Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
May 2012

Welcome to our May newsletter.

As prefaced in last month's newsletter we begin with two important Supreme Court decisions concerning age discrimination and retirement. Although some reports have suggested that the door to compulsory retirement has been re-opened, it would be a bold employer which seeks arbitrarily to impose a compulsory retirement age for its workforce or perhaps sections of its workforce. In the words of Lady Hale: "It is one thing to say that the aim is to achieve a balanced and diverse workforce. It is another thing to say that a mandatory retirement age of 65 is both appropriate and necessary to achieving this end. It is one thing to say that the aim is to avoid the need for performance management procedures. It is another to say that a mandatory retirement age of 65 is appropriate and necessary to achieving this end." One such bold employer is Cambridge University which has introduced an "Employer Justified Retirement Age" of 67 for academics. It is notable that the academics themselves voted for the age limit in order to promote "intergenerational fairness" and to enable career progression. Clearly any employer seeking to impose an age limit will need to be able to come up with comprehensive and well-documented reasons, not only in general terms but also as justification for the specific age selected.

Since the Queen's Speech made reference to "comprehensive employment law reform" it has been difficult to extract any details of precisely what is being proposed. It seems from yesterday's press coverage that this is yet another area in which there are conflicting views within the Coalition. It was reported over the weekend that there is "no appetite in business" for the much vaunted "no fault dimissals" and "protected conversations" first raised by Adrian Beecroft in his controversial report prepared for David Cameron. Instead, it seems that the focus is on reducing the minimum consultation periods for large scale redundancies (which will have no practical effect for SMEs) and backtracking on sharing parental leave by extending "maternity leave" to husbands (because it will be too expensive in terms of losses for employers - estimated £6bn). There has also been talk of restricting the extent of contractual obligations when employees are transferred from one business to another but this is a political minefield given that we are bound by the terms of the European Acquired Rights Directive which, as the name suggests, is designed above all to protect employees' rights when they transfer.

If there is any doubt about the extent of the schism, it has been starkly clarified by the comments made this morning (Monday 21 May) by Vince Cable, Business Secretary. He has described the Beecroft Report as "complete nonsense". Writing in The Sun he stated, "British workers are an asset, not just a cost for company bosses. That is why I am opposed to the ideological zealots who want to encourage British firms to fire at will". It seems that Vince Cable has got in ahead of the discussion which is likely to follow from the publication of the Beecroft Report following freedom of information requests (although we reported its contents last October it technically remains a confidential document). Given the proposed busy parliamentary schedule there must surely be a significant temptation for the Government to push employment law reform down its list of priorities.

While the decision in Quashie v Stringfellows appears finally to have resolved a conundrum concerning the employment status of lap dancers (they are employees if working on terms similar to Ms Quashie), those of us who look to expand our vocabularies are indebted to John Hendy QC, counsel for Ms Quashie, who, in the course of the hearing, described the contract as "synallagmatic" (imposing reciprocal obligations upon the parties; as, a synallagmatic contract. – Bouvier). However, the current leader in this particular field has to be Robert Jay QC, lead counsel for the Leveson enquiry, whose contributions to date include "pellucid", "propinquity" and "condign". Should you need to I'll leave you to looking them up at dictionary.com!

Finally, we take a look at this month's decision by Mr Justice Owen that Commerzbank must pay some £42 million in bonus payments following a verbal assurance given by the Bank's CEO and even though, according to the relevant contracts, the bonus payments were discretionary.

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Regards
Martin Malone


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This month's news:

1. justification for direct age discrimination must be related to the general public interest

This month's biggest employment law news stories have to be the Supreme Court's two decisions on age discrimination in Seldon v Clarkson Wright & Jakes and Homer v West Yorks Police. Both give useful guidance about how cases on age discrimination will be considered from now on – but both leave questions to be considered further.

Seldon is a case relating to membership of a professional partnership, but the principles discussed will apply equally in employment cases. Put briefly, Mr Seldon, senior partner in a law firm, challenged a rule in in the partnership deed providing for compulsory retirement at age 65 as direct age discrimination. The partnership defended the rule on the basis that it was justified, that is, that the rule was a proportionate means of achieving a legitimate aim. Three of the reasons put forward as legitimate aims were accepted by the employment tribunal:

  • 1 - retention of associates by ensuring that they have a chance to become partners within a reasonable time;
  • 2 - facilitating workforce planning; and
  • 3 - promoting a supportive culture by minimising the need to use performance procedures to expel partners.

At both Employment Appeal Tribunal and Court of Appeal levels it was considered that the mandatory retirement age was justified. Mr Seldon appealed to the Supreme Court, whose judgment surveyed the relevant European case law and drew out some general principles from it.

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2. indirect discrimination related to retirement is unlawful age discrimination

The second age discrimination case of the month, Homer v West Yorks Police, concerned a senior police officer who became a legal adviser at the Police National Legal Database after retiring from the police aged 51. At the time he joined, there was no requirement for advisers to have a law degree, but the PNLD later introduced a new grading structure, which required a degree for promotion to the top grade, with the intention of improving recruitment and retention. At this point, at the age of 62, Mr Homer was allocated to the second highest grade. He made a complaint of indirect discrimination because he would be unable to complete a law degree before his planned retirement age of 65, and so could not get promotion. He failed in both the Employment Appeal Tribunal and in the Court of Appeal, because it was considered that the reason for the discrimination was not his age, but his impending retirement.

The Supreme Court rejected this approach: it did not make sense to compare those approaching retirement with those leaving for other reasons, over which they had a choice, with those faced with a compulsory retirement age, nor was it realistic to treat retirement as unrelated to age.

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3. rejected applicants have no right to disclosure of the successful candidate's details

Do rejected applicants have the right to disclosure of documents relating to the successful candidate if they consider they have suffered unlawful discrimination the the recruitment process? No, said the European Court of Justice (ECJ) in Meister v Speech Design Carrier Systems GmbH which was a claim by an applicant for a job as an experienced software developer, who made a complaint that she had been discriminated against on the ground of her sex, age, and ethnic origin when she was not short-listed for interview. The questions considered by the ECJ were:

  • 1 - does the principle of equal treatment under EU law mean that unsuccessful applicants are entitled to information about the successful applicant; and
  • 2 - does refusal of that information give rise to any presumption of discrimination?

Having answered the first question in the negative, the ECJ went on to say that the second question was one for the national courts of each country to decide.

On the face of it, this decision is a relief: the possibility of routine disclosure of details of successful candidates to unsuccessful ones doesn't bear thinking of from all sorts of angles: preserving confidentiality; the administrative burden and the sheer nuisance value. But what approach will UK courts take to deciding whether a refusal to disclose details suggests that there may have been discrimination?

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4. servant or serf?

It doesn't seem so long ago that the concept of an automatic transfer of employees under TUPE evoked exclamations of incredulity and disbelief amongst non-lawyers (and some lawyers). Now we have all got used to the idea, Gabriel v (1) Peninsula Business Services Ltd (2) Taxwise Services Ltd reminds us that unless TUPE applies, employees cannot be transferred without their consent. To paraphrase Lord Atkin in the case establishing this principle (Nokes v Doncaster Amalgamated Collieries Ltd [1940] House of Lords), it is the right of a citizen to "choose for himself whom he would serve", and this right of choice constitutes the main difference between a "servant and a serf".

The case came about after Peninsula, where Ms Gabriel worked, bought the shares in a company called Qdos Taxwise Ltd ("Taxwise") in 2007.

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5. tribunals have no power to allocate liability between joint respondents

Brennan & Others v (1) Sunderland City Council (2) GMB (3) Unison is a case arising from somewhat unusual circumstances, but the decision is one of relevance in many more situations. It is part of the long running equal pay saga arising from changes in NHS terms and conditions. Briefly, the claimants are alleging that the preservation of certain bonuses for male staff in a collective agreement perpetuated unequal pay. As well as making equal pay claims against their employers, some claimants also named their trade unions as respondents to the claims, because they were parties to a discriminatory collective agreement. This decision of the Employment Appeal Tribunal deals with whether employment tribunals have jurisdiction to apportion liability between the respondents to a discrimination claim.

The answer to this question requires a little legal history. It depends on the interpretation of the Civil Liability (Contribution) Act 1978, which updated and extended the Law Reform (Married Women and Tortfeasors) Act 1935 to breach of contract cases. Before 1935, if two persons were both in part responsible for an injury to someone, there was no scope for the courts to split liability between the two wrongdoers according to their respective levels of fault.

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6. when is the reversal of burden of proof triggered?

The provision of the Equality Act 2010 reversing the burden of proof in discrimination claims (section 136) means that if a claimant can show facts which could amount to discrimination, then a tribunal must find for him or her, unless the employer can show that there was another explanation for those facts.

In Dziedziak v Future Electronics Ltd an employee selected for redundancy sought to rely on this reversal of the burden of proof, claiming, amongst other things, that the use of attendance as part of the selection criteria was indirectly discriminatory, because her attendance record as a single parent with responsibility for a sick child was poor. She failed in this part of her claim, because the tribunal found as a matter of fact that her lateness had not had an impact on her selection. Because she had not established that fact, the reversal of the burden of proof was not triggered, and her claim failed.

Although unsuccessful in this part of her claim, Ms Dziedziak did succeed in an unfair dismissal claim on the ground that she had not been adequately consulted.

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7. resignation "with immediate effect" takes immediate effect

Horwood v Lincoln County Council is a useful reminder that although the parties to a contract can, between them, agree to change the end date of a contract, bringing it forward and or putting it back, that cannot displace the effective date of termination as defined in the Employment Rights Act 1996 s. 97, which is crucial for calculating time limits for bringing employment claims.

Ms Horwood wrote a letter of resignation to her employer in response to what she said were defects in a disciplinary process applied to her and her subsequent demotion, claiming that these amounted to constructive dismissal. Her letter stated that she wished her resignation to have "immediate effect". It was sent on 28 January, and opened and date stamped on 29 January, although it probably wasn't read until a few days later. The employer subsequently wrote to her saying that it would treat 2 February as her date of termination and pay her until then. Ms Horwood then proceeded on the basis that her employment had ended on the 2 February and presented her claim on 29 April.

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8. guidance on costs orders

Two cases this month look at the question of costs orders. Rogers v Dorothy Barley School was an unsuccessful breach of contract claim brought by a school caretaker. Representing himself, he alleged that the school were in breach of contract when he received a water bill, in error, in respect of the house he occupied at the school. Although he did not have to pay the bill, he felt that it was a breach of contract that he had received it at all. He was unsuccessful on the grounds that the tribunal had no jurisdiction to hear the claim, because it can only deal with breach of contact claims where the contract has ended.

He appealed the tribunal decision, again without success, and the school made an application that he should pay its costs.

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9. is a lap dancer an employee?

The Employment Appeal Tribunal has considered the employment status of a lap dancer, Nadine Quashie, who worked at a Stringfellows club. She had made a claim for unfair dismissal, which had been rejected by an employment tribunal on the ground that she was not an employee and therefore not entitled to claim. Overturning this decision, the EAT looked at the three essential elements of an employment contract – the obligation to carry out work personally, the element of control over work by the employer, and mutuality of obligation and found all of these were present.

Although the relationship was described as one of self-employment, it was clear that Stringfellows exercised a strong degree of control over the dancer, requiring her comply with an extensive book of rules, and carry out specific duties in a prescribed way – including an obligation to perform free dances, and to re-audition if she took a break of more than four weeks - or be fined for failing to do so.

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10. bonus payments – beware what you say

Managers at Germany's second largest bank, Commerzbank, are facing the prospect of having to find £42 million after Mr Justice Owen, sitting in the High Court in London, held that 104 former City bankers at Dresdner Kleinwort are each entitled to bonus payments of up to £1.3million each.

The Bank claimed to be entitled to withhold payments when it faced massive financial pressure as part of the general turmoil in 2009. In 2008 the business was struggling and in May it was put on the FSA's "watch list" as a result of the apparent fragility of its business. With a view to avoiding mass defections resulting from the instability this caused CEO Dr Stefan Jentzsch promised at a meeting that there would be a 400 million euros' guaranteed bonus pot. This was a verbal representation to the employees concerning what was described as a discretionary bonus scheme.

In early 2009 the Bank decided to reduce the resulting allocated bonuses by 90%.

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