Employment Law Newsletter Spring 2014

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1 Call Employment Law Newsletter Spring 2014 Contract of employee claiming disability discrimination can be frustrated The EAT has held that when considering whether a disabled employee's contract has been frustrated (i.e. ended through no fault of either party), tribunals must still consider whether the employer was in breach of the duty to make reasonable adjustments. If there was something which it was reasonable to expect the employer to do in order to keep the employee in employment, the doctrine of frustration will not apply. In this case the tribunal had applied the correct test and that its conclusion that the employer had not breached the duty to make reasonable adjustments could not be challenged. (Warner v Armfield Retail & Leisure Ltd UKEAT/0376/12.) Employee who prevented a definitive diagnosis was not disabled The EAT has upheld a tribunal's decision that, despite an employee advising that he was suffering from bipolar disorder, the absence of a definitive diagnosis meant that the employer did not know, and could not have reasonably been expected to know, that the employee was disabled. The tribunal had been entitled to find that the employer had asked the right questions and was justified in concluding that the employee was not disabled. The tribunal took particular note of the fact that the employee had withdrawn consent for his GP and specialist to provide information to the employer's occupational health service. The case is a reminder to employees of the potential consequences of failing to co-operate with their employer's attempts to obtain medical advice on their position. The need for restrictive covenants for key employees A senior employee sought to transplant his employer's business to a competitor. His plan included taking over the employer's premises, incorporating a company with a similar name, registering similar 1

2 domain names and facilitating the recruitment by the competitor of a substantial section of the employer's workforce. In the absence of any post-termination restrictive covenants, or any express terms regarding confidential information, the employer brought claims against the employee for breach of his contractual duty of fidelity and fiduciary duties (based on his seniority), and against the competitor for passing off. The court found that the employee had broken his implied duty of fidelity by failing to inform the employer of the planned poaching raid, discussing confidential information about staff salaries with the competitor, arranging meetings with his colleagues at his home to discuss offers of employment from the competitor and colluding with the competitor in identifying and recruiting members of staff. Whilst this case is helpful in those situations where there are no contractual restrictions, the Employer would doubtless have been on much stronger ground with them. Extent of insured's right to choose lawyer under legal expenses insurance policy The ECJ has given a preliminary ruling on the interpretation of Article 4(1) of Council Directive 87/344/EEC of 22 June 1987 on the insured's right to choose its own lawyer under a legal expenses insurance policy. It ruled that Article 4(1) does not allow a legal expenses insurer to insist that the costs of legal assistance provided by a lawyer chosen by the insured will only be covered if the insurer considers that an external lawyer should be instructed (as opposed to the matter being dealt with by the insurer's own employees). The ECJ also confirmed that the position would not be any different if legal assistance in the particular inquiry or proceedings being covered by the policy was not compulsory under the national law in question. This was because the right to choose a representative was of general application, was obligatory in nature and was not subject to national rules on legal representation. This decision helpfully confirms that the insured's right to choose his lawyer cannot be restricted to situations in which the insurer decides that recourse should be had to an external lawyer. However, unfortunately, it still does not clarify at what point a person s right to choose his lawyer kicks in: whether this is at the pre-action stage or only when proceedings actually commence. Can an employer recover from a departing employee the cost of recruiting them? Sometimes. Initially the tribunal said that a clause entitling an employer to make deductions relating to the cost of recruiting the employee was unenforceable as a penalty. However, the EAT disagreed and said that tribunals should not consider the law relating to penalties when dealing with unlawful deductions claims. In this case, the tribunal had erred by considering the position at the time of the breach, rather than at the time the contract was entered into. It also erred by failing to consider whether there was an extravagant or unconscionable gulf between the maximum amount that could be recovered as damages for breach of contract and the sum deductible under the clause. The EAT substituted a finding that the deductions anticipated by the clause were a genuine pre-estimate of loss and so lawful at both common law and under the Employment Rights Act Contact Tozers if you need a contract clause allowing deductions for recruitment costs. 2

3 Trust and confidence dismissals The EAT has upheld an employment tribunal's decision that the dismissal of a school caretaker in response to unproven allegations of historical sex abuse was unfair. The school had been informed of the allegations by the police, who were investigating them, but at the time of the caretaker's dismissal, no criminal charges had been brought. The school governors decided to dismiss the caretaker on the basis that trust and confidence had broken down to the point where it was irreparable. It was felt that the matter could seriously damage the confidence that parents and public had in the school. The EAT held that where an employer learns of unsubstantiated allegations of abuse relating to an employee, they must not take an uncritical view of the information disclosed to them. Even if the employer is entitled to treat the disclosed information as reliable, the tribunal must go on to consider whether that is a sufficient reason for dismissal. While an employer's decision to dismiss purely on the basis of an unproven allegation of abuse may be fair, this is not inevitable. First set of official tribunal statistics since introduction of fees The Ministry of Justice (MoJ) has published tribunal statistics for the quarter July to September These statistics include statistics about employment tribunal claims and may be of particular interest to employment lawyers, as they represent the first set of official statistics since the introduction of employment tribunal fees on 29 July The report states that the number of "receipts" (an amalgamation of single and multiple claims, counting each individual within the multiple claims separately) in July to September 2013 was just under 40,000, which is 17% down on the same period in Unfair dismissal and failure to inform or consult on redundancy claims have fallen by around 40%. The largest increases were in equal pay and sex discrimination claims (although this might be in part due to a particular feature of historical claims being made in the North East of England). Redundancy Consultation: Expiry of Fixed Term Contract Does Not Count Towards 20+ Headcount The Court of Session confirmed that the termination of a fixed-term contract amounts to a dismissal. However, when determining whether the dismissal amounts to a redundancy dismissal it is necessary to consider whether the dismissal is for "a reason not related to the individual concerned" within the meaning of s.195 of the ERA In the four test cases before the Court of Session at least one of the reasons for the dismissal in each of them was that the employee had agreed to accept that the contract would come to an end at a particular time or on the occurrence of a particular event. The Court of Session concluded that such a reason did relate to the individuals as it had to do with their particular circumstances and their particular decisions. Accordingly, they were not dismissed as redundant and, in turn, their dismissals did not count for 'totting up' purposes when counting the number of people needed to trigger collective consultation requirements. National minimum wage penalty increased The National Minimum Wage (Variation of Financial Penalty) Regulations 2014 increase the maximum financial penalty for employers who flout the national minimum wage (NMW) from 5,000 to 20,000. In addition, the government also plans to introduce legislation as soon as possible so that the maximum 20,000 penalty can apply in respect of each underpaid worker. 3

4 Flexi-time scheme: no payment in lieu of accumulated hours on termination The EAT has overturned an employment tribunal's decision that an employee, who was not paid on termination of employment for extra hours worked under a flexi-hours scheme, had suffered an unlawful deduction from wages. The EAT held (by a majority) that, in the absence of an express term in the scheme regarding payment on termination, the tribunal was wrong to imply a term that the employee was entitled to be paid for accrued hours that he had not taken off in lieu. In the majority's view, it was not necessary for business efficacy to imply such a term and it was not a term which both parties would have agreed to. The EAT's reasoning in this respect is harsh on the employee, who had worked over 1,000 hours for no pay. To avoid disputes of this kind, employers should ensure that the terms of flexi-hours schemes make clear what will happen to accumulated hours on termination and that employees manage their accrued hours to avoid a significant build-up. End of employers' right to recover statutory sick pay from HMRC The Percentage Threshold Scheme enables employers to reclaim Statutory Sick Pay from HMRC, where the total SSP paid in a month exceeds 13% of their Class 1 National Insurance Contributions for that month. A draft Order abolishing the scheme, as part of the government's review of health at work, has been laid before Parliament and approved by the House of Lords on 12 February It is expected to take effect on 6 April Acas early conciliation: operational from 6 April, mandatory from 6 May 2014 The statutory framework introducing mandatory Acas early conciliation (EC) in tribunal claims will be brought into force on 6 April 2014 by the Enterprise and Regulatory Reform Act Transitional provisions cover the period between 6 April and 5 May 2014 during which EC will be available to prospective claimants. EC will be mandatory for claims presented on or after 6 May The draft Rules provide that, as an alternative to submitting a completed EC form online or by post, prospective claimants will be able to telephone Acas who will fill in the form. It will not be possible to deliver an EC form by hand. The mandatory required information, omission of which risks rejection of the EC form, is now limited to the name and address of both the prospective claimant and respondent. Limits on tribunal awards to increase from April 2014 Tribunal compensation limits will increase on 6 April The maximum compensatory award for unfair dismissal will rise from 74,200 to 76,574. The maximum amount of a week's pay, used to calculate redundancy payments or various awards including the basic or additional award of compensation for unfair dismissal, also rises from 450 to 464. Changes to spent convictions regime On 10 March 2014, the amendments to the Rehabilitation of Offenders Act 1974 made by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 will come into force. The rehabilitation periods in the Rehabilitation of Offenders Act 1974 will be reduced, shortening the time frame in which offenders must declare a previous conviction to prospective employers. 4

5 The definition of those deemed to be the most serious offenders, who have to declare their criminal record for the rest of their lives, will also be changed to cover those receiving prison sentences in excess of four years (rather than in excess of two and a half years, as currently). However, the convictions of those convicted of specified sexual or violent offences will still never become spent. Dismissal for absence owing to post-natal depression was not discriminatory The EAT has upheld a tribunal's decision that a woman, who was dismissed having been off sick with post-natal depression for several months after the end of her maternity leave, had not been discriminated against because of pregnancy or sex. Pregnancy discrimination under section 18 of the Equality Act 2010 only occurs where a woman is treated unfavourably during the "protected period" of pregnancy and maternity leave. Further, in light of the ECJ's decision in Brown v Rentokil Ltd, a woman is not necessarily discriminated against directly because of sex where she is dismissed because of pregnancy-related absence where her maternity leave has ended. In such circumstances, sex discrimination will only occur if her employer treats her less favourably than it would treat a sick man in similar circumstances. Watch what you say: covert recordings admissible The EAT has upheld an employment tribunal decision that covert recordings made by an employee of the public and private discussions of the panel at her grievance and disciplinary hearings could be admitted as evidence at a final hearing. The EAT held that the private comments made by the panel were not part of their deliberations on the matters under consideration and the case could therefore be distinguished from its decision in Amwell View School Governors v Dogherty. The tribunal was entitled to decide that the recordings were admissible in evidence, the cogency and relevance of which could be determined by the tribunal at the final hearing. Children and Families Act 2014: employment aspects The Children and Families Act 2014 received Royal Assent on 13 March The Act will introduce several changes for working parents, including: 30 June 2014: The right to request flexible working will be extended to all employees. The current statutory procedure that employers must follow when considering flexible working requests will be replaced with a duty on employers to consider requests in a reasonable manner, supplemented by a statutory code of practice from Acas. 1 October 2014: Fathers and partners will be able to take time off to attend up to two antenatal appointments. 5 April 2015: Mothers, fathers or adopters will be able to opt to take shared parental leave within the first year after the birth or adoption placement. This will apply to parents of babies due or children placed for adoption on or after this date. Adopters' pay and leave entitlements will also be brought into line with those of birth parents. 5

6 Employment Tribunal fees to increase in some cases On 6 April 2014 certain categories of claims will be re-classified as "Type B" claims attracting the higher fees ( 250 issue fee and 950 hearing fee for a single claimant). They are: Equal pay. Sex equality in pension schemes. Failure to inform or consult under TUPE. Failure to allow compensatory rest under the Working Time Regulations Breach of the right to request time off for training. This is to remedy what the government has identified as a mistake in the original legislation which categorised those claims as "Type A", attracting the lower fees ( 160 issue fee and 230 hearing fee). Tozers Employment Seminars - Spring 2014 This spring our seminars are going to look in detail at the increasingly complex area of family friendly legal rights and the problems that can easily arise for the unwary. You can expect us to discuss: Shared maternity, paternity and adoption leave The rules during maternity affecting rights to annual and sick leave The rules during and after maternity affecting rights in a redundancy situation Discrimination: complexities around sex, disability and maternity Flexible working requests: the risks Other family friendly legal rights Update and look ahead There are some new sanctions that tribunals are able to impose upon employers who have been found to breach employment rights. There are also other changes which are planned or are out for consultation. We will explain what these are in detail and how you can avoid being subjected to these penalties. We will discuss - Equal pay audits Financial penalties imposed by tribunals Public consultation on zero hour contracts and a proposed Private Members Bill. New maximum penalty for failing to pay the National Minimum Wage 6

7 Dates and venues The Future Inn, Plymouth 1 William Prance Road, Plymouth PL6 5US Thursday 8 May - Afternoon seminar (12.15pm pm) Exeter Racecourse Kennford, Exeter, EX6 7XS Tuesday 13 May - Morning seminar (9.15am pm) The Alverton Manor, Cornwall Tregolls Road, Truro, Cornwall, TR1 1ZQ Wednesday 21 May - Afternoon seminar (12.15pm pm) Exeter Racecourse Kennford, Exeter, EX6 7XS Friday 23 May - Morning seminar (9.15am pm) Booking details The cost is 40 +VAT (to include a buffet lunch). Please contact Sarah Bott (Marketing Executive) to book your place. s.bott@tozers.co.uk Telephone: Further advice Please contact our specialist employment team at Broadwalk House, Southernhay West, Exeter EX1 1UA. Call or employment@tozers.co.uk 7