HR Two Minute Monthly - October 2012

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Summary: A monthly roundup of recent employment law developments.

Proposed reforms – unfair dismissal awards, compromise agreements and employment tribunal reform

The Government has published a consultation paper on its proposal to reduce the cap on unfair dismissal awards and to encourage the use of compromise agreements, which are to be renamed settlement agreements.  It is also consulting on Mr Justice Underhill’s recommendations to streamline employment tribunal rules. 

Ban on age discrimination in services comes into force

The Equality Act 2010 applies not only to employment, but also includes provisions preventing discrimination in the provision of services and public functions. Since 1 October, it is unlawful for service providers to discriminate on the basis of age for those aged 18 and over unless the practice is covered by an exemption or can be objectively justified.

One important exemption applies to financial services and allows organisations such as insurers to continue to rely on age as a factor when assessing risk, provided the assessment is based on reliable and relevant information.

Pensions auto-enrolment roll out begins 

The roll out of provisions requiring employers to enrol qualifying jobholders into a pension scheme and make mandatory minimum contributions began on 1 October 2012. The date on which the duty applies depends on the size of the employer, with larger employers being first to fall within the new rules. The provisions are being phased-in for all employers over a 5 and a half year period.

Employee absent on sick leave did not need to ask to take holiday or to carry it over

The Court of Appeal held that, where a worker was absent from work due to sickness, she was entitled to receive a payment in respect of holiday accrued during her absence on termination of employment. It did not matter that the worker had not made a request to carry her holiday over into the next year, or to take a period of holiday during her sickness absence.

Consultant doctor was a “worker”

The Court of Appeal held that, although the claimant doctor was self-employed, he was nevertheless a “worker” for the purposes of employment legislation. His contract with the company required him to perform his services personally, and the company was not his client or customer – its own marketing material referred to him as being “one of our surgeons” and he was an integral part of the company’s operations.

The case is a useful reminder that even those who are not employees may still qualify as workers and be entitled to bring claims, including unlawful deductions from wages and holiday pay.

Market researcher carrying out ad hoc surveys under separate assignments could be an employee

A market researcher entered into a separate contract for each assignment conducted. The EAT accepted that each assignment could be a contract of employment and therefore the individual could be an employee with a year’s continuous service under a series of successive contracts, notwithstanding that he was under no obligation to accept the assignment when it was offered to him. The fact that the assignments could be terminated at will did not prevent them being contracts of employment.

This case forms part of what appears to be a growing trend for Tribunals to accept that individuals may be employees in situations where this may not have been anticipated at the outset of the arrangement.

An employer can prevent a potential breach of trust and confidence from escalating

It is established law that once the implied term of trust and confidence has been breached, an employer cannot remedy the breach to defeat a claim for constructive dismissal.

However, the EAT has held that an employer may still step in before a matter escalates into a breach of contract, to remedy the situation and thereby prevent an employee from successfully claiming constructive dismissal.

This is an important case for employers facing a situation that could lead to a fundamental breach of the implied term – taking swift, practical action when relationships start to break down can prevent the situation developing into a potential claim.

Death in service benefit could be claimed by an employee’s estate as damages for discrimination and unfair dismissal

The employee’s dismissal a few days before his death was claimed to be unfair and an act of discrimination. His dependants, bringing the claim on behalf of his estate, were able to claim the loss of the death-in-service benefit that would have been paid out, but for the dismissal.

The argument that it was the dependants’ loss rather than the employee’s and therefore not recoverable was rejected. As a result of his dismissal, the employee lost his contractual right for a payment to be made to his dependants in the event of his death. The loss of this benefit was the employee's and could form part of the claim.

A redundancy “pool of one” can be reasonable

The Employment Appeal Tribunal has clarified the circumstances in which it may be reasonable for an employer to use a selection pool of one employee, and the consideration that should be given to a wider selection pool. A Tribunal should consider whether the employer’s use of a “pool of one” was within the band of reasonable responses.

Directors were not “assigned” to the transferring services and did not transfer under TUPE

The directors of a housing charity that had only one client did not TUPE transfer to that client when it brought the services in-house.

Although there was an organised grouping of employees carrying out the services for the client, the directors were not assigned to the grouping. Their roles were not sufficiently dedicated to the services, as they were also involved in other activities such as preparing bids for other work.

The fact that the charity had only one client did not mean that all employees transferred to that client when the charity lost its contract.

Refusal to accept self-employed position following a TUPE transfer was not a failure to mitigate losses flowing from an unfair dismissal

The employees were unfairly dismissed when their employer lost its contract to provide window cleaning services to a local authority following a re-tendering exercise. The new contractor initially denied that TUPE applied to the employees, but later offered to engage the individuals as self-employed contractors under less favourable terms. The individuals refused the offer.

The EAT held that the refusal did not amount to an unreasonable failure by the employees to mitigate their losses. The Tribunal found that the new terms were a substantial change to the employee’s working conditions to their material detriment.  In any event, at the time the offer was made, the employees had not yet been dismissed and the duty to mitigate had not yet arisen.

Dismissal following a refusal to accept pay cuts was in connection with a TUPE transfer and automatically unfair

Several months after a TUPE transfer, the new employer proposed mass redundancies across its workforce and changes to employment terms for the remaining staff. The claimants resisted the proposed pay cut and were eventually dismissed.  They were then offered re-engagement on the new terms, which they accepted. After commencing employment on the new terms, the employees issued claims in respect of their earlier dismissals.

The Tribunal held that the dismissals were in connection with the TUPE transfer. They were not for an “economical, technical or organisational reason entailing changes in the workforce” as they were not connected with the mass redundancy exercise, which had been completed at the time of the dismissals.  The Tribunal ordered that the employees be re-engaged on their new terms and conditions, with the exception of salaries, which were set at the old levels.

The case is a warning to employers planning changes to terms and conditions following a TUPE transfer.

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