Employment Law Update

Issue No. 25. July 2007

1. Smoking Ban In Force

The blanket smoking ban in the workplace and enclosed public places in England has now come into force with effect from 1 July 2007 under the Health Act 2006. It is a criminal offence:

• to smoke in a smoke-free place;
• to breach the requirements to display 'No Smoking' signs in smoke-free premises and vehicles; and
• for an individual who manages or controls smoke-free places to fail to prevent smoking in the workplace.

According to Robin Hayley of Allen Carr's 'Easyway', "it costs an average £2,000 per year to employ a smoker, taking into account smoking breaks, loss of productivity and sickness".

34 million working days in England and Wales are lost through sickness absence caused by smoking, according to published figures. Undoubtedly a healthier worker is a better worker, so employers may wish to consider being proactive in their assistance to employees who wish to stop smoking.

2. Business and Personal Contact Details - To Whom Do They Belong?

PenWell Publishing (UK) Ltd v Isles QBD 18.6.07

The High Court held that a list of contacts maintained in Outlook on an employer's computer system belonged to the employer even though the list included personal contacts made by the employee prior to joining the employer. Mr Isles was a journalist employed as a publisher and conference chairman. When he joined PennWell, he brought with him a list of journalistic and personal contacts. He transferred these onto his employer's Outlook email system and maintained the contact list in Outlook. Before he left PennWell's employment he downloaded the entire contact list onto a memory stick which he took with him for future use. As the address list was in the employer's email system, backed up by the employer, it could not therefore be copied or removed in its entirety for use outside PenWell's employment or after his employment ended. Mr Isles was, however, able to remove private family contacts and copy key journalistic contacts who could properly be described as his personal sources but he was not entitled to any other copy details.

Employers would be best to advised to notify their employees of their rights with respect to computer held information and employees to maintain a separate list of their personal contacts. Employers should communicate sufficiently to ensure staff are aware that such information will belong to the employer if it is stored on the employer's computer systems.

3. Commercial Agents

Lonsdale v Howard & Hallam 2007 UK HL 32

The House of Lords has handed down its decision in an important case for those dealing with commercial agents. The Commercial Agents (Council Directive) Regulations 1993 provides a statutory right to compensation for any self-employed intermediary who sells goods on behalf of, and in the name of, a principal.

The conclusion in this case was that the English court should not follow the French practice of awarding 2 years' losses as compensation when an agency is terminated. Instead, the correct measure of damages is to value the income stream which the agency business would have generated. This will often require expert evidence and the best evidence of the value will be the price at which the agent could have sold his business on the open market.

4. Restrictive Covenants

Beckett Investment Management Group Limited v Hall 2007 AER D 375

The Court of Appeal has delivered a useful judgment concerning the enforceability of post-termination restrictive covenants in a financial services case. The Court of Appeal rejected the literal interpretation that words referring to protection of "the company" did not include protecting clients of subsidiary companies in a large group.

It was also held that the mere fact that the period was arbitrary (such as a 12 month period) did not prevent the clause being enforceable, since any fixed duration bears an element of arbitrariness. Injunctive relief was granted and the matter was remitted for damages to be assessed for the breach of non-dealing covenant.

5. Territorial Scope of Employment Law

Williams v The University of Nottingham UK EAT/0124/07/RN

The Employment Appeal Tribunal upheld the tribunal's decision that it did not have jurisdiction to hear claims of unfair dismissal and disability discrimination brought by a senior lecturer employed by Nottingham University to work in Malaysia. The question of territorial scope was resolved by the House of Lords in the case of Lawson v Serco in 2006. The Employment Rights Act 1996 applies only to those working or based abroad in exceptional circumstances. A tribunal's jurisdiction to hear a claim for disability discrimination is expressly provided by statute.

This case clarified that there is no distinction between the tests for unfair dismissal claims and that for discrimination claims when a tribunal considers whether an expatriate employee "worked for the purposes of a business carried on in Great Britain" or "for the purposes of the business carried on at the establishment in Great Britain" whilst based abroad. 

The University terminated Dr Williams' secondment after a meeting, which had failed to resolve difficulties between Dr Williams and colleagues in Malaysia. He was instructed to return to the University to take up his duties from 1 November 2005. However, he raised a number of grievances and before the process was completed, he resigned and remained in Malaysia. Had he in fact returned, then the tribunal may have had jurisdiction to hear his claims.

6. Data Protection

The EC Article 29 Data Protection Working Party has issued an opinion on the concept of personal data, which attempts to summarise the "common understanding of the concept of personal data" in EU member states. The opinion analyses the four key elements which make up the concept of personal data, adopting a wide interpretation. The elements are: "any information", "relating to", "identified or identifiable" and "natural person".

Complimentary copies of the Opinion are available on request.

7. Health and Safety

The European Court of Justice has held that the UK is not in breach of its obligations under the Health and Safety Directive to fulfil its obligations on the introduction of measures to encourage improvements in the health and safety of workers at work. The action by the European Commission against the UK was based on section 2(1) of the Health and Safety at Work Act 1974, which restricts the duty on employers to ensure the health and safety of workers to a duty to do this, only "so far as is reasonably practicable".

8. ACAS

ACAS is extending its conciliation services to cover certain categories of Employment Appeal Tribunal cases at the Employment Appeal Tribunal's invitation. The type of cases where conciliation is appropriate will include cases where:

• the employment relationship is ongoing;
• the case may be referred back to the Employment Tribunal; or
• appeals covering monetary awards.

9. Compromise Agreements - Parties

A F Blackmore and Son Limited and Others v Machin and Browne 2007 EWHC 963 Chancery

Two employees complained to the Pensions Ombudsman about their benefits. They had previously entered into compromise agreements in full and final settlement of all claims against their employer but this was not effective to extinguish a claim against the Pension Trustees even though the claim against them might oblige the employer to make good the cost of meeting their claims and in particular, as in this case, to fund the added cost of the Pension Fund. Employers may therefore need to consider extending compromise agreements to settle claims against Pension Scheme Trustees.

Compromise Agreements - Fraudulent Misrepresentation

Crystal Palace FC (2000) Limited v Dowie [2007] EWHC 1392 (QB)

The High Court held in this case that the football club had been induced to enter into a compromise agreement by the manager's fraudulent misrepresentation as to his future employment intentions. However, the Court declined to order the rescission of the compromise agreement as a remedy. Rescission would have revived the contract of employment (which neither party wanted). Furthermore, the practical justice required the Court to consider the position of third parties that would be affected by an order for rescission, namely the employee's successor and his new employer.

This case concerned former Crystal Palace FC manager, Ian Dowie, and his move to Charlton Athletic FC. The terms of a compromise agreement included an irrevocable waiver by Crystal Palace FC of its right to any compensation due to it under the compensation clause (of £1 million) in Mr Dowie's contract as Mr Dowie claimed he was moving North for family reasons. He was very shortly thereafter appointed manager of Charlton Athletic FC. An order for damages was made.

10. Holiday Entitlement

The Government has published its response to the recent consultation on proposals to increase the statutory holiday entitlement, indicating its intention to delay the full increase until April 2009 from 1 October 2008 in response to further consideration of the cost pressures this increase will entail, in particular for the health and social care sector.

The draft regulations have been published and complimentary copies are available on request.

11. Paternity Leave

The DTI has issued a consultation paper on how it proposes the Government's commitment to a new right of up to 26 weeks' additional paternity leave will work in practice. Under the new provision, to be implemented at the earliest in two years' time, a mother can pass some of her statutory maternity leave and pay to the father if she wants to return to work, giving parents for the first time the option of dividing a period of paid leave between them. Consultation closes on 3 August 2007.

12. Equality

The Government has issued a consultation document containing proposals for amendment to the law and the creation of a Single Equality Act, on which it is seeking views. The consultation period runs until 4 September 2007. The proposals span equality law in its widest sense and cover private members' clubs, education, positive duties of public authorities and the provision of goods and services, as well as employment. In the employment field, the major issue on which views are sought include:

• whether the requirement for a comparator in direct discrimination cases should be retained;
• whether a genuine occupational requirement test should be introduced for all strands of discrimination (except disability);
• harmonising the definition of indirect discrimination;
• whether the concept of 'reasonable adjustments' should be extended beyond disability discrimination;
• whether parents and carers should continue to be covered by targeted provisions rather than as part of a streamlined Act;
• whether to streamline equal pay law and sex discrimination law within the Single Equality Act;
• creating a single definition of disability discrimination;
• promoting compliance and good practice through guidance to be issued primarily through the new Commission for Equality and Human Rights; and
• promoting the use of alternative dispute resolution.

13. National Minimum Wage

The National Minimum Wage Act 1998 has been amended by new regulations to ensure that employers are not required to pay the National Minimum Wage to students who undertake work experience as part of their further education. Students have now been brought into the list of persons who are exempt from the national minimum wage.

14. Sick Pay and Unfair Dismissal Compensation

GAB Robins (UK) Limited v Triggs UKEAT/0111/07/RN

The EAT has handed down this important decision dealing with the calculation of a compensatory award for a constructively dismissed employee who had been off sick. There was previously no direct authority on the point whether an employee's loss of earnings had been caused by constructive dismissal or instead caused by her long term sickness absence.

The employer argued that since the employee had been off work for four months prior to her dismissal, her absence after the dismissal had not been caused by that dismissal. The judge, Peter Clark, distinguished an actual dismissal where loss of earnings might not be awarded from a constructive dismissal. Constructive dismissal covered a whole series of events, not just the last straw (in this case failure to deal with her grievance properly) some of which were the instances of bullying and overwork which gave rise to the sickness absence in the first place. In those circumstances, the course of conduct by the employer amounted to a breach of the implied term, formed part of the constructive dismissal and thus the employee's ill health caused by that breach was to be treated as a consequence of the dismissal leading to loss of earnings.

15. Share Options

McCarthy v McCarthy & Stone PLC 2007 EWCA Civ 664

The Court of Appeal has upheld the earlier judgment of the High Court in this case that the Company's discretion to allow or deny exercise of options to its employee after leaving employment had to be exercised on the strict terms of the relevant option plan rule. The Company did not have any discretion to modify the proportion of an option that could be exercised under the rule once its exercise has been permitted. The Company also had a right of restitution of amounts of PAYE and NICs paid on the former employee's gains on the exercise of the options. The option terms lacked an express contractual obligation for the employee to reimburse these items.

Whilst in the future, an employee would find it difficult to resist repaying amounts of PAYE and NICs, it is always important to ensure that any plan rules or stand alone share incentive awards, include a provision for recovery of tax and NIC liability.

16. Damages for Employees' lack of notice

Davis v Pyrz UK EAT/0304/06

This case concerned a Polish nanny who worked for Ms Davis but the relationship did not work out and Ms Pyrz left without giving notice. The case went all the way to the Employment Appeal Tribunal after Ms Davis pursued her rights for notice and unpaid bills. These types of personal issues frequently arise in employment situations within the home. Parties should be prepared to cater for such circumstances which are not anticipated at the outset. The EAT highlighted the extent that those issues between the parties were capable of falling within a tribunal's jurisdiction, in particular, the damages for breach of duty of fidelity. Ms Davis could not therefore recover the cost of a computer repair or the claim for a stolen CD and skirt but could recover for an unpaid telephone bill and airline ticket. Ms Davis was entitled to the difference between the amount she would have paid Ms Pyrz if the National Minimum Wage Act had been complied with and the amount that had to be paid to the stand in nanny. A difference of some £13.85 as damages

17. TUPE 2006 - Service Provision Changes

Hunt v Storm Communications Limited and Others ET/2702546/06

This is the first instance of an Employment Tribunal case which considered the provisions relating to service provision changes in TUPE 2006 in which it was found that they applied when a client changed PR agencies. The case may be appealed but does give some useful pointers on the approach tribunals are taking to these provisions.

The case concerned a Ms Hunt, who was an account manager for Storm, who was left in the lurch when the PR contract was awarded to a new provider. She claimed that she was transferred under TUPE. The tribunal held that whilst the provision of PR services was not a stable economic entity, there was a service provision change under Regulation 3(1)(b)(ii) of TUPE.