Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
May 2012

After our somewhat condensed updates for July and August welcome to our full newsletter for September.

Our first item concerns the Government's much vaunted but ultimately insubstantial review (not exactly an overhaul) of employment law procedures. Regular readers will be familiar with what has emerged since the main proposals have been outlined in earlier newsletters throughout the summer.

However, hot off the press are the Government's proposals for the ACAS code of conduct concerning settlement agreements which should include the following:

  • - settlement offers are inadmissible as evidence only in unfair dismissal claims;
  • - either party may propose settlement;
  • - employers need not have followed any particular procedure prior to offering settlement
  • - settlement offers should be made in writing, clearly setting out the reason for the offer, what is being offered (e.g. settlement sum and, if appropriate, agreed reference) and the next steps if the offer is rejected;
  • - individuals should be given a clear, reasonable period of time to respond;
  • - no undue pressure should be put on a party to accept the offer of settlement;
  • - if an employer handles settlement in the wrong way (i.e. not as explained in the Code) this may breach the implied term of trust and confidence, allowing the employee to claim constructive dismissal;
  • - if a settlement offer is rejected, the employer must go through a fair process before a dismissal; and
  • - the approach should reflect current practice in without prejudice negotiations as closely as possible.

Now, forgive me for being a little cynical but, in the absence of costs sanctions, is an employee likely to accept a settlement offer at first instance if he or she knows that if it is rejected, the employer then has to follow a full and fair dismissal process? Taking that into account, at the very least rejecting an offer will in very many cases prompt an improved offer so it would seem that the default position should be to reject an offer made within the settlement process, thereby forcing the employer to adopt the current arrangements which the procedure is presumably designed to avoid! We will have to wait and see how it plays out in practice.

We also have our usual round-up of case reports covering important issues such as the need for employers to follow the correct employment procedures, possible grounds for justifying compulsory retirement, the thorny old topic of employment status - employee or self-employed - and the risks that arise when an employer seeks to rely on constructive dismissal as an alternative to a formal disciplinary process based on specific allegations.

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August 2012
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This month's news round-up:

1. new (or maybe not so new) proposals to "streamline employment law"

In our June newsletter I outlined what changes were to be expected as a result of the Government's review of employment law. If anything, what has now emerged is an even more diluted version of what was anticipated in the sense that the proposed changes will be the subject of numerous consultations, rather than firm decisions to implement changes. The "fire at will" Beecroft proposals are nowhere to be seen but those which remain are unlikely to provide radical alterations to the existing employment tribunal provisions (except perhaps for the introduction of fees - see our July round-up).

It is clear that Vince Cable has had his way with the BIS press release emphasising that the UK has a lightly regulated, flexible labour market, considered by the OECD to have the third lowest employment protection among 20 OECD countries and 10 emerging countries.

Introducing the changes Mr Cable said

We have been looking across the range of employment laws with a view to making it easier for firms to hire staff while protecting basic labour rights.

Our starting point is that Britain already has very flexible labour markets. That is why well over one million new private sector jobs have been created in the last two years, even when the economy has been flatlining.

But we acknowledge that more can be done to help small companies by reducing the burden of employment tribunals, which we are reforming, and moving to less confrontational dispute resolutions through settlement agreements.

The consultations will cover:

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2. more disharmony in the world of classical music

Last month we reported the dispute affecting the London Philharmonic Orchestra concerning what constitutes a philosophical belief. The first of this month's Court of Appeal cases, Welsh National Opera Ltd v Johnston looks at the interplay of two procedures, following the dismissal of the principal oboist in the Company’s orchestra. By way of background, Mr Johnston had been principal oboist since 1974, but difficulties arose between him and the opera’s musical director, culminating in criticisms of Mr Johnston’s performance.

The Company had both a disciplinary procedure, in a fairly standard form, and a “poor artistic performance” procedure agreed with the Musicians Union which provided for musicians whose performance was giving cause for concern to undergo two individual auditions prior to a decision being made about dismissal. This procedure specifically stated that no notice of dismissal could be given unless a musician had failed both auditions. Rather than follow that procedure, the Company opted to use the standard disciplinary procedure, because the issue identified with Mr Johnston’s performance was related to his ability to perform as part of an ensemble, which was not susceptible to assessment by the type of individual audition contemplated in the procedure. It also opted not to follow the full procedure which provided for a series of oral and written warnings to be given, but proceeded straight to a final hearing, apparently with the intention of reducing the stress on Mr Johnson.

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3. more about proposed tribunal changes

Government efforts to streamline, speed up, and cut costs in the tribunal system continue. As part of that, Mr Justice Nicholas Underhill has led a comprehensive review of tribunal rules of procedure. Apart from a very welcome rewrite to render them comprehensible to intelligent laymen and lawyers alike, the headline proposals include:

  • - The introduction of an early “sift” by an Employment Judge to weed out claims and responses with no reasonable prospect of success and give directions to get cases ready for hearing;
  • - Removing the system of different preliminary hearings for different issues, and replacing it with a single form of preliminary hearing which can deal with both any procedural matters and with preliminary issues of fact;
  • - Introducing a power to limit how long parties are allowed to present their evidence and submissions;
  • - Simplification of the rules for default judgments – and setting them aside;
  • - New rules on anonymity and restrictive reporting intended to achieve a better balance between open justice/freedom of expression and privacy/effective justice.

Mr Justice Underhill pointed out that other changes which the government might have been keen to see, such as an increases in the numbers of costs orders, do not require rule changes at all.

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4. compulsory retirement at 67 can be justified

Now that there is no default state retirement age, employers who have retained a compulsory retirement age must justify it. Sweden has retained a rule allowing employers to implement compulsory retirement for all workers at 67 - a rule that has been found to be justified by the European Court of Justice in Hörnfeldt v Posten Meddelande AB. The justifications accepted included:

  • - To reduce the risk of termination of employment in humiliating circumstances for older workers;
  • - Making it easier for young people to enter the labour market;
  • - Making it easier for people to work beyond 65 and provide a right, but not an obligation, to work up to 67;
  • - Allowing for pension schemes to be adjusted to take account of lifetime earnings;
  • - To allow for adjustments to reflect demographic changes.

These, of course, are the types of justifications a state can put forward for a national rule but some, for example, the need to make changes to a pension scheme, or to reduce the risk of needing to dismiss older employees on performance grounds, could well be relied up on by private employers.

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5. are you are are you not a worker? It's a simple enough question, isn't it?

The difference between employee, self-employed and “worker” – a category somewhere between the two – is a crucial one, given that many employment protection rights depend on employment status – yet there is no single test to establish which is which.

In Hospital Medical Group v Westwood a doctor engaged as a surgeon to undertake hair restoration procedures for a private clinic was dismissed. After dismissal, he made claims for accrued holiday pay, and unpaid wages, to which he would be entitled if he were a “worker”. His contract indicated that he was self-employed and he paid tax and NI on that basis, and indeed he had other two contracts elsewhere for different work neither of which were of any relevance to the question of his employment status with the clinic. The question to be determined was whether he was nevertheless a “worker”, that is working under a contract to carry out services personally (which was not disputed) who provides those services to another who is not a client of his, in a professional context, or a customer of a business undertaking of his.

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6. new light on sick employees' holiday rights

Two important cases have come up on the vexed question of employee rights to holiday or payment in lieu of holiday when on sick leave.

The first, Asociación Nacional de Grandes Empresas de Distribución (ANGED) is a European Court of Justice (ECJ) case which confirms that when an employee falls ill during their annual holiday leave, they are entitled to take additional holiday later, for a period equivalent to the sick leave taken during annual leave. This is something some employers already allow as a concession, but many staff manuals and contracts will need updating to reflect this development.

The second, NHS Leeds v Larner, is another Court of Appeal decision, and dealt with a straightforward case in which an NHS employee was off sick for the whole of a leave year. She took no holiday because she felt unwell. Early on in the next year she was dismissed, and NHS Leeds refused to pay her for leave accrued during the year she was off sick, arguing that she had not put in a request for either holiday or to carry it over, and she had thus lost the right to the holiday – and payment for it on termination. She claimed that she was entitled to payment in lieu.

The Court of Appeal took the opportunity to review the ECJ case law so far to provide certainty on the matter for employers and employees alike.

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7. Equality Act guidance

Nearly two years after most of the Equality Act 2010 came into force, the Government Equalities Office has published a series of guides (27 in total) to the changes made by the Act.

Particularly useful to employers is the “quick start” guide to the restriction on asking about health questions in recruitment (eight pages and full of examples of what you can and can’t do) and the guide for small businesses on age discrimination in the provision of services – these provisions come in to force from 1 October this year.

The guide is very brief and sets out clearly what is covered. For example, shopkeepers will be able to retain those notices which say “No more than 3/4/5 children allowed inside at any time” to restrict the number of children allowed in their shops, because children fall outside the scope of the protection.

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8. dismissals for breakdown of trust must be for a substantial reason

Breach of the implied term of mutual trust and confidence is frequently relied upon by employees as the basis for resigning and claiming constructive dismissal. From this perspective, breach of such a term will always be a fundamental one bringing the contract to an end (Morrow v Safeway Stores). In Leach v Ofcom the Court of Appeal looks at the other side of the coin - where an employer dismisses an employee because of a breakdown of trust - and issues a reminder that the mantra of breakdown of trust should not be used as a "catch all" reason where the employer cannot establish a conduct reason for dismissal. Breach of trust by an employee will not justify dismissal unless it can be shown to be “substantial” – and so it seems it is not, of itself, fundamental.

The case arose when an employee, whose job entailed no contact with or direct responsibility for children, was found to have misled his employer about an earlier arrest abroad on child sex charges, and where subsequently, following his acquittal of those charges, the employer also received a warning, in the form of limited disclosure, from the police that he still posed a risk to children. The employer made enquiries and initiated a disciplinary process. Ultimately, the employer decided to dismiss the employee on the ground that he had not been honest about his earlier arrest, and because he represented a continuing risk to children – and in its role as a regulator the employer itself had a duty to protect children. It described this as a “breakdown of trust” – presumably because at the time it was considered that the misconduct was not of itself serious enough to justify dismissal.

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9. slave labour in a modern context?

Earlier this summer, a case brought in the Administrative Court by two benefits claimants made the headlines when two schemes requiring claimants to join unpaid work experience schemes on pain of losing Jobseeker’s Allowance were challenged. In one, a geology graduate already working as a volunteer in a museum in pursuance of her ambition to secure a paid job in the museum sector was expected, instead, to work in Poundland for two weeks, although this meant it cost her her voluntary position. In the other a qualified HGV driver was required to undertake a full time voluntary position for six months on an unpaid basis.

Much of the judgment of the court in Reilly & Another, R (on the application of) v Secretary of State for Work & Pensions was concerned with issues of maladministration and whether the schemes were within the statutory powers of the DWP, which are important issues but not issues of employment law. The crucial issue that made the case newsworthy, and does have an employment flavour, was whether these schemes represented “forced labour” and were thus contrary to Article 4 of the European Convention of Human Rights. Mr Justice Foskett took the view that while opinions might differ as to the appropriateness or effectiveness of such schemes they are “a very long way removed from the kind of colonial exploitation of labour that led to the formulation of Article 4”and so could not be called “forced labour“ or “slavery”.

Just a thought, but perhaps the sort of situations where vulnerable workers are trafficked across borders to work unpaid (often with loss of liberty), are a more current point of comparison from which to judge whether these schemes are slavery or not.

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