Welcome to the October edition of the Canter Levin & Berg Employment Solutions newsletter.
My commentary this month must focus on the remarkable kite-flying exercise which emerged today with widespread news coverage of the report about employment law produced by venture capitalist Adrian Beecroft at the request of David Cameron. With headlines such as "Scrap unfair dismissal claims for lazy workers - report" (BBC) and "Give firms freedom to sack unproductive workers, leaked Downing Street report advises" (Telegraph), the report suggests employers could dismiss employees without giving a reason, by using a "Compulsory No Fault Dismissal System". According to the report, "the employee should be given a chance to argue his or her case, and to suggest (but not demand) that they be given time to improve or be transferred to a less demanding job at a lower wage. If no agreement could be reached, the employee would receive the same payment they would get if they had been made redundant". So employers would become unaccountable (save for the equivalent of a redundancy payment) even if the action taken was blatantly unfair and unjustified. Incidentally, if that option is available, why would any employers follow the requirements for a full redundancy process if they can be safely circumvented? The report refers to Britain's "terrible" employment laws and suggests that they are undermining economic growth. The report is fundamentally wrong on two counts.
First, current employment law allows employers fairly to dismiss lazy and unproductive workers. However, there are safeguards in place. Not unreasonably employers are expected, if called upon to do so, to justify assertions that employees are, for example, lazy and/or unproductive. Capability and conduct are potentially fair reasons for dismissal as the law stands. In most cases, as long as the employer has followed fairly straightforward procedures, unjustified claims for unfair dismissal can be successfully resisted. What irks many employers is that there is an increasing trend for such claims to be accompanied by claims of discrimination. These claims are much more difficult to deal with and there is no suggestion that discrimination legislation should be watered down (no doubt because the European Court would have something to say about that). So, without the option of unfair dismissal, there would undoubtedly be a surge of discrimination claims which are far more expensive and time consuming for employers to deal with.
Second, there is no evidence produced to support the assertion that unfair dismissal claims are stifling economic growth. In fact, and contrary to common perceptions, the OECD's Employment Protection Index shows that nearly every developed country has more employment protection than the UK.
Evidently the report does not command coalition support with a senior Liberal Democrat spokesman describing it as "madness". Labour MP Michael Meacher was on the case last week, commenting that "for Beecroft, labour is a mere commodity of production whose cost shold be pared down to the irreducible minimum, and if the associated impedimenta of workplace rights can be stripped out, so much the better".
In a busy day for employment law, Deputy Prime Minister Nick Clegg has suggested that as part of the government's campaign against red tape, employers will be able to hold "protected conversations" with employees about issues such as performance and retirement. The idea is to encourage frank and open discussions on the basis that such discussions could not be used in tribunals. Mr Clegg has said that this will form part of a major package of employment law reform to be announced this autumn (so presumably very soon!).
Many employers will welcome the idea of being able to hold such discussions since there is an undoubted fear of "saying the wrong thing" which can, in itself, result in tribunal claims. Unlike the report produced by Mr Beecroft, this appears to be a constructive contribution to employment law reform.
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This month's news:
1. employment tribunal claims: do the latest changes really take account of the "human factor"?
You know that moment when someone voices something you've been thinking for a while? Lord Justice Mummery hit the nail on the head for many who have experience of the employment tribunal system in Gayle v Sandwell and West Birmingham Hospitals NHS Trust when he responded to criticisms about how long the case had taken to progress through the system and how much money had been spent on it.
On the face of it, the criticism was a fair one - the claimant unsuccessfully appealed twice after being unsuccessful in her claim that she was unfairly dismissed for taking unauthorised time off for union duties at a three week hearing, with the final decision being made nearly five years after the events in question. But as Lord Justice Mummery made clear, this case was very much the exception to the rule; few tribunal cases last longer than a day or two; still fewer go to one level of appeal, let alone two, and he pointed out that there are a range of reasons why cases such as this one take a long time to resolve. In particular, he remarked that it is difficult to achieve a speedy, inexpensive outcome where one or more party to the proceedings is determined to take every point of law, evidence and procedure.
2. equality reporting: how many employers will voluntarily "think, act and report"?
In the context of recent reports from the Equality and Human Rights Commission and Chartered Management Institute that it will take 70 years and 98 years, respectively, for women to be equally represented in positions of power and to achieve pay equality at senior levels, some might think that strong measures to address pay inequality are overdue. Moreover, both reports emphasise the business case for pay equality, and not just the issue of fairness.
3. employee references - the potential minefield that is the requirement to be true, accurate and fair
Many employers are wary of giving references, fearing they will end up in a no win situation. They may find themselves at the wrong end of a claim either by a new employer complaining that a reference was misleading, or by a former employee complaining that they have not got a job because the reference given was not true, accurate and fair. They are probably right to be wary - there is no universal obligation to give a reference, but if an employer does choose to give one, it is undoubtedly true that care needs to be taken when writing a reference.
Where an employee leaves during the course of a disciplinary or performance procedure, it would be misleading to prospective employers to fail to mention this, but what of the position where misconduct or a professional failing is discovered after the employee has left?
The Court of Appeal considered this in the case of Jackson v Liverpool City Council, where after a social worker had left his job at the Council, a number of issues were raised by clients which suggested record keeping failings on his part. When he later applied for a further job and a reference was requested, the Council gave a reference indicating that had he not left, he would have been subject to a form of performance management, but that the issue had not been investigated. The reference met the requirements of being both true and accurate - but was it fair?
4. disability discrimination and the effectiveness of reasonable adjustments - exactly what is "reasonable"?
The extent of the duty to make reasonable adjustments to avoid placing a disabled person at a substantial disadvantage, including taking steps to get them back to work, is highly fact sensitive. It has been looked at by the Employment Appeal Tribunal in a number of recent cases without giving a definitive answer about how effective an adjustment needs to be to qualify as a "reasonable" one to expect the employer to take.
The EHRC Code of Practice on Employment Chapter 6: Guidance on Reasonable Adjustments indicates that the effectiveness of a measure is a factor which may be take into account in deciding whether a measure is reasonable, but just how effective does a measure have to be to be reasonable?
5. an employee may well be reasonable in resisting pay cuts, but that does not automatically make it unreasonable to dismiss and re-engage them
In these continuing hard times, with profits squeezed and businesses facing collapse, it is becoming increasingly common to consider salary reductions as a cost saving exercise. Although some consider it a risky option, given the prospect of employment tribunal claims for unfair dismissal and breach of contract, it is well established that dismissal for refusal to accept a change of contract terms is potentially fair (as "some other substantial reason" for dismissal), and will actually be fair if the employer acts reasonably in deciding to dismiss. Such fairness, of course, calls for genuine efforts to negotiate the changes before resorting to giving notice of dismissal and offering re-engagement on new terms.
Two recent cases have reiterated this general principle and made certain aspects of it very it clear.
6. Agency Workers Regulations 2010 - it's not all doom and gloom!
The Agency Workers Regulations 2010 SI 2010/93 came into force on 1 October, giving effect (eventually) to the 2008 EU directive on temporary agency work. The government has given in to the inevitable, albeit not gracefully - there is still talk of removing any "gold plating" of the EU requirements, for example by amending them to take one man service companies out of the scope of the regulations.
As reported last month and in brief, the Regulations give agency workers the right to equal treatment on basic working and employment conditions, including pay and holidays, as if they had been recruited directly by the hirer. Most of these rights apply after 12 weeks' service but some, notably the right to access to the hirer's facilities such as a canteen, transport between sites or a creche, and to access to information on permanent vacancies, apply from day one.
There has been a lot of coverage on the possible negative impact on the economy (see for example this report from Allen & Overy of 12 September 2011), but in the spirit of "it's not all doom and gloom", here are a few points which may reduce the impact for individual employers.
7. working time and minimum wage disputes - "working time" is not necessarily the same in both cases
Both the National Minimum Wage Regulations 1999 (NMW) and the Working Time Regulations 1998 (WTR) call for calculations of "working time", so there is a temptation to assume that the words mean the same thing in both provisions. But beware - there is a crucial difference when it comes to periods when a worker is on stand-by. Contrast Baxter v Titan where, in the context of the NMW, periods a chauffeur spent away from home between assignments where he was able to sleep over at a hotel were not working time, with Wray v JW Lees & Co (Brewers) Ltd where periods where a temporary pub manager was required to remain on work premises but was permitted to sleep did not count for minimum wage but, it was accepted, could count as working time for the purposes of the WTR.
8. just how far can the concept of philosophical beliefs extend?
As originally drafted, the Employment Equality (Religion or Belief) Regulations 2003 prohibited discrimination on grounds of religion or "similar" philosophical beliefs.
Then the Equality Act 2006 removed the requirement for such similarity, and extended the protection to any philosophical belief: the Equality Act 2010 s.10 continues with that wide definition.
Removal of just one word dramatically increased the potential for seeking protection from discrimination on a whole range of lifestyles, ideas and practices. As we've reported on many occasions it is fair to say that, over recent years, claimants have put forward quite an esoteric mix of possible candidates, and establishing whether these actually amount to a protected philosophical belief is becoming a standard pre-hearing review issue for employment tribunals.
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