August 2008

Welcome to a late summer round-up of the main news from the last month. We'll be back to detailed analysis and commentary in next month's newsletter but for now we've highlighted some interesting cases and other news in the field of employment law. Although high summer is generally a quiet time while many people are away on holidays, we've included some very important reports covering topics including potential liability for injuries and death outside the workplace, age discrimination in practice and restrictive covenants. We've also got important news about new and very tough penalties by way of introduction to our new health and safety subscription service which complements our employment service and is available as an "add-on" for existing subscribers.

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. Employers' liability for psychological injuries and suicide

2. Compromise agreements and date of termination of employment

3. Job adverts and discrimination

4. Restrictive covenants and the duty of faithful service

5. New health and safety penalties!

6. Compensation for loss of earnings during sickness absence

7. Migrant workers

8. Discrimination - beware what you say let alone what you do!



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1. Employers' liability for psychological injuries and suicide

The Court of Appeal has recently delivered a very important decision which has established that businesses can face increased liabilities in respect of psychological injuries caused to employees and third parties.

Kerrie Gray was involved in the Ladbroke Grove rail crash. He was described as living a "healthy and uneventful life" prior to the train crash but subsequently suffered from post traumatic stress disorder accompanied by a personality change and in 2002 he was convicted of manslaughter on the ground of diminished responsibility as the result of stabbing a pedestrian.

Gray had claimed against Network Rail and Thames trains for loss of earnings after the rail crash. The interesting aspect of the claim was that he claimed for loss of earnings both before and after the manslaughter and the Court of Appeal decided that he was entitled to do so.

In another case decided in the House of Lords it has been held that employers can be held liable to employees and dependants in respect not only of a workplace accident but for subsequent injury and, in this case, death.

Mr Corr was employed by IBC vehicles and suffered severe head injuries in a workplace accident in 1996. As a result of the accident he suffered from post traumatic stress disorder and severe depression and in 2002 he killed himself by jumping from a multi-storey car park. His widow brought a claim against the former employer for her pain, suffering and loss caused by the accident and by her husband's suicide. Liability was admitted in respect of the accident but disputed in respect of the suicide. Initially the claim in respect of the suicide was dismissed but Mrs Corr was awarded £82,520 resulting from the accident. On appeal the Court of Appeal held that damages were also recoverable in respect of the suicide and this was recently confirmed by the House of Lords. What mattered was that there was a direct link or, in legal terms, a chain of causation which led from the accident to Mr Corr's death which, although it could not be precisely forecasted, could nonetheless be seen as a potentially foreseeable outcome.

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2. Compromise agreements and date of termination of employment

The recent decision of the Employment Appeal Tribunal in Radecki -v- Kirklees MBC emphasises the importance of having a clear date for termination of employment rather than proceeding on the basis of assumptions. Mr Radecki was suspended from work after issues were identified concerning his skills and experience and his relationship problems with other work colleagues. Terms for the termination of his employment were agreed and he was taken off the Council payroll. However, the compromise agreement was never concluded.

Some four months later, Mr Radecki received written notice that his employment had terminated when the compromise terms were agreed. He applied to an employment tribunal claiming unfair dismissal but his claim was struck out because it was more than three months after the termination. The Employment Appeal Tribunal disagreed and held that there was not a "sufficiently unequivocal statement" confirming the termination of employment until the letter was sent. Accordingly the claim for unfair dismissal was made in time and could proceed.

Whenever you are terminating employment and particularly by way of a compromise agreement it is vital that you obtain professional advice, even if the termination seems straightforward.

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3. Job adverts and discrimination

One of the important changes implemented by the Age Discrimination Regulations is that employers should not set requirements or conditions when recruiting which could have the effect of excluding candidates on the ground of age even if an age limit or range is not specified.

A good example of this is the recent case of Rainbow -v- Milton Keynes Council. The Council placed an advert looking for a teacher "in the first five years of their career". Ms Rainbow was an existing full-time calss curriculum support and supply teacher, aged 61 and with 34 years' experience. She had passed the threshold for higher salary. Due to financial difficulties the school asked her to reduce her hours to two days and she agreed but on the basis that she would have first option for any additional hours which might become available. A job became available but the deputy head told her that they wanted to recruit someone on a lower salary rate so she was not eligible to apply.

Subsequently the school placed their advert for the post. Ms Rainbow applied, was rejected and raised a grievance which was not upheld and her appeal was dismissed.

At her tribunal, her claim for direct discrimination was rejected because the requirement for five years' or less experience was not necessarily age discriminatory. However, her claim for indirect discrimination succeeded because people of her age were less likely to be able to comply with the requirement.

There is a potential defence in the Regulations based on objective justification and the Council tried to rely on this on the basis of the cost implications. However, they failed on this count as well because there was no evidence to justify the cost criterion or the consideration of alternatives which might have achieved the same result. the tribunal decided that the Council had failed to weigh up the financial implications against the discriminatory effect of their actions.

The case shows how an employer can easily fall foul of the Regulations even if there has not been direct discrimination and the action is believed to be justified. If you are in any doubt about how the Regulations can apply or if you want to have draft adverts vetted, we'll be pleased to assist as part of your subscription service.

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4. Restrictive covenants and the duty of faithful service

As subscribers will be aware, it is often good practice to require employees and particularly those in key positions of trust to be subject to restrictive covenants in a contract of employment or executive service agreement. The purpose of such clauses is to provide protection against the misuse of sensitive business information after the employee leaves which might operate against the commercial interests of the employer. Typically, restrictions can prevent dealings with clients and cutomers of the employer and the poaching of employees. In order to be effective, such restrictions need to be reasonable in area and duration. But what happens if a former employee runs down the clock and then engages or attempts to engage in potentially damaging competitive activities.

In Scott -v- UBS a senior manager resigned in May 2007 and set up a new business, Vestra Wealth. He was subject to non-competition restrictive covenants until September 2007. On expiry of the restriction period he could set up his business and offer services to former and existing clients of UBS.

However, in May 2008 there was a mass defection of 52 employees of UBS to Vestra Wealth and in the subsequent weeks and months a further 23 employees made the same transfer. UBS applied for and were granted an injunction preventing the defendants from doing business with certain UBS clients, inducing UBS clients to transfer their business and soliciting employees to leave UBS. There were breaches of contracts by employees and the judge took the view that there must have been plotting and planning before the defections. This conduct constituted breaches of the duties of loyalty and fidelity which are implied as being included in every employment contract, whether or not the contract includes restrictive covenants.

Although UBS were successful on this occasion, it should not be assumed that courts will always come to the assistance of employers (or former employers) in such circumstances. The starting point when considering such restrictions is that we live in a free market in which such restraints are contrary to public policy and should not be upheld unless shown to be necessary.

Although the UBS case is an example of a concerted and strategic attack on a large organisation, the effect of failing to guard against such events can have a catastrophic and sometimes fatal effect on businesses of all sizes, from a local hairdressers' to large City firms. If you have not already done so, please ask us about steps you can take to guard against the actions of former employees.

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5. New health and safety penalties!

Many employers regard the "red tape" which accompanies compliance with health and safety legislation as an irritating burden which "shouldn't apply to us". However, it is likely that all employers will soon be giving very careful consideration to the potential sanctions for failure to adhere to the legislation. Quietly making its way through the legislative process is a private member's Bill which has recently received its second reading in the House of Lords and is expected to be enacted very soon.

The Regulatory Enforcement and Sanctions Bill overhauls the penalties which can be applied to employers. Key provisions include:

  • fixed financial penalties;
  • variable monetary penalties;
  • compliance notices (requiring employers to take specified steps to ensure compliance);
  • restoration notices (a new requirement for employers to restore the position to what it would have been had there not been non-compliance);
  • stop notices (requiring employers to cease an activity which is causing harm or presents a risk of causing harm and / or is likely to give rise to regulatory non-compliance); and
  • enforcement undertakings (an agreement by a person to take steps relating to what the regulator considers to be an offence).

If these provisions do not command attention then it is likely that the sanctions for non-compliance will. They will apply to businesses and their owners including individual directors, partners, sole traders and all other owners:

  • an increases in Magistrates' Court sentencing for most health and safety offences to a maximum fine of 20,000 and a maximum prison sentence of 12 months;
  • increases in the Crown Court to an unlimited fine and two years' imprisonment for most offences;
  • at present imprisonment is only an option for limited health and safety cases but it will be available for most cases; and
  • there will be no change to the burden of proof for employers to show that they have not contravened the legislation notwithstanding the increased likelihood of a custodial sentence.

It is also worth noting that the Criminal Justice and Immigration Act 2008 has amended the Data Protection Act 1998 to impose tougher penalties for breaches of data protection obligations including up to two years' imprisonment. Taking into account recent press reports this should be of particular interest to government bodies!

If you are concerned about health and safety compliance (and as you can see above you should be!) contact us and we'll be pleased to arrange a consultation with facilities to provide a comprehensive subscription service.

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6. Compensation for loss of earnings during sickness absence

Loss of earnings often makes up a significant part of compensation for unfair dismissal. But if an employee is off sick then there is an argument that this aspect of loss should be reduced to cover the period of absence.

In Adey-Jones -v- O'Dowd Mrs O'Dowd was subjected to a police investigation and disciplinary proceedings concerning an allegation of theft from a patient in the care home where she worked and was dismissed. She denied the allegation and it was not proved. She obtained employment elsewhere at a lower rate of pay but became ill and had to leave the job.

She won her claim for unfair dismissal against the care home employer and the compensation included full losses during the period of sickness absence on the basis that the dismissal process was a contributing cause of her absence.

In the Employment Appeal Tribunal Judge Serota QC took into account that her sickness absence started some 20 weeks after her dismissal but nonetheless held that the award should take into account (on a percentage basis) the extent to which the employer's actions had contributed to the sickness absence.

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7. Migrant workers

As you may well have seen from the extensive TV campaign (hurdles on the athletics track) there are important new requirements being implemented from November for employers of migrant workers. Employers who wish to recruit workers from outside the European Economic Area (effectively the current European Union with a few extra countries) will need to apply for a licence from the UK Border Agency. Although the licensing requirement is a couple of months away, from February 2008 employers who have taken on illegal migrant workers face an unlimited fine and up to two years' imprisonment.

If this is relevant for you in terms of current or prospective workers then you must apply now to be licensed because failure to do so could make prosecition and conviction a formality!

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8. Discrimination - beware what you say let alone what you do!

Most employers are aware that acts of discrimination in work are likely to land them in hot water and could prove very expensive. But what about statements made outside the workplace which might indicate an intention or likelihood to discriminate?

In Centrum voor gelijkheid van kansen en voor racismebestrijding v Firma Feryn NV a Belgian door fitter put up a large roadside sign advertising vacancies. At around the same time he stated in the media that he would not employ Moroccans because his employers were scared of them breaking into their houses. He also said that employing immigrants would have the effect of "putting him out of business". The Belgian employment court took the view that this was only "evidence of potential discrimination" and that there was no specific victim who could bring a claim.

The case was referred to the European Court of Justice and it was held that there was direct discrimination in respect of recruitment notwithstanding the absence of a "victim" (the proceedings were brought by the Belgian anti-racism centre). This decision was contrary to representations from the UK and Ireland and emphasises that it is important to bear in mind that in the field of employment law decisions of the European Court are of direct application in the UK. As a result, this decision may well lead to a change in national legislation but can be relied on in our employment tribunals whether or not legislation follows. It is also a stark reminder that evidence of racist or other discriminatory intent, inside or outside the work environment, can result in costly penalties.


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 (currently on maternity leave)
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

Sean Carty
Direct dial: 0151 239 1138
e-mail: seancarty@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.

service enquiries

If you have any enquiries about using the service or if you are interested in subscribing, please contact Will Burrows on 0151 239 1010 or e-mail willburrows@canter-law.co.uk.

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