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Employment Bulletin - October 20124th Oct 2012

by on 4th Oct 2012



Like them, loathe them or view them with detached ambivalence. Some of the Government's proposed employment law changes are poised to receive the full force of public feedback.

The consultation document on ending the employment relationship is now available and you can read it here.

The figures tell a tale of far fewer claims this year than last. The annual employment tribunal statistics say that in 2011/2012 there were just over 186,000, a drop of 15% from the previous year. This leaves open the question of whether charging fees for ET1s and hearings, raising the unfair dismissal qualifying period, and simplifying settlement agreements will bring the figures down even further next year.

Neil Andrews

Partner, Coles Miller Solicitors LLP

Consultation - It's All Kicking Off

Opinions at the ready. You have until 23rd November to let the Government know how you feel about its proposals on ending the employment relationship.

Here's a snapshot of what's being talked about:

Cap on the unfair dismissal compensatory award

The idea is to slash the maximum amount that can be awarded from £72,300 to either the national median average earnings of £25,882 or the claimant's annual net salary (whichever is lower). Compensation looks set to be limited to 12 months' pay.

Some commentators are saying that the change would just make it cheaper for employers to behave unreasonably rather than making it easier for them to dismiss people. There would still need to be a fair process and lashings of reasonableness - unless of course the employer would be happy to bank on a maximum liability of £25,882. That would be a risky strategy particularly when discrimination claims, which are so often associated with unfair dismissal, continue to attract unlimited compensation.

Settlement agreements

The new name for compromise agreements. These sorts of settlements have always been on fairly standard terms but the Government has gone so far as to publish template agreements. You'll find these at the back of the consultation document.

The aim is to make it quicker and easier for parties to settle their dispute and without needing as much legal advice. Consultation is also being sought on whether or not there should be guideline tariffs for different types of settlements.

But there's no proposal yet to remove the requirement that employees receive independent legal advice before signing. According to some, this is a red tape-cutting opportunity missed.

Employment tribunal fees

A litigation deterrent if ever there were one. In some cases, anyway.

Under the proposals, a claimant would have to pay:

  • £160 to issue a claim for unpaid wages or redundancy pay, and a further £230 to take their case to a hearing;
  • £250 to issue an unfair dismissal, discrimination, or equal pay claim, and another £950 for a hearing.

The proposals, reportedly described by unions as a disgrace, are sure to challenge those with more shallow pockets. They could be a way of whittling out spurious claims and of discouraging the serial litigant. But would they also prove to be a disincentive to employers settling claims? Probably. Some would undoubtedly hold off from making a meaningful offer in the hope that a claimant would be unable, or unwilling, to pay the kind of fees proposed.

Subjectivity In Redundancy - Nicholls v Rockwell Automation Ltd

Mr Nicholls was made redundant. The process had involved criteria scored by one manager, checked by another who managed the employees on a day-to-day basis. Mr Nicholls had the lowest score.

At his unfair dismissal hearing the tribunal found that the redundancy was genuine and that the employer's procedure had been reasonable and fair. But the tribunal went on to conclude that the dismissal was unfair because Mr Nicholls' scores during the selection process were lower than they should have been. Some of the scores - 'flexibility', for example - had not been capable of objective assessment, the tribunal said. Compensation was reduced by one third to reflect the chance that even if Mr Nicholls had been properly scored he would still have been dismissed.

On appeal, it was argued that the tribunal had substituted its view of Mr Nicholls' capabilities for the company's. The Employment Appeal Tribunal agreed, overturning the unfair dismissal finding. The tribunal had been wrong to carry out a detailed critique of the scoring in determining whether or not it was reasonable for the company to have dismissed. It was also wrong for the tribunal to have substituted its view for the employer's.

This case is a reminder that subjective criteria can be acceptable, despite the misconception in many companies that subjective criteria can never be used. It's all about acting reasonably and being able to justify the scores given to employees.

Preparing To Compete Isn't Gross Misconduct - Khan and Hemming v Landsker Child Care Ltd

Mr Khan and Mr Hemming were managers at two of the company's care homes.

The company discovered that these employees had been preparing to set up in competition with it, using knowledge and expertise they'd picked up during their employment. They had prepared a business plan and the costings used were very similar to those relevant to the company. The document also indicated that the two had looked into acquiring properties for their new business and this, the employer believed, showed the seriousness of their intentions.

They were suspended and went on to be dismissed. Planning to set up in competition and using the employer's resources in doing so was gross misconduct, the company said. The claimants, who had denied firm intentions to compete, brought unfair dismissal claims.

The tribunal held that it was reasonable of the company to have concluded that the claimants were guilty of gross misconduct. Dismissal was within the band of reasonable responses.

The Employment Tribunal Appeal overturned that decision, making it clear that not every case of preparing to compete is necessarily gross misconduct. It's not gross misconduct merely to make plans to set up in competition. Nor is every piece of information the employer owns confidential information within its legal meaning. Here, the tribunal had failed to address two questions:

  • whether it was gross misconduct to draw up the business plan; and
  • whether the information the claimants had used in that business plan amounted to confidential information.

The case is now back with the same tribunal to reconsider the claim.

Compensation For Annual Leave - NHS Leeds v Larner

Mrs Larner was on sick leave for the whole of the 2009/2010 pay year. That meant that she couldn't take her holiday leave entitlement over that period. She was still on sick leave when her employer terminated her employment in the following leave year.

Was the employer obliged to pay her compensation for the holiday leave she had missed out on because she had been sick? The employer argued that it wasn't; she hadn't asked to take the holiday leave or to carry it over.

The tribunal and Employment Appeal Tribunal found against the employer. An employee who is on sick leave does not have the opportunity to rest and so has the right to have their annual leave carried over to the next year, irrespective of whether or not the employee asks for that to happen.

The employer appealed, arguing that as Mrs Larner hadn't made a formal request to take her leave or to carry it over, her right to that annual leave had extinguished on dismissal.

The Court of Appeal dismissed the employer's appeal. It held that a worker who isn't able to take annual leave because they are on sick leave must be allowed to take it later, in the next leave year if necessary. The worker doesn't have to request to take this leave or to carry it forward.

The upshot was that when Mrs Larner's employment ended she was entitled to compensation for the paid annual leave she hadn't been able to take.

Fundamental Breach For Constructive Dismissal - Logan v Celyn House Ltd

Ms Logan was a veterinary nurse. There was a dispute about the company's failure to pay her contractual sick pay. She raised a grievance which incorporated other complaints against a colleague who Ms Logan claimed was overbearing.

The company rejected these and she resigned. The manner in which the company had dealt with her grievances meant that she was unable to work there any longer, she said. A claim for constructive unfair dismissal followed.

The tribunal found against her. It held that the alleged bullying was a figment of her imagination and that while the non-payment of sick pay was a repudiatory breach, that wasn't why she had resigned. The main reason for her leaving was her perception of the way she had been treated by her colleague and the way in which the company had dealt with her complaint about that.

Ms Logan appealed and the Employment Appeal Tribunal (EAT) overturned the tribunal's decision. The tribunal had focused on the wrong question, the EAT said. It should have asked itself whether the breach of contract involved in not paying the sick pay was part of the reason for the resignation, and not whether it was the principal reason.

Here it was enough that Ms Logan had resigned in response, in part at least, to the failure to pay sick pay.

Settlement Discussions Wrongly Taken Into Account - Gallop v Newport City Council

Mr Gallop worked for the Council as a horticulture training officer. He had various bouts of stress-related absence and he and the council eventually tried to agree a compromise agreement which would bring his employment to end.

After these negotiations broke down the Council took disciplinary proceedings against Mr Gallop which resulted in him being dismissed for alleged gross misconduct. He brought a tribunal claim, partly for unfair dismissal.

During the hearing one of the tribunal lay members asked a question which led to a Council witness revealing that a compromise agreement had been discussed. This would ordinarily be something a tribunal should not know because of the without prejudice rule. Here the tribunal Chairman did not intervene and, in fact, the tribunal went on to take that evidence into account. It held that the dismissal had been unfair but that there was a 50% chance that a compromise agreement would have been reached but for the dismissal. Mr Gallop's award for loss of earnings, pension loss and notice pay was halved as a consequence.

He appealed and the Employment Appeal Tribunal found in his favour. It held that it is wrong for a tribunal to take without prejudice negotiations into account unless the parties have clearly waived that privilege. Here there had been no voluntary waiver; the fact of the compromise agreement had only arisen because of an innocent enquiry made by a tribunal lay member.

And Finally....

It isn't the first and won't be the last time that football has divided opinion in the workplace. But one business in the North East is now almost £44,000 lighter after being held liable for the harassment of one of its employees who suffered 'atrocious bullying'. The headlines were grabbed by one particular aspect: sales rep branded 'gay' because he didn't like football.

Diversity training, quick.


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This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.