Welcome to the latest issue of the Steptoe & Johnson UK Employment Law Update. 

These Employment Law Updates are aimed at providing information on recent developments and what the regulatory changes mean for you in practice, in managing workplace issues on a proactive basis.

To achieve our objectives and to continuously improve the Updates, we would be pleased to receive feedback from you. Please e-mail any comments or suggestions which you may have relating to the Updates to employmentgroup@steptoe.com. We look forward to hearing from you and best wishes for a prosperous 2014.

  1. TUPE Implementation Date

The new TUPE amendments will come into force on 31 January 2014 as the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2013. These amendments will apply to transfers which take place on or after that time. However there will be transitional provisions for the new increased time limit for providing employee liability information and the information and the consultation provisions for micro businesses. In summary, the amendments relate to service provision changes where the post transfer activities are fundamentally the same as the activities carried out previously, varying contracts, the static approach to collective agreements, reduced protection against dismissal, changes in workforce to include a change in the place of work after a transfer and pre transfer consultation by a transferee about future redundancies. A guide for employers and employees to the amended TUPE Regulations has been produced by the Department for Business Innovation and Skills. A copy is available here.

  1. Financial penalty for breach of workers’ rights

S.16 of the Enterprise and Regulatory Reform Act 2013, which gives Tribunals the power to order an employer who has lost at a tribunal to pay a financial penalty of a minimum of £100 up to £5,000 to the Secretary of State where the case has aggravating features, will come into force in April 2014. The penalty will be 50% of any award subject to the aforementioned cap which penalty will be halved if it is paid within 21 days. This penalty is intended to encourage businesses to have a greater regard to what is required of them in law.

  1. Consultation on use of zero-hours contracts

The Government has published a consultation on the use of zero-hours contracts. The consultation closes on 13 March 2014. The Government is seeking transparency over zero-hours contracts but it is not intending to ban them. It is seeking views on banning exclusivity clauses in contracts that offer no guarantee of work and on issuing guidance on the fair use of exclusivity clauses amongst others. Many workers are still unclear on their employment rights under a zero-hours contract.

  1. Illegal working in the UK

The Home Office has produced a new guide for employers on preventing illegal working in the UK. Those who hire illegal workers can be fined up to £10,000 per illegal worker or face criminal prosecution. The updated guide replaces the previous one published in May 2012 and includes the lifting of restrictions on Bulgarian and Romanian nationals, restrictions on employing Croatian nationals and how a sponsor’s licence can be revoked if an employer receives a civil penalty. A copy of the Guide is available here.

  1. Handling small-scale redundancies

ACAS has published a step by step guide for employers to help them handle small-scale redundancies where they want to make fewer than 20 people redundant. There is a seven step plan starting with preparation and briefing managers through to focusing on making the best of remaining staff for the future of the business. Copies of the guidance are available here.

  1. Redundancy

Stephenson College v Jackson [2011] WL6148273

The Employment Tribunal in this case decided that the College’s decision to dismiss Mr Jackson for redundancy when a co-worker had volunteered for redundancy was one that no reasonable employer would have taken and therefore his dismissal was unfair. Stephenson College appealed unsuccessfully.

Mr Jackson was pooled for redundancy and scored the highest points and accordingly the worst score. However Mr Cooper was only 1 point below. Mr Cooper applied for voluntary redundancy in April 2012 because he was unhappy in his role. This was not accepted. He resigned and left the college shortly after the conclusion of the redundancy exercise. The evidence was that there was very little between him and Mr Jackson. Mr Jackson commenced proceedings for unfair dismissal and was successful. The EAT agreed that the decision to refuse Mr Cooper’s voluntary application for redundancy rather than make Mr. Jackson redundant was one that no reasonable employer would have taken.

Key point: The employer must look at the totality of the redundancy process not just the individual scores, to avoid unfair dismissals.

  1. Right to be accompanied in disciplinary and grievance procedure hearings

ACAS launched a consultation on a revision to their code of practice on disciplinary and grievance procedures to reflect the EAT’s decision in Toal and anor v GB Oils (See issue 60 item 32). Workers have a statutory right to be accompanied at a disciplinary or grievance hearing where they are invited to a meeting and make a reasonable request to be accompanied provided the companion comes from one of the defined categories. Changes to the Code proposed by ACAS suggest that workers will have a right to choose whoever they like but as good practice they should have some regard to the effect that their chosen companion will have on the disciplinary and grievance procedure itself. Consultation closed on 7 January 2014.

Roberts v GB Oils Ltd UKEAT/0177/13/DM

In another case concerning GB Oils, Mr Roberts, like his colleague Mr Toal before him (See issue 60 item 32), was refused his first choice of companion at a disciplinary hearing at which he was found to have been fairly dismissed for misconduct. Mr Roberts brought a successful claim for compensation under s. 11 of the Employment Relations Act 1999 for breach of his right under s. 10 of the Act to be accompanied at a disciplinary hearing. Mr Roberts was a tanker driver and after some complaints from customers he was dismissed for alleged contamination of diesel oil. At his disciplinary hearing he sought to be accompanied by L. L however had been banned from any of GB’s sites and his request was turned down. He was accompanied by Mr Draper instead. The EAT somewhat reluctantly felt bound to follow the Toalcase and agreed that there had been a breach of his rights. The choice remains that of the employee, once he has made a reasonable request to be accompanied.

Key point: Unless an employer has a proper case for denying an employee his right to be accompanied by his first choice of companion, for the present that choice should be accepted rather than insisting on a substitute. If the employee’s choice is knowingly wholly unsuitable, and his choice is consequently refused, the employee may find he has a nil compensation award if he pursues a claim.

  1. Disability and health employment strategy

The Department for Work and Pensions has published a command paper setting out the Government’s proposals for improving employment support for disabled people and those with health conditions. There is a shift away from supporting individuals in a segregated employment to working with individual employers to ensure that the skills, talents and capabilities of all disabled people and people with health conditions are given the opportunity to thrive. A copy of the paper is available here.

  1. Disability Discrimination
  • Calculation of termination payments where there is PHI cover

Dawson v UK Asset Resolution Limited, ET Case 2506626/12

Although this is only a Tribunal case, the judgment is interesting. The decision by an employer to pay its redundant employee various termination payments by reference to the reduced income that the employee received under a permanent health insurance scheme rather than her full time earnings amounted to a breach of contract. It also amounted to unfavourable treatment arising as consequence of her disability and was not a proportionate means of achieving the employer’s aims of ensuring consistency and the continued practical and financial viability of its PHI scheme.

Ms Dawson suffered from lupus. She was incapable of working full time for her employer N and therefore when she was covered by the scheme she was paid 75% of her usual salary during her absence. Her employment was transferred from N to UKAR in 2010. She was then made redundant at the end of August 2012 after her lupus worsened during 2011 which caused her to have an extended period of absence.

UKAR argued that her contract had been varied with the effect of reducing her previous salary to the 75% PHI salary so that they were entitled to calculate her payments on this reduced salary rather than what she would have been earning if she had been working full time at the time of her dismissal. The Tribunal held there had never been a contractual variation to her salary. Her post was still open and she could have returned at any time. The reduced rate for her termination payments arose only because of her lupus and this constituted unfavourable treatment. Had she not been absent through sickness she would have been in receipt of full time earnings and all of her termination payments, excluding notice pay, would have been calculated on that basis.

To defend the discrimination claim UKAR would have had to show that her treatment was a proportionate means of achieving a legitimate aim and it had not done so. Ms Dawson was awarded her payments on her notional full time earnings but not her notice pay.

As she had not worked her notice she was only entitled to her PHI earnings for this. She was also awarded £4,000 for injury to feelings. An award of costs was awarded against UKAR to reflect its unreasonable behaviour in failing to articulate the legitimate aims it claimed until a late stage in the proceedings.

Key point: Termination payments to employees on PHI cover should in similar circumstances be based on full time earnings.

  • Reasonable adjustments

JobCentre Plus v Higgins UKEAT/0579/12

Mr Higgins was employed by JobCentre Plus. He began a long period of absence due to a heart condition in June 2009. In August 2010 his GP gave him a fit note which stated that he might benefit from a phased return to work on limited hours. Following consultation JobCentre informed him that a plan had been set up for his full return to work over 13 weeks. JobCentre stated that he would be expected to build up gradually to his normal hours by the end of that period and that if he did not feel able to meet this target he should discuss a change in his contractual terms with his manager. Mr Hughes told his manager that he was unwilling to return to work unless the plan was extended to a 6 month return to work period. This was not agreed and he was then dismissed when his absence could no longer be supported by JobCentre. After his dismissal was confirmed on appeal, he claimed that JobCentre had failed to make reasonable adjustments for him. The Employment Tribunal held that failing to consider an extension to the plan beyond 13 weeks JobCentre had breached its duty to make reasonable adjustments.

JobCentre Plus appealed. The EAT agreed that JobCentre had not failed in its duty to make adjustments. The PCP placing Mr Higgins at substantial disadvantage was a requirement for him to work his contractual hours. The plan allowed Mr Higgins 13 weeks of reduced hours on the basis of what he himself had suggested. It was not reasonable for him not to have started work on those hours without an agreement to extend the plan in place. His employer was not required to give an explicit guarantee of a future review. If Mr Higgins had continued to be under a substantial disadvantage at the end of the 13 week period, the duty to make an adjustment would still be applicable and would be judged in the circumstances prevalent at that time. The case was remitted for reconsideration as the finding of unfair dismissal could not stand.

Key point: If an employer grants an employee a phased return to work it is not necessary for the employer to give a guarantee of a future review. The duty to make an adjustment will still remain at the end of that period.

  • Reliance on occupational health report

Gallop v Newport City Council [2013] EWCA Civ 1583

Mr Gallop had his disability discrimination claim dismissed in the Tribunal and his appeal dismissed by the EAT. He appealed against that decision to the Court of Appeal. Although he had been working for the Council since 1997, in 2004 he complained of stress and was referred to the Council’s external occupational health advisors for assessment for stress counselling. The advisors reported back to the Council that Mr Gallop had some stress related symptoms but there were no signs of clinical depression. The Council made efforts to adjust his workload but by August 2005 he had become too ill to work and was signed off sick. He had intermittent absences of months at a time and abortive attempts to return to work. During this time the Council received reports from its advisors that he was not disabled for the purpose of the Disability Discrimination Act 1995 as it then was. He was dismissed following his return to work in February 2008 after complaints of bullying by him were made by his colleagues. The Tribunal rejected his disability discrimination claims on the basis that the Council did not know and could not have been expected to know that he was disabled on the basis that they were entitled to rely on its advisor’s advice that he was not disabled. The EAT endorsed that analysis on appeal.

The Court of Appeal held that the key question for the Tribunal should have been whether the Council had actual or constructive knowledge of the relevant facts and the Tribunal had not engaged in that enquiry. It had simply considered whether Newport was entitled to deny relevant knowledge by relying on its unquestioning adoption of its advisor’s opinions that Mr Gallop was not disabled. That was an error of law. The responsible employer has to make its own judgment as to whether an employee is or is not disabled when seeking assistance and guidance from occupational health or other advisors. However the employer cannot simply rubber stamp an advisor’s opinion without questioning it. The case was remitted to the ET for a re-hearing of Mr Gallop’s discrimination claims.

Key point: When asking questions that might lead to a view that an employee is or is not disabled employers should tailor these questions to the particular circumstances of the alleged medical condition or illness and whether he or she had a physical or mental impairment, whether that impairment had substantial long term adverse effects and whether the impairment effects his or her ability to carry out normal day-to-day activities. An employer must however know of the employee’s disability before he can be held answerable for alleged disability discrimination.

  1. Shared parental leave

The Government has published its response to the consultation on administration of shared parental leave and pay. The scheme is intended to be implemented by 2015.

Briefly, shared parental leave will allow eligible mothers and their partners to be absent from work to care for a child for a maximum of 50 weeks after the mother’s 2 week immediate maternity leave. Eligible couples could also take up to 39 weeks of shared parental pay. There will be a cut-off point of 52 weeks from birth for couples to take the shared leave and each person in a couple will have up to 20 keeping in touch days whilst on leave. The right to return to the same job will be maintained for employees returning from any period of leave which totals 26 weeks or less in the aggregate.

In order to support businesses in being able to plan their workforce employees will be expected to give at least 8 weeks’ non-binding notice of any leave they will be taking but there will be a limit of 3 times that a parent can notify their employer of their intention to take a period of shared parental leave or vary the length. A copy of the Government’s response is available here.

  1. Direct Earnings attachments

The DWP has produced a detailed guidance for employers on how a DWP direct earnings attachment should be operated. The Department for Work and Pensions is responsible for recovering money owed to the State as a result of a debt arising under the Social Security and Administration Act 1992. Where the Secretary of State has been unable to recover money owed to the DWP by a customer who is no longer in receipt of benefit in some circumstances that money may be recovered by deductions from the customer’s earnings. On receipt of a notice an employer must make a deduction from net earnings, make the payment in respect of the appropriate deduction to the DWP by 19th of the month and keep a record of every amount paid. If an employer fails to comply, it may be subject to a fine of up to £1,000. A copy of the guide is available here.

  1. Employment intermediaries and false self-employment

HM Revenue & Customs has issued a consultation on proposed changes to the tax system in order to tackle the use of employment businesses and intermediary companies to present employment situations as self-employment. The proposed changes are intended to come into force in April 2014. The main proposal is to water down the requirement for ‘personal service’ in sections of the Income Tax (Earnings and Pensions) Act 2003 that define when payments made to agency workers are to be taxable as employment income. Under the new tests an intermediary will need to deduct income tax and National Insurance contributions where there is payment for a worker’s services if the agency worker is personally involved in providing services to another, and is subject to supervision or control. The change will mean that such workers will become entitled to statutory sick pay and maternity pay and that in the majority of cases the worker will also gain the benefits of being an employee for employment rights purposes although this will depend on the worker being within the case law tests. Consultation runs to 4 February 2014. The consultation document is available here.

  1. Agency Workers hired for indefinite period

Moran and ors v Ideal Cleaning Services Limited and Anor UKEAT/0274/13

Mr Moran and his colleague were employed by Ideal and from the start of their employment they were placed to clean for the second Respondent Celanese Acetate Limited. They worked for Celanese for between 6 and 25 years until they were made redundant in 2012.

After the Agency Workers Regulations came into force in 2011 Mr Moran and his colleagues launched claims that they were agency workers within the meaning of the Regulations and as such they were entitled to the same basic working and employment conditions as if they had been recruited by Celanese directly. They were unsuccessful in their claims and again before the EAT on appeal. The EAT rejected their argument that all agency workers should fall within the scope of the Regulations once they had met the 12 week qualifying period. Their work was indefinite and was not therefore temporary. Regulation 3 defines an agency worker as an individual who “is supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer”. Accordingly, they fell outside the scope of the Regulations.

Subject to any appeal to the Court of Appeal, the case is likely to have significant implications for the many agency workers who were engaged on indefinite contracts. If they are outside the scope of the Agency Workers Regulations they will not be able to benefit from the right to equal treatment which will undermine the scope and purpose of the Regulations.

Key point: Subject to any appeal decision, employers should review the contractual positions of any agency workers in their businesses to ascertain whether this decision will have a bearing on the arrangements for such current agency workers or any new agency workers going forward, if indefinite agency workers are not entitled to Day 1 rights or 12 week rights under the Regulations.

  1. Ambiguous resignation

Secretary of State for Justice v Hibbert UKEAT/0289/13

This case concerned whether Ms Hibbert’s unfair dismissal claim was lodged out of time. Ms Hibbert worked as a works escort at HMP Wakefield. She was invited to a capability hearing on 26 June 2012 relating to her current role. She asked for the hearing to be postponed until her grievance appeal had been dealt with relating to another issue. The postponement was agreed to but her grievance appeal was rejected on 27 June. The capability hearing was fixed for 2 July but on 29 June she delivered a letter to her employer drafted by her solicitors complaining that her grievance had not been properly dealt with and there was no attempt to provide a return to work for her. It continued…. “therefore I am of the view that there has been a fundamental breach of my employment contract by my employer and I have no alternative but to resign my position”.

Her employer offered her time to reconsider but she did not and therefore her employer wrote accepting her resignation requiring her to work 4 weeks’ notice. The Tribunal held that her date of termination was still to be settled and therefore as a preliminary issue the Tribunal had jurisdiction to hear the claim. The EAT disagreed. Following the case of Southern v Franks Charlesly & Co, the Appeal Tribunal held that the words used by Mrs Hibbert were unambiguous. She had resigned on 29 June 2012. She terminated the contract without notice because of her employer’s conduct. The fact that she was paid for and required to work 4 weeks’ notice at her employer’s behest, had no legal effect.

The date of termination took effect from her resignation. The fact that there was post-resignation correspondence relating to subsequent working did not have any affect on the date of termination so as to extend it to the end of that notice period. The answer to the question of whether there was an immediate intention to resign by Ms Hibbert was yes. It was expressed in clear terms and there were no special circumstances.

Her unfair dismissal claim was out of time.

Key point: If a resignation was an acceptance of the employer’s repudiatory breach of contract it was not open to the employer to accept or refuse the resignation or for the employee to have to work the notice period. An employer should however ensure that the employee truly means to resign immediately so it can act on it. Claimants should also be mindful of the strict time limits for claims as should their advisors by not leaving it to the last minute to lodge claims.

  1. Statutory Residence Test

HMRC has updated its guidance note on the new Statutory Residence Test. Changes include clarification on UK day counts and transit days, overseas work days and split year treatment. A copy of the guidance is available here.

  1. Age discrimination
  • Statutory Authority Defence

Heron v Sefton MBC UKEAT/0566/12

Could a local authority treat Ms Heron aged 61 less favourably than her younger colleagues in the calculation of her contractual redundancy payment entitlement under the Civil Service Compensation Scheme? No. Para. 1(1) of Schedule 22 to the Equality Act 2010 provides that an employer does not discriminate against an employee because of the employee’s age, if the employer does anything it must do pursuant to a requirement of a statutory enactment. Ms Heron was employed in a central government agency whose terms and conditions included the Civil Service Compensation Scheme. Her employment was transferred under TUPE to Sefton and she remained contractually entitled to the benefits of the Scheme in the event of a redundancy. She was made redundant at 61 and under the Scheme her redundancy was capped at half the amount she would have received if she had been under 60.

She complained of breach of contract and direct age discrimination. Her employer successfully defeated the claim before the Tribunal by relying on the statutory defence but she appealed and the EAT reversed the decision. The pension scheme did not apply directly to her employment by Sefton but its rules were incorporated into her agreement when she was TUPE transferred. Thus the terms were contractual and not statutory. As a result any requirement under the Scheme in relation to Ms Heron was not a requirement of a statutory enactment. Sefton’s argument that it was required to discriminate against Ms Heron was incorrect. Ms Heron should therefore have received £29,481.77 instead of the payment she did receive of £16,881. The fact that a woman over 60 might be able to draw her State and Civil Service pension so justifying a difference of treatment between her and a younger colleague did not amount to an acceptable difference in treatment. Sefton were ordered to pay the full sum to her as a contractual entitlement.

Key point: For the statutory exception to apply the statutory provision relied on by an employer must do more than merely permit the discrimination it must have been necessary for the employer to have discriminated in order to avoid breaching the provision.

  • Proportionality

McCririck v Channel 4 Television Corporation ET/220478/2013

Channel 4’s decision to remove Mr McCririck who was 72 as a presenter of Channel 4 racing was not direct discrimination on the grounds of age. Its decision was made because of his image and presenting style. Mr McCririck chose not to bring an additional claim for indirect age discrimination so his claim failed in its entirety. Channel 4’s search for a wider audience, the Tribunal found did not mean a younger audience. Channel 4 had commissioned research in which Mr McCririck scored very low on certain aspects of his persona which caused Channel 4 concern in light of their aim to broaden the audience. His removal was a proportionate means of achieving the legitimate aim. As he was not an employee of Channel 4 he could also not claim his dismissal was unfair.

Key point: The case is not binding on other Tribunals as it is a first instance decision but if there is good evidence of another justifiable reason for the dismissal then a similar Claimant may be equally unsuccessful.

  1. Ill health dismissal

BS v Dundee City Council [2013] CSIH 91

BS was employed by Dundee City Council for 35 years. He was off sick for 272 days with stress and depression before finally being dismissed for ill health in September 2009. He had been repeatedly signed off by his GP for 8 weeks at a time. The occupational health nurse gave Dundee reports from time to time that there was no improvement in his symptoms. The Council met with the employee in August 2009 to discuss the latest medical opinion and the prospect of his return to work. The Council indicated that it would consider terminating him if he failed to return to work. The OH doctor indicated BS was improving and that he could be expected to return to work within 1-3 months, but he did not return to work on 14 September 2009 and was signed off for another 4 weeks. At a meeting on 23 September as the employee indicated that he did not feel any better, the Council decided to dismiss him on the basis that a return in the foreseeable future did not seem likely.

BS then brought a claim for unfair dismissal seeking reinstatement. The Tribunal found he had been unfairly dismissed which decision the Council appealed. The EAT held the Tribunal had imposed too higher standard of investigation on the employer and that the Tribunal had erred in considering BS’s length of service to be relevant to the employer’s investigation. The case was remitted to the Tribunal to consider the key question of whether the employer could be expected to wait any longer before deciding to dismiss. The employee appealed to the Inner Court against the decision of the EAT and he sought restoration of the Tribunal’s judgment that he had been unfairly dismissed. He was unsuccessful. The employer did not need to pursue a further detailed medical examination. The employee’s own assessment of his condition was important and fell to be put into the balance along with the opinion of the OH doctor when the Tribunal came to consider whether a reasonable employer would have reached the same decision to dismiss. However an employer should not necessarily take what an employee says about his health at face value in contrast to the opinion of a doctor. The case was remitted for the Tribunal to consider whether the employer could have expected to wait longer before deciding to dismiss.

Key point: As well as considering the medical evidence an employer can look at length of service and the employee’s work record to form a view whether he or she is likely to return to work as soon as he or she can. Length of service is not automatically relevant.

  1. Tribunal statistics

The number of claims accepted in the Tribunals after September 2013 appears to be dropping. The median award for unfair dismissal rose to £4,832 but a larger percentage of Claimants received awards between £1,000 and £1,999. 49 costs awards were made in favour of the Respondent of over £10,000. In the years 2007 to 2011 there were only 8 such awards. The EAT allowed 47.9% of all appeals with only 208 proceeding to a full hearing. 79% of all EAT appeals are brought by employees.

  1. Non-executive directors

On 20 November 2013 the European Parliament passed a resolution to adopt the Commission’s proposal for a Directive on gender balance amongst non-executive directors of companies listed on the Stock Exchange. Listed companies where the under-represented sex represents less than 40% of non-executive director boards positions should make appointments on the basis of a comparative analysis of the qualifications of each candidate in order to obtain 40% representation by 1 January 2020 or by 1 January 2018 for public undertakings. It is recommended that Member States should adopt strategies for moving towards a socio-cultural shift in their approach to gender balance to encourage women’s participation in management hierarchy. Possible measures include more active participation by men in family life, flexible working and family friendly workplaces for those required to provide care.

  1. National Minimum Wage
  • Interns

New guidance will be provided by the Government for further support to interns uncertain about their pay rights. New advice from the Department of Business, Innovation and Skills for people leaving education aims to give support about their pay rights and to crack down on unfair practices by employers. New video and posters from BIS will explain to school and college leavers what their rights are in relation to be paid the National Minimum Wage. Anyone considered a worker under the law should be paid at least the minimum wage, whether they are an intern or someone on work experience. HMRC is also to carry out checks on approximately 200 employers who have recently advertised intern opportunities and unpaid work to ensure compliance with the National Minimum Wage obligations.

  • Increased penalty fines

Employers who fail to pay their employees the National Minimum Wage (NMW) will face penalties of up to £20,000, according to new proposals. The new fines will have effect from February 2014.

  1. Effective date of termination

Robinson v Fairhill Medical Practice UKEAT/0313/12

The EAT in this case held that a summary dismissal takes effect only when the employee learns of it or has reasonable opportunity to learn of it where the dismissal is communicated through a third party.

Ms Robinson was an administrator who worked in the GP practice for over 40 years. She went on sick leave with stress after an investigation began into her alleged serious misconduct. In her absence she was summarily dismissed for gross misconduct of which her solicitor was informed by email on 6 July 2011. Ms Robinson was informed of the decision by phone the next day – 7 July. She received a letter from her employer informing her of her dismissal on 8 July. Her solicitor presented her unfair dismissal and disability discrimination claim on 7 October 2011. This claim was a day late if the effective date of termination was 7 July.

The Tribunal found that her solicitor was acting as her agent and that the claim should have been presented on 6 October as the notice of her dismissal was communicated by the solicitor to her on 7 July. She appealed this decision but was unsuccessful. The fact that a formal letter of dismissal had been sent but not received by 7 July 2011 did not alter the position. The effective date of termination was 7 July and her unfair dismissal claim was outside the time limit. However she was successful in persuading the court to extend time on the just and equitable basis, for her concurrent disability discrimination claim.

Key point: An employee may acquire knowledge of his or her dismissal through a third party and this satisfies the test of when that knowledge was acquired. The fault of an adviser may not be held against a Claimant as a factor as to whether it is just and equitable to extend time for a discrimination claim.

  1. Directors’ Duties

Madoff Securities International Limited (In Liquidation) v Raven & others 2013 EWCH 3147

The High Court in this case held that directors may legitimately defer to the views of fellow directors if persuaded that their views were held and advanced in the best interests of the company. None of the directors of Bernard Madoff’s London business had breached their duties of good faith in relation to certain payments made by the business according to Mr Justice Popplewell.

At the time the directors had no reason to question Bernard Madoff’s competence in his instructions of them. Nor did they have any reason to suspect fraud or otherwise. MSIL’s claims against the directors failed in their entirety. The 119 page judgement is worth a read for its description of the Madoff London office, the scandal and directors duties in this context. A copy of the case is available here.

  1. Repayment of expenses not a penalty

Cleeve Link Ltd v Bryla UKEAT/0440/12

B was employed by Cleeve for about 12 weeks between September 2011 and December 2011 as a live in care worker. She had been recruited in Poland by Miracles Recruitment and as part of the contractual agreement between Cleeve and Miracles, Cleeve had paid a standard candidate fee of £400 to Miracles. It also paid the cost of B’s flight to the UK. The Tribunal found that she had signed an agreement which provided for her employer to recoup the costs of bringing her to the UK from her if her employment was terminated as a result of her misconduct or at her own request within 6 months from commencement. For each month of completed employment by her the costs liable for repayment reduced by 1/6th on a sliding scale.

When B was dismissed summarily on the grounds of alleged gross misconduct after 12 weeks, Cleeve deducted its recruitment costs from her unpaid salary leaving her with nothing. The Employment Judge held that Cleeve could not rely on the repayment of expenses agreement because it was an unenforceable penalty clause. Cleeve appealed and the EAT allowed the appeal. It held the judge had erred in concluding that the clause was an unlawful penalty.

There was a relationship between the amount specified in the repayment clause and the maximum loss that could be incurred by Cleeve so as to make it a genuine liquidated damages clause. Whether a clause is a penalty is a matter of construction and the contract had to be construed at the time it was entered into, on an objective basis.

The issue is whether the main reason of the clause was to deter a party from breaking the contract or genuinely to pre-estimate the loss that the innocent party would suffer. This can involve comparing the amount that would be payable on breach with a loss that would be suffered as a result of the breach. A substantial difference between the two would suggest that the amount could only be explained by the fact that it is a penalty to deter breach and therefore unenforceable. There is a presumption of penalty where the same amount is payable on recurrence of a number of events which give rise to different levels of damage.

Rather than remit the case, the EAT judge held that he could substitute his findings of a penalty with a pre-estimate of genuine loss and therefore lawful at common law and under the Employment Rights Act 1996.

Key point: The case is a useful reminder of the law relating to penalty clauses and how they may be enforced in a Tribunal. Cleeve was able to recover from B the £400 it had paid Miracles although under UK law employment businesses and agencies are restricted from charging work seekers for finding them work.

  1. Insolvency – dismissal of employees by administrator

Crystal Palace FC Limited and another v Kavanagh and others [2013] EWCA Civ 1410

The Court of Appeal in this case reinstated the Tribunal’s original decision that the Claimants’ dismissals were not automatically unfair. Mrs Kavanagh and others worked for Crystal Palace Football Club 2000 which went into administration in January 2010 with the aim of being sold as a going concern. A consortium was incorporated as CPFC 2010 but this was put into administration too. The Administrator and CPFC 2010 signed an agreement to sell the club in May 2010 to be held in escrow pending the sale of the stadium. With cashflow difficulties the club was mothballed, the employees made redundant and CPFC 2010 withdrew its bid. The sale to CPFC Limited was finally completed in August 2010.

The Tribunal concluded that the dismissals, although connected with the subsequent TUPE transfer, were carried out for an ETO reason entailing changes in the workforce within the meaning of Regulation 7. The dismissals were designed to ensure that costs were reduced to enable the club to continue to trade. This was an ETO reason, specifically an economic reason, that could be distinguished from the administrator’s ultimate objective of selling the club as a going concern The Court of Appeal agreed and the EAT’s decision was therefore reversed.

The application of Regulation 7 is fact sensitive. There was a clear distinction between the reasons for the employees’ dismissals in this case where there was no money to pay wages and the administrator’s ultimate objective of achieving a sale of the business. The reduction in costs with the aim of preserving a business as a going concern is not very different from making the business more attractive for sale, but the former is capable of amounting to an ETO reason for dismissal. Consequently, the dismissals were not automatically unfair and liability did not transfer.

Key points: The case will be of considerable importance for insolvency advisors. The need to reduce a workforce in order to preserve a business as a going concern is capable of amounting to an ETO reason for dismissal and not automatically unfair where there is a subsequent transfer.

  1. Restrictive covenants

Croesus Financial Services v Bradshaw [2013] EWHC 3685 QB

The Defendants were father and son employed by Croesus as financial advisors. Their employment contracts contained 12 month restrictions on soliciting and/or dealing with Croesus’ clients. Mr Bradshaw senior retired and his son went to work for a competitor. Croesus then issued proceedings against him for an injunction and damages for loss of new business, recurring income and future income alleging unlawful means conspiracy, inducement of a breach of contract and breach of confidential information, successfully. The judge was satisfied that the 12 month non-solicitation and non-dealing covenants extended no further than was reasonably necessary for the protection of Croesus’ business and the interest of the public.

The judge was unpersuaded that there was no solicitation where it is the customer who first contacts the ex-employee. There is no general rule that wherever a customer initiates contact the ex-employee can respond seeking his custom without breaching a non-solicitation restriction. However a claim for damages by the former employer will be weakened if it has failed to take reasonable steps to mitigate its own losses by for example putting forward a new advisor into the relationship at the earliest opportunity. As conspiracy was also proved damages were awarded of £30,000.

Key point: Ex-employees are free to pursue their trade and earn money immediately so long as they do so without breaching their non-solicitation covenants or doing business with their former employer’s clients.

  • Garden leave

JM Finn & Co Ltd v Holliday [2013] EWHC 3450

Mr Holliday had been employed by Finn as an investment advisor from 1999 until his resignation in July 2013. He managed £200m of funds. Following his resignation Finn had exercised an express contractual right to place Mr Holliday on garden leave and sought to hold him to his 12 month notice period which he had agreed in 2008 when his salary was tripled. Within a month of having been placed on garden leave, Holliday resigned summarily relying on an alleged repudiatory breach of contract by Finn and indicating that he regarded himself as free to commence his new employment. Finn obtained an interim injunction enforcing the garden leave and notice period when Mr Holliday refused to assure him that he would not take up new employment.

At the full trial, the High Court extended the injunction until the expiry of Mr Holliday’s 12 months’ notice period in July 2014. This was considered to be no more than was necessary to protect Finn’s legitimate business interests in connection with its clients. The court held that garden leave in this context had to be justified on similar grounds as a restrictive covenant because long periods of garden leave were capable of abuse. Finn explained that it would need a reasonable period in which to establish a relationship between the clients and a new investment manager. As Mr Holliday would suffer no financial loss as he was to be paid his full salary and benefits and would not lose his new job, the court did not believe that his skills would diminish over the course of the notice period. 12 months was therefore a reasonable time for the stockbroking firm to establish itself with Mr Holliday’s client base.

Key point: A 12 month long garden leave period can be reasonable in these circumstances where a client base needs to be secured.

  1. Dismissal for some other substantial reason

Z v A UKEAT/0203/13

A was employed as a primary school caretaker and site manager. In April 2010 the school was informed by the police that an allegation had been made that A had some time ago abused a child. A denied the allegations and was suspended. Police investigations continued. After a year, when he had not been charged with any offence the head teacher recommended to the school governors that he be dismissed on the ground that trust and confidence in him had broken down to the point where it was irreparable. A was dismissed and his internal appeal was unsuccessful. The Tribunal found that a bare accusation could not in itself, even if serious, amount to “some other substantial reason”. His dismissal was unfair. Both parties appealed to the EAT, the school on liability and A on quantum. The EAT upheld the Tribunal’s decision. The dismissal was unfair. Where there are unsubstantiated allegations the issue is particularly difficult for an employer particularly here where it is caring for children. The duty of such an employer is first and foremost to the children but that does not remove its responsibility to its employees. There was a scant procedure applied by Z in dismissing A and it acted unreasonably.

Key point: While an employer’s decision to dismiss where there has been an allegation but no conviction of child abuse may be fair, this is not an inevitable result. When considering dismissal for SOSR the reason must be “…of a kind justifying dismissal…”

  1. Holiday pay

Lock v British Gas Trading Limited and others C-539/12

Advocate General Bot in this case delivered his opinion that commission payments should be taken into account when calculating a worker’s holiday pay.

Mr Lock was an internal sales consultant. His remuneration was made up of basic salary and sales commission, each of which was paid on a monthly basis. His commission was variable depending on his performance. Commission was paid a number of months in arrears and accounted for an average of 60% of his monthly remuneration. In December 2012 Mr Lock took a period of annual leave and therefore in the months following his annual leave his salary was significantly lower. He brought a claim before the Tribunal for outstanding holiday pay. The matter was referred to the Advocate General to determine the following: should commission payments be included as part of any holiday pay calculation, and if yes, how should employers determine the appropriate amount of commission to be included. Mr Lock’s pay should include an amount to reflect the commission he would have earned had he not taken annual leave. It was for the national court to determine how that amount should be calculated. It could be calculated over a representative period, say the previous 12 months. The fact that he received commission payments that fell due while he was on annual leave did not address the fact that he was unable to earn further commission while on leave. The opinion will be reconsidered by the European Court of Justice.

Key point: If the ECJ does follow this opinion, the decision is likely to have wide-reaching consequences for many businesses and its workers.

  1. Religious discrimination

Mba v London Borough of Merton [2013] EWCA Civ 1562

Ms Mba was employed as a care assistant in a children’s home. She was a Christian who believed it was wrong to work on Sunday. She was required to work 2 out of 3 weekends but after 2 years of accommodating her wish to abstain from Sunday shifts owing to her beliefs Merton required her to work as contractually obliged. She refused to do so and subsequently resigned alleging religious discrimination. She claimed that the requirement for staff to work Sunday shifts as proposed amounted to a PCP that discriminated against Christians and hence her on the grounds of religion or belief. The Tribunal held that the PCP put Christians at a particular disadvantage but this was a proportionate means of achieving Merton’s legitimate aims. Thus Ms Mba could lawfully be required to work on Sundays. The Tribunal stated that her belief that Sundays should be a day of rest while deeply held was not a core component of the Christian faith. She appealed this decision but was unsuccessful. She further appealed the decision to the Court of Appeal.

A majority of the Court of Appeal held that what the Tribunal had meant by saying that an objection to Sunday working was not a core component of the Christian faith was that the group potentially affected by Merton’s PCP was relatively small but the Tribunal was wrong to consider it. However on proportionality the Tribunal’s decision was plainly and unarguably right. Once Merton had established that there was really no viable or practical way of providing the service other than by requiring all staff to work on Sundays Ms Mba’s claim was bound to fail. Merton was justified in requiring a Christian to work on Sundays.

Key point: Religious discrimination is a protected characteristic and these claims will always be fact sensitive, but if the PCP was a proportionate means of achieving a legitimate aim (such as providing proper services) the claims will fail.

  • Philosophical belief

Olivier v Department of Work and Pensions ET/1701407/2013

At the preliminary hearing an Employment Tribunal considered whether Mr Olivier’s belief in democratic socialism qualified as a philosophical belief under the Equality Act 2010. It held that it did. Mr Olivier worked for DWP as a benefits adviser in a job centre. He had been an active member of the Labour party for over 30 years, had stood as a Labour candidate in council elections and was elected as a Labour councillor. Mr Olivier had strong belief in democratic socialism and he was dismissed for a gross misconduct for not seeking management permission before his most recent standing as councillor recently and for writing a letter to the newspaper criticising the Government’s taxation and benefits policies. He claimed that he had been dismissed because of his affiliation with the Labour party. On the balance of probabilities the Tribunal found that Mr Olivier had more than a passing interest in, and was not merely a repeat voter for, the Labour party. His belief was of a substantial aspect of human life and it had attained a certain level of seriousness and importance. Nonetheless, the Tribunal found that Mr Olivier’s claims had little prospect of success and made a deposit order against him.

Key point: The case is only a first instance and therefore not binding on other Tribunals but it is an example of how a member of a political party may be able to bring their political beliefs within the scope of discrimination legislation. Membership of or supporting a political party would not on its own be sufficient to qualify as a philosophical belief at present. The case is a useful illustration for other claimants who may consider that the nature of their political affiliation is such as to grant them protection nevertheless.

  • Witch wins case for religious discrimination

Karen Holland, a witch who was sacked after swapping her shifts at a Londis supermarket in Hemel Hempstead to attend a Wiccan ceremony to celebrate Halloween has been awarded £15,000 after winning her claim for religious discrimination. Ms Holland is thought to be the first pagan to win such a case.

Source: Times, 16 December 2013.

  1. Unfair dismissal – relevance of previous warnings

Rooney v Dundee City Council UKEATS/0020/13

Ms Rooney was employed by Dundee CC between 1985 and March 2012 when she was dismissed. At the time of her dismissal she had a final written warning outstanding about a disregard of an express instruction from her senior manager. That warning was to stay on her record for 15 months from September 2010. She appealed against that but no appeal was ever heard. A further incident took place in December 2011 when she failed to follow an instruction and at the disciplinary hearing in March 2012 she was dismissed. She appealed against her dismissal but was unsuccessful. As part of the appeal the circumstances of her first warning were reviewed and the decision was taken that the warning was justified.

The Employment Tribunal found the dismissal was not unfair. On appeal to the EAT she claimed that the fact that there was an appeal outstanding meant that she had been unfairly dismissed. Dundee had considered that the final written warning was still live and the second incident had similarities to the circumstances for which the first written warning was imposed, therefore taken together the incidents justified her dismissal. The EAT agreed and held the dismissal was fair. The dismissal was within the range of reasonable decisions an employer might take, notwithstanding the outstanding appeal.

Key point: A final warning implies that any subsequent misconduct will often result in dismissal, although where relevant and possible any outstanding appeal, in respect of a previous warning relied on by the employer, should be disposed of first.

And finally…What should an HR Director be thinking about at this time? Click here for the employment law to do checklist for January 2014.