ACAS Guide to Holiday

ACAS has today issued a revised guide to holiday and holiday pay.

The web version (which rather embarrassingly claims at the top to be dated as of November 2003, but at the bottom as of April 2003).

It provides the answers to (or guidance on) a number of questions, such as:

• do employees have the right to paid leave on public holidays?
• can a part-time worker who works Wednesdays to Fridays claim the right to paid bank holidays which fall on a Monday?
• does leave accrue during periods of absence?
• how must a worker apply for leave?

etc.

LINK: ACAS Guide to Holidays

ACAS Guide to Holiday

The Department of Work and Pensions has published details of a survey on age discrimination in the workplace.

According to the survey, despite legislation still being three years away, employers are beginning to take action to introduce appropriate policies into the workplace. The results of the survey include:

• 67% of employers are aware that age discrimination legislation will be introduced into the workplace by the end of 2006;
• 57% of employers confirmed they already avoid using age limits and age-related words in job advertisements;
• 55% do not use age as a basis for redundancy (the summary of the survey is unclear if they includes LIFO, which is indirectly discriminatory on grounds of age); and,
• 62% of employers base training purely on skills needs.
  

Age Discrimination

The Department of Work and Pensions has published details of a survey on age discrimination in the workplace.

According to the survey, despite legislation still being three years away, employers are beginning to take action to introduce appropriate policies into the workplace. The results of the survey include:

• 67% of employers are aware that age discrimination legislation will be introduced into the workplace by the end of 2006;
• 57% of employers confirmed they already avoid using age limits and age-related words in job advertisements;
• 55% do not use age as a basis for redundancy (the summary of the survey is unclear if they includes LIFO, which is indirectly discriminatory on grounds of age); and,
• 62% of employers base training purely on skills needs.
  

Repayment Clauses in Compromise Agreements

(Thanks to Neil Russell of BD Laddie, and to Michael Simpson of Thompsons, for telling me the official guidance was out)

On 26th August 2003, I gave advance notice of the Inland Revenue's intention to issue a formal statement on its attitude to repayment clauses in compromise agreements.

The statement has now been issued in issue 67 of the Tax Bulletin. It is reproduced below; but, in summary, the Revenue accepts that sums paid which are repayable in certain circumstances are not taxable.

TAX BULLETIN 67

Termination payments and benefits - repayment clauses in compromise agreements - application of s225-6 ITEPA 2003

In recent months, a question has arisen concerning whether the existence of a "repayment clause" in a compromise agreement made at termination of employment gives rise to a charge to tax and National Insurance Contributions under the legislation dealing with restrictive covenants (s225-6 ITEPA 2003 - formerly s313 ICTA 1988 - and s4(4)(b) Social Security Contributions and Benefits Act 1992).

Typically, such a clause requires the employee to repay some or all of the sum settled by the agreement if he or she subsequently initiates litigation in respect of the employment or its termination.

The Revenue's view has been, and remains, that a compromise agreement by its very nature includes a restrictive covenant. This is because the employee agrees not to do something, namely not to commence or continue litigation.

Statement of Practice 3/1996 advises that the Revenue will not attribute any of the settlement sum to such an undertaking, so there is nothing to charge under s225-6 ITEPA 2003.

However, an employer could still make a payment specifically for an undertaking not to litigate, in which case SP 3/1996 would not apply and a charge arises.

The question is whether a repayment clause entails attribution of some or all of the settlement sum to that undertaking since the sum is lost if litigation commences.

Following legal advice, the Revenue accepts that such a charge will not arise other than in very exceptional cases.

Vaughan-Neil v CIR (54 TC 223) confirmed that it is necessary to establish, realistically and as a matter of fact, what the settlement sum is actually paid for. Normally, a compromise agreement made at termination deals with genuine claims and the settlement sum is paid in consideration for settling those claims. Where that is the case, the settlement sum is exhausted by reference to those claims and no sum remains to be attributable to the undertaking not to litigate. That remains the case whether or not a repayment clause exists.

Consequently, enquiries will not normally be raised on this point alone. The Revenue will raise the question only if the claims appear spurious, for example the amounts are clearly in excess of a reasonable sum for settlement of the claims.

Practitioners should bear in mind that there are no tax or NIC provisions allowing adjustment to charges if such a repayment in fact happens.

All the NICs legislative references mentioned in this article are those which apply in Great Britain. Northern Ireland has its own NICs legislation which, in the main, is the same as that for Great Britain

Rutherford - Upper Qualifying Age

(Thanks to Paul Troop, junior Counsel for Messrs Rutherford & Bentley, for sending me the summary below)

The EAT has handed down its decision in Secretary of State v Rutherford & Bentley (previously Rutherford v Harvest Town Circle).

It has overturned the ET's decision, and found that the upper qualifying age for unfair dismissal and redundancy does not offend Article 119. Thus the rule remains that employees over normal retirement age cannot claim unfair dismissal or statutory redundancy payments.

The EAT declined to remit the case back to a tribunal and said it was the end of the road for the litigation (subject to any appeal to the Court of Appeal).

I have not read (or seen) the transcript. Paul Troop's summary is reproduced below.

Secretary of State for Trade and Industry v (1) Rutherford (2) Bentley

Mr Justice Wall, 2 October 2003

The EAT has today allowed the Secretary of State's appeal against the finding of the Stratford Employment Tribunal that the provisions of the Employment Rights Act 1996 that prevent employees over the age of 65 claiming either unfair dismissal or redundancy (sections 109(1)(b), 156(1)(b), 119(4) and 162(4)) should be disapplied as being indirectly discriminatory on the grounds of sex contrary to Art 141 of the European Treaty.

The SoS was successful in arguing that the Tribunal's decision in relation to both disparate impact and objective justification was wrong. The judgement runs to over 100 pages.

On the issue of disparate impact, the EAT held that the Tribunal selected the wrong pool for comparison, and even if the pool selected was the correct one, its rejection of the pool proposed by the SoS without any proper form or reasoned analysis was an error of law sufficient to vitiate its decision.

The EAT took the view that the correct pool to be examined is the entire workforce. To deal with any particular segment of it on the basis that it represents those "for whom retirement has some real meaning" is to introduce a subjective element which was capable of being expanded or reduced without the application of any measurable criteria. The EAT stated that this does not mean that it would be wrong, in appropriate cases, to consider the disadvantaged group. The EAT held that the wider pool shows clearly and unequivocally no disparate impact.

On the issue of justification for the provisions, the EAT found that the Tribunal was wrong to decide that the default provisions were inextricably linked to the State retirement age. The EAT accepted that the policy arguments advanced by the SoS constituted reasonable policy objectives that reflected legitimate aims of the State's social policy. The EAT held that the policy aims were not related to any discrimination based on sex and were not "tainted with sex discrimination" as had been found by the Tribunal. The EAT added that the Tribunal failed to give any weight to the consultation process currently under way in relation to age discrimination and to allow the government a reasonable margin of appreciation when striking the balance between the need to legislate and the need to ensure that proper processes have been gone through before legislation is placed before Parliament.

The EAT saw no point in remitting the case to another Tribunal for further consideration. The order of the Tribunal was set aside and the claims of Mr Rutherford and Mr Bentley were dismissed.

The EAT also stated "We do not, of course, criticise either Mr Rutherford or Mr Bentley for bringing these applications. By pointing up the difficulties, they and their lawyers have performed a public service, of which we hope the government will take note. But that said, we see no purpose in there being a Rutherford II. Subject, of course, to the Court of Appeal taking a different view, it is our judgement that this litigation should stop now."

ACAS Pilot Mediation Scheme

ACAS has launched a pilot mediation scheme. Help is available over the telephone, or an ACAS representative will visit the workplace and help employers and employees resolve their problems. They aim to visit the workplace within 5 working days of a request, and for formal mediations within 10 days of receiving an agreed request from both employer and employee.

The visiting / mediation service is free.

Whilst being piloted, it is only open to:

• employers in the Yorkshire & Humber region or the East London area (covering City of London, Newham, Tower Hamlets, Redbridge, Havering, Hackney, Barking & Dagenham, Lewisham, Greenwich and Bexley); and,
• employers that employ fewer than 50 employees.

New EAT Decisions

[An advertisement for the forthcoming 2 Gray's Inn Square discrimination seminar appears below]

Defer-Wyatt v Williams (EAT 24/7/03, HHJ Peter Clark)

If an employee reasonably holds a mistaken belief as to the correct EDT (resulting in late submission of the IT1), it is not reasonably practicable for him to present his claim for unfair dismissal within time. An extension of time should be granted.
________________________________________

Royal Mail Group plc v Lynch (EAT 2/9/03, HHJ Ansell)

When construing documents to see if they have an adverse impact on workers (in this case, a part-time worker who was not allowed to transfer to full-time work unless she agreed that the transfer was temporary), tribunals should not adopt a contra proferentum approach but should examine the document against the background facts known to the parties at the time.

Employment Status

The European Commission has produced a fascinating document on employment status across EU states. It has the snappy title:

"Economically dependant / quasi-subordinate (parasubordinate) employment: legal, social and economic aspects"

and comes in at a mere 141 pages. The report is not officially released until (I think) next week, but there is a sneak preview available on the European Commission website.

The report examines the distinction between employees and the self-employed, and considers what criteria are used in different countries to distinguish the two categories. It goes on to consider reform of the current distinction in all the member states and considers whether a community-wide definition is practical.

Amongst the dross are some interesting statistics (see pages 69+). In the year 2000 (the most recent year covered):

• 11.8% of the UK workforce were self-employed;
• 25% of UK employees were part-time employees (44% of all women, compared with 9% of all men);
• 6.2% of UK employees were on fixed-term contracts.

DRC Codes of Practice - Consultation

The Disability Rights Commission is in the process of issuing two new Codes of Practice, to reflect changes to the Disability Discrimination Act 1995 which come into force next year.

The draft Codes have been put out to consultation (until 30th November). The DRC invites comments on the Codes, and has questionnaires on its website enabling interested parties to make representations.

The two Codes are entitled:

• Employment and Occupation Code of Practice; and,
• Trade Organisations and Qualifications Bodies Code of Practice

The draft codes and questionnaires can be seen here

Employment Status

[An advertisement for the forthcoming 2 Gray's Inn Square discrimination seminar appears below]

The European Commission has produced a fascinating document on employment status across EU states. It has the snappy title:

"Economically dependant / quasi-subordinate (parasubordinate) employment: legal, social and economic aspects"

and comes in at a mere 141 pages. The report is not officially released until (I think) next week, but there is a sneak preview available on the European Commission website.

The report examines the distinction between employees and the self-employed, and considers what criteria are used in different countries to distinguish the two categories. It goes on to consider reform of the current distinction in all the member states and considers whether a community-wide definition is practical.

Amongst the dross are some interesting statistics (see pages 69+). In the year 2000 (the most recent year covered):
• 11.8% of the UK workforce were self-employed;
• 25% of UK employees were part-time employees (44% of all women, compared with 9% of all men);
• 6.2% of UK employees were on fixed-term contracts.

Press Bulletin CRE Statement on British National

In the last half-hour, speaking at the TUC conference, CRE Chairman Trevor Phillips has promised to back any trade union which expels any member of the British National Party (BNP).

Daniel Barnett, barrister at 2 Gray's Inn Square Chambers, comments:

"The BNP may try to take advantage of new laws coming in later this year, which prevent unions expelling members because of their philosophical beliefs. If hatred of other races and religions is deemed a philosophical belief, unions will be prohibited from expelling them.

"Moreover, the CRE may find itself liable to pay compensation to BNP members if it has supported the unions in unlawfully expelling them.

"But these new laws do not come in until December, so unions are safe following Trevor Phillips' call before then."

Note to Editor

Daniel Barnett is a barrister specialising in employment and discrimination law. He can be contacted on mail@danielbarnett.co.ukor by telephone on 020 7440 8499.

New TUPE Regs - Update

Thanks to Michal Stein of Nabarro Nathanson, and to Pat Stein of the DTI, for the following information]

We have been awaiting the new TUPE regulations for some time. This is an update as to the current position (source: the DTI).

• draft Regulations will be published, for a three-month consultation period, in October 2003. This second consultation will concentrate on whether the draft Regulations fulfill the stated policy aims, rather than consulting on the underlying policy aims themselves;
• it is hoped the new Regulations will take effect from April 2004;
• the Regulations will primarily codify existing caselaw and consolidate the provisions of the recent Acquired Rights Directive. For example, the rule in Wilson stands and there will be no scope for changing employees' terms and conditions following a TUPE transfer (except as set out in the next bullet point);
• the principal substantive change is for insolvent businesses. When a genuinely insolvent business is transferred (which includes wound up businesses but not those placed in administrative receivership):

1. the transferee will be able to agree changes to terms and conditions with the workforce (and will not thereby be in breach of TUPE); and,
2. liability for arrears of wages will not transfer over, but will be met by the state (up to the statutory cap). The DTI will not reveal the position for arrears of wages over the statutory cap; this will be revealed next month.

• eventually, provisions will be introduced requiring the transferee employer to match an employee's pension contributions up to a maximum of 6% into a stakeholder (or equivalent) pension scheme. Thus if an employee contributes 4% of salary into an occupational pension scheme, the transferee will have to do likewise. However, this will not form part of the new TUPE regulations, but will form part of the forthcoming Pensions Bill, to be issued by the Department of Work and Pensions, and is unlikely to take effect for some time.

Ditch the BNP

In the last half-hour, speaking at the TUC conference, CRE Chairman Trevor Phillips has promised to back any trade union which expels any member of the British National Party (BNP).

Whilst this may be a morally commendable stance, one must query whether the CRE is opening itself for significant liability. As from 2nd December 2003, it will be unlawful for a trade union to expel members based on their religion, religious belief or similar philosophical belief. It is strongly arguable that membership of the BNP demonstrates a philosophical belief that persons of a particular race - or religion - should have different rights to white anglo-saxon protestants. For a trade union to expel members because of this belief may contravene regulation 15 of the Employment Equality (Religion or Belief) Regulations 2003.

In turn, by inducing unions to expel members of the BNP, the Commission for Racial Equality may be:

• (a) aiding the union's unlawful act - which, in turn, is actionable under regulation 23; and,
• (b) insofar as the unions have contractual membership rules by which they undertakes not to expel members on grounds of political or other beliefs (as many do), liable for inducing a breach of contract.

Having said that, it could just as strongly be argued that membership of the BNP is not a "similar philosophical belief" - which would provide all the excuse a tribunal needs for rejecting a BNP member's claim in these circumstances.

So good on Trevor Phillips.

New EAT Decisions

The following decisions have been placed on the EAT website in the last few days.

Securiplan v Bademosi (HHJ McMullen, 9th May 2003)

A TUPE case, dealing with the issue of whether an employee was assigned to the part of the undertaking which transferred (provision of security services at a magistrates' court). Mr Bademosi had worked on another site for many years, but had been transferred temporarily to the magistrates' court for a period of one year. The TUPE transfer occurred a few weeks before he was due to return to the other site.

The EAT upheld the tribunal's decision that Mr Bademosi was not assigned to the magistrates court - and therefore did not transfer under TUPE - because his assignment to the magistrates court was as a temporary placing. It was not appropriate to look at where he worked immediately before the transfer (i.e. the magistrates court); rather, the wider circumstances should be examined to determine whether he was truly assigned to the magistrates court contract - and he was not.

Bolch v Chipman (Burton P., 19th May 2003)

This decision provides guidance on when a tribunal should (and should not) strike out one side's case/pleading on grounds of unreasonable behaviour under rule 15(2)(d) of the 2001 Rules. The primary point is that unreasonable conduct does not, of itself, mean a case should be struck out; rather, there has to be EITHER contumelious default OR no prospect of a fair trial. Tribunals should always consider sanctions short of striking out, for example, allowing the defaulting side to attend for a limited purpose (such as a remedies hearing, or testing the evidence of the other side).

The relevant paragraph of the judgment is paragraph 55.

Kear v Neural Technologies (HHJ Levy, 2nd June 2003)

Another case on unreasonable conduct; this time relating to costs in the EAT rather than striking out a pleading.

A litigant in person accused the solicitor on the other side of various improper actions, such as "colossal incompetence and corruption", that he had "fabricated" an EAT precedent, and that "you are not fit to practice law."

The EAT held that this was unreasonable conduct in conducting the proceedings, and awarded costs of (sadly only) £300, which was a broad reflection of the additional expense the solicitor had been put to.

Employment Status of GP's

The Employment Appeal Tribunal has held, in North Essex Health Authority v Dr C David-John (HHJ Levy, 15th August 2003) that GPs do not have a contractual relationship with the 'employing' Health Authority. Their obligations are governed by statute, not contract.

Therefore:

• (a) given there is no contract, there cannot be a 'contract for services' - thus GPs cannot claim unfair dismissal; and,
• (b) likewise, there cannot be a 'contract personally to execute any work or labour' - thus GPs cannot claim under the discrimination statutes.

Future Loss of Earnings: The Ogden Tables

[Thanks to John Bowers QC of Littleton Chambers, who acted for Kingston upon Hull City Council, for sending me the transcript of this decision]

The Employment Appeal Tribunal has handed down its decision in Kingston upon Hull City Council v Dunnachie (no. 3). Yes - this is the same Dunnachie case that we all know and love, but a less well publicised aspect of it.

The EAT (Burton P. presiding) held that it is normally inappropriate to use the Ogden tables when assessing future loss of earnings in unfair dismissal (and, presumably, discrimination) claims, unless it has been established that there will be a career-long loss. They should not be used to reflect the chance of a career-long loss, i.e. by choosing a multiplier from the tables and then reducing it by, say, 50% to reflect that the loss may not, in fact, be (working-) life-long.

The Appeal Tribunal held that using the Ogden tables:

"risks the introduction of an air of spurious accuracy. Great care is devoted to selecting the correct Table and the correct rate of return and the correct multiplier to two decimal places - and yet then a broadbrush percentage discount, 50% or 30%, is suddenly chosen and applied." (para. 26)

The EAT set out clear procedural guidelines, including an early and detailed Schedule of Loss and counter-Schedule of Loss (with specific factual assertions components which must be included), if the Applicant is seeking to rely on the Ogden tables. The core of the decision is at paragraphs 28-30, and paragraphs 33-34, of the judgment.

Burton P. made it clear that the warning against using the Ogden tables did not apply to the applicability of the Ogden tables when calculating pension losses. On this point, the new DTI guidelines on calculating pension losses in employment tribunals (which went out to consultation earlier this year) are likely to be published in the autumn. They are widely expected to support the use of the Ogden tables in calculating pension losses.

Finally, the decision dealt with an important point of principle on the award of costs. I will deal with this in a separate bulletin.

Costs in Employment Tribunals

Two recent decisions on costs in employment tribunals, both from the Employment Appeal Tribunal.

First, in Kingston upon Hull City Council v Dunnachie (no. 3) (dealing principally with whether the Ogden Tables can be used in tribunals when assessing future loss), Burton P. held that a tribunal has no jurisdiction to order that costs be paid to a litigant in person in respect of his preparation time for his tribunal case. Note that this may change if the Secretary of State brings in Regulations under the Employment Act 2002, which specifically enables tribunals to make orders for costs in respect of wasted preparation time.

Second, in McPherson v BNP Paribas,, HHJ Birtles upheld a tribunal decision ordering an Applicant to pay the costs of the entire proceedings when he withdrew his claim just two weeks before the hearing. Although the EAT made it clear that late withdrawal of a claim is not, in itself, necessarily unreasonable conduct, it formed the view that the Applicant's pattern of failing to comply with interlocutory orders and reluctance to disclose documents showed that he was only bringing the litigation to try to force an offer of settlement out of the Respondent. In those circumstances, his late withdrawal of the claim amounted to unreasonable conduct and the entire costs of the proceedings would be payable.

Repayment Clauses in Compromise Agreements

Thanks to Neil Russell of B.D. Laddie, who is the leading authority on this issue, for keeping me informed of his communications with the Inland Revenue

On 23rd May 2003, I sent out a bulletin concerning a disturbing new approach from the Inland Revenue, who were taking the view that where a compromise agreement contains a clause stating the monies are repayable in full if litigation is started in the future, the payment is brought within ICTA 1988, s313 (taxation of payments for undertakings restricting conduct) or, now, ITEPA 2003, s225.

This meant the Revenue were claiming tax on the full payment, rather than just that in excess of £30,000. [The bulletin of 23rd May 2003 is reproduced below]

This has become a significant issue amongst employment lawyers over the last few months. In the absence of formal guidance, different offices in the Inland Revenue have been taking different approaches.

The Revenue has now clarified its formal position on repayment clauses. Formal guidance will appear in the Tax Bulletin in October 2003 (and may appear on its website as early as next week).

The Revenue's official position is:

• it recognises that all compromise agreements contain an implied undertaking not to issue proceedings against the employer;
• it makes no difference if that undertaking is set out expressly as part of a repayment clause provided the sum of money payable under the compromise agreement is a real attempt to compromise the substantive claims;
• thus no tax is chargeable on any aspect of the monies paid under a compromise agreement, even where that money is repayable if the employee breaches an undertaking not to commence litigation;
• however, if the settlement sum is clearly in excess of a reasonable amount for the claims, the Revenue might regard the settlement as a 'sham' and investigate further.

In summary, provided the settlement sum is reasonable, there will be no tax chargeable on the first £30,000 of the termination payment even if a repayment clause exists in the agreement.

If anybody would like further information on this point, I suggest they contact Neil Russell of B.D. Laddie at n.russell@bladdie.co.uk.

Whistleblowing Disclosures

An updated list of prescribed persons, made under s43F of the Employment Rights Act 1996, has been published.

A worker cannot be dismissed, or subjected to a detriment, if he makes a qualifying disclosure (meaning a disclosure that tends to show a criminal offence has/will be committed, a breach to health & safety rules has/will be committed, a person is failing to comply with a legal obligation etc.).

Under s43F of the Employment Rights Act 1996, the DTI produces a list of prescribed person to whom a protected disclosure can be made. This list has now been updated (with effect from 1st October 2003).

Loss of Chance to Claim Unfair Dismissal

Since publication of a summary law report in the Daily Telegraph on 19th July, employment lawyers have been awaiting the transcript of the EAT's decision in Virgin Net Ltd. v Harper (HHJ Peter Clark, 9th July 2003).

The case is authority for the proposition that employees cannot circumvent the one-year qualifying period for unfair dismissal by bringing a claim for wrongful dismissal and claiming loss of a chance.

Previously, following Raspin v United New Shops (1999), when an employee was dismissed in breach of contract (ie without notice), and his/her contractual notice period would have taken him beyond the one year qualifying period, s/he could bring a breach of contract claim where the damages would include compensation for loss of a chance of claiming unfair dismissal. In a case where the dismissal would plainly have been unfair, an employee could theoretically recover 100% of the compensation s/he would have had if claiming unfair dismissal properly (subject to the £25,000 cap if the contract claim was brought in a tribunal).

However, the EAT has now declined to follow Raspin on the basis that it is not consistent with the House of Lords' decision in Johnson v Unisys (2001). In other words, the EAT in Virgin Net Ltd v Harper has held that the award of damages for 'loss of a chance' is exactly the type of circumvention of the unfair dismissal statutory framework castigated by the House of Lords in Johnson, and is therefore impermissible.