Worker status

If agency worker cases were a television series we would now be onto series three, having suffered numerous cliff-hanger endings. This year may see one of the lead characters of recent times (the Dacas case) killed off. A rash of cases now tell us that the Court of Appeal (CA) in Dacas was wrong to suggest that implied contracts of employment might readily be found between agency workers and end-user companies. This will only be the case if the facts cannot be read consistently with a true agency / self-employed relationship. A CA judgment to confirm or deny this is imminent (James v Greenwich Council).

Equal pay

There was a time when equal pay claims were scarce as hen's teeth. Not any more – as public sector attempts to address this issue have ironically landed them in hot water, it now has to defend old and new pay structures.

Fortunately the Employment Appeals Tribunal (EAT) has confirmed that in striking such deals unions and employers can (as is inevitable) balance the competing interests of male and female members in striking an overall pay package (GMB v Allen). That can be essential to justify typical aspects such as pay protection to cushion sudden and dramatic pay cuts (Middlesborough Borough Council v Surtees).

From the substance of equal pay claims, to process. It cannot be often that the House of Lords (HL) hears evidence on school dinners. But so it was in St Helens Borough Council v Derbyshire. The Lords found that aggressive letters to dinner lady staff, which suggested that persisting with equal pay claims would put jobs at risk - and deprive children of school dinners - were “effectively a threat”. The Council fell foul of victimisation rules, as the HL drew the line in how aggressively settlements can be pursued.

In that light, a slightly chilling suggestion from the EAT that claimants might be free to mount a succession of claims simply by picking different equal pay comparators (Bainbridge v Redcar & Cleveland Borough Council). Whether they will be allowed to in practice depends on the tribunals' use of case management powers, which unfortunately is not consistent.

On the broader equality front, the new national champion for equality - the Equality and Human Rights Commission - came into being in October. It covers all of the statutory discrimination regimes, which remain frustratingly and subtly different.

Age discrimination

Age is the new kid on the block, but has had a relatively tame start. Only 927 claims had been lodged as at September 2007. That said, we are seeing some early test cases. We await a European Court of Justice (ECJ) verdict on whether mandatory retirements at 65 are lawful. We will all age a little in the meantime however – a judgment may not be available until 2009. Similar rules in Spain were upheld, but the UK context is different.

We are also seeing organisations taking steps to tackle age-related benefits – no doubt prompting more challenges such as that unsuccessfully mounted by a Freshfields partner to test whether the outcome is balanced and justified. As with equal pay, the hope is that the courts recognise that tackling this issue requires some trade-offs, with winners and losers. 

Religious discrimination

One of the most high-profile employment cases this year was the ‘veiled teaching assistant' (Azmi v Kirklees Metropolitan Council). The EAT confirmed that a school did not discriminate in asking a Muslim woman to remove her veil whilst in the classroom. The school did attempt to find a way to accommodate her religious beliefs, however, the importance of facial expressions and clear diction to the effective performance of her role in teaching children English as a second language took priority.

Pregnancy / Maternity

Although the provisions on right to return to work following maternity leave have been in place for many years, this year saw the first decision on what is meant by “job in which she was employed before her absence”. The EAT stated that where the employee's role is variable, the employer does not need to “freeze time” at the moment she takes maternity leave but rather can take account of the normal range of variation. This meant that a teacher could not insist on returning to a specific year group (Blundell v Governing Body of St Andrew's Catholic Primary School). 

We have also had another reminder that although there is no right to return to work on a part time basis, refusal of such request may amount to unlawful indirect sex discrimination, enabling the employee to resign and claim constructive unfair dismissal (Shaw v CCL Ltd). 

On a more novel point, we have had an Advocate General Opinion confirming that a woman undergoing IVF treatment is not considered pregnant until such time as the fertilised embryo is implanted into the womb. However, if the less favourable treatment of a woman was due to her undergoing IVF treatment or her future motherhood, then it would amount to an act of discrimination since only women can become pregnant. We await the ECJ final ruling on this (Mayr v Bäckerei und Konditorei Gerhard Flöckner OHG). 

Sick pay and disability

A nagging question has been whether employers are obliged to extend company sick pay as a “reasonable adjustment” for disabled staff. The CA confirmed this year that will be a very rare case – the Disability Discrimination Act is not a social security subsidy, nor a tool that should be interpreted so as to discourage a return to work (O'Hanlon v. HMRC). However, this decision will not necessarily help an employer if its failure to make a reasonable adjustment caused the absence. 

Dismissal and discipline

Inflexible. Bureaucratic. Unsuccessful. That was the verdict of the Gibbons Review on the allegedly ‘here to help' Statutory Dispute Resolution Procedures. Entire repeal is now planned – see more in the 2008 preview below. In keeping with the season we shall simply raise a toast to that rather than trawl the countless technicalities generated in case law throughout the year. 

The CA surprised some in finding that an employer could dismiss for ill-health incapacity despite causing the illness in the first place (McAdie v Royal Bank of Scotland). Dismissal could still be a reasonable outcome, provided the employer went the ‘extra mile'. Potentially useful in, for example, stress-related cases.

The tricky overlap between stress and disciplinary procedures was also the subject of CA guidance (Deadman v Bristol City Council). Mere “aspirational” statements of policy (e.g. “all complaints will be handled sensitively”) do not bind the employer with a legal obligation. In addition, there must also be a foreseeable psychological reaction. No liability arose from simply leaving a letter on the desk of an employee, informing him of a renewed investigation (though it could hardly be commended as best practice for those employers hoping to avoid a tribunal!).

The highly emotive issue of employee suspension was examined again this year. The CA upheld an interim injunction blocking the proposed suspension of an NHS consultant pending an internal disciplinary hearing (Mezey v South West London Mental Health NHS Trust). It observed that in many cases suspension will not be a “neutral act” and it inevitably cast doubt over an employee's competence. This leaves open the possibility of injunctive relief in appropriate circumstances.

A footnote too on “spent” warnings. Although the EAT has confirmed that spent disciplinary warnings cannot be relied upon in subsequent proceedings, it left open the option for employers to draft rules that allow certain warnings to remain on the record for a long period of time seemingly in conflict with the ACAS Code of Practice (Airbus UK Limited v Webb). 

Protection from Harassment Act / Stress

Employers were rightly nervous about the HL decision in Majrowski. This threw in another wildcard piece of legislation for employers to worry about - the Protection from Harassment Act 1997. Not many liked the sound of strict vicarious liability for staff harassment - irrespective of any preventative measures the employer had put in place. Fortunately the CA offered some comfort this year, emphasising that the behaviour must be oppressive and unacceptable, amounting to a criminal offence under the PHA – not simply “boorish and ill-tempered” (Conn v Sunderland City Council).

On a related theme the Court of Appeal also laid to rest the urban myth that the mere provision of a confidential counselling service will ring-fence the employer from work-related stress claims (Intel Corporation v Daw).

Restrictive covenants

Michael Douglas, Catherine Zeta-Jones, Hello magazine and, er, employment law? So it was in a conjoined HL case that examined the tort of inducing breach of contract (Mainstream Properties Limited v Young and others). This tort is often threatened against an employer who has “poached” key employees and may be plotting to move onto clients and customers. Rare in practice, it could become even more of a collector's item as the HL told us that there must be the deliberate intention to interfere with the contract and induce breach. Circumstantial evidence (often all that there is) is not likely to cut it.

Those assessing senior level covenants will take heart from a CA case this year upholding a 12-month ‘non-dealing' covenant. The finding was driven by the seniority and importance of the employee, the logistics of replacing him, and the fact that a non-solicitation clause was unlikely to help (as he would delegate direct client contact). Useful stuff. 

Managed exits and compromise agreements

Christmas cheer here for employers fed up with exiting employees playing fast and loose with compromise agreements. In a case involving the departure of a Chief Executive, the severance payment was stated to be strictly conditional upon disclosure of any circumstances amounting to gross misconduct. Upon discovering fraud, the High Court agreed that there was no obligation on the company to pay up and the rest of the agreement remained valid and binding (Collidge v Freeport).

Less helpfully (though not surprisingly) the CA has underlined that a pressured “agreement to go” is not the same as a resignation (Sandhu v Jan de Rijk Transport). An employee called to an unscheduled ‘managed exit' meeting was found to have done no more than “salvage what he could from the inevitable fact that he was going to be dismissed…”. There was an actionable dismissal.


The new TUPE Regulations in 2006 have prompted a few new angles (and unearthed a few oldies). Decisions this year have picked up the following:

  • The EAT have confirmed that TUPE does in principle have the potential to apply to transfer of a service or business entity outside of the UK and the EU – so as we thought TUPE applies to offshoring (Holis Metal Industries Ltd v GMB and Newell Ltd). Given the increasingly global horizons of the union movement, this decision may become very important in future.
  • Helpful confirmation from the CA that TUPE does not create “new” rights. A transferring member of staff could not join a benefits scheme offered by the new employer (not previously enjoyed at the old employer) and claim credit for continuous service stretching back before the transfer (Jackson v Computershare Investor Services).
  • Less helpful was CA confirmation that if employers strike a deal to vary TUPE terms and conditions (other than lawfully in accordance with the new TUPE Regulations – which are as yet untested) they risk employees ‘cherry-picking' at a later date (Power v Regent Security Services Limited). Favourable changes for the employee stick, whereas detrimental changes are void. As ever, one to handle with care.
  • After some debate, TUPE 2006 did not specifically exclude professional services. Earlier this year a TUPE ‘service provision change' was found in relation to the transfer of a client account held by a PR services company (Hunt v Storm Communications Ltd and others). The risks upon a change of professional adviser remain - a genuine concern if the end-user specifically wants to ditch a service provider on the grounds of poor performing staff.
  • TUPE does not apply to share sales. True – but the EAT has reminded us that M&A deals are often not black and white. If the buyer assumes responsibility for business functions of the transferring company (as well as its shares) TUPE issues may still arise - notably consultation requirements and liability in insolvency (Millam v The Print Factory).
  • Scottish guidance has placed in doubt whether a pre-TUPE transfer redundancy exercise will avoid automatically unfair dismissal claims. This has always been high risk, but the Court of Session has indicated that the seller of a business cannot “borrow” an Economic Technical or Organisational (ETO) reason from the future buyer (Hynd v Armstrong and others). The fact that post-transfer redundancies are inevitable does not legitimise pre-transfer dismissals. Again, a sensitive issue in practice, and one that typically results in a pragmatic commercial solution with employee representatives, underpinned by commercial indemnities.
  • What happens if employees don't know who they are TUPE transferring to? Can they ‘opt-out' of the transfer after the event? The answer is yes – although the duration of this “TUPE trial period” will vary on the facts. In practice, of course, exercising the opt-out will leave the employees without any claim. Though also – as in this case – they are left free from restrictive covenant obligations to the buyer (New ISG Ltd v Vernon).
  • And finally on TUPE, amidst the fiery debates about the influence of private equity this year, a private member's Bill has been introduced in Parliament that would apply TUPE to the disposal of substantial shareholdings by private equity companies. A long-shot private Bill, and a complex set of issues to work through, but the debate might ruffle some feathers – and in relation to a variety of investment structures not simply private equity deals.

Information and Consultation with Employees Regulations

It took longer than expected, but the first organisation has been fined for failing to put in place adequate ICE arrangements. Macmillan Publishers was hit with a £55,000 penalty (the maximum award is £75,000) after a “wholly cavalier” approach to Amicus requests under the Regulations. A warning shot from the Central Arbitration Committee here – many organisations are attempting to push back on new ICE arrangements on the basis of “pre-existing” agreements. This can be a difficult line to hold unless there is clear historic evidence of employee/union approval.


An EAT decision on collective redundancy consultation caused major ripples a few months ago (UK Coal Mining Ltd v NUM). The big issue: does the obligation to consult arise when the relevant business decision (e.g. downsizing, closure) is being taken? Or does it only apply to implementation and the redundancy consequences?

Traditionally, it has been argued that tribunals are not there to second guess corporate decision-making. Consultation is about the employment implications only. That may not now be the case (and many felt it never was, really). The EAT confirmed that - because the idea is to avoid and mitigate redundancies where possible - this inevitably requires consultation on the business decision itself. Certainly in the case of a closure. We wait to see how unions and other employee reps run with this argument.

Further confirmation too that employers cannot sidestep the threshold for minimum redundancy consultation periods (twenty redundancies) by not counting voluntary redundancies (Optare Group v TGWU).

Working time and leave

The first provisions recognising worker expectations to Bank Holidays and other statutory holidays took effect in October – nudging the basic entitlement to 4.8 weeks (up to 5.6 weeks in April 2009).

April 2007 saw the further extension of family friendly' leave entitlements. The highlights were an extension of paid Ordinary Maternity Leave (from 6 to 9 months), removal of any qualifying criteria for Additional Maternity Leave, and helpful new provisions allowing employers to maintain reasonable contact and agree “Keep In Touch” days.

Looking ahead to 2008 …

How is the HR landscape shaping up for 2008? Setting aside the law for a moment, much may depend on the economic outlook. If conditions remain bumpy as the credit crunch bites, HR practitioners may face an abrupt switch from esoteric issues such as the ‘war for talent' to more pressing Board challenges such as “the war on headcount”.

It would be no surprise to see a rise in redundancy programmes, insolvency and corporate rescue/re-structuring, and a few City bonus disputes!

Pensions are likely to remain the most active benefit issue. The ground-breaking deal in which Paternoster ‘bought' the Emap pension schemes earlier this year is likely to provide an attractive blueprint for corporates looking to crystallise long-term pension exposure and/or create a more stable platform for sale or merger.

On the legislative front the big news is the announcement of the draft Employment Bill, which will be subject to consultation on its proposals to:

  • Repeal the Statutory Dispute Resolution Procedures.
  • Introduce new tribunal powers to flex awards for unreasonable failure to comply with a Code of Practice (notably the ACAS Code on disciplinary and grievance procedures, which is expected to be updated).
  • Extend ACAS' powers to conciliate.

Other ongoing consultations will dive into the detail of:

  • A consolidated Equality Act, which many practitioners feel is long overdue and would introduce greater consistency and certainty.
  • Extensions to the rights to request flexible working, for parents of older children.
  • Introduction of Additional Paternity Leave.

The agency and temporary worker saga will rage on. New Employment Agency Regulations are expected in force in April 2008, but these are largely an administrative sticking plaster on a more substantial union sore. More far-reaching reform remains in the political balance, despite mounting pressure for legislative clarity.

And the EU Council will continue its battles over the controversial Working Time Directive, including mooted amendments to working time opt-outs. Rather optimistically the Council has decided to tie this issue together with temporary workers to achieve a “simultaneous and integrated solution”. Whether putting two seemingly insoluble issues together will work some magic remains to be seen. We are unlikely to see much movement on this while Slovenia takes up the EU presidency in January, however, the same can not be said when France takes up the presidency in July.

Domestically, and in the light of numerous campaigns for accountability for major health and safety failings, a new offence of corporate manslaughter comes into force in April 2008. It will apply to organisations not individuals, with penalties that include an unlimited fine, the imposition of a publicity order and remedial orders.

We await changes to the Sex Discrimination Act 1975 following the successful judicial review earlier this year by the Equal Opportunities Commission (now incorporated in the Equality and Human Rights Commission) in relation to the definition of harassment, use of comparators and clarification of rights while on additional maternity leave.

Also look out for new immigration requirements designed to prevent illegal working from February 2008. Employers who negligently hire illegal workers face a fine of up to £10,000, escalating to an unlimited fine and a prison sentence for knowingly breaking the rules.

And finally, did you know…

In this branded age make sure you keep up:

  • On 1 December 2007 Employment Tribunal “Chairmen” were re-badged as “Employment Judges”. So much for the informal tribunal environment…
  • The Department of Trade and Industry became DBERR, the Department for Business, Enterprise & Regulatory Reform (though they seem to prefer plain and simple BERR, possibly after one too many Chris DBERR references).
  • In one of its first official acts, the new Commission for Equality and Human Rights (CEHR) re-badged itself as the Equality and Human Rights Commission (EHRC) to ensure “emphasis on the issues”.

Family planning? Bad news for fathers hoping to benefit from proposals to allow spouses to “share” maternity leave entitlement. The new laws are delayed and are not expected to apply to newborns before April 2009 at the earliest, according to planners at the HMRC.