Employment Law Update, Spring 2011
Issue 49, Spring 2011
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.
- Key employment changes
- Proposed amendments to Takeover Code
- Equalities and Human Rights Commission
- Review of IR35
- Disability Discrimination - volunteer not protected
- Unfair dismissal - Extent of employer’s knowledge
- Redundancy – withdrawal of enhancement amounted to breach of contract
- Costs in the Employment Appeal Tribunal
- Age discrimination
- TUPE - pre-pack administrations
- Administrators’ liability for discrimination by insolvent company
- Corporate Manslaughter
- TUPE – termination following change of location not for an ETO reason
- Constructive Dismissal - Team Poaching
- Insurance Premiums and Benefits – Gender related factors
- Jurisdiction for discrimination claims
- Reforming the tribunal system
- Religious discrimination – anti fox hunting belief
- Racial discrimination – third party harassment
- Taxation – pool cars
- Sexual Orientation Harassment
- Stay of tribunal proceedings and binding arbitration clause
- Employment tribunal proceedings stayed where overlap with High Court proceedings
- Farewell the Luncheon Voucher?
· Bribery Act 2010
The implementation of the Bribery Act 2010 was delayed until the guidance was published and distributed to businesses to allow adequate preparation for the new regime. The Act will now come into effect on 1 July 2011, 3 months after the recent publication of the guidance. For further information about the guidance please click here.
· Training
Time off for training is not now to be extended to all employees from April 2011. It will continue to apply for employees of larger employers with 250+ employees. The Government will continue to evaluate the extension so it may yet be implemented.
· Exempt Start Ups
The Government has confirmed it will impose a moratorium exempting businesses with fewer than 10 employees and start-up businesses from all new domestic laws for 3 years from 1 April 2011. This will cover businesses that commence a trade profession or vocation following the HMRC definition of a start up.
· Company cars
Owners of company cars with a list price over £80,000 will be subject to increased tax charges with effect from 6 April 2011 when the current cap will be removed.
With effect from 6 April 2011 the rate of approved mileage allowance payment for cars will rise to 45p per mile for the first 10,000 miles of business travel in an employee’s private car or van.
· PAYE
The PAYE Income Tax (Pay as You Earn) (Amendment) Regulations 2011 come into force on 6 April 2011. From that date employers must deduct PAYE using the 0T code when making taxable payments to departing employees after they are issued with a form P45. This will affect basic rate tax payers in the main who may lose a cash flow advantage. Tax at the full 20%, 40% or 50% rates must be deducted from post termination payments. Staggered payments may not be enough to reduce PAYE liability.
At present termination payments over £30,000 are taxed only at the basic rate with higher and additional rate income tax liabilities being paid through self-assessment at a later date.
· Budget 2011
For a full update on key announcements and implications for businesses of the 2011 Budget please click here.
· Pension
The annual allowance for tax relief on pension savings for individuals is reduced to £50,000 from the tax year 2011/2012 and the lifetime allowance will be reduced to £1.5 million or the tax year 2012/2013.
· Flexible Working
The Government is repealing the planned extension of the right to request flexible working to parents of 17 year olds (unless the child is disabled or under 18). In 2010 the Government announced that the right to request flexible working would be extended to parents of children under 18 years old in April 2011. The change reflects the Government’s concern for employers of the effects of this extension but it is still committed to extend the right to all employees at some stage.
2. Proposed amendments to Takeover Code
The Takeover Panel has published its consultation on proposed amendments to its Takeover Code. The changes are designed among other things to provide greater recognition of the interests of offeree company employees. Most takeovers by share purchase are excluded by definition from the scope of the TUPE regulations so the information and consultation obligations do not usually apply. The Code include proposals which would hold an offeror to any statement made during the offer period relating to any course of action that it claims to take or not to take towards the future business of the offeree company and this would cover redundancies, by way of example. Offerors could be held to such statements for at least 12 months.
3. Equalities and Human Rights Commission
The Home Secretary has launched a consultation on the reform of the EHRC. The reforms are intended to increase transparency, accountability and value for money. The proposed changes include clarifying the EHRC’s remit and stopping non-core activities.
IR35 is to be retained but the Government is proposing improvements to provide greater pre-transaction certainty including a dedicated helpline, greater clarity by publishing guidance on the types of cases HMRC view as outside the scope of IR35, restricting reviews to high risk cases and promoting more effective managed engagement with interested parties and an IR35 forum to monitor HMRC’s new approach.
IR35 – providing services through an intermediary
MBF Design Services Limited v HMRC 2011 UKFTT35
The First-tier Tribunal has allowed a consultant’s IR35 appeal notwithstanding that the requirement to provide personal service and the absence of any practical right to provide a substitute and other factors clearly pointed to employment. HMRC ruled that the sole director of a service company contracted to Airbus over several contracts was an Airbus employee for tax and national insurance purposes under IR35 but the service company argued the consultant was self employed and successfully appealed. The tribunal reviewed the case law and set out the guidelines that could point to either employment or self employment. Although the factors pointed to employment these had less weight and could be explained by the “special needs of a very complex and commercially sensitive undertaking”.
Key point: The case needs to be viewed with some caution as it does depend entirely on its own facts. There is no clear set of principles that can be adopted as indicative of an unarguable consultancy arrangement.
5. Disability Discrimination - volunteer not protected
X v Mid Sussex Citizens Advice Bureau and Others 2011 EWCA Civ 28
The Court of Appeal held in this case that a CAB volunteer who had no contract with the CAB could not pursue a claim against the CAB for disability discrimination. Miss X worked 4 or 5 hours a week with the CAB. She signed a volunteer agreement that was “binding in honour only… and not a contract of employment”. She often failed to attend work when she was expected but the CAB did not object to this at the time. She was eventually asked to cease her volunteer work and she then brought a claim for disability discrimination.
At a pre-hearing review an employment judge decided that the tribunal had no jurisdiction to hear her claims because she was not in employment. She appealed to the EAT which upheld the tribunal’s decision. She appealed to the Court of Appeal. It held she could not bring herself within the Act or under the Equal Treatment Framework Directive as the European Council had rejected a specific proposal to include wording in the Directive to make it clear that unpaid or voluntary work was covered. The EU concept of a “worker” is restricted to paid individuals and the concept of “occupation” did not include volunteers.
Key point: The case will equally apply to the scope of the Equality Act 2010 which has replaced the Disability Discrimination Act 1995. Although Miss X was not covered in this case some unpaid workers may be entitled to protection under UK law if they have a legally binding contract personally to do work or if they are in a work experience or vocational training placement. Employers should now check their documentation with such personnel to confirm the position.
· Reasonable adjustments
RBS v Ashton UKEAT/0542/09
A tribunal held that RBS had discriminated against its employee Ms Ashton by failing to make reasonable adjustments for her being disabled by withholding her sick pay under the sickness absence policy. Ms Ashton was employed from February 1989 onwards. She has since accepted voluntary redundancy from the Bank. In 2000 she became a branch manager but in 2006 she developed repetitive debilitating migraines. She was entitled to sick pay for up to 52 weeks in a rolling 12 month period. If absence triggers were hit, then disciplinary warnings were issued 99.5% of all cases. She had 128 days’ absence between 2007 and 2008. In May 2008 there was a disciplinary meeting and Ms Ashton was given a disciplinary warning for 12 months as to her attendance and in accordance with usual practice her sick pay was withheld for the period of warning. Thereafter she made a number of complaints that RBS was in breach of its duties under the Disability Discrimination Act by failing to make a reasonable adjustment in its decision by giving a warning and withdrawing her sick pay entitlement. She was successful and RBS appealed.
The Appeal court held that there was no tenable argument to support a claim that there was a failure to make a reasonable adjustment. Ms Ashton was not at a substantial disadvantage in comparison with persons who were not disabled. Her claim was dismissed on appeal.
Key point: Only in exceptional cases will withholding sick pay in accordance with a sickness absence policy amount to a failure to make reasonable adjustments.
· Reasonable adjustments – retirement on ill health grounds
Tameside Hospital NHS Foundation Trust v Mylott UKEAT/0352/09
Mr Mylott was employed in the Trust as a finance manager until February 2007 when he was dismissed on capability grounds. He brought claims for unfair dismissal and disability discrimination. He had grievances about his manager’s bullying and harassment. In November 2006 he was dismissed with 12 weeks’ notice but was told that if he was interested in ill health retirement, he would need to take up the matter with the Trust’s Human Resources department. He did not pursue this and his internal appeal against dismissal was rejected. The tribunal upheld his claims for compensation for injury to feelings and awarded £16,000 and aggravated damages of £6,000 but it made no award in respect of loss of earnings as that was no evidence that he could have returned to work but for the discriminatory treatment as he had suffered from mental illness for many years. The tribunal also held that the Trust had failed under the Disability Discrimination Act to look into the possibility of Mr Mylott taking ill health retirement. The Trust successfully appealed.
The EAT’s view was that the duty to make reasonable adjustments did not extend to enabling a disabled employee who was no longer able to work to leave employment on favourable terms including ill health retirement. The EAT also set aside the tribunal’s award of aggravated damages. A finding that an employer acted with malice giving rise to aggravated damages should not be made lightly. His manager had been brusque and insensitive but that was not sufficient to justify an aggravated damages award.
Key point: Assisting a disabled employee to retire on ill health grounds is not a reasonable adjustment.
· Dismissal for false grievances not victimisation of disabled employee
Martin v Devonshires Solicitors UKEAT/0086/10
Miss Martin was employed as a legal secretary from February 2006. In January 2008 she submitted a written grievance which set out her belief that her previous employer had informed some of the partners at Devonshires that she had brought a sex discrimination claim against it. Miss Martin alleged she had consequently suffered harassment and victimisation at Devonshires and that two of the partners had made discriminatory comments against her. Following an investigation it was found that none of the partners had been aware of her claim against her previous employer and no discriminatory comments had been made. The investigation also found that her grievance had been brought maliciously and in bad faith. Her appeal was dismissed. She went on sick leave and subsequently lodged 7 further grievances. Her employer sought a report from an occupational health consultant and learnt for the first time that she had a history of mental ill health. A subsequent report from a consultant psychiatrist suggested she suffered from paranoid delusions and possibly an auditory hallucination.
Devonshires advised Miss Martin that it was considering terminating her employment due to a breakdown in trust and confidence. At a meeting she insisted the allegations were true and that no proper investigation had been carried out. She was dismissed the following day because the relationship between her and her firm had irretrievably broken down. The decision to dismiss was upheld on appeal. She brought a tribunal claim for sex and disability discrimination, victimisation and unfair dismissal. The tribunal dismissed all of her claims.
Whilst she suffered from a disability, Devonshires’ duty to make reasonable adjustments did not oblige it to continue to employ her. Devonshires would have acted the same way to any other employee who had made similar false allegations, disabled or not. She appealed and the EAT upheld the tribunal’s decision. Devonshires were prompted to dismiss her because of a combination of interrelated features and the consequences of her complaints not because of the complaints themselves.
Key point: Employers should still regard dismissal for unreasonable multiple failed grievances as a last resort in such cases to avoid a claim for victimisation.
6. Unfair dismissal - Extent of employer’s knowledge
Orr v Milton Keynes Council 2011 EWCA Civ 62
In determining the fairness of a dismissal a tribunal must assess the reasonableness of the employer’s conduct, not the level of injustice to the employee.
Mr Orr was employed by the Council as a youth worker. The Council took disciplinary action against him for two incidents and he was dismissed for gross conduct. Mr Orr then brought a claim for unfair dismissal and race discrimination. The tribunal held that the cause of Mr Orr’s rude and aggressive behaviour was due to his employer’s attempt to reduce his working hours without his agreement and a racial remark made by his manager. It held nevertheless that the dismissal was fair and non-discriminatory. Mr Cove, a senior manager, who was appointed by the Council to oversee the disciplinary process had not known of the manager’s behaviour or the comments made, at the time of reaching a decision to dismiss. Mr Orr appealed to the Employment Appeal Tribunal and the Court of Appeal arguing that at the time of his dismissal the facts were known at a sufficiently level of seniority within the Council albeit not by the decision maker which exonerated him or at least mitigated his offence.
The Court of Appeal by a majority decided that an employer cannot be deemed to have knowledge of all the facts made to its employees when deciding whether it was reasonable for it to dismiss. As long as a fair and thorough investigation had been carried out it is only the facts known to the decision maker that are relevant in determining whether the dismissal was fair.
Key point: The test for reasonableness in dismissal cases still depends on whether in the circumstances including the size and administrative resources of the employer’s undertaking the employer acted reasonably or unreasonably in treating the reason as a sufficient reason for dismissing the employee which is determined in accordance with equity and the substantial merits of the case. Provided there has been a thorough investigation that will usually be sufficient.
· Final warnings
Davies v Sandwell Metropolitan Borough Council UKEAT/0416/10
The EAT held in this case that Miss Davies’ failure to appeal against a final warning did not prevent a tribunal from looking behind the validity of that warning when considering the reasons for the decision to dismiss.
Miss Davies was employed as a teacher by the council. In 2005 she was given a final written warning and appealed but her appeal was dropped when she realised she could be dismissed. In 2006 following further disciplinary proceedings the council took account of the final warning and dismissed her. Her unfair dismissal claim was unsuccessful and she appealed. The EAT held that where a final warning was issued, the absence of an appeal could not have the effect of making the final warning valid, so her appeal was allowed.
If an earlier warning was clearly unfair, a failure by an employee to appeal it does not rectify that unfairness or validity. An employer should be proactive in remedying that invalidity rather than waiting for the employee to raise it formally.
Key point: If there is a risk of an employee challenging any subsequent dismissal, employers should ensure that the decisions imposing its sanctions are correct, the disciplinary procedures are fair and that they are reasonably applied. Otherwise the decision to dismiss may be outside the band of reasonable responses and make the dismissal unfair.
· Offensive email
Gosden v Lifeline Project Ltd ET2802731/2009
Mr Gosden was employed by Lifeline, a charity. He was assigned to work in Moorland Prison in 2006 and then another prison in 2007. In 2008 outside working hours and from his home computer Mr Gosden forwarded an offensive email to the home computer of a Mr Yates, a colleague employed by HMPS. It contained material of a racist and sexist nature. It was a chain email and Mr Yates forwarded it to a colleague who worked at Moorland prison and so the email entered the computer system of HMPS. The matter was escalated to a formal internal investigation. Mr Gosden admitted that he had sent the email to Mr Yates. Mr Gosden was suspended and Mr Yates was compulsorily retired. Lifeline began its own investigation into Mr Gosden’s conduct. The panel found him guilty of gross misconduct by having carried out an act which might damage their reputation and integrity and for having breached its equal opportunities policies. Mr Gosden had been excluded by HMPS from all prisons in Yorkshire and Humberside so his current employment was unsustainable and that was a further ground for dismissal. He was dismissed in April 2009 and his appeal against dismissal was unsuccessful. His claims in the tribunal for unfair and wrongful dismissal were unsuccessful. The tribunal also considered the Human Rights Act 1998 and whether it was reasonable for an employer to dismiss for misconduct which took place outside the workplace. In this case having sent it to another employee’s home computer it was not intended to be private and Mr Gosden was aware that as a chain email asking recipients to pass it on he had no control of the email once it was passed to Mr Yates.
Key point: This is an important decision for employees who frequently send on chain emails outside work and who may not realise that their employment position may be jeopardised. This is one of the first decisions on cases involving bringing an organisation into disrepute as a result of the use of social media.
· For some other substantial reason - breakdown of relationships at work
Ezsias v North Glamorgan NHS Trust UKEAT/0399/09
Mr Ezsias was employed by the Trust as a consultant surgeon from July 1998. He was dismissed with immediate effect on 1 February 2005 with 3 months’ pay in lieu of notice following an irretrievable breakdown of relationships between him and others and his department.
The way Mr Ezsias raised concerns about standards in the department was very blunt and he antagonised a lot of people. Relationships within the department deteriorated to the extent that 9 senior managers in the department signed a petition in 2003 expressing a complete lack of confidence in and total breakdown of the relationship between him and his senior staff.
He brought a claim for automatic unfair dismissal alleging his dismissal was connected with qualifying disclosures and that the Trust had failed to follow their contractual disciplinary procedure. The tribunal dismissed his claim as his disclosures were not protected disclosures and his making them was not the reason for the dismissal. No formal disciplinary hearing was appropriate given that the dismissal was for some other reason and not conduct. He appealed and lost. The appeal tribunal found that his dismissal was fair and for some other substantial reason. There was a difference between dismissing him for conduct causing the relationships to break down and dismissing him for the fact that those relationships had broken down.
Key point: Employers should consider carefully the option of the “some other substantial reason” route rather than conduct route when considering breakdown of relationship dismissals.
7. Redundancy – withdrawal of enhancement amounted to breach of contract
Arkley v Sea Fish Industry Authority EAT 15 April 2010
Mr Arkley worked for the Sea Fish Industry Authority since 1985. His contract stated that staff in the event of a redundancy situation with not less than 5 years’ service who were aged 50 or more and members of the Authority’s pension scheme were entitled to pension benefits enhanced by not more than 10 additional years. In past redundancy situations the Authority had offered employees to whom the policy applied 10 years’ enhanced service. This would result in a clawback from the lump sum, however, under the pension scheme on retirement. Employees were therefore offered an alternative option of 6 2/3 years’ enhancement which meant a smaller pension but a full lump sum.
When Mr Arkley was made redundant at age 51 the issue arose as to how his pension benefits should be calculated. As new regulations came into effect in July 2008 that pension funds could no longer operate the clawback system to reduce the lump sum, he asked for his 10 year enhancement and a full lump sum payable on retirement.
The Authority decided it could not afford to give him the 10 year enhancement and offered him an enhancement of 6 2/3 years. This was not acceptable to him and he brought a claim for breach of contract. The majority of the tribunal dismissed his claim but the tribunal chairman considered that the use of the word “entitled” meant he should have been offered the 10 year option and he upheld his breach of contract claim. He appealed to the EAT who agreed. It held that any reasonable person would have concluded that the redundant staff in his position would be offered 10 years’ enhancement. The policy was expressed in mandatory terms. The Authority could have sought to vary the contractual terms by consent to reduce the 10 year enhancement following the introduction of the new regulations in 2008 but it did not do so. When Mr Arkley was made redundant therefore he had a reasonable expectation he would be offered the full enhancement. The Authority’s unilateral withdrawal of that option amounted to a breach of contract.
Key point: If a similar contractual right is not consensually varied so employees have a reasonable explanation that it remains in place it will be difficult for an employer to later avoid liability simply on the ground of affordability.
· Selection for alternative role
Hurdus v Amazon.co.uk Ltd UKEAT/0377/10
Mr Hurdus was a senior recruiter. Amazon carried out a redundancy exercise and he was selected for redundancy. He expressed an interest in a vacant position of labour manager which was occupied by another employee on a 6 month fixed term contract. Mr Hurdus and the other employee were interviewed for the post and the other employee was selected. Mr Hurdus was made redundant and brought proceedings for unfair dismissal. His case was successful before the tribunal but Amazon appealed. The Employment Appeal Tribunal allowed the appeal. It was not the function of the tribunal to engage in an over minute investigation of the employer’s selection process. The question was whether Amazon had taken reasonable steps to find alternative employment for Mr Hurdus so that he could retain his employment. The labour manager job had been effectively promised to the other employee if her fixed term employment went well. That did not render his redundancy unfair. If there had been a vacant post for which he was suitable but he had not been considered for it, then the employer would have acted unreasonably in that context. It is for an employer to adopt a fair selection procedure, not the employment tribunal. The decision was reversed and Mr Hurdus’ dismissal was held to be fair.
Morgan v The Welsh Rugby Union UKEAT/0314/10
Mr Morgan’s post was made redundant during a business reorganisation. He and 3 other potentially redundant employees applied for a new post created as a result of the reorganisation. The panel conducting the interviews for this new post considered that Mr Morgan was capable of doing the job but decided to appoint another candidate who impressed them more during the interview. Mr Morgan brought a claim for unfair dismissal arguing that his experience and qualifications were better than the successful candidate and that his dismissal was therefore unfair. The tribunal disagreed and he appealed. The EAT dismissed his appeal even though the interview panel did not adhere to the job description and the format of the interview was substantially different between the candidates.
It held that the selection for employees for redundancy should be based on objective criteria but this did not extend to deciding which potentially redundant employee should be appointed to the alternative vacancy. An employer is entitled to undertake a competitive interview process and appoint the candidate it considers to be best for the job even if this is a subjective view.
Key point: In looking at who should fill a new role or vacancy it is right and proper for the employer to choose that person who has the best skills set and experience for the role and yet not be at risk from a consequential unfair dismissal claim, if the interviewing process is subjective and fair.
· After TUPE transfer
First Scottish Searching Services Ltd v McDine EAT/S/0051/10
The employer was in the business of property title searching. In September 2009 they acquired the business of two other search companies. This involved a TUPE transfer of the claimants who were employed as searchers. Prior to the transfer their employer had warned that they were likely to effect redundancies after the transfer. There had been redundancies in 2008. It was accepted there was a genuine redundancy situation and the exercise undertaken in 2009 utilised the same scoring matrix as had been used in 2008. Mr McDine and others complained the selection process was unfair and biased as it had been specifically designed to discriminate against staff who had transferred and they claimed their dismissals were unfair.
The tribunal made no criticism of the pools but found that there was a risk of unfairness in there being no system for moderating two sets of scores for the two groups of employees, namely those who has transferred and those who had not.
The tribunal did not explain what the panel had in mind by moderation. The search company appealed. The EAT found that the employees had been scored by managers who knew them and their work. As to the difference in the appraisal systems it was difficult to see why that mattered. The dismissals were not unfair. There was no evidence of bad faith in order to favour the non transferring employees.
Key point: The effect on the employees’ scores of their lengths of service was substantial and no moderation would have altered this.
8. Costs in the Employment Appeal Tribunal
G4S Services v Rondeau UKEAT/0207/09/DA
In this case Mr Rondeau was ordered to pay his former employer’s costs in the sum of £3,420 as he had previously refused to accept offers of settlement in the same terms as those which were finally accepted at the door of the court. This was held to be unreasonable conduct.
The EAT held that by not accepting the initial offer and/or failing to make a reasonable counter-offer was unreasonable conduct which justified a cost award even in the EAT which like the employment tribunal is normally cost free. A party is entitled to resist an appeal unless and until there is an outcome or an offer which requires consideration. Making and considering offers is “part and parcel of any litigation proceedings”. The Court put the blame for not accepting the offer earlier on the shoulders of Mr Rondeau’s advisers. Mr Rondeau had already received an interim payment of £30,000 from his employers for which the tribunal found them liable. The tribunal ordered no further sum was payable.
Key point: Parties to employment litigation and their advisers should note this case and that failing to make a reasonable counter-offer may amount to unreasonable conduct and have costs consequences.
O’Reilly v British Broadcasting Corporation and anor Case No. 220423/10
The presenter of Countryfile was replaced on the show and her age was a significant factor in the BBC’s decision to replace her. The BBC was found not liable for any sex discrimination. The BBC’s attempt at justifying their action on the ground of appealing to younger prime time viewers was not a legitimate means of achieving that aim or proportionate. The tribunal also held that the BBC had victimised Ms O’Reilly by denying her other work after she had made the discrimination allegations.
She claimed direct discrimination (as well as combined direct age and sex discrimination which under the Equality Act 2010 the Government has indicated will not now be brought into force.) The tribunal found that there was no record of the criteria applied nor any documentation of the decision-making process. The BBC’s explanation was that this is the way things were done in the media world. The failure to apply a formal procedure did not in itself evidence discrimination but its absence made it much more difficult for the BBC to explain its decision.
Key point: Diversity is a commendable aim but any consequential discrimination still needs to be justified whatever the employers’ business.
· Pension Reduction
Determination of the Pensions Ombudsman relating to D Johnson 80333/1
This case concerned an age discrimination complaint against the Civil Service Compensation Scheme.
Mr Johnson was made redundant in 2007 but because he was within 3 years of his normal retirement age his lump sum was reduced. In 2008 an employment tribunal ruled that this kind of reduction was discriminatory on the grounds of age in another case. The reduction was removed with effect from 16 July 2008 but not for earlier redundancies. After the Equality Act 2010 came in Mr Johnson argued that his treatment was discriminatory on the grounds of age and the Ombudsman found in favour of him. The reduction appeared to be a cost saving exercise and this was an insufficient justification on its own. The Ombudsman followed the tribunal’s decision in JM Wallis and Others v The Cabinet Office 2201982/2007.
Key point: This case contains useful guidance on how an objective justification defence in age discrimination cases may be viewed.
10. TUPE - pre-pack administrations
OTG Limited v Barke and others UKEAT/0320/09
For an authoritative decision this was one of 5 cases that the Appeal Tribunal considered as to whether regulation 8(7) of TUPE could apply to sales by administrators. The EAT held in this case that a sale of an undertaking by the administrator does not amount to a relevant transfer for the purposes of regulation 8(7) of TUPE 2006 so the employees assigned to that undertaking will transfer to the buyer and be protected against transfer related dismissals, irrespective of whether the sale is pursuant to a pre-pack arrangement or not.
However certain liabilities in respect of the affected employees will be taken over by the Secretary of State rather than passed to the buyer and the buyer will have more scope than usual to agree variations to the transferring employees’ terms and conditions.
The case of Oakland v Wellswood (Yorkshire) Ltd was not followed.
Key point: Subject to any subsequent authoritative decision in the Court of Appeal regulation 8(7) of TUPE will never apply to an administrator’s sale of an insolvent company’s business or assets.
11. Administrators’ liability for discrimination by insolvent company
Spencer v Lehman Brothers (in administration) ET/3201700/20/09
Miss Spencer was employed by Lehman Brothers as a threat assessment director within corporate security. On 17 September 2008 she took a pre-arranged holiday prior to commencing maternity leave. On 15 September Lehman went into administration. The administrators asked the head of corporate security to recommend members of his team for redundancy. The head did not formally consult with any of his team but Miss Spencer was recommended for redundancy and was dismissed on 28 October 2008.
She submitted a grievance complaining the she had been disadvantaged by not being kept informed about the status of her role or of job opportunities because she was absent on maternity leave. Her grievance was rejected on the basis that the reason for her dismissal was the reduced need for her role after the administration. She lodged a complaint of unlawful discrimination.
The claims against Lehman were stayed due to the statutory moratorium on the legal process. However she argued that PWC and the administrators were liable on the basis that they knowingly aided Lehman’s unlawful discrimination and in doing so acted as the administrators’ agent. The tribunal dismissed her complaint. She received no less information about her status than her colleagues who were not absent on maternity leave. Her dismissal was not because of her maternity absence.
The tribunal also concluded that PWC was not the administrator of Lehman and there was no basis of any claim against it, even though the firm received the fees from the administrator. There were no facts known or apparent to the administrators from which a tribunal could infer that they knew that they were aiding an act of unlawful discrimination, had there been any unlawful discrimination by Lehman. It was perfectly legitimate and reasonable for the administrators to proceed on the basis that the Lehman managers involved in the redundancy selections were acting professionally, fairly and lawfully.
Key point: The case is a useful decision about the potential liabilities of administrators for discrimination claims on the basis of agency.
Cotswold Geotechnical (Holdings) Limited was found guilty of corporate manslaughter in the first conviction of its kind. The company was charged under the Corporate Manslaughter and Corporate Homicide Act 2007 which came into force in April 2008. A director of Cotswold was originally charged with gross negligence but the court stayed those charges due to his ill health. An employee died at the bottom of a trial pit when the walls collapsed on him. The company had ignored well recognised industry guidance about excavations and supervision on site. The company was fined £385,000 with 10 years to pay.
Key point: Employers should review carefully their health and safety practice procedures to ensure they not only have safe working practices in place but also that their employees are properly trained to undertake their duties. The Court can order a company to put details of its conviction on their website and inform their customers which could pose a substantial reputational risk, dwarfing any fine.
13. TUPE – termination following change of location not for an ETO reason
Tapere v South London and Maudsley NHS Trust ET/2329562/07
Mrs Tapere worked in Camberwell and lived in Grays. In April 2007 her job was transferred to the Trust under TUPE and it was proposed that she would work in Beckenham. She objected to the change of location because of her family arrangements. She resigned and claimed constructive unfair dismissal and a dismissal contrary to TUPE. The tribunal held that the relocation was not a fundamental breach of contract and she had not been dismissed under TUPE.
On appeal the EAT held that whether there has been a substantial change was a question of fact and the impact of the change had to be considered from the employee’s point of view. It held that she had been dismissed by operation of TUPE. A fresh tribunal was required to decide whether her dismissal was for redundancy and if it had been unfair. The tribunal held it was a redundancy and there was no ETO reason so it was also automatically unfair. Although there were good economic and organisation reasons for the Trust to relocate to Beckenham none of those reasons entailed a change in the workforce. For there to be an ETO reason, there must be a change in the numbers for the workforce or changes in their job functions. In this case, as the whole team transferred intact and unchanged there was no ETO entailing changes in the workforce and therefore her dismissal was automatically unfair.
Key point: Where there is a change of location, the critical issue will be whether this is a substantial change to the employee’s contract and whether the employee’s refusal is unreasonable. This will always be dependent on the facts.
14. Constructive Dismissal - Team Poaching
Tullett Prebon plc and others v BGC Brokers LP and others 2011 AER 227
Tullett and BGC are rival inter-dealing broker firms. 13 brokers from Tulletts entered into forward contracts to join BGC but 3 subsequently withdrew from their contracts when they changed their minds. The remaining 10 resigned from their employment to join BGC and claimed they had been constructively dismissed by Tulletts: Tulletts obtained an interim injunction preventing them from joining BGC. Their claims for constructive dismissal failed.
A forward contract is an inducement by a prospective employer to a prospective employee which provides for them to start employment by a certain date in order to encourage them to leave their current employment as soon as possible. Some employees with such encouragement manufacture grounds for claiming constructive dismissal so they can be released from their employment contract promptly and without any restrictive covenants. The Court held that BGC had breached trust and confidence by engaging in unlawful conspiracy to induce the brokers to breach their contracts of employment with Tulletts by leaving early without lawful justification.
The Court also held that there could be concurrent obligations of trust and confidence between the employees and Tulletts and the employees and BGC under these forward contracts. The 3 brokers who stayed with Tulletts were not in breach of contract with BGC when they withdrew from the forward contracts as BGC was itself in repudiatory breach. Nor was Tullett in repudiatory breach of contract and confidence when it sought to persuade the workers to renege on the forward contracts as their intention was simply to preserve its relationship with these employees.
Key point: Forward contracts are lawful at least for the present but caution must be exercised in their use.
15. Insurance Premiums and Benefits – Gender related factors
Association Belge des Consommateurs Test-Achats ASBL and others Case C-236/09
The ECJ has decided to remove an exemption which applied from 21 December 2007 under which EU member states could allow insurance companies to use gender related factors to determine premiums payable.
In this decision the validity of the exemption was challenged by a Belgian consumer affairs body. The ECJ held the exemption was invalid as European law requires the progressive elimination of inequality between the sexes and insurers will have to use unisex rates.
From December 2012 men and women who use money purchase benefits to buy a pension at retirement will have to be offered an annuity on the same terms. Men may well be paid a smaller pension than before while women will be paid a bigger one. The decision is also likely to affect other insured benefits provided by employers such as life assurance and private medical cover.
The transitional period between now and December 2012 will allow Member States to decide what action to take on domestic laws and give businesses the opportunity to adjust and find ways to mitigate the potentially substantial knock-on effects of this decision.
Key point: Although the decision does not apply to occupational pension schemes the Government may review this.
16. Jurisdiction for discrimination claims
British Airways plc v Mak and others 2011 EWCA Civ 184
The Court of Appeal has held in this case that a tribunal had jurisdiction to hear race and age discrimination claims brought by 16 cabin crew who were resident in Hong Kong but who served on flights between Hong Kong and London. Their claims were based on the discrimination legislation prior to the Equality Act 2010 coming into effect. That Act has no provisions concerning its territorial scope. If a similar claim was brought now under the Act it is uncertain whether the tribunal would reach the same conclusion.
The case concerned the flight crews who faced compulsory retirement at 45, where international cabin crew working out of London were not retired. BA had argued that they did not employ the flight crew at an establishment in Great Britain and the tribunal did not have jurisdiction to hear their claims as they were only in British airspace for 30 minutes and this was followed by a de-brief and a short rest period in a hotel accommodation.
Key point: The test identified by the House of Lords in Serco v Lawson remains the main reference point for deciding disputed territorial jurisdiction in unfair dismissal cases.
· Rome Convention: where does mobile employee “habitually” work?
Koelszch v Luxembourg (C-29/10)
The ECJ was asked to give guidance on how national courts should determine whether a lorry driver “habitually” worked in one country for the purpose of the Rome Convention.
Mr Koelszch was a lorry driver based in Germany who delivered all over Europe but mainly to destinations in Germany. He wanted to sue his employer under German unfair dismissal law. However, the employer was based in Luxembourg and his contract stated that it was governed by Luxembourg law. The European Court of Justice held that the national courts must look at all the factors including the place from which the employee carries out his transport tasks, receives instructions and organises his work and where his tools are situated as well as places where the transport is principally carried out, goods unloaded and the place to which the employee turns up to complete any tasks when deciding jurisdiction. This will favour the employee.
Under the Rome Convention contracts are governed by the law chosen by the parties. In the absence of choice, the contract of employment is governed by the laws of the country in which the employee habitually carries out his work in performance of the contract. Or if not in any one country by the law of the country in which the place of business through which he was engaged is situated. When Mr Koelszch brought a claim for unfair dismissal in Germany the German labour court declined jurisdiction. He then had to sue in the Luxembourg labour court claiming that German law should apply as these were more favourable to him. The court disagreed.
The ECJ held that where an employee works in more than one contracting state the country in which the employee “habitually works” is the country in which or from which (in the light of all the factors which characterise that activity) the employee performs the greater part of his obligations to his employer.
Key point: Employers who use employment contracts to impose a choice of law other than the law of the country in which the employee habitually works run the risk of having to comply with the employment law of both countries or the contractual laws of one country and the employment laws of another.
· Jurisdiction for MOD unfair dismissal and sex discrimination claims
Ministry of Defence v Wallis and another 2011 EWCA Civ 231
Mrs Wallis and Mrs Grocott were both British citizens and married to serving members of the British armed forces who had been posted to organisations within NATO in Belgium and the Netherlands. The Court of Appeal held that the tribunal had jurisdiction to hear their claims for unfair dismissal and sex discrimination when they were dismissed by the MOD only because their husbands ceased to be employed by the armed forces as they had strong connections with Great Britain. Their terms and conditions of employment were subject to English law. The sex discrimination claim could also be brought in Great Britain because this was a directly enforceable right under an EU Directive.
Working outside Great Britain is a major obstacle in bringing unfair dismissal proceedings in a British tribunal but not if there are employment factors which have clear connections with Britain. They were not working in a British enclave and did not fall within the Serco categories but their situation was analogous. The court rejected the MOD’s suggestion that Mrs Wallis should bring her discrimination claim before the Belgian courts.
Key point: The case has wide significance for the MOD given the number of civilian and service personnel employed worldwide. As there is no single definition of an “expatriate employee” international employers with staff in the EU may find themselves before a British tribunal more often than not. It is also interesting to note that the MOD was not able to say whether or not it would plead state immunity in proceedings brought in the local foreign tribunal and this may have been a factor in the Court’s decision.
17. Reforming the tribunal system
The Government has launched a consultation on reforming access to the employment tribunal system. Consultation closes on 20 April 2011. One of the proposals includes increasing the minimum qualifying period for claiming unfair dismissal to 2 years.
The Government has also published an employers’ charter which sets out in clear terms what employers can and cannot do when managing staff. Complimentary copies of the Consultation and Charter are available on request.
18. Religious discrimination – anti fox hunting belief
Hashman v Milton Park (Dorset) Ltd t/a Orchard Park ET3105555/2009
Mr Hashman was a professional gardener, lifelong animal rights activist and anti-hunt campaigner. He was dismissed from the Orchard Park Garden Centre in September 2009 after 6 months’ service allegedly because the majority shareholders of Orchard Park discovered his opposition to hunting.
He complained to an employment tribunal that his dismissal amounted to direct discrimination on the grounds of his philosophical belief in the sanctity of life which included his anti-fox hunting belief. Orchard Park argued that his dismissal was on the ground of cost and that his belief did not come under philosophical beliefs in the religion or belief regulations.
The tribunal disagreed and found as a preliminary issue that his belief constituted a philosophical belief. There will now be a formal hearing on the issue of whether he suffered discrimination on the basis of that belief.
Key point: Tribunals and courts are prepared to adopt a bold and broad approach to what constitutes a philosophical belief for the purposes of protection from religious discrimination.
19. Racial discrimination – third party harassment
Conteh v Parking Partners Ltd UKEAT/0288/10
This case concerned events taking place before the Equality Act 2010 came into effect. There is a new provision under the Act which now renders an employer liable to third party harassment in limited circumstances.
Ms Conteh was a car park attendant at a residential development in Southwark. Her employer was the contractor to the development owner. She was not supposed to allow anyone to leave the car park without paying unless their tickets had been validated. When she was approached by someone who did not have a validated ticket she told her that she could not leave. She was subject to significant racial abuse the following day. She complained to her manager who spoke to the third party employees who denied any abuse. He reviewed the CCTV coverage but did not believe it was strong enough to prove the racial harassment allegations. As Parking Partners had no authority to take action against the third parties they instructed Ms Conteh that she should allow all the third party’s staff to leave the car park without paying regardless of whether or not their ticket has been validated in order not to rock the boat.
Ms Conteh then brought tribunal claims under the Race Relations Act 1976 against Parking Partners for direct race discrimination and harassment but was unsuccessful. It was held that its inaction did not create the hostile environment nor make matters worse and this was not on the grounds of her race. Parking Partners would have acted the same way regardless of the race of the member of staff who complained so she had not been treated less favourably.
Key point: The decision is surprising and shows how difficult it is for an employee to succeed with discrimination or harassment claims arising from the conduct of others. The Equality Act 2010 may not have assisted her either had the Act been in force at the time.
TC00889: Angela Ryan-Munden
Mrs Ryan-Munden was a director of Securidoor in May 2003. During a visit to the company premises in November 2006 the HMRC officer established that the company owned a Mercedes Benz car, provided fuel for it and made it available to Mrs Ryan-Munden. It was claimed by Securidoor that it was a company pool car, HMRC did not believe this and consequently sought payment of income tax from Mrs Ryan-Munden in the sum in excess of £25,000. The Company and Mrs Ryan-Munden failed to provide satisfactory evidence to show that all 5 conditions relating to pool cars existed.
Key point: The case is worth a read as to how tenacious the Revenue will be in pursuing this type of matter and what employers need to establish for the pool car exemption.
21. Sexual Orientation Harassment
Thomas Sanderson Blinds v English (No 2) UKEAT0316/10
Mr English’s claim of harassment on the grounds of sexual orientation was allowed to proceed by the Court of Appeal even though his friends knew him not to be gay. On remittal to the tribunal it upheld only one aspect of his harassment claims. Although an article in a magazine did amount to harassment his claim based on it was out of time. His claim in respect of his colleagues’ previous conduct was rejected.
It was held that Mr English, a heterosexual employee was subject to homophobic banter at work, but it was held he did not suffer harassment under the Sexual Orientation Regulations as the tribunal had taken into account his own “extremely offensive” behaviour and the fact that he had remained friends with his alleged tormenters and had not complained about them in concluding that the relevant conduct did not have the effect of harassing him.
Key point: In order to bring a successful harassment claim based on the effect of allegedly offensive conduct a victim must reasonably feel or perceive his or her dignity to have been violated or an adverse environment to have been created. Where it is not reasonable to take offence the claim will fail.
· Constructive dismissal and third party discrimination
Lisboa v Realpubs Ltd EAT0224/10
Realpubs acquired a pub in September 2008 which had previously been a gay pub. Mr Lisboa, a gay man, was interviewed for the assistant manager post and he was told during the interview that Realpubs wanted to transform it from a gay pub to a gastropub but insisted that it wanted to retain its existing clientele. Mr Lisboa commenced employment on 1 December 2008. One of Realpubs’ directors wanted to put a notice outside informing the public that it was no longer a gay pub but Mr Lisboa objected to this. He also objected to staff being encouraged to seat customers who did not appear to be gay in the area that could be seen from outside. A few weeks into his employment after offensive remarks were made to him by his director Mr Lisboa resigned and brought claims of direct discrimination and constructive dismissal.
As Mr Lisboa did not have one year’s service, his claim was framed as one of unlawful constructive dismissal under the Sexual Orientation Regulations. He was successful in his direct discrimination claim the tribunal finding that the manager had made comments that were offensive to him and awarded him £4,500 for injury to feelings. However it rejected his claim that nothing was done by Realpubs to make the pub unwelcome to gay customers. Mr Lisboa appealed this point to the Employment Appeal Tribunal and he was successful. The re-branding policy constituted discrimination against gay customers and also against Mr Lisboa. This gave rise to a constructive dismissal claim and this issue is to be assessed by a fresh tribunal. His award of £4,500 was set aside for reconsideration.
Key point: Giving an instruction to discriminate on the grounds of sexual orientation is now expressly covered under the Equality Act 2010.
22. Stay of tribunal proceedings and binding arbitration clause
Clyde & Co LLP and another v van Winkelhof 2010 EWHC668 QB
The High Court in this case held that a provision for binding arbitration in a partnership agreement breached the prohibition on contracting out in the Employment Rights Act 1996 and the Equality Act 2010. Ms Van Winkelhof was a partner of Clyde & Co and brought discrimination and whistleblowing claims in the employment tribunal after she was expelled from the partnership. Clyde & Co applied for a mandatory injunction in the High Court requiring her to apply for a consent to a stay of her employment claims pending compliance with the Dispute Resolution Procedure set out in the LLP agreement. It was held that the provision for binding arbitration was void. Also any agreement to preclude or limit the continuity of sex discrimination proceedings unless reached in accordance with the Equality Act was also unenforceable. Clyde & Co’s application for an injunction was therefore dismissed.
Key point: Dispute resolution clauses are common but cannot be relied on to preclude an individual from pursuing their employment tribunal claims. It is understood Clyde & Co are seeking leave to appeal the High Court’s decision.
23. Employment tribunal proceedings stayed where overlap with High Court proceedings
Mindimaxnox LLP v Gover and another UKEAT/0225/10
In this case two employees brought employment claims for unfair dismissal and unlawful deduction of wages. One of the claimants was also being sued by the employer in a related High Court case on the same facts. The employers appealed the tribunal’s refusal to stay the tribunal claims. The case concerned associated Cypriot companies and proceedings in Cyprus and in the High Court. The EAT allowed the appeal and ordered a stay of the employment tribunal until the conclusion of the High Court action.
The reasons for doing so were because of the complex factual dispute, to avoid embarrassing the High Court who might be bound by findings of a tribunal, complex legal matters, considerable overlap and the fact that a relatively small amount of money was at stake in the tribunal proceedings.
Key point: Concurrent proceedings are undesirable and this is a common issue. Claimants often seek to secure a swift decision from an employment tribunal or on fundamental points to hasten settlement discussions, whereas many employers are inclined to favour court proceedings because of the timescale and costs consequences. In most cases where there is an overlap, employment tribunal proceedings should and will be stayed.
24. Farewell the Luncheon Voucher?
The Government is to hold consultation on removing the 15p income tax relief on luncheon vouchers in the 2012 Finance Bill. First created in 1954 the voucher may disappear.
And finally remember:
3 April - Right to additional paternity leave available.
3 April - SMP, SPP and SAP rises to £128.73.
3 April - SSP rises to £81.60.
6 April - Default retirement age will be abolished.
