Collective redundancy: employees cannot bring representative claims for protective awards

Employees who bring a claim for failure to inform and consult on collective redundancies (eg, where there are no trade union or employee representatives) can only obtain a protective award in their own favour individually, and not in favour of other affected employees.

Collective redundancy law requires employers to inform and consult trade union or elected employee representatives. Those representatives can bring claims for a protective award for breach in respect of all the employees they represent. Individual affected employees can bring claims for failures concerning the election of employee representatives and any other failures where there are no representatives. In these circumstances, some tribunals have made protective awards in favour of all the affected employees, not just the individual claimant.

The EAT has now ruled that this is wrong in a case handled by Herbert Smith's employment team and advocacy unit. Only trade union and elected employee representatives can bring representative claims and win protective awards in favour of their constituency. Individual claimants can only seek awards in their own personal favour.

By analogy, the same should apply to awards for failure to inform and consult under TUPE.

While this could lead to a multiplicity of claims, it does at least remove the option for individual claimants to raise the prospect of a representative award in order to negotiate a higher settlement. Employers should now have more certainty and confidence in handling and settling individual claims. (Independent Insurance v Aspinall, EAT)

Another EAT ruling has established that uncontested elections for employee representatives are valid. Where there are the same number of vacancies as candidates, an employer can treat all the candidates as elected without holding a ballot. (Phillips v Xtera Communications, EAT)

TUPE: increased risks for transferees where employee terms set by collective agreement

The Supreme Court has referred to the ECJ the issue of employees' rights following a TUPE transfer where their contracts provide for pay to be set by a collective agreement negotiated by the transferor and union. Private sector employers who have acquired public sector employees under a TUPE outsourcing now face a period of uncertainty and, potentially, the prospect of having to abide by terms over which they have no control. Those considering a TUPE transaction from the public sector should build this risk into their position on price and indemnities.

The Court of Appeal had ruled that in these circumstances pay rights are frozen at the time of the TUPE transfer and that new pay rates set by collective agreements negotiated by the transferor post-transfer do not bind the transferee (the "static" approach). This overruled previous EAT case law adopting the "dynamic" approach allowing employees to benefit from post-transfer pay increases agreed by the transferor. In doing so, the Court of Appeal relied on a decision of the ECJ interpreting the Acquired Rights Directive as only requiring the static approach.

The Supreme Court agreed with this interpretation of EU law and ruled that Parliament intended TUPE to do no more than give effect to EU law in this respect. However, it referred to the ECJ the question of whether EU law precludes our national courts from interpreting TUPE more generously in order to give effect to ordinary principles of contract law.

If the answer is no, there is a strong indication that the Court will side in favour of reverting to the dynamic approach. 

Although this would be bad news for transferees, there may be a glimmer of hope: the Government is currently reviewing TUPE and could consider limiting the period for observing collectively negotiated terms to a fixed period of at least one year, as permitted by the Directive. (Parkwood Leisure v Alemo-Herron, SC)

TUPE: employees on garden leave can still transfer; liability for unfair dismissal awards on a pre-pack sale

The Court of Appeal has confirmed that an employee will not cease to be "assigned other than on a temporary basis" to a transferring business simply because at the time of transfer he has handed in his notice and is doing only a small amount of work from home during his notice period. Such an employee can still transfer under TUPE. The Court also confirmed that a failure to inform and consult does not prevent an employee transferring, even if that denies the employee the opportunity to object pre-transfer. (Marcroft v Heartland, CA)

Transferees buying pre-pack insolvent businesses should also note that they will inherit liability for unfair dismissal basic awards if they dismiss post-transfer. The EAT has ruled that the Secretary of State will only pick up certain liabilities (including unfair dismissal basic awards and notice pay) if they are incurred before the transfer, so it will be important to consider the timing of dismissals. (Pressure Coolers v Molloy, EAT)

Third party harassment: employers may be liable under general harassment law

An employer should take appropriate steps to deal with third party harassment, even where the express provisions in the Equality Act (requiring two prior occasions of third party harassment) do not apply.

An EAT ruling strongly suggests that, pursuant to EU law, the Equality Act general prohibition on harassment "related to" a protected characteristic such as race can cover an employer's failure to deal with racial harassment, even if race is not the reason for the employer's own inaction. (The case actually concerned the pre-Equality Act "on grounds of" test but, as the employer was public sector, this had to be construed widely in accordance with EU law.)

For procedural reasons, the EAT did not consider the decision in Conteh that an employer is only liable if its inaction itself "creates" a hostile environment. The EAT acknowledged that there is tension between the cases, so this is unlikely to be the last we hear on this subject, not least because the Government is consulting on the removal of the express third party harassment provisions in the Equality Act.

The case also establishes that mocking someone's foreign accent is inherently racial in the same way as overtly racist comments, even if the underlying motivation is not racial. (Sheffield City Council v Norouzi, EAT)

Disciplinary meetings: limits to right to legal representation

An employee may be entitled to legal representation at a public sector employer's disciplinary hearing where the outcome will have a substantial influence or effect on another body's decision whether to bar the employee from practising his profession. The Supreme Court has agreed with earlier judgments that this is the effect of Article 6 of the European Convention on Human Rights (the right to a fair trial).

However, unlike the Court of Appeal, it considered that a school's disciplinary dismissal decision did not have the required influence over the Independent Safeguarding Authority (ISA)'s decision whether to bar the employee from working with children. This was because the ISA's rules expressly require it to make its own findings of fact and use its own knowledge of additional factors and independent judgment to take its decision. Perhaps surprisingly, the majority of the Supreme Court did not consider that the lack of an oral hearing before the ISA affected this conclusion.

Private sector employers are not directly bound by the European Convention, but there has been concern that unfair dismissal law might be used to make the same argument eg, in relation to financial services employees. Financial services employers may now be more confident in refusing requests for legal representation at disciplinary hearings, given some of the similarities between the FSA's and ISA's role. (R v Governors of X School, SC)

Age discrimination: retirement notices which fail to specify the retirement date are invalid

The EAT has ruled that a statutory retirement notice must specify the date of retirement and cannot simply refer to other documents, such as an employee handbook, to ascertain the date. It will not be sufficient to refer to retirement in accordance with a handbook, even if the handbook provides that retirement occurs at the end of the week on which an employee turns 65.

However, a notice stating that retirement would take place "after" the employee's 65th birthday was interpreted as meaning on his 65th birthday and therefore was valid. (Howard v Campbell's Caravans, EAT)

Termination: employers should not describe notice pay as "ex gratia"; notice runs from day after receipt

A recent EAT case highlights the importance of taking care when drafting termination letters and, ideally, of obtaining a statutory compromise agreement to waive claims. An employer had dismissed an employee without notice where there was no pilon clause. It made a payment intended to cover notice pay, but unfortunately described this as an "ex gratia" payment in the termination letter. The EAT construed this to mean that the payment was not being made pursuant to any contractual obligation and therefore the employee was still entitled to claim damages for breach of her notice clause. (Publicis Consultants v O'Farrell, EAT)

The EAT has also confirmed that, unless an employment contract provides otherwise, notice of dismissal (whether oral or written) starts to run on the day after the working day during which it is received by the employee. This will obviously affect when the employment ends for payroll purposes and the time limits for tribunal claims. Employers wishing to include the day of receipt in the notice period need to specify this expressly in the employment contract. (Wang v University of Keele, EAT)

Bribery Act 2010 – in force on 1 July 2011

A reminder that the Bribery Act 2010 will come into force on 1 July 2011.

The Act repeals the existing legislation relating to bribery and creates four new offences:

  • A new 'corporate' offence which applies where a corporate or partnership fails to prevent those performing services on their behalf from paying bribes. The only defence to this offence is to show that an organisation had in place "adequate procedures" to prevent such bribery. The Ministry of Justice has published guidance on what amounts to "adequate procedures" for this purpose.
  • An offence of active bribery (i.e. giving, promising or offering a bribe), which applies in the public or private sector.
  • An offence of passive bribery (i.e. requesting, agreeing to receive or accepting a bribe), which applies in the public or private sector.
  • A specific offence of bribing a foreign public official.

The Serious Fraud Office and Director of Public Prosecutions have published joint prosecution guidance on the Act. It contains guidance for prosecutors on when to commence prosecutions under the Act and lists factors which will be relevant when a prosecutor is considering whether bringing an action is in the public interest.

For further details on the Act, see the anti-corruption e-bulletin which our corporate crime and investigations team published last year which is available here.

For further details of the MoJ guidance and the SFO guidance, please see our anti-corruption e-bulletin published in March which is available here.