HR Two Minute Monthly: Reasonable adjustments; employee held to notice period; TUPE; references


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Summary: Our September update includes two cases on the duty to make reasonable adjustments for disability in a redundancy process, a High Court case in which an employer succeeded in obtaining an injunction where it did not accept an employee's repudiatory breach of contract and three cases on TUPE. It also reports on a case on liability for negligent references and the recent PRA and FCA consultations on remuneration and accountability.

Reasonable adjustments should be made even if they do not prevent an eventual dismissal

In Dominique v Toll Global Forwarding Limited the EAT confirmed that a duty to make reasonable adjustments to a redundancy selection process arises even if the adjustment would have made no difference to the decision to dismiss the employee.

Disabled employee disadvantaged by selection criteria

A disabled employee who was selected for redundancy brought claims for unfair dismissal and disability discrimination. As part of the discrimination claim, he alleged that the employer had failed to make reasonable adjustments in relation to the selection criteria and weightings given to those criteria, which placed him at a disadvantage compared to his non-disabled colleagues.

The Tribunal rejected the claims. In relation to the reasonable adjustments point, it held that even if the criteria and scoring had been appropriately adjusted to overcome that disadvantage, the disabled employee would still have received the lowest scores and been selected for redundancy.

Receiving lower scores was itself a disadvantage

The EAT disagreed with the Tribunal on the issue of reasonable adjustments. The Tribunal had focused on the need to make adjustments specifically in relation to avoiding dismissal. However, the EAT found that the duty applied more broadly. The fact that the employee received lower scores than he would have been awarded had adjustments been made was itself a disadvantage. Even if making adjustments will not ultimately avoid a disabled employee being dismissed, employers should carefully consider what adjustments can be made to avoid disabled employees facing other disadvantages. This principle almost certainly extends to other internal processes, such as disciplinary or grievance proceedings. Although an employee who would have been dismissed anyway will have no financial loss, the employee may still be awarded compensation for injury to feelings.

Employer failed to make reasonable adjustments by requiring disabled employee to attend interview for redeployment

The EAT in London Borough of Southwark v Charles found that where a disabled employee is unable to attend an interview for an alternative role in a redundancy exercise, reasonable adjustments should be made to the redeployment process.

Disabled employee required to interview for redeployment role

An employee was unable to attend an interview for an alternative role during a redundancy exercise because of his disability and was subsequently dismissed for redundancy. Although the employer indicated that it would consider making reasonable adjustments to the role if the employee was successful at interview, it did not consider adjusting the redeployment process itself.

Employer should have considered other methods of assessing employee

The EAT agreed with the Tribunal that the duty to make reasonable adjustments applied to the interview process and that, in requiring a formal selection interview, the employer had failed in its duty to make reasonable adjustments. Potential adjustments the employer should have considered, as set out by the Tribunal, included interviewing the employee at home, requesting information from him in advance, or consulting his previous managers for an assessment of his abilities to undertake the vacant role.

The EAT also found that it was not an inevitable conclusion that the duty created a requirement for the employee to be offered the post. The duty the Tribunal identified was for the employer to make reasonable adjustments to the interview process. It was possible that, having done so, the employee would still have been unsuccessful. However, the EAT did note that this issue should be the subject of further submissions. The key point for employers is to consider whether any part of a redeployment process disadvantages disabled employees and, if so, make reasonable adjustments to avoid that disadvantage.

Employee who resigned in breach of contract held to notice period

The High Court in Sunrise Brokers LLP v Rodgers addressed the options open to employers when an employee resigns without notice in breach of contract. This case is a reminder that a repudiatory breach of the employment contract by either party does not automatically terminate the employment relationship; the breach has to be accepted by the wronged party.

Employee resigns without notice in breach of contract

Mr Rodgers was tied into his contract with Sunrise until October 2014, after which he was obliged to give a further 12 months’ notice. Mr Rodgers could not then work for a competitor for 6 months after his employment ended. Therefore, under his contract, the earliest Mr Rodgers could join a competitor was April 2016. In March 2014, Mr Rodgers resigned with immediate effect having agreed to join a competitor in January 2015. Importantly, Sunrise did not accept his resignation and required him to return to work.

When Mr Rodgers did not return, Sunrise stopped paying him. It said it would start paying him when he returned to work to undertake an orderly handover and offered to agree a reduced notice period. When he refused, Sunrise issued proceedings and sought an interim injunction.

Employer did not accept employee’s repudiatory breach

The High Court found that Mr Rodgers was undoubtedly in repudiatory breach by resigning before the expiry of the initial term of his contract and without giving the required notice. Sunrise had not accepted this breach and had affirmed the contract. Sunrise’s non-payment of salary was due to his unwillingness to work and was not a repudiatory breach bringing the contract to an end.

Employee remained bound by contract

The High Court granted an injunction requiring Mr Rodgers to observe the terms of his contract for the length of the reduced notice period agreed by Sunrise. It also upheld the post-termination restrictions in his contract, although for a reduced duration.

This decision builds on the Supreme Court decision in Societe Generale v Geys. It confirms that where an employment contract is breached, it is open to the wronged party (in this case the employer) to elect to affirm the contract. The confirmation that ceasing salary payments is not in itself a repudiatory breach is also helpful for employers. Practically, where an employee resigns without giving the necessary notice, employers should carefully consider whether or not to accept the employee’s breach. It is unlikely to be possible to force an employee who resigns with immediate effect to undertake a handover but it could be possible to stop them joining a competitor, at least for the remainder of their unexpired notice – and potentially beyond.

TUPE transfer occurs when responsibility for business passes from one entity to another

In Housing Maintenance Solutions Limited v McAteer and others the EAT overturned a Tribunal’s decision that a TUPE transfer occurred when a transferee assumed responsibility for employees.

Activities temporarily stopped after change of contractor

A TUPE transfer occurs when an economic entity transfers which retains its identity post-transfer or where there is a service provision change. In this case, a client terminated its contract for the provision of repair and maintenance services. Shortly afterwards, the employees of the outgoing contractor were informed that their employment had terminated due to redundancy. At the same time as the client terminated its contract with the outgoing contractor, it appointed a new contractor to provide the services. The incoming contractor assured the outgoing contractor’s employees that it would employ them. However, it did not start providing repair and maintenance services to the client until some weeks after the previous contract had ended. Who, if anyone, employed the employees in the interim?

Offering employment before activities resumed did not trigger a transfer

According to the Tribunal, the employees transferred from the outgoing contractor to the incoming contractor when the latter assured the transferring employees that it would employ them. However, the EAT overturned this decision. The date of transfer is not when the transferee assumes responsibility for employees but when responsibility for the relevant business passes from the transferor to the transferee. The Tribunal will now need to determine when the transfer in fact took place.

This case highlights the difficulty in pinpointing exactly when a transfer occurs, especially if there is a break in the activities which are transferring. The point at which a transferee assumes responsibility for the business will not necessarily be when the transferee starts undertaking the transferred activities and must be assessed on the specific circumstances of each case. It is possible for a transfer to take place where no employees are working and no activities are being carried out.

No service provision change when underlying client changed

In Horizon Security Services Limited v Ndeze and another the EAT confirmed that no service provision change took place for the purposes of TUPE when the client to whom security services were provided changed.

TUPE applies to a service provision change

TUPE is likely to apply where a client outsources services to a contractor, takes services previously undertaken by a contractor back in-house, or re-assigns services from one contractor to another. These situations are typically known as a “service provision change”.

Workspace engaged PCS to provide security at a serviced office complex owned by the London Borough of Waltham Forest which Workspace managed. When plans were announced to demolish the complex and replace it with a supermarket, Workspace terminated its contract with PCS. Waltham Forest then entered into a contract with Horizon to provide security for a period of eight to nine months pending demolition of the site. The Tribunal initially found that there had been a service provision change from PCS to Horizon.

But not where the identity of the client changes

The EAT overturned this decision because there had been a change in the client to whom PCS provided the services. PCS had been engaged to provide security services to Workspace, whereas Horizon provided the services to Waltham Forest. The fact that Waltham Forest was the owner of the building throughout did not make it the client before the termination of PCS’s contract. There was therefore no service provision change under TUPE.

This case focused on a service provision change and did not address whether there was a ‘traditional’ TUPE transfer, i.e. the transfer of an economic entity which retains its identity post-transfer. Parties should consider whether there is merit in arguing not just a service provision change, but also that there has been a ‘traditional’ TUPE transfer in the alternative.

Relocation following TUPE transfer was not a substantial change to employees’ material detriment

The EAT in Cetinsoy and others v London United Busways Limited upheld a Tribunal’s decision that bus drivers who were relocated following a TUPE transfer had not been unfairly dismissed.

Employees protected from substantial changes to working conditions

Following a TUPE transfer, a group of bus drivers were relocated 3.5 miles across West London to a new depot. Their contracts permitted relocation to named depots, some further than this, but not to this specific site. The employees resigned, claiming that this amounted to a constructive dismissal and, in the alternative, that it was a substantial change in working conditions to their material detriment.

The Tribunal found that there was no material detriment and that the change was not substantial. This was despite a previous EAT decision, Musse v Abellio, which found that relocating bus drivers 6 miles to a new London depot was a substantial change to their material detriment. The case was appealed to the EAT.

Each case must be judged on its particular facts

The EAT upheld the Tribunal's findings. Musse is not authority that a change to a bus driver's depot is always a substantial change to their material detriment. Instead, whether something is a substantial change to the employees' material detriment is a question of fact. Here, taking into account the length of the extra commute, the term of the contract which permitted relocation to more distant depots and the value of the employees' jobs, the Tribunal was entitled to conclude that there was no material detriment. In any event, the Judge also found that the change was not substantial. This was a finding of fact and meant that the employees could not succeed with either the material detriment or constructive unfair dismissal claims.

This decision is useful for employers as it suggests it is harder for employees to establish a material detriment claim than previously thought. The case also pre-dates the amendments made to TUPE which confirm that a change of location can amount to an “economic, technical or organisational” reason for dismissal.

Employer liable for negligent reference provided by unauthorised employee

Although not an employment case, the High Court’s decision in Playboy Club London Limited and others v Banca Nazionale del Lavoro is a salutary reminder to employers of the need to exercise extreme caution when providing references.

Inaccurate reference provided by unauthorised employee

The Bank in question provided a reference to a casino which claimed that one of its customers was creditworthy up to a specified limit. The casino relied on the reference to grant a £1.6 million cheque-cashing facility. The customer drew down a large amount against forged cheques.

It transpired that the customer had never had any funds in his account with the Bank. The employee who provided the reference on the Bank’s behalf had no actual authority to do so. Nevertheless the Bank was held liable for the employee’s negligent mis-statement.

Key points for employers

This is a reminder to employers who provide references for former employees that they owe a duty of care to the recipient to ensure that information contained in the reference is accurate, true and fair. Breaching this duty of care can result in a claim for negligent mis-statement if the recipient suffers loss as a result. Employers are likely to be liable for references given by their employees in the course of employment, even if the employee is acting without authority. Employers should therefore have very clear policies in place for giving references.

PRA and FCA consult on accountability and remuneration - and final clawback rules published

The Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) have issued two joint consultations on proposals to improve individual responsibility and accountability and strengthen alignment between long-term risk and reward in the financial services sector. Key features of the proposals include:

  • A new Senior Managers Regime to clarify lines of responsibility at the most senior levels, enhance the regulators’ ability to hold senior individuals to account and require firms regularly to vet their senior managers’ fitness and propriety;
  • A new Certification Regime which requires firms to assess (and re-assess (at least once a year)) the fitness and propriety of staff in positions where their decisions could pose significant harm to the firm or its customers;
  • A new set of Conduct Rules setting out standards of behaviour for a firm’s employees;
  • A two-level approach to deferred remuneration whereby firms must defer payment of variable remuneration for a minimum seven year period for senior managers and five years for other material risk-takers;
  • Enhancing the ability of firms to recover both paid out and deferred remuneration if risk management or conduct failings come to light at a much later date; and
  • Options to address employees avoiding reduction of unvested awards by changing firms and having their new employer unconditionally “buy-out” any forfeited awards.

The consultations close on 31 October 2014.

The PRA has also published the final rules on bonus clawback, which introduce a seven-year minimum period for clawback from the date of award (and not six years from vesting as originally proposed). The new rules on clawback will only apply to bonus awards made on or after 1 January 2015 and not those made prior to 1 January 2015 but which vest after that date as previously suggested.

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