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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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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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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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:

http://nds.coi.gov.uk/content/detail.aspx?ReleaseID=422195&NewsAreaID=2&HUserID=895,779,885,848,782,879,710,705,765,674,677,767,684,762,718,674,708,683,706,718,674&ClientID=-1

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

http://www.bis.gov.uk/Consultations/call-for-evidence-effectiveness-of-current-tupe-regulations?cat=open

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

http://www.bis.gov.uk/Consultations/call-for-evidence-collective-redundancy?cat=open

Government Response to Resolving Workplace Disputes

http://www.bis.gov.uk/Consultations/resolving-workplace-disputes?cat=closedwithresponse

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.

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.

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.

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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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.

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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Dismissals - new developments explained

Overview

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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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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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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