Employment Law Update

Issue No.40

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.    New Legislation Effective April 2009

The following changes are due to come into effect in April 2009:

• Extension of right to request flexible working to employees who are parents or carers of children up to the age of 16, from 6 April 2009.
  
• Increase in statutory holiday entitlement.  The statutory annual leave entitlement is increased from 4.8 weeks to 5.6 weeks with effect from 1 April 2009.  This includes Bank Holidays. 
  
• Repeal of the statutory dispute resolution procedures with effect from 6 April 2009.  Subject to transitional provisions which provide for the existing statutory procedures to continue to apply after 6 April these procedures have been repealed in their entirety and the ACAS Code of Practice will now apply.
  
• Increases to statutory sick pay, maternity pay and adoption pay from 5 April 2009.  The revised weekly rate of statutory sick pay will be £79.15.  The prescribed weekly rate of statutory maternity pay, paternity pay and adoption pay will be £123.06.
  
• PAYE.  Employers with 50 or more employees must file their employee starter and leaver information online from 6 April 2009 as a failure to do so could result in a penalty for the employers. 
  
• HM Revenue & Customs has introduced new P45 forms which must be used from 6 April 2009.  The old ones will be invalid from that date.  They are now A4 in size and contain extra fields for the employee’s date of birth and gender. 

2.    Long Term Sickness Absence and Right to Holiday Leave

Stringer and others v HM Revenue and Customs C-520/06 ECJ

In this case and a conjoined German case, the ECJ has ruled on the effect of long term sick leave on a worker’s right to the statutory minimum annual leave under the Working Time Directive. 

The key point is that a worker on sick leave will accrue annual leave despite not working.  The House of Lords will now have to determine whether UK workers can take their annual leave during a period of sick leave in the light of this ruling.  The ECJ also ruled that at the end of the leave year a worker on sick leave who has been unable to take annual leave must be allowed to carry it over. 

At present the Working Time Regulations do not provide for this.  In addition the right to be paid in lieu of accrued holiday on termination will apply even if the worker has been on sick leave for the whole or part of the leave year. 

For those employees in the public sector the ruling will have an immediate impact. Public authorities must now allow employees to carry over any unused holiday from one leave year to the next if their sick leave has prevented them from taking it and must provide payment in lieu of such untaken holiday as part of any termination payment.  This does not apply to any contractual holiday leave above the statutory minimum. 

The ruling has no direct effect yet on the private sector but the House of Lords will be asked to look at key issues in the light of this ECJ decision and the Government will then have to decide whether to introduce amending legislation if the Working Time Regulations are incompatible with EU law for all employees.

Key point:  Employees should review their current employment terms for holiday leave during sickness absence and consider what amendments may be useful, if any. 

3.    Age Discrimination – Is compulsory retirement at 65 justified?

Age Concern England v Secretary of State for Business Enterprise and Regulatory Reform Case C-388/07

The ECJ has given its judgment in the Heyday case holding that the provisions of the Employment Equality (Age) Regulations 2006 which allow for the compulsory retirement of workers at age 65 falls within the scope of the Equal Treatment Directive.  Heyday had challenged the forced retirement of employees at 65. 

The ECJ mirrors the Advocate General’s opinion of September 2008 that the retirement age directly discriminates on account of age and requires that it must be justified by “legitimate social policy objectives” such as those relating to employment policy, the labour market or vocational training.  It will be for the High Court taking into account the discretion Member States have in areas of social policy to determine whether the compulsory retirement of workers at 65 is justified by a legitimate aim within the meaning of Article 6(1) of the Directive. 

Key point:  Whatever the High Court decision the Government is committed to reviewing the retirement age in 2011 and it may be that the retirement age of 65 is done away with altogether. 

- Age bar

Baker v National Air Traffic Services Limited ET/2203501/2007

In this case the Tribunal found that a blanket ban on anyone age 36 or over applying to become a trainee air traffic controller was direct age discrimination that could not be justified. 

There was a long history of “received wisdom” within National Air Traffic Services Limited (“NATS”) that competency decreased with age.  In 1988 the age limit for trainees was 25 but an age bar of 36 was gradually introduced.  With the advent of the age discrimination Regulations NATS decided to review the age limit and pending its review suspended the age bar in June 2006. 

In January 2007 NATS instructed an external consultant to provide a report on the proposal to reintroduce an age bar of 36.  The expert recommended an age limit of 40.  NATS had concerns that setting the age at 40 would compromise safety so put pressure on the expert to revise her opinion, which she did. NATS reintroduced the age bar of 36 in April 2007.

Mr Baker applied to become a trainee in August 2007.  This application was rejected as he was aged 50 at the time.  He brought a claim for direct discrimination under the Age Regulations.  The Tribunal’s view was that NATS had failed to strike a balance between the discriminatory effect of the age bar and the needs of their undertaking.  It had failed to explore other ways of achieving its aims without imposing an age bar.  There was a lack of correlation between the age bar and its stated aims of achieving a high success rate in training, providing an adequate pool of qualified individuals receiving a reasonable period of service post-training and ensuring safety. 

Key point:  An employer imposing an age bar for employment should explore less discriminatory means of achieving its aims rather than providing post event evidence to justify its approach on making a general assumption about declining ability with age. 

4.    Disability Discrimination - Comparator Test

Stockton on Tees Borough Council v Aylott UKEAT/0401/08/1103

The Employment Appeal Tribunal in this case has handed down a second judgment confirming that the Employment Tribunals should follow the approach on the correct comparator test as set out in the Malcolm case in an employment law context. 

Mr Aylott had a bipolar affected disorder.  He was employed from 3 June 2003.  After difficulties with colleagues he was moved to a different department and was then seconded to a different team.  His last day at work was 13 April 2006 and his employment ended on 8 November 2006. He brought a claim for unfair dismissal and disability discrimination and was awarded £32,356.54 compensation which included 1 year’s loss of earnings and 10% uplift.  The Tribunal held that his dismissal was discriminatory based on a stereotypical view of mental illness. 

The Honourable Mr Justice Slade in the case made the following comment on the appropriate comparator: “… although disabled people may not now be able to establish that they have been discriminated against for a reason related to their disability……, they may be able to establish discrimination by the employer’s failure to make reasonable adjustments.  An employee for example who is not able to drive because of his disability who was disciplined for frequently arriving late for the night shift would not be able to establish discrimination for a reason relating to his disability, if a non-disabled person with a similar record of bad time-keeping would also be disciplined.  However, depending on the circumstances, he could claim that this employer had discriminated against him by failing to make a reasonable adjustment by not providing him with transport.”

The EAT held that Stockton’s appeal against the findings of disability discrimination should succeed and the case was remitted for re-hearing. 

Key point:  Disability related discrimination claims using the correct comparator will be hard to establish but employers should not treat employees less favourably as a result and should make all possible but reasonable adjustments to allow them to continue to work.  Managers should ensure they are provided with adequate training to deal with these issues. 

Child Support Agency (Dudley) v Truman UKEAT/0293/08

Mrs Truman worked as a complaints officer for the Child Support Agency and suffered from a back condition.  She requested and finally received an adjustable desk and worked from home. 

In January 2007 the Child Support Agency decided to end home working and encouraged her to apply for early retirement but her application was refused.  She brought claims against the Child Support Agency under the Disability Discrimination Act 1995.  The Tribunal held that the Agency had discriminated against her and failed to make reasonable adjustments in inter alia bringing her home working arrangements to an end.  She was awarded £7,000 for injury to feelings.  The Child Support Agency appealed successfully. 

The appropriate comparator for her was a non-disabled employee who was unable to work full-time in the office.  The case was remitted to the same Tribunal to reconsider the question of disability discrimination using the correct comparator. 

- Time Limits for Reasonable Adjustments

Shaw & Co Solicitors v Atkins UKEAT/0224/08

Miss Atkins was a Legal Executive who suffered from ME.  After a prolonged period of sickness absence she asked for her hours to be adjusted to enable her to return to work.  Her preference was for a 4-day week, 2 days being worked in the office and 2 days at home.  Her employer rejected her request for home working and proposed an alternative scheme.  She raised a grievance and she made an additional request for adjustments including the installation of a lift and the provision of a taxi to and from work.  After her employer refused to accommodate her request, she lodged a claim.

The Tribunal found that the employer had failed to make reasonable adjustments by failing to offer the hours she wanted, by failing to permit home working and by failing to rent an adjoining ground floor accommodation. 

The Employment Appeal Tribunal held the Tribunal had not taken the correct approach.  It had not had regard to the relevant considerations when determining the reasonableness of taking a particular step, including the cost and the practicability of taking those steps.  The EAT upheld the finding in relation to hours of work but overturned the findings in relation to home working and alternative accommodation.  The issue of the chair lift was remitted to the Tribunal for reconsideration. 

Eastern & Coastal Kent PCT v Grey UKEAT/0454/08

An employer is exempted from the duty to make reasonable adjustments if it did not know and could not reasonably be expected to know that someone is likely to be placed at a substantial disadvantage by a disability. 

This defence is often used by prospective employers defending allegations of failing to make reasonable adjustments when offering or not offering a job.  The EAT in this case held that each, not merely one of the following limbs has to be satisfied, for the employer to be exempt from making adjustments, namely that the employer:-

• does not know that the disabled person has a disability;
• does not know that the disabled person is likely to be at a substantial disadvantage compared with people who are not disabled;
• could not reasonably be expected to know that the disabled person had a disability; and
• could not reasonably be expected to know that the disabled person is likely to be placed at a substantial disadvantage in comparison with others who are not disabled. 

Miss Grey was a senior, extremely experienced and well qualified nurse. She suffered from dyslexia and the issue on appeal was whether her employer was exempted from making adjustments for her during the interview process when she applied for promotion.  Her performance at the interview for promotion was adversely affected by her dyslexia and she was not successful in obtaining the position. 

The Tribunal found that the PCT had not directly discriminated against her but the PCT appealed the finding that it was in breach of its duty to make reasonable adjustments for Miss Grey and in consequence it discriminated against her.  The Appeal Tribunal remitted the matter to the same Tribunal which heard the original claim to determine whether the provisions were satisfied to exempt the employer from its obligations to make adjustments for Miss Grey. 

Key point:  The case is a reminder of the complications of defending or bringing a disability discrimination claim and the delicate and sensitive balance that has to be drawn between the interests of the disabled employee and the potential employer.  A robust and well publicised equal opportunities policy should be put in place and adhered to. 

5.    Employee Inventors

Kelly and Chiu v GE Healthcare Ltd 2009 EWHC181(Pat)

This is the first reported successfully contested claim by employee inventors for compensation under s.40 of the Patents Act 1977 where the employees have made an invention for their employer for which a patent has been granted and that patent is of outstanding benefit to the employer.

Mr Kelly and Mr Chiu were employed as research scientists by Amersham who were later acquired by GE.  They were involved with others in the first synthesis of a compound called P53 which later formed the basis of an imaging agent which was a very successful product for their employers. 

They brought an action seeking an award of compensation from their employer under s40 of the Patents Act claiming a share of the benefit which they said had been derived by their employer from the patent.  The Judge held they were entitled to compensation.  In determining the employees’ share of the benefit the following had to be considered:

• The nature of duties and remuneration and other benefits;
• Their effort and skill;
• The contribution of others;
• The employer’s contribution.

Dr Kelly, the senior researcher was awarded £1m and Dr Chiu £500,000, as being just and fair.  The patents were of outstanding benefit to Amersham and it mattered not that the employees had been well paid in their employment. 

Key point:  This is a landmark case but it may not be so easy for other inventors in other areas to establish a right to compensation. 

6.    Unfair Dismissal - Compensation

Roberts v Aegon UK Corporate Services Ltd UKEAT/0277/08

The EAT upheld in this case the Tribunal’s decision that an unfairly dismissed employee was entitled to compensation for ongoing pension loss even though immediately after her dismissal she obtained a new job with a remuneration package that was more favourable overall. 

This employee received no award for loss of earnings but she did have a pension loss.  Prior to being unfairly dismissed she had enjoyed the benefit of a final salary scheme.  In her new job, which she obtained immediately after her dismissal she had access only to a money purchase scheme.  She had therefore lost the benefit of being a member of a final salary scheme which she was unlikely to receive again in the future.  Although this new employment lasted only 8 months the EAT had to consider whether, although the new employment had broken the chain of causation with regard to loss of earnings, she was still entitled to compensation for ongoing pension loss.  She was. 

In assessing the compensation, it found that her loss of pension rights under the scheme was £173.80 per week and this loss would be ongoing until she reached the age of 50, the age at which the Tribunal decided she would have remained with Aegon but for her unfair dismissal.  However, in order to achieve a just and equitable result, she had to give credit for the benefit she was likely to receive in the future from a new money purchase scheme and for the pension rights and salary increase she received whilst working.  Taking this into account the Tribunal ordered Aegon to pay compensation of over £37,000.  Aegon appealed but they were unsuccessful. 

Key point:  This is an important decision for employers operating similar pension schemes and such potential loss should at least be considered and then settled or compromised on termination. 

- Taxable amounts

SpC 734 A v Revenue and Customs Commissioners

A resigned from his job as head of department with the Bank on being told that he would receive a written warning.  He made a claim of unfair dismissal seeking compensation. 

His claim was settled by mediation which resulted in him receiving a payment of £250,000 from the Bank together with a payment of his legal expenses.  The issue in dispute was how much of the settlement payment fell within s.401 of the Income Taxes (Earnings and Pensions) Act 2003 as a payment in consequence or otherwise in connection with the termination of his employment.  The ex-employee contended that only £50,000 of the £250,000 was caught by s.401, and that the balance was split between £175,000 for loss of reputation and £25,000 for injury to feelings.  Thus the only taxable element was £50,000 subject to the exemption of £30,000.  The Revenue contended that £240,000 of the £250,000 was caught by s.401, £10,000 only being attributable to injury to feelings. 

A’s main argument was that his reputation was irreparably damaged by the sham disciplinary proceedings and the written warning that ensued.  His resignation did not of itself cause the damage to his reputation and the damage was not therefore connected with the termination of his employment.  His claim therefore before the Tribunal included the element of damage to his reputation.  The Revenue on the other hand relied on the wording of the settlement agreement which stated that the Bank would pay him £250,000 upon withdrawal of his claims before the Employment Tribunal. 

Thus they claimed it was not open to him to redraft the terms of the agreement made in good faith.  He was bound by a statement that the compensation arose from the termination of his employment although no formal notes of the negotiations conducted at the mediation were taken and the settlement sum was not particularised. 

It was held by the Special Commissioners that of the £250,000 compensation paid only £10,000 could be allocated to injury to feelings which did not count as employment income.  The balance was directly connected with the termination of his employment and therefore was employment income subject to the £30,000 exemption.  His liability for tax was increased therefore by £88,000. 

Key point:  Terms of a settlement have to be consistent with what will be put forward later to the Revenue and what has been agreed by the parties.

- Mitigation earnings

Bell v Stuart Peters Ltd 2009 AER 165

Miss Bell presented a claim to a Tribunal alleging that she had been unfairly constructively dismissed.  The Tribunal found that she was entitled to a 6 month contractual notice period and she had been dismissed without notice.  It also found that had the employee acted reasonably to mitigate her loss she would have found suitable employment at the end of the 6 month period.  In the event she was awarded 6 months’ notice pay. 

During the 6 month notice period the employee found temporary work which lasted 3 months but the Tribunal declined to offset the earnings she had received against the award in respect of earnings unpaid by the employer in the 6 month notice period.  Her employer appealed but was unsuccessful.  It was held that the principle established in Norton Tool case decided 36 years ago applied also to cases of constructive dismissal.  The Tribunal was correct in not deducting the earnings which she had received from alternative sources during the course of her notice period from the award of compensation, although this meant double recovery.  She was entitled to a compensatory award that included a full payment in lieu of notice. 

Key point:  Employers should proceed cautiously when dismissing without notice or pay in lieu of notice as the duty of mitigation will arise in calculating the employee’s future losses only after the notice period. 

7.    Racial Harassment

Richmond Pharmacology v Dhaliwal Case No. UKEAT0458/08

Miss Dhaliwal was a Project Manager in the clinical department of her employer, a research organisation.  She was British and had lived in England all her life but was of Indian ethnic origin.  In August 2007 she gave 1 month’s notice of resignation.  Against the background about how much notice she would serve and her holiday leave, a short meeting took place between her and Dr Lorch who was one of the founders and co-owners of the company and its Medical Director. 

Dr Lorch advised her that her work had deteriorated since she had resigned but that she should work out her notice in a professional way.  He then went on to say “We will probably bump into each other in the future, unless you are married off in India”. 

She was very upset by that remark and said she would not proceed with the meeting any further unless someone from HR was present.  She subsequently took out a grievance but that was not resolved to her satisfaction.  Dr Lorch and Miss Dhaliwal had talked about her prospects of marriage previously, but she brought a claim for racial harassment.

The Appeal Tribunal held that the Tribunal was entitled to find that a remark made by an employer to a female employee of Indian ethnic origin referring to the possibility of her being “married off in India” had the effect of violating her dignity and constituted harassment within the meaning of Section 3A of the Race Relations Act 1976.  Although it was an ill-judged remark rather than a comment that was intended to cause offence and was a single incident within an otherwise positive working relationship, the Tribunal had not erred in awarding her compensation of £1,000 for injury to feelings.  

Key point:  Employers should be sensitive to the hurt that can be caused by such stereotypical and racially offensive comments and conduct but equally a culture of hypersensitivity should not be encouraged.  All employers should all be made aware of what is not acceptable behaviour by effective policies and procedures.

8.    Agency Workers

The Department for Business Enterprise & Regulatory Reform has published a leaflet on “Agency Workers: Know Your Rights”.  It is designed to give general advice on the law covering the conduct of employment agencies operating in the UK.  Complimentary copies are available on request. 

9.    Religion or Belief Discrimination

Chondol v Liverpool City Council UKEAT/0298/08

Mr Chondol was a social worker employed by the local authority and committed Christian.  He was aware that he was prohibited from promoting his beliefs in the course of his work.  Concerns arose about him giving a Bible to one of his service users and an attempt by him to promote his religious beliefs to a different service user which resulted in a complaint from that user.  Following a disciplinary hearing he was summarily dismissed.  He brought a claim against Liverpool CC alleging that the dismissal was unfair and constituted unlawful religious discrimination. 

The Tribunal found that the true reason for his treatment was that he had been inappropriately promoting Christianity to service users and that his employer would have reached the same conclusion and acted in precisely the same way regardless of what religion had been promoted in respect of any other employee.  The Tribunal also found that in the light of Liverpool CC’s concerns it had been reasonable in dismissing him.  The employee appealed but was unsuccessful.  He had not been mistreated because of his religion but because he was improperly foisting his religion on service users. 

Key point:  The key question is why an employee has been treated in the manner complained of.  He did not complain of indirect discrimination but if he had he might have been able to establish that his Christianity meant that he had a fundamental belief in promoting Christianity and therefore he was put at a disadvantage in not being able to do so. 

10.    Race Discrimination

Osborne Clarke Services v Purohit UKEAT/0305/08

Osborne Clarke is a legal firm.  They had a policy of never accepting applications for training contracts from non EEA nationals who required work permits to work in the UK.  Mr Purohit was an Indian national whose application for a training contract was not accepted because of his immigration status. 

The Employment Tribunal found that OC’s policy was indirect discrimination on the grounds of nationality as the proportion of non EEA nationals who could comply with the requirement to have a work permit was considerably smaller than the proportion of persons not in that group who did not require a permit and the policy was not justifiable.  The relevant guidance from UK Border Agency at the time required employers to show why the post could not be filled with resident EEA workers and give credible reasons why they had not employed a suitably qualified resident worker or one who, with extra training, could do the job. 

OC argued that their policy was justified as the job was training related and so EEA candidates who were apparently less qualified than non EEA candidates could always with training, do the job.  Furthermore, the number of potential applicants for training would involve the employer in considerable administration costs in making work permit applications which were destined to be unsuccessful.  The Employment Appeal Tribunal rejected these arguments.  It found that OC had not established the level of evidence required to prove justification on an objective basis.  There was no evidence of a dialogue with UKBA about the chances of succeeding in work permit applications for potential trainees from non-EEA countries. 

Key point:  Employers should have regard to the Commission for Racial Equality Code of Practice on racial equality in employment which makes it clear that, as far as possible, selection should be based simply on merit and work permit issues should only come into consideration at the final stages of selection. 

11.    Statutory Dismissal Procedure – Step 1 letter

Zimmer v Brezan UKEAT0294/08/2410

Mr Brezan was employed by Zimmer as a regional sales manager for a very large territory.  Zimmer’s HR Director looked at Mr Brezan’s mileage and expense claims when he was selected for promotion to a new role, which would have been office based.  Mr Brezan was concerned about his loss of his entitlement to mileage payments.  He was therefore invited to a meeting on 9 November to discuss his mileage and expense claims and attached to that letter was a copy of a disciplinary policy. 

After further meetings he was eventually dismissed for misconduct.  The Tribunal held that the dismissal was automatically unfair as the Step 1 letter inviting him to this meeting did not state that Zimmer was contemplating or he was at risk of, dismissal.  Therefore, the resulting dismissal was automatically unfair.  Zimmer appealed unsuccessfully.  His Honour Judge Burke held that even though the words of the statutory dismissal procedure did not expressly require the employer to state in writing that it was contemplating dismissing the employee, it was desirable to construe the statutory procedure purposively so as to include such a requirement. 

Key point:  This is an important point to remember when preparing Step 1 letters in matters which will be subject to the transitional provisions of the Statutory Dismissal Procedures post 6 April 2009. 

- When is “action” taken?

Smith Knight Fay Ltd v McCoy UKEAT/0245/08

Mr McCoy was employed by SKF from June 1998 to May 2007.  In February 2007 the Chief Executive, Mr Lock set about assessing management roles in the business which his group had just bought.  He decided to remove unnecessary and inconsistent levels of management and he asked his secretary to invite Mr McCoy to a meeting on 3 April.  No letter preceded the meeting.  Mr Lock’s evidence was that he had formed a preliminary view that Mr McCoy was to be made redundant and at the meeting on 3 April he intended to announce that preliminary view.  The news came as a great shock to Mr McCoy at the time.  He was then invited to meet with the person from HR to discuss a financial package and a compromise sum but no agreement was reached. 

There was a further meeting in April and in May but at the end of the last meeting the decision was confirmed that Mr McCoy was to be dismissed.  He was given 9 weeks’ notice of termination and his appeal against dismissal was unsuccessful. 

The Tribunal and the EAT found his dismissal substantively unfair.  The question was whether his dismissal was automatically unfair.  He was clearly terminated on the grounds of redundancy.  It was held that employers who announce an intention to dismiss an employee before the Step 1 letter and Step 2 meeting can recover the situation by sending the letter and holding the meeting afterwards, provided they have not actually dismissed the employee.  The phrase “before action is taken” in the statutory dismissal procedure referred to the act of dismissal, not the decision to dismiss.  If an employee was told he was being made redundant and then given a Step 1 letter followed by an invitation to a meeting, he was not automatically unfairly dismissed. 

The case was remitted to the Tribunal for further reconsideration. 

Key point:  This case is also important in respect of future dismissals which will be subject to the transitional provisions of the Statutory Dismissal Procedure post 6 April 2009. 

12.    FSA Code of Practice on Remuneration Policy

On 26 February 2009, the FSA published a draft Code of Practice for the remuneration policies of FSA regulated firms.  Although the Code is still in draft, businesses should take note of it now.  It is binding only at this stage on Banks which take part in the HM Government’s Asset Protection Scheme.  The Code sets out a detailed framework for linking risk management and remuneration.  It may have a useful impact outside the financial sector given the current state of performance and reward in businesses.  The Code is likely to be in place by November 2009.

13.    ACAS and CIPD Guidance – Recession

ACAS and CIPD have launched a draft Guidance “How to manage your workforce in a recession”.  The guidance emphasises the importance of thinking long term when managing employees as well as maintaining employee engagement, wellbeing and productivity.  Complimentary copies are available on request. 

14.    Holiday Leave

Craig and Taylor v Transocean International Resources Ltd UKEATS/0029/08

Oil rig operators were entitled to require offshore workers to take their statutory minimum annual leave as part of their onshore field breaks.  The operatives worked a 2 weeks on and 2 weeks off duty cycle.  They had argued that they were entitled to take their annual holiday when they were working i.e. when they were rostered for 2 weeks on, and not on their off duty cycle but were unsuccessful.

15.    Compromise Agreements

McLean v TLC Marketing Plc UKEAT/0429/08

Clear language is needed in a Compromise Agreement to waive claims arising out of events taking place after the agreement has been entered into.  In this case the language was not sufficiently clear to prevent a fresh claim of victimisation that was not in the contemplation of the parties at the time of entering into the agreement. 

Miss McLean entered into a COT3 Agreement with her employer TLC Marketing and others in April 2008.  The agreement settled claims for inter alia victimisation providing for Miss McLean to receive a lump sump in settlement of her claims and a reference.  In the event the employer failed to pay the full amount due or to provide her with the agreed reference.  She then submitted a claim to the Employment Tribunal claiming victimisation alleging she had been subjected to a detriment by her employers for their failure to comply with the Compromise and that was because she had brought proceedings under the Sex Discrimination Act 1975.  The Tribunal refused to accept her claim since the Compromise Agreement had precluded a victimisation claim being lodged based on events after the agreement had been entered into. 

She sought a review of the decision but the Judge declined to review.  She then successfully appealed to the Employment Appeal Tribunal.  The case was remitted for consideration on its merits by the Tribunal.  The language of the relevant clause was not sufficiently clear to support the conclusion that the parties had intended to exclude all future claims. 

Key point:  It is not possible to waive all future claims in a Compromise Agreement as such agreements have to relate to particular complaints or particular proceedings raised at the time of the agreement and therefore employers should be mindful of this case if they breach the terms of a compromise as they risk a later victimisation claim.

16.    Confidential Information – business cards and email address book

WRN Ltd v Ayris – High Court

In February 2008, Mr Ayris was Head of Sales and Marketing in WRN.  He left his employer to take up a role as Business Development Manager for the company’s main competitor and took with him 50 – 80 business cards that he had collected during the course of his employment and a copy of his email address book containing details of customers and suppliers of his employers.  WRN applied to the High Court for an injunction to enforce the restrictive covenants against him and also demanded the return of business cards and address book, which he returned before the start of the proceedings. 

It was agreed that WRN had legitimate business interests which it was entitled to protect.  However, WRN failed to enforce the restriction against Mr Ayris that prevented him having contact with company customers with whom he had never had previous dealings.  Nevertheless he was restrained for 6 months from soliciting customers with whom he had dealt in the period before he left the Company’s employment.  The Court thought 6 months was reasonable for the purpose of enabling WRN to replace Mr Ayris, giving the replacement employee the opportunity to forge for him or herself the contacts that Mr Ayris enjoyed for WRN’s benefit.  The lack of geographical restrictions did not make the covenants unreasonable. 

As to the business cards and addresses removed by Mr Ayris, these business cards were given to him as a representative of WRN during the course of his employment by actual or prospective customers, and along with the addresses in his email address book, they were in the Court’s view, clearly the property of the Company.  However, much of the information they contained was not confidential or treated by WRN as confidential because this had been made available to the public on its own website, so accordingly no injunctive relief was appropriate.

Key point:  Restrictive covenant clauses in senior employees' contracts should be kept under review from time to time.  It should be made clear when such employees leave employment that the clauses will be enforced and all company property should be surrendered including contact details. 

17.    TUPE - Genuine Belief in no Application

Royal Mail Group Ltd v Communication Workers Union UKEAT/0338/08

This case concerned Royal Mail and the transfer of its post offices into private hands to be run as franchises.  Their practice was to offer employees voluntary redundancy on favourable terms when branches were transferred into private hands or to use the mobility clause in their contracts to require them to work elsewhere than their original place of employment.  It was on advice that Royal Mail considered that under Regulation 4 of TUPE the contracts of employees working in those branches would not therefore transfer.  Accordingly Royal Mail did not inform and consult with the employees.  The majority of employees who had worked in the post offices to be transferred were moved away or accepted redundancy before the transfers occurred.  However those who had not formally objected, had their employment transferred automatically if they were employed right up until the point of transfer, their mobility clauses being of nil effect. 

Was Royal Mail under an obligation under TUPE to provide information about the transfer and measures if it genuinely believed that the employees in question were not affected by TUPE?  The purpose of the provisions was to enable employees and their representatives to consider what steps and measures were proposed.  There was no legal requirement for an employer to warrant the legal accuracy of the information provided.  Therefore if the information that was given that turned out subsequently to be legally wrong Royal Mail was not be in breach of Regulation 13 in respect of the automatically transferring employees. 

Key point:  An employer may not be liable under TUPE if incorrect information is given in the genuine belief that it is correct. 

- Post-Transfer Obligations

Alemo-Herron v Parkwood Leisure UKEAT/0456/08

This case concerned 23 public sector employees’ entitlement to protection of their conditions on a competitive transfer to the private sector.  The EAT held that a contractual term entitling employees to pay in accordance with collective agreements negotiated from time to time was protected on a 1981 TUPE transfer to the private sector so as to give them a right to future pay increases negotiated post-transfer. 

Article 3(2) of the Acquired Rights Directive requires the transferee to continue to observe the terms and conditions of a collective agreement for not less than one year or the earlier expiry of the relevant collective agreement.  However this limitation had not been transferred into TUPE Regulation 6.

Although the ECJ had held in the Werhof case in 2006 that the Acquired Rights Directive did not bind transferees in respect of contractual amendments negotiated post-transfer, the EAT held that that decision was not binding in the UK and that as the UK was entitled to interpret the Acquired Rights Directive in a way more favourable to the employees than European law required under Article 8, the employees were therefore entitled to have their pay increased.  An appeal to the Court of Appeal has been lodged.

- Service provision change

Clearsprings Management Ltd v (1) Ankers and others (2) Angel Services UK Ltd UKEAT/0054/08

In this case, the EAT upheld a Tribunal’s decision that no service provision change had occurred and therefore there was no relevant transfer for the purpose of TUPE where a contract was reassigned from an original contractor to several new contractors.  The activities were so fragmented after the reassignment that it was not possible to determine to which new contractor the employees would have transferred. 

Clearsprings provided accommodation and support services to asylum seekers in North West England under a contract with the Home Office.  In February 2006 as part of a re-tendering exercise new contracts were awarded for the provision of the services to three new contractors.  A transitional period commenced on 20 March 2006 during which the new contractors acquired leases of properties to accommodate asylum seekers who were randomly distributed between the new contractors on a gradual basis.  Clearsprings’ contract was terminated on 30 June 2006.  The question was whether there was a relevant transfer of the contracts of employment of 17 Clearsprings employees to the new contractor and the answer was no.

Key point:  Employers who are involved in outsourcing or re-tendering exercises should take note of this case although the distinguishing feature of substantive fragmentation will not always be present.  TUPE 2006 may still apply where activities are divided up and awarded to a number of different contractors. 

- Duty to consult

UCATT v Amicus and others UKEATS/0007/08

The Employment Appeal Tribunal in this case held that neither the Acquired Rights Directive nor the TUPE Regulations obliged a transferee employer to consult after the transfer about measures it envisages taking in respect of a transferred employee. 

G transferred a division of its operations and 2000 of its employees to LLP under TUPE.  The union representatives presented claims alleging that G and LLP had failed to comply with their obligations under Regulation 13 – the obligation to consult about measures.  The unions argued that unlike a transferor the obligations of a transferee were not restricted to a pre-transfer timetable because Article 7 of TUPE did not give a cut-off date for the transferees’ consultation duties.  The EAT disagreed.  The cut-off point for consultation was the date of the transfer. 

Key point:  This does not mean that the transferee is not obliged to consult post-transfer.  If redundancies are planned, for example the new employer may be obliged to consult under the collective redundancy provisions.  Further, the parties are not prevented from consulting pre or post transfer with the employees who transfer over measures but the transferee is not required to do so.