Friday 25 February 2011

Territorial Jurisdiction - Cabin Crew

[Thanks to Emma Price of Temple Garden Chambers for preparing this case summary]

The Court of Appeal has handed down its decision in the case of British Airways Plc v Ms Eliza Mak & Ors, which is authority for the proposition that jurisdiction is conferred on an ET to hear race and age discrimination claims provided the Claimant does his or her work "partly" in Great Britain.

The Claimants were cabin crew of Chinese nationality, who were based in Hong Kong. The case turned on whether employment was "at an establishment in Great Britain" for the purposes of s.8(1) of the Race Relations Act 1976 and the similar provision under Reg. 10(1) of the Employment Equality (Age) Regulations 2006. The Court of Appeal found that there was no error of law in the ET's ruling that Ms Mak (the lead Claimant) did her work partly in Great Britain, despite the fact that this made up a small percentage of her overall work. Provided Ms Mak did her work "partly" in Great Britain then s.8(1) was satisfied. This having been established, s.8(4) did not apply, s.8(1) taking priority over the statutory deeming process.

Tuesday 22 February 2011

Written Reasons for Tribunal Decisions

[Thanks to Rad Kohanzad, pupil at Old Square Chambers for preparing this case summary]

Greenwood v NWF Retail is an important case dealing with whether a tribunal's written reasons go into sufficient detail to satisfy the tribunal's statutory obligation to give reasons. The EAT made it clear that an employment tribunal is required to comply with rule 30(6) Employment Tribunal Rules (amongst other things, to decide relevant facts and how those facts should be applied to the law) and that failure to do so in substance will amount to an error of law.

The EAT held that "a judgment will not be erroneous simply because the structure of the rule is not visible on the surface of the decision". On the other hand, the "constituent parts will need to be more than a formal statement paying lip service to the subparagraphs of the rule" (paragraph 56).

The well known case of Meek v City of Birmingham District Council continues to be relevant in helping decide whether there has been compliance in substance with the rule. But the EAT indicated that other caselaw which suggested that the provisions of rule 30(6) were not mandatory should not be followed.

Monday 21 February 2011

TUPE Applies to Pre-pack Administrations

[Thanks to James Medhurst of Employment Law Advocates for preparing this case summary]

The EAT (Underhill P) has handed down its decision in OTG Ltd v Barke, which is authority for the proposition that an administration can never qualify as "insolvency proceedings with a view to the liquidation of the assets of the company" within TUPE regulation 8(7).

Accordingly, any employees who are employed by the transferor immediately before the transfer will have their contracts transferred under TUPE. The earlier decision of the EAT in Oakland v Wellswood was not followed.

The EAT stated that the situation is different for employees who have already been dismissed by the transferor or the administrator by the time of the transfer (unless there is an attempt to circumvent TUPE). The employee will have to make a claim to the Insolvency Fund for any redundancy payment or wages that remain unpaid.

Friday 18 February 2011

Repeal of Retirement Age - 3

Yesterday the Department for Business, Innovation and Skills published the draft Employment Equality (Repeal of Retirement Age) Regulations 2011.

Several commentators have pointed out there appears to be a significant drafting error in the Regulations (which may still be capable of being corrected). As they read at the moment, employers will not be able to retire those who 65th birthday fell before 1st April 2011, before 1st October 2011, without facing an age discrimination and unfair dismissal claim.

For the best discussion I have seen explaining the problem, please see this blogpost by Darren Newman of Inco Training. It's important, and it's worth reading.

Thursday 17 February 2011

Repeal of Retirement Age - 2

Further to my email a few minutes ago, I am told the link does not work on a lot of computers (it does on mine, bizarrely). So here is another link to the draft Employment Equality (Repeal of Retirement Age) Regulations 2011.

Also, for a fast-moving discussion of the compulsory retirement legal issues, I recommend Twitter (that link should, if it works, take you straight to the employment law discussion area on Twitter - but you may need to sign in first).

Repeal of Retirement Age

And they're out. The draft Employment Equality (Repeal of Retirement Age) Provisions 2011 have been published.

They are fairly succinct, doing pretty much what we all expected. One welcome element is regulation 2, which provides that it is not an age contravention to provide insurance benefits to the under 65s but not the over 65s (this is a superficial summary of a far more detailed regulation).This email is just to send out the link.

I will look out for the best summaries/guides produced by solicitors' firms over the next few days, and send out links.

Insurance Benefits for the over 65s

The Department for Business, Innovation and Skills has published the draft Employment Equality (Repeal of Retirement Age) Regulations 2011, setting out the framework and timetable for removal of the default retirement age.

Abolition of compulsory retirement means more older workers on the payroll. Employers were concerned that this would send insurance premiums through the roof, as insurance companies would insist on higher premiums to reflect the increased risk of insuring older workers.

The government recognised that many employers might simply withdraw insurance benefits for the entire workforce as a result, or reduce benefits for new employees. So it announced last month that group insurance benefits would be exempt from the age discrimination laws, meaning that employers would be able to have a cut-off date of 65 at which it would not be an age contravention to refuse to provide insurance benefits for older workers. This has good business justification, but it leaves employees at risk of losing their life insurance and private medical cover at exactly the time they need it most.

The government's attempt to turn this policy objective into litigation is contained in regulation 2, which creates a new Schedule 9, paragraph 14 to the Equality Act 2010 in the following terms:-

Insurance etc.
14.—(1) It is not an age contravention for an employer to
make arrangements for, or afford access to, the provision of insurance or a
related financial service to or in respect of an employee for a period ending
when the employee attains whichever is the greater of—
(a) the age of 65,
and
(b) the state pensionable age.
(2) It is not an age contravention
for an employer to make arrangements for, or afford access to, the provision of
insurance or a related financial service to or in respect of only such employees
as have not attained whichever is the greater of—
(a) the age of 65, and
(b) the state pensionable age.
(3) Sub-paragraphs (1) and (2) apply only
where the insurance or related financial service is, or is to be, provided to
the employer’s employees or a class of those employees—
(a) in pursuance of
an arrangement between the employer and another person, or
(b) where the
employer’s business includes the provision of insurance or financial services of
the description in question, by the employer.
(4) The state pensionable age
is the pensionable age determined in accordance with the rules in paragraph 1 of
Schedule 4 to the Pensions Act 1995( ).”.

That seems straightforward. It's not an age contravention for employers to stop providing insurance benefits to employees when they hit 65 (or any increased state pension age, if higher).

But some important points must be made:-
  1. if the insurance benefit is a contractual entitlement, an employee over 65 can still claim breach of contract even if s/he can't claim age discrimination. In theory, an employee who finds they are no longer covered for private medical cover could have any treatment and sue their employer for the cost.

  2. regulation 2 does not give employers the right to invite employees over 65 to pay any additional premiums themselves. If the employer makes insurance benefits available to those employees over 65 who are willing to pay the top-up, then the situation falls outside regulation 2 and the employer will need to objectively justify their stance. This brings into question the whole issue about whether saving cost can ever be a legitimate aim in its own right.

  3. it is difficult to see why regulation 2 applies to all insurance benefits. Many employers provide legal expense insurance. There is little rationale for saying that the employer can withdraw access to legal expense insurance for the over 65s (which regulation 2 permits). Unlike many other forms of insurance, the cost of purchasing legal expense insurance will not increase for the over 65s.

  4. regulation 2 does not cover self-insuring employers (which most public bodies are). A self-insuring employer will still need to objectively justify any failure to provide such benefits to the over 65s. It is possible that this is a deliberate policy decision by DBIS, as it is difficult to know where to draw the line with self-insured benefits (eg is contractual sickpay a self-insured benefit?) [Thanks to Joy Drummond of Simpson Millar for this point.]

Wednesday 16 February 2011

Update: Default Retirement Age

Rumours are circulating about the transitional provisions abolishing the default retirement age, which are expected to be published later this week.

According to a number of usually impeccable sources, including PLC, the transitional provisions will provide for the default retirement age to survive until 6th April 2012 (not 30th September 2011 as previously thought), provided the employee has reached 65 on or before 30th September 2011. This allows for up to 12 months' notice of intention to retire to be issued before 5th April 2011.

Support for this can be seen on the Acas website (about halfway down, under 'Timescales and transitional arrangements').

And with The Telegraph reporting today that "Human Resource professional are in disarray" because of uncertainty over how to deal with retirement dismissals, we can continue to expect uncertainty for a while.

Further news will be provided as soon as it is available.


Right to request Time Off for Training

The Department for Business, Innovation and Skills has just issued a Press Release announcing that the right to request time off for training is not going to be extended to all employees from April 2011.

The right to request time off for training was introduced for employees of large employers (250+ employees) in April 2010, with a view to it being extended to all employers from April 2011. The maximum penalty for an employer which failed to consider such a request is eight weeks' pay. In November 2010, the government announced that employers with fewer than 50 employees would be exempt. The announcement today means that the right will not be extended as previously anticipated.

Update: Abolition of Default Retirement Age

Rumours are circulating about the transitional provisions abolishing the default retirement age, which are expected to be published later this week. According to a number of usually impeccable sources, including PLC, the transitional provisions will provide for the default retirement age to survive until 6th April 2012 (not 30th September 2011 as previously thought), provided the employee has reached 65 on or before 30th September 2011. This allows for up to 12 months' notice of intention to retire to be issued before 5th April 2011.

Support for this can be seen on the Acas website (about halfway down, under 'Timescales and transitional arrangements').

And with The Telegraph reporting today that "Human Resource professional are in disarray" because of uncertainty over how to deal with retirement dismissals, we can continue to expect uncertainty for a while.Further news will be provided as soon as it is available

Tuesday 15 February 2011

Costs in the EAT

[Thanks to Ed McFarlane of EEF for preparing this case summary]

The EAT (Burton J) has handed down its decision in G4S Services v Rondeau, which is authority for the proposition that a failure by a party to consider a reasonable settlement offer, even if just by making a reasonable counter-offer, can amount to unreasonable conduct and justify a costs order.

The Tribunal Claimant was resisting the appeal, and settled just before the hearing, accepting an offer he had turned down some months previously. The EAT held that not accepting the initial offer, and/or failing to make a reasonable counter-offer, was unreasonable conduct which justified a costs award, even in the EAT, which, like the Employment Tribunals, is normally costs-free.

The EAT observed that a party is entitled to resist an appeal unless and until there is an outcome or an offer which requires consideration, and described making and considering offers as "part and parcel of any litigation proceedings".

Friday 11 February 2011

Default Retirement Age

Some important news: the Supreme Court has granted permission to appeal in Seldon v Clarkson, Wright & Jakes. The Court of Appeal's judgment suggested that a compulsory retirement age of 65 could be justified for partners in a law firm, and its reasoning provided some comfort to those who are looking at the approaching abolition of the default retirement age (on 1 October 2011) with dread.

For more information on Seldon, see the previous case reports.

Employment Status - IR35

[Thanks to Ed McFarlane of EEF for preparing this case summary]

The First tier tribunal tax chamber has handed down its decision in MDB Design Services v HMRC, which is authority for the proposition that the guidelines for determining employment status for income tax and/or National Insurance purposes for contractors under IR35 under the notional contract between "employee" and end-user involve consideration of the combined effect of a contract and its practical outworking, as well as mutuality, control, business risk and integration.

HMRC ruled that the sole director of a service company contracted to Airbus over several contracts was an Airbus employee for tax & NI purposes under IR35, the service company successfully appealed. The Tribunal reviewed the case law and set out guidelines at paragraph 53.

Applying the notional contract test to the relationship between the "employee" and end-user as if the service company wasn't involved, the reality of the relationship was typical of a contract for services. Where aspects might point to employee status, due to various factors arising from the special needs of the undertaking including hourly payment, time recording, work approval, on-site working, and intellectual property vesting in the end-user, they had less weight, and were held to be consistent with a contract for services.

Thursday 3 February 2011

Defamatory Comments in Correspondence

[Thanks to Claire Darwin of Matrix Chambers for preparing this case summary]

Wallis & GHP Securities Limited v Justin Meredith, or the case of the "two burly men with Eastern European accents" as it will doubtless become known, is authority for the proposition that if an employee sends a letter alleging unlawful conduct by the employer to the employer's own solicitor, this does not amount to a real and substantial act of defamation.

The letter had been sent in the context of a commercial dispute, and the allegation (that the employer had sent the two burly men to visit the employee's home) was denied by the employer. This denial was repeated by his solicitor in correspondence. Accordingly the High Court (QBD) held that it was doubtful that the employer's solicitor had thought any the worse of his client on account of the allegation, and no need for vindication of the employer's reputation arose.

Clarke J observed that solicitors routinely receive publications about their own clients which are defamatory. However such publications are likely to be covered by qualified privilege or perhaps absolute privilege, both of which provide a defence to an action for defamation.

Wednesday 2 February 2011

Unfair Dismissal

[Thanks to Lionel Stride of Temple Garden Chambers for preparing this case summary]

The Court of Appeal has handed down its decision in Orr v Milton Keynes Council, which is authority for the proposition that in an unfair dismissal claim, an employer cannot be held to know key mitigating facts known to other employees about an individual, including his line manager, of which the decision maker had been unaware. It is only the person who is "deputed to carry out the employer's functions" whose knowledge or state of mind is relevant. Thus, ignorance of key information known to another employee does not render a dismissal unfair, provided it could not reasonably have been acquired through an appropriate disciplinary procedure.

O, the appellant, had been dismissed following two separate incidents, including rudeness to his line manager, M, both of which his employer found amounted to gross misconduct. However, the decision maker had been unaware that the second incident had been provoked by the conduct and language of M, which the Tribunal later found amounted to direct race discrimination.

Nevertheless, the Court of Appeal held by a majority that the tribunal had been correct to conclude that the dismissal remained fair because the decision, on the facts known to the decision maker, was reasonable.

Interestingly Sedley L.J (in the minority) preferred to take a holistic approach, examining the totality of the information known to an employer, including any of its employees. This, he acknowledged, would be a departure from the current construction of 'reasonably' in s98(4) of the Employment Rights Act 1996.

Tuesday 1 February 2011

Correction: Equal Pay

CORRECTION: Thanks to all the eagle-eyed readers who spotted this case involved Sunderland (not Sutherland) City Council. Our mistake transcribing the case summary; not the author's mistake. Amended version below.

Equal Pay

[Thanks to Naomi Cunningham of Outer Temple Chambers for preparing this case summary]

The EAT (Underhill P) has handed down a lengthy decision in Bury MBC v Hamilton and Sunderland City Council v Brennan, two appeals heard together about Genuine Material Factor defences to claims for bonuses and pay protection.

Women employed in female-dominated roles by both Councils claimed to be entitled to the benefit of bonus payments originally genuinely linked to productivity, but by the relevant time paid as a conventional supplement to wages - enjoyed by their comparators in male-dominated jobs. In Bury, the claimants also sought the benefit of pay protection provided to the predominantly male groups on withdrawal of their bonuses.

At first instance, both Councils' defences under section 1(3) of the Equal Pay Act 1970 that the differences in pay were genuinely due to a material factor (the existence of historic bonuses) which were not the difference of sex were rejected on the basis that by the relevant dates, any link between receipt of bonuses and productivity on the part of the comparators had been lost; and accordingly the Councils' explanation of the differential was not genuine. In Bury, the claims to pay protection were rejected on the grounds that the Council could not have been under an obligation to pay sums that were not susceptible to calculation at the time the obligation arose; and in any event, even in the absence of precise calculation, to extend pay protection to the claimants would be unaffordable. Both Councils appealed against the rejection of their section 1(3) defences, and the claimants in Bury cross-appealed on the pay protection point.

The Councils' appeals failed. The EAT held that the tribunal had been wrong to characterise their explanation for the bonuses as a 'sham' merely because the link with productivity had been lost: contrary to the tribunals' findings, the factor which they had identified as explaining the bonuses was genuine (¶¶18,25, 29,44-45). But showing that the bonus schemes had been non-discriminatory when first introduced did not establish that the differential was due to a non-discriminatory factor in the period to which the claims related (¶31). The difference in gender breakdown of the claimant and comparator groups gave rise to Enderby-type indirect discrimination, calling for justification; and the loss of the link between the bonuses and productivity meant that the Councils could not justify the differential (¶¶29-34, 49).

The Bury claimants' cross-appeal succeeded. The impossibility of determining, at the time the payments should have been made, the amount that should have been paid to the claimants by way of pay protection did not establish a section 1(3) defence (¶¶71-73); nor could the Council establish by mere assertion (which was as far as their evidence on the matter went) that extending pay protection to the claimant groups would have been unaffordable (¶¶75-79).

The judgment is notable for a discussion and restatement of the 'structured analysis' of equal pay cases formulated by Elias P (as he then was) in Middlesbrough BC v Surtees [2007] ICR 1644 and developed in later cases: see ¶¶14-25; and a caution against excessive focus on the requirement in section 1(3) that the difference in pay be 'genuinely' due to the material factor (¶8).


Equal Pay

[Thanks to Naomi Cunningham of Outer Temple Chambers for preparing this case summary]

The EAT (Underhill P) has handed down a lengthy decision in Bury MBC v Hamilton and Sutherland City Council v Brennan, two appeals heard together about Genuine Material Factor defences to claims for bonuses and pay protection.

Women employed in female-dominated roles by both Councils claimed to be entitled to the benefit of bonus payments originally genuinely linked to productivity, but by the relevant time paid as a conventional supplement to wages - enjoyed by their comparators in male-dominated jobs. In Bury, the claimants also sought the benefit of pay protection provided to the predominantly male groups on withdrawal of their bonuses.

At first instance, both Councils' defences under section 1(3) of the Equal Pay Act 1970 that the differences in pay were genuinely due to a material factor (the existence of historic bonuses) which were not the difference of sex were rejected on the basis that by the relevant dates, any link between receipt of bonuses and productivity on the part of the comparators had been lost; and accordingly the Councils' explanation of the differential was not genuine. In Bury, the claims to pay protection were rejected on the grounds that the Council could not have been under an obligation to pay sums that were not susceptible to calculation at the time the obligation arose; and in any event, even in the absence of precise calculation, to extend pay protection to the claimants would be unaffordable. Both Councils appealed against the rejection of their section 1(3) defences, and the claimants in Bury cross-appealed on the pay protection point.

The Councils' appeals failed. The EAT held that the tribunal had been wrong to characterise their explanation for the bonuses as a 'sham' merely because the link with productivity had been lost: contrary to the tribunals' findings, the factor which they had identified as explaining the bonuses was genuine (¶¶18,25, 29,44-45). But showing that the bonus schemes had been non-discriminatory when first introduced did not establish that the differential was due to a non-discriminatory factor in the period to which the claims related (¶31). The difference in gender breakdown of the claimant and comparator groups gave rise to Enderby-type indirect discrimination, calling for justification; and the loss of the link between the bonuses and productivity meant that the Councils could not justify the differential (¶¶29-34, 49).

The Bury claimants' cross-appeal succeeded. The impossibility of determining, at the time the payments should have been made, the amount that should have been paid to the claimants by way of pay protection did not establish a section 1(3) defence (¶¶71-73); nor could the Council establish by mere assertion (which was as far as their evidence on the matter went) that extending pay protection to the claimant groups would have been unaffordable (¶¶75-79).

The judgment is notable for a discussion and restatement of the 'structured analysis' of equal pay cases formulated by Elias P (as he then was) in Middlesbrough BC v Surtees [2007] ICR 1644 and developed in later cases: see ¶¶14-25; and a caution against excessive focus on the requirement in section 1(3) that the difference in pay be 'genuinely' due to the material factor (¶8).

Should Employment Judges sit alone?

The government's consultation paper on Resolving Workplace Disputes, published last month, seeks views at p43 on whether Employment Judges should sit alone, without wing members, in unfair dismissal claims.

Wing members are typically highly capable and experienced small business owners, HR professionals or union representatives. They add a very real benefit to tribunal hearings. They provide perspective as to what is (and isn't) acceptable in the workplace. They act as a fetter to an occasionally overbearing employment judge (of whom there are thankfully far fewer these days) - never in public, but often behind the scenes. And the need for structured panel debate before reaching a conclusion avoids a swift rush to judgment.

But these benefits come at a price. Not only the considerable financial cost of paying the wing members' fees and reimbursing their expenses, or the administrative cost of the wing member selection and allocation processes. But the following costs are also real and significant:-

(a) slowing down proceedings: the tribunal goes at the speed of the slowest reader of the three tribunal members, and the speed of the slowest writer of the three members.

(b) delay: when cases go part-heard, the frustration at having to wait months for another date when everyone can attend can be reduced (albeit not eliminated) if the dates do not need to fit the convenience of the wing members' diaries.

(c) legal issues: it is very rare for a judge or wing member to have difficulty applying the Burchell test. But once one comes to the application of a tricky equal pay or working time regulations point, it is undesirable that (in theory, at least) the two unqualified wing members can overrule the legally qualified and experienced employment judge on a point of law.

The requirement for a panel of three has been eroded over the years. Employment judges now sit alone on case management discussions, most pre-hearing reviews, and claims relating to unlawful deducions, unpaid holiday pay and redundancy payments. In some cases, the parties can consent to the employment judge sitting alone. If the case is particularly complex, the Regional Employment Judge can still direct it be heard by a panel of three rather than a single judge (s4(5) Employment Tribunals Act 1996).

Notwithstanding the benefits that wing members bring, 'mainstream' justice has never seen the need to temper a judge's assessment of the facts, or of what is reasonable, with wing members who can overrule him. County court and High Court judges made decisions all the time about whether someone has acted reasonably (which is the fundamental issue in any unfair dismissal case). It is the bread and butter of judging. It is difficult to see why central funds should pay for wing members to help employment judges make this sort of decision, when other judges (often hearing much higher-value and more complex claims) do not receive such help.

If the judge sits alone, the case is dealt with faster. That might not be a popular statement, but it's true. That means less cost and time for the parties, and less cost for the tribunal system. It also means that employment judges will be able to get through more cases, either reducing the backlog of cases waiting for a full hearing or dealing with the neverending boxes of case management applications which require a decision on paper.

Sometimes it will be desirable for an Employment Judge to have the assistance of wing members. Such cases are probably not common, but they do exist. Such a case will inevitably require at least one case management discussion, at which the judge can raise the issue (or the parties can make an application), and an informed decision can be made.

There were 9,700 unfair dismsisal claims disposed of at a full hearing by the employment tribunal system last year. Assuming each lasts an average of one day, this would potentially eliminate the deployment of 19,400 wing member days. The daily fee paid to a tribunal wing member is £194, although the Department of Business, Innovation and Skills assesses this at about £230 if administrative and other support costs are added in. So there would be an immediate annual cost saving of up to £3.8m (or £4.5m if including support costs) if wing members were no longer required in unfair dismissal claims.

A caveat must be added; many claims involve multiple jurisdictions. A Claimant may allege discrimination at the same time as unfair dismissal. Assuming that wing members will remain for such hearings, it is apparent that the savings will not be as high as set out in the previous paragraph. But, nevertheless, they remain substantial. Balanced against this is the fact that a very significant proportion of unfair dismissal cases take more than a day, increasing the overall cost to the system.

As an ancillary benefit, abolishing the requirement for wing members in unfair dismissal claims would also enable the Employment Tribunals Service to cancel the recruitment exercise, due to take place later this year, for a further 300 wing members to cope with current needs. This would make an immediate saving of £0.5m (the cost of the previous recruitment exercise).