Tuesday 30 April 2013

Contributory Conduct

[Thanks to Sarah Fitzpatrick of Collingwood Legal for preparing this case summary]

In Ladrick Lemonious v Church Commissioners, the EAT reviewed the correct approach to reducing awards for unfair dismissal for contributory conduct.

The Claimant had over 36 years' service when he was dismissed from his post as a technical support worker for sending emails in the names of other employees, one of which wrongly implied that a colleague had committed a criminal offence. At tribunal, the dismissal was found to be procedurally unfair. The tribunal held that because of the Claimant's conduct, it would not be just and equitable to award him either a basic or a compensatory award.

At the EAT the Claimant raised a number of grounds of appeal. The EAT dismissed the appeal and set out the following principles: 

  • a reduction of 100% for contributory conduct can be justified even if there were procedural failings by the employer, provided those procedural failings did not cause or contribute to the dismissal.
  • a tribunal may reduce the basic award to nil by virtue of the Claimant's conduct (and the accepted approach set out in Devis v Atkins remains good law).

Construction of Bonus Clause

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

In Dresdner Kleinwort Limited & Commerzbank AG v Attrill & Ors, the Court of Appeal considered an employer's discretion to refuse to pay out pay out a bonus pool of 400m euros to 104 investment bankers

Dresdner Bank was sold by Allianz to Commerzbank in 2009. In the period of uncertainty before the sale, there were fears of a 'mass exodus' of staff and the collapse of the business. The situation was so serious the FSA became involved. In order to address this, the Chief Executive announced a guaranteed minimum bonus pool of 400m euros for the investment bank. Within days of the sale being announced, Lehman Brothers collapsed and (according to the evidence) 'enquiries were made left, right and centre to find any excuse to avoid having to pay out.' The bank introduced a 'material adverse change' (MAC) clause into the bonus letters, stating that the bonuses would be adjusted if revenue suffered, which in the end they were.

The Court of Appeal had to consider whether the announcement of the bonus pool created a binding obligation to pay and whether the MAC clause was a breach of the implied duty of trust and confidence. The judgment (delivered by Elias LJ) makes a number of interesting points on unilateral offers and the intention to create legal obligations.

To begin with, the court considered the bank's express power to unilaterally vary the contract. Since this allowed the bank to make changes adverse to an employee, it had to be read strictly. However, in this case the employees argued that this power had been used (because, if so, there was no need for the offer to be accepted). Despite upholding this strict approach, the court found that the power had been exercised.

As for the intention to create legal obligations, this had to be addressed objectively. The bank sought to argue that whilst the authorities which suggested the burden of proof lay with the party who asserts there was no such intention dealt with bilateral contracts, this was a unilateral offer. However, since this offer was made in the context of a pre-existing legal relationship, the onus remained on the party denying such an intention. In addition, the court went on to hold that it was permissible to take into account matters known to the employer but not the employees at the time the offer was made. Although it was right to focus on what the recipient of the offer would have reasonably understood, the bank could not take advantage of a rule designed in part to prevent one party concealing evidence from the court which is inconsistent with their assertion. Finally, given the 'striking absence' of evidence to support the employer's case on the issue of reasonable and proper cause, the finding that the MAC clause had undermined trust and confidence was upheld.                                       

Termination Payments and Penalty Clauses

[Thanks to Naomi Cunningham of Outer Temple Chambers for preparing this case summary]

Where termination of a fixed term contract was permitted provided the employer paid the employee’s salary for the unexpired portion of the term, was that arrangement an unenforceable penalty cause? Obviously not, holds HHJ Pelling QC in Hennigh Berg v Blackburn Rovers Football Club & Athletic plc.

The contract of employment between the Football Club and Mr Berg permitted early termination of his fixed term, but required the Club to pay Mr Berg his salary for the whole period if it chose to terminate early. It did so choose, and Mr Berg claimed that sum.

Refusing the Club permission to withdraw its admission that the sum was due, the judge ruled that it was not arguable that the clause was an unenforceable penalty, because it was not a penalty for breach at all: it operated when the Club did something it was entitled under the contract to do.                 

Monday 29 April 2013

TUPE - Affected Employees

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

If only part of a business is subject to a transfer, does the obligation to inform and consult under Regulation 13 of TUPE extend to employees working in the part which does not transfer?

Equally, does the obligation engage where there is an intended transfer that never materialises?

No and no, says the EAT in I Lab Facilities v Metcalfe and others.

The original employer was a company, part of which was sold and the remainder put into liquidation. The claimants were employed in the part which was ultimately closed down. They brought claims for breach of Regulation 13. The EAT held that the claimants were not "affected employees" within the meaning of reg 13(1).

An employee will not ordinarily be "affected" simply because the part of a business in which he is employed is made less viable by virtue of the sale of the other part. The law requires something more, such as the employee carrying out some element of work within the part of the business which is to be transferred. The methodology adopted by the EAT stands as a useful blueprint for practitioners approaching this issue.               

Pension Contributions are not 'Wages'

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

Do pension contributions amount to 'wages' for the purpose of an unlawful deductions claim?

No, says the EAT in Somerset County Council v Chambers.

Mr Chambers was a social worker employed by the Council. He was a member of a superannuation scheme to which both the employer and employee contributed. He later became a locum social worker on a fractional basis. A change to the Local Authority Pension Scheme rules meant that a person could not be a member of the scheme unless he was employed under a contract of employment of more than 3 months duration. The Council suspended contributions but later re-instated them. There was a dispute about pay, holiday pay and pension contributions in the suspension period.

The employment tribunal awarded the sums claimed as being wrongful deductions from wages.

On appeal to the EAT one of the questions was whether the employment tribunal had jurisdiction to award repayment of the employer's pension contributions on the basis these were deductions from 'wages'.

The EAT held that, notwithstanding the definition in s 27 (1) (a) of the Employments Rights Act 1996 that 'wages' meant "any sums payable to the worker in connection with his employment", this did not include contributions paid to a pension provider on the employee's behalf.

An earlier case, Chambers v Cromwell Group (Holdings) Ltd (EAT 1178/98) which had suggested the contrary was wrong and per incuriam (because this jurisdiction point had not taken).                                    

CJEU - Homophobic Comments and the Burden of Proof

[Thanks to Michael Reed Employment Legal Officer at the Free Representation Unit for preparing this case summary]
When considering reversing the burden of proof in discrimination cases, can statements made by someone not legally responsible for an organisation, but closely associated with it, be facts from which discrimination may be presumed? Yes.

If the burden is reversed, can a respondent rebut the presumption without producing evidence that would interfer with the right to privacy? Yes.

So found the CJEU in Accept v Consiliul National pentru Combaterea Discriminarii.

Accept, an organisation working for gay rights, complained about FC Steaua. They argued that the club refused to employ gay footballers.

Mr Becali, a prominent figure in FC Steaua, had said that he'd close the club before accepting a homosexual on the team. Mr Becali didn't have authority over recruitment, but did play an important management role and was associated with it publicly.

The CJEU concluded lack of legal authority didn't prevent his remarks being facts from which discrimination might be presumed, given his close association with the club.

The court also considered what evidence would be required to rebut the presumption. They concluded that it wouldn't be necessary to produce evidence, such as information about the sexual orientation of other players, that would interfere with the right to privacy.            

Employment Tribunal Fees

The Employment Tribuals and the Employment Appeal Tribunal Fees Order 2013 is now available to view. It's fairly short; it simply sets out the level of fees and includes information about remission in Schedule 3. 

Three points to note:-

  •  it states the 'hearing fee' will fall due on a date set out in the employment tribunal's notification of hearing date (which does not deal with the question of whether it falls due shortly after the hearing date is set, or a certain number of weeks before the hearing - they could be months apart).

  • it is technically silent on the consequences of failure to pay the hearing fee. But there is a mention, in connection with multiple claims, that another member of the multiple can avoid the claim being "struck out" by paying the fee - which strongly suggests the penalty is a strike out. There is no indication of whether (and how) a case can be reinstated if the fee is paid late. Hopefully this will be dealt with in the (as yet unseen) procedural regulations.

  • the nomenclature has changed: 'level 1' and 'level 2' claims are now 'type A' and 'type B' claims.

Friday 26 April 2013

Employment Tribunal Fees

Regulations were apparently laid before parliament yesterday (they are not yet available on the legislation.gov.uk website) dealing with the introduction of employment tribunal fees.

The Ministry of Justice has published a stakeholder letter explaining the new rules (which are expected to come into force this summer).

The letter states that the "sanction for non-payment of issue fees and hearing fees are that the claim will not be allowed to commence or continue in the tribunal." It is unclear whether this means the claim will be stayed or struck out; hopefully the answer will appear in the draft statutory instrument.

Fee levels are unchanged from the information issued following consultation, ie a £250 issue fee, and a £950 hearing fee, for most types of claim (including unfair dismissal, discrimination and whistleblowing). Starightforward claims such as unlawful deductions and statutory redundancy payments carry a lower fee (£160 issue; £230 hearing).

An accompanying Q&A document states that fees can be paid online (when issuing claims online). If lodging a claim by post, the ET1 and a cheque must be sent to a designated tribunal (I have heard a rumour that Bristol will be the designated tribunal for all claims in England & Wales, but that is unconfirmed).

New Employment Tribunal Rules Commencement Dates - not 25th June after all!

Yesterday, BIS issued a press release saying that the rules for "simplifying the procedures and costs of deciding tribunal cases" will come into force on 25th June 2013. 

According to an email I have received this afternoon from BIS, that doesn't actually mean the new tribunal procedural rules are coming into force on 25th June.

BIS state that "Discussions are still continuing in Whitehall about the implementation of the new rules of procedure - we want to do what makes the most sense in terms of the administration of the system. It is Government's aim, however to give users of the system as much familiarisation time for the new rules as possible."

So that's clear. Enjoy the weekend, everyone.

Commencement Dates Announced

BIS has issued a press release containing commencement dates for some of the changes introduced by the Enterprise and Regulatory Reform Act 2013, which received Royal Assent yesterday. 

On 25 June 2013 the following will come into force:-
  • the new tribunal procedural rules (final version not yet available)

  • changes to whistleblowing laws (introducing a public interest element, removing the requirement that the disclosure must be made in good faith, imposing vicarious liability on employers for detriments by employees on other workers)

  • removing the 2-year qualifying period for unfair dismissal where the main reason for dismissal is the employee's political opinions or affiliations.
 Commencement dates are still awaited for:- 
  • confidential termination negotiations (expected summer 2013)
  • new caps on the compensatory award (expected summer 2013)
  • fees for bringing tribunal claims (expected summer 2013)
  • employee shareholder status (expected 1 September 2013)
  • changes to TUPE (expected October 2013)
  • Acas early conciliation (expected 2014)
  • financial penalties for employers (expected 2014)
  • changes to Equality Act (no indications known)

Wednesday 24 April 2013

Employee Shareholders - Yet another Update

Yesterday (24 April), the government introduced yet a further concession into the Growth and Infrastructure Bill and, last night, the House of Lords voted to accept the clause (having rejected it twice).  Employee Shareholders will now become law - Royal Assent is expected today and BIS intends to implement this new, third, type of employment status in autumn 2013.

The further concession is that an agreement that someone shall become an employee shareholder is invalid unless, prior to entering into the contract, the individual has received advice from a relevant independent advisor (ie a lawyer, CAB, law centre, union etc).  Further, the employer has to pay the reasonable costs of that advice - whether or not the employee then accepts the role - if they would otherwise have been payable by the employee.  Doubtless unions will now start charging fees for advising on employee shareholder status, and look for those fees to the employer.

If the employee does not receive independent advice before agreeing to become an employee shareholder, then s/he will be an ordinary employee.

This concession is in addition to earlier concessions, namely:-
  • there will be a seven day 'cooling off' period, during which any acceptance of employee shareholder status will not be binding
  • employers must provide a written statement with full details about the shares and the rights they carry
  • any jobseeker who refuses an offer with employee shareholder status will not forfeit their social security benefits
  • the first £2,000 of shares will not attract income tax
  • existing workers will be protected from detriment if they refuse to switch to an employee-shareholder contract

Laurie Anstis of Boyes Turner has put together an excellent timeline of employee shareholders, from proposal through to enactment.

And best comment of the day goes to barrister Sean Jones QC, for his comment on Twitter:-

Tuesday 23 April 2013

Employee Shareholders - an Update

Employee Shareholder Status - an Update

Last night, the House of Lords voted for the second time to reject the proposed Employee Shareholder status set out in the Growth and Infrastructure Bill (by 260-191).

Under this scheme, which creates a third type of employment status, employers can award employees at least £2,000 in shares in exchange for the employee giving up a bundle of employment rights (including 'ordinary' unfair dismissal and the right to a statutory redundancy payment).

The government is determined to pursue the scheme, however, and this morning published a list of concessions which it hopes will mean the Lords accepts the proposed legislation. The concessions include:-

  • a provision that the employee cannot accept the offer within seven days of it being made (how that would work in practice is unclear, and an employer remains free to refuse to offer the job to a prospective employee who doesn't want to take up employee shareholder status)
  • a written statement setting out the rights that the employee is giving up

  • a written statement setting out the details of the shares being offered (including whether they are voting or non-voting shares, whether they carry a dividend, and whether they carry a right to a share in the company's assets if it is wound-up, whether pre-emption rights are excluded, and details of drag-along and tag-along rights). Most employees will not understand the implications of this information, and there is nothing to prevent employers issuing pages of gobbledigook about the shares which buries this information somewhere within.
The government had made some earlier concessions to the original proposals:-
  • a jobseeker who refuses a job on an employee shareholder basis will not automatically forfeit their unemployment benefits
  • the first £2,000 of shares given to the employee will not attract income tax
So, the Commons will now re-debate - and presumably re-pass the relevant clause of the Growth and Infrastructure Bill. It will then go back to the Lords for a third time.  Meanwhile, shadow Business Secretary Chuka Umanna has tweeted:-