Employment SolutionsCLB Solicitors

April 2009

TUPE or not TUPE is the main theme in this month's newsletter. In the current economic climate many stronger companies are taking over struggling ones with the result that we are being asked to advise more and more on the application of TUPE; the reason being that the consequences for getting it wrong are potentially devastating. A firm of solicitors in Merseyside recently found this out first hand and they have not been the only ones in the past few months. There are several large companies facing huge bills for either failing to recognise that a TUPE situation existed or ignoring the continuity provisions and altering contractual terms. The law of TUPE is very complicated and the whole process involving consultation and due diligence can be arduous and time consuming. We urge all companies to seek advice before embarking upon what for many is a step into the dark. In next month's newsletter we will be bringing you a point by point guide to TUPE that will hopefully provide our subscribers with the basics and a few useful tips and tricks.

The new ACAS guidelines are now in force. Whether they will make things better or worse is the subject of much debate in the legal community. I consider that, whilst employers will welcome the end of automatically unfair dismissal for failing to follow minor procedures the vague wording, semi-voluntary nature and the apparent lack of consideration by the Government's draftsmen as to the application of the ACAS code to the new 25% uplift will mean that the tribunals will have great difficulty in interpreting the new legislation. This will, in my opinion, lead to an increase in applications to the Employment Appeal Tribunal to clarify the application of the code which will mean more common law principles and ultimately the creation of yet another legal minefield. I may just be pessimistic but we have seen it all before!

This newsletter also gives all our HR and Payroll subscribers clear advice on the new statutory holiday entitlement so please take note of the new provisions and their effect.

If you have enquiries about the items featured or require any further information then don't hesitate to contact us on 0151 239 1000, freephone 08000 320974 or by e-mail to enquiries@clbemployment.com.

Regards

Will Burrows


1. April 2009 - new law

2. Heyday result (age discrimination)

3. A warning to employers

4. Rejecting non-EU job applicants and race discrimination

5. TUPE and legal services contracts

6. More TUPE!

7. SMP, SSP and benefit rates

8. Holidays

9. Discrimination on grounds of religion or belief

10. And finally...


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1. April 2009 - new law

As much heralded in recent newsletters there is a raft of new legislation and accompanying regulations which come into effect this month. Here is a list of the most significant:

  • Dispute resolution procedures. A new semi-voluntary ACAS Code of Practice replaces the ill-fated 2004 compulsory dispute resolution procedure rules.
  • Holidays. Phasing in of increased entitlement to annual holiday is completed - 28 days for full time employees, pro rata less for less.
  • Flexible working. Increase from 6 to 16 in age of children whose parents will normally have the legal right to request flexible working.
  • Employment Agencies. Increased powers for the Employment Agencies Standards Inspectorate.
  • Enforcement of employment tribunal awards. Requirement removed for a tribunal award to be registered in the County Court (or High Court) as a pre-condition of enforcement.
  • Employment Tribunals. Detailed changes to the rules of procedure plus proposals for holiday pay claims to be heard by an employment judge sitting alone.
  • Statutory Maternity Pay etc. Weekly main rate of SMP (and Statutory Adoption and Paternity Pay) increased to £123.06 (from £117.18) and of Statutory Sick Pay to £79.15 (from £75.40).
  • Minimum wage enforcement. The current £5,000 limit to the maximum fine is abolished.
  • Work Permits. Tougher tests for tier 1 and tier 2 immigrants from non-EU countries.
  • Equality Bill. The government proposes to publish its big Equality Bill in April. Amongst other things this is intended to consolidate a mass of anti-discrimination law.
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2. "Heyday" result - age discrimination

This is a bit of a damp squib - at any rate so far. Heyday is the "popular" name of the age discrimination case taken to the European Court of Justice (ECJ) by Age Concern. Heyday, a now defunct section of Age Concern, hopes to establish that it is contrary to European law for the British Employment Equality (Age) Regulations 2006 to contain an exemption allowing employers to require employees to retire at age 65.

The case went to the British High Court in late 2006. The High Court referred particular questions to the ECJ in July 2007. The questions posed did NOT directly ask whether the relevant provision of the British regulations (reg 30) was contrary to European law but were of a more technical nature, the basic one being "Does the scope of the Directive [2000/78] extend to national rules which permit employers to dismiss employees aged 65 or over by reason of retirement?".

The ECJ has now answered "yes" to that question - but that is not an end to the matter. The ECJ judgment, handed down in March 2009, is to the effect that there is nothing inherently wrong with the British regulation and the question of whether or not it is compatible with EU law depends on "justification". In practice this means that the case must now go back to the British Courts to decide whether reg 30 is justifiable as a "proportionate means to achieve a legitimate aim". Age Concern is still hopeful that the final result will be in its favour, noting that the ECJ said that a "burden of establishing to a high standard of proof the legitimacy of the aim pursued" will have to be shouldered by the British government.

It is understood that some 260 tribunal cases have been stayed pending the final decision and that thousands of individuals who were forced to retire against their will at age 65 are intending to bring compensation claims if the High Court rules that the compulsory retirement age is not justified. However it is worth noting that the Government has said it will review the retirement age provision in 2011 so it is possible it will then be increased or removed regardless of the final outcome of the Heyday case.

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3. A warning to employers

It is illegal for an employer to make an offer to any of his workers "for the sole or main purpose of inducing the worker ... not to take part, at an appropriate time, in the activities of an independent trade union" (Trade Union and Labour Relations (Consolidation) Act 1992 s.145A(1)(b)).

There is a fixed statutory award, currently £3,100 per employee concerned, for breach of this provision.

As a general rule the sort of activities protected by this provision have been thought to be acting as a union official, persuading fellow workers to join a union, conducting union backed health and safety activities and so on. However an employment tribunal in Glasgow has recently held that "participating in industrial action was an activity of an independent union" and was covered by the section (Sharkey v Bridon Coatbridge Limited, Case No: S/100083/2008).

As a result an employer who offered increased overtime rates to employees who agreed not to take part in threatened industrial action has been ordered to pay a total of around £100,000 (between 30 and 40 employees were involved and the fixed statutory award at the relevant time was £2,700 per employee).

This may be the first time that a tribunal has found that "industrial action was an activity of an independent union" for this purpose. In most cases the question simply does not arise as it is usually easy for an employer to show that the "appropriate time" condition has not been fulfilled.

The statute includes a definition of "appropriate time". In effect, it means the employee's own time unless the employer agreed that the activity could take place during working hours. Therefore it is unlikely that taking part in a strike could ever be taking part in an activity "at an appropriate time". However in this case, the threatened industrial action included not only a strike but also refusal to work overtime (clearly at different times). As voluntary overtime is the employee's own time, this may explain how the tribunal felt able to decide that the employer was in breach of the provision noted above.

The case was an employment tribunal case and as such it does not set a legal precedent which other tribunals must follow. Nevertheless it is a salutary warning for employers to tread with caution in how they approach their workers if threatened with industrial action by members of a trade union.

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4. Rejecting non-EU applicants and race discrimination

The Employment Appeal Tribunal recently ruled that rejecting a non-EU foreign job applicant simply because he or she did not have permission to work in the UK at the time of making the application is unlawful race discrimination.

An eminent firm of solicitors in Bristol, had rejected an online application for a training contract from an Indian without considering it in any detail. This was in implementation of their policy of not considering any application from anyone needing a work permit from the Home Office Border Agency ("UKBA").

An employment tribunal found that there was no direct race discrimination but that there was indirect race discrimination as the proportion of non-EEA nationals who could comply with the work permit requirement was smaller than the proportion of persons not in that group who could comply with it. The tribunal ruled that this indirect discrimination was not justified and was therefore unlawful. The solicitors appealed to the EAT against this ruling but lost.

The EAT, in Osborne Clarke Services v Purohit on 9th February 2009, agreed with the original employment tribunal that:

(i) there was nothing to support the assumption that an application for a work permit for a trainee would be unsuccessful on the basis of UKBA guidelines, not least because the solicitors had never applied for a work permit for a trainee.

(ii) it was not for the BIA to tell employers who it would be suitable for them to employ. It is for an employer to identify suitable candidates and then to make the case to the BIA for a work permit if they consider there is a case to be made.

The moral for employers is that the criteria for deciding whether to consider a job application should be based simply on merit. Work permit issues should not be considered until later in the selection process.

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5. More solicitors in trouble - TUPE and legal services contracts

It is commonplace for businesses to place work with solicitors on a structured basis, frequently after a tender exercise. The common presumption is that the successful tenderer takes over the work, perhaps as a member of a panel of firms providing services to the client. This can lead to redundancies in the outgoing service provider's business and, for those who rely on a handful of large contracts, can cause severe financial pressure and, on occasion, the demise of the firm.

But how do such arrangements sit with the TUPE regulations? Very uncomfortably according to the decision of a Liverpool employment tribunal in the case of Royden and others v Barnetts Solicitors (Case No: 2103451/07).

LLW Solicitors provided conveyancing services for Britannia Building Society. They paid referral fees to Britannia for each matter received and the customer paid their fees in full (including the work carried out for Britannia). There were agreed minimum service levels. In 2006, Britannia commenced a tender process. Barnetts and Hammond Direct made a successful joint bid and took over the contract in June 2007. There was a good deal of correspondence prior to then concerning what would happen to the LLW employees who had been doing the conveyancing work but no suitable arrangements were agreed. The affected employees maintained that they were transferred under TUPE but there were no jobs for them at Barnetts in Southport and it was impractical for them to travel to Hammond Direct in Bradford. They resigned on 4th June.

The tribunal concluded that those workers who spent the majority of their time working on the Britannia matters WERE transferred under TUPE notwithstanding that the incoming providers were adamant that they did not. A convenient reminder that it is never open to either incoming or outgoing contractors to decide, alone or jointly, whether or not TUPE applies.

This is the first case of its kind and the significant ramifications are obvious. The affected employees claimed they were subject to a "substantial change in working conditions to their material detriment" and of course that was right. They were entitled to treat their employment contracts as having been terminated unfairly. The combined claims amounted to more than £250,000.

The reality is that this is really no more than a correction of an anomaly which has somehow survived far longer than might have been expected. Those involved in other business sectors (e.g. local authority contractors) would have taken it for granted on these facts that the employees would transfer and although there used to be significant differences in the way TUPE was applied in the public and private sectors, those distinctions now barely exist.

The unintended consequences can impact just as significantly on the party awarding the contract. For example, a company might be dissatisfied with the service provided by the incumbent contractor's employees and that is of course often the trigger for a tender process. However, if the objective is to have the work done by different employees then it seems that transfer of the contract will no longer (at least in many cases) be the means by which to achieve it.

This is clearly going to be a fertile area for litigation and if any of our subscribers are in any doubt about how the decision might affect them then they should contact us for advice as soon as possible.

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6. More TUPE!

It is well known that under the TUPE regulations if a company or individual sells its business to another company or individual the employment contracts of employees working in the transferred business are automatically transferred to the new owner. Those contracts are then treated as if originally made between the employees and the new owner.

But what happens if in such a case an employee's contract says that terms and conditions of employment will be in accordance with a collective agreement as negotiated from time to time by, for example, a trade union?

The "as negotiated from time to time" part is an obvious source of difficulty. Does this mean the new employer could be stuck for ever with terms negotiated in the future by or with the previous employer or a trade association? The EAT, in a controversial decision (Alemo-Herron & Others v Parkwood Leisure Ltd), has in effect said that under British law the answer is "yes".

Apart from policy considerations there are complicated technical legal issues involved in this decision. Not least of these is that the EC Acquired Rights Directive (which the British TUPE regulations implement) allows for the opposite answer. The European Court has ruled that contractual amendments negotiated under a collective agreement made more than a year post-transfer between the transferor of a business and a trade union are not covered by the Directive. The EAT noted this but pointed out that there is nothing to prevent British regulations being more favourable to employees than required by an EU Directive. In the circumstances outlined above, a straightforward interpretation of the British TUPE regulations (TUPE 2006 reg 5) clearly meant that a collective agreement would have effect as if made by or on behalf of the transferee. This interpretation was more favourable to employees than required by the EC Directive but did not conflict with it.

In the Alemo-Herron case employees were employed by the London Borough of Lewisham in the Council's Leisure Department. The relevant services were privatised in 2002. The employees' contracts of employment were transferred under the TUPE regulations, first in 2002 to a company called CCL Ltd and then in May 2004 to Parkwood Leisure Ltd. The contracts with Lewisham provided for terms and conditions of employment to be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services. The effect of the EAT decision is that Parkwood has to honour revised terms negotiated by the National Joint Council for Local Government Services, finalised in July 2004.

Clearly this is an important case. Recognising this, the EAT gave Parkwood leave to appeal to the Court of Appeal. So watch this space - and in any situation where the TUPE regulations may come into play, be careful and take our advice in good time if there is any uncertainty as to the position.

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7. SMP, SSP and benefit rates

This note is just a reminder that the following are amongst social security benefit increases which will take effect in April 2009:

  • the flat rate for statutory maternity, paternity and adoption pay has increased to £123.06 (was £117.18); and
  • the rate for statutory sick pay has increased to £79.15 (was £75.40)
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8. Holidays

There are two points regarding annual holiday entitlement to note in this month's newsletter.

First, the minimum annual paid holiday entitlement for most full time workers increases to 28 days from April 2009. This is 8 days more than the absolute minimum required by the EC Working Time Directive so the 8 extra days are not subject to EC requirements. It follows that it will be possible, if employer and worker agree, for the 8 additional days to be carried forward from one year to the next. Also in respect of the 8 extra days there is no requirement to round up part days’ holiday entitlement.

Technically, the entitlement is to 5.6 weeks in the leave year April 2009 to March 2010 and thereafter, subject to a maximum of 28 days. Mathematicians can check but this works out at 28 days for a worker who works 5 days per week, pro rata less for those who work less. (See our May 2008 newsletter for a handy reference table dealing with the transitional entitlements.)

It should be noted that bank and public holidays count towards the 28 days. Therefore, assuming 8 bank holidays in a year, the new rules make no difference to the minimum amount of holiday which can be taken in cases where the employer already allowed 20 days' annual holiday plus paid bank holidays.

Second, there has been a recent EAT decision concerning the holiday entitlement of school teachers, professional footballers, offshore workers and anyone else whose normal work routine involves substantial off duty periods. The effect of the decision, which concerned holiday rights of workers on offshore rigs, is to confirm that the employer can insist that the statutory annual holiday entitlement of such persons is, in effect, subsumed into their off-duty time. Thus school teachers, for example, cannot normally take their statutory paid holiday entitlement during term time unless, of course, their employer agrees to let them do so.

None of this affects the basic position under the Working Time Regulations that an employer can stipulate when a worker is to take the holiday to which he or she is entitled provided he gives advance notice of at least twice as long as the amount of holiday to be taken (and vice-versa - subject to any contrary agreement a worker can give his employer notice of intention to take holiday which must be at least twice as long as the amount of holiday to be taken).

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9. Discrimination on grounds of religion or belief

Discrimination against an employee on grounds of religion or belief is unlawful under the Employment Equality (Religion or Belief) Regulations 2003. An amendment made in 2007 ensures that any philosophical belief is covered whether or not "similar" to a religious belief.

An employment tribunal has ruled in March 2009 that belief in the importance of the environment and climate change can amount to a philosophical belief within the meaning of the regulations as amended.

Tim Nicholson was head of sustainability at a large residential property investment company, Grainger plc until he was made redundant in July 2008. He considers that he was selected for redundancy because of his strong belief in the importance of the environment which did not fit neatly with his employer's commercial interests. He is claiming that his selection for redundancy was thus in breach of the religion and belief regulations and on that basis he is arguing that his redundancy dismissal was unfair.

At a preliminary tribunal hearing in London Grainger plc sought to have Mr Nicholson's attempt to use the religion and belief regulations struck out. The employment judge refused. Therefore unless Grainger plc appeals or settles out of court, the next stage is for the case to go to a full tribunal hearing. It is understood this is likely to take place in early June.

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10. And finally...

Ill-chosen words

Hotel barmaid Veronica Jones, has been awarded £16,715 by an employment tribunal after she claimed that she was unfairly dismissed. Her boss, Ronald Luckman, admitted telling her to “get off her fat backside and do some work” after claiming he discovered Mrs Jones watching television - but he denied sacking her. However, the tribunal decided to agree with her version of events, as she had a disabled husband and therefore it deemed that she was unlikely to have walked out on her job in view of her domestic situation.

"Boss-napping"

An adhesive manufacturing company called Scapa is trying to close its glue factory at Bellegarde in the South of France. This will mean the loss of 68 jobs. Three British executives and the manager, taken hostage in protest, were stuck inside since 7th April 2009. The BBC reports that they have now been released.

According to a report in the Daily Telepgraph "Trade union members grabbed the executives, including Derek Sherwin, the company's European operations director, after negotiations over the loss of 68 jobs collapsed .....".

President Sarkozy is reported to have pledged to outlaw so-called 'boss-nappings' (which seems odd as it suggests that "bossnapping" is not already illegal in France!).

"Good Ol' Restaurant"

Hooters is an American fast-food chain which, in its own publicity, describes itself as "delightfully tacky yet unrefined"! According to a report in the Houston Chronicle a Texas man has filed a lawsuit against the chain alleging sex discrimination in recruitment practices after his application to be a server at Hooters in Corpus Christi was rejected because he’s a man. The lawsuit filed on behalf of 22-year-old Nikolai Grushevski seeks unspecified damages in recompense for a claim that "Hooters tries to circumvent the law by referring to its waiters as ‘Hooters Girls’".

"He doesn't want to be a Hooters Girl. He just wants to be a waiter," said Grushevski’s attorney Martin Shellist, referring to the women in orange shorts and tight shirts who serve food and drinks to customers.

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advice service

Call free on 08000 320974, e-mail enquiries@clbemployment.com or contact one of our employment lawyers:

Will Burrows
Direct dial: 0151 239 1010
e-mail: williamburrows@canter-law.co.uk

John Booth
Direct dial: 0151 239 1124
e-mail:johnbooth@canter-law.co.uk

Misbah Sadiq
Direct dial: 0151 239 1138
e-mail: misbahsadiq@canter-law.co.uk

Rupert Budgen
Direct dial: 0151 239 1059
e-mail: rupertbudgen@canter-law.co.uk

Kath Kelly
Direct dial: 0151 239 1079
e-mail: katharinekelly@canter-law.co.uk

Martin Malone
Direct dial: 0151 239 1003
e-mail: martinmalone@canter-law.co.uk

For sales and client services enquiries please contact:

Jameel Abbas
Direct dial: 0151 239 1017
e-mail: jameelabbas@canter-law.co.uk

use our extensive resources on the CLB Employment Solutions website.

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