Newsletter April 2014


Employers are no longer able to reclaim Statutory Sick Pay from the government. This has not been given the same level of publicity as other recent employment law developments, which is perhaps not surprising as it does not sit easily with the government's stated intention to reduce the burden of employment on employers. Rather, it will result in increased costs in employing staff.

The introduction of Early Conciliation through Acas has been given more publicity, however, and is part of the government's initiative to bring down the number of Employment Tribunal claims. More details are provided below, along with the usual variety of case reports.

Darryl Evans
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Early Conciliation

With effect from 6th May 2014 anyone taking a claim to the Employment Tribunal will have to notify Acas of their intention to do so, with a view to Acas attempting to settle the dispute.

Having made the notification to Acas, neither employer nor employee is obliged to take part in conciliation, but the hope is that parties will do so to attempt settlement earlier than currently tends to be the case.

In order to promote conciliation, the three month time limit for the employee to lodge the claim is put on hold during the conciliation process, which will normally last a maximum of one month, but can be extended for a further two weeks if a settlement looks likely.

Early conciliation will come to an end either when the parties reach agreement or when either party states that it no longer wishes to pursue conciliation. If early conciliation is not successful, Acas will issue a certificate, and the potential claimant is then able to lodge the claim.

Statutory Sick Pay

Since 6th April 2014 it has no longer been possible for employers to reclaim Statutory Sick Pay from the government.

Previously, employers could reclaim the majority of SSP through a reduction in National Insurance contributions. The published, but frankly unconvincing, rationale for the change is that the right to reclaim gave employers an incentive not to encourage long-term sick employees to return to the workplace. As if employers prefer to have their staff off sick.

The real reason of course is to save money, which will apparently be put towards the new Health & Work Service, due to start in 2015, designed to help employees and employers plan a facilitated return to work. I will provide more information about that next year.

Dismissal fair despite lack of final warning

The claimant in Disotto Food Ltd v Carlos Santos (UKEAT/0623/12) was employed as a factory and warehouse manager until he was dismissed for misconduct (note: not gross misconduct). He had already been given three warnings about his conduct, two of which were still live, but none of which were final warnings. Then he failed to follow some loading instructions and was dismissed for misconduct, with the employer taking into account the previous incidents.

The Tribunal found that Mr Santos had been unfairly dismissed because the last incident was 'so slight a matter' that no reasonable employer could reasonably dismiss an employee because of it, even when the previous disciplinary issues were taken into account. Therefore dismissal was not within the range of reasonable responses.

The EAT allowed the employer's appeal on the basis that the employer was entitled to rely on the earlier warnings, and that it is the reasonableness of the employer's view of the gravity of the final incident which matters, not the view of the Tribunal.

It will usually be the case that it will not be fair to dismiss an employee in the absence of a final written warning, except in cases of gross misconduct, but this case is a reminder that the test is whether it was reasonable for the employer to treat the misconduct, in all the circumstances, as sufficient to dismiss. Those circumstances can include existing live warnings, even if they are not final warnings.

Dismissal following positive drugs test

In Kuehne and Nagel Ltd v Cosgrove (UKEAT/0165/13) Ms Kuehne worked as a warehouse operative, driving a vehicle which picked up heavy weights. She gave her consent to be tested for cannabis use following an anonymous tip-off, confirming that she was aware of the contents of her employer's substance misuse policy. The policy contained a list of scenarios that were classified as gross misconduct, including a positive drugs screen result. Her test results proved positive for cannabis and she was summarily dismissed.

An Employment Tribunal decided the dismissal was unfair, largely on the basis that the employer had failed to carry out an adequate investigation, including establishing whether she was intoxicated at work.

However, the Employment Appeals Tribunal (EAT) held that the employer was entitled to rely on the positive test result as the reason for the dismissal, since it was plainly identified as gross misconduct under the substance misuse policy. The ET should have taken into account evidence as to why the employer had introduced such a strict policy, such as the dangers obviously posed when employees operate heavy machinery in a warehouse environment.

TUPE - still applies even when post transfer activities are carried out

Just as we thought that the scope of circumstances in which TUPE applied on a service provision change (SPC) was narrowing, along comes the case of Qlog Ltd v O'Brien (UKEAT/0201/13).

The service in question was the transportation of cardboard packaging goods. The outgoing contractor engaged HGV drivers to work on the services for its client. However, Qlog, the replacement service provider, contracted with other haulage companies for them to carry out the delivery and collection work and so did not take on the outgoing contractor's HGV drivers. They claimed unfair dismissal.

Qlog argued that, as it did not did not carry out the delivery and collection work itself, there was no SPC and so the HGV drivers did not transfer to it under TUPE.

The Employment Tribunal held that the activities before and after the transfer were fundamentally or essentially the same and therefore that a TUPE transfer had taken place. It had particular regard to the contractual agreement between the client and the incoming contractor, in which the change from one contractor to another was described as a 'transfer' of 'its transportation, delivery and distribution services'.

Qlog appealed to EAT, which acknowledged that another tribunal might have reached a different conclusion on the facts, but was reluctant to interfere with the decision reached by the Tribunal in this case.

Maybe another tribunal would have reached a different view, but the cautionary note for incoming contractors is that merely sub-contracting some activities to a third party might not avoid TUPE if overall the services are not materially altered. One other obvious lesson is that if parties do not intend TUPE to apply they would do well to avoid using the word 'transfer' in their agreement and employee communications.

Employees transferred to parent company under TUPE following share purchase

It is settled law that TUPE does not apply where a company is bought by the purchase of its shares. So how can it be that in this case employees became employed by the parent company of a subsidiary which purchased the shares of a third company?

The Tribunal found, on these particular facts, that the share sale triggered a co-extensive but separate transfer to the parent company. It took account of a statement of intent made by the parent company that employees would be moving over to it, the arrival of its integration team, and the fact that day-to day control of the target company's business activities had passed to the parent company. The EAT was happy to uphold the Tribunal conclusion that employees had transferred under TUPE to the parent company.

So it is always important to look beyond the deal itself to the business arrangements which follow it to determine whether TUPE might be engaged. (Jackson Lloyd Ltd and Mears Group plc v Smith and others UKEAT/0127/13.)

Accessing former employees' personal computers

In the case of Warm Zones v Sophie Thurley and Alex Buckley (2014 EWHC 988 (QB)) the High Court granted an injunction to Warm Zones allowing it to access their former employees' personal computers in order to check whether they had taken confidential information before leaving their employment.

In the course of the litigation, several emails were disclosed which suggested that the employees had disclosed, or had been prepared to disclose, confidential information (an extensive customer database) belonging to Warm Zones to a competitor, prior to the termination of their employment. The employer's proposition that it had taken many years and significant resources to build up the data base was taken into account by the Court.

The injunction required the former employees to permit an independent IT expert, paid for by Warm Zones, to inspect their personal computers and take images from them where necessary.

If the inspection of the computers revealed nothing of relevance, then that would bring a swift end to the litigation, but if confidential information was found, then Warm Zones would be able to seek a further injunction prohibiting the use of that confidential information, and possibly damages if any loss arose to Warm Zones as a result of their former employees' breaches of contract.

This could be a useful precedent for employers who have evidence of the taking and (potential) abuse of confidential material.

12-month non-competition restriction enforceable

The High Court has held that a 12 month non-competition post-termination restrictive covenant in an agreement between a financial adviser and his employer was enforceable. It upheld the employer's claim for damages, which it sought instead of the more normal request for an injunction to stop the competing activity.

The financial adviser, who had been paid for the goodwill in the client base he brought with him to the firm, was prevented from working in any capacity in competition with his employer for 12 months after his employment terminated. The Court held that this restriction was enforceable because the goodwill payment was akin to a business sale agreement into which the parties had entered with equal bargaining power. It also noted that 12 month post-termination restrictions were common within the financial services industry and were reasonable in cases such as this where there was an exceptionally strong relationship between the employee and the clients.

The court rejected the employee's argument that the employer had failed to mitigate its loss as it had not put him on garden leave or sought injunctive relief. A claim for breach of contract was understandable where the employer did not want to cause further damage to its client relationships. (Merlin Financial Consultants Ltd v Cooper 2014 EWHC 1196 (QB).)

Duty of trust and confidence

In the days when I was also a pensions lawyer (a long while ago) I would have had to have read the whole of the 1,597 paragraphs and five annexes of the judgment in the case of IBM UK Holdings Ltd v Dalgleish (2014 EWHC 980). As it is I can concern myself only with a particular point of significance for employment law.

That point is that if an employer holds itself out as maintaining high ethical standards, it may find a court considering such statements in the context of the employer's own duty to maintain trust and confidence in the employment relationship.

So when IBM's statements of principle included language such as: 'Never make misrepresentations... Honesty based on clear communication is integral...', the Court was happy to turn that back against the company in the context of consulting with staff over pension changes. IBM's employees were entitled to expect consultation and IBM had failed to do so openly and transparently. Management mislead the members and they failed to disclose their true motives and did not consult with an open mind. Particularly in the context of IBM's statements of principle, this was a breach of the implied term of trust and confidence.

War Horse musicians not entitled to specific performance of their contracts

You may have seen in your newspapers reports on the case brought by the musicians appearing in War Horse, the play produced by the National Theatre. From an employment law perspective it is not in fact that remarkable.

The musicians applied to the High Court for an order that their employment should continue, rather than be replaced by recorded music which was the National Theatre's decision and which led to their redundancy.

Such orders are very rare, and the musicians predictably failed here. The Court decided that the National Theatre had a right to freedom of expression under the European Convention on Human Rights in terms of how the play was produced (i.e. live or recorded music), and that to enforce the musicians' continued employment would interfere with those rights. It also decided that damages - financial compensation - would be an adequate remedy for the dismissed musicians, and there was no need for an injunction. (Ashworth and others v The Royal National Theatre 2014 EWHC 1176 (QB).)

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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