Newsletter May 2014


In a departure from the norm, May was a quiet month for employment law developments so this Newsletter is shorter than usual (but still perfectly formed, of course). Nonetheless, the decisions summarised below are significant, especially for employers who pay commission to sales staff and
the like, or those who have workers 'on-call'.

In the final items I refer to the recent Queen's Speech, which announced some employment law initiatives. They are not exciting, hence the lack of any headline billing.

Darryl Evans
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LLP partner was a 'worker'

Starting at the top, the case of Clyde & Co LLP and another v Bates van Winkelhof (2014 UKSC 32) has reached the end of its journey through the courts with the Supreme Court (the House of Lords as was) overruling the Court of Appeal and determining that a member of an LLP can be a 'worker'
under employment legislation.

In the context of this particular case the decision allowed the LLP member in question to claim the protection of the whistle-blower legislation and therefore to claim compensation for detriment suffered as a consequence of her alerting her firm to regulatory breaches in its Tanzania office, where she was on secondment. More broadly, it brings LLP members within the coverage of working time rules (including paid holiday) and national minimum wage protection (which could be relevant if pay is entirely performance related). It also means that LLP members should be covered by pensions 'auto-enrolment' requirements.

Does being 'on-call' count as working time?

The Employment Appeals Tribunal (EAT) in Esparon t/a Middle West Residential Care Home v Slavikovska (UKEAT/0217/12) identified that it is 'very difficult' to distinguish between cases where the worker was 'at work', being paid to be on the employer's premises 'just in case', and where the
worker was 'on call' and not deemed to be working the whole time.

Ms Slavikovska, a care worker, was required to work a number of 'sleep in' night shifts at her employer's premises and be available for emergency purposes. The question was whether she was entitled to pay under the national minimum wage legislation for the whole of these shifts.

The answer was: yes, she was. An important consideration was why the employee's attendance was required. Here, Ms Slavikovska was there to fulfil the employer's regulatory obligations to have staff available on the premises at all times. It was essential for staff to be there even if they did nothing.

Statutory holiday pay should include commission

The European Court of Justice (ECJ) has ruled that where a worker's remuneration includes contractual commission, determined with reference to sales achieved, statutory holiday pay must not be based on basic salary alone.

Mr Lock was a salesman earning a base salary with variable commission paid in arrears. The commission depended on sales achieved. On average it represented about 60% of his pay. He could not earn commission whilst on leave - a clear disincentive to the taking of holiday, and therefore contrary to the aim of the Working Time Directive, said the ECJ. He claimed 'lost' holiday pay after taking leave in December 2011 and January 2012.

The UK Government intervened to argue that in fact pay was maintained during holiday, because of the deferred payment of commissions previously earned. But the ECJ was not diverted by this. Its ruling was not impacted by the fact that the effect of reduced pay accruing on holiday was delayed.

The ECJ left it to national courts to determine the actual calculation of the holiday pay. This presents the UK Employment Tribunal which referred the case the conundrum of what it should mean financially for Mr Lock, given that the UK Working Time Regulations seem to limit holiday pay to base salary in these circumstances. The Regulations will need amending to account for this decision, but that will not happen overnight. (Lock v British Gas Trading Ltd C-539/12.)

This decision is likely to be followed by further decisions from the same court, this time relating to the question of whether holiday pay should also include a payment in respect of overtime, so that holiday pay more accurately represents what the employee would have been paid had they not been on holiday. I hope to be able to report on these decisions later this summer.

Need to consider thoughts of everyone involved in decision-making process

Reynolds v CLFIS (UK) Ltd and others (UKEAT/0484/13) concerned whether a company's decision to terminate a consultancy agreement was on the grounds of the consultant's age.

In determining that the decision was not age-related, the tribunal focused only on the mental processes of the decision-maker himself, despite that fact that it was common ground that his decision was informed by the views of other employees.

The EAT held that this was the wrong approach. The burden of proof was on the company to prove that the decision was not tainted by discrimination. In addition, it was liable for the discriminatory acts of its employees. Therefore the tribunal should have considered the mental processes of all those employees who had significantly influenced the alleged discriminatory decision.

The limits of a summary dismissal clause

It is tempting for an employer to include in its employment contracts a wide power to dismiss instantly an employee who commits any kind of breach of duty or, indeed, underperforms. The decision of the EAT in Robert Bates Wrekin Landscapes Ltd v Knight (UKEAT/0164/13) demonstrates that the courts will limit a summary dismissal clause to serious breaches only, whatever it actually says. Mr. Knight was employed as a gardener, whose contract said that his employment could be terminated without notice or payment in lieu of notice in specified circumstances, including 'if the Employee commits any breach of the Employer's or Customer's security rules'. A large part of the company's business was maintaining the gardens of a secure MOD site. The MOD's rule book stated that no MOD property should be removed from the site without permission. When a bag of bolts belonging to the MOD was found in Mr. Knight's van he was summarily dismissed for theft and for removing goods from the MOD's site, contrary to protocol.

Mr. Knight said that he had simply forgotten to hand in the bolts and therefore held that he was not guilty of theft. The Employment Tribunal accepted that explanation. It also determined that he had breached his contract by breaching the security rules, but that that breach was not deliberate and therefore was not a fundamental breach of contract allowing summary dismissal.

The EAT agreed. An employee is entitled to notice of termination unless the employer can point to a repudiatory breach of contract, i.e. gross misconduct or gross negligence. The summary dismissal clause therefore had to be interpreted in this commercial context. Only breaches which were serious and wilfully or grossly negligent would justify summary dismissal.

Ability to rely on misconduct warnings

Mr Way was dismissed for sending inappropriate emails in breach of his employer's policy. He had previously received a final written warning for breaching another company policy (on not hiring friends or relatives).

In the Employment Tribunal Mr Way tried to argue that the final warning had not been given in good faith, but the Employment Judge refused to allow this line of argument and found the dismissal fair in the light of the warning.

The EAT said that the Judge ought to have investigated Mr Way's complaints about the warning, but dismissed the appeal because doing so would have made no difference to the outcome. The employer was entitled to rely on the warning for various reasons, including that both incidents involved breach of company policy, that the warning was not challenged at the disciplinary hearing, and that at the appeal stage of the dismissal process the warning had been investigated and the complaints rejected, with no complaint being made about the conduct of that appeal.

Two cases from last year determined that the test for a fair dismissal is whether it was reasonable for the employer to treat the misconduct, taken together with any warnings, as sufficient to dismiss. A Tribunal should not normally reopen the circumstances of a warning and assess whether it should have been issued, unless the warning was 'manifestly inappropriate'. Nor does it matter whether the misconduct leading to the warning was of a different nature to that which led to the dismissal, provided the warning is drafted widely enough to cover any kind of misconduct. (Way v Spectrum Property Care Ltd UKEAT/0181/13.)

Asking employees to reaffirm restrictive covenants on leaving

Capgemini included in the termination agreements of some departing employees an undertaking in which they re-affirmed the non-competition restrictive covenants in their employment contracts. The benefit of this was apparent when the company later tried to get an injunction to stop the employees from working for a competitor.

The High Court considered the usual presumption of unequal bargaining power did not apply as the employees had left their employment and had received legal advice on the termination agreement. By signing the undertaking, the employees had reversed the burden of proof - it was now they who had to prove that the restrictions should be set aside, rather than the onus being on Capgemini to show they were enforceable.

The moral of the tale: have employees reconfirm their post-termination restrictions on leaving, wherever possible. (Capgemini India Private Limited and another v Krishnan and others 2014 EWHC 1092(QB).)

Employment tribunal fees - latest news

The rumblings about the introduction of tribunal fees continue.

UNISON has been granted permission to appeal the decision of the High Court to dismiss its application for judicial review of the introduction of fees. The dismissal was based largely on lack of evidence supporting UNISON's complaints about access to justice. Since then of course we have had the tribunal statistics I have reported which showed a massive drop in lodged claims. So expect more on this.

There are also stories circulating that Labour has plans to abolish the fees if they come into power next year. Again, watch this and other similar spaces.

Queen's Speech

The Small Business, Enterprise and Employment Bill, to be introduced in the new Parliamentary session, will contain measures to:

  • strengthen employment law by tackling NMW abuses and cracking down on abuse of zero-hours contracts,
  • crack down on costly tribunal delays, although no detail is given of the Government's intentions in this regard, and
  • ensure that the red tape that affects small businesses is frequently reviewed to ensure regulations are either cut or remain effective, and to place that requirement into law.

The government will also introduce a Social Action, Responsibility and Heroism Bill which will apparently 'put the law more clearly on the side of employers who do the right thing to protect employees if something does go wrong through no fault of their own'. I'm looking forward to the government's definition of 'heroism', a term not previously featuring in any employment legislation.

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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