What will Brexit mean for the future of employment law?
One
consequence of the ending of the UK’s transition period following its exit from
the EU is that the Government is now free to make changes to employment law
that would not have been possible before. There are some limits, however. The
trade agreement that the UK has reached with the EU states that in the field of
employment law, neither side will ‘weaken or reduce’ levels of protection ‘in a
manner affecting trade or investment between the parties’.
It is
worth noting that this obligation is not limited to those areas of employment
law governed by the EU – it refers to employment law as a whole. Unfair
dismissal is not an area covered by EU law, but if the government were to
repeal it altogether that would clearly be a breach of the trade agreement. It
is also clear that the wholesale repeal of the Working Time Regulations
or TUPE is out of the question.
Nevertheless,
there are many changes that could be made that would not be regarded as
sufficient to affect trade, but which could be of importance to those
interested in employment law. The rules on holiday pay for example have been
causing difficulty for many years and there is a serious disparity between the annual
leave provisions of the Working Time Regulations and the requirements of
the Working Time Directive as it has been interpreted by the European
Court. There is now nothing to stop the UK Government from providing clarity on
such issues as the inclusion of overtime in the calculation or the effect of
long-term sickness absence on an employee’s entitlement. If the Regulations
were to be amended, the UK courts would have to apply the new rules without
considering the requirements of the Directive.
Other
changes that might be suggested include: making it easier to agree a change in
terms and conditions following a TUPE transfer, capping compensation in
discrimination cases and perhaps simplifying some of the rules on agency
workers. How much appetite or capacity the government has for making such
changes remains to be seen. But given the outstanding commitments from the 2019
Conservative Party manifesto on redundancy protection for new parents and
additional leave for carers, a significant Employment Bill in 2021 is very much
on the cards.
Employment tribunal procedure
– ACAS uplifts
Employers and employees must
follow the ACAS Code of Practice in relation to disciplinaries and dismissals.
If either party fails to follow the Code, the tribunal can increase or decrease
tribunal compensation by up to 25%. In Wardle v Credit Agricole Corporate
and Investment Bank, the Court of Appeal said that a tribunal should only
fix the rate of uplift once it has considered how much the uplift would equate
to financially, to ensure it isn’t disproportionate. An Employment Tribunal can
‘reconsider’ any judgment where it is necessary in the interests of justice. A
tribunal can do this of its own initiative, at the request of the Employment
Appeal Tribunal or if one of the parties makes an application for a
reconsideration within 14 days of a judgment. The Employment Appeal Tribunal
has recently looked at a case where an employer asked a judge to reconsider a
case ‘of its own initiative’ in circumstances where they were out of time to
make the application themselves.
In Banerjee v Royal Bank of
Canada, the employee won his claim for whistleblowing unfair
dismissal. The Employment Tribunal found that the employer had failed to follow
the ACAS Code and ordered a 25% - the maximum – uplift. This was contrary to
the Wardle approach because the percentage uplift was fixed before the
remedy hearing which would calculate the employee’s compensation. This was
especially important in this case because the employee was a highly paid City
trader and the 25% uplift equated to £261,000. The employer wanted this
decision to be reconsidered but by the time of the remedy hearing the time
limit for making an application had expired. The employer argued that the
tribunal could reconsider the decision of its own initiative, telling the
tribunal ‘that’s what you should do’. The tribunal agreed. It decided
that the parties should calculate how much compensation was owed to the
employee and then address the ACAS uplift afterwards. The employee appealed,
saying that the employer had essentially got around the expired time limit by
planting the reconsideration idea, which meant any reconsideration would not be
on the tribunal’s ‘own initiative’.
The EAT disagreed. Although the
issue of reconsideration was discussed at the remedy hearing, the employer did
not actually make an application. The tribunal could still decide itself
whether to reconsider a judgment. The fact that the employer had reminded the
judge about his ability to reconsider the judgment, and suggest that they
should do this, did not undermine the tribunal’s ability to act on its own
initiative. A (failed) application by one party to reconsider a judgment might
stop an employment tribunal being able to take that step ‘on its own initiative’,
but that had not happened here because no application had been made. An
advocate can remind a tribunal about its own powers without undermining their
ability to act independently.
This is a win for the employer in
both form and context. The power to reconsider judgments is rarely used by
tribunals. It is comforting to know that parties are not prevented from
reminding a judge of the rules and their overriding duty to deal with matters
fairly and justly. There is a sage reminder for employers though about the
importance of making any relevant tribunal applications within the appropriate
time limits. This judgment is also a helpful aide-memoire about ACAS uplifts,
which should be considered at the remedy rather than liability stage.
Indirect discrimination
One of the key differences between direct and indirect
discrimination is that a claim for indirect discrimination can be defeated if
the employer can show that the provision criterion or practice under challenge
is a ‘proportionate means of achieving a legitimate aim’. The circumstances in
which this defence of justification will succeed have been the subject of many
years of case law. One principle that has emerged is that an employer cannot
simply rely on cost savings as a legitimate aim – although it has generally
been accepted that cost can be counted as one among several factors – a so
called ‘costs plus’ approach.
The issue came up for review by the Court of Appeal in Heskett
v Secretary of State for Justice in which an employee complained of indirect
age discrimination. The case concerned the pay of probation officers which was
based on a pay scale with 25 incremental points. A probation officer would
previously have progressed three points up the scale each year, with the result
that they could reach the top of their pay scale within about 8 years. In 2010,
however, the Government introduced a pay freeze – limiting the increase in any
public sector employer’s pay bill to just 1%. The Probation Service responded
to this by limiting pay progression to just one point on the scale per year.
Since those at the bottom of the scale were likely to be younger than those at
the top it was clear that this change would amount to indirect age
discrimination unless it could be shown to be a proportionate means of achieving
a legitimate aim.
The employer argued that its policy was legitimate given the
limitations imposed on it by central Government. The employee argued that this
amounted to no more than relying on a desire to avoid the cost of allowing pay
progression to continue as it had in the past. The Employment Tribunal and the
Employment Appeal Tribunal (EAT) sided with the employer and the employee
appealed to the Court of Appeal.
The Court conducted a detailed review of the case law and
concluded that the term ‘cost plus’ was unhelpful. What had to be decided was
whether, looked at fairly, the employer’s primary objective had been to save
money. If that was all the employer was doing, then that would not amount to a
legitimate aim. However, an employer was entitled to take proportionate steps
to ensure that it ‘lived within its means’. It followed that the Tribunal was entitled to
find that the employer in this case was pursuing a legitimate aim in seeking to
operate within the financial constraints imposed on it by the Government.
As for proportionality the Tribunal had taken into account the
fact that the employer had accepted that its current pay system was
unsatisfactory and that it intended to change it so that it was less dependent
on length of service. The Court of Appeal rejected the argument that this was
an irrelevant consideration. The Tribunal had held that the reduction in pay
progression was justified as a temporary measure while the employer carried out
a more fundamental reform of its pay structure. That was a finding that it was
entitled to reach, although it raised the possibility of future claims
succeeding if the reform was not carried out. The appeal was dismissed.
Dismissals for Redundancy
A redundancy is a dismissal as a result of a workplace closing
down or the employer needing fewer employees to do work of a particular kind.
In Berkeley Catering Ltd v Jackson the question was whether the reason
that an employer needed fewer employees made a difference to whether or not
there was a redundancy situation.
Mrs Jackson was the Managing Director of a company owned by Mr
Patel. Over the course of 2017 Mr Patel began – as he himself admitted - to
undermine Mrs Jackson and disparage her in front of colleagues. He also began
to take a more active role in the business. In 2018 he decided that he would
step in as a full time CEO, making the role of Managing Director redundant.
After a series of consultation meetings, Mrs Jackson was dismissed.
She claimed unfair dismissal, arguing that her redundancy was
bogus. The Tribunal upheld her claim. There was no diminishing need for an MD
role. Mr Patel had simply decided to increase the amount of time that he put
into the company. There was no financial difficulty and the employer had taken
on an Events Director after Mrs Jackson was made redundant, indicating that
there was no diminishing need for senior management staff as a whole.
On appeal, the EAT held that this was the wrong approach. The
Tribunal had distracted itself by asking whether there was a ‘genuine’
redundancy situation. A redundancy situation either existed or it did not and
an employer was free to organise its affairs in such a way as to reduce its
requirement for employees. If it did so, then the motive behind that decision
was irrelevant to the question of whether or not there was a redundancy. Motive
was of course relevant to the issue of reasonableness, both in terms of whether
the employer had acted in good faith and whether Mrs Jackson should have been
offered the role of Events Director. But the Tribunal had fallen into error by
bringing motive into play when considering whether there was a redundancy
situation. The case was sent back to a different employment tribunal to decide whether
the redundancy situation was genuinely the reason for dismissal and whether the
dismissal was fair.
Whistleblowing
An employee who is dismissed for making a public interest
disclosure – whistleblowing – can claim unfair dismissal even without the two
years’ continuous service that is normally required. What is more, there is no
cap placed on the amount of compensation that can be awarded, so successful
claims can be very expensive for employers.
In the case of Simpson v Cantor Fitzgerald however, the
employee’s claim was unsuccessful. Mr Simpson had been employed for less than a
year as a trader for an investment bank when he was dismissed. He claimed that
his dismissal was the result of numerous allegations that he had made over the
course of his employment about the behaviour of his fellow traders. In all the
Tribunal identified 37 specific allegations.
The Tribunal held that none of these were protected disclosures.
Broadly, a protected disclosure is a disclosure of information that tends to
show that some legal wrongdoing has occurred and which the employee reasonably
believes is in the public interest. The Tribunal found that many of Mr
Simpson’s disclosures were really just complaints that he had lost out on
commission because of the way in which trades were carried out. The real reason
he had been dismissed was that ‘distrustful and obstructive’ behaviour had made
it ‘utterly impossible for the team to work with him’.
Nevertheless, the case reached the Court of Appeal which upheld
the Tribunal’s findings. The Tribunal
had been entitled to find that the allegations that he relied on were not
protected disclosures – whether because they were insufficiently specific or
because Mr Simpson did not genuinely believe that they tended to show wrongdoing
on the part of the employer or its employees. In any event, the complaints
themselves were not the reason for dismissal. The Tribunal had found that the
manager who made the decision to dismiss was not influenced by those
allegations, but by the hostile and corrosive attitude that Mr Simpson
displayed towards colleagues, as well as his poor timekeeping. He was dismissed
because his employer considered him to be a poor team player, not because he
had made protected disclosures.
Unfair
dismissal and redundancy
An
employer making an employee redundant will not normally be acting reasonably
unless it considers whether there is any alternative work that may be offered.
In Aramark (UK) Ltd v Fernandes however, the employee argued that the
employer should also have considered placing him in a bank of casual workers
after his redundancy had taken effect.
The
employer maintained a list of workers who they would call upon to perform ad
hoc assignments from time to time. They did so frequently with the result that those
on the list, while not having the security of employment, had a reasonable
expectation of future earnings. When Mr Fernandes was placed at risk of
redundancy he asked to be placed on the list as that would help him offset his
lost income. The employer refused and a Tribunal subsequently held that this
rendered the dismissal unfair.
The
EAT overturned this decision. In an unfair dismissal case, the question is
whether the employer has acted reasonably in treating the reason for dismissal
– redundancy in this case – as a sufficient reason for dismissing the employee.
Placing Mr Fernandes in the bank of casual workers would not have altered the
fact that he had been dismissed – it was not a way of avoiding dismissal as an
offer of alternative work would have been. It was therefore not a relevant
consideration in deciding whether or not redundancy was a sufficient reason for
dismissal. Whether the employer had granted the employee’s request or not, he
would have been dismissed all the same. Since this was the only ground on which
the Tribunal upheld his claim, the EAT ruled that the dismissal was fair.
National minimum wage
The government has accepted the
recommendations of the Low Pay Commission and announced the National Minimum
Wage and National Living Wage rates which will come into force from April 2021.
Recognising the formidable task of recommending minimum wage rates in the
middle of a global pandemic, the Low Pay Commission has sought to balance the
needs of low paid workers – many of whom are doing critically important work –
and the real solvency risks which small businesses are currently exposed to.
The different terms can be
confusing. The National Minimum Wage is the minimum hourly pay that almost all
workers are entitled to. The National Living Wage is higher and is currently
paid to workers who are over 25. From April 2021, the government is extending
the NLW to 23 and 24 year olds too. The new rates from April will be:
- NLW (age 23 and over) - £8.91
- Age 21 and 22 - £8.36
- Age 18 to 20 - £6.56
- Age 16 and 17 - £4.62
- Apprentice rate - £4.30
Find full details at https://www.gov.uk/government/news/national-living-wage-increase-to-protect-workers-living-standards.
Constructive
dismissal and maternity leave
A
constructive dismissal involves the employee resigning in response to
fundamental breach of contract on the part of the employer. Normally the
employee will need to make it clear both that they are resigning and that the
reason for their resignation is the employer’s conduct. In Chemcem Scotland
Ltd v Ure however the EAT held that these requirements were met by
implication when an employee simply failed to return from maternity leave.
The
case involves a family business in which the employee in question was the
daughter of the owner. While she was on maternity leave, he was in the process
of divorcing her mother, having formed a relationship with someone else – who
was also an employee of his business. If his daughter returned from maternity
leave, she would be his new partner’s manager. It seems that this led to some
tension and conflict.
The
Tribunal identified a number of matters in the handling of her maternity leave
that amounted to a breach of mutual trust and confidence. These included
failing to pay her SMP on time and refusing to answer queries about what she
was entitled to. The whole circumstances, the Tribunal found, showed that her
father was hostile to the idea of her continued employment by the company. In
the event she did indeed decide not to return but did not expressly resign. The
Tribunal found that her resignation could be implied from the circumstances and
took effect on the day when she had been due to return to work.
The
EAT upheld this finding. It rejected the argument that the employee had not
clearly communicated the fact that she was resigning or her reason for leaving.
As the Tribunal had pointed out the employer had not, when she failed to
return, taken any steps to clarify matters or ask her about her intentions. In
the circumstances of the case her failure to return was ‘eloquent of the true
position’ and this was understood by the employer.
Breach of contract
Repudiatory – or very serious –
breaches of contract entitle the other party to the contract to consider that
the contractual terms have been metaphorically ripped up. What happens in a
case where one party contemplates breaching a contract, but the other party
beats them to it? In Palmeri v Charles Stanley, Mr Palmeri was a
self-employed stockbroker who had worked for Charles Stanley for more than 20
years. He had a three-month notice period, but his contract did not contain a
payment in lieu of notice (PILON) clause. The business decided to change its
operating model to take a bigger chunk of Mr Palmeri’s earnings. He was not
pleased. The company gave him an ultimatum – sign a new contract on the new
terms or leave immediately with a PILON. Mr Palmeri reacted furiously and was
verbally abusive to the managers present and the firm more generally. He then
agreed to take the new terms under protest for the duration of his notice
period. Unfortunately, the abusive behaviour continued and escalated so the
company withdrew the offer of new terms and summarily (without notice)
terminated his contract.
Mr Palmeri brought two claims in
the High Court – one for breach of contract for the summary termination and a
second claim for breach of the implied term of mutual trust and confidence for
failing to allow him an orderly exit for his clients. The company said Mr
Palmeri’s abusive behaviour was a repudiatory breach of contract which entitled
them to ignore contractual terms and terminate without notice. They also relied
on several serious regulatory breaches which they only discovered after his
termination. They said he was already in repudiatory breach of contract due to
those regulatory breaches.
The High Court agreed that the
company had no contractual right to make the original offer to Mr Palmeri -
accept the new terms or receive a PILON - because they had no contractual right
to pay him in lieu of notice. However, they said Mr Palmeri’s behaviour,
including the abuse and the regulatory breaches, amounted to serious misconduct
and a breach of the implied duty of trust and confidence. That repudiatory
breach by Mr Palmeri justified the employer’s summary termination. The fact
that the firm was preparing to breach his contract in future (by paying him in
lieu of notice) if he didn’t agree to new terms was irrelevant. They were still
entitled to rely on the abuse and regulatory issues as serious breaches of
contract enabling them to avoid its terms on notice.
This case shows that repudiatory
conduct by one party releases the other from the terms of the contract. In this
case, the company had been planning to pay in lieu when it hadn’t got the
contractual right to do so. Fortunately, Mr Palmeri’s bad behaviour got there
first and prevented the employer from effecting that proposed breach of
contract. Always check contractual terms before paying in lieu of notice. These
clauses should be standard in contracts to give businesses flexibility when it
comes to termination.
And Finally…
Employers across the country are being encouraged to accommodate
the need for employees to self-isolate when required to do so because of Covid.
According to widespread reports over Christmas, however, this message did not
reach a newsagent in Lincolnshire who sacked a 15 year old paperboy for missing
work after being told to self-isolate by his school. The boy’s father is
reported to be considering legal action, but may face some difficulty. It does
seem that the boy in question has been doing the job for around two years – so
it is possible that he has sufficient length of service to claim unfair
dismissal. But it is not entirely clear that a 15-year-old, still legally
regarded as a child, has the capacity to enter into a contract of employment in
the usual sense.
The law is unclear. In 2003 a 15-year-old paperboy was held not to be a worker for the purposes of the Working Time Regulations in the EAT case of Addison v Ashby. But that case turned on the fact that the working time of children was dealt with by the Children and Young Persons Act 1933 and there was no appeal from the Tribunal’s finding that the boy in question had been unfairly dismissed. The issue remains open – possibly because the rather modest pay of children delivering newspapers makes a lengthy legal battle uneconomic. Still, the boy’s father in this case does seem very annoyed. On balance, the newsagent might be better off reconsidering their decision.
LexLeyton in the news
Real Business: Experts explain: An SME guide to unfair dismissal
Yorkshire Times: Business Responds To Treasury Business Support Announcement
HR Review: Chancellor offers new grants to businesses in wake of lockdown restrictions
Business Advice: Unfair dismissal – a concise guide for employers