Friday 29 February 2008

Fast track for tribunal claims

The Government has announced in Hansard that it proposes to develop a fast-track system for employment tribunals to deal with simple monetary claims.

This 'fast-track system' will involve five jurisdictions: unlawful deductions from wages claims; breach of contract claims; redundancy pay claims; holiday pay claims; national minimum wage claims. It is likely that employment judges will sit alone to determine such claims, without the assistance of wing members.

[Thanks to for allowing me to use their summary.]

When is a controlling shareholder an employee?

The EAT has, in Clark v Clark Construction, today provided observations on the relevant criteria to consider when seeking to determine whether a controlling shareholder is also an employee..

Elias P., presiding, set out the following guidelines for tribunals follow (at para. 98):-

1. Where there is a contract ostensibly in place, the onus is on the party seeking to deny its effect to satisfy the court that it is not what it appears to be. This is particularly so where the individual has paid tax and national insurance as an employee; he has on the face of it earned the right to take advantage of the benefits which employees may derive from such payments.

2. The mere fact that the individual has a controlling shareholding does not of itself prevent a contract of employment arising. Nor does the fact that he in practice is able to exercise real or sole control over what the company does.

3. Similarly, the fact that he is an entrepreneur, or has built the company up, or will profit from its success, will not be factors militating against a finding that there is a contract in place. Indeed, any controlling shareholder will inevitably benefit from the company's success, as will many employees with share option schemes.

4. If the conduct of the parties is in accordance with the contract that would be a strong pointer towards the contract being valid and binding. For example, this would be so if the individual works the hours stipulated or does not take more than the stipulated holidays.

5. Conversely, if the conduct of the parties is either inconsistent with the contract (in the sense described in para.96) or in certain key areas where one might expect it to be governed by the contract is in fact not so governed, that would be a factor, and potentially a very important one, militating against a finding that the controlling shareholder is in reality an employee.

6. In that context, the assertion that there is a genuine contract will be undermined if the terms have not been identified or reduced into writing. This will be powerful evidence that the contract was not really intended to regulate the relationship in any way.

7. The fact that the individual takes loans from the company or guarantees its debts could exceptionally have some relevance in analysing the true nature of the relationship, but in most cases such factors are unlikely to carry any weight. There is nothing intrinsically inconsistent in a person who is an employee doing these things. Indeed, in many small companies it will be necessary for the controlling shareholder personally to have to give bank guarantees precisely because the company assets are small and no funding will be forthcoming without them.

8. Although the courts have said that the fact of there being a controlling shareholding is always relevant and may be decisive, that does not mean that the fact alone will ever justify a Tribunal in finding that there was no contract in place. The fact that there is a controlling shareholding is what may raise doubts as to whether that individual is truly an employee, but of itself that fact alone does not resolve those doubts one way or another.

Monday 25 February 2008

Enforceability of Employment Contracts

The EAT has held, in Steelcraft v Ellis, that a clause asserting that a 'contract' was not intended to create any legally enforceable rights is void under s203 of the Employment Rights Act 1996 if the only purpose of that clause is to alter what would otherwise be the legal effect of contractual arrangements.

In other words, an employer cannot avoid (what would otherwise be) contractual - and consequent statutory - obligations by inserting a clause in a contract providing that it has no legal effect. (see paras. 66-69 of the judgment).

Thursday 21 February 2008

Increases to SMP and SSP

The draft Social Security Benefits Up-rating Order 2008 has been published. From 6th April 2008, SMP increases to £117.18pw (from £112.75), and SSP increases to £75.40pw (from £72.55).

[Thanks to David Perry of Tinsdills for telling me about this]

Wednesday 20 February 2008

Sexual Orientation Harassment

The EAT has, today, held that the Sexual Orientation Regulations 2003 do not prohibit homophobic banter against a heterosexual man who is known not to be gay.

The Claimant, who was heterosexual, was subjected to sexual innuendo by his colleagues to the effect that he was homosexual, even though they knew he was not. The 'joke' arose because he had (a) attended a boarding school and (b) lived in Brighton.

In English v Thomas Sanderson Blinds, HHJ Peter Clark held that the 2003 Sexual Orientation Regulations do not cover this form of 'homophobic banter'. He described the position as unsatisfactory and has given permission to appeal to the Court of Appeal.

Tuesday 19 February 2008

Orders for Re-Engagement

The EAT has handed down a reminder, in Home Office v Khan & King, that orders for re-engagement should specify the job into which a Claimant is being re-engaged.

In particular, it is not adequate for the tribunal to set out a process for re-engagement (ie tell the Respondent to find a suitably paid job) and delegate the decision over the actual job to the parties (see para. 12 of the judgment).

Friday 8 February 2008

Expired Disciplinary Warnings

The Court of Appeal has held, in Airbus v Webb, that an employer may take expired disciplinary warnings into account when deciding whether to dismiss an employee.

Mr Webb had been given a final written warning for misuse of company time, which was stated to last for 12 months. One month after the warning expired, he was caught watching TV during company time with some colleagues and was dismissed. His colleagues - who had not had a previous final warning - were not dismissed.

The Court of Appeal (overturning the ET and the EAT - see bulletin 15/2/07) held the dismissal was fair. Mummery LJ stated that reliance upon an expired warning was a relevant factor in deciding whether the employer has acted reasonably - and may in some circumstances mean the dismissal is unfair - but does not inevitably mean that it is unfair. David Richards J. added (para 86) that employers should not now expect to be able to rely on expired disciplinary warnings as a matter of course - it is the exception rather than the rule.

[Thanks to Luke Menzies of the EEF, instructed by the successful Appellant, for telling me about this decision.]

Thursday 7 February 2008

Immigrant Workers - changes from 29th Feb 2008

Thanks to Mark Barnett, head of Immigration at Steeles Law Solicitors, who wrote this summary (

2008 sees radical changes being introduced into all aspects of Business Immigration as a result of the introduction of Civil Penalties for illegal workers on 29th February 2008 and the new Points Based System being introduced on a roll out process by the Home Office which will affect 80 current work and study immigration categories.

The points based system will be based on a five tier structure and will have significant impact on those companies proposing to make new work permit applications and/or extension applications, in that they will need to apply to be licensed as a sponsor and have various ongoing obligations in order to maintain their licence.

Tier 1 which includes Highly Skilled Migrants is likely to be implemented in March 2008 and Tier 2 which covers the existing Work Permit Scheme albeit a greatly modified basis, to include an English language requirement and electronic certificates of sponsorship issued by the licensed UK companies , in Autumn 2008.

Further details here.

Tuesday 5 February 2008

Agency Workers

The Court of Appeal has, this morning, handed down its decision in James v Greenwich Borough Council.

This case was widely expected to resolve the conflicting authorities on whether and when agency workers become employees of an end-user. A large number of tribunal cases have been stayed pending this decision, pursuant to the President's Practice Direction (see bulletin 30/11/07).

The Court of Appeal has not grappled with what many believe to be conflicting authorities. Instead, it has asserted that no conflict exists (see para. 46), and that all the authorities point the same way. The correct approach, according to the Court, is for an employment tribunal to decide - as a question of fact - whether it is necessary to imply a contractual relationship between agency worker and end-user. As a question of fact, it should not be reviewed by an appellate court unless a clear error of law exists.

So, it's an answer of sorts - but it doesn't provide the clear guidance or answer that many practitioners were hoping for.