Continuity of Employment

The Court of Appeal has handed down its decision in Bower v Stevens (& ors.), a curious case about continuity of employment in solicitors' firms.

Mrs Stevens was employed by Hughes Hooker, a solicitors' firm which "attracted a degree of notoriety", where the controlling partner was "a man well practised in flaunting the norms of professional behaviour and personal integrity in the pursuit of financial gain."

Mr Bower (who was not involved in any wrongdoing) was a salaried partner in the firm. The controlling partner did not pay Mr Bower's wages etc. for some time. By the end of 2000, there were just the two partners left who resolved to dissolve the firm on 31st March 20001. In early March, the controlling partner was struck off the roll of solicitors. By operation of law, this meant that Mr Bower became sole principal with just three weeks to go before the firm closed.

Some of the employees brought a claim against the two partners for unauthorised deductions, wrongful dismissal, unfair dismissal and redundancy payments. The controlling partner took no part (he was in and out of bankruptcy). Mr Bower argued (before the EAT and Court of Appeal) that the change in partnership from two to one partners meant that continuity of employment was broken.

Under s218(5) of the Employment Rights Act 1996, continuity of employment is deemed to be preserved when there is a change of partners. The Court of Appeal held, resolving inconsistent EAT authorities, that this includes the situation where two partners become one - which must achieve the purpose of the section - even though it did not rest easily with the natural wording of s218(5) which required a need for partners (plural) after the change to trigger the deemed continuity of employment.

Thus the employees had continuity of employment to claim unfair dismissal, redundancy payments and the longer notice periods.

New EAT Decisions

Haberdashers' Monmouth School v Turner
(Burton P., 8th March 2004)

An unusual case concerning constructive dismissal. Ms Turner had been a teacher for 22 years, on (as everyone believed) a self-employed contract. The school wanted to formalise her position and offered her employment. The contract did not recognise her 22 years' previous service and, after taking legal advice, Ms Turner refused to sign the contract on the basis she had been working under an implied contract of employment for 22 years, and her continuity of employment should be recognised. She resigned, claiming constructive dismissal. The tribunal found (i) she had been an employee for 22 years; and (ii) accordingly the school's refusal to recognise this was a repudiatory breach of contract.

The EAT held that the tribunal's approach was wrong. The correct approach, following classic contract law cases, was to ask whether the school had shown an intention not to be bound by the terms of the contract (which is necessary for a repudiatory breach). Importantly, the fact a party to the contract may make a genuine and honest mistake as to the legal interpretation does not mean it no longer intends to be bound; to the contrary, it may well intend to be bound by the contract but has just made a mistake over what the contract requires. Accordingly the case was remitted.

Sexual Orientation Attack

The much reported attack on the sexual orientation discrimination legislation, brought by Amicius and other unions, was rejected by the High Court yesterday.

Amiucus (and six other major unions) argued that various exemptions in the Employment Equality (Sexual Orientation) Equality Regulations 2002 were incompatible with the obligations imposed on the UK by the EU Equal Treatment Framework Directive 2000 and also conflicted with provisions of the European Convention on Human Rights.

In an extremely long and thorough judgment (apparently the judge had to deal with over 200 pages of skeleton argument and 14 bundles of authorities), Richards J. rejected the unions' arguments and held that the exceptions to the general prohibition on discrimination were lawful. The issues raised are quite fascinating, even extending to an invitation (which the judge refused!) to decide whether extracts from the Bible prohibit homosexuality (paras. 36-38).

The exceptions challenged were (in summary):

* reg 7(2): where being of a particular sexual orientation was a genuine and determining occupational requirement

* reg 7(3): where the employment is for the purpose of an organised religion, and either religious doctrine prohibits a particular sexual orientation, or appointment of the individual would offend the strongly held religious convictions of a significant number of the religion's followers

* reg 20(3): admitting students into religious training, where the religion meets the conditions of reg 7(3)

* reg 25: nothing in the Regulations shall render unlawful anything which prevents or restricts access to a benefit by reference to marital status

I recommend that anyone dealing with the sexual orientation legislation read this decision: it involves detailed consideration of the policy behind the legislation and extensive construction of the various exceptions.

Scott v Inland Revenue

The Court of Appeal has handed down judgment in Scott v Inland Revenue. The case straddles the border on whether it warrants a bulletin, but I have done so as it contains a small number of useful 'soundbites' on diverse points that advocates might want to quote in tribunals.

* disclosure: there is an ongoing duty of disclosure in tribunals (when standard disclosure is ordered). Thus the Inland Revenue ought to have disclosed to the Applicant that it changed its normal retirement date from 60 to 65 after he was dismissed, but before the remedies hearing (paras. 20-21);

* aggravated damages: aggravated damages are separate from awards for injury to feelings, and the two should not be amalgamated (paras. 34-35)

* costs: the fact that an Applicant drops some of his claims (he dropped the named individual Respondents) and failed on one other (an "inconsequential head of claim had failed") is not relevant to the decision whether to award costs. At most, it is relevant to the issue of how much should be awarded (para. 47)

Amendments to EAT rules - consultation

The DTI is consulting on some minor changes to the EAT Rules of Procedure 2001, largely to bring them into line with the proposed ET Rules of Procedure. It is proposed the changes will come into force on 1st October 2004, the same date as the statutory disciplinary and grievance procedures.

The amendments, on which views are sought, are:

• introducing an overriding objective;
• introducing a requirement that the claim and response forms (the new name for the IT1 and IT3) must be lodged with the Notice of Appeal and written reasons for the decision;
• importantly, the time limit for appealing changes from 42 days from the decision being sent to the parties to 42 days from the date of the order - which presumably means the day that the verbal order/decision is given at the tribunal hearing. Thus it is possible that parties will have to draft their Notices of Appeal without having seen the written reasons! There seems to be no provision for an extension of time in these circumstances;
• a formal system of 'permission to appeal' will be introduced. If the judge or registrar thinks the appeal has no reasonable prospect of success, there will be an oral permission to appeal hearing (currently the registrar and then, in turn, the judge, consider the position on paper only - and if permission is not given the appellant must go to the Court of Appeal);
• a provision for temporary restricted reporting orders, while the substantive application is being considered;
• a general re-wording of the costs provisions, to make costs more likely in the event of an amendment or an adjournment caused by a party. It also allows the EAT to summarily assess costs (with no £10,000 cap, as in the ET), take the paying parties financial position into account, make wasted costs orders against representatives, and award costs to litigants in person. Interesting, it does not introduce a right to recover costs, in line with the ET, if the appeal was 'misconceived' (presumably on the legal fiction that no appeal could be misconceived or the judge would never have let it through to a full hearing!). Successful parties will have to continue relying on the argument that pursuing a hopeless appeal amounts to unreasonable conduct.

Responses to the consultation paper are sought by 25th June 2004.

Stress at Work - House of Lords

The House of Lords has, this morning, handed down judgment in Barber v Somerset County Council. This is one of the four co-joined cases heard before the Court of Appeal as Sutherland v Hatton - but was the only one of the four to appeal to the House of Lords.

The majority of the House of Lords, in a 4-1 judgment, allowed the appeal and overturned the Court of Appeal's decision.

Despite that sounding enormously exciting for Claimant / Applicant lawyers, all five judges made it very clear that they believed the Court of Appeal's (restrictive) interpretation of the law relating to stress at work claims to be correct - largely because Mr Baber's legal team accepted it was correct (para. 39). Lord Scott stated that the Court of Appeal had "succinctly and accurately express[ed] the principles that ought to be applied." (para. 5). Lord Walker described, as "a point of great importance", the distinction between an individual believing they suffered from stress at work, and telling their employer that they suffered from stress at work.

The decision was overturned, though, on the facts. The majority (Lords Walker, Bingham, Rodger and Steyn) thought that even though the legal principles enunciated by Hale LJ in the Court of Appeal were correct, the County Court judge was "entitled to form the view" that the Defendant employer was in breach of its duty of care (para. 70). The minority (Lord Scott) thought that - again, although the Court of Appeal's exposition of the law was correct - the trial judge might have reached a different conclusion if he had the benefit of Hale LJ's judgment, and as a matter of policy, the Court of Appeal had been correct in interfering.

Thus, by a 4-1 majority, the County Court judge's finding that Mr Barber could recover damages for stress at work was reinstated.