Welcome to our new quarterly round up of employment law developments.

Discrimination

Disability discrimination and reasonable adjustments

The Equality Act 2010, like the Disability Discrimination Act 1995, imposes a duty on employers to make reasonable adjustments to premises or working practices to help disabled job applicants and employees. But what amounts to a 'reasonable adjustment'? This is a question which repeatedly troubles tribunals.

Aim of adjustment

In O'Hanlon v Commissioners of HM Revenue & Customs [2007], the Court of Appeal confirmed that employers would only very rarely need, as a reasonable adjustment, to give more sick pay to a disabled person than it would otherwise give to a non-disabled person on sick leave. A possible exception may arise where the employer has caused the absence by failing to make different reasonable adjustments which would have enabled the employee to remain in work (Meikle). The purpose of the disability discrimination legislation is to enable disabled persons to play a full part in the world of work, not to "treat them as objects of charity".

Two recent decisions provide further confirmation that the duty to make reasonable adjustments is designed to enable disabled persons to fully participate in the world of work, not provide compensation for being unable to do so.

In Royal Bank of Scotland v Ashton, the tribunal needed reminding of the O'Hanlon decision. In this case, the Bank had already generously adjusted trigger points (by some 800 per cent) under its absence policy in relation to Mrs Ashton due to her disability. When Ms Aston reached her adjusted trigger point, disciplinary action was taken which meant she was not paid sick pay during the period of her disciplinary warning of 12 months. Mrs Ashton claimed that it was a reasonable adjustment for the bank to continue to exercise its discretion and further adjust the relevant trigger points, and the tribunal agreed! Overturning the tribunal, the Employment Appeal Tribunal (EAT) reiterated that only in exceptional cases would withholding sick pay in accordance with a sickness absence policy amount to a failure to make reasonable adjustment.

The EAT was also asked in Tameside Hospital NHS Foundation Trust v Mylott, whether an employer had breached its duty to make reasonable adjustments in failing to help a disabled employee to retire on ill-health grounds. Mr Mylott was given 12 weeks' contractual notice of dismissal following the trust's attendance management procedure. He was informed that if he was interested in ill-health retirement, he would need to take the matter up with the trust's human resources/occupational health departments. Mr Mylott did not follow this up.

Mr Mylott later claimed that the trust should have actively helped him to retire on ill-health grounds and failure to do so amounted to a breach of its duty to make reasonable adjustments. The tribunal agreed.

The EAT disagreed. The duty to make reasonable adjustments does not extend to enabling a disabled employee who is no longer able to work to leave the employment on favourable terms. Reasonable adjustments are steps which make it possible for the employee to remain in employment and do not extend to, in effect, providing compensation for being unable to do so. Please note that employers still need to consider their duty of trust and confidence. In this case it was important that the dismissing officer did inform Mr Mylott that he could enquire about ill-heath retirement with the appropriate department, but he chose not to do so.

Cost of adjustment

The Disability Discrimination Act 1995 sets out a list of factors that tribunals must take into account when determining whether an adjustment is reasonable. This includes "financial and other costs which would be incurred by the employer in taking the step and the extent to which taking it would disrupt any of his activities". The list is now set out in the Equality and Human Rights Commission (EHRC) Code of Practice as factors which may be taken into account.

In Cordell v Foreign & Commonwealth Office (FCO) an employment tribunal found that the FCO did not breach its duty to make reasonable adjustments for a deaf senior diplomat when it withdrew an offer to post her to Kazakhstan. The tribunal found that, viewed objectively, the £250,000 annual cost of the proposed adjustments to support the employee in the new post was unreasonable.

The case illustrates that the reasonableness of an adjustment will not simply be determined by an employer's available resources, although these are a relevant factor. With a reported annual budget of £2.2 billion, the FCO may arguably have been able to afford the cost of the proposed adjustments. However, in finding the cost of the proposed adjustments unreasonable, the tribunal took account that it was disproportionately larger than other allowances paid by the FCO and would account for a very large proportion of the FCO's disability budget. We now await EAT guidance as to the role of cost in determining the reasonableness of an adjustment, as an appeal by Mrs Cordell will be heard on 16 June.

Philosophical Belief

Growing list of potentially protected beliefs

Under the Employment Equality (Religion or Belief) Regulations 2003 the term 'belief' included any 'religious or philosophical belief'. The Equality Act 2010 includes substantially the same broad definition.

In 2008, the EAT in McClintock v Department of Constitutional Affairs held that views can properly be considered a philosophical belief if they have "sufficient cogency, seriousness, cohesion and importance and are worthy of respect in a democratic society". Since then we have had a growing body of case law as to what may amount to a protected 'belief'. So far, potentially protected beliefs have included a belief in man-made climate change (Grainger) and a spiritualist belief in the power of psychics (Power). There are now two additions.

The Southampton employment tribunal has now added to the list a belief in the sanctity of life extending to a fervent anti-hunting belief. The tribunal found in Hashman v Milton Park (Dorset) Ltd t/a Orchard Park, as a preliminary issue, that a professional gardener and lifelong animal rights activist's beliefs about fox hunting fell within his general commitment to the sanctity of life (which also encompassed his views on veganism, environmentalism and animal rights activism). Although interestingly an example of veganism from the January 2010 draft of the EHRC Code of Practice did not make its way into the final version.

However, the Hashman decision should not necessarily be seen as paving the way for discrimination claims by animal rights activists. The tribunal emphasised that its decision was very much based on the facts and evidence before it and did not mean that all opponents of fox hunting necessarily hold a philosophical belief as defined under the discrimination legislation.

In Maistry v The BBC, the Birmingham employment tribunal has also added to the list a belief that "public service broadcasting has a higher purpose of promoting cultural interchange and social cohesion." We wait to see if Mr Hashman and Mr Maistry are able to establish that their respective dismissals were in fact due to their beliefs.

Both decisions are on preliminary points determined by tribunals. As such, they are not binding on other tribunals. Nevertheless these decisions raise interesting questions about the extent to which a moral issue or lifestyle choice qualifies as a protected philosophical belief.

Age Discrimination

Windfalls

Back in 2008 the EAT heard the case of Loxley v BAE Systems Land Systems (Munitions & Ordnance) Ltd. It found that in relation to an enhanced redundancy scheme, it was potentially justifiable both to exclude those who are entitled to immediate benefits from their pension fund, and to use tapering provisions for those approaching pension age. In that case the tribunal had found that the employer had a legitimate aim of ensuring that those who were entitled to a pension after their redundancy did not receive a 'windfall' and use of a tapering mechanism was a proportionate means of achieving that aim. A similar prevention of windfall decision was reached last year in Kraft Foods UK Ltd v Hastie.

But does the ability to take a pension always mean that an enhanced redundancy payment will be a 'windfall'? Well, no.

In Ormerod v Cummins Engine Company Ltd, an employee approaching retirement age successfully disputed that a full enhanced redundancy payment would in fact be a windfall. Mr Ormerod was able to establish before the Newcastle employment tribunal that by taking his pension early it would result in a £5,000 reduction in his pension lump sum and £1,000 reduction in his annual pension. He also lost the opportunity to work and further enhance his pension, the opportunity to work overtime, potential bonuses and the opportunity to request working beyond the age of retirement. Without evidence of the value of such benefits, the employer could not show that Mr Ormerod had in fact achieved a windfall.

While prevention of a windfall remains a potentially legitimate aim, establishing that a windfall would have occurred is more complicated.

Costs

More generally, to what extent can economic factors form part of a justification defence?

Last year in Woodcock v Cumbria Primary Care Trust, the EAT held that it was legitimate to seek to avoid incurring costs where compliance with dismissal procedures was cut short so as to avoid enhanced pension rights vesting. The use of a shortened dismissal process was objectively justified.

In Mr Woodcock's case his post as chief executive "disappeared" in a reorganisation and he was not selected for the successor post. He then spent 12 months working in temporary positions during which time the employment tribunal found that all possible redeployment options had been fully exhausted.

Although the trust could have instigated its formal redundancy process at any time during the previous 12 months, it did not do so and the situation was simply left to drift. When finally taking steps to dismiss Mr Woodcock for genuine redundancy, the trust noted that prompt action was required to avoid incurring an increased pension liability costing between £500,000 and £1,000,000. The trust therefore accelerated the redundancy process, bypassing the consultation stage entirely to ensure his dismissal took place before enhanced pension rights vested.

The tribunal and EAT found the potentially discriminatory act was not the dismissal as such but its timing, and more particularly the giving of notice before a consultation meeting. However the treatment was objectively justified as a proportionate means of achieving the legitimate aim of avoiding a vast additional cost. This was because a consultation meeting would have changed nothing in the circumstances of the case. All possible redeployment options were already exhausted.

The EAT found the justification issue in this case fell within the so-called 'costs plus' justification taken from Cross v British Airways plc [2005]. The discriminatory act was based not only on cost but also on preventing the employee receiving a benefit he had no legitimate right to expect (a windfall). In the EAT's view, as a matter both of principle and of common sense, considerations of cost must be admissible in considering whether a discriminatory act may nevertheless be justified.

The EAT also expressed the view, although it was not directly relevant to their decision, that it was "hard to see" why cost considerations can never, by themselves, constitute sufficient justification, and that the need to "find the other factor" is likely to produce "arbitrary and complicated reasoning".

The extent to which 'increased cost' can justify an otherwise age discriminatory act or practice is an increasingly important issue for employers needing judicial clarity. The Court of Appeal will hear a further appeal in the Woodcock case on 31 October. Fingers crossed we will get the needed clarification. Definitely, one to watch!

Unfair dismissal

Potential for tribunals to revisit unappealed warnings

When taking disciplinary action, employers may take account of live warnings on the employee's personnel file. A tribunal will not ordinarily look behind the validity of earlier warnings, unless a warning is itself 'manifestly inappropriate' or given for an 'oblique motive'.

In Sakharkar v Northern Foods Grocery Group Ltd t/a Fox's Biscuits, the employer had a detailed four stage absence procedure. An employee's absences triggered the start of various stages potentially leading to stage four dismissal. In this case, a genuine mistake by a line manager meant some absences triggering stage three were incorrectly included. At the time, the employee had also not noticed the error and so never appealed the stage three warning. In fact the error was only picked up by the tribunal itself in the course of the proceedings. Despite the error, the tribunal nevertheless concluded that the dismissal was fair as it was a genuine and reasonable error which the employee did not appeal. The EAT disagreed.

The EAT has now said the key question is whether in the circumstances, including the size and administrative resources of its undertaking, the employer acted reasonably. The employer had a HR department which had express responsibility for monitoring absence and attending all final review and dismissal hearings. Accordingly, a specialist personnel resource should have been deployed to support a fair and consistent application of the absence policy. Also, the employee's failure to appeal the stage three warning was irrelevant as the warning was 'manifestly inappropriate'.

This case serves as a warning of the potential for an apparently valid unappealed warning to be revisited by a tribunal rendering a subsequent dismissal unfair. It also highlights the need for HR involvement to ensure fair and consistent application of procedures.

Extent of an employer's knowledge

When deciding if the employer acted reasonably, the tribunal may only take into account facts known to the employer at the time of the dismissal. However, what is the extent of an employer's knowledge? In Orr v Milton Keynes Council, the Court of Appeal considered whether facts known to an employee's manager, which were concealed from the investigating manager and the decision-maker, should be deemed to be 'known by the employer' rendering the employee's dismissal unfair.

The Court of Appeal accepted by majority, that in a large organisation, inevitably, there must be delegation to individuals who have authority to make decisions on the employer's behalf. Crucially, it should only be the knowledge or state of mind of that individual that is relevant. Reasonableness must therefore be considered in light of that person's investigation and knowledge. If the investigation is as thorough as can be reasonably expected, it will support a reasonable belief in the findings. In this case the council had carried out a thorough investigation, but the employee unreasonably refused to take part.

As part of a fair and reasonable investigation, the employee needs to be given an opportunity to raise any mitigating factors or explanations for their behaviour, before a decision is reached. In this case, Mr Orr was given that opportunity but refused to take it. So ignorance of key information known to an employee and their line manager, but deliberately withheld from the decision maker, will not render a dismissal unfair, provided that information could not reasonably have been acquired through an appropriate disciplinary procedure.

E-mails and damaging an employer's reputation

E-mails are now an essential of every day life. Employees' use of internet and e-mail facilities at work (including employee participation in social networking sites and blogs) is potentially embarrassing to employers and can lead to damage to reputation and loss of business. Standards of conduct expected of an employee regarding use of electronic communications systems should be clearly set out by an employer in an e-mail misuse policy.

But can an employer take action as a result of e-mails sent from an employee's private home computer? In Gosden v Lifeline Project Ltd, the Sheffield employment tribunal held that an employee was dismissed fairly for sending a racially and sexually offensive chain e-mail from his home computer to a friend's home computer. The friend worked for a major client of the employer. The friend in turn forwarded the chain e-mail to colleagues at work, and so the e-mail entered the client's intranet system. The client complained.

Although the email was sent outside working hours and on a private computer, the decision was made to dismiss Mr Gosden because he had damaged his employer's reputation and his actions made further assignments for him within client organisations impossible. Mr Gosden argued that the e-mail was a private communication that could not be taken into account.

The tribunal found that a reasonable employer would be entitled to conclude that Mr Gosden had committed an act of gross misconduct that could damage the company's reputation or integrity. The communication was a chain e-mail, containing an imperative to pass it on and therefore taking it outside the realms of private life. The key point was not whether the employee intended for the material to be passed on further, but that he had no control over whether it would be.

The employer in this case took care to characterise this misconduct correctly, relying on the example in its disciplinary policy of gross misconduct as including bringing the organisation into disrepute, as well as being in breach of its equal opportunities policy. It may have run into difficulties if it had sought to rely on the company's computer use policy as such policies are normally only concerned with misuse of company equipment.

This is a first instance decision and therefore not binding on other tribunals. However, as tribunal cases involving damage to reputation which comes about as a result of use of social media are still in their infancy, it does provide some useful guidance for HR practitioners.

Legislative developments

April changes, postponements and turnarounds

For a number of years, April has been a key month for changes in employment law. This April too sees important employment law changes coming into force. Unlike previous years, many changes announced for April have now been postponed or shelved altogether. Below we provide a round-up of the changes that are coming into force and those that are not.

In force

Default Retirement Age

From 6 April, the default retirement age and corresponding statutory retirement procedures are abolished (transitional provisions apply in relation to retirement notices served before this date).

Positive action

Section 159 Equality Act 2010 came into force on 6 April. This permits employers to take into account under-representation of a particular protected group when selecting between equally qualified candidates for appointment or promotion.

Equality duty (general)

Section 149 of the Equality Act 2010 came into force on 5 April. This is the General Equality Duty replacing the existing race, disability and gender equality duties. The new duty will cover age, disability, gender, gender reassignment, pregnancy and maternity, race, religion or belief and sexual orientation. Briefly, the general equality duty requires public bodies and those who exercise public functions to have due regard for the need to:

  • Eliminate unlawful discrimination, harassment and victimisation
  • Advance equality of opportunity between different groups
  • Foster good relations between different groups

EHRC Codes of Practice

The Equality and Human Rights Commission updated Codes of Practice on employment and equal pay. The Codes do not impose legal obligations, however, tribunals and courts must take into account any part of the Code that appears to them relevant to any questions arising in proceedings.

Additional paternity leave and pay

While the new regulations came into force last year they are only effective in relation to parents of babies due on or after 3 April 2011 and to adoptive parents who are notified that they have been matched with a child for adoption on or after that date.

Briefly, mothers with maternity leave outstanding after the child is 20 weeks old, will be able to transfer that leave to the father. The father will be able to take up to 26 weeks' additional paternity leave which will be paid at the same rate as statutory maternity pay if the leave is taken during the mother's 39-week maternity pay period. The remainder will be unpaid.

Statutory maternity, paternity and adoption pay

Statutory maternity, paternity pay and adoption pay increased on 3 April from £124.88 to £128.73 and the weekly earnings threshold will rise from £97 to £102.

Statutory sick pay

Statutory sick pay increased on 6 April from £79.15 to £81.60, with the weekly earnings threshold rising from £97 to £102.

Migration cap

Changes to the points based immigration system came into force on 6 April including the introduction of a migration cap restricting the number of certain non-EU immigrants entering the UK to work.

Micro and start-up business moratorium

Starting from 1 April, businesses with fewer than 10 employees and genuine start-up businesses will be exempt from new domestic regulations for three years.

Taxation of termination payments

From 6 April, employers must use the 0T PAYE code for post-P45 payments. Essentially, the employer must withhold income tax at 20 per cent, 40 per cent and 50 per cent (as appropriate) as if the employee is entitled to no allowances. This may have cash flow implications for the departing employees and is a point to consider in relation to the timing of payments under compromise agreements.

Employer-supported childcare

From 6 April, the changes to the tax and national insurance contribution exemptions in relation to employer-supported childcare for new joiners take effect.

Postponed

Equality Duty (Specific)

Implementation of the specific public sector equality duties has been put back and the duties will now come into force in July 2011.

Bribery Act

The Bribery Act 2010 will now come into force on 1 July 2011. Implementation was delayed while the Ministry of Justice developed guidance on what will amount to adequate anti-bribery procedures. See below.

Scrapped

Flexible Working extension

The right to request flexible working will not be extended to parents of non-disabled children under 18. However, the Government has stated that during 2011 it will consult on extending the right to request flexible working for all employees and creating a system of shared parental leave.

Time off for Training extension

The right to request time off for training will not be extended to those employed by employers with less than 250 employees.

Two-tier Workforce Code withdrawal

On 23 March, the Code of Practice on Workforce Matters in Local Authority Service Contracts, commonly known as 'the two tier code' and the related statutory guidance was repealed with immediate effect.

The Code of Practice, which has been operative since 2003, dealt with the terms and conditions of new joiners, and sought to ensure that private contractors recruit new employees on the same terms and conditions as those that applied to other parts of their workforce whom they inherited in accordance with the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations following local authority outsourcing.

The abolition of the 2003 Code and associated guidance will not be applied retrospectively. So existing contracts and the employment terms that flow from them will not be affected by the repeal. Parties may, however, renegotiate those contracts. The move was widely anticipated when, in December, the Code of Practice on Workforce Matters in Public Sector Service Contracts 2005 (Central Government) was also repealed with immediate effect. The Government will now be consulting on whether any new guidance, such as a statement of good employment principles, should take the place of the repealed Code and guidance.

Budget and 'Plan for Growth'

The Government announced in the 2011 Budget and accompanying 'Plan for Growth' that it will:

  • Consult on removing the requirement in the Equality Act 2010 that businesses take reasonable steps to prevent persistent harassment of their staff by third parties;
  • Not bring into force the dual discrimination provisions of the Equality Act;
  • Invite the Low Pay Commission to consider including two-year recommendations;
  • Encourage public bodies to disclose their TUPE-related liabilities at an early stage of the commissioning process of public tenders;
  • Consult on moving the Mayday bank holiday to either St George's Day in England or a new 'UK Day' or 'Trafalgar Day' bank holiday during the October half term; and
  • Publish a White Paper in May on improving regulatory enforcement.

Bribery Act 2010 guidance

On 30 March, the Ministry of Justice published guidance on the procedures that commercial organisations should put in place to prevent persons associated with them from bribing. Adequate anti-bribery procedures will enable organisations to rely on the statutory defence to a charge of failing to prevent bribery.

The guidance sets out six guiding principles, each followed by commentary and examples:

  • Principle 1: Proportionate procedures
  • Principle 2: Top level commitment
  • Principle 3: Risk assessment
  • Principle 4: Due diligence
  • Principle 5: Communication
  • Principle 6: Monitoring and review

Although the principles are intended to be of general application, the guidance stresses that it is not advocating a one-size-fits-all approach. Instead, organisations are encouraged to put in place procedures that are proportionate to the risk of bribery they face. The risks faced will differ depending on the size of the organisation, the sectors and jurisdictions in which it does business, and the nature of its business partners and transactions.

The guidance also includes practical case studies on hospitality, facilitation payments and joint ventures to provide additional clarity in these areas. It is further supplemented by a 'quick start guide', explaining the key points organisations should know prior to the Act's implementation on 1 July.

See the Ministry of Justice's Guidance and Quick Start Guide.

Draft guidance on Agency Workers 2010 Regulations

The Agency Workers Regulations 2010 are due to come into force on 1 October and are intended to ensure that:

  • after 12 weeks in a given job, agency workers will be entitled to equal treatment on basic working and employment conditions;
  • from the first day of their assignment, agency workers will be entitled to information about vacancies in the hiring organisation to give them the same opportunity as other workers to find permanent employment and equal access to on site facilities such as childcare and transport services; and
  • new and expectant mothers receive additional rights for.

On 1 April, the Department of Business Innovation and Skills (BIS) published its 46-page draft guidance in relation to the regulations. Among other things, the draft guidance explains:

  • what arrangements fall outside the scope of the Regulations
  • when the 12-week qualifying period for equal treatment is met
  • what constitutes pay for the purposes of the Regulations
  • when agency workers will be entitled to bonus payments.

BIS is accepting comments on the draft Regulations until 15 April, with final guidance hoped to be published the end of April.