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

Welcome to our June newsletter.

Apologies for the late arrival of this month's newsletter but it's been a busy month with lots to report on and more to follow into next month.

Our first item - after the fuss about Beecroft - what are the real changes likely to come into effect? - is intended to round up what has emerged following all the recent press coverage about "major upheavals in employment law" and to focus on what is happening or can reasonably be expected to be happening once all the bluff and bluster has died down. Since they can play such an important role in the settlement of disputes without the risk of tribunal claims we have also included an article about the new compromise agreements which will be known as "settlement agreements". Is it more than just a name change? We'll leave you to decide. We also have news about what appear to be issues keeping the courts particularly busy: TUPE (as always!) and illegal contracts.

In the style of Denis Norden we should mention some of the news which we've been unable to fit into this month's newsletter including the private school which sacked a teacher to avoid wasting money on maternity pay: "you should all just be thankful you have jobs", the UNISON report rather unpleasantly entitled "Call Centre Chiefs Restrict Bog Breaks" and the man who brought 31 employment claims, none of which proceeded to a hearing.

Among items to watch out for in next month's edition is confirmation from the Court of Appeal that, unlike directors, employees do not owe a fiduciary duty to their employers

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This month's news:

1. after the fuss about Beecroft - what are the real changes likely to come into effect?

The pace of change never gets any slower in employment law, and I have quite a few consultations and proposals to report. It remains to be seen how many of them will become law, and in what form, but after a couple of well publicised retreats over the budget, and the leaking of the Beecroft Report in advance of its release in slightly different terms, perhaps a considered and thoughtful approach will be taken to them.

I should first confirm what is not happening. The key proposal in the Beecroft report for "compensated no-fault dismissals" has been omitted from the Enterprise and Regulatory Reform Bill which is currently making its way through the Commons. Instead, a clause proposing "new" voluntary settlement agreements (compromise agreements under another name and about which more below) has taken its place and most people are regarding that as the quiet death of Mr Beecroft's proposal.

It is known that of 135 businesses consulted only 38% were in favour of the proposals which most considered to be unnecessary. Many have commented in the press that they have far more important things to worry about at the moment.

The strength of feeling about Beecroft's contribution was demonstrated particularly well by an article in The Times (behind paywall) which described the report as "short on evidence and long on recommendations - and the prejudices of its author are never far from view" and this was why it was "leaked, published and strangled at birth in a matter of hours".

So what is to be expected?

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2. what are "settlement agreements" and how, if at all, do they differ from compromise agreements?

During the second reading of the Enterprise and Regulatory Reform Bill on 11 June Vince Cable announced that the Government wants to promote and increase the use of agreements relating to the termination of employment as an alternative to employment tribunal proceedings. No details were provided but the intention is to "ensure that the offer of a settlement cannot be used against an employer in an unfair dismissal case". But, hang on, isn't that what a compromise agreement under the current legislation does and are these new settlement agreements going to be confined to unfair dismissal claims?

It has been suggested that, for small employers, there will be no need to obtain legal advice. But small employers do not need legal advice as matters stand: it is employees who must obtain advice in order for an agreement to be binding. Clearly, employees might not know whether a proposed settlement is fair and reasonable given the circumstances and the requirement to obtain legal advice is intended to address this understandable lack of knowledge. However, the Government has suggested that employees will continue to enjoy full employment protection because they can reject a settlement offer and proceed to an employment tribunal.

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3. early retirement benefits transfer under TUPE

In any business sale, the buyer and seller are concerned to be as sure as they can be that rights and obligations will transfer to the buyer under TUPE – and in areas where there is doubt, will usually provide for an indemnity by the seller for any rights not accounted for in the purchase price. Generally, pension schemes fall outside the scope of TUPE, but parts of pension schemes which are not "benefits for old age, invalidity or survivors" do transfer.

In Procter & Gamble Company v Svenska Cellulosa Aktiebolaget SCA & Anor [2012] EWHC 1257 (Ch), the US company sold its European tissue towel business to a Swedish company. There were no indemnities in the sale and purchase agreement, and SCA were very clear that they didn't want to take on any pension liabilities. After the sale the question arose whether some early retirement benefits under the P&G scheme, which had a normal retirement age of 65 but allowed early retirement from age 55 transferred or not. There was no argument at all that TUPE did not apply – and the High Court therefore had to consider whether these benefits were excluded from TUPE with the standard old age retirement pensions or not.

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4. organised groupings are not just a matter of happenstance

Another TUPE case this month highlights the need for an "organised grouping of employees" in a service provision change case which has as its principal purpose the carrying out of the activities concerned on behalf of the client.

In this March's decision in Eddie Stobart v Moreman and others it was held by the Employment Appeal Tribunal that employees who spent the majority of their time working for a particular client were not an organised grouping for the purposes of the TUPE Regulations.

Issues concerning the identification of an "organised grouping" have returned quickly in the shape of the latest EAT decision on the point. In Seawell Ltd v CEVA Freight (Uk) Ltd & Anor Ceva had a contract for the storage and supply of materials to Seawell for use on the oil platforms they operated. Mr Moffat worked for Ceva, and spent all his time on their contract, and a number of other Ceva employees spent varying amounts of time on Seawell work, but most of their time on other clients' work. Seawell took the work back in house and ended the contract. Ceva maintained that there was a service provision change, and told Mr Moffat to report to Seawell after the changeover, but Seawell would have none of it, and Mr Moffat found himself without a job. He succeeded in an Employment Tribunal claim against Seawell but failed on appeal.

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5. whistle-blowers' protection for LLP members

The decision of the Employment Appeal Tribunal in Clyde & Co LLP v Winkelhof [2012] UKEAT 056 holds that limited liability partnership (LLP) members may be "workers" for the purposes of whistle-blowing protection, even if they are remunerated in part by a profit share. The case concerned an equity member of a LLP who worked in part in the UK and in part for an associated firm in Tanzania. She was expelled from the partnership after she made allegations of bribery and corruption against associated Tanzanian firm AKO Law's managing partner, Kibuta Ongwamuhana. She made a complaint that her expulsion was detrimental treatment on the ground of a protected disclosure. She also made complaints of sex discrimination and pregnancy discrimination.

At a preliminary hearing her claim was rejected because she did not fall within the definition of a "worker" and was therefore not entitled to protection. The Employment Appeal Tribunal overturned this decision, concluding that she fell within the definition of a worker, that is a person working under a contract "to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual". Although, for some of the time, the claimant was working on her own account, when she did so, the respondent partnership was not her client.

The question also arose whether the tribunal had jurisdiction to hear her claims under the Equality Act 2010 (which specifically covers partners) when she worked partly in Tanzania (she had spent 78 days of the year in London).

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6. refusing a settlement offer

Can a claimant be found to have failed to mitigate their loss if they refuse an offer of settlement during the course of tribunal proceedings? No says the Employment Appeal Tribunal, unless the refusal is "wholly unreasonable".

In Konczak v BAE Systems (Operations) Ltd, an employer made a settlement offer of £75,000 which the claimant employee refused. She went on to succeed on liability but, at a separate remedies hearing, an employment tribunal considered that she should not be permitted to recover compensation for any period after she turned the offer down. (The offer had been made "without prejudice," but came out during the remedies hearing because the employee had waived privilege). The Employment Appeal Tribunal considered that this approach was wrong.

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7. illegal working and employment rights

Illegal working and eligibility for employment protection is another topic which seems to have been keeping the courts busy this year. Possibly a reflection of a wider issue concerning the composition of the workforce, some of the working practices which have been disclosed in these cases give serious cause for concern.

In March we reported the decision in Zarkasi v Anindita and anor [2012] UKEAT in which a race discrimination claim by an au pair who had entered the UK to work using falsified documents failed, because the unfavourable treatment related not to her race but to her lack of any right to live or work in the UK. Hounga v Allen & Anor [2012] EWCA Civ 609 is a decision of the Court of Appeal concerning a similar situation, which arrives at the same result by a different route based on earlier Court of Appeal decisions on illegal contracts, including Hall v Woolston Hall Leisure Ltd (2001) and Vakante v Governing Body of Addey and Stanhope School (No 2) (2005).

Ms Hounga, with help from others (she being illiterate), obtained a passport in a false name in Nigeria and entered the UK on a 6 month visitor’s visa, ostensibly to visit her grandmother (who, if she existed at all, did not live in the UK), but in fact to take up a job arranged for her here as an au pair for a family with connections in Nigeria.

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8. rights to a hearing by an impartial and independent tribunal

Mattu v The University Hospitals of Coventry and Warwickshire NHS Trust [2011] EWHC 2068 (QB) is a useful case looking at the extent to which Article 6 rights will be engaged in NHS disciplinary procedures. It concerns a consultant dismissed for misconduct by the Chief Executive of the Trust he worked for, who appealed unsuccessfully against his dismissal to an external appeal panel. The reasons for dismissal included refusing to agree to a “re-skilling” plan of action proposed by the NHS Trust employing him after a long period of suspension (five years!).

Dr Mattu challenged the dismissal, saying that it had an impact on this ability to practice as a doctor, and so he had a right to have his dismissal considered by an impartial and independent tribunal under the Convention. He failed.

The Court of Appeal considered that this was a pure employment dispute, and it had no impact on his right to practice as a doctor; even if he would have difficulties finding work within the NHS, (and it was not accepted that this had been shown) he had the option to go into private practice. Further, the court thought it would be wrong for the question of whether Article 6 applied to require an investigation of a claimant’s job prospects. The situation was quite different to that in Kulkarni v Milton Keynes Hospital NHS Foundation Trust CA 2009, where a junior doctor would not be able to acquire a qualification as a result of the outcome of a disciplinary process, so that there was a clear impact on his ability to practice: that said, the majority of the Court doubted whether Kulkarni itself established a sound principle.

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9. Olympic Sundays

In case you're overcome with excitement at the prospect of the Olympic torch appearing on a High Street near you, here's a quick reminder of the employment law impact of the suspension of the usual Sunday Trading laws from 22 July to 9 September.

Shop workers can opt out of Sunday working in larger shops by giving three months' notice, provided they are not employed just to work on Sundays. To give these workers a chance to opt out in time to avoid longer Sunday working hours for the Olympic period, this notice period has been shortened to two months or the interval between the date notice is given and the day before the suspension starts, if that is longer. If workers want their opt-out to last only for the period of longer opening hours, they should specify this in their notice, otherwise it will continue indefinitely until they give notice to opt back in. The last date on which a shortened notice can be given is 9 July 2012.

In a separate development concerning Sunday trading an attempt by Boots to cut Sunday pay for some its staff has been ruled unlawful.

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