Wednesday, 29 February 2012

TUPE: ETO Reason for Dismissal

[Thanks to Ed McFarlane of Deminos HR for preparing this case summary]

Can a transferee establish an ETO defence to an otherwise automatically unfair transfer-related dismissal if it provides the services rendered by transferring employees through franchised limited companies, rather than by its own employees?

Yes, says the EAT in
Meter U Ltd v Ackroyd, conjoined appeals from tribunals in Leeds and Exeter involving the same employer and multiple Claimants.

The employer had taken over meter reading contracts as service provision changes under TUPE, and dismissed the transferring meter readers as redundant, using franchised companies in their place. The employer's ETO defence was that this entailed a change in the nature and composition of its workforce, with companies replacing redundant employees, even though the employees could have taken up franchise arrangements through their own companies. The two employment tribunals found the dismissals unfair on different bases, holding either expressly or implicitly that the franchise companies were part of the employer's workforce - hence the changes in the workforce were like for like and there was no ETO.

Overturning the findings of Unfair Dismissal, the EAT held that the term 'workforce' in Regulation 7 (2) TUPE 2006, which is not defined either in TUPE or the Acquired Rights Directive, did not include limited companies (or their staff) performing services for the employer. Accordingly, it upheld the ETO defence. If the franchise arrangements were a sham, disguising continued employment by the employer, the ETO defence would not apply, as it would be a simple change in terms and conditions in connection with a transfer.

The EAT remitted the cases for determination of the fairness of the dismissals, and in the Exeter case, for further findings as to whether the franchise arrangements were a sham, the Leeds Tribunal having rejected a 'sham' argument.

Fraudulent/Illegal Contracts

[Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary]

Can a worker enforce employment rights dependent on a contract of employment if the contract was illegal from the outset? No, says the EAT (Langstaff J) in
Zarkasi v Anandita.

The claimant was an Indonesian domestic worker recruited from Indonesia to work for a family in the UK. To enter the UK she obtained an identity card, passport and visa from a passport office in Jakarta using a false identity. Ultimately she left her employer in the UK and brought a number of employment claims dependent on a contract of employment.

It was held by an employment tribunal that she had freely and voluntarily participated in an arrangement to enter the UK by pretending to be someone else in order to work for her employer. That made the contract unlawful as being proscribed by law when it was first entered into. As such it was unenforceable, as were any statutory rights dependent on it. Notwithstanding this, the claimant asserted she had been the victim of human trafficking and that the tribunal should, in the spirit of the European Convention on Action against Trafficking in Human Beings, provide her with a remedy. The tribunal rejected this - it had no jurisdiction or powers in that regard. The EAT agreed with the tribunal on both points.

Nor could her claim for race discrimination succeed. Her treatment was not because she was Indonesian, but because she was in the UK illegally and without a work permit.

Thursday, 23 February 2012

Restrictive Covenants and Confidential Information

[Thanks to Ed McFarlane of Deminos HR for preparing this case summary]

Should an employer get an injunction, based on a contractual confidentiality clause when there are no restrictive covenants - to prevent a former employee in possession of confidential information from working for the employer's competitor, or from using that information when it might harm the employer's interests?

No, says the Court of Appeal in
Caterpillar Logistics Services (UK) Ltd v Huesca de Crean, turning down the former employer's appeal against the refusal of an interim injunction and a strike-out of the claim by the High Court, but leaving some scope for fact-sensitive distinctions.

There were two main issues on appeal. The first was the Appellant's request for 'barring-out relief' - to prevent the employee from working for the competitor at all on the basis of an alleged fiduciary duty arising from holding confidential information; the second was an injunction to prevent the employee from using the employer's confidential information if she was working for the competitor.

The Court of Appeal unanimously rejected the application for barring-out relief, distinguishing the fiduciary duty to a client that a solicitor or adviser engaged litigation would be subject to, preventing it from acting against a former client's interests with confidential information, from that of a former employee, who was not ordinarily a fiduciary to her former employer, with the Court doubting that an employee would be a fiduciary other than in the most exceptional circumstances.

By a majority, the Court of Appeal refused the application for an injunction in respect of the feared use of confidential information by the former employee on the facts, noting the lack of any real risk of harm to the Appellant, but, differing from the High Court, observed that an employee's duty of confidentiality could be indefinite and therefore might be subject to injunctive relief.

Monday, 20 February 2012

TUPE - Organised Grouping of Employees

[Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary]

In deliberating whether there has been a service provision change under Reg 3 (1) (b) of TUPE 2006, is it sufficient to say that employees will transfer if, simply, they "go with the work"?

Not so says the EAT in
Eddie Stobart Ltd v Morman (Underhill P presiding).

There needs to be analytical distinction between an organised grouping of employees (TUPE, Reg 3 ((3) (a)), on the one hand and, on the other, whether employees are assigned (Reg (4 (1))to it.

ES was a warehousing and logistics service provider. It had 35 employees at one site in Nottinghamshire servicing at least 5 clients. The contracts reduced to two, the principal one relating to Vion. ES closed the site. FJG Logistics Ltd picked up the Vion work. ES took the view that all employees engaged wholly or 50% plus of their time on Vion work should transfer to FJG.

The EAT held that it is necessary to identify an organised grouping of employees in advance of the question of which employees were assigned to it. Here, the employees were "organised" as to their shifts, not as to a particular customer. A paradigm example of an organised grouping of employees would be where there was a particular client "team" dedicated to the client. Such was not the case here.

Suspending Employees During Disciplinary Hearings

[Thanks to Louise Jones of Temple Garden Chambers for preparing this case summary]

In Crawford v Suffolk Mental Health Partnership NHS Trust, the employer referred a matter of alleged gross misconduct that arose out of the care given to a patient, to the Police. Describing this as "little short of astonishing", Elias LJ noted:

  • Hospitals in this situation, although they must be seen to act transparently, owe duties to long-serving staff;
  • Being under the cloud of possible criminal proceedings is a very heavy burden;
  • Employers should not subject employees to that burden without the most careful consideration and a genuine and reasonable belief that the case, if established, might justify the epithet "criminal" being applied to the conduct.
Elias LJ also doubted whether suspension had been appropriate in this case, and observed that suspension should not be a knee-jerk reaction "if it is, it will be a breach of the duty of trust and confidence. Suspended employees will frequently feel belittled and demoralized".