European Court clarifies when collective redundancy consultation obligations apply

The Court of Justice of the European Union (“CJEU”) has today given its decision in the case of USDAW and others – v – Ethel Austin and others, otherwise known as the Woolworths case. The CJEU has decided that, in determining whether collective redundancy consultation obligations are triggered, an employer need only consider proposed redundancies in each of its ‘establishments’ separately, and not all proposed redundancies in aggregate across all sites.


UK law requires that, where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, collective consultation must take place prior to the dismissals taking place. During the administration of Woolworths and Ethel Austin, the administrators proposed that thousands of employees across the two companies’ stores throughout the UK would be dismissed by reason of redundancy. Collective consultation took place with the employees in larger stores, where it was proposed that 20 or more employees would be made redundant. However, in the smaller stores, where fewer than 20 employees were affected, the employer did not collectively consult. This was challenged by the employees affected and the trade union, USDAW. They regarded it as unfair (and contrary to EU law) that, in the case of mass redundancies where all employees of Woolworths and Ethel Austin were affected, some employees were consulted and others were not, and this depended on the happenstance of the size of the store in which the employees worked.

Tribunal Litigation

Claims were brought in the Liverpool and London Central Employment Tribunals. The Tribunals held that the redundancies in each store needed to be considered separately; therefore, in the smaller stores, where fewer than 20 employees were proposed to be made redundant, the collective consultation obligations were not triggered. The employees appealed.

In the Employment Appeal Tribunal, the EAT held that the UK had applied EU law (from which the collective consultation rights originate) incorrectly. The EAT said that it was necessary for an employer to determine how many redundancies it was proposing to make across its whole undertaking, not in each establishment, to determine whether the threshold of 20 proposed redundancies would be met. Clearly, this would result in the threshold being reached much more quickly, particularly in the case of large employers with operations throughout the UK.

CJEU Decision

The decision was appealed to the Court of Appeal, which referred the matter to the CJEU. The CJEU has decided that the UK has applied EU law correctly. For the purposes of EU law, ‘establishment’ means the entity of an undertaking to which a worker is assigned to carry out his or her duties (in this case, the Tribunals found that the ‘entity’ was each individual store to which an employee was assigned). Furthermore, it was legitimate for the UK to link the collective redundancy consultation triggers to the number of redundancies per establishment, rather than to the employer’s undertaking as a whole.

Effect on Employers

The EAT’s decision in this case constituted a major rewriting of UK collective redundancy law, with an enormous impact on employers, particularly those with many sites across the UK. It will come as a relief to employers that the CJEU has restored the long-established test, meaning that the collective redundancy consultation threshold will be met far less often. However, employers still need to be aware that the test of what constitutes an ‘establishment’ is not, itself, an easy one, and a careful analysis will still need to be undertaken where redundancies are proposed across several sites.

The general election - implications for employment law

With just three weeks to go until the general election, and the main parties having now published their manifestos, what is the future looking like for employment law?

The Conservatives have indicated their support for real terms increases in the National Minimum Wage, rising from its current level of £6.50 per hour to reach £8 per hour by the end of the decade. The Conservatives have also promised to prohibit the use of exclusivity clauses in zero-hours contracts. Employers with more than 250 employees will be required to publish the difference between the average pay of male and female employees.

There will also be restrictions on the ability to strike. Lawful strike action will only be able to take place where at least half of eligible workers have voted. In essential public services, industrial action will require the support of at least 40 percent of those entitled to vote, as well as a majority of those who actually turn out to vote. Restrictions on the ability of employers to hire agency workers to provide cover during strikes will also be lifted.

Of potential far greater significance is the promise to hold a referendum on the UK’s membership of the EU by the end of 2017. Any re-negotiation of the UK’s terms of membership, and any withdrawal from the EU, has the potential for a huge upheaval in employment law.

Labour also promises to increase the National Minimum Wage to £8 per hour, by October 2019. Labour will additionally use government procurement to encourage the higher Living Wage (currently £7.85 per hour, £9.15 per hour in London). Publicly listed companies will be required to report whether they pay the Living Wage.

Zero-hours contracts will also be restricted. Those workers who work regular hours for more than 12 weeks will be entitled to a “regular” contract. Employers will also be prevented from undercutting the pay of permanent staff by using cheaper agency workers.

Labour has also promised to abolish the current Employment Tribunal fees system. It is not clear whether fees will be abolished completely or whether a new system will be put in place with (we assume) lower fees.

The Other Parties

While it is almost certain that either the Conservatives or Labour will be the largest party after the general election, the likelihood that neither will secure an overall majority and may need to form a coalition or looser alliance with smaller parties, makes the policies of those smaller parties significant.

The Liberal Democrats aim to expand flexible working. They aspire to paternity leave and shared parental leave becoming rights from day one of employment. More particularly, the Liberal Democrats will expand shared parental leave and introduce a “use it or lose it” month to encourage fathers to take time off to care for their young children.

The Liberal Democrats will also require employers with more than 250 workers to publish details of pay differentials between men and women. By 2020, those employers will also be required to publish details of those who are paid less than the Living Wage and the difference between top and median pay. Interestingly, the Liberal Democrats also propose measures to prevent employers from avoiding employment rights by wrongly classifying employees as workers or self-employed. In relation to zero-hours contracts, the Liberal Democrats would introduce a right to request a regular-hours contract, and consult on making regular working patterns contractual after a certain period of time.

UKIP proposes that the UK should leave the EU. Given that so many UK employment rights (such as those relating to unlawful discrimination, the regulation of working time, and paid holidays and rights provided under TUPE) derive from EU law, there promises to be a significant upheaval to employment law. If Britain left the EU, UKIP have said that they will seek to incorporate EU derived rights into UK law, but with amendments. The Working Time Directive has been cited as an EU law which would require amendment before being incorporated into UK law. UKIP also promises to give employers the right to choose to employ British citizens first. UKIP additionally proposes to regulate, but not ban, zero-hours contracts.

The Green Party aim to increase the National Minimum Wage to £10 per hour by 2020, with the highest earner in an organisation earning no more than 10 times the pay of the lowest earner. A 35-hour working week would be phased in, together with an end to ‘exploitative’ zero-hours contracts. The Greens would also reduce Employment Tribunal fees.

The Scottish National Party has today launched its “Jobs Manifesto”. Proposals include increasing the minimum wage to £8.70 per hour by 2020 and ending ‘exploitative’ zero-hours contracts.

Plaid Cymru proposes to end ‘exploitative’ zero-hours contracts, as well as to increase the National Minimum Wage to the level of the Living Wage. Plaid Cymru would also require supervisory boards of employers with more than 500 staff to include employee representatives. A ‘fair pay’ scheme will be introduced to link the pay of everyone within a company. The stated aim is to prevent spiralling executive pay while other staff receive no pay increase. A review of the Employment Tribunal Fees system is also promised, together with legislation against ‘blacklisting’.

With the opinion polls so close, it is very unclear at the moment as to what changes will be made to employment law after the election. What is clear, though, is that further changes are coming, with the National Minimum Wage and zero-hours contracts being targets for whoever is elected.

UK Update - Whistleblowing: When is a disclosure made in the public interest?

In Chestertons –v– Nurmohamed, the Employment Appeal Tribunal has given the first appellate guidance on when a worker’s disclosure is made in the public interest, so as to attract whistleblower protection.

Changes to Whistleblowing legislation

In July 2013, the whistleblower legislation was changed to require a worker making a disclosure to have a reasonable belief that the disclosure was made in the public interest. The change was primarily aimed at removing whistleblower protection from workers who made disclosures about an employer’s alleged breaches of their own personal contract of employment, where such breaches had no wider public interest.

Mr Nurmohamed’s disclosures

Mr Nurmohamed was a director at the Mayfair branch of Chestertons Estate Agents. In August and September 2013, Mr Nurmohamed made three disclosures to the effect that Chestertons was manipulating its accounts to the benefit of shareholders with the effect that he, and approximately 100 other managers, would be disadvantaged through receiving lower commission payments. Mr Nurmohamed was subsequently dismissed and brought claims in the Employment Tribunal. One of his claims was that he had been automatically unfairly dismissed for making a protected disclosure, i.e., he had blown the whistle on his employer’s wrongdoing.

The Employment Tribunal agreed with Mr Nurmohamed. It found that Mr Nurmohamed’s three disclosures pointed to Chestertons having breached its legal obligations to the 100 managers in question. This meant that the disclosures were potentially covered by the whistleblowing legislation. The Tribunal also found that the disclosures were made in the (reasonable) belief of Mr Nurmohamed at the time that it was in the interest of the 100 senior managers (and not just himself). The Tribunal felt that this was a sufficiently large group of ‘the public’ to amount to being a matter of public interest. Chestertons appealed to the Employment Appeal Tribunal

The EAT’s Decision

The EAT upheld the Employment Tribunal’s decision. The EAT made the following points about disclosures in the public interest:

  • The question was not whether the disclosures were actually in the public interest, but whether Mr Nurmohamed had a reasonable belief that they were. Mr Nurmohamed had such a reasonable belief in this case.
  • The new requirement for disclosures to be made in the public interest was introduced to do no more than prevent a worker from relying on a breach of his own employment contract, where the breach was of a personal nature and there were no wider public interest implications. The implication of the EAT’s statement is that the legislation should not be read too widely to exclude potential whistleblowing claims.
  • The EAT did not accept the argument made on behalf of Chestertons that Mr Nurmohamed’s disclosures were essentially about a private dispute between Chestertons and its workers regarding their contracts of employment and, therefore, not in the public interest. The Tribunal had recognised that the person that Mr Nurmohamed was most concerned about in making the disclosures was himself. However, it was satisfied that Mr Nurmohamed did have other managers in mind as well. There was no reason to overturn the EAT’s conclusion that this resulted in a section of the public being affected, and the public-interest test was therefore satisfied.

Effect on Employers

This is the first appellate decision on the meaning of ‘public interest’ in the whistleblowing legislation. The EAT has made clear that the public interest hurdle will be fairly easy to clear. Even in circumstances where an employee’s primary motivation in making a disclosure involves a dispute about his or her own contract of employment, that disclosure may be in the public interest so long as other employees are affected, even in what is essentially a ‘private’ dispute between the employer and its employees about their contracts of employment.

In this case, the fact that 100 other senior managers were affected made it relatively easy for the Tribunal to find that a section of ‘the public’ was affected by Mr Nurmohamed’s disclosure. However, it will be interesting to see how this case law develops where fewer employees are affected. What happens if an employee’s disclosure about an employer’s breach of employment contracts only affects that employee and one other? We shall have to wait and see.

Term Limitations in Competitive Sports: Are All German Professional Sports Contracts Invalid?

The Labour Court Mainz is currently creating quite a stir in German professional sports. For decades, it was customary and recognized by the courts that contracts of professional athletes could be limited. The Labor Court in Mainz now sees this differently.

German goalkeeper Heinz Müller brought an action against his club Mainz 05. He had been under a fixed-term contract with the club since 2009, most recently between 2012 and summer 2014. The club Mainz 05 was of the opinion that because of uncertain progress in performance of the player (Müller, in 2012, was already 34 years old), and because of it being customary practice in the industry, a fixed-term contract was permissible. However, the Labour Court Mainz instead agreed with Müller's complaint, and explained that with regard to the last contract of employment, there were no substantive exculpatory reasons. The central assertion of the Labour Court is that even in professional sports, the mere uncertainty of future performance does not justify a limitation.

The club Mainz 05 has announced plans to appeal. The case carries explosive force and is expected to be decided before the Federal Labour Court or the European Court of Justice. This can take time, and there is uncertainty whether countless professional sports contracts contain invalid fixed-term clauses.

The decision can hit the clubs hard. That the uncertain progress in performance of professional athletes should not justify a term limitation is difficult to accept. Careers of professional football players regularly end no later than in the athlete’s late 30s. This must be taken into account. Either the legislature must intervene, or collective bargaining agreements in professional sports must regulate practice-oriented term limitations in the future. First, however, the opinion of the Labour Court Mainz must contend with the judicial instances. Thus, the game is not over by a long shot. We will keep you posted.

Sickness absence management - employee rights, risks and recommendations

This post was written by Séverine MartelMarie BrunotJan WeißgerberMartin GätznerDesmond LiawAnita WanMichael Smith, Amy Ferrington, and Joel S. Barras.


Under French law, the employment contract of an employee who is on sick leave is suspended. The employee is expected to inform his or her employer and the relevant social security organisations of the sickness absence within 48 hours, and will be entitled to receive social security allowances while absent from work.

Depending on the provisions of the applicable collective bargaining agreement, employees may be entitled to receive their full salary for a limited period. In such cases it falls to the employer to pay the difference between usual salary and the allowances provided by the French social security organisations.

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Lock v British Gas - eagerly awaited holiday pay Judgment now handed down

This post was written by Amy Ferrington and Michael Smith.

The recent line of holiday pay cases has led to widespread media coverage suggesting some employers’ payroll costs are due to soar. Businesses have therefore been eagerly awaiting the Employment Tribunal’s decision in Lock v British Gas, which has now been handed down on the question of whether commission structures will impact holiday pay. In short, many employers are to pick up a bill, but the question of quantum here is yet to be determined.


In our previous blog on this case, we described the decision of the European Court of Justice which established that, in some circumstances, a worker’s holiday pay should be calculated based on salary and commission payments, not just basic pay, where commission payments are “intrinsically linked” to the performance of tasks required to be carried out by a worker. The ECJ left it to the Employment Tribunal to decide the method of calculating commission payable to workers away on annual leave.

The case returned to the Tribunal in February this year, and in the Judgment handed down this week, the Tribunal has held that the Working Time Regulations 1998 should be interpreted so that an employee’s holiday pay includes an element of commission. A further Employment Tribunal Hearing will be held to determine the applicable reference period for calculation purposes (i.e., over what period a worker’s earnings should be averaged to calculate holiday pay) and how to quantify claims.


Mr Lock was a sales consultant with British Gas. Mr Lock’s wage was made up of basic monthly salary plus commission payments, which were calculated in accordance with the level of sales achieved. Commission earned in one month was paid in subsequent months. Accordingly, when on annual leave, Mr Lock received commission payments relating to his sales achieved in previous months. However, Mr Lock incurred a reduced income in the months following his annual leave because he had not generated any sales during his period of holiday. Mr Lock argued that the reduced income constituted a breach of the Working Time Regulations 1998.

The case was referred to the ECJ, which held that where a worker's remuneration includes contractual commission, which is determined by reference to sales achieved, a national law that calculates statutory holiday pay based on basic salary alone will be incompatible with the Working Time Directive.

The case therefore returned to the Employment Tribunal, to determine the extent to which the WTR 1998 could be read consistently with the EU law and, if not, whether words should be added to the WTR to ensure conformity.

Tribunal Decision

The Tribunal held that it was necessary to interpret the domestic legislation (i.e., the WTR 1998) to require that employers take results-based commission into account when calculating pay for annual leave. The Tribunal went on to decide that a conforming interpretation of national law could be achieved by adding a new sub-paragraph to the WTR 1998.

The new sub-paragraph provides that where remuneration includes commission or similar payments, employers should calculate “a week’s pay” for holiday pay purposes on the basis that remuneration varies with the amount of work done. In short, this will likely mean that under the WTR 1998, employers are now required to calculate the employee’s holiday pay by reference to the previous 12 weeks’ total earnings, including commission.

Unfortunately for employers, however, key issues have been set aside for determination at a later date, including what the correct reference period should be for calculating commission payments due during holiday (i.e., whether it should be more than 12 weeks). The issue before the Tribunal at this stage was purely conceptual, that is, how to resolve any potential conflict between EU and domestic law.

This means that a definitive conclusion regarding the reference period for calculation and how to quantify Mr Lock’s claim has been reserved for a future Hearing, and therefore employers cannot be assured just yet that all uncertainty in this area has been resolved.

Also, note that a further potential frustration for employers is the reference in the new WTR wording to both commission and “similar payments”. So while this case should ultimately provide clarity for employers on commission payments in particular, this change to the WTR could throw up a wealth of related claims on other types of remuneration.

A Note on Limitation Periods

Employers can take some comfort from the Deduction from Wages (Limitation) Regulations 2014, which came into force on 8 January 2015. The Regulations provide that for most claims for unlawful deductions, there is a new backstop period of two years. This will apply to claims concerning commission, holiday pay, bonuses, fees and other emoluments (but not other types of remuneration, such as statutory sick pay and statutory maternity pay). The Regulations will take effect for claims presented on or after 1 July 2015.

UK update - Type 2 diabetes controlled by diet is not automatically a disability

This post was written by David Ashmore and Amy Treppass.

In Metroline Travel v Stoute, the Employment Appeal Tribunal (“EAT”) decided that employees with type 2 diabetes controlled by diet (rather than medication) are not automatically protected by disability discrimination legislation.

The Facts

Mr Stoute was employed by Metroline and worked for them as a bus driver for 21 years. He suffered from type 2 diabetes. To keep his blood sugar levels low, he followed a low sugar diabetic diet which mainly consisted of avoiding soft drinks.

On 11 March 2013, he arrived late at work and was dismissed for gross misconduct. He claimed that his late arrival at work was the result of diarrhoea, which was a consequence of his diabetes.

Mr Stoute brought claims against Metroline of unfair dismissal, discrimination arising from disability, and failure to make reasonable adjustments. A preliminary hearing took place to determine if type 2 diabetes meant that he was disabled under the Equality Act 2010.

The Employment Tribunal (“ET”) referred to a medical report where it was noted that for two periods of time, Mr Stoute was not taking medication which reduces blood sugar levels, but was following a controlled diet.

In rendering its decision, the ET had regard to guidance from the Equality and Human Rights Commission on the definition of disability. The guidance provides that if a person suffers from an impairment and is undergoing treatment or correction for that impairment, then the impairment is to be treated as having a substantial adverse effect if, without the treatment or correction, the impairment was likely to have that effect.

The ET decided that a controlled diet amounted to treatment or correction of an impairment, and that Mr Stoute was disabled within the meaning of the Equality Act as a consequence of his type 2 diabetes.

The EAT’s decision

The EAT found that the ET had made an error of law in concluding that anyone with type 2 diabetes was automatically disabled under the Equality Act. In the EAT’s view, abstention from sugary drinks did not amount to medical treatment that had to be ignored when determining the issue of disability. The EAT also pointed out that a coping or avoidance strategy (such as a controlled diet) might result in the effects of an impairment being reduced to the extent they are no longer substantial, with the outcome that an individual is not disabled under the Equality Act 2010. The EAT also concluded that diabetes controlled by diet does not amount to an impairment or interference with normal day-to-day activities. The EAT allowed the appeal and ordered Mr Stoute to pay the appellant’s fees in full.

What does this decision mean for employers?

This is an interesting and potentially important decision. Type 2 diabetes is by far the most common type, with 90% of approximately 3.1 million diabetics in the UK having type 2 diabetes. This case illustrates the fact that even where a medical condition is clinically well recognised, that in itself is not sufficient for it to be a disability. This case will also likely make it harder for people suffering from nut allergies, lactose intolerances, etc., who manage their conditions by avoiding certain foods/drinks, to claim that they are disabled. Note that the EAT accepted that medicated diabetes sufferers (type 1 or type 2) are regularly considered to be disabled for the purposes of the Equality Act.

Employment Appeal Tribunal gives guidance on what constitutes sufficient knowledge of a disability to give rise to a duty to make reasonable adjustments

In Donelien v Liberata, the Employment Appeal Tribunal (“EAT”) has held that an employer did not have constructive knowledge of an employee’s disability, even though further steps could have been taken to investigate her condition.


Under the Equality Act 2010, employers are obliged to make reasonable adjustments to help disabled employees overcome disadvantages arising from working rules and practices, the physical features of the workplace, and the need for auxiliary aids. However, that duty only arises where an employee is disabled within the meaning of the Equality Act 2010 and the employer knows (i.e., has “actual knowledge”) or could reasonably be expected to know (i.e., has “constructive knowledge”) that the employee is disabled. This case was decided under the Disability Discrimination Act 1995, which was replaced by the Equality Act 2010. However, the legal principles are the same.

Whether an employer has constructive knowledge of an employee’s disability will be determined by an Employment Tribunal looking at all of the facts of the case, including the information known to the employer and the efforts made to investigate the employee’s medical condition and its effect on the employee. This will often involve referring employees to Occupational Health or another medical expert so a report can be prepared. However, in Gallop v Newport City Council, the Court of Appeal held that the employer in that case had constructive knowledge of the employee’s disability, even though the Occupational Health report indicated that the employee was not disabled. An employer must therefore form its own view of whether an employee is disabled, and cannot uncritically rely on an Occupational Health report.

The facts

Ms Donelien was employed by Liberata as a Court Officer. She was dismissed in October 2009 for unsatisfactory attendance, a failure to comply with sickness notification procedures and a failure to work her contractual hours. This followed Ms Donelien being absent from work for 128 days in the last year of her employment for a variety of different reasons, including stress, colds, stomach upsets, a viral infection and high blood pressure.

Liberata had instructed its Occupational Health provider to prepare a report on Ms Donelien’s condition in May 2009. The enquiries put to the provider included (i) whether Ms Donelien suffered from a medical condition which explained her pattern of absences; (ii) whether any such condition impacted her ability to carry out her role; (iii) how long any such condition would be likely to last; (iv) whether any such condition amounted to a disability; and (v) whether any reasonable adjustments were recommended. The Occupational Health report provided general information but did not fully engage with these enquiries. Accordingly, Liberata followed up by telephone and received a more detailed response. However, although the second response stated that Occupational Health did not believe Ms Donelien to be disabled, it was still lacking in detail, including by not explaining the impact of her medical conditions and their likely duration. However, Liberata did not ask for more information again.

Following her dismissal, Ms Donelien brought Employment Tribunal claims, including for disability discrimination for an alleged failure to make reasonable adjustments.

At a preliminary hearing, the Employment Tribunal determined that Ms Donelien was disabled by August 2009 at the latest. In contesting liability for a failure to make reasonable adjustments, Liberata denied having actual or constructive knowledge that Ms Donelien was disabled. The Employment Tribunal agreed with Liberata.

The decision of the EAT

Ms Donelien appealed to the EAT on two grounds:

  1. In reaching its decision, the Employment Tribunal had failed to take account of Gallop v Newport City Council when determining whether Liberata had constructive knowledge of Ms Donelien’s disability. Liberata had unreasonably relied on the Occupational Health report and failed to form its own view of whether Ms Donelien was disabled.
  2. The Employment Tribunal’s decision that Liberata had done what it reasonably could to investigate Ms Donelien’s medical conditions was incorrect, such that Liberata did have constructive knowledge of her disability.

The EAT dismissed both grounds of appeal.

In relation to the first ground of appeal, the EAT, in reviewing the Employment Tribunal’s judgment, decided that the Employment Tribunal had made a determination that Liberata formed its own view that Ms Donelien was not disabled and had not uncritically relied on the Occupational Health report. The EAT noted that Ms Donelien had a variety of apparently unconnected medical complaints, and that it was also difficult for Liberata to draw a distinction between what she could not do and would not do. As such, the Employment Tribunal was entitled to find that Liberata did not have constructive knowledge of Ms Donelien’s disability from the information available to it.

In dismissing the second ground of appeal, the EAT accepted the Employment Tribunal’s finding that Liberata had taken reasonable steps to understand Ms Donelien’s medical position. Clear instructions had been sent to Occupational Health, and Liberata had followed up when the initial response was lacking in detail. Although some employers may have followed up again when the second response still lacked particularity, the test for whether an employer had constructive knowledge is one reasonableness, and Liberata was not required to conduct the perfect investigation.

What does the case mean?

The case is helpful for employers in that it confirms that Employment Tribunals may give them some latitude in determining whether they have constructive knowledge of an employee’s disability. However, care should be taken in seeking to rely on this case as grounds for limiting investigations into an employee’s state of health. The decision of the Employment Tribunal was highly fact-sensitive, and another Employment Tribunal may have taken a different view.

Accordingly, it remains best practice to conduct as thorough an investigation as possible into the medical reasons for employee absence, and to follow up with Occupational Health providers and other medical professionals if their reports are lacking in detail.

Newsflash: New ACAS Code Now In Force

This post was written by Amy Ferrington.

ACAS has issued a new Code of Practice on Disciplinary and Grievance Procedures, which came into force last Wednesday (11 March 2015).

The new Code has been issued due to uncertainty regarding workers’ statutory rights to be accompanied by a trade union representative or fellow worker at disciplinary and grievance hearings, following the EAT decision in Toal and another v GB Oils Ltd.

In Toal, the EAT held that an employee's right to choose a companion is an absolute right, which is subject only to the requirement set out in the Employment Relations Act 1999 that the companion be a trade union representative or fellow worker.

This decision was at odds with the previous version of the ACAS Code, which stated “To exercise the right to be accompanied a worker must first make a reasonable request. What is reasonable will depend on the circumstances of each individual case.”

In the new Code, ACAS reflects the decision in Toal, stating “The statutory right is to be accompanied by a fellow worker, a trade union representative, or an official employed by a trade union. A trade union representative who is not an employed official must have been certified by their union as being competent to accompany a worker. Employers must agree to a worker’s request to be accompanied by any companion from one of these categories” (emphasis added).

This could give rise to potential issues, for instance where an employee’s chosen companion is somehow involved in the matter under investigation, meaning that they may have a conflict of interests.

Note that employees may receive compensation for a breach of the right to be accompanied, up to a maximum of two weeks' pay.

No other parts of the ACAS Code have been changed.

UK update - TUPE service provision changes become more complex with the potential involvement of multiple clients and contracts

In Ottimo Property Services Ltd -v- Duncan and another, the Employment Appeal Tribunal has decided that, where several different clients change service provider at or around the same time, each individual service provision change can be considered together to decide how TUPE applies.

The facts

Mr Duncan worked as a site maintenance engineer at a residential estate called Britannia Village. The estate was made up of several different blocks, each of which had a residents' management company. Each of these companies was a separate legal entity which contracted separately for the provision of property management services for each block. Additionally, a general management company at the estate contracted for the maintenance of the common parts, such as the estate car park and gardens.

Initially, Mr Duncan's employer was responsible for providing the maintenance work under most of the maintenance contracts at Britannia Village, but, gradually, those contracts were lost to other contractors. Between May and August 2012, Mr Duncan's employer, Ottimo, lost work under five of the contracts to Warwick Estate Properties. Warwick employed a property manager to work on the contracts and also engaged contractors to provide some of the services. Warwick did not believe that TUPE applied to transfer Mr Duncan's employment to it and did not consider him for the property manager's position. In July 2012, Ottimo terminated Mr Duncan's employment.

Mr Duncan brought a claim in the Employment Tribunal. The Tribunal had to decide whether Mr Duncan's employment had transferred to Warwick under TUPE when Warwick acquired the five contracts. The Tribunal decided that there had been no transfer. The key part of their decision concerned whether there had been a "service provision change" from Ottimo to Warwick which might have caused TUPE to apply to transfer Mr Duncan's employment.

Service Provision Changes under TUPE

Regulation 3(1)(b)(ii) of TUPE says that a service provision change can occur where:

"activities cease to be carried on by a contractor on a client's behalf……and are instead carried out by another person…" [emphasis added]

Ottimo and Mr Duncan argued that the word "client" should not be limited to the singular; in other words, where several clients changed service provider as here, those changes should be considered together as one single service provision change. If there was one single larger service provision change, Mr Duncan would be better able to say that he was assigned to that service, such that TUPE applied to transfer his employment, rather than having the more difficult task of arguing that he was assigned to one of the individual contracts that had been transferred to Warwick.

The Tribunal disagreed. It said that, reading TUPE literally, a service provision change occurred when a single client changed contractor; in other words each client's situation needed to be looked at individually, not together with other service provision changes going on at the same time. In this case, while it could be argued that the service provision change provisions of TUPE applied to the change of contractor made by each individual residents' management company, Mr Duncan was assigned to none of these contracts, and so his employment did not transfer to Warwick under TUPE.

The EAT's decision

On appeal, the Employment Appeal Tribunal overturned this decision. It said that the word "client" in regulation 3(1)(b) of TUPE could be read as the plural "clients", so long as the clients retained their identity before and after the service provision change (as was the case here). However, the EAT was keen to emphasise that there must be some commonality, or link, between those clients for individual service provision changes to be considered together. This does not mean that there needs to be a single "umbrella" contract between all the clients and the contractor. The fact that each client contracted individually with the contractor in this case was not fatal. However, in this case, the EAT said the fact that each individual client contracted with the contractor using the same standard form contract did not necessarily mean that there was such commonality. The case has been sent back to the Tribunal to decide the point.

Practical Issues for Employers

Unfortunately, this case does muddy the waters for employers deciding whether the service provision change provisions of TUPE might apply. The EAT's decision makes clear that where several different clients change contractors at or around the same time, the employer cannot focus on an analysis of each individual contract change to decide how TUPE might apply. Where there is some "commonality", there is a risk that a Tribunal may analyse each service provision change together to decide how TUPE might apply.

For the time being, and until a Tribunal makes a decision on what "commonality" might mean, employers may understandably struggle to come to a conclusion as to whether a contract change needs to be considered in isolation or together with other changes going on at the same time. This may have a significant impact on the analysis of those employees who may be in scope to transfer under TUPE.

Contractual flexibility clauses must be clear and unambiguous to give an employer a right to make unilateral changes

In the case of Norman and others v National Audit Office UKEAT/0276/14, the Employment Appeal Tribunal (“EAT”) confirmed that flexibility clauses in employment contracts which seek to give employers the right to make unilateral changes to the contract’s terms will be interpreted restrictively against employers.

In reaching its decision, the EAT overturned an Employment Tribunal’s decision that the National Audit Office (“NAO”) had the power to unilaterally vary its employees’ contracts in relation to their leave and sick pay terms.

The Facts

Under their contracts of employment, NAO staff had entitlements to ‘Privilege Leave’ (an additional leave benefit beyond standard holiday entitlements) and generous enhanced sick pay benefits. The NAO sought to reduce those benefits and commenced consultation with the employees’ trade union in 2012. That consultation was ultimately unsuccessful in reaching agreement and, in spring 2013, the NAO sought to impose the changes on its employees unilaterally, relying on what it asserted was a clause in the employees’ contracts allowing the NAO to make unilateral changes without the agreement of the employees.

The NAO’s HR Manual contained two key provisions in this respect. The first (the “Variation Clause”) covered changes to terms and conditions of employment and provided that:

  • Conditions of service are “subject to amendment”
  • Any significant changes will be notified to staff by one of a number of specified methods

The second provision entitled “Settlement of Disputes” stated that:

  • Wherever possible, management and the Trade Union will try to reach agreement before implementing any changes that affect staff
  • Changes to working practices or terms and conditions will not be implemented whilst negotiations are taking place, or whilst the issue is under referral to ACAS, unless management considers this essential to the operation of the NAO

The employees sought a declaration from the Employment Tribunal that their terms of employment were unchanged and contained the original Privilege Leave and Sick Pay provisions. However, the Employment Tribunal found in the NAO’s favour.

The EAT’s decision

On appeal, the EAT disagreed with the Employment Tribunal for two reasons:

1. The Variation Clause was not sufficiently clear and unambiguous to give the NAO a unilateral right to amend the employees’ contractual terms.

The statement that conditions of service are “subject to amendment” did not, when read objectively, give the NAO discretion to change contractual terms unilaterally. In fact, the provision said nothing about which party to the contract could amend it and how. The stipulation that significant changes would be notified to staff did nothing to change that, and was entirely consistent with the NAO not having discretion to amend contractual terms unilaterally.

2. The Settlement of Disputes provision did not give the NAO the right to amend the contracts unilaterally.

The EAT made this finding for two reasons. First, on the facts, the provision did not have contractual effect, such that it could not give the NAO a unilateral variation right. Second, even if it did have contractual effect, it could at most give the NAO a power to unilaterally implement changes which were “essential to the operation of the NAO”. The EAT was not persuaded that the NAO had met that criterion.

The EAT therefore determined that the employees’ Privilege Leave and Sick Pay provisions remained unchanged.

What does this decision mean for employers?

The case emphasises the need to be cautious when seeking to rely on purportedly wide flexibility clauses to make unilateral changes to employees’ terms and conditions without their consent. Clear and unambiguous wording will be required to give an employer a discretion to make changes and, in most cases, the discretion will need to be expressly stated to cover the area which the employer is looking to change. For that reason, when drafting employment contracts, express reference should be made to terms where flexibility is likely to be required, such as an employee’s place of work. A blanket general right for the employer to make changes unilaterally to any term of the contract is unlikely to work.

The duty on employers to maintain their relationship of trust and confidence with employees means that, whatever the contractual position – before making unilateral contractual changes – consultation with employees should be undertaken. In this case, the NAO had consulted with the employees’ trade union and taken measures to lessen the impact of the changes. However, that was not enough to overcome the absence of an adequate flexibility clause.

Where employee consent is not forthcoming and changes that are not permitted by the contract are required, an employer could decide to follow a dismissal procedure and offer to reengage the employees on the required new terms. That is, however, always a risky process, not least because it triggers the right for employees who qualify to bring unfair dismissal claims. The process needs to be managed carefully to limit the scope for successful unfair dismissal, breach of contract and other claims.

Whistleblower Protection Around the World

This post was written by Séverine Martel, Marie Brunot, Claudia Röthlingshöfer, Jan Weißgerber, Desmond Liaw, Anita Wan, Michael Smith, Amy Ferrington, and Joel Barras.

Welcome to Reed Smith’s monthly global employment law blog post. This month’s post covers the protection afforded to whistleblowers around the world.


Under French law, employees cannot be sanctioned, dismissed or be subject to direct or indirect discriminatory measures (especially concerning salary, training, reclassification or appointment) for reporting in good faith suspected wrongdoing by their employer.

French companies are not obliged to adopt a written whistleblowing policy. However, whistleblowing procedures in France must comply with the principles set out by the CNIL (i.e., the French Data Protection Authority). These rules are primarily designed to protect employees from invasion of privacy, potential breaches of individual liberties, false denunciation and wrongful data management.

Any form of retaliation taken against an employee who has used a whistleblowing mechanism in good faith is deemed to be null and void. By way of exception to this legal principle, an employee may face a disciplinary sanction and even incur criminal liability should he or she report a violation in bad faith or with malicious intent.


There is no legislation relating specifically to whistleblower protection in Germany. The rights and duties of employees in this respect are determined by the general rules and obligations applicable to the employer-employee relationship. In short, employees must be loyal to their employer and protect its business.

German labour courts have considered the validity of sanctions that employers have applied to employees who have raised concerns with third parties outside of the company (such as police and public authorities), after escalating – or without trying to escalate – an issue with the employer first.

German courts have deemed terminations or sanctions based on whistleblowing actions as invalid, where employees have tried to address illegal behaviour of a colleague/superior internally without success before informing third parties outside the company. The courts have stated that any sanction violates the principle of protection against victimisation and retaliation, provided that the whistleblowing was justified. In such cases, dismissed employees must be reemployed.

The entire whistleblowing topic is still under development in Germany, and several Acts covering these issues have been discussed recently. As there is no clear legal regulation in place, there is still a lot of uncertainty as to which disclosures are protected.

Hong Kong

In Hong Kong, no legislation specifically offers whistleblower protection. To gain protection from having “blown the whistle”, an employee has to rely on other rights found in employment and anti-corruption legislation.

For instance, under the Employment Ordinance (Cap. 57), an employee who gives evidence in any proceedings regarding the enforcement of labour legislation, industrial accidents, or breach of work safety regulations, is protected from dismissal and discrimination. An employer who dismisses or discriminates against such a whistleblowing employee commits a criminal offence and is liable to pay a fine of HK$100,000 and/or compensation to the employee.

Further, a whistleblowing employee is protected from allegations of breaches of confidentiality in the following circumstances:

  • Where it is in the public interest to make the disclosure under common law
  • Where the disclosure is made under a Court Order or under the directive of a statutory inspector
  • Where the disclosure relates to suspected money laundering or other serious crimes, and is made under certain pieces of legislation to an “authorised officer” (e.g., a police officer, a member of the Customs and Excise Service, the Joint Financial Intelligence Unit)
  • Where the disclosure relates to corruption and bribery and is made under the Prevention of Bribery Ordinance (Cap. 201)

The Stock Exchange of Hong Kong Limited has amended its Corporate Governance Code to state that it is recommended best practice for all Hong Kong-listed companies to establish a whistleblowing policy, under which employees may raise concerns about possible improprieties in confidence. This is not compulsory, but listed companies that fail to comply must explain non-compliance in their annual report.

United Kingdom

In the UK, the Public Interest Disclosure Act 1998 (“PIDA”) protects whistleblowers in two respects:

  • Dismissal of employees will be automatically unfair if the reason, or principal reason, for their dismissal is that they have made a “protected disclosure”
  • Workers (a wider category of individuals than employees) are protected against being subjected to any detriment on the grounds that they have made a protected disclosure. “Detriment” is defined very widely and can include any circumstances in which a worker might reasonably take the view that they have been disadvantaged.

A whistleblower will only qualify for the protection described above where they have made a qualifying disclosure which is also a protected disclosure.

A qualifying disclosure for these purposes is a disclosure of information which, in the reasonable belief of the worker making it, tends to show that malpractice (e.g., a breach of a legal obligation regarding health and safety) has taken place, is taking place, or is likely to take place. Following reform in this area, a disclosure made on or after 25 June 2013 will only be a qualifying disclosure if the worker has a reasonable belief that the disclosure is in the public interest.

Whether or not a qualifying disclosure will amount to a protected disclosure depends upon the identity of the person to whom the disclosure is made. PIDA generally encourages disclosures to be made internally, to the employer, and further conditions apply to disclosures to third parties.


U.S. law prohibits employers from taking adverse action against employees who engage in whistleblowing activities. Federal law specifically protects those employees who blow the whistle on environmental, workplace safety, and securities laws violations. Federal whistleblower laws also prohibit retaliation against employees who participate in governmental or administrative investigations into potential workplace law violations – even if that employee did not initiate the complaint.

The Occupational Health and Safety Act of 1970, for instance, protects workers from retaliation as a result of reporting/investigating health or safety violations in the workplace. Similar laws address specific industries or niche categories, such as commercial motor vehicle safety and environmental hazards.

The Sarbanes-Oxley Act of 2002 (“SOX”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 work in tandem to protect whistleblowers at all publicly traded companies. Employers at publicly traded companies are prohibited from taking adverse action against any employee in retaliation for that employee “initiating, testifying in, or assisting in any investigation or judicial or administrative action” related to the employer’s violation of the federal securities law. The SOX and Dodd-Frank whistleblower protections are particularly broad, encompassing adverse action taken even in minor part as a result of protected activity. Thus, even if an employee has committed an otherwise terminable offense, if that employee has also engaged in whistleblowing activity, he or she may be protected from adverse employment action.

In addition, many individual states have independent whistleblower statutes protecting employees of private companies. In New York, for example, both public and private employers are prohibited under state law from disciplining or taking retaliatory action against any employee who has disclosed or threatened to disclose policies or practices that violate the law or that otherwise threaten public health or safety.

What is an 'establishment' for collective redundancy consultation purposes?

This post was written by Eleanor Winslet.

The Advocate General has given a preliminary opinion in the case of USDAW & Wilson v Woolworths and others (“the Woolworths case”) on the question of whether there is a requirement to aggregate the number of employees across different locations to meet the thresholds for collective consultation obligations (in England and Wales, of 20 employees in a 90-day period).

Advocate General Wahl found that the meaning of “establishment”, for the purposes of calculating whether the threshold has been met, did not necessarily mean all affected locations owned by the employer. Instead, the Advocate General stated that an “establishment” is effectively a “local employment unit” which it is for a national court to determine.


In England and Wales, collective consultation obligations arise where 20 or more dismissals are proposed at one “establishment” within a 90-day period (as set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”)).

The well-known Woolworths case relates to claims by former employees of the now insolvent retail group, that they should have been entitled to protective awards for failure to comply with collective consultation obligations. The approach taken by Woolworths was to consider whether there were 20 or more employees at one location and, if not, to take the view that collective consultation obligations did not apply.

The Employment Tribunal agreed that each store should be considered as a separate “establishment”. On appeal, the Employment Appeal Tribunal held that the provisions of TULRCA were incompatible with the European Directive from which they were derived. The reason for this is that the Directive does not refer to the need for employees to be based “at one establishment”.

The EAT therefore stated that the words “at one establishment” should be disregarded, meaning that the threshold of 20 employees may be met by calculating the number of dismissals for one employer across all locations. This could have a huge impact, particularly on larger businesses with a number of sites across the country, and could make collective consultation processes far more frequent.

The matter was appealed to the European Court of Justice (“ECJ”) to decide the point.

Questions asked to the ECJ

  • When calculating whether 20 or more employees are at risk of dismissal, does this relate to the number of employees in one establishment or across locations?
  • What is the meaning of an “establishment”?
  • Should the Directive be seen as having “direct effect”, i.e., be able to be relied on even if it was not properly put in place by the member state?
  • Would the member state be liable in circumstances where the employer was insolvent and could not satisfy the claim?

Advocate General’s position

Prior to the matter being considered by the ECJ, Advocate General Wahl set out his view on the case. Two other cases were linked with the Woolworths case and they were considered together.

On the question of whether proposed dismissals across location must be aggregated, he considered that the Directive did not confirm the position either way, and confirmed that it is for the member states to make a choice.

He stated that the meaning of “establishment” was a “local employment unit”. In the decision, the Advocate General referred to the importance of having protection in place where a large number of dismissals are to be made in the same local area (given the impact this would have on the local community and the limited jobs available in one location). This suggests that there should be some geographical limitation when assessing an establishment. The Advocate General also stated that a local employment unit could be determined by member states, and would be on the facts of each case.

The Advocate General declined to give an opinion on the questions relating to direct effect and liability of member states.

What does this mean for employers?

While it is not certain that the ECJ will follow the Advocate General’s opinion, this is usually the case.

A number of questions remain unanswered, but the good news for employers is that the decision suggests that when calculating the number of proposed dismissals, an “establishment” should relate to employees within the same general locality, even if this is not limited to one office or location.

When thinking about whether the collective consultation obligations should apply, employers should look at whether employees are located in such a way that they could be considered to be a “local employment unit”. Existing case law suggests that there should be a distinct entity in place with a degree of permanence and stability which has a structure in place to enable it to fulfill certain tasks (for example, a number of sites controlled by a regional management structure might be regarded as a “local employment unit”). It will be a question of fact whether employees across locations should be aggregated when assessing whether the 20-employee threshold is met.

An Introduction to Global Reductions in Force - Reed Smith To Present Teleseminar on January 29

Reductions in force – also known as collective redundancies – can be daunting for employers, both in dealing with employee issues and protecting the company from liability. On Thursday, 29 January 2015, my partners and I will present a primer on what employers need to know about redundancies in four key jurisdictions: the UK, France, Germany, and the United States. We’ll address:

  • What qualifies as a redundancy/RIF in each jurisdiction?
  • When is an employer required to consult with employees before a dismissal?
  • What happens if an employer wants to dismiss only some employees in a group?
  • Are employers required to consider alternatives to dismissal?
  • What payments are dismissed employees entitled to?
  • What liabilities could an employer face it if doesn’t comply with its obligations?

Joining me will be Reed Smith Labor & Employment partners Severine Martel in Paris, David McAllister in Pittsburgh, and Jan Weissgerber in Munich.

The teleseminar will be presented at two times to accommodate schedules: 9:00 a.m. ET / 2:00 p.m. GMT and 12:00 p.m. ET / 5:00 p.m. GMT. Employers are invited to register here for the time that best suits your schedule.

Post-termination restrictions in a nutshell - to what extent will they protect your global business?

This post was written by Michael SmithAmy FerringtonSéverine MartelMarie BrunotJan Weißgerber, Desmond Liaw, and Anita Wan.

United Kingdom

In the UK, a contractual term restricting an employee's activities after termination of employment will be void for being in restraint of trade and contrary to public policy, unless the employer can show that:

  • It has a legitimate proprietary interest that the term protects
  • The scope and duration of the protection sought goes no further than is reasonable, having regard to the interests of the parties and the public interest

Post-termination restrictions in employment contracts will be subject to greater scrutiny by the courts, when assessing enforceability, than covenants in commercial contracts or other scenarios where the parties are deemed to be of more equal bargaining power (for instance, in the context of a share sale or in partnership agreements).

The current list of potential legitimate interests includes protecting trade connections with customers, trade secrets, and other confidential information; the stability of the workforce; and the goodwill in a business. Avoiding competition per se is not a legitimate interest. Enforceability is determined on a case-by-case basis, and what is enforceable will vary between employees, depending on their roles and seniority. Where a court deems that a restriction is too wide, it will likely declare it void in its entirety, unless a minor amendment (known as “blue pencilling”) would render it reasonable.


In France, post-termination restrictions are quite common in the employment contracts of employees who have valuable business connections, or access to confidential information, or who hold senior responsibilities or sensitive positions.

Under French law, employees are not bound by a post-termination non-competition obligation and can work for a competitor provided that they don’t act unfairly in doing so.

Therefore, to prevent an employee from working for a competitor, a post-contractual non-competition covenant has to be inserted in the employee’s employment contract.

In France, the validity of non-competition clauses is subject to the following requirements:

  • That they are designed to protect the legitimate interest of the employer
  • That they are limited in time and space
  • That they do not prevent the employee from holding a position for which he is qualified
  • That they provide for financial compensation in consideration for the performance of the non-competition obligation. The amount of the financial compensation is usually fixed by the applicable collective bargaining agreement or, if not, must be fixed in the employment contract. It usually ranges between 25% and 100% of the employee’s gross monthly salary to be paid during the application of the clause.

Non-solicitation and non-poaching clauses have to be limited in time (usually no more than two years), but there is no legal obligation to provide financial compensation for these clauses to be valid, except when their scope is very broad and they could be considered as non-competition clauses.

An employee can also be bound by a confidentiality obligation under which he undertakes to keep in the strictest confidence all information, knowledge and data concerning the company and its activities. This clause has also to be limited in time, at least up until the information concerned becomes public.


From a German employment law perspective, ‘post-termination restrictions’ basically refer to non-competition and confidentiality obligations.

German statutory law does not provide for a general post-termination non-compete obligation and thus employees, as a rule, are free to compete with former employers. German statutory law only stipulates a non-compete obligation during the term of the employment and a limited confidentiality obligation.

In order to prevent employees from joining a competitor, the employer has to agree on a post-contractual non-compete covenant with the employee. Unlike in other European countries, post-contractual non-compete covenants in Germany are subject to a number of mandatory requirements. It is important for employers to comply with these requirements as the non-compete otherwise may not be valid and in the end may be unenforceable.

German statutory law, among others, requires any post-contractual non-compete covenant to be in writing bearing original signatures. Furthermore, German law contains limits on the territorial application and covered area of business. It also stipulates that non-compete covenants may not exceed a period of two years. Additionally, a non-compete covenant is only valid if it provides for a compensation of at least 50% of the employee's most recent remuneration. This compensation has to be paid to the employee for every month of the agreed term of non-competition.

Contrary to a general post-contractual non-compete covenant, a mere post-contractual non-disclosure agreement and non-solicitation agreement is valid without compensation. However, the line between a non-disclosure, non-solicitation and non-competition covenant is a fine one.

Hong Kong

In Hong Kong, there is no legislation governing the enforceability of post-termination restrictive covenants. As such, their enforceability will be determined by the Hong Kong courts in accordance with the principles that are well-established in common law.

The starting position is that all post-termination restrictive covenants are unenforceable as a matter of public policy. The courts will be prepared to enforce such covenants to the extent that (i) they are necessary to protect the legitimate interests of the employer, and (ii) they are reasonable in all the circumstances.

In assessing whether or not an employer has a legitimate interest to protect, the courts will consider the nature of the interest it is aiming to protect. For example, legitimate interests worthy of protection may include goodwill (e.g., customer connections), trade secrets, confidential information and workforce stability. Once a legitimate interest has been established, the employer must prove that the post-termination restrictive covenant only goes as far as reasonably necessary to protect that legitimate interest. Reasonableness is ordinarily considered by the courts in terms of (i) the scope of the activities restricted, (ii) the length of time of the restriction, and (iii) the geographical coverage of the restriction.

Evidently, there are no fixed guidelines to adhere to when drafting post-termination restrictive covenants. Their enforceability depends on, inter alia, the employee’s role and seniority, and whether the position requires that degree of restriction. The takeaway point is that extra care must be taken when drafting them, and they should always be tailored to the individual employee – after all, there is no “one size fits all” employment contract.

New year - New social media policy?

Game Retail Limited v Mr C Laws

In what is thought to be the first such case involving Twitter, the Employment Appeal Tribunal has overturned an Employment Judge’s decision that an employee was unfairly dismissed after posting offensive tweets.

Although the EAT declined to give general guidance about the manner in which misconduct involving social media should be dealt with, the issues in the case give rise to some important practical points for employers.


The claimant, Mr Laws, worked for Game Retail as a risk and loss prevention investigator with responsibility for investigating losses, theft, etc., for around 100 stores in the north of England.

As with many businesses, Game used Twitter and other social media for marketing purposes. Each of Game’s stores had its own Twitter account which was administered by the store manager. Mr Laws opened his own Twitter account to monitor the stores for which he was responsible to see if anything happened with their communications that was unacceptable. Of the 100 stores which Mr Laws followed, 65 followed him in return. This was because the manager in the Preston store had posted a tweet encouraging other Game stores to follow Mr Laws.

Over time, Mr Laws started to use Twitter as a way to vent his frustrations at various non-work related issues, using highly offensive language. (See paragraph 13 of the judgment for some examples.)

One of the store managers who followed Mr Laws brought these offensive tweets to Game’s attention. Following an investigation and then a disciplinary hearing, Mr Laws was dismissed for gross misconduct on the basis that he had posted “offensive, threatening and obscene tweets” which were available in the public domain.

Employment Tribunal’s Decision

The Employment Tribunal decided that the decision to dismiss Mr Laws did not fall within the so-called “band of reasonable responses” for these reasons:

  • Mr Laws had not registered on Twitter as part of his job but principally to communicate with friends outside of work using his own mobile phone, and concerning matters which were nothing to do with work
  • There was no evidence that any customer or member of staff was offended by the tweets
  • Mr Laws had not posted anything derogatory about Game or anything which would reveal he was its employee
  • He only engaged in tweeting offensive material in his own time and not on work time
  • Mr Laws did have explanations for some of the offensive tweets

The Employment Judge therefore found that the dismissal was unfair, but reduced Mr Laws’ compensation by 40% to reflect his own contributory fault.

Appeal to the EAT

The EAT allowed Game’s appeal on the finding of unfair dismissal and sent the case back to a different Employment Tribunal to reconsider whether the decision to dismiss Mr Laws fell within the band of reasonable responses open to Game.

The EAT essentially decided that, in respect of various aspects of his reasoning, the Employment Judge had either impermissibly substituted his own view for that of the dismissing employer, or had reached a decision which was perverse on the evidence. For example, the EAT was dissatisfied with the Employment Judge’s reasoning that Mr Laws was only using Twitter for “private” purposes in circumstances where he was followed by 65 of Game’s stores and had not set his account to “private”.

When considering unfair dismissal claims, an Employment Tribunal must decide whether the decision to dismiss falls within the band of reasonable responses. It is not allowed to substitute its own view for that of the employer, which the EAT considered it had likely done in this case.

Practical Tips for Employers

  • Ensure that your reasoning in disciplinary outcome letters is clearly set out. Game’s appeal to the EAT and the subsequent rehearing of the case will no doubt be expensive. By setting out its reasoning in the outcome letter in a clear and detailed way, an employer can help the Employment Tribunal avoid falling into the trap of substituting its own view for that of the employer’s, and possibly avoid having to appeal the Employment Tribunal’s decision.
  • Adopt a social media policy. Ensure that the policy is reviewed regularly, as the nature of social media platforms and the use your business makes of social media evolves. Ensure that updates to the policy are brought to employees’ attention.
  • Ensure your policy deals with the “blurring” between personal and professional use of social media. This is particularly important if your business makes active use of social media for its own marketing communications. In this case, although Mr Laws did not post tweets about Game’s business, the endorsement from the Preston store manager and the large number of stores that subsequently followed Mr Laws created an association between Game and Mr Laws’ account which we suspect both parties now regret.

European Court confirms obesity can be a disability under EU law

In our previous blog, “Are obese workers protected from discrimination” , we confirmed the advocate general’s opinion in the case of Kaltoft v Municipality of Billund (case C-354/13) that while obese workers were not automatically covered by EU disability discrimination law, the worker may be considered to be disabled where he or she is “severely, extremely or morbidly obese”. 

The case has now gone before the Court of Justice of the European Union (“ECJ”), which agreed that there is no general principle of EU law that prohibits discrimination because of obesity, but that if the obesity amounts to a disability (and hinders the full participation of the individual in professional life on an equal basis with other workers), this may be protected under discrimination law. 

We discuss additional points made by the ECJ below.

Is there anything new to consider? 

As is usual, the ECJ followed the opinion of the advocate general which was delivered in July this year. It stated that there was no standalone protection for obese employees. However, the ECJ agreed that obesity may amount to a disability (and therefore be protected on that basis) where there is a: 

“limitation which results in particular from physical, mental or psychological impairments that in interaction with various barriers may hinder the full and effective participation of that person in professional life on an equal basis with other workers, and the limitation is a long-term one.”

The ECJ also echoed the advocate general’s point that the origin of the disability, or the contribution to it by the individual, was not relevant when determining whether a worker was protected.

What does this mean?

When considering whether an obese employee or worker is entitled to any protection under discrimination law, Employment Tribunals will need to consider whether the obesity amounts to a disability in the particular individual’s case. 

Practical points

As with many ill-health issues, the effect on each individual will be unique, and a separate assessment will be needed to determine whether an individual is disabled. However, employers would be wise to consider making reasonable adjustments where an employee is morbidly obese.
For example:

  • Providing particular equipment to work, e.g., a special desk or chair for an office worker
  • Considering whether there are duties that the employee may find particularly challenging because he or she requires a long period of time standing or walking
  • Considering requests for reduced hours or alternative working where the employee suffers from particular fatigue or other physical symptoms which make it difficult to work core hours

Mr Kaltoft raised that as an obese person, he may face barriers to the employment market on the basis of his physical appearance. While this was not directly considered by the advocate general, it is worth being aware that an applicant who is not selected on the basis of obesity may have a discrimination claim. Office “banter” relating to an obese person’s physical appearance may also lead to harassment claims. Managers should be made aware of these sensitivities in equal opportunities training.

Holiday Pay - What Are Your Minimum Legal Requirements?

This post was written by Michael Smith, Joel S. Barras, Séverine Martel, Marie Brunot, Jan Weißgerber, Desmond Liaw, and Anita Pui Ling Wan.

Welcome to the first in a series of blogs covering global employment law issues. Each month we will be sending you information about key employment law topics from our offices across the globe. The first of our topics is:

Holiday Pay – What Are Your Minimum Legal Requirements?

United Kingdom

In the United Kingdom, all workers are entitled to 5.6 weeks’ paid annual leave each year. A worker is either an employee or someone who contracts to perform work personally, but who cannot be regarded as genuinely self-employed (usually, a casual worker would be caught by this definition). If a worker works a standard five-day week, this means that he or she will be entitled to 28 days’ paid leave per year. This total includes public holidays. Workers who work a different number of days per week will have their entitlement adjusted accordingly.

Workers must be paid for their holidays as and when they take them. Employers should not pay a supplement to workers’ normal wages to cover holiday pay (known as rolled-up holiday pay) and not pay when holidays are actually taken. Nor can employers pay workers in lieu of holidays, except on termination of employment. A great deal of controversy has arisen recently as to how to calculate holiday pay. Traditionally, employers have paid only basic salary while workers are on holiday. However, recent decisions of the Court of Justice of the European Union and the UK Employment Appeal Tribunal (see our blogs here and here) mean that, in the future, any sums workers earn by way of commission and overtime may need to be included when calculating holiday pay. This could substantially increase the cost to employers of workers’ holidays.

United States

In the United States, there is no federal law that entitles employees to vacation, paid or unpaid. Several states regulate voluntary payment for vacation, however. For instance, in Massachusetts, if an employer chooses to provide its employees with paid leave, that paid time off is considered wages; thus, withholding vacation payment is tantamount to illegally withholding wages. Similar laws govern paid vacation policies in California and a number of other states. Employees in those states must be paid for any accrued but unused vacation time upon termination of employment.

A variety of states provide for vacation time for public employees, but no state requires a private employer to offer vacation time. All laws regarding pay for unused leave apply only to employers who voluntarily offer paid time off. Therefore, if the employer does not offer paid leave, employees need not be paid for any unused time off.


In France all workers are entitled to five weeks’ paid annual leave. Saturday is a business day in France, and workers accrue 2.5 business days of annual leave per month of work, which amounts to a total of 30 days of annual leave (i.e., five weeks under the French system).

This total excludes public holidays, of which there are 11 per year, and rest days (known as “jours RTT”), which may be granted where employees have worked more than 35 hours per week.

Holiday pay must be calculated according to whichever of the following options is the most favourable to the employee:

  • One-tenth of the total gross salary received by the employee within the “reference year” (i.e., from 1 June to 31 May); or
  • The same salary as if the employee had been working


In Germany, employees’ minimum paid annual leave entitlements depend on their usual number of working days per week. Paid annual leave amounts to at least 20 days in the case of employees working a five-day week, or 24 days for employees who work six days per week. In practice, employees’ actual vacation entitlements (based on employment contracts or the provisions of collective bargaining agreements) are much higher and regularly amount to 26 to 30 days per year for employees with a five-day working week.

As in the UK, a supplement or vacation bonus is not required in addition to the normal salary paid when the employee takes holiday. Also like in the UK, employers cannot pay employees in lieu of holidays, except on termination of employment. In a continuing employment relationship, holiday claims expire at the latest on 31 March of the year following the calendar year to which the holiday entitlement relates.

Recently in Germany, the question of forfeiture of holidays in cases where an employee was incapable of working during the entire calendar year received significant attention. Pursuant to several decisions of the Court of Justice of the European Union and the German Federal Labour Court, vacation claims of sick employees will not be forfeited sooner than the expiry of 15 months after the vacation year’s end. Well-drafted vacation clauses in employment contracts can avoid the extensive accumulation of vacation claims of employees on long-term sick leave. A review of contract templates can therefore help an employer improve its position.

Hong Kong

In Hong Kong, the Employment Ordinance (Cap. 57) (the “EO”) only grants paid annual leave to employees who have been employed for not less than 12 months (this is called “statutory annual leave”). The number of days granted depends on the employee’s number of years’ service. For example, an employee who has been working for at least one year, but less than three years, will be granted seven days of annual leave.

The preferred approach taken by many Hong Kong employers is to provide in the employment agreement an agreed number of annual leave days (this is called “contractual annual leave”). Since statutory annual leave is an employee’s minimum entitlement, contractual annual leave must exceed statutory annual leave.

Employers cannot pay employees in lieu of annual leave, except on termination of employment. However, the EO allows an employee to choose to accept payment in lieu of that part of his/her leave entitlement that exceeds 10 days. For example, an employee who is entitled to 12 days' annual leave can take 10 days' leave and accept payment of the equivalent wages for the two days' leave.

The daily rate of annual leave pay is the average daily wages earned by the employee in the 12 months preceding the annual leave (or the shorter period if he/she was employed for less than 12 months). “Wages” should not be taken to mean basic salary only, as the EO has defined it to include, inter alia, commission, overtime pay, tips and service charges.

Gender equality and pay

This post was written by Thomas McLaughlin and Laura E. Philips.

This summer, 30 female managers, backed by the Transport Salaried Staff Association, launched an equal pay claim against Network Rail. The managers allege that they are being paid between £3,000 and £4,000 less a year than male colleagues doing the same job. The TSSA claims that if these 30 claimants are successful, 3,000 female employees of Network Rail could be eligible for pay rises, costing Network Rail in excess of £10 million per year.

This claim highlights that the gender pay gap, although narrowing, is still very much present in 2014. This is particularly evident looking at recent figures released by the House of Commons Library which show that in 1997 the pay gap between men and women was 27.5 per cent, over the following years it narrowed steadily, but in 2013 it rose slightly from 19.6 per cent to 19.7 per cent.

Legislating for Change – Equality Act 2010

Publication of Pay Information

Some commentators argue that Section 78 of the Equality Act 2010 could be part of the solution.

Section 78 (which is not yet in force) enables the government to issue regulations requiring employers who have 250 or more employees to publish information about the difference in pay between female and male employees.

If the section is brought into force, the regulations made under it will be able to specify what information is to be supplied about the employer and employee, as well as the form and timing of any publication. Additionally, an employer may be required to publish this information annually (but no more frequently). If an employer does not comply with the publication requirements, they could face civil enforcement procedures or be liable for a criminal offence, punishable by a fine of up to £5,000.

The Explanatory Note to Section 78 says the government wants large private and voluntary sector employers to voluntarily publish information about the difference between pay for men and women as opposed to being required to provide information by regulation. In order to facilitate this, and to encourage employers to improve gender equality by means of greater transparency, the government developed 'Think, Act, Report' which provides employers with a framework to help identify issues in relation to pay, to address inequalities and to share their findings with other companies.

In order to allow time for voluntary participation to gain momentum, the government decided that it would not create regulations under this section before April 2013, and then only if sufficient progress on voluntary reporting had not been made.

However, despite the current voluntary reporting scheme in place, Section 78 continues to gain increasing media interest due to the on-going gender pay gap issue. For example, Grazia is petitioning for Section 78 of the Equality Act 2010 to be enacted as it feels that the gap is still not being addressed effectively. The petition is being championed by Grazia’s editor-in-chief Jane Bruton, who states that the fact that women essentially earn 80p for every pound that men receive is an issue that needs to be redressed, and swiftly.

Equal Pay Audit

Alongside this, the Equality Act 2010 (Equal Pay Audits) Regulations 2014 came into force on 1 October 2014. These regulations state that employers who lose a claim for equal pay or sex discrimination in relation to pay will be required to carry out an equal pay audit, unless a specific exemption applies (for example, the disadvantages of an audit would outweigh its benefits, or the employer is a “new business”).

The Employment Tribunal will decide the scope of the audit (which may include the entire workforce) and the minimum requirements for an audit will be as follows:

  • The audit must include information relating to the pay of the affected individuals.
  • The audit should identify any differences in pay and the reasons for those differences, including the reasons for any potential equal pay breach that is identified.
  • The audit should include the employer’s plan to prevent equal pay breaches occurring or continuing.

Employers will be required to publish the audit on their website within 28 days of completion and notify employees (other than in exceptional circumstances). The audit must then remain on the website for a minimum of three years after initial publication. Evidence of publication must be provided to the Employment Tribunal within 28 days; a failure to do so may be considered contempt of court.

If the Employment Tribunal finds that an employer has failed to meet the requirements of the audit, or the employer fails to provide evidence of the audit, the Employment Tribunal may fine the employer up to £5000.

Practical Points for Employers

  • The Equality Act 2010 has put the spotlight on the gender pay gap, and therefore employers must not ignore equal pay issues.
  • If it is not existing practice, it is advisable to conduct a voluntary audit of current remuneration practices and identify any potential issues before they arise.
  • Voluntary audits need not be published or distributed to employees, and are considered good business practice. Note, however, that they may be disclosable in any subsequent litgiation.
  • Employers should be aware that being ordered to carry out an audit may have adverse consequences in addition to the administrative cost, such as further equal pay claims due to increased employee awareness.
  • Employers may also wish to join the voluntary publication of information scheme to demonstrate their transparency and align themselves with best practice in the market.

Shared Parental Leave Regulations come into force

The Shared Parental Leave Regulations are now in force. Parents of children who are due to be born or adopted on or after 5 April 2015 will be entitled to 50 weeks of shared leave, and have the opportunity to request leave either simultaneously or consecutively, in continuous or discontinuous blocks.


The UK Government set out in its Programme for Government that it would 'encourage shared parenting from the earliest stages of pregnancy - including the promotion of a system of flexible parental leave'. Today the new system comes into force, and employers may expect requests for Shared Parental Leave for parents of children due to be born or adopted on or after 5 April 2015.

Additional Paternity Leave, which currently allows mothers or primary adopters to transfer leave‎ to their partners, will remain in force in respect of children due to be born or adopted prior to 5 April 2015.

What does the new right entail?

The default position for parents remains that they are entitled to 52 weeks' maternity/adoption and 2 weeks' paternity leave. However, if the mother or primary adopter opts to curtail their maternity/adoption leave period, the remaining leave can be divided between the parents. Please note that it remains compulsory for a mother to take 2 weeks’ maternity leave following the birth of her child and her maternity leave can only be shared after that time (so, in theory, up to 50 weeks of the maternity leave may be shared).

The parents then have the right to request whichever pattern of leave they wish, although this is subject to the employers of both agreeing to that pattern.

How does Shared Parental Leave differ from Additional Paternity Leave?

  • Shared Parental Leave is more flexible and can be tailored to each family's requirements as long as these fit with the parents' employers;
  • parents can take leave at the same time;
  • parents can take leave in a number of blocks;
  • fathers/partners are able to take a far longer period of leave up to a maximum of 50 weeks (compared to up to 26 weeks from the 20th week after the baby was born under the Additional Paternity Leave provisions).

What notifications are required?

The administration of the Shared Parental Leave right is more complex than‎ the previous system. To qualify for the right, employees must provide the following notices to their respective employers:

  • Notice to curtail maternity leave;
  • Notice of entitlement and intention to take Shared Parental Leave; and
  • Period of leave notice.

There are complex provisions in place relating to when the curtailment notice may be revoked. There is also the potential for three separate period of leave notices to be issued.

Are employers bound to provide the requested leave?

Where the eligibility requirements are satisfied and notices are provided within the relevant timescales, an employer must agree to any request by an employee to take continuous leave in one block. Where the employee requests to take leave in a number of discontinuous blocks, the employer is able to refuse this request without giving reasons.

What about pay?

Employees who are eligible will be entitled to up to 37 weeks’ statutory shared parental pay which may be shared between parents.

It will be interesting to see whether employers choose to make enhanced pay available to those on Shared Parental Leave, if they currently enhance maternity pay. The Civil Service announced in October that they were intending to enhance shared parental pay, and other employers may follow suit. There is an argument that failure to do so may lead to indirect sex discrimination claims. The point was raised, unsuccessfully, in the case Shuter –v- Ford Motor Company (3203504/13) in relation to the Additional Paternity Pay provisions, but this failed in large part due to the particular factors of the workforce in question.

Anything else?

In a similar way to other family leave rights, there is a right not to be unfairly dismissed or subject to a detriment as a result of taking or intending to take SPL.

There are also provisions which replicate those relating to maternity leave in relation to the right to return to the same role, if no more than 26 weeks’ leave is taken, or a “suitable and appropriate” role where a longer period of consecutive leave is taken and it is not reasonably practicable for the employee to return to their former role.

Employees are entitled to 20 additional keeping in touch days (known as “SPLIT” days) during the Shared Parental Leave period.

Practical steps

The notification requirements are complicated and so it would be beneficial for employers to put in place a clear Shared Parental Leave policy, including the relevant forms for employees to complete. Providing training to managers would also be useful given the challenges of the new rules. It also is recommended that employers give thought to whether to enhance pay for employees taking Shared Parental Leave.

How much should employers be paying workers for holidays? Part 2

This post was written by Michael Smith and Thomas Ince.


Yesterday’s decision by the Employment Appeal Tribunal (“EAT”) in Bear Scotland Ltd v Fulton and ors (and conjoined cases) on holiday pay has the potential to affect any employer that requires its workers to work overtime. The EAT held that both guaranteed and non-guaranteed compulsory overtime worked by a worker should be included when the employer calculates his or her holiday pay. Importantly, employees can also make claims for backdated holiday pay.

Impact on employers

The decision in Bear Scotland confirms that overtime required to be worked by workers under their contract constitutes part of their ‘normal’ pay. This important finding means that compulsory overtime should be included when calculating holiday pay. ‘Overtime’ in this decision related to non-guaranteed overtime, that is, overtime which the worker is required to work if so asked by the employer but which the employer does not guarantee to provide. Strictly speaking, voluntary overtime (overtime which the worker is not contractually obliged to perform) is not covered by the decision. However, given European case law, it seems very possible that voluntary overtime will be included in calculating holiday pay going forward.

Yesterday’s decision held that any claim for backdated holiday pay is normally only valid if the ‘unlawful deduction from wages’ was made in the past three months or was one of a series of deductions, the last of which occurred in the past three months (with no more than three months passing between each deduction in the series). This will be of some comfort to employers and mitigates some of the concerns that were being reported in the press that claims could be backdated to 1998, but this could still represent a large bill nonetheless. Query whether there is any possibility of a breach of contract claim, going back six years. It will mean that claims can still be made in relation to the end of the busy summer holiday season, if the employee is quick off the mark. Workers are being encouraged to contact their union or ACAS in order to make their claim. Time will tell how big the uptake will be among workers, although some unions have already filed claims which have been stayed pending yesterday’s outcome.

The ruling limits the application to the basic four weeks of holiday that a worker is entitled to under the EU Working Time Directive. However, UK workers are entitled to a further 1.6 weeks of holiday under the Working Time Regulations, to which this ruling does not apply. This raises the possibility that different rates of holiday pay may be applied to different parts of an employee’s holiday entitlement with the consequent difficulties of actually administering this.

Continued uncertainty

To further complicate matters, readers may recall the recent case of Lock v British Gas Trading Ltd, in which the Court of Justice of the European Union held that, in some circumstances, a worker’s commission payments should be included in the calculation of holiday pay (see our blog). Lock was referred back to the UK in order to be applied by the Employment Tribunal, but this has been delayed until February 2015. In yesterday’s case, leave to appeal to the Court of Appeal was granted, particularly in relation to the issue of backdated holiday pay, although a reference to the Court of Justice of the European Union was refused. An appeal is expected to be lodged. As a result, the financial impact on employers is unknown, but as a result of both of these developments, it is expected that it will nonetheless be significant. As we mentioned in our earlier blog, the difficulties of devising a scheme that conforms to these recent decisions will be challenging, and further clarity will be needed.

Going forward

As referred to above, it is very difficult to see what the future will bring for holiday pay. Following yesterday’s judgment, the Business Secretary, Vince Cable, announced that BIS will be setting up a taskforce to urgently assess the impact on businesses. However, this taskforce does not include any unions or employee representatives. One issue that the Institute of Directors (“IoD”), a member of the taskforce, has already highlighted is that workers could now be more likely to book holiday after periods of higher than normal overtime, as this would increase the amount of holiday pay payable (holiday pay usually being calculated by reference to the average of the previous 12 weeks’ earnings). The IoD has called for Parliament to legislate against this outcome.

A further consequence already highlighted is that, with costs for all employers increasing, it may be that it is more cost effective longer term to use agency staff rather than to encourage overtime to be worked by employees.

What is clear is that the holiday pay saga will continue to run for a while yet.

What Ebola means for employers worldwide

This post was written by Thomas Ince and Laura H. Juillet.

As more terrible news of the on-going Ebola epidemic continues to reach us each day, and with the disease showing no sign of slowing, employers around the world are asking what steps they should be taking regarding their employees, both now and in the future, if the disease spreads closer to home.

We take a look below at some of the questions and risks which are concerning employers. You can find out more from our legal experts by signing up for our teleseminar on Wednesday 22 October 2014 (see below for further details).

1. Our sales team regularly travel to West Africa – should we stop these trips?

Depending on the applicable legal system, employers have a general duty of care towards their employees, as well as specific health and safety obligations. These apply equally on foreign business trips as well as in the office. Before considering whether to cancel or go ahead with a specific business trip, make sure you monitor government and insurance guidance carefully, and remember that advice can change very quickly. Failure to follow such advice could put your business at risk of negligence or health- and safety-related claims should an employee become infected on such a trip, and it may invalidate your insurance policies.

If a business trip goes ahead, continue to monitor updates to travel advice, and ensure these are communicated to the individuals who are travelling. Ensure that employees are aware of guidance surrounding avoidance of the disease (hygiene measures, for example). Make sure effective systems are in place should they need assistance when abroad (for example, regarding evacuation or seeking medical assistance if unwell). Check with your insurers that the individual will be covered on the trip. You need to always bear in mind your duty of care to your employees, and carefully consider beforehand any situation which might put them at risk.

2. What can we do if employees refuse to go on such a business trip?

Depending on the applicable legal system, this may be contingent on the employee’s job description and employment contract (whether this is in writing or not). If their contract requires them to make the trip, then refusal could amount to a disciplinary offence. You will need to handle this fairly and reasonably, as you would any other disciplinary matter, making sure you take into account all the circumstances (including, of course, the reason why the individual is refusing – the risk of contracting Ebola and whether this is reasonable in light of government and other guidelines). What constitutes a fair disciplinary sanction will vary in each case, but sanctions against an employee who is refusing to go to one of the three primary affected countries (currently Guinea, Sierra Leone and Liberia) are at the greatest risk of being found to be unreasonable.

3. We’re worried about the risk of people contracting Ebola within the workplace or spreading the virus - can we make our employees stay at home?

Depending on the applicable legal system, you will need to carefully check your internal policies and employment contracts – is there anything which permits you to put employees on enforced leave, or allows you to require someone to work from home? If so, then make sure you operate within the scope of such terms, and act reasonably at all times.

Otherwise, requiring any employee to stay at home instead of coming to work may, depending upon the reasonableness of the decision and current guidelines at the time, amount to a breach of express contractual terms and/or a breach of the implied term of mutual trust and confidence, and may lead to employee claims (such as claims in the UK for breach of contract and/or constructive unfair dismissal). Whether such risks are worth taking may depend on weighing up the risks of such claims, along with the risks in relation to your general duty of care to employees, plus any specific health and safety requirements (such as taking steps to ensure that working practices do not pose undue risks to employees).

If you choose to make an employee stay at home, there are certain ways to minimise the risk of potential claims. Consider, for example, the length of the enforced leave: longer periods will no doubt be more open to challenge, but you will have to take into account the disease’s incubation period (two to 21 days). Consider also the scope of any ban on coming to the office – blanket bans are unlikely to be reasonable. If you are requiring employees to stay at home, make sure they are able to work (unless they are ill), and be prepared to answer challenges from employees who state that they are prejudiced by being required to work from home (for example, those who need to meet clients to earn commission). To avoid claims of breach of contract, unlawful deductions from wages and constructive dismissal, you will need to continue paying employees. Finally, make sure you are consistent and aware of possible accusations of discrimination in the way you implement enforced leave.

4. I’m concerned that some of our employees will refuse to come to work because of the perceived Ebola risk – how can we deal with them?

Such individuals will be in breach of contract and (just as for those employees who refuse to attend a business trip) disciplinary procedures and sanctions may be appropriate. Take all circumstances and reasons into account when carrying out any disciplinary procedures, and act reasonably throughout. If after reasonable investigation you are sure that an employee’s refusal is unreasonable, then disciplinary action may be appropriate.

5. What do we need to be thinking about if there is an epidemic in our home country – do we need a specific plan?

It is advisable for all businesses to have plans in place for emergency situations, such as an Ebola (or other disease) epidemic. Financial services businesses that are regulated will need to consider any specific obligations they are under regarding ensuring business continuity. While many businesses will already have such plans, regularly reviewing and testing them is worthwhile. While the risk of Ebola spreading globally is currently said to be low, now is nevertheless a good time to ensure that effective disaster recovery plans are in place.

6. What should we be saying to employees, both now and if there is an outbreak at home?

Internal communications are key, and will help ensure you meet your health and safety obligations towards your employees. Make sure that effective communications systems are in place to help you monitor any risk – for example, asking employees to let you know if they are travelling to affected countries. Make sure that employees know who to contact when unable to attend work (especially important if many people are off sick). Finally, ensure you have effective communication of the actual risk of the disease (regularly communicating government guidance to your employees, for example). Potential panic caused by a (perhaps mistaken) risk of infection can in itself be hugely disruptive to an employer’s business, and effective communication with employees can help reduce this.

If you want to find out more on this topic from our international labour and employment experts, you can sign up for our teleseminar on Wednesday 22 October 2104 at 5 p.m. GMT / 12 p.m. EST / 11 a.m. CST / 9 a.m. PST. Partners Thomas Ince and Michael Jones will be on hand to guide you through some of the legal issues faced in light of this outbreak, and to provide some practical advice on what steps you should be taking now to minimise any risk to your business.

The end of the "percentage argument" in TUPE negotiations?

This post was written by Laura H. Juillet and Thomas Ince.

Time after time, businesses are faced with (and use themselves) the classic argument in TUPE negotiations: “Of course the employee must transfer under TUPE – he spends more than 50% of his time on the transferring service”.

It is a very convenient and much rolled-out line of reasoning, which can work in both directions (“Of course he doesn’t transfer – he only spends 30% of his time on the transferring service…”). It is both a frustrating and a powerful argument in equal measure – an employer may be firmly telling his opposition in a TUPE negotiation that the argument is irrelevant, while desperately seeking to rely on it in a separate debate.

Can (and should) businesses really rely on this argument? In this article we examine the argument’s validity, and explore how the recent case of Costain Ltd v Armitage and ERH Communications Ltd may change its likely success in service provision change scenarios. We then consider some tips for businesses when using (or rebutting) such an argument in practice.

The classic argument – it boils down to percentages, doesn’t it…?

It is indeed a classic argument – and understandably so: the evidence is often easy to gather, readily presentable, and simple to understand (far easier to understand, usually, than convoluted and often technical and unclear descriptions of an employee’s actual duties).

But nevertheless, it is not (or should not be) true to say that an employee’s position under the transfer ‘boils down’ to this question alone.

Why not? It is such a classic argument, after all!

The argument that percentages should be determinative of whether an employee transfers is not accurate for two principal reasons, both of which have been reiterated and confirmed by EAT in the recent case of Costain.

Firstly, it ignores the fact that a two-stage process needs to be followed when determining whether an employee should transfer under TUPE. Secondly, it places too much emphasis on one single factor (the percentage of time spent on the transferring service), instead of taking a multi-factorial approach.

A two-stage process

In a service provision change scenario, if “immediately before the service provision change there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client”, any employees “assigned” to that organised grouping will transfer under TUPE.

Parties to TUPE negotiations will often jump to the second part of the equation (whether an employee is “assigned”), before stopping to consider the rest of the test (whether there is a relevant organised grouping). They will say, for example, that an employee who carries out 75% of his work on the transferring service must therefore transfer under TUPE, as he is clearly ‘assigned’ to that part. This might well lead to the correct result under TUPE (or at least will often be enough to persuade the other side in negotiations), but not always.

In the present case, Mr Costain spent an estimated 67% of his time on the transferring part of a communications maintenance contract (the rest being spent on ancillary non-transferring works). The Employment Tribunal found that Mr Costain was assigned to an organised grouping of employees (the parties accepted that there was a service provision change), and therefore should transfer under TUPE to the new service provider.

The EAT, however, was less than impressed with the Tribunal’s handling of this question, finding that it had not properly considered the two steps in isolation. The Tribunal did not seem to have considered, first of all, whether there was an organised grouping of employees which had as its principal purpose the carrying out of the services in question – it just seemed to have jumped to that conclusion. Then, and only then, should the Tribunal have considered whether Mr Costain was ‘assigned’ to such a grouping.

Assignment and percentages

A further mistake which the Tribunal went on to make was to place too great a focus on the question of percentages when determining whether Mr Costain was assigned to the grouping of employees. The EAT was concerned that the Tribunal had not in fact made “a proper examination of the whole facts and circumstances” when determining the question of assignment, and had instead relied too heavily on the magic figure of 67%. The case was therefore remitted to the Tribunal to reconsider the question of whether Mr Costain was in fact assigned.

Established TUPE case law has always made clear that the percentage of an employee’s time spent on a transferring service will often be indicative of whether that employee is assigned to the service, but will not be determinative, and should be considered as part of the bigger picture. Costain confirms this.

The case does not say that percentages should never be used as an argument for or against a TUPE transfer, and indeed the EAT recognises what a useful and understandable argument it is. The case does, however, act as a warning to businesses intending to rely solely on this argument when attempting to avoid or push through a particular TUPE transfer.

How this case helps negotiations

The case does not establish any new points of law regarding TUPE, but does provide useful guidance and indeed ‘ammunition’ for TUPE negotiations. Businesses should remember the following when conducting TUPE negotiations:

  • Don’t jump to conclusions: Follow the TUPE steps carefully when setting out your arguments as to why a particular employee should (or should not) transfer – first establish whether there is an organised grouping of employees with their principal purpose of carrying out the activities for the client. Then, and only then, consider whether the employee in question is assigned to that grouping. Missing out the first step might still lead to the same result, but your arguments will be more convincing if you can show that you are following the same approach that a Tribunal would in resolving the dispute.
  • Don’t rely on percentages alone: It is often tempting to do this, but it is important to find further arguments to support or defeat the transfer. The higher the percentage in question is, of course, the harder this might be; but consider other factors such as the cost and value of the employee to each part of the business, and any managerial responsibilities the employee may have over various parts of the business.
  • But don’t ignore percentages completely: Often, in practice, TUPE negotiations are less about the legal technicalities established by case law, and more about the commercial realities of what employees actually do. The question of percentages can therefore be a useful and practical indicator of which business most requires the employee after transfer. If you are negotiating a TUPE transfer, do not be afraid to use percentages to prove your point: it is a clear and effective example that is hard to dispute, and the Costain case does not change that. Just remember, though, that if you have to continue the dispute in a Tribunal, the judge may now be more inclined to pick apart all other arguments before agreeing with you.

Employment Law Changes Taking Effect 1 October 2014

As is generally the case each year, 1 October brings a number of changes to employment law.

The key changes taking effect 1 October 2014 are as follows:

National Minimum Wage Increase

The annual increase to national minimum wage rates for all workers will take effect, such that from 1 October:

  • Workers aged 21 and over will be entitled to £6.50 per hour
  • 18-20 year olds will be entitled to £5.13 per hour
  • 16-17 year olds will be entitled to £3.79 per hour
  • Apprentices will be entitled to £2.73 per hour

Power to order Equal Pay Audits

From 1 October, Tribunals will have the power to order employers found to be in breach of equal pay law under the Equality Act 2010 (i.e. those who have lost an equal pay claim brought on or after 1 October 2014) to carry out equal pay audits.

The audit will have to identify any differences in pay between men and women and the reasons for these, as well as the reasons for any equal pay breach and how the employer plans to avoid further breaches in the future.

The employer will be required to publish the relevant gender pay information and make it available on its website for at least three years – therefore making it available to competitors, customers and potential job applicants.

Time off for ante-natal appointments

An expectant father or the partner of a pregnant woman will be entitled to take unpaid time off work to accompany the woman to up to two of her ante-natal appointments. “Partner” includes the spouse or civil partner of the pregnant woman and a person (of either sex) in a long-term relationship with her. The right to time off is capped at 6.5 hours for each appointment.

An employer is not entitled to ask for any evidence of the ante-natal appointments, such as an appointment card, as this is the property of the expectant mother attending the appointment.

However, an employer is entitled to ask the employee for a declaration stating the date and time of the appointment; that the employee qualifies for the unpaid time off through his or her relationship with the mother or child; and that the time off is for the purpose of attending an ante-natal appointment with the expectant mother that has been made on the advice of a registered medical practitioner, nurse or midwife.

Reserve Forces Reform

The statutory two-year service requirement for bringing an unfair dismissal claim will no longer apply in cases where the dismissal is connected with the employee’s membership of the Reserve Forces. The order also makes provision for the secretary of state to make payments to small and medium-sized employers of reservists who are called out for service.

Are obese workers protected from discrimination?


An opinion on whether an obese worker is protected under discrimination law has been issued by Advocate General Jääskinen. It was found that while obese workers are not automatically covered, where a worker is "severely, extremely or morbidly obese", the worker may be considered to be disabled and therefore protected under discrimination law.

We discuss this in more detail below.


The case of Kaltoft v Municipality of Billund (C354-13) involved Mr Kaltoft, who was a childminder for the Municipality of Billund and was dismissed purportedly for redundancy after 15 years with his employer. Mr Kaltoft had been obese throughout his employment, and at one time had a BMI of 54. It was alleged that there had been "discussions" about Mr Kaltoft's obesity during the dismissal process and Mr Kaltoft sought to bring a claim that he had been dismissed because of his obesity, which amounted to discrimination on the grounds of obesity.

The Danish District Court sought clarification on whether this was a valid claim from the European Court of Justice.


The two questions that were referred were:

  • Whether there was a self-standing ground of discrimination which applied to obese workers
  • Whether obesity was always or is in some cases included in the scope of disability under the Equal Treatment Directive

Standalone principle of obesity discrimination?

The Advocate General dismissed the idea that there was a standalone principle of EU law that applied to obese workers. The argument raised was that there was a general principle prohibiting discrimination in the labour market. It was clearly stated that discrimination was not prohibited in a generalised way, but rather on specified grounds, e.g., age, disability, etc.

Could obesity amount to a disability?

When looking at whether obesity could amount to a disability under the Equal Treatment Framework Directive (which the Equality Act 2010 implements in Great Britain), the Advocate General confirmed that an obese person may meet the definition of disability under the Directive. It would be a question of degree and would depend on the effects of the obesity, i.e., whether there were long-term physical or mental impairments which hindered the effective participation of the person in professional life on an equal basis with others (a test similar to the one in the Equality Act 2010).

The Advocate General referred to the World Health Organisation's classification of obesity as being ranked into three classes according to BMI, with Class III or morbid obesity being where an individual has a BMI of higher than 40. In his view, the Advocate General stated that only Class III obesity would likely amount to a disability.

He also stated that the notion of disability was considered to be "objective", and the fact that it was self-inflicted should not preclude the condition from being protected. The Advocate General likened this to precluding disabilities which arose from risk-taking in traffic or in sports. (Note, however, that conditions such as alcoholism are excluded from the Equality Act 2010, but a disability arising from an excluded condition, say liver disease from alcoholism, could be covered.)

Previous case law in GB

This finding is consistent with the recent EAT decision of Walker v Sita Information Networking Computing Limited [2013] UKEAT 0097_12_0802 which came out last year. It was found that a Tribunal must simply consider the definition of disability, starting with whether the individual has a physical or mental impairment. In that case, the Claimant, who was 21.5 stone, suffered from "functional overlay compounded by obesity" which had a number of symptoms (including asthma, diabetes, high blood pressure, and bowel and stomach problems). He was found to be disabled.

What does this mean for GB employers?

While this opinion was given at EU level, it is applicable to decisions made in GB courts. The ECJ needs to make a formal finding, but it commonly follows the Advocate General's opinion.

Therefore, obese workers may be considered to be disabled, depending on the extent of the obesity and the impact on the particular individual. A good rule of thumb is to consider that individuals with BMI of around 40 or higher, or who appear to be morbidly obese, could well be covered.

Practical points

As with many ill-health issues, the effect on each individual will be unique, and a separate assessment will be needed to determine whether an individual is disabled. However, employers would be wise to consider making reasonable adjustments where an employee is morbidly obese.

For example:

  • Providing particular equipment to work, e.g., a special desk or chair for an office worker
  • Considering whether there are duties that the employee may find particularly challenging because they require a long period of time standing or walking
  • Considering requests for reduced hours or alternative working where the employee suffers from particular fatigue or other physical symptoms which make it difficult to work core hours

Mr Kaltoft raised that as an obese person he may face barriers to the employment market on the basis of his physical appearance. While this was not directly considered by the Advocate General, it is worth being aware that an applicant who is not selected on the basis of obesity may have a discrimination claim. Office "banter" relating to an obese person's physical appearance may also lead to harassment claims. Managers should be made aware of these sensitivities in equal opportunities training.

Planning for an independent Scotland - Employment & Pensions Issues

This post was written by Thomas McLaughlin and William Sutton.

It is less than two months now until the referendum on Scottish independence.

So far as lawyers are concerned, Scotland is already a separate legal jurisdiction.  However, subject to some very minor differences, Scotland’s employment law is sufficiently similar to the law in England & Wales that the majority of employers are able to operate both north and south of the border with little regard for the border itself.

Plainly, all of that will change in the event that Scotland becomes an independent country.

From an employer’s point of view, planning for this eventuality is not entirely straightforward.  The Westminster Government has said that it is not willing to “pre-negotiate” the terms of Scotland’s independence; so even if there is a “yes” vote on 18 September, we do not know any of the details of how an independent Scotland would function.  However, it seems certain that employers will have to confront at least some of the following issues:

  1. Taxation:  As an independent country, Scotland will have its own exchequer.  Employers would therefore need to run a separate payroll for operations where employees will be taxed in Scotland.  Where employees undertake only some of their duties in an independent Scotland, it will be necessary to decide where their employment taxes should be paid.
  2. Currency issues: The Scottish Government envisages that an independent Scotland would continue to use sterling in a formal currency union with the rest of the UK; a position not supported by the UK Treasury.  If an independent Scotland were to adopt a different currency, then employers with Scottish operations would be exposed to exchange rate risk in respect of those operations including in respect of salaries and other labour costs. 
  3. Pensions: There have been vast quantities of material produced analysing the issues that independence would present for both state pension and private pension provision, and it is fair to say that there are significant challenges and unknowns in both areas.  Focusing on private sector occupational pension schemes, the key uncertainty is in relation to what tax treatment Scotland will provide in relation to such schemes.  Other key issues affect defined benefit pension schemes and could have unappealing consequences.  It is not, for example, clear what type of pension protection regime would be put in place by Scotland to deal with underfunded pension schemes of insolvent employers (as these would presumably no longer be covered by the UK Pension Protection Fund).  Defined benefit pension schemes also risk becoming ‘cross border’ schemes overnight which would trigger various consequences including, most significantly, a requirement to fully fund the pension scheme from day one of independence.
  4. Conflict of laws: Immediately after becoming an independent country, Scotland would carry over its existing employment law unchanged.  However, from that point onwards Scottish employment law would diverge from the rest of the UK.  The Scottish Government has already indicated that it would make certain changes to employment law, such as abolishing “employee shareholder” status and reinstating the 90 day consultation period for redundancies affecting 100 or more employees.  Where employees undertake some duties in independent Scotland but are not based there exclusively, it will be necessary to decide which legal system governs the employment relationship.  This is much easier said than done and, in the event of a dispute, the rules concerning the territorial reach of UK employment law are complex and depend very much on facts pertaining to each employee.
  5. Immigration:  This may be a particular issue if an independent Scotland is not initially successful in joining the European Union.  The White Paper produced by the Scottish Government sets out an intention for an independent Scotland to have a points-based immigration system, but beyond this we know little of how easy it would be for employees to live and work in an independent Scotland.

The difficulty with all of these issues is that there is a limit to the amount of planning which an employer can undertake at this stage.  The full details of the functioning of an independent Scotland will only become known in the event of a “Yes” vote.  However, the Scottish government envisages that the country would become independent on 26 March 2016 – i.e. only 18 months after the referendum, which does not leave very much time for employers to make the necessary preparations.

How much should employers be paying employees on holiday?

This post was written by Amy Ferrington and David Ashmore.

With school holidays under way, thoughts of UK employees are now turning to their summer holidays. Given the far-reaching implications of the recent case of Lock v British Gas, employers with employees on commission arrangements need to take special care when paying employees during annual leave.     


The recent European Court of Justice decision in the case of Lock v British Gas has established that, in some circumstances, a worker’s holiday pay should be calculated based on salary and commission payments, not just basic pay, where commission payments are “intrinsically linked” to the performance of tasks required to be carried out by a worker.


Mr Lock is a sales consultant with British Gas. Mr Lock’s wage is made up of two elements: (i) a basic monthly salary and (ii) commission payments calculated in accordance with the level of sales achieved (which make up approximately 60% of his monthly wage). Commission is paid subject to customers completing contracts, and therefore commission earned in one month will be paid in subsequent months. When on annual leave, Mr Lock receives commission payments relating to sales achieved in previous months, and also holiday pay equal to the basic salary he would have received if he was working.

In December 2011, Mr Lock took a period of annual leave. Consequently, Mr Lock incurred a reduced income in the following months because he had not generated any sales during this period of holiday. Mr Lock made a claim to the Employment Tribunal for outstanding holiday pay on the basis that this drop in commission income in future months, as a result of taking holiday, was unlawful. Mr Lock claimed that his holiday pay should include an additional element to compensate him for the loss of opportunity to earn commission during his period of annual leave.

Mr Lock’s claim was unusual because he did not suffer any drop in income at the time he took his annual leave. Rather, his complaint was that, as a result of taking annual leave, his commission “pipeline” was disrupted and therefore he suffered a delayed (or deferred) financial disadvantage. Mr Lock argued he should receive additional holiday pay to compensate for this delayed financial disadvantage.

The Employment Tribunal referred this case to the European Court of Justice (“ECJ”) to ascertain whether the Working Time Directive (the “Directive”) requires loss of the opportunity to earn commission during a period of annual leave to be factored into the holiday pay calculation.

ECJ Decision

The ECJ decided that:

  • Mr Lock was entitled to additional holiday pay to compensate him for not being able to earn commission when taking annual leave
  • It was for the UK courts to decide how that payment would be calculated
  • It was a fundamental principle that during periods of statutory annual leave, workers should be put in a comparable position to periods when they are working.  To deviate from this would be contrary to the motivation of the Directive, which is to ensure that there are no deterrents from taking annual leave.
  • It was not relevant that the commission scheme targets had been adjusted to take into account annual leave (i.e. it was irrelevant that Mr Lock’s commission targets were based on 48 weeks’ work as opposed to 52)

In short, the ECJ held that the amount an employee receives as holiday pay should correspond to an employee’s “normal” pay. Where the employee’s remuneration has variable elements (which might include overtime, commission or allowances), these will form part of the employee’s normal pay where they are “linked intrinsically” to the performance of their duties.

Implications of the Decision

This decision will have a significant impact on UK employers and workers. 

UK Employers

Employers face the difficult task of trying to devise a Lock-compliant commission scheme. The argument of British Gas that their commission targets and payments were based on 48 weeks’ work (and not 52) was rejected by the ECJ.

The Advocate General proposed compensating employees for holiday periods with an average level of commission calculated by reference to commission earned over the previous 12 months (see the Advocate General’s opinion here). However, it will be up to the UK courts to decide whether UK law can be interpreted “purposively” to comply with the Lock decision and, if so, what calculation method is appropriate.

The extent to which this decision could have a broader impact is difficult to predict. It is unclear whether this principle will only apply to workers such as Mr Lock, whose pay was predominantly commission-based, or whether it could apply where commission is a smaller element of pay. The ECJ itself did not elaborate. All workers who are rewarded based on performance suffer some kind of hypothetical loss of earning capacity (whether through commission/bonus schemes or other performance incentives) during periods of annual leave and, accordingly, the impact of this decision on employers has the potential to be far-reaching.

UK Workers

The decision opens the door to UK workers who regularly earn commission as a substantial proportion of their overall remuneration claiming back pay, in respect of holiday pay which was calculated by reference to basic salary only.

There is no basis to assume from the judgment that these principles will also apply to annual leave in excess of the four-week entitlement derived from the EU Working Time Directive. However, we anticipate that this point will be explored in future litigation. 

Restrictive Covenants - Little way out for employers when the drafting goes wrong

In the recent case of Prophet  Plc - v- Huggett, the Court of Appeal reminded employers how vitally important it is to ensure that the drafting of restrictive covenants is accurate and well thought through.  Overturning an earlier High Court judgment, the Court of Appeal refused to re-write an unambiguous, but commercially meaningless, restrictive covenant to make it commercially effective. 

Prophet developed, sold and updated computer software for the fresh produce industry.  In early 2012, it recruited Mr Huggett as its UK Sales Manager.  Mr Huggett entered into an employment contract with Prophet which included a 12-month non-compete covenant.  The covenant limited its scope as follows:

‘……this restriction shall only operate to prevent the Employee from being so engaged, employed, concerned or interested in any area and in connection with any products in, or on, which he/she was involved whilst employed hereunder.’

In December 2013, Mr Huggett handed in his notice.  He told his employer that he was joining a company called K3 which was a software supplier operating in part of the fresh produce industry.  Prophet believed that Mr Huggett would be breaching the terms of his restrictive covenant to do so and sought an injunction to prevent him taking up employment with K3. 

Prophet brought proceedings in the High Court and an injunction was granted.  In the High Court, the judge accepted that the wording of the restrictive covenant was clear but it was commercially meaningless and offered Prophet no protection.  This was because the covenant sought to prevent Mr Huggett being involved with products in which he was involved while employed by Prophet.  Mr Huggett had only been involved with a very discrete product line while employed with Prophet, and this product was not provided by any other company.  There was, therefore, nothing to prevent him from joining a competitor as no competitor provided the same product.  

The judge’s view was that, although the meaning of the restrictive covenant was clear, something had gone wrong in the drafting and the covenant did not give effect to the parties’ intentions.  The judge was therefore prepared to add the words “or similar thereto” to the end of the restrictive covenant above to give it, what he believed, was the parties’ intended meaning.  With the additional wording, the judge believed that Mr Huggett would be in breach of the restrictive covenant by joining K3 and granted an injunction.  Mr Huggett appealed to the Court of Appeal.

The Court of Appeal overturned the injunction.  The Court found that the wording of the restrictive covenant was plain in that it prevented Mr Huggett from joining another company where he would be involved in the same products as he had been with Prophet.  However, there were no such other companies.  Although this rendered the covenant commercially meaningless, the Court of Appeal did not believe that anything had gone wrong with the drafting.  Rather, the drafting was clear, but the person who had drafted the restrictive covenant had not thought through its effect.  In that case, it was not for the courts to rewrite the restrictive covenant.  It was only if the covenant was ambiguous, with one interpretation leading to a meaningless outcome and the other giving rise to a commercially sensible outcome, that the court would likely favour the latter.  However, this was not the case here; the meaning was clear. 

The Court accepted that it could, if necessary, “blue pencil” a restrictive covenant to delete words which rendered an otherwise enforceable covenant unenforceable but would not re-write a clear restrictive covenant as here.  In the words of Lord Justice Rymer, “it was not for the judge, nor is it for this court to remake the parties….. bargain.  Prophet made its…. bed and it must lie upon it.”

Implication for Employers

When the High Court decision in this case was published, it came as a great relief to many employers.  The courts are notoriously reluctant to enforce post-termination restrictive covenants and traditionally had been unwilling to do anything to render a meaningless or unenforceable restrictive covenant enforceable, other than using the “blue pencil” test.  However, the High Court’s decision in this case appeared to give some hope that the courts would look to re-write meaningless or unenforceable restrictive covenants to reflect what they believed to be the intentions of the parties.  However, the Court of Appeal’s decision in this case firmly rejects this approach and reasserts the previously understood method of dealing with restrictive covenants.  It is therefore vital for employers to ensure that restrictive covenants are enforceable and commercially workable when they are entered into.  It is clear that if the wording goes wrong, the courts will not be prepared to correct it, other than to utilise the “blue pencil” test.

Flexible Working For All

This post was written by Joanna Powis.

From 30 June 2014, the statutory right to request flexible working was extended to all employees with 26 weeks’ continuous service. The right was previously limited to employees with caring responsibilities.

It is important to remember that the rules are limited to a right to make a flexible working request. Prior to 30 June 2014, employers had a broad discretion to reject a request for legitimate business reasons. We examine below whether this is still the case. We also look at how the flexible working request procedure has changed and some tricky issues that may arise as a result of employers receiving more flexible working requests.

Simplified procedure

The good news for employers is that the procedure that needs to be followed when dealing with a flexible working request is far less prescriptive under the new legislation. The complex statutory procedure has been abolished and instead, employers are required to comply with the ACAS Code of Practice – Handling in a Reasonable Manner Requests to Work Flexibly. ACAS has also produced guidance which supplements the Code.

In summary, the Code provides that once the employee has made a written request, the employer has three months to consider it, discuss it with the employee and notify them of the decision and, if the request is rejected, give the employee the right to appeal. Employees should be allowed to be accompanied to any meetings.

There is no longer a requirement on the employer to explain the reasoning behind its decision, but it is still advisable to do so, not least because it may avoid an appeal and/or a subsequent claim. Remember that in order to avoid a discrimination claim, the reasoning should be unrelated to protected characteristics (e.g. age, disability, sex).

Refusing a request

The position remains that an employer can only refuse a request to work flexibly on one or more of the eight specific (but relatively broad) grounds set out below:

  • The burden of additional costs
  • Detrimental effect on ability to meet customer demand
  • Inability to reorganise work among existing staff
  • Inability to recruit additional staff
  • Detrimental impact on quality
  • Detrimental impact on performance
  • Insufficiency of work during the periods the employee proposes to work, or
  • Planned structural changes

Under the legislation (which remains the same), the test of whether or not one of the specific grounds applies is a subjective one. If the employer considers that one of the grounds applies, then the test is satisfied. However, the new Code confuses matters. The Code imposes an obligation on employers to act reasonably in making a decision whether to accept a flexible working request. This obligation appears to apply to the decision itself, as well as to the procedure followed in coming to the decision – meaning that employees could argue that the Code introduces an element of objectivity to the test.

For example, the Code provides that requests should be considered carefully by weighing up the benefits of the requested changes against any adverse business impact. Employers who are unable to demonstrate they have gone through this thought process leave themselves open to claims that they have not dealt with the request reasonably. In the future, we are likely to see more claims challenging the basis of the decision itself.

Prioritising requests

It remains to be seen whether employers will be flooded with flexible working requests as a result of the recent changes. Many employers have considered flexible working requests outside of the statutory scheme for some time. However, it can probably be assumed that, at least as a result of the publicity generated by the changes, there will be some increase for employers. A tricky question is how employers should deal with multiple requests. For example, can an employer give priority to requests it considers are made for more ‘worthwhile’ reasons (e.g. how do you prioritise a request for a later start time to accommodate childcare arrangements over the same request to accommodate reduced commuting costs)? What can an employer do if it grants a request then a couple of months later receives another request which it considers ‘more deserving’?

The ACAS guidance explains that employers faced with multiple requests are not required to make value judgments about the most deserving, but there is nothing preventing an employer from doing so (provided it does not act in a discriminatory way). Indeed, in order to properly consider the benefits of the requested change to each employee (as expressly required by the Code), employers will arguably have to apply some form of value judgment. There are some circumstances in which it might be legitimate to apply value judgments to prioritise one request over another (e.g. prioritising a request made by a disabled employee, the refusal of which could amount to a failure to make reasonable adjustments), but it should be avoided where possible.

The Guidance says that requests should be considered in the order in which they are received. This isn’t much help to the employer who receives a request it can no longer accommodate because it previously granted a ‘less deserving’ request. In this situation, the best option would be to speak to affected employees about the issue and see if a compromise can be reached. Failing that, the Code is clear that the correct approach is “first come, first served”.

Take aways

  • Check whether your flexible working policy needs updating - it probably does. References to the old prescriptive procedural requirements should be removed. Consider whether to set out how multiple requests will be dealt with.
  • Make sure you follow the Code and Guidance when dealing with new flexible working requests. Remember that the old procedural rules still apply to flexible working requests made prior to 30 June 2014.
  • If you are not sure whether a request can be accommodated, consider trialling the request, or a variation of the request, over a certain period. Make sure details of the trial period, and how it will end, are properly documented.
  • Remember that the main risk of refusing a request is not usually the maximum compensation payable for failure to comply with the flexible working regime (eight weeks’ pay currently capped at £464 per week), but a claim for discrimination with potentially unlimited compensation.
  • Take a consistent approach to dealing with requests to reduce the risk of discrimination claims.

Selecting a Retirement Age: Is 65 just a number?

This post was written by Eleanor J. Winslet.


The EAT has issued a decision in the well-known and long-running retirement case of Seldon v Clarkson Wright and Jakes, which dealt with the question:

Was the retirement age of 65 PROPORTIONATE to achieve the firm’s stated aims of retention of staff and workforce planning?

Following the removal of the default retirement age, employers need to justify any retirement policy in place by showing that it is a proportionate means of achieving a legitimate aim.  In Seldon, the EAT has found that it was proportionate for the firm to select a retirement age of 65, even though using a higher age could have a less discriminatory effect.  The reasoning in this case may be useful to employers setting a retirement age, or considering other policies which may be potentially age-discriminatory (e.g. benefits policies).  

We discuss this in more detail and also consider essential points when deciding on a retirement age.


More than seven years ago, Mr Seldon raised a claim of age discrimination because he had to retire from the solicitors’ practice that he worked for at age 65.  The firm’s defence was that having a retirement age of 65 in place was a “proportionate means of achieving a legitimate aim” and therefore allowable under the legislation in place at that time.  Protracted litigation ensued, and the Supreme Court eventually decided that the firm had legitimate aims in place, namely:

  • Retention of Staff – i.e. ensuring that associates were given the opportunity to become partners rather than leave the firm
  • Workforce Planning – having a sense of when vacancies would become available by having a retirement age in place
  • Congeniality – avoiding the awkwardness of having to dismiss a long-standing and senior figure for performance reasons (NB: this aim was not ultimately relied on by the firm as justification for the age chosen)

Having reached a decision on one prong of the test for justification, the Employment Tribunal had to decide whether the age of 65 itself was proportionate.  The Tribunal found against Mr Seldon.  It stressed that in this case a balance needed to be achieved between the interests of the practice, the partners, and the associates who aspire to partnership.  It found that there was a narrow range of ages that would be proportionate to achieve the two aims of retention of staff and workforce planning, but that 65 was within this range.  Mr Seldon appealed again to the EAT.

The EAT found that the age of 65 was proportionate.

It noted that determining whether a particular age is proportionate is fact-sensitive to the particular business, but in this case the Tribunal had considered this appropriately. 

One of the arguments raised by Mr Seldon was that the given age of 65 could not be proportionate because it was possible for another age to have been used (e.g. 68 or 70), which would have met the legitimate aims just as well.

The EAT confirmed, however, that the fact that it would be less discriminatory for the firm to have chosen another age did not prevent the age of 65 from being appropriate in this case.  If this were the case, it would be impossible for a given age to be proportionate as there would always be a less discriminatory choice.

How does this decision help employers?

While it may be challenging to decide on a specific retirement age for a given business, it is helpful to note that the precise age is not completely critical. It was remarked throughout the case that a retirement age needs to be decided on the basis of the needs of the particular organisation.  If, for example, the firm had no trouble retaining associates regardless of partners being retired or not, this may well have undermined the legitimate aim of workforce retention. 

The EAT repeated the list of factors used by the ET when weighing up whether a retirement age of 65 was appropriate in this case, which may be useful when thinking about justifying a retirement age:

  • The partners had consented to the retirement age of 65 in the partnership deed where it was set out
  • The retirement age for partners was the same as for other staff
  • The State Pension Age
  • At the time, the default retirement age was 65
  • There had been a number of European cases where a retirement age of 65 was upheld

The Tribunal also considered that the congeniality aim, while not contested, might be a factor to consider when looking at proportionality for the other two aims.

It is possible that the ET and EAT may have reached a different decision if Mr Seldon had been retired following the removal of the default retirement age (of 65), which provided a useful benchmark.  However, this was not the only factor looked at and the case suggests that an age of 65 may well be justifiable if this appears to be appropriate for the given organisation. 

Key points when thinking about setting a retirement age

  • Think about what legitimate aims are relevant to your organisation: e.g. is there a need to incentivise junior staff to stay with the employer?
  • Give careful consideration to which age you will set by reference to the particular legitimate aim: e.g. for succession planning, the higher the retirement age the higher the detriment for junior staff, the lower the age the higher the determent for potential retirees.  The respective needs must be balanced as far as possible.
  • Document any deliberations about possible legitimate aims and the rationale for selecting a certain age, but bear in mind that these will be discloseable in the event of litigation.
  • Make sure that you act consistently whether or not you decide to put a policy in place.

Early Conciliation

As part of the government’s aim to reduce employment litigation, a mandatory Tribunal pre-claim conciliation process is about to be introduced.

This early conciliation process was introduced on a voluntary basis on the 6th April 2014, and will be mandatory for most Employment Tribunal claims from the 6th May 2014.

What is early conciliation?

Early conciliation requires employees to submit an early conciliation form (EC form) to ACAS before bringing a claim. The EC form sets out the employee’s details and the details of their employer; however no information is required about the nature of their claim.

Once the EC form has been submitted and the prospective claimant has confirmed that they wish to undertake early conciliation (the employee does not have to participate any further in the process), ACAS will appoint a conciliator to the case. The conciliator will contact the employer, and ascertain whether they wish to participate in early conciliation (participation on the employer’s part is not mandatory either). Where both parties consent to undertake early conciliation, the conciliator will have one month to promote a settlement between the parties. If the conciliator thinks there is a reasonable prospect of achieving settlement ACAS can, with the consent of both sides, extend discussions for a further 14 days beyond the end of this one month period.

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Victimisation under the Equality Act 2010 - ex-employees are now protected (again!)

This post was written by Thomas McLaughlin and Laura Juillet.

The Equality Act 2010 makes it unlawful to subject an employee to detriment because they have raised (or are threatening to raise) a complaint about discrimination – so-called “victimisation.”

Over the last year or so there have been conflicting judgments from the Employment Appeal Tribunal on the issue of ex-employees and whether they are protected from victimisation.

Today the Court of Appeal handed down its judgment in Jessemey –v- Rowstock Limited [2014] EWCA Civ 185 and confirmed that ex-employees are protected from victimisation by their former employer. The judgment is not, at the time of writing, available online but please contact us if you would like a copy.

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Costs in Tribunals - what employers should know

Costs awards in Employment Tribunals do not ‘follow the event’: a losing party will not automatically find themselves having to pay the other party’s costs of the litigation. However, the Tribunal has discretion to order costs where a party, or their representative, has acted "vexatiously, abusively, disruptively, or otherwise unreasonably" in the bringing or conducting of the proceedings, or the claim had "no reasonable prospect of success" (Rule 77 of the Employment Tribunals Rules of Procedure 2013).

We take a look at some recent cases on this issue – some will reassure employers, but some may make them wonder if pursuing costs against an unreasonable Claimant is worth it...

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Settlement discussions - when can employers safely use the 'without prejudice' rule?

This post was written by Michael D. Smith.

For employers wanting to bring an employment relationship to an end, whether for disciplinary or performance related reasons or simply because it is not working out, it is often difficult to judge the right time to have a ‘without prejudice’ conversation with an employee. Get it wrong and the contents of that discussion may be used by an employee in a subsequent Tribunal claim as evidence of an admission of guilt or constructive dismissal. The recent EAT case of Portnykh v Nomura International Plc gives some useful guidance as to when the ‘without prejudice’ rule applies.

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"European" employment law applies in Europe only

The application of UK employment law to employees working outside the UK is a big issue for multi-national companies and employers in the shipping industry. If you have an employee who works for you outside the UK, can you be sure that they are not entitled to UK employment rights?

Not always – and there has been a great deal of case law over the last few years which indicates just that. Some employees working outside the UK may have UK employment rights – international employers should remain aware of that risk to avoid surprise claims.

But which employees will have such rights? A new case this week in the Employment Appeal Tribunal ("EAT") might provide some help in answering that question, at least in relation to employment protection derived from EU law, such as discrimination claims. We take a look at Hasan v Shell International Shipping Services (PTE) Ltd, and consider if this case takes us any further in defining the true scope of UK employment law.

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Three 'golden rules' when considering whether an employee is disabled

Last month, we looked at when employer might be deemed to have knowledge of an employee’s disability, discussing (among other cases) the EAT’s decision Gallop v Newport County Council. At that time we noted that the appeal had already been heard in the Court of Appeal but judgment had been reserved. 

The Court of Appeal has this week handed down its decision, urging caution to employers tempted to simply rely on an Occupational Health report to argue that they did not know (and could not reasonably have been expected to know) about an employee’s disability. 

We look at the impact of this judgment, and consider three ‘golden rules’ for employers when seeking opinions on whether an employee is disabled.

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Reed Smith successfully defends Channel 4 and IMG Media in discrimination case

A Reed Smith team, led by employment partner Graham Green and including associates Tom Remington and Amy Ferrington, acted for Channel 4 and IMG Media in successfully defending the age discrimination claim brought by John McCririck in the London Central Employment Tribunal.

Mr McCririck had claimed that the decision not to select him for a pundit role on Channel 4 Racing from 2013 was an act of age discrimination. In the Judgment handed down yesterday, Employment Judge Lewzey states: “it is the unanimous judgment of the Tribunal that Mr McCririck’s claim fails.”

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How do you "know" if your employee is disabled?

A duty to make reasonable adjustments in respect of a disabled employee will not arise if the employer does not know, and could not reasonably be expected to know:

  • that the individual is disabled, or
  • that he or she is likely to be placed at a substantial disadvantage because of that disability

 (paragraph 20, schedule 8 of the Equality Act 2010).

The question which will often arise for employers, therefore, is how do you “know” whether an employee is disabled? Is the employee telling you he thinks he has a certain condition enough? Do you need a formal medical report or diagnosis? What questions do you need to ask?

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Faced with an employee unlikely to ever return to work? What can you do?

Most employers recognise the need to treat employees who are on long-term sick leave fairly and with compassion. But this has to be balanced with the needs of the business, and sometimes it becomes clear that unfortunately an employee will never be able come back to work, and the employment relationship simply has to be brought to an end.

What can (and should) employers do in this situation? Does the recent case of Warner v Armfield Retail & Leisure Ltd change how an employer should react?  Here are some important steps that employers should take to minimise the risk of claims. 

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TUPE service provision change - look at what is going on 'on the ground', as well as the contract

In the recent case of Lorne Stewart plc v Hyde and others, the EAT made clear that it is important not to get side-tracked by the details of formal written contracts which are in place between the parties before and after a potential TUPE transfer, if such details do not reflect reality. Rather, it is essential to consider whether, in practice and on the facts, there is a service provision change and, if so, whether the employees in question are assigned to an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned. 

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Holiday pay - five things you should know when calculating holiday pay

Holiday pay is often a tricky issue for employers and one which seems to be changing constantly. In the light of several new cases discussing holiday pay which have been reported over the summer and in the last couple of weeks, we take the opportunity to round up the legal developments, and set out five things employers should know before deciding how much holiday pay an employee may be entitled to on termination of their employment.

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It's not quite "all change" for TUPE - service provision change provisions will not be repealed after all

Since 2011, the Government has been considering proposals to amend the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). Following an initial call for evidence and subsequent consultation, the Government yesterday confirmed the amendments it intends to make to TUPE.

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Q & A - What does the new "employee shareholder" status mean for employers?

From 1 September 2013 new and existing employees can now give up certain employment rights in return for shares in their employer.   

We take a look at some of the matters employers will want to consider when deciding whether to make use of this new status.

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Zero-Hours Contracts - A Hot Topic

Laura Juillet and Amy Ferrington co-authored this post.

Zero-hours contracts have been in the news a lot recently. We take a look at their legal status, and consider the pros and cons of their use for both employers and workers.

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Collective agreements negotiated after a TUPE transfer will not bind transferee employers

The European Court of Justice (the “ECJ”) has handed down its judgment in a key, long-running TUPE case – Alemo-Herron v Parkwood Leisure Ltd.

The decision is good news for employers who regularly inherit employees via ‘TUPE transfers’, especially where those employees were originally employed in the public sector or in sectors that are heavily unionised. Thanks to this ECJ ruling, the new employer will not be bound by the terms of any collective agreement which is negotiated after the transfer and to which it is not a party.

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NLRB General Counsel Keeps Unfriending Employer Social Media Policies

In a just-released Advice Memorandum found here, the NLRB General Counsel’s office (“GC”) publicized its position that employers must bargain with their unions before implementing new social media policies. The Memo “casually” notes that work rules, such as social media guidelines, provide an independent basis for discipline and are mandatory subjects of bargaining.  According to the GC, even if an employer navigates around the ever-increasing landmines set by the Board and GC in developing a social media policy, employers must also seek union approval before implementing the policy, unless, of course, the underlying collective bargaining agreement contains a clear and unmistakable waiver of the union’s right to bargain over such policies.

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UK Legislative Reform - No Summer Break

The sun may have finally decided to make an appearance but this is no indication of a relaxing summer break for employment specialists!

A number of key employment law provisions came into force on 25 June 2013, with 29 July 2013 as the next key date for legislative reform. We take a look at what employment-related legislative changes are in store this summer.

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Rewriting the law - UK collective redundancy consultation obligations change dramatically

Laura Juillet and Thomas McLaughlin contributed to the content of this post.

Employers are required to collectively consult when proposing to dismiss 20 or more employees at one establishment as redundant within a period of 90 days or less (section 188 Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).Defining what is meant by “at one establishment” for this purpose has always been tricky, and has led to significant debate. The issue is of particular importance to employers with multiple sites, such as retailers.

But now it seems that such debate has been rendered obsolete, with the Employment Appeal Tribunal (the “EAT”) holding that the words “at one establishment” should be deleted from section 188. Although this makes the law easier to apply, employers should be aware that the price of such clarity is that they are now more likely to be subject to collective consultation obligations when making widespread redundancies.

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When is an organised grouping of employees not an organised grouping of employees? (UK TUPE update)

Imagine a scenario where one employee spends 100% of his time working for one client. That client takes its services back in-house. Does the employee transfer to the client under TUPE? 

The instinctive answer might be yes – but that will not always be right. A recent decision of the Scottish Court of Session demonstrates that it is always important to go back to the wording of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and, specifically, always consider whether there is an “organised grouping of employees […] which has as its principal purpose the carrying out of the activities concerned […]” (regulation 3(a) TUPE).

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Dismissing a UK employee? It may be cheaper to wait a while longer...

There has long been talk of amending the upper limit on the compensatory award for unfair dismissals, and we now have confirmation and details of this new statutory cap. 

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Employment Law Watch - UK case law update

It has been a busy few weeks with several new interesting employment cases being reported – here is a quick round up of a few that caught our eye: 

There is yet another warning to employers on the importance of getting that contract drafting just right, as Blackburn Rovers found out to their cost (that cost being £2.25 million). And victimisation has been a hot topic in the last few weeks – we look at three new important victimisation cases below. 

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UK Employment Tribunal fees - not just for employees!

The draft Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 (the “Order”) has just been published by Parliament, giving us an insight into how the new Employment Tribunal fee structure will operate when it comes into force, expected to be this summer. 

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Employment Law Watch - UK case law roundup

Today we take a brief look at a couple of interesting employment law cases from the last two weeks: Anderson v London Fire and Emergency Planning Authority  shows us how not to draft a pay review clause, and HM Land Registry v McGlue looks at when aggravated damages in discrimination cases might be appropriate.

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Changes to UK collective redundancy consultation rules come into force - ACAS publishes new guidance

On 6 April 2013, new consultation periods came into force for collective redundancies.

As before, the law does not specify a minimum period of collective consultation. Collective consultation must however be ‘meaningful’ and, importantly, must start at least a specified number of days before the redundancy dismissals take effect.


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"Radical" reform of parental leave announced

Flexible parental leave

The Deputy Prime Minister, Nick Clegg, has today announced plans to introduce a new flexible system of parental leave, as part of what is described as a “radical” shake-up.

Under the reforms, a mother will still be required to take a compulsory 2 week period of leave after the birth of a child, but at any time following that, the parents will be able to ‘opt in’ to the new flexible parental leave system, and to share what remains of the maternity leave period.

It will be up to both parents to decide how they share the remaining period of leave – they may choose to split the leave between them, take it in turns, or take some time off together.

A new statutory payment for parents on flexible parental leave will be introduced, with the same qualifying requirements that currently apply to maternity and paternity pay.

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Plans for new 'owner-employee' employment contracts announced

The Chancellor of the Exchequer, George Osborne, has announced plans to introduce a new type of employment contract – an 'owner-employee' employment contract. ‘Owner-employees’ will receive between £2,000 and £50,000 worth of shares (which will be exempt from capital gains tax) in exchange for giving up certain rights, including redundancy rights, the right to claim unfair dismissal and the right to request flexible working or time off for training.  Owner-employees will also be required to give 16 weeks’ notice of their return from maternity leave, rather than the current 8 weeks.

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Employer's E-Mail System May Become Tool for Union Organizing

The National Labor Relations Board (“NLRB”) is expected to issue a ruling shortly on whether employers can lawfully prohibit their employees and unions from using employer-owned e-mail and intranet systems to distribute union campaign materials. An NLRB decision favoring employee and union use of these internal communication avenues for union organizing and other NLRA-protected activities would effectively extend and be the NLRB’s “blessing” of its Acting General Counsel’s social media “rules” and guidelines discussed here and here.

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Preparing to compete - employee duties

In the recent case of Ranson v Customer Systems Plc, the Court of Appeal considers whether behaviour of a senior employee during his notice period in taking steps to compete with his employer was in breach of his duty of fidelity and whether there existed a fiduciary duty which would have placed stricter obligations on the employee. The case highlights the importance of the employment contract and reminds employers of the need to update job descriptions, job duty clauses and post termination restrictions as employees are promoted, so as to ensure they are appropriate and relevant to employees’ roles at all times.

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Introduction of Fees in Employment Tribunals - results of consultation published

This post was written by Helena Tiernay.

Earlier this year, as part of its Employment Law Review, the Government conducted a public consultation on its proposal to introduce fees in the Employment Tribunals. The Ministry of Justice has now published the results of that consultation, and has indicated an intention to introduce fees in the summer of 2013.

This is a significant development in the life of Employment Tribunals, further watering down the original principle that the Tribunals would be an informal and accessible forum for resolving industrial disputes.

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Service provision changes: Is an employee who works only for one client an "organised grouping of employees"?

This blog was written by Ed Hunter and Ruth Bonino.

In Seawell Ltd v Ceva Freight (UK) Ltd and another UKEATS/0034/11, the Employment Appeal Tribunal (“EAT”) held that an employee who spent 100% of his time working for a single client was not an “organised grouping of employees” for the purposes of regulation 3(3)(a)(i) of the Transfer of Undertakings (Protection of Employees) Regulations 2006 (“TUPE”). Therefore when the client brought in-house work previously carried out by the Claimant’s employer, there was no service provision change.

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UK Supreme Court rules on two important age discrimination cases

This post was written by Joanna Powis and Ruth Bonino.

Following abolition of the national default retirement age of 65 last year, the Government left open the possibility for employers to introduce their own “employer justified retirement age” provided the age set was capable of being objectively justified in order to meet the employer’s legitimate aims for introducing this policy.   A recent decision of the Supreme Court in Seldon v Clarkson Wright and Jakes (A Partnership) indicates that although it may be technically possible to justify a retirement age, an employer will be taking a big risk in attempting to do so (the Seldon case concerned a partnership but the same principles will apply in an employment case). In another decision heard at the same time, Homer v Chief Constable of West Yorkshire Police, the Supreme Court considered whether an employer’s policy of restricting promotion to employees with a law degree was justified indirect age discrimination against an employee who didn’t have a law degree and didn’t have the time to obtain one before retirement.

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London Olympic and Paralympic Games 2012: Employee Considerations

This post was written by Ed Hunter and Ruth Bonino.

The London 2012 Olympics and Paralympics Games are just around the corner! The Olympic Games take place from 27 July to 12 August 2012 and the Paralympic Games from 29 August to 9 September 2012.

This briefing contains guidance on the issues employers are likely to face as a result of employees who have volunteered at the Games, and those wishing to attend events as spectators or follow the Games at work. Due to the unique circumstances of the event it is important for employers to have clear policies in place well before the Games, and for the policies to be communicated effectively to all staff.

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What's Coming Up in UK Employment Law in April?

This post was written by Fiona McFarlane and Ruth Bonino.

It is that time of year again when the UK Government brings into force legislative changes relating to employment law. In this update we highlight the changes taking place in April 2012 and consider the impact these might have for employers.

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TUPE: Service Provision Changes and what activities transfer

The Employment Appeal Tribunal (EAT) has held in Johnson Controls v Campbell and Anor that there was no service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) where a centralised taxi booking service was brought back in-house by the client. Although the client was still undertaking the activity of booking taxis, there was no “centralised service” in place following the transfer. As a result, there was held to be an essentially different activity in place and TUPE did not apply. 

This case follows another recent decision in Nottinghamshire Healthcare NHS Trust v Hamshaw and others which held that where care services transferred from the Trust to new providers there was not a service provision change because the services were not fundamentally or essentially the same, owing to the methods used to provide them.

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'Costs plus' approach to justifying discrimination in the UK endorsed by the Court of Appeal

The Court of Appeal in Woodcock v North Cumbria Primary Care Trust has ruled that the savings of costs alone will not, without more, amount to a legitimate aim so as to justify discrimination. In this case, Mr Woodcock was dismissed by reason of redundancy just before his 50th birthday in order to avoid his qualifying for significant enhanced early retirement terms. The Court of Appeal (CA) held that this treatment amounted to discrimination by reason of age but was justified since the legitimate aim of dismissing him was to give effect to his redundancy and to save costs. The aim of the dismissal at that particular age was not purely to save costs and so was justifiable.

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Service provision changes: Relocation because of TUPE transfer was a substantial change to employees' material detriment

This post was written by Thomas Ince and Ed Hunter.

In Abellio London Ltd (Formerly Travel London Ltd) v Musse and others UKEAT 0283/11 and 0631/11, the Employment Appeal Tribunal (“EAT”) ruled that a relocation of six miles within central London which resulted in the employees having to travel an extra one to two hours to work following a service provision change amounted to a substantial change to employees’ working conditions to their material detriment entitling them to resign under regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). As regulation 4(9) of TUPE deems an employee’s resignation to be a “dismissal” where it is in response to such a change, the employees concerned were entitled to claim automatic unfair dismissal and liability for their dismissals passed to the transferee. Since it would not have mattered had the contracts of employment contained valid mobility clauses, the decision is not good news for transferees in TUPE transfer situations. The decision sets a very low hurdle for employees to overcome in order to be able to resign in reliance on regulation 4(9) of TUPE. Transferees will need to consider the extent of this risk when negotiating transfer provisions with the transferor, and, if necessary, seek indemnity protection.

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Dealing with dismissal and compensated no fault dismissal for micro businesses

The Government has recently issued a new “Call for Evidence”, Dealing with dismissal and “Compensated no fault dismissal” for micro businesses.  The main aim of the paper is to gather evidence from businesses to establish what can be done to encourage small employers to recruit more employees, whilst at the same time ensuring some protection for employee rights. The paper also aims to gather evidence regarding the dismissal process, and in particular how well the 2009 Acas Code works in the case of dismissals for underperformance. 

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Disciplinary action and suspension for misconduct: guidance from UK Court of Appeal

The Court of Appeal decision in Crawford and another v Suffolk Mental Health Partnership NHS Trust [2012] EWCA Civ 138 provides guidance as to the procedural standards required in misconduct cases in which dismissal is likely to impact on the employee's ability to pursue his/her chosen career. The case also highlights the need to consider very carefully both the appropriateness of suspension during a disciplinary investigation and whether there are grounds for reporting matters to the police.

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UK Court of Appeal refuses to uphold a barring order against a former employee

This post was written by Ruth D. Bonino and Fiona McFarlane.

In Caterpillar Logistics Services (UK) Ltd v Huesca de Crean, an employee who had no restrictive covenant in her contract of employment prohibiting her working for a third party, could not be prevented from taking up employment with a client of her former employer on the grounds that she might breach a confidentiality agreement she had entered into with her former employer. Nor would the Court grant a “barring order” which would prohibit the employee from being involved in a commercial relationship between the employee’s former employer and its client.

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Service provision changes: UK EAT gives guidance on the meaning of an "organised grouping of employees"

This post was written by Ruth Bonino and Ed Hunter.

In the case of Eddie Stobart v Moreman & Others the Employment Appeal Tribunal (EAT) has provided welcome guidance on the meaning of “organised grouping of employees” for the purposes of a “service provision change” under regulation 3(3)(a)(i) of the Transfer of Undertakings (Protection of Employees) Regulations 2006 (“TUPE”). A group of employees who happened to work mainly for a particular client because they worked the day shift were found not to comprise an “organised grouping of employees” for “service provision change” purposes under TUPE. The EAT held that, when assessing whether employees will transfer to a new contractor following a service provision change, it is necessary to identify the existence of an “organised grouping of employees” the principal purpose of which is to carry out the relevant activities on behalf of the client, before analysing whether employees are assigned to that group. There will only be an “organised grouping” where the employees in question are “organised” for the purposes of the provision of services to the relevant client. 

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Expiry of fixed term contracts and UK collective redundancy consultation


The Employment Appeal Tribunal (EAT) has provided guidance on when the expiry of a fixed term contract will count toward the number of dismissals proposed by an employer that triggers collective redundancy consultation obligations.

The EAT held that employees who were dismissed by virtue of the expiry of their fixed term contracts were not dismissed for “redundancy” under the wider definition of that concept contained in s.195 Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA) and therefore their dismissals did not count toward the number of dismissals required to trigger collective redundancy consultation obligations under s.188 TULCRA minimum 20 employee threshold. (University of Stirling v University and College Union). This decision should be treated with caution since not all dismissals on expiry of fixed term contracts will fall outside s.188 obligations. Such dismissals may ‘count’ when the dismissals are part of a wider exercise involving job losses and in other circumstances where the dismissal does not relate to the employee’s performance or conduct.

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What's coming up in UK employment law in 2012?

UK employment lawyers and HR professionals need to be on the alert this year to keep up with the numerous consultations and proposals which have been or are expected to be initiated by the Government. The key developments this year will be the increase in April in the qualifying period for unfair dismissal rights from one to two years and, in October, the introduction of the new pensions auto-enrolment rules but more is in the pipeline. 

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UK TUPE: No service provision change where client changes identity

This post was written by Thomas Ince and Ruth Bonino.

A service provision change does not occur under TUPE where there is a change in the client on whose behalf the services are being carried out. This is the conclusion of the Employment Appeal Tribunal (EAT) in the case of Hunter v McCarrick, the first EAT decision to rule on this issue. The decision does not come as a great surprise but it provides welcome clarification on a point which occasionally arises in outsourcing situations. 

What happened in this case

The Claimant (Mr McCarrick) brought an unfair dismissal claim against the Respondent (Mr Hunter) when he was dismissed on 8 March 2010 after having allegedly been employed by Mr Hunter for 7 months since August 2009. Since 2005, Mr McCarrick’s job was to manage a property portfolio owned by Waterbridge Group (WG)(of which Mr Hunter was Managing Director). In order to succeed in his claim against Mr Hunter, Mr McCarrick needed to show that he had at least one year’s continuous employment and that his employment had transferred to Mr Hunter under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) from his previous employers. 

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Government announces radical reform to UK employment laws

The Government has today announced what it describes as “the most radical reform to the employment law system for decades”. In a speech to EEF, the UK manufacturers’ organisation, Vince Cable outlined the results of the Government’s recent consultation on Resolving Workplace Disputes and the recent Red Tape Challenge Review of employment law. 

The proposals announced by Vince Cable include the following:

  • Merge, scrap or simplify 70 of the 159 employment regulations examined in the Red Tape Challenge (this includes consolidation of 17 national minimum wage regulations)
  • Publish calls for evidence on proposals to simplify TUPE and to reduce the minimum consultation period for proposed collective redundancies involving 100 or more employees, from 90 days to 60, 45 or 30 days (see links below to these consultation papers which were issued today and which will close on 31 January 2012)
  • Publish a call for evidence on simplifying dismissal processes, seeking views on two proposals: whether to introduce compensated no fault dismissals for micro firms with fewer than 10 employees; and how to simplify the existing dismissal process, potentially changing the Acas Code, or to provide supplementary guidance for small businesses.
  • Remove protection for any whistleblower making a disclosure about the worker’s own contract (to counter the EAT’s decision in Parkins v Sodexho Ltd [2002] IRLR 109
  • Create a universally portable CRB check that can be viewed by employers instantly online from early 2013
  • Consult on the introduction of fees for bringing a claim in the Employment Tribunal, seeking views on two options: a system involving an initial fee to lodge a claim and a second fee to take that claim to hearing; or a system involving a £30,000 threshold whereby anyone seeking an award above that figure will pay more to bring a claim
  • Consult on streamlining the current regulatory regime for the recruitment sector.

In addition, as part of the Government’s response to its consultation to the Resolving Workplace Disputes, the Government has said that it is committed to:

  • Increasing the qualifying period for unfair dismissal from one to two years from April 2012
  • Requiring all Employment Tribunal claims to be lodged with Acas and to be offered mediation before going to Tribunal
  • Modifying the formulae for up-rating Tribunal awards and redundancy payments to save business an estimated £5.4 million (net) a year
  • Giving Employment Judges discretion to levy a financial penalty, payable to the Exchequer, against employers for breach of employment rights
  • Consulting on whether employers should be allowed to have “protected conversations” with staff without the existence of a formal dispute and without such conversations capable of being used in evidence in a future Tribunal claim
  • Consulting on the simplification of compromise agreements, such as doing away with long lists of causes of action. Other proposals include introducing a standard text, amending s.146 Equality Act to provide reassurance that compromise agreements can safely be used to compromise discrimination claims, and renaming them “settlement agreements”
  • Consulting on developing a “rapid resolution” scheme which will offer a quicker and cheaper alternative to determination of straightforward, low value claims at an Employment Tribunal
  • Carrying out a review of Employment Tribunal rules, to be led by Mr Justice Underhill, who steps down at the end of this year from his Presidency of the Employment Appeal Tribunal.

Much of the detail of these proposals is yet to be revealed and we now have to wait for a number of consultations to be completed before we know more. It looks like 2012 will be an important year for employment law reform so watch this space!

Please click on the following links for more information:

Government Press Release:,779,885,848,782,879,710,705,765,674,677,767,684,762,718,674,708,683,706,718,674&ClientID=-1

Call for evidence on TUPE regulations (closing 31 January 2012)

Call for evidence on collective redundancies (closing 31 January 2012)

Government Response to Resolving Workplace Disputes

UK: TUPE and post-transfer harmonisation of terms to improve productivity not connected to transfer

This post was written by Ruth Bonino and Danny Bloom

In Enterprise Managed Services Ltd v Dance and Others, a case concerning a TUPE transfer, the Employment Appeal Tribunal (EAT) held that a decision to ‘harmonise’ the incoming employees’ terms with existing employees could have been legitimately made to improve productivity, so that subsequent dismissals based upon the ‘harmonised’ terms may not have been for a reason connected with a transfer, and would therefore not be automatically unfair under TUPE. Although this case should be viewed with caution, it gives transferees some hope that where the reason for post-transfer harmonisation of terms and conditions takes place for a business decision such as to improve productivity, rather than for administrative tidiness, such changes may be lawful.

Regulation 7(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) provides that any dismissal of an employee either before or after a relevant transfer will be automatically unfair where the sole or principal reason for the dismissal is either; (i) the transfer itself; or (ii) a reason connected with the transfer, that is not an economic, technical or organisational (‘ETO’) reason. Whether a dismissal is connected with the transfer is a question of fact and will be for the employer to prove that there is no causal link between the two events.

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UK: Workers required to request holiday whilst on sick leave in order to qualify for holiday pay

This post was written by Ruth Bonino and David Ashmore.

UK: The Employment Appeal Tribunal (EAT) has provided important clarification on the annual leave entitlement under the Working Time Regulations 1998 (WTR) of workers (including employees) who are off work on long-term sick leave.

In the case of Fraser v Southwest London St George’s Mental Health Trust, the EAT has decided that:

  • a worker on long-term sick leave must request annual leave in line with the requirements of the WTR in order to be entitled to be paid for it;
  • a worker is entitled to be paid in lieu of accrued but untaken holiday when employment terminates, but only in respect of leave accrued during the leave year in which employment terminates. Accrued but untaken annual leave from previous leave years does not carry forward for the purposes of the payment in lieu entitlement where no request to take such leave was made by the worker; and
  • there is no duty on the employer to make a worker aware that the WTR rules operate in this way.

The decision provides welcome clarification to employers facing holiday-pay claims from workers on long-term sick leave on how to calculate annual leave. It is now clear that such workers are not entitled to be paid unless they requested annual leave during the relevant leave year. The EAT commented that it may seem artificial for an employee who is not at work to have to give notice in this way, but in the EAT’s view that “merely reflects the artificiality of a period of long term sickness counting as holiday at all”.

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UK court rules employers not vicariously liable for employees who victimise whistleblowers

The UK Court of Appeal has ruled, in the case of NHS Manchester v Fecitt & Others, that an employer cannot be vicariously liable for acts of victimisation by its employees against whistleblowers. The Court also clarified the correct test for determining whether a worker has suffered a detriment on the ground of making a protected disclosure (ie. whistleblowing). The Court decided that to avoid liability under the whistleblowing legislation, the employer must show that the employee’s protected disclosure did not materially influence (i.e. more than trivially influence) the employer’s treatment of that employee.

The whistleblowing legislation provides protection in two ways. First, dismissal of an employee is automatically unfair if the principal reason for dismissal is that they have made a protected disclosure. Second, workers have a right not to be subjected to a detriment by their employer on the ground that they have made a protected disclosure. This case concerned the second of these protections. 

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Cost alone meant a proposed adjustment was unreasonable under UK disability discrimination law

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.

Extensive new duty to provide agency worker information under TUPE and collective redundancy rules

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.

Impact of the UK Government's plan to increase the unfair dismissal qualifying period

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.

Will your outsource lead to automatically unfair dismissals under UK law?

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.

What's coming up in UK employment law this October?

In this alert we outline the main changes in UK employment law this October. The most notable piece of legislation coming into force this October is the Agency Workers Regulations 2010, but there are quite a few possible changes afoot. These include a forthcoming increase to the qualifying period for employees to bring unfair dismissal claims from one year to two years, as well as introducing fees for lodging employment tribunal claims.

Agency Workers Regulations

On 1 October 2011, the Agency Workers Regulations 2010 will come into effect. These controversial new regulations (the Regulations) will have a dramatic impact on the relationship between agency workers, agencies and hirers. They will provide increased protection to agency workers, giving them from day one equal access to facilities and amenities at work and the right to receive information about new positions within the hirer. Most importantly, after working for a qualifying period of twelve weeks, agency workers also have the same right to basic working and employment conditions as those enjoyed by workers recruited directly by the hirer. Both the hirer and the recruitment agency may be liable for breach, depending on the type of claim.

What you should be doing:

  • make an assessment of the skills required for roles carried out by your agency workers and your employees to assess whether the agency workers have an appropriate comparator for the purposes of the Regulations;
  • carry out an audit of your agency workers, paying particular attention to their basic terms of employment, and comparing them to the terms of “comparable” employees;
  • provide to agencies appropriate information of comparable workers (including standard terms of employment, pay scales and holiday entitlements);
  • put in place HR systems to accurately calculate the qualifying period for each agency worker;
  • consider mechanisms to mitigate the impact of the Regulations and take advice as necessary.

For more information concerning the basic rights of hirers and agency workers, please see our client alert.

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UK Agency Workers - understanding the new regulations

This post was written by Thomas Ince and Carl de Cicco.

The Agency Workers Regulations 2010 (“AWR”) are due to come into force on 1 October 2011. The AWR put in place the requirements of the controversial EU Temporary Agency Workers’ Directive, which has to be implemented by 5th December this year. Last week, rumours circulated in the media that there may be a last minute “watering down” of the AWR by the present government. This seems unlikely, particularly because the AWR has already been scrutinised carefully by the new coalition government after they came into power. The Conservatives were unhappy about the proposed 12 week qualifying period which was not set out in the EU Directive. However, having conducted a review, nothing was changed because the AWR was based on an agreement between the CBI and the TUC made prior to the election and could not be changed. We will, of course, update you on any last minute changes to the AWR, but in the meantime we have prepared below a short summary of the basic elements of the AWR.

The AWR will apply to the relationships between agency workers, agencies and hirers. They offer protection to agency workers, providing them with equal access to facilities and amenities at work, the right to receive information about new positions within the hirer. After working for a qualifying period of twelve weeks, agency workers would also have the right to basic working and employment conditions that are equal to those enjoyed by workers recruited directly by the hirer. In May 2011 the government published guidance (the “Guidance”) to help hirers and agencies understand the implications of the AWR and their responsibilities under them.

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UK Pensions and auto-enrolment 2012

This post was written by William Sutton and Marc Bergen.

The new pensions auto-enrolment duties will begin to apply to employers from October 2012 through to September 2016 (depending on the number of people employed). Although some of the detail around the new regime is yet to be finalised, many employers are beginning to put this on the agenda to make sure they are well prepared for their new duties. The first client alert, issued by Reed Smith's UK pensions group and aimed, predominantly at pension trustees, sets out an overview of what those duties entail. The alert also covers the abolition of the default retirement age and its impact on pension provision/insured benefits, as well as a round up of issues relating to the Bribery Act 2010, early access to pension savings, contracting out in money purchase pension schemes and other topics.

A second more comprehensive client alert on the new pensions duties, which is primarily aimed at employers, is also available here.

For more information on any of these topics, please refer to Simon Hartley, head of Reed Smith's pension group, or your usual contact at Reed Smith.

A belief in a 'conspiracy theory' surrounding 7/7 and 9/11 terrorist attacks is not a philosophical belief under UK discrimination law

In Farrell v South Yorkshire Police Authority, an Employment Tribunal has considered whether a dismissed employee’s belief in a conspiracy theory surrounding a ‘New World Order’ and the terrorist attacks in 2001 and 2005 constituted a philosophical belief, such as to attract protection under the Employment Equality (Religion or Belief) Regulations 2003 (“the Regulations”). The Tribunal found that, although Mr Farrell’s beliefs did meet most of the requirements set out by the Employment Appeal Tribunal in the case of Grainger plc and others v Nicholson (finding that the beliefs were genuinely held, they related to weighty and substantial aspects of human life and behaviour, they were ‘beliefs’ rather than mere opinions, and they were not incompatible with human dignity), they did not attain a sufficient level of cogency or cohesion. As such, the Tribunal held that Mr Farrell’s beliefs did not satisfy the definition of a ‘belief’ under the Regulations and so therefore were not capable of protection against discrimination.

What happened in this case?

Mr Farrell was employed as a Principal Intelligent Analyst by the South Yorkshire Police Authority. He claimed to hold a belief in a ‘New World Order’, under which a ‘global elite’ (including the UK and US governments and world financial institutions) were seeking to “introduce a secret satanic ideology to enslave the masses and claim control of the world’s resources”. To this end, he believed in particular that the UK and US governments perpetrated the terrorist attacks of 11 September 2001 and 7 July 2005.

During his employment, Mr Farrell was asked to prepare a report for the South Yorkshire Police area, analysing the level of threats posed by various crimes (including terrorism). Mr Farrell made various comments in his report, specifically referring to his views regarding the New World Order and, in particular, his belief that the terrorist attacks in 2001 and 2005 were “sham” operations authorised by the US and UK governments “to divert attention from their own secret scheming and evil ways of the elite”. In light of the content of his report, Mr Farrell was invited to a disciplinary hearing. The South Yorkshire Police Authority took the view that Mr Farrell’s expression of his views was incompatible with his employment and that his position was therefore untenable. Mr Farrell was consequently dismissed.

Mr Farrell brought a claim in the Employment Tribunal for unfair dismissal and unlawful discrimination on the ground of his beliefs.     

The Employment Tribunal’s decision

The case of Grainger plc and others v Nicholson (reported in a previous blog) identified five criteria to be satisfied for a belief to attain protection under the Regulations:

  1. The belief must be genuinely held.
  2. It must be a belief and not an opinion or viewpoint based on the present state of information available.
  3. It must be a belief as to a weighty and substantial aspect of human life and behaviour.
  4. It must attain a certain level of cogency, seriousness, cohesion and importance.
  5. It must be worthy of respect in a democratic society, not be incompatible with human dignity and not conflict with the fundamental rights of others.

The Tribunal dealt with Mr Farrell’s claim by considering these criteria, finding that criteria 1-3 and 5 above were satisfied. The case therefore concentrated on whether point 4 was satisfied, i.e. whether Mr Farrell’s belief was sufficiently cohesive and cogent.

On this point the Tribunal noted that the Employment Appeal Tribunal in Grainger had unfortunately not been specific about the level of cogency or cohesion required, simply referring to a “certain level”. The Tribunal also recognised that it should not expect too much from a Claimant in demonstrating the coherence of his beliefs, pointing to the fact that religious beliefs, for example, are not always susceptible to rational justification or explanation. Finally, the Tribunal also found that it was appropriate (and indeed important) to objectively scrutinise the nature of the Claimant’s beliefs, in order to consider whether the test of cogency and coherence was indeed met. In this regard, the Tribunal noted that, given that Mr Farrell’s beliefs related to matters where there is a substantial amount of evidence within the public domain (unlike, for example, a belief regarding the existence of a god), the scrutiny put on those beliefs must take into account such available evidence.

Taking all this into account, and considering Mr Farrell’s evidence as to the nature of his beliefs, the Tribunal found that Mr Farrell’s conspiracy theories simply failed to meet any minimum standard of cogency or coherence, and in fact, applying an objective test, were “absurd”. 

The Tribunal did not doubt the sincerity of Mr Farrell’s beliefs, but nevertheless found them not to constitute the definition of belief within the Regulations. Mr Farrell’s claim for discrimination on those grounds could not therefore continue. 

What this decision means to employers

This is the latest in a line of cases considering the question of what constitutes a belief for the purposes of the Regulations (and now the Equality Act 2010). Recent Tribunal decisions have meant that various beliefs (concerning, for example, climate change, the "higher purpose" of public service broadcasting, and anti-foxhunting) have been found to constitute philosophical beliefs under the Regulations. Whilst the trend of such cases indicated that the definition of a philosophical belief was perhaps wider than originally perceived, this current case demonstrates that Tribunals will still need to carefully consider each claim on a case by case basis. It is not a forgone conclusion that even a strong and genuinely held belief will attain protection under the Regulations, and it will be irrelevant how passionately an individual believes in their cause, if that cause is objectively incoherent. 

Employers might take reassurance from this, and from the fact that Tribunals are permitted to analyse the nature of the belief itself, rather than merely the extent to which the Claimant believes in it. It is also worth remembering that establishing that a belief is capable of protection is only the first step: a Tribunal then has to consider whether an employer unlawfully discriminated by reference to that belief. This is only a Tribunal decision and so is not legally binding, but is nevertheless perhaps indicative of how future Tribunals may approach such cases.  

However, employers do need to continue to exercise care when taking action against someone who has a strongly held belief, or treating such person differently from any other employees, as in many cases the individual concerned may well be able to meet all five criteria set out in Grainger. It is worth ensuring that equal-opportunities policies and staff training take into account various religions and widely-held beliefs, as well as ensuring that sufficient measures are in place to prevent harassment or victimisation of employees on all protected grounds, including belief.

Employer's duty to consider request to work beyond retirement

In the recent case of Compass Group plc v Ayodele, the UK Employment Appeal Tribunal (“EAT”) has ruled that an employer must give genuine consideration, in good faith, to an employee’s request to work beyond retirement under the Employment Equality (Age) Regulations 2006 (the “Age Regulations”). A blanket refusal to grant any such request without giving any consideration to the employee’s representations in circumstances where the decision is pre-determined (e.g. by a company policy), will result in the dismissal for retirement being unfair.

This case will be of interest to those employers who have already served notice of retirement on employees on or before 5 April 2011 which, because of the forthcoming abolition of the default retirement age of 65 on 1 October 2011, is the last date on which employers could serve valid retirement notices under the Age Regulations.

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Supreme Court grants teacher working in Germany the right to claim unfair dismissal in the UK

This post was written by Tom Remington.

In Duncombe and others v Secretary of State for Children, Schools and Families [No.2], the UK Supreme Court has decided that a teacher employed by the Secretary of State for Children, Schools and Families to work in a European School in Germany enjoyed the protection against unfair dismissal contained in the Employment Rights Act 1996 (the “ERA”), such that he was entitled to pursue a claim in the English Employment Tribunal in connection with the termination of his employment. The Supreme Court found that Mr Duncombe’s employment had a sufficiently close connection with Great Britain, more so than with any other jurisdiction, to justify this conclusion.

In its decision, the Supreme Court examined the principles already set out by the House of Lords in the landmark 2006 case of Lawson v Serco Ltd

This is an important decision for employers based in the United Kingdom who engage staff to work abroad and highlights the need to give careful consideration to the employment law rights that any such employees might have.

What happened in this case?

Mr Duncombe was employed on a series of fixed-term contracts to work in a European School in Germany by the predecessor to the Department for Children, Schools and Families. After nine years’ employment and on the expiry of Mr Duncombe’s final fixed-term contract, his employment was terminated (as required by the relevant EC Regulations governing the administration of the European Schools under the so-called “nine-year rule”) and he subsequently brought Employment Tribunal claims for wrongful and unfair dismissal. 

The arguments in Mr Duncombe’s case centred around the territorial scope of the ERA and the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002. The case went all the way to the Supreme Court. The Supreme Court has already ruled on 30 March this year on a different aspect of the case, finding that the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 did not operate to convert Mr Duncombe’s fixed-term contract into a permanent contract after he had been continuously employed for nine years on a series of successive fixed-term contracts (on the grounds that the nine-year rule objectively justified the use of a final fixed-term contract), thereby defeating Mr Duncombe’s wrongful dismissal claim. The Supreme Court has now also ruled on Mr Duncombe’s claim that he is protected against unfair dismissal under the ERA, despite working exclusively in Germany.

In reaching its decision, the Supreme Court relied on the decision of the House of Lords in Lawson v Serco Ltd. In that case, it was held that there are three categories of employees who are entitled to claim unfair dismissal protection under the ERA, as follows:

  1. employees who work in Great Britain;
  2. peripatetic employees who are based in Great Britain (e.g. pilots and travelling sales staff); and
  3. expatriate employees in ‘exceptional circumstances’ such that, despite their workplace being abroad, other relevant factors are sufficiently powerful to give the employment relationship a closer connection with Great Britain than any other country’s system of law (e.g. a foreign correspondent who is posted abroad).

The Supreme Court held that MrDuncombefell within the third category in Lawson v Serco Ltd, basing its decision on the following key factors:

  • his employer was based in Great Britain;
  • as well as being based in Great Britain, the employer was the Government of the United Kingdom, giving it the closest connection with Great Britain that any employer could have;
  • Mr Duncombe’s employment was governed by an English law contract;
  • Mr Duncombe was employed in an international enclave which had no particular connection with the country in which he happened to be situated (Germany);
  • Mr Duncombe did not pay local taxes; and 
  • it would be anomalous if a teacher who had been employed by the British Government to work in the European School in England enjoyed greater protection than a teacher employed by the British Government to work in the same sort of school in another country.

The Supreme Court therefore remitted Mr Duncombe’s claim of unfair dismissal to an Employment Tribunal for it to reach a decision on the merits of his case.

What the Supreme Court’s decision means for employers.

On the facts, it is perhaps not surprising that the Supreme Court decided that Mr Duncombe’s employment had a sufficiently close connection with Great Britain to entitle him to unfair dismissal protection under the ERA. However, the case does highlight the English courts’ willingness to give employees who work outside of Great Britain unfair dismissal protection (and potentially other domestic rights) where their employment has a demonstrably close connection with Great Britain.

English employers would be wise to consider carefully the legal rights that their expatriate employees may have both before engaging them and, in particular, when considering whether to terminate their employment.

On a separate note, it is worth pointing out that the Supreme Court did not have to deal with the particularly interesting point which was thrown up by the lower courts in this case concerning the extension of the territorial scope of UK employment law to give effect to directly effective EU rights. The Employment Tribunal and the EAT, applying their view of the principles in Lawson v Serco Ltd, both decided that the Mr Duncombe was not entitled to bring a claim for unfair dismissal, which would have meant that his remedy would have been limited to contractual notice rights. However, applying the principle in Bleuse v MBT Transport Ltd [2008], the Court of Appeal found it necessary to extend the remedy of unfair dismissal to Mr Duncombe in order to give him an effective remedy for breach of certain specific rights under EU law (namely those derived from the EU Fixed-term Working Directive). This decision of the Court of Appeal effectively gives employees working outside the UK, but in the EU, a "back door" means of pursuing an unfair dismissal claim in the Employment Tribunal in circumstances where they do not fit within the Lawson v Serco Ltd categories but where the Court considers that to be necessary to give them an effective remedy for a failure to give effect to an EU derived right (such as rights under the Fixed-term Working Directive). There was no need for the Supreme Court to consider the Bleuse issue as it had already decided (in its first decision) that Mr Duncombe’s fixed term contract did not convert to a permanent contract under the Fixed-term Employees Regulations (so that no effective remedy was therefore required) and because in this second decision of the Supreme Court, it decided that Mr Duncombe fell within one of the Lawson v Serco Ltd categories and was therefore entitled to bring a claim for unfair dismissal under the ERA. The Court of Appeal's decision on the Bleuse issue therefore remains good law and UK employers need to be especially careful when considering the rights of employees who work outside the UK but in an EU Member State, particularly where their contracts are governed by English law.

Final Preparations for the UK Bribery Act 2010

This post was written by Eleanor Winslet.

Are you ready for the Bribery Act 2010 (“the Act”) which will finally come into force on 1 July 2011? To help you, we summarise below the main points that HR professionals and in-house counsel should be thinking about to ensure their organisations are in the best position to defend themselves against any offences under the Act, and that employees are well-informed about its implications.


As said in our previous alert The Bribery Act – what it means for you, the Act sets four offences:

  • Offering, promising or giving a bribe;
  • Requesting, agreeing to receive, or accepting a bribe;
  • Bribing a foreign public official; and
  • Failure of a commercial organisation to prevent bribery.

An organisation will be guilty of the last of these four offences (the “Corporate Offence”) where an associated person” bribes another person with the intention of obtaining business, or an advantage in the conduct of business, for that commercial organisation. The organisation will have a defence to the Corporate Offence if it can show that it had in place “adequate procedures” designed to prevent bribery.

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Defective retirement notices could lead to unfair dismissal and age discrimination claims in the UK tribunals

In the recent case of Bailey v R & R Plant (Peterborough) Limited, the UK Employment Appeal Tribunal (EAT) considered the procedural requirements for a valid retirement notice under the Employment Equality (Age) Regulations 2006 (“Age Regulations”). The case is important since the last date on which such notices could be served was 5 April 2011 so any defective notices cannot now be rectified. In this case, the EAT held that a retirement notice given by an employer had to inform the employee of the conditions that the employee would need to meet for a request by the employee to work beyond retirement to be valid. If the employer dismisses for retirement on the basis of a retirement notice lacking that information, a dismissal will be unfair and/or age discriminatory.

This is a surprising decision as it arguably places a greater burden on employers than the Age Regulations themselves. It is therefore likely that many employers will have unwittingly served defective retirement notices. These should now be checked urgently and advice should be sought if there is any possibility they might be defective.

What happened in this case?

Mr Bailey was employed by R & R Plant (Peterborough) Ltd. He had a normal retirement age of 65 and, six months before his 65th birthday, his employer wrote to him informing him of their intention to retire him at 65 and his right to request working beyond retirement, stating that such an application must be made in writing to be valid. Accordingly, Mr Bailey wrote to his employer explaining that he would like to continue working after his 65th birthday. A meeting was then arranged at which he was informed that it was Company policy to retire employees at 65 and that therefore the intended retirement would go ahead.

Mr Bailey’s subsequent Employment Tribunal claims for unfair dismissal and age discrimination failed as the Tribunal held that his request to extend his employment had been defective. This was because his letter had omitted to state specifically that it was made pursuant to paragraph 5 Schedule 6 of the Age Regulations (which provides that a request to work beyond retirement must be in writing and must state it is made pursuant to paragraph 5).

Mr Bailey appealed. The EAT allowed the appeal, holding that the employer’s retirement notice was defective because it did not comply with paragraph 2(1) of Schedule 6 to the Age Regulations (which states that an employer can lawfully retire employees at 65 provided the employer complies with the Regulations). In the present case, the employer had failed to inform Mr Bailey of all the essential conditions which any request to work beyond retirement would have to meet. According to the EAT, the employer should have expressly explained Mr Bailey’s statutory rights including the fact that, if Mr Bailey were to make a request to defer his retirement, his request must state that it was made under paragraph 5 of the Age Regulations. The absence of any mention of this meant the dismissal was automatically unfair.

The EAT awarded a basic award only on the basis that retirement would have taken place on the intended date in any event.

What this decision means for employers

The decision is surprising – on a plain reading of paragraph 2(1), all that is required of an employer is to write to the employee to put them on notice of their right to request to continue working beyond retirement. The EAT appears to have placed a greater burden on employers in respect of the notice they are required to serve in retirement situations. The EAT felt that an employee was unlikely to be aware of the statutory requirements and therefore construed paragraph 2(1) as imposing an obligation on the employer to inform the employee of the essential conditions for a valid request to be made (of which the requirement for the employee to state that the request to continue working is made pursuant to paragraph 5 is just one).

It is necessary for employees to cite paragraph 5 in any request to work beyond retirement. However, the outcome in Bailey makes such a failure by an employee irrelevant if the employer has already fallen at the previous hurdle by failing to advise the employee of the essential conditions they must comply with under the Regulations.

The decision is unfortunate for employers and will leave them at risk if they have issued defective retirement notices on or before 5 April 2011 (which was the last date that a valid notice could be issued under the now-repealed provisions). If such notices did not specifically spell out the requirements under paragraph 5 of the Regulations, employers will be exposed to opportunistic discrimination and unfair dismissal claims by employees who may wish to exploit the decision in this case. Such retirement notices cannot be corrected retrospectively, nor can fresh notices be drawn up.

You should now review any retirement notices that were issued prior to 6 April 2011 and take appropriate advice. Where retirement has not yet taken effect, you may consider allowing the employee to remain in employment to head off risk, but no fresh retirement notice can be issued under the Schedule 6 process. Alternatively, you could try and find some other fair reason for dismissal outside retirement, but this will undoubtedly involve instigating and following a fair procedure, such as a redundancy or capability process.

It remains to be seen whether the case of Bailey will be appealed, but for the time being at least, Employment Tribunals are bound to follow it and employers should be aware of the risk this creates.

When accepting business from former clients breaches a non-solicitation covenant under UK law

This post was written by Joanna Powis.

The High Court of England and Wales has considered the construction of non-solicitation clauses where the former client initiated contact with the ex-employee. In Baldwins (Ashby) Limited v Andrew Maidstone (PDF), the Court held that the substance of what passes between the parties will determine whether there has been a breach of a non-solicitation clause and that how contact is first initiated is not relevant. The case is a useful reminder of the value of including non-dealing restrictions in addition to non-solicitation provisions in commercial agreements and employment contracts.

What happened in this case?

The defendant, Mr Maidstone, sold his accountancy business to the Claimant (Baldwins (Ashby) Limited) for approximately £1m in September 2007. Following the sale of the business Mr Maidstone was employed by Baldwins until November 2009, when he moved to a firm called Charnwoods. The sale agreement contained a three year covenant protecting the goodwill in the company from Mr Maidstone ‘canvassing, soliciting or endeavouring to entice away’ any of his former clients. Baldwins brought proceedings against Mr Maidstone alleging that he was in breach of this covenant.

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UK EAT comments on cost-plus approach in religious discrimination decision

This post was written by Lee Howard.

A recent Employment Appeal Tribunal decision, Cherfi v G4S Security Services Ltd [2011], deals with indirect religious discrimination and offers employers further guidance on how they might deal the issue of time off work for reasons concerning religion. It may also aid those seeking to justify ostensibly discriminatory practices on the grounds of cost.

What happened in this case?

The employer, G4S, was bound under the terms of one of its client contracts to provide a prescribed number of security guards on site at all times during operational hours. The employee, Mr Cherfi, was a Muslim who frequently left the client’s site on Friday lunchtimes to attend prayers at a Mosque. G4S informed Mr Cherfi in 2008 that he would no longer be able to leave the site at lunchtimes, as G4S would be in breach of its contract if the requisite number of guards were not present at the client’s site.

G4S made a number of efforts to accommodate Mr Cherfi, offering him an amended work pattern of Monday to Thursday, with the option of working Saturday or Sunday so that he would not suffer financially. However, Mr Cherfi did not wish to work at weekends, and discussions did not result in agreement.

Thereafter, Mr Cherfi ensured that he was not present at work on Fridays, by either taking sick leave, annual leave or authorised unpaid leave. When G4S expressed discontent with this situation, he brought a claim for indirect discrimination, arguing that Muslims were put at a particular disadvantage by the employer’s requirement for all security guards to remain on site on Friday lunchtimes.

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UK Regulations Amending PAYE Treatment of Post P45 Payments

This post was written by Fionnuala Lynch.

From 6 April 2011 the PAYE treatment of termination payments to an employee after a P45 has been issued will change. Any employers considering the timing of any imminent dismissals should consider whether it may be better to enter into any compromise agreement or other termination agreement before the end of this tax year. This will not change the actual amount of tax due but will have cash flow advantages for employees on higher rates of tax. As regards payments to be made after 6 April, employers should consider whether it may be better to make the entire payment before the issue of the P45 or structure the payment monthly, post P45. 

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Enhanced Paternity Pay

In April last year we posted a blog on the change in law on paternity leave focussing on the new right to Additional Paternity Leave (APL) which came into force on 6 April 2010. Under this, eligible employees whose children are due to be born on or after 3 April 2011 will have the right to take up to 6 months’ APL. The right will also apply in the case of adoptions where parents are notified of a match on or after 3 April 2011.

Since the implementation of the right to take APL, a question has arisen on whether an employer who offers an enhanced maternity pay package to its female employees should also offer enhanced paternity pay to those employees who take APL.

This issue has become particularly pressing since a recent ruling of the Court of Justice of the European Union (CJEU) in the Spanish case of Roca Álvarez v Sesa Start España ETT SA (ECJ Case C-104/09). Spanish law provides that female employees are entitled to time off during the course of the working day to feed a child under the age of 9 months. This right was originally introduced to facilitate breastfeeding by working mothers. However, this right was subsequently developed so as to allow fathers to take this leave provided both parents were employed. Therefore mothers who are employed were always entitled to this leave while fathers who also have employed status would only be so entitled if the child’s mother is also an employed person. This difference under the provision was held by the CJEU to amount to sex discrimination. In reaching this decision, the CJEU noted that the purpose of this leave was no longer strictly associated with breastfeeding but was actually a measure which reconciled family life and work for both parents. Therefore this purpose could be achieved by fathers taking the time off work as well as mothers. In addition, the fact that this leave could be taken by the father meant that this measure could not be regarded as being to ensure the protection of the special relationship between a mother and her child.

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What's Coming Up in UK Employment Law in April?

UK employment law seems to be in a constant state of flux and this year is no exception. Summarised below are the main legislative changes that employers need to know about this April. There are some urgent action points to consider before 6 April regarding serving any last minute retirement notices and the timing of termination payments.

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The Bribery Act - What it means for you

Guidance on the delayed UK Bribery Act 2010 has now been published. The guidance sets out what procedures a commercial organisation should adopt to prevent persons associated with it from committing offences under the Act. The breadth and importance of this legislation means that companies and their senior officers would be well advised to familiarise themselves with the effects of this new law.

In particular, the Act provides that "senior officers" (including non-board level managers) can "individually be held criminally liable" for a company’s bribery offences. The Act also includes extensive extra-territorial powers of prosecution similar to those found in the U.S. Foreign Corrupt Practices Act ("FCPA") and the offences apply to acts of bribery in both the public and private sectors (unlike the FCPA).

Reed Smith has produced a briefing note on the new Guidance. This new briefing note complements our previous briefing note on the substantive elements of the Act.

Phasing out the UK default retirement age: legal update

In our last update, we reported that the UK Government had issued its response to its consultation “Phasing out the Default Retirement Age”, confirming that from 1 October 2011 there will no longer be a default retirement age (DRA) of 65. Draft Regulations were laid before Parliament in February but after much criticism over how they should be interpreted, a revised draft of those Regulations (Employment Equality (Repeal of Retirement Age) Regulations 2011) have been made available and are due to come into effect 6 April 2011. Several of the Government’s original proposals set out in their response to the consultation (and as set out in our last update) have been changed. In particular, changes concern when the last notice of retirement can be served and when the last date it can expire. There was some confusion over retirement of the over 65s but this was a drafting error and has been rectified in the revised draft Regulations.

Confusion about when notice of retirement can expire

Under the current rules, an employee must be given a minimum of six months’ and a maximum of twelve months’ notice to be compulsorily retired. The Government first indicated in its response to its consultation that because the DRA will not apply from 1 October 2011, an employer who wishes to effect a compulsory retirement would need to issue the retirement notice by 30 March 2011 (or before 6 April 2011 under the “short notice” rules). It was understood that this meant that such employees would have to be retired on or before 30 September 2011.

On 17 February 2011, ACAS issued a Guidance update indicating this view was not entirely correct. The ACAS Guidance indicates that employers will in fact have until 5 April 2011 (but no later) to issue notice to an employee of compulsory retirement and that notice (being no less than six and no more than 12 months under the current rules) may run its course and so may expire after the 30 September 2011 deadline. Short notice notifications will not be permitted on or after 6 April 2011. The revised draft Regulations confirm this. 

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UK tax implications for settlement payments in cases of discrimination - recent developments

Two recent cases give guidance on the tax treatment of settlement payments on termination of employment. A First-tier Tax Tribunal has, for the first time, laid down the correct approach to apportioning a settlement payment which is to compensate an employee for both discrimination and termination of employment. It was decided in Oti-Obihara v. HMRC that the proper starting point is the amount that can be identified as the ‘employment termination payment’, i.e. the amount which represents compensation for financial loss arising from the termination. The balance, being the compensation for injury to feelings, can be paid free of tax, recognising that it may be appropriate for a larger payment to be made.

In addition, the Court of Appeal in Norman v. Yellow Pages Sales Ltd has held that an employer has no implied duty to apportion a termination payment between taxable and non-taxable elements. The employer is entitled to deduct tax on the full amount (above £30,000), and any dispute over the amount of tax payable is a matter for the employee, not the employer, to pursue with HMRC.

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UK Government's final decision on plans to phase out the default retirement age

The UK Government has now issued its response to its consultation “Phasing out the Default Retirement Age”, confirming that the default retirement age (DRA) of 65 will be abolished from 1 October 2011. The last retirement notice under the current procedure should be issued by no later than 30 March 2011, so employers have very little time to prepare. We understand draft Regulations will be laid before Parliament by the end of this month and will come into effect on 6 April 2011. 

The Government has stuck to its original proposal that, from 6 April 2011, employers will no longer be able to issue notices of retirement under the DRA procedure. In practice, notices must be issued by 30 March 2011 as the current procedure requires employers to give no less than 6 and no more than 12 months notice of retirement. Notices can be issued after 30 March 2011 and before 6 April under the short notice provisions but the employee could claim compensation of up to 8 weeks’ wages as a result. Where notifications have already been made prior to 6 April 2011, employers will be able to continue with retirement procedure, as long as the retirement is due to take place before 1 October 2011. Retirement notices already issued which provide for a retirement date on or after 1 October 2011 will be void.

No retirements using the DRA procedure will be possible from 1 October 2011. After that date it will only be possible to retire a particular employee at a particular age if the employer can objectively justify that age for retirement. This will be very difficult to do other than in particular professions (such as those requiring significant physical fitness) and will require substantial supporting evidence. 

Most importantly for employers, the Government has responded to employer concerns (as communicated by us in our response to the consultation) as regards group risk insured benefits (such as medical insurance, death in service and income protection). The Government’s proposal is to provide an exemption so that employers will be able to exclude employees aged over 65 (such age rising in line with increases in the State Pension Age) from benefits under these schemes, without risk of age discrimination claims being brought. This has been a particular concern for our clients, and so it will come as a relief to many employers who will be able to continue to operate existing schemes without incurring inflated costs. We await the draft Regulations to determine which schemes will be captured by the exemption.

ACAS has now issued guidance for employers “Working without the default retirement age.” While this has been designed to assist employers rather than set statutory guidelines, we recommend that all employers read this carefully. In addition to the new ACAS guidance, the Government recommends that employers look at the guidance already available through the Age Positive Initiative. This gives information on how to review retirement practices, manage performance and flexible approaches to retirement without the use of a fixed retirement age.

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Can cost justify age discrimination in the UK?

The established view that cost considerations by themselves cannot justify age discrimination in the UK has been questioned in the recent decision of the Employment Appeal Tribunal (“EAT”) in Woodcock -v- North Cumbria Primary Care Trusts. The EAT in this case upheld the Tribunal’s decision that a redundancy dismissal timed so as to avoid ‘enhanced’ early retirement rights being triggered due to the appellant’s age, although unfair, did not amount to age discrimination. This was on the basis that it was objectively justified, on grounds other than cost alone. The EAT did not therefore go as far as to depart completely from the established view that cost alone cannot form the basis of an employer’s justification for age discrimination. However, its reasoning did suggest that, in some circumstances, there is no reason why this should not be sufficient to be the basis of justification.

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Effective Date of Termination - Employer's letters of dismissal

The UK's Supreme Court in Gisda Cyf v Barratt has ruled that where an employer communicates dismissal without notice by way of a letter, the effective date of termination (‘EDT’) is when the employee reads the letter or has had a reasonable opportunity of reading it, as opposed to when it is posted. This will be the case unless the employee has deliberately failed to open the letter or gone away in order to avoid reading it. This is in contrast with the ‘normal’ contractual position and reaffirms the view that employment law is a special case, recognising the more vulnerable position of employees.

What happened is this case?

Mrs Barratt, the respondent, was suspended from her employment because of allegations that she had behaved inappropriately at a private party. In her disciplinary hearing shortly thereafter she was told to expect to receive a letter on 30 November informing her of the outcome. Mrs Barratt then went away on 30 November as her sister had just given birth. Later that day her boyfriend’s son signed for the letter from Mrs Barratt’s employers. Mrs Barratt had left no instructions for it to be opened or read. Mrs Barratt arrived home late on 3 December and didn’t actually open the letter until 4 December, at which point she discovered she had been summarily dismissed.

The EDT is the date on which an employee’s continuous employment has ended. Establishing the EDT is important because a claim for unfair dismissal must be presented to the Tribunal before the end of three months beginning with the EDT. Mrs Barratt presented a claim for unfair dismissal and sex discrimination on 2 March 2007. If the EDT was when Mrs Barratt’s employers posted the letter, this would mean her claim was out of time because she would only have until the end of February to bring her claim; if it was when she actually read the letter, then her complaint was lodged within time because the time limit was 3 months from when she read the letter i.e. 3 March 2007.

The Employment Tribunal held that both claims were brought within time’ the EDT was when Mrs Barratt opened the letter. This was appealed all the way to the Supreme Court. The employer argued that the Tribunal should have adopted more traditional contractual principles i.e. that termination occurs when communication could be expected ‘in the normal course of things’ to come to the party’s attention. However, the Supreme Court said that employment law is a special case in which employees are in a ‘more vulnerable position than employers’. The rules on time limits should be interpreted in a way favourable to the employee. 

The question to be considered was whether the EDT was determined by the existence of the opportunity to open the letter, or was it the date on which the employee had a “reasonable opportunity” to find out what the letter contained? The Court decided that it was the latter: the proper consideration should be whether the employee had a reasonable opportunity to find out what the letter contained. 

In assessing whether Mrs Barratt had a reasonable opportunity to discover the contents of the letter, the Court placed great emphasis on her behaviour. The Court reasoned that even though the letter had been signed for and Mrs Barratt’s boyfriend’s son could have opened the letter and told Mrs Barratt of its contents, it was not unreasonable for her to fail to leave instructions to do so. It was also considered perfectly reasonable that Mrs Barratt should want to visit her sister, who had just given birth. In addition the Court considered it reasonable that Mrs Barratt would want to absorb the contents of the letter alone, given its contents, rather than give instructions for someone else to read the letter and tell her of the contents. 

One key caveat to the ruling is that the EDT being when the employee opens the letter of termination will not apply where the employee deliberately avoids reading the letter or goes away so as to avoid reading it.

What does this case mean for employers?

This case highlights that in assessing when the EDT in the context of employment rights legislation, employers must be ‘mindful of the human dimension’. Employers looking to terminate an employee by way of letter, rather than say a face to face meeting, must ensure that they consider what can be reasonably expected of an employee facing the prospect of dismissal. 

The Tribunals will generally treat the employee favourably due to their more vulnerable position. In which case, unless an employee is shown to have deliberately avoided reading a letter, the EDT will be when the employee reads the letter or has had a reasonable opportunity to discover its contents. It would appear that the employee would have to make a concerted effort not to read such a letter for this rule to be displaced.

The UK Equality Act 2010 - new risks for employers using Compromise Agreements

On the day the Equality Act 2010 came into force last Friday, it became apparent that there is a significant drafting error in the Act which could affect the enforceability of compromise agreements intended to settle discrimination and equal pay claims under the Act.

In order to have a qualifying compromise agreement the complainant must receive advice from an “independent adviser” about its terms and effect. The problem has arisen in relation to section 147 which sets out the requirements for an independent adviser. 

The Act, in force as of 1 October, provides in Section 147(5)(d) that:

‘. . . none of the following is an independent adviser in relation to a qualifying compromise contract:

(a) a person who is a party to the contract or the complaint; and

(d) a person who is acting for a person within paragraph (a) in

relation to the contract or the complaint . . ."

The literal effect of this would be that an adviser who has acted for the employee in relation to the contract or complaint to date cannot also advise the employee on a compromise agreement to settle a claim or complaint.   It would appear that this is a flaw in the drafting of this section of the Act.   

How will this be interpreted?

The Courts have built up, over the years, a line of case law which deals with the interpretation of drafting errors in legislation and other ambiguities. Where the wording of the statute is plain and unambiguous, the Courts are bound to construe them in their ordinary sense, even if it leads to an absurd result or manifest injustice. However, as soon as the provision is acknowledged to be ambiguous (i.e. more than one meaning can be derived from the plain reading of the words used) the Courts may take account of any absurdity that would occur from a particular interpretation. 

It appears that the wording of section 147 is plain and unambiguous in the way it is drafted. However, a reading of the explanatory notes shows that its effect is clearly not what the legislature intended. There is case law which indicates that the Courts may, in such cases, be prepared to look at all the evidence (such as Parliamentary debates recorded by Hansard) to determine what the legislation was intended to do.

We would hope that any Employment Tribunal faced with interpreting this section would agree that its meaning does not accord with the corresponding sections of other legislation such as section 203 of the Employment Rights Act 1996 (which relates to the settlement of claims under that Act, such as unfair dismissal), and therefore conclude that this could not have been the Government’s intention.

How could this affect employers?

Taking a literal interpretation of section 147 of the Act could mean that a compromise agreement is not valid because the adviser was not an independent adviser within the Act. Indeed, it could mean that no claim under the Equality Act could ever be settled by way of compromise agreement since an independent advisor is not allowed to be a person (e.g. solicitor) who is “acting” for an employee in relation to the claim or complaint.  

Options for employers and associated risks

As the wording of section 147 of the Act produces what can only be described as a clear error, it is hoped that Parliament will be able to resolve this shortly. Until that time, or until the Courts are required to make a declaration as to the meaning of this provision, employers are left in the uncomfortable position that there is a risk that their compromise agreements can be challenged as unenforceable. 

The only watertight solution is for employers to consider using a COT3, where appropriate. This is an ACAS form for conciliating an agreement between employer and employee. 

In cases where a COT3 is not appropriate, employers will have to assess the risk of continuing to use a compromise agreement. Essentially, the risk is that employers will be open to a challenge being made. However, given that the drafting error appears to be a simple one, which will not require much creativity on the part of the courts, it is hoped the risk will not be great or prolonged.

Click on the following link for the Government Equalities Office website, which contains all the latest news from the government on the Equality Act 2010 and its implementation, as well as links to the text of the Act and the Explanatory Notes.

Click on the following link for the Equality and Human Rights Commission website, which gives more information the Equality Act 2010 and the draft Codes of Practice.

The UK Equality Act - Your Questions Answered

This post was written by Joanna Whiteman and Ruth Bonino.

In this Q&A, we have attempted to cover some of your most frequently asked questions on the UK Equality Act 2010.  This is not intended to be a comprehensive guide of the new provisions, so if you would like further information, please do not hesitate to contact us.

The Equality Act 2010 has been in the press a lot recently. Should we already have taken steps to ensure that our systems are in compliance with it?

The Equality Act 2010 ("the Act") received Royal Assent in April, just before the general election and after a period of intense discussion and debate.  The new coalition government has recently announced that most of the Act's provisions are due to take effect, as planned, from October 2010. However, despite this, questions remain over the more controversial provisions, such as the socio economic duty, gender pay reporting and positive action.

Employers need to act now in order to prepare for the Act, and the action we recommend is set out at the end of this note.  As regards those provisions of the Act where a question mark remains, there is no need to jump the gun - keep a close eye on developments, but be prepared to act as soon as any announcements are made.

I've heard that the Act makes it easier for employees to show they have suffered disability discrimination. Is this true?

The Act introduces some significant changes in the law concerning disability discrimination, and the government has said that these will come into force in October.  The changes have come about because of a recent decision of the House of Lords (London Borough of Lewisham v Malcolm (2008)), which rendered the existing protections against disability-related discrimination inadequate.  The changes make it easier for people to show they are disabled and are protected by disability discrimination law.  Two new types of disability discrimination are recognised as unlawful by the Act:

  • Indirect discrimination - under Section 19 of the Act, a person will be indirectly discriminated against if the employer applies a "provision, criterion or practice" that puts people sharing that person's specific disability, at a particular disadvantage. This means, for example, that a job applicant or an employee with dyslexia could claim that a rule that employees must be able to type at a certain speed disadvantages people with dyslexia. Unless the employer can justify this, it would be unlawful.
  • Discrimination arising from disability - under Section 15 of the Act, an employer discriminates against a person when it treats that person less favourably, not because of the disability itself, but because of something arising "in consequence of that person's disability," such as the need to take a period of disability-related absence. For this type of discrimination to occur, the employer must know, or reasonably be expected to know, that the disabled person has a disability. This type of discrimination will be easier for an employee to show since there will be no need to make a comparison with a person who does not have a disability (as is currently the position). It will, however, be possible for an employer to defend a claim by showing that the treatment is justified as being a proportionate means of achieving a legitimate aim.

Some aspects of disability discrimination law are not changed by the Act. For example, the Act still requires employers to make reasonable adjustments for disabled employees and does not change the extent to which these are required. However, it may be necessary to review your organisation's policies to ensure that they are up to date and compliant with the current interpretation of "reasonable adjustments."  It will also be advisable to review your policies and practices to ensure that they cover the new definitions of disability discrimination referred to above.

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UK Emergency Budget 2010 - Newsflash

The Emergency Budget announced by the Chancellor yesterday contained a number of measures (such as income tax, national insurance and pensions) which will be relevant to all UK employers. Fionnuala Lynch, counsel in the Reed Smith UK tax department has produced a summary of the key measures, with particular emphasis on the proposals affecting business taxation. Please feel free to forward the paper on to anyone in your organisation who may find the paper of interest.

Breach of contractual disciplinary procedure may lead to significant loss of earnings claims

The Court of Appeal has ruled that an employee subject to a contractual disciplinary procedure, who was dismissed for misconduct in breach of that procedure may, in principle, recover damages for loss of future employment prospects. The case of Edwards v Chesterfield Royal Hospital NHS Foundation Trust represents a significant departure from decades of established case law concerning the calculation of damages for wrongful dismissal. The decision (which we understand is being appealed) potentially opens the door to huge loss of earnings awards for employees who are unable to find alternative employment due to loss of reputation because of their dismissal.

What happened in this case?

Mr Edwards was employed by the Chesterfield Royal Hospital Trust (the “Trust”) as a consultant surgeon. In 2006 he was dismissed for gross professional and personal misconduct following a disciplinary hearing and had since then been unable to obtain work as a permanent consultant. Mr Edwards maintained that if the contractual disciplinary procedure to which he was subject had been followed correctly, he would never have been dismissed. He brought a High Court claim seeking damages for breach of his contract of employment in the sum of little under £4.3 million (including a loss of earnings claim for £3.8 million to cover his loss of employment income from dismissal to retirement at age 65).

Usually a wrongful dismissal claim would be limited to loss of earnings over the contractual notice period and, where there is a contractual disciplinary procedure, the period in which the procedure should have been followed. Since Mr Edwards’ claim went beyond this (to include loss of earnings to retirement), the Trust applied for an order from the Court that any damages which exceeded the loss of earnings over the notice period should be struck out. This matter was dealt with as a preliminary issue and for those purposes the Court only had to consider whether Mr Edwards had any real prospect of recovering, after trial, damages in excess of the loss of earnings over the notice period. For this purpose, it was entitled to assume that Mr Edwards would succeed in all the allegations made in his Particulars of Claim.

The issue finally ended up before the Court of Appeal, and the issue the Court had to consider was whether Mr Edwards was entitled to damages for loss of professional status in circumstances where, if the disciplinary proceedings had been conducted properly and not in breach of contract, he would not have been dismissed. The Court concluded that damages should not be limited to damages over the notice period and the time which the employer would have taken for the disciplinary procedure to be followed.

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The UK Bribery Act 2010 - What it means for you

This post was written by Suzie A. Savage.

The UK Bribery Act 2010 has far-reaching implications for any business (including US businesses) which is either registered in the UK or which has any part of its operation in the UK. The breadth and importance of this legislation means that companies and their senior officers would be well advised to familiarise themselves with the effects of this new law.

In particular, the Act provides that “Senior officers” (including non-board level managers) can "individually be held criminally liable" for a company’s bribery offences. The Act also includes extensive extra-territorial powers of prosecution similar to those found in the U.S. Foreign Corrupt Practices Act (“FCPA”) and the offences apply to acts of bribery in both the public and private sectors (unlike the FCPA).

Reed Smith has produced a Client Briefing Note which provides you with a summary of the key provisions and offers suggestions for best practices to comply with the Act. Please click here for the full Reed Smith Client Briefing - The Bribery Act 2010.

In addition to this Client Briefing, Reed Smith is running a client teleseminar "The New UK Bribery Act 2010: What Does it mean for US Companies that operate in the UK?" on Thursday, June 10, 2010 from 12:00 pm - 1:00 pm ET; 11:00 am - 12:00 pm CT; 9:00 am - 10:00 am PT; 17:00 pm - 18:00 pm British Summer Time and 18:00 pm - 19:00 pm Central European Summer time.

Please click here to register for the teleseminar.

Reed Smith Employment Attorneys Expand Social Media Advice to Europe in New Edition of White Paper

This post was written by Laurence G. Rees, Sara A. Begley, Eugene K. Connors, Casey S. Ryan, Carl De Cicco, Amber M. Spataro.

In our everyday lives, we've all noticed or become a part of the phenomenon of social media Facebook, Twitter, YouTube, Flickr, MySpace and more. The options offered and growth of the media have been staggering. With that growth has come new legal risks, including employment issues, quite unlike anything we've seen before. And with things happening at lightning speed, it's hard to keep up, much less react when something goes awry.

In October 2009, we published a White Paper on social media and United States law entitled Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon. The response was unlike quite anything we'd ever seen before as clients, friends, and colleagues from around the globe asked for copies and praised the work.

This month, we've published the second edition which includes a chapter on Employment Practices that addresses employment issues arising from the use of social media in both the U.S. and Europe.

Click here for the new edition and bookmark the entry to be sure to get ongoing revisions.  You can also read the employment chapter by clicking here on our sister technology blog, Legal Bytes.


Paternity leave

Regulations concerning the new right to additional paternity leave (APL) came into force on 6th April 2010. Currently those eligible for ordinary statutory paternity leave are entitled to one whole week or two consecutive weeks’ paternity leave on statutory paternity pay, which is currently £124.88, to be taken within eight weeks of the expected week of childbirth (EWC). However, eligible fathers whose children are due on or after 3 April 2011 will have the right to take up to 6 months’ additional paternity leave (APL). The right will also apply to adoptions where parents are notified of a match on or after 3 April 2011 and husbands, partners or civil partners who are not the child’s father but expect to have the main responsibility (apart from the mother) for the child’s upbringing.

Continue reading our for a summary of the new provisions regarding Additional Paternity Leave.

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Leave and pay - a confusing mess?

The subject of leave and pay has caused a number of headaches for employers over recent years. Recent cases have sought to clarify this area of the law, however, many questions remain unanswered. One of the most confusing areas relating to leave is the interaction between sick leave and annual leave. What happens when a worker is off sick and therefore does not take his/her accrued holiday? Do workers accrue annual leave whilst off sick? Read on for a summary of the recent cases which have sought to answer some of these questions.

Accrual of annual leave during sick leave

In Stringer and Others v HM Revenue & Customs, the European Court of Justice (ECJ) held, in respect of questions refered to it by the House of Lords, now the Supreme Court (HL), that:

  • workers on sick leave must continue to accrue annual leave;
  • it is for Member States to decide whether workers can actually take annual leave during sick leave; and
  • if workers are prevented from taking annual leave during sick leave, they must be able to take it following their return to work, even if this means carrying the annual leave over into the next holiday year.

The HL has now determined how these principles should be applied in the UK. Regulation 13(9) of the Working Time Regulations 1998 (WTR) states that “leave.... may only be taken in the leave year in respect of which it is due”. The parties agreed that statutory annual leave could not therefore be carried forward to the next holiday year. The HL held that it was therefore necessary to interpret the WTR as allowing workers on long-term sick leave to take (and be paid for) annual leave whilst on sick leave.

However, this case raises as many questions as it answers. For example, what happens if the worker does not request annual leave whilst on sick leave? Does the employer have to permit annual leave to be carried forward in these circumstances, despite the WTR? Many of the points raised by the ECJ were not fully considered by the HL, and therefore the manner in which the ECJ’s decision might be interpreted under UK law remains uncertain.

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Dismissals - new developments explained


During the past year, there have been a number of cases which have impacted on the area of dismissals. We consider the major cases below:

Unfair dismissal

In order for a dismissal to be fair, an employer has to show:

  1. that it has a potentially fair reason for dismissal; and
  2. that the dismissal is reasonable in all the circumstances.

When assessing “reasonableness”, the Tribunal will look at the employer’s dismissal procedure to see whether it satisfies this test.

In West London Mental Health NHS Trust v Sarkar, the Employment Appeal Tribunal (EAT) held that an employer acted reasonably in dismissing an employee for gross misconduct under its formal disciplinary procedure, despite initially taking the view that the misconduct could be dealt with under an informal procedure designed to deal with less serious matters.

It was found that the employer was entitled to consider further incidents of poor conduct which occurred and justified a change in approach.

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Interpreting TUPE - an update on the latest cases

The past 18 months has seen a significant number of TUPE related cases. The following is a summary of some of the key decisions.

The meaning of the term `activities’ (Service Provision Change)

A TUPE transfer will occur when there is a ‘service provision change’. In a first-generation outsourcing, where a client outsources an activity to a contractor for the first time, the conditions to be met in order for there to be a service provision change include a requirement that ‘activities’ cease to be carried on by the client for itself and are instead carried on by the contractor on the client’s behalf. As TUPE does not include a definition of ‘activities’, it has been for the Courts and Tribunals to consider how this issue should be approached.

In Metropolitan Resources Ltd v Churchill Dulwich Ltd, the Employment Appeal Tribunal (EAT) decided the activities carried out by the transferee must be ‘fundamentally or essentially the same’ as those that were carried out by the transferor in order for a TUPE transfer to occur. The EAT also indicated in its decision that in assessing whether the activities are similar, a more detailed rather than an ‘overview’ approach should be adopted (i.e. consideration should be given to the exact nature of the activities performed by each of the transferee and the transferor and the exact manner in which those activities are performed).

Further support for the adoption of a detailed approach can be found in the EAT’s decision in OCS Group Ltd v Jones and another. Here, the EAT decided that a contractor which provided catering services to a client by preparing hot and cold meals in on-site kitchens performed activities that were different to those of a contractor which only sold pre-prepared sandwiches and salads. The EAT rejected the ‘overview’ approach argument that the activities carried out by each of the transferee and the transferor in this case should be considered to be the provision of food or catering services and should therefore be considered to be the same.

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Changes in Employment Law for April 2010

In force from today are a number of legislative changes which will be of interest to employers. These include the new right to request time off to train and the replacement of sick notes with “fit notes”. Also expected to come into force today are various regulations relating to additional paternity leave which will affect parents of babies born or expected to be born on or after 3rd April 2011 and parents who are notified of having been matched for adoption on or after that date. For the moment, however, they still appear in their draft form but will no doubt come into force shortly.

New right to request time off to train

From 6 April 2010 employees working for employers with 250 or more employees have a new right to request time off to train. As from 6 April 2011, the right will extend to all employees, regardless of the size of their employer. The right will be available to employees only (not to other “workers”) and is subject to a qualifying period of service of 26 weeks. Employers are required to consider all requests seriously and follow a prescribed procedure. They may only refuse a request if they think that one of a number of specified business reasons set down in section 63F(7) of the Employment Rights Act 1996 apply. An employee whose application is refused can bring a claim before an Employment Tribunal but their remedies are limited to compensation of up to eight weeks’ pay and/or an order for the employer to reconsider the application.

For more information see the Government’s business link website

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Unilateral contractual variations and employee handbooks

In Bateman and others v Asda Stores Ltd, the Employment Appeal Tribunal (EAT) upheld an Employment Tribunal’s decision that Asda was entitled to introduce new pay terms without its employees’ consent because it could rely on a statement in its staff handbook reserving a right to make unilateral variations to the terms of its employees’ contracts of employment.

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Effect of TUPE on Collective Agreements

In the case of Parkwood Leisure Ltd v Alemo-Herron and others, the Court of Appeal has examined the effect of regulations 5 and 6 of Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE 1981) in relation to collective agreements. The Court has held that in circumstances where a contractual right to a pay increase is dependent on collectively agreed terms, the transferee of an undertaking transferred will not be bound by terms collectively agreed by third parties after the transfer. In making this decision, the Court declined to follow established UK case law and preferred instead to follow a 2006 decision of the European Court of Justice (ECJ).

Although the case involved an issue relating to the 1981 Regulations, the law as stated in it will apply to the current Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006).

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Justifying Age Discrimination

The European Court of Justice (ECJ) has ruled that the protection of patients from declining performance of dentists due to their age may be a legitimate aim justifying difference in treatment on the grounds of age. However, whilst setting a maximum practising age of 68 for German national health service dentists is potentially lawful under the EC Equal Treatment Directive, it was not justifiable because German law permitted private dentists to practice beyond 68. The age limit was justifiable, however, on a different basis, namely because it gave opportunities to younger workers to join the health service(see Petersen v Berufungsausschuss für Zähn für den Bezirk Westfalen-Lippe). In another decision, the ECJ held that a German law which restricted applications to join the fire service to those under the age of 30 could be defended as a genuine occupational requirement. (see Wolf v Stadt Frankfurt am Main)

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What's on the cards for UK employment legislation this year?

Equality Bill

This long awaited piece of legislation is due to hit the statute books this Spring, with many of its provisions coming into force in October. It is this year’s most significant piece of legislation so far and will affect employers in both the private and public sectors. As well as harmonising and consolidating discrimination legislation, it will also strengthen it. For example, new types of disability discrimination will redress the balance in favour of the employee following the case of London Borough of Lewisham v Malcolm. Also, the definitions of direct discrimination and harassment will be widened to cover claims based on “association” and “perception” and there will be a new type of claim for gender pay discrimination based on hypothetical comparators. Widely publicised in the press is the extension of the concept of positive action to enable employers to choose from two equally qualified candidates, the person who is from a group which is under-represented in their workforce. It will also be possible for claimants to bring “multiple” direct discrimination claims. Finally, amongst other things, proposals to make the gender pay gap more transparent include a power to issue regulations which can require large employers (250+ employees) in the private sector to report their gender pay gap. Public bodies with more than 150 employees will be required to do this from 2011.

For more information, view the Bill.

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Religious belief did not exclude Christian Registrar from civil partnership duties

In Ladele v The London Borough of Islington and Liberty, the Court of Appeal has confirmed the decision of the Employment Appeal Tribunal (EAT) that Ms Ladele, a Registrar of Births, Marriages and Deaths at Islington Council who held strong Christian beliefs, had not suffered discrimination on the grounds of her religion or belief when she was required by the Council to perform same sex civil partnership ceremonies. The Court made it clear that the Council had a legitimate aim to provide the full range of civil partnership services without discrimination and so was entitled to require Ms Ladele to perform the ceremonies despite her objections to doing so based on her Christian belief. Moreover, having been designated a Registrar, it was unlawful under the Equality Act (Sexual Orientation) Regulations 2007 for the Ms Ladele to refuse to perform such ceremonies.

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Guidance on discrimination on the grounds of philosophical belief

In Grainger plc and others v Nicholson the EAT has given guidance on what might qualify as a ‘philosophical belief’ for the purposes of the Employment Equality (Religion or Belief) Regulations 2003 (the “Regulations”). In the case, the Employment Appeal Tribunal (“EAT”) held that a belief in the existence of man-made climate change and the need to cut carbon emissions was capable of amounting to a philosophical belief which would qualify an employee holding that belief for protection from discrimination under the Regulations. However, importantly, the EAT made clear that it would be necessary for any claimant to establish that their adherence to the philosophical belief in question is genuine.

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October Changes in Employment Law

Continue reading for an overview of what legislative changes have taken effect from the beginning of this October.

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Workers entitled to postpone annual leave if they fall sick

In Pereda v Madrid Movilidad SA, the European Court of Justice ("ECJ") has decided that where a worker is sick during a period of pre-planned annual leave, annual leave must be granted to him for a different period and if he is prevented from taking it during the current holiday year, he can carry it forward to the next one. This judgment follows on from the recent and highly publicised conjoined cases of Schultz-Hoff and Stringer, which established that a worker on sick leave accrues annual leave whilst off sick but it is for Member States to decide whether a worker can take their annual leave during a period of sick leave. The upshot of these decisions appears to be that employees can choose to do what suits them best – if on long term sick leave, they can elect to take paid annual leave, but if they are sick whilst on paid annual leave, they can elect to postpone paid annual leave and take it later even if that means having to postpone it to the next holiday year. Pereda represents a very worrying development for employers as it opens the door to abuse because unscrupulous employees will be able to re-classify parts of their holiday as sick leave on their word alone.

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TUPE and Constructive Dismissal

In an important decision concerning TUPE transfers, the Employment Appeal Tribunal (EAT) has given guidance in the case of Tapere v South London & Maudsley NHS Trust on, first, the interpretation of mobility clauses in the context of a TUPE transfer and, secondly, on Reg 4(9) TUPE, which allows a transferred employee to treat themselves as dismissed if a relevant transfer involves a substantial change in working conditions which is to the employee’s material detriment. The EAT held that "detriment" should be considered using the subjective approach which applies in discrimination law. The case will be particularly important to purchasers of businesses and transferees in outsourcing situations where transferred employees are required to move location after the transfer takes place.

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Extending the time limit to present a claim in the Employment Tribunal

A recent decision of the Employment Appeal Tribunal in Eagles v Rugged Systems has confirmed the position as to the circumstances in which an Employment Tribunal should exercise its discretion to extend the ordinary three-month time limit for presenting a claim in the Employment Tribunal for an extra three months under the statutory dispute resolution regulations (repealed on 6th April 2009). The decision will be of interest to employers dealing with recent claims for unfair dismissal or who are currently negotiating compromise agreements or dealing with ongoing dismissal procedures in cases where, on a time limit transitional basis, the statutory dispute resolution procedures still apply.

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House of Lords paves way for back-dated holiday pay claims

The House of Lords, in the case of HM Revenue and Customs v Stringer and others has overturned the decision of the Court of Appeal in that case, ruling that claims for unpaid statutory holiday pay and accrued statutory holiday pay on termination under the Working Time Regulations 1998 (“WTRegs”) can be made as unlawful deduction from wages under the Employment Rights Act 1996 (“ERA”), as well as under the WTRegs. This will mean that workers can take advantage of the more favourable time limits which apply under the ERA, which could potentially allow them to claim unpaid holiday pay on termination of their employment going back several years, provided they bring their holiday pay claim within three months of their employer’s most recent failure to pay them holiday pay. This decision will not be welcomed by employers as it will increase the cost of both continuing to employ workers on long term sick leave, and also on termination of their employment. It also leaves unresolved a number of practical problems arising from the decision of the European Court of Justice (ECJ) earlier this year on this issue (see our blog for details of the ECJ decision). 

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Length of service criteria in redundancy selection can be lawful

In Rolls Royce Plc v Unite the Union, the Court of Appeal has ruled that using length of service as a criterion in a redundancy selection policy can be lawful in some circumstances. Although the use of length of service amounts to indirect age discrimination, it can be objectively justified where it pursues the legitimate aim of maintaining a stable workforce during a redundancy exercise and rewarding loyalty, and is a proportionate means of achieving that aim. In this case, the means of achieving that legitimate aim were proportionate because the criterion was one of many criteria used in the selection process and the means used were consistent with principles of fairness.

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The Equality Bill

The UK Government has published the long awaited Equality Bill, the aim of which is to harmonise and consolidate discrimination legislation and also tackle inequality and discrimination which continues to persist in employment and in the provision of services. Aspects of the Bill which have attracted media attention include the new public sector duty to consider reducing socio-economic inequalities and the banning of “gagging clauses” in employment contracts so that employees can be free to talk about their pay packages. The Bill also extends the concept of positive action to enable employers to recruit or promote people who are from groups which are under-represented in their workforce. Despite concerns of commentators and employers about the difficulties employers may face, the real practical impact of some of these provisions might be low. Other proposals may however have a greater impact. Large employers should note the proposed requirement to report on their gender pay gap, and the recasting of the definition of disability related discrimination should help to redress the balance between the protection of disabled persons and providing employers with the opportunity to defend the treatment that they have given. Many aspects of the Bill fall outside the employment law field but the main issues which will affect employment law are as set out below.

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European Court supports UK retirement age

The European Court of Justice has decided that the UK's retirement age of 65 is not necessarily in breach of EU law. However, that is not the end of the matter because the case must now return to the UK Court to decide if the UK's compulsory retirement age of 65 can be justified. This will require the High Court to assess if the retirement age pursues a legitimate aim (such as social policy objectives), and whether the means to achieve such an aim, i.e. a blanket mandatory retirement age of 65, is proportionate in achieving that aim.

Click here to view the Judgement of the European Court:

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European Court rules on holiday pay during sick leave

The European Court of Justice has ruled that workers on long term sick leave will not lose their right to holiday pay where they have been unable to take the holiday by virtue of being on sick leave. This decision is very unwelcome to employers as it will increase the cost of both continuing to employ workers on long term sick leave, and also on termination of their employment. Read on to see what we think this means for employers in practice.

Gerhard Schultz-Hoff (C-350/06) v Deutsche Rentenversicherung Bund, and Mrs C. Stringer and Others (C-520/06) v Her Majesty’s Revenue and Customs

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Phasing out of the statutory procedures

The Regulations bringing parts of the Employment Act 2008 into force on 6th April 2009 also introduce transitional arrangements for the removal of the statutory dispute resolution procedures. These regulations provide for one set of arrangements for dismissal and disciplinary actions, and another for grievances. These changes will be important for all HR managers and line managers. In particular, the transitional arrangements relating to grievances may catch many employers out in the year ahead.

The Employment Act 2008 (Commencement No. 1, Transitional Provisions and Savings) Order 2008

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April changes to the Tribunal Rules of Procedure

Regulations to amend the 2004 Employment Tribunal Rules of Procedure have been laid before Parliament and will come into effect on 6th April 2009. These changes will be relevant to all practitioners and HR managers involved in Tribunal proceedings – take note in particular of the changes regarding making a request to extend time for filing a Response.   

The Employment Tribunals (Constitution and Rules of Procedure) (Amendment) Regulations 2008

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What is coming up in Employment Law in 2009?


Some important legislative changes are planned for 2009, including the abolition of the statutory dispute resolution procedures and the extension of the right to request flexible working for parents with children under 16. Read on for a summary of these and other expected developments which may affect your business in the year ahead.


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TUPE and Insolvency Proceedings


In Oakland v Wellswood (Yorkshire) Ltd, the Employment Appeals Tribunal (EAT) decided that an employee of a business in administration was unable to have the protection afforded to employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) when the business in which he was employed was transferred and continued as a going concern with the transferee. The decision is important news for administrators and purchasers of businesses in administration because it contradicts current Government guidance on this issue.

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UK's 48 hour working time opt-out under threat

The UK’s ability to opt out of the 48 hour working week is now in peril following the European Parliament vote this week to have it scrapped. The UK’s opt out of this element of the Working Time Directive (in other words employees in the UK being able to agree to opt out of the limit) was agreed in the 1990s but has been under threat now for a number of years. The vote will come as a great disappointment to UK businesses bearing in mind that earlier this year the UK agreed to the Temporary Agency Directive provided it could keep the Working Time Directive opt out. Keeping the opt out was, however, dependent on being accompanied by a number of conditions which guarantee the protection of health and safety of workers. The European Parliament was not convinced that keeping the opt out does not undermine health and safety. 

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Revised ACAS Code of Practice approved

The Secretary of State has approved the new draft ACAS Code of Practice on discipline and grievances following public consultation. The new draft Code has been revised to take into account the changes proposed to be made to workplace dispute resolution procedures by the Employment Act 2008, which received Royal Assent on 13th November.

In the consultation, which ended in July this year, the draft Code was criticised for being too vague, which it was suggested, could have led to increased litigation. The revised Code has addressed some of these concerns by adding more detail, but this may have the effect of restricting flexibility and leave employers open to challenge when mistakes or omissions are made.   Employers should now think about what changes are needed to disciplinary and dismissal, capability, performance and grievance policies in time for 6 April 2009 when the Code is likely to come into force.

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EU Temporary Workers Directive approved by European Parliament

After many years of political wrangling, the European Parliament has finally approved a Directive giving new rights to temporary agency workers. The Directive must now be implemented into each Member State’s national laws within three years.

Press release of the European Parliament. 

The Directive should be accessible via this link as soon as it is available in its approved form.

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Stress at work claims

The Court of Appeal in the case of Dickins v O2 has given guidance which will assist employers in understanding the steps to take to avoid liability for stress at work claims. The case is important because the Court of Appeal has made it clear that in cases of severe stress it is not enough for an employer to provide access to a confidential counselling helpline or to refer an employee to an occupational health professional. It is likely that a more interventionist approach to managing stress is required of managers and HR professionals following this case.

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Employment Tribunal respondents' names and addresses to be published


The Deputy Information Commissioner has recently ordered the Department for Business, Enterprise and Regulatory Reform (BERR) to disclose names and addresses of the respondents to all Employment Tribunal claims lodged since October 2004. The Information Commissioner considers that, on balance, the public interest was best served by disclosing the information. This effect of this order is that anyone can now make a similar application under the Freedom of Information Act and have access to all respondents’ names and addresses in Tribunal proceedings. Whether in the “information age”, this will have any adverse impact on businesses, as was argued by BERR, remains to be seen. 

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Advocate General's opinion in Heyday's challenge to the Age Regulations

The Advocate General of the European Court of Justice has rejected the claim by Heyday (an offshoot of Age Concern) that UK law, which entitles employers to retire employees compulsorily at or after reaching 65, is contrary to EU law.  In 2007, Heyday brought a claim in the High Court against the UK Government that the national default retirement age of 65 under the Employment and Equality (Age) Regulations 2006 was incompatible with the EU Law. The High Court referred certain questions regarding the lawfulness or otherwise of the Age Regulations to the European Court of Justice (ECJ). Before the ECJ can give its judgement, the Advocate General must give a preliminary legal opinion which is usually (but not invariably) followed by the ECJ. The AG’s opinion is therefore significant because it is more than likely to be followed.  Click here for a link to the opinion:

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What's coming up in Employment Law this Autumn?

Continue reading for an overview of what legislative changes to expect and prepare for this coming October.

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Jurisdictional limits in sex discrimination cases

In the case of Tradition Securities & Futures SA v X & Y, the Employment Appeal Tribunal clarified the Employment Tribunals’ jurisdiction in sex discrimination cases.

Whilst this case relates to sex discrimination, its implications are relevant to other types of discrimination as well and will be of interest to large multi-national organisations whose employees work in various jurisdictions throughout their employment.

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High court considers validity of a 'no show' clause

The High Court decision of Tullett Prebon Group Ltd v Ghaleb El Hajjali will be of interest to all employers who recruit highly specialised senior employees. The decision considers the enforceability of a liquidated damages “no show” clause, and how damages should be calculated where an employee changes his mind about joining a prospective employer, after signing an employment contract containing such a clause.

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Liability for equal pay claims on TUPE transfer


The case of Sodexo Ltd v (1) Gutridge and others (2) North Tees and Hartlepool NHS Foundation Trust considers a transferee’s liability for equal pay claims made by transferred employees following a TUPE transfer. In this case, the Employment Appeal Tribunal (EAT) holds that following a TUPE transfer, claims for equal pay relating to discrimination in pay by the transferor must be made (against the transferee) within 6 months of the transfer. Claims for equal pay arising as a result of discrimination in pay by the transferee can, however, be brought within 6 months from the end of employment with the transferee. Significantly for transferees, where the transferring employees are in receipt of unequal pay at the time of the transfer, as compared to chosen pre-transfer comparators, they will remain entitled to the same pay as the comparator, even if the comparator is not transferred to the transferee.

In practice this means that after a TUPE transfer, transferees are at a continuing risk of significant claims of up to 6 years arrears of pay, even though they are ignorant of the fact that they are paying their employees less than they should because the persons with whom the employees are comparing their pay (the comparators) are not employed by the transferee. 

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Discrimination by Association

In the eagerly awaited case of Coleman v Attridge Law & Steve Law, the European Court of Justice (ECJ) has ruled that the EC Equal Treatment Directive (‘the Directive’) prohibits direct discrimination and harassment by association. This ruling will have wide-reaching consequences for employers.

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Legislation Update

In addition to the Equality Bill which we reported on last week, recent developments include secondary legislation under the Employment Bill, draft regulations relating to terms and conditions of employment during maternity leave, draft guidance for the revised new ACAS code, EU proposals on working time, and new consultations on carers and the right to request training during employment. Read on for a brief overview of these proposals, as well as links to the relevant documentation for further reading. 


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Government publishes White Paper on Equality Bill

The Government has published its White Paper, Framework for a Fairer Future – The Equality Bill, setting out its proposals for a Bill to be published in the next Parliamentary session.

Many of the White Paper’s proposals fall outside the employment law field. The main issues which will affect employment law are set out below.

Click to view the White Paper

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House of Lords reforms approach to disability-related discrimination cases


In the case of Mayor and Burgesses of the London Borough of Lewisham v Malcolm, the House of Lords has made potentially major changes to the law on disability-related discrimination. Although the case concerns issues to do with housing, the Lords’ decision will make it more difficult for employees to bring certain DDA claims. Particularly noteworthy is that the House of Lords concluded that the well-established ‘comparator’ test for DDA purposes, laid down by the Court of Appeal in the 1999 Clark v Novacold case, is incorrect.

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EAT gives guidance on how TUPE applies to service provision changes

In Kimberley Group Housing Ltd v Hambley and ors and Angel Services (UK) Ltd v Hambley and ors, the Employment Appeal Tribunal (EAT) has overturned an Employment Tribunal’s finding that where a service provision contract is performed by one company and is taken over by two companies, the liability for transferred employees should be apportioned between the two companies.

This is an important case, as it is the first guidance to be given by the EAT on the effect of service provision changes under TUPE.

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Equal Pay - the relationship between grievances and Employment Tribunal claims

The Scottish Court of Session in the case of Cannop & Others –v- The Highland Council has confirmed that where the employee’s Employment Tribunal claim follows on from a grievance previously communicated, there does need to be a necessary relationship between the grievance and the complaint pleaded in the ET1 Tribunal claim form, so that the grievance underlying the ET1 is essentially the same as the grievance earlier communicated. In respect equal pay claims, the Court declined to comment on the Employment Appeal Tribunal’s decision that the relevant grievance must refer to the comparators which are subsequently cited in the ET1.

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Legislation Update


In this edition of Human Capital we give you a brief update of some recently announced or proposed developments in employment law.

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ACAS publishes draft Code of Practice for consultation

On 2 May 2008, ACAS published a new draft Code of practice on discipline and grievances for public consultation. The Code has been revised to take into account the changes proposed to be made to workplace dispute resolution by the Employment Bill, currently before Parliament, and in particular the forthcoming abolition of the statutory dispute resolution procedures.

Consultation Paper and draft Code of Practice

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Unfair dismissal time limit extended owing to ongoing dismissal procedure

In Towergate London Market Ltd v Harris the Court of Appeal held that a claimant was entitled to a three-month time extension to bring her unfair dismissal claim, since she had reasonable grounds to believe that a dismissal procedure was ongoing upon the expiry of the original time limit. The Court reached this conclusion despite the fact that the claimant had not appealed internally against her dismissal under any formal process, but rather had raised a post-employment 'grievance' with her employer.

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What's coming up in employment law this April?


What’s coming up in employment law this April?

Continue reading for an overview of what legislative changes to expect and prepare for this coming April.

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