Restrictive Covenants

Thanks to Miranda de Savorgnani of Outer Temple Chambers for preparing this case summary

In Bartholomews Agri Food v Thornton, the High Court resoundingly rejected the reasonableness of a restrictive covenant in an employment contract on various grounds.

First, the Court ruled, in accordance with Pat Systems v Neilly[2012] IRLR 979, that a covenant which was unenforceable when it was first imposed, remains unenforceable regardless of whether the employee is later promoted to a role where it could be regarded as reasonable. In this case, the covenant was in place when the employee first entered the business as a trainee agronomist in 1997. At that time he had no experience or customer base; therefore a non-compete clause which prevented him from working with any of the employer's existing customer base for six-months was manifestly inappropriate and in restraint of trade. On that basis alone, the covenant was unenforceable.

In any event, the Court went further and found that the terms of the covenant were drafted too widely to be reasonable even after the employee's 20-year career. It sought to prevent the employee from dealing with any customer of the employer regardless of whether he had had any prior dealings with the customer. Given that the employee worked with customers who represented only 2% of the company's overall turnover, it would be manifestly unfair to prevent him from working with customers representing the other 98% of the employer's existing customer base.

Nor was the Court persuaded by an unusual term of the clause which provided that the employer would continue to pay the employee in full during the six-month period. Following JA Mont (UK) Ltd v Mills [1993] IRLR 1782 in the context of a severance agreement, it would be contrary to public policy to allow an employer to 'purchase' a restraint of trade.

National Minimum (and Living) Wage

The Department for Business, Innovation and Skills has issued a new 55-page booklet on Calculating the Minimum Wage.

It covers how to calculate the minimum wage, what counts as pay, what hours needs to be counted, and how to enforce the national minimum wage.

Discrimination Claims against Qualification Bodies can be brought in the ET

Thanks to Rad Kohanzad of Serjeants’ Inn Chambers for preparing this case summary

Do employment tribunals have jurisdiction to hear discrimination claims against qualification bodies such as the GMC?

Yes, held the Court of Appeal in Michalak v General Medical Council.

Dr Michalak was dismissed by the NHS Trust that employed her. Prior to her successful employment tribunal proceeding, the Trust referred her to the GMC. Dr Michalak complained that, in the investigation and hearing of her case, the GMC discriminated against her.

In finding that the employment tribunal had jurisdiction to hear the claim against the GMC, the Court of Appeal rejected the contention that the employment tribunal's jurisdiction was ousted by section 120(7) Equality Act 2010 because of the availability of judicial review.

Section 120(7) precludes employment tribunal claims against qualification bodies where the decision is subject to "proceedings in the nature of an appeal". Upholding the appeal, the Court held that Parliament had not intended that judicial review were proceedings in the nature of an appeal, and its availability did not therefore oust the jurisdiction of the employment tribunal.

This decision does not necessarily mean that all allegedly discriminatory acts of regulators are amenable to employment tribunal proceedings. If the act complained of is appealable, either internally or statutorily to the High Court, then the employment tribunal's jurisdiction will probably be ousted.

Consultation: Pension Losses in Employment Tribunals

Over the last few years, the (excellent) 2003 booklet on Compensation for Loss of Pension Rights in the Employment Tribunals has become increasingly out of date. The President of the Employment Tribunals has issued a consultation paper on abandoning that guidance and, instead, introducing Presidential Guidance involving a distinction between simple and complex pension loss cases. Responses are sought to the consultation by 20 May 2016, with details of how to respond in a letter from the President.

Protected Disclosure: Rarely appropriate to strike out on 'public interest' grounds

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

Can a complaint about an individual employee's cramped working conditions be a protected disclosure for 'whistleblowing' purposes?

Yes, held the EAT in Morgan v Royal Mencap Society, overturning an employment tribunal's decision to strike out an employee's claims relating to protected disclosures.

The Claimant claimed that complaints about cramped working conditions posing a risk to her health and safety were protected disclosures. An employment tribunal struck out the claims at a preliminary hearing, with no evidence from the Claimant, since taking the Claimant's complaints at their highest, the Claimant would not have had a belief that the 'disclosure' was in the 'public interest' (see Chestertons), so the claims must fail.

The EAT reversed the employment tribunal's strike out, noting that for whistleblowing claims to be struck out at a preliminary hearing, a high threshold was required. It was reasonably arguable that the employee's complaints, even if she were the principal person affected, may have been made with a reasonable subjective belief that they were in the wider interests of employees generally, so could meet the 'public interest' test as protected disclosures. Such questions of fact should be determined by hearing evidence and resolving factual disputes.

The 'public interest' test may be considered by the Court of Appeal in Chestertons later in the year.

Disability: No Imputed Knowledge

Thanks to Karen Jackson of didlaw for preparing this case summary Can knowledge by Occupational Health of a disability be imputed to the employer? No, held the EAT in Gallop v Newport City Council. The EAT found, following the Court of Appeal's guidance in CLFIS (UK) Limited v Reynolds, that knowledge cannot be implied, even where the fact of disability is already known within the organisation. The EAT opined that the focus of an employment tribunal's enquiry ought properly to be on the thought-processes and motivation of the decision-maker. The test is: did the decision-maker know of the disability and were they influenced by it? This decision conflicts with the EHRC Statutory Code of Practice on Employment at paras.5.17 to 5.19 which provide that employers will usually not be able to use the knowledge defence to a disability discrimination claim if an employer's agent or employee (such as Occupational Health) has knowledge. The Guidance is clear that knowledge is not imputed if it is gained by a person providing independent services to a worker, such as counselling. We wait to see if this goes to appeal to resolve the conflict.

Breaking News: Budget

Chancellor George Osborne has announced that from 2018, termination payments over £30,000 will be subject to employer's national insurance contributions (under £30,000 is currently free of tax).

BBC Budget at a Glance

'Pulling a Sickie'

With great aplomb, in Metroline West v Ajaj, the EAT has held that 'pulling a sickie' is dishonest and a fundamental breach of contract.

Mr Ajaj was a bus driver. He wrongly claimed to be more sick than he was, and surveillance evidence proved him to be exaggerating. The employment tribunal held that fairness of dismissal should be assessed based on traditional 'capability' considerations, ie when could the employee reasonably be expected to return to work based on his real (rather than exaggerated) symptoms.

The EAT disagreed. It held (at para 54) that an employee who 'pulls a sickie' is dishonest and in fundamental breach of contract. The principal reason for dismissal of a malingering employee is conduct, not capability, and the procedures to be followed are the traditional British Home Stores v Burchell ones.

Whistleblowing: Who is 'Protected'?

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

If a junior doctor makes a disclosure to an organisation that arranges his placements at the hospital which employs him, is that a 'protected disclosure' under whistleblowing law?

No, held the EAT in Day v (1) Lewisham and Greenwich NHS Trust and (2) Health Education England.

The Claimant was a junior doctor in training employed by the Trust at Lewisham hospital. The Claimant's training placements were arranged by Health Education England (HEE), which also paid the Trust part of his salary. The Claimant made various disclosures to the Trust regarding patient safety, and repeated them to HEE, which he claimed led to him suffering detriments.

The Claimant then brought employment tribunal proceedings against the Trust and HEE. An employment tribunal struck out his detriment claim against HEE, as their relationship did not come within the extended definition of 'worker' under S43K ERA 1996 (e.g. agency or contract workers).

The EAT rejected the Claimant's argument that Article 10 of the European Convention of Human Rights (freedom of expression) required that whistleblowing legislation be interpreted purposively to apply to his relationship with HEE. Whilst a purposive approach to whistleblowing is appropriate, the circumstances in which legal protection applies are set out in statute, and there was no need here for additional protection. The lack of protection for disclosures made to third-party bodies such as HEE was not a 'lacuna' in the law, more that the Doctor's relationship with HEE was well outside the category of workers and relationships protected by it.

Late Application For Reconsideration

Thanks to Jennifer Danvers of Cloisters for preparing this case summary.

Is it an error of law to allow a late application for reconsideration without giving a Respondent a chance to make representations?

Yes (unsurprisingly), held the EAT in The Practice Surgeries Ltd & Secretary of State for Health v Dr Srivatsa.

The employment tribunal failed to dispose of an application made in 2011 by the first Respondent for dismissal of the Claimant's claim and judgment following withdrawal. The Claimant issued proceedings in the High Court in 2012 and, in 2014, the first Respondent reiterated its request for dismissal of the employment tribunal claim. In October 2014 the Employment Judge dismissed the claim, three years after the initial application.

The Claimant made an application for reconsideration of the dismissal in February 2015. This was granted by the Employment Judge who revoked her previous order dismissing the claim.

Mrs Justice Slade, allowed the appeal against the revocation order on the following grounds:

- the employment tribunal had failed to invite a response from the second Respondent to the application for reconsideration (contrary to Rule 72 Employment Tribunal Rules 2013);

- The second Respondent was not sent the revocation order (contrary to Rule 60 Employment Tribunal Rules 2013);

- The Employment Judge had failed to give any reasons for allowing an extension of time of nearly 100 days in relation to the Claimant’s application to reconsider; and

- the employment tribunal had erred in allowing the reconsideration on the basis that the Claimant’s view was not known at the time of dismissing the claim when the employment tribunal had, in fact, been made aware of the Claimant’s objections to the 2011 application.

Mrs Justice Slade held that the October 2014 order dismissing the claim stood, despite the Claimant's objections in relation to the time elapsed between the initial application and judgment.

Salary Sacrifice schemes can be discontinued during maternity leave

Thanks to Karen Jackson of didlaw for preparing this case summary

Is it discriminatory to discontinue childcare vouchers during maternity leave?

No, held the EAT in Peninsula Business Services v Donaldson.

Women on maternity leave are entitled to non-pay benefits pursuant to the Maternity and Parental Leave Regulations 1999. Following HMRC guidance that contractual non-cash benefits provided under a salary sacrifice scheme must continue to be provided during ordinary maternity leave, an employment tribunal held that it must be discriminatory for an employee to lose childcare vouchers during maternity. PBS appealed.

The EAT allowed the appeal and substituted a decision that the claim should be dismissed. No legislative basis had been found to support the HMRC guidance. The key question was: did the vouchers constitute remuneration? If they did Regulation 9 of the Regulations did not require this to continue during maternity leave. Langstaff J held that the vouchers did represent part of salary since pay had been substituted with vouchers under a salary sacrifice scheme. On this basis they were to be regarded as remuneration and could be discontinued during maternity leave.

Annual Compensation Limit Increase

BIS has made The Employment Rights (Increase of Limits) Order 2016, containing the annual increases in compensation payments, before Parliament. It applies to dismissals (or detriments, etc) occurring on or after 6 April 2016.

The main changes (and they're not going to break the bank) are:-
 

• a week's pay - £479 (currently £475)
• maximum compensatory award - £78,962 (currently £78,335)

EHRC on Discriminatory Advertising

The Equality and Human Rights Commission has published new guides on advertising, for organisations who advertise jobs or services.

They include some guidance, a checklist and an FAQ document.

They're written in plain English, and tackle an often underlooked area of discrimination law.

Supreme court re-examines vicarious liability

Thanks to Angharad Davies of St. Pauls Chambers for preparing this case summary

What sort of relationship has to exist between an individual and a Defendant before the Defendant can be made vicariously liable in tort for the conduct of that individual? And what is the connection between that relationship and the wrongdoer's act or default (such as to make it just that the Defendant should be held legally responsible to the claimant for the consequences of the wrongdoer's conduct)?

A relationship other than employment is in principle capable of giving rise to vicarious liability provided certain conditions are met and there is nothing wrong with the traditional close connection test if properly employed held the Supreme Court in (1) Cox v Ministry of Justice and (2) Mohamud v WM Morrison Supermarkets plc.

Mrs Cox, was working as a catering manager at Swansea Prison, when a prisoner working in the kitchen accidentally dropped a bag of rice on her, causing injury. She brought proceedings against the Ministry of Justice on the basis that the prison service, one of its executive agencies, was vicariously liable. The prisoner was not an employee but was required to work in the prison, he had been specifically selected to work in the kitchen and his work was carried out under the direction of the prison staff. Therefore his work formed part of the operation of the prison providing meals for his fellow prisoners.

In 2008 Mr Mohamud stopped at a petrol station he was on way to London wanted to print some documents from a USB stick. He enquired at a kiosk to see if they could help. The petrol station was part of Morrisons Supermarkets and their employee, Mr Kahn, was behind the counter. Mr Khan was rude to Mr Mohamud. Mr Kahn ordered him off premises with a torrent of threatening and racist abuse. Mr Mohamud returned to his car, he was followed by Mr Khan but before he could drive off Mr Kahn opened the passenger door and punched him on the head. Mr Mohamud got out to close the door and Mr Kahn continued to assault him.

In Cox, the Court held that a relationship other than employment is in principle capable of giving rise to vicarious liability provided certain conditions are met. First, harm must be wrongfully done by a person who carries on activities as an integral part of the business or operation carried on by the Defendant for its benefit and second, the risk of a wrongful act being committed must be caused by the Defendant assigning activities to the person in question.

In Mohamud, the Court traced the history of the development of the law of vicarious liability and concluded that there is nothing wrong with the close connection test properly applied. In a case such as this the court is to ask itself two questions, firstly, what field of activities was entrusted to the employee or what was nature of job, which is to be answered broadly. Secondly, whether there was sufficient connection between the field of activities carried out by employee for it to be just for the employer to be responsible.

In this case the violence was a re-enforcement of Mr Kahn’s order to leave the premises which was sufficiently connected to the job assigned to him that the employer should be held responsible.

The implications of this go beyond prisons as the Supreme Court has now accepted that vicarious liability can arise where there is no contract of employment but where activities are undertaken that are integral to the business. This approach may be relevant in the context of many modern work places where workers may be part of work force but without having a contract of employment with it.