Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
May 2014

Welcome to our May review of UK employment law, including important news about the extension of the right to request flexible working to most employees, as well as the latest developments covering discrimination based on religion or belief, time limits and injunctions. There is also news of an important European Court decision which is relevant for all employers who pay commission or bonuses to their employees and may prompt a review of such arrangements to avoid liability for potentially significant back pay.

For the benefit of regular readers I should also include some updates concerning stories covered in the last few months:

  • UNISON has, as predicted, been granted leave to appeal the decision rejecting its challenge to the introduction of tribunal fees last July. Based on the startling information now available and indications given in the judgment, the appeal has to stand a good chance of succeeding.
  • While on the topic of employment tribunal fees, evidence has emerged that far more applications for fee remissions are rejected than are accepted. In its impact assessment the Ministry of Justice predicted that 31% of claimants would have to pay fees whereas those paying comprise 94.5% of claimants. Concerns have also been expressed about anecdotal evidence suggesting that fee remission claims are being rejected on technical grounds even in the cases of those in receipt of income based benefits. No matter which side of the employment fence you are on, access to justice is a basic right in a democratic country and must be upheld.
  • The long running (seven years) case of Leslie Seldon has finally reached its conclusion with the judgment of the Employment Appeal Tribunal that a firm of solicitors was entitled to require Mr Seldon to retire at 65. Although the case went as far as the Supreme Court and has clarified the law concerning compulsory retirements, the unfortunate outcome for Mr Seldon is that he has lost.
  • As previously advised statutory sick pay (SSP) is no longer reclaimable. However, employers are still obliged to pay SSP of £87.55 per week to eligible employees for up to 28 weeks and thereby costing £2451.40 for a full claim.

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This month's news round-up:

1. right to request flexible working extended to most employees


Most employers are familiar with the procedure to be applied when dealing with flexible working applications which have been around, on a legislative basis, since 2003. Initially the right to request flexible was confined to the parents of children under six or of disabled children under 18.

In 2007 the right was extended to carers of adults and in 2011 to parents of children under 18. With effect from 30 June 2014 the right is extended to all employees who have 26 weeks' continuous employment at the time the application is made. Only one application per year may be made.

As a result, now is a good time to recap the key elements of fairly handling a request for flexible working. The first thing to bear in mind is that the entitlement is to request flexible working rather than an entitlement to flexible working on request. Nonetheless, employers must take request for flexible working seriously. What does that mean in practice? If an application is refused then the employer may be required to justify the decision, both in terms of the steps taken to consider it and the substantive reason for rejection.

According to the ACAS draft guidelines valid reasons for rejection may include:

  • Burden of additional costs
  • Inability to reorganise work among existing staff
  • Inability to recruit additional staff
  • Detrimental impact on quality
  • Detrimental impact on performance
  • Detrimental effect on ability to meet customer demand
  • Insufficient work for the periods the employee proposes to work
  • Planned structural change to the business

However, employers should bear in mind that it is not enough to give the reason; if called upon to do so the employer may be required to justify the reason.

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2. Liverpool Mayor claims that belief in public service is protected under the Equality Act


My regular readers are aware that I am intrigued by the way in which protection of religion or philosophical belief has developed in ways that surely could not have been envisaged when the Regulations which preceded the current protection under the Equality Act 2010 came into force in 2003.

In January I reported that belief in the Labour Party was a characteristic capable of protection under the Act. It should therefore come as no great surprise that a belief in public service attracts the same protection.

Joe Anderson is the current and first directly elected Mayor of Liverpool. It would be fair to say that he divides opinions. Among many things he has been called the left's answer to Boris Johnson. He was born in 1958 and left school at 16 without any qualifications. He joined the Merchant Navy and spent some time working in the leisure industry. As a mature student at Liverpool John Moores University he obtained a Postgraduate Diploma in Social Work and subsequently became a full-time social worker.

Alongside his working life he was elected as a city councillor in 1988, became leader of the Labour group in 2003 and in 2010 became Leader of the Council. He became elected Mayor in 2012.

The background is relevant because, in Anderson v Chesterfield High School, he contended that he was a victim of direct discrimination as a result of the termination of his employment after an extended leave arrangement to allow him to fulfil his public duties. The period of leave commenced in 2010 but his election as Mayor in 2012 for a four year term prompted the dismissal.

The 2009 Employment Appeal tribunal case of Grainger v Nicholson (which concerned a belief in climate change) established the five point test which has subsequently been used in such cases and was duly applied at the preliminary hearing in this case.

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3. a just and equitable extension of time should not be a matter of routine


Only last month I commented on the strict application of time limits in tribunal claims and how they can prevent otherwise strong claims from proceeding. One month on and the issue is to the fore once again in the Employment Appeal Tribunal case of Beale & others v Clydesdale Bank plc and another. The case also provides yet another reminder that reliance on a representative will rarely provide a way out of procedural default.

As all those involved in employment claims know, the time limit for unfair dismissal claims is three months (or, to be strictly accurate three months less one day) and will not be extended unless it was not reasonably practicable for the claim to have been presented in time. The time limit for discrimination claims is also three months or, in the case of connected discriminatory acts, three months from the date of the last discriminatory act. Time will only be extended if it is just and equitable to do so (a much lower threshold).

Mr Beale and his three colleagues were members of Unite the Union. They consulted the union about age discrimination claims and entrusted the union to deal with them. It was accepted that none of them knew that there was a three months time limit for commencement of proceedings. Therefore they were entitled to conclude that they had entrusted the matter to the union and were unaware of any need to take any action themselves.

Claims were not lodged within three months. In order to decide whether it was just and equitable to extend the time limit the Employment Judge had to weigh up all the evidence placed before her and exercise her discretion. She found that no blame attached to the Claimants since it was "entirely reasonable" for them to have entrusted the matter to their trade union to progress their claims, including taking any necessary action.

The judge also took into account that a potential claim against the union for professional negligence was a relevant consideration. As an aside, any potential claim against the union might be problematic since, in order to establish negligence, there has to be a breach of a duty of care and it has been held on many occasions that the standard expected of a union in this regard is generally much lower than might be expected of a solicitor. In the appeal judgment Lady Stacey picked up on this, commenting that "the Employment Judge plainly equiparated the union with a solicitor in that she had found that it was reasonable for the Claimants to entrust not only the provision of advice but also the taking of action to the union, and it is not in dispute before me that the union, for whatever reason, failed to take action in time". Incidentally "equiparate" is a word and quite simply means to compare but why use the latter when there is an obscure alternative!

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4. data protection versus data access


It never ceases to surprise me that employees can be so horrified when action is taken against them following the misappropriation and/or misuse of information belonging to an employer. All employment contracts incorporate an implied duty to keep confidential information belonging to the employer and not in the public domain. Confidential information in the nature of a trade secret, such as financial information, customer lists, production processes and sales strategies is protected. Further, any decently drawn contract of employment will include express protection of confidential information, both during and after employment.

If an employer has good reason to believe that confidential information has been misused, for example by disclosure to a competitor or by a former employee diverting business away from the company, there is a clear risk that serious damage could quickly follow. Consequently, it is often thought appropriate to apply for an injunction requiring the current or former employee (and any of his or her associates) to stop using the information and to deliver up the information in whatever form it has been taken. In order to prevent action being taken to thwart the employer's efforts (e.g. by hiding away the information) injunctions are often granted without notice to the party to be served.

I recall some years ago making a home visit to a suburban address early one morning. The purpose of the visit was to carry out the terms of an injunction order requiring the delivery up of property belonging to the employer. A supervising solicitor from another firm was in attendance to ensure that correct procedures were followed. The recipient of the order was shocked to find out that the order covered delivery up of all physical documents at the house and, in addition, all electronic devices that could hold information belonging to the company including PCs, mobile phones and even the children's laptops. Technological advances have served to widen even further the scope of disclosure to include, for example, documents stored in the cloud through Google, OneDrive, Dropbox or any number of other providers. It has also come to the attention of many employers that, particularly in the online world we nearly all inhabit, relevant data is one of their most important assets.

The recent High Court case of Warm Zones v Thurley and Buckley includes a useful summary of the relevant factors to be taken into consideration when considering such an application and confirms the willingness of the court to make an order in appropriate cases.

Warm Zones is a not-for-profit company that provides energy efficiency and related advice for domestic users, targeting principally low income and vulnerable households throughout the UK. Ms Thurley was a zone director from January 2007 until she was dismissed in March 2013. She covered addresses in North Staffordshire and Cheshire West. Mr Buckley worked as an IT and project manager, also based in North Staffordshire. Both had access to the employer's database for the region containing, according to Warm Zones, "important, unique confidential information and property belonging to it".

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5. last month it was overtime, this month it is commission to be added to holiday pay


In what appears to be an emerging trend to emulate actual regular pay rather than basic pay, the Court of Justice of the European Union (CJEU) has held that holiday pay should include commission if commission forms part of an employee's remuneration.

Last month I reported that overtime (or its notional equivalent) should be included in holiday pay and that failure to do so could result in significant back pay claims. Applying very similar reasoning the European Court in the case of British Gas v Lock has held that holiday pay should include commission.

Mr Lock was employed by British Gas in 2010 as an internal energy sales consultant. His job entailed persuading business clients to buy energy products. His basic salary was £1222.50 per month. Commission was also paid monthly, based on sales made but with reference to a period some weeks or months earlier (presumably to allow for variations and cancellations).

He was on annual leave from 19 December 2011 to 3 January 2012. His December salary comprised his basic pay of £1222.50 plus commission in relation to earlier weeks amounting to £2350.31. His average monthly commission for 2011 was £1912.67.

During his annual leave he did not make any sales and therefore did not earn any corresponding commission. Logically, that had an adverse impact on his earnings during the month after his annual leave. As a result he brought an employment tribunal claim for what he considered to be the balance of his holiday pay for the period from 19 December to 3 January. This was based on notional commission which he would have earned had he been in work during the period he was on holiday, even though it did not equate to commission earned on actual sales.

In the sort of European judgment which causes understandable irritation to many people, the CJEU held on 22 May that, notwithstanding that Mr Lock received payment of both basic salary and commission during his annual leave, the fact that he lost out on commission in subsequent months because of the holiday should be compensated.

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6. can a business owner claim a redundancy payment?


The Employment Appeal Tribunal recently considered in the case of Secretary of State for Business Innovation & Skills v Knight whether or not a business owner can claim a redundancy payment.

Mrs Knight was managing director and owned 100% of the shares in Receptors Security Systems (UK) Limited. The Company was incorporated in 1991 and ceased trading, having become insolvent, in October 2011. Mrs Knight was employed under a contract providing for her to work 9.00 to 5.30 Monday to Friday for a salary of £20,000 plus discretionary bonuses. In practice she worked from 8.00 to 7.00 and was paid £1000 "take home" per month. However, as the Company faced financial difficulties she took no pay at all in the last two years of trading. In effect she forfeited her salary in order to pay other employees and suppliers.

At an Employment Tribunal it was held that she was an employee and therefore entitled to a redundancy payment from the National Insurance Fund. The Secretary of State appealed on the grounds that:

  1. Judging her to be an employee was based on a perverse conclusion;
  2. Having forfeited her pay she had changed her position so there was no mutuality of obligations sufficient to establish a continuing contract of employment; and
  3. The Tribunal should have considered her position at the date of the insolvency, not what might have been the position earlier.

The Secretary failed on all grounds. There was a sequence of cases from which it was clearly established that, subject to the particular facts, a controlling shareholder can still be an employee. This applies equally to a claim against the Secretary of State for payment from public funds.

Was there a subsisting contract of employment at the date of insolvency? Yes. The Company would have been obliged to pay a redundancy payment if it could have done so because, quite simply, she was an employee during the time when she drew no salary and she was therefore an employee at the time when the claimed obligation arose. There was no agreed variation or discharge of the contract. As for use of the word "forfeited" this did not mean that she had agreed not to take any salary at all or that this had brought her employment to an end.

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