Gross misconduct dismissal fair despite lesser sanction for colleague guilty of similar conduct

In MBNA Limited v Jones, the EAT has confirmed that a dismissal will not be rendered unfair because another employee in similar circumstances was issued with a lesser sanction. Disparity of treatment will only be relevant to fairness where the circumstances of the misconduct are truly parallel.

Mr Jones was assaulted by a colleague at a works function. He retaliated by punching the colleague, who then sent Mr Jones aggressive and threatening texts. Following an investigation and disciplinary proceedings, the employer concluded that Mr Jones and his colleague were both guilty of gross misconduct. Mr Jones was dismissed but his colleague only received a final written warning.

In overturning its decision that Mr Jones’ dismissal was unfair, the EAT criticised the Tribunal for focusing on the lesser sanction imposed on Mr Jones’ colleague. Instead, it should have considered whether the employer had reached a reasonable conclusion and imposed a reasonable sanction in Mr Jones’ case. If so, it was irrelevant that the employer may have been unduly lenient to his colleague.

It is very rare that the circumstances of two (or more) employees’ misconduct are truly parallel. However, that does not mean that employers can ignore consistency when dealing with disciplinary issues. Case law confirms that previously lenient sanctions for a particular offence may lead employees to believe that such behaviour is condoned. Alternatively, significantly different outcomes may suggest that a dismissal is not genuinely for the reasons the employer is putting forward. In either case, this could still lead to a finding of unfair dismissal.

Further early conciliation not required to amend existing claim

Claimants in discrimination claims sometimes wish to add complaints of victimisation to their existing claim if they believe they have been retaliated against as a result of issuing proceedings. This is particularly common where the individual remains employed.

The EAT has confirmed in Science Warehouse Limited v Mills that where a further claim arises out of the same facts as a claim that has already gone through ACAS Early Conciliation, the claimant is not required to go through the Early Conciliation process again in respect of the additional complaint. Rather, the claimant should apply to amend their existing claim. Whether or not the amendment is allowed will be a matter for the Tribunal’s general case management powers.

The EAT’s decision provides some welcome clarity for claimants. However, where a claimant wishes to bring an additional claim that is not related to the facts of their existing claim, they are still required to go through the Early Conciliation process. The difficulty will lie in cases where it is unclear whether a new claim is sufficiently closely linked to an existing claim. In such cases, it may be prudent for employees to go through Early Conciliation again to protect their position.

Definition of “redundancy” under Collective Redundancies Directive includes resignation following substantial unilateral change to terms and conditions

For collective redundancy consultation purposes (both under UK law and the EU directive that underpins it) a redundancy is a dismissal for one or more reasons not related to the individual(s) concerned. This is wider than the definition of redundancy for statutory redundancy and unfair dismissal purposes.

In Pujante Rivera v Gestora Clubs Dir SL and another, the ECJ decided that when an employee resigned in response to her employer unilaterally varying her employment contract by reducing her salary by 25%, her resignation fell within the definition of “redundancy” in the Directive. This meant that the number of redundancies made by the employer triggered the obligation to collectively consult.

It was already well-established that changes to employees’ terms of employment through termination and re-engagement falls within the wider definition of redundancy. However, the ECJ has now confirmed that if an employer unilaterally makes “significant” and “detrimental” changes to an employee’s contract for reasons not related to them as an individual and the employee resigns as a result, this is also covered by the wider definition of redundancy and should be included when considering whether collective consultation obligations have been triggered. This is potentially broader than previously thought and leads to a degree of uncertainty for employers, for example when assessing whether a change is “significant”.

Holiday pay – accrued annual leave does not need to be retrospectively re-calculated when working hours increase

In Greenfield v The Care Bureau, the ECJ has held that where a part-time worker increases their hours, annual leave does not need to be retroactively re-calculated as if the worker had been working the revised pattern in respect of the earlier period of part-time work. Rather, where a worker’s hours increase, the entitlement to annual leave must be calculated for each period.

Mrs Greenfield had worked relatively few hours for the initial part of the leave year before significantly increasing her hours. When her employment terminated shortly before the end of the leave year, she claimed that her employer owed her accrued but untaken holiday. However, her employer claimed that because she had taken 7 days’ leave at a time when she was working just one day a week (equating to 7 weeks’ leave), she had already exhausted her entitlement to 5.6 weeks’ paid annual leave. The Tribunal referred the case to the ECJ to consider, amongst other issues, whether the pro-rata principle for part-time workers requires the recalculation of annual leave that has already been accrued.

The ECJ held that it does not. Where an employee changes their working pattern part way through a leave year, the entitlement to annual leave is calculated with reference to the actual working pattern of the employee for each period. To the extent that an employee has taken leave which has not been accrued in the first period, this will be offset against the entitlement for a later period. This seems logical and prevents employees from receiving either a windfall (if they increase their hours at the end of the year) or from being penalised (where they reduce their hours). It is therefore a sensible decision, however it does not consider the practical implications of calculating the leave entitlement of employees whose working pattern varies significantly throughout a leave year. This remains problematic, with no mechanism for doing so provided by the Working Time Regulations.

Useful guidance from Supreme Court on when penalty clauses will be enforceable

Like other contracts, employment contracts and settlement agreements often specify what will happen if one party to the contract does not fulfil their contractual obligations. It had long been understood that to be enforceable, such a provision should represent a genuine pre-estimate of the loss likely to be suffered by the innocent party. Where such a provision was primarily designed to deter one party from reneging on their obligations to the other, the clause was likely to be unenforceable as a penalty clause.

However, the Supreme Court has recently updated the test for establishing whether a clause is an unenforceable penalty. In Cavendish Square Holding BV v El Makdessi; ParkingEye Ltd v Beavis the Supreme Court ruled that first, it is necessary to determine the nature and extent of the innocent party’s legitimate interest in the relevant obligation being performed, before then considering whether or not, given that legitimate interest, what is required under the clause is unconscionable or extravagant. The Court made clear that a clause will not necessarily be an unenforceable penalty just because it is not a genuine pre-estimate of loss or because it aims to deter one party from failing to comply with its obligations to another.

This revised test is more flexible and should give parties greater freedom to negotiate clauses that are deterrents against breach. However, in order to maximise the chances that such clauses are enforceable, parties seeking to rely on them will need to consider carefully what legitimate interests they are seeking to protect. They may even wish to consider identifying those interests within the clause itself.

You can read more about the wider implications of the case in our blog, Out of chaos arises order: Supreme Court confirms the rule against penalties.

Prosecution of directors for failure to notify redundancies fails

Three ex-directors of City Link, the delivery company which went into administration just before Christmas 2014, were prosecuted for failing to notify the Secretary of State of the redundancy proposals in good time. The company was put into administration on 22 December 2014 but the directors did not submit an HR1 form. The administrators subsequently notified the Secretary of State on 26 December 2014. The directors were prosecuted, BIS alleging that that the notification should have been made on 22 December. On that date, the dismissals were inevitable or almost inevitable, satisfying the requirement for there to be a proposal to dismiss the workforce as redundant.

The directors were acquitted. In reaching this finding, the judge held that placing a company into administration did not mean that dismissals were inevitable or almost inevitable. On the evidence, the sale of the business was possible and in fact there was an offer made by a potential buyer. Further, although no buyer had been identified by management prior to the administration, a business in administration is potentially more attractive to a buyer. For these reasons, the judge concluded that a proposal to dismiss was not an automatic consequence of placing a company into administration.

This is helpful for directors, particularly in an insolvency context. However, it is worth considering why this case was brought at all, given that the HR1 form was filed only 4 days later than BIS alleged it should have been even with Christmas intervening, and the judge noted it was unlikely that the delay made any practical difference (although this was not relevant to the finding). It is likely that the circumstances of the case (significant redundancies within a parcel delivery firm the day before Christmas and the media’s reaction) played a part. However, this and a similar prosecution of the Chief Executive of Sports Direct are the first prosecutions brought under the power to prosecute directors for failure to notify, so it is possible that this marks a shift in approach from BIS and we will see more prosecutions brought in the future.

European Commission consults on impact and efficiency of CRD IV remuneration requirements

On 22 October 2015, the European Commission published a consultation on the impact and efficiency of the CRD IV remuneration rules which were introduced in June 2013. The Commission is seeking views on the “Maximum Ratio Rule” which requires that the variable remuneration of material risk takers must not exceed 100% of their fixed remuneration (or 200% with shareholders’ approval). The Commission is also seeking views on other aspects of the CRD IV remuneration provisions. The deadline for responding is 14 January 2016 and the Commission is expected to publish its findings by 30 June 2016.

Lord Davies publishes final report on women on boards

On 29 October 2015, Lord Davies published his latest and final report on improving the gender balance on British boards. Despite many considering it overly ambitious when it was first announced in 2011, the target of 25% female board representation in FTSE 100 companies has been met. As at 1 October 2015, women hold 26.1% of board position in FTSE 100 companies and 19.6% of FTSE 250 board positions. This represents an increase from 20.7% and 15.6%, respectively, in March 2014 and from 12.5% and 7.8%, respectively, in February 2011. There are no longer any male-only boards in the FTSE 100, but there remain 15 male-only boards in the FTSE 250.

However, the report identified that further work is needed to increase the number of women holding executive board positions (currently only 9.6% within the FTSE 100). The report also made a number of recommendations, including setting a target for female board representation in the FTSE 350 of 33% within five years and the establishment of a new steering group under a new chair to support businesses, ensure sustained progress and monitor and report upon progress.

Gender pay gap reporting – bonuses must be included

Although the government is yet to publish its response to the recent consultation on closing the gender pay gap, it has indicated that bonuses (and not just basic salary) will need to be included in calculating the gender pay gap. Rebecca Harding-Hill’s blog, Gender Pay Gap Reporting – Government minister says bonuses must be included, considers this in more detail.

Apprenticeship levy – further details announced

The government’s Autumn Statement contained further details about the apprenticeship levy. This measure, designed to fund three million new apprenticeships during the current Parliament, was the subject of a consultation which closed earlier this year.

The details announced confirm that the levy will be 0.5% of the employer’s annual pay bill and it will be payable by employers whose pay bill exceeds £3 million each year (in that employers receive an allowance of £15,000 against the levy). This means that 2% of UK employers will be affected. The measure will be introduced through the Finance Bill 2016 and it is due to take effect in April 2017.