Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
February 2014

So it is the last day of the month and therefore time for our review of February in the world of employment law.

The month's news provides a mixed bag covering the new TUPE Regulations (and a reminder of the general principles governing all TUPE transfers), a salutary reminder of the need for scrupulously fair and impartial disciplinary procedures (as demonstrated by a complaint about a disciplinary processs that went all the way to the Supreme Court), the need to oberve time limits, more news about zero hours contracts, the juxtaposition of guarding against disability discrimination in a redundancy situation, whether expiry of fixed term contracts falls within the scope of redundancy consultations, a minimum wage update and the suitability of alternatives to redundancy.

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This month's news round-up:

1. what are the practical effects of the new TUPE changes?


How much difference will the new changes to TUPE (The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014) actually make? For TUPE aficionados the changes are no doubt very interesting but, bearing in mind that I have already commented on the changes in general terms I will confine my observations to those most likely to be of significance for those dealing with transfers.

Guidance recently issued by the Department for Business, Innovation and Skills and commenting specifically on the new changes is also a handy general reference for those dealing with TUPE transfers. For instance, there is a useful reminder that TUPE applies to "relevant transfers", i.e. (i) when a business, undertaking or part of one is transferred from one employer to another as a going concern or (ii) when a client engages a contractor to do work on its behalf, or reassigns such a contract (including bringing the work "in house"). The second scenario is generally referred to as a "service provision change". Further, the guidance restates the maxims of TUPE transfers:

  • the identity of the employer must change (e.g. share takeovers are not covered);
  • asset only sales are generally not covered;
  • the transfer must be of an economic entity that retains its identity following the transfer;
  • for this purpose "economic entity" means "an organised grouping of resources which has the objective of pursuing and economic activity, whether or not that activity is central or ancillary"; and
  • in the event of the transfer of part of a business the resources (including employees) do not need to be used exclusively in the transferring part of the business and by no other part.

So, what of the changes?

The first important one is a reinforcement of an existing principle concerning service provision changes – the activities carried out must be fundamentally the same before and after the transfer for TUPE to apply.

The provisions allowing for a transferee to start consultation before the transfer with the transferor's consent have been tweaked to make it clear that if the transferee changes his mind about wanting to consult early and cancels his request he cannot then revive it.

Protection from dismissal and adverse contract changes in the event of a transfer (the core purpose of TUPE) will not apply in certain circumstances where the sole or principal reason for dismissal or a contract variation is an economic, technical or organisational (ETO) one entailing changes in the workforce. Those who have dealt with TUPE transfers will no doubt be aware that the "ETO defence" may turn an automatically unfair dismissal to a potentially unfair dismissal. Accordingly, this change takes the application of ETO reasons a little further.

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2. impartiality and the need to follow procedures accurately


A couple of cases this month illustrate the crucial importance of paying more than lip service to fair procedure.

West London Mental Health v Chhabra illustrates the dangers of allowing non decision makers to meddle in disciplinary proceedings. In this case, concerns were raised about a consultant psychiatrist, including about possible breaches of confidentiality after she was observed working on patient related matters during train journeys. Advice was taken from HR and an investigator was appointed. The investigator came to the view that she had admitted a breach of confidentiality and that it was unlikely to be repeated. The investigator sent a draft report to the head of HR, who suggested a number of amendments which made the case look significantly more damning, many of which were adopted. Based on the "sexed-up" report, a decision was made to treat the confidentiality allegations as gross misconduct. Other issues relating to working relationships were characterised as issues of capability and handled under a separate procedure.

Dr Chhabra challenged the process and succeeded in obtaining an injunction to halt the disciplinary proceedings. The case made its way to the Supreme Court which found that the head of HR had gone beyond helping to make sure that the investigation report had covered everything necessary and was expressed clearly, which would have been permissible, and had influenced the conclusions reached – which was not. Dr Chhabra's implied contractual right to a fair process had been breached.

The Supreme Court judgment identified four specific irregularities:

  • The findings of fact and evidence, taken at their highest, were insufficient to support a charge of gross misconduct.
  • There was too much reliance on a list of typical examples of what the Trust might regard as constituting gross misconduct rather dealing with the concept of misconduct.
  • The Trust breached its contract with Dr Chhabra when it allowed an HR manager to make extensive amendments to the case investigator's report and in breach of an undertaking that the HR manager would play no further part in the investigatory process.
  • There was a failure to re-assess the decision to dismiss when the factual grounds for the making the decision were altered.

The result was that the Trust was prevented from dealing with certain confidentiality concerns as matters of gross misconduct and in respect of the remainder it could not do unless it conducted an entirely new disciplinary process from the outset.

It is of course extraordinary that objections to a disciplinary procedure should have made it all the way to the Supreme Court, although perhaps less so when one considers the labyrinthine processes and procedures that apply in the NHS.

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3. zero hours contracts - update


Anne Sharp, the chief executive of ACAS, recently identified zero hours as one of three key issues for this year (the others are resolving disputes earlier and pay) and in doing so welcomed the launch of a consultation on this pattern of employment.

As I have pointed out in an earlier blog post there is currently a divergence of views about whether zero hours contracts are a good or bad thing. When initially presented by Business Secretary Vince Cable as "a bad thing", many employees on zero hours contracts were quick to point out that they were quite happy with their arrangements.

However, two main problem areas have emerged for discussion:

  • Situations where workers on zero hours contracts are subject to an exclusivity clause – so potentially employees employed under such contracts could be offered no work at the same time as being prevented from taking on work elsewhere:
  • A lack of transparency over the terms of zero hours contracts, access to employment rights and the financial impact of an uncertain income, for example on access to personal finance or state benefits.

Broadly, whilst the consultation acknowledges the scope for abuse of exclusivity clauses, it seems unlikely that any legislation will be proposed. For example, the thinking appears to be that existing common law rules on the enforceability of exclusivity clauses could be adequate protection against the abuse of such terms, possibly bolstered by guidance, while preserving the option in cases where protection is genuinely required (for example if the employee has access to confidential information). In principle, this makes sense, but it does ignore the lack of certainty about whether a particular clause is enforceable until tested in court, the expense of challenging such a clause in these days when access to justice is increasingly limited, and the temptation to impose a doubtful clause simply for deterrent effect.

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4. reasonable adjustments for absent employees in the event of redundancy


In McCarthy v Jaguar Cars Ltd the Employment Appeal Tribunal considered, and upheld, an Employment Tribunal decision that where a disabled person had been selected for redundancy although the selection criterion relating to attendance amounted to a discriminatory provision, criterion or practice, the employer had made a reasonable adjustment by scoring the employee on the period before he became disabled.

Mr McCarthy was a process engineering manager who became ill with depression and went off sick in 2007. There was no dispute that his illness was a disability. He was still absent from work when a redundancy situation arose in 2009. He fell within the pool for selection, scored poorly and was made redundant. He appealed successfully and was re-scored, this time based purely on his attendance and performance prior to his illness when he was at work and performing well. The result of the re-mark was virtually the same.

The Employment Tribunal found that the re-mark was an appropriate way forward and "expunged any disadvantage" to Mr McCarthy and the Employment Appeal Tribunal upheld the decision.

It is quite plain that the Tribunal were accepting the concession made, that the application of the criterion would ordinarily lead to a substantial disadvantage to the Claimant, and they were satisfied, for the reasons we have just reproduced, why it was that the steps taken by the employer removed the relevant disadvantage. Against that background, we reject the proposition that it was necessary to deal, for example, with Mr McCarthy's contention that there were different ways of making reasonable adjustments (for example by averaging his points). The Tribunal found that what was done was the making of reasonable adjustments and that they eliminated the disadvantage.

Overlaps between rights and procedures such as those highlighted in this case can often seem daunting for employers, so much so that I can think of some employers who have abandoned proposed dismissals for fear of procedural errors. Another good example is the difficult co-existence of protection from disability discrimination and dismissal on the ground of ill-health incapacity. In fact, as long as key principles are adhered to, employers can proceed in relative safety. For example, dismissal for incapacity will generally be fair as long as it is established (almost always supported by professional medical evidence) that the employee will be unfit to return to work for the foreseeable future.

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5. expiry of fixed terms - do they count for consultation duties?


Fixed term contracts have become very popular in the public sector, not least as the result of the need for strict budgeting and frequent funding reviews. This is nowhere more so than in the academic world. University of Stirling v University & College Union deals with whether fixed term workers whose contracts are not being renewed should be counted when totting up the number of employees being made redundant at one time for the purpose of working out whether the duty to carry out collective consultation is triggered. As most readers will be are there are special procedures to be applied in the event that more than 20 redundancies are proposed at one establishment in any period of 90 days. This triggers an obligation to notify the Redundancy Payments Service and a minimum consultation period of 30 days. In this case the decision turned on whether the employees whose contracts ended were made redundant – which for this purpose means being dismissed

... for a reason not related to the individual concerned or for a number of reasons all of which are not so related.

The Court of Session concluded that non-renewal of the fixed terms was a reason related to the individual employee – so these dismissals did not count as redundancies. This conflicts with previous decisions of the Employment Appeal Tribunal which assumed that non renewal of a fixed term was not a reason relating to the individual (Lancaster University v The University & College Union [2011] IRLR 4).

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6. minimum wage update


The latest review of the minimum wage has attracted more attention than usual, perhaps because we are not that far away from the next general election. First, the Department for Business, Innovation and Skills (BIS) announced that the maximum penalty for failure to pay minimum wage is to increase to 100% of unpaid wages, up to £20,000 (from £5,000) from the end of this month (The National Minimum Wage (Variation of Financial Penalty) Regulations 2014).

Shortly after that announcement, the Chancellor mentioned in a BBC interview that the standard rate of minimum wage may be increased from £6.31 to £7.00 for workers aged 21 and over on the basis that "the economy can now afford it". The current "living wage" outside London is £7.65 so the proposal still falls short of what many consider should be the default rate. According to BIS as reported in Hansard, the Department "supports the living wage and encourages businesses to pay it when it is affordable and not at the expense of jobs".

With inflation at 1.9% recent increases have broadly retained parity with the cost of living. However, this is on the back of much higher inflation when the real value had fallen back.

Notwithstanding the Chancellor's bold statement, Vince Cable announced to a legislative committee on Wednesday that the Low Pay Commission has recommended an increase of 3%, i.e. an increase to £6.50 per hour. Consequently, notwithstanding the fanfare and bold aspirations the very likely increase is broadly in line with previous years.

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7. a reasonable alternative to redundancy?


In redundancy situations employers sometimes offer "suitable alternative employment" as a means of avoiding redundancy. Suitability depends on how similar the work is, the terms of the job being offered, the skills, abilities and circumstances of the person being offered the job and the pay, status, hours and location. If a reasonable offer is unreasonably refused, the individual concerned may lose the right to a statutory redundancy payment.

When the writing was on the wall for Tavistock and Summerhill School as a result of falling rolls, the governors decided there was no option but to close the school and gave notice of redundancy to the staff in March 2011 – without much regard to collective consultation, although the Head and Deputy Head were involved in management discussions about it. The parents stepped in and mounted a rescue plan, and offered most of the staff new employment just before the end of the summer term, when their employment was due to end. No such offer was made to the Head, and no explanation was ever given for this. The teachers turned the offer down, having found other employment. Were they reasonable in doing so? Both the Employment Tribunal and the Employment Appeal Tribunal agreed that they were. The offer came very late in the day after all had made alternative arrangements either by way of alternative employment or, in one case, planned retirement. Accordingly all were entitled to redundancy payments.

A number of further issues were considered in the case, including the obligation to carry out collective consultation. It was found that a protective award was due to all of the employees, including those on the management team who had been aware of what was being discussed:

A clear distinction must be drawn between the discussions with a view to saving the school at a high management level and consultation with employees about job losses or possible job losses in the future.

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