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."