Collective Redundancies – Advocate General’s guidance on “establishment”

The Advocate General has given his opinion in the ‘Woolworths’ case (USDAW v. Ethel Austin Ltd (in administration)) and two other linked cases, on the meaning of “establishment” in the context of the threshold for triggering collective redundancy consultation. If confirmed by the European Court of Justice, it could significantly reduce UK employers’ potential redundancy consultation liabilities when they make large scale redundancies.

The Advocate General’s view is that “establishment” under the EU Directive refers to the local employment unit. This opinion contradicts the EAT’s decision in the Woolworths case. Assuming the ECJ follows the opinion when giving its judgment, it is good news for employers, because it would mean that collective consultation obligations would only apply to larger establishments where there were sufficient numbers of affected employees.

Read more for a detailed analysis of the Advocate General’s opinion and its implications.

Unilateral changes to terms and conditions of employment

Three cases this month highlight the difficulties employers face when they try to introduce changes to employment terms without agreement. Although employers may try to reserve a power in the contract to make changes unilaterally, the courts and tribunals are reluctant to accept that such a power is effective unless the clause is very clear in its meaning and the employer exercises it reasonably.

Employer unable to unilaterally change its absence management trigger point

In Sparks and another v. Department for Transport the DfT wanted to make changes to its staff handbook to set a new trigger point for absence management procedures. There was a clause entitling the DfT to make unilateral changes, but only if the changes weren’t detrimental to the employees. The High Court rejected the argument that the proposed changes to the trigger point were in fact beneficial to the employees. It therefore reinstated the original contractual terms.

Attempts to reduce sickness benefits were invalid

In the second case, Norman and others v National Audit Office, the NAO sought to make changes to staff leave and sick pay entitlements. When the union did not agree, the NAO made the changes unilaterally, relying on a general clause which stated “… [the terms and conditions] are subject to amendment; any significant changes affecting staff in general will be notified by Management Circulars.”

The EAT held that this wording was not clear and unambiguous and was not therefore a unilateral power to vary, and reinstated the original terms.

Imposed changes to working hours were ineffective

In Hart v. St Mary’s School (Colchester) Ltd, the school required a teacher to spread her working hours across five days a week rather than three days. The school tried to rely on wording saying that working hours “may be subject to variation depending on the requirements of the school timetable”. The EAT said the wording was not sufficiently clear when looked at in context to allow the school to unilaterally vary the teacher’s working days.

As these three cases highlight, attempts to rely on unilateral variation wording will rarely be effective, especially where the changes are detrimental to employees. In practice, if an employer doesn’t think it has a clear right to vary terms and conditions unilaterally, and it cannot obtain its employees’ agreement to the changes, it should consider instead terminating and re-engaging staff on the new terms.

18 month delay before resigning whilst accepting sick pay prevented constructive dismissal claim

In Colomar Mari v. Reuters Ltd the employee alleged that her employer had committed a fundamental breach of contract which entitled her to resign. She went off sick for 18 months, during which time she received 39 weeks’ sick pay and engaged with the employer about other workplace benefits and issues. It was only after that period that she claimed constructive dismissal.

The EAT, agreeing with the Employment Tribunal below, held that the employee had affirmed her contract by accepting sick pay, and by having discussions with the employer about other matters relating to continuing employment. As a result, she had waited too long before resigning in response to the fundamental breach of contract and so couldn’t claim constructive dismissal.

Whether or not an employee has behaved in a way that indicates that they intend their employment to continue – with the effect that they lose the right to claim constructive dismissal – depends on the facts of each case. The length of delay before the employee resigns will be relevant, as will other evidence of how they are treating the employment relationship. In this case, accepting 39 weeks’ sick pay was a factor suggesting the employee had affirmed the contract. Sick employees typically have more leeway in the amount of time they delay before resigning, where for medical reasons their sickness affects their ability to decide whether or not to resign. However, in this case there was clear evidence that the employee was able to make such a decision well within 18 months of going off sick.

Non-payment of bonus to disabled employees with warnings for high levels of sickness absence was disability-related discrimination

In Land Registry v. Houghton and others the EAT said that the employer had discriminated against disabled employees who didn’t receive payment under a discretionary bonus scheme. Employees who received a formal warning were not eligible a bonus. The employees here had received a warning for high levels of sickness absence. The employer had already made reasonable adjustments to increase the trigger level before they received such a warning.

Despite this, their claims for disability-related discrimination succeeded, because not receiving the bonus was unfavourable treatment related to their disability which the employer couldn’t objectively justify. Whilst the employer had a legitimate aim of encouraging and rewarding good performance and attendance, the scheme was not operated in a proportionate way to meet that aim. Firstly, under the scheme rules, managers had a discretion to ignore warnings about misconduct when deciding whether an employee should get a bonus, but there was no similar discretion to discount sickness warnings, and it was not clear why the two types of warning were treated differently. Further, the lack of discretion meant that no account could be taken of any improvement in performance post-warning, which went against the bonus scheme’s legitimate aim.

Employment status of director with no clear contract

In our July 2014 Two Minute Monthly, we reported on the EAT decision in Stack v Ajar-Tec Ltd. The EAT said that Mr Stack, a director and shareholder in a company, who had an arrangement to do work for the company, but didn’t receive any remuneration for providing his services, was unlikely to be an employee.

Court of Appeal overturns EAT – unpaid director and shareholder was an employee

The Court of Appeal has now disagreed with the EAT. In particular, the Court of Appeal said that it was possible for a contract to be entered into partly on express terms and partly on implied ones. There had been an express agreement that Mr Stack would provide his services to the company. The fact that no express term had been agreed in relation to remuneration was not fatal to a finding of employee or worker status. The Employment Tribunal that originally heard the case was entitled to find that there was an implied term that he would be paid for doing the work.

This is a long running case, which has now twice been considered by the Court of Appeal. It remains a strong reminder of the importance of clearly documenting the terms of employment arrangements, particularly for senior individuals, whose terms may be subject to negotiation.

Early conciliation rules for extension of time limits interpreted in a generous way

The Employment Tribunal in Booth v. Pasta King UK Ltd has given a generous interpretation to the way the the Acas Early Concilation (EC) time limit extension rules work. For a detailed explanation of the EC procedure generally, click here. The EC extension of time limits rules broadly provide that:

  1. time stops for the period during which EC is ongoing (‘stop the clock’);
  2. where the time limit expires sometime during the period between starting EC and one month after EC finishes, the time limit is extended to one month after EC finishes.

The employment judge in the Booth case said that rules 1. and 2. should be applied cumulatively. In other words, you first extend the original time limit date by the ‘stop the clock’ period. This gives a revised time limit date, which is what is used in rule 2, to decide whether the time limit is then extended to one month after EC finishes.

The EC time limit extension rules are ambiguously drafted, and an alternative, more limited interpretation is to use in rule 2 the original time limit date provided by statute for that particular claim, rather than the revised time limit date worked out under rule 1. You can get different results depending on whether you use the limited or generous interpretation.

As this case indicates, the EC time limit extension provisions are complicated and are already leading to secondary litigation on time limits. Booth is only an Employment Tribunal  decision and so has no binding authority. Pending clarification of this issue by the EAT, employers should apply both interpretations of the EC time limit extension rules and, where this gives two different extended time limit dates, bear that in mind when deciding whether to argue that a claim has been brought out of time.

A single person can be an organised grouping of employees under the TUPE ‘service provision change’ test

The Court of Appeal in Rynda (UK) Ltd v. Rhinjsburger confirmed that an individual employee transferred under the TUPE service provision changes rules because she was ‘an organised grouping of employees’. The employer had consciously arranged its affairs so that the employee, a commercial property manager, was solely responsible for managing a particular portfolio of Dutch properties. It was not just a matter of happenstance that the employee was managing those properties. When the business transferred to another organisation, the employee therefore transferred with it under TUPE.

2015/16 increases to employment rates and limits

From 5 April 2015:

  • the flat rate of statutory maternity, paternity, adoption, and shared parental pay increases to £139.58 pw (from £138.18pw).

From 6 April 2015:

  • the unfair dismissal compensatory award cap increases to £78,335 (from £76,574).
  • The limit on a week’s pay, used, among other things, to calculate statutory redundancy pay and the unfair dismissal basic award, increases to £475 (from £464).
  • the weekly rate of statutory sick pay increases to £88.45 (from £87.55).