Employment Bulletin - July 201225th Jul 2012

by on 25th Jul 2012



So the Enterprise and Regulatory Reform Bill continues to make its slow passage through parliament. Last month saw its second reading. This time next year, we should be on the brink of some pretty significant employment law changes.

Until then the titbits of information, hints and predictions will keep us interested. We'll see more of the kind of Telegraph debates between Adrian 'no-fault dismissals' Beecroft and Brendan 'don't send employment rights back decades' Barber.

But we won't be hearing that particular argument again, for now at least. The government has said that it won't be going ahead with Beecroft's compensated no-fault dismissals idea. While that proposal doesn't fit the Bill, fuller details are emerging about the raft of others that do. More on those later....

Neil Andrews

Partner, Coles Miller Solicitors LLP

No Double Jeopardy in Internal Disciplinary Proceedings - Christou & Ward v London Borough of Haringey

This is an unusual case arising out of the tragic death of Baby P in 2007. Ms Ward was the social worker responsible for the care of Baby P. Ms Christou was her supervisor.

They were both given written warnings, the most serious penalty that could be issued under the Simplified Disciplinary Procedure adopted at the time by Haringey Council. Later on, there were concerns about the adequacy of that disciplinary process. New senior management believed there were more serious matters which had not been investigated and which justified separate disciplinary proceedings based on the same facts. So a second disciplinary hearing was held, following which both Ms Christou and Ms Ward were dismissed.

They claimed unfair dismissal on the basis that they had already received their sanction (the written warning) in relation to the disciplinary offence. The tribunal wasn't convinced and found against them.

Their appeal was rejected. The Employment Appeal Tribunal (EAT) held that Haringey had been entitled to launch second disciplinary proceedings when the view was taken that a simplified procedure and a written warning did not reflect the seriousness of the situation. Res judicata - the legal principle preventing people being tried more than once on the same facts - does not apply to internal proceedings, said the EAT.

So it's possible that an employee can be put through two disciplinary procedures for the same offence. In reality, though, this will be rare.

No Fiduciary Duty Owed By Employee - Ranson v Customer Systems Plc

Fiduciary duties are usually imposed on directors, and sometimes those just below board level. They include legal obligations not to set oneself up so there is a conflict of interest between the director and employer, not to profit from one's position at the employer's expense, and to disclose one's own wrongdoing.

Mr Ranson was a divisional manager with responsibility for a team of technicians. Shortly before leaving his job at Customer Systems (CS) to set up his own company, he canvassed work in competition and didn't tell CS what he was doing. These two facts gave rise to a High Court claim based on breach of fiduciary duty which the company argued was implied into his contract of employment.

The question was whether fiduciary duties - usually found in directors' contracts - can apply to employees. The High Court said that they could and that Mr Ranson had acted in breach.

The Court of Appeal disagreed. It suggested that the trial judge's decision had been influenced by an analysis of the law on directors' fiduciary duties. The correct approach in determining the duties owed is to look at the employee's employment contract. Mr Ranson s contract simply required him to do his job faithfully and with an implied duty of trust and confidence. That fell short of a fiduciary duty.

So Mr Ranson was not bound to tell his employer what he was planning. And he was perfectly entitled to start a competing business after leaving CS.

Where Annual Leave and Sickness Meet - ANGED v FASGA

A worker who falls sick before their annual leave is entitled to take that annual leave at a later date. But what if they fall sick during their holiday?

The European Court of Justice considered this issue in ANGED v FASGA. The case began as a set of collective actions in the Spanish courts. The employees argued that they should have paid annual leave even where that leave coincided with sick leave. The employer's case was that if a worker fell ill before or during annual leave, they were not entitled to take that annual leave later on.

The ECJ held that when a worker is sick during annual leave then, irrespective of when that period of sickness began, they are entitled to take their annual leave at a later time. The purpose of paid annual leave is to enable the worker to rest; sick leave is about recovery. It would go against the spirit of annual leave to only allow workers who had fallen sick before their annual leave began to take that annual leave once they had recovered.

A deceptively significant decision. It raises a host of potential issues about when someone is or is not unfit for work, and about the way in which employers should deal with holidays and sick pay both in contracts and company policies.

Enterprise and Regulatory Reform Bill

The government may have said no thanks to no-fault dismissals but what other news has the Bill generated?

Settlement agreements

Legislation to introduce settlement agreements will be announced later this month. It follows the Bill's amendment to include 'protected conversations' provisions. Under the new rules, an employer will be able to offer a termination package without this coming to light at a subsequent tribunal hearing.

Sound like compromise agreements? There are some important differences. Settlement agreements will only apply to unfair dismissal (but not automatically unfair dismissal) cases. Also, there won't need to be an existing dispute between the employer and employee before a valid agreement can be entered into.

As the birth of settlement agreements draws nearer, we'll continue to hear debates on the pros, cons and potential loopholes and legal arguments likely to be associated with the new system. One of these will be the proviso that a tribunal will have scope to take pre-termination negotiations into account where there has been impropriety. Another will be about what happens if a breach of contract claim for example is brought at the same time as an unfair dismissal claim, as often happens in constructive dismissal. A space to watch.

Compensatory awards

The Department of Business, Innovation and Skills has said that the cap on the unfair dismissal compensatory award may well be based on median average earnings of £26,000. This is higher than some people thought. The bracket of compensation should therefore be £26,000 (one year's earnings) to £78,000 (three years' earnings). DBIS have also said they will introduce a power to cap the compensatory award at one year's earnings - meaning that employer's may (depending on what happens) end up liable only for £26,000 or, if less, one year's earnings.

Directors' pay

The government has announced a package of reforms that it thinks will address failures in corporate governance. It's about directors' pay and, more specifically, giving shareholders more say. The reforms are intended to (among other things):

  • enable shareholders to hold companies to account by voting on pay policies and exit payments
  • encourage transparency in pay and in the link between pay and performance

These reforms will be introduced as an amendment to the Bill.

Subjectivity in Selection Can Be OK - Mitchells of Lancaster v Tattersall

Mr Tattersall was one of five members of the company's senior management team. He was made redundant and went on to bring an unfair dismissal claim.

The employment tribunal found in his favour. The decision rested partly on the way in which the company had gone about selecting Mr Tattersall for redundancy. The tribunal found that it was based on subjective criteria (which role could be lost with least damage to the company?) and solely on the views of the company's directors. The tribunal concluded, for a number of reasons including the pool for selection and internal appeal process, that the dismissal was unfair. However, compensation was reduced by 20% to reflect the chance that Mr Tattersall would have been dismissed via a fair procedure (Polkey).

The company appealed but the Employment Appeal Tribunal (EAT) upheld the unfair dismissal. Crucially though, the EAT disagreed with the tribunal's criticism of the company's subjectivity during the selection process. Just because criteria are matters of judgment, the EAT said, it doesn't mean that they can't be assessed in a dispassionate or objective way. The tribunal's suggestion that a criterion could only be valid if it could be 'scored or assessed' was concerning because it could lead to selection being reduced to a box-ticking exercise.

The upshot is that even where criteria involve a degree of judgment, that's not necessarily fatal particularly perhaps where (as in this case) the company is small and in serious financial difficulty. While the combined flaws in the process lead to Mr Tattersall's unfair dismissal being upheld, the EAT overturned the Polkey decision. The deduction should be significantly higher than 20%, it said.

Justification of Retirement Age - Seldon v Clarkson Wright and Jakes

Mr Seldon was a partner at a law firm. When he was required to retire at 65, in line with the firm's policy, he brought a claim for age discrimination.

The employment tribunal found against him. The firm's policy was justified, the tribunal said. It was a proportionate means of pursuing legitimate aims. In this case, the legitimate aims were to do with giving younger staff a change to progress, helping with workforce planning and limiting the need to expel underperforming partners and so engendering a supportive culture.

This went all the way to the Supreme Court via the Employment Appeal Tribunal and Court of Appeal. Mr Seldon argued that the employer's aims didn't justify direct age discrimination, and that the treatment had to be justified specifically in relation to his case and not the retirement policy generally.

His arguments failed. The Supreme Court said that the firm's aims were social policy aims (inter-generational fairness and preserving the dignity of older workers) rather than individual business needs (cost-cutting or improving competitiveness). And they were legitimate, justifying direct age discrimination.

The case has been sent back to tribunal to decide whether choosing the age of 65 for retirement was a proportionate means of achieving the firm's legitimate aims (rather than, say, 67 or 70). We'll have to wait and see.

Until then, while it might be possible to justify a retirement age, we don't have any guidance on what that age might be. This case certainly doesn't open the door for employers to start retiring staff at 65 without some very careful thought, and a bit more direction from the courts.

And Finally.... HM Attorney General v Bentley

You have to wonder what Adrian Beecroft would make of this one.

Mr Bentley issued 31 employment tribunal claims over a two year period. Each stemmed from his having been turned down for a job. He claimed age discrimination and, sometimes, disability discrimination.

None of the claims got as far as a full hearing. Nineteen were dismissed because they were not being actively pursued or because Mr Bentley hadn't attended hearings, had applied to withdraw them or because he'd failed to comply with tribunal orders. Eleven were struck out because they had no prospect of success and/or were scandalous or vexatious. Mr Bentley was subject to a number of costs orders too.

The tables turned when the Attorney General successfully applied for a Restriction of Proceedings Order. As a result, Mr Bentley now needs the permission of the Employment Appeal Tribunal before bringing a claim in the future. It's hoped that this order will help protect potential respondents and the reputation of the system.


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