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June Employment Law Bulletin


It's caused a bit of a stir. Adrian Beecroft's government-commissioned report on employment law has 'shake-up' as its middle name.

With the Institute of Directors reporting a positive response from businesses, to one particular proposal described elsewhere as ‘bonkers’, Beecroft has certainly divided opinion. But that was always going to be the case because its thrust is about making employment laws more favourable to employers. The question now is what will the government take from Beecroft's proposals?

More on the report later.

PILON Payable Despite Gross Misconduct - Cavenagh v William Evans Limited

Mr Cavenagh was the company's managing director before being made redundant. His contract provided for six months' pay in lieu of notice. Before the company paid up, it discovered that Mr Cavenagh had been guilty of gross misconduct – there had been an unauthorised company payment of £10,000 into his pension fund. In light of its discovery, the company refused to pay him the notice, arguing that Mr Cavenagh's conduct had repudiated the contract and the company had accepted that repudiation.

The question was could the company escape liability for the 6 months' pay based on facts that weren't known to it at the time of dismissal? The court held that it could and dismissed Mr Cavenagh's claim.

He won on appeal. The Court of Appeal held that, in line with contractual obligations and the employer's decision to dispense with the notice period, a payment in lieu was due. Had dismissal been for misconduct then the situation would have been very different; the company would have been liable to pay salary and other benefits accrued to the date of dismissal, and no payment in lieu.

The Court went on to say that where an employer chooses to terminate a contract on notice and offers payment in lieu, it is looking for a clean break and accepts the risk of discovering something which could have justified a summary dismissal. There was nothing in Mr Cavenagh's contract entitling the company to withhold payment if misconduct later came to its attention. The payment in lieu was a debt properly due.

No Double Jeopardy in Internal Disciplinary Proceedings - Christou & Ward v London Borough of Haringey

This is an unusual case arising out of the tragic death of Baby P in 2007. Ms Ward was the social worker responsible for the care of Baby P. Ms Christou was her supervisor.

They were both given written warnings, the most serious penalty that could be issued under the Simplified Disciplinary Procedure adopted at the time by Haringey Council. Later on, there were concerns about the adequacy of that disciplinary process. New senior management believed there were more serious matters which had not been investigated and which justified separate disciplinary proceedings based on the same facts. So a second disciplinary hearing was held, following which both Ms Christou and Ms Ward were dismissed.

They claimed unfair dismissal on the basis that they had already received their sanction (the written warning) in relation to the disciplinary offence. The tribunal wasn't convinced and found against them.

Their appeal was rejected. The Employment Appeal Tribunal (EAT) held that Haringey had been entitled to launch second disciplinary proceedings when the view was taken that a simplified procedure and a written warning did not reflect the seriousness of the situation. Res judicata – the legal principle preventing people being tried more than once on the same facts – does not apply to internal proceedings, said the EAT.

So it's possible that an employee can be put through two disciplinary procedures for the same offence. In reality, though, this will be rare.

No Clause, No Deduction - Fahey v Plymouth Hospitals NHS Trust

Ms Fahey had been off sick for a year before her employment was terminated. She brought tribunal claims, including one for unlawful deductions. During her notice period, the Trust had made deductions from her basic pay because it assumed Ms Fahey would have been receiving incapacity benefit. Had she continued to receive her full salary, she would have earned more while off sick than had she been in work, the Trust argued.

The tribunal found in the Trust's favour but the Employment Appeal Tribunal didn't. It held that there was no evidence that the Trust had been contractually entitled to make the salary deduction.

A reminder that key to a legitimate salary deduction is a valid clause in an employee's contract.

The Beecroft Report. What's the Buzz?

While the government is busy plugging away at its Red Tape Challenge, the stage is set for yet more reforms aimed at simplifying employment law. At least that's how the venture capitalist Adrian Beecroft would like to see it. His report, published (post-leak) in May puts forward ways of reducing the burden on employers, making it easier for them to take on staff and, ultimately, prosper.

At the same time, a new Bill before Parliament – the Enterprise & Regulatory Reform Bill – gives the government power to substantially reduce maximum compensation for unfair dismissal claims. This is quite separate from the Beecroft report, and we'll come back to it in next month's bulletin.

Here's a selection of highlights from the Beecroft Report:

Compensated no-fault dismissals
Employers should be able to dismiss employees and buy off their unfair dismissal claims with a set payment equivalent to statutory redundancy. Discrimination and some other claims would remain live.

Much of the debate about this has been to do with whether or not making dismissal easier (or 'firing at will' as it's been termed) would actually aid business growth. From a HR perspective, what would it do to workforce stability and morale?

Beecroft says that transferring employers should be able to make redundant employees who, on transfer, would immediately be made redundant for a valid economic, technical or organisational reason.

The report also suggests that TUPE should not apply to businesses in administration and that UK law should set out a better way of identifying whether or not TUPE applies where an employer changes its service provider or outsources/insources its services.

Do away with the Equality Act's third party harassment provisions and perhaps re-introduce the Default Retirement Age.

Employment law opt outs
Employers with fewer than 10 employees should be allowed to opt out of some employment laws, including unfair dismissal and flexible parental leave.

Tribunal process and awards
The government should introduce many of the changes already in hand (such as a fee for bringing a claim). The report also proposes limiting the future financial loss aspect of compensatory awards to, say, nine months.

Collective consultation
The period of collective consultation required in redundancy situations involving 20 employees or more should be reduced to 30 days (or five in the case of insolvency).

As the debate surrounding the report continues, it's certainly created a headline or two out of employment law.

No Right to Suspend Without Pay - Kent County Council v Knowles

Mr Knowles was a senior employee at the Council. He was arrested at work following allegations that he had misappropriated large sums of money.

The Council suspended him to allow an internal investigation to take place. During this time he was technically available for work but his pay was withheld because of the seriousness of the allegations. The Council said that he would be reimbursed if the disciplinary hearing concluded that there was no case to answer.

But the disciplinary investigation unearthed the diversion of more than £200 million into an account seemingly in Mr Knowles' name, or which was available to him. He was dismissed and he claimed payment of his withheld salary.

The employment tribunal upheld his claim and the Council appealed – unsuccessfully. The Employment Appeal Tribunal said that Mr Knowles' salary had been properly payable because there was no contractual right to suspend without pay. Mr Knowles had been able to work and this amounted to consideration for his salary.

Employee Status and the Bare Facts - Quashie v Stringfellows

The question for the Employment Appeal Tribunal (EAT) was whether a lap dancer was an employee, and therefore entitled to unfair dismissal protection.

Ms Quashie had worked at Stringfellows for 18 months, where dancers were generally regarded as being self-employed. She was dismissed for alleged drug-taking and brought an unfair dismissal claim. The tribunal found against her on the basis that there wasn't sufficient mutuality of obligation between her and Stringfellows to create an employee/employer relationship.

She appealed and won. Some of the key aspects of Ms Quashie's role which contributed to the EAT's finding of employee status were:

A case illustrating that employee status will always come down to facts, rather than the parties' belief about their relationship.

And Finally….Brevity Extremity - Fairbank v Care Management Group; Evans v Svenska Handelsbanken AB

Two cases involving very long ET1s (Tribunal Claim Forms) prepared by the same firm of solicitors.

How long is very long? In this case, around 27 pages. The employment judge considered this to be too long and ordered that the ET1s be condensed to a single page each. The solicitors objected but the Regional Employment Judge responded by explaining the requirements of 'Details of claim' in the Rules. “The Tribunal has to manage thousands of cases a year and most claimants are able to provide a description of the events relevant to their claim, no more complex than [these], confining themselves to one or two sides of A4," the Judge said.

The claimants appealed and won. It is for the claimant to decide how to present their claim, said the Employment Appeal Tribunal. It held that the tribunal's decision to limit the content of an ET1 was an error of law/perverse. The proper course of action was to narrow issues during a case management hearing and by striking out any irrelevant material at that stage.