Employment Law Update

Issue No. 23.  May 2007  

Welcome to the latest issue of the Steptoe & Johnson Employment Law Update.  This update is 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.        Equality Regulations

From 30 April 2007, it is unlawful to discriminate on the grounds of sexual orientation as defined in the Equality Act 2006,  meaning an individual's sexual orientation towards persons of the same sex as her or him, persons of the opposite sex, or both.  The protection will apply to everyone and the Regulations prohibit direct and indirect discrimination, victimisation, discriminatory advertisements and practices.  

2.        Grievances and Continuing Acts of Discrimination

Smith v Network Rail Infrastructure Ltd UKEAT/0047/07/DA

The EAT in this case held that one grievance letter was sufficient to cover an employer's continuing failure to make reasonable adjustments for Mr Smith's disability.  The Tribunal had jurisdiction to consider the acts and omissions of the employer after the date of the initial grievance letter where Mr Smith's complaint was essentially the same as before.  The EAT also considered the date on which the employer's duty to make reasonable adjustments was triggered in a situation where it was clear in view of the employee's disability that he would never be able to return to his original job.

Mr Smith was a track maintenance worker.  After a series of strokes he was left partially sighted. It was held that Network Rail was wrong to conclude that Mr Smith should try and find a new position first and only then offer him re-training for that position.  Employers who are considering alternative positions for less abled employees should offer basic training before the job vacancies arise, say in IT, so the employee would be fit for office based  vacancies as and when they arose.

3.        Return to Work from Maternity Leave

Blundell v Governing Body of St Andrews Catholic Primary School and Another 2007 AER159

This case concerned a teacher and her claim that she had been discriminated against by not being able to return to Reception class teaching after her maternity leave.  In determining her appeal, the EAT looked at the meaning of 'job' in the phrase "... the job in which she was employed before her absence", in Regulation 18 (2) of the Maternity and Parental Leave (etc) Regulations 1999.  It was held that where an employment position was variable, an Employment Tribunal was not obliged to freeze time at the precise moment its occupant took maternity leave, but might have regard to the normal range of variability within the spectrum of her work.  Therefore, there was no discrimination where she was offered the option of a floating role or a class 2 teacher role on her return.  The aim of the Regulations is to provide continuity and to avoid as little dislocation as possible.

4.        Automatic Unfair Dismissal and Compensation

Ingram v Bristol Street Parts UKEAT/0601/06CEA

The EAT dealt in this case with the scope of information required for a Stage 2 meeting to satisfy the requirements of the statutory dismissal procedures.  The employers were not obliged to provide all the evidence on which they relied in advance of the meeting, but merely sufficient material to enable the employee to put her side of the story, i.e. the basis for the allegation in advance of the meeting.

Ms Ingram was dismissed for gross misconduct for failing to notify the company of theft of monies in her possession.  Initially the Tribunal upheld her complaint but reduced both the basic compensatory award to nil on the basis of contributory fault.  She appealed the 100% deduction claiming that where there was a finding of automatic unfair dismissal then in the absence of any exceptional circumstances her basic compensation should be paid and increased between 10 and 50%.

It was held that the House of Lords' authority in Devis v Atkins (that a 100% contributory  fault can be appropriate) has not been eroded by the law on automatic unfair dismissal. The right order is to calculate the compensatory award, make the adjustment upwards if relevant and then apply the 100% contributory fault discount to that figure.

The case is also a reminder of the interplay between the various types of adjustments to compensation, namely relating to the employer's failure to comply with the statutory procedures, the employee's conduct, which has nothing to do with the fairness of the procedure, and the general injustice to the employer.

5.        Economic Tort:  Inducing Breach of Contract

Mainstream Properties Limited v Young 2007 UK HL 21

Two senior employees of a property company acted in breach of their employment contracts by diverting a development opportunity to a joint venture in which they were interested.  A Mr de Winter, knowing of their contractual duties but wrongly thinking they would not be in breach, facilitated the acquisition by providing finance.  The trial judge found Mr de Winter was not liable for the tort of inducing them to breach their contracts.  So did the Court of Appeal and this decision has now been upheld by the House of Lords.  

Mainstream complained that Mr de Winter was liable for the tort of wrongfully inducing breach of contract.  The trial judge held that actual knowledge and Mr de Winter's intention to interfere with the employment contracts could not be proved. What a reasonable man, placed as Mr de Winter was placed, ought to have known or done or intended was not relevant because the tort is one of deliberately inducing a breach of contract, not carelessly or negligently inducing such a breach.  

In the context of such a claim, it was not enough to show the action of the alleged wrongdoer was deliberate.  It must be shown that the object or purpose of the wrongdoer is to inflict harm on the Claimant whether as an end in itself or as a means to another end.  Mainstream's appeal was therefore unanimously dismissed.  

6.        Victimisation

St Helen's  Borough Council v Derbyshire and Others 2007 UKHL 16

This case concerned a group of dinner ladies who argued that they were entitled to the same rates of pay as road sweepers.  A group of them employees brought equal pay claims when their claim did not settle.  The Council then wrote a letter to all staff stating that, if successful the cost of the claims would mean the school meal provision would have to be scaled back and this would lead to a reduced workforce.  A second letter was sent to the Claimants, urging them to settle and referring to the first letter.  They then brought a claim arguing that the letters amounted to victimisation contrary to s.4 of the Sex Discrimination Act 1975.  Unanimously allowing the appeal, the House of Lords held that whilst it was recognised that an employer may make honest and reasonable attempts to settle a claim, the letters were not such an attempt.  The letters were to put pressure on the women to settle.  They were treated less favourably than staff who were not pursuing equal pay claims and the letters amounted to a detriment.  The letters, therefore, amounted to victimisation.  

7.        TUPE and Share Acquisitions

Millam v The Print Factory ( London) 1991 Ltd [2007] EWCA Civ 322

The Court of Appeal held in this case that employees of a company whose shares had been purchased by a holding company had transferred to the holding company under TUPE.   This was an unusual case in which the Tribunal had found the business activities of the subsidiary had been integrated into the holding company's business to such a degree that the business entity itself and not merely shares had transferred into the hands of the holding company.

The Court of Appeal's decision does not change the general rule that in most share acquisitions there will be no change in the identity of the employer and therefore no TUPE transfer.  Those involved in share purchase arrangements should be aware of the risk, therefore, of TUPE applying, particularly where the intention is to fully integrate the target business into the buyer's existing business.  

8.        Probationary Periods

Przybylska v Modus Telecom Limited UK EAT/0566/06 CEA

Ms P commenced employment on 3 October 2005.  Her three month probationary period was due to expire on 2 January but that day being a New Year bank holiday she was absent from the office.  She returned to work on 4 January.  Modus had not expressly exercised their right to extend the probation period beyond its expiry of 2 January.  On 31 January Ms P was told that her employment was to be terminated because she had not successfully completed her probationary period.  When she was paid one week's pay in lieu of notice, she claimed that as her contract provided for three months' notice following successful completion of the probation period, she was entitled to three months' pay less one week.

The EAT agreed.  Although there had been delay in bringing her probationary period to an end, it was not reasonable to imply that it still continued until formalised.  If the period was not extended then any reasonable person would assume that once the period had expired, she was regarded to have successfully completed the period and was entitled to move on to an entitlement to three months' notice.  She was therefore entitled to compensation for breach of contract.

When considering probationary periods to be included in contracts of employment, employers should consider whether there should be some formal arrangement so that the employee does not pass their probationary period by default simply through passage of time and that the probationary period is extended automatically until the employee has been formally advised that he or she has completed the period successfully.

9.        Union Membership

Union membership has fallen from 29% to 28.4%, the largest percentage drop since 1998, according to figures from the Office for National Statistics.  Only 16.6% of private sector employees in the UK were union members in 2006 with collective agreements covering fewer than one in five private sector employees.

On the back of this, TUC has announced it is to target non-unionised companies across the UK in a bid to convince reluctant employers that union involvement could prove an asset rather than a threat to their businesses. 'An Employer's to Trade Unions' explains what trade unions are all about and say that not only can union representatives help business be safer they can also improve lines of communication with a workforce and take a lead on training issues.

10.       Company Fraud

KPMG Forensic has completed an international study on company fraud.  Regardless of geographical region, the patterns from this survey of 360 fraud cases in Europe, Middle East and Africa over recent years were as follows:

• 85% of company fraudsters are male
• The typical fraudster is in the 36-55 age bracket
• By the time he starts enriching himself by illegal means, the fraudster has usually been employed by the company for at least six years
• He typically works in the finance department and commits the fraud single-handed
• In 86% of cases he is at management level and in 66% of cases he is a member of senior management
• Greed and opportunity are his motivating factors  
  

11.       Fiduciary Duties

Foster Bryant Surveying Ltd v Bryant and Another 2007 EWCA 200

The Court of Appeal in this case held that a director who accepted an unsought offer during the period after his resignation but before the end of his notice period was not in breach of his fiduciary duties. The Court found that Mr Bryant had been excluded from his role as a director after his resignation and that there had been no breach of his fiduciary duty.  The surveying company had suffered no loss.  As he had tendered his resignation before he was approached and his resignation was irrevocable, his acceptance of a proposal to join a new company was no different from preparing for potential competition after his resignation had become fully effective.  If he had, however, been in breach of his fiduciary duties then he would have been liable to account even if the Company itself had suffered no loss.

12.       Immigration

The Home Office has unveiled a timetable for introducing the new points-based system for immigration.  It was originally due to come into force by 2008 but is has now been announced that it will be phased in over a year, with the first elements coming into effect at the start of 2008, as follows:  

1. Tier 1 of the system (which caters for highly skilled migrants such as scientists and entrepreneurs) will apply from the start of 2008.
2. Tier 2, targeting skilled workers with a job offer and Tier 5 (for youth mobility and temporary workers) will apply from the third quarter of 2008.
3. Tier 4 (for students) will apply at the start of 2009.  

The announcement does not mention Tier 3.  However, the system of sponsorship by employers and educational institutions to ensure compliance with the new points-based system will be introduced at the beginning of 2008.  

13.       Age Discrimination

Cunningham v BMS Sales Limited DEC E2007 - 006

This is a case in the Republic of Ireland (which is likely to be relevant in the UK)  in which the Complainant was asked questions about his age at an early stage of the interview process, including questions on the application form such as "living with parents/renting/mortgaged accommodation, number of children, age and date of birth".  The Complainant provided incorrect information objecting that the questions were irrelevant and invasive.  He was not given the job despite being suitable for it.  The Quality Officer held that he had been discriminated against on grounds of his age and awarded him €5,000. 

14.       European Union

Germany

On 1 May 2007, a new package of measures aimed at improving the employment chances of older workers came into force in Germany.  Workers aged 52 or over who have been unemployed for at least four months may be hired on fixed-term contracts of up to five years' duration.  Workers aged 50 or over who have been on the unemployment register for a similar period may qualify for a 'combination wage' subsidy if they take a new job for at least 12 months that pays less than their previous job. Support for the training of older workers is also extended.  

Working Time Rules - Transport Sector 

The new working time rules in the transport sector for road transport workers has now come into force across the European Union (Regulation (EC) No. 561/2006).  Daily working time limits of nine hours (extendable to 10 hours twice a week) remain but drivers of heavy goods and passenger transport vehicles must no longer work more than 56 hours per week or 90 hours during any two consecutive weeks. A driver is now required to take a 45 minute rest break every 4.5 hours, although this may be split into two shorter breaks if required.  Daily rest periods may only be split into two rather than three periods.  Drivers must also be given 45 continuous hours off every week, which may be reduced to 24 hours if a block of compensatory time is given by the third week after the reduction was made.  

15.       Smoking at Work 

ACAS has produced a question and answer sheet for how to stop smoking containing answers to frequent questions.  ACAS has also produced a revised guide on Smoking at Work. Complimentary copies are available on request .  

16.       Redundancy Payments 

ACAS has produced a revised guide on Redundancy Payments.  Complimentary copies are available on request. 

17.       Redundancy - Alternative Employment 

Loosley v Social Action for Health 

Mr Loosley was employed by Social Action for Health (SAH) as a mental health worker.  The local authority decided to terminate the funding of this arrangement and he was therefore told he was potentially redundant.  Before the funding arrangement came to an end, the local authority asked SAH whether one of its employees, Mr Walker, would undertake a new project post 31 March.  Mr Loosley was not informed of the new position. The Tribunal held that Mr Loosley should have been considered for the new role but believed it was unlikely he would have been successful in securing it, as the local authority had made it clear that they wanted Mr Walker to undertake the project.   The Tribunal held that the decision to dismiss was fair notwithstanding the failure to inform him about the potential suitable vacancy.  The EAT upheld this finding stating that SAH's failure to inform Mr Loosley about the vacancy was to be regarded as procedural.  This meant that S98A(2) ERA applied.  This states that a failure to follow a procedure in relation to the dismissal of an employee should not be regarded as by itself making the employer's action unreasonable, if he shows that he would still have decided to dismiss the employee if he had followed the procedure. His dismissal was not therefore unfair.  

18.       Web Blogs

Fashionable as they are, they are also dangerous for employers and their business.  If a business does not already have a policy on Web Blogs or specific guidelines, it will be harder for employers to take action against an employee who is keeping an on-line journal which refers to their working environment and colleagues in a less than flattering manner.

19.       Working Time

McLean v Rainbow Home Loans 2007 IRLR 14

Mr McLean was working 50 to 60 hours a week and when he refused to work more hours at weekends, he was dismissed.  Unable to claim for unfair dismissal in the normal way, as he did not have 12 months' service, he claimed that this was automatically unfair because he was asserting his rights unde the Working Time Regulations 1998.  Rainbow defended the claim on the grounds that he was already working more than 48 hours and he had never asserted his rights.  His only objection had been that he wanted to keep the weekends to himself for personal reasons.  The EAT was deeply impressed with this and the employee was successful in his claim.  His refusal to obey an order that would have had the effect of breaching the Working Time Regulations meant that no qualifying period was required for him to bring a claim for automatic unfair dismissal.

20.       Minimum Wage and Accommodation

The DTI has published a new advice in response to accommodation offsets. This is calculated at the rate of £4.15 per day rising to £4.30 from 1 October 2007 for each day that the employer makes the accommodation available to the worker in a pay reference period (up to a maximum of £29.05 a week rising to £30.10 from 1 October 2007).

21.       Whistleblowing

Croke v Hydro Aluminium Worcester Ltd UKEAT/0238/05/ZT

Mr Croke supplied his services through a limited service company which in turn was engaged by an employment agency to provide services for the "end user". The EAT held that within the extended defintion of worker, Mr Croke was able to bring a claim that he had been subject to a detriment on the grounds that he had made a protected disclosure under the whistleblowing legislation.

22.       Religion or Belief Discrimination Questionnaire

Forms designed to assist discrimination victims to gain more information about their treatment and to decide whether to bring proceedings or how better to present their complaints are now available.  These forms are very similar to existing forms under other anti-discrimination legislation.

23.       Statutory Paternity Leave - Consultation

The DTI has issued a further consultation paper on the implementation of statutory paternity leave and pay, which is intended to be implemented in two years' time.

The scheme allows mothers to pass some of their statutory maternity leave (and pay) to fathers if they (the mothers) want to return to work during either OML or AML. This is likely to prove popular with families where the mother earns substantially more than the father.

The government proposes to allow fathers to 'self-certify' that their child's mother is returning to work early and passing maternity entitlements over to them.  He will be required to give eight weeks' notice. It is not proposed that the father's employer carry out any checks with the mother's employer, although HM Revenue & Customs will carry out occasional random checks to detect and prevent fraud. Consultation on the implementation of the scheme closes on 3 August 2007.