Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

In Cordell v the Foreign and Commonwealth Office (UKEAT/0016/11), the UK Employment Appeal Tribunal (“EAT”) considered whether an employer’s refusal to provide lip-speaking support to a deaf employee was unreasonable based on cost alone. The EAT provided guidance on how Tribunals might put costs considerations into context when considering reasonable adjustments for disabled employees but, ultimately held that Tribunals will have to make a judgement in each case based on “what they consider right and just.” 

What happened in this case?

Mrs Cordell who was employed by the Foreign and Commonwealth Office (“FCO”) in a senior position, was posted to Warsaw. She was profoundly deaf, and was provided with lip-speaking support whilst working. This consisted of a team of individuals who commuted to Warsaw on a fortnightly basis from the UK. Including the costs of airfares and accommodation, the annual cost of this lip-speaking support was around £146,000 per year.

Mrs Cordell was later offered a promotion, based in Kazakhstan, with the same level of lip-speaking support. By this time, the FCO had implemented a policy on reasonable adjustments, setting out the matters which would be taken into consideration and the process to be followed when considering whether proposed adjustments in respect of disabilities were reasonable. Following this process, the FCO considered that the cost of the lip-speaking support in the new role was unreasonable, and so withdrew the offer of promotion.

Mrs Cordell brought claims to the Tribunal that this amounted to disability discrimination under the Disability Discrimination Act 1995 and, in particular, that the FCO had failed in its duty to make reasonable adjustments. She argued in particular that the cost of supporting an employee posted abroad who has a number of children would be similar to the cost of providing lip-speaking support (given the FCO’s policy on paying school fees and airfares for children boarding in the UK).   

The Employment Tribunal’s decision

In relation to the issue of reasonable adjustments, the Tribunal found that the cost of providing the support would have been at least £249,500 per year. It found that such cost made the adjustment unreasonable, relying on various factors to support this:

• this annual cost of support was around five times Mrs Cordell’s salary;
• this figure was greater than the annual salary costs of all local embassy staff in Kazakhstan;
• the cost exceeded the previous cost of the support in Warsaw by nearly £100,000, and was around £180,000 more expensive than support would be in London;
• it was a significant proportion of the FCO’s disability budget, and was around £200,000 more costly than the next largest expenditure in that budget;
• the costs of school fees for an employee with even seven children would be a maximum of £175,000 plus travel expenses.

The Employment Appeal Tribunal’s decision

The EAT agreed that the Tribunal had approached the question of cost and reasonableness correctly. The factors considered by the Tribunal were legitimate as they contextualised the relevant costs. The FCO had therefore not failed in its duty to make reasonable adjustments in this case, given the comparatively high cost of the support.

The EAT went on to list other considerations which might be useful when making this contextual analysis, including what costs the employer has approved in comparable situations, what other employers might spend, and whether there is any collective agreement as to what might be appropriate. The EAT recognised the difficult balancing act between the disadvantage suffered by the employee if the adjustments are not made on one hand, and the cost of making such adjustments on the other, but pointed out that there was no objective measure which could be used when assessing such considerations. The EAT ultimately held that, when considering whether the cost of a proposed adjustment will render it reasonable or unreasonable, Tribunals will have to make a judgement call as to what is ‘right and just’ in each case.

What this decision means to employers

In some ways this decision is helpful to employers: there is now guidance from the EAT that cost alone may well be enough to demonstrate that a proposed adjustment is not reasonable. This is useful given that, in most cases in practice, cost will often be one of the main objections to making proposed adjustments. 

However, employers might understandably be frustrated that this decision appears to give significant discretion to the Tribunals to do what is ‘right and just’, without much in the way of definitive guidelines. This is certainly true, but if an employer takes care to consider each case for adjustments individually, analysing cost in context (rather than arbitrarily deciding a specific figure is too high), considering all the factors set out by the Tribunal and the EAT in this case, as well as considering any other relevant facts, then the wide discretion of the Tribunals should hopefully work in the employer’s favour.

Whether cost alone can justify indirect discrimination (as opposed to a reasonable adjustments claim) is a matter which has already been considered by the EAT, particularly by Woodcock v North Cumbria Primary Care Trust [2011] (discussed in a previous edition of this blog). Before Woodcock, the prevailing approach was a ‘costs plus’ approach, meaning employers would struggle to rely on cost alone as a justification. Woodcock did not depart from such an approach entirely, but did cast some doubt on it. Employers should bear in mind that this current case of Cordell does not directly affect such reasoning, and so, whilst possibly open to doubt, the ‘costs plus’ approach in relation to justifying indirect discrimination still appears to be relevant. We wait to see how the ‘costs plus’ approach develops (or not), and whether this current case, relating as it does to reasonable adjustments, has any impact on that.

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The U.S. House of Representatives Committee on Education and the Workforce has approved the Workforce Democracy and Fairness Act (“Bill”), which is part of the House Republican jobs agenda aimed at removing regulatory hurdles to creation of jobs. The Bill is a legislative challenge to a recent NLRB Rule. That Rule provides for conducting union representation elections within 10 days of the filing of a representation petition with the NLRB— a move favored by unions to expedite elections and, unintentionally of course, to drastically limit an employer’s time to provide employees with a fuller understanding of the facts prior to a vote. In contrast to the NLRB Rule, the Bill would mandate a waiting period of at least 35 days before an election.

The Bill also addresses the NLRB’s recent decision in Specialty Healthcare and Rehabilitation Center of Mobile, 357 NLRB No. 83 (2011). That decision adopted a new approach for determining an appropriate bargaining unit. Specialty Healthcare “opens the door” to smaller, more narrowly defined bargaining units that, being smaller, take fewer votes to become unionized. Under the Specialty Healthcare standard, an employer that argues that a proposed unit inappropriately excludes certain employees must prove that the excluded employees share “an overwhelming community of interests” with employees in the proposed unit. The proposed House legislation would reinstate the more than 50 year old NLRB standard for determining employee-voter inclusions and exclusions in the proposed bargaining unit. That traditional standard includes in the proposed voting unit all employees who share a sufficient—rather than “overwhelming”-- community of interests.

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In a related matter involving a different NLRB Rule, several national trade associations have filed federal lawsuits to prevent the NLRB from enforcing another Rule that would require employers to post a notice notifying employees of their rights under the National Labor Relations Act. The multiple judicial challenges-- now consolidated in the District of Columbia in federal court—are before the court on motions for summary judgment to declare the Rule unlawful and block the Board from implementing and enforcing it.

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Employers could face significant unanticipated penalties under TUPE and collective redundancy legislation as a result of the Agency Workers Regulations 2010 (AWR) which came into force on 1 October 2011.

The AWR adds to the list of mandatory information to be provided to employee representatives under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006) and collective redundancy legislation (s.188 of TULR(C)A 1992). From 1 October 2011, the AWR requires that employee representatives also be given information about the use of agency workers by the transferor including:

• the number of agency workers working temporarily for and under the supervision and direction of the employer;
• the parts of the employer's undertaking in which those agency workers are working;
• the type of work those agency workers are carrying out.

The requirement is extensive since information is required in respect of all agency workers working "temporarily for and under the supervision and direction" of the employer. Under TUPE, the employer is the employer of any affected employees which is widely defined to include not just transferring employees but also those affected by the transfer, or those who may be affected by measures taken in connection with it. Hence, if only part of a business is transferred, it is not only necessary to provide information about agency workers working in the relevant part but also those working in all other parts of the employer’s business, provided they are under the supervision of the transferor. Agency workers working temporarily in the business or part that is transferred will not, however, transfer along with the employees of the transferor who are wholly or mainly assigned to the business. Nor does TUPE give them the right to participate in the election of the employee representatives.

However, a failure to comply with this new requirement could result in the employer receiving a punitive award of compensation of up to 13 weeks' actual pay per affected employee under TUPE and 90 days' actual pay per affected employee under the collective redundancy legislation.

The AWR makes no allowance for employers who had already complied with their TUPE/S.188 obligations prior to the additional requirements of the AWR coming into force on 1 October 2011. It follows that an employer risks incurring such penalties unless they comply with these extended requirements to provide information prior to the TUPE transfer or the collective redundancies taking effect. Further, to comply with the AWR it would be prudent for an employer to update the information provided to employee representatives if the number of agency workers fluctuates prior to the transfer date (in the case of TUPE transfers), or the date the redundancy dismissal take effect (for collective redundancy dismissals).

For further information, contact Ruth Bonino or any member of the Reed Smith employment team with whom you normally deal.

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This post was written by William Bevan, III and Joel S. Barras.

As we noted in our August 26 posting, the National Labor Relations Board (“Board”) has adopted a Rule that requires all employers covered by the National Labor Relations Act (“Act” or “NLRA”) to post a notice notifying employees of their rights under the Act. This requirement will apply to some 6 million private-sector employers, but not agricultural, railroad, airline or very small employers. The Rule is to inform employees – both unionized and non-unionized – of their rights under the Act, similar to posting requirements under the FLSA, FMLA and a recent Department of Labor rule requiring posting of NLRA rights by federal contractors.

Originally, the Rule was effective November 14, 2011. However, the NLRB has recently extended that deadline to January 31, 2012. The NLRB explained its reasoning for the extension as follows: “The decision to extend the rollout period followed queries from businesses and trade organizations indicating uncertainty about which businesses fall under the Board’s jurisdiction, and was made in the interest of ensuring broad voluntary compliance.” The Board also noted that the Rule was not otherwise amended and that no future changes are contemplated.

Therefore, unless one of the legal challenges filed by several national trade associations is successful in enjoining the Board from enforcing this Rule, employers will be required to post the 11-by-17-inch poster in a conspicuous location seen by all employees in the workplace by the new January 31, 2012, deadline.

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In a speech this afternoon to the Conservative Party Conference, George Osborne Chancellor of the Exchequer has confirmed that the qualifying period for standard unfair dismissal claims is to be increased from one year to two from 6 April 2012. This statement does not come as a great surprise since the issue was the subject of a Government consultation earlier this year. The Chancellor said that this proposed change is one of a raft of measures to help small businesses. It is notable that the proposed extension of the qualifying period is not confined to small employers but would appear to affect all employers, irrespective of size. The Government has expressed the hope that by increasing the limit, employers will be more encouraged to take on new staff. As this change in the law would represent an erosion of employee rights, it is controversial and the unions in particular have expressed their opposition. It will, however, be welcomed by employers since it will make it easier for them to dismiss employees with less than two years’ service. 

Strong views will no doubt be expressed on both sides concerning the change, but will it make much difference in practice? 

• The Government hopes that the number of standard unfair dismissal claims will drop by about 2000 per year. A reduction may well occur as employees who have not acquired precisely one year and 50 weeks’ continuous employment will not be entitled to make a claim for unfair dismissal, so will be more vulnerable to dismissal without their employer following the appropriate procedure.
• It is likely, however, that there will be an increase in the number of discrimination or whistleblowing unfair dismissal claims, some of which are likely to be spurious. There is no qualifying period of employment for such claims and, significantly, neither have an upper compensation limit (unlike standard unfair dismissal where the limit currently stands at £ 68,400). Employees may therefore be inclined to bring more claims of this nature but it is possible that the proposal to introduce fees for bringing a claim in the Employment Tribunal might act as a deterrent to some extent.
• Employers might become less focussed on dismissing poor performers early on. Prudent employers will often make use of probationary periods and will have therefore terminated the employment of those employees with whom they are unhappy, well before the current one year qualifying period is up.   For them, having the extra year to dismiss may perhaps not make a great difference in the ordinary course. Other less diligent employers may be tempted to delay performance management problems for longer than at present.  
• In the difficult economic situation which businesses now face, employers may be tempted to select employees with less than two years’ service for redundancy rather than choosing longer service employees whose dismissals would be more costly (since they will trigger statutory redundancy pay). Employers should remember, however, that any employer proposing to dismiss 20 or more employees by reason of redundancy is required to observe the collective redundancy obligations of informing and consulting trade unions or employee representatives. Hence, even though employees with less than two years’ service might not have the right to redundancy pay, they will still be counted for the purposes of assessing whether collective redundancy obligations are triggered.

This isn’t the first time that there has been a qualifying period of two years. The limit prior to 1999 was also two years and was reduced by the Labour Government. Prior to this change in the law, there had been a legal challenge that the two year limit was itself indirectly discriminatory on the grounds of sex because women tended to have shorter service than men (R v Secretary of State exparte Seymour-smith and Perez (No.2) [2000] IRLR 263). The challenge was unsuccessful because although the House of Lords found that the limit did result in a disparate impact between men and women, it was objectively justified. However, the Government proceeded to change the law anyway since it had already committed to making the change in what was one of the first pieces of legislation of the incoming Labour Government. It is therefore conceivable that the increase could be subject to another such challenge since the question of whether the increase is objectively justifiable will turn on the statistical evidence presented to the Court at the relevant time. 

Another possible challenge might come on the grounds of indirect age discrimination. It is not inconceivable that statistical evidence could be adduced to show that the change has a disparate adverse impact on younger workers because they are less likely to have two years’ qualifying period of employment. If such evidence could be found, the Government would have to show that it had a legitimate aim in increasing the limit and that as a means of achieving that aim, the increase in the qualifying period was proportionate.   If, for example, the Government argues that its aim is to encourage employers to recruit more staff, one would assume that for that to succeed, there would have to be statistical evidence linking the change in the law with job creation. Even if that were possible, one can foresee arguments about alternative options that might have had a lesser detrimental impact on younger employees such as a reduction in the upper limit of the compensatory award for unfair dismissal.   It may not be an easy case for the Government to prove!

Click here for the Government's press release.

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It is common in an outsourcing situation for the incoming service provider to undertake the service at a different location to the client or the existing service provider. In this situation, case law now exposes the incoming service provider to a risk of automatically unfair dismissals.

The change in location will amount to a redundancy situation unless the employer is able to invoke clear and unambiguous mobility clauses. However, according to an Employment Tribunal decision this year, the change in workplace location of itself will not be an economic, technical or organisational reason entailing a change in the workforce (an “ETO reason”). If there is no ETO reason, any dismissal due to an employee refusing to move to the new workplace will be automatically unfair as such a dismissal is connected to the transfer.

This seems to lead to the absurd conclusion that in any outsourcing situation where the new service provider undertakes the service at a new location and attempts to move the workforce from the existing location to the new location, there will be a risk of employees claiming automatically unfair dismissal.

What can an incoming service provider do about this? For information on strategies to minimise the risk of automatic unfair dismissal claims in this situation, please contact Thomas Ince at Reed Smith on 020 3116 2998.

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