Employment Law Update

Issue No. 26 / September 2007

1. Forthcoming Legislation

Equality Act 2006: The Commission for Equality and Human Rights will assume the powers and functions of the three current equality commissions, the CRE, EOC and DRC on 1 October 2007.

The initial increase in statutory holiday entitlement from 4 to 4.8 weeks comes into force on 1 October 2007. The Department for Business Enterprise and Regulatory Reform (BERR - previously known as the DTI) has published a holiday entitlement Ready Reckoner on its website which enables employers to calculate the increased holiday entitlement for their employees. Complimentary copies are available on request.

2. Managed Service Companies

The Regulations needed to implement the National Insurance Contribution aspects of the new managed service company regime and dealing with the mechanics of the rules that make certain third parties liable for unpaid PAYE and NICs of these companies have been published and will come into force on 6 August 2007. On 10 July 2007, HMRC published its revised Guidance on the new regime which provides guidance on the transfer of debt provisions. Copies of the revised Guidance are available on request.

3. Home Working

HMRC has revised the Guidance on the allowances that can be claimed in respect of business use. It is now possible to apportion the use and cost of a room on a time basis and claim the expense of the room during the hours in which it is used exclusively for business use. This then becomes a similar calculation to the business expense of a car which is sometime used for business purposes and sometimes used for pleasure.

4. Claims Statistics

According to ACAS the number of Employment Tribunal claims in the U.K. fell from 191,885 in 2005/6 to 180,420 in 2006/7 but still remained higher than in 2004/5 at 147,418. 34% of all claims resulted in a Tribunal hearing.

5. EU

Holidays

In 2008 the Labour and Ascension public holidays in many countries will both fall on 1 May. The last time this happened was in 1913 and will not reoccur until 2160! Few governments, with the notable exception of Luxembourg, have issued advice to employers on how to deal with this issue. The other countries affected are Austria, Belgium, Denmark, Finland, France, Germany, Liechtenstein, Poland and Sweden.

Jurisdiction

The low cost airlines, Easyjet and Ryanair have failed in their joint challenge to overturn a French legal requirement that the crews of aircrafts based in France are subject to French labour law when operating outside the country. France's administrative court threw out the complaint and ordered both airlines to pay court costs.

The European Commission has now been asked by Ryanair to carry out an official infringement procedure against France over what it still claims to be an unlawful restriction on mobile workers. However, although the Rome Convention permits EU based companies to conclude contracts under any EU countries' jurisdiction, in the case of employment contracts the Convention also guarantees protection under the statutory rights of the country where an employee habitually carries out his work in performance of the contract even if he is temporarily employed in another country or, in the place of business through which they were engaged or situated.

In practice this makes it very difficult for any international business to consolidate standardised terms and conditions into the jurisdiction of any single EU country because the convention will always provide the highest level of legal protection for mobile employees that is potentially available.

6. Stress

Deadman v Bristol City Council 2007 EWCA Civ 822

In this case the Court of Appeal has provided further guidance on the scope of stress at work claims in the context of employment procedures. Here the employee's stress arose from the employer's manner in conducting an investigation and informing him of a renewed investigation by leaving a letter on his desk. The Court of Appeal held that there was no contractual term to act sensitively when investigating a complaint and the fact that the employee would suffer psychiatric illness as he did, was not reasonably foreseeable by his employer.

There is therefore a limit on the scope of stress claims in the context of the operation of disciplinary or similar procedures and cases concerning stress induced by work rather than the operation of employment procedures are more likely to succeed.

McAdie v Royal Bank of Scotland 2007 EWCA Civ 806

The Court of Appeal considered in this case the fairness of a dismissal where Mrs McAdie was absent from work as a result of a stress induced illness which had been caused by the conduct of her employers. As Mrs McAdie would not consider returning to work there was no alternative to dismissal. The Court of Appeal held that the Bank was not prevented from fairly dismissing her in those circumstances simply because its conduct had contributed to her inability to work.

What is important, however, is whether "in all the circumstances" (which includes the employer's conduct in contributing to the employee's illness) it is fair and reasonable to dismiss an employee. What was clear is that in these circumstances an employer is required to go further than it would otherwise in finding alternative suitable employment for the employee. The employer may also need to be more lenient concerning the period of time which the employee is allowed to be on long term sick leave before they consider terminating the employment.

7. Age Discrimination

Johns v Solent SD Limited

Heydey, an arm of Age Concern, has brought a claim in the European Court of Justice that the UK Government is in breach of the European Union's Equal Treatment Directive by imposing a mandatory retirement age of 65. That case is likely to be heard by the European Court within the next few years.

Accordingly, in the interim a Southampton Employment Tribunal struck out a claim for unfair dismissal and unlawful age discrimination and denied a request that proceedings be stayed pending the outcome of the Heydey challenge.

Mrs Johns challenged the fact she had been retired having reached the statutory retirement age of 65. She accepted that her employer had followed the correct procedures and that the reason for her termination was retirement, a fair reason for dismissal.

The result of the ruling is that businesses should not have unresolved employment tribunal claims hanging over their heads indefinitely. The Tribunal decided that the prejudice to the employer in these proceedings being held in abeyance for a considerable period of time outweighed the prejudice to Mrs Johns in having her claim struck out as it only had a remote chance of success.

8. Race Discrimination

Iqbal Rasheed v Chubb Security

Mr Rasheed suffered 4 years of racial abuse while working as a street warden for Chubb on a job for Westminster City Council. Mr Rasheed was nicknamed "Saddam" by his colleagues and won £45,000 from an Employment Tribunal. His line managers and colleagues were accused of bullying. It was held by the Tribunal that he had been subject to racial and religious discrimination. He resigned after 4 years because he could no longer cope with the abuse. Chubb Security was also ordered to pay £10,000 court costs.

9. Corporate Manslaughter and Corporate Homicide Act 2007

This legislation which comes into force on 8 April 2008 will make it easier to prosecute large and medium sized organisations for activities resulting in an individual's death. The Ministry of Justice will issue further guidance for organisations affected by the Act in autumn 2007. The Act is about corporate liability not increasing the liability of individual directors or managers who can already be held to account through health and safety laws and the common law of manslaughter.

10. Disability Discrimination

Patterson v Commission of Police of the Metropolis UKEAT/0635/06, 23 July 2007

After over 15 years in the police force and promotion to the rank of Chief Inspector the Claimant discovered he was dyslexic. He had not previously had any difficulties with report writing, financial literacy or any other aspects in his complex and demanding job. However, the medical evidence suggested that he ought to be given 25% extra time in his examination for promotion to the rank of Superintendent as a result of his newly diagnosed dyslexia.

Mr Patterson brought a claim for disability discrimination. He alleged his employers failed to make reasonable adjustments particularly in the processes for determining whether he might be promoted to Superintendent. Although some adjustments had been made he claimed that these were insufficient. The Employment Tribunal held that he was disabled. It is the comparison between what the individual can do and would be able to do without the impairment which is important in determining whether somebody is disabled. It was self evident that a person who needed 25% longer to complete an examination because of his dyslexia was at a substantial disadvantage to the position if he did not have dyslexia and he was therefore disabled.

This case is useful as it addresses the issues that arise in connection with senior employees who have managed well for most of their career and are only now encountering new problems. The decision that assessments and examinations are normal day to day activities may also prove useful in other claims for disability discrimination based on learning difficulties or other mental impairments.

McDougall v Richmond Adult Community College UKEAT/0589/06

In this case the EAT held that someone who satisfied the conditions for compulsory admission to hospital under the Mental Health Act 1983 was not automatically disabled for the purposes of Disability Discrimination Act 1995. The EAT also held that when deciding whether an impairment has a long term effect the Tribunal should take account of all the information available at the hearing. They should not restrict themselves to asking what the likelihood of reoccurrence was at the date of the alleged discriminatory act.

Mrs McDougall who had a history of mental illness was offered the job of a database assistant at the College in early April 2005. On 22 April the offer was withdrawn on the ground that medical clearance was not available. Mrs McDougall issued tribunal proceedings claiming that the withdrawal of the offer was an act of disability discrimination. The College denied this and disputed that Mrs McDougall was disabled. Before the tribunal hearing to determine the issue of disability took place, Mrs McDougall suffered a relapse in her mental health and was again sectioned. It was held that Mrs McDougall was disabled within the meaning of the Act, but the issue of discrimination was remitted to the tribunal for hearing.

Spence v Intype Libra Limited, EAT (0617/06)

An employer's failure to obtain an up to date medical report before dismissing a disabled employee was not in itself capable of amounting to a breach of the duty to make reasonable adjustments held the EAT in this case. The issue was whether or not the necessary adjustments had in fact been made.

On a separate point when assessing whether an employee's condition was long term for the purposes of the statutory definition of disability the Tribunal should have disregarded events occurring after the date on which the alleged discrimination occurred. The employee's claim was dismissed on the Appeal Tribunal's conclusion that there had been no failure to make reasonable adjustments and that although the dismissal amounted to less favourable treatment for a disability related reason it was justified in these circumstances.

11. Information and Consultation

Amicus v Macmillan Publishers

The first penalty has been handed out to an employer for failure to inform and consult with his employee under the Information and Consultation of Employee Regulations (ICE) 2004. The EAT took a dim view of Macmillan's non-compliance and imposed a fine of £55,000 to be paid within 14 days. The maximum fine is £75,000. The sum was an attempt to deter others from adopting the same "wholly cavalier attitude to their obligations". This was the third occasion on which MacMillan was in breach of the ICE Regulations.

Macmillan had failed to arrange a ballot to elect employee representatives on receipt of a valid employee request. Macmillan argued that the formal system of staff consultation committees which had operated for many years was a pre-existing arrangement which removed its obligations under the Regulations. However, the previous arrangements amongst other things did not cover all Macmillan employees.

With the threshold for compliance under these Regulations reducing to 50 employees as from April 2008 this issue will be relevant to an increasing number of employers who have no information or consultation arrangements with their employees in place. Employers may therefore wish to consider the benefits of reaching such an agreement on a voluntary basis before a statutory request is made.

12. Race Discrimination

Mehmet t/a Rose Hotel Group v Aduma, EAT

Mr Aduma was a Nigerian national who worked in accordance with the terms of his student visa as a night manager at a hotel. He was employed to work 6 nights a week for 12 hour shifts, for which he received a weekly wage of £130 - well below the national minimum wage. He did not have a National insurance number and, when he told the hotel manager that he intended to apply for one he was strongly dissuaded from doing so. When he persisted in applying he was dismissed.

Mr Aduma brought various claims before the tribunal including the complaint that he had been discriminated against contrary to the Race Relations Act 1976. The Employment Appeal Tribunal held that the tribunal had been entitled to find that a British based person would not have been underpaid as Mr Aduma was and that the less favourable treatment of pressing Mr Aduma not to apply for a National Insurance number could be on discriminatory grounds. Mr Aduma was awarded £17,720 in respect of his discrimination complaints and £1,000 in aggravated damages, all increased by 40% on account of the hotel manager's failure to comply with the statutory grievance procedure.

13. Redundancy

Harris v Towergate London Market Limted, EAT 0090/07

Ms Harris was dismissed for redundancy by TLM on 31 October 2005. She was informed that she could appeal the dismissal. She did not do so as she believed the dismissal process had been properly applied. After the event, following comments she received at her leaving party, she and her union representatives met with the HR manager who provided information on her selection. However she raised the grievance about the decision to dismiss her for redundancy. The company replied that it was not obliged to deal with her grievance as it related to her dismissal. She then commenced tribunal proceedings for unfair dismissal more than 2 months after the normal time limit for bringing such claim had expired.

The preliminary question for the tribunal was whether it had jurisdiction to hear her claim. The EAT held that Ms Harris in reality was challenging the legitimacy of the redundancy assessment which formed part of the dismissal procedure. Her time for doing so was therefore extended by 3 months because on the date the original time limit expired she had reasonable grounds for believing that some sort of dismissal procedure was ongoing. One of the reasons for such a finding was the company's generosity in conceding to Ms Harris' request for a meeting which resurrected an otherwise closed procedure. Employers should be wary of such a step.

Rogers v Slimma plc 2007 AER 162

Ms Rogers was a production manager with her employer. She was advised that she was being considered for redundancy in October 2003. There was a consultation period between the employer and the employee of one week. In the event that the employee was made redundant and she brought a complaint alleging unfair dismissal. The tribunal dismissed her claim and held that a longer consultation would not have been reasonable, and in the circumstances of the case one week was appropriate.

Although it became apparent to the company in September 2003 that sales were falling and redundancies might be possible there was no obligation on the facts to consult with the employee during the later part of September, as opposed to the beginning of October. A one week consultation period was in the circumstances of the case an adequate period.

The tribunal ordered the employee to pay the employer's costs in the sum of £1,475.80. This case should be a warning to employees of the risk of challenging an obvious redundancy.

Transport and General Workers Union v Optare Group Limited UK EAT/0143/07/RN

The employer in this case made 17 compulsory redundancies immediately on the back of 3 voluntary redundancies. The Union alleged that the collective consultation requirements were engaged as the employer proposed to make 20 people redundant. The employer argued that the 3 voluntary redundancies should not be included, as the employer had not proposed to dismissed them, they had agreed to leave!

The Employment Appeal Tribunal disagreed. It was evident that the employer had proposed to make 20 people redundant within a 90 day period thus the collective consultation provisions were engaged and a protective award could be made, as it was common ground that the employer had not complied. The 3 had volunteered to be dismissed as part of the redundancy exercise which was the cause of their termination.

14. Industrial Action

The UK lost a total of 754,500 working days due to industrial action in 2006. Five times more than in 2005. 87% of those days lost were in the public sector, particularly in public administration and defence.

15. PILON Clauses

Morrish v NTL Group Limited 2007 CSIH 56 XA143/06

In this case the Scottish Court of Session considered whether a company could terminate an employee's contract immediately by making a payment in lieu of notice without breaching the employee's contract of employment if the right to do so was not specifically set out in the employee's contract. That is, was it possible to imply a PILON clause into a contract of employment?

Mr Morrish's written employment contract contained an express clause requiring both he and his employer to give "not less than 12 months written notice" of termination. When he was dismissed immediately and paid basic salary in lieu of his notice period he sued NTL claiming damages for breach of contract as he had been deprived of the ability to earn his bonus.

The Court held that to imply a term into a contract there must be a good reason and it could see no reason to imply a PILON clause into his contract when there was an express clause dealing with the notice provisions. Although there may be tax consequences with such a clause on balance it is better to include a PILON than not to do so then there is no question of forfeiting any restrictive covenant clauses.

16. Jurisdiction Over Contract Claims

Samengo-Turner and Ors v J&H Marsh & McLennan (Services) Limited and Ors 2007 EWCA Civ 723

The Court of Appeal in this case ruled that Marsh & McLennan could not sue its three former executives in New York when they left to join a rival broker. The three executives were based in London and had a UK employment contract, but their valuable bonus arrangements were operated through a scheme based in New York subject to a US jurisdiction clause. The employees were afforded the protection of only being able to be sued by their employers in their country of domicile.

17. Compensation for Loss of Statutory Rights

Dugdale v Cartlidge UKEAT/0508/06

The EAT considered the approach that tribunals should take when making an award in respect of loss of statutory rights. It has become common for tribunals to award a single amount to cover both the loss of protection against unfair dismissal and the loss of statutory minimum notice period in unfair dismissal claims.

Mr Cartlidge was dismissed by Dugdale and brought a claim for unfair dismissal. His claim was upheld and he was awarded compensation including £500 in respect of loss of statutory rights. Dugdale appealed against a number of findings including the award of £500 rather than the £200 which Mr Dugdale had claimed. The EAT allowed the appeal holding that the tribunal should have awarded the appropriate compensation sum which would have been based on the £100 awarded in the 1986 case of Muffett v Head increased in line with inflation which would now be worth £202 - £210, which meant the amount claimed by Mr Cartlidge in his case would have been about the right amount. Employers facing claims by ex-employees for more than £200 should refer to this case.

18. Casual Employees and Continuity of Employment

Vernon v Event Management Catering Limited UKEAT/0161/07

The EAT held in this case that the holiday during which a casual employee received rolled-up holiday pay did not break their period of continuous employment. Although this case is unlikely to arise again in view of the finding that rolled-up holiday pay is not lawful, it does mean that casual employees could preserve continuity by taking a day's holiday in any week during which they are not given work.

Event Management engaged workers from a large pool of casual staff when necessary and Mr Vernon started working in February 2003. He was entitled to holiday under the Working Time Regulations and received rolled-up holiday pay. He worked 2 or 3 days each week between February 2003 and June 2006. The only weeks which he did not work was when he took a holiday for 2 weeks in 2005. As Mr Vernon was absent by arrangement due to his statutory holiday leave, continuity was preserved and he had the necessary period of employment to claim unfair dismissal.