magnetic letter image

Key employment law developments: employment status; zero hour contracts; summary dismissal


Posted by on

Summary: Our July update includes cases on employment status, the impact of PHI on compensation awards, zero hour contracts and summary dismissal. We also highlight developments in the pipeline including changes to immigration rules.

Supreme Court confirms that plumber was a ‘worker’, not self-employed

In the latest high profile employment status case, the Supreme Court has confirmed that an Employment Tribunal was entitled to find that Mr Smith, a plumber, was a worker rather than self-employed. Mr Smith is therefore able to pursue his claims for disability discrimination, statutory paid holiday and unlawful deductions.  You can read our full analysis here.

Pimlico Plumbers Ltd and another v Smith

Fair summary dismissal in the absence of an act of gross misconduct

Generally speaking, an employer will need to identify an act of gross misconduct in order to fairly dismiss an employee summarily (that is, without giving any notice or making a payment in lieu of notice).  However, in this case, the EAT agreed with the employment tribunal that the employer (a hospital trust) was entitled to rely on a series of misconduct issues by a consultant surgeon to justify a summary dismissal.  It succeeded in demonstrating that the employee’s actions were sufficiently serious to undermine the relationship of trust and confidence.  This was notwithstanding the fact that the employee had 15 years’ service, an unblemished disciplinary record and his professional body (the General Medical Council) decided to take no action against him.

Why this matters?

This case illustrates the fact that if an employer has carried out a robust investigatory and disciplinary process, it is feasible to fairly dismiss an employee summarily for a series of misconduct issues, despite there being no single act of gross misconduct.  However, employers should treat this decision with caution.  The fairness (or otherwise) of a summary dismissal will be very much dependent on the specific facts of each case.

Mbubaegbu v Homerton University Hospital NHS Foundation Trust

Restrictions on oral agreements to vary contracts

In this case, which involved a licence agreement rather than an employment contract, the licence agreement contained a “No Oral Modification” (NOM) clause which expressly stated that all variations must be agreed in writing and be signed by both parties.  The licensee was in arrears and verbally agreed with the licensor to vary the payments it was making.  However, this amendment to the agreement was not formally documented in accordance with the terms of the contract.  The Supreme Court, overturning the decision of the Court of Appeal, ruled that the NOM clause in the contract was legally binding on the parties.  Accordingly, the oral agreement between the parties was not a binding variation of the licence agreement.

Why this matters?

Although this case related to a commercial agreement, rather than to a contract of employment, the principles apply in the HR arena.  The case provides helpful certainty for both employers and employees that changes to a contract should be made in accordance with any formal process that may be set out in the contract.  As a matter of good practice, care should be taken when making oral variations as these often lead to a lack of clarity and increase the risk of a dispute.  Best practice is always to record any contractual changes in writing and place that document on the employee’s personnel file.

PHI benefits and discrimination compensation

Permanent health insurance (PHI) is a significant employee benefit.  Sometimes it is provided directly by an employer.  On other occasions, it is offered as part of a flexible benefits package under which an employee may or may not decide to “purchase” a particular level of cover.  In this case, the employee opted for the default cover of an amount equivalent to 75% of his salary in circumstances where he could have chosen to reduce his PHI cover to 50% and take a higher salary instead.  The employee was on long-term sick leave and received PHI based on 75% of his salary.  He brought successful discrimination claims against his employer. 

The general rule on how insurance affects compensation is that pay-outs received from insurance funded by the employer can be set-off against the loss suffered by the employee. However, where the insurance has been paid for by the employee, the employer should not be able to benefit from the employee’s prudence and, therefore, pay-outs from such insurance are not set off against the employee’s financial loss when working out compensation.  Accordingly, in this case The EAT, upholding the decision of the employment tribunal, said that even though the employer paid the insurance premiums, by sacrificing the ability to opt for a higher salary, the employee had indirectly contributed to the PHI premiums for the top up from 50% to 75% cover. The employment tribunal was therefore correct in only deducting PHI based on 50% of salary (not 75% of salary) when assessing the employee’s loss.

Why this matters?

This case is a useful reminder of the general rule that employees are not entitled to double recovery, and that there is an exception to this rule for insurance benefits where it is the employee who funds the insurance cover.  Accordingly, if employees are in receipt of employer-funded insurance benefits, these are set off against any award of compensation made by the employment tribunal.  However, as in this case, where the employee has personally funded insurance cover, there is no such set-off in respect of the benefit received from the insurance.

Colt Technology Services Ltd v Brown

Automatic unfair dismissal of a trade union representative

Employees who are dismissed for taking part in the activities of an independent trade union have special protection and are deemed to be automatically unfairly dismissed.  In this case, a trade union representative retained a photograph (which was taken without consent and sent to him anonymously) of a page in a manager’s diary.  Believing that it was relevant to his trade union role because it contained detrimental information about trade union members who had failed an assessment, he discussed it with HR.  He was dismissed for gross misconduct.  His claim for automatic unfair dismissal was successful in the employment tribunal, but the employer’s appeal to the EAT succeeded.  The Court of Appeal, however, has now overturned the decision of the EAT and restored the initial decision of the employment tribunal, finding that the individual was automatically unfairly dismissed for taking part in trade union activities.

Why this matters?

In a decision which is unfavourable to employers, the Court of Appeal has taken a broad view of what constitutes trade union activities and was unprepared to condemn what may be regarded by some as improper conduct.  In recognising that it was not uncommon for union representatives to receive unsolicited information of this type, the Court found that the way in which the individual made use of this information was not a sufficient enough departure from good industrial relations practice to take it outside the scope of his trade union activities.

Morris v Metrolink RATP Dev Ltd

Zero hours contract and permanent full-time contract – the same type of contract

The EAT, overturning the decision of the employment tribunal, found that an individual employed on a zero-hours contract as a part-time associate lecturer could compare himself to a permanent full-time lecturer for the purposing of bringing a claim under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (the “Regulations”).  The EAT held that both employees were employed under the same type of contract.

The Regulations set out four types of contracts that are regarded as being different to one another.  However, a contract is not of a different type simply because the terms and conditions it lays down are different.

Why this matters?

Part-time workers get special protection under the Regulations.  Employers should be mindful of those protections in circumstances where an employee or worker is able to compare themself to a full-time equivalent.

Roddis v Sheffield Hallam University

Roundup of other developments

Possible judicial review of CAC decision that Deliveroo drivers are not workers

The High Court has granted permission to the Independent Workers Union of Great Britain to seek a judicial review of the decision of the Central Arbitration Committee that Deliveroo drivers are not workers for the purposes of statutory recognition.

Changes to immigration rules

The government has published a Statement of Changes to the UK immigration rules.  The key changes are as follows:  (1) a new settlement route of Turkish ECAA business persons, workers and their family members; (2) doctors and nurses exempted from annual Tier 2 visa limit; (3) requiring Tier 2 migrants applying for settlement who have been absent on family leave to provide evidence of the birth or adoption; (4) prevention of Tier 2 migrants from holding shares in their sponsor directly or indirectly and (5) financial institutions required to confirm funds invested on behalf of a Tier 1 migrant have only been invested in qualifying investments and that no loan has been secured against those funds.

Stay informed

Sign up to receive email alerts from our award winning Expert Insights team

Sign up now

See more insights by category

This site uses cookies to help us manage and improve the website, your browsing experience, and the material/information we send to our subscribers. For further information about cookies, including how to change your browser settings to no longer accept cookies, please view our Privacy Notice. Otherwise we will assume you are OK to continue.