Thursday 28 June 2001

Consultation Paper on Paid Holiday

The government has today published a consultation paper proposing changes to the Working Time Regulations 1998.

These proposals are as a result of Tuesday's decision of the ECJ in BECTU v UK (see bulletin 26.6.01), holding that the UK 13-week qualifying period for holiday pay is in breach of the Working Time Directive.

Curiously, the proposed amendments provide that in the first year of employment, holiday pay "shall the rate of 1/12th for each month of employment". In other words, holiday entitlement will not start until the worker has worked for one month.

This appears to remain incompatible with the Working Time Directive, which provides for the right to paid holiday to begin accruing from the first day of employment.

The consultation paper can be downloaded from (Adobe Acrobat needed). The closing date for responses is 27th July 2001.

Wednesday 27 June 2001

Lord Chancellor changes Discount Rate


This afternoon, the Lord Chancellor has announced a reduction in the discount rate to 2.5%.

This will affect awards for long-term future loss of earnings in unfair dismissal and discrimination claims (the reduction from the long-standing 3.0% discount rate means that multipliers will be higher, and therefore awards will be higher).

The change will take effect from 28th June 2001.

Tuesday 26 June 2001

13-week holiday rule unlawful

A number of people have been having problems receiving bulleins recently.
Until the problem is resolved, all messages are being sent in 'text' format.
Apologies for the unattractive appearance.


The ECJ has held, following the Advocate-General's opinion (see bulletin 8th February 2001), that the condition under the WORKING TIME REGULATIONS stating that the right to paid holiday does not accrue until workers have been employed for 13 weeks is unlawful.

This means that the UK will have to change the WORKING TIME REGULATIONS to remove the 13-week qualification period for paid holiday.

This decision will particularly affect people working in the media (who usually work on short-term contracts). It will also affect sectors such as cleaning, catering and security services, where short-term contracts abound.
Likewise, supply teachers (who often work for short periods) and temporary workers will benefit.

Monday 25 June 2001

TUPE decision - ADI v Firm Security

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On Friday (22nd June 2001), the Court of Appeal handed down its decision in ADI (UK) Ltd v Firm Security Group Ltd..

ADI provided security services at a shopping center. ADI terminated the contract, and the shopping centre initially stated it would take over the employment of the nine security officers. However, following a dispute over terms (prior to the 'transfer'), with the officers apparently indicating reluctance to be transferred, the shopping centre announced it would not be taking on any of the nine security officers.

The Employment Tribunal
The employment tribunal held (by a majority) that the provision of security services was not a discrete economic entitity and, in any event, there had been no transfer because neither assets nor staff were taken on by the shopping centre.

The Employment Appeal Tribunal
The EAT held (again, by a majority) that there had been a discrete economic entity, but that - due to the lack of transfer of assets and staff - there had been no transfer of the undertaking.

Issues for the Court of Appeal
The Court of Appeal (in line with precedent, by a majority!) allowed the transferor's appeal. It considered the following issues:
1. whether the tribunal was under a duty to consider whether the shopping centre had avoided taking staff on the avoid the effect of the TUPE regulations; and,
2. if so, what the effect of that was.

Issue 1: Was there a duty to investigate the motive behind not taking on any staff?
Both May and Dyson LJJ considered that there was an active duty on tribunals to investigate the motive behind not taking on any workers - provided the issue was raised by one of the parties. May LJ went further, and stated that there was not a positive burden of proof on the person arguing against the transfer to establish the reason for not taking on the workforce.

Issue 2: What is the effect of deliberately not taking on the workforce?
May and Dyson LJJ held that transferees could not escape the effect of the TUPE Regulations by the simple device of refusing to take on a workforce - the very mischief which the Regulations are designed to prevent. Thus, if it is decided that the transferee failed to take on the workforce so as to avoid there being a transfer, the tribunal should treat the case as if they had taken on all of the workforce. It must be noted that this point, whilst clearly agreed with by the majority of the Court of Appeal, was conceded by the transferee and was not fully argued.

In the minority, Simon Brown LJ held that the reason for not taking on the workforce was not relevant. The simple question was whether the workforce transferred (this being one of the many factors in deciding whether a TUPE-transfer had taken place). The reason was immaterial - either the workforce transferred (pointing to a TUPE-transfer), or it did not.

Because the point about the effect of a deliberate refusal to take on the workforce was conceded by the transferee, this is not as authoratitive a ruling as would otherwise be hoped for. Nevertheless, it follows the clear and useful dicta of the Court of Appeal in ECM v Cox. A purposive construction of the Acquired Rights Directive has always been adopted, and this approach is more consistent with a purposive construction.

To all people with TUPE headaches - take courage! May LJ stated that sections of the 1977 Directive have been "emasculated out of existence by purposive judicial interpretation", and that "the concept of transfer is now a judicially constructed fiction derived from the purpose of the Directive and the Regulations...". It is always heartening to know the Court of Appeal has trouble with TUPE concepts too!

Please note that I have prepared this note from a copy of the transcript which has been approved by the Court but which is subject to editorial corrections. Any quotations from the decision cannot be regarded as authoritative.

Friday 22 June 2001

Government to promote Dispute Resolution

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Determined to show it still has ideas after the general election, the government has this afternoon (Friday) announced a review of employment disputes to encourage dispute resolution.

Alan Johnson, employment relations minister, today announced that the government is concerned about the increasing number of tribunal claims - which do not appear to be related to the recently introduced causes of action (such as working time, minimum wage, parental leave etc.)

The government will therefore be issuing a consultation document shortly to consider alternative methods - other than litigation - of promoting good employment practice in the workplace. The review is not intended to amend employment rights, but will concentrate on the way in which those rights are exercised.

A factual background paper is available at

Wednesday 20 June 2001

The Queen's Speech - Legislation proposals

Employment Law (UK) List -
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The Queen's speech this morning included proposals for the following legislation:

• The Welfare Reform Bill, which will increase the rate of statutory maternity pay to £100pw from 2003, and increase the payment period from 18 to 26 weeks; and,

• The Female Representation Bill, which will allow political parties to "increase the representation of women in public life" via all women shortlists, should they so desire. Readers will recall that the 1997 Labour party women-only shortlist policy was declared contrary to the Sex Discrimination Act.

There was no mention of introducting anti-discimination legislation to comply with the EC Equal Treatment Framework Directive. Nor was there the much anticipated proposal for parternity pay. Still, there are four more sessions of parliament to go!!

Thursday 14 June 2001

New Faces / EAT cases

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1. New Faces and Places
2. New EAT decisions


1. New Faces and Places

The government lineup for employment posts is as follows:

Work & Pension Secretary - Alastair Darling
Minister for Trade - Baroness Symons
Minister for Work - Nick Brown
Minister for Pensions - Ian McCartney
DTI Minister of State for Employment Relations and Regions - Alan Johnson

(I know it's not particularly interesting news, but occasionally it is useful to have a check list of who's who!)


2. New EAT Decisions

These cases are unreported (although some may be reported in due course). The transcripts were posted on the EAT website ( on 12th June 2001.

Jiad v BBC World Service [Hooper J., 5th June 2001]
An appeal by a litigant in person on grounds, in essence, of inadequate reasoning/perversity. The decision contains no points of law, but is of interest because of a costs order granted to the successful Respondent at the end of the appeal. This costs order was made despite stating that the appeal had been conducted properly by the Appellant, on the ground that the appeal was "of no merit and should never have been brought". Is this a sign of things to come under the new costs test (not yet in force)?

Asda Stores v Malyn [Lindsay J., 6th March 2001]
A long-standing ASDA employee allowed her son to use her 10% staff discount card. This was in breach of a very clear store policy, which the employee had signed and had drawn to her attention (in writing) on a number of occasions, stating that misuse of the card was gross misconduct. Despite the fact that the discount achieved was only £3, ASDA dismissed her because it said it had to be seen to apply the disciplinary rules consistently between all employees. The ET found the dismissal was unfair because, during the disciplinary process, the staff member has said she had not realised that gross misconduct would result in dismissal. The EAT overturned that decision. It laid down the following four rules (albeit tentatively, saying that it was overturning the decision on other grounds and the four principles did not form the ratio):

A dismissal will be fair, despite the employee's ignorance as to the actual consequences of an act, if:

1. there is a provision in the disciplinary code stating that a particular act or omission would amount to gross misconduct, with the possible sanction of dismissal (and it was reasonable in the industry to have that as an act of gross misconduct);
2. the employer takes reasonable steps, including asking the employee to sign it, to bring the disciplinary code to the attention of employees;
3. the employee knows he is doing wrong under the code; and,
4. the employee had access to the code.

Lana v Positive Action Training in Housing Ltd. [Mr Recorder Langstaff QC, 15th March 2001]
Ms Lana was a trainee quantity surveyor. She had a contract with Positive Action for Positive Action to find her a training contract / work placement for a year. Positive Action placed her with a firm (W) for training. After five months, she told W that she was pregnant, and W immediately cancelled the remainder of her placement. Positive Action subsequently terminated their contract on the basis that the placement had been terminated by W in circumstances beyond their control, and they had no alternative placements to offer. The tribunal found that this was a non-discriminatory reason for terminating the contract, and dismissed the claim under the Sex Discrimination Act. The EAT overturned this finding. It held that W was the agent of Positive Action for the purpose of providing training, and that Positive Action was accordingly vicariously liable for any discrimination by W under section 41 of the SDA 1975. Accordingly it remitted the case to a fresh tribunal.

Tuesday 12 June 2001

Worker Consultation - EC Directive

Today's papers are flooded with the news that the EC has finally approved the proposed Directive for Informing and Consulting Employees in the European Community.

Assuming the Directive is formally passed and published (which is now fairly automatically - the approval being the controversial stage), the UK will have to implement the Directive within seven years (faster for employers with 150+ employees).

The legislation will require all employers with over 20 workers in a single workplace (or 50 workers throughout different workplaces) to inform and consult their employees on all crucial decisions, including:

• the reasonably foreseeable development of the undertaking's activities and its economic and financial situation (Art 4(1)(a));
• the situation, structure and reasonably foreseeable developments of employment within the undertaking (Art 4(1)(b)); and,
most importantly - any decisions likely to lead to substantial changes in the work organisation or contractual relations (Art 4(1)(c)).

There are provisions enabling the domestic legislation to contain obligations of confidentiality, and there is an exception to the consultation requirement where "the nature of th[e] information or consultation is such that, according to objective criteria, it would seriously harm the functioning of the undertaking or would be prejudicial to it."

An important point on enforcement: the Directive states that domestic legislation must provide that, in cases of serious breach of consultation requirements relating to Art 4(1)(c) (ie the third bullet-point above), any business decisions taken - or dismissals made - will have no legal effect until the employer has fulfilled his consultation obligations (or, if no longer possible, made adequate redress).

This is an enormously controversial Directive, and the CBI's response has been quite scathing (see link to CBI below).

Prior to the election, the government published the Employee Consultation Rights Bill (see bulletin dated 3rd April 2001). It is insufficient to comply with the Directive, because it provides a penalty of up to four weeks' pay for breach of the obligations (rather than, as the Directive requries, stating that decisions to dismiss or vary contracts will - if the breach of the consultation obligations is serious - be of no effect). If the Bill is not made Directive-compliant, it will generate a significant (and expensive for the government) number of Francovich claims.