Welcome to the latest issue of the Steptoe Employment Law Update.

The Employment Law Updates are aimed at providing snapshot information on recent developments in UK employment law and also a brief practical insight in managing workplace issues on a proactive basis.

1. Coming into force

  • Changes to whistleblowing laws come into effect on 25 June 2013. There will be a requirement that the disclosure must in the Claimant worker’s reasonable belief to be in the public interest. There will no longer be the need for the disclosure to be made “in good faith”. Instead Tribunals will have the power to reduce any compensation awarded by up to 25% if the disclosure was not made in good faith. Employers will also be vicariously liable if their employees victimise a whistleblowing colleague subject to their statutory defence of having taken all reasonable steps to prevent the detrimental treatment. However, this provision is not yet in force.

  • The two year qualifying period for claiming unfair dismissal where the main reason for dismissal is the employee’s political opinions or affiliations will also be removed with effect from 25 June 2013, for all terminations effective after that date.

Following the Enterprise & Regulatory Reform Act 2013 receiving Royal Assent on 25 April 2013, commencement dates are still awaited for confidential termination negotiations and caps on the compensatory award, which are expected to be in place in late Summer 2013.

2. Tax residency rules

The new Statutory Residence Test rules apply from 5 April 2013. Employers of mobile employees should familiarise themselves with the new tests.

3. Collective consultation

With effect from 6 April 2013 the minimum consultation period where an employer proposes 100 or more redundancies with 90 days fell from 90 to 45 days.

The minimum period of notice which should be given to the Secretary of State on Form HR1 before the first redundancies take place has also been reduced from 90 days to 45 days.

Employers are also reminded that the fixed term contracts which will expire naturally on the planned termination dates will not be included in assessing whether or not collective consultation is required. However where fixed term contracts are coming to an end prematurely because of a redundancy situation, then the fixed term employees will count towards the threshold for collective consultation.

4. Statutory sick pay, maternity pay

After 6 April 2013 the weekly rate of statutory sick pay is £86.70 and after 7 April 2013 the prescribed weekly rate of statutory maternity pay, paternity pay and adoption pay is £136.78.

5. Employment Tribunal fees

The Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 will come into effect on 29 July 2013. Only claims made to the Employment Tribunal on or after that date will attract fees. Fees will be payable when a claim is presented to an Employment Tribunal and following notification of listing for the final hearing. Employers should note they may be liable for fees where there is an application for a dismissal of an action following a withdrawal of £60 or where there is a counterclaim as part of the response to an employee’s contract claim of £160.

6. Traineeship programme

The Government has published details of a new programme which will allow 16-19 year olds to undertake work placements. This will begin in August 2013 with each traineeship lasting up to 6 months. Employers will lead delivery of the programme. The traineeships will conclude with a guaranteed interview with the work placement host either for a position or a reference to develop the trainee’s CV.

7. Employee shareholders

The new employee shareholders employment status will be implemented in Autumn 2013. There are a number of administration hurdles to be overcome by an employer and it remains to be seen how many will seek to persuade any employees to take on this new status. An agreement that someone will become an employee shareholder will be invalid unless prior to entering into the contract the individual has received advice from an independent advisor, for which the employer has to pay the reasonable costs, whether or not the employee then accepts the role. If the employee does not receive independent advice about agreeing to become an employee shareholder then he or she would be an ordinary employee. There will also be a 7 day cooling off period during which an employee can withdraw their acceptance of the contract if they change their mind.

8. Minimum wage increase

Minimum wage rates will increase with effect from 1 October 2013. The new rates are as follows:

Standard rate £6.31 an hour for workers aged 21 and over. For workers aged between 18 and 20 the new rate is £5.03 an hour. The young workers’ rate is £3.73 and the rate for apprentices will rise to £2.68 an hour.

9. Redundancy

ACAS has published new guidance on “How to handle collective redundancy”. It includes a sample selection matrix and redundancy agreement, guidance on the election of the roles and responsibilities of employee representatives. Click here for a copy of the guidance.

  • Promise to pay enhanced redundancy terms enforceable
    Allen and ors v TRW Systems Ltd, UKEAT/0083/12
    In 1999 a redundancy policy was agreed at TRWS’s plant. This was operated in 2001 and 2008 and 2009. The employee handbook referred to the policy which stated that “in the event of redundancies the redundancy policy will be implemented. A copy can be obtained from the HR department.”

    The employees’ contract referred to the handbook but not to the redundancy policy. In 2008 TRWS’s HR manager wrote to all employees giving a guarantee that the redundancy policy would remain in its place until the end of the next pay deal in December 2010. This was restated again in March 2009 but TRWS closed the plant in 2010 without making enhanced redundancy payments under the policy and a number of employees including Mr Allen brought claims for breach of contract, arguing that the redundancy policy which provided for generous severance payments was apt for incorporation as an express term of each employer’s contract or alternatively that it was incorporated by implication. The Tribunal disagreed and the Claimants appealed to the EAT. The EAT held that the handbook was capable of being a source of contractual obligation and that the Tribunal had adopted too narrow an approach. Enhanced redundancy terms are a widely accepted feature of remuneration packages and this was equally relevant when considering whether a term has been incorporated into a contract of employment by implication. The fact that the policy had been followed on previous occasions albeit differently did not help TRWS nor that they had made it clear to employees previously that it was under no contractual obligation to make the payments under the policy. The EAT remitted the case to be considered by a new tribunal.

    Key points: If policy is intended to be discretionary this should be made clear both in the policy and in any contractual terms referring to it. An employee’s statement of terms and conditions and the handbook itself should make it clear what the status of the handbook is, either contractual, enforceable or non-contractual and therefore non-enforceable.

  • Redundancy situation where replacement recruited
    Malekout v Ahmed and others (t/a The Medical Centre) UKEAT/0556/12
    M worked as a practice manager of a medical practice. He was responsible for all non-clinical administration matters. When M invited his colleagues to discuss his current employment as he had received a job offer, the partners were anxious not to be left without a practice manager and therefore hired K to assume responsibility for some of M’s duties. The partners then told M that it would be in his interests if his employment ended. During a period when M was on sick leave before he left, the practice undertook a restructure. M was dismissed for redundancy two weeks later.

    Unsurprisingly M brought several claims including age discrimination, that he had been dismissed because of protective disclosures and that he had not been dismissed for redundancy. His claims failed but the Tribunal then went on to consider whether his dismissal was due to redundancy. The Tribunal found that at the time he was dismissed the practice had two managers, M and K and as it only needed one in the future there was a diminishing requirement. So his dismissal was for redundancy. There was however no genuine redundancy consultation and he had been unfairly dismissed. The Tribunal then went on to decide that as it was inevitable that his shortcomings would have been exposed at some stage, his compensation should be reduced by 100% due to the inevitability of his termination in any event.

    The EAT dismissed his appeal at a preliminary hearing. It held that when the practice found it had two people in the post for effectively one job and there was only the need for one, this was a diminution in the requirement for employees to carry out the work of a particular kind and it was therefore a redundancy situation reality. The EAT also upheld the Tribunal’s decision to reduce M’s compensation by 100%. In reality this was a capability situation but the practice had engineered its own redundancy scenario to dismiss M who was a poor performer.

    Key point: Employers should not rely on this case in similar circumstances without more in the hope of achieving the same result.

  • Appropriate representatives
    Kelly and another v Hesley Group Ltd UKEAT0339/12
    Hesley employed 300 staff and wanted to change their contracts. The majority of the workforce accepted the new terms by January 2011. However 32 had not. It was apparent that jobs might be lost if employees did not agree the changes. Hesley advised the employees that it would enter into collective consultation in respect of its proposals to terminate their contracts and offer them re-engagement on new terms. There was no trade union recognised for collective consultation and purposes and Hesley chose to consult with employee members of an existing joint consultative committee. However, that committee did not have a negotiating function.

    Two employees brought claims disputing the adequacy of Hesley’s consultation process. These claims were rejected. On appeal the EAT agreed with their appeal concerning the appropriate representatives and the extent of the consultation. It held that the Tribunal had failed to consider adequately the key question of whether the representatives had authority from the affected employees to be consulted about the proposed dismissals.

    Key point: The collective consultation rules must be followed strictly. It is not enough to provide an opportunity for consultation or ways to avoid dismissals. Employers should be careful in simply consulting with any existing body rather than going through the proper election process for appropriate representatives.

  • Failure to provide information about agency workers
    Unison v Capita Business Services Ltd
    The Tribunal in this case found that Capita was in breach of its obligations during a collective redundancy consultation exercise when it failed to provide Unison with information about its agency workers. Even though Capita had complied with other collective consultation obligations it was ordered to make a protective award of 45 days’ pay to each of the 36 employees who were made redundant. Capita had been asked by Union to provide information about all the agency workers employed in the organisation, not just at the call centre which was to be transferred. Capita did not provide the required information and it tried to justify this omission by alleging that it would have been extremely difficult to provide details of all the agency works across all its sites. Notwithstanding this practical issue, the Tribunal considered that Capita’s failure was indefensible. However it was not a complete failure to consult and an award of 45 days’ pay was appropriate.

    Key point: Employers cannot cherry-pick the information it will provide in a collective redundancy consultation expertise. Failure to comply with Section 188 of TULRCA 1992 will not be viewed sympathetically.

  • Tapered redundancy pay and discrimination
    Odar v Baxter Deutschland GmbH, ECJ 61212(c152/11)
    This was a German case where the European Court of Justice held that a compensation scheme operated by the German employer which applied a special formula to taper the redundancy pay for employees over the age of 54 was not age discriminatory. However, the scheme was indirectly discriminatory on the grounds of disability since severely disabled workers who were eligible under German law for a pension earlier than other workers received less redundancy compensation including O. Had O not been severely disabled the ECJ held that he would have been entitled to receive €570,839.47 in compensation on termination. Instead he had been paid €308,253. The three year pension advantage offered to O as a disabled worker did not justify the reduction in compensation and could not be objectively justified.

    Key point: Although the case involved a non-UK employer the court’s reasoning on objective justification will be relevant when considering similar UK redundancy schemes if they are discriminatory they will have to be justified.

10. Collective consultation by insolvent companies

AEI Cables Ltd v GMC and others UKEAT/0375/12
The EAT in this case held that it was not reasonable to expect an insolvent employer to continue to trade for 90 days so that it could inform and consult with its employees in accordance with its obligation under Section 188 TULRCA 1992.

The Company had had advice that it risked trading while insolvent. So following an unsuccessful request for an overdraft the directors made 124 employees redundant with immediate effect. The workers successfully claimed there had been a breach of duty to consult under Section 188 and the Tribunal awarded 90 day protective awards to each employee.

The Company successfully appealed the decision and 60 days’ pay was substituted instead of 90 days. The question for a Tribunal was why the employer had acted as it did. Had it asked that question it would have seen that the Company could not have traded lawfully for 90 days. It was therefore wrong for the Tribunal to anticipate that a 90 day consultation could have taken place.

Although the failure to consult was complete, the EAT agreed that some consultation could have taken place in the limited time available and the EAT decided that an award of 60 days’ pay was appropriate. The purpose of making a protective award is penal not compensatory and it is designed to encourage employers to comply with their obligation to consult.

Key points: Tribunals will always regard an employer’s default in consulting the workforce on redundancy as serious. Employers will need to react quickly to avoid the consequences of insolvency but must be prepared for an award being made. If it is unable to consult or provide the information within a meaningful period it should pull out all the stops to do what it can to provide information as best that it can.

11. Union recognition

Pharmacists’ Defence Association Union v Boots Management Services Ltd TUR 1-823/2012 (CAC)
In January 2012 the trade union PDA applied to the CAC for recognition for collective bargaining purposes by Boots. Boots argued that CAC should not accept the application as it already had an established relationship with another union BPA. However that arrangement specifically excluded bargaining rights in respect of pay hours, holidays, working conditions and terms and conditions of employment.

Boots codified its relationship with BPA in March 2012. The CAC held that PDA’s application was not inadmissible, as there was not already in force a collective agreement under which BPA was recognised and entitled to conduct full collective bargaining. There was an overlap between the 2 unions for collective bargaining in respect of facilities for officials, trade unions and machinery for negotiation or consultation. The agreement between Boots and BPA did not fall within paragraph 35 of Schedule A1 of TULRCA 1992 meaning that PDA’s recognition application could proceed. To be able to rely on paragraph 35, that an application is admissible only if there is no other trade union recognised as entitled to conduct collective bargaining, the CAC held that an employer would need to have in place a pre-existing collective agreement with a listed, although not necessarily independent, trade union which provides for collective bargaining over pay, hours and holidays. The CAC instructed its case manager to conduct a membership and support check to decide on whether the majority of the proposed bargaining unit would be likely to favour recognition of the DDA for the purpose of collective bargaining on their behalf.

Key point: By adding the wording in italics above the CAC has closed the loophole whereby employers could set up “sweetheart” arrangements with a trade union in order to close out other more traditional unions. This case is therefore potentially significant for unions seeking recognition. Employers who have reached agreement with non-independent unions for a limited degree of consultation but without engaging in any negotiations over terms of employment may not be able to resist a similar application for statutory recognition.

12. EU

  • France
    Waiver of non-compete

    Under French law an employment agreement or collective bargaining agreement may validly provide that the employer can unilaterally waive a non-compete covenant. In the absence of any specific time limits set in the employment agreement or in the collective bargaining agreement the waiver should be notified within a reasonable period of time after the notification of the dismissal – around 3 weeks. However, where an employer decides to exempt the employee from working during the whole or part of his notice period the employer should waive the non-compete clause in the termination letter.
    Source: Jeantet et Associés

  • Denmark
    HK Danmark (on behalf of Ring) v Dansk almennyttigt Boligselskab
    The Court of Justice of the European Union confirmed in this case that a condition caused by illness may amount to a disability where that results in a condition which prevents the full and effective participation of the individual in professional life. A reduction in working hours may be appropriate accommodation to make in respect of such a disabled employee.

    Mrs Ring was not able to return to full time work after she developed constant lumbar pain. Her union submitted that she had a disability and that her employer was obliged to offer her reduced working hours to accommodate her disability. This was disputed and the court held that the fact that the person concerned can work only a limited extent was not an obstacle to their state of health being covered by the concept of disability. The Directive did not specifically include reduced working hours as an accommodation that may be required. However recital 20 in the preamble to the Directive did refer to patterns of working time. It was therefore for the National Court to assess whether a reduction in working hours as an accommodation measure represented a disproportionate burden on the employer.

    Key point: Offering part time work in the UK in appropriate circumstances may well be a reasonable adjustment that an employer is required to make. However, employers should take note from this decision that an impairment which would significantly affect someone’s ability to participate in professional life due to not being able to work full time because of illness may amount to a disability even if what might be regarded as their day to day activities were not affected i.e. an impairment which affects the employee in the workplace but not at home if it is sufficiently long term. In the UK the Equality Act 2010 sets 12 months as the benchmark for “long-term”.

  • Belgium
    Application of the Flemish Decree on Use of Languages
    Anton Las v PSA Andrewp NV
    In this case the employer was based in Antwerp but was part of a multi-national group which had a registered office in Singapore. It had entered into an employment agreement drafted in English with a Dutch citizen residing in the Netherlands. The work was carried out in Belgium and the Netherlands. There are three official languages spoken in Belgium: Dutch, French and German. A Decree of the Flemish (Dutch speaking) Community of 1973 obliges employers with an established place of business in the Dutch speaking region to use Dutch in their social relations with employees. Thus all employment agreements, work rules, payslips, notice letters and other documents must be drawn up in Dutch. Documents in another language are null and void. The employer terminated the employment agreement with Mr Las and paid him the indemnities agreed on in the English employment agreement. He contended the employment agreement in English was null and void and claimed a higher indemnity in lieu of notice.

    The ECJ decided that the provision requiring employees with an established place of business in the Dutch speaking region of Belgium to draft employment agreements exclusively in Dutch under penalty of nullity infringe the free movement of workers at least where the employment agreement had a cross-border nature.

    The nullity provision went beyond what was strictly necessary to meet the objectives pursued by the Decree and less prejudicial of legislation that would not only require the use of the official language but also permit the drafting of the official version in a language known to all parties concerned will be equally appropriate for achieving the objectives pursued.

    It is recommended that employers continue to use the official language for employment agreements and other documents as the case may be, accompanied with a translation.
    Source: Liedekerke Wolters Waelbroeck Kirkpatrick

    - From 1 July 2013 Foreign Nationals from outside the EEA will not be able to hold temporary appointments (even for a few days) in the Netherlands without being sufficiently competent in the Dutch language.
    Source: FedEE

  • Croatia
    Croatia joins the EU on 1 July 2013. The Government proposes a 5 year transition agreement to restrict Croatian immigrants for work purposes.

13. Working Time Regulations and Territorial Jurisdiction

Dhunna v Creditsights Ltd 2013 WL618028
Mr Dhunna was employed as an institutional sales person between 2006 and May 2010. His place of work was in London. He wanted to live in Dubai with a business development role solely in the Middle East and Africa. He eventually moved there in October 2009.

He was asked to move to Singapore when the Dubai office was closed as there was insufficient work in Dubai and he was dismissed. The employment Judge held that the UK Tribunal had no territorial jurisdiction to hear his claims of unfair dismissal. He appealed that and his employer cross-appealed from the decision that the Tribunal had territorial jurisdiction to hear his claim for accrued holiday pay. The EAT Tribunal had to determine whether an employee of a British company who worked and lived abroad fell within the territorial scope of the Employment Rights Act 1996 post Serco and whether the connection with Great Britain and its employment law was stronger than that to the place where he performed all his work to overcome the general rule that the place of employment is decisive and sufficiently strong to bring the employee within the scope of the Act.

The connection with Great Britain and its employment law must be especially strong in the case of an employee who performs all his work and lives abroad. His appeal was allowed and the case was remitted for consideration by a freshly constituted Tribunal. However the employer was successful in its appeal that the Tribunal had jurisdiction to deal with the holiday pay claim. The Working Time Regulations 1998 extended to Great Britain only. They expressly did not apply to Dubai. The claim for accrued holiday pay was dismissed.

Key point: The test of whether when working abroad the employee is a representative of his British employer or is working in a branch office no longer of itself has the importance asserted in Serco.

14. Dismissal

  • Some Other Substantial Reason
    Handshake Ltd v Summers UKEAT/0216/12
    Mr Summers was employed as a senior manager of Handshake in 2003. He was to be offered shares on joining but these did not materialise. Instead he received a share of the net profits in cash. From 2006 onwards Handshake tried to resolve the terms for Mr Summers’ employment but the parties never reached agreement. In June 2009 his solicitors wrote to Handshake saying that he had lost all trust and confidence in his employer and referring to a potential constructive dismissal claim. Attempts to reach a settlement came to nothing and Mr Summers was dismissed on notice in August 2009. His dismissal letter referred to a breakdown in the working relationship. He later brought claims for unfair dismissal and unlawful deduction from wages which related to loss of a bonus. The Tribunal found that Mr Summers had been unfairly dismissed and that the real reason for his dismissal was a power struggle over the terms of his contract and remuneration.

    Nevertheless, the Tribunal found Mr Summers had been responsible for his dismissal and so reduced the compensatory award by 40%. Handshake appealed but was unsuccessful. The EAT found that the relationship of trust and confidence between Handshake and Mr Summers had not broken down to the point of dismissal. Opening up a debate over terms of employment cannot of itself amount to a breach of the duty to maintain trust and confidence. Although a breakdown in relations can amount to “some other substantial reason” it did not do so in this case.

    Key points: It is not sufficient to simply claim that trust and confidence has broken down. Something more is required. A mutual breakdown in trust and confidence can lead to dismissal and be fair but in order to avoid any procedural unfairness there should be discussions between the parties to try and resolve issues first. It is always best to settle the contract terms before employment commences.

  • Some Other Substantial Reason and ACAS Code of Practice
    Lund v St Edmund’s School UKEAT/0514/12/KN
    Under Section 207A of the TULRCA 1992 where it appears to a Tribunal that an employer has failed to comply with the ACAS Code and that failure was unreasonable the Tribunal may if it considers it just and equitable in the circumstances increase any award it makes to the employee by no more than 25%. The relevant Code of Practice (in this case dated 2009) was silent as to whether it applied to dismissals for “some other substantial reason”.

    The Judge held that s207A did apply. It was incorrect for the Tribunal to decline to apply the uplift simply because compensation had been reduced on the ground of Mr Lund’s contributory fault. He may have contributed to his dismissal but he had done nothing to contribute to his employer’s failure to act in accordance with the Code.

    Mr Lund was dismissed by his employer school because they had lost confidence with him when he had difficulties with his work, in particular a frustration with the school’s computer equipment. The dismissal was procedurally unfair because he had no warning of the dismissal meeting and no opportunity to appeal. The case was remitted to the same Tribunal for it to decide whether the school’s failure to comply with the Code was unreasonable and whether it is just and equitable for an uplift to be awarded and if so by what percentage.

  • Contributory conduct
    Ladrick Lemonious v Church Commissioners UKEAT/0253/12/KN
    Mr Lemonious complained of unfair dismissal but the Tribunal found that although the dismissal was procedurally unfair because of his misconduct it would not be just and equitable to award him either a basic or compensatory award. Although he had over 36 years’ exemplary service he was dismissed from his post as a technical support worker because he had sent emails in the names of other employees anonymously. His employer regarded the sending of such emails as a serious matter, particularly as they were sent anonymously and that the Claimant had lied about this. This amounted in total to gross misconduct. Mr Lemonious appealed the award of nil compensation on the grounds that this was applicable only in exceptional cases and not here where the dismissal was found to be unfair. The EAT agreed and the case was remitted to the same Tribunal to reconsider whether the 100% deduction on the basic award was just and equitable where there was little in the Tribunal’s judgment about why it had reached that decision.

  • Dismissal at request of third party
    Bancroft v Interserve 2012 UKEAT0329/12/1312
    Mr Bancroft was a chef who from 2004 until March 2011 worked at a bail hostel. He was TUPE transferred into the employment of Interserve in June 2008. He had a difficult working relationship with the manager of the bail hostel. By 2010 the relationship had broken down. There was an incident in May 2010 and the Claimant was suspended and subject to disciplinary proceedings. He in turn raised a grievance and he was given a first and final warning. In the meantime his manager tried to find him another job but was unsuccessful. He was dismissed at the Home Office’s behest without reason.

    The Tribunal considered the fairness of the dismissal and concluded that Mr Bancroft’s behaviour was not such that he should have been dismissed. He had been given a first and final warning. He had suffered an injustice but that dismissal was not unfair. He appealed. The EAT concluded that the Tribunal had failed to make all necessary findings of fact on the issue of whether Interserve had taken all steps to seek to mitigate the injustice caused to Mr Bancroft by his removal. The case was remitted to the employment Tribunal for findings of fact on the issues and to reach a conclusion on the fairness of the dismissal.

    Key point: It is not reasonable to dismiss an employee at the request of a third party without considering whether the request is justified.

15. Restrictive covenants

Ashcourt Rowan Financial Planning Ltd v Hall IHQ/13/0309
This is a first instance case. It concerns ARFP’s claim to enforce post termination covenants against its former employee, Mr Hall. Mr Hall worked from home in the specialist investment management services and was a financial adviser and planner. He had a contract of employment which entitled ARFP during any period of notice not to require him to do any duties or only some of them. He also had restrictive covenants in a standard format which prevented him for a period of 6 months from his termination date in any capacity for being engaged in any business or activity which competed with ARFP. Mr Hall resigned on 4 October 2012 and he was requested during his notice period to continue to work mainly from home. Mr Hall acknowledged this request indicating that he would during his garden leave remain bound by his terms of contract. ARFP pointed out that he was not on garden leave since he was simply required to work from home as he had done previously. He had to continue to comply with his duties and that his clients would be told that he was leaving and that someone would be stepping in to take over their matters going forward.

The issues in the case related to whether the instruction to Mr Hall to work from home counted as garden leave which period of leave could be set off against his 6 month restrictive covenant and whether the non-compete clause was enforceable.

The Judge found against Mr Hall. He was not on garden leave while he worked out his notice. Mr Hall contended that the non-competition covenant had the effect of preventing him from working in the investment business in which he had worked for many years without geographical limits. With the concurrent obligations of confidentiality and non-solicitation covenants these provided the protection which ARPF were entitled and the non-compete clauses were necessary. The Judge held that the non-compete clause was wider than was necessary to protect ARPF’s legitimates interests as its application was ill defined. The restriction that he could not work as an employee, manager, officer, director, agent or consultant meant that the covenant was wider than is necessary. There was no obvious justification for preventing Mr Hall from working in a competing business in other roles such as regulatory compliance, training and research into investment products and the like.

Key point: The case is fact sensitive but it does highlight the importance of carefully drafting restraints and the balance between protecting legitimate business interests and the departing employee’s need to earn a living.

Romero Insurance Brokers Ltd v Templeton and another [2013] AER 142
In this case the High Court upheld a 12 month non-solicitation restrictive covenant as the period was reasonable in the context of selling insurance. Romero were granted an injunction to enforce the covenant when Mr Templeton was unable to make out his case that he had been constructively dismissed. He had been told that he was at risk of redundancy in September 2012 and that a period of consultation would be commenced. His view was that the Company had dressed up a case of redundancy rather than trying to establish a fair dismissal on the grounds of performance and he resigned claiming constructive dismissal. The Judge disagreed. Romero was also entitled to damages for breaches by Mr Templeton occurring between his leaving Romero and the date of judgment on 10 May 2013.

Key point: An injunction and damages award will be an appropriate remedy in similar cases.

16. Breach of confidentiality

Vestergaard Frandsen v Bestnet Europe Ltd 2013 UKSC31
Vestergaard employed Mrs Sig in their business for developing, manufacturing and marketing of insecticidal bed nets. She was a sales and marketing assistant and later sales manager for Europe and Latin America. In the spring of 2004 Mr Larsen, who was a chemical engineer employed by Vestergaard, and Mrs Sig decided to start a new business selling long lasting insecticidal nets in competition with Vestergaard. They discussed this with Dr S, a consultant who had worked with Vestergaard until 2005.

When Vestergaard learned of the net protect products that Dr S was testing they issued proceedings in Denmark against Intection. Mrs Sig resigned and then the company ceased to trade. A new company was then set up - Bestnet - with Mrs Sig as a sole director and where Dr S was a shareholder. The Judge found that Mr Larsen and Mrs Sig moved the business to England with the express intention of trying to avoid the consequences of Danish litigation. In 2007 Vestergaard began proceedings for damages against Bestnet, Mr Larsen and Mrs Sig.

The Judge found that Dr S was liable in breach of confidence to Vestergaard but he was not a party to the proceedings. The Judge also found that Mr Larsen, Mrs Sig and Bestnet were also liable. Mrs Sig disputed this but she was found liable for her breach of her own obligation of confidence. She successfully appealed. Her express confidentiality obligation related to knowledge gained by her during her employment and this did not make her liable for assisting in the misuse of confidential information afterwards when she was unaware of the information or its misuse after. Individuals could be liable for breach of confidence through a common design thus Mr Larsen was liable on that basis as he knew Dr S was misusing confidential information and helped him. As Mrs Sig did not know confidential information was being misused there was no breach of confidence through a common design. The Supreme Court held it would be oppressive to hold her liable to Vestergaard for breach of confidential information.

Key points: In a modern economy the law has to maintain a realistic and fair balance between effectively protecting trade secrets and not unreasonably inhibiting competition in the marketplace. The law should not discourage former honest employees from competing. Blind eye knowledge is insufficient to render an employee liable for misuse of trade secrets.

17. When does continuous employment start?

Koenig v Mind Gym Ltd UKEAT/0201/12
In this case the EAT agreed with an Employment Judge’s decision that an employee’s continuous employment did not begin until the date on which her contract provided she would start work. The fact that the employee had attended meetings before that date at the employer’s request did not bring the start date forward.

The question of when an employee starts work for the purpose of determining their continuous employment is a question of fact and degree. The date was important for Ms Koenig as she had one day short of having sufficient continuous service to bring an unfair dismissal claim. Her contract stated that her period of continuous employment would begin on 1 October 2009 but she had attended a team meeting on 14 September, was invited to a breakfast event on 23 September and attended a client meeting on 29 September, which her employer had agreed that it would be useful for her to go to.

Key point: If an employer wants to involve employees pre-start date it should bring forward the start date, if the employee’s attendance is required and he or she is to be paid for attending.

18. Disability Discrimination – obesity

Walker v Sita Information Networking Computing Ltd UKEAT/0097/12
Mr Walker weighed 21.5 stone. He claimed disability discrimination by Sita and a preliminary issue arose as to whether he was in fact disabled. It was accepted that he suffered from a wide range of symptoms but there was no one symptom which would lead to any significant impairment or disability. The question therefore was whether Mr Walker suffering from “functional overlay accentuated by obesity” could claim to be disabled.

The Judge found that he was not disabled, obesity not being a disability in itself, so Mr Walker appealed. The EAT also rejected the suggestion that obesity as and of itself could amount to a disability. What mattered was the extent of any impairment as a result of his obesity. Mr Walker’s appeal was allowed.

Key point: The physical and mental consequences of obesity could meet the definition of disability in appropriate cases where they have a substantial adverse long term impact on the employee’s ability to carry out day to day activities.

19. Racial discrimination

Burrell v Micheldever Tyre Service Ltd UKEAT/0368/12
Mr Burrell was a tyre fitter and the only black employee at Micheldever Tyre Service in Fareham. He was unhappy about the name calling and abuse that he had suffered and the Fareham employees were told by management to whom he had complained that this behaviour had to stop. It did not. Eventually Mr Burrell submitted a grievance and when he returned to work Micheldever suggested he should relocate to another site rather than returning to work at Fareham for which they would pay him any increased travel costs. However Mr Burrell declined the offer.

Micheldever believed it had the right to insist that he moved and when he refused he was dismissed. The Employment Tribunal found that his dismissal was fair but imposing the relocation on Mr Burrell amounted to victimisation. A direct race discrimination claim was also made out. On appeal, the EAT held that he was not victimised when Micheldever required him to relocate to an alternative site. The relocation was imposed on him after he had refused to participate in an ACAS mediation and was a reasonable solution to the problem that had arisen. In the circumstances the Tribunal had been entitled to find that the dismissal was fair and not tainted by race discrimination. Mr Burrell failed to persuade the Tribunal that his alternatives were reasonable, namely relocating all the Fareham staff or dismissing them.

Key point: The real reason or motive for Mr Burrell’s treatment was not to get rid of him but to resolve the situation which might otherwise have become a stalemate. Employers should always consider whether there is an alternative other than dismissal and dismiss as a last resort. For victimisation to be made out the protected act must be the real reason or motive for the treatment.

20. Sex discrimination

HM Land Registry v McGlue UKEAT/0435/11
Miss McGlue who was on a career break was indirectly sexually discriminated against when HM Land Registry in need of a reduction in head count and costs offered generous early retirement schemes to all its staff except those on a career break who were not due to return before a set date. She was awarded £12,000 for injury to feelings - mid-point of the middle range on the Vento scale - but on appeal by HMLR her award of £5,000 for aggravated damages was denied. She was nevertheless entitled to damages of the full payment she would have received if she had been accepted for the scheme since the evidence was such that she would have been accepted if she had not been excluded from consideration by the discriminatory act. She received approximately £72,000.

Key point: The provision criterion as practice of not being on a career break which had applied to the employee (and others) was not justified. The compensation was not a windfall and was properly payable. A victim of discrimination is to be placed in the position she would have been in had the wrong not been committed as nearly as possible as money will do it.

21. Victimisation

Bouabdillah v Commerzbank AG ET/2203106/12
Ms Bouabdillah previously worked for Deutsche Bank. She brought sex discrimination and equal pay claims against the Bank and resigned. She was then employed by Commerzbank. When she was asked in the interviewing process why she had left DB she did not mention that she had lodged discrimination proceedings against DB. After she had started with Commerzbank an article was published in the press about her litigation. Commerzbank challenged her as to why she had not disclosed the litigation. It considered that she had exposed the Bank to a reputational risk and it believed she had been dishonest and could not be trusted so it dismissed her.

Ms Bouabdillah brought a claim for victimisation which was successful. The Tribunal held that Commerzbank dismissed her because she had brought Tribunal proceedings, not because she had failed to disclose them. She had not misled them or been dishonest. The Tribunal found that it was the discriminatory nature of the litigation that caused Commerzbank to think twice about retaining her. The Tribunal also found that Commerzbank’s handbook was wrong and the witnesses did not understand how discrimination worked. Commerzbank had also failed to adequately respond to the statutory discrimination questionnaire.

Key point: Protected acts done while employed by a former employer can lead to a victimisation claim against a new employer.

22. Victimisation after end of employment

Onu v Akwiku UKEAT/0283/12/RN
Ms Onu was a domestic servant who brought a race discrimination claim against her previous employer and for inter alia post-employment victimisation. The Employment Tribunal held that victimisation was not made out on the facts and she appealed. The Respondents argued that post employment victimisation was precluded by virtue of s108 of the 2010 Equality Act as she claimed that the reason for her employer’s threats was that she had commenced proceedings under the Race Relations Act 1976.

The EAT held that the Equality Act did protect individuals against post-employment victimisation departing from the previous decision in Rowstock Ltd v Jessamy because the section was ambiguous and that it must have been intended to allow victimisation as a head of claim.

Key point: As there are two inconsistent EAT decisions permission to appeal to the Court of Appeal was granted as s108(7) must be more than just a drafting error.

23. Age Discrimination

Seldon v Clarkson Wright & Jakes Case No: 1100275/2007
On remission from the Supreme Court, an employment tribunal has held that a compulsory retirement age for a partner of 65 was a proportionate means of achieving the legitimate aims of workforce planning and retention of staff in the particular circumstances. Therefore, the compulsory retirement provisions in a law firm’s partnership deed affecting Mr Seldon were objectively justified for the purposes of age discrimination. He lost his case for age discrimination. The case was decided on its facts based on the position in 2006 and that all the partners including Mr Seldon had agreed to 65 as the retirement age.

Key point: The position may be different if the case was heard today after the abolition of the default retirement age. Employers cannot rely on this case to justify retaining a compulsory retirement age of 65. Employers should still consider whether if a retirement age is to be imposed, whether 65 is the appropriate age.

24. Religious Discrimination

Five European Court of Human Rights judges have rejected requests for the ECtHR’s decision in Eweida and ors v United Kingdom (Brief 966) in relation to the cases of Chaplin, Ladele and McFarlane to be referred to the Grand Chamber. The current practice of the panel is not to give reasons for its decisions to accept or reject requests for referral to the Grand Chamber. The Court’s judgment in Eweida is now final.

25. Termination payment not a penalty clause

Hennigh Berg v Blackburn Rovers Football Club & Athletic plc [2013] EWHC1070 Chancery
Mr Berg was employed by Blackburn Rovers under a Service Agreement signed on 16 November 2012 for a fixed period ending on 30 June 2015. This was signed by Mr Shaw, Blackburn’s Managing Director on behalf of the Club. In the event the Club wished to terminate the agreement with immediate effect it could do so provided that it paid [Mr Berg] a compensation salary payment by way of liquidated damages for the unexpired balance of the fixed period for flexibility and convenience.

On 27 December 2012 Blackburn terminated the agreement with Mr Berg. He then became entitled to a payment of £2.25m, but when payment was not forthcoming, Mr Berg started proceedings on 14 February claiming the sum of £2.25m. On 1 March solicitors for Blackburn on Mr Shaw’s instructions admitted liability for the £2.25m but asked to pay by instalments of £562,500 per month starting on 26 February 2013. Only one instalment was paid.

Blackburn’s case was that the Service Agreement had been entered into by Mr Shaw in breach of the express instructions given to him by the owners and that he had been instructed to ensure that the agreement be subject to a 12 month notice period so any compensation for early determination being limited to 12 months’ salary. Blackburn’s solicitors applied to withdraw the admission that had been filed with their previous solicitors on the basis that Blackburn no longer sought time to pay, and Mr Shaw did not have the authority to enter into the Service Agreement on behalf of Blackburn. It was also claimed that the compensation due was an unenforceable penalty. In deciding whether to allow a withdrawal of admission the Court has to be certain there is a realistically arguable defence. The compensation clause was not a penalty clause because it provided for payment of money upon the happening of a specified event other than a breach of contractual duty by the contemplated payer to the contemplated payee.

The Court held that the termination of Mr Berg’s employment prior to the fixed term did not constitute a breach of contract. The law of penalty clauses was not engaged, as it was not a disguised or hidden penalty clause. Mr Shaw had the usual authority to enter into the Service Agreement on behalf of Blackburn by reason of his appointment as Managing Director of Blackburn. By so appointing Mr Shaw he had been held out as having the usual authority of someone holding that office.

Key point: Where the trigger for payment is not on the happening of a breach of contract, the law on penalties will not apply.

26. Bankers bonuses – contractual obligation to pay

Dresdner Kleinwort Ltd and Commerzbank AG v Attrill and others [2013 EWCA Civ 394
The Court of Appeal finally dismissed Commerzbank’s appeal against the finding that its August announcement of a guaranteed minimum bonus pool created a contractually binding obligation to pay discretionary bonuses from the pool. The Bank’s conduct after the announcement had amounted to a breach of implied term of trust and confidence. There was no evidence in support of the argument that there had been a reasonable and proper cause for the introduction of the MAC clause allowing the bonus awards to be reviewed. 104 former employees of Dresdner had brought a claim against Dresdner and Commerzbank when their discretionary annual bonuses were reduced in the following January payroll by 90%, after the employees had been sent letters in December setting out their provisional bonus awards stating that a review would take place in January 2009 allowing bonus awards to be adjusted if there was a material negative deviation in Dresdner’s revenue and earnings.

The issue concerned whether the announcement made to the employees in August at a town hall meeting which they were all asked to attend, and subsequent statements about the guaranteed bonus amounted to a binding promise. The Court of Appeal found that the announcement coupled with the later emails had amounted to a variation. There was an intention to create legal relations and they were not required to communicate their acceptance of the offer. The promise had been clearly made to encourage staff to stay in order to stabilise the Bank which might otherwise have collapsed.

The trial judge described the Bank’s conduct as highly reprehensive when making an order for indemnity costs in a separate judgment. The decision not to pay the bonuses has taken to avoid negative public reaction after a German taxpayer bailout and nothing more. The Bank has publicly stated that it will not appeal the ruling.

Key point: Where any contractual right is established an employer must honour it even if it is no longer in its best interests. Employers should be extremely careful when making statements about pay which is acknowledged to be the most fundamental obligation under an employment contract.

27. Bankers’ Cap

It is reported that the European Banking Authority (EBA) has issued proposals to widen the scope of the forthcoming cap on variable pay for banking employees by changing the definition of a “material risk-taker”. It is reportedly proposing that anyone earning more than €500,000 will be subject to the cap. It is expected that banks may simply increase base pay to counteract the effects of the cap.

The European Parliament has voted to cap banker’s bonuses in order to “curb speculative risk-taking”. Under the plans the basic salary-to-bonus ration will be 1:1. However, this could be raised to a maximum of twice annual salary, if approved by at least 66 per cent. of shareholders owning half the shares represented, or of 75 per cent. of votes if there is no quorum. To encourage bankers to take a long-term view, a minimum of 25 per cent. of any bonus exceeding 100 per cent. of salary must be deferred for at least five years.

The new rules apply from 1 January 2014 if approved by the Council of Ministers.

28. TUPE

  • ETO reason for dismissal
    Kavanagh and others v Crystal Palace FC (2000) Ltd UKEAT/0354/12
    In January 2010 Crystal Palace went into administration and the administrator aimed to sell the club as a growing concern. In May 2010 the administrator and a preferred bidder entered into an agreement for the sale of the club which was to be held in escrow pending the sale of the stadium. Shortly afterwards the administrator discovered the club’s cash flow difficulties and decided to mothball the club over the closed season. As part of these arrangements 4 employees including Mr Kavanagh were made redundant on 28 May 2010. The sale of the club and the stadium were then agreed in June 2010 and completed in August 2010. Mr Kavanagh brought Tribunal claims arguing that his and his colleagues’ dismissals had been automatically unfair and that liability therefore had transferred to the new owner. The Tribunal found that they had been dismissed for an ETO reason because the administrator could not have foreseen that the sale.

    The EAT allowed the appeal holding that his dismissal was automatically unfair and liability passed to the new owner. An administrator’s dismissal of an employee in order to change the workforce so as to continue the business could be an ETO. Dismissing Mr Kavanagh had however been part of the mothballing. The administrator had not been intending to carry on the business but simply preserve it so that it could be sold. The only conclusion open to the Tribunal had been that Mr Kavanagh had been dismissed for the purpose of selling the business. That was not an ETO reason.

    Key point: The onus will be on an employer to show that the dismissals had no connection with the impending transfer and were concerned with the day to day operations of the business. Dismissals proximate to a TUPE transfer risk being regarded as part and parcel of the process of making the business more attractive to a potential buyer.

  • Outstanding disciplinary appeals
    Bangura v Southern Cross Healthcare UKEAT/0432/12/RN
    Ms Bangura worked in a care home owned by Southern Cross. She was summarily dismissed on the grounds of misconduct about 6 weeks before the care home was transferred to Four Seasons. At the time of the transfer she had an appeal pending against her dismissal but it had not been by then determined by Southern Cross. The Tribunal held that the TUPE regulations did not transfer liability to Four Seasons since the employee was not employed by Southern Cross immediately before the transfer.

    She appealed on the basis that this decision was inconsistent with the case of G4S Justice Services (UK) Limited v Anstey [2006] IRLR 588, where an employee who appealed against dismissal successfully transferred to the transferee under TUPE as the original dismissal by virtue of the successful appeal had been overturned. However, the EAT distinguished her case from the G4S case because the dismissal there was nullified. In the absence of a successful appeal the normal principles apply, and a summary dismissal takes effect immediately terminating the employment at the time. As the dismissal had nothing to do with the transfer Ms Bangura was not therefore employed or deemed to be employed in the undertaking immediately before its transfer. Any obligation to consider an appeal remained with Southern Cross and if successful then the dismissal would vanish and the employee would then be the subject of the transfer to Four Seasons. In this case Southern Cross, on whom the obligation rested, had not yet heard or determined the appeal.

    Key point: If the appeal is successful it will retrospectively have the effect that an employee is no longer to be treated as dismissed. If the appeal is not successful then the dismissal takes effect on the original date.

  • TUPE informing and consulting with employees
    Shields Automotive Ltd v Langdon and Brolly UKEATS/0059/12/BI
    In this case Shields had failed to comply with its duty to inform and consult transferring employees under TUPE. An election was called at 2pm with voting to be completed by 5pm on the same day. Mr Brolly was not able to vote as it was his day off. Mr Langdon chose not to exercise his vote in protest. The election produced a tie for second place and Shields intervened by selecting one of the tied candidates without informing the employees. The Tribunal held this was unfair. Mr Langdon was awarded 2 weeks’ pay and Mr Brolly 3 weeks’ pay as protective awards, the purpose of which the judge held was to ensure that employers were generally mindful of their obligations to consult and inform even where there will be pressures of time. As the starting point for a protective award is 13 weeks, only modest sums were awarded nevertheless due to technical breach.

    Key point: An employer’s duty is to take reasonable steps and make such reasonable arrangements to ensure that an election is fair and to satisfy this test an employer must ensure that employers have a proper opportunity to exercise their right to vote.

  • Non transferring affected employees
    I Lab Facilities Ltd v Metcalfe and others UKEAT/0224/12
    I Lab provided services to the film and television industry specialising in rushes work. It merged in 2009 with RKT whose work post production was more sophisticated and less time pressured. Following the merger, RKT staff became employed by I Lab, but they were two self-contained businesses. Shortly after the merger I Lab encountered financial difficulties and went into liquidation. The rushes business was then sold to a company in the same ownership and the rushes employees transferred to ILF under TUPE. However the RKT business was closed down by the liquidator and the post production employees lost their jobs. Several RKT employees brought proceedings arguing that I Lab had breached its obligations towards them under the TUPE information and consultation provisions. The key question for the Tribunal was whether those employees were “affected” employees for TUPE purposes. The Tribunal held that they were, and they were each awarded the maximum 13 weeks’ pay. As I Lab were in liquidation and I Lab and ILF were jointly and severally liable for the ward, ILF was responsible for the cost of £81,375.

    ILF appealed, arguing that I Lab had been under no obligation to inform and consult with the representatives of the RKT employees because part of the undertaking with which they were employed did not transfer under TUPE. The EAT agreed. I Lab had two wholly self-contained businesses and the sale of the I Lab business did not affect the employees in RKT.

    Key points: It is not the case that employees who do not transfer under TUPE can never be “affected” employees. If they are affected by the departure of the transferring employees by for example having to take on greater responsibilities then they would be “affected” under TUPE.

29. Whistleblowing

The Whistleblowing Commission is seeking views on improving whistleblowing laws in the workplace to ensure greater protection for whistleblowers. Responses to the consultation are required by 21 June 2013 and the Commission intends to publish a paper summarising the responses by the end of 2013. Apart from gathering the evidence the consultation document seeks views on mandatory whistleblowing policies, rewards extending whistleblowing protection, gagging clauses and the powers of the Tribunal in whistleblowing claims.

  • Protected disclosures
    Onyango v Berkeley (t/a Berkeley Solicitors) UKEAT0407/12
    Mr Onyango was a solicitor employed by B. After he had left he wrote a letter before action to B relating to his employment and also wrote a letter to the Legal Complaints Service about B. In turn B reported Mr Onyango to the Solicitors Regulation Authority citing allegations of forgery and dishonesty which led the SRA to investigate him.

    Mr Onyango brought a number of claims against B together with a whistleblowing claim. He argued that he had been subjected to a detriment by being reported to the SRA, the two protected disclosures being the letter before action and the letter to the Legal Complaints Service. His claims were unsuccessful before the Tribunal but the EAT upheld his appeal and remitted the whistleblowing claim to a different Tribunal. The Tribunal had held that a disclosure after termination of employment could not be a protected disclosure. The EAT held that it could be protected.

    Key point: It is now the case that a qualifying disclosure will be protected if the disclosure was made during employment with the current employer, during employment with a previous employer, after employment with the current employer and before the whistleblowing legislation came into force.

30. Women on boards

As at 1 March 2013 women accounted for 17.3% of FTSE 100 and 13.2% of FTSE 250 board directors. Although progress has slowed the report suggests that the UK is still on target to meet a minimum of 25% female representation by 2015 from FTSE 100 companies. Only 6 companies now have all male boards in the FTSE 100 down from 21 in 2010.

31. Health and safety

Following initial consultation in June 2012 the Health & Safety Executive has decided to revise, consolidate and withdraw a number of approved codes of practice in line with the recommendation of the Löfstedt report of reclaiming health and safety for all. A new revised code of practice on Workplace Health, Safety and Welfare has been published for consultation. The consultation aims to establish if the proposed changes make it easier for employers to understand and meet their legal obligations. Responses are requested by 30 July 2013. Click here for a copy of the consultation.

32. Unpaid internships

The Department for Business, Innovation and Skills has released new guidance to tackle employers using unpaid interns unfairly. A copy of the National Minimum Wage Working Experience and Internships Guidance. Click here for a copy of the Guidance.

33. Disclosure and Barring Service

The Disclosure and Barring Service launches its new service on 17 June 2013. Previously called the Criminal Records Bureau job applicants will pay a fee of £13 a year in exchange for which prospective employers can carry out a free update search to check their Disclosure and Barring Service certificates remain valid and up to date. This is a cheaper and quicker service for employers but the employee bears the costs. Employees will also be able to take the certificate with them from role to role within the same workforce where the same type and level of check is required. Guidance on the new service has been produced to explain the service to applicants’ employers. Click here for a copy of the guidance.

34. Equal pay audits

The Government has published Equal Pay Audits: A Further Consultation on how mandatory equal pay audits for employers who are found to have breached equal pay legislation should work in practice. Click here for the consultation paper https://www.gov.uk/government/consultations/equal-pay-audits-a-further-consultation. The Regulations are intended to come into force in 2014. The Regulations will include a power for the Tribunals to impose a civil penalty of up to £5,000 for non-compliance of an equal pay audit.

35. Working remotely this summer?

Research commissioned by Microsoft has found that 7% of office workers feel they can get more done working away from the office. When working away from the office employees tend to over compensate in order to suppress colleagues’ negative perceptions with 47% claiming that they make a conscious attempt to be extra visible by sending more emails and making more phone calls. Furthermore 30% say they feel guilty about not being in the office while 39% say they work longer hours to prove they are not shirking from home. Despite the fact that employees seemingly increase their productivity the research suggests flexible working is being held back by issues of trust within organisations. Businesses can benefit from allowing employees to work remotely, “work should be the thing you do, not the place you go to”.

Source: HR Review

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.