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October 2009

Welcome to our latest newsletter. I'm covering for our head of employment, Will Burrows, while he takes a well earned break. The political discussions about changes to the state retirement age are driven by the need to save money and although the "Heyday" (Age Concern) case has finally resulted in a decision that the current retirement age of 65 is lawful, everyone seems reconciled to the need to increase the standard age for retirement. The Conservatives have indicated but not confirmed (see below) that they will raise the state retirement age for men from 65 to 66 in 2016 and have not ruled out the possibility of moving towards 66 for women as a direct result of increased national debt levels. Labour are consulting and their current plans are that the retirement age will increase to 66 in 2026, 67 in 2036 and 68 in 2046. The Institute of Directors has proposed more urgent action with an increase to 70 as soon as "reasonably practical".

We've also included developments about unfair dismissal claims which debunk some myths and a word of warning about "without prejudice" communications which may nonetheless be used in proceedings.

We'd be delighted to meet you at the Business North West Exhibition and Conference at Manchester Central (formerly the G-Mex) today and tomorrow. I'm posting this from the show where I and my colleagues can provide you with instant access to our services and we'll even provide you with free legal advice if you have any current concerns. If that's not enough, anyone signing up at the Exhibition will get a 10% discount on our usual rates. So come and see us! We're near the entrance in the main arena and next to the infoUK Network Cafe so join us for a coffee or a glass of wine and a chat about how we can provide you with a service which puts the others to shame! If you can't make it or if you pick this up after the half term break, please call free on 08000 320 974 and we'll be pleased to come and see you. Whether you're a current subscriber or enquirer, we'll happily arrange to see you to discuss your current or proposed requirements.

We'll keep you up to date with any important developments between newsletters on our blog and if you have enquiries about the items featured or require any further information then don't hesitate to contact us on 0151 239 1000, freephone 08000 320974 or by e-mail to

Martin Malone

This month's news:

1. Retirement dismissals: the battle is lost, but not the war

2. Without prejudice discussions - a warning

3. Unfair dismissal - compensation

4. Unfair dismissal - percentage uplift

5. Unfair dismissal - unofficial strikes

6. October 2009 changes

7. Increase in discrimination awards

8. ...and finally

Employment Solutions

october 2009

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September 2009
August 2009
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1. Retirement dismissals: the battle is lost, but not the war

It was a brave, perhaps even foolhardy, decision by Age Concern in July 2006. The Government's new anti-age discrimination law was about to come into force, applauded by Age Concern. However there was (and is) a hole in the new legislation. A special exception allows an employer to force an employee to retire at age 65, provided specified procedures are followed. Age Concern challenged the legality of this exception in the Courts.

Age Concern have now, three years later, finally lost, but only on points.  In a judgment handed down on 25 September 2009 the High Court ruled that the age 65 default retirement age (or "DRA") exception is lawful. That therefore is the current position. However although Age Concern lost the Court battle it seems likely that they will win the war.

Age Concern (or more accurately the National Council on Ageing operating under its "Heyday" banner) originally applied to the High Court for judicial review in 2006. The argument was that Employment Equality (Age) Regulations 2006 SI 2006/1031 reg 30 was unlawful as it was not compliant with the Equal Treatment Framework Directive 2000/78/EC (which the 2006 regulations implemented in the UK).  The High Court referred basic questions to the European Court of Justice. In March 2009 the European Court ruled, unsurprisingly as this is what article 6 of the Directive says, that the question of whether the age 65 "DRA" is or is not lawful depends on whether it can be justified as a proportionate means of achieving a legitimate aim.

Age Concern, which by now had amalgamated with Help the Aged, was still optimistic. This was because the European Court specifically said that a high standard of proof would be required for the British government to justify the DRA and there was little such proof on offer. Nevertheless the advocacy skills of Dinah Rose QC and Lord Lester QC, with back-up from junior barristers Emma Dixon and Diya Sen Gupta, persuaded the High Court judge that the British government had managed to meet the standard of proof required.

It may well be that Age Concern and Help the Aged feel they were unfairly outmanoeuvred by the Government outside the courtroom.  Only three days before the final High Court case started on 16th July 2009 the Government announced that it was going to bring forward to 2010 a review of the whole question of whether the age 65 DRA should be changed or abolished (a review had been promised right from the outset but was originally proposed for 2011). On 13 July 2009 the Government issued a consultation document on age policy generally. It included the announcement that "we will bring forward the review of the Default Retirement Age to 2010, to reflect the change in economic circumstances since it was introduced". Cynics might have been tempted to add "and to help us win the Court case starting in three days' time."

The judge made it clear in his judgment that he had been strongly influenced by the fact that the government review was imminent. He said:

"The claim [by Age Concern that the British age 65 retirement exception is unjustified] fails and I do not grant the claimant the relief sought. It will, however, be apparent from my observations ... above that the position might have been different if the government had not announced its timely review. I cannot presently see how 65 could remain as a DRA [default retirement age] after the review..."

The government consultation ran until 12th October 2009.

In the light of the judge's comment and the Government consultation it seems almost certain that the age 65 DRA will not last much longer. Whether it is raised to 68 or 70 or some other age or simply scrapped altogether remains to be seen. A not immediately obvious factor which will no doubt be taken into account is that any increase above 65 will have a knock-on effect on damages and compensation awards in personal injury and unfair dismissal cases - the more working years a claimant has left, the greater the amount generally awarded for "loss of earnings". And that, in turn, will affect business generally as insurance premiums will no doubt rise accordingly.

There was a further twist when it was suggested that the Conservatives would announce at their conference on 6 October that they intended to raise the pension age (for men) to 66 by 2016. George Osborne pointed out that this would lead to a saving of 13bn. However, it is difficult to see that this will ever arise because the probability is that the default retirement age will at least rise to 70 or more sooner than then and, more likely, be abolished altogether. It is inconceivable that the state pension age would be altered without first addressing the question of the default retirement age because, otherwise, there would arise the possibillity that people could be required to retire when they were not yet eligible to receive state pension payments. It was therefore no surprise that by the time David Cameron was asked about the matter by the BBC, he stated that it was only an "option under consideration".

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2. Without prejudice discussions - a warning

There is a common misconception that if something is said, verbally or in writing, on a "without prejudice" basis then there is an absolute bar against it being admissible in evidence in a court or tribunal. In an employment law context "without prejudice" discussions are common when settling the terms of compromise agreements after a potentially unfair or wrongful dismissal - but of course the expression is used in many other contexts.

The effect of the expression "without prejudice" was considered in a case in July 2009. Two companies had entered into a written settlement agreement in relation to a disputed invoice. Prior to entering the agreement they had had extensive "without prejudice" negotiations about the outstanding amount. Subsequently one of the companies sued the other, claiming that the other had defaulted on its obligations under the settlement agreement. Although the negotiations had been "without prejudice" the allegedly defaulting company wanted to adduce details of them in evidence. The High Court has allowed it to do so.

In consenting to allow evidence of the without prejudice discussions "to the same extent as if they had not been without prejudice" the judge pointed out the general principle that "without prejudice" communications between parties in order to resolve a dispute are not admissible in evidence is based on public policy and is not an absolute rule. The policy reasons for the rule require the courts to be careful not readily to allow exceptions but nevertheless "without prejudice" material can be admissible in evidence for a variety of reasons when the justice of the case requires it.

It can be dangerous to over-shorten a complicated decision which involves balancing different considerations. Subject to that caveat the decision in the case in point (Oceanbulk Shipping & Trading SA v TMT Asia Ltd & ors, High Court, 29th July 2009) can be summed up as follows:

The general rule is that 'without prejudice' negotiations which fail to achieve settlement of a dispute are generally inadmissible as evidence in subsequent litigation to resolve that dispute. However if the negotiations led to a concluded settlement evidence of them may in appropriate circumstances be admissible if there is subsequent litigation concerning the meaning and effect of the settlement to the same extent that it would be admissible evidence if the negotiations had not been 'without prejudice'. 

To be more precise, the judge said

"The law generally admits evidence of the contractual context, by way of background facts known or taken to be known to both or all the parties, because it is recognised that such information assists in ascertaining the parties' (objectively evinced) intention. It undeniably follows that, if the court is deprived of such evidence in the case of settlement agreements following without prejudice exchanges, it will be the less well equipped to discern the parties' intentions and the less likely to construe the contract in accordance with them."

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3. Unfair dismissal - compensation

If an employee has been unfairly dismissed he is entitled to compensation for loss suffered. How should his loss of earnings be assessed if he gets another job at once or almost at once?  His loss will be that much smaller as a result of having earnings from new employment and so it can be strongly argued that compensation, as it is compensation for loss, should be reduced accordingly. On the other hand it seems unfair that the benefit of the earnings from his new employment should effectively accrue to the employer who had unfairly dismissed him.

This basic problem was amongst the first to come before industrial tribunals when unfair dismissal law was "created" by the (Conservative) government in 1971. The National Industrial Relations Court, the predecessor of the Employment Appeal Tribunal, took a pragmatic approach in Norton Tool Co Ltd v Tewson [1972] ICR 501 - a case well known to students of employment law.

An employee had been unfairly dismissed without either notice or pay in lieu of notice. The employee got another job before the end of the period of notice which he should have been given. In assessing compensation the NIRC pointed out that if the employer had given the employee pay in lieu of notice, as it should, there would have been no question of the dismissed employee having to make a refund to the employer if he got another job during the notice period. The NIRC ruled that the same principle should apply, as a matter of sound industrial practice, in assessing compensation when an employer failed to give an employee pay in lieu of notice. This made an exception to the normal rules but it is an exception which has been applied consistently by courts and tribunals ever since.

However there is a problem.  Nowadays there is no doubt that the Norton Tool exception to normal rules applies where the unfair dismissal is actual dismissal. But does it apply where the unfair dismissal was a constructive dismissal, that is where an employer has treated an employee so badly that the employee was entitled to resign, and did resign, in response to that bad treatment?  

It seems amazing that it has taken nearly 40 years to get an unequivocal answer, but at the end of July 2009 the Court of Appeal has ruled categorically that the exception to normal rules made by the Norton Tool case does NOT apply in constructive unfair dismissal cases. It applies only in cases of actual dismissal. Therefore the normal rules must apply.

Thus a constructively dismissed employee must give credit for sums earned from other employment during the notice period and compensation payable to him for loss of earnings must be based on actual loss suffered. His earnings during the notice period from other employment must be taken into account. That is the conclusion of the Court of Appeal. However as a rider it should be noted that this conclusion overruled the Employment Appeal Tribunal's decision in the same case - the EAT had come to the opposite conclusion and finished its judgment by expressing "the hope that what we recognise as a continuing controversy about the narrow principle in Norton Tool might be settled by the House of Lords in the near future, when the opportunity arises".

So maybe we haven't yet heard the end of what is effectively a 37 year old saga.

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4. Unfair dismissal - percentage uplift

The "percentage uplift" rules contained in the discredited and now revoked 2004 dispute resolution regulations have to a substantial extent been re-enacted in the post-April 2009 replacement rules. Under both sets of rules, an Employment Tribunal can order an uplift in compensation awarded to an unfairly dismissed employee if the employer failed to follow proper procedures, subject of course to the overall statutory "cap" on the maximum which can be awarded (a compensatory award is currently subject to a statutory cap of 66,200).

The main differences between the pre- and post- April 2009 rules in relation to "uplift" are:

  • a reduction from 50% to 25% in the maximum increase to an unfair dismissal award which can be made by an Employment Tribunal if the employer had failed to follow proper procedures. However in cash terms even 25% can be a substantial increase;
  • there is no requirement in the post-April 2009 rules that a tribunal must apply a minimum uplift if the employer had failed to follow proper procedures (a minimum uplift of 10% was required by the pre-April 2009 rules "save in exceptional circumstances"); and
  • the "procedures" now comprise the ACAS Code of Practice for Disciplinary and Grievance Procedures and are therefore guidance rather than a set of statutory rules

Employers may take some relief from a recent decision of the EAT which suggests that there will be some situations in which an employer will be able to avoid any uplift.

The EAT has pointed out that a tribunal's discretion to order an uplift in compensation is limited to ordering an uplift in the amount it has actually awarded. It follows, therefore, that an employer who realises before an unfair dismissal tribunal hearing that he had failed to follow proper procedures in dismissing an employee (and thus accepts that he is bound to have to pay compensation) should be able to avoid or reduce any uplift by paying a suitable amount to the employee in advance of the hearing. Making a suitable payment to the employee in advance of the hearing should prevent the tribunal from making "an award" or at least reduce the amount of the award.

The EAT case explaining the position (Tim Arrow & Sons v Onley, EAT on 14th September 2009) was concerned with procedures under the 2004 dispute resolution regulations but, as pointed out above, similar considerations apply under the post-April 2009 regime. The current wording (in the Employment Act 2008 amending the Trade Union and Labour Relations (Consolidation) Act 1992) allows a tribunal to increase by up to 25% 'any award it makes' for unreasonable failure to follow the ACAS Code of Practice.

In the case the EAT agreed with the tribunal's rationale for setting the percentage uplift at the then maximum permissible amount of 50%. However the original tribunal had failed to take into account a payment made by Tim Arrow & Sons to Mr Onley in the week before the tribunal. As this included notice pay and redundancy pay, the EAT found that Mr Onley was only entitled to one week's pay (in respect of the additional week he would have stayed in employment had he been dismissed fairly) plus holiday pay. The award made by the original tribunal was therefore adjusted accordingly.  Taking these matters into account and eliminating the 50% uplift reduced the award payable to Mr Onley from some 20,000 to a little over 1,000.

Other employers should take note. The effect is to provide a possible way, in appropriate cases, to remove the tribunal's discretion to order an uplift in compensation.

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5. Unfair dismissal - unofficial strikes

A recent EAT case provides a useful reminder of the rule that an employee has no right to complain of unfair dismissal if at the time of dismissal he was taking part in an unofficial strike or other unofficial industrial action. The EAT has held in Sandhu & ors v Gate Gourmet London Ltd (17th July 2009) that dismissal of unofficial strikers was lawful. In those circumstances an employment tribunal simply has no jurisdiction.

Gate Gourmet provided pre-packaged airline meals at Heathrow. On 10th August 2005 they sacked some 600 staff in a dispute relating to employment of seasonal staff. Hundreds of British Airways baggage handlers stopped work in sympathy, thousands of passengers had their flights disrupted and the matter hit the national press headlines.

Although an agreement was reached to end the dispute, a number of Gate Gourmet employees refused to accept it and brought unfair dismissal claims. Most of the claims were later withdrawn and many of the remaining ones were settled but some went to employment tribunals. In some of the tribunal cases the employees won and in others they lost. Six of those who lost appealed to the EAT. In July 2009 the EAT dismissed their appeals.

The EAT considered amongst other things:

  • what makes a strike "unofficial" (basically that it does not have backing from a trade union);
  • what constitutes "taking part" in a strike (noting that case law establishes that unauthorised and unexplained absence from work at a time when industrial action is in progress constitutes participation);
  • the position where an employee is dismissed for taking part in industrial action after he or she has ceased to do so (in such cases the ordinary unfair dismissal rules apply so an employment tribunal will have jurisdiction).

The EAT went on to consider each of the six appeals individually. The overall conclusion, as noted above, was that all six appeals were dismissed. In simplest terms the EAT concluded that either the employment tribunal had no jurisdiction for the reasons outlined above or that in those cases where it did have jurisdiction the dismissals were fair on ordinary principles.

The lesson, of course, for employees is that taking part in unofficial industrial action can result in dismissal without compensation. For employers it is that the law entitles them to be tough if employees take industrial action without going through the proper preliminary procedures.

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6. October 2009 changes

Regular readers will be aware that changes in rates and other aspects of employment law are generally introduced in April and October each year. The main changes this October are:

  • The Work and Families (Increase of Maximum Amount) Order 2009 SI 2009/1903 raises the maximum amount of a week's pay, for the purpose of calculating certain statutory payments, from 350 to 380 as of 1 October. The weekly maximum is used for various calculations, in particular, statutory redundancy payments and basic awards for unfair dismissal.
  • On 1 October, the National Minimum Wage Regulations 1999 (Amendment) Regulations 2009 SI 2009/1902 raised the level of the national minimum wage (NMW) from 5.73 to 5.80 an hour for workers aged 22 and over; from 4.77 to 4.83 for 18 to 21-year-olds; and from 3.53 to 3.57 for 16 and 17-year-olds.
  • The Minimum Wage Regulations have also been amended to deal with the treatment of tips paid in restaurants and other establishments. Basically, tips cannot be treated as counting towards minimum wage payments made to employees. Very detailed guidance has been issued by the BIS (formerly the DTI).

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7. Increase in discrimination awards

For some time employment lawyers have been aware that there are guidelines to be applied to awards for "injury to feelings" in discrimination cases. In 2001 WPC Angela Vento was awarded 257,844 after succeeding in her claim for harassment and sex discrimination against West Yorkshire Police. She claimed that she had been "grilled, roasted and reduced to tears" by senior officers at Bradford central police station. She said she had been racially and sexually discriminated against before she was sacked in December 1997 for what the force said was poor performance and a lack of honesty.

The tribunal heard that Miss Vento had been persistently bullied until her confidence was so undermined that she could not cope with the simplest of tasks. She believed that the force saw her child care responsibilities as a liability and was awarded compensation for injury to feelings, aggravated damages and the psychological damage she had suffered at the hands of senior officers. The claim for injury to feelings resulted in award of 65,000 and the Chief Constable appealed, claiming that the award was manifestly excessive. The Employment Appeal Tribunal decision included what have become known as the 'Vento Guidelines' for awards for injuries to feelings. In essence there were identified three bands:

  1. 15,000 - 25,000 for the most serious cases, typically a sustained campaign of discriminatory harassment;
  2. 5,000 - 15,000 for serious cases but not so serious as to justify an award in the highest band; and
  3. 500 - 5,000 for less serious cases, typically an isolated or one-off occurrence.

The bottom end of the lower bracket has steadily increased on the basis that tribunals have taken the view that if an award for injury to feelings is justified then there is a level of award below which the wrongdoing cannot properly be recognised.

The EAT has recently returned to the topic of awards for injury to feelings in the (as yet unreported) case of Da'Bell -v- NSPCC and decided that the bands should be increased with immediate effect so the lower band increases to 6,000, the middle band to 18,000 and the upper band to 30,000.

Another recent disability discrimination case has emphasised the financial penalty for employers who fail to follow correct procedures. KPMG dismissed trainee Dhrupa Bid without waiting for the results of a dyslexia test. Ms Bid had twice failed her ICAEW exams at a time when she was unaware of her dyslexia. She had passed paper exams with marks of over 80% but when she sat exams taken on a computer her marks fell below 40%. Having failed her exam she was given permission by KPMG to defer the retake until a dyslexia assessment could be obtained. She was warned that if she failed the retake she would be dismissed. She sat the retake in November 2008 and failed but only afterwards established that she was indeed suffering from dyslexia. Reasonable adjustments would have been to allow her more time to take the exam and allowing her to take the exam on paper instead of on a computer. Failure to make those adjustments resulted in awards of 12,000 for injury to feelings, 8,528.92 for loss of earnings, 24,906.14 for future losses, 311.85 interest on the injury to feelings award and 102.96 interest on compensation, a total of 45,435.06.

Meanwhile the Department of Health has directed that Sandwell and West Birmingham NHS Trust must pay a health worker who retired more than 13 years ago 370,550 plus 24,000 a year for the rest of his life. The worker was found to have been permanently incapacitated as a result of workplace stress.

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8. ...and finally

Moonlighting and "entrapment"

Insurance claims handler and amateur model Hannah Ellis was signed off work with her employer RSA in March 2007 with a diagnosis of tendonitis and chronic fatigue syndrome. In January 2009 and while still off work sick she received an offer to play the part of a celeb being photographed by the paparazzi in a supermarket car park. Her father played the role of her "minder" and they were paid 150 for the half hour photo shoot. She was more than a little surprised to be called in to a disciplinary meeting in June with her bosses at RSA who told her they had a video of the photoshoot. She was dismissed for gross misconduct for accepting money for another job while off sick. According to the Daily Mirror, Hannah said "I believe the company used the photoshoot as a sting to entrap me. The company knew I did amateur modelling for friends for nothing". She maintains that she was encouraged to carry on modelling by an RSA psychologist, to help her cope with her illness. She is now pursuing a claim for unfair dismissal.

Harassment claim by recruitment consultant who attempted pole-dance fails

Rachel Harris worked as a 100,000 a year recruitment consultant with IDPP Consulting. She says that she was persuaded by her line manager, Danny Whelan, to attend the Spearmint Rhino club in Tottenham Court Road. On arrival at the club she claimed that "under great duress" she was forced "to share a private lap-dance" with him. However, her tribunal claim for 175,000 was thrown out when it was found that she allegedly laughed throughout the dance and then, according the Daily Telegraph, she had to be pulled off the pole by a bouncer to stop her from performing her own dance around it.

Her claims to the tribunal were for sex discrimination, harassment, victimisation and constructive dismissal. The tribunal found that Miss Kelly attended the club "in the full knowledge of what the establishment was" and that she was a "willing participant". In the least surprising part of the decision the tribunal stated, "We have come to the conclusion that this was an occasion which was fuelled extensively by alcohol".

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