Part-Time Pensions - Preston v Wolverhampton (no. 3)

Perfectly timed to wrap up in a stocking, the EAT has handed down the latest decision in the Preston v Wolverhampton saga of pension cases. The series of cases represent the largest litigation ever in an employment tribunal, involving roughly some 60,000 claims, mainly by female part-time workers.

In an admirably clear judgment, the EAT (HHJ McMullen, sitting alone) asked and answered the following six questions (note: I have adopted the order used by the judge in his judgment, not the order used in the formal list of issues):

(1) Is there a breach of the Equal Pay Act 1970 where pension scheme membership is compulsory for full-time staff but part-time staff are excluded? Yes (paras 30-55)

(2) Is there a breach of the 1970 Act where scheme membership is compulsory for full-time staff and optional for part-time staff? No (paras. 56-66)

(3) Is there a breach of the 1970 Act where an employer has failed to inform staff of the removal of a barrier to scheme membership? Yes, but only where there is a policy of failing to inform, having a disparate effect on women (paras. 67-80)

(4) Did the Chairman err in his consideration of Mrs Savage’s and Mrs Thomas’ test cases? Yes - their cases should be dismissed. (also paras. 67-80)

(5) When does a “stable employment relationship” arise? One needs to look at the intention of the parties. (paras. 81-128)

(6) Does time begin to run in a claim against a TUPE transferor from the date of transfer, or does time not run until the end of an employee’s employment with the transferee? Since pension rights do not transfer under TUPE, employees need to sue the transferor as well as the transferee. Time, for the purpose of the six-month limitation period, starts running from the date of end of employment with the transferee, not when the transfer took place. (paras. 129-148)

Employment Status

The Court of Appeal has handed down its decision in Emerging Markets Partnership v Bachnak (19th December 2003).

It holds that where an 'employee' enters into two contracts with the 'employer', one (without any remuneration) in a traditional employee/employer relationship, and the other (with remuneration to the limited company) through the intermediary of a one-man limited company, the tribunal cannot simply say that the lack of remuneration on the one contract, and the absence of a direct contractual relationship on the other, means that the individual is not an employee (and thus cannot claim unfair dismissal).

What a tribunal should do is look at the two contracts in the round and decide whether, in the light of the co-existing contracts, an express or implied contract of employment arises.

It's not a very interesting case, but - hey - it's Christmas. Merry Christmas everyone.

Normal Retirement Age: Employees in Unique Position

Section 109 of the Employment Rights Act 1996 provides that employees cannot clair dismissal if they are over the 'normal retirement age' (or, if there is no normal retirement age, 65). This section, commonly known as the upper qualifying limit, was upheld as lawful recently in Rutherford v Town Circle (bulletin 2/10/03).

In a majority judgment handed down this morning, Wall v The British Compressed Air Society, the Court of Appeal has held that an employee's contractual retirement age, where he is the only employee in that position, sets up a presumption that that is the 'normal' retirement age.

Previously, the EAT had held that a employee holding a unique position cannot have a 'normal' retirement age, because the requirement for a 'norm' entails the need for a group of people with that retirement age within the company. These cases, Age Concern Scotland v Hines and Dormers Wells Infant School v Wells, have been overturned by the majority of the Court of Appeal.

Giving the leading judgment, Simon Brown LJ (with whom Evans Lombe J., agreed) stated that it was absurd that an individual aged, say, 68, with a contractual retirement age of 70, might claim unfair dismissal if there were two people in his position but was prohibited from claiming unfair dismissal if there was only the one person in his position. Accordingly, the majority held that an employee holding a unique position was not prohibited from establishing a 'normal retirement age'.

Giving a dissenting judgment, Scott Baker LJ held that a unique contractual right of a particular employee to retire on a particular date cannot, by itself, create a 'norm' so as to set a normal retirement age.

LINK: http://www.bailii.org/ew/cases/EWCA/Civ/2003/1762.html

Data Protection - Curtailment of Right to demand information

The Court of Appeal has decided an important case on the scope of the Data Protection Act 1998 and, in so doing, provides guidance on the extent to which employers are obliged to provide copies of employees' personnel files, Emails etc.. In short, it drastically curtails the right of employees to demand information by means of a data protection request.

The case, Durant v Financial Services Authority, provides as follows:

* 1. in order for data, whether held on computer or a manual file, to be 'personal data' (thus giving rise to a disclosure obligation), it must name or directly refer to an individual. But that it not enough: mere mention of a subject's name in a document does not make the information in that document 'personal data'. For the disclosure obligation to arise, the information must be biographical in a significant extent, and should have the data subject as its focus. Thus information stored by the FSA concerning a complaint by Mr Durant about Barclays Bank was not personal data which the FSA was obliged to disclose to Mr Durant (paras 26-28).

* 2. a 'relevant filing system', for a manual (rather than computer) system, is one where the information is structured by reference to that individual. Thus the FSA's file marked 'Mr Durant', which contained a large number of documents relating to his claim in date order, was not a relevant filing system because it was structured by reference to date, not to the individual (para. 35 and 48). The purpose of the Act is to protect the privacy of personal data, not documents. If the documents are not structured by reference to that data, the disclosure provisions of the Act are not triggered. Any manual filing system which requires an individual to "leaf through" multiple documents to find the personal data contained therein falls outside the scope of the Act. The fact a folder is labelled with an individual's name is not, without more, enough to bring it within the Act.

The Court of Appeal also considered the difficulties arising when personal data, which would otherwise be disclosable, identifies other people.

The Court concluded with criticisms of individuals who seek to use the Act as a method of obtaining information generally which refers to them by name, rather than information relating only to personal data. Mummery LJ described Mr Durant's application and appeal as "misconceived", which will not bode well for Applicants who put Respondents to cost in tribunal claims dealing with a (now) unwarranted Data Protection disclosure application.

New TUPE Cases

New TUPE Cases

Two new TUPE cases: one Court of Appeal, one Employment Appeal Tribunal.

Alderson v Secretary of State for Trade & Industry (Court of Appeal, 8/12/03)

A case of historical interest only: regulation 2(1) of TUPE used to define an 'undertaking' as including "any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture."

The employees were employed by Liverpool City Council as refuse collectors. The refuse services were contracted out, and the employees were engaged by the new contractor on less favourable terms and conditions. They brought a Francovich claim against the DTI, arguing that by excluding non-commercial ventures (ie refuse collections for a local authority) from the scope of TUPE, the government had failed to properly implement the Acquired Rights Directive.

The Court of Appeal held that exclusion for undertakings "not in the nature of a commercial venture" did not apply to this case, because it was clear that (i) the undertaking was of a commercial nature after the transfer, and (ii) it had all the same characteristics, other than it was not operated for profit, before the transfer (para. 31)

As stated above, the case is of historical interest only because the non-commercial venture exclusion was abolished in 1993 by the Trade Union Reform and Employment Rights Act 1993.

LINK: http://www.courtservice.gov.uk/judgmentsfiles/j2135/alderson.htm

-------------------------------------------------------------------------------- Perth & Kinross Council v Donaldson (EAT, Lord Johnston, 30/10/03)

The EAT (sitting in Scotland) held that TUPE does not apply to a liquidator who is gathering in assets to dispose of them for the maximum benefit of creditors. Unlike receivers and administrators, "if [the liquidator] has to look over his shoulder at the TUPE Regulations, this might well fetter the extent to which he might perform his duty. (para. 19)".

Thus when the local authority took housing maintenance services back in-house (pun unintended), following the insolvency of, and appointment of liquidators for, the company it had contracted those services to, TUPE did not apply.

New ET Rules of Procedure: Consultation

A consultation paper has been issued in connection with revising ET procedu= res. The proposals arise primarily from the Employment Act 2002 and the Em= ployment Tribunal taskforce report.

The key reforms proposed are:

• the Rules of Procedure are to be recast so that they follow a more logical structure and are expressed in more 'plain English' terms.
• the IT1 and IT3 disappear, now to be called Claim and Response forms. The forms must contain specified information and, if not provided, will cause the forms to be rejected.
• the circumstances in which a respondent may gain an extension of time for submitting a response form are to be more tightly specified.
• there will be new pre-acceptance procedures to sift out claims and responses that (for one or more of a number of specified reasons) should not go forward.
• Acas's duty to conciliate is to be limited to a fixed period in most cases, to encourage parties to settle in good time rather than just before the Tribunal hearing. This fixed period will be either a short 7 week period or a standard 13 week period, depending on what the case is about. However, in discrimination cases, which tend to be particularly complex, Acas's duty to conciliate will remain unlimited in time.
• where a case is uncontested, the Tribunal will in future usually issue a default judgment against the respondent without holding a hearing.
• powers are to be provided for the Employment Tribunal Presidents to issue practice directions to ensure that a consistent approach is adopted to procedural issues.
• explicit provision is to be made for cases to be struck out at pre-hearing review, but only within the grounds on which Tribunals may currently strike out claims or responses outside such a review. (Such grounds include failure to comply with an order or direction, or the inclusion in the claim form or response form of anything scandalous, unreasonable or vexatious or conducting the proceedings in such a manner.)
• two substantial changes are to be made to the present costs rules: (i) there will be a new provision for awards in respect of preparation time in some circumstances; and (ii) it will be possible for representatives (except not-for-profit representatives) to incur a costs award on account of their own conduct.
• the rules will apply to the whole of Great Britain, replacing the current separate, but essentially equivalent, Rules for England and Wales and Scotland.
• Following this public consultation, it is intended that revised Regulations will be laid before Parliament in spring 2004 and come into force on 1 October 2004.

Annual Increase in Tribunal Awards

The annual increases in compensation have been published. They take effect from 1st February 2004 under the Employment Rights (Increase of Limits) Order 2003.

The main increases are:

• maximum compensatory award increased from £53,500 to £55,000;
• maximum amount for a week's pay (for calculating basic award or redundancy payment) increased from £260 to £270.

The full list is attached as a Schedule to the S.I. (see link below).

Employment Relations Bill - Correction

A keen reader has pointed out to me that I missed out the word 'Relations' = in the second sentence of the first paragraph below (aptly, she works for S= pecsavers). It should have said 'Employment Relations Act 1999', not 'Empl= oyment Act 1999'. Corrected version follows:

Employment Relations Bill
-------------------------
The government has, this morning, introduced the Employment Relations Bill = in the House of Commons. The Bill 'tweaks' the Employment Relations Act 19= 99, following the review that took place after the first three years of the= Act's operation.

The Bill contains:

• clarification of procedures for establishing what is an appropriate barga= ining unit for compulsory union recognition;=20
• an amendment incorporating the ECHR's decision in Wilson & Palmer, namely= that employers cannot pay an enhanced rate to 'buy out' an employee's righ= t to be bound by union agreements;=20
• greater case management powers for the CAC=20

and other similar matters

Employment Relations Bill

The government has, this morning, introduced the Employment Relations Bill in the House of Commons. The Bill 'tweaks' the Employment Relations Act 1999, following the review that took place after the first three years of the Act's operation.

The Bill contains:

• clarification of procedures for establishing what is an appropriate bargaining unit for compulsory union recognition;
• an amendment incorporating the ECHR's decision in Wilson & Palmer, namely that employers cannot pay an enhanced rate to 'buy out' an employee's right to be bound by union agreements;
• greater case management powers for the CAC

and other similar matters.

LINKS:
Government Press Release
The Bill

Court of Appeal - Challenging Jurisdiction

The Court of Appeal's long-awaited decision in Harada Ltd (t/a Chequepoint) v Turner has been handed down today (see bulletin 25/11/99 for earlier issues arising in this case).

Harada challenged the tribunal's jurisdiction as the employee worked overseas. They employment tribunal found it had jurisdiction. Harada's appeal to the EAT was dismissed, so it appealed to the Court of Appeal. The merits hearing was listed in the meantime, and Harada unsuccessfully applied to adjourn the merits hearing, then unsuccessfully appealed the refusal to adjourn to both the EAT and the Court of Appeal.

At the full merits hearing, it refused to participate as it said it did not want to be seen as subjecting to the ET's jurisdiction, pending the outcome of the appeal on jurisdiction.

Having lost (badly) on the merits, it appealed the chairman's refusal to grant a review on the basis that it could not have attended for fear of submitting to the jurisdiction. The ET and then the EAT rejected this argument (and the EAT awarded costs against Harada).

The Court of Appeal has, today, dismissed Harada's further appeal. It held that it was:

"nothing short of absurd to suggest that, having failed (before the Morison EAT and Mummery LJ) to stop the merits hearing being listed, and then failed again, once it was listed, to have it adjourned, Harada could conceivably have been held to have submitted to the jurisdiction and thereby abandoned its outstanding appeal against the earlier jurisdictional ruling had it, under continued protest, participated in the merits hearing." (para 35)

It also upheld HHJ Ansell's order for costs in the EAT, holding:

"In my judgment, after considering the facts of this case in some detail, it would have been very surprising had the Ansell EAT not made a costs order against Harada: there had never been any realistic prospect of a successful review application." (para 44)

A reminder...

[An advertisement for freelance solicitors for Sherrards appears below]

I rarely send out reminders about commencement dates, but since so much is = happening today (and tomorrow), I thought I would make an exception.

The following are coming into force today...

1. prohibition on discrimination on grounds of sexual orientation

2. ban on hand-held mobile telephones in cars, with liability for employers

3. the EOC Code of Practice on Equal Pay

and tomorrow...

4. prohibition on discrimination on grounds of religion or belief.

Remember how in April 2003, the government promised that it would arrange for harmonisation of commencement dates for employment legislation (bulletin 6/4/03)? It promised all new regulations would commence from one of two trigger dates, 6th April or 1st October. So it's nice that they're keeping their promise.

New EAT Decisions

[An advertisement for employment lawyers for Abbey Legal Services in = Croydon appears below]

These decisions have been placed on the EAT website this week.

Appeal - Inadequate Reasons

Bax Global Ltd v French (Lord Johnston, 20/10/03)

This is an important case for those who appear in the EAT.

The EAT found that the tribunal's reasons were inadequate. Normally,= this would result in the appeal being allowed and the case being remitted = for re-hearing.

However, in this case the EAT adjourned the appeal and directed that = the original employment tribunal provide fuller reasons for its decision. = It did this following a recent Court of Appeal decision allowing this appro= ach in the personal injury context, and directly contrary to established EA= T convention. Indeed, this approach (adjourning the appeal and asking the = tribunal to provide further reasons) was prohibited by an earlier division = of the Court of Appeal in Tran.

With luck, other divisions of the EAT will follow this approach, whic= h should reduce the number of 'technical' appeals based upon complaints of = inadequate reasoning rather than genuine errors of law.
-------------------------------------------------------------------------

Implied Term of Trust and Confidence

Billington v Michael Hunter & Sons Ltd (HHJ Richardson, 16/10/03)

If an employer tells an employee that she is likely to face dismissal= but may, instead, resign on a generous resignation package, this is conduc= t likely to damage or destroy the employment relationship. Therefore unles= s the employer establishes it had reasonable and proper cause for acting in= the way it did, it is in breach of trust and confidence and the employee c= an claim constructive dismissal.

Pension Losses: 3rd edtn. of Guidelines published

The Employment Tribunal Compensation for Loss of Pension Rights booklet, 3rd edtn., is being published on Monday.

It replaces the 2nd edition, published in 1991, which was criticised by the EAT in Clancy v Cannock Chase Tech [2001] IRLR 331 as being over-simplistic. Rumour has it that the 3rd edition, which is the bible used by tribunal chairman when there is no actuarial evidence, is very different from the draft version which was put out to consultation earlier this year.

The booklet is available from The Stationary Office or 0870 240 3701 price £10.75.

New EC Employment Website

The European Commission DG Employment and Social Affairs Department has, today, launched a new website.

According to the Press Release, it "brings together a wealth of legislation, documentation and publications on the subject of labour law and work organisation. Not only will it provide access to a lot of information for the general public but it will also be an excellent source of information for social partners, researchers and national administrations."

Illegality - Colen v Cebrian

The Court of Appeal has, today, handed down its judgment in Colen & anor. v Cebrian (UK) Ltd.

The case deals with whether a tribunal has jurisdiction to hear unfair and wrongful dismissal claims where the contract of employment is tainted with illegality.

Most of the three judgments (Waller, Carnwath and Peter Gibson LJJ) deal with whether the tribunal was entitled to make the findings of fact that it did. There is a useful summary of existing caselaw at paras. 21-23 of Waller LJ's judgment. But two points of interest emerge from the case:

(1) the burden of proof is firmly on the employer to establish illegality, not on the employee to establish he is entitled to bring a claim;

(2) there is nothing illegal or objectionable in an employer agreeing that remuneration shall be paid jointly to husband and wife in respect of services provided by them as a team, notwithstanding that the precise division of remuneration may not be agreed and may fluctuate from time to time to minimise tax exposure.

TUPE - Celtec v Astley

In a judgment handed down this morning, the House of Lords has referred the Celtec v Astley case to the ECJ.

Facts
Prior to 1990, vocational training and enterprise activities were managed by the Department of Education. In 1989, the government announced the creation of Training and Enterprise Councils (known as TECs). Approximately 80 TECs were set up, using (in the main) the same premises, databases and staff as had been doing the job under the Department of Education. They took over the Department of Education's existing contracts with suppliers and other third parties.

This case was concerned with the North Wales TEC, which began operations in about September 1990. In common with the other TECs, it was a company limited by guarantee and was initially staffed by civil servants, previously working for the Department of Education, who were seconded out for a 3-year period to the TEC. The terms of secondment provided that they continued to be civil servants and that, at the end of the period, they could extend the period of secondment or return to normal civil service duties.

In September 1991 the government decided to end the secondments and arrange for staff to be directly employed by the TECs. Following a period of consultation, all staff were offered the opportunity to return to the civil service at the end of their secondment, or resign from the civil service and enter into contracts of employment with the TEC. Many employees, including the Respondents to this appeal, adopted the latter option. The three in question, who brought their claims as test cases, resigned and entered into new contracts in about October 1993 (although the process extended until 1996 for other employees).

If the TUPE transfer took place in September 1990, then "at the time of the transfer" (being the wording in ERA 1996, s218, dealing with continuity of employment) the employees were, and remained, employees of the Department of Employment. Thus s218 would not grant them continuity of employment.

If, however, the TUPE transfer was a gradual process occurring between September 1990 and October 1996 (as the staff transferred), then the employees would have retained continuity of employment for their years spent with the civil service.

Issues Referred to ECJ
(I am paraphrasing the questions posed by the House of Lords)

1. Should the phrase "rights and obligations...existing on the date of a transfer", in the Acquired Rights Directive (which gave rise to TUPE and which had direct effect) be interpreted as meaning that there is a particular point in time at which the undertaking is deemed to have transferred?

2. If so, how is that date to be ascertained when a transfer takes place as a series of transactions over a period of time?

3. If not, how should the words 'on the date of a transfer' be interpreted?

Legal Services Commission can be sued for Discrimination

The Court of Appeal has handed down its decision in Legal Services Commission v Yvonne Patterson, overturning the decision of the EAT.

Ms Patterson is a sole practitioner whose firm is overwhelmingly (98%) made up of legal aid work. She brought a claim in the tribunal under the Race Relations Act 1976 when she was refused a franchise, alleging that she had been discriminated against on grounds of race.

The Court of Appeal has held that the tribunal has jurisdiction to consider such a claim, because:

• (a) although Ms Paterson would not be an 'employee' of the Legal Services Commission (since she would not be required to 'personally execute any work or labour', so as to bring her within the definition of an 'employee');
• (b) a legal aid franchise is an 'authorisation or qualification' and, as the body which awards that authorisation or qualification, the Legal Services Commissions had a duty not to discriminate under section 12 of the Act.
  

Although the Court of Appeal were at pains to point out that they were deciding this case under the Race Relations Act 1976 only, there seems to be no good reason why it should not apply to other forms of discrimination.

This decision may result in a large number of unsuccessful franchisee applicants, particularly sole practitioners, bringing discrimination claims against the Legal Services Commission. (It does not, of course, mean they will win!)

New EAT Decisions

COSTS
Metropolitan Police v Logan (HHJ Serota, 31/10/02 and 20/9/03)

The EAT's power to award costs includes cases where the receiving party's costs are being met by a trade union. The fact that a union is paying the bill does not offend the indemnity principle.

--------------------------------------------------------------------------------

HUMAN RIGHTS
Pay v Lancashire Probation Service (HHJ McMullen, 29/10/03)

Mr Pay was a probation officer, responsible (amongst other things) for dealing with sex offenders and their victims. In his spare time, he ran a company selling bondage, domination and sado-masochism merchandise through a website. He also had involvement with a club called 'Club Lash'. The probation service dismissed him on the grounds that his extra-curricular activities, advertised in the public domain, were inconsistent with the duties of a probation officer dealing with victims of sex crimes and would bring the probation service into disrepute. The tribunal found the dismissal was fair and, in particular, did not offend Mr Pay's rights under the European Convention of Human Rights.

The EAT upheld the finding of a fair dismissal. Article 6 (right to private life etc.) was not engaged because, by advertising on a web-site, Mr Pay's activities had been brought into the public domain. Although article 10 (freedom of expression) was engaged, the EAT upheld the tribunal's conclusion that the probation service's right to uphold its reputation, when balanced against Mr Pay's right to freedom of expression, meant that the probation service was entitled to dismiss him.

New ACAS Guides - Final Version

Further to my Email of yesterday (announcing the draft versions), the final version of ACAS's guides to sexual orientation discrimination, and to discrimination on grounds of religion/belief, have now been published.

The links are:

Sexual orientation

Religion

I had several complaints yesterday that the links did not work. They do work - but ACAS's website cannot cope with the flurry of demand when the recipients of this bulletin all click on the link simultaneously. As the advert says, if you can't get through, try again later.


(Thanks to Victoria Wright of Vizold Oldham for telling me the final version had been published)

New ACAS Guides

ACAS has, today, published draft guides on discrimination on:

(a) sexual orientation discrimination; and,

(b) discrimination on grounds of religion/belief.

The guides are really, really good. They are not that long, and contain a comprehensive summary of the new law, worked case examples, suggestions as to what practices employers should follow or avoid, and a useful Q&A section. If you haven't read the legislation itself (and even if you have), these two documents are well worth reading.

Statutory Dispute Resolution

[An advertisement for an employment lawyer at nicholasfrimond, Guildford, appears below]

The DTI has produced a website summarising the anticipated changes (and implications) of the forthcoming statutory disciplinary and grievance procedur= es.

Along with copies of government press releases, there is a copy of a DTI training Powerpoint presentation.

Alternatively, I have now put my seminar Powerpoint presentation on the web (to accompany my seminar notes on the forthcoming changes, which were put on the web in July).

ACAS Guide to Holiday

ACAS has today issued a revised guide to holiday and holiday pay.

The web version (which rather embarrassingly claims at the top to be dated as of November 2003, but at the bottom as of April 2003).

It provides the answers to (or guidance on) a number of questions, such as:

• do employees have the right to paid leave on public holidays?
• can a part-time worker who works Wednesdays to Fridays claim the right to paid bank holidays which fall on a Monday?
• does leave accrue during periods of absence?
• how must a worker apply for leave?

etc.

LINK: ACAS Guide to Holidays

ACAS Guide to Holiday

The Department of Work and Pensions has published details of a survey on age discrimination in the workplace.

According to the survey, despite legislation still being three years away, employers are beginning to take action to introduce appropriate policies into the workplace. The results of the survey include:

• 67% of employers are aware that age discrimination legislation will be introduced into the workplace by the end of 2006;
• 57% of employers confirmed they already avoid using age limits and age-related words in job advertisements;
• 55% do not use age as a basis for redundancy (the summary of the survey is unclear if they includes LIFO, which is indirectly discriminatory on grounds of age); and,
• 62% of employers base training purely on skills needs.
  

Age Discrimination

The Department of Work and Pensions has published details of a survey on age discrimination in the workplace.

According to the survey, despite legislation still being three years away, employers are beginning to take action to introduce appropriate policies into the workplace. The results of the survey include:

• 67% of employers are aware that age discrimination legislation will be introduced into the workplace by the end of 2006;
• 57% of employers confirmed they already avoid using age limits and age-related words in job advertisements;
• 55% do not use age as a basis for redundancy (the summary of the survey is unclear if they includes LIFO, which is indirectly discriminatory on grounds of age); and,
• 62% of employers base training purely on skills needs.
  

Repayment Clauses in Compromise Agreements

(Thanks to Neil Russell of BD Laddie, and to Michael Simpson of Thompsons, for telling me the official guidance was out)

On 26th August 2003, I gave advance notice of the Inland Revenue's intention to issue a formal statement on its attitude to repayment clauses in compromise agreements.

The statement has now been issued in issue 67 of the Tax Bulletin. It is reproduced below; but, in summary, the Revenue accepts that sums paid which are repayable in certain circumstances are not taxable.

TAX BULLETIN 67

Termination payments and benefits - repayment clauses in compromise agreements - application of s225-6 ITEPA 2003

In recent months, a question has arisen concerning whether the existence of a "repayment clause" in a compromise agreement made at termination of employment gives rise to a charge to tax and National Insurance Contributions under the legislation dealing with restrictive covenants (s225-6 ITEPA 2003 - formerly s313 ICTA 1988 - and s4(4)(b) Social Security Contributions and Benefits Act 1992).

Typically, such a clause requires the employee to repay some or all of the sum settled by the agreement if he or she subsequently initiates litigation in respect of the employment or its termination.

The Revenue's view has been, and remains, that a compromise agreement by its very nature includes a restrictive covenant. This is because the employee agrees not to do something, namely not to commence or continue litigation.

Statement of Practice 3/1996 advises that the Revenue will not attribute any of the settlement sum to such an undertaking, so there is nothing to charge under s225-6 ITEPA 2003.

However, an employer could still make a payment specifically for an undertaking not to litigate, in which case SP 3/1996 would not apply and a charge arises.

The question is whether a repayment clause entails attribution of some or all of the settlement sum to that undertaking since the sum is lost if litigation commences.

Following legal advice, the Revenue accepts that such a charge will not arise other than in very exceptional cases.

Vaughan-Neil v CIR (54 TC 223) confirmed that it is necessary to establish, realistically and as a matter of fact, what the settlement sum is actually paid for. Normally, a compromise agreement made at termination deals with genuine claims and the settlement sum is paid in consideration for settling those claims. Where that is the case, the settlement sum is exhausted by reference to those claims and no sum remains to be attributable to the undertaking not to litigate. That remains the case whether or not a repayment clause exists.

Consequently, enquiries will not normally be raised on this point alone. The Revenue will raise the question only if the claims appear spurious, for example the amounts are clearly in excess of a reasonable sum for settlement of the claims.

Practitioners should bear in mind that there are no tax or NIC provisions allowing adjustment to charges if such a repayment in fact happens.

All the NICs legislative references mentioned in this article are those which apply in Great Britain. Northern Ireland has its own NICs legislation which, in the main, is the same as that for Great Britain

Rutherford - Upper Qualifying Age

(Thanks to Paul Troop, junior Counsel for Messrs Rutherford & Bentley, for sending me the summary below)

The EAT has handed down its decision in Secretary of State v Rutherford & Bentley (previously Rutherford v Harvest Town Circle).

It has overturned the ET's decision, and found that the upper qualifying age for unfair dismissal and redundancy does not offend Article 119. Thus the rule remains that employees over normal retirement age cannot claim unfair dismissal or statutory redundancy payments.

The EAT declined to remit the case back to a tribunal and said it was the end of the road for the litigation (subject to any appeal to the Court of Appeal).

I have not read (or seen) the transcript. Paul Troop's summary is reproduced below.

Secretary of State for Trade and Industry v (1) Rutherford (2) Bentley

Mr Justice Wall, 2 October 2003

The EAT has today allowed the Secretary of State's appeal against the finding of the Stratford Employment Tribunal that the provisions of the Employment Rights Act 1996 that prevent employees over the age of 65 claiming either unfair dismissal or redundancy (sections 109(1)(b), 156(1)(b), 119(4) and 162(4)) should be disapplied as being indirectly discriminatory on the grounds of sex contrary to Art 141 of the European Treaty.

The SoS was successful in arguing that the Tribunal's decision in relation to both disparate impact and objective justification was wrong. The judgement runs to over 100 pages.

On the issue of disparate impact, the EAT held that the Tribunal selected the wrong pool for comparison, and even if the pool selected was the correct one, its rejection of the pool proposed by the SoS without any proper form or reasoned analysis was an error of law sufficient to vitiate its decision.

The EAT took the view that the correct pool to be examined is the entire workforce. To deal with any particular segment of it on the basis that it represents those "for whom retirement has some real meaning" is to introduce a subjective element which was capable of being expanded or reduced without the application of any measurable criteria. The EAT stated that this does not mean that it would be wrong, in appropriate cases, to consider the disadvantaged group. The EAT held that the wider pool shows clearly and unequivocally no disparate impact.

On the issue of justification for the provisions, the EAT found that the Tribunal was wrong to decide that the default provisions were inextricably linked to the State retirement age. The EAT accepted that the policy arguments advanced by the SoS constituted reasonable policy objectives that reflected legitimate aims of the State's social policy. The EAT held that the policy aims were not related to any discrimination based on sex and were not "tainted with sex discrimination" as had been found by the Tribunal. The EAT added that the Tribunal failed to give any weight to the consultation process currently under way in relation to age discrimination and to allow the government a reasonable margin of appreciation when striking the balance between the need to legislate and the need to ensure that proper processes have been gone through before legislation is placed before Parliament.

The EAT saw no point in remitting the case to another Tribunal for further consideration. The order of the Tribunal was set aside and the claims of Mr Rutherford and Mr Bentley were dismissed.

The EAT also stated "We do not, of course, criticise either Mr Rutherford or Mr Bentley for bringing these applications. By pointing up the difficulties, they and their lawyers have performed a public service, of which we hope the government will take note. But that said, we see no purpose in there being a Rutherford II. Subject, of course, to the Court of Appeal taking a different view, it is our judgement that this litigation should stop now."

ACAS Pilot Mediation Scheme

ACAS has launched a pilot mediation scheme. Help is available over the telephone, or an ACAS representative will visit the workplace and help employers and employees resolve their problems. They aim to visit the workplace within 5 working days of a request, and for formal mediations within 10 days of receiving an agreed request from both employer and employee.

The visiting / mediation service is free.

Whilst being piloted, it is only open to:

• employers in the Yorkshire & Humber region or the East London area (covering City of London, Newham, Tower Hamlets, Redbridge, Havering, Hackney, Barking & Dagenham, Lewisham, Greenwich and Bexley); and,
• employers that employ fewer than 50 employees.

New EAT Decisions

[An advertisement for the forthcoming 2 Gray's Inn Square discrimination seminar appears below]

Defer-Wyatt v Williams (EAT 24/7/03, HHJ Peter Clark)

If an employee reasonably holds a mistaken belief as to the correct EDT (resulting in late submission of the IT1), it is not reasonably practicable for him to present his claim for unfair dismissal within time. An extension of time should be granted.
________________________________________

Royal Mail Group plc v Lynch (EAT 2/9/03, HHJ Ansell)

When construing documents to see if they have an adverse impact on workers (in this case, a part-time worker who was not allowed to transfer to full-time work unless she agreed that the transfer was temporary), tribunals should not adopt a contra proferentum approach but should examine the document against the background facts known to the parties at the time.

Employment Status

The European Commission has produced a fascinating document on employment status across EU states. It has the snappy title:

"Economically dependant / quasi-subordinate (parasubordinate) employment: legal, social and economic aspects"

and comes in at a mere 141 pages. The report is not officially released until (I think) next week, but there is a sneak preview available on the European Commission website.

The report examines the distinction between employees and the self-employed, and considers what criteria are used in different countries to distinguish the two categories. It goes on to consider reform of the current distinction in all the member states and considers whether a community-wide definition is practical.

Amongst the dross are some interesting statistics (see pages 69+). In the year 2000 (the most recent year covered):

• 11.8% of the UK workforce were self-employed;
• 25% of UK employees were part-time employees (44% of all women, compared with 9% of all men);
• 6.2% of UK employees were on fixed-term contracts.

DRC Codes of Practice - Consultation

The Disability Rights Commission is in the process of issuing two new Codes of Practice, to reflect changes to the Disability Discrimination Act 1995 which come into force next year.

The draft Codes have been put out to consultation (until 30th November). The DRC invites comments on the Codes, and has questionnaires on its website enabling interested parties to make representations.

The two Codes are entitled:

• Employment and Occupation Code of Practice; and,
• Trade Organisations and Qualifications Bodies Code of Practice

The draft codes and questionnaires can be seen here

Employment Status

[An advertisement for the forthcoming 2 Gray's Inn Square discrimination seminar appears below]

The European Commission has produced a fascinating document on employment status across EU states. It has the snappy title:

"Economically dependant / quasi-subordinate (parasubordinate) employment: legal, social and economic aspects"

and comes in at a mere 141 pages. The report is not officially released until (I think) next week, but there is a sneak preview available on the European Commission website.

The report examines the distinction between employees and the self-employed, and considers what criteria are used in different countries to distinguish the two categories. It goes on to consider reform of the current distinction in all the member states and considers whether a community-wide definition is practical.

Amongst the dross are some interesting statistics (see pages 69+). In the year 2000 (the most recent year covered):
• 11.8% of the UK workforce were self-employed;
• 25% of UK employees were part-time employees (44% of all women, compared with 9% of all men);
• 6.2% of UK employees were on fixed-term contracts.

Press Bulletin CRE Statement on British National

In the last half-hour, speaking at the TUC conference, CRE Chairman Trevor Phillips has promised to back any trade union which expels any member of the British National Party (BNP).

Daniel Barnett, barrister at 2 Gray's Inn Square Chambers, comments:

"The BNP may try to take advantage of new laws coming in later this year, which prevent unions expelling members because of their philosophical beliefs. If hatred of other races and religions is deemed a philosophical belief, unions will be prohibited from expelling them.

"Moreover, the CRE may find itself liable to pay compensation to BNP members if it has supported the unions in unlawfully expelling them.

"But these new laws do not come in until December, so unions are safe following Trevor Phillips' call before then."

Note to Editor

Daniel Barnett is a barrister specialising in employment and discrimination law. He can be contacted on mail@danielbarnett.co.ukor by telephone on 020 7440 8499.

New TUPE Regs - Update

Thanks to Michal Stein of Nabarro Nathanson, and to Pat Stein of the DTI, for the following information]

We have been awaiting the new TUPE regulations for some time. This is an update as to the current position (source: the DTI).

• draft Regulations will be published, for a three-month consultation period, in October 2003. This second consultation will concentrate on whether the draft Regulations fulfill the stated policy aims, rather than consulting on the underlying policy aims themselves;
• it is hoped the new Regulations will take effect from April 2004;
• the Regulations will primarily codify existing caselaw and consolidate the provisions of the recent Acquired Rights Directive. For example, the rule in Wilson stands and there will be no scope for changing employees' terms and conditions following a TUPE transfer (except as set out in the next bullet point);
• the principal substantive change is for insolvent businesses. When a genuinely insolvent business is transferred (which includes wound up businesses but not those placed in administrative receivership):

1. the transferee will be able to agree changes to terms and conditions with the workforce (and will not thereby be in breach of TUPE); and,
2. liability for arrears of wages will not transfer over, but will be met by the state (up to the statutory cap). The DTI will not reveal the position for arrears of wages over the statutory cap; this will be revealed next month.

• eventually, provisions will be introduced requiring the transferee employer to match an employee's pension contributions up to a maximum of 6% into a stakeholder (or equivalent) pension scheme. Thus if an employee contributes 4% of salary into an occupational pension scheme, the transferee will have to do likewise. However, this will not form part of the new TUPE regulations, but will form part of the forthcoming Pensions Bill, to be issued by the Department of Work and Pensions, and is unlikely to take effect for some time.

Ditch the BNP

In the last half-hour, speaking at the TUC conference, CRE Chairman Trevor Phillips has promised to back any trade union which expels any member of the British National Party (BNP).

Whilst this may be a morally commendable stance, one must query whether the CRE is opening itself for significant liability. As from 2nd December 2003, it will be unlawful for a trade union to expel members based on their religion, religious belief or similar philosophical belief. It is strongly arguable that membership of the BNP demonstrates a philosophical belief that persons of a particular race - or religion - should have different rights to white anglo-saxon protestants. For a trade union to expel members because of this belief may contravene regulation 15 of the Employment Equality (Religion or Belief) Regulations 2003.

In turn, by inducing unions to expel members of the BNP, the Commission for Racial Equality may be:

• (a) aiding the union's unlawful act - which, in turn, is actionable under regulation 23; and,
• (b) insofar as the unions have contractual membership rules by which they undertakes not to expel members on grounds of political or other beliefs (as many do), liable for inducing a breach of contract.

Having said that, it could just as strongly be argued that membership of the BNP is not a "similar philosophical belief" - which would provide all the excuse a tribunal needs for rejecting a BNP member's claim in these circumstances.

So good on Trevor Phillips.

New EAT Decisions

The following decisions have been placed on the EAT website in the last few days.

Securiplan v Bademosi (HHJ McMullen, 9th May 2003)

A TUPE case, dealing with the issue of whether an employee was assigned to the part of the undertaking which transferred (provision of security services at a magistrates' court). Mr Bademosi had worked on another site for many years, but had been transferred temporarily to the magistrates' court for a period of one year. The TUPE transfer occurred a few weeks before he was due to return to the other site.

The EAT upheld the tribunal's decision that Mr Bademosi was not assigned to the magistrates court - and therefore did not transfer under TUPE - because his assignment to the magistrates court was as a temporary placing. It was not appropriate to look at where he worked immediately before the transfer (i.e. the magistrates court); rather, the wider circumstances should be examined to determine whether he was truly assigned to the magistrates court contract - and he was not.

Bolch v Chipman (Burton P., 19th May 2003)

This decision provides guidance on when a tribunal should (and should not) strike out one side's case/pleading on grounds of unreasonable behaviour under rule 15(2)(d) of the 2001 Rules. The primary point is that unreasonable conduct does not, of itself, mean a case should be struck out; rather, there has to be EITHER contumelious default OR no prospect of a fair trial. Tribunals should always consider sanctions short of striking out, for example, allowing the defaulting side to attend for a limited purpose (such as a remedies hearing, or testing the evidence of the other side).

The relevant paragraph of the judgment is paragraph 55.

Kear v Neural Technologies (HHJ Levy, 2nd June 2003)

Another case on unreasonable conduct; this time relating to costs in the EAT rather than striking out a pleading.

A litigant in person accused the solicitor on the other side of various improper actions, such as "colossal incompetence and corruption", that he had "fabricated" an EAT precedent, and that "you are not fit to practice law."

The EAT held that this was unreasonable conduct in conducting the proceedings, and awarded costs of (sadly only) £300, which was a broad reflection of the additional expense the solicitor had been put to.

Employment Status of GP's

The Employment Appeal Tribunal has held, in North Essex Health Authority v Dr C David-John (HHJ Levy, 15th August 2003) that GPs do not have a contractual relationship with the 'employing' Health Authority. Their obligations are governed by statute, not contract.

Therefore:

• (a) given there is no contract, there cannot be a 'contract for services' - thus GPs cannot claim unfair dismissal; and,
• (b) likewise, there cannot be a 'contract personally to execute any work or labour' - thus GPs cannot claim under the discrimination statutes.

Future Loss of Earnings: The Ogden Tables

[Thanks to John Bowers QC of Littleton Chambers, who acted for Kingston upon Hull City Council, for sending me the transcript of this decision]

The Employment Appeal Tribunal has handed down its decision in Kingston upon Hull City Council v Dunnachie (no. 3). Yes - this is the same Dunnachie case that we all know and love, but a less well publicised aspect of it.

The EAT (Burton P. presiding) held that it is normally inappropriate to use the Ogden tables when assessing future loss of earnings in unfair dismissal (and, presumably, discrimination) claims, unless it has been established that there will be a career-long loss. They should not be used to reflect the chance of a career-long loss, i.e. by choosing a multiplier from the tables and then reducing it by, say, 50% to reflect that the loss may not, in fact, be (working-) life-long.

The Appeal Tribunal held that using the Ogden tables:

"risks the introduction of an air of spurious accuracy. Great care is devoted to selecting the correct Table and the correct rate of return and the correct multiplier to two decimal places - and yet then a broadbrush percentage discount, 50% or 30%, is suddenly chosen and applied." (para. 26)

The EAT set out clear procedural guidelines, including an early and detailed Schedule of Loss and counter-Schedule of Loss (with specific factual assertions components which must be included), if the Applicant is seeking to rely on the Ogden tables. The core of the decision is at paragraphs 28-30, and paragraphs 33-34, of the judgment.

Burton P. made it clear that the warning against using the Ogden tables did not apply to the applicability of the Ogden tables when calculating pension losses. On this point, the new DTI guidelines on calculating pension losses in employment tribunals (which went out to consultation earlier this year) are likely to be published in the autumn. They are widely expected to support the use of the Ogden tables in calculating pension losses.

Finally, the decision dealt with an important point of principle on the award of costs. I will deal with this in a separate bulletin.

Costs in Employment Tribunals

Two recent decisions on costs in employment tribunals, both from the Employment Appeal Tribunal.

First, in Kingston upon Hull City Council v Dunnachie (no. 3) (dealing principally with whether the Ogden Tables can be used in tribunals when assessing future loss), Burton P. held that a tribunal has no jurisdiction to order that costs be paid to a litigant in person in respect of his preparation time for his tribunal case. Note that this may change if the Secretary of State brings in Regulations under the Employment Act 2002, which specifically enables tribunals to make orders for costs in respect of wasted preparation time.

Second, in McPherson v BNP Paribas,, HHJ Birtles upheld a tribunal decision ordering an Applicant to pay the costs of the entire proceedings when he withdrew his claim just two weeks before the hearing. Although the EAT made it clear that late withdrawal of a claim is not, in itself, necessarily unreasonable conduct, it formed the view that the Applicant's pattern of failing to comply with interlocutory orders and reluctance to disclose documents showed that he was only bringing the litigation to try to force an offer of settlement out of the Respondent. In those circumstances, his late withdrawal of the claim amounted to unreasonable conduct and the entire costs of the proceedings would be payable.

Repayment Clauses in Compromise Agreements

Thanks to Neil Russell of B.D. Laddie, who is the leading authority on this issue, for keeping me informed of his communications with the Inland Revenue

On 23rd May 2003, I sent out a bulletin concerning a disturbing new approach from the Inland Revenue, who were taking the view that where a compromise agreement contains a clause stating the monies are repayable in full if litigation is started in the future, the payment is brought within ICTA 1988, s313 (taxation of payments for undertakings restricting conduct) or, now, ITEPA 2003, s225.

This meant the Revenue were claiming tax on the full payment, rather than just that in excess of £30,000. [The bulletin of 23rd May 2003 is reproduced below]

This has become a significant issue amongst employment lawyers over the last few months. In the absence of formal guidance, different offices in the Inland Revenue have been taking different approaches.

The Revenue has now clarified its formal position on repayment clauses. Formal guidance will appear in the Tax Bulletin in October 2003 (and may appear on its website as early as next week).

The Revenue's official position is:

• it recognises that all compromise agreements contain an implied undertaking not to issue proceedings against the employer;
• it makes no difference if that undertaking is set out expressly as part of a repayment clause provided the sum of money payable under the compromise agreement is a real attempt to compromise the substantive claims;
• thus no tax is chargeable on any aspect of the monies paid under a compromise agreement, even where that money is repayable if the employee breaches an undertaking not to commence litigation;
• however, if the settlement sum is clearly in excess of a reasonable amount for the claims, the Revenue might regard the settlement as a 'sham' and investigate further.

In summary, provided the settlement sum is reasonable, there will be no tax chargeable on the first £30,000 of the termination payment even if a repayment clause exists in the agreement.

If anybody would like further information on this point, I suggest they contact Neil Russell of B.D. Laddie at n.russell@bladdie.co.uk.

Whistleblowing Disclosures

An updated list of prescribed persons, made under s43F of the Employment Rights Act 1996, has been published.

A worker cannot be dismissed, or subjected to a detriment, if he makes a qualifying disclosure (meaning a disclosure that tends to show a criminal offence has/will be committed, a breach to health & safety rules has/will be committed, a person is failing to comply with a legal obligation etc.).

Under s43F of the Employment Rights Act 1996, the DTI produces a list of prescribed person to whom a protected disclosure can be made. This list has now been updated (with effect from 1st October 2003).

Loss of Chance to Claim Unfair Dismissal

Since publication of a summary law report in the Daily Telegraph on 19th July, employment lawyers have been awaiting the transcript of the EAT's decision in Virgin Net Ltd. v Harper (HHJ Peter Clark, 9th July 2003).

The case is authority for the proposition that employees cannot circumvent the one-year qualifying period for unfair dismissal by bringing a claim for wrongful dismissal and claiming loss of a chance.

Previously, following Raspin v United New Shops (1999), when an employee was dismissed in breach of contract (ie without notice), and his/her contractual notice period would have taken him beyond the one year qualifying period, s/he could bring a breach of contract claim where the damages would include compensation for loss of a chance of claiming unfair dismissal. In a case where the dismissal would plainly have been unfair, an employee could theoretically recover 100% of the compensation s/he would have had if claiming unfair dismissal properly (subject to the £25,000 cap if the contract claim was brought in a tribunal).

However, the EAT has now declined to follow Raspin on the basis that it is not consistent with the House of Lords' decision in Johnson v Unisys (2001). In other words, the EAT in Virgin Net Ltd v Harper has held that the award of damages for 'loss of a chance' is exactly the type of circumvention of the unfair dismissal statutory framework castigated by the House of Lords in Johnson, and is therefore impermissible.

Kamlesh Bahl

Unless you're living on Mars, you will know the Employment Appeal Tribunal overturned the decision in Kamlesh Bahl v The Law Society last week.

The judgment is 93 pages long, and makes for dull reading. But it is nevertheless worth reporting, for the following reasons:

* it contains an excellent summary of the principles of law relating to direct discrimination (paras. 80-90);

* it reminds tribunals not to confuse unreasonable behaviour with discriminatory behaviour (and provides extended justification for the distinction - paras. 93-101)

* it considers the problems of identifying a hypothetical compatator (paras 102-115), including circumstances where it is unnecessary to identify any comparator

The bulk of the decision deals with the facts of the case, and analyses the evidence (and the tribunal's thought process) in great detail. The ultimate conclusion is that the tribunal had no evidence before it from which it could infer discrimination, whereas it had an abundance of evidence to show there was a non-discriminatory reason for the treatment of Dr Bahl. Accordingly the findings of sex and race discrimination were overturned.

The Law Society v Kamlesh Bahl

Stress at Work - EAT Case

Marshall Specialist Vehicles Ltd v Osborne [Burton J., 29th/30th April 2003]

A case on when employees can claim constructive dismissal arising out of stress at workl.

Ms Osborne resigned because of overwork, which led to a nervous breakdown. She claimed constructive dismissal. The tribunal implied a term that the employers would take reasonable action to avoid imposing a workload, or acquiescing in an employee's assumption of a workload, which would foreseably cause mental or physical injury. It found the term had been breached and awarded the maximum compensatory award for unfair dismissal.

The EAT overturned the employment tribunal in robust terms. It castigated the tribunal for 'manufacturing' an implied term which was designed to provide the means to achieve a predetermined conclusion (para. 40).

It stated that there is a general term implied into all contracts that an employer should take reasonable care for the safety of its employees. It then stated that to succeed in establishing breach of the term, an employee had to:

• (a) establish that the risk of injury was forseeable, in the same was is in civil claims (as in Sutherland v Hatton);
• (b) establish the employer was in breach of its duty (again, as in Sutherland v Hatton).

then, unlike with civil claims (where the above two steps would suffice to establish liability, provided causation could also be established);

• (c) also establish the breach was a fundamental breach of the contract of employment.

Thus it is rendered even harder to claim constructive dismissal arising from stress in employment tribunals than it is to win a claim in the civil courts (para 48).

The EAT then spent time considering the nature of the signs of stress in the case, and concluded that there was insufficient to enable the employee to succeed under the common law principles in Sutherland v Hatton. The important aspect of the decision is an unequivocal determination that the high hurdles for establishing stress in the civil courts, as set out in Sutherland v Hatton, must also be met in constructive dismissal claims.

'Rolled up' holiday pay

Marshalls Clay v Caulfield (+ others) [Burton J., 24th July 2003]

A series of five cases which considered the legality of 'rolled-up' holiday pay. The EAT identifies five typMarshalls Clay v Caulfield (+ others) [Burton J., 24th July 2003]

A series of five cases which considered the legality of 'rolled-up' holiday pay. The EAT identifies five types of 'rolling-up' provisions, namely:

(1) contracts which are silent as to holiday pay;
(2) contracts which purport to exclude liability for holiday pay;
(3) contracts where rates are said to include an amount for holiday pay, but there is no indication of specification of an amount;
(4) contracts providing for a basic wage or rate topped up by a specific sum or percentage in respect of holiday pay;
(5) contracts where holiday pay is allocated to and paid during (or immediately before or after) specific periods of holiday.

The EAT held, after analysing the various scenarios, that (1), (2) and (3) offend the Working Time Directive, but (4) and (5) are permissible.

The EAT also gave guidance (para. 37) as to good practice, viz.:

"We would however take this opportunity to give guidance for the future to employers, and indeed trade unions and employees, with regard to rolled-up holiday provisions, in order both to minimise the risk of any such contractual remuneration not qualifying under Regulation 16(5) and in particular, with a view to Health and Safety and the provisions of Regulation 13(1) and in particular Regulation 13(9)(b) to avoid a breach of those Regulations, and hence pro tanto avoidance under Regulation 35(1)(a); in particular any payment made to or agreed with an employee instead of taking a holiday, or with that effect, would be void. In this regard we are grateful to the submissions of Miss Eady for the Respondent in Marshalls Clay and to the written submissions of Mr Camp in Blue Sword, which we have adapted as follows:

o a) The rolled-up holiday pay must be clearly incorporated into the individual contract of employment, and thus expressly agreed.

o b) The allocation of the percentage or amount to holiday pay must be clearly identified in the contract, and preferably also in the payslip.

o c) It must amount to a true addition to the contractual rate of pay.

o d) Records of holidays taken must be kept.

o e) Reasonably practicable steps must be taken to require the workers to take their holidays before the expiry of the relevant holiday year."

New EAT Cases

The following cases have just been placed on the EAT website.

Frewin v Consignia plc (HHJ Reid QC, 18/7/03)

In this case, the EAT clarifies the tension between London Fire & Civil Defence Authority v Betty (1994) and Edwards v Governers of Hanson School (2001).

In Betty, the EAT held that when considering capability dismissals, it was irrelevant to the question of fairness whether the employer caused the illness in the first place.

In Edwards, another division of the EAT held that Betty was probably wrongly decided, and that it was certainly relevant to compensation - and probably relevant to liability - if the employer was the cause of the employee's absence.

The EAT has now stated that Betty should be confined to its facts, and that when considering the fairness of a dismissal, a tribunal is entitled to take into account the fact that the incapacity was caused by the employer.
________________________________________

Thorpe v Dul, Brooksby Melton College & Learning and Skills Council (Wall J., 1/7/03)

A modern apprenticeship is not a contract of apprenticeship within the Employment Rights Act 1996. Therefore modern apprentices do not automatically fall within the definition of 'employee' and do not have the right to claim unfair dismissal and other statutory remedies.

However, on the facts of any given case, a traditional contract of employment might arise in addition to the modern apprenticeship arrangement. This is a question of fact which must be investigated by tribunals.

Statutory Disciplinary and Grievance Procedures

I have updated my notes on the forthcoming disciplinary and grievance procedures which will become mandatory from October 2004.

To view or download them, click here.

New EAT Cases

The following cases have just been placed on the EAT website.

Frewin v Consignia plc (HHJ Reid QC, 18/7/03)

In this case, the EAT clarifies the tension between London Fire & Civil Defence Authority v Betty (1994) and Edwards v Governers of Hanson School (2001).

In Betty, the EAT held that when considering capability dismissals, it was irrelevant to the question of fairness whether the employer caused the illness in the first place.

In Edwards, another division of the EAT held that Betty was probably wrongly decided, and that it was certainly relevant to compensation - and probably relevant to liability - if the employer was the cause of the employee's absence.

The EAT has now stated that Betty should be confined to its facts, and that when considering the fairness of a dismissal, a tribunal is entitled to take into account the fact that the incapacity was caused by the employer.
--------------------------------------------------------------------------------


Thorpe v Dul, Brooksby Melton College & Learning and Skills Council (Wall J., 1/7/03)

A modern apprenticeship is not a contract of apprenticeship within the Employment Rights Act 1996. Therefore modern apprentices do not automatically fall within the definition of 'employee' and do not have the right to claim unfair dismissal and other statutory remedies.

However, on the facts of any given case, a traditional contract of employment might arise in addition to the modern apprenticeship arrangement. This is a question of fact which must be investigated by tribunals.

No Case to Answer - Court of Appeal

The Court of Appeal has handed down its decision in Logan v Commissioners of Customs & Excise.

The case is primarily concerned with submissions of 'no case to answer', in connection with which the majority of existing authorities date back to the 1970s. However, the Court of Appeal has held the position remains unchanged, confirming that even where the burden of proof lies on the Applicant (as in discrimination or constructive dismissal cases), it is only in exceptional or frivolous cases that it is right for an advocate to make an application of no case to answer.

The Court of Appeal berates the fact that the tribunal allowed the submission of no case to answer, and sent the case back for a rehearing. Ward LJ states:

"This outcome is one of the very reasons why submissions of no case to answer are dangerous to make and allow. The shortcut has once again led to a much longer journey for the parties at greater expense" (para 34)

The Court of Appeal also consider the principles in connection with 'last straw' resignations and provide a useful summary of the issue (paras. 30-33).

Guide to Religion/Belief and Sexual Orientation Discrimination

The symbol ~ is used in phrases such as 's~x discrimination' to prevent this message being rejected by spam detectors]

ACAS has published guidance to the new laws prohibiting discrimination on grounds of s~xual orientation, and on grounds of religion or belief. The guidance seems useful and comprehensive, and ACAS is asking for feedback - presumably with the intention of issuing a formal Code of Practice in due course.

Revised Combined Code on Corporate Governance

The revised Combined Code on Corporate Governance was issued by the Financial Reporting Council yesterday. It comes into force for reporting years beginning on or after 1st November 2003.

The Code’s overall aim is to enhance board effectiveness and to improve investor confidence by raising standards of corporate governance. Its main features are:

• new definitions of the role of the board, the chairman and the non-executive directors;
• more open and rigorous procedures for the appointment of directors and from a wider pool of candidates;
• formal evaluation of the performance of boards, committees and individual directors, enhanced induction and more professional development of non-executive directors;
• at least half the board in larger listed companies to be independent non-executive directors, with a definition of independence of non-executive directors;
• the separation of the roles of the chairman and the chief executive to be reinforced;
• a chief executive should not go on to become chairman of the same company;
• closer relationships between the chairman, the senior independent director, non-executive directors and major shareholders; and
• a strengthened role for the audit committee in monitoring the integrity of the company’s financial reporting, reinforcing the independence of the external auditor and reviewing the management of financial and other risks.

As with the existing Code, in order to meet their obligations under the Listing Rules, listed companies will have to describe how they apply the Code’s main and supporting principles and either confirm that they comply with the Code’s provisions or provide an explanation to shareholders. The new Code emphasises that companies and institutional investors should enter into dialogue based on trust and mutual understanding. Companies should give helpful and informative explanations, and institutional investors should take a considered approach when evaluating them.

DTI Flexible Working Forms

The DTI has placed forms on its website for employees and employers to use when making / granting / refusing requests for flexible working. It is not mandatory to use the forms, but they are useful to ensure that all the statutory requirements are met. They also look pretty.

Employment Tribunal Annual Report

[Thanks to Claire Birkinshaw of Abbey Legal Protection Ltd for telling me the annual report had been published.]

The 2002/03 Employment Tribunal Service Annual Report has been published.

Key statistics are:

• a 12% drop in the number of tribunal applications (just under 99,000, down from just over 112,000);
• but only a 3% reduction in the number of single applications registered (a truer representation of the workload);
• the largest number of claims are unfair dismissal (26%), followed by unlawful deduction from wages (23% - still quaintly called 'Wages Act' applications in the report, seven years after the Wages Act was repealed!). Breach of contract comes in with a surprisingly high 17% of applications, and discrimination claims account for 12% of tribunal applications.
• a reduction in the number of registered appeals to the EAT (1,170, compared with 1,432 the previous year). Of the 756 full hearings that took place, the appeal was allowed in 349 (46%) of them;
• 74% of cases were heard within six months of the application being lodged (obviously I seem to be involved in the other 26%!). The London tribunals seem to be the worst offenders (Stratford only managed 59%) and Bristol had the best record (91%);
• male staff represent 35% of all staff employed (excluding judicial posts), but 48% of management level staff. Hmmmm....
• 39% of all cases settled through ACAS, 31% were withdrawn, 13% were successful at tribunal, 11% were unsuccessful at tribunal, and 6% were 'disposed of otherwise'.
• 16 orders of reinstatement or reengagement were made. This is 0.2% of cases which had full hearings in the tribunal;
• costs orders were made in favour of the Applicant in 307 cases, and in favour of the Respondent in 691 cases.

ETS Annual Report 2003

Minimum Wage - Tips

[A job advertisement for Gotelee & Goldsmith, Ipswich, appears below]

The National Minimum Wage (Tips) Bill has been introduced in the House of Commons.

Its purpose is to correct the anomaly, under the National Minimum Wage Regulations 1999, that:

(a) tips paid directly from customers to staff (such as waiters or hairdressers) do not count as wages for the purpose of the minimum wage; whereas,

(b) if the tips go through the employer's payroll (which often happens when a service charge is automatically added to restaurant bills), those tips do count towards calculating whether the employee has been paid the minimum wage.

The Bill, assuming it is enacted, will amend regulation 31 of the National Minimum Wage Regulations 1999 so that no tips, whether paid directly to the employee or through the payroll, will count as remuneration going towards the minimum wage (currently £4.20ph for adults).

Equal Pay Regulations

The Equal Pay Act 1970 (Amendment) Regulations 2003 have just been published, and come into force on Saturday, 19th July 2003.

Their main effect is to:

• remove current provisions in Equal Pay Act 1970 s.2(5) under which compensation for breach is limited to two years back pay (so as to comply with the judgment of the ECJ in Preston v Wolverhampton Health Authority); and,

• extend the six month period after employment has ended during which a claim must be brought if an employer deliberately conceals relevant facts or if the claimant was under a disability.

The Regulations amend and add to the Equal Pay Act 1970, and provide in outline as follows:-
• reg 1. Commencement date - 19th July 2003.

• reg 2. Transitional provisions covering situations existing at 19th July 2003.

• reg 3. Equal pay proceedings must be instituted on or before the "qualifying date" (as defined) and an award to cover back-pay cannot go back beyond the "arrears date" as defined.

• reg 4. Defines the "qualifying date" (normally 6 months after the last day of the employment).

• reg 5. Defines the "arrears date" (normally the date which is 6 years before the day on which the proceedings are instituted). There are different rules for Scotland (normally the period of 5 years ending on the day on which the proceedings are instituted).

• reg 6. Consequentials.

• reg 7. Defines the "qualifying date" for members of the armed forces (normally nine months after the end of service).

• reg 8. Defines the "arrears date" for members of the armed forces (normally the date which is 6 years before the day on which complaint under the service redress procedures was made

• reg 9. Defines "disability" (see immediately below).

The new rules make special provision to extend both the "qualifying date" and the "arrears date" in favour of a claimant if the employer deliberately concealed relevant facts or if the employee was under a disability . "Disability" for this purpose means under a legal disability (ie being under age or mentally incapable) and has nothing to do with the definition used in the Disability Discrimination Act 1995.

Release to Journalists

GOVERNMENT REVERSES SEX DISCRIMINATION LOOPHOLE

1. The government has published an amendment to the Sex Discrimination Act which closes an existing loophole.

2. Since a court decision in 2000, neither officers nor the chief constables of police forces have not been liable for discrimination or harassment committed by one police officer against another.

3. This means that a woman police constable who is sexually harassed could not bring a sex discrimination claim against the officer who was harassing her, nor against the police force (her employer).

4. This loophole was caused by poor legal drafting when the Sex Discrimination Act 1975 was passed in 1975, but was not spotted until 2000 in the case of Chief Constable of Bedfordshire Police v Liversidge

5. The government has, today, issued a statutory instrument which amends the relevant provisions of the Sex Discrimination Act and closes the loophole.

6. Accordingly, as of Saturday 19th July 2003 (when the amendment comes into force), police officers will be able to claim for sexual harassment against their employers.

7. Daniel Barnett, barrister at 2 Gray's Inn Square Chambers, comments: "This is an overdue and necessary change in the law. Hundreds of police constables have had to tolerate a culture of harassment and discrimination, with no legal remedy. No other country would tolerate this lack of protection for its police".


NOTES TO EDITORS

1. The Sex Discrimination Act 1975 (Amendment) Regulations 2003 were published today and come into force on 19th July 2003.

2. The case in which the courts decided that police officers were not covered by the Sex Discrimination Act 1975 was Chief Constable of Bedfordshire Police v Liversidge (2000).

3. Mrs Cheryldeen Liversidge was a black woman police constable in the Bedfordshire Police. She brought a race discrimination claim against the Chief Constable of Bedfordshire Police and a fellow constable, PC Fitzgibbon. She alleged that PC Fitzgibbon had referred to her as a "Papa Mike" or "PM", a derogatory term meaning "Porch Monkey" used in some parts of America to refer to a negro woman.

4. Her claims against the Chief Constable included a claim that he was vicariously liable as employer for PC Fitzgibbon's alleged wrongdoing. She also alleged that the investigation by the police into her complaint had been inadequate and that disciplinary charges brought against her constituted sex discrimination and/or victimisation for which the Chief Constable was responsible. She further alleged that the Chief Constable did not investigate her complaint with the same energy, commitment and competence compared with the way PC Fitzgibbon's counter allegations had been investigated.

5. The Employment Appeal Tribunal (and, in 2002, the Court of Appeal) held that the discrimination statutes, through a drafting error, did not cover acts of discrimination by one police officer against another.

6. The position was reversed for race discrimination in the Race Relations (Amendment) Act 2000, so that police forces were liable for race discrimination by one officer against another. However, no amendment was made at the time for sex discrimination, and so police officers have been unprotected for the last three years.

Sex Discrimination Regulations

[Thanks to Charles Piggott of Mills & Reeve for telling me about these Regulations]

The Sex Discrimination Act 1975 (Amendment) Regulations 2003 have just been published, and come into force on Saturday, 19th July 2003. Unlike the correspondence Race and Equal Pay Regulations, very little seems to have been written about these amendments.

They make two very important changes, namely:

• at long last, reversing the rule in Liversidge, i.e. providing that chief constables of police forces will be vicariously liable for sex discrimination committed by one police officer against another;
• prohibiting discrimination after the end of the employment relationship, provided the act of discrimination arises out of and is closely connected to the employment relationship. This partly implements the House of Lord's decision in Relaxion Group v Rhys-Harper last month. The effect is that, for example, failures to provide a reference (or bad references on grounds of gender) is capable of amounting to direct discrimination (avoiding the need to bring a difficult claim of victimisation).

ACAS Booklet - Pay Systems

ACAS has just published a new booklet setting out how different pay systems work, and giving guidance on how businesses should introduce new, and modify existing, pay systems.

For a subject where a first reaction might be "isn't it obvious?", the booklet makes enlightening reading.

Sex Discriminations Regulations

[Thanks to Charles Piggott of Mills & Reeve for telling me about these Regulations]

The Sex Discrimination Act 1975 (Amendment) Regulations 2003 have just been published, and come into force on Saturday, 19th July 2003. Unlike the correspondence Race and Equal Pay Regulations, very little seems to have been written about these amendments.

They make two very important changes, namely:

* at long last, reversing the rule in Liversidge, i.e. providing that chief constables of police forces will be vicariously liable for sex discrimination committed by one police officer against another;
* prohibiting discrimination after the end of the employment relationship, provided the act of discrimination arises out of and is closely connected to the employment relationship. This partly implements the House of Lord's decision in Relaxion Group v Rhys-Harper last month. The effect is that, for example, failures to provide a reference (or bad references on grounds of gender) is capable of amounting to direct discrimination (avoiding the need to bring a difficult claim of victimisation).

The Sex Discrimination Act 1975 (Amendment) Regulations 2003

EAT Comments on Costs

The following decisions have been placed on the EAT website recently.

Billany v Knutsford Conservative Club (HHJ Birtles, 8th July 2003)

An decision dealing with the 'employee / self-employed' distinction.

Of interest is the EAT dealing with an application for costs. It stated:

"Neither do we consider that the Appellant’s refusal of the Respondent’s offer to settle the appeal for £500 is itself unreasonable. Although the amount of compensation is a material factor for us to take into account, the case also involved the issue of whether or not the Appellant had been unfairly dismissed."
Which seems to be further support for the increasing common argument that Calderbank letters can be taken into account when deciding whether to award costs in tribunals.

For a summary on the current status of Calderbank letters in tribunals, send a blank Email to calderbank.article@danielbarnett.co.uk. You will receive an automatic reply, so please do not use that address if you want me to read your message.

Statutory Dispute Resolution

The DTI has published the first draft of Regulations on the forthcoming mandatory disciplinary and grievance procedures introduced by the Employment Act 2002. They are due to come into force on 1st October 2004.

For a summary of the relevant provisions of the Act, see 'Compulsory Dispute Resolution' [2002] 9 ELA Briefing 139.

The consultation document and draft Regulations are available at http://www.dti.gov.uk/er/individual/DRcondoc.pdf.

The draft Regulations make fairly horrendous reading, and seem to complicate rather than simplify disciplinary and grievance procedures for employers and employees.. A very loose summary (as they are full of conditions, exceptions and caveats) is:

• the short-form 'modified procedure' for disciplinary proceedings will apply if (a) the employee is guilty of gross misconduct (note: as presently drafted, reasonable grounds for belief in gross misconduct is insufficient - there has to have been actual gross misconduct), or (b) the dismissal is for reasons beyond the employer's control (I suspect this means pressure from third parties to dismiss);
• the short-form 'modified procedure' for grievance hearings will apply if the employment has terminated and both parties agree in writing to follow the modified procedure rather than the standard procedure;
• the disciplinary and grievance procedures do not apply if one party believes compliance would result in a significant threat to person or property, or if one party to the employment contract has been harassing the other (note: this rather drives a coach and horses through the requirement to use the grievance procedure in cases of s#ex, race or disability harassment, although there have been arguments raised that this exception is necessary to comply with EU laws);
• importantly, if any party fails to comply with a step in the procedure, it discharges the other party from continuing with the procedures. There is an exception where the employee has failed to attend a meeting for a reason which was not foreseen when the meeting was arranged;
• an extension of time for presentation of claims to the tribunal, by up to three months, when certain going through certain statutory procedures.

Responses to the consultation paper are due by 29th October 2003. I reproduce below the executive summary from the beginning of the consultation document, and the questions for consultation.

Consulting on Consultation

[An advertisement for an employment law LLM at Middlesex University Business School appears below]

The government has issued its consultation document on the draft Regulations implementing the EU Information and Consultation Directive.

The Regulations will apply to all businesses with more than 50 employees. If 10% of employees request it, the company must set up a workforce committee enabling full information and consultation with the workforce.

The company must then provide information to, and consult with, the committee on matters relating to the development of the undertaking, changes in employment patterns (particularly if there is a threat to employment) and decisions likely to lead to substantial changes in work organisation or contractual relations, such as changes to terms and conditions, TUPE transfers or collective redundancies.

The sanctions, though, are small. Employees can apply to the CAC if the employer has failed to comply with the Regulations. If the CAC orders the employer to take steps to remedy the position, and the employer fails to comply with the CAC's order, the complainant can apply to the Employment Appeal Tribunal which can impose a fine of up to £75,000 (irrespective of the number of employees affected). This is unlikely to be a sufficient deterrent to large companies to force them to comply with the information and consultation obligations on large or sensitive issues.

Neither the CAC nor the EAT will have power to reverse or suspend any decisions or actions taken by the employer whilst in breach of its consultation obligations.

The consultation period closes on 7th November. The draft Regulations are appended at the back of the Consultation Document.

The following decisions have been placed on the EAT website in the last 24 hours.

Grattan plc v Hussain (HHJ Burke, 1st July 2003)

An important decision on conduct dismissals. The EAT emphasises the test is not whether further investigation might reasonably have been carried out by the employer, but whether the investigation which had been carried out could be regarded by a reasonable employer as adequate. It emphasises the decision in Sainsbury's Supermarkets v Hitt, which applies the 'range of reasonable responses' test to the investigation process as well as to the ultimate decision.

Stansbury v Datapulse plc (Wall J., 8th May 2003)

An unusually interesting case to read, in which it seems (although the EAT carefully avoided making findings of fact) that a wing member had been drunk during part of the employment tribunal hearing, had fallen asleep and had made disparaging remarks about the chairman to the parties when passing them in the corridor.

The EAT held, largely because the decision was (a) unanimous, (b) reserved, and (c) not substantively challenged that even if the Appellant's allegations (which were supported by some significant evidence) were upheld, it would not mean that he had not received a fair trial under article 6 of the ECHR. His appeal was accordingly dismissed.