract set out a right to maternity leave and adoption leave, there was no provision about the birth of a child via a surrogacy arrangement. Nor had she been subjected to disability discrimination as her medical condition which prevented her from supporting a pregnancy did not amount to a disability as it did not hinder her participation in a professional life.

CD v STC – 167/12

On the same day as the opinion provided on the above case another Advocate General in a similar matter took the contrary view. An intended mother who has a baby via a surrogacy arrangement does have the right to maternity leave under the Pregnant Workers Directive. Such leave would be shared between the intended and surrogate mothers.

The mother in this case was allowed maternity leave not less than the compulsory leave period of 2 weeks. However a surrogacy arrangement cannot result in the doubling of the maternity leave entitlement arising from a child's birth. Therefore the leave taken by the surrogate mother must be deducted from that of the intended mother and vice versa. CD's employer offered her support by means of a career break, annual leave, reduced hours and unpaid leave.

The Advocate General stated that the principal of 14 weeks' continuous maternity leave that a mother is entitled to should be qualified in surrogacy cases. The main criteria being to protect interests under the Pregnant Workers Directive to ensure the protection of the surrogate mother before and after birth and the child's best interests.

The ECJ will have to decide which opinion, if either, it prefers.

- Shared leave

Betriu Montull v Instituto Nacional de la Seguridad Social (INSS) C-5/12

In this case the ECJ considered whether EU law precludes Spanish national legislation which provides that maternity leave cannot be shared between parents where the mother is self-employed even if the father is an employee covered by a social security scheme. The ECJ held that a self-employed mother not covered by the state social security system has no primary right to maternity leave. Therefore she has no right to share maternity leave with the employed father of the child and he has no independent right to the leave himself.

Key point: This is a Spanish case but the decision in particular interest in the UK as it is the Government's intention to introduce shared parental leave and pay in 2015. Self-employed women in the UK are eligible for up to 39 weeks' maternity allowance but also have no entitlement to maternity leave.

24. Sex discrimination

- Discrimination following rejection of a flexible working request remedied on appeal

Little v Richmond Pharmacology Ltd UKEAT/0490/12

Ms Little was a sales executive for Richmond. All sales executives were required to work full time. She went on maternity leave in September 2009 and made a flexible working application in April 2010 to return to work on a part-time basis from August 2010. In June 2010 her application was rejected on the basis it was not feasible for sales executives to work part-time. Ms Little was allowed to appeal that decision and she submitted an appeal but before the hearing she resigned. Richmond asked her to reconsider the position and she attended the appeal on 22 July. Richmond allowed the appeal and agreed to a part-time working arrangement on a 3 month trial basis to commence upon her return to work in August. Ms Little refused this offer and confirmed her resignation on 26 July.

She brought claims for constructive unfair dismissal and indirect sex discrimination but was unsuccessful. She appealed to the EAT but was again unsuccessful. It was held the Tribunal had been correct to conclude that she had not suffered a disadvantage or detriment because on appeal her part-time flexible working request had been granted. She did not suffer any disadvantage or detriment (as the PCP to work full-time would not be applied to her until she had completed her maternity leave).

Key point: The fact that she was still on maternity leave and had not returned to work were crucial in this case. Ms Little's claim for constructive dismissal was time-barred and was therefore not considered by the EAT.

25. Unless order sanctions

Richards v Manpower Services Ltd UKEAT/0014/13/LA

Miss Richards brought proceedings against her employer while she was still employed, for race discrimination, and then when she was dismissed after disciplinary proceedings against her, further proceedings for unfair dismissal, race and disability discrimination followed. At a Case Management Discussion the parties were ordered to disclose to each other all documents in their possession relevant to the issues in the case including remedy. The employer failed to comply with the order for disclosure and at a further Case Management Discussion the employer was ordered to comply by no later than 4pm on 1 June and if it failed to comply its Response would be struck out in its entirety without further consideration.

On 31 May the employer delivered 4 files of documents but the solicitor's covering letter indicated there were further documents to come and indeed two further files of documents were served on 19 July. It was not until 23 July the employer's solicitor stated they considered complete disclosure had been given.

Miss Richards believed they had not complied with the order and the Response should be struck out. Her application was heard in November, but the strike-out was refused. The EAT disagreed. It is established law that the sanction contained in a properly drafted unless order would take effect. The Tribunal had no discretion in the case of an unless order. Partial compliance was not sufficient. On their own admission the employer's solicitor had not complied with the unless order and there had been no application for relief from sanction. Accordingly, a declaration that the Response would be struck out was made.

Key point: Parties struggling to comply with case management orders should seek an extension of time on proper grounds to avoid a draconian order which could be upheld if there is no relief from sanction application.

26. Costs

Ghosh v Nokia Siemens Networks UK Ltd [2013] WL 4788841

Miss Ghosh took out an appeal against an award of costs that was made against her by the Tribunal of £5,000 following the dismissal of all her claims based on discrimination. Although she had been found to have been unfairly dismissed, the Tribunal did not consider it just and equitable to make either a basic or compensatory award to her because of the unreasonable conduct of her claims. The Tribunal took account of the Claimant's means and limited the amount she was directed to pay the Respondent £5,000 although this would be wholly inadequate in the context of reimbursing the Respondent for the costs it incurred in defending the unmeritorious claims. The case took up 9 Tribunal hearing days. The Tribunal found that her conduct in the proceedings and making unsustained allegations were capable of amounting to unreasonable conduct. The EAT agreed. Her appeal was dismissed. She had a history of employment disputes but claimed she had not made the complaints for any perverse motive. Although she honestly believed her complaints, her conduct was still unreasonable and her complaints wholly unmerited. The costs order was therefore justified.

Key point: The exercise of the costs jurisdiction is discretionary once the threshold of unreasonable conduct is crossed.

27. Disability discrimination

- Damages for psychiatric injury

Osei-Adjei v RM Education 2013 UKEAT0461/12

O had suffered from dyslexia for some time. In 2010 he applied for a job with RM and he was successful. However, by February he was finding work difficult and in May 2010 he was placed on an improvement plan. Nevertheless he felt that he was being unfairly criticised and in June 2010 he left work never to return as he was signed off with stress and depression. By February 2011 he was due back at work but he resigned before doing so claiming he had been constructively dismissed being asked to return to work before the necessary adjustments had been put in place to allow him to resume work.

The Tribunal found he had suffered an act of disability discrimination but not unfair constructive dismissal. He was awarded £4,000 for injury to feelings and £10,000 for psychiatric injury. The Tribunal were entitled to find that when he resigned it caused a break in the chain of causation in respect of any future loss of earnings as he was medically fit to return to work.

On appeal by RM the EAT held the Tribunal's award of £10,000 was excessive and so awarded O the sum of £5,000 instead. The question was then what percentage should be paid by RM for their relative contribution to the single wrongful act of failing to carry out an assessment. It was held that O should receive £2,000 or 40% of £5,000 for this psychiatric injury as RM were only partially to blame and there were other contributory causes for O's depressive symptoms after his resignation.

Key point: Resignation as opposed to dismissal from a post can break the chain of causation for future losses.

- Private medical treatment and reasonable adjustment

Croft Vets Limited v Butcher [2013] WL 5336069

Mrs Butcher worked for Croft Vets as a reception manager but her responsibilities increased over time as the business grew. She eventually went off work with depression – a disability. Her doctor recommended Croft Vets pay for her course of private treatment but he could not guarantee that she would then be well enough to return to work. Croft Vets did not arrange or pay for the treatment. Mrs Butcher resigned in 2010 and then brought a claim for disability discrimination.

The Tribunal held that Croft Vets' failure to arrange and pay for the psychiatric treatment amounted to a failure to make reasonable adjustments. The EAT agreed. Mrs Butcher's depressive illness was a disability and Croft Vets' arguments that it was outside the scope of reasonable adjustments to require an employer to fund private medical treatment and that the reasonable adjustments must be job related were rejected. The adjustments were not for private medical treatment in general but involved payment for a specific form of support to enable Mrs Butcher to return to work and cope with the difficulties she had been experiencing at work. The doctor had thought that the treatment would lead to a significant improvement in her depression and the adjustments were therefore reasonable as they would mitigate the effect of the disadvantage of not yet being able to return to work to perform the essential functions of her role.

Key point: What is a reasonable adjustment is for an employer to decide but it is not without limits. These will vary depending on the costs involved and the size and resources of the employer.

28. Frustration of contract

Warner v Armfield Retail & Leisure Ltd UKEAT/0376/12

Mr Warner had been employed as a site manager by Armfield. In February 2010 after 5 years' service he suffered a severe stroke. He was paid in full until the end of May and managers kept in touch with him by telephone but he never returned to work and the parties lost contact. In January 2011 Armfield wrote to Mr Warner confirming the end of his employment enclosing his P45 and a cheque for accrued holiday pay. Mr Warner then brought claims for unfair dismissal, breach of contract and disability discrimination.

The Tribunal upheld Armfield's argument that Mr Warner's contract was frustrated. However, Armfield accepted that Mr Warner had been dismissed for the purpose of his disability discrimination claim. The Tribunal found that Armfield had not discriminated against Mr Warner. On appeal by Mr Warner his submissions in support of his discrimination claim were remitted to the Tribunal for consideration namely:

  • Whether Armfield's failure to carry out a capability procedure or enquiry before dismissing him was because of his disability?
  • If so did this amount to unfavourable treatment?
  • If there was unfavourable treatment was it justified?

29. Grievance

Blackburn v Aldi Stores Ltd UKEAT 0185/12

Mr Blackburn was employed by Aldi as an LGV driver. In June 2009 he presented a grievance in which he raised issues about health and safety and his treatment by the deputy transport manager. His grievance was dealt with and partially upheld by the regional manager, H. Mr Blackburn wanted to appeal the decision but despite the procedure allowing for the appeal to be held by the next level of manager H dealt with the appeal himself in a meeting that lasted no more than 20 minutes. He rejected Mr Blackburn's appeal and Mr Blackburn then resigned. He claimed unfair constructive dismissal relying on the breach of the implied term trust and confidence that he was effectively denied a proper appeal.

The Tribunal held that there was no constructive dismissal. Aldi's alleged failure to allow anyone other than H to hear Mr Blackburn's appeal was not in breach of contract. The EAT disagreed. The right to an appeal in respect of a grievance was important both as a feature of Aldi's own grievance procedure and the ACAS Code of Practice on disciplinary and grievance procedures. An appeal should be dealt with impartially and wherever possible by a manager who has not previously been involved in the case. The case was remitted for the Tribunal to hear afresh.

Key point: A failure to adhere to a grievance procedure is capable of amounting or contributing to a breach of the implied term of trust and confidence as defined by the Malik v BCCI case.

30. Trade union certification

Akinosun v The Certification Officer

The EAT in this case upheld the finding of the Certification Officer that the General and Health Workers Union whose purpose included representing employees at internal disciplinary hearings was not a trade union. To meet the definition of a trade union as set out in section 1 of TULRCA 1992 the EAT held that there were three points of construction relevant to that definition:

  • Whether the organisation's principal purposes include the regulation of relations between workers and employers or employers association.
  • Whether the principal purpose of the organisation was collective in nature. In this case providing representation at internal disciplinary hearings would not by that reason alone mean the union was a trade union; and
  • Whether an organisation is a trade union is a question framed in the present tense, not one which looks to what it will be at some future date.

31. Health and safety at work

- Protecting employees from violent crime

Nicholls v Ladbrokes Betting & Gaming Ltd [2013] EWCA Civ 1963

The use of a magnetic door lock after dark was left to the discretion of the betting shop manager, Ms Nicholls. One evening two robbers entered the shop and the safe was robbed. After the incident the employee suffered psychiatric injury and she brought a case against Ladbrokes alleging negligence and breach of statutory duty. In particular she alleged that the company was negligent in failing to keep the front door locked by operating a magnetic lock. At the trial the judge concluded that Ladbrokes had failed to carry out a risk assessment of the shop amongst other things and had it so complied with its duties the robbery would probably not have occurred.

Ladbrokes appealed. The appeal was upheld. It was not a breach of duty to leave the use of the magnetic lock after dark at the premises to the discretion of the manager. The shop was situated within an area with a low crime rate, had no known specific threat and no history of violent incidents.

32. Vicarious liability

Vaickuviene and ors v J Sainsbury plc [2013] CSIH67

Sainsbury's were held not to be vicariously liable for the murder of one of their employees by another.

Simply because the individuals concerned were engaged in the same workplace did not make their employer vicariously liable as the murderous act was not so closely connected with their employment.

The murdered man's family (represented by Vaickuviene) commenced proceedings against Sainsbury's in the civil court under the Protection from Harassment Act 1997 on the basis that the co-employee's – M - conduct in stabbing R to death could properly be regarded as an extreme form of harassment for which Sainsbury's should be vicariously liable. Sainsbury's application for the claim to be dismissed failed and the case proceeded to a full hearing.

The Court of Session dismissed the claim finding it was not just and reasonable to hold R's employers vicariously liable for all acts of harassment solely on the basis that employees R and M were engaged to work together. The fact that the harassment of R by M was racially motivated did not justify the imposition of a more generous interpretation of the test for vicarious liability. Neither Sainsbury's retail business in general nor their engagement of persons to stack supermarket shelves and supermarkets in particular carried any special or additional risk that persons so engaged such as M or R would be either harassed or otherwise come to harm as a result of the deliberate and violent actions of co-employees. The fact that M was known to be violent to immigrant workers was irrelevant to the issue of vicarious liability.

Key point: It is primarily a matter for Parliament to decide whether to impose strict liability for all or particular categories of acts of harassment in the workplace which it has not done as yet. The relevant question should be whether on the facts it could be said there is such a close connection between the fatal assault by and the duties which the employer employed X to perform that it would be fair and just to hold the employer as X's employer vicariously liable.

33. UK challenges EU bonus cap

The UK Government has lodged a legal challenge to the banking sector bonus cap contained in the Capital Requirements Directive IV with the European Court of Justice. It is estimated that bonuses in 2013 were over 60% lower than in 2011/2012 and over 85% lower than in 2007/2008. The bonus cap will apply from 2014, if unsuccessfully challenged.

And finally...

34. Best practice for internships

There is a new guide published by the TUC in partnership with the Gateways to the Professions Collaborative Forum on common best practice for high quality internships.

This provides employers with guidance on the 6 core elements of best practice compromising:

  • Preparation
  • Recruitment
  • Induction
  • Treatment
  • Supervision and mentoring
  • Certification, reference and feedback

It is applicable to all organisations so that they and their interns can gain the maximum benefit from the internship experience.

The guide is available here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

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