Employment Writes June Edition
Here comes the summer! Think holidays, sunshine and significant employment law reform. The next 18 months are going to be both interesting and challenging for employers now that the Enterprise and Regulatory Reform Act has received Royal Assent. In this edition of Employment Writes we have put together a handy “at a glance guide” listing the key employment law changes over the next few months. We examine in more detail the changes to the whistleblowing legislation due to commence in June
“...Enterprise and Regulatory Reform Act has received royal assent.”
and the government’s crackdown on unpaid work experience. We also consider the most recent case law from the EAT and Court of Appeal.
At a glance – what’s new? 25 April 2013 • ACAS are prohibited from disclosing information held by them relating to a worker, employer or trade union. There are certain exceptions to this including where the disclosure is made for the purposes of enabling ACAS to carry out any of its functions. • The government can make powers to allow tribunals to order an equal pay audit where an employer loses an equal pay claim. 17 June 2013 • A portable Disclosure and Barring Service (DBS) check becomes available. Job applicants will pay a fee of £13 pa, which will allow prospective employers to carry out a free ‘update’ search to check their DBS certificates.
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25 June 2013 • EAT judges will sit alone, without lay members, unless a full panel is ordered. • The qualifying period for unfair dismissal (now two years) will not apply where the main reason for dismissal is the employee’s political opinions or affiliation. • Tribunals can award a deposit order relating to a specific part of a claim or response. They can also make an order for payment of witness expenses where a preparation time order has been made. • The government will have the power to vary the unfair dismissal compensatory award limit. The limit will be the lower of either: • a specified amount that must be between one and three times median annual full-time earnings, or • a specified number of weeks’ pay (not less than 52 weeks). The award limit may be varied for smaller employers, although no plans have yet been announced.
“The government will have the power to vary the dismissal compensatory award limit.”
• Reform of the EHRC, with certain duties and powers repealed. • Abolition of the Agricultural Wages Board. • Changes to whistleblowing legislation (see article below for more information). • The power to legislate to make caste an aspect of race discrimination. The government are aiming to introduce legislation by April 2015. • Rounding up of increases to statutory redundancy payments and tribunal award limits. 29 July 2013 • Fees are expected to be introduced into employment tribunals and the EAT. • The new Employment Tribunals Rules of Procedure are expected to come into force. Summer 2013 • Pre-termination negotiations will be inadmissible in unfair dismissal proceedings. • Compromise agreements to be renamed settlement agreements.
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The winds of change are blowing the whistle The current whistleblowing rules are set to change.
“A new ‘public interest’ test will be introduced...”
Whistleblowing protection is available to workers and employees who are dismissed or who suffer a detriment because they have made a protected disclosure. The advantage of this type of claim is that there is no minimum qualifying period or cap on the compensation a tribunal can award. As the law currently stands an employee who complains of breach of a term of their employment contract can theoretically bring a whistleblowing claim. A new ‘public interest’ test will be introduced which attempts to reverse this position so that in order to attract whistleblowing protection the employee must reasonably believe that their disclosure is in the public interest. This term is not defined, but is likely to cover disclosures affecting more than just one person. Arguably, however, this could still cover contractual breaches if the disclosure relates to a breach affecting a class of people. The second change expands whistleblowing protection to those disclosures made in bad faith. ‘Bad faith’ isn’t defined but is likely to mean acting with selfish or malicious intentions or for monetary gain, rather than for the primary purpose of putting right a wrong.
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This seems to counterbalance the public interest test. The focus will therefore be on the message rather than the messenger, so that as long as the message is in the public interest it won’t matter if the messenger is making the disclosure for selfish reasons. ‘Good faith’ will still play a part in the tribunal’s consideration of a whistleblowing claim, as in circumstances where a disclosure is found to be made in bad faith, a tribunal will have the power to reduce any award made by up to 25%, if it is just and equitable to do so. These changes will apply to protected disclosures made on or after 25 June 2013. A further change, due to come into force at an unspecified date over the summer, is the introduction of vicarious liability for employers and the personal liability of co-workers for detriment caused by the co-worker to a whistleblower. This closes the existing loophole and will make it much easier for claimants who are victimised for making disclosures, to take action. In recognition of the fact that whistleblowers may have trouble securing new employment, the government has also pushed for whistleblowing protection for job applicants. For the time being this extended definition of ‘worker’ to include job applicants is on hold, pending the launch of a call for evidence by the Whistleblowing Commission. We will keep you updated.
“...a tribunal will have the power to reduce any award...”
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No such thing as a free lunch With summer comes the droves of school leavers looking for unpaid work experience to bolster their CVs. The number and range of these internships is on the increase and interns are the norm across many industries. However a recent government crackdown on the “unpaid internship” raises concerns about the exploitation of unpaid workers and the fact that such placements may favour the socially privileged and well-connected. This comes at a time when Westminster school’s auction of prestigious work experience placements for its students, which saw bids of up to £825 for two weeks’ work, has been severely criticised. A group of MPs have written to participants of the auction including Farbergé and Coutts bank, urging them to withdraw their placements from the online auction on the grounds that it is “explicitly favouring privilege”. The government has said they will be taking “aggressive” steps to “crack down” on employers abusing the national minimum wage requirements by using unpaid interns. Last year the Department for Business, Innovation and Skills (BIS) reclaimed nearly £200k in wages owed to unpaid interns. BIS will be publishing a student handout to inform graduates of their employment rights, and encourage people to identify “bad employers” for investigation. Calls made to the Pay and Work Rights Helpline regarding employer abuse will also be fasttracked. So is this the death of the unpaid internship? Maybe not, but employers need to be careful to ensure that interns and volunteers do not, contrary to their intentions, become ‘workers’ by virtue of the behaviour or conduct of the parties. For example, if there is a mutual promise between the parties to perform and provide work. This is important as a worker is entitled to receive the national minimum wage, paid holiday and is protected by anti-discrimination legislation. An employer can help to protect itself by having a written specification for the internship, which is carefully worded to avoid creating an employment relationship.
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Be careful what you promise, it could cost you €50 million The Court of Appeal in Dresdner Kleinwort v Attrill [2013] EWCA Civ 394, has dismissed Dresdner Kleinwort’s (the bank) appeal against the decision that the bank was contractually bound to pay bonuses worth €52 million (£44 million) to 104 ex-employees in early 2009. With the future ownership of the bank uncertain during 2008, the Financial Services Authority (FSA) became alarmed by May 2008 at the high number of staff leaving the bank. The FSA instructed the CEO of the bank to stabilise staff turnover. In August 2008, the bank approved a bonus pool worth a value of a minimum €400 million from which discretionary bonuses which would be distributed in early 2009. On 18 August 2008, at a meeting with staff, and a live broadcast on the bank’s intranet, the CEO of the bank announced the bonus pool. The pool would be distributed ‘no matter what’, said the CEO, regardless of the bank’s actual performance. The size of actual bonuses as individual’s bonuses would be calculated “in the usual way”. The bank was subsequently bought by Commerzbank. Following the Lehman Brothers collapse in 2008, the German Government lent Commerzbank €18.2 billion. In December 2008 the bank’s employees received a letter from the bank confirming that the bonus would be paid in January 2009. However, the letter stated that the bonus would be reduced if the bank’s performance dropped. In January 2009, the bonus payments were made to employees. The bonuses were reduced by 90%. The employees sought enforcement of the contractual obligation to pay the promised bonuses.
“...a warning to all employers that oral promises can be contractually binding.”
The Court of Appeal rejected the bank’s appeal against the decision to uphold the bonus claims. The Court found that the ‘Town Hall’ announcement by the CEO in August 2008 was a contractually binding obligation on the bank to make 100% bonus payments to employees. It rejected the bank’s argument that the
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CEO’s announcement was binding in honour only. The Court decided that the announcement contained information which was sufficiently clear and precise to be enforceable and which was intended to create a legally binding obligation between the bank and the employees. Further, the Court also decided that the bank’s letter of December 2008, permitting the bank to reduce the bonus payments, was a breach of the implied term of mutual trust and confidence between the bank and employees. This decision is a warning to all employers that oral promises can be contractually binding. The ruling highlights the need for businesses to be careful when making any employee announcements, especially in connection with salaries and bonuses. Businesses should avoid references to bonus payments being ‘guaranteed’ and should include in contractual documents clauses specifying how and by whom contractual changes can be made.
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Who are affected employees under TUPE? The EAT has provided clarification as to who is covered by the definition of ‘affected employees’ under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) in the case of I Lab Facilities Ltd v Metcalfe & Others UKEAT/0224/12. In circumstances where only part of a business transfers under TUPE and the remainder of the business is closed, the employees within the closed part of the business are not ‘affected employees’, so the obligation to inform and consult with those employees does not arise. I Lab (UK) Ltd (IL UK) provided an overnight service to the film and television industry. In 2009 it merged with RKT Post Production Ltd (RKT) who also worked for the film and TV industry but did their work during daytime hours. IL UK became the employer of both sets of employees, but both parts remained distinct. After the merger IL UK went into liquidation and the business was split into two. The IL UK part was sold and the IL UK employees TUPE transferred to I Lab Facilities Ltd (ILF). The RKT business was closed down and the staff made redundant. Several ex-RKT employees issued tribunal proceedings stating that IL UK had breached its TUPE obligations towards them regarding informing and consulting, as they were ‘affected employees’. If they were ‘affected employees’ IL UK was under a duty to inform and consult with their representatives. The penalty for not doing so was up to 13 weeks’ gross pay per affected employee. IL UK and ILF were jointly and severally liable for any compensation award. The employment tribunal held that the ex-RKT employees were
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‘affected employees’ and awarded compensation of £81,375.00. ILF appealed.
“...the right to be consulted collectively under the redundancy consultation rules.”
The EAT upheld ILF’s appeal. ILF persuaded the EAT that it was not sufficient for the ex-RKT employees to state that they were ‘affected employees’ merely because they were excluded from the transfer, or even, that they were excluded from it having been informed that they would be part of it. The transfer of the part of the business which did not employ them, did not make them ‘affected employees’. Regulation 13(1) TUPE defines affected employees as “any employees of the transferor or the transferee… who may be affected by the transfer or may be affected by measures taken in connection with it”. The EAT explained that the affected employees are those: • who will or might be transferred; • whose jobs are in jeopardy by reason of the proposed transfer; or • who have job applications within the organisation pending at the time of transfer. Employers can take comfort that where there are two distinct businesses, sideby-side, a TUPE transfer affecting one does not mean that the employers of the other business are also ‘affected employees’. Like many potential TUPE situations, however, this ruling is fact-specific. The EAT stated that, in theory, a proposed transfer may affect employees who do some work in or for the part of business transferring. Employers should also remember that non-transferring employees in cases similar to this, would have the right to be consulted collectively under the redundancy consultation rules.
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Post-termination victimisation is unlawful, confused anyone? In a controversial move the EAT has given conflicting decisions only weeks apart on whether post-employment victimisation is unlawful. The decision in Rowstock Ltd v Jessemey (as covered in Employment Writes April 2013) held that post-employment victimisation was not unlawful. However, a differently constituted EAT has now ruled that post-employment is protected under the Equality Act 2010 in the case of Onu v Akwiwu and another UKEAT/0022/12. Miss Onu was a domestic servant working in the UK for Mr and Mrs Akwiwu, a Nigerian family. She left her employment alleging that she had been exploited and badly treated and brought claims for unfair dismissal, race discrimination and failure to pay the national minimum wage. Some six months later, the Akwiwus telephoned Miss Onu’s sister in Nigeria and said that “if [Onu] thought things would end there, she was wrong” and that “[Onu] would suffer for it”. Onu brought a further claim for victimisation. The employment tribunal rejected Onu’s victimisation claim as the Akwiwu telephone call did not make specific reference to the discrimination claim. Further Onu had failed
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to show that the threats from her employers were because she had commenced proceedings for race discrimination.
“...employers should assume that exemployees are protected by post-termination victimisation.”
Onu appealed this finding and the EAT considered the provisions of the Equality Act 2010 and whether it provided protection from post-employment victimisation. The EAT stated that this required a two-stage approach, involving a consideration of domestic and then EU law. Following a convoluted analysis, the EAT came to the conclusion that the Equality Act 2010 does cover post-employment victimisation, contradicting the finding of the EAT weeks earlier. The EAT explained that the draftsman of the Equality Act 2010 must be taken to have been aware of the 2003 House of Lords’ decision in Rhys-Harper v Relaxion Group and that victimisation under previous discrimination legislation could give rise to a claim if it occurred posttermination. Further section 108(7) Equality Act 2010 was not considered expressly to exclude a claim for victimisation under other provisions of the Act, which were deemed to apply whether the employment was continuing or had ceased. The final reason given by the EAT was that if the construction of the Act did not accord with the EU law, the second stage would be for the tribunal to interpret the Equality Act 2010 in a manner consistent with European obligations which provided post-employment victimisation protection. Employers are right to be confused by the conflicting EAT decisions on this point. The EAT has granted permission to appeal. In the meantime, employers should assume that ex-employees are protected by post-termination victimisation.
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Can obesity amount to a disability? Yes, says the EAT in Walker v Sita Information Working Computing Ltd UKEAT/0097/12. The BBC recently reported that the number of people with obesity in the UK has more than trebled within the last 25 years. Doctors now say that the condition is reaching ‘epidemic’ proportions. It is therefore unsurprising that the issue of whether obesity can amount to a disability has found its way to the Employment Tribunal. Mr Walker brought a disability discrimination claim against his employers. He weighed 21 stone and suffered from what his doctor referred to as ‘functional overlay’, which was compounded by his obesity. He had numerous health problems such as asthma, chronic fatigue syndrome, knee problems, bowel problems, anxiety and depression. At first instance, the employment tribunal decided that he was not disabled, for the purpose of the Equality Act 2010. The tribunal based this decision on the fact that a specialist had examined Mr Walker and had not been able to identify a ‘physical or organic cause’ for his conditions other than his obesity. However, the EAT overturned this decision on the basis that it was not the cause of Mr Walker’s symptoms that should be focussed on, but rather the effect. Mr Walker’s health problems amounted to a disability even though the symptoms may have been caused by obesity which is not, in itself, a disability. The key question for the EAT was whether Mr Walker had a physical or mental impairment and not what the cause of the impairment was. An employer managing an obese employee with health problems should seek medical advice to identify whether the employee has a physical or mental impairment satisfying the definition of disability under the Equality Act 2010. This would be the same for an employee with alcoholism or drug dependency. Whilst the condition itself is not a disability, the possible effect of that condition, i.e. liver disease would qualify as an impairment. The employer can then consider whether the employee in question is suffering from a substantial disadvantage (in comparison to those who are not disabled) as a result of a provision, criteria, practice or physical feature, and therefore whether reasonable adjustments should be considered.
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