Gowling WLG's experts bring you five significant employment law developments you should be aware of this month - what they are and how they might impact your business

  1. Disability discrimination: reasonable adjustments and employer's failure to follow its own stated policy.
  2. TUPE: on employer's insolvency arrears of equal pay can be claimed from the NIF with liability for excess passing to transferee.
  3. Vicarious liability: employer not liable for injury at work's party.
  4. Discrimination - injury to feelings award bands uprated.

1. Disability discrimination: reasonable adjustments and employer's failure to follow its own stated policy

An employer has a duty to make reasonable adjustments where it knows (or ought reasonably to know) that a person has a disability and there is a provision, criterion or practice (PCP) which places the disabled person at a substantial disadvantage compared to those who are not disabled.

Whether a particular step is a reasonable adjustment will depend on the circumstances of the particular case. When assessing whether a step is 'reasonable' for an employer to take, tribunals will consider various factors including:

  • the extent to which the adjustment will ameliorate the disadvantage;
  • the extent to which it is practicable;
  • the financial and other costs of making the adjustment;
  • the employer's financial and other resources;
  • external assistance the employer can access; and
  • the nature and size of the employer.

In Linsley v Commissioners for Her Majesty's Revenue and Customs, the Employment Appeal Tribunal (EAT) points out that if an employer's own policy recommends a particular step, the employment tribunal is entitled to infer that the employer considers it to be practicable. In other words, a company policy is a factor which should be given significant weight in assessing the reasonableness of the adjustment, regardless of whether the policy gives rise to any contractual right.

In this case, the employer had a national policy on the use of its staff car parks. Priority was to be given to staff requiring a parking space as a reasonable adjustment, whether or not they were a blue badge holder. The employer knew Mrs Linsley had ulcerative colitis which amounted to a disability. As a result of her condition she could require access to a toilet urgently and the condition was aggravated by stress. Between 2012 and 2016 she was provided with a dedicated parking space near to her workplace entrance as a reasonable adjustment. When she transferred to work from a new site she requested a dedicated parking pace. However, instead of being provided with a dedicated parking space, she was given something which the employer appeared to regard as equivalent, namely temporarily parking in an unauthorised zone if she failed to get a space near the building on a first come first served basis.

The tribunal held that the employer had not been in breach of its duty to make reasonable adjustments. It found that the alternative arrangements constituted a reasonable adjustment. The tribunal did note that the employer had failed to abide by its own policy on parking space allocation, but that the rights contained in it were discretionary and could not be depended upon.

On appeal, the EAT held that when the tribunal was assessing whether the provision of a dedicated parking space was a reasonable adjustment, it should have considered the existence of the car parking policy. An adjustment that is recommended in the employer's own policy is one that is likely, at least as a starting point, to be a reasonable adjustment to make. While there may be good reasons for departing from the policy, in such cases the employer ought to be able to provide a cogent reason for doing so.

In this case, the employer departed from its policy. The only explanation for this appeared to be that the relevant managers acted in ignorance of it. This was not a good reason for failing to apply the policy. The tribunal had incorrectly diminished the policy's significance by referring to it as non-contractual or discretionary. As the tribunal did not find that the employer had actively considered the policy or exercised any discretion as to why it should not apply, the tribunal would need to reconsider the issue.

Lesson for employers: a company policy does not need to be contractual to be relevant when determining the reasonableness of an adjustment. An employer is unlikely to be able to show that it discharged the duty to make reasonable adjustments where it fails to follow its own policies, without a considered and cogent reason for doing so. It is also best practice to explain any reason relied upon to the disabled employee.

2. Transfer of Undertakings (Protection of Employment) Regulations (TUPE): on employer's insolvency arrears of equal pay can be claimed from the National Insurance Fund (NIF) with liability for excess passing to transferee

In Graysons Restaurants Ltd v Jones and others, the Court of Appeal has now confirmed that arrears of pay includes equal pay arrears, even if the equal pay claim remains to be determined at the time of the insolvency.

In this case, equal pay claims were lodged in 2007 by a group of female employees against their then employer, Liverpool City Council. The women worked in local schools in catering roles and were paid less than their male comparators, despite being employed on work of equal value. The Council had, however, pleaded "material factor" defences to justify the difference in pay. While the equal pay litigation was continuing, the employment of the equal pay claimants was subject to a number of TUPE transfers, ultimately resulting in a transfer to Graysons from an insolvent company.

The effect of regulation 8 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 is to preserve the normal rights of transfer and protection under TUPE, save that not all of the transferor's debts pass to the transferee. Instead, the employees have the right to claim certain debts from the NIF. This lists certain payments that are to be treated as "arrears of pay" and provides for up to eight weeks of pay arrears to be covered by the NIF where the employer becomes insolvent (subject to the statutory limit on a week's pay, currently £525).

The Court of Appeal has now confirmed that liabilities arising from an equal pay claim can be arrears of pay within the insolvency protection scheme, even if those claims are undetermined. This means, if the equal pay claims are determined in the claimants' favour, they can claim up to eight weeks' (capped) arrears of equal pay from the NIF and this liability does not transfer to the transferee. To the extent that the liability for arrears of equal pay exceed the amount recoverable from the NIF, liability transfers to the transferee.

The insolvency provisions of TUPE aim to balance the attractiveness of failing businesses on the one hand, with ongoing protection of the rights of employees of such business on the other. A purchaser of a business from a company in administration needs to be aware that any liability in excess of the eight week sum guaranteed by the statutory scheme transfers to the transferee and is not extinguished. Transferees should therefore be wary of the potential for a liability for equal pay arrears to arise. Ideally, such potential risks will be disclosed as part of due diligence and ideally covered in warranties and indemnities from the seller. But the reality is that an administrator is likely to provide limited due diligence, and limited (if any) warranties and indemnities, so price negotiation may be the only protection mechanism if it can be negotiated.

3. Vicarious liability: employer not liable for injury at work's party

Vicarious liability is a common law principle of strict, no-fault liability for wrongs committed by another person. In an employment relationship, it involves an employer being liable for the wrongs committed by an employee where there is a sufficient connection between those wrongs and the employee's employment such that it would be fair to hold the employer liable. It does not matter that the employer itself has committed no wrong.

A number of judgments on employer vicarious liability over recent years have expanded the scope of conduct meeting the "sufficient connection" test. The courts have made it clear that for vicarious liability to arise, it is not a question of whether the employee was "'on the job" in a strict traditional sense, when the act was committed. Instead, the question is was the employee acting "within the field of activities assigned to them". For example, an employer was liable for a Managing Director's violent assault of a colleague at an impromptu after-party following a work's Christmas party as the MD "chose to wear his metaphorical managing director's hat" at the time of the incident. Another employer was vicariously liable for a data breach by a rogue employee as access to the data was within the "field of activities assigned to him". The fact that the rogue employee's actions were committed from his personal computer and designed to harm the employer were irrelevant, an appeal in this case is currently pending before the Supreme Court.

However, the High Court in Shelbourne v Cancer Research UK, reminds us of the limits on the "sufficient connection" test. The High Court has held that an employer was not liable for personal injuries sustained by one of its employees at a works' Christmas party. The injuries had been caused by the actions of an inebriated colleague who had attempted to lift her while dancing, but instead dropped her causing a serious back injury.

In this case, the wrongdoer worked as a research scientist. He was not doing his laboratory work when he attempted to lift the claimant on the dance floor. The employer did not require him or anyone else to attend the party. Although he was present in the same building that housed the laboratories, the context of his presence was radically different. In the circumstances of this case, the "field of activities" was not sufficiently connected with what happened at the party as to give rise to vicarious liability.

As ever, these types of cases are highly fact-sensitive. As the High Court states, the requirement to address the field of activities of the wrongdoer "broadly" does not mean that the concept has no boundaries.

4. Government resurrects plans for cap on public sector exit payments

HM Treasury has published draft Restriction of Public Sector Exit Payments Regulations 2019, which resurrect plans to introduce a £95,000 cap on exit payments, along with draft guidance. The draft regulations and guidance are subject to consultation, which closes on 3 July 2019.

The new cap will apply to the majority of public bodies which are set out in a schedule to the Regulations. The type of payments to which the cap will apply are identified in the draft regulations including any non-exempt termination payments which represent a cost to the employer, including ex gratia sums, redundancy payments, pension contributions (including any "pension strain" payments to provide unreduced pension before normal pension age), any payment in lieu of notice that exceeds one quarter of the employee's annual salary, and shares and share options.

Any payment made pursuant to an award of compensation under the ACAS arbitration scheme or a settlement or conciliation agreement are also caught, but a special mandatory relaxation of the rule will apply in discrimination and whistleblowing claims where the minister is satisfied on the balance of probabilities that an employment tribunal would uphold the claim and award compensation. Relaxation of the rules will also be applied for payments made as a result of TUPE.

There will also be discretion to relax the rule if applying it would cause undue hardship or significantly inhibit workforce reform.

Payments specifically excluded from the cap include death in service payments, injury compensation, pay in lieu of untaken holiday and pay in lieu of notice that does not exceeds one quarter of the employees' annual salary.

Where two or more public sector exits occur in respect of the same person within a period of 28 consecutive days, the total amount of the exit payments made to that person cannot exceed the £95,000 cap. With the Regulations setting out the sequence in which exit payments will be considered paid when applying the cap, Public sector workers will be obliged to disclose their departure and eligibility to an exit payment to any other interested or affected public bodies, for example those responsible for paying them as office holders.

An implementation date is not yet confirmed but the Consultation refers to the reforms being introduced "without further delay" following closure of the consultation. The Chief Secretary to the Treasury has also alluded to the cap being brought in later this year, so public sector employers subject to the Regulations need to start planning now.

5. Discrimination: injury to feelings award bands uprated

The Equality Act 2010 expressly provides that compensation for discrimination may include (or be made up entirely of) compensation for injured feelings. A claimant can recover for injury to feelings even when they have suffered no financial loss.

As the equalities legislation is silent on how a tribunal should evaluate injured feelings financially, it has been left to the tribunals and courts to provide guidance. In 2002, in the leading case of Vento v Chief Constable of West Yorkshire Police (No 2), the Court of Appeal set clear guidelines setting out three bands of potential awards, known as the "Vento bands". After 15 years of no change, the original bands were revised for inflation in September 2017 and again in April 2018.

In what appears to be a move towards annual uprating, the Vento bands have increased again for claims presented on or after 6 April 2019.The bands are now:

  • A lower band of £900 to £8,800 (previously £900 to £8,600)
  • A middle band of £8,800 to £26,300 (previously £8,600 to £25,700)
  • An upper band of £26,300 to £44,000 (previously £25,700 to £42,900)

The Tribunal can award over £44,000 for the "most exceptional" cases.

The revised bands apply to claims in England and Wales.