Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
November 2012

Welcome to our November newsletter.

This month's round-up primarily deals with a number of important court decisions covering equal pay, redundancy consultation, parallel proceedings in the court and tribunal, union recognition, guarantee payments, the practicability of re-engagement, unsigned contracts of employment and, of course, TUPE.

Political news includes the Government's apparent determination to press on with employee ownership contracts (which I criticised in last month's newsletter and the extension of the right to request flexible working to all employees. Sometimes it is also important to acknowledge changes that have not happened. In Turner v East Midlands Trains Limited the Court of Appeal was asked whether the test of proportionality incorporated within the European Convention on Human Rights should be extended to unfair dismissal claims. The claimant was dismissed by her employer following an allegation of train ticket fraud. The question was whether, even if dismissal was justified on conventional grounds, the impact of loss of employment was disproportionate to the conduct alleged from a human rights perspective. Accompanied by a collective sigh of relief from employers and heading off what might have been an explosion of litigation, the Court took the view that the Convention right cannot be relied on in such circumstances.

On the other hand, the European Court of Human Rights has intervened for the benefit of a Bradford bus driver who was sacked on the basis of his membership of the BNP. Although pollitical affiliation is not expressly protected by the Equality Act 2010 (but philosophy (in the sense of a belief system) is and can often stray very close to directly political issues), removing BNP councillor Arthur Redfearn from his job of transporting disabled passengers, mostly of Asian descent, infringed his right to freedom of association. Mr Redfearn had been employed for less than a year when dismissed and therefore did not have protection from unfair dismissal. Nonetheless the decision to dismiss was an infringement of his human rights entitling him to redress.

Another unusual case, Heafield v Times Newspapers Limited concerns the practical application of protection from religious discrimination. Mr Heafield worked as a sub-editor, proofing and finalising articles for publication in what was undoubtedly a high pressure environment. Stories would be given abbreviated names for quick reference. On the evening in question one such story concerned an allegation of concealment by the Pope of child abuse by a priest. In the course of the evening Mr Heafield's line manager shouted across the room "can anyone tell me what's happening to the ****ing Pope?". Mr Heafield did nothing at the time but, two days later, complained that the statement was "offensive, unnecessary and blasphemous". No specific action followed the complaint. Mr Heafield's claim failed because although there was unwanted conduct which had the effect of upsetting Mr Heafield as a Catholic, ultimately the conduct was not "related to religion" and it was not reasonable for it to have had the effect claimed by Mr Heafield. It was a trivial comment which was made neither as an insult nor on the grounds of religion. I believe that many might have predicted a different outcome and, yet again, this emphasises that this is a notoriously difficult area of law in which it is dangerous to make assumptions. However, what is not in doubt is that in not dealing with the matter as a formal complaint, Times Newspapers had a lucky escape.

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Martin Malone


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This month's news round-up:

1. time barred equal pay claims get a new lease of life

The Supreme Court’s decision in Birmingham City Council v Abdulla is a significant development in equal pay law, opening the way for many cases which would previously been time barred. The time limit for bringing equal pay claims in the employment tribunal is six months, and unlike other types of discrimination claims, there is no scope in the tribunal rules for an employment tribunal to allow out of time claims on the ground that is just and equitable to do so. However, the mechanism used to implement the right to equal pay is to imply an equality clause into every employment contract - and of course the ordinary courts have jurisdiction to hear claims for breach of contract - for which the limitation period is six years not six months.

This is the route 175 claimants whose claims were time barred in the employment tribunal successfully took in this case. The respondent, Birmingham City Council, asked for their claims to be struck out under a power allowing the court to strike out claims if they can “more conveniently” disposed of by an employment tribunal.

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2. feeling left out?

Tamang v ACT is an illustration of the importance of careful drafting - and of the importance of not making assumptions. The case arose after a pair of security guards claimed that they had been unfairly dismissed for a TUPE related reason after a service provision change, and that they had not been consulted about the change. They started claims against both their old employers and the new service providers, but then reached an agreement to drop their claims against the original employers, and signed settlement agreements which only named those original employers. The employees then carried on the proceedings against the new service providers, who sought to rely on the compromise agreements, arguing that they acted as a release against all the respondents.

The Employment Appeal Tribunal rejected that argument, holding that the agreement was a valid form of settlement, but only against the respondent actually named; it was not in fact a release of the respondents but a promise not to continue or start new proceedings against a named party.

The EAT referred to Chitty on Contracts (widely regarded as the leading work on contracts subject to English law) with particular reference to release, accord and satisfaction.

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3. "employee ownership" - full steam ahead

Readers of last month's newsletter are aware of my serious reservations about them; however, no review of recent employment law news would be complete without at least a passing reference to the new proposals to introduce a new "employee-owner" status, which after a very short consultation period, are being rushed through with what some might describe as unseemly haste in order to come into effect next April. The basic proposition is that employers will be allowed to offer employment on terms that an employee receives between £2,000 and £50,000 worth of shares in return for signing away a number of employment rights, including the right to claim unfair dismissal or a redundancy payment, to request flexible working (in most circumstances) or to ask for time off for training. Employees would also have to agree to giving longer notice of their intention to return early after maternity or adoption leave. Employees who agree to such a deal could then be required to sell back any shares if they leave or are dismissed at “unrestricted market value”. Any gains in value would be free of capital gains tax, but the shares will be subject to tax and NI in the same way as other employee shares.

As I commented, there seems to be little enthusiasm for the measure for a variety of reasons. Some suggest it will not be widely adopted, others that it is too cumbersome a mechanism and will be too expensive to run, and still others that it is open to abuse by unscrupulous employers at the expense of economically weaker employees. Moreover, when disputes arise (as they inevitably will) they are likely to prove far more difficult and expensive to resolve than unfair dismissal claims, thereby rather defeating the stated purpose.

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4. European Court of Justice judgment on timing of collective consultation obligations

European Court of Justice

In United States of America v Nolan, the European Court of Justice has confronted the combined forces of redundancy procedure and semantics. Perhaps overfaced with such a powerful combination it has declined to give a ruling in the long running saga of whether the USA was in breach of an obligation to inform and consult employees before closing an army base situated in the UK, because although UK law does not exclude public bodies from the operation of domestic rules on redundancy consultation, the European directive on collective consultation expressly does make such an exclusion. The Court of Appeal had asked it to determine the point at which the duty to consult is triggered. While the UK legislation refers to redundancies being "proposed" – EU law uses the term "contemplated"; and so uncertainty has arisen about when, exactly, the duty to consult is triggered. The point therefore remains to be determined by the Court of Appeal.

As is usual with European cases the judgment of the Court was preceded (last March) by the Opinion of the Advocate General (AG). The AG was concerned that, above all, the obligation to consult under TUPE should not be triggered "prematurely". This seems to be an entirely laudable concern, taking into account that employees might be unnecessarily worried about a potential transfer, even though that transfer might not ultimately happen. However, that appears to be at odds with the European reference to redundancies being "contemplated" which implies that, at that stage, the decision to make people redundant has not been finalised.

The counterpoint to that is that a consultation should not take place too late, so that it is in effect a sham. What is the point of a collective consultation when the decision to make people redundant has already been taken, i.e. when redundancies are "proposed"?

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5. it's not unusual...

It’s not unusual for there to be parallel proceedings in both the High Court and in the Employment Tribunal – for example, an unfair dismissal claim and a claim for breach of contract for a highly paid employee. In such circumstances, it’s usual for the tribunal case to be put on hold while the High Court case is determined. BUQ v HRE is an example of the opposite situation, where a High Court claim was stayed pending an Employment Tribunal discrimination claim.

The case arose when an employer made allegations of financial impropriety against once of its senior executives. The executive responded by alleging that the disputed expenditure had been authorised by another more senior director, and made a claim in the employment tribunal alleging unfair dismissal and that the same director had sexually harassed him. The alleged harasser argued that the executive had made false allegations of harassment to undermine the credibility of the financial allegations, and sought an injunction to restrain the executive from publishing his allegations.

There was thus an overlap between the two sets of proceedings, in that both would consider the allegations about finances. While normally the High Court determination of the facts of such matters would be followed by the employment tribunal later, in this case the High Court considered that the Employment Tribunal was best placed to deal with the allegations of harassment and establish the truth of the matter and adjourned a listed trial date pending resolution of the tribunal case.

The circumstances of this case were fairly unusual, and it will be rare that the High Court will be prepared to delay its own proceedings where there is an overlapping tribunal case.

It would be fair to say that the vast majority of High Court judges take the view that the civil court system as opposed to the employment tribunal system provides the better forums in which to make findings of fact based on disputed evidence. There remains a very clear heirarchy when it comes to perceptions of the pecking order for courts and tribunals.

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6. union recognition for employees working outside the UK

source: Commons Creative

Netjets Management Ltd v CAC is a significant decision for multinational, unionised businesses, which applied the case of Ravat v Halliburton Manufacturing and Services Ltd to applications for union recognition and held that an application by a union for recognition for collective bargaining could succeed in respect of pilots working for a European airline, in circumstances where they worked all over Europe and different aspects of their employment terms and conditions were handled in different jurisdictions, but factually the workers in the proposed bargaining unit had a strong connection with the United Kingdom.

Relevant factors included that individual workers’ contracts were governed by English law and subject to English jurisdiction, despite HR administration being handled in Lisbon. Although there was no necessity for a decision as to whether there had been any breach of Article 11 of the European Convention on Human Rights in this case, (the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and join trade unions), Mr Justice Supperstone did comment that:

The reality is that if the Union cannot bargain collectively with the Claimant in relation to their pay, hours and holidays in Great Britain they will not be able to exercise their Article 11 right.

Although this case is perhaps most likely to be relevant for large, multinational organisations, there is an increasing tendency for SMEs to conduct business within other European states which, of course, carries with it the likelihood of having to deal with jusrisdictional issues, as well as working practices which may be untypical.

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7. no guarantee payments for employees who agree a shorter week

In the continuing harsh economic climate, it is not uncommon for employers and employees to strike a deal whereby employees agree to work shorter hours, or take lower wages, to avoid being made redundant. Abercrombie v AGA Rangemaster Ltd deals with just such a situation, and in it the Employment Appeal Tribunal considers the relationship between such agreements and the right to a guarantee payment under the Employment Rights Act 1996 (ERA) section 28 if work is not provided for them on a day when they would normally work.

Guarantee payments are frequently misunderstood. They are payments in respect of any normal working day for which the employer provides no work in circumstances specified in the legislation. The statutory entitlement is five days in any three months and the current rate is £23.50 per day, hence a maximum of £117.50 in any three months period. As such it is not a particuarly valuable benefit.

In this case, after a deal for a shorter working week was struck, which entailed hours being compressed so that workers did not need to work on a Friday, the union representing the employees sought guarantee payments for those Fridays. The claim failed in the Employment Tribunal, which considered that, once the shorter week was in place, the employees did not “normally” work on Fridays – so there could be no right to a guarantee payment . The Employment Appeal Tribunal, confirming that this was right, made the further point that it didn’t matter whether the agreed variation in the contract was a permanent one or a temporary one.

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8. when should the practicality of a return to work be considered?

breach of contract?

With reductions in tribunal awards on the way, and with it becoming increasingly difficult to find alternative employment, the remedies of reinstatement and re-engagement, which have rather fallen into disuse, are perhaps due a revival.

Rembiszewski v Atkins Ltd is a decision on when the practicability of the dismissed worker returning to work should be assessed – should it be at the point when the question of remedy was considered by the tribunal or at the point when the return to work would actually happen?

In May 2009 Mr Rembiszewski, an architect, raised concerns about a fire exit at a railway station. This was a protected disclosure in the context of whistleblowing legislation.

In September 2009 the employer commenced redundancy consultations. Based on scoring in pools of candidates at risk Mr Rembiszewski was selected for redundancy.

The Employment Tribunal held that he was dismissed not for whistleblowing but for redundancy. However the procedure was flawed and therefore his dismissal was unfair. Mr Rembiszewski applied for reinstatement but, since he was made redundant, the Tribunal determined that the appropriate remedy was re-engagement. The employer maintained that this was impractical, taking into account in particular an assertion made in the course of the proceedings that the Company had acted vexatiously, abusively, disruptively, or otherwise unreasonably. As it turned out, the Tribunal concluded that there were no suitable jobs available for Mr Rembiszewski and he was therefore awarded compensation of £25,403.

On appeal it was contended on behalf of Mr Rembiszewski that the Tribunal erred in not considering reinstatement and that practicability should be considered at the time either reinstatement or re-engagement would take effect rather than the date of dismissal. There was also a Polkey argument, i.e. that if the correct redundancy procedure had been followed then the outcome would have been the same. This was quickly rejected by the Employment Appeal Tribunal since, had the employer wished to rely on it, it should have adduced evidence in this regard at the Tribunal hearing and it did not do so.

It was settled that re-engagement rather than reinstatement was the option potentially available. As for the date at which practicability of returning to work should be considered, it was confirmed that this must be the date at which it would take effect.

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9. the unsigned contract in the desk drawer bites back

locked desk

It’s a familiar scenario: after a promotion, an employee is sent a new contract to sign. It includes some new benefits, but also there are some post termination restrictions in there. The employee looks it over, perhaps, then tucks it away at the back of a drawer to deal with later, or with no intention of ever signing it. Fast forward a few years – that employee has left his job, and is working for a new employer. Can his old employer enforce those post termination restrictions, even though the employee never expressly agreed to be bound by them?

The question of whether a contract of employment which is unsigned is nonetheless effective is one that is often asked and it is therefore very helpful to have some guidance from the Chancery Division of the High Court. Often much emphasis is placed on the obligation for an employer to provide a written statement of main particulars of employment within eight weeks from the start of the employment. Failure to do so gives the employee the right to complain to an employment tribunal and to ask the tribunal itself to specify the written particulars. If combined with another or other claim(s) there may also be a right to compensation. However, what is generally far more important for an employer is whether it can rely on the terms of a contract which has been issued to an employee but which has not been signed

According to Mr Justice Hildyard in FW Farnsworth Ltd & Anor v Lacy & Ors the employee may be bound by the terms in the contract.

Paul Lacy and Maria Yuste worked for FW Farnsworth Limited and Northern Foods Limited. It was alleged that during the course of their employment they passed confidential information to a competitor, Pooles of Wigan Limited. Additional defendants, Neil Court-Johnston, Bobella Limited and Joanne Kenedy (sic) were alleged to have participated in the conspiracy.

In 2009 Mr Lacy was issued with a contract containing restrictive covenants which, for example, prevented him from working for a rival business or soliciting defined customers for a period of six months following the termination of his employment. He had also been issued with a contract in 2003 which did not contain any such restrictions. The key question was whether he was employed under the 2003 contract or the 2009 contract. He had started work in 2000 and signed the 2003 contract when it was issued to him. In 2009 he progressed to the position of Site Technical Manager. Some time after this appointment, in September 2009, he was issued with the 2009 contract which he neither signed nor returned.

The employer maintained that he had impliedly accepted the terms of the 2009 contract because he applied for and received additional benefits which were only available under the 2009 contract, specifically a move to a defined contribution pension scheme and medical benefits for him and his family. In response Mr Lacy maintained that neither of the matters were so unequivocally referable to the 2009 contract as to imply that he was bound by its terms.

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