- Discrimination: Court of Appeal rules that costs alone cannot be justification
Employers must establish some legitimate reason other than saving costs in order to justify discrimination. The Court of Appeal has declined to take up obiter suggestions that disproportionate cost might itself be capable of justifying discriminatory treatment, but its decision leaves a doubt as to how difficult it may be to identify another reason. If one can be identified, the key question will remain whether treatment is proportionate in terms of objectively balancing the discriminatory effect of the treatment and the employer's legitimate needs.
The Court of Appeal has ruled that an employer was justified in its decision to time a redundancy dismissal so as to avoid the employee accruing generous pension entitlements should he continue in employment to the age of 50, notwithstanding that as a result no formal redundancy consultation had taken place prior to giving notice.
The Court upheld the decision of the EAT and ET that the case was one of "costs plus" justification of age discrimination. It recognised that there is some degree of artificiality in having to find a non-costs factor. However, it maintained that approach and confirmed that treatment aimed solely at saving costs cannot be justified.
Rimer LJ gave as an example of "costs alone" treatment a decision to pay A less than B simply because it would cost more to pay them the same. In this case "costs alone" treatment would have been a decision to dismiss at the relevant time simply to avoid the extra costs of dismissing once the employee was 50.
Here, the additional factor was the legitimate aim of wishing to give effect to its genuine decision that the employee was redundant. Given that the alleged discrimination here was the timing of the dismissal (prior to completing formal consultation) rather than the selection for redundancy itself, the additional factor arguably ought to relate to the timing. Although not expressly stated, presumably the Court considered it a legitimate aim to wish to give effect to the redundancy decision without further delay.
Having identified the additional legitimate aim, it was then for the Court to decide whether the treatment was a proportionate means of achieving the aims. The significant level of cost saving was relevant to this, as was the fact that the employee knew of his impending redundancy almost a year prior to notice being given, the employer had engaged in informal consultation for a lengthy period, the delay to the start of formal consultation was no-one's fault, and the employee could not have had any expectation at the start of the process that he would continue in employment to the age of 50. Set against these were the lack of formal consultation prior to the dismissal notice being given, but in the particular circumstances of this case the Court considered that this did not deprive the employee of anything of value. The lengthy informal consultation had already lead to the conclusion that there was no alternative role the employee would have accepted, and formal consultation could have continued during the notice period had the employee been willing to cooperate.
The Court denied leave to appeal, so Mr Woodcock will have to apply to the Supreme Court for leave if he wishes to take it further.
The decision is helpful for employers in confirming that costs can form part of the equation and in confining "costs alone" cases to decisions made without any other business context, based on nothing more than saving cost. However, suggestions that the ruling opens the door to earlier dismissals of long-term sick employees, refusal of PHI to older workers and the use of LIFO for redundancy selection may be overstated. If employers can show a non-costs aim to support such treatment (and it is uncertain whether aims such as maintaining workforce morale through inter generational fairness or rewarding loyalty will be sufficient), they will still need to show that their approach is proportionate bearing in mind the level of cost and the degree of discriminatory impact.
Even in relation to pension windfalls, the facts in this case were quite stark and unusual, in terms of the generous way in which the employee had been kept on for several months despite clearly being redundant, the size of the windfall and the lack of any legitimate expectation that the process would last long enough for him to reach 50. The position in other cases is likely to be more finely balanced. (Woodcock v Cumbria Primary Care Trust, CA)
- Marital status discrimination: previous EAT ruling incorrect
Employers can continue to apply particular rules to married employees (or registered civil partners) provided that those in a close unmarried relationship are treated in the same way.
A recent EAT case decided that treating an employee less favourably because they are married to a particular person is unlawful marital status discrimination, even where they would have been treated the same had they been in a close unmarried relationship with that person.
This called 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.
Employers will therefore welcome another EAT decision disagreeing with this approach and preferring the orthodoxy that there is only unlawful marital status discrimination where the employee would have been treated more favourably had her relationship been close but unmarried. Although there are now two conflicting decisions at EAT level, this more recent ruling from the President of the EAT, which is supported by other case law, should be preferred. (Hawkins v Atex Group, EAT)
- Redundancy: selection pool can be challenged
Employers should take extra care when deciding whether a selection pool of one is appropriate. The EAT has confirmed that, where the employer has genuinely applied its mind to the issue, it is difficult but not impossible for an employee to challenge a selection pool as unfair.
Tribunals will scrutinise more closely the use of a selection pool that is the same size as the number of roles to be made redundant, so employers will need to have strong reasons for not using a wider pool.
In Capita Hartshead v Byard the employer employed four actuaries but the selection pool only included the actuary whose clients had defected, on the grounds that there was a risk of losing more clients if they were transferred between actuaries. The EAT upheld the ET's ruling that the selection pool of one was unfair, given that the risk of client departure was slight, the other actuaries did similar work and the claimant's work had been praised. Employers should take care not to exaggerate the commercial risks in selecting from a wider pool.
In contrast, in Halpin v Sandpiper Books the EAT ruled that it was not unfair to use a selection pool of just one employee (and not consider bumping) when it was ceasing its operations in China and the claimant was the only individual employed in China.
Another recent EAT decision has confirmed that, when considering an employee at risk of redundancy for suitable alternative employment, an employer can use subjective criteria in the interview process and has considerable flexibility when assessing their suitability for the role. It was reasonable for the employer to decide not to use past performance appraisals as part of the process, given the different nature of the new role. (Samsung Electronics (UK) Ltd v Monte-D'Cruz)
- Collective redundancy consultation: ECJ Advocate-General's Opinion suggests UK law on timing may be wrong
Under EU-derived law, employers are required to consult in good time about ways of avoiding or minimising collective redundancies and mitigating the consequences. Readers will be aware that in USA v Nolan the ECJ has been asked to decide whether consultation is required before an employer proposes to make a strategic business decision that will foreseeably or inevitably lead to redundancies (so that consultation must encompass the reasons for that decision), or whether consultation is only required once the employer has made that decision and is proposing the consequential redundancies (so that consultation only covers the redundancy proposals themselves).
Current UK law takes the former, more onerous approach, at least where there is a business closure (UK Coal Mining v NUM).
The ECJ's judgment is expected this Summer, and the Advocate-General's Opinion (which is not binding on the ECJ but is often followed) has just been published. If adopted by the Court, it would be good news for employers.
The Opinion rejects the suggestion that consultation is necessarily required prior to a strategic business decision to close a workplace, even if in practice this means that consultation would be limited to ways of mitigating the consequences. However, an employer could still be in breach of the obligation to consult if a strategic decision (for example a closure decision by a parent company) were made without leaving the employer any time in which to contemplate redundancies and genuinely consult. This suggests a slightly different focus, on whether the consultation has been effective rather than on issues of timing. It will be interesting to see whether the ECJ agrees.
- Red tape day: April 2012
The qualifying period for unfair dismissal (and for eligibility for the right to written reasons for dismissal) is to increase from one to two years for employees whose period of continuous employment starts on or after 6 April 2012.
Those starting new jobs on or after this date will have to accrue two years' service to be eligible, unless they have prior continuous service, for example, because they have been transferred under TUPE or the new job is with an associated employer.
The following changes are due to take effect from 6 April 2012:
- The maximum deposit order a tribunal can make if a party wishes to proceed with a weak case will increase from £500 to £1,000.
- The maximum costs that can be awarded by a tribunal without detailed assessment will increase from £10,000 to £20,000.
- Witness statements will be taken as read unless the tribunal judge directs otherwise.
- Witness expenses will no longer be state-funded. The tribunal will have power to direct parties to pay witness costs and order the losing party to reimburse the successful party for these costs.
- Unfair dismissal cases are to be heard by judge alone unless the judge directs that lay members should also sit.
The flat rate of statutory maternity pay, statutory paternity pay and statutory adoption pay increased on 1 April 2012 from £128.73 to £135.45. Maternity allowance will increase on 9 April 2012 from £128.73 to £135.45.
Statutory sick pay will increase on 6 April 2012 from £81.60 to £85.85.
The weekly earnings threshold rises from £102 to £107.
From 6 April 2012 employers can use an apprenticeship agreement under the Apprenticeships, Skills, Children and Learning Act 2009 (which is a contract of service rather than a common law contract of apprenticeship) provided that the agreement includes the information prescribed by the Apprenticeships (Form of Apprenticeship Agreement) Regulations 2012. These require the agreement to contain the basic terms of employment required to be given to employees under section 1 of the Employment Rights Act 1996 and to include a statement of the skill, trade or occupation for which the apprentice is being trained under the relevant apprenticeship framework.
Coming up in October
The Government has confirmed the changes to the national minimum wage due to come into force from 1 October 2012. The hourly rate for workers aged 21 and over will increase to £6.19, the hourly rate for workers aged 18-20 and workers aged 16 and 17 will remain £4.98 and £3.68 respectively, and the rate for apprentices will increase to £2.65. The accommodation offset will rise to £4.82 a day.
- Legislative proposals
Call for evidence on dismissal process
BIS has issued a call for evidence seeking views on (i) whether the Acas Code of Practice on Discipline and Grievance could be made more accessible and easier to use by smaller businesses (with a particular focus on whether the same principles should apply to poor performance as to misconduct), and (ii) the concept of allowing micro-employers (with fewer than ten staff) to carry out compensated no-fault dismissals as an alternative to a fair dismissal. The call for evidence closes on 8 June 2012.
Progress on Employment Law Review
The Government has published an annual report on the progress of the Employment Law Review. It does not contain any new proposals but provides a helpful list of what is currently under review.
Board gender diversity
The European Commission is consulting on possible action at EU level, including legislative measures, to redress the continuing gender imbalance on corporate boards in Europe. The consultation is open until 28 May 2012, after which the Commission will take a decision on further action later in 2012.
Meanwhile in the UK, Lord Davies's first annual progress report following his independent review of women on boards has been published. It shows that last year saw the largest ever annual increase in the number of women on boards, with women now accounting for 15.6% of all FTSE 100 directorships, up from 12.5%. The report recommends that FTSE 100 boards should aim for a minimum of 25% female representation by 2015.
The Government has published a consultation paper on its proposals to increase shareholder voting rights in relation to executive remuneration at UK incorporated listed companies, including four key measures:
- an annual binding vote on future remuneration policy;
- the possibility of requiring a higher than 50% majority to approve future remuneration policy;
- an annual advisory vote on the implementation of the remuneration policy over the previous year; and
- a binding vote on exit payments of more than one year's base salary.
The consultation paper closes for comment on 27 April 2012. The Government expects legislation on the new shareholder voting rights to come into force in spring 2013, with the provisions applying to reporting years ending after 1 October 2013. Our briefing considering the proposals is available here.
- New resources
- HMRC guidance on dual contracts, covering (i) when duties in the UK are merely incidental to duties outside the UK and (ii) the documents HMRC expects employees and employers to make available in response to an HMRC dual contract enquiry
- revised Criminal Records Bureau eligibility guide, setting out occupations which are excepted from the Rehabilitation of Offenders Act 1974 and therefore eligible for CRB check.