Posted on October 3, 2011 by Ruth Bonino

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.

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Posted on October 20, 2010 by Ruth Bonino

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.

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Posted on April 29, 2010 by Graham Green

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.

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

Scenario Points to Consider
What if the employee asks to be accompanied by a legal representative at a disciplinary hearing? 1.  Is there any right to legal representation in the employee’s contract or company handbook?
  2.  Could the proceedings, in the event of an adverse outcome, end an employee’s ability to practice in his or her profession or is the effect simply that they will lose their current job?
  3.  If the answer to either question is yes, the employee will be entitled to legal representation.
  4.  Remember the ACAS code only provides for the employee to be represented by a fellow worker or a Trade Union representative.
Points to remember when terminating an employee’s employment. 1.  A claim for unfair dismissal must be presented to the Tribunal before the end of three months beginning with the EDT.
  2.  In Kirklees Metropolitan Council v Radecki, the CA held that EDT can be the date of an act demonstrating a clear intention to terminate employment.
  3.  Make sure that the employee is clearly aware that his or her employment has terminated to avoid arguments about the EDT (and any claims for unpaid wages).
  4.  If sending a termination letter bear in mind that the EDT will be the date that the employee reads the letter, not the date it is written, posted or delivered.
When assessing exposure for a claim. Constructive Dismissal
Any earnings from new employment should offset the employee’s claim for a notice payment.
  Discrimination
The Claimant may claim stigma damages and should be put to proof that he/she has been victimised as a result of bringing a claim.

 

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.
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