Employment law case round up: 12 lessons learnt in 2014

22 December 2014

A new year inevitably brings with it a time for reflection. As ever, 2014 has been a year of change in employment law.  In this blog, we take a look back at some of this year’s key cases including those relating to Early Conciliation, Tribunal fees, post-termination victimisation, redundancy payments, holiday pay and TUPE.  By reminding ourselves of lessons learned this year, we prepare for the new year ahead.

1.  Employment status is not necessarily “what it says on the tin”.  It is defined by the reality of the situation rather than the contractual terms.

Boss Projects LLP v Bragg reminds us that no matter how “watertight” contractual terms appear to be, they do not provide a complete or reliable definition of the relationship between the parties to the contract for the purposes of establishing employment status.   Tribunals will look behind the written terms to investigate the facts, and will aim to make a decision as to employment status based on the reality of the situation.

2. Be aware what amounts to a “reasonable” request to be accompanied by a companion at a disciplinary or grievance hearing.

In Toal & another v GB Oils Limited the EAT held that an employer cannot take into account the identity, nature or qualities of the worker’s chosen companion when assessing the reasonableness of that worker’s request to be accompanied.  The employee's right to choose a companion is an absolute right, subject only to the limitations that the companion must be an appropriate union representative or one of the employer's other workers.

This seemed to contradict the wording of the ACAS Code.  ACAS has said they intend to publish new guidance following these cases.

3. An employer can still be liable for victimisation after an employee has left.

In Rowstock Limited v Jessemy the Employment Tribunal had accepted that the reason Mr Jessemy had received an unfavourable reference was specifically because he had brought proceedings.  However, they said the action of victimisation could not succeed because of the drafting of the Equality Act 2010. The EAT agreed, but the Court of Appeal reversed that decision and found a way round the problem. In their view the Equality Act was not supposed to change the law and if it did (such that post-employment victimisation was not prescribed), that would put the UK in breach of our obligations under EU law.

The Court of Appeal therefore chose to “reinterpret” the statute, so as to accord with the “grain” of the legislation. Post termination victimisation was prescribed and this, they believed, was in any event, what the draftsman had intended.

4. Tribunal fees appear to be here to stay.

Earlier in the year, Unison were unsuccessful in their judicial review to challenge the lawfulness of Employment Tribunal fees. A second judicial review was heard in October which was also unsuccessful and so, for now at least, it looks like fees are here to stay. 

5. Custom and practice could mean that enhanced redundancy payments are an implied contractual entitlement.

An implied term can exist as a result of consistent custom and practice by the employer to make enhanced redundancy payments, over and above the statutory minimum. In Peacocks Stores v Peregrine & Ors the EAT confirmed that the employer was required to pay enhanced redundancy payments, as the evidence showed that the employer had a consistent practice of doing so.  The term was therefore implied.

Employers can inadvertently find themselves bound by implied terms that are undesirable, and should also be aware that previous custom and practice needs to be considered in the early stages of planning redundancies. This case also highlights the fact that the potential existence of implied contractual redundancy terms is an important due diligence issue in business acquisitions and other TUPE transfers.

6. The Tribunal should not use the maximum award as a starting point for compensation for failure to inform and consult where some consultation has occurred.

The EAT has held in London Borough of Barnet v Unison that the starting point of the maximum award should only be used where the employer has not engaged in any consultation at all.  However, the case did not provide guidance as to what the correct starting point should be.

7. Covert recordings of public and private conversations at disciplinary and grievance meetings can be admissible in evidence.

Employers need to be careful when holding any grievance or disciplinary (or indeed, any other) meetings with employees, particularly given the ease with which an individual can make covert recordings of these meetings on their mobile phone or other electronic device. Managers should be careful about what they say and how they conduct themselves before, during and after any such discussions. Simply because a conversation is “private” or has been recorded without someone’s knowledge does not automatically render it inadmissible in evidence, and the Tribunal can exercise wide discretion in this regard.

In Punjab National Bank (International) Limited & Ors v Gosain, the EAT held that covert recordings of private and public conversations at disciplinary and grievance meetings were admissible in evidence.  This included degrading sexual comments made about her during a recess, which were covertly recorded. 

8. Statutory holiday pay should include both basic salary, average commission payments and overtime.

In light of recent rulings, employers should carefully review their contractual leave provisions and entitlements in order to ensure that where appropriate commission or other variable payments such as overtime, allowances or bonuses are factored into statutory holiday pay.

Lock v British Gas confirmed that where a worker’s pay consists of basic and variable elements which are directly and intrinsically linked to work (such as commission or potentially overtime, allowances or bonuses), holiday pay should be paid at a level comparable to normal pay to ensure that a worker is not deterred from taking holiday for financial reasons. It is, however, unlikely that this extra element of holiday pay extends to any holiday taken beyond the four week statutory minimum annual leave entitlement.

Later in the year, in Bear Scotland Ltd v Fulton, the EAT held that overtime payments (including non-guaranteed overtime) are “normal remuneration” for the purposes of the Working Time Directive, and the Working Time Regulations 1998 must be interpreted to achieve this.  This means that overtime should also be taken into account when calculating holiday pay for the four weeks statutory minimum annual leave.

9. Don’t forget the possible application of TUPE, even following a share purchase.

In the case of Jackson Lloyd Limited & Mears Group Plc v Smith & Ors, employees were found to have transferred to a parent company following a share purchase of their previous employer by a subsidiary. 

Although a share transfer itself would not be a TUPE transfer, TUPE may nevertheless be found to apply post-acquisition, for example as a result of steps that are taken in many acquisitions such as embarking on a process of integration.  This is a reminder that TUPE does not only apply to ‘obvious’ business purchases and outsourcings.  In addition, in this case, each of the affected employees were able to bring their own claim because the employee representatives’ mandates were not kept up to date.  If they had been, then only the employee representatives could have brought the claims, on behalf of the employees they represented.

10. There is no duty to make reasonable adjustments for non-disabled employees “associated” with a disabled person.

Employers should take note that although the Hainsworth v Ministry of Defence case confirms that employees/prospective employees will not be able to bring claims against employers for a failure to make reasonable adjustments in relation to a person to whom the employee is “associated”, an employee who has caring responsibilities could look to bring a claim for direct discrimination. Such employees could also make a request for flexible working, which would need to be considered carefully and handled appropriately in order to avoid a potential discrimination claim.

11. It is possible for a deduction from salary for an employee’s failure to serve their notice period not to be a penalty

The case of Yizhen Li v First Marine Solutions could be a useful decision for employers, albeit with potentially limited application.

The employer made a deduction of one month’s salary (£5,000) from Miss Li’s final salary payment, pursuant to a clause in her employment contract. The deduction was made even though she also did not receive her notice pay for the period she did not work. This was held by the Employment Tribunal, and upheld by the Employment Appeal Tribunal (EAT), not to be a penalty clause and so was enforceable by the employer. However, in doing so, the judge expressed to a “very real concern” about the way this particular clause was approached.  The judgment itself therefore has limited application in theory, as the EAT stated that it should not create an unfortunate precedent. The judge’s observations encourage pro-employee judicial treatment of similar clauses, and so employers should exercise caution in seeking to rely on such a clause.

12. A failure to comply with Early Conciliation requirements can be rectified, and the claim is treated as presented on the date the defect was rectified.

In Thomas v Nationwide Building Society, a Claimant incorrectly completed her ET1 form to suggest that she was exempt from Early Conciliation.  The Respondent raised this in its ET3 response.  The Tribunal found that she could rectify that defect by complying with the Early Conciliation procedure and by applying for a reconsideration of the Tribunal’s decision to reject the claim.  The ET1 was then treated as presented on the date the defect was rectified.  Whilst there was no need for a new ET1 claim to be presented, the question of whether the claim had now been presented in time would need to be considered.

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