Employment Law Update

Issue No. 39

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.    Annual Increase in Compensation Limits

With effect from 1 February 2009 the limit on a week’s pay will increase to £350.  This is for the purpose of calculating a statutory redundancy award or an unfair dismissal basic award.  The maximum statutory redundancy or basic award rises to £10,500 and the maximum statutory compensation award to £66,200.  The maximum combined compensation is therefore £76,700 for dismissals which take effect on or after 1 February 2009 or any redundancies to be put in place after 1 February 2009. 

2.    Pensions Act 2008

The Pensions Act 2008 received royal assent on 2 November 2008.  The Act requires that from 2012 every employer must provide a qualified workplace pension scheme to their workers aged between 16 and 75.  Eligible employees aged between 22 and under pensionable age earning between £5,035 and £33,540 must be automatically enrolled into the chosen scheme although they may opt out of it.  An employer who willfully fails to comply with the Act’s automatic enrolment will face up to two years’ imprisonment and/or a fine. 

A new head of automatic unfair dismissal is to be created covering the situation where employees are dismissed as a result of exercising their rights under the Act.  Protection from suffering a detriment as a result of enforcing their rights is also to be provided. 

This new scheme will replace the stakeholder pensions regime.  An employer can enrol their workers into their own “qualifying pension” scheme or a new Personal – Accounts based arrangement.  Either arrangement will receive a minimum level of compulsory contributions from the employer and the employee.  Employers will be obliged to pay into the Personal Accounts at the rate of 3% of qualifying earnings while their employees must contribute 4%. 

Employers who offer staff either a money purchase scheme with an equivalent or better contribution scheme or who operate a final salary scheme will be exempt from the new regime. 

3.    Business Mileage – Reimbursement

HM Revenue & Customs has announced new rates for the reimbursement of employees for business travel in their company cars or when employees are required to repay the cost of fuel used for private travel.  The new rates apply from 1 January 2009. 

If the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type of car i.e. between 7p and 17p there is no income tax or class 1 NIC’s liability for the employee. 

4.    Discipline and Grievances at Work – ACAS Guide

ACAS has issued its draft Guide to Discipline and Grievances at Work providing good practice and advice when dealing with discipline and grievances in the workplace.  It is intended to compliment the ACAS Code of Practice - Discipline and Grievance which Tribunals are required to take into account when considering relevant cases.  Complimentary copies are available on request.

- Repeal of current procedures

New regulations have been published and will come into force on 6 April 2009 which deal with the repeal of the much criticised statutory dispute resolution procedures and the transitional arrangements that will apply in specific circumstances.  The transitional provisions govern which dispute resolution regime will apply to disciplinary action or grievances which are under way when the statutory procedures are repealed on 6 April 2009.

Key point:  Employers should now be considering whether their current discipline and grievance procedures comply with the new ACAS Code and be preparing their managers for dealing with disputes in a few months’ time.  If either the employer or the employee fails to adhere to the Code the Tribunal may increase or decrease the compensation by up to 25%.

5.    Right to Time off

ACAS has launched a consultation on revisions to their 2003 Code of Practice - Time off for Trade Union Duties and Activities.  The revised Code covers trade union representatives and those organisations where an independent union is recognised for collective bargaining purposes.  ACAS is also consulting on draft guidance for other types of employee representation and developing effective employee representation.  The consultation closes on 16 March 2009.  Complimentary copies of the revised Code are available on request. 

6.    European Works Councils

The European Parliament has adopted a number of amendments to the European Works Councils Directive based on an informal agreement reached between the EU Council and Parliament on 4 December 2008.  This is aimed at increasing European Works Councils.  The recast Directive will:

• Clarify the concept of “information and consultation”.
• Establish a right to paid time off for training for EWC members.
• Insist on effective dissuasive and proportionate sanctions for those employers who fail to comply with the Directive’s requirements. 

The European Works Councils Directive applies to undertakings with at least 1,000 employees across the Member States and at least 150 employees in each of two or more of those Member States, in which case they must establish a European Works Council to inform and consult employees about transnational issues. 

The UK Government is expected to hold further consultation in 2009 as to how the recast Directive should be implemented. 

7.    Specific Performance in Dismissal Proceedings

Lakshmi v Mid Cheshire Hospitals NHS Trust 2008 EWHC 879 (QB)

Dr Lakshmi, a consultant physician, was employed by the Mid Cheshire Hospitals NHS Trust.  The Trust undertook an investigation into Dr Lakshmi’s alleged failure on at least 46 occasions to take steps to examine a body where a patient had died as a preamble to certifying that the patient’s death was not suspicious.  Her file was passed to the Crown Prosecution Service but the Trust refused to postpone the disciplinary hearing pending their decision.  The Trust upheld the case against her and she was summarily dismissed.  The CPS decided no further action would be taken. 

Dr Lakshmi applied to the High Court for a declaration that the disciplinary hearing and her dismissal were a nullity, that she remained employed by the Trust and that any disciplinary proceedings must comply with the procedures specified in her contract.  She sought damages for breach of contract. 

The High Court held that in refusing to delay the disciplinary hearing the Trust had been in breach of contract and it awarded Dr Lakshmi one month’s pay, by way of damages for the losses she suffered, which was the period during which the hearing should have been adjourned.  The Trust’s summary dismissal of Dr Lackshmi had been in breach of contract.

Dr Lakshmi appealed claiming that she should have been awarded damages for her 3 month notice period.  Dr Lakshmi was not successful in her injunction application to preserve the employment relationship because the mutual trust and confidence between her and the Trust had broken down.  She had been dismissed in breach of contract but the loss flowing from her subsequent dismissal was protected by a prospective claim for unfair dismissal and therefore she was unable to recover more compensation at common law.

Key point: Employers should make it clear in their employment contracts or handbook whether the disciplinary policies have contractual effect or not, whether expressly or impliedly.

8.    Gross Misconduct – Disparity of Treatment

Ashraf v The Metropolitan Police Authority 2008 All ER D 301

The employee received a written caution for common assault inflicted on his wife.  Under the provisions of his employer’s disciplinary body that constituted gross misconduct and following an internal disciplinary procedure Mr Ashraf was dismissed. 

His internal appeal was unsuccessful.  He brought a complaint before the Employment Tribunal seeking to have the decision set aside as he submitted a list of 14 cases which he contended were comparable to his case and he should not have been dismissed.  In its judgment the Tribunal did not address the issue of the list of comparative cases but noted that, although the employee alluded to cases within the employer’s organisation which had been dealt with differently, he had not put any of those cases before the Tribunal.  The Tribunal ruled that the dismissal had not been unfair and would be upheld.  The employee appealed.  His appeal failed.  Disparity arguments have to be scrutinised with particular care and any comparators put forward have to be truly similar.  None of the cases put forward to the Tribunal was a true comparator as none concerned domestic violence.

Key point:  Employers should aim for consistency of approach in dealing with sanctions for an employee who is to be disciplined or dismissed.  

9.    Effective Date of Termination

Barratt v Gisda CYF 2008 All ER 288

A letter notifying Ms Gisda that she had been summarily dismissed was sent by recorded delivery to her home address on Wednesday 29 November 2006 following a disciplinary hearing the previous day.  It arrived on 30 November.  Ms Gisda was not there but the letter was signed for by her boyfriend’s son.  She had left home to travel before the letter was delivered and did not arrive home until Sunday 3 December.  The next day she asked whether any post had arrived and was given the letter. 

She brought a claim for unfair dismissal and sex discrimination which claim was presented on 2 March 2007.  If the effective date of termination was on or before Saturday 2 December the claim was out of time.  If the effective date was Sunday 3 December or Monday 4 December the claim was in time.  The Employment Tribunal found the claim had been presented in time, as 4 December was the effective date of termination.  That was the date on which the employee read the letter. 

The employers appealed but were unsuccessful.  The usual rule that a letter of dismissal was only effective when the employee read it, applied.  There was no principle that an individual had to be at home to receive the post when it was expected following a termination hearing. 

Key point: If an employer wishes to ensure that notice of termination is delivered to an employee without delay this should be provided for in the contract of employment or notice is given verbally and later confirmed in writing. 

10.    Associative Disability Discrimination

Coleman v Attridge Law ET/2303745/2005

The Tribunal held at a pre-hearing review that the Disability Discrimination Act 1995 is capable of being interpreted so as to protect people associated with a disabled person from discrimination or harassment. 

Mrs Coleman was the primary carer for her disabled son.  When she took time off to care for him her employer accused her of trying to change her working conditions.  She then brought a claim for discrimination and harassment.  The case will now proceed to a full hearing to decide on the substantive merits of the claim. 

See Employment Update Issue 36 for the original decision of the European Court of Justice which confirmed that the Framework Directive prohibits associative disability discrimination.  However, the Tribunal will only be able to consider Ms Coleman’s claim for compensation insofar as this relates to events taking place from 1 October 2004 as the 2003 Disability Regulations implementing the Equal Treatment Framework Directive were not in force before then. 

Key point: This case could give rise to other claims against employers for associative discrimination in particular regarding age and sex and where carers are treated less favourably. 

11.    Migrant Workers and TUPE

The UK Border Agency has updated its guidance to clarify who is responsible for notifying the Border Agency via the sponsorship management system when a transfer under TUPE results in the transfer of sponsored migrant workers. 

The licensed sponsor must inform the Border Agency within 28 calendar days of taking over an organisation that is not a licensed sponsor.  If the licensed sponsor is taken over by a company that is not a licensed sponsor then the existing sponsor must tell the Border Agency about the takeover and the new organisation must apply for a sponsor licence within 28 calendar days. 

If the new organisation fails to apply for a licence the permission for all sponsored migrants who have transferred to stay in the UK is likely to be reduced to 60 calendar days to allow them to find a new sponsor as they will no longer be working for a licensed sponsor.  If both companies are licensed sponsors then both companies must tell the Border Agency about the takeover within 28 calendar days.  The organisation that was taken over must state who now has responsibility for the respective migrants and the organisation that has taken over must tell the Border Agency about the migrants that it has taken responsibility for. 

Key point: Businesses must not overlook these provisions.  The statutory Code of practice which prevents illegal working will apply fines of up to £10,000 per illegal worker employed and transferee employers have only 28 days to check the documentation relating to transferred employees to ensure that no illegal workers have been transferred.  Consideration should be given to the provision of relevant indemnities in any Asset Purchase Agreement to deal with this. 

12.    Administration proceedings and TUPE

Oakland v Wellswood (Yorkshire) Ltd UKEAT/0395/08

In this case the EAT has upheld the Tribunal decision that a transferor employer which was in administration at the time of a TUPE transfer was subject to “bankruptcy proceedings or any analogous insolvency proceedings…instituted with a view to the liquidation of the assets of the transferor”.  Therefore owing to Regulation 8(7) of TUPE the transferor’s employees did not automatically transfer to the transferee.  Where employees do not automatically transfer any dismissals by reason of the transfer are not automatically unfair. 

Mr Oakland was an employee, director and 50% shareholder in a fruit and veg wholesaler.  In mid 2006 the company ran into difficulties and went into administration.  On 6 December a sale of assets took place to Wellswood and Mr Oakland was taken on by Wellswood under TUPE.  He was dismissed on 23 November 2007.  He brought a claim for unfair dismissal but the Tribunal held that he had insufficient service to bring a claim having only 11 months service and not 4 years.  Regulation 4 of TUPE was disapplied by virtue of Regulation 8(7). 

Key point: A relevant transfer in the context of an administration would therefore fall within Regulation 8(7) rather than Regulation 8(6).  If, however, administrations in which it is unclear at the outset, whether a rescue is a viable option, the position under TUPE is less clear cut. 

13.    Age Discrimination

Seldon v Clarkson, Wright and Jakes UKEAT/0063/08

The EAT in this case has allowed an appeal by Mr Seldon against the Tribunal’s conclusion that his compulsory retirement as a partner in a law firm aged 65 was direct age discrimination but it was objectively justified.  Although the firm had a potentially legitimate aim in maintaining a congenial culture by limiting the need to expel partners through performance management that did not justify a retirement age of 65 in the absence of evidence that performance tended to decline at that age.  The assumption that performance dropped off at 65 was not supported by any evidence provided by the firm. 

In principle such a rule could be justified but it was not justified in this case.  The case was remitted to the same Tribunal to consider whether the need to achieve the other legitimate aims was sufficient to justify the relevant age rule.  The fact that the partners had consented to the rule originally may be a factor to consider but it does not automatically justify it.  Mr Justice Elias held that where a partnership seeks to conduct matters so as to achieve a congenial relationship amongst the partners this was a perfectly legitimate aim. 

Key point: A compulsory rule requiring partners to retire at a particular age is potentially discriminatory unless it can be objectively justifiable.  Regulation 30 of the Age Regulations, which provides that retirement at 65 or above for all employees will not be discriminatory, does not apply to partners.

14.    Increases to statutory sick pay and maternity, paternity and adoption pay

HM Revenue & Customs has announced the revised rates of statutory sick pay, statutory maternity pay, statutory paternity pay and statutory adoption pay for 2009 to 2010 subject to parliamentary approval from 6 April 2009 as follows:

Statutory sick pay will increase to £79.15.  The prescribed weekly rate of statutory maternity, paternity and adoption pay will increase to £123.06. 

15.    Temporary Agency Workers

The Directive on Temporary Agency Work 2008/104/EC was published on 5 December 2008.  Member states now have until 5 December 2011 to implement its provisions. 

The main provision is that agency workers must have the right to equal basic working and employment conditions with comparable permanent employees.  The Directive will enable the UK to provide that an agency worker must be in a job for at least 12 weeks before such protection is afforded. 

16.    Redundancy – Fairness of Scoring

Goodin v Toshiba Tec Retail Information Systems SA 2008 All ER 128

Mr Goodin was employed as a senior installation engineer.  In March 2007 there was a necessity for two engineers to be made redundant.  He was told about this on 7 March and thereafter there was consultation.  The main decision taken by Toshiba was based on a matrix scoring system.  Two engineers were at the bottom with 11 points and on that basis Toshiba decided that those on 11 points were the unsuccessful candidates and were to be made redundant. 

At no stage was Mr Goodin given his precise scoring or details of what the others had scored.  When he was made redundant he brought a claim alleging unfair dismissal.  The Tribunal concluded that the marking Toshiba had adopted was fair and that they had a proper constructive approach to the redundancy.  The only criticism of the selection process was the failure to provide Mr Goodin with his scoring and therefore his dismissal was unfair.  It then went on to consider that on the balance of probabilities that had a fair procedure been followed the employee would still have been dismissed.  Where there was a breach of the statutory procedure he was entitled to a minimum basic award of 4 weeks’ pay.  He had already received a redundancy pay which equalled to 3 weeks.  He was therefore awarded another week.  In terms of compensation for automatic dismissal, that award was reduced by 100%. 

The employee appealed but it was dismissed.  The Tribunal had been entitled to come to the view that although there had been a potential for unfairness arising from the failure to give him his scores, on the balance of probabilities the dismissal had not been unfair because that would not have made any difference to their decision.  As the Tribunal’s enquiries had not revealed any defect in the scoring system, this was fatal to the success of his appeal. 

Key point: In a redundancy exercise there is no tangible prejudice in permitting the selected employees to see their own scores and where they are placed in relation to the non-selected employees.   

17.    Permanent Health Insurance

Blake v PSL Energy Services Ltd 2008 Scot (D) 6/12

This case concerned a former employee of PSL who sought damages for an alleged breach of contract by his employer for failing to sue or assign the right to sue the insurers of his permanent health scheme to obtain benefits to which he was entitled and that they had terminated his employment for no good reason.  Consequently he was unable to obtain the insured permanent health benefits to which he would have been entitled had his employment continued. 

This is not an unfamiliar claim.  The employee tried to suggest that under contract an employer would not terminate the employment where that would affect his eligibility to benefit from the permanent health scheme and that there was an implied obligation on the employer to sue on behalf of the employee or at least to assign the right to do so. 

The Court held that it would be unreasonable to expect an employer to embark on litigation, even one with good prospects of success and to be held responsible for the costs when it had not been asked to do so, where no terms had been set out as to its management control and the only beneficiary of it if successful would be the employee. 

The express terms and circumstances of the contract could not be construed as placing a restriction on the employer’s right to dismiss where the employee was no longer entitled to demand payment of a benefit from his employer.  The employee could if so advised, still bring a claim arising out of his termination in the Tribunal. 

Key point: The terms of providing PHI cover should be considered carefully by both an employee and an employer in particular the potential issues on cessation of cover. 

18.    Sexual Orientation

English v Thomas Sanderson Ltd 2008 EWCA Civ 1421

The Court of Appeal has overturned the EAT’s decision that Mr Sanderson was not discriminated against or harassed because of homophobic banter where he was not gay and was not perceived or seemed to be gay by his fellow workers.  See Employment Update Issue 32.  His claim originally failed on the basis that he was not, or was not perceived to be homosexual.  The Court of Appeal has now held however that he was discriminated against, in a majority decision.  The majority decided that where the subject matter of teasing is related to sexual orientation this can found a harassment claim under the Sexual Orientation Regulations even though he was not gay.

Key point: This decision could lead to similar teasing claims being brought under the Race, Religion or Belief and Age legislation.  As Lord Nicholls said “Members of [racial] groups need protection from conduct driven by unrecognised prejudice (i.e. subconscious motivation) as much as from conscious and deliberate discrimination.”

The Government is currently drafting the Equality Bill which is designed to bring all the discrimination strands together in one Act.  It will be interesting to see how this issue is addressed in the Bill.  

19.    Religious Discrimination

London Borough of Islington v Ladele UKEAT/0453/08

The EAT has upheld the Council’s appeal that the Tribunal had erred in law when it found that a Christian Registrar, who refused to perform civil partnership ceremonies, had been discriminated against, both directly and indirectly, and harassed on the grounds of her belief.  The EAT observed that the way in which the Council had handled the Registrar’s objections might be considered unsatisfactory but it was not discriminatory.  The Council had taken disciplinary action against the Registrar not because of her religious beliefs but because of her refusal to abide by its policy that all Registrars carry our civil partnership ceremonies.  The EAT accepted that the Council’s policy put Ms Ladele’s religious beliefs at a disadvantage but held that the Council had been justified in imposing its policy.  See Employment Update Issue 36 for details of the original Tribunal claim.  It is understood that Ms Ladele, who is supported by the Christian Institute, will appeal the decision. 

Key point: This case provides some guidance on how employees balance competing and conflicting interests when considering differing discrimination issues and their potential justification. 

20.    Length of Service Pay Criteria and Equal Pay

Wilson v Health & Safety Executive UKEAT/0050/08

Mrs Wilson was employed as a band 3 inspector by the HSE.  Their pay scale linked pay to length of service over a 10 year period, meaning that she received less pay than equal but longer serving male colleagues.  In 2002 she brought an equal pay claim.  She was unsuccessful.  She appealed to the EAT which upheld her claim and it was remitted to a fresh Tribunal to consider whether there were “serious doubts” as to whether the HSE length of service pay criterion was appropriate. 

The EAT held that the Tribunal had interpreted the scope of the Cadman “serious doubts” test which if passed by a worker would require the HSE to provide objective justification for its length of service, pay criterion, too narrowly.  The Tribunal had to be satisfied that there was a real reason to suspect the employer has stepped beyond the margin which can properly be afforded to employers when considering whether added experience typically improves job performance. 

The Tribunal must therefore ask itself whether a worker has in fact raised serious doubts as to whether a length of service criterion is appropriate.  The hurdle is a high one for the worker to clear.  The EAT decided the case should be referred to a fresh Tribunal to consider whether the HSE length of service pay criterion was appropriate. 

Key point: It is clear from the EAT’s ruling that length of service pay criteria applying over a long period of time might fall foul of equal pay law.  Employers who have long term incremental pay schemes should examine them and consider whether they can be objectively justified and are therefore lawful. 

21.    Health & Safety

The Health & Safety (Offences) Act 2008 comes into force on 16 January 2009.  The maximum penalties for breach of s.33 of the Health & Safety at Work Act 1974 will be increased.  The maximum penalties vary depending on the specific offence committed but include unlimited fines and in the case of prosecution of an individual, up to two years’ imprisonment. 

22.    Statutory Holiday Entitlement

The statutory holiday entitlement will increase from 1 April 2009 to 28 days per holiday year inclusive of Bank holidays.  Employees who already have a contractual entitlement of at least 20 days plus Bank holidays will be unaffected by this increase.