Oliver McCannn
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Employers Update - November 2010
Welcome to this month’s edition
of Employ!
As the winter cold begins to take
hold, employment law developments
keep things hot! Read on for an update on recent cases or developments
relevant to HR.
If you have any queries in relation
to the content of Employ, or any
employment issue, please call the
Employment Team on 0844 8000 263
or email
oliver.mccann@taylors.co.uk.
Oliver McCann - Partner and
Head of Employment
James Bellamy
- Employment Solicitor
Tel: 0844 8000 263
Email:
oliver.mccann@taylors.co.uk
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There seems to have been a significant
amount of fuss over the wording of the
Equality Act 2010, in particular whether or
not it prevents claims under the EA being
validly compromised under a compromise
agreement.
As before for a Compromise Agreement to
be effective an employee must have received
advice from an independent adviser. Under
the EA the definition, on a strict
interpretation, excludes someone who is
acting for a person who is either a party to
the contract or the complaint, or connected
to such a person. However, this means that a
solicitor who was instructed by the employee
prior to the production of the final
agreement for consideration, which is very
common, will technically be precluded from
acting any further.
There are opposing views as to whether or
not this drafting error creates the problem
above.
Representations have been made for this
error to be rectified quickly so that all
parties can have certainty as to the
enforceability of the Compromise Agreement.
What do I need to know?
A compromise agreement may not validly
settle a claim under the EA if the solicitor
advising the employee has been involved in
the negotiations of the compromise
agreement. A temporary solution would be to
settle any claims via a COT3 agreement –
ACAS do offer a pre claim conciliation
service.
Alternatively employers could conclude
that on the specific facts of the case the
employee’s ability to claim under the EA is
minimal or non existent i.e. the principal
allegations being unfair dismissal and
breach of contract and as such proceed with
settling matters via a compromise agreement.
Where there is a real risk of a claim
under the EA then more care will need to be
taken, although it is likely that a court or
employment tribunal will adopt a purposive
approach as to the interpretation of the EA
in this regard and find that claims have
been validly compromised.
Another option would be to build in to
the agreement a repayment clause in the
event proceedings are brought against the
Company. This acts as a strong deterrent to
the employee from ignoring the intentions of
the parties and pursuing a claim.
Each matter will have to be assessed
having regard to the nature of the
complaints from the employee and the size of
the settlement. If in doubt take legal
advice.
Remember also that you will need to alter
your references in the Compromise Agreement
to various sections under the EA.
There has been a leak from the
government which suggests it is reviewing
the 12 month eligibility rule to bring a
claim for unfair dismissal and reverting
back to requiring 2 years continuous
employment.
Of course if this is implemented this
will be welcome news for employers who would
enjoy a much longer period of time to assess
a new employee’s performance and value to
the business.
However employees faced with the hurdle
of a two year qualifying criteria are likely
to look at ways around this to pursue claims
perhaps by alleging discrimination or trying
to suggest the dismissal was related to
health and safety or making a protected
disclosure. Indeed, Taylors see many
claimants under the current system seeking
to circumvent the 12 month eligibility
requirement.
What do I need to know?
- Watch this space for a possible
change in the law
- Regardless of the fact that an
employee may have less than the
qualifying period of continuous service
we would always recommend that some
formal process (albeit shortened in most
cases) be followed when dismissing that
employee. This ensures that you have
documented the reasons behind the
dismissal, brought it to the employee’s
attention and given the employee an
opportunity to respond. It makes it much
more difficult to allege that there was
another reason behind the dismissal.
- Always bear in mind that there are
quite a number of exceptions to the 12
months rule for example, dismissals
because of pregnancy, whistleblowing,
health and safety, exercising or
asserting statutory rights, trade union
membership etc
The key to a fair redundancy is fair
selection, consultation and consideration of
other suitable opportunities.
A recent case has held that fair
consultation includes giving the employee an
explanation for his scoring and a meaningful
chance to comment on the scores.
This decision makes sense as it is quite
feasible that genuine errors may have been
made on that individual’s scoring which may
affect their selection for redundancy.
Likewise there are obvious concerns over the
use of subjective criteria and so it would
be reasonable to give the employee the
opportunity to comment and raise points on
subjective criteria scores.
What do I need to know?
- When first notifying of selection
for redundancy, emphasise that this is
provisional dependant on further
consultation relating to the scoring and
pooling
- An individual is only allowed to see
their own score, not that of others in
the pool
- Where subjective criteria are
involved then employees should have
sufficient information to understand
their scores and to challenge
- The Employment Tribunal will not
endorse a microscopic analysis of the
scoring of individuals but simply ensure
that the criteria are sufficiently
objective and fair and that there are no
clear discrepancies in the scores
allocated.
A recent case acts as a reminder that
dismissal for a misconduct offence (not a
gross misconduct offence) can still fall
within the range of reasonable responses of
a reasonable employer.
In this case the employee borrowed a mini
bus from his employer with consent. He
returned it to his employer in an unsafe
condition in that the seats were insecure
and the rear step was missing. After an
investigation relating the employee was
dismissed for gross misconduct. It was held
by the Tribunal and the EAT that although
dismissal was within the range of reasonable
responses and a fair procedure had been
followed, they did not find that summary
dismissal was justified. The claimant should
have been dismissed with notice. As such the
employee had been wrongfully dismissed.
What do I need to know?
Employers often overlook the fact that they
can proceed to dismissal, despite no
previous warnings and despite it not being a
gross misconduct offence, where the conduct
is sufficiently serious to justify entering
the disciplinary procedure at the dismissal
stages ie conduct just short of gross
misconduct.
It has been widely accepted that an
employer cannot raise a justification
defence to discrimination cases on cost
alone. However a recent EAT case has pushed
the door slightly open to challenge this
orthodox view.In a case against the
Cumbria Primary care NHS Trust the NHS made
the Chief Executive redundant. Notice to
terminate his employment by reason of
redundancy was deliberately given earlier
than usual would be the case as the NHS
wanted to avoid the Employee becoming
entitled to significantly enhanced pension
benefits which would arise if he was still
in employment on his 50Th birthday. The
additional cost to the NHS had they not
issued notice early would have been
approximately £500,000.
What do I need to know?
The EAT cast doubt on the previously
held view that cost alone can never
constitute objective justification stating
an employer can have a legitimate interest
in considering cost alone on the basis that
if the cost of avoiding or rectifying a
discriminatory impact would be
disproportionately high there would be scope
for considering the proportionality of the
measures.
Although this judgement opens the door
for such arguments extreme care still needs
to be taken where the sole criteria for
discriminatory conduct is cost. Take legal
advice on the strength of your justification
defence before committing to a course of
action.
1. Is it permissible to pay rolled up
holiday pay?
The ECJ has previously decided that
rolled up holiday pay is unlawful. In their
view workers must be placed in the same
financial position as they would have been
if they were carrying out the work. This
means payment must continue throughout the
statutory holiday period.
However the ECJ then went on to say that
employers should be given credit for making
holiday payments under a rolled up pay
system as long as such systems are clearly
transparent and the employee comprehensively
understand and agrees to the system. In
these circumstances any amounts of holiday
pay paid to the worker will be offset
against any award made to the worker.
Ideally employers should, wherever
possible, seek to use a holiday system which
does not rely on rolled up holiday pay.
However where this is not feasible then
currently employers can get away with using
such a system so long as it remains
transparent.
2. Is there anything we can do to
prevent an individual who has signed a
contract of employment to commence
employment with the business but who then
changes his mind at the last minute and
stays with his present employer?
Yes. At the time you make an offer of
employment issue the prospective employee
with a contract of employment and ensure you
get the contract signed and returned to you
so that there is a binding agreement. Within
the contract you can insert a “No Show”
clause – in essence a clause which states
that the employee will pay sums to the
business as compensation if he fails to
commence employment under the contract i.e.
changes his mind. This clause has been held
to be valid. However it is critical that the
clause is not a penalty clause but instead a
liquidated damages clause designed to act as
compensation, rather than a deterrent form
breaching the contract. As such an
assessment of the anticipated losses to the
business arising from a “no show” needs to
be made so that you can insert that amount
within the clause as a genuine pre estimate
of loss and ensure the clause is
enforceable..
Copyright 2006 - 2010 Taylors Solicitors
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