Fiduciary Duties

[Thanks to Michael Reed, Employment Legal Officer at the Free Representation Unit, for preparing this case summary]

Does an employee owe his employer a fiduciary duty? He did not in Ranson v Customer Systems Plc.

Mr Ranson resigned and set up his own business. Some of his work arose from discussions during his notice period. CS said he breached fiduciary duties by not telling them about those discussions.

The Court of Appeal sharply distinguished employees from directors. Directors owe fiduciary duties to their companies. Some employees owe fiduciary duties to their employer, but only if these are created by the contract of employment.

Mr Ranson's contract went no further than the duty to do his job faithfully and the implied term of trust and confidence.

These were not equivalent to the loyalty required of a fiduciary. In an ordinary employment contract employer and employee must have regard to the other's interests. But employees do not subjugate their own interests as a director must.

CS's complaint was Mr Ransom failed to inform them of his actions. Without a fiduciary duty this was not a breach of contract. Employees are not generally required to disclose their own misconduct. Further, Mr Ransom's acts were preliminaries to starting a competing business after leaving, something he was entitled to do.

Reduction in Headcount not required for Redundancy

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

Can there be a redundancy where the headcount remains the same? Yes, says the EAT in Packman v Fauchon.

The claimant was employed as a book-keeper. There was a downturn in business. Also, the employer introduced an accountancy software package which reduced the number of hours which it was necessary for the book-keeper to work. Accordingly, it sought to persuade the claimant to cut down her hours. She refused and was dismissed.

The employment tribunal held that the downturn in business meant there was a diminishing need for book-keeping. Since the claimant did not agree to a significant reduction in her hours, the reason for her dismissal was redundancy. This analysis is consistent with an early, Divisional Court, decision in Hanson v Wood [1967] 3 KIR 231.

But in a later, unreported, EAT decision in Aylward v Glamorgan Holiday Home Ltd (EAT/0167/02) it had been suggested that there must always be a reduction in the headcount of employees for redundancy to apply. Aylward has, however, always been doubted, notably by the editors of Harvey on Industrial Relations and Employment Law. The employment tribunal took this into account and decided not to follow Aylward.

The employer appealed, relying upon the Aylward case, which, it contended, bound the employment tribunal. The EAT dismissed the appeal, departing from Aylward and noting Harvey's criticism with approval.

If the amount of work available for the same number of employees is reduced then a dismissal of an employee caused wholly or mainly for that reason is a redundancy.

Sickness and Annual Leave

[Thanks to Angharad Davies of Dere Street Barristers for preparing this case summary]

If a worker is sick during annual leave can they take their annual leave at a later date?

Yes, says the CJEU in ANGED V FASGA, they can regardless of when the period of sickness began.

This was a reference for a preliminary ruling from the Tribunal Supremo (Spain) concerning the interpretation of Article 7(1) of Directive 2003/88/EC. Article 7 entitles worker to four weeks annual paid leave each year. This period may not be replaced by an allowance in lieu, except after termination.

The court considered the following propositions:

First, the entitlement to paid annual leave is an important principle of European Union law enshrined in the Charter of Fundamental Rights of the European Union.

Second, the right to annual leave cannot be interpreted restrictively.

Third, annual leave and sick leave have different purposes.

Fourth, a worker who is on sick leave during scheduled annual leave has the right to take annual leave at a different time.

Therefore, it would be contrary to the purpose of annual leave to grant that right only if the worker was already unfit for work when the period of annual leave commences.

Article 7(1) must be interpreted as precluding national provisions under which a worker who becomes unfit for work during a period of paid annual leave is not entitled subsequently to the paid annual leave which coincided with the period of unfitness for work.

Protected Conversations

[This is a blogpost, published this morning, from Laurie Anstis of Boyes Turner, who has kindly given me permission to reproduce it]

The Enterprise and Regulatory Reform Bill was expected to be the vehicle for the government's promised reform of compromise agreements.

As originally presented to Parliament, the only element of the Bill that related to compromise agreements was clause 16, which simply renamed compromise agreements as "settlement agreements".

It later emerged that the government was intending to introduce further amendments in the committee stage of the Bill. Those amendments were tabled yesterday.

The amendments add a new section 111A to the Employment Rights Act 1996, as follows:

"111A Confidentiality of negotiations before termination of employment

(1) In determining any matter arising on a complaint under section 111 [an unfair dismissal claim], an employment tribunal may not take account of any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee.

This is subject to the following provisions of this section.

(2) Subsection (1) does not apply where, according to the complainant's case, the circumstances are such that a provision (whenever made) contained in, or made under, this or any other Act requires the complainant to be regarded for the purposes of this Part as unfairly dismissed.

(3) In relation to anything said or done which in the tribunal's opinion was improper, or was connected with improper behaviour, subsection (1) applies only to the extent that the tribunal considers just.

(4) The reference in subsection (1) to a matter arising on a complaint under section 111 includes any question as to costs, except in relation to an offer made on the basis that the right to refer to it on any such question is reserved.

(5) Subsection (1) does not prevent the tribunal from taking account of a determination made in any other proceedings between the employer and the employee in which account was taken of an offer or discussions of the kind mentioned in that subsection."

This is effectively what the government had been previously calling a "protected conversation", but it only applies to a very limited extent.

First, it is only comes into play on an unfair dismissal claim. Discrimination claims and, for instance, breach of contract claims, will not be affected by the new rules. If a discrimination claim is brought at the same time as an unfair dismissal claim, it seems that the "protected conversation" can be taken into account in the unfair dismissal claim as well as the discrimination claim - at least if those are to be considered "other proceedings".

Second, it doesn't apply in any of the automatic unfair dismissal situations, such as whistleblowing.

Third, it does not apply (or only applies to a limited extent) where the behaviour of the employer has been "improper". Expect plenty of argument about what that might mean and, of course, a tribunal is going to have to hear all about the protected conversation in order to determine whether or not the behaviour has been improper.

Fourth, it is notable as the first legislative recognition of the practice of making offers "without prejudice save as to costs" in the employment tribunal.

It will be interesting to consider how these provisions will apply in cases of constructive dismissal. These days an employee will sometimes resign in response to such a conversation with their employer and claim, rightly or wrongly, to have been constructively dismissed. How will this work under the new rules? A constructive dismissal claim will often be alleged to be both a breach of contract and an unfair dismissal. It appears that under these rules the protected conversation can be taken into account on the breach of contract claim but not on the unfair dismissal claim. Or will the determination of the breach of contract claim then allow the protected conversation to be taken into account for the unfair dismissal claim under s111A(5)?

The Enterprise and Regulatory Reform Bill is being scrutinised by Parliamentary committee all this week, with the committee taking evidence from various organisations and individuals. The committee's hearings can be viewed live online here.

Union Withdrawing Legal Support - Victimisation?

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

Is it unlawful victimisation for a Trade Union to refuse to fund litigation by a member against her employer for disability discrimination, if that employee also brings (or intends to bring) similar proceedings against the Trade Union? No, says the EAT in University and College Union v Croad (His Honour Judge Pugsley, presiding).

The Claimant brought a claim including disability discrimination against her employer, the University of Wales, and received advice and legal assistance from her Trade Union, the Respondent.

The Claimant then complained about the Union's support for her, which ultimately led to tribunal proceedings against the Union for disability discrimination. The Union had withdrawn support for the Claimant's action against her employer, before she brought proceedings against it, on the grounds of difficulties in acting for the Claimant unless she had agreed to abide by Union advice. The Claim failed. The Claimant's appeal also failed, the EAT noting that there would in any event be a conflict of interest for the Union in representing the Claimant in a case against her employer and itself facing linked proceedings, noting that it is not discrimination if an act is done to protect a party's own legal interests.

The EAT also rejected an argument that the reverse burden of proof applied under the victimisation provisions of the DDA (which was then in force), similar to the approach to the analagous provisions of the RRA.

Update on Enterprise and Regulatory Reform Bill

The Enterprise and Regulatory Reform Bill received its second reading in the House of Commons yesterday.

During the debate, the Secretary of State for Business, Innovation and Skills (Vince Cable) announced that the government would not be pursuing Adrian Beecroft's 'compensated no fault dismissals' proposals (see column 65 of Hansard).

Vince Cable also announced that legislation to bring in settlement agreements would be introduced in the Bill at committee stage (19th July). This will allow employers to make an offer of a termination package without fear of the offer being raised in a tribunal claim. It goes further than the 'without prejudice' rule as there will not need to be an existing dispute. The government will also publish standard 'settlement agreement' forms for employer and employee to use. It is not clear whether the requirement to obtain legal advice before signing a compromise agreement will be affected. For first-class comment on this proposal, see Darren Newman's blogpost.

Finally, he defended an attack on the power in the Bill to reduce the compensatory award to the lower figure of an employee's annual earnings, or national median earnings (£28,000). For an excellent article lambasting this proposed reduction to the compensatory award, see Anya Palmer's article in this week's Solicitors Journal.