Employment Law Update
September 5, 2006Welcome to the latest issue of the Steptoe & Johnson Employment Law Update. The Employment Law Updates are aimed at providing information on recent developments in UK employment law. It is our desire to provide you with not only an update of the law, but also a practical insight in managing workplace issues on a proactive basis.
To achieve our objectives and to continuously improve the Updates, it is important that we receive feedback from you. With a view to this, 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. Age Discrimination
There is just a month to go before the new age discrimination laws take effect. Employers should be carrying out a health check on their equality and diversity policies and briefing all employees as a minimum.
The DTI has published the official Age Discrimination Questionnaire. It is in similar form to questionnaires under other pieces of discrimination legislation.
Transitional Retirement Provisions
The final Employment Equality (Age) Regulations, as approved by Parliament, have now been published. Employers should note that there are transitional provisions in respect of retirement to ensure employers can manage the process effectively in the first six months of the Regulations coming into force. The transitional arrangements will apply to retirements from October 1, 2006 to March 31, 2007.
Share Schemes
Some small changes to executives’ scheme rules will be required before October 1, 2006 to ensure that their provisions are “objectively justifiable” going forward. Scheme rules can normally be amended by Board resolution and shareholder approval will not usually need to be obtained.
2. National Minimum Wage Increase
As from October 2006, they are £2.30, £4.45 and £5.35 per hour for workers from 16 to those aged 22 and over, respectively.
3. Breach of Contract – Claims over £25k
Fraser v Hamid Ltd. The Court of Appeal has held that the excess over £25,000 in a Tribunal breach of contract claim cannot be recovered in the civil courts. Mr Hamid reserved his right expressly to pursue the excess over the £25,000 in the High Court. Following a strike out application by the Defendant in the High Court claim, the Court of Appeal held:
- Mr Fraser’s wrongful dismissal claim merged into the judgment of the Tribunal claim on his wrongful dismissal claim;
- his cause of action for wrongful dismissal ceased to exist independently of the judgment;
- he no longer had any cause of action to pursue in the High Court even for the excess of over £25,000;
- it is not open to a Claimant to avoid the operation of a cause of action estoppel simply by purporting to reserve a right to make a second claim in the future.
Woodward v Abbey National Plc. The Court of Appeal has overturned a decision of both the Tribunal and the Appeal Tribunal (“EAT”) holding that a Tribunal does have jurisdiction to hear a worker’s complaint that she had been subjected to a post-employment detriment for making a protective disclosure. Ms Woodward complained that Abbey National had failed to provide her with a reference long after her employment had ended.
5. AIDS
The TUC and the National Aids Trust have published “HIV and the Workplace”. This leaflet provides advice and basic information on HIV and Aids. Complimentary copies are available on request.
6. Sex Discrimination
The National Union of Teachers v. Watson UK EAT /0204/06. The EAT has held that a Tribunal was wrong to infer discrimination on grounds of pregnancy on the basis that it did not believe the employer’s explanation for the treatment in question was cogent or coherent. An employer only has to show they had a genuine, non-discriminatory, but not necessarily reasonable reason for the treatment.
7. Working Time
There is still no agreement on the 48-hour working time opt-out. Talks between ministers from 25 EU states have failed to reach agreements on changes to the Working Time Directive with the result that the UK’s controversial opt-out from the 48-hour working week has survived its fourth consecutive EU presidency. An agreement during the Finnish presidency of the EU looks increasingly unlikely.
Anderson v Jarvis Hotels UK EAT /0062/05. A hotel manager was entitled to be paid for work even when he was asleep. The manager brought a claim for unpaid contractual wages in respect of a 9 month period when he was required to sleep at the hotel overnight. His presence was required in case of an emergency and in the 9 months he had only ever been required to work on one occasion. On another occasion he had left the hotel for half an hour, between 3:30 am and 4:00 am and he had received a verbal warning as a result. The hotel argued that ‘on call’ time when the risk of actually being required to do something was insignificant, should not be regarded as working time for the purpose of being paid under the contract of employment. The EAT disagreed. It held that time during which the manager was contractually obliged to be present at the hotel was plainly working time and he was entitled to be paid in respect of it.
This could cause operational problems where an employee has slept through their ‘on-call’ period because they are still entitled to a minimum daily rest period of 11 hours. There is also a danger that the domestic courts may eventually try to apply the rulings to those required to stay overnight away from home on business.
8. Holiday Pay
Sanderson and another v Excel Management Services Ltd 2006 UK EAT /0194/06. The EAT has held that workers who were paid according to notional ‘productivity’ hours, whereby certain tasks were deemed to take a specified amount of time, regardless of how long they actually took, were not working a ‘fixed number of hours’ a week in accordance with Section 234(1) of the Employment Rights Act 1996. Therefore, the Claimants’ holiday pay under the Regulations was to be calculated on the basis that they did not have ‘normal working hours’. As a result, they were able to have all their remuneration taken into account when calculating their holiday pay including overtime. The calculation of a week’s pay for workers with ‘normal working hours’, whether or not their pay varies according to work done or the timing of shifts, will exclude any sums earned outside those normal working hours such as voluntary overtime.
May Gurney Ltd v Adshead and Others UK EAT /0150/06/2607. If work pay is related to output and the output in turn is significantly connected with the level of performance then it can be properly said that pay varies for the work done. Thus, in a typical productivity scheme where remuneration varies depending on output, a week’s pay should be calculated by averaging over 12 weeks and not based on remuneration levels in a specific single frozen week.
Paid Bank Holidays. Plans to ensure that workers receive paid leave for Bank Holidays in addition to the statutory four weeks’ annual leave have been set out in a Government consultation. The Government proposes to phase in the additional paid leave starting with an increase from 20 to 24 days from October 1, 2007. Views are being sought as to whether the rest of the leave should be introduced in one or two stages from October 2008.
9. Data Protection
The Information Commission has published updated guidance to companies and other organisations on the Eighth data protection principle and the transfer of personal data outside the European Economic area. Complimentary copies are available on request.
10. Fixed-Term Contracts
From 10 July 2006, employees with at least four years’ continuous service who are on a second or subsequent successive fixed-term contract will automatically be granted permanent employee status unless the continued use of a fixed-term contract was objectively justified at the time the contract was renewed. Organisations which employ people on fixed-term contracts should review the use of contracts and consider whether there are objective grounds for their continued use. A gap between two fixed-term contracts does not necessarily break continuity.
11. London Weighting
The annual payment in the private sector now averages £1,548.
12. e-Thrombosis
Office workers are at risk of being struck down by deep vein thrombosis if they sit at their computer screens for long periods without a break, health experts have warned. The term e-thrombosis was coined after a man in New Zealand who often spent 12 hours a day at his computer and did not stand up for hours suffered a pulmonary embolism.
13. Health and Safety - Workplace Temperatures
As summer temperatures soared, employees were concerned about thermal comfort in the workplace. In the UK no upper limit temperature is set by regulation although the Health and Safety Executive Guidance indicates that 30°C is the upper limit for workers carrying out sedentary activities. Employers cannot be expected to counteract the effects of extreme weather conditions but they should take reasonable steps to ensure the comfort of their workforce commensurate with their working obligations.
14. Collective Agreements
Framptons Limited v Badger2006 UK EAT 0138/06/0906. The EAT has held that enhanced redundancy terms contained in a collective agreement that had been incorporated into employees’ contracts of employment continued to apply after the termination date contained in the collective agreement, as evidenced by the parties’ conduct, notwithstanding its termination date. Even if it had not the terms that had been incorporated into the employees’ employment contracts were still binding.
15. Work and Families Act 2006
The Act has received Royal Assent. The Act will inter alia:
- increase statutory maternity pay, adoption pay and maternity allowance to 9 months from April 2007;
- give those who care for adults the right to request flexible working from April 2007.
The Act also gives the Secretary of State for Trade and Industry power to make regulations as to paternity leave and ‘keeping in touch’ days.
Maternity and Parental Leave
The Maternity and Parental Leave and the Paternity and Adoption Leave Regulations have now been approved by Parliament and come into force on October 1, 2006. The amendments will only take effect in relation to employees whose expected week of childbirth or expected date of adoption is on or after April 1, 2007.
Statutory Paternity and Adoption Pay
The Statutory Paternity pay and Statutory Adoption Pay Commended Regulations 2006 have been published and come into force on October 1, 2006 with effect from April 1, 2007. They amend the existing regulations dealing with Statutory Paternity and Adoption Pay by extending the Adoption Pay period from 26 to 39 weeks and providing that Statutory Adoption Pay will continue to be paid where an employee works 10 days or less for their employer.
16. Corporate Manslaughter and Corporate Homicide Bill
The new Bill which provides for a new offence of corporate manslaughter for corporate bodies was introduced in the House of Commons on July 20, 2006. The key offence of corporate manslaughter will be proven if someone has been killed as a result of the gross failure of an organisation’s senior managers in managing the health and safety of its operations. The concept of ‘senior management failure’ remains in the Bill but liability has not been extended to individuals so there remains an absence of sanctions against senior managers. The Bill will apply to the whole of the United Kingdom.
17. Statistics
The Employment Tribunal Service has published its annual report for 2005/06. Although there has been a rise in the number of tribunal claims from the previous year, this can be expected by a number of different factors and is not indicative of an overall rising trend. However, the Government’s predicted drop in tribunal claims following the introduction of the statutory dispute resolution procedures has not happened. 115,039 claims were registered in 2005/06. 26% of cases were settled through ACAS and 18% were successful at tribunal.
18. The 2004 Workplace Employment Relations Survey
The DTI has published the first findings from the 2004 Workplace Employment Relations Survey. This is the fifth survey in the series conducted since 1980. It provides an up-to-date account of the state of employment relations in Britain, together with information on changes that have occurred in workplaces since the last survey in 1998. Complimentary copies are available on request.
19. Race Discrimination
Aziz v Crown Prosecution Service 2006 EWCA Civ1136. The Court of Appeal held that the employment tribunal was correct to infer that discrimination on racial grounds had occurred where the employer had breached its own code in relation to disciplinary hearings and could not give a satisfactory explanation about why the breaches had occurred.
Ms Aziz was a solicitor employed by the Crown Prosecution Service. She was suspended after a remark following the 9/11 bombings. By commencing disciplinary proceedings against her and suspending her, the CPS had acted in breach of the Code. The Tribunal held that a white solicitor would not have been treated the same way as Ms Aziz so her treatment was less favourable on racial grounds and was therefore discriminatory. The case is a reminder that the decision to suspend an employee should not be taken before some sort of preliminary enquiries have been carried out, regardless of what an employer’s disciplinary procedure says.
20. Stress
ACAS has published an advisory booklet on dealing with Stress at Work. Complimentary copies are available on request.
21. Equal Treatment
The European Parliament and the Council for the European Union have published a recast Directive, No 2006/54 on equality between men and women in matters of employment and occupation. The recast Directive consolidates the provisions of the 7 existing Directives in this area, together with relevant settled ECJ case law on the Directives, into a single text. The new Directive does not create any notable new rights or obligations but is instead an attempt at simplification. The Directive will enter into force on August 15, 2006 and must be implemented by member states by August 15, 2008. The 7 consolidated Directives will be repealed with effect from August 15, 2009.
22. Bullying At Work
Green v Deutsche Bank Group Services Ltd 2006 EWHC 1898 QB. Helen Green has won an £800,000 award after a High Court Judge ruled that her former employer, Deutsche Bank, had not protected her from bullying from colleagues who drove her to two nervous breakdowns. The case was brought under the Protection from Harassment Act 1997.
Majrowski v Guy’s and St Thomas’ NHS Trust 2006 UKHL 34. The House of Lords has unanimously held the Court of Appeal’s decision that an employer can be vicariously liable under the Protection from Harassment Act 1997 for harassment committed by an employee in the course of employment. This considerably widens the scope for employees to make claims against their employer where a manager or colleague has pursued a course of action that causes the employee alarm or distress. However, such claims can only be brought in the civil courts, not in an employment tribunal.
Daw v Intel Corporation UK Limited 2006 EWHC 1097 QB. Mrs Daw was employed by Intel Corporation UK Limited. She suffered a breakdown in 2001 and brought a claim for personal injury against Intel on the basis that Intel should have foreseen that there was a risk of a breakdown. The stress she complained of was the result of confused reporting lines and priorities between the demands made on her by her different managers. Her history of post-natal depression was relevant in that it made her more vulnerable and should have been taken into account. The Judge commented: “Whether in any case the counselling service provided will be enough to discharge the reasonable employer’s duty must depend on the facts of each case. Mrs Daw cannot be criticised for not using it. A short term counselling service could not have done anything to ameliorate that risk or help Mrs Daw cope with it. It could not reduce her workload. The most it could have done was to advise her to see her doctor. It does not seem to me on the facts of this case the service provided was a sufficient discharge of the Defendant’s duty.”
23. TUPE
The Print Factory (London) 1991 Limited v Mr Millam UK EAT /0253/06/0108. The EAT confirmed in this case the Tribunal should not pierce the corporate veil unless there is clear evidence of a sham arrangement. TUPE will not apply to transfer relevant employees if they are employed by a separate service company or holding company. In the absence of evidence of a sham, a Tribunal is not permitted to lift the corporate veil when determining whether a transfer has taken place.
24. Tax
Demibourne Ltd v HM Revenue & Customs 2005 UK SPC 00486. This case is authority for the proposition that HM Revenue and Customs is entitled to charge an employer full tax and NI under the PAYE Regulations, where the parties have wrongly viewed the employee as self-employed, without giving credit for the tax and national insurance already paid directly by the employee. Mr Bone and his employer genuinely believed he was self-employed. For ten years he had sent invoices to the Company and was paid gross. He completed annual accounts and paid his own tax. The HM Revenue decided that he was an employee rather than self-employed. Mr Bone was unable to recover his own payments as they were too old. The effect of this is double recovery of the tax.
25. Employee Share Schemes
McCarthy v McCarthy & Stone plc 2006 EWHC 1851 (Ch). The High Court recently considered whether a remuneration committee had appropriately exercised its discretion under a share option scheme when it prevented a former employee from exercising his option in full even though the performance targets for his option has been fully satisfied. The High Court considered both the wording of the relevant section of the scheme rules and the minutes documenting the rationale behind the remuneration committee’s decision and held that the committee had exercised its discretion incorrectly. If the conditions for a bonus share scheme award are performance linked then if consideration of further factors such as performance or conduct might be relevant, the power to consider these factors should be expressly reserved.
26. Procedure
D & G Travel and Henderson v Foster. The EAT held that the Respondent could be permitted to participate in a remedies hearing even though they had not submitted a response and a default judgment (in relation to liability only) had been entered against them. Normally, a Respondent who does not submit a response to a claim is prevented under rule 9 of the Employment Tribunal Rules from taking any further part in the proceedings except in very limited circumstances. In this case, the EAT used rule 34 to circumvent the effect of rule 9 so that a litigant in person, who had expressed an interest in participating in the remedies hearing, was not prevented from doing so.
27. Misconduct
ASLEF v Brady 2006 IRLR 576. Dismissal may be for an unfair reason even where the employee has committed misconduct. The question is whether the misconduct was the real reason for dismissal and it is for the employer to prove that. Once, therefore, an employee has raised with proper evidence the issue that the operative reason for the dismissal was pique or antagonism, it is for the employer to rebut this.
28. Smoking
The draft Smoke Free (General Provisions) Regulations have been published for consultation, which expires on October 9, 2006. In brief:
- All work premises are to be smoke free if enclosed or substantially enclosed – defined as meaning premises with a ceiling unless more than 50% of the wall area is open to outside.
- All employers or occupiers must display a prominent ‘No Smoking’ sign of at least A5 size with a logo and words. “It is against the law to smoke in these premises except in a designated room”.
- Company cars are deemed to be entirely non smoking if they might be used by more than one person, unless it is a convertible car and the roof is open.There is an exemption for bedrooms in residential accommodation.
- There is no exemption for allowing employers who have a designated smoking room.
- An employer who fails to display a prominent ‘No Smoking’ sign is subject to a fixed penalty of £200.
- An employee or visitor who is caught smoking is subject to a fixed penalty of £50, discounted to £30 if it is paid within 15 days.
- An employer who fails to take reasonable steps to prevent smoking is liable to a fine up to £2,500.
The EU Commission for Employment has confirmed that the EU Anti-Discrimination Law does not in itself prohibit discrimination on the grounds that somebody is a smoker. However, European Union Data Protection Law makes it illegal for an employer to ask a job applicant if he/she smokes as this is a private habit. During the job interview, however, the employer has the right to indicate that smoking in the company is forbidden.
29. Implied Terms
Takacs v Barclays Services Jersey Limited case no: 05X 03074. Mr Takacs was a banker who would have been entitled to a substantial bonus if he achieved specified targets. He failed to do this and was dismissed. Mr Takacs’ contract included a term making payment of bonus conditional on continued employment. When he did not receive a bonus he complained that it was Barclays’ fault because they had recruited other employees who had closed him out, hampered his ability to close trades and dismissed him in order to complete the trade without paying his bonus. He claimed that by behaving in this way Barclays had breached three terms which he said were implied into his employment contract:
- mutual trust and confidence;
- duty of co-operation; and
- duty of anti-avoidance
Barclays applied to the High Court for his claim to be struck out but this was refused. The Court found that Mr Takacs was likely to be successful in establishing the existence of an implied term that Barclays would not terminate his employment in order to prevent him from being paid a bonus but of more concern is the Court’s finding that Mr Takacs had a good chance of proving the existence of the implied term of cooperation.
30. Mutuality of Obligation
ABC News International v Gizbert UK EAT /0160/06. The Claimant, a TV reporter for ABC, was employed under a framework agreement whereby ABC was obliged to offer him at least 100 days work a year and he was entitled to either accept or refuse the assignments as he did not want to work in a war zone. The Tribunal held there was no mutuality of the obligation since the Claimant was not obliged to accept any work. The EAT held that there was an implied obligation on the Claimant to decide whether to accept or refuse assignments in good faith. Thus mutuality could be implied into the arrangement and the Claimant had continuity of employment in order to bring an unfair dismissal claim.
31. Employer Liable for Suicide
Corr v IBC Vehicles 2006 EWCA Civ 331. An employer was liable for the suicide of an employee who suffered from severe depression after being seriously injured in a work accident caused by the employer’s negligence. It was not necessary to establish the employee’s suicide was reasonably foreseeable but only that the kind of harm that he suffered, in this case a psychiatric injury, was foreseeable and that it was that injury that drove him to take his life.
32. Disability Discrimination
Chacón Navas v Eurest Colectividades SA Case C – 13/05. A person dismissed on account of absence from work due to sickness was not discriminated against on the grounds of disability and therefore was not protected by the disability provisions of the EC Equal Treatment Framework Directive. Nor could sickness be regarded as protected ground of discrimination in addition to those set out in the Framework Directive.
O’Hanlon V Commissioners for HM Revenue and Customs UK EAT/0109/06. The Revenue Office offered six months full pay to all employees who were absent from work on grounds of health, followed by six months on half pay. Ms O’Hanlon was clinically depressed and claimed the failure to pay her during her absence at full pay was either a failure to make a reasonable adjustment to compensate for her disability or unjustified disability related discrimination. The EAT held that it would be a rare case indeed where the duty to make reasonable adjustments entailed paying a disabled absent employee more than a non-disabled absent employee as to do so would be some sort of wage fixing for the disabled sick. A reduction of pay because of sick absences where the employee is disabled, is disability related discrimination. The reason for cutting her pay was that her absence was for twenty-six weeks and the underlying reason for her absence was her disability. However, the disability related discrimination by not receiving full pay was justified. Once it is established that the duty to make reasonable adjustments does not require an employer to pay full pay to a disabled absent employee, it is very easy to establish that a failure to make such a payment is justified and not discriminatory.
Tarbuck v Sainsbury’s Supermarkets Ltd UK EAT /0136/06/LA. There can be no breach of duty merely because an employer fails to consult an employee on what adjustments it might be reasonable to make. The question is an objective one as to what the employer did or did not do, rather than what the employer thought about or discussed. However, this does not mean that employers should ignore the need to conduct a proper assessment of any adjustments, including consulting with disabled employees and appropriate advisers such as Occupational Health professionals.
Taylor v OCS Group Ltd 2006 EWCA Civ 702. An employer who has dismissed a profoundly deaf employee for misconduct in circumstances where the employee had not had a fair disciplinary hearing because of his inability to understand what was going on, was found by the Court of Appeal not to have been discriminated against on disability related grounds. The case also deals with the distinction between reviews and rehearings. The essential question when deciding whether a dismissal is fair is whether an employer acted reasonably. There is no rule of law providing that a ‘rehearing’ can cure earlier procedural defects, whereas a ‘review’ cannot. If the first hearing is defective, the appeal can cure the defect if the appeal is comprehensive.
Royal Liverpool Children’s NHS Trust v Dunsby. The question of whether or not disability related sickness absence should be discounted for the purpose of sickness absence procedures and redundancy selection is unclear. In this case, Mrs Dunsby was a disabled person on three basis: gynaecological problems, migraines and depression. Of the many absences during the 12 months period considered, two of her absences were caused by migraines. It concluded that apart from the two migraine absences, she would not have progressed to the next stage of absence procedure. The tribunal’s view was that the two migraines absences should have been discounted because they related to disability, but because they were not she progressed to the next stage and was dismissed which meant that her dismissal was for a reason connected to an assumed disability. The EAT disagreed with this decision. The Disability Discrimination Act 1995 does not impose an absolute obligation on an employer to refrain from dismissing an employee who is absent wholly or in part on grounds of ill health due to disability.
33. Territorial Jurisdiction
Anderson v Stena Drilling PTE Limited UK EAT S/0086/04/RN. The EAT considered the territorial jurisdiction tests established by the House of Lords case of Serco for the first time in this case. The Claimant, who was Scottish, worked on an oil rig in far eastern waters and was employed by a company registered in Singapore. He unsuccessfully argued that he had the protection of the unfair dismissal provisions in the Employment Rights Act 1996 on the basis that he was a peripatetic or an expatriate employee. The EAT upheld the Tribunal’s finding that it had no jurisdiction to hear his unfair dismissal claim. At no stage had he performed any work in Great Britain.
34. Who is an Employee?
Ncube and Others v 24/7 Support Services Ltd ET/2602005/05. An employment tribunal found that bank nurses and carers were employed by an employment business. It based its decision, in particular, on the close management and disciplinary control exercised by the employment business and its obligation to provide regular training and the agency workers’ obligation to undertake it. Their employment status was important to establish whether they had a cause under TUPE against the transferee of an insolvent business for outstanding holiday pay. It was held that the transferee company was liable for their holiday pay. The case, however, will not be applicable to all agency arrangements as there were unique features of this case, particularly in the management and training of its workers.
35. Religious Discrimination
Mohmed v West Coast Trains Limited. The EAT has handed down its first appeal case concerning religious discrimination. Mr Mohmed’s appeal failed. There was no direct or indirect discrimination regarding his beard or by the delay of the Respondent replying to his statutory questionnaire for 4 months.
