Employee Shareholder Contracts

[Thanks to Michael Rubenstein for notifying the employment law community about this news via Twitter]

The House of Lords has voted (by 232 to 178) to strike down clause 27 of the Growth and Infrastructure Bill, which is the clause introducing the concept of employee shareholders.

This comes hot on the heels of the announcement in today's Budget that employee shareholder contracts will come into force on 1 September 2013 - an announcement which may have proven premature.

The Bill will now return to the House of Commons, where the government will decide whether to accept the defeat (in which employee shareholder contracts will not happen), or try to re-introduce the clause.  It is rumoured that the Liberal Democrats are against employee shareholder contracts, and the result of a vote in the Commons is uncertain.

Budget Announcement regarding Employee Shareholders

The Chancellor of the Exchequer, George Osborne, has announced in today's budget an important development with regard to employee shareholders.

Part of the definition of 'employee shareholder' in the forthcoming new s205A Employment Rights Act 1996 requires that the employer must issue or allot shares to the employee which have a value of at least £2,000.  Until now, the award of those shares was to be subject to income tax (so
a 20% taxpayer would have paid £400 income tax on their award of £2,000 shares).

The Chancellor has today announced that the first £2,000 of shares will be exempt from income tax and NICs, which means they are effectively free of tax for anybody receiving the minimum allotment - see para 1.133 of the Budget.  He has also announced the precise implementation date for employee shareholder status will be 1 September 2013 (until last week, it was to be 6 April, but last week BIS announced it was being put back until the
autumn).

To learn about employee shareholder status, as well as the other changes to employment law coming soon (including Acas Early Conciliation, Protected Settlement Conversations and the Underhill procedural reforms), see Daniel Barnett's Employment Law MasterClass which is taking place soon in Bristol, Birmingham, Manchester and London.

Equal Pay / Associated Employers

[Thanks to James English of Samuel Phillips solicitors for preparing this case summary]

Is a limited liability partnership a 'company' for the purposes of the Equal Pay Act?

Yes, says the EAT in Fox Cross & Others v Glasgow City Council & Others.

The Claimants were Council employees, until they were transferred to three different bodies.  One group went to a company, whilst two groups went to two different LLPs.  All three groups wanted to compare their pay with Council employees.

The employment tribunal held that the company was an associated employer but the LLPs were not. Overturning that decision, Langstaff P held that an LLP fell within the definition of 'company' under section 1(6) of the Act.  As an anti-avoidance measure, the EAT adopted a purposive construction.

Having decided that issue, the EAT did not have to consider whether there was a 'single source' responsible for pay but did provide some illuminating if obiter comments.  The focus should be on the alleged single source, not necessarily the Claimant's employer, as the central question is whether there is a body which is responsible for the inequality and which could restore equal treatment.  Although it did not intervene on a daily basis, the Council retained overall responsibility for the LLPs.

New Timetable - Major Employment Law Reforms

The Department for Business Innovation and Skills has announced a new implementation timetable for the major employment law reforms, many of which had originally been intended to come into force in April 2013.

Coming into force in summer 2013: protected settlement conversations; 12 month earning cap on compensatory award; revised (Underhill) employment tribunal procedural rules; new tribunal fees; changes to whistleblowing laws

Coming into force in autumn 2013:  employee shareholder status and TUPE reforms

Finally, coming into force sometime in 2014:  Acas early conciliation and employment tribunal penalties for employers

For more information, see here.

Recognising a Trade Union

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

Was a history of consultation between an employer and a trade union sufficient to show that the union had been recognised for the purposes of collective bargaining?

No, concluded the EAT in Working Links v Public and Commercial Services Union.

PCSU brought a claim under the Trade Union and Labour Relations (Consolidation) Act 1992 regarding failure to consult over collective redundancies. To succeed, they needed to establish that they were a recognised trade union for the purpose of collective bargaining.

There had been a history of discussion and consultation between Working Links and PCSU. But the EAT concluded this fell short of the clear evidence of recognition needed in the absence of a written agreement.

The EAT emphasised that recognition for the purposes of collective bargaining required involvement in the negotiation of collective agreements. Discussions in relation to other matters, such as redundancies, was not the same thing and was not enough to evidence recognition.

Internal Disciplinary Proceedings

[Thanks to Laura Samuel of Berrymans Lace Mawer for preparing this case summary]

Do the judicial doctrines of res judicata and abuse of process apply to internal disciplinary proceedings?

No, says the Court of Appeal in Christou v London Borough of Haringey.

The facts related to the handling of the tragic Baby P case, in which a 17-month-old baby died as a result of abuse. The Claimants had been social workers responsible for Baby P and were employed by Haringey Council. Initially, the Claimants were disciplined under the Council's disciplinary procedure and given a written warning. Following extensive media coverage, a review of the case found the original disciplinary proceedings to have been "blatantly unsafe", and fresh disciplinary proceedings were instituted. As a result of these proceedings, both Claimants were dismissed.

The main argument relied on by the Claimants was that the doctrine of res judicata prevented the re-opening of a matter where a decision has already been pronounced by a judge or other tribunal with jurisdiction.  The Court of Appeal rejected that argument, saying "it is wrong to describe the exercise
of disciplinary power by the employer as a form of adjudication".

The Court of Appeal held that the purpose of disciplinary procedure is not "a determination of any issue which establishes the existence of a legal right", nor does it determine a dispute. The critical question was whether the procedures "operate independently of the parties such that it is appropriate to describe their function as an adjudication between the parties".

Redundancy Selection and Competency Assessments

[Thanks to Liane Atkin of Collingwood Legal for preparing this case summary]

Is it fair to carry out a redundancy selection exercise where employee capability is assessed entirely on the basis of competency tests?

Not necessarily, says the EAT in Mental Health Care (UK) Ltd v Biluan & Anor, particularly if no account has been taken of past performance.

The case involved a redundancy exercise where staff were selected using selection criteria comprising disciplinary and absence records and a competency assessment.  In the vast majority of cases it was the competency score which was decisive.  The manager said that he was surprised by the competency results and that several employees who had been selected for redundancy were good employees.

The original tribunal held that dismissals were unfair because capability had been assessed mainly on the competency assessments and had taken no account of prior performance.  The employer appealed arguing that the tribunal had substituted its own view.  The EAT acknowledged that the employer took care over the process but chose an 'elaborate and HR driven method' depriving it of the benefit of input from managers and others who knew the staff in question.  Importantly for employers they commented that whilst it is desirable to seek to avoid subjectivity and bias, this goal can come at "too high a price" adding that it is misplaced to fear that a tribunal will find a procedure unfair only because there is an "element of 'subjectivity" involved.  The appeal was dismissed.

Covert Recordings

[Thanks to Jahad Rahman of Rahman Lowe Solicitors for preparing this case summary]

Can an employment tribunal refuse to admit covert recordings?

No, says the EAT in Vaughan v London Borough of Lewisham and Others.

In support of a discrimination claim, the Claimant applied for permission to rely on 39 hours' worth of covert recordings that she had made, using a dictaphone, of contacts between herself and her managers and colleagues. She claimed that the recordings would show that official notes made by the Respondents were inaccurate or wrong. The Employment Judge refused the application.

On appeal, the EAT confirmed that whilst the practice of covert recordings is "very distasteful", such recordings are not inadmissible simply because the way in which they were taken may be regarded as discreditable.

Based on the evidence produced by the Claimant, the EAT held that the Judge was right to refuse the application because it was not possible for her to form any view on the relevance and thus the admissibility of the tapes.

However, the EAT was not entirely happy with the Judge's reasoning and at paragraphs 24 and 29, Underhill J recommends the procedure that should be adopted when there are covert recordings. He went on to say that parts of the material would be potentially relevant and admissible, and that if the Claimant lodged a more focused application, supported by transcripts of the recordings she sought to rely on, together with an explanation of why they are relevant, "she might get a different result".

Employer Perceptions of Employment Law

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

The Department for Business Innovation & Skills (BIS) has published a new report in its Employment Relations Research series:  Employer Perceptions and the Impact of Employment Regulation.

This report was carried out on behalf of BIS by researchers from TNS/BMRB and Kingston University.  A total of 40 businesses took part and were interviewed over the spring and summer of 2012.

The report makes very interesting reading.  Contradicting the Coalition government's thinking on the impact of employment law on business via its 'Red Tape Challenge' and Employment Law Review, respondees generally considered that employment regulation was both necessary and fair.  In the main, anxiety about employment law stemmed from a fear and misunderstanding of the law. This is the so-called 'perception reality gap', identified by other researchers such as Peck and others in Business Perceptions of Regulatory Burden (2012).

The key points in the report are as follows:

Employers were often supportive of a regulatory framework for employment for the employment relationship.

Reducing regulation for small employers might not actually be effective in reducing anxiety, because those employers are often unaware of the changing laws relating to employment.

Employers have a fear of being taken to an employment tribunal over unfair dismissal, and some myths surrounding the dismissal process need to be dispelled.

Tribunal outcomes were perceived as unpredictable.

Small employers tended not to formalise disciplinary procedures unless dismissal was being considered, a process which often let to litigation.

A solution to that problem would be for small businesses consistently to follow a procedure for dealing with performance and conduct. But these employers expressed a fear that this would damage the personal element of the employment relationship in a small business.  

The report identifies a clear need to provide a single information portal regarding employment law and HR.

When looking at reforms to simplify employment law, the focus should be on disciplinary and dismissal procedures. An interesting finding was that, four years on,  many employers still believed there was a statutory disciplinary and dismissal procedure that needed to be followed.

An insightful conclusion of the report is that employers' perception of legislation as burdensome is based more on an actual fear of litigation, rather than any actual experience and is actually worsened by the public pervasiveness of the 'anti-regulation' debate.

Litigants in Person

The Master of the Rolls, Lord Dyson MR, has issued Practice Guidance: Terminology for Litigants in Person.  It provides that the term 'Self-Represented Litigant' should no longer be used in courts. The correct nomenclature, going forward, reverts to 'Litigant in Person'.

Technically this applies to criminal, civil and family courts - but doubtless tribunals will also follow it.
     

Unfavourable Treatment on Grounds of Vulnerability

[Thanks to Sian McKinley of Cloisters for preparing this case summary]

Does unfavourable treatment on the grounds of vulnerability for reasons including immigration status constitute race discrimination?

No, says the EAT in Taiwo v Olaigbe, because the vulnerability of foreign national domestic workers is not indissociably linked with migrant status.

The Claimant, a Nigerian woman, worked as a domestic worker in the home of the Respondents between February 2010 and January 2011. Upon her departure, she was assisted by North Kensington Law Centre in bringing a number of claims, including a claim for direct, or alternatively, indirect race discrimination.

The employment tribunal made a finding of fact (which was not appealed) that the Claimant had been treated in an appalling manner by the Respondents and upheld nearly all of the Claimant's claims. However, the tribunal held that the treatment she had suffered did not amount to direct or indirect race discrimination. The tribunal dismissed these claims and the Claimant appealed.

The EAT upheld the decision of the tribunal and held that unfavourable treatment of the employee did not constitute direct or indirect race discrimination. This was even though the tribunal had found that such treatment was strongly associated with her vulnerability caused by her lack of English and dependence on her employer for her right to stay in the UK.  The presence of other factors which caused her vulnerability (such as low socio-economic status and the imbalance of power in the relationship between the Claimant and the Respondents) meant that the factual cause of the unfavourable treatment of the claimant was not indissociably linked to immigration status.

The EAT rejected the indirect race discrimination claim on the basis that in this case there was no appropriate provision, criteria or practice (PCP) which put the Claimant (and her racial group) at a substantial disadvantage. Mistreatment could not amount to a PCP.

Permission to appeal is currently being sought by the Claimant.

Importantly, the EAT also held that legal costs can be recovered by a third party who is funding litigation, even though the party themselves is not incurring the cost. North Kensington Law Centre was able to assist the Claimant without charging her by funding from the Legal Services Commission. The costs incurred by North Kensington Law Centre were to be treated as costs incurred by the Claimant for the purposes of a costs application.

Equality Act does not provide remedy for post-termination victimisation

[Thanks to Paul Smith of Broadway House Chambers for preparing this case summary]

Does the Equality Act 2010 provide a cause of action or remedy in respect of post-termination victimisation?

No, says the EAT in Rowstock Ltd v Jessemey.

The appellant was dismissed by reason of retirement when he reached 65. In dismissing him the employer had failed to comply with the statutory retirement procedures, and the appellant claimed unfair dismissal and age discrimination. As a consequence of the claim, the employer provided him with a very unfavourable reference and a victimisation claim resulted. The employer contended that s.108(7) Equality Act 2010 specifically disapplied the anti-victimisation provisions in circumstances where the employment relationship has ended. The employment tribunal agreed, and the Equality and Human Rights Commission intervened in the appeal of that decision.

All parties accepted that if s.108(7) had this effect it would not be compatible with the Equal Treatment Directive, but having reviewed the authorities on statutory construction the EAT (Mr Recorder Luba QC presiding) concluded that it would have exceeded its judicial remit if it were to construe the subsection in a wording directly opposite to that which had been expressed in the Act.
Therefore, no cause of action or remedy is available under the Equality Act 2010 for post-termination acts of victimisation. Permission to appeal has understandably been granted, but it may require Parliamentary intervention to close the loophole, ensuring continuity with the previous law and compliance with the Directive.

Collective Agreements, without more, do not justify pay disparity

[Thanks to Daniel Tivadar of 3 Hare Court for preparing this case summary]

Can collective agreements in themselves justify prima facie indirect discrimination under the Equal Pay Directive?

No, says the CJEU in Kenny v Minister for Justice.

The appellant employees were civil servants deployed to clerical duties with the police force in Ireland. Clerical duties were also carried out by police officers for higher wages. 'Civilian' clerks were mostly female, police clerks were predominantly male. The employees brought an equal pay claim alleging indirect discrimination. The Respondent sought to justify the different treatment by arguing, amongst other things, that the number of posts reserved for police staff had been determined by a collective agreement. The national court sought assistance from the CJEU with the interpretation of the Equal Pay Directive.

The CJEU held that employees perform the 'same work' if they can be considered by the national court to be in a comparable position, considering relevant factors, such as the nature of their work, training requirements etc. The employer's objective justification has to relate to statistics of comparators illustrating the true and long-term position. The interest of good industrial relations is subject to the requirement of non-discrimination and cannot of itself constitute the only basis justifying discrimination. Nevertheless, collective bargains are a factor in determining whether differences of pay are due to objective factors unrelated to discrimination on the grounds of sex.