Employment Law Update

Welcome 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.

We take this opportunity to wish you very warm compliments of the Season and a successful 2007.

1.      Age Discrimination
Age discrimination will become unlawful in respect of pensions as from 1st December 2006 when the Employment Equality (Age) (Amendment No. 2) Regulations 2006 come into force.  Any potentially discriminatory practices should be removed as soon as possible. 

2.      Compensation Limits for 2007
The annual upgrading of compensation limits for tribunal claims has been published.  The cap on a week's pay will be £310 and the maximum compensation for unfair dismissal will be £60,600.  The new limits apply where the effective date of termination falls on or after 1 February 2007.

3.      Equal Pay
Cadman v Health and Safety Executive 
The European Court of Justice has decided in this equal pay test case that as general rule employers need not provide specific justification for using length of service as a criterion in a pay structure but in certain circumstances they must.  For employers who use length of service to determine pay and particularly for those who rely on professional job evaluation systems this is good news.  The case pre-dates the Age Discrimination Regulations but employers should check their remuneration and reward schemes to ensure where possible potentially discriminatory effects are minimised or if they cannot be, there is a justification for retaining them. 

Blackburn and Manley v Chief Constable of West Midlands Police
In this case special "anti-social hours" bonuses paid to police officers who were rostered to work at any time of the day or night were indirectly discriminatory as women with childcare responsibilities who could not work the roster were not eligible for the bonuses.  The Tribunal found that whilst the requirement to work on a 24/7 basis could be a genuine material factor for equal pay purposes and rewarding anti-social hours was a legitimate aim, it had not been carried out in a proportionate or reasonably necessary way in this case.

4.      Redundancy
Keeley v Fosroc International Ltd 2006 EWCA Civ 1277
Where a staff handbook contains details of an enhanced redundancy payment, there is a presumption that it has contractual status (rather than policy status) and can be relied on by an employee to bring a breach of contract claim.  The handbook in this case was expressly incorporated into the terms and conditions of employment. 

Redundancy Handling
ACAS have issued an advisory booklet on "Redundancy Handling".  Complimentary copies are available on request.

The Collective Redundancies (Amendment) Regulations 2006
These came into effect on 1 October 2006 and will implement the ECJ's decision in Junk v Kuhnel by amending TULRCA to make it clear that the Secretary of State must be notified of proposed collective redundancies before notice is given to any relevant employees.

Glasgow City Council v Deans.  UK EATS/006/05/RN
When considering the fairness of dismissals arising out of a business reorganisation the EAT held that the Tribunal should have carried out a balancing act, taking into account the advantages to the employer of its business reorganisation and the disadvantages to the employees.  It was not necessary however for the employer to establish an onerous level of commercial advantage or prove that the reorganisation was vital to the survival of the business, for the dismissals to be fair.

5.      Protective Awards
Transport and General Workers Union v Brauer Coley Ltd (in administration). 
Only those employees who are the subject of a protective award may enforce it.  In this case only the employees in respect of whom the Union was recognised could benefit from the award.  Other employees, in respect of whom the Union was not recognised, had to claim individually or via elected employee representatives.  Having a single vehicle for enforcing a protective award for all employees who were dismissed for redundancy at the same time had the advantage of simplicity but this was inconsistent with the statutory scheme.

6.      Disability Discrimination
NTL Group Ltd. v  Difolco CA
Mrs Difolco was partially paralysed and could only work part-time.  When she was made redundant, she was offered another job which was advertised on a full-time basis but was told that the employer would consider changing the role to part-time.  She refused to apply for the job unless it was changed to a part-time one before she applied.  The Court of Appeal held that the employer had not failed to make reasonable adjustments.  There was no failure until she applied for the job.

Humphries v Chevler Packaging Limited UK EAT/0224/06/2407
In this case the EAT held that a failure to make adjustments was an omission and not a continuing act.  Where a claim arises out of a deliberate omission, the time limit for bringing a claim starts to run when the employer makes a decision not to do the omitted act, or where there is no evidence of a decision, does an act inconsistent with the omitted act.  In this case time started when the employer wrote to the employee to confirm that there was no alternative employment available other than a cleaner's job, which the employee had already refused.  Even though the employer's breach of duty continued after this letter was sent, the employee could not argue that the breach was a continuing act and that time only started to run on the employee's resignation.  Her claim was therefore out of time.

7.      Smoking
Wales is to introduce a ban on smoking in public places from 2 April 2007.

The smoking ban in France in public places comes into force on 1 February 2007.  However, the effective date for bars, restaurants and nightclubs will be 1 January 2008.  Individuals who contravene this ban will be subject to €75 whilst those in charge of establishments will be subject to €150 fine for each occasion the law is infringed.  The new French ban follows similar bans in Belgium , Germany , Ireland , Italy , Malta , Montenegro , the Netherlands , Norway , Scotland , Spain and Sweden .  Smoking bans are due to come into force in England , Northern Ireland and Lithuania in 2007.

The TUC has produced a guide for union representatives on "Negotiating smoke-free workplaces".  Complimentary copies are available on request.  

8.      Constructive Dismissal
Quigley v University of St Andrews

This is the first decision on constructive dismissal and affirmation which examined the issue of delay where the reason given was the time it took to obtain legal advices.  The Tribunal was not satisfied that Mr Quigley had resigned because of the outcome of his appeal or because of any other alleged breaches of contract.   There were two months between the outcome of the appeal and his resignation letter.  He had taken time to arrange a meeting with his solicitor but the delay did not justify him postponing his resignation and his claim was dismissed.

9.      Restrictive Covenants
Allan Janes LLP v Johal 2006 ICR/42. 
A non-dealing covenant in a solicitor's contract of employment restricting her for a period of one year after the end of her employment from acting as a solicitor for any person who had been a client of the firm in the previous year was reasonable and enforceable.  The LLP obtained an interim junction against Ms Johal, her business partner and the new partnership restricting them from practising as solicitors within a radius of six miles of their offices within the relevant fields of practice and Ms Johal was restrained from canvassing or soliciting its clients.    Although her contract had been entered into in 2000 it was in contemplation by both parties at that time that she would become a partner of the firm and the protection was both reasonable in terms of both the restriction and the period.

Dunedin Independent PLC v Welsh (Scottish case) CSOH 174
In November 2002 Dunedin obtained an interim injunction against Mr Welsh preventing disclosure of confidential information and non-solicitation.  However, it was unsuccessful in its application for an injunction to prevent him dealing with its clients.  At the full hearing in March 2006 Dunedin sought damages from Mr Welsh for dealing with their clients.  Dunedin failed on the basis that the non-dealing clause was too wide.  The judge held that even if the clause had been enforceable, the issue of damages did not arise because Dunedin had not proved on the balance of probability that but for the alleged breach of the restrictive covenants they would have retained the clients and therefore the commission relating to their work.  The case is a reminder that it is not sufficient for the employer to show a breach of enforceable covenants but they must also show that they suffered loss as a result of the breach.

Fox Gregory v Spinks 2000 EWCA Civ 1544
The Court of Appeal has held that a new employer who fails to give suitably swift undertakings not to use confidential information which an employee brings over from his old employer can be held liable for the costs of any injunction application even if an undertaking has been given.

10.      Compensation for Pension Loss
Greenhoff v Barnsley Metropolitan Borough Council. 
Where an employee is a member of an occupational pension scheme is unfairly dismissed, the loss of pension rights can form one of the most important elements of the compensatory award but the five-stage approach for the Tribunal, suggested in this case by the EAT, is not mandatory.  The steps are:

• identify all possible benefits that the employee could obtain under the pension scheme.
• set out the terms of the pension scheme relevant to each possible benefit;
• consider in respect of each benefit the advantages and disadvantages of applying the simplified approach, the substantial loss approach or any other approach which the tribunal or parties consider appropriate;
• explain why it has adopted a particular approach and rejected any other possible approach;
• set out its conclusions and explain the amount of compensation for each head of the claim.

11.      Sexual Orientation
Martin v Parkam Foods Limited ETS 1800241/2006
In this case the Tribunal upheld an employee's claim of discrimination on the grounds of sexual orientation and constructive dismissal on the basis that the employer's investigation into his grievances had been inadequate.  Of particular note was the employer's failure to address the homophobia which the Tribunal found to exist within the employer's business.  Graffiti had remained on the walls long after he had been complained about.  It is not enough for an employer to have policies in place and to carry out an investigation.  It may also be necessary to challenge peoples' attitudes and educate staff in this area of discrimination.

12.      Immigration
On 7 November 2006, the Immigration Minister introduced changes to the Highly Skilled Migrant Programme which applies to highly skilled workers applying to come to the UK .  This is the first step in the implementation of the new points-based immigration system which forms part of the Government's five year plan for immigration.

As a result of the changes, entrepreneurs and professionals wanting to come to the UK will have to meet a mandatory English language requirement and will be scored against the following criteria:

• qualifications
• previous earnings
• prior UK experience as a student or employee
• age
• participation in an MBA scheme

The current scheme is presently suspended and the new rules will apply from 4 December 2006 .

13.      Employment Status
Gladwell v Secretary of State for Trade and Industry 2006 UK EAT 0337/062510
The EAT held that a Tribunal was wrong to conclude that a 50% shareholder and director of the company could not also be an employee on the basis that joint control of the company was inconsistent with employment status.  The fact that an employee acts as an employer does not prevent them from being an employee too.  After his company went into voluntary creditors' liquidation Gladwell sought payment from the Secretary of State of sums owed to him by the company, this was rejected on the basis that he was not employed by the company.  The case has been remitted to another Tribunal to determine whether in fact he was an employee of the company.

14.      Flexible Working - Who is a carer?
The DTI has announced who will qualify as a 'carer' under the new right for carers to request flexible working, coming into force on 6 April 2007, under the Work and Families Act 2006.  The definition of 'carer' will cover any employee who is or expects to be caring for an adult who:

• is married to, or the partner or civil partner of the employee; or
• is a 'near relative' of the employee;
• falls into neither category but lives at the same address as the employee.

The 'near relative' definition includes parents, parent-in-law, adult child, adopted adult child, siblings (including those who are in-laws), uncles, aunts or grandparents and step-relatives. 

15.      Rights and responsibilities of employees
The DTI has published a new 96 page guide for both employers and employees entitled "Rights and Responsibilities of Employees".  It is an excellent summary.  Complimentary copies are available on request.

16.      Discretionary Bonus
Commerzbank AG v Keen 2006 EWCA Civ 1536
The Court of Appeal held in this case that an employee cannot rely on the Unfair Contract Terms Act 1977 in order to circumvent a contractual clause which required the employee to still be in employment in order to participate in a discretionary bonus scheme.   He was not awarded a bonus for the year in which his employment was terminated and he challenged this as an unreasonable exclusion.  It was held that he was not dealing with his employer as a consumer nor could his contract of employment be described as standard terms of business.  The Bank had not breached the implied term not to exercise their discretion, irrationally or perversely when determining the size of his bonus pool for the years 2003 and 2004.

17.      Holiday  Pay
HM Revenue and Customs v Stringer (formerly Commissioners of Inland Revenue v Ainsworth).
The House of Lords has now referred this case to the European Court of Justice to decide the question of whether workers on long-term sick leave accrue paid holiday under the Working Time Regulations.

18.      'Without Prejudice' Settlement Discussions
Brunel University v Vaseghi & Webster
This case dealt with the admissibility in victimisation cases of 'without prejudice' settlement discussions.  Generally they are not admissible before courts and tribunals.  The employees brought cases of victimisation and sought to rely on the evidence from a solicitor involved in the settlement discussion.  The EAT held that due to the fact that liability in discrimination cases is very fact sensitive, they would be hindered in their victimisation claims and severely prejudiced and disadvantaged if they could not refer to the conversations that occurred.  Therefore, the evidence was admissible despite the University's objections.

19.      TUPE
Balfour Beatty & another v Wilcox 2006 EWCA Civ1240
The Court of Appeal held that an outsourcing contract which did not contain any guarantee of the amount or continuation of work could still be a stable economic entity capable of amounting to a TUPE transfer.  Where the undertaking was reliant on significant plant and equipment, the fact that the plant and equipment was leased and therefore could not transfer, did not prevent there being a transfer of undertaking.  Whilst the facts refer to TUPE Regulations 1981, the approach to deciding whether there is a relevant transfer in such situations remains the same under TUPE 2006.

20.      Covert recording of disciplinary hearing
Chairman and Governors of Amwell View School v Dogherty UK/EAT/0243/06/DA
An employee who covertly recorded her own disciplinary hearing could use the recording in evidence before the tribunal, but a covert recording of the private deliberations of the disciplinary panel was not admissible on grounds of public policy.  Balancing the public policy requirement for including or excluding evidence is always a difficult task.  Employers may wish to review their disciplinary procedures to ensure that the possibility of employees recording hearings is explicitly excluded.   When deliberating in private, the disciplinary panel ought to make confidential notes of its reasons for future reference.

21.      Unfair Dismissal - Principal Reason
ASLEF v Brady
Mr Brady was found guilty of bringing the union into disrepute for his involvement in a fight and speaking to the media about it.  He was then dismissed for gross misconduct.  He brought a claim for unfair dismissal and contended that his dismissal had been a culmination of a campaign to undermine his position.  The Tribunal found that ASLEF had not dismissed the employee for one of the potentially fair reasons, namely misconduct, but concluded on the evidence that the real reason for the dismissal had been the employers' political antipathy towards him.  Even if his misconduct could have justified his dismissal it was not the operative reason for his dismissal and it was therefore unfair. 

East Lancashire Coachbuilders Ltd v P Hilton UK/EAT/0054/06/RN 2006-11-28
Mr Hilton was a director and joint managing director of a company and he was dismissed.  A dismissal is only a potentially fair dismissal if the principal reason for the dismissal is one of the five potentially fair reasons in S.98 of the ERA 1996.  If the employee, as Mr Hilton did, provides evidence that the dismissal is for some other reason, the employer will have to show that the statutory reason was in fact the principal reason.  The real reason for Mr Hilton's dismissal was that his continued presence could cause problems following the MBO as it would be expensive to then dismiss him without cause due to his three year notice clause.  The Company had therefore unfairly dismissed him.

22.      Working Time
The DTI has made a minor change to its guidance on the Working Time Regulations to implement the decision in Commission v UK  in which the ECJ held that the section on rest breaks in the Guidance was not compliant with the Working Time Directive.  The Guidance now states that employers must ensure that workers can take their rest.  Employers should therefore:

• actively see to it that an atmosphere is created in which the minimum rest periods are observed.
• ensure that such breaks are scheduled as part of the organisation of working time.
• ensure that workers are not under pressure to forego breaks, whether directly from the employer, for example through the setting of performance targets or from other workers who are choosing not to take their breaks and creating peer pressure to do the same.

23.      Re-engagement Orders
Johnson Matthey PLC v Watters UKEAT/0236/0237/0910
The EAT considered in this case an order of re-engagement made by the Tribunal and the factors that should be taken into account when deciding if it practicable to make such an order.  In particular, it approved the Tribunal's comment that "in any situation in which the Claimant has succeeded before a Tribunal there is likely to be an element of difficulty on the part of the Respondent in swallowing its pride and taking the employee back into the workplace" and, if that was to be a determining factor, the remedy would be of no practical effect. 

It is rare for a Tribunal to award a re-employment.  The employer argued that re-engagement was not practicable because of the breakdown in trust and confidence.  In this case, the Tribunal disagreed, considering:-

• The fact that the events leading to the dismissal concerned an isolated incident and that there was no breakdown in relationships in the workplace.
• The employee's evidence that he was willing to "draw a line" under the events.
• Evidence from the employee's colleagues, which indicated that they were supportive of him.
• The fact that the employee did not have to report to either of the managers involved in his dismissal.
• The fact that it was unlikely that a similar event would occur in future.

24.      Compensation for Unfair Dismissal where there is a pre-existing illness
Drewitt v Seafield Holdings Ltd
The employee had a long-standing underlying medical condition which was nothing to do with her employment.  This condition had been exacerbated by the employer's treatment of her.  She was constructively dismissed.  In this case her losses were to be considered in two parts:

• Past losses - i.e. those losses between the date of dismissal and the date of the hearing.  The tribunal will apply a "but for" test; and
• Future losses - i.e. those occurring after the date of the hearing. 

The Tribunal will therefore estimate, with reference to the evidence before it, the percentage chance of those future losses occurring had the employer not acted as they did.  The employer will only be liable for the extent to which it is said they contributed to the chance of those losses occurring.  If future losses would have occurred in any event, the employer will not be liable for a proportion of these losses or at all. 

25.      Failure of Procedure on Dismissal
Kelly-Madden v Manor Surgery UK/EAT/0105/06/DM
The EAT has handed down another decision dealing with the interpretation of S. 98A (2) ERA 1996, namely the defence that the dismissal should not be unfair if the employee would have been dismissed in any event.  This defence can only be invoked if the employer has complied with the statutory dismissal procedure.  What this means for employers is that provided they have followed any relevant statutory DDP a failure to take further procedural steps, of whatever nature, will not render the dismissal unfair if the employer proves the failure would have made no difference to the dismissal.  However, the burden of proof is on the employer and this decision should not be viewed that they can ignore either the ACAS code or their own internal procedures when dismissing employees.

Draper v Mears Ltd  UKEAT/0174/06/ZT
An employee was dismissed for being found in a company van about to drive after having consumed alcohol.  He was in breach of the zero tolerance rule.  The step 1 letter his employers wrote to him simply referred to "conduct which failed to reasonably ensure the health and safety of oneself and others".  The EAT held that the letter was sufficient to comply with step 1 of the statutory dismissal procedure.

26.      Procedural Appeal Mistakes
Master Foods (a division of Mars UK ) Limited v Wilson UKEAT/0202/06/ZT
In this case the EAT upheld a Tribunal's decision that the requirement in a contractual disciplinary procedure for an employee to submit written grounds of appeal in order to proceed to an appeal of a disciplinary decision failed to comply with step 3 of the statutory DDP.  The employee's subsequent dismissal was therefore automatically unfair. 

The company refused to allow Mr Wilson to appeal based on his failure to lodge written grounds of appeal.  This requirement was not necessary in order to satisfy the statutory conditions of the statutory DDP.  The statutory DDP contains no prescription about the form in which the appeal was to be registered, only that the employee has to inform their employer of their wish to appeal.

The case is a warning for employers that, while their disciplinary procedures can provide greater safeguards than the statutory procedures, the minimum statutory conditions must nevertheless be satisfied.

27.      Time Limits
Bisset v Martins & Castlehill Housing Association Ltd
Ms Bisset brought a race discrimination claim against her employer and the individual she claimed had discriminated against her.  It was held her claim was out of time against the fellow employee.  Time limits are not extended under the statutory DDP where an employee brings a discrimination claim against another employee.

28.      Unfair Dismissal - Contravention of a Statutory Enactment
London Borough of Hounslow v Klusova  UK/EAT/0325/06/DM
Ms Klusova was dismissed because she failed to provide documentary proof that she was entitled to work in the UK .  She brought a claim for unfair dismissal.  Hounslow argued that she was dismissed because her continued employment was contravening the statutory restriction and the statutory dismissal procedures did not apply under S.98(2)(d) or in the alternative there was some other substantial reason justifying her dismissal.  It was held that where an employer genuinely believes that S.98(2)(d) applies but is subsequently found to be wrong, it could argue in the alternative that the dismissal was for some other substantial reason.  However, as the statutory DDP do apply to such a dismissal, unless the employer is absolutely certain of the facts, the statutory DDP should be followed otherwise if the dismissal is for some other substantial reason this will be automatically unfair if the statutory DDP has not been followed.

And finally………

Businesses face a £7 billion pound Christmas shopping bill which the Employment Law Advisory Service has calculated is the cost of UK employees Christmas shopping on line from their desks whilst at work and not working.  Perhaps an extended lunch hour or two this month is not such a bad idea after all.