Welcome to our October newsletter.
After a few months focusing on employment law reform, this month we are back with the full flow of decisions from the Employment Appeal Tribunal and Court of Appeal and after a rare absence last month they include, of course, another new and important TUPE case.
You may have read about the "owner-employee" proposals announced by George Osborne in his speech at the Conservative Party Conference. Quite rightly the proposals have been roundly condemned by employers and employees alike. However the Government's adviser, Graeme Nuttall, has suggested that people should hold fire before passing judgment on his proposals and wait for full details of the proposals to be announced; hardly a robust defence. The idea that employees should give up their employment rights, including protection from unfair dismissal and redundancy payments, in return for shares is fraught with practical problems. What about claims for wrongful dismissal (i.e. breach of contract) which presumably cannot be excluded under common law principles? Potentially much more significant are the problems that businesses will stack up by sacking employees who are left without the usual protection and yet retain shares in the employer. It's reasonable to assume that such employees are likely to be disaffected and could cause significant problems in connection with the running of the business following their departure. If, to counter this, an employee is given shares which he or she would be obliged to surrender on the termination of employment then, frankly, he or she would be mad to take up the offer in the first place. A potentially more disturbing scenario is that new employees might be offered (only) these terms on commencement of employment. Would someone be penalised in terms of benefits for not taking such an offer? Probably.
Other potential issues include share valuation disputes and the risk that employers will set up service companies which will employ the workforce but with no real value in the company itself. There is also the not so small matter of those businesses that are concerned to be seen as good employers and are not hell-bent on depriving their workforces of employment rights.
The more I think about it the more I think that these proposals are even more off the wall than those recently suggested by Adrian Beecroft (and quickly rejected).
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This month's news round-up:
1. a breach too far
In order to establish a claim for constructive dismissal, an employee has to show that he or she resigned in response to a fundamental breach of contract by the employer – and must do so promptly, to avoid being regarded as having waived that breach. In Logan v Celyn House Ltd, the Employment Appeal Tribunal considered the situation where an employee is alleging a number of breaches, some with more substance than others. and cites only one when resigning.
The background was that the claimant was a veterinary nurse who raised 11 grievances against her employer alleging, amongst other things, bullying by one of her managers, and a twelfth about failure to pay her sick pay. All of her grievances were rejected by the employer, and in response to the rejection, she resigned stating that the rejection of all her grievances placed her in an “impossible and intolerable situation”. The Employment Tribunal hearing her case found that the alleged bullying was a figment of her imagination but also that the employer had failed to pay her proper sick pay – which was a repudiatory breach of contract. Because the breach of contract relating to sick pay was not the principal reason for resignation the Employment Tribunal rejected the constructive dismissal claim.
The Employment Appeal Tribunal overturned the decision: there had been a repudiatory breach of contract which was one of the reasons for resignation, which, applying Meikle v Nottinghamshire County Council, meant that there was sufficient causal connection between the breach and the resignation, for the resignation to be properly regarded as a constructive dismissal. Having considered the authorities, Judge Shanks summed up the correct approach as follows:
2. re-engagement for employees dismissed after "dramatic" TUPE transfer
Manchester College v Hazel & Anor looks at when a dismissal relating to harmonisation of terms after a TUPE transfer will be fair, and when it is not, the appropriate remedy. The case arose after a contract for provision of education in the prison service was transferred under TUPE to a new provider. After the transfer, the new provider discovered expenses which had not been uncovered during due diligence prior to transfer and started a cost-cutting process. After asking for volunteers for redundancy, it then sought to change contract terms for some of the transferred employees to harmonise terms and conditions – this involved significant pay cuts. Cases were brought by two of the employees affected, Miss Hazell and Mrs Huggins, who refused to agree the changes and were dismissed for their refusal. They were then offered new contracts at reduced rates, which they accepted. However, they also made unfair dismissal claims in relation to their old contracts. The Employment Appeal Tribunal first looked at the fairness of the dismissals. While the harmonisation was an “economic, technical or organisational” reason for dismissal – it did not entail a change in the workforce, and so fell outside the scope of that defence. While there happened to have been recent redundancies the harmonisation was a separate issue and did not make a change to the workforce employed. Because the dismissals were for a reason connected to the transfer, they were automatically unfair.
His Honour Judge McMullen QC summarised the court's view of the matter as follows:
In our judgment, the findings in relation to timing are ones of fact for the Tribunal. It was required to look into the mind of the actors in this drama and decide what it was [that] caused the dismissal of the Claimants.
3. tribunals must check parties' availability when listing hearings
Listing of tribunal hearings is a perennial problem for all concerned, particularly if many witnesses are required.
University Of East Anglia v Amaikwu was an appeal against the refusal of an application for an adjournment of a hearing of an unfair dismissal and discrimination claim by the respondent to the claim. The application was made when the tribunal relisted the hearing after the original date had been cancelled at the last moment because no judge was available to hear the case (an all too frequent occurrence, anecdotal evidence suggests).
A new date was sent out without first asking the parties whether there were any periods when they or their witnesses could not attend. The date given was when one of the employer’s witnesses had already booked to travel to Albania for a family wedding. The notification sent by Employment Judge Pritchard-Witts was peremptory and unequivocal:
The hearing must take priority over a family wedding. The Claimant's objections are well founded and this case is becoming decidedly stale. Postponement refused.
Some might take the view that a simple assertion, without more, that an employment tribunal hearing "must" take priority over a family wedding is a bold call.
4. with prejudice
In Gallop v Newport City Council the Employment Appeal Tribunal has held that an inadvertent disclosure while giving evidence that there had been “without prejudice” negotiations did not waive privilege, and a tribunal should not have taken them into account when assessing an award of compensation. The point came out of an unfair dismissal case where, in response to a question from the tribunal, a witness let slip the existence of failed negotiations to settle the dispute. On the basis of the information it gathered about the offer, the tribunal found that there was a 50/50 chance that the case would have settled amicably before a hearing and so awarded him half of the sum offered in the negotiations and reduced other elements of compensation by half.
The Employment Appeal Tribunal held that the tribunal was wrong to have enquired about the terms of the agreement and wrong to take it into account in assessing the award. Neither party had set out to waive privilege, nor was there reliance on the privileged material. The EAT commented that:
Employment Tribunals must not enquire into negotiations between the parties before them where no agreement is reached and where there has been no clear and unequivocal waiver of privilege by the parties. … It is pellucidly clear to us that privilege was not waived in this case, and no advice was given to the Claimant in person as to the principles of privilege.
5. reasons for dismissal
Nejjary v Aramark Ltd is a reminder that a tribunal is only entitled to take into account the reasons given by an employer when deciding whether a dismissal is within the reasonable range of responses to misconduct, and should not take into account other matters disregarded by the employer. In this case a hospitality manager who worked on events hosted by Goldman Sachs was sacked for three acts of gross misconduct following client complaints about problems at events he had managed. He already had two warnings on file for similar offences, but these were not referred to in the disciplinary procedure at all. He appealed, and his dismissal was upheld but on the basis of just one of the three offences.
He complained to an employment tribunal who found that there was a fair reason for dismissal (conduct) and that a fair procedure had been followed. They then considered whether the decision to dismiss was reasonable in the particular case. They held that on its own, the single allegation upheld at appeal would not have justified dismissal, but took into account two live warnings still extant for similar matters in concluding that the dismissal was fair. The Employment Appeal Tribunal held that the tribunal had been wrong to take any account of matters not considered by the employer in its consideration of whether the dismissal was a reasonable response, and moreover had been wrong to hold that as an alternative the claimant had contributed to his own dismissal by his conduct
Mr Recorder Luba QC summarised the position as follows:
The plain fact, as found by the Employment Tribunal and as confirmed by Ms Mellon [for Aramark] in her submissions before us, was that the reason and the only reason for the dismissal was the single matter that remained extant at the time of the appeal; that is to say, ...an instance of failure to check a booking form.
6. when criticism becomes apparent bias
Tribunal judges have the power and are encouraged to deal robustly with weak and vexatious claims (or indeed defences – sauce for the goose…), and in doing so are likely to be critical of the conduct of the case by the party in question. However, they must take care not to overstep the mark and appear to prejudge other issues – for example an award of costs. In Oni v NHS Leicester, the tribunal dismissed a nurse’s claims of constructive unfair dismissal, race discrimination and victimisation after a long hearing and commented that both the claims and the way in which they had been conducted were unreasonable. In particular they said she was an unreliable witness and her answers to questions were evasive and equivocal. An application was made for costs against her; she argued that the same tribunal should not consider the question of costs, on the ground of bias, but the tribunal declined to step down. The matter went to the Employment Appeal Tribunal who accepted that while there was no actual bias, the views expressed about the case’s weakness meant that there was apparent bias and so costs should be considered by a differently constituted tribunal. While tribunals are entitled to comment on the conduct of claims before them, they should be careful not to go too far and indicate what view they would take on a costs application.
A further point which arose from the case was that when considering costs the tribunal had not taken any account of the claimant’s ability to pay an award of costs. This is a factor which should always be taken into account – and it was suggested that tribunals could usefully direct the use of county court form EX140 to establish the losing party’s financial circumstances.
This case is particularly timely because, taking into account the Government's proposed reforms, we can expect to see a significant increase in the number of costs awards made, as well as the "weeding out" of unmeritorious claims. There is also the potentially significant matter of tribunal fees and the claimant's ability to pay.
7. "something more" required to establish discrimination
In the 2007 case Madarassy v Nomura International the Court of Appeal remarked that: "The bare facts of a difference in status and a difference in treatment only indicate a possibility of discrimination. They are not, without more, sufficient material from which a tribunal ‘could conclude’ that, on the balance of probabilities, the respondent had committed an unlawful act of discrimination."
Birmingham City Council v Millwood is an illustration of one way of establishing the “something more” needed to reverse the burden of proof where a difference in treatment has been shown.
A black employee was found to have been treated less favourably than an Asian employee. They were in comparable circumstances – both were family support workers but had originally been teaching assistants. The Asian employee was given a permanent contract while the black worker was not. Various explanations were put forward. These included suggestions that there had been administration problems, that funding for the post of family support worker was limited, and that the Asian worker had asked for a permanent contract and had relevant experience. These were not untrue; but they were not enough of an explanation. This, said the Employment Appeal Tribunal was the “something more” needed to shift the burden of proof.
Mr Justice Langstaff (President of the Employment Appeal Tribunal) set out the reasoning applied as follows:
It seems to us that two issues arise for our determination. The first is whether as a matter of law Mr Beever is correct in his submission that whatever the explanations advanced for the treatment of the Claimant and however inadequate or wrong they might be, the Tribunal could not simply upon the basis of the difference in race and status coupled with the inadequacies of the excuses proffered regard the burden of proof as shifting. If he is right in that submission, then the appeal must succeed and the claim must be dismissed. If he is wrong in that submission, we have to ask whether the Tribunal by asking for "something more" identified that which Mr Swanson submits they did: that there had here been a number of rejected explanations put forward for consideration. We approach this question by remembering that the purpose of the provisions is to identify a proper claim of discrimination, recognising that it is highly unlikely in the real world that there will be any clear evidence that that has occurred.
8. more about settlement agreements and compensatory awards
Proposals regarding settlement agreements from earlier this year have been fleshed out in a new government paper. Avid readers will recall talk of “protected conversations” – these seem to have died a death for now. The Government’s response to consultation seems to accept that such a concept could add to the administrative burdens on employers and create a new area of contention which could be “a field day for lawyers”. The response instead concentrates on “settlement agreements” to replace compromise agreements. The question is whether this will amount to more than just a change of name.
The paper sets out a proposed model wording for a settlement agreement, which doesn’t differ all that much from the sort of wording seen in compromise agreements in common use. This is not too surprising, given that any wording must be sure to satisfy the requirements of s203 of the Employment Rights Act 1996, which permits contracting out from employment rights in limited circumstances. Moreover, the standard wording sets out a long list of potential claims which could be covered. Many compromise agreements look pretty cumbersome, it is true, but that is for a number of reasons – some excessive caution perhaps, but many issues are often dealt with over and above statutory employment claims. Pensions and personal injury claims are frequently carved out. Benefits in kind and so on are dealt with. Employers want post termination restrictions and confidentiality obligations added or reaffirmed. The tax position needs to be dealt with. The employer wants written confirmation that the necessary legal advice has been given. The model agreement put forward covers some, but not all of these, and extends, with its guidance notes, to 15 pages.
More specifically we now have the answer to the question of contribution to the employee's legal costs. Clause 10 of the draft settlement agreement provides:
9. October 2012 wage rates and contributions and the final demise of the state retirement age
As most readers are no doubt aware national minimum wage rates were subject to their usual increase on 1 October. The main rate has increased from £6.08 to £6.19.
The rates for workers aged 16-17(£3.68) and 18-20 (£4.98) are unchanged this year.
The apprentice rate has increased from £2.60 to £2.65 and the accommodation offset (which employers providing accommodation can set off against the minimum wage) has increased from £4.73 to £4.82 per day.
The TUC has pointed out that those on the minimum wage (who are mainly women) will experience a net drop in spending power in real terms, taking into account that the rise in the main rate is 1.8% whereas RPI inflation is currently 2.9%. General Secretary Brendan Barber commented:
While we are pleased that Government has rejected the siren calls of some employers to freeze the minimum wage for adult workers and apprentices, these increases are still far below inflation and will leave the lowest-paid facing a real terms cut.
Also on 1 October auto-enrolment came into force for the biggest employers.
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