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July Employment Law Bulletin


In breaking news, the Ministry of Justice has announced that from summer 2013, (ex-) employees will have to pay fees to bring an employment tribunal claim.

The cost will either be £390 to take a very simple claim to a hearing (mainly unpaid wages claims), or £1,200 to take another type of case to a hearing (including unfair dismissal and discrimination).

Some people - we expect those on Income Support and without any savings - will be able to claim exemptions from the fees, but the details of fee exemptions are still awaited.

This is bound to mean a reduction in the number of claims, and so is excellent news for employers. We will keep you informed as more details emerge.

Without Prejudice Not Without Limits - Vernon v LB of Hammersmith and Fulham

Jamaican-born Ms Vernon worked as a senior social worker for the Council. She had made four applications for promotion over a six year period, each unsuccessful. She brought a discrimination claim.

During the course of conciliation the Council’s solicitor emailed Acas saying that there would be no offer of settlement. In the email the solicitor alluded to grammatical and spelling mistakes in Ms Vernon’s ET1 which, together with basic errors in her applications for promotion, demonstrated that she was not suitable for the roles. The solicitor gave Acas permission to forward the email to Ms Vernon.

The effect of this was said to be profound and Ms Vernon lodged a victimisation claim.

But could the solicitor’s email, which had been sent during a without prejudice process, be disclosed to the employment tribunal? The tribunal said yes. Its content went beyond the defence put forward by the Council in its ET3. It was clearly intended to dissuade Ms Vernon from pursuing her claim and it placed improper pressure on her, negating its otherwise ‘without prejudice’ status.

Ms Vernon went on to win her victimisation claim, but lost on discrimination.

No Fiduciary Duty Owed By Employee - Ranson v Customer Systems Plc

Fiduciary duties are usually imposed on directors, and sometimes those just below board level. They include legal obligations not to set oneself up so there is a conflict of interest between the director and employer, not to profit from one’s position at the employer’s expense, and to disclose one’s own wrongdoing.

Mr Ranson was a divisional manager with responsibility for a team of technicians. Shortly before leaving his job at Customer Systems (CS) to set up his own company, he canvassed work in competition and didn’t tell CS what he was doing. These two facts gave rise to a High Court claim based on breach of fiduciary duty which the company argued was implied into his contract of employment.

The question was whether fiduciary duties – usually found in directors’ contracts – can apply to employees. The High Court said that they could and that Mr Ranson had acted in breach.

The Court of Appeal disagreed. It suggested that the trial judge’s decision had been influenced by an analysis of the law on directors’ fiduciary duties. The correct approach in determining the duties owed is to look at the employee’s employment contract. Mr Ranson’s contract simply required him to do his job faithfully and with an implied duty of trust and confidence. That fell short of a fiduciary duty.

So Mr Ranson was not bound to tell his employer what he was planning. And he was perfectly entitled to start a competing business after leaving CS.

Where Annual Leave and Sickness Meet- ANGED v FASGA

A worker who falls sick before their annual leave is entitled to take that annual leave at a later date. But what if they fall sick during their holiday?

The European Court of Justice considered this issue in ANGED v FASGA. The case began as a set of collective actions in the Spanish courts. The employees argued that they should have paid annual leave even where that leave coincided with sick leave. The employer’s case was that if a worker fell ill before or during annual leave, they were not entitled to take that annual leave later on.

The ECJ held that when a worker is sick during annual leave then, irrespective of when that period of sickness began, they are entitled to take their annual leave at a later time. The purpose of paid annual leave is to enable the worker to rest; sick leave is about recovery. It would go against the spirit of annual leave to only allow workers who had fallen sick before their annual leave began to take that annual leave once they had recovered.

A deceptively significant decision. It raises a host of potential issues about when someone is or is not unfit for work, and about the way in which employers should deal with holidays and sick pay both in contracts and company policies.

Enterprise and Regulatory Reform Bill

The government may have said no thanks to no-fault dismissals but what other news has the Bill generated?

Settlement agreements
Legislation to introduce settlement agreements will be announced later this month. It follows the Bill’s amendment to include ‘protected conversations’ provisions. Under the new rules, an employer will be able to offer a termination package without this coming to light at a subsequent tribunal hearing.

Sound like compromise agreements? There are some important differences. Settlement agreements will only apply to unfair dismissal (but not automatically unfair dismissal) cases. Also, there won’t need to be an existing dispute between the employer and employee before a valid agreement can be entered into.

As the birth of settlement agreements draws nearer, we’ll continue to hear debates on the pros, cons and potential loopholes and legal arguments likely to be associated with the new system. One of these will be the proviso that a tribunal will have scope to take pre-termination negotiations into account where there has been impropriety. Another will be about what happens if a breach of contract claim for example is brought at the same time as an unfair dismissal claim, as often happens in constructive dismissal. A space to watch.

Compensatory awards
The Department of Business, Innovation and Skills has said that the cap on the unfair dismissal compensatory award may well be based on median average earnings of £26,000. This is higher than some people thought. The bracket of compensation should therefore be £26,000 (one year’s earnings) to £78,000 (three years’ earnings). DBIS have also said they will introduce a power to cap the compensatory award at one year’s earnings – meaning that employer’s may (depending on what happens) end up liable only for £26,000 or, if less, one year’s earnings.

Directors’ pay
The government has announced a package of reforms that it thinks will address failures in corporate governance. It’s about directors’ pay and, more specifically, giving shareholders more say. The reforms are intended to (among other things):
enable shareholders to hold companies to account by voting on pay policies and exit payments encourage transparency in pay and in the link between pay and performance

These reforms will be introduced as an amendment to the Bill.

Subjectivity in Selection Can Be OK - Mitchells of Lancaster v Tattersall

Mr Tattersall was one of five members of the company’s senior management team. He was made redundant and went on to bring an unfair dismissal claim.

The employment tribunal found in his favour. The decision rested partly on the way in which the company had gone about selecting Mr Tattersall for redundancy. The tribunal found that it was based on subjective criteria (which role could be lost with least damage to the company?) and solely on the views of the company’s directors. The tribunal concluded, for a number of reasons including the pool for selection and internal appeal process, that the dismissal was unfair. However, compensation was reduced by 20% to reflect the chance that Mr Tattersall would have been dismissed via a fair procedure (Polkey).

The company appealed but the Employment Appeal Tribunal (EAT) upheld the unfair dismissal. Crucially though, the EAT disagreed with the tribunal’s criticism of the company’s subjectivity during the selection process. Just because criteria are matters of judgment, the EAT said, it doesn’t mean that they can’t be assessed in a dispassionate or objective way. The tribunal’s suggestion that a criterion could only be valid if it could be ‘scored or assessed’ was concerning because it could lead to selection being reduced to a box-ticking exercise.

The upshot is that even where criteria involve a degree of judgment, that’s not necessarily fatal particularly perhaps where (as in this case) the company is small and in serious financial difficulty. While the combined flaws in the process lead to Mr Tattersall’s unfair dismissal being upheld, the EAT overturned the Polkey decision. The deduction should be significantly higher than 20%, it said.

Internal Appeal Can Change EDT - Hawes & Curtis v Arfan

Mr Hawes and Mr Curtis were the two key holders to the company’s store in Liverpool Street station. They were summarily dismissed when the company concluded that one or both of them were responsible for the theft of a significant amount of stock.

A letter from the company confirmed that their effective date of termination (EDT) was 4 November. That was the date of their internal appeal being rejected.

Tribunal claims followed. While the parties were preparing for the hearing, the company began to make reference to the EDT being 5 October, the date of the dismissal rather than of the appeal. If that were right then the claims had been brought too late.

The employment tribunal held that the claims were in time. Both parties had believed that the EDT was 4 November. The claimants had been paid to that date and there had been no suggestion of an earlier EDT in correspondence, in the ET1 or ET3, or until much further down the line.

The Employment Appeal Tribunal agreed. It said that the EDT doesn’t always crystalise on the date of summary dismissal. An internal appeal is integral to the protection of employment rights and can result in the EDT being changed (perhaps the employer takes the decision on appeal to dismiss on notice, rather than summarily, for example). While it’s unusual for an employer to vary the date of dismissal at the internal appeal stage, that is what happened here.

A cautionary note: the EDT must still be determined objectively and not every agreement between an employer and employee will effectively change the date.

And Finally...HM Attorney General v Bentley

You have to wonder what Adrian Beecroft would make of this one.

Mr Bentley issued 31 employment tribunal claims over a two year period. Each stemmed from his having been turned down for a job. He claimed age discrimination and, sometimes, disability discrimination.

None of the claims got as far as a full hearing. Nineteen were dismissed because they were not being actively pursued or because Mr Bentley hadn’t attended hearings, had applied to withdraw them or because he’d failed to comply with tribunal orders. Eleven were struck out because they had no prospect of success and/or were scandalous or vexatious. Mr Bentley was subject to a number of costs orders too.

The tables turned when the Attorney General successfully applied for a Restriction of Proceedings Order. As a result, Mr Bentley now needs the permission of the Employment Appeal Tribunal before bringing a claim in the future. It’s hoped that this order will help protect potential respondents and the reputation of the system.