Newsletter April 2011


A little bit after the end of the month, here is my update of the important developments in employment law and regulation during April.

In my introduction I draw particular attention to where a development might mean immediate action for employers. This month that means I must highlight the Agency Workers Regulations, which will, from October, give additional rights to any temporary agency staff you have, and possibly some other non-core staff as well. You may well find the terms of business of the agencies you use will change. I encourage you to review the make-up of your non-employee work force and make sure you understand exactly what impact these new laws are likely to have on your business

I also think the McKie case I refer to below is of particular note. Careless remarks about a former employee cost the employee his subsequent job and the previous employer money as a result. A tight policy on giving references and making statements can be very valuable.

Darryl Evans
T: +44 (0)7771 725341

New rights for agency workers

The Agency Workers Regulations 2010 will come into force on 1 October 2011. They will give temporary agency workers the right to equal treatment in basic working conditions as compared to those of equivalent permanent workers.

The essential principle is that agency workers must, after 12 weeks (from 1 October 2011), have the same core terms as the comparable employees they work alongside. These core terms are: pay (including certain bonuses), working time, rest breaks/periods, time off for ante-natal appointments and annual leave. Excluded items include: bonuses which are not linked to individual contribution or are discretionary, share plans, non-cash rewards, pension, notice, redundancy pay and sick pay.

In addition, temporary agency workers will gain certain entitlements immediately on hiring, such as notification of vacancies and access to certain facilities.

The hirer (i.e. the user of the agency staff) must provide certain information to the agency to allow it to meet its obligations. It is realistic to expect that agency terms of business will alter to reflect these new laws, and indeed rates also may change.

To assist employers the Government has issued guidance on the regulations which is now in final draft form.

These Regulations are important for any business which uses temporary staff provided by an agency. In addition, because the scope of the rules is not very clear it is possible that other staff, such a certain contractors, are also covered. For this reason I encourage all businesses to review their work force make up and assess the impact of these rules.

New minimum wage rates announced

From 1 October 2011the adult (21 and over) national minimum wage will increase to £6.08 per hour, a 15p rise.

The hourly rates for other categories will be:

  • 18-20 year olds: £4.98
  • 16-17 year olds: £3.68
  • Apprentice rate: £2.60

The accommodation offset will rise by 12p to £4.73 per day.

Terminating by paying in lieu of notice: easy if you do it right

The Court of Appeal has decided that an employer can validly terminate employment under a pay in lieu of notice (PILON) clause simply by paying the required money into the employee’s bank account. The fact that it did not tell the employee it was doing this did not alter the date of termination, which was when the money arrived in the account, even though the employee was unaware of the payment for some time.

PILON clauses have tax disadvantages but those can be outweighed by other benefits for the employer, for example in helping to maintain restrictive covenants or avoid payment of bonuses or share rights on termination. Drafting is important though: the amount to be paid under the PILON clause must be clear otherwise termination may be ineffective. (Société Générale, London Branch v Geys [2011] EWCA Civ 307.)

TUPE related dismissals before a buyer identified can still be unfair

Mr Baillavoine was the Managing Director of a business which was to be sold. The sellers decided he was too expensive for a buyer and he was dismissed, purportedly for redundancy, before any specific buyer had been identified.

The Employment Appeals Tribunal (EAT) agreed with the employment tribunal that the dismissal was linked to the eventual transfer and was unfair even though the transaction was at any early stage and no specific buyer, and therefore specific transfer, was underway. It also concluded that this was not a dismissal for an economic, technical, or organisational (ETO) reason, and therefore potentially fair, because the employee was the managing director and there was a continuing need for that role. (Spaceright Europe Ltd. v Baillavoine UKEAT/0339/10/SM.)

Comparing a man with a lady on maternity leave: law firm gets it wrong

The law firm Eversheds was forced to make redundancies and needed to select from a pool of staff which included a lady on maternity leave. It decided to award that lady a notional maximum score for one of the selection criteria (to do with speed of recovery of fees on her files) whereas her male colleague was given a rating based on his actual performance.

Pregnant employees and those on maternity leave may only be treated more favourably than male colleagues to the extent that this is reasonably necessary to remove the disadvantages casued by their condition. The approach taken by Eversheds was considered as going beyond that and was not a proportionate means of removing the woman's disadvantage. There were alternatives available, such as measuring both employees' actual performance during the period before the woman's maternity leave started. The firm had unlawfully discriminated against the man – a further case demonstrating that dealing with pregnant employees or those absent on maternity leave requires great care to avoid claims from them and their male counterparts. (Eversheds Legal Services Ltd v De Belin UKEAT/0352/10.)

Careless remarks cost money

The case of McKie v Swindon College (2011 EWHC 469 (QB)) is a reminder of the dangers of making inaccurate statements about former staff not just in formal references but also outside them.

Most employers know that they can be liable to an ex-employee if they damage them in a reference by making a ‘negligent misstatement’. In this case, the reference Mr McKie received was fine but the problem arose when he later joined Bath University, a role involving contact with Swindon College. A new HR Director at the College allowed an email to be sent to the University about Mr McKie which was damaging and ultimately cost him his job at Bath. The court found that the email was "fallacious and untrue" and that its preparation was "sloppy and slapdash". It applied the duty of care over statements about former employees beyond formal references and found the College liable to pay compensation.

What to do when you discover an employee does not have the right to work in UK

It is interesting and, I think, helpful for employers to contrast two recent cases involving employees who did not have a right to work in UK.

The employer in Kurumuth v NHS Trust North Middlesex University Hospital (UKEAT/0524/10/CEA) dismissed the employee when it had insufficient evidence from UK Border Agency (UKBA) to satisfy itself that the employee had the right to work in the United Kingdom. The decision to dismiss was found to be reasonable, not least because it helped the employer avoid civil penalties of up to £10,000 for employing illegal workers.

On the other hand in Allen (née Aboyade-Cole) v Hounga and another (UKEAT/0326/10 - UKEAT/0329/10) an employee who entered the UK dishonestly and without the right to work here could still bring a race discrimination claim against her UK employer. The discrimination she complained of did not arise from and was not inextricably linked with the employee's illegal conduct. In fact that conduct had been instigated by the employer, who had wanted her to come to the UK to work for them.

So termination of an ‘illegal’ employee may be permissible but the full implications of that course of action, particularly the risks of a race discrimination claim, must always be considered.

Compromise agreement clarity

McWilliam and others v Glasgow City Council (UKEATS/0036/10) concerned the validity of compromise agreements in multiple-claim situations. As often happens in such situations, the employer, Glasgow City Council, arranged for lawyers (who had not advised the Council) to be available to give advice to employees on the compromise agreements to be entered into to settle their (here, equal pay) claims. Mr McWilliam and other employees who signed such agreements subsequently challenged their validity.

The EAT decided that the advice the employees had received was independent, one of the requirements for the agreements to meet the statutory criteria for validity, even though the Council had arranged the engagement of the lawyers and met their fees. It also concluded that another of the requirements, that the employee had received advice on the "terms and effects of the proposed agreement", does not require the lawyer to take a view on whether the deal on offer is a good one or whether they think the employee should accept it. It is essentially the effect of the agreement and the consequences of its terms on which the lawyer must advise.

In addition, the problem of what is meant by the requirement that the agreement settles a "particular complaint" arose again. The key issue, said the EAT, is that the specific complaint is identified in the agreement itself. Whether or not there has been previous communication of the complaint is not relevant and neither does is matter whether a claim has been formally lodged at a tribunal. Similarly, it was suggested that blanket waivers of all possible claims would not satisfy the statutory test. In summary, what mattered was what claims the compromise agreement specifically covered.

The lesson remains that care must be taken to draft compromise agreements accurately and with focus on the actual claims the employee has.

Tax on legal fees

Currently an extra statutory concession provides that an employee's legal fees in connection with the termination of employment can be tax-free if they are paid by the employer to the employee's lawyer under the terms of a settlement agreement, or are paid pursuant to a court or tribunal order.

This concession has now been codified but only in a way which covers agreements under the Employment Rights Act 1996 (such as unfair dismissal). This could mean agreements settling other claims, such as ones under the Equality Act, especially if they do not include any ERA claims, are not covered. It seems unlikely that this is HMRC’s intention so hopefully it will clarify the position.

‘Sick’ employee caught red-handed – but not so fast

Caterpillar Logistics obtained the sort of surveillance film lots of employers love to have: it showed an employee who was absent on ‘sick’ leave carrying out various physical activities.

It dismissed the employee on grounds of gross misconduct for falsely claiming sick pay. The company took this decision based on a review of the film, but without any input from its occupational health team.

The tribunal accepted that the employee appeared able to do a lot of things despite being ‘sick’ but that only appropriately qualified individuals could determine whether the employee had an injury which was sufficiently to keep him off work. The dismissal was unfair. (Pacey v Caterpillar Logistics Services (UK) Ltd ET/3501719/10.)

Facebook comments lead to dismissal

In my last Newsletter I highlighted a case in which the private use of social media cost an employee his job. Guess what – here’s another example.

A pub manager suffered verbal abuse and threats from two customers and she responded by making comments about them on Facebook. The employer decided that the Facebook conversation, which the manager undertook while she was at work, did not reflect her upset or anger at the customers, but seemed more like a joke between friends. Whilst she thought that her privacy settings meant that only close friends could see her entries, in fact a wider audience was able to see her Facebook page, including relatives of the customers in question. As a result, the manager was found to be in breach of the employer's email and internet policy, which specifically referred to employees' use of media such as Facebook while at work, and her conduct damaged the company. Her dismissal for that was found to be fair. (Preece v JD Wetherspoons plc ET/2104806/10.)

I can see a definite advantage to employers in reviewing their technology policies and disciplinary procedures to make it clear that gross misconduct can arise out of activities an employee takes outside the course of their employment.

The information and any commentary contained in this newsletter are for general information purposes only and do not constitute legal or any other type of professional advice. Darryl Evans and Evans Employment Law Limited do not accept any and, to the extent permitted by law, exclude all, liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this newsletter. If you have a particular query or issue you are strongly advised to obtain specific, personal advice and not to rely on the information or comments in this newsletter.

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