Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
July 2013

July is normally a fairly quiet month for employment law news. However, this July has proved to be a notable exception with the introduction of some of the most far-reaching changes to employment law practice and procedure for many years. By far the most significant is the introduction of fees for employment tribunal claims. I have discussed this as well as the increased likelihood of costs orders. Many have taken the view that a standard employment tribunal claim will cost more than a similar county court claim. This clearly strikes at the heart of the raison d'etre of tribunals ("a quicker, cheaper alternative to court proceedings") and, in my view, strongly enhances the case for merging both systems. In Liverpool, and very sensibly, court and tribunal cases now take place in shared court rooms at the same location and it seems to me that the case for merged procedures and processes across the board is now overwhelming.

Other topics covered this month concern whether a tribunal can order a party to pay costs that he or she cannot afford, redundancy procedures, use of covert recordings, restrictive covenants, the "Woolworths case" on collective consultation, a whistleblowing update and my thoughts about how the new "without prejudice discussions" process is likely to work out in practice.

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June 2013
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This month's news round-up:

1. making costs orders against the impecunious


In April I reported on the first of two appeals by Ms A A Vaughan, which related to the admissibility of covert recordings in Tribunal proceedings. Following the dismissal of all her claims Ms Vaughan brought a second appeal, this time against a costs order of between £60,000 to £87,000 (depending on how the cost assessments went) against her. Ms Vaughan was successful in her last appeal but not with regard to costs. The order was made after her discrimination and whistleblowing claims were dismissed and she appealed on multiple (and diffuse) grounds, including that:

  • Her employers had never given her any warning that they would apply for costs, or applied for an order that she pay a deposit to be allowed to carry on with the case;
  • The employer had made a settlement offer, and had shown bad faith in negotiations;
  • No proper consideration had been given to the fact she was unrepresented or that she had a disability;
  • The costs order was punitive rather than compensatory; and
  • Her lack of means had not properly been considered – she was unemployed and she could not pay anything immediately.

Judgment on the costs issue was reserved and has now been published. All of the grounds put forward by Ms Vaughan failed. Although no one doubted that the she genuinely believed in her case, it was misconceived in the sense it had no reasonable prospect of success. The Employment Appeal Tribunal found that although there was some scope to argue that the tribunal had not expressly dealt with all her arguments in its written reasons, it was undoubtedly right that the claims had no reasonable prospect of success and so the tribunal had a discretion to make a costs order.

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2. redundancy and "keeping it real"


You might think that Contract Bottling Ltd v Cave is just an example of the phenomenon of "bumping", and is based on somewhat unusual facts which are unlikely to be replicated, but it is noteworthy as an illustration of how not to go about selecting employees for redundancy. When a new owner rescued Contract Bottling from financial dire straits, he set about reducing excessive costs. He hired an outside consultant to do this. It was clear that the office was overstaffed. The decision was made to put all ten office based employees into the same pool for selection from accounts manager to stock controllers via the sales team. The thinking was that they would all be selected according to the same matrix, and if those that remained after that had the wrong skills, well, then they would be retrained. As odd as it was, there was nothing wrong with this decision. However, the tribunal had a lot of compelling criticisms of how the process was approached:

  • A redundancy selection matrix already in place and in the staff handbook was abandoned;
  • The criteria used were, without exception, subjective;
  • The assessment was carried out by someone who knew nothing of the employees;
  • The company either could not, or would not, explain how the scoring had been done;
  • No meaningful consultation took place; and
  • The same person did the initial scoring and dealt with appeals against selection.

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3. new employment tribunal rules


On Monday 29 July, new employment tribunal rules came into force, and the new tribunal fees regime is now upon us.

The rules have universally been greeted as a model of clarity, which just goes to show what can be done when you get your drafting done by experts who have a deep understanding of both law and practice.

Among the most significant changes:

  • Cases are now looked at by an employment judge at an early stage to weed out hopelessly weak claims (and defences);
  • There is just one type of preliminary hearing at which tribunals will be able to deal with any kind of prehearing issue;
  • Tribunals are allowed to assess costs themselves instead of having to send larger claims to the county court;
  • The need to apply for claims to be dismissed when withdrawn by the claimant has been removed;
  • Claims will be rejected if the appropriate fee has not been paid (or remission application made); and
  • Respondents are allowed to make applications for extra time to respond to a claim after the initial 28 day time limit has expired, and they have an opportunity to present reasons why a default judgment should not be given.

There are new claim forms and response forms and these must be used with effect from 29 July. The online claim form is preceded with a declaration that the claimant is either applying for a fee remission or agrees to pay the fee. In typically confusing fashion claimants are asked to confirm that they will pay the fee even if they are applying for a remission - more haste less speed!

The Ministry of Justice has just issued guidance documents concerning the new fees:

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4. snooping on employees


If you are an urban dweller in the UK, according to research carried out for The Times, you should expect to be photographed as many as 300 times a day. Combine that with the numerous profiles maintained by advertisers and others based on your internet browsing behaviour and goodness knows what information held by the NSA and it is reasonable to assume that what limited rights to privacy used to be enjoyed have eroded almost out of existence.

However, the right to private life is enshrined in the European Convention on Human Rights (ECHR) and applies equally to employment law claims as it does in other areas of law. The case of City And County Of Swansea v Gayle led to consideration of how the right to private life sits alongside the right of an employer to supervise its employees. Swansea Council employed an enquiry agent to keep tabs on an employee they suspected of playing squash during his working hours, and dismissed him when presented with evidence that he was to be seen at his local leisure centre instead of at work on Thursday afternoons. He made a number of claims, most of which failed because of his downright dishonesty. However, the Employment Tribunal found that he had been unfairly dismissed, on the basis that his right to privacy had been infringed, but without awarding any actual compensation.

The Employment Tribunal took the view that the employer had taken its investigations too far so that, once unauthorised absence was established, covert surveillance was disproportionate and unjustified. There had been a breach of Article 8 ECHR and the employer had not paid sufficient attention to its obligations under the Data Protection Act.

On appeal to the Employment Appeal Tribunal EAT President Langstaff disagreed with the Employment Tribunal on just about every point made concerning the finding of unfair dismissal:

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5. limits to the extent of protection of confidential information


There are many cases concerning the alleged infringement of employers' proprietary information, particularly following the termination of an employee's employment. The classic counterpoint is between the protection of confidential information to which an employee has had access in the course of employment and need to avoid interference in commerce by restraint of trade unless protection is clearly required.

The case of Vestergaard Frandsen A/S and others v Bestnet Europe Ltd and others is significant because it is a decision of the Supreme Court and reveals what might an emerging trend that the balance may be tipping back towards former employees after years of findings very largely in favour of employers.

Vestergaard is a Danish company engaged in the manufacture of insecticidal mosquito nets. It sought to protect its trade secrets against Bestnet, a company set up by two of its former employees and a third party who had also worked for them on a self-employed basis. The three were Mrs Sig, who had worked for them in sales, a chemical engineer, and a biologist, Dr Skovgard, who had been involved in developing the crucial techniques. Mrs Sig was required, pursuant to her contract of employment to:

keep absolutely confidential all information relating to the employment and any knowledge gained in the course of the employment and which inherently should not be disclosed to any third party. The absolute duty of confidentiality also applies after [Mrs Sig] has terminated the employment...

Mr Larsen (the chemical engineer) was subject to contractual terms that prevented him from competing with Vestergaard for 12 months following the termination of his employment and to respect the confidentiality of Vestergaard's trade secrets. Dr Skovmand (the consultant biologist) had no formal service contract.

In 2004 Mr Larsen and Mrs Sig set up a new business - Intection - in competition with Vestergaard. Mrs Sig and Mr Larsen both resigned from Vestergaard and Dr Skovlund agreed to work with them. They looked for manufacturers of their 'new' product, Netprotect, and told prospective manufacturers that any agreement would include confidentiality clauses. Vestergaard brought proceedings in Denmark alleging breach of trade secrets and the day before the hearing Mrs Sig resigned as a director of Intection, which then ceased trading. However Mr Larsen and Mrs Sig moved the business to England through a new company, Bestnet Europe Limited, according to the judge "with the express intention of trying to avoid the consequences of the Danish litigation". Mrs Sig and Mr Larsen provided their services to Bestnet through a limited company, 3T Europe Limited and Dr Skovmand worked directly for the company.

Unsurprisingly in 2007 Vestergaard commenced proceedings based in misuse of their confidential information.

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6. collective consultation - one establishment or many?


When USDAW originally took the liquidators of Woolworths to Court over the failure to consult employees before shutting down all its shops in 2008, workers in smaller branches were excluded from the award of 60 days' pay for each employee. The reasoning behind this was that the obligation to consult on a collective basis only applies where more than 20 employees are to be made redundant at "one establishment". The conventional interpretation of those words has been that individual sites, like factories, schools, or shops, which are managed locally, are distinct establishments. However, in USDAW and others v WW Realisation 1 Ltd the Employment Appeal Tribunal has broken with "established" tradition in taking the view that "establishment" in this context refers to a business rather than a particular location at which a business operates.

In his summary His Honour Judge McMullen QC has left in no doubt the firmness of his approach by stating that a purposive construction of section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 required the court to delete the words "at one establishment", thereby allowing protective awards to be made. USDAW has estimated that the value of the awards in this case (which was a combined hearing covering both Wooolworths and Ethel Austin) is about £5 million. With reference to the new rules which have come into force this month it is notable that the appeal very nearly never happened. It was rejected by Mr Justice Langstaff, President of the EAT on initial assessment and only allowed to proceed after a review by His Honour Judge Peter Clark.

Judges are normally very reluctant to interfere with the words contained in a statute, based on the primacy of Parliament. It is no doubt with this in mind that Judge McMullen made the following observation:

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7. whistleblowing update


Late June saw the introduction of some significant changes to the whistleblowing provisions set out in the Public Interest Disclosure Act. However, before considering the changes I think that it is worthwhile taking a little time to consider just what whistleblowing is in the context of UK employment law. In its simplest sense whistleblowing is "blowing the whistle" or bringing out into the open wrongdoing by an employer. Prior to the implementation of the Public Interest Disclosure Act 1998 (in July 1999) whistleblowers had no protection from dismissal. Further, they could be subject to claims for damages for breach of confidence (on the basis that the whistleblowing entailed the disclosure of confidential information obtained in the course of employment), although it was possible to raise a public interest defence in limited circumstances.

The Act came into force against a background of financial scandal and "sleaze" and is aimed at ensuring that employees can disclose certain types of information, such as financial wrongdoing, crime, or health and safety matters, without suffering a detriment. Examples could include a danger in the workplace, financial misreporting, or medical negligence in a hospital. The concern raised must be "genuine" and based on "reasonable grounds". Breach of the Act by employers can result in employment tribunals proceedings and awards of compensation. Dismissal for whistleblowing is treated as automatically unfair.

Many employers responded to the new law by implementing "whistleblowing policies" confirming their commitment to the avoidance of detriment and providing express protection for whistleblowers. Such protection can only be effective if employees know what whistleblowing is (e.g. it is not raising general grievances) so policies tend to explain this as well as specifying a method for reporting wrongdoing confidentially and confirming that it will be a disciplinary offence to victimise a whistleblower or to make a false allegation maliciously. Our Employment Solutions standard documents (available to subscribers) include a tried and tested whistleblowing policy along with detailed guidance notes. Other employers have sought to "gag" employees by requiring them to sign confidentiality clauses, generally accompanied with substantial payments on the termination of employment.

Whistleblowing has been much in the news in recent months, what with Edward Snowden and the NSA, the conviction of Bradley Manning, revelations about police undercover operations and attempts to smear the Lawrence family. Gagging orders included in settlements are reported to have cost the NHS £2 million and the BBC a staggering £28 million.

So, what are the changes?

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8. the practicalities of settlement agreements and without prejudice discussions


Ahead of the implementation of the new regime for settlement agreements, the Acas Code of Practice has been published in its final form. This is a statutory code of practice, not just guidance. That means that when considering matters such as procedure and fairness, a tribunal can take into account whether the provisions of the Code have been applied and adhered to. It is therefore essential reading for all involved in HR and employment law matters and is a commendably straightforward document. In its final form it is a bit more flexible than the original draft. In particular there is now no need for a written offer to start the process (although a lot of employers will have one prepared) and the standard letters are not part of the statutory Code. However, they are still part of the guidance provided. An important point is that it provides for employees to be accompanied at meetings – as a matter of good practice, not a statutory right. This is a sensible move. If a settlement offer is coming out of the blue, an employee will be "shell-shocked" and could very well not be taking in what is being said. If on the other hand the employee has seen the writing on the wall, he or she will be feeling anxious and defensive – and on this basis might well not be taking in what is being said. Another change is that the suggested minimum time to consider the offer has been increased from seven to ten days, which gives the employee a weekend to fret and/or fume, and a working week to get some informed advice.

The protection given to pre-termination settlement negotiations only applies "to the extent that the tribunal considers just" and will not be available to the employer if anything done or said in the negotiations is "improper". The Code gives examples of improper behaviour, including:

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