Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
November 2011

Welcome to the November edition of the Canter Levin & Berg Employment Solutions newsletter.

You would be forgiven when reading our news items this month for thinking that important employment law decisions are the more or less exclusive preserve of His Honour Judge Jeremy McMullen QC. Formerly a part-time chairman of the employment tribunals (now called employment judges), he is now a Senior Judge of the Employment Appeal Tribunal and known for his robust decisions. Last week he ruled that a dancer at Stringfellows is entitled to proceed with her employment tribunal claim in which she contends that she was an employee of the club rather than self-employed.

Our reports cover rather less racy but nonetheless important issues concerning the potential overlap between employment and court proceedings and transfers of undertakings. The judgments provide commendably straightforward guidance. The decision in Enterprise Managed Services Ltd v Dance includes a particularly interesting analysis concerning how employment terms may be altered following a TUPE service contract transfer.

Last month we reported the leaked parts of the Beecroft Report concerning employment law reform. Today (23 November) Business Secretary Vince Cable is announcing details of those recommendations which the Government intends to adopt. As usual, the firm proposals are a much diluted version of what was initially outlined. The main proposals are consultation on the possibility of reducing the 90 days' consultation period when 20 or more redundancies are proposed, increasing the qualifying period for unfair dismissal claims from one to two years (as it used to be), initial referral of claims to ACAS (this has been tried before), the introduction of "protected conversations" and simplification of the procedure for compromise agreements. The last two items should be welcomed by both employers and employees and are likely to be the most significant in practice. It is pleasing to note that the minefield which would have been "no fault dismissals" appears to have been dropped. In his round of TV and radio interviews this morning Mr Cable said that this was the most radical overhaul of employment law for a generation. Taking into account that most of the proposals are couched in terms such as "consultation" and "pilot schemes" and that the changes themselves are not fundamental, that appears to be an overstatement.

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October 2011
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This month's news:

1. stay of tribunal proceedings, triangular interests...and draconian rules

A litigant can sometimes find it difficult to elect the forum in which to issue proceedings. Sometimes it can simply be an issue of cost. Litigating in tribunal is less expensive and the findings of fact will bind a higher court. When deciding whether a stay of tribunal proceedings should be granted where claims are issued on similar facts in more than one court, it is necessary to consider the balance between duplication of court proceedings and the prejudice which might be caused by a stay. In Chorion plc and others v Lane the High Court held that tribunal proceedings should be stayed where there was a sufficient overlap between the tribunal and court proceedings. However, it should be remembered that there is no absolute rule that provides that tribunal proceedings should automatically be stayed.

The litigant, Mr Halstead, in Paymentshield Group Holdings Ltd v Halstead had first issued proceedings in an employment tribunal for unfair dismissal and breach of the Working Time Regulations 1998 in respect of holiday pay. Some two months prior to the hearing, Mr Halstead decided to send a letter before action with attached draft particulars of claim to Paymentshield. When Paymentshield sought a stay of the tribunal proceedings, Mr Halstead at first agreed but then changed his mind, intending to fund the more costly High Court proceedings with the compensation he expected to win from his tribunal claims. He applied for reinstatement of the tribunal proceedings and two employment judges at first instance agreed with him, agreeing to lift the stay because no High Court proceedings had been issued.

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2. variation of terms after a TUPE transfer: when is it permissible?

One of the most difficult issues a transferee employer has to deal with after the transfer of a business to it is when it can make changes to the terms and conditions of staff in the transferred company. TUPE 2006 makes clear that any purported variation of an employment contract will be void if the sole or principal reason for the variation is the transfer itself or a reason connected with the transfer that is not an "economic, technical or organisational reason" (Regulation 4(4)).

This has led to a great deal of caution exercised by transferee employers and their advisors when intending to implement changes. However, the legislation is quite clear. There is no absolute prohibition on changes to terms and conditions in the context of a TUPE transfer unless such changes are solely or mainly by reason of the transfer, or are for a reason connected with the transfer (which is not an economic, technical or organisational reason). On occasion, it can be said that sight of the wood is lost for the trees.

The case of Smith & others v Trustees of Brooklands College illustrates this point succinctly.

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3. more TUPE and variation of terms

The EAT has given further helpful guidance on determining whether a variation to terms and conditions after a services transfer pursuant to TUPE 2006 falls within the ambit of Regulation 4(4) and Regulation 7(1) (automatically unfair dismissal for a reason connected with the transfer) of TUPE 2006. The decision in Enterprise Managed Services Ltd v Dance is arguably of greater relevance in today's work environment than that in Smith v Brooklands (also reported this month) since it concerns re-tendering between contracting businesses. However, the EAT in Dance follows the same approach as that in Brooklands (unsurprising since the leading judgment was given by HHJ McMullen in both cases).

In this case, Mr Dance and others were employed by Williams which, along with another contractor, Enterprise, provided services to MHS. From around October 2008 meetings were held between MHS and its contractors emphasising, amongst other concerns, budgeting constraints and the requirement that future services would have to be provided at reduced cost but achieve high service performance. Both Williams and Enterprise depended on MHS for the supply of work. In January 2009 Enterprise reviewed terms and conditions for its workers, introducing performance related pay and different hours. These altered terms were accepted by its staff. Williams made no changes but lost the contract and Mr Dance and others transferred by operation of TUPE to Enterprise in April 2009.

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4. disciplinary hearings and hospital trusts

Along comes another case to add to the long list of claims against hospital trusts concerning alleged flaws in the disciplinary process. Trusts have very detailed contractual disciplinary procedures, complicated by reviews and the introduction of new and often overlapping procedures consequent to Directions issued by the Secretary of State which have led to a plethora of claims of failure to comply with contractual terms, express or implied. These cases have often assisted more generally in the clarification of tricky legal questions (such as the right to legal representation at disciplinary hearings under human rights legislation).

In Lim v Royal Wolverhampton Hospitals NHS Trust the High Court was asked to consider whether Mr Lim (a consultant anaesthetist) should be granted an injunction preventing a capability hearing from proceeding until an assessment panel of the National Clinical Assessment Service (NCAS) had made a determination as to his performance. The court was asked to determine two questions:

  • 1. Whether the Trust was in breach of contract by failing to comply with its own procedures by failing to refer the issues (relating to bullying and inappropriate behaviour) to the NCAS
  • 2. Whether, by seeking to revive allegations of misconduct some three years earlier, the Trust failed to comply with the terms of its own disciplinary procedure that it should act fairly and speedily.

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5. costs of reasonable (or not?) adjustments under the spotlight as deaf applicant loses discrimination case on appeal

The vexed question of what constitutes a 'reasonable adjustment' and whether cost can be a factor in the equation has long been a problem for employers when dealing with disabled employees and job applicants. The Equality Act 2010 largely replicates the provisions concerning 'reasonable adjustments' which were previously contained in the Disability Discrimination Act 1995 (DDA). The problem for employers is that the test of reasonableness is objective and is to be determined by a tribunal. Some guidance is provided in the EHRC Employment Statutory Code of Practice (previously contained in the DDA) which sets out a list of factors to be taken into account. However, case law has proved to be helpful to employers in setting out some of the parameters of what may be considered to be reasonable adjustments.

The EAT has now upheld the tribunal decision in Cordell v Foreign & Commonwealth Office which considered the question of to what extent cost can be a factor in the 'reasonable adjustments' equation and has helpfully laid down some further guidelines.

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6. first prosecution under the Bribery Act 2010

Employers have been waiting to see whether the application of the provisions of the Bribery Act 2010 will impact upon the way in which they conduct business, most particularly in respect of corporate hospitality and overseas transactions where it is often considered essential to 'smooth the way' in order to do business. The Act has a broad jurisdictional reach as it covers acts which take place outside the UK if the individual or company have a close connection with the UK.

It may then perhaps come as a small relief that the first prosecution under the Act is in connection with conduct that most of us would consider to be inappropriate, even immoral. Mr Munir Patel, a former magistrates' court clerk, was filmed accepting a £500 'bung' to ensure details of a traffic offence were not entered onto the court's database.

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7. whistleblowing: causation and vicarious liability

More confusion on the correct causation test in whistleblowing cases as the Court of Appeal controversially overturns the EAT decision in NHS Manchester v Fecitt. The Court of Appeal has held that section 47B of the Employment Rights Act 1996 (protection from detriment on the ground of a protected disclosure) is infringed if a protected disclosure materially (i.e. more than trivially) influences an employer's treatment of an employee who has made a whistle-blowing allegation. It also held that an employer cannot be made vicariously liable under the whistle-blowing legislation for such actions of its employees as one might otherwise argue amount to victimisation. This is because an employer can only be held vicariously liable for the legal wrongs of its employees (see the House of Lords decision in Majrowski v Guys and St Thomas' NHS Trust). In contrast to discrimination legislation, there is no clear statutory provision which makes it illegal to victimise employees who make protected disclosures.

Revisiting briefly the facts of this case, it concerned three nurses who worked for NHS Manchester and who, in various capacities, raised concerns about the qualifications of a colleague. An investigation disclosed no major concerns but the three nurses did not let the matter drop and caused general dissent among the staff working with them. As a result of what then became a 'dysfunctional' working atmosphere, one claimant had her managerial responsibilities removed, one was redeployed and the other, a bank nurse, was given no further work. They brought claims that they had been subjected to a detriment under s.47B Employment Rights Act. NHS Manchester's response was that the reason for its actions was that it was the 'only feasible method' to deal with the dysfunctional working conditions created by the three nurses.

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8. capability or conduct? one, the other or both?

A helpful case for employers, but one that should be treated with caution, deals with the issue of whether a dismissal which is purportedly for misconduct can be found to be fair even if the tribunal holds it is for capability and conduct (both potentially fair reasons for dismissal under section 98(2) Employment Rights Act 1996).

It is a common problem for employers whether, faced with an employee's incompetence or negligence, they should opt for a capability or conduct procedure and/or dismissal. Often, the behaviour in question overlaps both conduct and behaviour. The soundest advice is to cover both bases although, of course, in the case of a capability dismissal it is expected that a different kind of procedure with different expectations and support will be followed. An early EAT decision in Hotson v Wisbech Conservative Club made clear that an employer is not tied to the label he happens to put on particular facts, nor is he prevented from running the two as alternatives. However, it is clearly wise to ensure that both capability and conduct are considered at an early stage to ensure that no argument can be progressed that prejudice has been caused to an employee.

In Screene v Seatwave Ltd, Seatwave was the victim of a large scale fraud and Mr Screene was the unfortunate financial controller who failed to detect the fraudulent transactions. Mr Screene was called to a disciplinary hearing to consider three allegations, the central one being that he "failed to identify or address large amounts of cash leaving the German bank account totalling to roughly 1.7m euros within several weeks". The next day Seatwave wrote to Mr Screene "to confirm the decision to summarily dismiss you on the grounds of Gross Misconduct". The letter continued: "you have been negligent in the completion of your duties as absolute failure to complete non UK bank reconciliations leading to significant financial losses for the company". It concluded: "your serious negligence in the performance of your duties...clearly justifies Summary Dismissal".

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8. and finally... more on philosophical beliefs

There seems to be a never ending stream of cases in tribunals at the moment concerning whether claims for discriminatory treatment on the ground of philosophical belief should proceed. In our October 2011 newsletter we examined some of the recent case law on the ever shifting limits of what may qualify as a philosophical belief. A Watford employment tribunal has now very lightly put the brakes on.

In Lisk v Shield Guardian Co Ltd, the subject matter was a topical one. Mr Lisk, an ex serviceman, objected when he was asked by his employer, Shield Guardian, to remove his poppy at work and he submitted claims for direct discrimination and harassment on the protected ground of philosophical belief. A pre hearing review was listed to determine whether the "poppy incident" claim should proceed.

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