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.

1.   Agency workers to have equal rights

The Government has agreed a deal between unions and employers that will see agency workers in the UK receive equal treatment after 12 weeks’ employment.  This will allow fairer treatment for agency workers whilst not removing the important flexibility that agency work can offer both employers and workers.  Equal treatment will be defined as “at least the basic working and employment conditions that would apply to the workers concerned if they had been recruited directly”.  It will not however cover occupational pension provisions.

The Government hopes that the EU agreement which will be sought will be obtained in time for the necessary UK implementing legislation to be introduced in the next parliamentary session. 

2.   Extension of flexible working rights

The Government has accepted the recommendations of the review into flexible working.  The review recommended that:

• The right to request flexible working is extended to those with parental responsibility for children up to the age of 16; and
• The extension of the right should not be phased in but implemented in one go. 

The Government has accepted these recommendations and will be consulting on how to implement the proposals. 

3.   Residence and Domicile Rules

HM Revenue & Customs has published its new interim guidance on residence and liability to UK tax IR 20.  Complimentary copies of IR 20 are available on request. 

4.   National Staff Dismissal Register

A National Staff Dismissal Register for retail employers is expected to go live shortly.  The register is a commercial initiative championed by the Action Against Business Crime Group.  The register will apparently hold data on individuals who are dismissed for prescribed dishonesty reasons including theft and/or damage and on individuals who resign partway through a disciplinary process or investigation based on such reasons. 

Employers will be able to check whether prospective employees have faced allegations of stealing, fraud, damaging company property or causing a loss to employers or suppliers.  Concern has been expressed from many sources about the effect of this “blacklist” on data protection issues. 

5.   Grievances under the modified procedure

Clyde Valley Housing Ltd v MacAulay UKEATS/0045/07

The EAT in this case held that an employee’s generalised complaint that she had been subjected to degrading and humiliating treatment such as to destroy trust and confidence was insufficient to comply with step 1 of the modified grievance procedure as she had not set out the basis of the grievance.  Her letter had described the character of the alleged conduct but it failed to set out the evidential basis for her complaint, namely the who, what, why, where, when. 

Miss MacAuley resigned from the Housing Association claiming constructive dismissal and disability discrimination.  It was agreed that the modified procedure applied and so her solicitors wrote to Clyde setting out a number of allegations.  Clyde sought clarification of exactly what acts and conduct of theirs it was that Miss MacAuley was referring to.  These were not forthcoming so they wrote to say that as a result they had been unable to address her grievance. 

The EAT confirmed that the Tribunal could not entertain the claim unless she had sent something in writing to Clyde which set out her grievance and the basis for it.  This was a threshold condition.  The fact that details would come to light during litigation or indeed that there could be financial penalties for failing to comply with the procedure did not remove the Tribunal’s need to consider the written statement and be satisfied that it met the certain minimum requirements. 

Key point: The requirements under step 1 of the modified grievance procedure are much more stringent than those under step 1 of the standard procedure making it much more likely that a claim could be inadmissible. 

6.   Redundancy: reasonable refusal of a suitable alternative job

Commission for Healthcare Audit and Inspection v Ward UKEAT/0579/07

In this case the employee had become disillusioned with the handling of the redundancy process, partly because of her employer’s lack of clarity and refusal to discuss the details of the alternative job on offer.  She also perceived the alternative job as involving a significant loss of status.  The Tribunal found that the job did not involve any loss of status and was “on balance” suitable, but the employee had not been unreasonable in refusing it based on her perceptions. 

The EAT held that it was permissible for a Tribunal to find that a job was suitable, but in the circumstances the employee perceived it, not unreasonably, as unsuitable.  The fact that, objectively, it was only marginally suitable rather than plainly suitable was a relevant consideration.  Where a new job offer is overwhelmingly suitable it will be easier for the employer to show that refusal by the employee is unreasonable. 

Key point: The employer’s communication and general handling of a redundancy situation, which will inevitably affect the employee’s perception of any alternative job offer, are critical.

7.   Information and consultation

Darnton v Bournemouth University IC/14/2007

The Central Arbitration Committee (CAC) held in this case that despite providing a number of varying estimates and employee numbers, the University had not failed to provide data in response to an employee request under Regulation 5 of the Information and Consultation of Employees Regulations 2004.  The fact that an employee could complain to the CAC one month after making their request did not equate to a requirement that the University had to provide the requested data within that time. 

The University had attempted to calculate employee numbers in good faith and had explained to the employee the difficulties which it had encountered.  The University had not therefore provided false data.  Although the data was incomplete it satisfied the two purposes in Regulation 5 for which data could be requested, those two purposes being to calculate the number of employees in accordance with Regulation 4 and to determine what number of employees constituted 10% of the employees in the employer’s undertaking. 

8.   Constructive Dismissal

Parsons v Bristol Street Motors UKEAT/0581/07/2802

Mr Parsons, who was 60, worked at the dealership in Oxford where a new manager was recruited.  He resigned some 4 months later as a result of his new manager’s style and brought a claim for constructive unfair dismissal.  The Tribunal had to decide whether he had resigned in circumstances amounting to constructive dismissal.  His new manager was indiscriminately tactile with staff but Mr Parsons was not singled out for such treatment.  His new manager regularly used bad language and gave Mr Parsons a nickname which focused on his age referring to him as the “old parsonage”, “old buzzard” and “old git”. 

The Tribunal held that the new manager’s conduct towards the employee was not calculated or likely to destroy the employment relationship and therefore Mr Parsons’ claim failed.  He appealed.  

The Appeal Tribunal found the Tribunal’s decision was plainly and unarguably wrong.  The treatment of Mr Parsons by the manager as found, regardless of whether the treatment was in part applied to other members of staff, was to be objectively viewed as likely to destroy the employment relationship. 

A finding of constructive unfair dismissal was substituted and the matter was remitted to a fresh Tribunal to determine the question of remedy absent agreement between the parties. 

Key point: Whilst the employee’s subjective reaction to his employer’s conduct was not determinative of the breach question, it was a factor which the tribunal were entitled to take into account in deciding, objectively, whether the conduct was likely to destroy trust and confidence.

9.   Irish Pension Schemes 

Companies in the Irish Republic that operate occupational trusts must arrange for current trustees (except professional trustees) to be given appropriate training within the next 6 months.  New trustees must also be given training within 6 months of their appointment and in future refresher training must be provided every 2 years. 

The Irish Pension Board is currently establishing a programme of courses to meet this new requirement.  The Social Welfare and Pensions Bill 2008 requires trustees to prove that they have received training and companies may be given on the spot fines for non-compliance. 

10. ACAS

ACAS has issued for consultation its revised Discipline and Grievance Code of Practice, to take into account the proposed repeal of the statutory dispute resolution procedures in the Employment Bill currently progressing through Parliament. 

The proposed Code aims to simplify the dispute resolution process.  Failure to follow the new draft Code does not make a person or organisation liable to proceedings but an unreasonable failure to comply with any provisions of the Code will entitle Tribunals to adjust any rewards made in relevant cases by up to 25%.  Copies of the draft Code are available on request. 

Key points in the Code to note are:

• The draft Code provides that written and final written warnings need normally be given before dismissing for performance or misconduct and applies the same procedural standards to disciplinary warnings as to dismissal.  The current disciplinary procedure does not apply to the issue of warnings.  Employers could therefore be at risk of increased tribunal awards if they trip up earlier in a performance management process than is currently the case.
• The draft Code is concerned with disciplinary matters and appears not to cover redundancy dismissals or the expiry of a fixed term.  These are covered by the current statutory disciplinary procedure.
• Employers may be at a greater risk of failing to spot and react properly to an employee grievance under the draft Code.  The draft Code provides that grievances are best put in writing, but does not require this (unlike the statutory grievance procedure).
• The draft Code does not replicate the current modified statutory procedures, which permit some dismissals for gross misconduct without a hearing and enables grievances to be resolved without a meeting or appeal if employment has ended and both parties agree. 

Conciliation Policy

ACAS has announced an important change to its policy on conciliation.  It has announced that in light of the Government’s intention to abolish fixed periods of conciliation it will, from 1 April 2008, exercise its power to conciliate in all cases irrespective of whether the fixed period for conciliation has expired. 

Health and Wellbeing

ACAS has issued new advice to employers on how to spot signs of depression in the workplace.  This coincides with ACAS’ new Guide on Health and Wellbeing which includes sample checklists and policies.  Complimentary copies of the advice and health, work and wellbeing Guide are available on request. 

11. Automatic unfair dismissal: burden of proof

Kuzel v Roche Products Limited 2008 EWCA Civ 380

In this case it was held by the Court of Appeal that it was for the employer to prove that it had a potentially fair reason for dismissing an employee or to prove that the reason asserted by the employee was not the real reason.  When an employee asserted a different reason, in this case whistleblowing, the burden of proof did not pass to her.  The employee must produce some evidence supporting their assertion but will not bear the burden of proving that the dismissal was for that reason.

Ms Kuzel brought a claim for unfair dismissal arguing that she was dismissed because she had made a number of protected disclosures during the course of her employment and was therefore automatically unfairly dismissed.  Her dismissal was found to be unfair but not to be have been automatically unfair for having made a protected disclosure.

12. Age Discrimination

Swann v GHL Insurance Services UK Limited, Case 2306281/2007

The Tribunal held by a majority that the provision of a fund to staff with which to purchase items from a flexible benefits package was not capable of amounting to less favourable treatment on the grounds of age.  This was notwithstanding the fact that the benefit scheme provided an option to join a private health insurance scheme whose premiums were calculated according to age and gender.  The majority went on to hold that even if the offer of the benefits package had amounted to discrimination on the grounds of age, they were satisfied that GHL had made out the justification defence. 

GHL had made all reasonable efforts to offer its employees a flexible benefits package that was the most advantageous possible to staff and on the balance of probabilities the package would have the beneficial effect on the recruitment and retention of staff.

When Mrs Swann chose the health package the premium was £631.56 based on her age and gender.  However, the total flex fund available to her to purchase her benefits was only £462.50 per year.  She brought a claim for age discrimination on the basis that the premiums for the PMI element of the package were age related and therefore more costly for her than for a younger employee.  The Tribunal disagreed and by a majority dismissed her claim for age discrimination.

13. TUPE

Dynamex Friction Ltd and another v Amicus and others 2008 EWCA Civ 381

In this case the administrator of a business had carried out dismissals which were for economic reasons and were not transfer related.  The fact that the eventual buyer may have stage managed the dismissals was immaterial as this had not affected the administator’s decision.  The administrator had decided that he had no option but to dismiss the employees because he had no money with which to pay them and that decision was taken at a time when no buyer had been identified and the sale of the business as a growing concern was not definite.  There was no suggestion that he took the view to dismiss the staff in order to improve the prospects of selling the business.  Nor had he already engineered the dismissal specifically to avoid TUPE related liabilities.  There was also no evidence that he had colluded with or was under the control of anyone.  Therefore the Tribunal’s conclusion that the reason for the dismissals was an economic one, was inevitable.

Key point: The reason for pre-transfer TUPE dismissals is of crucial significance to a Buyer and Seller because it determines which of them has liability for the dismissal and other employment related debts.  Although the case was decided under TUPE 1981 the same issues would arise under TUPE 2006. 

Post-transfer immigration checks

Transferees may need to carry out checks on the immigration status of all employees acquired under TUPE within 28 days of the transfer.

Employers found employing illegal workers may be issued with a civil penalty for up to £10,000 per worker, unless they carried out specified immigration checks before hiring the worker.  The nature of the required checks changed on 29 February 2008.

The Border and Immigration Agency has now issued Summary Guidance stating that employers who acquire staff as a result of the TUPE transfer are provided with a grace period of 28 days to undertake the appropriate document checks following the date of the transfer.

It is unclear whether the Agency is treating transferees as newly employing employees acquired under TUPE.  If so, the checks required would be those under the post-February 2008 rules.  If not, the position may simply be that a transferee will risk not being able to establish the statutory defence if it does not redo the relevant checks (to the level required at the time the worker was hired) and the transferor failed to do them.

Key point: Employers should at the very least review the personnel files of all transferring employees to see what checks the transferor did make and make good any obvious deficiencies within 28 days if possible. 

14. Statutory Dismissal Procedure: Extensions of Time

Towergate London Marketing v Harris 2008 EWCA Civ 433

In this case the Claimant was entitled to an extension of time under circumstances where she had filed a grievance but not an appeal letter within the original three month time limit from her termination date. 

Lord Justice Keen stated that whereas to an employment lawyer there is clearly a distinction between a grievance and an appeal no one expected an employee to have ready grasp of these arcane mysteries.  As employees do not have ready access to skilled legal advices it is therefore important that the courts avoid an unduly technical approach.  He felt that the wording of the Regulation was clear and that the Claimant’s belief did not have to be that a statutory procedure was being followed, merely that a procedure was being followed. 

Miss Harris was engaged as an insurance broker.  On 24 October 2005 she was informed that she had been made redundant and that she had the right to appeal against the decision within 7 calendar days.  She acknowledged the letter and confirmed its acceptance of its terms but did not appeal.  She later consulted her trade union who advised her to put in a grievance.  She did that by writing a letter.  On 31 January, the day after the limitation period expired the employer replied saying it was not going to deal with the grievance because it was not obliged to.  She then commenced proceedings for unfair dismissal. 

The Tribunal Chairman decided as a matter of construction that the grievance letter could not constitute an appeal and that the claim for unfair dismissal had not been made within the statutory limit of three months notwithstanding the availability of an extension of that time by a further three months pursuant to Regulation 15.  Her claim was accordingly dismissed.  She appealed and the EAT held that there were reasonable grounds for her to believe that there was an ongoing procedure. 

The employer appealed but this was dismissed.  It had been open to the Appeal Tribunal to reach a conclusion which it had and to hold that Regulation 15 had been satisfied on the evidence.  The issue was whether the employee reasonably believed that a dismissal procedure of some kind was being followed in respect of redundancy and dismissal.  Accordingly the complaint of unfair dismissal had been presented in time. 

Key point: Employers should be cautious of assuming that once the limitation period has expired there is no automatic extension of 3 months after the termination date.

15. New immigration scheme proposals published

The Home Office has published its proposals for how the new points based system will apply to Tier 2 and Tier 5 applications.  Tier 2 applications relate specifically to skilled workers and will replace the existing work permit and TWES work permit arrangements.  Tier 5 applications relate to temporary workers such as sports people, entertainers and agency workers and youth mobility schemes and will replace the existing categories of working holidaymakers. 

These tiers will be introduced during Autumn 2008.

16. Working Time Regulations 1998 compensation

Miles v Linkage Community Trust Limited UKEAT/0618/07

Linkage provided specialist education in care homes.  Mr Miles was employed by Linkage on a shift system which required him to work for a long period and sleep at the care home.  This did not always give him a break of at least 11 hours so he brought a claim for breach of the Working Time Regulations.  Linkage conceded that sleeping time constituted working time.  This, in effect meant that the only remaining issue was the amount of compensation due to Mr Miles.  The Tribunal held that Mr Miles was not entitled to any compensation as he had suffered no pecuniary loss arising from the breach.  There was no scope in the Regulations to award injury to feelings and there was no culpable default on the part of Linkage. 

He appealed to the Employment Appeal Tribunal but he was unsuccessful.  The Tribunal had a discretion as regards compensation and the parties agreed that this extended to a discretion not to make an award. 

Key point: The amount of compensation awarded will be based only on the employer’s default. 

17. Employer’s counterclaim in unfair dismissal claim

Wright v Weed Control Limited EAT 29.01.08 (0492/07)

In a claim for unfair and wrongful dismissal, his employer’s counterclaim that the employee had breached the implied term of trust and confidence was not excluded by the Employment Tribunal’s extension of jurisdiction (England and Wales) 1994.

Mr Wright was managing director of Weed Control until he was dismissed for gross misconduct.  The alleged misconduct included paying VAT invoices by bad cheques which subsequently bounced and led to fines.  Mr Wright brought claims for unfair dismissal, wrongful dismissal and unlawful deduction from wages.  In its response Weed Control contended that dismissal was fair and included a counterclaim for damages for Mr Wright’s breach of the implied term of mutual trust and confidence.  The Tribunal found that there had been an unlawful deduction of wages over a period of 2 weeks while he was suspended but in respect of the counterclaim the Tribunal concluded that he had been in breach of the implied terms of trust and confidence and awarded £18,159.79 being the sum that Weed Control lost and fines when the VAT was not paid promptly. 

Mr Wright appealed the award of damages arguing that the breaches of the implied term of trust and confidence fell outside the Employment Tribunal’s jurisdiction.  The EAT took the view that although Tribunals may not award damages in respect of “a term imposing an obligation of confidence” this was a much narrower category relating to a duty of an employee with access to confidential information not to disclose it.  That type of claim was reserved to the Chancery Division of the High Court.  In contrast, the Tribunal was perfectly able to consider implied term of mutual trust and confidence claims and to award damages in respect of them.  Accordingly Mr Wright’s appeal was dismissed. 

18. Illegality in Unfair Dismissal Claims

Enfield Technical Services v Payne 2008 EWCA Civ 393
BF Components Limited v Grace

The Court of Appeal upheld the decision that the contracts of two employees, who had been previously treated as self-employed, were not illegal.  The Court confirmed that the employees’ active participation in the incorrect labelling of the employment relationship was not sufficient to make the contract illegal.  It was necessary for there to be a misrepresentation of the underlying facts to HMRC. 

Mr Payne wanted to be self-employed and he and Enfield agreed a sub-contractor’s contract. HMRC accepted that he was self-employed (although the matter was not clear-cut and a finely balanced matter).  He later claimed he had been unfairly dismissed by Enfield .  The Tribunal held that Mr Payne was an employee.  There was nothing inherently illegal in the contract. 

Mr Grace brought a claim for unfair dismissal against BF Components and the issue arose as to whether he had sufficient continuity of employment as he had been self-employed from June 2002 to September 2003. 

An individual who has been incorrectly labelled as self-employed and has benefited from the tax advantages of self-employment would not automatically be prevented from claiming the advantages of employment.  He will however be excluded from the right to claim unfair dismissal if his contract is held to be illegal.  The most common form of illegal contract is where there has been no PAYE deductions.  The contract of employment will only be void for illegality if it can be shown that the employee, in bad faith, falsely represented the underlying facts of their relationship to HMRC.

Key point: The cases illustrate that in the absence of any misrepresentation, the fact that an employee has previously benefited from the tax advantage of being self-employed will not prevent them from subsequently claiming the advantage of being employed. 

19. Statutory Maternity Leave - Salary Sacrifice and Non Cash Benefits

HM Revenue & Customs have published Guidance on the effect of the changes in the Sex Discrimination Act 1975 on the entitlement of women expecting babies after 5 October 2008 to receive contractual non-cash benefits during additional maternity leave. 

There are useful worked examples of a number of different scenarios faced by employers when dealing with salary sacrifice schemes and non-cash benefits for employees who are on maternity leave. Complimentary copies of the Guidance are available on request.