HR Two Minute Monthly: Whistleblowing; TUPE; Post-termination restrictions; May employment law changes

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Summary: Our May update includes a case on whether a whistleblowing disclosure can be separated from other events relating to the disclosure, when a share acquisition can trigger a TUPE transfer, a case on the rights of employees to bring a claim for failure to inform and consult under TUPE, and a reminder of the May employment law changes.

A whistleblowing disclosure can be separated from closely connected events

The EAT in Panayiotou v Chief Constable Kernaghan & Police and Crime Commissioner for Hampshire has held that when identifying the reason why an employee is subjected to a detriment or dismissal, a protected disclosure can be separated from closely connected events. In this case, the employee’s treatment was due to the way in which he pursued the whistleblowing issues after he had raised them.

A relentless campaign to have whistleblowing issues rectified

Mr Panayiotou, a police officer, made a number of protected disclosures during his employment relating to other officers’ treatment of victims. An investigation largely upheld Mr Panayiotou’s concerns. However, Mr Panayiotou continued to campaign relentlessly where he was not satisfied with the action taken by the Police force in relation to those issues. When the Police force failed to take the action that Mr Panayiotou wanted, he complained of a cover-up and tried alternative means of redress.  As a result, Mr Panayiotou became very difficult to manage and was ultimately dismissed.

The reason for the employee’s treatment was not his protected disclosures

Dismissing Mr Panayiotou’s claim that he had been dismissed because he blew the whistle, the EAT found that Mr Panayiotou’s protected disclosures were not the reason for his treatment. The real reason was his campaign and the manner in which he went about it, and the frustration that this caused his employer. His misconduct, although related to the protected disclosure, could be separated from it.

A warning for employers

Although this decision is helpful for employers, differentiating between treatment by reason of a protected disclosure, and treatment by reason of the circumstances or manner in which the disclosure is made, is specific to the facts of each particular case. Employers should consider carefully before taking disciplinary action against an employee for the manner in which a disclosure is made, or any other events that are connected closely to the disclosure.


High Court grants an order for inspection and imaging of ex-employees’ computers

In the case of Warm Zones v Thurley & Buckley, the High Court granted an order that an employer may inspect and take images from the personal computers of two former employees.

Why was the injunction sought?

Ms Thurley and Mr Buckley’s contracts of employment with Warm Zones contained express provisions preventing them from using or disclosing confidential information about their employer’s business. Following the termination of Ms Thurley’s employment, Warm Zones discovered documents that suggested that both employees had disclosed, or were preparing to disclose, Warm Zones' confidential customer database to a new employer. Warm Zones applied for an interim injunction, specifically covering inspection and imaging of the defendants’ computers.

The court preferred the employer’s evidence…

Warm Zones was able to produce cogent witness evidence that it had invested significant time and resources building up the database and that the information was not available in the public domain. It also produced documents which strongly suggested that the defendants intended to use the database for the purposes of the new employer’s business. By contrast, the judge was sceptical of the defendants’ evidence that they had not misused the confidential information, but had merely been “talking up” their value to a prospective new employer. Accordingly, Warm Zones was able to show that it would have at least an arguable case at a full hearing. The court was also satisfied that damages would not have been an adequate remedy for Warm Zones. Therefore, the conditions for granting an injunction were satisfied.

...and granted an order for imaging and inspection of computers

The defendants had already offered to make sworn affidavits and deliver up hard and soft copies of the relevant documents, but the judge felt justified in also making an order for inspection and imaging of their computers. This case is a rare example of such an order being made.


UK’s ban on secondary industrial action is not incompatible with EU human rights law

The European Court of Human Rights in the case of RMT v United Kingdom held that the UK's restrictions on secondary industrial action (also known as 'sympathy strikes') is not an unlawful interference with the right to freedom of association under the European Convention on Human Rights.

Why might the ban on secondary action be incompatible with the Convention?

Article 11 of the Convention guarantees the right to freedom of peaceful assembly and of association with others. This covers freedom to engage in trade union activities. In the UK, a trade union cannot induce or threaten to induce employees to breach their contracts of employment by undertaking unlawful industrial action. This would be the case if, for example, in relation to an industrial dispute with employer A, the union induces industrial action by employees of employer B (a ‘sympathy strike’). This is the first time that the ECtHR has been asked to consider whether the restriction under UK law is compatible with the Convention.

The ECtHR holds that the UK is not in breach of the Convention

The ECtHR decided unanimously that the UK is not in breach of the Convention. The court noted that member states have a broad margin of appreciation in relation to regulating trade union activity. It decided that, although the ban interfered with Article 11 rights, overall the UK law struck a fair balance. The UK had legitimate interests to protect and the ban was proportionate to securing these interests. Despite the ban, the RMT was still able to exercise its right to freedom of association as it could still represent its members, negotiate on their behalf and undertake primary industrial action. In this sense, the court drew a distinction between secondary action and the ‘core’ elements of the right to freedom of association.

The RMT’s alternative argument was also dismissed

The ECtHR also rejected a challenge by the RMT to the UK's provisions on strike ballot procedures. The RMT argued that the provisions are too strict and impose an unjustified burden on unions. In dismissing the argument, the Court noted that despite the procedural requirements, the RMT had managed to comply with them and had held a strike.


Employees cannot bring a claim against a transferee for failure to provide information on a TUPE transfer

In Allen v Morrisons Facilities Services Ltd the EAT held that employees can only bring an action for failure to provide information to employee representatives under Regulation 13 of TUPE against the organisation that employs them at the time of the breach. Therefore employees transferring from their old employer (the transferor) cannot bring a claim directly against the new employer (the transferee) where the new employer has failed to provide adequate information to their old employer.

Employees sought to bring claims against the transferee as well as the transferor

Leeds City Council (LCC) engages various private contractors to provide maintenance services in respect of its housing stock. A number of new contractors, including Morrisons, were engaged to provide the services following the expiry of certain contracts. The transfer was a ‘service provision change’ under TUPE, and so the employees engaged to provide those services transferred to Morrisons. The employees then brought claims against Morrisons, LCC and their former employer for breach of the information and consultation duties under Regulation 13 of TUPE.

What obligations does Regulation 13 impose?

Regulation 13 requires the new employer to provide information to the old employer to enable the old employer to perform its duty to inform representatives of its transferring employees of the measures that it envisages that the new employer will take in relation to those transferring employees. There is no duty on the new employer to provide information directly to the transferring employees.

EAT holds that claims cannot be brought against the transferee

The EAT confirmed that a claim for breach of Regulation 13 can only be brought against an employer by those who are employed by it at the time of the breach. Therefore the transferring employees could not bring a claim against the new employer, even though they became its employees following the transfer. What matters is the identity of the employer at the date of the breach of the obligation to provide the information. The only way in which an affected employee of the old employer could claim compensation from the new employer is where the old employer joins the new employer as a party to the proceedings. However, this was not possible as the employees in this case had settled or withdrawn their claims against the old employer.


Share acquisition resulted in a transfer of employees under TUPE

In Jackson Lloyd Ltd & Mears Group plc v Smith and others the EAT considered the unusual question of whether employees had transferred to a parent company under TUPE, following the acquisition of their employing company’s share capital by a subsidiary. Generally, share acquisitions do not result in a change in the employer’s identity and so TUPE does not apply.

The factual background

These claims arose when the shares in JL, which was in financial difficulty, were purchased by Mears Ltd, a subsidiary of Mears Group plc. On the purchase, JL’s board were replaced with Mears Group nominees. JL’s employees were also told that their employment would move over to Mears Group, following a period of integration. No TUPE consultation took place. The employees brought claims, arguing that TUPE applied and that JL and Mears Group had failed to comply with their information and consultation obligations.

Was the ‘classic’ TUPE test satisfied?

This was not a ‘service provision change’ scenario, so the Employment Tribunal had to consider whether there had been a transfer of an economic entity which retained its identity after the transfer (sometimes referred to as the ‘classic’ TUPE test). Emphasising that this issue is multifactorial and fact sensitive, the EAT upheld the Tribunal’s decision that there had been a TUPE transfer. The purpose of the integration was so that Mears Group could carry out the services previously performed by JL, using the same employees. However, to the outside world JL was portrayed as a separate company. On these particular facts, the ET was entitled to find that a TUPE transfer had taken place and the claims for failure to inform and consult were successful.

In exceptional cases, share acquisitions can result in a TUPE transfer

This case is a reminder that despite the general rule that share acquisitions do not trigger a TUPE transfer, there can be a TUPE transfer still in relation to a share acquisition. Employers that are party to a share acquisition should still consider whether the particular facts of the transfer could give rise to a TUPE transfer and obligations to inform and consult.


High Court upholds a 12 month non-compete restriction despite a drafting error

The High Court in Prophet Plc v Huggett held that a poorly-drafted restrictive covenant could be enforced even though the Court had to read words into the clause in order to give the employer protection.

The drafting of the restriction left the employer with no protection…

Mr Huggett was subject to a restrictive covenant that prevented him from competing with Prophet, or working for a competitor. The definition of competition in the contract meant that Mr Huggett was prevented from being engaged or employed in relation to the supply of products in which he was involved during his employment with Prophet. On a literal reading of the covenant, it would provide Prophet with no protection, as a competitor company would never use software systems produced by Prophet. When Mr Huggett left to join a competitor, Prophet sought an injunction to enforce the covenant.

…but the judge decided to add words into the restriction to reflect its true meaning

The judge decided that a literal interpretation of the covenant did not reflect the true intent of the parties. Construing the clause in accordance with ‘business common sense’, the judge concluded that he could add the words "or similar thereto" into the definition of the products supplied by Prophet, to reflect the true meaning of the restriction. The judge then considered Prophet’s application for an injunction on the basis of this new formulation.

A rare example of the Court’s discretion to interpret restrictive covenants

It is rare that a court will re-write a restrictive covenant in this manner. More often, a court will remove certain words in order to give effect to a restriction that would otherwise not be enforceable. This case demonstrates the broad flexibility that the Court has in interpreting restrictions. Plainly however, it is preferable for employers to ensure that restrictions are well drafted and do what they are intended to, rather than relying on the mercy of the Courts.


Draft Code of Practice on avoiding unlawful discrimination while preventing illegal working

The Home Office has published a draft Code of Practice for employers that gives guidance on how to avoid race discrimination when complying with its obligations to carry out pre-employment immigration checks.

The Code will replace guidance from 2008 and has been introduced following the Government’s consultation on the prevention of illegal working and changes to the civil penalties for employing illegal workers, which were recently laid before Parliament (see below). The draft Code recommends that employers have “clear written procedures for the recruitment and selection of all workers, based on equal and fair treatment for all applicants”. Employers are also advised to carry out statutory immigration checks for all workers, not just those who are, or appear to be, from an ethnic minority. The date from which the final Code will apply is yet to be confirmed.


Increase to the civil penalty for illegally employing an immigrant

In April a draft order was laid before Parliament which will increase the maximum civil penalty for an employer found to have employed adults who are subject to immigration control but do not have the right to work in the UK, from £10,000 to £20,000. The order is expected to come into force later this month, although the exact date has yet to be confirmed.


Equal Pay test case brought by employees of Asda

A test case for equal pay claims has been brought by 414 employees of Asda. The claimants, who are mostly women, assert that their roles are of equal value to higher paid positions in Asda’s distribution centres, which are mostly staffed by men. The case is expected to be heard in the next two months. If successful, the employees could be entitled to several years’ back pay. The case could also have ramifications for other supermarkets who employee staff in distribution centres.


Third Annual Progress report on women on boards

On 26 March 2014, Lord Davies published his third annual report on women on boards. Overall, the report stated that FTSE 350 companies have made significant progress in increasing the number of women on boards. As at 3 March 2014, women accounted for 20.7% of FTSE 100 and 15.6% of FTSE 250 board positions. This is an increase from 17.3% and 13.2%, respectively, in April 2013 and from 12.5% and 7.8%, respectively, in February 2011. The report also notes that fewer than 50 women need to be appointed to FTSE 100 boards in order to reach the target of 25% female board representation by 2015.


Employment law changes coming into effect in May

For TUPE transfers that take effect on or after 1 May 2014, the time period for the transferor to provide employee liability information to the transferee will increase to 28 days (from 14 days).

From 6 May 2014, the majority of claimants bringing claims in the Employment Tribunal will have to submit their details and those of the respondent to Acas for early conciliation before they can submit their claim to the Tribunal.  Early conciliation has been voluntary since 6 April. Larger employers who want to register a person with Acas who is to be the contact point for all early conciliation can contact Paula Parker on 0151 728 5615 or email eccontactslist@acas.org.uk.

 

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