Key Employment Law Developments: employment status; legal privilege; TUPE

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Summary: Our September blog outlines the key UK employment law developments over the last month. These include cases on employment status, legal professional privilege, employment tribunal powers, TUPE and the enhanced criminal records regime. We also outline other points of note, including recent reports focusing on gender pay and CEO remuneration.

Tribunal’s power to require a claimant to select sample allegations

The EAT has provided welcome guidance on the power of the Tribunal to order a claimant to effectively limit the number of allegations pursued at a hearing by relying on sample allegations only (with the remainder to be pursued at a later date, if the sample succeed).

In this case, the Claimant made multiple allegations of discrimination (21 alleged acts of direct discrimination, 19 alleged acts of harassment and 6 alleged acts of victimisation, plus additional complaints included as background). She was told by the Tribunal to select the ten most recent and serious allegations for consideration, with the remaining allegations either included as background or held over to be pursued at a subsequent hearing.

The EAT held that the Tribunal’s approach was perverse in circumstances where there was an agreed list of issues and no suggestion that the respondent could not understand or respond to the claimant’s case. The EAT noted that the Tribunal had no power to stop a claimant from pursuing a properly arguable claim. Moreover, in discrimination cases, allegations are very often interconnected and need to be considered in the round before findings can be made. The EAT also rejected the idea that a sample approach would always reduce time and costs, particularly where a second hearing was subsequently pursued.

Why this matters

It is clear that despite the Tribunal’s broad case management powers, it will only be in exceptional cases where the sample approach is adopted and, importantly, this is likely to require the claimant’s express consent. If no such consent is forthcoming, the respondent’s focus should be on ensuring that the claimant’s claim is sufficiently clear and properly reflected in a well drafted list of issues.

Tarn v Hughes and others


Email from lawyer advising on a redundancy exercise was not legally privileged

The EAT has held that legal professional privilege was lost over an email sent by a lawyer to his employer client, because it contained advice on how to disguise an act of unlawful discrimination as a redundancy dismissal.

It is long established that for good public policy reasons a party cannot enjoy the benefit of legal professional privilege where the relevant communication furthers iniquity – in these circumstances, the privilege will be lost and the advice may be referred to in open court.

In this case, the EAT found that the advice which was recorded in the email was not limited to highlighting the claims that may be brought if the employee in question was selected for redundancy. Instead, the email went as far as advising that the redundancy could be used as a cloak for dismissal of an employee who was continuing to make discrimination allegations against his employer. Further, the EAT held that discrimination was sufficiently serious conduct to be considered as iniquity and contrary to public policy, and that what had been advised was an attempt to deceive not just the employee, but also the Tribunal in anticipated legal proceedings arising out of the dismissal. For all of those reasons, the privilege was lost.

Why this matters

This is an important case for employers and their lawyers. It is common for employers to seek legal advice in relation to workplace issues and the termination of a particular employee’s employment via an internal restructure and resulting redundancy exercise. It is important that advice on these issues is given by the lawyer in an appropriate manner so as not to fall foul of the iniquity exception.

X v Y Ltd


Court pierces the corporate veil to find employment relationship exists 

The High Court has found an employment relationship to exist, despite the parties agreeing and documenting a contract for services (consultancy) arrangement.

The case concerned ownership of intellectual property rights, in relation to which the relationship between the parties is highly relevant. Despite the individual providing his services to the company via a personal services company for tax reasons, the court held that the true relationship between the company and individual was that of employer/employee, not least because the individual was required to personally perform the technical services described in the contractual documentation. Ownership of the IP was construed accordingly.

Why this matters

This is one of only a handful of cases where the court has been willing to pierce the corporate veil and set aside the contractual arrangements adopted by the parties. It is a reminder of the need for the documentation to accurately reflect the true relationship between the parties, whatever that might be. If not, the parties risk the court not respecting the contractual structure and making a contrary determination.

Sprint Electric Ltd v Buyer's Dream Ltd and another


Rape acquittal should be disclosed in an enhanced criminal records certificate

The Supreme Court has held that there was no breach of Article 8 of the European Convention on Human Rights (the right to privacy) in circumstances where an enhanced criminal records certificate included details of an individual’s acquittal on a rape charge.

The certificate had been issued in relation to job applications for work as a teacher and subsequently as a minicab driver. Unlike standard certificates, enhanced certificates can include details of unproven allegations where the police consider the information relevant and that it ought to be included. In this case, it was held that the reference to the rape acquittal had been reasonable and proportionate and no more than necessary to secure the objective of protecting young and vulnerable people.

Why this matters

The inclusion of unproven allegations in an enhanced certificate is almost certain to impact on an individual’s future career prospects. Unfortunately, there is no clear guidance on how employers should deal with such information disclosed. The Supreme Court expressed concern about the consequences of the enhanced regime, but it remains to be seen whether this will result in the government taking further action in this area. In the meantime, employers are likely to continue to adopt a cautious approach to information received.

R (on the application of AR) v Chief Constable of Greater Manchester Police


Default judgment should not prevent an employer being heard on remedy

The Court of Appeal has held that an employer who had been debarred from participating in proceedings at the liability stage should have been allowed to make representations on remedy.

In this case the claimant had issued various claims in the employment tribunal, including for unfair dismissal and sex discrimination. The employer had failed to submit its ET3 response within the 28 day deadline and had been refused an extension of time. Default judgment on liability was issued in favour of the claimant. Remedy was duly considered without a further hearing, but the employment judge refused to consider the employer’s representations on remedy. On appeal to the EAT, it was held that the Tribunal’s decision not to hear the employer on remedy was permissible. The employer appealed to the Court of Appeal.

The Court of Appeal noted the position in the civil courts, as well as employment case law which had been decided under the old 2004 Tribunal rules which held that employers ought to be permitted to participate in a remedies hearing notwithstanding that default judgment had been awarded against them. The Court of Appeal was of the view that the same principle should apply under the 2013 rules, such that the employer should be heard on remedy issues. In practice this meant that if remedy was to be dealt with at the liability hearing, then the Tribunal should as a minimum consider written representations from the employer. If remedy was dealt with at a separate hearing, then the employer should generally be allowed to participate in that subsequent remedy hearing. This should only be deviated from in exceptional circumstances, which did not exist in the current case.

Why this matters

This is good news for employers. In circumstances where a default judgment is awarded, the employer should not only focus on challenging the liability judgment but also on submitting written representations on remedy for the Tribunal to consider and, in more complex cases, arguing for a separate remedies hearing at which they can make oral representations on remedy.

Office Equipment Systems Ltd v Hughes


Transfer of undertaking can occur despite a five month cessation of activities

The CJEU has held that a transfer of an undertaking could occur under the Acquired Rights Directive (2001/23/EC) (the ‘Directive’) where a contract to provide services was terminated and the service resumed by another contractor some five months later.

The claimant worked as a music teacher at a school in Spain. The local authority had outsourced the running of the school to a small private company. In April 2013, due to declining student numbers, the company running the school ceased its activities and dismissed the entire staff body. The local authority duly terminated its contract with the company and, following a new tender process, awarded a new contract to another private company to run the school. That new contract started in September 2013 at the start of the new academic year. The company that took over the running of the school used the same premises, instruments and resources to provide the services, but appointed a new staff body.

The employees that had been dismissed brought proceedings for unfair dismissal in the Spanish courts. As part of those proceedings, the Spanish court held that there was no transfer of an undertaking because the activities were only resumed after a gap of five months. On appeal, the Spanish court referred the case to the CJEU to determine (inter alia) whether there could be a transfer of an undertaking under the Directive. The CJEU, departing from the Advocate General’s opinion, held that there could in principle be a transfer within the scope of the Directive (albeit it was of the view that the dismissals were for an ETO reason entailing changes in the workforce). Central to the CJEU’s decision was the fact that the economic activity was asset reliant and the new contractor used the same premises, instruments and resources, as well as the fact that the school would have been closed in any event for a three month period over the summer holidays.

Why this matters

This case is a helpful reminder of the issues to consider when deciding whether there is a traditional TUPE transfer when you have a temporary cessation of activities. A similar analysis needs to be carried out when deciding whether there is a service provision change under TUPE.

Colino Sigüenza v Ayuntamiento de Valladolid and others


Roundup of other developments

Inquiry into the enforcement of the Equality Act 2010

The Women and Equalities Committee has launched an Inquiry into the enforcement of the Equality Act 2010 and the effectiveness of the Equalities and Human Rights Commission. The Committee want to hear evidence on how easy it is for the public to understand their rights under the legislation, the effectiveness and accessibility of the Tribunal system, and the effectiveness of remedies and penalties for discrimination. The deadline for submissions is 5 October 2018.

BEIS report on gender pay gap reporting

The House of Commons BEIS Committee has published a report on gender pay gap reporting. The report is part of its Inquiry into executive pay and the gender pay gap in the private sector (launched March 2018). The report notes that in some organisations the median gender pay gap is 40% (against a national average of 18%). It makes various recommendations as to ways to close the gap, including: extending the reporting requirement to companies with 50+ employees; making a narrative mandatory, to explain any gap and set out the steps to tackle it; including partner remuneration in the figures to be reported; further guidance on difficult areas (such as bonuses); and new enforcement powers for the EHRC, including fines for non-compliance.

Report by CIPD on CEO remuneration in the FTSE 100

The CIPD has published a report on CEO remuneration within FTSE 100 firms. The report finds that the pay ratio of a median FTSE 100 CEO to a median UK worker has increased from 153:1 in 2016 to 167:1 in 2017. There has also been a 11% increase in FTSE 100 CEOs' median pay from 2016-2017, against an average increase for ordinary workers of 2.4%.

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