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March Employment Law Bulletin


Last month, Vince Cable 'named and shamed' employers who pay less than minimum wage. Except he didn't.

He named just five employers – three of whom had underpaid less than £1,000 to only one worker, and the other two had underpaid just a few thousand pounds. None of the big companies who, according to the TUC, are depriving hundreds of workers of the minimum wage, were identified.

But even paying the minimum wage is nowdays seen as not quite enough. According to a report by the Living Wage Commission, 21% of workers in the UK earn less than a Living Wage (defined as the amount people need "to enjoy a basic, but socially acceptable standard of living").

What can we do about it? The Commission is encouraging employers to pay the Living Wage if they can. (The current hourly rate is £7.65, or £8.80 for London.) But whatever you do, make sure you're paying the minimum wage to all workers (not just those with employment contracts) – which is expected to increase to £6.50ph for the over-21s from October 2014 (it is currently £6.31).

Intermediaries and false self-employment

When it comes to employment law, one thing's for certain. If you create a false picture to avoid duties and liabilities, you'll be found out.

But even the innocent could get penalised by the government's clamp down on employment status. Consultation has just finished, and a report is expected soon on proposals to catch organisations which are engaging employees or workers, and claiming that they're self-employed.

While on a practical level it can sometimes be difficult to differentiate an employee from a self-employed contractor, the distinction is very important from a tax and employment law perspective. Unlike the self-employed, employees attract employer NICs at 13.8% and PAYE obligations. They're also entitled to employment rights including holiday pay, sick pay, redundancy pay and pension contributions.

The government wants to stop the exploitation of a loophole in legislation which is enabling employers to move workers into ostensible self-employed arrangements with third party intermediaries. The intermediary either simply labels the worker 'self-employed', or they set up a contract which allows the worker to provide someone else to do the work in their place (which in reality would never happen). That substitution element is an important difference between a worker and a self-employed contractor.

The proposal is that agency legislation will apply where the worker is:

  1. subject to control, supervision or direction in the way they carry out their duties
  2. providing their services personally
  3. paid for providing their services
  4. paid remuneration not already taxed as employment income.

Where these four criteria are met and the worker is engaged by or through an intermediary, they will be deemed to be employed by the intermediary for tax and employment rights purposes - unless they are already employed elsewhere.

There are a few problems with this which could affect legitimate business arrangements. It's not uncommon for there to be a long contractual chain involved in the supply of services, and various employers and intermediaries could exercise supervision and control over an individual. Who bears the tax burden? It could be any of them, and could end up being an organisation which in actual fact has less contact with the individual than others.

While this remains uncertain for now, there are concerns that this spells the beginning of a risky time for businesses which use self-employed people. Recruitment agencies could be hit hard - many could end up footing the tax and NIC bill for the people it places, unless they can show that the worker really is self-employed. These agencies will probably want to steer clear of placing workers who are paid as self-employed, for fear of being held liable for employment-related payments.

It looks as though the new legislation could come into force as soon as 6 April 2014. In the meantime, speak to us if you have questions about your existing arrangements for using self-employed contractors.


Employer's decision to dismiss

Kisoka v Ratnpinyotip

It can be a good idea for employers to engage an independent panel of people in some part of the disciplinary process. This often happens when an employer does not have enough officers in-house to cover the various elements (it's best that different people conduct the disciplinary hearing and appeal, for example). It can also happen where an employer wants to ensure, and be seen to ensure, impartiality and fairness.

In the Kisoka case, the employer had investigated the alleged gross misconduct and decided to dismiss the employee. It brought in an independent panel to hear Ms Kisoka's appeal, and that panel overturned the decision to dismiss. But the employer chose not to implement the panel's decision and so the dismissal stood.

Was this an unfair dismissal? Perhaps surprisingly, the Employment Appeal Tribunal held not. The employer was not bound to follow the panel's decision. There was nothing in the terms of the panel's engagement to say that its decision would be final, or that the employer would implement it.

Here it was relevant that the employer's investigation was found to have been reasonable. It was also relevant that this was a small employer which had done what it needed to do, and which wasn't obliged to have the appeal heard independently.


The Woolies sweater

The 'Woolworths case' is keeping us all waiting (some on the end of our seats) as it trickles through the court process. It's made its way to Luxembourg; the Court of Appeal has referred to the European Court of Justice the question of whether the words "in one establishment" should be disregarded from collective redundancy legislation.

What does that mean? It's significant because removing these three words leads to more employers needing to collectively consult before making 20 or more people redundant. The size of the shop, office, factory etc in which these employees work becomes irrelevant.

The case is about workers in Woolworths and Ethel Austin stores which, individually, had fewer than 20 employees working there. Under existing legislation the employer would not be obliged to consult with a recognised union or specially elected employee representatives because there were not 20 people "in one establishment". But before the case reached the Court of Appeal, the Employment Appeal Tribunal decided that these employees were entitled to be included in collective consultation. To retain a provision requiring there to be at least 20 employees at one establishment was not compatible with the EU Directive on Collective Redundancies.

So we're waiting for Europe to have its say. In the meantime, the safest course of action to take if you're looking to make 20 or more employees redundant within 90 days is to collectively consult, even with those based in your smaller operations.


Fees are here to stay (for now)

A court action which could have led to the abolition of employment tribunal fees has been thrown out. The Administrative Court has dismissed Unison's application for judicial review of the decision to introduce fees.

Unison had argued that people who had been badly treated by their employers were denied access to justice by having to pay to bring and pursue their employment law claims. That may be the reality, but the Court concluded that Unison's challenge had been brought prematurely. It said that robust evidence would be needed before the decision to bring in fees could be reversed.

Unison has said that it wants to take the case to the Court of Appeal.


Liability for employee's assault of customer

Mohamud v Morrison Supermarkets

Employers are responsible for their employees' actions in the course of their employment. It's called vicarious liability. But it has limits; sometimes employees stray beyond their remit, or otherwise act in ways that cannot be said to be endorsed by their employer. In those situations, vicarious liability will not apply. And that's what happened in the Morrisons case.

It concerned a petrol kiosk attendant at the supermarket. A customer, Mr Mohamud, went in and asked if some documents could be printed off a USB stick he was carrying. The employee reacted angrily and abusively, using racist language. He followed Mr Mohamud to his car and punched and kicked him while the customer lay on the floor.

Mr Mohamud brought a claim against Morrisons. But the Court of Appeal held that the supermarket was not liable. The employee's actions were beyond the scope of his employment; he wasn't employed to keep order over customers (as in cases involving night club doorman who overstep the mark). The employee's supervisor had told him not to follow Mr Mohamud out of the shop but he hadn't listened, instead carrying out the attack for no good or apparent reason.

So Morrisons was not vicariously liable, which will provide some comfort to employers. After all, there is no accounting for spontaneous and unexpected actions by employees. Things might have been different, however, if the employer had been aware of the possibility of something like this happening.


Post-employment victimisation

Jessemey v Rowstock

There's been some discussion about a legal loophole in the Equality Act 2010. While the legislation prohibits post-employment harassment and discrimination, it doesn't actually expressly protect against post-employment victimisation too.

The Court of Appeal has now decided that the legislation must be viewed in its context and that the omission must have been an unintentional drafting mistake. The Court upheld Mr Jessemey's claim for victimisation stemming from an unfavourable reference written about him by his employer. Mr Jessemey said that the employer's action was in response to a discrimination claim he had brought.

The Court of Appeal has brought certainty to the law in this area by holding that victimisation which happens after employment has ended is covered by the Equality Act.


Dismissals without notice

Robert Bates Wrekin Landscapes v Knight

Most employment contracts contain a summary dismissal clause. This entitles employers to end the employment straightaway (summarily) if the employee commits a serious breach.

The Employment Appeal Tribunal (EAT) has issued a reminder that not every breach justifies summary dismissal. Gross misconduct is an accepted basis for immediate termination, but employers need to be careful to ensure that that threshold has been reached before invoking a summary dismissal clause.

Mr Knight was a gardener. His contract listed a number of circumstances in which his contract could be terminated without notice. These included "breach of the employer's or customer's security rules", and "theft of the employer's or customer's property".

Mr Knight was working on a Ministry of Defence site. The rule book stated that removal of any property required a "property pass" and that vehicles would be security searched.

Mr Knight was suspended after a bag of bolts from the MoD site was found in his van. During the investigation, he explained that he had forgotten to hand the bolts in but had intended to do so the next day. He was summarily dismissed for theft and for breaching protocol by taking goods from the site.

At the EAT the big question was whether the employer was entitled to summarily dismiss for any breach of protocol (including those which were minor or inadvertent). The EAT said not. The usual rules of contract should play a part; a repudiatory breach - one which entitles the employer to dismiss without notice - must involve gross negligence or a deliberate breach of contract. Mr Knight's conduct was not serious enough to justify summary dismissal.

The main point to take from this case is: just because a contract gives examples of gross misconduct, that doesn't mean that the right to summarily dismiss kicks in when one of those events happens. Consider the context and the severity of the breach before taking the serious step of ending the contract.


Sexual harassment whilst working illegally

Wijesundera v Heathrow Logistics

The Employment Appeal Tribunal (EAT) has decided that an individual who was working illegally in the UK still had the right to bring a claim for sexual harassment.

It means that employers shouldn't assume that they can end illegal workers' contracts without there being employment law ramifications. There could be a discrimination claim lurking in there somewhere.

Ms Wijesundera was a Sri Lankan national. She agreed to work for Heathrow Logistics, making it clear that she needed a UK work permit first. But she started working before the permit was in place. During that time she was sexually assaulted by a colleague.

The EAT held that Ms Wijesundera could bring a sexual harassment claim for things she said happened whilst she was working illegally. That's because this didn't just boil down to the employment contract (or the lack of a valid one). The treatment she complained of could be separated from her contract with Heathrow and from the illegality.