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

Entitlement to legal representation

Employees have a statutory right to be accompanied (by a fellow worker, trade union representative or official employed by a trade union):

1. at a grievance meeting which deals with a complaint about a duty owed by the employer to a worker; and
2. at a disciplinary hearing where the disciplinary hearing could result in either: i) a formal warning being issued; ii) the taking of some other disciplinary action; or iii) the confirmation of a warning or some other disciplinary action (e.g. appeal hearings).

Article 6 of the European Convention on Human Rights provides that an individual has the right to a fair hearing in the determination of his or her civil rights and obligations or of any criminal charge against him or her, and the right to legal assistance in the case of a criminal charge.

The Court of Appeal (CA) in two cases (Kulkarni v Milton Keynes Hospital NHS Foundation Trust and R (on the application of G) v X School and others), held that in the case of disciplinary hearings, Article 6 will be engaged if the effect of such proceedings would be to deprive a person of their right to practice a profession (as opposed to simply losing a specific job).

Looking at whether an employee has the right to legal representation under Article 6, the CA held that what mattered most was the gravity of the issue being considered at a disciplinary hearing, rather than whether the case was civil or criminal. Therefore the more serious the allegation, the more likely that the individual would require an enhanced level of protection.

Where proceedings could, in the event of an adverse outcome, end an employee’s ability to practice his or her profession, it will be difficult for employers to deny the employee legal representation.

Constructive dismissal

Constructive dismissal occurs where an employer fundamentally breaches an employee’s contract entitling the employee to treat his or her employment as at an end.

In Buckland v Boumemouth University Higher Education Corporation, it was held by the CA that the test for whether conduct amounts to a fundamental breach of contract is objective and should not be assessed by reference to the range of reasonable responses test used in unfair dismissal claims.

The CA also went on to hold that an employer cannot “cure” a repudiatory breach before an employee decides to treat it as a constructive dismissal. However, an employee’s claim may fail if he or she ‘affirms’ the contract by delaying their resignation and treating the contract as at an end.

Time limits

A claim for unfair dismissal must be presented to the Tribunal before the end of three months beginning with the effective date of termination (EDT).

In Kirklees Metropolitan Council v Radecki, the CA held that the EDT can be the date of an act demonstrating a clear intention to terminate employment, such as removing an employee from the payroll while he/she was suspended.

In Gisda Cyf v Barratt, the CA held that where an employer communicates termination of employment by letter, the EDT is the date that the employee reads the letter, rather than the date of the letter or the date that it was posted or delivered. This rule will apply unless the employee has deliberately avoided either receiving or reading the dismissal letter.

Compensation for unfair dismissal

Compensation awarded in an unfair dismissal claim comprises two strands:

1. Basic Award - calculated using a statutory formula based on length of continuous service, age and a week’s pay; and
2. Compensatory Award - such amount as the tribunal considers “just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to the action taken by the employer”.

The compensatory award is most often made up of the employee’s loss of earnings. Generally, where the unfairly dismissed employee obtains an equally well or better paid job, lost earnings will be calculated up to, but not exceeding this point.

Aegon UK Corporate Services Ltd v Roberts considered how an employee’s new role should impact on ongoing pension loss. The CA held that pension loss should not be the subject of special treatment. Where an employee obtains a new role which is deemed to break the chain of causation for liability for the employee’s ongoing loss of remuneration, this is also to include his or her pension loss, particularly where the new overall package is on better terms.

Compensation for constructive dismissal

In Norton Tool v Tewson, the National Industrial Relations Court (the predecessor of the EAT) held that it was good employment relations practice for an employee who is summarily and unfairly dismissed to receive a compensatory award that includes a payment in lieu of notice, regardless of whether the employee received earnings from new employment during the notice period.

However, the CA in Stuart Peters Limited v Bell held that this principle does not apply to compensation awarded for constructive dismissal.

Therefore, an employee who succeeds in a claim of unfair constructive dismissal is entitled to compensation for his/her entire notice period but account must be taken of wages received from a new job during that period.

Compensation for discriminatory dismissal

In Chagger vAbbey National plc, the CA held that an employer responsible for a discriminatory dismissal may need to compensate the employee for financial loss suffered as a result of the stigma attached to bringing a discrimination claim.

Practically speaking, a claimant will have to show extensive evidence that they have been victimised as a result of pursuing such a claim. In addition, in most cases stigma loss will be considered as one of many factors which will impact on how long it will take for an employee to find a new job.

Compensation for termination of employment - £30,000 tax free

Payments and other benefits received in connection with the termination of employment, which are not otherwise taxable, are taxable under sections 401 to 416 of the Income Tax (Earnings and Pension) Act 2003. The first £30,000 of such payments is tax free and the entire payment is free of national insurance contributions.

Crompton v HM Commissioners of Revenue & Customs provides further assistance of when such payments will fall within this definition.

In this case, the Tribunal illustrated that despite the wider drafting of section 401, it is not a general sweep up provision that catches all payments made on termination of employment regardless of the reason for the payment or the termination. There has to be a link between the payment and the termination which is a question of fact and where that does not exist, the payment will not fall under section 401.

Practical considerations for employers

Case studies

Beth

Duckhouse Associates (DA) operate a dignity at work policy which has an informal procedure for the resolution of disputes. The procedure seeks to resolve disputes by an informal discussion and by agreement and it provides for employees to attend training sessions or counselling if necessary.

Beth is a receptionist at DA. She works with Lucy who has complained that she has been subjected to abusive outbursts by Beth which have left her feeling vulnerable and intimidated. Beth’s line manager, Karen, investigated this and has concluded that this warranted action but felt it was more appropriate for this to be dealt with under the internal Dignity at Work policy.

Whilst undergoing this informal procedure, Karen receives more complaints from Lucy who has alleged that Beth’s behaviour has got worse since she started this programme and now feels victimised for bringing a complaint. It has also emerged that a customer has complained about the “rude and aggressive” manner in which he was spoken to by Beth. Beth’s line manager now feels that the informal procedure is not appropriate and now wishes to take Beth down the formal disciplinary route where one of the possible sanctions to be considered would be dismissal.

Question and outline answer

Can DA now move to a formal procedure?

The ACAS code acknowledges that many potential disciplinary issues can be resolved informally and therefore the company is perfectly entitled to try and resolve this dispute using its informal procedure. Even though it has initially adopted this procedure, the company is not prevented from addressing this matter under the formal disciplinary procedure should the circumstances justify that approach.

DA will therefore need to make an assessment as to whether they think it is justified for them to now adopt the formal disciplinary procedure in relation to Beth’s actions given the additional information received.

Barry

Barry works as an administrative assistant for DA which is moving to new offices. All staff have been informed that, due to the move, all IT infrastructure, including emails and data from the shared drives, will be moved. All staff are advised that as a result it will be necessary for the company to gain access to their information stored on the system and they are asked to ensure that all personal information is removed prior to the transfer.

Upon transfer of Barry’s data, pornographic images are discovered. As a result Barry is suspended pending further investigation. He is subsequently called to a disciplinary hearing. He was informed in the letter inviting him to the disciplinary hearing that one of the possible sanctions could be dismissal.

Barry has asked to be accompanied by a legal representative at the disciplinary hearing. His contract is silent on this and the Company Handbook says that he can be accompanied by either a fellow worker or a trade union official.

Question and outline answer

Is Barry entitled to be accompanied by a legal representative at his disciplinary hearing?

Barry has no contractual right to be accompanied at the meeting. The Company Handbook mirrors the ACAS Code of Practice which provides that the employee can only be accompanied by a fellow worker or a trade union representative.

DA would need to consider whether, if Barry was dismissed, this dismissal would prevent him from practising in his profession or effectively make him unemployable. It is arguable that this is not the case here as there is nothing to suggest that being dismissed in this instance would prevent him from getting a job anywhere else. On this basis, DA would be justified in refusing Barry’s request and informing him that he is only entitled to be accompanied by either a fellow worker or a trade union official.

Whilst there is nothing to prevent the company from allowing this request, having legal representation may not be appropriate in these circumstances as it may result in the disciplinary hearing becoming a “mini trial” which is not desirable and is clearly not what is intended by the ACAS Code of Practice.

Sahia

Sahia is a human resources manager at DA. She was dismissed for gross misconduct but subsequently succeeded in her claim that she was actually dismissed on the basis of her race.

At the remedies hearing she claims stigma damages as part of her loss alleging that she has suffered “stigma” as a result of bringing these proceedings against DA.

Question and outline answer

Would Sahia be entitled to stigma damages?

Under the Chagger case, an employer responsible for a discriminatory dismissal can, in principle, be held liable for financial loss suffered by the employee due to the stigma attached to the bringing of a discrimination claim.

However, Sahia should be put to proof to show that she has been victimised for pursuing a claim. She would have to provide compelling evidence that she was prejudiced in the labour market by virtue of bringing proceedings.

DA can argue this stigma (if demonstrated evidentially) should not be considered as a separate head of loss but should be considered as a factor to consider in determining how long it will take for Sahia to find a new job. In addition, if DA can provide evidence to show that there would have been a strong chance that Sahia would have been dismissed had there not been discrimination, then this can reduce the amount of compensation that would be awarded to her.

What happened in this case?

Ms Tapere worked for Lewisham Primary Care Trust in the Procurement Team based in Camberwell, London. Her employment was transferred to the Respondent, South London & Maudsley NHS Trust under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Her terms and conditions were to remain the same but her place of work changed from Camberwell to Beckenham. Ms Tapere objected to the change in place of work as this increased her journey time by 10 miles and made childcare arrangements more difficult. She lodged a grievance to this effect and on return from holiday, found her colleagues had moved without her into the new offices in Beckenham. She was upset and went off sick before lodging a further grievance and eventually resigned claiming unfair dismissal.

The Tribunal found that a mobility clause in Ms Tapere’s contract could require Ms Tapere to work at any location “within the Trust”. The Tribunal said that this should be interpreted as meaning the transferee’s own geographical locations and accordingly the transferee was entitled to require Ms Tapere to move to Beckenham under the terms of her contract. Under Reg 4(9) of TUPE an employee can treat his or her contract as terminated where a TUPE transfer involves a substantial change in working conditions to the employee’s material detriment. The Tribunal also ruled that the journey time was not materially longer, and viewing this objectively, there was no substantial change to Ms Tapere’s detriment under Reg 4(9) of TUPE.

The Employment Appeal Tribunal (EAT) overturned the Tribunal’s decision.

Mobility Clause - The requirement to work at locations “within the Trust” were plainly words which restricted the geographical area of the mobility clause. These words had to be construed at the point that the contract was entered into; this was different to the interpretation of terms such as those relating to share options where a transferee might be able to use a “substantial equivalence” argument to defend breaches of pre-transfer terms where honouring the original terms would present practical difficulties. The transferee was therefore not entitled under the terms of Ms Tapere’s contract to require Ms Tapere to move to Beckenham.

Substantial change in working conditions to the employee’s material detriment (Reg 4(9)) -
"Working conditions” means not only the physical conditions from a health and safety or environmental point of view, but also contractual terms and conditions. Whether there has been a change in working conditions is a question of fact. Whether it is substantial is also a question of fact and the Tribunal must consider the nature as well as the degree of the change. The change in working conditions must be to the material detriment of the employee. “Detriment” should be construed from a subjective point of view (following the same principles as those applicable in the field of discrimination law as set out in Shamoon v RUC). In other words, the Tribunal should have considered the impact of the proposed change from the employee’s point of view. The questions that ought to have been asked were whether the employee regarded the factors such as disruption to childcare and a longer journey, as detrimental and, if so, whether that was a reasonable position for the employee to adopt. The Tribunal had wrongly used an objective test to determine this issue.  

The EAT found that Ms Tapere had been constructively dismissed and was entitled to treat herself as dismissed under Reg 4(9) of TUPE. The question of fairness and redundancy pay were re-admitted to a fresh Tribunal.

What does this decision mean for employers?

This case will be important to purchasers of businesses and transferees in outsourcing situations where transferred employees are required to move location after the transfer or service provision change takes place. The transferee will be bound by the terms of the employees’ mobility clauses which will be interpreted in accordance with the parties’ intentions at the time the contract was entered into. Hence, for example, if the mobility clause allows the employer to transfer the employee’s place of work to any Group Company’s place of business, the term “Group Company” may be interpreted by reference to the transferor’s group, depending on how the contract has been drafted. Employers should therefore only seek to rely upon mobility clauses where, in the light of these factors, they clearly cover the intended relocation.

As regards whether an employee can claim dismissal under Reg 4(9) TUPE, transferees wishing to use mobility clauses in order to require transferred employees to move location after the transfer are advised to consult employees about the change and listen carefully to their objections (this will be relevant to the employer's fair handling of the matter should it later progress to an unfair dismissal claim). The transferee should consider whether the employee’s position is a reasonable one to adopt. If the transferee requires the employee to move location and the employee decides to treat himself as dismissed (as in the above case), the employee need not give any notice (and there is at that point no obligation on the employer to pay in lieu of notice). The employee will be entitled to claim unfair dismissal and in the majority of cases the dismissal will be for a transfer-related reason and so will be automatically unfair unless the transferee is able to show an economic, technical or organisational reason for it (which may, in fact, be the case).

Where the employee also objects to becoming an employee of the transferee under Reg 4(7), his employment will not transfer to the transferee and his claim for unfair dismissal will be against the transferor. This means that the transferor, who is under a duty to inform the transferring employees of any “measures” which he envisages the transferee will take after the transfer, might be faced with objections from those employees about any proposal to move location after the transfer. The transferor is not under a duty to consult about those measures but may decide to do so if the employees object to being transferred to the transferee for this reason.

In a case where the mobility clause does not cover the intended move, or there is uncertainty about this, or where employees raise what appears to be a valid argument that being relocated pursuant to such a clause represents a substantial and detrimental change, the transferee will have no real alternative but to proceed on the basis that the employee is redundant, and undertake appropriate consultations.