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Employment Law Update
July 2010Issue 46
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.
To view any of the topics in this issue, please click on the relevant link below.
1. Tribunal Claims
2. UK Corporate Governance Code
3. Company cars - fuel rates from 1 June 2010
4. Vetting and Barring Scheme
5. Termination payment not ultra vires
6. Equality Act 2010
7. Damages for loss of future employment
8. Fairness in misconduct dismissals
9. Drug testing at work
10. Redundancy
11. Compromise Agreements
12. Russian Federation
13. EU: France
14. Concurrent criminal and disciplinary proceedings
15. Intention to give notice
16. Discretionary bonuses
17. Sexual harassment and constructive dismissal
18. Jurisdiction - unfair dismissal claim
19. Unfair dismissal - Informal and formal misconduct procedures
20. Directors’ dismissal - error of judgment or wilful neglect
21. Disability discrimination - home working was not reasonable adjustment
22. Consultation on limiting numbers of non-EU economic migrants
23. Data Protection and data transfers
24. Information and Consultation Regulations
25. Stigma Damages and references
26. Age discrimination – cap on redundancy payment justified
27. Judicial Review
28. Contempt of Court for disobeying search and seizure order
29. Restrictive covenants – 12 months’ non-solicitation clause too long
30. Agency agreement – lawful termination for abusive language
31. Flexible working
32. June 2010 Budget
33. NEST Pension Schemes
The Tribunal service has published its annual statistics for the year ending 31 March 2010. There was a 14% increase from 2009 in the number of claims accepted.
The most common type of claim remains unfair dismissal. Of all the claims disposed of just under 13% were successful at Tribunal. 65% of single claim cases are heard within 26 weeks of the claim being lodged.
2. UK Corporate Governance Code
The Financial Reporting Council has published the revised UK Corporate Governance Code which applies to companies with a premium listing for accounting periods beginning on or after 29 June 2010. The main change in the Code is a requirement for all directors of FTSE 350 companies to stand for re-election annually.
Directors’ remuneration and incentives remain of critical importance. A new supporting principle has been added namely “the performance-related elements of executive directors’ remuneration should be stretching and designed to promote the long-term success of the company”.
Further guidance on the Code is available on request.
3. Company cars - fuel rates from 1 June 2010
HMRC has published its revised advisory fuel rates which take effect from 1 June 2010. These rates apply for all journeys on or after that date until further notice. The rates range from 8p to 21p. The next review date is 1 December 2010.
Voluntary registration under the Vetting and Barring Scheme for new employees and job movers working or volunteering with children and vulnerable adults was due to start on 26 July 2010 with compulsory registration due to follow in November 2010. The Government has announced that it will halt registration for the time being and will review this.
This hiatus will not however affect the Regulations which come into effect at the beginning of November 2010 when employers will face criminal sanctions for knowingly employing a barred individual.
5. Termination payment not ultra vires
Gibb v Maidstone & Tunbridge Wells NHS Trust 2010 EWCA Civ 678
Ms Gibb who was Chief Executive of the Trust was terminated on advice after a well publicised outbreak of the super-bug at hospitals managed by the Trust, in September 2007. The Trust and Ms Gibb then signed a Compromise Agreement which provided for a payment to her of approximately £250,000 representing a payment in lieu of notice and a compensation payment. Subsequently in 2008 the Department of Health instructed the Trust to withhold the severance payment from her and she was paid only in respect of her notice period. Ms Gibbs sued to enforce the terms of the agreement for the £175,000 but her claim was dismissed. [See Update 41 June 2009].
The High Court concluded that the decision to pay her a severance of £250,000 was ultra vires. She appealed to the Court of Appeal which held that the Trust could not escape paying her the severance sum as the Trust had acted within its powers in entering into the Agreement and the sum agreed was not outlandish or irrationally generous. The payment in lieu of notice and compensation reflected her previous years of good service and mitigation prospects.
Key point: There will only be very limited circumstances that a public authority can renege on its contractual commitments on the grounds that it had acted ultra vires.
The Government has announced that the first wave of the Equality Act implementation will still go ahead on 1 October 2010. The Government Equalities Office has published short explanatory guides to support the Act implementation. Further guides will follow in the coming months. Complimentary copies of “The Equality Act – What’s New for Employers?” are available on request.
The Government Equalities Office has just finished a 4 week consultation on the equality forms and guidance which are to replace the questionnaires in discrimination claims when the Act comes into force. There will be two forms, one to be used when seeking information about potential discrimination (in all types of discrimination cases) and another to be used when seeking information about potential inequality of terms (equal pay claims).
7. Damages for loss of future employment
Edwards v Chesterfield Royal Hospital NHS Foundation Trust 2010 EWCA Civ 571
Dr Edwards was a consultant at the Trust and was dismissed for gross professional and personal misconduct. He issued proceedings for breach of contract claiming that in addition to his notice period he was entitled to damages not only for the time that it would have taken the Trust to carry out its disciplinary procedure properly but also for his lost continued employment. He alleged that had the procedure been properly observed he would not have been dismissed by the Trust and he would have remained employed. His claim was for more than £3.8 million based on his salary to 65 in 2022.
The Trust applied to strike out his claim which was successful. Dr Edwards appealed and the High Court held that he was only entitled to damages representing the length of time it would have taken the Trust to carry out his contractual disciplinary procedure and for his notice period. It rejected his argument that he should have had an opportunity to prove that he would have been found not guilty in properly conducted disciplinary proceedings. He appealed to the Court of Appeal who upheld his appeal.
The Court of Appeal found for Dr Edwards and held that he could in principle succeed in showing that the loss he sought to recover until his retirement in 2022 was caused by the Trust’s failure to comply with the contractual disciplinary procedure and that it was not too remote to be recoverable in law. If the Trust decided what disciplinary route should be followed and then failed to comply with this express term if there was a breach of disciplinary procedures resulting in damages they had to bear this consequence. The Trust is seeking permission to appeal to the Supreme Court. What Dr Edwards damages will be if the breach of contract is proved will depend on the evidence at trial.
Key point: The case is a move away from the traditional view that the end of the notice period represents the cut-off date for damages. Employers should be wary of agreeing to contractual disciplinary procedures.
8. Fairness in misconduct dismissals
Salford NHS Trust v Roldan 2010 EWVA Civ 522
Ms Roldan was a nurse recruited from Singapore. She was dismissed for misconduct relating to the mistreatment of a patient. The evidence of mistreatment was from another witness and the disciplinary panel had to decide the issue on a conflict of evidence. She successfully pursued a claim of unfair dismissal in the Tribunal and was awarded compensation but the findings were overturned on appeal by the Employment Appeal Tribunal and she pursued her appeal before the Court of Appeal as the consequences of her termination were very significant. She lost her job, her permit to work and the right to remain in the UK. She also became the subject of a criminal investigation by the police. She was prosecuted but acquitted.
The Court of Appeal restored the finding of unfair dismissal. Elias LJ held that when assessing the reasonableness of an employer’s investigation, Tribunals should take into account the gravity of the consequences for the employee where these are serious. The investigator must be even-handed in looking for evidence in the accused’s favour as well as evidence against them. When an employer is faced with a conflict of evidence it does not always have to decide that it believes one person and not another. It could decide that the difference is merely one of perception and that both parties are telling the truth as they see it. Alternatively it could be decided that the conflict cannot be resolved in which case the accused employee must have the benefit of the doubt.
Key point: Ms Roldan was unfairly dismissed because of flaws in the employer’s disciplinary procedures. Where an employee faces potential criminal charges an employer must conduct a more if not the most rigorous investigation.
The TUC has produced a new guide on “Drug Testing in the Workplace” and has called on the Government to produce clear guidance on drug testing to clear up the confusion around the legality of random or routine testing in jobs that are not safety critical. Complimentary copies of the guide are available on request. Employers should have a comprehensive drugs and alcohol policy in place so no one is unclear about the risks of working under the influence of drink or drugs.
De Belin v Eversheds Legal Services Limited ET/1804069/09
Eversheds, a law firm, had to make redundancies in its real estate department. It notified Mr De Belin that he was at risk of redundancy in September 2008. He was scored against 5 criteria as was a colleague who was on maternity leave. They were the only 2 employees in the pool. Mr De Belin scored 27 points and his colleague scored 27.5.
He raised concerns about the unfairness of his colleague being given the maximum score for “lock up” which was one of the criteria, as her score had been adjusted due to her maternity leave. Otherwise she would have been chosen for redundancy rather than him. After further consultation his dismissal for redundancy was confirmed. He then brought a claim for direct sex discrimination and unfair dismissal.
The Tribunal held that he had been discriminated against and also unfairly dismissed. It held that if Eversheds was not in a position to give his colleague an actual score for the period when she was absent on maternity leave they should either have taken this score out of the equation or used a difference reference period. By inflating her score it made him the likeliest candidate for redundancy. This was less favourable treatment as well as being outside the range of reasonable responses for the purpose of unfair dismissal.
Key point: Employers should not assume that employees on maternity leave have to be automatically treated more favourably over other employees.
McWilliams & Others v Glasgow City Council Case No S132316/07
Ms McWilliams and 5 other employees submitted claims under the Equal Pay Act against Glasgow City Council. Each signed a Compromise Agreement with the assistance of an independent solicitor by which they agreed not to pursue equal pay complaints against the Council relating to a specified period in return for payment of a specified sum. A Compromise Agreement cannot have the effect of excluding a future claim under the Equal Pay Act, unless it complied with the requirements of s.77 of the Sex Discrimination Act. S.77 states that advice needs to be given as to the terms of the effect of the Compromise Agreement and in particular its effect on an employee’s ability to bring a complaint in an employment tribunal.
The Tribunal held that the independent solicitor was not obliged to advise whether it was a “good deal”. The solicitors who agreed the Compromise Agreements with the employees were independent even through their fees were paid by the City Council. It was held that the requirements of s.77 had been met and the Tribunal had no jurisdiction to consider the claims insofar as they related to the period covered by the relevant Compromise Agreement.
Key point: If employers recommend certain solicitors to their employees they should ensure that they are independent and competent to give advice on the Compromise.
The Russian State Parliament is considering a bill to attract highly skilled foreign workers by relaxing immigration restrictions. The new law would allow specialist immigrant workers to obtain a work permit for 3 years rather than the current 1 and to bypass the general quotas. This new facility will only be enjoyed by employees on acceptance of an offer of employment with an annual salary of not less than 2 million rubles (€52,400). These employees will also pay income tax at the fixed rate of 13% instead of the current 30% levied on non-resident highly qualified workers (Source: FEDEE).
The French Government has launched its reform package to be debated in the autumn which includes raising the minimum pensionable age from 60 to 62 by 2018 and the mandatory retirement age from 65 to 67 by 2023.
14. Concurrent criminal and disciplinary proceedings
Secretary of State for Justice v Mansfield UKEAT/0539/09
Mr Mansfield was a prison officer at HMP Pentonville. In April 2006 allegations were made against him of planting drugs on a particular prisoner and orchestrating violence among prisoners. He was suspended from duty and the matter was referred to the police in May 2006. The internal investigation commenced in April 2006 but it was not proceeded with during the police investigation which led to his prosecution.
At his trial the Crown offered no evidence against Mr Mansfield and it entered a verdict of not guilty. On 6 February 2008 the Prison Governors informed Mr Mansfield that he was to be dismissed. That decision was upheld twice on appeal and a claim for dismissal was issued.
The Tribunal held he had been unfairly dismissed. There had been a lengthy and unacceptable delay in the proceedings leading to his dismissal and that the Governor did not genuinely believe that he was guilty of misconduct. The Secretary of State on behalf of the Prison Service successfully appealed both findings. The EAT held that the decision to postpone the disciplinary investigation arising from the same facts during the police investigation could not be criticised as unreasonable or involving unjustifiable delay and Mr Mansfield’s claim was dismissed.
Key point: Employers should be open and clear with the employees as to how it intends to manage the internal procedures when an employee is facing a criminal investigation.
Mitie Security (London) Ltd v Ibrahim UKEAT/0067/10
Mr Ibrahim had worked for Mitie as a security supervisor since 2003. In September 2008 Mitie removed him from a worksite allegedly on the basis of a client’s request. Mitie suggested a 4 week consultation period with him during which they would each look for alternative employment within Mitie but if no position could be found Mitie would have no alternative other than to issue him with notice to terminate his employment for some other substantial reason. No alternative employment was found and Mr Ibrahim never returned to work. He launched a grievance and then brought a claim in the Tribunal for unfair dismissal and race discrimination. Mitie denied that Mr Ibrahim had been dismissed.
The Tribunal found that the effective date of termination was 23 October, his employment having been terminated by Mitie at the end of the 4 week consultation period as set out in their letter of 26 September. Unsurprisingly the EAT overturned this decision noting that while the terms of the letter made it clear that notice might be given this was not the same as actually giving notice. The fact that he was not paid and removed from site did not constitute a dismissal either.
- Conditional resignation
Heaven v Whitbread Group PLC 2010 UKEAT0084/10
Mr Heaven wrote a letter following a meeting with his employer headed “conditional resignation letter” and in it he tendered his resignation conditional on receiving an assurance that he would be paid a month’s salary in lieu of notice and be given a good reference. His employer wrote back confirming that if he resigned he could have a month in lieu of notice which he would not be expected to work. He replied on 3 September making it clear he was resigning saying that his resignation was effective from 29 August 2008.
The EAT held that a contract of employment cannot be brought to an end by a conditional letter. The effective date of termination is a statutory issue. Mr Heaven was unable to backdate his termination date. Therefore, his termination was effective 3 September when he made it clear that he intended to resign. His claim was therefore in time which it would not have been had he been held to the parties’ agreement as to the termination date of 29 August 2008.
Key point: Employers and employees are not prevented from agreeing a termination date in a Compromise Agreement but otherwise the effective date of termination is determined by what actually happens, and not the parties’ intentions.
Attrill and others v Dresdner Kleinwort Ltd and Commerzbank AG 2010 EWHC 1249QB
In this ongoing case concerning entitlement to discretionary bonuses, the High Court held that the Claimant bankers were not entitled to summary judgment against the Bank based on an announcement by the Bank that there would be a guaranteed minimum bonus pool available for staff to retain them. There was no enforceable right. However, it held that whether the Claimant bankers could rely on a subsequent letter to each of them setting out provisional bonus awards (each award being subject to a material adverse change clause if there were additional material deviations in actual revenue and earnings against forecasts) would be a matter for determination at trial. The matter will therefore proceed to trial.
Khatri v Cooperative Centrale Raiffeisen-Boerenleenbank BA 2010 EWCA Civ 397
Mr Khatri was entitled to €1.6m damages in compensation for an unpaid bonus as the Court held that this was not a discretionary bonus but a performance related bonus. His contract had not been subsequently varied by agreement to replace the performance related bonus with a discretionary bonus scheme.
Mr Khatri was a derivatives trader and his contract terms stated that he was entitled to a bonus if he reached a certain revenue threshold. In July 2008, his terms and conditions were further amended and in addition to restrictive covenants his formula based bonus was to be replaced by the Bank’s discretionary performance related scheme. Although Mr Khatri was asked to agree the changes by signing a letter he did not and was never pressed to sign the letter signifying his acceptance. By the end of 2008 he generated a profit giving him a bonus of over €1.6m. When he was made redundant in January 2009 he brought an action for summary judgment for that sum with interest. The High Court refused his application and he appealed.
The Court of Appeal held that the construction of his contract was a matter suitable for summary judgment and his contract did confer on him the right to a bonus. If the Bank was to reward its employees by means of purely discretionary bonuses then it should have said so openly and not in qualified language which did not make it absolutely clear that there was in fact no bonus entitlement at all.
As to the variation, the Court agreed that as Mr Khatri had not signed and was not made to sign the varied contract he had not accepted the new terms. The fact that he continued working but not under protest about the new terms was not an indication that he had accepted this change. The variations which the Bank wanted him to accept were wholly to his disadvantage and it would be wrong to conclude that he had accepted the changes, without more. His appeal was upheld and he was awarded summary judgment.
Key point: Employers who wish to vary contracts of employment should ensure that employees formally sign up to the new terms so that they do not have to rely on the employees of working as inferring their acceptance of the change.
17. Sexual harassment and constructive dismissal
Karmazyn and others v Munchkins Restaurant Ltd and others 2010 AER76
Ms Karmazyn and the other claimants were waitresses who worked for a restaurant owned by Mr Moss. They alleged that throughout their employment they were made to wear short skirts and were subjected to talk of a sexual nature by Mr Moss who frequently asked them questions about their personal lives. The Claimants admitted they also asked Mr Moss questions about his love life as they found this made him easier to handle. They had complained to Mr Moss about his behaviour. The assistant manager who was female, kept the peace in the restaurant but when she left due to illness, Ms Karmazyn and her colleagues found their situation with Mr Moss unbearable and they resigned within 3 months.
They brought claims for sexual harassment and constructive dismissal. The Employment Tribunal upheld their claims and Mr Moss and the Company were made jointly and severally liable for the discrimination and harassment awards. Each waitress was awarded £15,000 for injury to feelings plus an award of £1,000 for aggravated damages to reflect the inappropriate and excessive way in which the case had been conducted.
Mr Moss and the Company appealed on the basis that the Claimants had put up with the intolerable conduct for a considerable length of time before resigning. The EAT held that putting up with it did not make it welcome and therefore the Tribunal was right to find that the conduct had been unwelcome and it had not been perverse for the Tribunal to find that there were grounds for constructive dismissal. However, the aggravated damages award was overturned and the case was remitted as it was not clear why the Tribunal had decided the case had been inappropriately conducted.
Key point: This is a surprising result given that it is accepted that Claimants should not delay too long before resigning otherwise they may have waived any breach of contract, delay being usually fatal. Where the owner of a company and the Company are effectively one and the same, both can be liable for the full extent of the damages awarded.
18. Jurisdiction - unfair dismissal claim
YKK Europe Ltd v Heneghan 2010 AER 13
Mr Heneghan started work with YKK in August 1988. He moved to Germany with the group in 2004. In October 2007 he was told that his role as programme director would cease that year, following which he should return to London. He stopped working for YKK on 31 December although the company continued to pay his salary and expenses. He returned to London in May 2008 when the lease on his accommodation expired. His understanding was that he was either on garden leave until the company decided whether to retain or dismiss him. He received a draft Compromise Agreement and shortly after that he was told that YKK was terminating his employment with effect from 30 June.
He lodged proceedings in the Tribunal claiming amongst other things unfair dismissal. The Tribunal accepted that it had jurisdiction to hear his claim as he was still employed by YKK but no longer living or working in Germany and all the active elements of his employment were managed from London. YKK appealed.
The EAT concluded that the Tribunal had asked the wrong question and that an employee could bring a claim in the UK only if he fell into one of the three categories as set out in the case of Lawson v Serco Ltd. Either he was working in Great Britain or he was a peripatetic employee or he was an expatriate employee. The Tribunal had made no finding as to which category he fell into and appeared to proceed on the basis that he was in a separate category of a non-working employee. In fact, at the date of the dismissal he was not working at any establishment in Great Britain or anywhere else and he was not an expatriate employee. The case was remitted to a fresh Tribunal to determine whether it had territorial jurisdiction to hear his unfair dismissal claim.
Key point: Employers should always consider first the jurisdiction issue when faced with an unfair dismissal claim from an employee as this could be fatal to the employee’s claim.
- In discrimination claims
Neary v Service Children’s Education and others UKEAT/0101/10
Mr Neary moved to Germany in 2007 to take up a teaching post and he stayed there until November 2008. He applied for a position in Cyprus in March 2008 but was unsuccessful. He was living and working in Germany both at the time for applying for the job and learning that it was unsuccessful. He was still in Germany in September 2008 when he submitted his claim to the UK employment Tribunal complaining of disability and age discrimination. At a pre-hearing review the Tribunal decided that it did not have jurisdiction to hear his claims finding he was not ordinarily resident in Great Britain. He appealed to the EAT which dismissed his appeal. However, in doing so the EAT proved some useful guidance on how Tribunals should interpret the phrase “ordinarily resident in Great Britain”.
Key point: There is no guidance in the DDA or Age Regulations on the meaning of the words “ordinarily resident”. The position will not be helped when the Equality Act 2010 comes into force as the Act is silent on territorial jurisdiction. The Act leaves it to the Tribunals to determine whether the law applies depending on for example a connection between the employment relationship and Great Britain. An employee can be ordinarily resident in more than one country at the same time.
- Absent choice of law clause
Chunilal v Merrill Lynch International Incorporated 2010 EWHC 1469
Mr Chunilal was a UK national resident in Hong Kong. He sued Merrill Lynch which had its principal place of business in New York for breach of contract in the High Court. Merrill Lynch argued that the English court was not the appropriate jurisdiction to hear the claim as there was no express choice of law in his employment contract. To determine the applicable law and therefore whether it was the most convenient for it to hear the claim the Court considered the tests set out in the Rome Convention.
The Court found there were no contractual terms and circumstances which demonstrated with any reasonable uncertainty that English law had been chosen by the parties and Article 3 did not therefore apply. It decided that Mr Chunilal had originally worked in Hong Kong within the meaning of article 6 and he had been based there for the duration of the 5 year contract, only travelling occasionally overseas. The Court concluded English law was not the applicable law and was therefore not the appropriate forum to hear his claim.
Key point: The case is a useful example of how a court applies the test set out in the Rome Convention to determine the applicable law of an employment contract where a choice of law has not been expressly chosen by the parties.
19. Unfair dismissal - Informal and formal misconduct procedures
Sarkar v West London Mental Health NHS Trust 2010 EWCA Civ 289
Mr Sarkar was employed by the Trust as a consultant psychiatrist based at Broadmoor. Complaints were made about him of harassing conduct and the Trust investigated this. It concluded that his actions warranted disciplinary action but expressed concern about him returning to work in a team where the relationships had deteriorated. A number of meetings took place to discuss whether the matter could be dealt with under the “fair blame” policy, a policy aimed at resolving minor performance and conduct issues by negotiation and agreement. It was agreed that the policy would apply and at a final meeting action was agreed which included a formal written warning, continued consultation and his relocation to a different directory. However at the end of the meeting the Trust’s medical director announced that she would report Mr Sarkar to the General Medical Council.
This was an outcome that had not previously been discussed and was unacceptable to Mr Sarkar. He drew from the informal procedure and decided to take his chance with a disciplinary hearing instead. The outcome of this was his summary dismissal for repeated incidents of unacceptable behaviour and bullying and harassment which the Trust concluded amounted to gross misconduct. He then brought a claim for unfair dismissal.
The Tribunal held that Mr Sarkar had been unfairly dismissed but he had contributed to his dismissal and reduced his award to reflect his culpable and blameworthy conduct. The Trust appealed to the EAT which allowed the appeal. The Tribunal should have asked itself whether having regard to the totality of the allegations made against Mr Sarkar the decision of the dismissing panel was one that a reasonable employer could make. Once the fair blame policy broke down for whatever reason it was open to the Trust to continue with the disciplinary procedure. Consequently his dismissal had been fair. Mr Sarkar appealed to the Court of Appeal which overturned the EAT’s decision holding the original Tribunal had been entitled to find he had been unfairly dismissed. It was inconsistent to use allegations of misconduct which were relatively minor and not warranting dismissal and then dismiss him for gross misconduct based on the same matters. The Court of Appeal allowed the appeal and restored the Tribunal’s decision remitting the claim to the Tribunal for a remedies hearing.
Key point: However well intentioned, an employer should not adopt an informal approach when trying to resolve serious conduct issues as this may restrict the sanctions available at a later stage.
20. Directors’ dismissal - error of judgment or wilful neglect
Dunn v Anor v AAH Ltd 2010 EWCA Civ 183
Mr Dunn and his colleague were the financial and managing directors respectively of AAH, a company owned by a German pharmaceutical company. Both men had contracts of employment with AAH and Mr Dunn reported to the managing director. In 2004 the company distributed new mandatory risk management guidelines to all directors. This required a twice yearly risk inventory to be submitted and there was also a facility for ad hoc risk reporting where information of essential significance was to be sent to the management board. In May 2007 there was a shortfall of some £4 million in relation to a supplier of pharmaceutical products but this was not included in the half yearly risk assessment. The directors believed the problem could be solved. When the position deteriorated the matter was eventually reported on 25 October after which both directors were suspended and then summarily dismissed.
They issued proceedings in the High Court for breach of contract but the judge held that the company was entitled to exercise its right of summary dismissal. There was no excuse for not reporting the matter from 25 May onwards and the failure to do so constituted willful neglect of duty or gross misconduct. The finance director appealed to the Court of Appeal arguing that in reporting the matter to the managing director, his line manager, he had fulfilled his duty. He had no personal responsibility after that if the managing director failed to report the matter onwards. Failing to report the matter was an error of judgment by him but not something which was willful neglect. The Court of Appeal disagreed.
As finance director he had a particular obligation to keep a proper hold on matters such as risk management. When a serious matter like a potential fraud was exposed he ought to have known that AAH should have been informed immediately so that it could assess the risk for itself. It was not for him to assess the seriousness of the situation. If he knew his line manager had not reported the affair he should have done so. If he did not report it knowing that the managing director had not done so he repudiated his contract because he had undermined the trust and confidence which is at the heart of the contract of employment with the result that AAH was entitled to terminate it. His appeal was therefore dismissed.
Key point: Risk management guidelines should be enforced by employers and taken seriously by employees.
21. Disability discrimination - home working was not reasonable adjustment
Secretary of State for Work and Pensions and ors v Wilson EAT/0289/09
Mrs Wilson was employed by the Department for Work and Pensions and was agoraphobic. She was given a back office role but the pilot scheme in which she worked was due to be closed and this would require her redeployment. She was put on fully paid leave in September 2006 whilst DWP investigated ways of facilitating her return to work. She refused their suggestions insisting that home working was the only way in which she would be able to work. Her special leave ended in May 2007 after which she was on sick leave. She was eventually dismissed in January 2009. She brought a claim for inter alia disability discrimination. The Tribunal held that she had been discriminated against as the DWP had failed to make reasonable adjustments. On appeal by the DWP the EAT held that the Tribunal failed to consider whether the adjustments which DWP had proposed would alleviate the disadvantage imposed on her rather than focusing on the only adjustment that Mrs Wilson had said she would accept, namely home working. There were no home working vacancies within the organisation and it was impractical for her to do the work that was available from home as it involved direct customer contact and confidential public information. DWP’s appeal was accordingly allowed.
Key point: Employees who are disabled are entitled not to be placed at a substantial disadvantage. Provided the adjustments offered are reasonable in the circumstances an employer will not be liable for disability discrimination.
- Website accessibility
The new draft BS 8878 Web Accessibility Code of Practice has been issued and it sets out a non-technical standard on web accessibility for the disabled. The draft has been issued for public consultation. The new standard is expected to come into force in November 2010. Failure to make websites available to the disabled may result in claims under the anti-discrimination legislation in the Equality Act 2010 when that Act comes into force in October 2010. Organisations should now be considering the processes which will allow full accessibility.
- Where employee denies disability
London Borough of Redbridge v Baynes EAT0293/09
Mrs Baynes had been employed by the Council since 1994. During her employment she lost the sight of her right eye. She complained that her manager thereafter changed her duties because of what he referred to as her disability, thereby subjecting her to a detriment. She finally resigned on one month’s notice in 2008. She then raised a grievance and presented claims for unfair constructive dismissal and disability discrimination. She had presented her claims out of time and at a pre-hearing review she was ordered to provide material establishing the fact of her disability. She confirmed she was not disabled and had no physical or mental impairment but she had been advised by the Citizens Advice Bureau that she was classed as disabled even though she did not consider herself to be so. The Tribunal found that notwithstanding her assertions that she was not disabled, she had a physical impairment which had an effect on her ability to carry out normal day to day duties and was therefore disabled. The Tribunal then extended her time to make her claim. The Council appealed and was successful. The conclusion that she was disabled was an error and perverse. Her claim was dismissed.
Key point: Under the new Equality Act 2010 an employee will be protected from perceived discrimination, i.e. less favourable treatment based on a perception that he or she is disabled even if he or she is not in fact disabled under the Disability Discrimination Act 1995.
- Depression
J v DLA Piper UK LLP UKEAT0263/09
In mid 2008, J, a barrister, was interviewed for a job with DLA Piper. She had a history of depression. She was offered a job, subject amongst other things to completing a medical questionnaire. Prior to completing the questionnaire she spoke to the HR manager at DLA Piper and told her about her history of depression. She was told to consider whether in truth the role was suitable for her as she would not be able to do any work from home. A few days later she was contacted by DLA Piper and told that the decision had been made to impose a recruitment freeze as a result of the credit crunch and the offer to her was withdrawn. She believed the true reason for the withdrawal of the offer was that she had told the HR department about her medical history.
In September 2008 she commenced employment Tribunal proceedings complaining of disability discrimination. Her claim was originally struck out on the basis that she was not disabled. She appealed that decision. Her appeal was on the basis first that she was in fact disabled and secondly if she was not in fact disabled then if DLA withdrew the offer to her because they believed she was disabled such discrimination on the grounds of perceived disability was contrary to EU law and should be treated as prescribed under the Disability Discrimination Act 1995.
The EAT allowed her appeal and remitted the disability issue to a fresh Tribunal to determine. It set out guidelines for a Tribunal considering mental impairment and how it should focus on the effect the impairment has on an employee’s day to day activities rather than medical questions. Her GP was fully qualified to express an opinion on whether she was suffering from depression or not. J failed in her alternative argument that she was discriminated on the grounds of perceived disability as it was not argued below in the Tribunal. That head of claim would be possible under the Equality Act 2010 in October 2010.
Key point: Depression can be a disability and employers should be familiarising themselves with the new Equality Act 2010 before October 2010 so they can be prepared for the changes ahead in the disability sphere.
22. Consultation on limiting numbers of non-EU economic migrants
The Government has launched a consultation on the process to be used to limit the number of non-EU economic migrants entering the UK. The overall policy objective is to reduce net migration of highly skilled (Tier 1) and skilled (Tier 2) entrants to earlier levels and reduce the economic, social and public service impact of migration. At present inter-company transfers count for 45% of all Tier 2 entry visas. Consultation will close in September 2010.
The Government intends to announce the first annual limit by the end of the year and have this in place by 1 April 2011. The Government hopes that every reasonable avenue to recruit a resident worker will be exhausted before an employer turns to migrant recruitment to fill its vacancies.
23. Data Protection and data transfers
The European Commission has sent an opinion to the UK Government requesting that it comply with the EU Data Protection Directive. Currently the Information Commissioner’s office has no mandate to monitor whether third countries have adequate data protection laws and practices in place and is therefore sometimes unable to make an informed assessment prior to data transfers being made. It also has no right to perform random checks on people or organisations processing data to establish whether they are in legal compliance or to enforce penalties on its own authority. The UK Government has 2 months to inform the European Commission about what steps it intends to take to ensure compliance with the Directive. (Source: FEDEE).
24. Information and Consultation Regulations
Brown v G4 Security (Cheltenham) UKEAT/0526/09
Mr Brown submitted a petition to G4 in January 2009 requesting information and consultation arrangements under the ICE Regulations. Despite an informal meeting in March the deadline for compliance passed without G4 having taken any steps to comply with the Regulations.
In October 2009 following a complaint by Mr Brown the CAC held that a valid employee request had been made and ordered G4 to arrange a ballot. Thereafter Mr Brown applied to the EAT to issue a penalty notice under the ICE Regulations and the EAT imposed a penalty of £20,000 on G4. It held that G4 had persisted over a significant period of time in its breaches of the Regulations.
Key point: This case together with the decision in Amicus v Macmillan and Darnton v Bournemouth University offers employers a range of decisions to consider when assessing the risk of a penalty if they fail to comply with the ICE Regulations.
25. Stigma Damages and references
Brown v Careham Hall UKEAT/0354/09
Ms Brown was employed as an assistant care manager at Careham Hall from 1982. In June 2008 she was summarily dismissed for gross misconduct. In February 2009 the Tribunal held that she had been automatically unfairly dismissed and in breach of contract. Her damages for breach of contract were increased by 30% for her employers’ failure to follow the statutory disciplinary procedures then in force. She appealed this uplift seeking 50% and she also appealed the additional compensation for the loss of her new employment which she alleged was the result of an inaccurate reference and unfounded allegations made against her by the care home to her new employer.
The EAT held that the level of the uplift was a matter of fact for the Tribunal to decide if there was a serious breach of the statutory procedures. An uplift in the top half of the range of 30%-50% was appropriate and her appeal on this point failed. Her complaint about the reference which her employer was under no obligation to provide which post-dated her termination of employment was held to be outside the jurisdiction of the Tribunal. If the care home had issued deliberately a negligent, untrue reference then she may have a remedy in the civil courts for defamation or under the case of Spring v Guardian Insurance in an action for negligent misstatement. However she did not have a claim for unfair dismissal compensation due to an unfavourable reference. The loss suffered was, if any, not as a consequence of the dismissal but due to an unfavourable reference.
Key point: This issue of uplift relates to the previous and now repealed statutory procedures. Stigma damages for career loss are recoverable arising from the process of litigation and damage to reputation but not because of a poor reference.
26. Age discrimination – cap on redundancy payment justified
Kraft Foods UK Ltd v Hastie UKEAT0024/10
Kraft operated an established voluntary redundancy scheme under which employees received 3.5 actual weeks’ pay for each year of service. However, the scheme applied a cap to ensure that the employees’ redundancy payment did not exceed the amount they would have earned at their current rate of pay had they remained in employment until the normal retirement age of 65.
Mr Hastie was 2 years’ from retirement and had his voluntary pay reduced by £13,600 on application of the cap so he complained of unlawful age discrimination. Kraft argued that the cap was justified as it prevented employees receiving a windfall. The Tribunal upheld Mr Hastie’s claim and Kraft appealed. The EAT allowed the appeal. It held it was legitimate for the scheme to incorporate a provision designed to prevent excess compensation and the cap was a proportionate means of achieving that aim. The cap used in this case was fairer than the application of a taper and it was important to consider the fairness of the scheme as a whole.
The Tribunal commented that 3.5 weeks’ pay for each year of service, in today’s climate was exceptionally generous. Mr Hastie had over 39 years of service at the time of his redundancy and he was about 2 ¼ years’ from his 65th birthday. His redundancy package would have amounted to some £90,101 but his salary that he would have earned up to his 65th birthday would have been £76,560.
Key point: Employers who implement a contractual redundancy scheme need to ensure that employees are fairly treated across the board and that any awards are not discriminatory. Capping contractual redundancy payments at a maximum of 12 months’ pay, is a frequently used device and is likely to be proportionate.
- Referees retired at 48
Martin and others v Professional Game Match Officials Ltd ET/2802438/09
Mr Martin and three colleagues were retained by Professional Game Match as assistant referees at professional football matches. Their retirement policy provided that officials who reached 48 during the season would have their membership terminated unless they were to be retained. Two assistant referees were removed on reaching the age of 48 and their appeals were rejected. They brought claims for automatic unfair dismissal and direct age discrimination.
The Tribunal dismissed the claims for unfair dismissal as they were not employees but held they had been directly discriminated against on the grounds of age. Professional Game Match was unable to show that a lower retirement age than the default retirement age of 65 and in particular a retirement age of 48 was a proportionate means of achieving a legitimate aim. To amount to a legitimate aim a policy or practice must have a public or social policy objective and that the purely private interests of an individual company were not sufficient to qualify as a legitimate aim. Professional Game Match’s only aim that met the social policy objective was the creation of a career route for match officials. The Tribunal identified several other ways that Professional Game Match could have achieved its aims but held that it had done nothing to satisfy the Tribunal that the appropriate retirement age was 48.
Across Europe there was a variety of retirement ages in place for comparable match officials ranging between 45 and 50. None of the witnesses could explain why it had decided on a retirement age of 48 as opposed to any other age.
Key point: A retirement policy must have some social or public policy objectives and go further than simply meeting the needs of a particular business. Employers will continue to find it difficult to justify any fixed retirement age lower than the current default retirement age of 65.
Shoesmith v Ofsted and ors, High Court EWHC 852
Ms Shoesmith lost her challenge against the unfairness of the process by which she was removed from office in relation to the Baby P case. She was Director of Children and Young Person’s Services a role that had been created for someone who was accountable for local authority education and children’s social services, following a previous enquiry into child protection arrangements for children on the Council’s protection Registry in 2000.
Ms Shoesmith was subject to intense media coverage and wide criticism. She applied for a judicial review to challenge the lawfulness of the Ofsted report, the Secretary of State’s directions and the council’s dismissal procedure. She claimed the processes were flawed by breaches of natural justice and were unfair. She had not been given a fair opportunity to make representations on the concerns that appeared in the Ofsted report and there was political interference with the Ofsted inspection such that it was slanted to put her in a bad light.
Mr Justice Foskett did not find that she should have been allowed to make representations or that there was political interference with the Ofsted report. He concluded Ofsted had overall complied with its obligation to act fairly. He did conclude though that her lack of opportunity to challenge the detail and underlying evidence of the Ofsted report and the Council’s failure to consider alternative employment for her created the appearance of unfairness. The fact she was accountable for her staff’s actions did not mean that this entitled the Council to dismiss her summarily without compensation. Ms Shoesmith was entitled therefore to pursue an unfair dismissal claim.
28. Contempt of Court for disobeying search and seizure order
Aspect Capital Ltd v Christensen 2010EWHC 744
Mr Christensen was employed as a researcher by his employer Aspect Capital, an investment manager regulated by the FSA. In 2009 it came to light that he had been carrying out personal account trading in breach of both company policy and the FSA rules. He denied the allegations when confronted. He was then suspended and following a disciplinary meeting on 2 October he was summarily dismissed.
Consequent to his dismissal Aspect Capital engaged a forensic expert to examine his computer. The expert concluded that he had uploaded large quantities of confidential data and information for his own account. In light of this Aspect Capital applied to the court for a search and seizure order which was granted. Mr Christensen failed to comply with the order in a number of ways and the High Court held a hearing to determine the extent of his breaches. He was found in contempt in relation to 6 actions which were proved beyond reasonable doubt. He was sentenced to a prison term of 3 months suspended for 18 months.
The Court recognised that his contempts were deliberate but took into account his good character including his service as an officer in the armed forces and evidence from a former colleague. Nevertheless the contempts were so serious that the judge considered that only a prison sentence was justified and the shortest sentence he could impose given the gravity of the case was 3 months. He had already suffered financial loss along with the probability that he would never work in financial services again. He also faced a risk of being ordered to pay Aspect Capital’s costs. The severe effect that the proceedings had had on his mental health as evidenced by a letter from his doctor tipped the balance in favour of the sentence being suspended.
Key point: Cases like this are rare but the case is of interest to see how procedures more usually associated with criminal proceedings can apply to the employment law sphere of theft of confidential information.
29. Restrictive covenants – 12 months’ non-solicitation clause too long
Associated Foreign Exchange Ltd v International Foreign Exchange (UK) Ltd and another 2010 EWHC1176
In this case the High Court held that there was insufficient evidence that a non-solicitation restriction of 12 months’ (less time spent on garden leave) was reasonable to protect an employer’s legitimate business interests. The Court therefore refused to grant an injunction to prevent an ex-employee soliciting its customers. The Court found that in the selling and buying of foreign currency, the market in which the former employer operated, it was likely that after 6 months the market would have moved on so much that protection against solicitation from their ex employee was unnecessary. The non-dealing clause gave adequate protection in the court’s view where the employee was not particularly senior and where foreign currency exchange customers were not particularly loyal. The Court also held that a delay of one month between discovering the breach and seeking injunctive relief would not be too long so as to justify refusing to grant an injunction in this type of case where neither party could argue that the delay was evidence of acquiescence or had resulted in prejudice to them.
Key point: An alternative non-dealing sub-clause is always useful in restrictive covenants clauses.
30. Agency agreement – lawful termination for abusive language
Gledhill v Bently Designs (UK) Ltd 2010 AER 04
Bently supplied dining and bedroom furniture. Mr Gledhill was one of its 10 national agents. In 2006 there was a move by Bently to a paperless environment. In an effort to encourage compliance Bently’s managing director levied a charge on Mr Gledhill, who was the only agent who failed to accept the change, for dealing with his paper. This led to Mr Gledhill having two abusive telephone conversations and leaving an abusive message on the answering phone of the managing director. The managing director gave Mr Gledhill ample opportunity to apologise. Six days letter he wrote a letter of apology but it was more of a justification for his behaviour. His contract was terminated and Mr Gledhill brought an action for unlawful termination. The sole issue of the case is whether the termination was lawful. He lost.
Abusive language by an employee towards an employer is capable of amounting to a repudiatory breach of contract. Words spoken in the heat of the moment might not always lead to a conclusion that the relationship could not continue. An apology might heal the breach where words were spoken in heat and haste and the apology was heartfelt and sincere. In this case Mr Gledhill was under an express duty to act towards Bently in good faith and conscientiously and any serious breach of such a term entitled Bently to terminate him with immediate effect. Mr Gledhill was an established businessman slow to adapt to technological changes. His behaviour was not on the spur of the moment and was thought out, calculated and inappropriate. It was gross insubordination which would lead to an irrevocable breakdown of the personal relationship of trust required between the principal and agent unless repaired. His response 6 days later did not amount to that.
Key point: Employers should give employees an opportunity to retract any abusive comments and to apologise. If this is not done promptly then his or her immediate termination should not be unlawful or unfair.
The Parliamentary Under-Secretary of State for BIS has confirmed the Government will issue an extensive consultation on its commitment to extend the right to request flexible working to all employees not simply for those with children or elderly dependants.
The Budget Report was delivered on 22 June 2010.
- The Chancellor has confirmed that consultation will take place on how to phase out the default retirement age from April 2011.
- Also announced were the Government’s plans for an immediate review of employment laws by appropriate Government departments with changes to be made to employment law as part of the Governments one in one out approach to regulatory reform.
- The 50% tax rates will still apply.
- The pensions tax anti-forestalling measures for 2009/10 and 2010/11 will not be removed.
- In 2011 the majority of benefits including maternity pay and sick pay will be uprated in line with the Consumer Price Index rather than the Retail Price Index.
The Government appears to be set to go ahead with plans to introduce national employment savings trust pensions schemes from 1 October 2012. Employers will be required to auto-enroll their employees in a qualifying pension arrangement and start making contributions to the scheme. The minimum contribution will be phased in starting at 2% of earnings including 1% from the employer, rising to 8% of earnings including 3% from the employer by October 2017.
Employers with existing pension arrangements will be able either to enroll their employees into their existing scheme (assuming they fulfil the minimum requirements) or set up a new NEST scheme.
