Employment Law Update
February 2007Welcome to the latest issue of the Steptoe & Johnson Employment Law Update. This update is now published monthly to respond to the ever-increasing growth in employment legislation and case law.
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. Compensation Limits for 2007
The annual upgrading of compensation limits for tribunal claims comes into effect for terminations on or after 1st February 2007. The cap on a week's pay is £310 and the maximum compensation for unfair dismissal is £60,600. The maximum statutory redundancy payment increases to £9,300.
2. Annual Leave Entitlement
The DTI has announced an increase in minimum holiday entitlement under the Working Time Regulations 1998 from 20 days to 28 days per annum. The change effectively requires employers to add the 8 bank holiday days to the 20 day annual leave entitlement. About 6 million workers will benefit from this change. The statutory annual leave entitlement will be increased in two stages rising from 20 to 24 days on 1st October 2007 and from 24 to 28 days on 1st October 2008.
3. Frustration
Hatton Logistics Limited v Waller UKEAT/0298/06/RN
Mr Waller was an LGV driver for Hatton. In November 2004, after a routine health check, a doctor diagnosed him with heart palpitations and signed him off work pending further tests. His LGV licence was suspended. His final medical certificate read, "awaiting possible cardiac pacemaker". In May 2005 he was dismissed having been told that his contract was frustrated because it was not possible for him to carry out the driving duties for which he was employed. In fact Mr Waller did not need a pacemaker and in due course became fit for work again. He brought a claim for unfair dismissal claiming his contract had not been frustrated. The Tribunal agreed. Where a frustrating event occurs the contract in question terminates automatically, without either party to the contract bringing it to an end. In this case it was abundantly clear that, whilst the language of frustration of contract was used, Hatton terminated the Mr Waller's contract of employment and thereby dismissed him.
The case highlights the dangers for an employer that are inherent in the doctrine of frustration. Tribunals are very reluctant to find a contract of employment is frustrated, however, and will only do so in the most extreme circumstances as no statutory protection will then be available to the employee.
4. Constructive Dismissal
Abbey National plc v Fairbrother UK EAT /0084/06/RN
Mrs Fairbrother was a customer manager with Abbey National. She suffered from Obsessive Compulsive Disorder (OCD) and raised a grievance about the conduct of other employees who allegedly bullied, ostracised and victimised her. Her grievance was dismissed. She was not satisfied with the outcome of the grievance and resigned because her grievance was not upheld. It was held that the "range of reasonable responses" test applied to the conduct of Abbey's grievance procedures.
It is not only appropriate but necessary to consider whether Abbey's conduct at the grievance procedure fell within the band of "reasonable responses". It is not necessary, however, to separate out each part of the grievance procedure to see whether it was reasonably conducted. It should be examined as a whole. In a constructive dismissal case the Tribunal should consider the question of whether an employer had reasonable and proper cause for its conduct before going on to consider whether the conduct complained of was calculated or likely to destroy or seriously damage the employer/employee relationship of trust and confidence.
Ms Fairbrother lost her case as the Tribunal found that she had not been constructively dismissed and had not suffered from disability discrimination because of her OCD.
5. Modified Grievance Procedure
City of Bradford v Pratt [2007] UKEAT 0391/06/0901
This is the first case on Appeal dealing with the modified rather than the standard grievance procedure. His Honour Judge Richardson held that the requirement in the modified procedure that the employee set out in writing the grievance and the basis for it meant that a grievance letter that simply identified an equal pay complaint (without identifying the category of comparator and the nature of the disparity in pay) did not comply with the modified grievance procedure, notwithstanding it would have complied with the standard procedure. It meant that the Claimant was barred from access to the Tribunal on a technicality. Mrs Pratt was a cleaner at a theatre and she originally wrote a letter to the Council concerning an allegation of unlawful sex discrimination in relation to her pay and conditions and consented to the use of the modified grievance procedure. Her subsequent claim differed from the substance of her earlier grievance letter and therefore failed. The Tribunal had no jurisdiction to hear her new claim.
6. Minimum Wage
The DTI have published a policy document containing its policy on issuing fines to employers who do not pay the minimum wage. The policy document states that the fine (approximately £207 per week for each full-time employee) will be levied if the minimum wage arrears have not been paid within 7 days' of service of an enforcement notice.
The DTI has announced that it will undertake a review of the National Minimum Wage in relation to voluntary workers. Under the National Minimum Wage Act 1998, volunteers who provide their time and effort completely free do not need to be paid the National Minimum Wage because they are not considered to be workers.
7. Redundancy and Unfair Dismissal
Software 200 Limited v Andrews and Others UK EAT 0533/06/2601
Four employees successfully established before a Tribunal that they had been unfairly dismissed for redundancy. There had been procedural defects and in particular the assessments in the redundancy exercise had been inadequate and subjective. The EAT held that the Tribunal were entitled to find that the dismissals had not been fair but there was evidence which they ought to have considered in order to decide whether and to what extent a Polkey reduction was appropriate on the basis the employees would have been dismissed in any event.
Having considered the evidence in a case the Tribunal may determine:
a) that if a fair procedure had been complied with and the employer had satisfied the Tribunal - the onus being firmly on the employer - that on the balance of probabilities the dismissal would have occurred when it did in any event, the dismissal is then fair;
b) that there was a chance of dismissal but less than 50%, in which case compensation should be reduced accordingly;
c) that the employment would have continued but only for a limited fixed period, where the evidence demonstrating that may be wholly unrelated to the circumstances relating to the dismissal itself; or
d) the employment would have continued indefinitely.
The principle is therefore that in assessing compensation the task of the Tribunal is to assess the loss flowing from the dismissal using its common sense, experience and sense of justice. In the normal case that requires it to asses for how long the employee would have been employed but for the dismissal and to award compensation accordingly.
8. Discrimination and Equality
ACAS has updated its booklet, "Tackling Discrimination and Promoting Equality—a good practice guide for employers". Complimentary copies are available on request.
9. Sex Discrimination
Madarassy v Nomura Court of Appeal A2/2005/0870
This deals with the burden of proof in discrimination cases. Mrs Madarassy brought 35 separate cases of sex discrimination spanning the 22 months she was employed by Nomura. Only one allegation was well founded. She appealed on the question of burden of proof and lost. There is a two-stage approach to be adopted by a Tribunal in such discrimination cases, the first requiring facts to be established from which the Tribunal could infer sex discrimination, as in this case, before placing the burden on the employer, here Nomura, to provide an explanation for its treatment of Mrs Madarassy.
10. Unlawful Deductions
Coors Brewers Limited v Adcock Court of Appeal A2/2006/1035
About 600 employees claimed they had not been given adequate bonuses under an implied contractual promise to replicate a shared bonus scheme operated by a predecessor employer. As they remained employees, the Tribunal could only order payment under its unlawful deductions jurisdiction and not under its breach of contract jurisdiction which only applied to ex-employees. The Court of Appeal held that such claims are in reality claims for unliquidated damages and they fell outside the scope of an unlawful deductions claim. Accordingly, if there needed to be a detailed investigation as to the level of alleged underpayment, the proper route was for the employees to bring a breach of contract claim in the County Court.
11. Immigration - Skills
As from 2 April 2007 all adults who apply for settlement in the UK will need to demonstrate Knowledge of Language and Life in the UK. Applicants will need to pass the Life in the UK test and successfully complete the English for Speakers of Other Languages Skills for Life course. Applicants who already have a good standard of English will take the Life in the UK test.
Immigration-Biometrics
The Home Office also announced plans to implement new powers to capture foreign nationals by biometrics to exercise greater control over immigrants. Biometric ID visas are currently issued in approximately 40 UK posts abroad as part of the entry clearance process. This will gradually be extended over the next two years so that by 2008 the Home Office will screen and store biometric ID for everyone outside the EEA who applies for a visa to enter the UK and for those already in the UK who apply to extend their stay.
12. Non Residency and Days Spent in the UK
Non residents are liable only to pay UK tax on income arising in the UK. Following the recent Gaines-Cooper case, to qualify for non-residency an individual must:
a) remain out of the UK for at least 183 days of a tax year;
b) average no more than 90 days in the UK each year over 4 years;
c) not accept a job that will base them in the UK for 2 years or more;
d) not live in the UK and go abroad for short periods; and
e) lifestyle factors such as club memberships, social events and family ties will be taken into account.
13. Goodbye IR35
Changes are to be made to the taxation of individuals who provide their services through a managed service company with effect from 6 April 2007. Proposed new legislation will oblige the managed service company to operate PAYE on the income received by workers in relation to their services provided through the managed service company. As a result, those who use managed service companies will, in the future, be exempt from IR35 but face more stringent rules that will be less resource intensive for HM Revenue and Customs. National Insurance obligations will arise by virtue of regulations to be laid immediately after the Finance Act 2007 receives Royal Assent.
14. Workplace Representatives
The Government has issued a consultation document, following a review in June 2006 of the facilities and facility time provided to workplace representatives. The consultation addresses two basic issues: whether new methods of working at the modern workplace seriously affect the ability of workplace representatives to function well and whether their effectiveness and efficiency can be enhanced to optimise the net benefits to employees, employers and society more generally. It will also consider regulatory issues, the consistency and adequacy of the rights to paid time off and facilities enjoyed by various categories of workplace representatives. The consultation will not consider the specific statutory functions assigned to the different types of workplace representative. Respondents have until 29 March 2007 to reply and the Government intends to conclude its review by summer 2007.
An estimated 47% of all employees at establishments with five or more employees have at least one on-site representative and representation is much more marked in the public sector.
15. TUPE and Contract Variations
Power v Regent Security Services Limited [2007] UK EAT 0499/06/2901
The EAT has made an interesting decision on contractual variations following a TUPE transfer. Changes to contracts made as a result of TUPE transfers which are to the detriment of the employee are void but this does not apply to changes which are to the benefit of the employee. The case was decided under the TUPE 1981 Regulations but the principles remain relevant to TUPE 2006. The case concerned the contractual retirement age of Mr Power which was raised from 60 to 65 when the part of the business in which he was employed was transferred. He was dismissed on his 60th birthday. He contended he had been unfairly dismissed. An employee can object to any change which he considers to be to his detriment and the existence of compensating advantages will not deprive him of that right. Equally, the transferee employer is not allowed to resile from a voluntary agreed variation to the contract even when the transfer was the reason for the variation. In this case, therefore, the employer was not entitled to refuse to employ Mr Power to the age of 65 and he was eligible to pursue his claim for unfair dismissal. Because the dismissal was by reason of redundancy and automatically unfair, no statutory procedures having been followed, he was entitled to compensation forthwith.
16. Using Mobile Phones Whilst Driving
The fixed penalty for using a hand-held mobile phone or similar device whilst driving will be increased to £60 from 27th February 2007 together with 3 penalty points. The maximum fine if a fixed penalty notice is challenged increases to £1,000 if contested unsuccessfully in Court and £2,500 for drivers of vans, lorry and coaches.
Employers may also be affected by this because it is an offence for anyone to cause or permit another person to use a hand-held mobile phone whilst driving. Directors and managers could be personally liable for this offence if they permit an employee to use a mobile phone in this way which breaches the legislation or if working practices continue to condone such behaviour.
Relevant policies should be reviewed to ensure that using a hand-held mobile phone device whilst driving is not permitted under any circumstances and will be considered a disciplinary offence. Driving whilst using a hands-free phone is not in itself an offence. However, employees may be liable for a separate offence for failing to have proper control of the vehicle. There should be no positive encouragement for use of mobiles or Blackberries whilst driving. Whilst this might put the employees out of contact for a period of time, it is better to be safe than convicted.
17. Failure to Provide Written Particulars of Employment
RKF Services v Palen
Mr Palen was employed by RKF Services for less than a month before he was dismissed. The Tribunal found that he had been dismissed for taking time off to look after a dependant. His employer had not applied the statutory disciplinary or dismissal procedures. He was awarded £3,835 plus 2 weeks' capped pay on account on the employer's failure to provide a written statement of particulars of employment. The Employment Appeal Tribunal dismissed the employer's appeal save it was allowed in respect of the 2 weeks' pay for failing to provide a written statement which the EAT claimed did not arise until there was 2 months of continuous employment. The case highlights the need for vigilance when dismissing an employee, notwithstanding the short service, where the dismissal could be for reasons which do not require a qualifying service period.
