Employment Law 2009 review/2010

preview: Part 1
15.12.09

Introduction
Another eventful year (nearly) over. Harriet Harman frantically pushes the Equality Bill
through Parliament before the next general election and the draft Agency Worker Regulations
continue to make their way through the parliamentary system, albeit at a slower pace than
originally promised. In the meantime the judiciary have continued last year's trend of turning
their hand to legislative drafting.

As in other aspects of life, the two great issues facing the world today, the credit crunch and
climate change, are having a significant impact on employment law in 2009. Here, gentle
reader, we pick out some of the need-to-know highlights. Later in Part 2 we will be looking
forward to the anticipated trends for 2010.

Another year over - review of 2009

The holiday season

Ah, the end of the year, a time when many of us use up our untaken holiday leave by putting
our feet up and enjoying the holiday season with our families - (ok, run around the shops,
cook lots of food and keep the children entertained!)

For many employers, the end of the calendar coincides with the end of the annual holiday
year. The Working Time Regulations clearly provide that a worker who has not taken their
full statutory holiday entitlement during a leave year cannot be paid in lieu, unless they leave,
nor carry forward any of the first four weeks of leave not taken. So, can employers draw a
line under this year's annual leave entitlements and move on to next year? Well, NO.

The European Court of Justice (ECJ) has, in three high-profile decisions following swiftly on
the heels of one another, provided some guidance on the interrelation of holidays and
sickness absence. The key points are:

• workers on long-term sick leave are entitled to take paid statutory holiday leave while
on sick leave (Stringer)
• where a worker has been prevented from taking their annual leave due to sickness,
they must be allowed to take that leave when they return in a new leave year, or
receive payment on termination (Schultz-Hoff)
• a worker who is sick during a period of scheduled statutory holiday has the right to
reschedule the holiday for a later date and, if necessary, to roll over that holiday to the
following leave year (Pereda).

However, this has left more questions unanswered than answered. For instance, are workers
on sick leave entitled to decide not to take their holiday and to roll it over to the following
year, storing up potentially years of untaken leave? Do workers have to give notice and take
holiday to be entitled to holiday pay? How do PHI schemes fit in? Is UK law actually even
compliant with the European Working Time Directive?

Whatever the answers, it is clear that employers could be facing not insignificant bills if
employees on long-term sick leave start claiming holiday entitlement, or holiday pay, in
respect of years gone by. Yet another reason to manage sickness absence robustly and for HR
managers to keep paracetamol to hand!

Discrimination: peace and goodwill

As ever, 2009 has seen a number of significant discrimination cases. Making a particularly
high profile showing this year are two of the new kids on the block, age and religion & belief.
Not to be outdone, old favourites disability and equal pay have equally filled the law reports
this year.

Before reviewing the 2009 UK discrimination case developments, let's just take a moment to
pause for thought and consider possible future areas for discrimination law. Is a new form
written in the stars?

Well, what about astrological discrimination? Earlier this year, an Austrian insurance
company advertised for sales and management staff, but only those with certain star signs.
Apparently, people born under the signs of Capricorn, Taurus, Aquarius, Aries and Leo make
the best workers in the sector.
The Austrian anti-discrimination authority investigated the advertisement but concluded that
"It does appear like a certain limitation, but it is not discrimination". On a personal note, the
writer apologises for writing a legal developments review, as a Gemini I should apparently
really be writing travel guides!

Age

A legal challenge that started even before the age discrimination regulations came into force
has finally come to an end: we are of course talking about the Heyday saga challenging the
compulsory retirement age of 65. It is lawful for employers to compulsorily retire employees
at age 65, as long as they follow the statutory processes. However, don't expect it to last. The
High Court was clear that the decision would have been different had the Government not
already brought forward its review of the default retirement age from 2011 to 2010.

Not surprisingly given the current economic climate, we have seen several cases concerning
age discrimination and redundancy selection. One question vexing HR professionals and
employment law specialists is how redundancies can be made in a way that minimises
disruption to the workforce and rewards workers for their loyalty, service and commitment,
while not falling foul of discrimination legislation.

How easy is it to justify an enhanced redundancy scheme which does not mirror the statutory
scheme, but rewards older employees at the expense of younger employees? Clearly it will
depend on the scheme, but it seems that justification will be easier where the workforce as a
whole broadly supports the scheme. So, where an employer offers to level down a scheme so
the older workers get the same as (rather than more than) the younger workers, and the
workforce as a whole rejects the proposal, the original discriminatory scheme is more likely
to find favour with the tribunal.

Of particular concern has been the way in which redundancy selection criteria are applied to
employees 'at risk' of redundancy. Can employers reward longer serving employees by giving
them more points in redundancy scoring without breaching the Age regulations?

The Court of Appeal in Rolls Royce PLC v Unite the Union declared that the use of length of
service as part of the redundancy selection criteria can be a proportionate means of achieving
a legitimate aim, and therefore is not age discriminatory. However, the decision is loaded
with caveats and employers still need to be careful about how their redundancy selection
criteria are structured and applied in each case.

We have also had a couple of cases on whether consideration of minimising pension

liabilities could be a legitimate aim justifying a discriminatory impact. In both cases, the
selection for redundancy was not based on age. However, in the first case all possible
redeployment options had been fully exhausted whereas in the second case it was held they
were not. In the first case, the fact that the employer chose not to comply fully with its own
dismissal procedures in order to save significant pension liabilities accruing was held to be a
proportionate means of achieving a legitimate aim. However, in the other, the same motive
was held to be unlawful age discrimination. Both cases are currently making their way
through the appeal process.

Religion or Belief

The hot political and scientific issue of climate change has also made its way into the
employment law reports. The Employment Appeal Tribunal (EAT) has agreed with Mr
Nicholson that a belief that "man is heading towards catastrophic climate change" and that we
are under moral imperative to do something about it can be protected under the Religion or
Belief Regulations. In another case, a police trainer, Mr Power, has successfully argued that
his belief that psychics can contact the dead is capable of protection.

What some sections of the press have missed, intentionally or otherwise, is that this does not
mean Mr Nicholson or Mr Power won their discrimination claims; it just means that the type
of beliefs they assert are capable of being protected. They must still establish that their beliefs
were the reason for their dismissals and the employers may successfully argue that they were
dismissed for foisting their beliefs on others, rather than for simply holding those beliefs. Mr
Power has already failed in his claim. So we may not see a sudden influx of successful
claims. But with uncapped damages in a difficult job market, that doesn't mean some
employees won't be tempted to try it on.

The EAT's guidance on what constitutes a belief is welcome, but far from easy to apply. It
seems that a belief in a political philosophy or doctrine might be protected. The EAT listed
Socialism, Marxism, Communism or free-market Capitalism as examples in its judgment. So,
what about the British National Party's (BNP) philosophy? The BBC took a slating for
allowing Nick Griffin to appear on Question Time. How would the public react to a tribunal
decision that afforded BNP members' legal protection? Can that really have been Parliament's
intention? A tricky test case waiting to happen, perhaps...
2009's other significant religious discrimination cases can best be described as "clash of the
discriminations". We began the year with the Christian registrar who refused to carry out civil
partnership ceremonies (Ladele), mid-year we had the Christian social worker handing out
Bibles to clients (Chondol) and finished the year with the Christian relationship counsellor
unwilling to provide psycho-sexual therapy to same-sex couples (McFarlane).

They all failed in their claims for religious discrimination. Their dismissals were found not to
be on the grounds of religion, but rather the improper proselytising of their religious views at
work. Where a belief leads the holder to participate in discriminatory behaviour, it is unlikely
they will be able to invoke religious discrimination protection.

Disability

This time last year we reflected on the tribunal's decision to redraft the Disability
Discrimination Act (DDA) extending protection to people who are not themselves disabled,
but are associated with someone who is. In the Coleman case, the tribunal attempted to give
effect to associative discrimination by drafting into the DDA a few additional words. This
year the EAT have decided the tribunal did not go far enough and have added not just a few
words, but two entirely new sub-sections! The radical redrafting is intended to avoid spurious
litigation about what "association" means. It remains to be seen, however, whether we will
see a flood of claims from carers claiming associative discrimination on the back of this
decision.

Not to be outdone, the House of Lords turned previously settled case law on its head by
deciding that the word "likely" in the DDA does not mean "more probable than not", but
means "could well happen", lowering the bar for claimants. Although the Lords were
considering the meaning of "likely" in the context of what amounts to a disability, they went
on to suggest that it would mean the same thing when mentioned elsewhere in the DDA. The
decision also opens the door to debate as to what "likely" means in other employment
legislation.

Last year the House of Lords were also making waves, having decided that the well-
established comparator test for disability-related discrimination claims was in fact wrong.
The EAT have cunningly found a way to mitigate against the effect of that decision, by
finding that a dismissal can, in itself, be a failure to make reasonable adjustments. So now, if
there was a possible reasonable adjustment which would have avoided a dismissal, the
dismissal itself will be an act of discrimination as it will be a failure to make reasonable
adjustments.

Race discrimination

It seems counter intuitive to say an employer may have a "reasonable and proper cause" for
acting contrary to the race discrimination legislation. Nevertheless that is exactly what the
EAT found in a case earlier this year.

Amnesty International failed to appoint an employee of northern Sudanese ethnic origin to a

post involving field work in the Sudan. Its motives were concerns over the organisation's
perceived impartiality and genuine increased safety concerns for both the employee and those
who would be working with her. While their motives were benign, it did not prevent the
actions being directly discriminatory. While being unable to escape liability for race
discrimination, Amnesty's benign motives saved it from also being in repudiatory breach of
the implied contractual term of trust and confidence, so her constructive unfair dismissal
claim failed.

Sex discrimination

Following last year's ECJ ruling, this year our own courts have confirmed that an employee
who undergoes failed In vitro fertilisation (IVF) treatment does fall within the bounds of the
protection afforded under the Sex Discrimination Act (SDA).

An employee is protected against pregnancy discrimination from the date the eggs are
implanted until two weeks after she learns that an implantation failed. Of more general
application, suffering a detriment due to undergoing IVF also falls within the protection of
the wider SDA provisions.

Equal pay

As in 2008, the continuous stream of equal pay cases has continued to wind its way through
the tribunals and courts, often on technical points. Key cases include:

• An employer can be required to provide objective justification for both the way in
which it applied a length of service criterion as well as its adoption in the first place,
where the claimant has raised "serious doubts" about its appropriateness (Wilson).
• Equal pay claims must be brought within six months of a TUPE transfer for claims
based on pre-transfer employment. But claims for the period after the transfer can be
brought against the new (transferee) employer, even if the comparators have not
transferred (Gutridge).
• Subject to a further pending appeal, a man may validly pursue a 'piggyback' equal pay
claim by comparing himself with a female employee who herself has succeeded in an
equal pay claim with a male comparator (McAvoy).

While local councils around the country struggle to settle claims with limited resources, the
NHS no doubt gave a sigh of relief having ploughed through a 220-page tribunal decision
which rejected claims that the NHS Agenda for Change introduced in 2004 perpetuated
alleged prior systemic discrimination.

Compensation

Compensation awards for discrimination claims can be very costly as, unlike many other
employment claims, there is no statutory cap on awards. In addition, with the exception of the
Equal Pay Act 1970, anti-discrimination legislation provides for payment of compensation
for injury to feelings suffered by claimants as a result of the discrimination. From a claimant's
point of view there has been some bad news and good news on calculating awards.

The bad news for claimants is that the Court of Appeal has said that a Polkey equivalent
principle applies to awards for discrimination. So, as in unfair dismissal cases, a reduction
should be made to discrimination awards to reflect the chance that the employee would have
been dismissed even if there had been no discrimination.
But the good news is that the Vento bands for potential injury to feelings awards set back in
2002 have finally had an inflation adjustment. The new bands are:

• Lower band: up to £6,000 (formerly £5,000)

• Middle band: £6,000 to £18,000 (formerly £15,000)
• Higher band: £18,000 to £30,000 (formerly £25,000).

Bonuses: gold, frank nonsense and a stir

Bankers' bonuses are now the subject of daily press headlines. The size of the Royal Bank of
Scotland (RBS) bonus pot and the taxing of bonus payments are current political hot topics.
There have been several High Court writs issued this year involving highly paid bankers
complaining about unpaid bonuses. Such big bonus claims historically tend not to make the
law reports as a deal is done out of court. It seems now that at least some financial institutions
would rather be forced by a court to make a payment to apparently mitigate the wrath of the
public and shareholders, which in some cases, are now one and the same.

However, some cases have reached the hallowed halls of the High Court. In the summer, four
City bankers won a £10.8 million legal battle. Commerzbank was ordered to honour its bonus
and severance commitments to the former Dresdner Kleinwort bankers following its bail-out
by the German Government. Two further groups of ex-Kleinwort bankers have now
commenced High Court proceedings to sue for millions in withheld guaranteed bonuses.

Bonuses are of course not just the reserve of the highly paid. This year the EAT considered
the word discretionary in a bonus scheme for warehousemen. Employers were reminded that
labelling a bonus scheme "discretionary" in employment documentation, does not necessarily
mean that it does not have contractual status. The use of the word "discretionary" in the
context of bonus schemes may relate to the decision to pay the bonus, how to calculate the
bonus or the amount of the bonus.

Bonus schemes often contain discretion elements while being contractually enforceable. In
such circumstances, the employer must exercise any discretion rationally and in good faith.
This need not mean a bonus must be paid, but the decision must be considered carefully to
avoid a successful challenge.

It will be interesting to see whether the courts will develop new principles from the cases
arising out of the recent banking crisis.

TUPE: talking turkey

Service provision changes

As predicted at the beginning of the year, many of this year's TUPE cases concerned the new
service provision changes under TUPE 2006.

Is the provision of pre-prepared sandwiches and salads fundamentally the same as the
provision of a range of hot and cold meals, including hot soups and English breakfasts? No,
according to the EAT. Tribunals in the past have generally adopted fairly wide definitions of
the activities carried out when considering outsourcing contracts, and have used a pragmatic,
common sense approach. While purporting to do just that, the EAT seemed here to actually
apply a detailed factual analysis and to adopt a narrow definition of "activities".

Duty to inform & consult

We have some further guidance on the duty to inform and consult under TUPE.

On the one hand, a transferor is under a duty to inform long enough before the transfer to
allow consultation to take place, even though there are no measures envisaged giving rise to
the statutory duty to consult. Time for possible voluntary consultation needs to be built into
the timetable (GMB Northern).

On the other hand, a transferor is only obliged to inform and consult on what it genuinely
believes to be the legal, social and economic implications of a proposed transfer. Transferors
will not automatically be in breach of their duty under TUPE by failing to inform employees
of the correct legal position. But note this does not mean employers can fail to consider
properly the legal implication or can simply shut their eyes to problems (Royal Mail Group).

As for transferees, the EAT has confirmed that their duty to consult about measures they
envisage taking ceases on the date of the transfer. But remember, regardless of consultation
obligations under TUPE, a transferee planning 20 or more dismissals following a transfer will
still be obliged to consult under the collective redundancy provisions (Glasgow City
Council).

Changes to working conditions

The EAT has confirmed that whether there has been a substantial change to working
conditions is a question of fact, and whether it was to the employee's material detriment is
assessed from the employee's point of view. So a change of location following a transfer,
objectively of little difference on the face of it (a further 2 ½ miles from the employee's
home), could be a material detriment where it disrupted her child care arrangements (Tapere).

Effect of collective agreements post transfer

The EAT held that a contractual term entitling employees (previously employed in the public
sector) to pay increases "in accordance with collective agreements negotiated from time to
time by the NJC" was protected on a TUPE transfer to the private sector so as to give a right
to pay increases negotiated by the NJC post-transfer. The ECJ decision in Werhof was
distinguished due to the different nature of the collective agreements involved. Not
surprisingly this question has been referred to the Court of Appeal whose judgment is eagerly
awaited by those undertaking public sector outsourcing contracts (Alemo-Herron).

Disciplinary hearings: a merry ding dong

2009 saw the wholesale repeal of the unpopular statutory dismissal, disciplinary and
grievance procedures, which were tidings of comfort and joy to employers and practitioners
up and down the kingdom. We have now welcomed in the new ACAS Code of Practice with
tribunal discretion to increase or reduce awards by up to 25% for unreasonable failure to
comply with the Code. While cases regarding the repealed procedures have continued to
make their way through the tribunals and courts, cases under the new regime have yet to
make their way through to appellate level.

The 2009 big question has instead been "do employees ever have the right to legal
representation when attending an internal disciplinary hearing?"

The Court of Appeal has found that the NHS disciplinary procedures give doctors a
contractual right to be represented at internal disciplinary hearings by a lawyer instructed by
their professional indemnity body. Although that was enough to determine the Dr Kulkarni
case, the court did not stop there. It went on to suggest that the European Convention of
Human Rights could be interpreted to extend the right to legal representation to any employee
faced with what is in effect a criminal charge that could result in them being deprived of the
right to practise their profession.

While the additional comments are not strictly binding, they are in line with a separate High
Court judgment which held that a school teacher had the right to legal representation at an
internal hearing which could lead to his name being added to the child protection list of those
not permitted to work with children. The High Court expressly limited its decision to the facts
of the particular case without the intention of having wider implications. Nevertheless, it
appears that employees may have the right to legal representation when facing a career
ending charge (as opposed to just losing a specific job). The school teacher case has recently
been considered by the Court of Appeal and we await a more definitive answer to the
question.

Unfair dismissal: panto time

As we look back over some of the significant 2009 unfair dismissal cases a seasonal chorus
of "Oh yes it does! Oh no it doesn't!" springs to mind.

Constructive dismissal

The controversy around the Norton Tool principle has found yet another twist this year: does
it apply in a constructive dismissal scenario?

Under this principle, an employee who is summarily and unfairly dismissed will receive a
compensatory award that includes a payment in lieu of notice, without reduction for earnings
from new employment during the notice period.

At the beginning of the year we were told oh yes it does, but by the end of the summer the
Court of Appeal said oh no it doesn't! The principle is restricted to direct dismissals only
(Bell).

A further step in the trend to narrowly apply the principle first espoused in 1973.

In the case of Buckland, we were told that when assessing whether there is a fundamental
breach of the employment contract, the employer's conduct should not be subject to a "range
of reasonable responses" test. So says the EAT class of 2009, leaving the law confused; in
2007, the EAT had said the opposite.
In the same case, the EAT held that the employer had remedied the breach by upholding the
employee's complaint. Again, this has led to some confusion: surely some breaches are so
serious that they cannot be remedied? Is simply upholding a complaint always sufficient to
remedy a breach?

Compensation

Scenario - an employee whose remuneration package includes membership of a final salary

pension scheme is unfairly dismissed. Very shortly after dismissal she finds other
employment with an overall better remuneration package, but a money-purchase pension
scheme.

We had the EAT at the beginning of the year tell us that in assessing her losses, while the
new employment broke the chain of causation for loss of future earnings, it did not do so for
loss of pension rights as her final salary pension loss constituted a unique type of loss.

Oh no it doesn't! says the Court of Appeal. Pension benefits are an important but not unique
part of the remuneration package so the usual rules apply to them (Roberts). Note this does
not mean that a different period of loss may be awarded for pensions loss where there is not a
break in the chain of causation.

Effective Date of Termination (EDT)

The EDT is all important for calculating whether an employee has enough continuous service
to bring a particular claim and whether their claim has been presented within the tribunal time
limits.

We now have updated judicial decisions on two EAT decisions which featured in last year's
review highlighting the importance of having a clearly defined EDT.

The Radecki case is a lesson on not letting things drift on and on when trying to negotiate a
settlement. A council who wanted to dismiss a teacher for capability, suspended him for three
months on full pay and then removed him from the payroll. Signing of the negotiated
compromise agreement drifted on for a further six months. The employee then refused to sign
and hey presto now had one year's service. Last year the EAT held that the removal from the
payroll did not amount to an actual dismissal and so the teacher could proceed with his unfair
dismissal claim.

Oh no he couldn't! This year the Court of Appeal held by majority that on the facts of the
particular case, removal from the payroll of which the employee was aware was sufficient to
amount to termination of the employment. A relief for the council involved, but the lesson
still remains not to let things drift and ensure there is a clear communication of termination.

In the Gisda case, the Court of Appeal has now confirmed that when an employer sends a
letter of dismissal via the post, and the employee has neither gone away deliberately to avoid
receiving the letter nor avoided opening and reading it, the EDT is the date the letter is read
by the employee not when it is delivered.
For auld lang syne...
The judicial committee of the House of Lords

After centuries as the country's highest court, the final appeal hearings and judgments of the
House of Lords took place on 30 July. On 1 October its judicial role was assumed by the
Supreme Court of the United Kingdom.

By the way this also meant a name change for solicitors, instead of solicitors in England and
Wales being called "Solicitors of the Supreme Court", we are now the perhaps less
impressively titled "Solicitors of the Senior Courts".

The Department for Business, Enterprise and Regulatory Reform

Speaking of names, at the beginning of June, BERR merged with the Department for
Innovation, Universities and Skills (DIUS) to form BIS, the Department for Business
Innovation and Skills.

At the beginning of the decade we had DTI, then DPEI (but only a seven-day blip), back to
the DTI, then DBERR with a quick drop of the D, so BERR and now BIS. Perhaps the
dropping of the D was not enough to get rid of echoes of the Chris DeBurgh nickname. D'BIS
is much more Hip Hop.

And finally, the 2009 awards...

The nice try award 2009

As first runner-up, the care worker's employer who tried to claim there was no breach of the
national minimum wage legislation where an employee's basic contractual pay rate was
beneath the National Minimum Wage (NMW) since 2005, but she always worked nights and
weekends which attracted a 30% increase. The EAT quickly concluded that it would "be
completely contrary to the purpose of the legislation if [the NMW] obligation could be
avoided simply because an employee chooses to normally work those hours when she would
be in receipt of some enhancement."

And the winner is...

In a late entry, but with a certain inevitability this year, this goes to a banker. The 42-year old
banker brought age claims against ABN Amro following his dismissal for redundancy. One
of his claims was based on his non-selection for any of the three remaining posts.
Unfortunately for him the three successful applicants were all within his age bracket of 38 to
48 with one being younger and another only nine months older. In rejecting his claim, the
EAT found that it was "prima facie implausible to the point of absurdity".
Best judicial use of a fairytale... are you sitting comfortably?

In this new category for 2009, we have as first runner-up Judge Peter Clark in GMB Northern
v Cable Realisations Ltd sitting in the EAT. Describing the level of an award for failure to
inform under TUPE he said:

"It was neither too high, as Mr Hyams submits, not too low, as Mr Goldberg argues. Like
baby bear's porridge, it was just right".

But the clear winner is...

Arden LJ, explaining why and how the provisions of the Equal Pay Act 1970 can be wider
than Article 141 of the EC Treaty:

"Like the foot of Cinderella, the 1970 Act (as amended from time to time) has for some
purposes at least to be fitted into a slipper (Community law). However, unlike Cinderella's
slipper, the slipper is not made of glass but of some altogether technologically more advanced
material that can expand and improve. Neither the foot nor the slipper can, however, be
shrunk in the process of applying the slipper. Moreover, Cinderella is not always bound to
wear the slipper: on some occasions she can dance perfectly well on her own two feet without
any slipper."

Arden LJ, failed to go on to comment on whether Cinderella did indeed go on to live happily
ever after!

In Part 2 we look forward to the anticipated judicial and legislative trends for employment
law in 2010.

Key Contact

Connie Cliff, associate, +44 (0)121 260 9816, connie_cliff@wragge.com

This analysis may contain information of general interest about current legal issues, but does
not give legal advice.

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