Employment Law Update

Issue 44

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 compensation and pay limits for 2010

The maximum limit on a week’s pay for terminations on or after 1 February 2010 remains at £380.  The maximum compensatory award for unfair dismissal has been reduced to £65,300.  The standard rate for statutory maternity pay, paternity and adoption pay from April 2010 will rise to £124.88.  Statutory sick pay will remain at £79.15 per week.  The weekly earnings threshold for all payments will rise to £97. 

2.   Contingency fee arrangements

The Damage-Based Agreement Regulations 2010 come into force on 6 April 2010.  They formalise the arrangements for lawyers entering into contingency fee arrangements with clients.  All contingency fee arrangements signed on or after 6 April have to meet the following requirements:

• The fees are capped at 35% of the client’s compensation and include the VAT. 
• The agreement must be in writing and specify the proceedings to which the agreement relates. 
• The circumstances when the lawyer’s payments falls due must be identified; and
• The reason for fixing the agreed percentage must be identified. 

Before the agreement is signed a client must be informed in writing about how and when they can request a cost review, the dispute resolution service that ACAS provide, whether an alternative way of funding the claim is available, including other insurances and pro bono representation and a reasonable estimate of the likely costs of the expenses that the client will be required to pay and when.

The client will not be able to terminate the agreement early if liability has been admitted, settlement has been agreed or it is less than 7 days before the start of the tribunal hearing.  The lawyer will only be able to terminate the agreement early and charge if the client is behaving or has behaved unreasonably.  If an agreement is terminated early, the lawyer can only charge the client a reasonable amount for the work done and costs incurred in the case up to that point.  Barristers are not yet permitted to enter into contingency fee arrangements. 

3.   Medical fit notes

The Government is to replace sick notes with “fit notes”.  The Social Security (Medical Evidence) and the Statutory Sick Pay (Medical Evidence) (Amendment) Regulations 2010 will come into force on 6 April 2010.  Using fit notes will allow doctors to record whether a patient may be fit or not fit for work and will list the common types of changes employers can introduce to assist a return to work either on a phased basis or with amended duties or hours or other workplace adaptations.  It is the employer’s responsibility to carry out a risk assessment when the employee returns to work to ensure he or she is then fit for work.  The maximum duration of a fit note is 3 months.  

The Department for Work and Pensions has prepared a “Statement of Fitness for Work - Guide for employers”.  Complimentary copies are available on request.

4.   Right to request time off to train

The Employee Study and Training (Eligibility, Complaints and Remedies) Regulations 2010 and the Employee Study and Training (Procedural Requirements) Regulations 2010 come into force on 6 April 2010.  These set out the detail of the new right for employees to request time off to undertake study or training but will only apply to employees of employers with 250 or more employees from 6 April 2010.  It is expected to be extended to all employees from April 2011.  The Tribunal can award up to 8 weeks’ pay for any procedural breach of the Regulations.  The Regulations contain details of what an employer needs to do if they receive a request which closely follows the statutory flexible working procedure including a meeting with the employee to consider their request and a right of appeal.  An employee must have been employed for at least 26 weeks before they can make an application.  The amount of time allowed o! ff is at the discretion of the employer and they have no right to payment during the training or study period. 

5.   Pension Age

On 6 April 2010 the normal minimum pension age will increase from 50 to 55.  This is the earliest age at which a member of a UK registered pension scheme can ordinarily draw their pension.  There are two exceptions to this.  First pension scheme members who meet the ill health condition can continue to receive early payment of their pensions after April 2010 whether or not they have reached the normal minimum pension age and secondly those who have protected pension ages. 

6.   Data Protection Breach Fines

The Information Commissioners has been given new powers to impose financial penalties of up to £500,000 for serious breaches of the Data Protection Act 1998.  The Information Commissioner’s Office has published statutory guidance on the circumstances in which the Commissioner will issue fines and the level of these.  The new powers are expected to come into force on 6 April 2010.  The Commissioner will have power to impose financial penalties where there are serious breaches of the Data Protection Act such as in the previous cases of loss of confidential records. 

Data controllers should urgently review their practices and systems to reduce the risk of fines. 

7.   National Insurance and Secondees

From 1 May 2010 under new EU Regulations employees relocating to another European country will automatically pay National Insurance under their home country system for up to 2 years.  After the 2 years are up, an application may be made to extend home country payments for up to 5 years.  Under the new system however, where employees work regularly both in the UK and overseas for long periods, they may be required to transfer into another National Insurance system.

Employers should review working arrangements of their staff who spend a lot of time overseas to see whether their National Insurance status will be affected. 

8.   Blacklisting

The Employment Relations Act 1999 (Blacklisting) Regulations 2010 are due to come into force in April 2010.  The Regulations make it unlawful to compile, use, sell or supply prohibited lists.  They also create new rights for workers not to be subjected to a detriment or dismissal for a reason connected to a prohibited list.  A “prohibited list” must contain details of persons are or have been members of trade unions or persons who are taking part or have taken part in trade union activities.  The list must also be complied with a view to it being used by employers or employment agencies for the purpose of discrimination. 

Compensation is capped at £65,300 but any award shall not be less than £5,000.  Claims for breaches must be brought in the employment tribunal within 3 months of the date of the relevant conduct. 

9.   Jurisdiction for age and race discrimination complaints

British Airways Plc v Mak UKEAT/0055/09/FM

Ms Mak and other Hong Kong based cabin crew flew between Hong Kong and London.  The crew also had to take part in a de-briefing session whilst in Great Britain, had duties upon arrival and also had to undergo training here. 

The EAT held that as the Claimants worked partly in an establishment in Great Britain the Tribunal had jurisdiction to entertain their claims of discrimination.  “Partly” meant more than a de minimis period.  The Tribunal had been correct to look at the nature of the job, not simply the proportion of time spent working in Great Britain. 

Key point:  Employers considering whether an employee works “wholly or partly in Great Britain” cannot ignore the extent of overseas work but the place with which the work has the closest connection is not determinative.  

10.   TUPE

Parkwood Leisure Limited v Alemo-Herron 2010 EWCA Civ 24

The Court of Appeal overturned the EAT’s decision in this case and held that transferees, whose employment, which was subject to a collective agreement prior to a transfer under TUPE and who transferred to a new employer, did not benefit from bargaining agreements negotiated after the date of the original transfer. 

Key point:  Post transfer negotiations can be viewed differently from pre-transfer negotiations.  Pre-transfer negotiations which are due to take effect after the transfer will be binding on the new transferee employer. 

TUPE – Payment of compensation on transfer for loss of rights

Kuehne + Nagel Drinks Logistics Ltd and others v HMRC [2009] UKFTT 379

In 2006 K+N acquired the drinks distribution business of Scottish & Newcastle.  This involved a transfer of 2,000 employees from S&N to K&N.  TUPE applied.  During the consultation it became apparent that because the new pension scheme was not as generous as the S&N scheme the employees should be compensated in the sum of £5,000.  They could either take the sums in cash or elect for the sum to be contributed to their pension scheme.  Payments were agreed for the employees and the transfer went ahead smoothly. 

The Revenue made self-assessment returns on two employees on the basis that the payments were earnings from employment namely for loss of pension rights and as an incentive to work willingly with their new employer.  Consequently they were liable for the tax and NIC. 

Key point:  Employers should consider carefully the status of similar payments where there is no change in the nature of service. 

11.   EU – Age discrimination

Wolf v Stadt  Frankfurt am Main C-229/08

The ECJ held in this case that a German law restricting applications to join the fire service to those under the age of 30 could be defended as a genuine occupational requirement.  The ECJ decided that the proper functioning of the emergency services was a relevant legitimate objective and the maximum recruitment age of 30 was proportionate.

In Petersen v Berufungsausschuss für Zahnärzte für den Berzirk Westfalen-Lippe, the ECJ held that a law setting a maximum age of 68 for dentists to be accredited to work in the German national health service was potentially compatible with the Directive as a national law aimed at protecting public health. 

There were legitimate aims to ensure the financial viability of the system and the competence of younger dentists.

Dentists working exclusively in the private sector were not subject to the cut-off at 68. 

In both cases the ECJ accepted that age related decline in performance is capable of justifying direct age discriminatory rules. 

EU – Belgium

With effect from 1 January 2010 a social security levy will be charged in Belgium on the private use of company mobile phones unless the employer has devised a way to distinguish between personal and business calls.  The levy will average €150 per annum and be apportioned between employers and employees.

EU – France

A bill has recently been submitted to the French parliament which would require all public quoted companies to ensure that women fill 50% of their boards by 2015.  Implementing the new law will oblige companies to achieve 20% representation within 18 months and 40% within 4 years.  Currently only 10% of board members in CAC 40 companies are female.  To become law this measure will need to be voted through by the French National Assembly where just 18% of the MP’s are women!

Redeployment obligations in workforce reductions in France

A bill to ease employer redeployment obligations is under review.  If the bill is adopted then employers will be allowed to limit job searches to positions offering a level of remuneration similar to the employee’s current compensation. 

Before looking for positions outside France employers will be allowed to ask employees what type of restrictions notably in relation to remuneration and location they would be prepared to accept in order to have a job within the company.  Employers will no longer have to offer positions abroad where the remuneration is more than 10% below the minimum wage guaranteed by French law unless the employee expressly requests it in advance of the employer’s search for replacement jobs.  (With thanks to Jeantet Associés, Paris, France).  

EU – Finland – Allowance payments during pregnancy

Parviainen v Finnair Oyj (C-471/08)

Ms Parviainen worked for a Finnish airline as an air stewardess.  When she became pregnant she was moved to ground staff in order to comply with health and safety laws.  As a result she received less pay than she was receiving before and complained.  The Finnish court referred the matter to the European Court of Justice.  The Advocate General held that her employer was under a duty to transfer her to ground staff to avoid health and safety risks.  As a result her entitlement was not to receive the same salary as that which she received before her temporary move but the obligation on her employers was to ensure that the payment for her new role was adequate.  So her allowances she received in her former role did not have to be maintained. 

EU – Germany

A German federal labour court has ruled that an employer may require written German language skills where this is a clear requirement in order to perform the job.  The case concerned a Spanish production assistant who had been hired on condition that they attended language courses funded by the employer. 

After 2 years they discontinued the language training and they were warned that they must resume the course or be dismissed.  When their linguistic skills were subsequently tested they were discovered to be inadequate and they were dismissed. 

The court found that the dismissal was for a legitimate reason and did not amount to indirect discrimination on grounds of nationality or ethnic origin. 

12.   Risk assessment for pregnant workers

O’Neill v Buckinghamshire County Council 2010 UKEAT0020 090501

Mrs O’Neill was a teacher who had had a chequered career with her employer.  In June 2006 she informed her employer of her pregnancy and remained at work until the end of term on 21 July.  On 17 July her employer began to prepare a risk assessment and formed the view that the appropriate time to complete it would be later in her pregnancy.  The employer did not in general consider the risks attached to her pregnancy. 

When she was told there would be a disciplinary hearing in respect of certain allegations made against her she went off sick and did not return.  Her sick leave ran into her maternity leave in 2007.  She resigned and claimed constructive dismissal and sex discrimination in relation to the failure to carry out the individual risk assessment following the notification that she was pregnant.  The tribunal rejected her claim and she appealed. 

The Appeal tribunal held that although it is prudent for employers to carry out risk assessments for pregnant workers, the relevant health and safety legislation makes it clear that employers only have an obligation to do so if the following pre-conditions are met:

• The work is of a kind which would involve a risk of harm or danger to the health and safety of the expectant mother or her baby;
• The risk arises from either processes of working conditions or physical chemicals or biological agents in the workplace.

There is no general obligation to carry out a risk assessment for a pregnant worker.  Nor is a meeting with the worker required before the obligation to carry out a risk assessment is satisfied but an employer must provide the employee with comprehensive and relevant information on the identified risks to health and safety.  There is no obligation for an employee to have input into the risk assessment.  The only obligation is for the employer to inform the pregnant worker of the result.

The Appeal Tribunal also held that where there is an obligation to carry out a risk assessment and then there is a failure to carry out that assessment sex discrimination is established. 

Key point:  Employers need to be careful about carrying out risk assessments where the pre-conditions are met.  In this case, although her work was stressful in general terms, there was no material before the Tribunal suggesting a risk of any harm or danger to the employee. 

13.   IVF Treatment

Sahota v Home Office 2009 UKEAT/0342/09

The case concerned the extent to which discrimination may be regarded as discrimination on the ground of sex or pregnancy for an employee who is receiving IVF treatment.  The protection against dismissal for absences caused by pregnancy can only be extended to a woman absent because they have reached the stage in IVF treatment where there has been a transfer of the in-vitro fertilised ova into the uterus. 

An employee dismissed on the grounds of absence before that could amount to discrimination on the grounds of sex and not on the grounds of pregnancy.   

14.   Age discrimination

Beck v Canadian Imperial Bank of Commerce ET/2328832

An employment tribunal held that a 42 year old head of marketing was unfairly dismissed and subject to age discrimination when the employer Bank was actively seeking to find a replacement for him with a “younger, entrepreneurial profile”.  Mr Beck was also entitled to a protective award of 90 days’ pay because the Bank had not engaged in any collective consultation and had provided meaningless information to him.  Pay in this case however, did not include any estimate of Mr Beck’s anticipated discretionary bonus. 

Although the Bank had been warned by its HR department that the use of the word “younger” was inappropriate, the wording was included in the brief sent to a recruitment consultant.  The Bank’s evidence that there was still a redundancy situation even though the plan was to replace Mr Beck with another person who had the same key skills, was not credible. 

Mr Beck nevertheless failed in his claims of race discrimination even though the Tribunal accepted that Canadians and ex pats were favoured for redeployment in a genuine redundancy situation.  It was held that such employees would not have been given more favourable treatment if they too had fallen out with the Bank. 

As damages for age discrimination are uncapped these will be determined in a future hearing.

Key point:  The case serves as a reminder to all employers to avoid potentially discriminatory wording in recruitment exercises and to treat similar non redundancy dismissals as dismissals for “some other substantial reason”.  

15.   Religious discrimination

Ladele v London Borough of Islington 2009 EWCA Civ 1357

Ms Ladele claimed discrimination on the grounds of her religion and belief because she did not wish to carry out (same sex) civil partnership ceremonies in her role as registrar of births, deaths and marriages.  She resigned in September 2009 rather than waiting to be terminated. 

The Court of Appeal held that she did not suffer religious discrimination when she was threatened with dismissal for refusing to carry out civil partnership services.  Her employer was a public authority which was committed to the promotion of equal opportunities and required all its employees to act in a way which did not discriminate against others.  Her proper and genuine desire to have her religious views respected did not override the council’s concern to ensure that all its registrars had equal respect for the community as a whole.  Having been designated a civil partnership registrar it was unlawful for her to refuse to perform the civil partnership duties.

McFarlane v Relate Avon Ltd 2009 AER 233

Mr McFarlane was a Christian and was employed by Relate which provided relationship counselling services.  He was a volunteer counsellor and then became a paid employee.  He raised the possibility of his being exempted from any obligation to work with same sex couples where sexual issues were involved.  He believed the bible teaching which stated that same sex sexual activity was sinful.  His employer confirmed that such a stance would be in conflict with its equal opportunity policy which he had agreed to adhere to and that therefore he should be disciplined.  At an investigatory meeting he agreed that he would undertake counselling work but if problems arose he would refer them to his supervisor.  He was subsequently summarily dismissed as he continued to maintain the position that he should be excepted from certain counselling. 

Mr McFarlane brought a claim for unfair and wrongful dismissal and religious discrimination.  He lost his case on discrimination and his appeal.  The court held that the tribunal had not erred in dismissing his claim because it was justifiable for the employer to require its employees to adhere to the same principles which it regarded as fundamental to its own ethos and pledges to the public.

Key point:  Employers are entitled to require employees to comply with their internal policies even where those policies require the employee to act in a way which conflicts with their own personal beliefs.   

Eweida v British Airways Plc 2010 EWCA Civ 80

The Court of Appeal upheld the appeal tribunal’s ruling that Ms Eweida, a Christian employee, did not suffer indirect discrimination on the grounds of her religion or belief where BA, in line with its uniform policy insisted that a cross on her necklace be concealed.  Her claim for indirect discrimination failed as no one but her felt disadvantaged by the policy but even if her argument had succeeded any disadvantage suffered by her alone could be justified as a proportionate means of achieving a legitimate aim. 

Ms Eweida was a member of the check-in staff and wore a silver cross as an expression of her faith.  BA’s uniform policy at the time prohibited the wearing of any visible item of adornment round the neck.  She wore the cross visibly and rejected BA’s offer of an alternative role in which she would not be required to wear a uniform and hence would be allowed to display the cross. 

Before the Court of Appeal Ms Eweida further argued that she had the right to manifest her religious belief under Article 9 of the European Convention on Human Rights which provided for freedom of thought, conscience and religion.  The Court held that Article 9 did not protect every act motivated or inspired by a religion or belief.  Ms Eweida intends to appeal the case to the Supreme Court.

Key point:  These decisions may be helpful to employers faced with the challenges on grounds of religion or belief.  A distinction can be drawn between items that are a mandatory requirement of the faith and those which are desired only.   

16.   Suspension during notice period

Standard Life Health Care Limited v Gorman and others 2009 EWCA Civ 1292

Mr Gorman and his fellow employees were prevented by an injunction from joining a competitor for the duration of their notice periods even though there was no express garden leave clause in their contracts of employment.  The court held that Standard Life was able to rely on the suspension clause to keep the employees from attending work. 

Mr Gorman was paid on a commission only basis.  He and others resigned from Standard Life to join a competing medical insurer.  Standard Life suspended them for the duration of their notice because it believed the employees to be in breach of contract.  An injunction was obtained against each employee restraining them from selling private medical insurance for anyone other than Standard Life for the duration of their notice periods.  The effect of the suspension and injunction was that they could not earn any money from their current employment or from their new employment.  Their appeal was unsuccessful, the Court of Appeal finding that the balance of convenience clearly favoured the continuation of the injunction. 

The employees were held to have breached their duty of good faith and therefore the employer was released from its obligation to provide work to them even though the contract of employment continued and there was no express garden leave clause.  The court took into account the fact the employees were fully aware of the potential consequences of their actions when they decided to register to work as appointed representatives of the new employer.  It was also noted that the employees had received both lump sum payments and ongoing financial compensation from their new employer for the period they had not been able to work for either company. 

Key point:  Employers should where possible, have an express right to place key employees on garden leave in their employment contracts.  

17.   Enforceability of Compromise Agreements

Industrious Ltd v Horizon Recruitment Ltd (in liquidation) and Vincent

Mrs Vincent resigned from employment with Horizon in December 2008.  In 2009 the business of Horizon transferred under TUPE to Industrious Ltd.  She brought a claim in the Employment Tribunal against Horizon and settled those claims by way of a Compromise Agreement in June 2009.  On 22 July 2009 Horizon entered into a creditors’ voluntary liquidation.  Mrs Vincent applied to set aside the Compromise Agreement on the basis that either Industrious or Horizon or both of them must have known they were not going to be able to comply with the payment provisions in the Compromise and misled her into entering the agreement on the question of their solvency.  The issue for the Employment Tribunal to determine was whether it had jurisdiction to consider a challenge on the validity of the Compromise Agreement on the basis of misrepresentation or whether she had to bring separate proceedings in the county court to set aside the Compromise Agreement. 

It was held that the tribunal did have jurisdiction to consider the enforceability of Compromise Agreements due to misrepresentation.

18.   Jurisdiction for unfair dismissal claims – fixed term employment

Duncombe v Secretary of State for Children, Schools and Families 2009 EWCA Civ 1355

Mr Duncombe was a teacher employed to work in a European school in Germany.  He and a colleague worked on successive fixed term contracts which were expressly governed by English law.  Eventually their employment ended in accordance with the 9 year rule which limited their employment at a European school to 9 years unless a further year was agreed in exceptional circumstances. 

Mr Duncombe brought claims against the Department for Children, Schools and Families for wrongful and unfair dismissal.  These claims could not succeed unless the Fixed Term Employee Regulations operated to convert his employment from a series of fixed term contracts to a permanent employment under Regulation 8.  The EAT allowed that and the Court of Appeal allowed his unfair dismissal claim to proceed.  Although he had permanent employment, he was working outside Great Britain and would normally have been precluded from bringing such a claim.  However the court accepted his argument that his contract was governed by English law.  It followed that his fixed term contract had been converted into a permanent contract and the remedy of unfair dismissal was open to him where English law governed his employment contract.

Key point:  Overseas employees may not be excluded from exercising unfair dismissal rights in Great Britain and care needs to be taken in drafting the jurisdiction clauses in temporary, permanent and fixed term contracts. 

Territorial jurisdiction for employees on garden leave

YKK Europe Ltd v Heneghan UKEAT/0271/09

Mr Heneghan commenced employment in 1998 with YKK.  In 2004 he relocated to Germany.  He worked all the time in Germany.  In 2007 he was informed that he was no longer required and he would have to cease working by the end of the year and return to the UK.  He could not return to the UK immediately because his property was rented out.  He was eventually repatriated in May 2008 and remained on a period of unofficial garden leave.  He was finally terminated in June 2008, negotiations over a Compromise Agreement having failed. 

He brought a claim for breach of contract and unfair dismissal.  The Tribunal decided that it had jurisdiction to hear an unfair dismissal claim on the basis that Mr Heneghan was either working in the UK at the time of his dismissal or else he should be regarded as an expatriate employee.  YKK appealed the decision which appeal was successful.  Although he was not actually working at the time of his dismissal the correct approach was to identify the category in which he fell under the House of Lords’ decision of Serco Ltd v Lawson.  The Tribunal had failed to do so and the case was remitted.  

19.   Appeal Costs order refused

St Albans’ Girl School v Neary 2009 EWCA Civ 1214

Mr Neary was involved in litigation with his employer, a school.  He lost in the tribunal but was successful in the Employment Appeal Tribunal.  However, St Albans wanted to appeal that decision and the Court of Appeal eventually overturned the Employment Appeal Tribunal decision.  The school then applied for costs against Mr Neary.  Costs usually follow the event.  However, because he was impecunious and came before the Court of Appeal on the decision of the school, the court held it relevant not to make an order for costs against him because he was in the Court of Appeal not out of choice.  It would have been very hard on him if he had had to withdraw before the Appeal hearing so as to avoid the risk of costs.  The court also remarked about the amount of charges that St Albans were seeking stating that if it had made an order for costs it would have been in the sum of £5,000 inclusive of VAT a sum much lower than the figure sought by St Albans.   

Key point:  Employers take on impecunious applicants at their peril and indeed at their own risk as to costs.

20.   Dress codes

Dansie v Metropolitan Police 2009 UKEAT/0234/09

Mr Dansie had long hair which he wore in a bun.  He was told to cut it as the dress code for male police officers was for short hair and did so only when he was threatened with disciplinary action.  He claimed sex discrimination on the basis that a female employee would not have been required to cut her hair.  The tribunal found that there was a difference in treatment.  However the police could provide a non-discriminatory explanation for this so as to discharge their burden of proof of sex discrimination.  The Court of Appeal held that the issue of dress code was to be considered as a whole.  A dress code which applied a conventional standard of appearance to both sexes requiring each to display equivalent levels of smartness, was not in itself discriminatory.  So Mr Dansie lost his appeal. 

Key point:  Employers should take care when implementing dress codes to ensure they are as far as practicable gender neutral, overall.   

21.   Employees liability for underpaid PAYE

Burton v HMRC 2009 UKFTT 320

Mr Burton became an employee of Iris heading new business sales in Europe in February 2001.  At the time of his joining Iris, he had not received a P45 from his old employer and he informed Iris that the form was to follow.  Iris outsourced its payroll function but he failed to provide his P45.  Basic rate tax was only deducted as a result.  Mr Burton did not know of this and the Revenue pursued him for the tax.

An employee’s liability for underpaid tax is reduced if and to the extent that the employer has failed to account for correct income tax.  Mr Burton however did not discharge the burden of proof that he had provided a form P45 to his employer.  This meant that Iris were only obliged to deduct tax at basic rate even though he was a higher rate tax payer.  Accordingly Iris properly operated PAYE and Mr Burton remained liable for the additional tax charge under self-assessment. 

Key point:  This case highlights the importance of employees ensuring that their employers operate PAYE correctly by determining that in particular the employer and HMRC are in possession of the correct documentation. 

22.   Constructive dismissal and pay in lieu of notice

Clinton v HMRC 2009 UKFTT 337

Ms Clinton commenced employment with Bristol Myers in October 1996.  In 2003 she resigned claiming constructive dismissal when her role changed and was unacceptable to her.  Bristol Myers did not accept that she had been constructively dismissed but as a goodwill gesture offered to make a lump sum payment equal to 3 months’ notice but with no pension contribution, health care cover or life cover or to make monthly payments for the 3 month notice period with those additional benefits.  She accepted the first option.  Bristol Myers made a lump sum payment deducting income tax and employee NIC’s.  She sought repayment through her self-assessment tax return on the basis that the lump sum paid by Bristol Myers was compensation for constructive dismissal or was an ex gratia payment and was therefore a termination payment that should have been paid tax free. 

The Revenue disagreed claiming that the payment made on termination was made under the terms of the contractual PILON or based on a term implied by custom and practice or was made pursuant to the agreement to terminate the employment forthwith without notice and therefore taxable in full.  The tribunal held that the taxpayer would succeed in her appeal as the termination payment was either an ex gratia payment or a payment to settle her constructive dismissal claim.  The tribunal rejected the Revenue’s contention that a PILON term was implied into her contract by custom and practice.

Key point:  The case illustrates the importance of ensuring that an employer’s correspondence with and from the employee clearly refers to the reason for the termination and that any settlement agreed is to compromise an unfair dismissal claim or notice as the case may be.  Payments that are similar to PILONs are not necessarily PILONs and therefore will be taxable in full. 

23.   ACAS pre-claim conciliation service

Employers are reminded of the Pre Claim Conciliation Service offered by ACAS.  If internal efforts have failed to resolve a dispute with an employee then ACAS may be able to resolve the matter promptly and without cost.  If a conciliation fails the parties retain their right to lodge (and defend) a formal complaint to the Employment Tribunal.  See ACAS website for more details.

24.   Human Rights – request for adjournment during Ramadan

Khan v Vignette Europe Ltd

Mr Khan was dismissed for gross misconduct for viewing pornography online at work.  During the course of his claim before a tribunal he asked for an adjournment for a period of mental and spiritual purity during Ramadan.  This was refused.  He had known for at least a year when Ramadan would occur and he had not objected to the proposed dates of the hearing. 

This was not a breach of his right to a fair trial established by Article 6 of the European Convention on Human Rights.  The tribunal’s decision was carefully balanced and considered all relative factors.  The genuineness of his beliefs were not disputed but his right to a fair trial was not a trump card and the hearing was conducted in his absence.  He could not appeal on the basis that the failure to adjourn was a denial of a fair trial.

– Right to legal representation during disciplinary process

R v X School and others 2010 EWCA Civ 1

The Court of Appeal has confirmed in this case that a teaching assistant was entitled to legal representation during the disciplinary procedures for sexual misconduct with a child.  Article 6 of the European Convention on Human Rights - the right to a fair trial - was engaged and given the seriousness of the charge and its likely effect in ending R’s career, this included the right to legal representation in the preliminary stages. 

The Governor of the school refused to allow R legal representation at the legal disciplinary hearing after which he was dismissed for kissing a boy.  The more serious the allegation or charge the more careful the court should be to ensure that the trial process is a fair one.  What matters most is the gravity of the issues in the case.  Where the outcome of the disciplinary proceedings would be to deprive a person of their right to practice their profession, he should have right to a fair trial, from the outset which included legal representation. 

Key point:  Public sector employers should offer the legal representation at disciplinary hearings to those whose employability in that particular job is at stake. 

25.   Voting for a strike

British Airways Plc v UNITE 2009 EWHC 3541

It is well known that the High Court granted an injunction which prevented UNITE from proceeding with a 12 day planned strike over the Christmas period.  The court found that UNITE did not take reasonable steps to establish that the employees who were voting for the strike would still be employed at the time of the planned strike.  UNITE, it was held, should have done more to ensure the accuracy of the information it provided to the airline about the numbers to be balloted. 

The support for the strike was overwhelming and the number of redundant leavers would not have affected the outcome of the ballot.  However, the court held that the union had failed to provide any evidence about the steps taken to ensure that members not entitled to vote did not in fact vote.  These were technical failures but the requirements had to be complied with if a call for industrial action was to be lawful. 

Key point:  Trade unions should ensure that their membership database is up to date at all times and in particular in advance of any prospective strike ballots. 

26.   Agency workers and discrimination

Muschett v HM Prison Service 2010 EWCA Civ 24

A temporary worker was held by the Court of Appeal not to be able to pursue claims for discrimination whilst working for an agency’s client.  It seems all temps working under the usual agency arrangement with no contractual relationship between the temp and the client and with no obligation to work for the client would similarly lack statutory protection against discrimination at work.

Mr Muschett was placed in a temporary role as a laundry assistant at Feltham Young Offenders unit by Brook Street.  He worked at the prison from 22 January to 10 May 2007.  He subsequently brought claims against both Brook Street and the Prison Service for unfair dismissal, wrongful dismissal, race, sex and religious discrimination.  The tribunal held that he was neither an employee of Brook Street nor in the employment of the Prison Service.  As there was an absence of mutuality of obligations he could not be a contract worker.  The EAT agreed and Mr Muschett appealed to the Court of Appeal.  The appeal was dismissed.  He was not an employee of the Prison Service and an employment contract could not be created simply because he wished there to be one.  

Mr Muschett was under no obligation to work for the Prison Service and he could terminate his engagement with them at any time by giving notice to Brook Street.  This was fatal to his claim to have a contract with the Prison Service. 

Key point:  The decision that temporary employees have no protection under the discrimination legislation will have far reaching consequences for all agency workers and casual workers.  These workers remain therefore vulnerable to discrimination at the hands of the end user.  Businesses should treat all workers equally regardless of their status.

27.   Forfeiture of paid holiday

Lyons v Mitie Security Ltd UKEAT/0081/09

In this case the EAT confirmed that holiday leave not taken at the end of the leave year can be lost provided the employer has not unreasonably denied the employee’s request for leave. 

An employee’s right to statutory leave is not inalienable.  The statutory and contractual notice requirements have to be followed and this can result in the loss of the right to leave at the end of the year in respect of leave not already taken.  Mr Lyons was a security officer.  His holiday year ended on 31 March 2008.  At the beginning of March he had 9 days’ leave still due to him.  On 6 March there was no further work scheduled for him.  He sent a fax to his employers requesting payment of those remaining 9 days before the end of the current leave year.  That request was not dealt with.  On 1 April Mr Lyons found out that his 9 days’ leave had not been paid and he raised a grievance.  As he should have given a minimum of 4 weeks’ notice “wherever possible” for a leave request and as his annual leave could not be carried over to the following year, when his employers stated they were unable to pay him, he resigne! d.  There was no previous case law in this subject.  The case was remitted for re-hearing as the tribunal had not considered fully whether Mitie had breached the contractual provisions governing his right to take holiday. 

Key point:  If notice provisions are operated correctly, employers can deprive employees, who fail to comply the right to take holiday before the end of the applicable holiday year, of their leave under the Working Time Regulations 1998.  However, employers may find it easier to provide a discretionary right to carry over a fixed number of days holiday to the following year where employees have not been able to exercise their full entitlement to holiday for clear good reasons, to avoid grievances and claims.     

28.   Holiday leave and sickness

Shah v First West Yorkshire Limited ET/1809311/09

Mr Shah booked 4 weeks’ holiday leave from 22 February to 21 March 2009.  This accounted for 12 days of his annual holiday entitlement as he worked part time.  In January 2009 he broke his ankle and was absent from work between 15 January and 18 April.  His sickness absence therefore overlapped with his booked holiday period.  However, during his absence he received contractual sick pay and also holiday pay for the 12 days he had booked.  On 4 April he wrote asking to reclaim his 12 days’ holiday but his employers refused as it related to a previous holiday year and had therefore been lost.

Mr Shah submitted a claim for loss of holiday under the Working Time Regulations 1998 and the Tribunal upheld Mr Shah’s claim.  This is the first case in which a Tribunal has given effect to the Pereda decision, the decision in the European Court of Justice which held that a worker who was incapacitated during a period of previously scheduled holiday, should as far as the EU Directive is concerned, have the right to reschedule the holiday to a later date. See Bulletin 43. 

Key point: It is likely Tribunals will apply the Pereda decision in further cases.  Employers should address this issue in their contractual sick leave entitlement terms. 

29.   Variation clauses

Bateman v Asda Stores 2010 UKEAT0221/09/1102

Asda wished to ensure that all their staff were employed on the same pay and work structures and this meant that they all had to transfer to a new regime.  Most employees agreed but some did not.  When the new regime was imposed on them 6 test Claimants brought claims for unauthorised deductions from their wages.  Asda contended that they were entitled to impose the new conditions because the staff handbook stated that Asda reserved the right to review, revise, amend or replace the contents of this handbook and introduce new policies from time to time to reflect the changing needs of the business.  The handbook also provided details of pay and other conditions of employment. 

The EAT held that a broad contractual right to alter terms and conditions of employment in line with business needs can permit an employer to make unilateral changes to contractual terms including pay and hours of work without the need for the express consent of the employees provided that the changes were properly implemented and the employer acted in line with its implied duty to maintain trust and confidence. 

On the facts the court held that Asda had acted properly in harmonising terms and conditions of employment for a small proportion of staff who refused to agree to a new pay structure.  The decision might have been different if Asda had chosen to introduce a more radical change to the employees’ detriment.  The majority of affected employees were not claiming that the change would cause them any financial loss, indeed only one of the 6 test Claimants contended that she would suffer a loss due to the move to the new regime. 

Key point:  The decision is useful for employers wishing to make changes but they must be careful to avoid breaching the implied term and breach of trust and confidence.  Proper consultation with the employees should be undertaken.  Including a clear and unambiguous clause in a contract or handbook should also be considered.

30.   Tax treatment of bought-out redundancy rights

Colquhoun v Revenue & Customs 2010 UKFTT 34

Mr Colquhoun received a £30,000+ payment from his employers Babcock Group to buy out his accrued contractual redundancy rights in 1997.  The question was whether that had to be taken into account when determining the extent to which the £30,000 exemption was available in respect of a subsequent redundancy payment paid to him in 2005 when he was made redundant.  The question for the Tribunal concerned only the nature of the 1997 payment.  The tribunal held that it was not a termination payment and therefore did not have to be taken into account when applying the £30,000 exemption in respect of the 2005 payment.  The Tribunal did not address how it should have been treated in 1997 and the assessment for 1997 was closed.

Key point:  The case has raised uncertainty about the treatment of buy out payments where there is no termination of employment.   

31.   Bribery Bill

The Bribery Bill has now been introduced into Parliament.  If it makes it on to the statute books the Bill will create a modernised suite of corruption offences which will have particular significance for commercial organisations.  The Bill introduces 3 key offences.  The criminal offence of giving, promising or offering a bribe, the bribery of foreign public officials and the corporate offence of a failure by a relevant commercial organisation to prevent bribery by persons working on behalf of the business including employees, agents and subsidiaries.

For Steptoe & Johnson’s briefing on developments in UK anti-corruption, please click here.