This e-bulletin includes short summaries of the following recent developments. Please contact us if you would like more information.
- Marital status discrimination: less favourable treatment because of marriage to a particular person is unlawful
- TUPE developments: SPCs, pre-packs and transfer-connected dismissals
- Termination: no contractual damages for manner of dismissal
- Statutory holiday: non-working periods can be holiday
- Confidential information: cannot be protected by barring order or premature application for injunction
- Inequality in discretionary benefits: employers may benefit from uncertainty over division between sex discrimination and equal pay claims
- Consultation on tribunal fees
- New compensation and benefits levels
- New resources: winter workplace issues, clawbacks
Marital status discrimination: less favourable treatment because of marriage to a particular person is unlawful
Treating someone less favourably because they are married to a particular person is unlawful, according to a recent EAT decision.
The claimant alleged that she was treated less favourably because her husband was employed by the same employer and was in dispute with them. The treatment was not simply because of her status as a married person, but rather because of her relationship with a particular man. Surprisingly, the EAT was untroubled by the suggestion that she might have been treated similarly had she been in a close but unmarried relationship with the same man.
This seems to go further than previous caselaw and, unless appealed, could call into question employer policies such as prohibiting employees in close relationships working together, or refusing to employ those in a close relationship with someone working for a competitor due to the risk of disclosure of confidential information - any married employees (or employees who are registered civil partners) subjected to such policies may now be able to claim unlawful discrimination. (Dunn v The Institute of Cemetery and Crematorium Management, EAT)
- No service provision change under TUPE where client changes
The EAT has ruled for the first time that the service provision change provisions of TUPE cannot apply where the client to whom services are being provided changes at the same time as the change in service provider. This is good news in particular for purchasers of property portfolios. Until now the cautious approach was to assume that TUPE might well apply where a property portfolio was sold and new managing agents and/or other service providers were appointed by the new owner. Now it appears there cannot be a service provision change in this situation (at least until any appeal is heard), although in some cases there might still be a transfer of a business. It will remain best practice to address the risk and potential costs in the contractual documentation. Further details can be found in our ebulletin here. (Hunter v McCarrick, EAT)
- TUPE will always apply to transfer the employees of a business sold while in administration.
The Court of Appeal has upheld the EAT's ruling that administrations are never to be viewed as "instituted with a view to liquidation", even if it is immediately clear to the administrator on appointment that there is no real prospect of rescuing the company as a going concern. The legal character of an administration is primarily to rescue the company and as such it cannot benefit from TUPE Regulation 8(7) (which disapplies the automatic transfer of employees to liquidation proceedings).
Employees will therefore be automatically transferred to a purchaser of a business from an administrator, including pre-packs. This will need to be factored into the commercial assessment of the deal and in particular the price, given that administrators will rarely give adequate indemnities for employment claims. (Key2Law (Surrey) v De'Antiquis, CA)
- Pre-transfer dismissal can be transfer-connected even where no transferee identified at time.
The Court of Appeal has resolved conflicting EAT decisions and ruled that a dismissal can be "transfer-connected" even if the transferor has yet to identify a likely or actual transferee. The dismissal by an administrator of a company CEO in order to facilitate the sale of the business was transfer-connected and not for an ETO reason (economic, technical or organisational reason entailing changes to the workforce). It was not a redundancy situation, given that the business would clearly continue to need a managing director in the future. The dismissal was therefore automatically unfair and liability passed to the transferee who purchased the business one month later.
Transferees in this situation will need to try and assess whether any pre-transfer dismissals of employees can be shown to relate to the conduct of the business, or whether they may be viewed as to facilitate its sale, and factor the risk into the price offered. (Spaceright Europe v Baillavoine, CA)
Termination: no contractual damages for manner of dismissal
The Supreme Court has ruled that employees are not entitled to claim contractual damages for the manner of dismissal, whether in relation to a breach of an express disciplinary policy or breach of the implied term of trust and confidence.
Damages can only be claimed in relation to contractual beaches which precede and are independent of the dismissal, for example loss caused by suspension, or financial loss from mental illness caused by pre-dismissal unfair treatment.
Where there is the potential for findings of misconduct to cause reputational damage and therefore future loss of earnings, it could be more costly for employers to impose a disciplinary sanction less than dismissal (such as suspension) than to dismiss. Further details are available in our ebulletin here. (Edwards v Chesterfield and Botham v Ministry of Defence, SC)
Statutory holiday: non-working periods can be holiday
The Supreme Court has upheld a decision of the Court of Session that employers can designate as statutory holiday periods of time where the employee is not normally required to work, such as field-breaks spent onshore by offshore workers or school holidays for teachers.
The Supreme Court did not reach a concluded view on whether days which are part of the seven day weekly cycle but which are not normally worked (eg Saturdays, assuming Sunday is treated as the weekly rest period) can be designated as holiday. However, the Court favoured the suggestion that, in light of the Directive's purpose, the entitlement is to periods of annual leave measured in weeks, not days, such that a worker can choose to take single days but the employer cannot force him to do so. If correct this would call into question the practice of designating bank holidays as part of employees' statutory minimum entitlement. (Russell v Transocean International Resources, SC)
Confidential information: cannot be protected by barring order or premature application for injunction
Case law has established that it may be possible to injunct a professional adviser from acting as an expert for one party to a claim when it had previously provided services to the other side and had been given access to highly confidential information which could be relevant to the new matter, unless it can show that it has taken reasonable measures to prevent disclosure. In this case an employer creatively sought to extend this principle to the employment context and prohibit an employee going to work for one of its clients, on the basis that this was likely to involve her in the use of the employer's confidential information. The High Court ruled that the principle did not apply to employees, and refused to make a barring order. (Caterpillar Logistics Services (UK) Ltd v Huesca de Crean, HC)
In another case, the Court refused an injunction restraining breaches of post-termination restrictive covenants where the employee was still working out his notice period and the Court considered there was no reason to suppose he would breach the covenants. The application was premature and the employer should have waited to see what the employee did at the end of his notice period. The Court also refused to grant declaratory relief as to the enforceability of the covenants as this might never be in issue, depending on what the employee did after his notice expired. (Sunseeker v Tobia, HC)
Inequality in discretionary benefits: employers may benefit from uncertainty over division between sex discrimination and equal pay claims
Equal pay claims can only be brought where there is a contractual term which is modified or included as a result of the equality clause which statute deems to apply. If there is no such clause, the only option is a sex discrimination claim. This division originates from the split between the Equal Pay Act and Sex Discrimination Act, and is retained in the Equality Act 2010. The uncertainty over where the dividing line lies between these two types of claim may hand employers an easy win if an employee fails to make both claims in the alternative and/or within the three month time limit for a sex discrimination claim, should this turn out to be the correct choice (the time limit for equal pay claims is six months). A recent Court of Appeal ruling suggests that more 'discretionary' benefits may fall on the sex discrimination side of the line than previously thought.
In this case, an employee was eligible to be awarded share options under the terms of the share option scheme, but there was no term in the employment contract referring to the scheme. She claimed that the employer had exercised its discretion more favourably towards her male comparator than her. Her claim was out of time if properly framed as sex discrimination, but in time if equal pay.
It was argued that previous caselaw (concerning a discretionary bonus) should be interpreted as establishing that an equal pay claim is appropriate where a discretionary benefit is paid only because there is a contract of employment in existence. The Court of Appeal did not consider this sufficient and also rejected the suggestion that, once the employer had exercised its discretion, there was a contractual term requiring the employer to provide the options on which the equality clause could bite. The Court ruled that the claim concerned the way in which the employer exercised its discretion under the scheme to allocate share options and therefore did not involve an employment contract term modified or implied by virtue of the deemed equality clause. The claim therefore could only be brought as a sex discrimination claim.
An equal pay claim will be appropriate where the contract determines the amount of the benefit. The position is less clear where the terms of the contract govern eligibility for the benefit but leave the amount to be decided at the employer's discretion, as it was not necessary to decide this on the facts. Obiter Stanley Burnton LJ suggested that this would still be a sex discrimination claim. (Hosso v European Credit Management Ltd, CA)
Consultation on tribunal fees
The Ministry of Justice has launched its consultation, Charging Fees in Employment Tribunals and the Employment Appeal Tribunal, seeking views by 6 March 2012. It sets out two options for charging fees in the employment tribunal.
The first option (which, it is suggested, could be introduced in 2013) proposes an issue fee (of between £150 and £250) and a hearing fee (of between £250 and £1,250), the level of which would depend on the nature of the claim.
The second option (which would take until 2014 to implement) is to impose a fee only on issue of between £200 to £600 if the claimant states their claim to be worth less than £30,000 (in which case the tribunal would not be able to award more than this), otherwise £ 1,750.
Under both options:
- there would be additional fees of up to £750 for specific applications eg for written reasons, to counterclaim or for judicial mediation
- the fees would be capped where there are multiple claimants
- there would be a fee remission scheme for those who cannot afford the fees
- the unsuccessful party would normally be ordered to bear the cost of the fees.
In the EAT, there would be an issue fee of £400 and a hearing fee of £1,200.
New compensation and benefits levels
From 1 February 2012, the cap on the unfair dismissal compensatory award will increase from £68,400 to £72,300 and the cap on weekly pay (used to calculate the unfair dismissal basic award and statutory redundancy pay) will increase from £400 to £430.
From April 2012 the weekly rate of statutory maternity/paternity/adoption pay will increase from £128.73 to £135.45, with the earnings threshold increasing to £107 a week. The weekly rate of statutory sick pay will rise from £81.60 to £85.85.
- Acas has published new guidance on winter workplace issues
- Clawback provisions are becoming increasingly common in employees’ share schemes, and companies across all sectors should be considering whether it would be appropriate to introduce such provisions. There has been an increasing focus on clawback provisions, both by regulatory bodies and by shareholders. Our employee incentives team has produced a briefing which discusses what is meant by “clawback”, why companies should be considering the issue, and how clawback can be implemented. It is available here.