Commercial Agents

The Court of Appeal has, this morning, handed down an important judgment dealing with the valuation of claims brought under the Commercial Agents (Council Directive) Regulations 1993.

These Regulations (which, over a decade on, many people remain unaware of) provide a statutory right to compensation for any self-employed intermediary who sells goods on behalf of, and in the name of, a principal.

Historically, the view has been taken in many first instance decisions (based upon French jurisprudence) that a commercial agent ought to be awarded compensation of two years' earnings if his agency is terminated, unless there is a good reason to depart from the two year presumption.

The Court of Appeal (Moore-Bick LJ giving the leading judgment) overturned these previous cases, holding:

* the correct measure of damages is the loss of the agency business, including whatever goodwill attaches to it. This will often require expert evidence

* as a result, there can be no presumption that the starting point for compensation is two years' earnings, as that does not involve any reasoned attempt to ascertain the true extent of the agent's loss. All cases suggesting there is a presumption of two years' loss of earnings are wrongly decided

* likewise, there is no room for importing a 'just and reasonable' test into the assessment of compensation


This decision is a compulsory read for anybody dealing with commercial agency cases.

Lonsdale v Howard & Hallam Ltd

Sleepy Tribunals

What to do when a tribunal member falls asleep?

It's been established for some time (see, for example, Stansbury v Datapulse) that a decision can be set aside if a member of the tribunal appears to be asleep.

But matters now go further. In Fordyce v Hammersmith & Fulhan Conservative Association, the EAT was asked to grapple with the situation where a wing member had apparently fallen asleep not one, but twice!

The first time, Counsel raised the problem with the tribunal but agreed to continue. The second time, Counsel did not complain but, instead, appealed the decision.

The Employment Appeal Tribunal held that, by initially agreeing to continue, Ms Fordyce had waived her right to object to the initial episode of slumber. But the right to object arose again when the wing member nodded off a second time (although, according to the decision, he was still turning pages in an automaton-like state), and so the tribunal's decision was set aside and a rehearing ordered. Funnily enough, the EAT ordered the case be heard by a different tribunal!

Fordyce v Hammersmith & Fulham Conservative Association

Expired Disciplinary Warnings

The Court of Session has, today, handed down an interesting judgment dealing with whether employers can rely on a written warning which has expired.

Mr Thomson worked in a chemical factory. He was well aware that failure to comply with important health & safety rules might cause serious injury and would potentially be regarded as gross misconduct.

In July 2000, he failed to comply with a basic health & safety measure, leading to a chemical spillage but no injury. He was given a written warning, expressed to last for twelve months.

In November 2001, about 17 months later (so five months after the warning expired), following an explosion in which somebody died, he was again found to have ignored the same health & safety measure. 17 other operators were also discovered to have ignored the health & safety measure. The other 17 were not dismissed, but Mr Thomson was dismissed on the basis that the employer thought he was incapable of following clear safety instructions even when they had been specifically brought to his attention in a disciplinary context.

The Court of Session held the dismissal was unfair, as it was ipso facto unreasonable to rely on an expired disciplinary warning. The Court of Session rejected what is arguably a stronger argument, that the fact a warning has expired is one factor to take into account in deciding whether the employer had acted reasonably in treating the health & safety breach as a sufficient reason to dismiss. Instead, the Court of Session held that it is unarguably the case that an expired warning cannot be a factor in deciding the sanction, and confirmed the EAT's substitution of a finding of unfair dismissal (rather than remitting the case to the tribunal to reconsider).

This case is important and well worth reading.

Diosynth v Thomson

[Thanks to Brian Napier QC, who acted for Mr Thomson, for informing me of this decision]

Compensation for Failure to consult under TUPE

The Employment Appeal Tribunal (Lady Smith presiding) has handed down a starred judgment (i.e. a judgment of particular importance) dealing with compensation for failure to consult under TUPE.

It held that tribunals should adopt the same approach when assessing compensation for failure to consult under TUPE, as that adopted when assessing compensation for failure to consult under s188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (i.e. multiple redundancy consultation).

In other words, the Susie Radin principle applies, that the tribunal should award the maximum 13 weeks' pay as compensation for failure to consult unless there are mitigating circumstances justifying a departure from the maximum award.

Sweetin v Coral Racing

Work and Families - New Regulations

The DTI has, this afternoon, published the new draft

• Maternity and Parental Leave (Amendment) Regulations 2006
• Paternity and Adoption Leave (Amendment) Regulations 2006; and
• Flexible Working (Eligibility, Complaints and Remedies)(Amendment) Regulations 2006.

They deal with some of the government's family-friendly proposals summarised in my bulletin of 19th October 2005 (reproduced below).

The draft Regulations are currently being put out for consultation. Consultation closes on 18th April 2006.

Consultation Document and draft Regulations (needs Adobe Acrobat)



What I said on 19th October...

The government has just announced its new family-friendly proposals, following extensive consultation. They will appear in the Works and Families Bill, to be published soon.

The new / changed laws will be:

• extending Statutory Maternity Pay and Maternity Allowance to nine months from April 2007 with the ambition of moving to a year by the end of the Parliament;
• a power to introduce new paternity leave for fathers, enabling them to benefit from leave and statutory pay if the mother returns to work after six months but before the end of her maternity leave period;
• extending the right to request flexible working to carers from April 2007;
• measures to help businesses manage the administration of Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay;
• introducing 'keeping in touch' days so that where employees and employers agree, a women on maternity leave can go into work for a few days, without losing her right to maternity leave or a week's statutory pay;
• extending the period of notice for return from maternity leave to two months enabling employees and employers to more effectively plan for return to work;
• making clear in the regulations that employers can make reasonable contact with their employees on maternity leave to help employers plan and ease the mother's return to work.

ACAS Conciliation Video

Acas has prepared a nine-minute online video, explaining how its conciliation process works. It's a really useful resource, particularly for Claimants, to put their minds at ease as to how the Acas conciliation process works.

Please note: the link below DOES work. It's likely the Acas website will lack sufficient bandwith to let all the recipients of this bulletin watch the video simulteneously. If it doesn't work, try again later.

Click here to view video

New TUPE 2006 Guidance

The Transfer of Undertakings (Protection of Employment) Regulations 2006, which were widely expected to be published today, are not quite ready...

In the meantime, the DTI has published its official guidance on the new TUPE regulations. The main changes in the Regulations from the existing 1981 version are as follows:

• a widening of the scope of the Regulations to make it clearer that outsourcing and insourcing (known as 'service provision changes') will be covered by TUPE. It appears from p10 of the Guidance that there will be an exception where the service provision is a "one-off" service provision "of short-term duration"
• a new duty on the transferor to provide 'employee liability information' to the transferee (see p22 of Guidance Notes). This include

o the identity and age of all transfering employees
o the information contacted in their statutory statement of particulars of employment
o details of any disciplinary action or grievances in the previous two years
o details of actual or potential legal action brought by the employees in the previous two years

• The transferee can complain to a tribunal if the transferor fails to provide this information, and the tribunal can order the transferor to award compensation for any loss suffered by the transferee (with a minimum award of £500 per employee unless it is unjust to do award the minimum)
• special provisions making it easier for insolvent businesses to be transferred to new employers
• clarifying the ability of employers and employees to agree variations to contracts of employment, when the reason for the variation is an "economic, technical or organisational reason"
• provisions clarifying the circumstances under which it is unfair for employers to dismiss employees for reasons connected with a transfer.

I will be running a web/telephone seminar on the new TUPE regulations later in the year - watch this space for details.

Click here for DTI Guidance Notes (large .pdf document)

Age Discrimination Analysis Notes

A detailed commentary and analysis of the new laws, written by Daniel Barnett and Kate Palka. Spanning over 150 pages, the commentary explains how the new laws will work, highlighting practical difficulties and setting out arguments on both sides when the Regulations are unclear.

The notes will be updated free of charge at regular intervals during 2006.

For further details click here, or click here to view sample extracts.

Serco v Lawson

The House of Lords has, this morning, delivered its opinion in Serco v Lawson (and associated appeals).

The issue relates to the territorial scope of the right not to be unfairly dismissed. Section 196(3) of the Employment Rights Act 1996, which provided that the right did not apply to "any employment where...the employee ordinarily works outside Great Britain" was repealed in 1999 and not replaced.

Lord Hoffman, giving the only reasoned judgment, stated (para 23) that "it is a mistake to try to formulate an ancillary rule of territorial scope, in the sense of a verbal formula such as s196 used to provide...". He then went on (para 25) to say that the right to claim unfair dismissal applies to "the employee who was working in Great Britain", and that overreliance on the contractual position shold be avoided (paras 26 and 29).

Lord Hoffman also highlighted the problem of the peripatetic employee (look it up in a dictionary!!) and said that tribunals should look at the base of the peripatetic employee (para 29), i.e. the place he should be regarded as ordinarily working even though he may spend months working overseas.

The problem of expatriate employees was more difficult, as the concept of a 'base' provides no help with expatriates. Lord Hoffman held that it would be unusual for an employee who works and is based abroad to come within the scope of British labour legislation (para. 36-40), although some occasionally may do so if there are other factors so powerful that the employment relationship has a closer connection with Great Britain than with the foreign country where the employee works. Examples include an employee posted abroad to work for a business conducted in Britain, and the employee working in a political or social British enclave.

Serco, a UK company, employed Mr Lawson (an ex-RAF policeman) to work as a security operator on Ascension Island, where Serco had a contract to service the RAF base. Ascension is a 35 square mile volcanic island in the South Atlantic with no indigenous population. Both employer and employee had close connections with the UK, but all the services were performed abroad. The House of Lords held that this was sufficient for Mr Lawson to have the right to claim unfair dismissal.

Clear? If only.

Serco Ltd. v Lawson

Age Discrimination - Consultation Responses

The DTI has published 248 of the responses it received to its consultation paper on the draft Employment Equality (Age) Regulations 2006. A further 143 respondees asked that their responses remain confidential.

Winner of the 'most apt name for a respondee' competition is 'Wrinklies Direct Ltd.'

See Responses to Consultation Paper

Reinstating Withdrawn Claims

The EAT has handed down an esoteric case on the construction of rule 25 of the Employment Tribunal (Constitution and Rules of Procedure etc.) Regulations 2004.

Under rule 25, a Claimant can withdraw his case at any time. If the Respondent chooses, it can then apply to have the withdrawn proceedings formally dismissed.

In Khan v Heywood Primary Care NHS Trust, Dr Khan withdrew his race discrimination claim on legal advice. Following a change of advisers (and, presumably, advice), he applied to set aside the withdrawal so as to enable him to resume his claim.

The Employment Appeal Tribunal (Rimer J.) held that a tribunal has no power to set aside a notice of withdrawal. The effect of withdrawing a claim means that the Claimant is free to issue a fresh claim based on the same facts (subject to any limitation issues), whereas if the Respondent successully applies to have the claim dismissed upon withdrawal, the Claimant then becomes debarred from issuing a fresh claim based on the same facts.

The crux of the judgment (the arguments are complex!) is at paragraph 24.

The EAT also upheld a costs order under Dr Khan, on the basis it was unreasonable for him to withdraw his claim, and then renege on his withdrawal and seek to have the claim reinstated.

Khan v Heywood Primary Care NHS Trust

Setting Aside Default Judgment

Another example of the EAT overturning a default judgment when the tribunal declined to do so.

As subscribers will know, a Response has to be entered within 28 days, or the tribunal may enter default judgment against the Respondent.

On day 27, the Respondent's solicitors posted the Response Form to the tribunal (by first class-post). It arrived two days later, on day 29, by which time default judgment had been entered.

The solicitors also faxed a copy of the Response Form, but in error faxed it to Acas rather than the tribunal.

The chairman refused to set aside default judgment, taking the view that first-class post should be expected to take two days to be delivered (as, indeed, it did), and so no good reason for failing to enter a Response within 28 days had been shown.

The EAT (HHJ Peter Clark) overturned this and set aside the default judgment. He agreed that no good reason had been shown for the failure to enter the Response within 28 days. However, showing a good reason was not a hurdle which had to be overcome by the Respondent - rather, it was one of the many factors that should be taken into account. When others were taken into account, including the prejudice to each party and that there was an attempt to fax the Response Form within time (albeit it was faxed to Acas in error).

The Pestle & Mortar v Turner

Temporary Deemed Employer

The Court of Appeal has, this morning, handed down its judgment in the case of Hawley v Luminar Leisure Ltd..

Mr Hawley was visiting a nightclub when one of the doormen hit him so hard he fell to the floor and suffered serious and permanent brain injuries.

The doorman was not employed by the nightclub, but by another company (ASE Security Services Ltd) to whom the nightclub had subcontracted its security.

The Court of Appeal upheld the High Court's finding that the nightclub exercised sufficient practical control over the doorman to make it the "temporary deemed employer" for the purpose of vicarious liability. Important factors taken into account were that the doormen were subject to the nightclub's code of conduct, and the nightclub's manager supervised the doormen both in terms of where they should be stationed, and also on detailed issues such as who should be admitted and what should be done about customers who were proving troublesome.

This case is a useful example of when an organisation to whom an employee is seconded might be regarded as having legal responsibility for that employee. It is part of the developing trend seen in employment agency cases, where implied contracts of employment can arise over a period of time between agency worker and end-user.

Hawley v Luminar Leisure Ltd

New SI to help people build up pension rights

The Occupational Pension Schemes (Early Leavers: Cash Transfer Sums and Contribution Refunds) Regulations 2006 have been laid before Parliament today.

They provide that, where a member of an occupational pension scheme leaves the scheme with at least three months' qualifying service, but with no right to a pension from the scheme, they will be entitled to receive either a cash sum to be transferred to another pension scheme, or to a refund of their contributions. The choice is the member's. Currently, people are usually only entitled to a refund of contributions.

The DTI states "This will provide more of an incentive to build up pension rights than currently exists. If the member decides to take the cash transfer sum then they will benefit not only from their own contributions to the scheme but also those of the employer."

The new Regulations will come into force on 6th April 2006.

Occupational Pension Schemes (Early Leavers: Cash Transfer Sums and Contribution Refunds) Regulations 2006

Mutuality of Obligation

A new decision from the Employment Appeal Tribunal, providing an example of when mutuality of obligation can exist despite no express obligation on the 'employee' to do anything!

Mr Younis was engaged to generate sales for a three year period, terminable on 60 days' notice. He was paid a small daily/monthly retainer, plus a commission. He worked for other organisations, and there was no direct contractual obligation on him to actually do any work for the 'employer' during the three year period of the contract.

The EAT (HHJ Peter Clark presiding) overturned the employment tribunal's finding that there was no mutuality of obligation.

It recognised that the normal question is whether the employer is under an obligation to provide work, and the worker to do it when provided. However, the EAT considered (on the facts of the case) that the existence of an overriding contract of three years' duration - notwithstanding that there was no express obligation to do anything during those three years - was sufficient to create mutuality of obligation.

Younis v TransGlobal Projects

Statutory Grievance Procedures

Yet another decision on statutory grievances, this time dealing with the issue of whether a questionnaire under the Equal Pay Act 1970 can constitute a statement of grievance.

Under regulation 14 of the Dispute Resolution Regulations, statutory questionnaires are expressly excluded from what constitutes a statement of grievance.

The Claimant, who had served an Equal Pay questionnaire but not lodged any other grievance before bringing her claim, argued that a statutory questionnaire should be broken down into two parts. In the first part, the Claimant sets out the information about her case - and this can amount to a statement of grievance. It is only the second part, where the Claimant asks her questions, that is debarred from amounting to a statement of grievance.

The EAT (HHJ Peter Clark presiding), whilst recognising the point as arguable, rejected the submission. They held that the policy behind regulation 14 was to exclude altogether the statutory anti-discrimination questionnaire procedure from the statutory definition of grievance.

The EAT also rejected a subsidiary argument that the requirement to lodge a statutory grievance before claiming breached the Equal Pay Directive.

Holc-Gale v Makers UK Ltd EAT 2005

Review of the year 2005

For those who appreciate a light-hearted review of the employment law year, Wragge & Co. have produced a first-class summary of this year's employment law developments (and a preview of anticipated issues for 2006).

Click here to download (.pdf file)

Transexuals - Advocate General says UK in break of EU law

The Advocate General has, today, handed down an opinion stating that the UK is in breach of EU law.

In the UK, men are entitled to draw a state pension at 65, but women are entitled to draw a state pension at 60.

Sarah Richards is a male-to-female transexual. She underwent gender reconstruction surgery in 2001. In 2002, she applied to be paid her state pension from the age of 60, but was refused by the DWP on the grounds she was still male.

Advocate General Jacobs considered that in that situation the correct comparator is a female person whose identity is not the result of gender reassignment surgery.

In this instance, Ms Richards was denied her pension in circumstances where, had she been registered as female at birth, she would have been entitled to it. The alleged discrimination lies in the United Kingdom's failure to recognise transsexual persons in his or her acquired gender on equal terms with persons recorded as of that gender at birth. The Advocate General therefore considered that it is contrary to Community law for a Member State to refuse to grant a retirement pension before the age of 65 to a male-to-female transsexual where that person would have been entitled to a pension at the age of 60 had she been regarded as a woman as a matter of national law.

Richards v Secretary of State for Work and Pensions (press release - full text of opinion not available until later today)

[Thanks to Marianna Patane of White & Case for telling me about this case]

Ministers of Religion are Employees

The House of Lords, in a judgment handed down this morning, has overturned decades of practice/authority by holding that ministers of religion are employees (at least for the purpose of the Sex Discrimination Act 1975).

Ms Percy was an ordained Minister of the Church of Scotland. She claimed sex discrimination. The employment tribunal, EAT and Court of Session all held she was not an employee within the meaning of the Sex Discrimination Act 1975.

It is important to note that Ms Percy did not appeal the employment tribunal's finding that she was not an employee for the purpose of claiming unfair dismissal. She said that she fell within the wider definition in the Sex Discrimination Act 1975, i.e. that she was engaged "under a contract to personally execute any work or labour".

The House of Lords upheld her appeal by a 4:1 majority.

The majority (Lords Nicholls, Hope, Scott and Baroness Hale) held:

• the fact that somebody is an office-holder does not mean they cannot simultaneously be working under a contract;
• the difficulty of establishing the identity of the 'employer', given the fragmented nature of many religious institutions, should not of itself defeat a claim;
• the offer and acceptance of a church post, with provisions for the appointee's duties and remuneration, holidays, accommodation etc. will give rise to an intention to enter legal relations;
• * it is quite apparent, given the degree of control and the requirement for Ms Percy to undertake duties in a personal capacity, that there was a contract to personally undertake work or labour.

Dissenting, Lord Hoffman held that the long-established position is correct, and that a Minister of Religion has legal obligations pursuant to being an office-holder, but not under any contract of employment (whether under the narrow definition for unfair dismissal rights, or the wider definition for discrimination rights).

Although the case only dealt with the definition of employee for the purpose of the SDA 1975, this decision does open the door for Ministers to argue that they are employees within the meaning of the unfair dismissal legislation as well (both Lord Nicholls and Baroness Hale suggested that the cases stating that Ministers cannot claim unfair dismissal may need to be revisited).

Percy v Church of Scotland (.pdf version)

Annual Increase in Compensation Limits

The statutory instrument containing the annual increase in compensation limits has just been laid before Parliament.

The increases take effect, as always, on 1st February (2006). They apply to dismissals occurring on or after that date).

The important increases are:

• maximum compensatory award to rise from £56,800 to £58,400
• maximum on a 'week's pay' to increase from £280 to £290

For a list of all the increases, see the statutory instrument below.

The Employment Rights (Increase of Limits) Order 2005