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September Employment Law Newsletter

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Employee-shareholder contracts

This month brings with it a huge shift in the balance of power in the workplace. Or, if you believe most legal commentators, it won't.

From 1 September, employee-shareholder contracts became a new way of governing employment relationships. They offer a minimum £2,000-worth of the company's shares, and related tax advantages, to employees in return for their giving up some of their employment rights (most importantly the right to bring most types of unfair dismissal claim, including constructive dismissal).

Existing employees can't legally be forced to sign up to these new contracts, but employers can insist that new recruits sign them. The real question for now is about uptake – will this new model suit many businesses, and will employers and employees be interested in doing things differently?


No carry-over of additional leave
Sood Enterprises v Healy

Last year, the Court of Appeal decided that workers could carry over their Working Time Directive (WTD) holiday entitlement of four weeks. But it didn't go on to deal with what should happen to the additional 1.6 weeks' leave provided to UK workers under the Working Time Regulations (WTR).

That was the question for the Employment Appeal Tribunal (EAT) in this case. Mr Healy was off work for almost a year after suffering a stroke, although his leave spanned two leave years. When he resigned he wasn't paid for the leave which he'd been unable to take because of sickness, and brought an unlawful deduction from wages claim.

Mr Healy won his case and the tribunal ordered the employer to pay him more than the four weeks' leave entitlement under the WTD (dipping into the extra 1.6 weeks). But the EAT held that that was wrong – without a relevant agreement between Mr Healy and his employer, he could not be paid in lieu of all or any of the additional 1.6 weeks under the WTR.

So here's some clarity for UK employers. Where a worker is on long-term sick leave then unless you've agreed otherwise they are only entitled to carry over up to four (and not 5.6) weeks' leave.


Dismissal versus mutual termination
Francis v Pertemps Recruitment


Mr Francis was employed by the agency, Pertemps. He was no longer needed by the agency's client and was given two options: either two weeks' notice plus redundancy pay, or two weeks' notice with Pertemps looking for new work for him.

He chose the first, and Pertemps wrote to him confirming his "formal notice of redundancy". He was told that he had the right to "appeal against the decision to terminate [his] employment".

Was this a dismissal or, as Pertemps argued, a mutually agreed termination? It was a dismissal, said the Employment Appeal Tribunal. Even though Mr Francis had been given choices about the terms of his departure, both options involved him being given notice. The language used by Pertemps pointed to this being an employer's termination.

A warning then that what may seem consensual (wholly or partly) will not necessarily be judged to be. What was the trigger? How were terms agreed? What language was used? These could all be important factors in any termination, particularly if an unfair dismissal claim happens to follow.


Disability and other ailments
Commissioners for HMRC v Whiteley


Disability raises all sorts of complex workplace issues, and the Employment Appeal Tribunal (EAT) has just taken a look at one of these. What should an employer do when an employee is absent because of a combination of their disability and other ailments?

Ms Whiteley had asthma. It was a disability made worse by respiratory infections which made her absent from work. HMRC's sickness policy said that an employee who was off work through illness for 10 days or more could be disciplined. Ms Whiteley challenged that policy, saying that it put her at a disadvantage and that HMRC had failed to make reasonable adjustments.

So what should an employer do when disability interacts with other ailments? The EAT has given some guidance, and it involves taking one of two courses of action. Either:

  1. carefully consider (with expert evidence) the periods of absence, and try to analyse which were because of the disability and which were not; or
  2. use proper information to work out what sort of periods of absence the employee would reasonably be expected to take over the course of an average year because of their disability.

Nobody is suggesting that either is an easy task, but get this right and you'll have done the reasonable thing.


Claim against colleague after settlement
Hurst v Kelly

Employers quite rightly expect settlement agreements to draw a line under employment issues between them and their departing employees. But do they put an end to claims against colleagues too? Not necessarily, as the Employment Appeal Tribunal (EAT) pointed out in Hurst v Kelly.

The employee signed a compromise agreement preventing her from bringing any claims against her employer arising out of her employment or its termination. She subsequently brought a sexual harassment claim against her line manager. The employment tribunal held that it wasn't able to hear the claim because the former employer hadn't been named as a party.

But the EAT held that that didn't matter. Where victimisation in the course of employment is alleged, a claim can be brought against a former colleague without having to include the employer in the proceedings.

The case highlights that that wording of any settlement agreement really does set the boundaries and employers need to negotiate the best possible terms – perhaps protecting remaining staff from future claims, perhaps not.


Pack more into holiday pay?
Neal v Freightliner Limited


An employment tribunal has potentially broadened the scope of statutory holiday pay.

In Neal v Freightliner it held that a freight worker was entitled to have his voluntary overtime taken into account when his employer calculated his holiday pay. The overtime work was closely connected to the contractual duties.

What does this mean for employers? Well, it's worth thinking about taking workers' overtime and shift premium payments into account when calculating holiday pay. But until the Neal case is heard by a higher court (the Employment Appeal Tribunal would be the next port of call) it creates yet another grey area for employers and for other tribunals which are not bound to follow the decision.


And finally...
Continuity of employment
Lipinski v Ebbsfleet Autospray Centre Ltd

Mr Lipinski's relationship with Ebbsfleet could best be described as on/off. It went like this:

Disjointed, yes. But how continuous was his service? To be able to claim unfair dismissal after the 2011 dismissal, he'd need to have been continuously employed for at least one year.

The Employment Appeal Tribunal said that he had been because of regulations which are in place to preserve continuity in certain, specific, circumstances. These are where:

  1. the employee has been dismissed;
  2. they have presented a complaint about that dismissal; and
  3. as a consequence of that complaint, the employee is reinstated or re-engaged.

The employment tribunal will now decide if Mr Lipinski satisfied all three of these. If he didn't, he could be facing another dismissal – of his case. But there's always the chance of an appeal...