Newsletter December 2013


…to the last Newsletter of 2013, which I am expecting most readers will take a look at when they return after the festive season. I hope you have had an enjoyable and relaxing break.

But it’s a Bumper Christmas Special! There are lots of cases for you to take note of, as well as the usual excitement of proposed Government reforms. I summarise here the new look maternity rules which would result from the widely publicised proposals for shared parental leave. Please also
note that TUPE will change from 31 January 2014 – to be covered next time.

Darryl Evans
T: +44 (0)7771 725341

12 month garden leave period upheld

Mr Holliday, a stockbroker, resigned with the intention of joining a competitor as soon as he could. His notice obligation was 12 months. He was immediately placed on garden leave.

A month later he claimed his employment had ended owing to constructive dismissal on the rather flimsy basis of the employer's decision to stop providing him with daily email summaries of financial news. If he had successfully been able to claim constructive dismissal, he would have been free to start employment with the competitor.

Unsurprisingly, the High Court ruled that Mr Holliday had not been constructively dismissed. It went on to decide that he should remain subject to his full 12 month notice period, which he had to spend on garden leave.

A period of garden leave must be justified on similar grounds as apply to restrictive covenants, but judged at the time of the court proceedings rather than when the garden leave clause is entered into. An employer therefore has to demonstrate a legitimate interest to protect and that the injunction extends no further than is reasonably necessary to protect that interest.

In this case the employer was able to demonstrate that. 12 months was an appropriate period to establish a relationship between a new investment manager and his or her clients, because formal contact with clients only occurs a few times a year. (JM Finn & Co Ltd v Holliday 2013 EWHC 3450 (QB).)

12 month non-solicitation and non-dealing restriction is enforced too

That was the decision of the High Court in Croesus Financial Services v Bradshaw (2013 EWHC 3685 (QB), applying the same principle that 12 month non-solicitation and non-dealing covenants extended no further than was reasonably necessary for the protection of the employer’s business.

The Court accepted that 12 months appeared to be an industry standard and that the strength of the relationship between an independent financial adviser and his/her clients and their pattern of contact meant that 12 month provisions were reasonable. Croesus would need a substantial period of time to establish relationships between Mr Bradshaw's clients and the new advisers - the process could not be rushed.

Notable also is that the Court was willing to interpret the clauses with a measure of flexibility rather than in purely literal terms. So when the employee argued that the restrictions were unenforceable because they applied to all clients with whom the employee had ‘personal contact in the course of [his] duties’ in the two years prior to termination, the Court said that excluded ones with whom he had only trivial business contact.

Repayment of recruitment costs

Cleeve Link Ltd v Bryla (UKEAT/2013/0440) concerned the contractual obligation placed on an employee to repay recruitment costs if he/she left (in this case, following resignation or dismissal for misconduct) within a certain period of the costs being incurred.

Ms Bryla was recruited in Poland by Cleeve Link to work as a live-in care worker. After three months she was dismissed for misconduct and her recruitment costs were deducted from her final pay, in accordance with a term in her contract.

She argued that the repayment clause was a penalty, and therefore not enforceable, in that the purpose of the clause was not to compensate the employer for its loss but rather to stop the employee from leaving employment. On that basis she suffered an unlawful deduction from wages.

She lost because the Employment Appeal Tribunal (EAT) considered it had jurisdiction to decide whether or not the deducted amount did represent the loss the employer sustained, and in this case it did.

Another excuse to mention Crystal Palace

Sceptics will assume that I am only covering this case in order to point out that, since I last referred to it, Palace have been promoted to the Premiership and, under the new management of Tony Pulis, are starting to garner points and climb the table. In fact, it raises very important points of law.

What Crystal Palace FC Limited v Kavanagh and others (EWCA/Civ/2013/1410) establishes is that a company administrator (yes, the Club did go bust a four years ago) can make dismissals for economic, technical or organisational (ETO) reasons and then sell the business on without necessarily passing TUPE liability for them to the purchaser. That is provided it can show that the reason for the dismissals was to enable the company in administration to continue to trade rather than to make the business more attractive for a buyer. In other words, it must have its own trading reasons.

The Court of Appeal, overruling the EAT on this, pointed out that administrators will almost always have a transfer of the undertaking as their ultimate objective, but that does not mean that the reason for dismissals made by them will always be to make the business more attractive to a purchaser. They can also be made to allow the business to carrying on trading. On the facts the dismissals at the Club had been made for that reason, so liability did not transfer.

Service provision changes under TUPE - tasks of short-term duration

The service provision change rules which trigger TUPE (outsourcing, insourcing etc.) do not apply, say the Regulations, to services related to a single specific event or a task of short term duration.

The insulation and cladding of boilers at a power station was an 18 month contract. When Swanbridge, a replacement contractor, took it over there were eight months left.

This was capable of falling within the exclusion, said the EAT. Importantly, it was the remainder of the task which had to be considered in the context of ‘short term’, not the length of the whole contract. (Swanbridge Hire & Sales Ltd v Butler and others UKEAT/0056/13.)

International commuter could not bring tribunal claim

I have seen reports of a case in which a British resident who commuted to work in Dubai was found to be ineligible by the EAT to bring employment tribunal proceedings when his employment ended. I have not found the case myself, but I thought it would nonetheless be of interest to my readers who deal with international assignees.

The employee was apparently engaged by a company incorporated in the Isle of Man which had no connection with the UK and was administered from Austria. The contact of employment was governed by Manx law. He worked almost entirely in Dubai, but did some work in England on his monthly rest weeks.

So there were several barriers in his way and collectively they proved fatal to his claim. First there was the fact that his work was not based here. He was engaged by a Manx rather than a British company, which may have been of key importance. Plus the employer made the contract subject to English law, thus removing that link to UK as well.

Associative disability discrimination - reasonable adjustments

Associative disability discrimination is discrimination against someone not because they are themselves disabled, but because they are associated with someone else who is. In the case of Hainsworth v Ministry of Defence (UKEAT/0227/13) the EAT has confirmed that the duty to make reasonable adjustments does not apply in this situation.

So the MOD’s unwillingness to change the place of work of Dr. Hainsworth despite her daughter suffering from Down's syndrome was not unlawful.

Does holiday pay have to include commission?

The Advocate General of the European Court of Justice (ECJ) thinks it does.

To remind you, before giving judgment on the cases it hears the ECJ obtains the view of its legal adviser, the Advocate General, which is then published ahead of the Court’s decision. It does not need to follow his/her opinion, but it usually does so that opinion is a good clue as to the outcome.

In Lock v British Gas Trading Ltd and others (C-539/12) Advocate General Bot has said that holiday pay for a salesman working on commission should include an amount that reflects commission, or other regular variable component of pay, previously earned over a representative period where that commission or payment is intrinsically linked to the performance of the duties. This is so holiday pay properly reflects normal pay during time worked and the employee is not discouraged from taking holiday.

An ECJ ruling in this way would contradict and potentially overrule a Court of Appeal decision in a previous case which went the other way.

Redundancy dismissal unfair when volunteer not accepted

In Stephenson College v Jackson (UKEAT/0045/13) the College applied selection criteria to a pool of employees as part of a redundancy exercise. Mr Jackson received the worst score of the employees in the pool and was therefore selected for redundancy.

When the employee who scored second worst applied for voluntary redundancy, he was declined.

The EAT found that Mr Jackson’s dismissal was unfair because the employer was unable to explain why the volunteer had been turned down, other than because his scores were not as low as Mr Jackson’s. There was little difference in the scores of the two employees and, in light of the fact that the College's redundancy policy included a commitment to avoid compulsory redundancies by seeking volunteers for redundancy, the dismissal was unfair.

It is perfectly acceptable to refuse an application for voluntary redundancy if, for example, the volunteer has skills that the employer wants to retain in the business. The problem for the employer in this case was not that it rejected the volunteer but that it was unable to identify good reasons for doing so.

Ill health dismissals

One of the most difficult and frustrating questions many employers face is whether they can they fairly dismiss an employee who has been absent from work for some time due to ill health. The case of BS v Dundee City Council (2013 CSIH 91) has provided some guidance which is potentially reassuring to employers caught in this tricky situation.

The crucial question is whether a reasonable employer could be expected to wait any longer before dismissing the employee. In this context the following are all relevant factors:

  • is the employee was still being paid sick pay?
  • is the employer able to use temporary staff?
  • how big is the organisation?

The tribunal will also ask whether reasonable steps have been taken to discover the employee's medical condition and likely prognosis and whether the employee has been consulted, with his/her views being taken into account and assessed against the medical advice.

Here the employee had 35 years of service. Whilst, said the Court, length of service is not automatically relevant, it may show that the employee in question is a good and willing worker with a good attendance record who is likely to return to work as soon as she or she can.

Asleep and working

The EAT has decided in the case of Whittlestone v BJP Home Support Ltd (UKEAT/0128/13) that mployees who are required to spend the night at a specified location in the course of their work are entitled to be paid the National Minimum Wage ("NMW") for those hours, regardless of whether their sleep is interrupted.

Ms Whittlestone was a care worker who was paid £6.35 per hour for time spent attending to clients at their homes, but nothing for travel time. She also undertook "sleepovers", when she had to be present at a client's home from 11pm to 7am, and was paid £40 for each of those. She could sleep in a bed during this time except when her services were actually required.

The EAT said she entitled to the NMW throughout the time she was required to be present, irrespective of whether she performed any tasks. She was also entitled to the NMW for her travel time between clients' homes.

Employers using these types of staff should check their conditions to ensure that they are receiving at least the NMW, on average, in respect of all hours that they are at work.

Shared parental leave

The Government has published its response to the consultation on the administration of Shared Parental Leave and Pay. It intends to implement its new shared parental leave scheme by 2015.

Under the proposals eligible mothers and their partners will be allowed to be absent from work to care for a child for up to 52 weeks and take up to 39 weeks of shared parental pay. The leave can be together or in turns, provided it does not exceed 52 weeks in total. Each employee will be entitled to a maximum of three periods of leave. Leave may not be taken after 52 weeks after the child’s birth.

This will result in the need for a complete overhaul of maternity policies and procedures. That in itself is a headache for employers, but I can see scope for some significant issues for those who offer enhanced maternity pay. Couples will surely be mindful of whether the mother is in a generous maternity pay scheme before deciding that the father should take the leave instead. But what if it is the father’s employer who offers the generous maternity pay? Would the father qualify? Would it be discriminatory if he doesn’t? The cost of an enhanced ‘maternity’ pay scheme could suddenly go up markedly. I recommend that all of you taking time in 2014 to think about this issue.

Right to be accompanied – changes to Acas code and disciplinary policies

Acas is proposing a revision to the Code of Practice on Disciplinary and Grievance Procedures to reflect the EAT’s decision in Toal and anor v GB Oils in which the EAT suggested that the Code did not accurately reflect the law on the right to be accompanied in disciplinary and grievance hearings and in particular the law relating to the need to make a reasonable request. The Code, which is reflected in many employer policies, says that it would not normally be reasonable for a worker to insist on being accompanied by a companion who would have to come from a remote geographical location if someone suitable and willing was available on site, or whose presence would prejudice the hearing.

In Toal, the EAT stated that if a worker has been invited to a disciplinary or grievance hearing then, provided that he or she has made a reasonable request to be accompanied at the hearing, he or she has the right to choose whoever he or she likes as a companion (as long as the companion is from one of the categories set out in the legislation). The changes to the Code would reflect that, although retaining the ‘good practice point’ that workers should have some regard to the effect that their choice of companion will have on the disciplinary or grievance process itself.

Employers should note this development and, especially if the Code is changed, review their own procedures.

Make up your own headline

People become employment lawyers, rather than banking or competition specialists, precisely because of cases like this one. I refer to the headline PC caught having sex on duty reinstated because his firearm was within reach (link supplied).

Taking advantage of his community standing, Gwent copper PC Shaun Jenkins left armed patrol duty to spend a valuable 40 minutes with a married female acquaintance, leaving his colleague in the patrol car outside. PC Jenkins was dismissed for gross misconduct when the lady’s husband reported the incident.

On the basis that British comedy is founded in innuendo, from Max Miller via the Carry Ons to Julian Clary, and with apologies to my foreign readers, here goes. He went to the house of their assignation in an armed response vehicle, so they were clearly well protected. According to his appeal against his dismissal, he could have been ‘back on duty’ within a minute or two, and his weapon was never out of his control as it was still attached to him. Clearly he was ‘providing service to the public’. So to everyone’s relief, he was ultimately reinstated.

Happy 2014!

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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