This e-bulletin includes short summaries of the following recent developments. Please contact us if you would like more information.

  1. Statutory holiday: employees unable to take holiday due to sick leave can carry it over into a new year without express request

Where an employee is unable or unwilling to take their EU-derived entitlement to 4 weeks' statutory holiday in the current holiday year due to being on sick leave, an employer must allow the employee to carry over this leave into a new holiday year even if the employee has not expressly requested this.

Upholding the EAT ruling in Larner, the Court of Appeal decided that an employee who had been on sick leave for the whole holiday year and until her dismissal in the following year was entitled to carry over the earlier year's entitlement and receive pay in lieu on termination.

There is no right to carry over in the express provisions of the Working Time Regulations.  However, public sector workers can rely directly on EU law to this effect.  The Court of Appeal ruled that private sector workers have the same rights because the necessary words can be read into the UK regulations. (NHS Leeds v Larner, CA)

This decision resolves the conflict with the EAT ruling in Fraser v South West London St George’s Mental Health Trust, which suggested that employees had to expressly request carry over, but there are still unanswered questions:

  • Is the employee entitled to pay in lieu of holiday carried over from a previous year due to sick leave where the employee has returned to work prior to dismissal in the second year and therefore had an opportunity to take the holiday?  This was the situation in Fraser, and was the basis on which the Court of Appeal distinguished that case from Larner.  It is unclear whether the Court considered that Fraser was wrongly decided on its facts, but the wording which the Court suggested could be read into the UK regulations would not exclude the right to payment in lieu in this situation.
  • Can employers impose a cut off by which carried over holiday must be used (assuming the employee is not on sick leave)?  ECJ case law suggests that this may be possible provided the period is substantial (over 12 months).  The Government is due to announce amendments to the UK regulations to deal with carryover; hopefully the cut off issue will be addressed.
  • Is the additional 1.6 days' statutory holiday provided under UK law to be treated in the same way as the 4 week entitlement? Again ECJ caselaw suggests that different rules can apply.  The Government's original proposal was to limit carryover rights to the 4 week entitlement.  
  1. Dismissal compensation: employers can be liable for value of death in service benefit payout where employee dies shortly after dismissal

Compensation for unfair and discriminatory dismissal can include the value of a death in service benefit, as this is a loss suffered by the employee notwithstanding the fact that the proceeds will go to the beneficiaries he designates, rather than him.

Although normally the value of this benefit would be the cost of the insurance premium to provide the same level of cover, in this case that value was the full death in service payout given that the employee had died shortly after dismissal. (Fox v British Airways, EAT)    

  1. Redundancy: continued confusion over whether reduction in total hours, rather than total employees, qualifies

Last month we reported an EAT ruling (Packman) that a reduction in total employee hours needed, ie in full-time equivalent employees, could be a redundancy situation entitling a dismissed employee to claim a statutory redundancy payment. Hot on its heels is a decision of the Scottish EAT this month apparently taking the opposite approach and concluding that a reduction in the number of individual employees is necessary. (Welch v The Taxi Owners Association, EATS)

However, the claimant in the latest case did not actually claim statutory redundancy pay;  instead the EAT found that she was really claiming that she ought to have been made redundant and was unfairly constructively dismissed because she was not.  In our view Packman is to be preferred.

Of course the issue will only arise where the reduction in hours can be shown to be attributable to a reduction in work and where there is an actual dismissal for refusing to agree to the reduction, or a constructive dismissal (ie, the employee can show that a unilateral reduction in hours is a fundamental breach of contract and resigns in response).      

  1. Unfair dismissal: care needed when relying on loss of trust and confidence

Employers should not rely on "breakdown of trust and confidence" as a reason for dismissal without careful consideration of their true reasons and whether these are sufficient to justify dismissal.

Following last month's decision that it will not always be fair to dismiss for a breakdown in trust and confidence depending on the circumstances, the Court of Appeal has confirmed the risk of an employer jumping too readily to dismiss for this reason.

OFCOM dismissed an employee following a police disclosure of unproven allegations against the employee such that he was viewed as posing an ongoing threat to children.  The employer cited breakdown in trust and confidence as the reason.  Although the dismissal was held to be fair, the Court criticised the employer for simply reaching for the trust and confidence label.  It would have been better to give the reasons for dismissal as the employer's concerns about reputational damage and the employee's lack of honesty about the unproven allegations against him. (Leach v OFCOM, CA)    

  1. Constructive dismissal: employers may prevent a breach of trust and confidence by making amends for mistreatment

Employers should always investigate employee complaints of mistreatment and make amends if appropriate.

Where the conduct complained of is not yet serious enough to amount to a breach of trust and confidence, this may prevent the situation escalating to such a breach and thereby defeat a constructive dismissal claim.  (Assamoi v Spirit Pub Company, EAT)

However, once a breach has occurred, this cannot be cured and the employee is entitled to choose whether to treat the breach as terminal, even if the employer upholds the employee's grievance and attempts to make amends. (This was established by the Court of Appeal in Buckland v Bournemouth University).    

  1. Employment tribunal fees: plans confirmed for Summer 2013

The government has confirmed its proposals for tribunal fees following public consultation. From Summer 2013 claimants will have to pay an "issue" fee when they submit their claim or appeal followed by a "hearing fee" prior to a hearing. The aim is for tribunal users to bear more of the cost burden and, by using a two stage structure, to provide a second incentive to settle.

The level of fee will be determined by the type of claim.  The fee for more straightforward "Level 1" claims (including claims for breach of contract, unauthorised deductions from wages, holiday pay, various statutory time off rights, and failure to pay a protective award or redundancy payment) will be £160 for issue, £230 for the hearing.

All other claims will be "Level 2" (covering unfair dismissal, discrimination, whistleblowing claims) and subject to an issue fee of £230 and a hearing fee of £950.

The intention is to require the hearing fee to be paid around 4-6 weeks prior to the hearing, to balance allowing time for settlement with avoiding wasted costs when hearings are cancelled, but the Government has indicated that it is still considering this point in light of comments that settlement is more achievable after exchange of witness statements.  It will also review whether the same timing is appropriate for both levels of claim. 

The Government's announcement does not address what happens where a claimant submits a Level 1 and Level 2 claim together.  The original consultation proposal was that a single fee at the higher level would be payable.

The fee is multiplied by up to 6 where multiple claimants are bringing a claim, depending on the number of claimants.

There will also be charges for making certain applications:

  • £100 for an application to set aside a default judgment
  • £60 for an application to dismiss a claim following the claim's settlement or withdrawal. This will cost £60. (Note that proposed changes to tribunal rules will do away with the need to make such an application.)
  • £600 for an application for judicial mediation, payable by the employer
  • £160 to bring a breach of contract counter-claim
  • £100  (Level 1) or £350 (Level 2) for an application for a review of a tribunal's decision or judgment.

The proposal to charge for written reasons has been dropped.

In the EAT there will be a fee of £400 to issue an appeal and £1,200 to proceed to a full hearing.

The civil courts fee remission scheme will be extended to the employment tribunals for claimants who cannot afford the fees. A full public consultation on remissions will be published in the autumn of 2012.

Tribunal judges will have a discretion to order the unsuccessful party to reimburse the fees paid by the successful party; guidance on reimbursement will be produced.

The jury is out as to whether claimants will be deterred from making justified claims by the fees proposed and how much revenue will actually be generated given the administrative cost.  What is certain is that the significant hearing fee is likely to impact on timing and tactics for settlement negotiations.    

  1. Employment tribunals: recommendations for revised tribunal rules

Following a review requested by the Government, Mr Justice Underhill has published his recommended reforms to the employment tribunal rules.

The recommended new draft rules are shorter and simpler.  One of the key changes is for there to be a new sift stage, at which an employment judge would review the claim on the basis of the ET1 and ET3 to assess whether there is an arguable complaint and defence within the tribunal's jurisdiction and either make case management directions or strike out a party's case for having no reasonable prospect of success (subject to a request for a hearing to contest this).

New ET1 and ET3 forms have also been proposed and drafts will be available shortly.  Respondents will be able to apply for an extension of time after the original deadline for the ET3 has expired.   There will be provision for the Presidents of the tribunals to issue guidance on matters or practice to assist users and hopefully improve consistency of tribunal approach.

Other changes are summarised in Mr Justice Underhill's letter.  They include a change to the provisions on the jurisdiction of the tribunal to rectify the strained construction of the old rules in Pervez.

The report also makes recommendations outside the scope of the tribunal rules.  These include giving tribunals the power to apportion compensation between two or more respondents where both are found jointly and severally liable for an act of discrimination (given that the EAT in Brennan recently ruled that tribunals currently do not have that power).

BIS is currently considering the recommendations and intends to consult on changes later in 2012.    

  1. New resources

While this guide provides some useful advice, the section on suitable alternative vacancies is over-simplified.  For example, it states that "an employee on maternity leave who has been selected for redundancy must be offered a suitable vacancy before any other employee".  This will not always be correct, not least as employees on additional paternity leave will have equivalent rights to priority over suitable vacancies.  It also overlooks the potential for challenging this aspect of the law: recent case law (De Belin v Eversheds Legal Services on adjusting redundancy selection criteria) could be used by a man claiming sex discrimination to argue that an employer can only give priority to a woman on maternity leave if this is a proportionate response to the legal requirement to correct any disadvantage suffered by the woman. It could be argued that an employer should be required to consider firstly whether there is any actual disadvantage in the redeployment process suffered because the woman is on leave and secondly whether it could be corrected in some other way which is less disadvantageous to the man.