Newsletter June 2015


One consequence of the outcome of the General Election is that we now have a better sense of the changes to employment laws which lie ahead in the medium term. The Queen's Speech itself was not especially exciting and I have been amusing myself more by contemplating what seismic changes there could be to the employment law landscape if UK withdrew from Europe (I must get out more).

More immediately, though, this month's headline is the first attack on zero-hours contracts, as described in my first item below.

Darryl Evans
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Ban on exclusivity in zero-hours contracts

From 26 May 2015 any provision of a zero-hours contract which prohibits the worker from doing work or performing services under a contract or other arrangement with another employer, or prohibits him or her from doing so without the employer's consent, is unenforceable.

There is recognition that employers might find ways around this rule by imposing other restrictions or penalties on employees who take other work, without absolutely prohibiting it but the new legislation does not address this potential to avoid the restrictions. Neither does it give the employee any right to make a claim should they suffer any detriment arising from their wish to work for another employer.

Fines for underpayment of NMW

In another immediate measure following its election win, the Government has increased the maximum financial penalty for underpayment of the national minimum wage to £20,000 per worker.

Age discrimination - the views of others

In CLFIS (UK) Ltd v Reynolds (2015 EWCA Civ 439) the question in issue was whether a decision to end a consultant's contract was discriminatory on account of age when the manager who made the decision was shown to have been aware of the discriminatory views of other managers, but showed no discriminatory motive himself.

Ms Reynolds worked as a medical officer under a consultancy agreement. The General Manager decided to end her consultancy following various performance issues having been drawn to his attention by the Managing Director. Ms Reynolds was 73 at the time and difficulty lay in the fact that some of the input of the Managing Director was tainted by age factors. For example, he complained that she did not use email.

The employment tribunal found that it was the General Manager's decision alone to end the contract on the basis that Ms Reynolds was not providing the service required, according to his view of her performance over a long period. It accepted the company's argument that this was a non-discriminatory explanation for its decision: dissatisfaction with performance and a genuine belief that she was incapable of change. There was no unlawful discrimination.

The Employment Appeals Tribunal (EAT) overturned the decision of the tribunal, but, no doubt to the delight of the Employment Judge, the Court of Appeal reversed that and restored the tribunal's original finding. This had not been a joint decision, but the General Manager's alone. The tribunal was entitled to conclude on the facts that his decision had not been influenced by the discriminatory views of others who had clearly not been party to the decision.

Interaction of grievance and disciplinary processes

Jinadu v Dockland Buses (UKEAT/0434/14) dealt with a problem which comes up often: how should an employer handle a disciplinary procedure if in the course of it the employee raises a grievance?

Ms Jinadu was a bus driver who was put into a disciplinary process as a result of poor driving. In the course of that process she made some allegations about some of the managers involved. Despite these, the disciplinary process continued and she was dismissed.

Ms Jinadu argued that the decision not to put the disciplinary process on hold so that the grievance could be heard rendered the dismissal unfair. The EAT flatly rejected this argument and did not overturn the tribunal's finding of a fair dismissal.

Standard advice in this situation is to sort out the grievance before reaching a disciplinary decision, and that may well remain the right thing to do in most cases. But at least we know that deciding not to do that is not necessarily fatal.

A related question is whether you need to hold a separate grievance process, or to deal with the grievance within the framework of the disciplinary process. The answer generally depends on the complaints made in the grievance. If they are intrinsically related to the subject of the disciplinary process, then they can likely best be dealt with all together. However, if the grievance is alleging, for example, that the disciplining manager is likely to be biased, then that should probably be dealt with by a separate grievance process.

Dismissed for disobeying an instruction

The Royal Borough of Greenwich faced an allegation by one of its employees, Mr Barton, that it was in breach of its data protection obligations. It instructed Mr Barton not to contact the Information Commissioner's Office (ICO) about the alleged breaches, but he did so anyway and as a result he was dismissed.

Mr Barton claimed that his communications with the ICO constituted one or more protected disclosures, and that therefore he was dismissed for making those - i.e. as a whistle-blower.

The EAT disagreed. Although one of the communications was a qualifying disclosure, it was not protected. The reason for the employee's dismissal was in fact his misconduct.

This was a fine line decision which could very well have gone the other way. The EAT declined to decide whether the Borough's prohibition on contacting the ICO was lawful, as the employee had not pleaded the point. That said, it considered that the lawfulness of the instruction was relevant, but not decisive, as to whether the employer had acted reasonably. This is possibly not a decision to rely on, though, if you face a similar situation. (Barton v Royal Borough of Greenwich UKEAT/0041/14.)

TUPE - transferee's liability on an opt-out

You all know by now that I enjoy a good TUPE case (as I said, I must get out more) - they have a delightful habit of throwing up new angles. Here's another.

The question in NHS Direct NHS Trust v Gunn UKEAT/0128/14 came down to this: does the TUPE transfer of a contract of employment amount to an offer of employment?

The reason this was relevant was because Ms Gunn, who was disabled, worked 8.5 hours a week for Shropshire Doctors. The service was due to transfer to NHS Direct, which informed her that she would have to work at least 15 hours. She could not manage this, so asked for 10 hours. This was rejected. She objected to the transfer and was redeployed by Shropshire Doctors. Nonetheless, she complained that she had been discriminated against by NHS Direct for its failure to make reasonable adjustments.

NHS Direct said she had no right to claim as she was neither their employee nor an applicant.

The tribunal ignored TUPE and said that NHS Direct had made her an offer of new terms. Hence, she was an applicant. NHS Direct appealed and the EAT rejected the appeal but for an entirely different reason. The transfer under TUPE was not an offer of employment so she was not an applicant. However, it transpired that as part of the process NHS Direct had also made an "offer of suitable alternative employment" to Ms Gunn: hurrah! It found a way of allowing her claim through.

So the law seems to be that a transfer under TUPE is not an offer of employment and normally the transferee will not be liable for claims by employees who opt-out, except in unusual circumstances such as these.

Tax on compensation for discrimination

The Tax Chamber of the First-Tier Tribunal has held that a £600,000 payment received by a former bank employee in settlement of claims of race discrimination, among other things, was not chargeable to tax on earnings from employment. The payment was not made in return for the employee's services and so could not be considered 'earnings' for the purpose of S.62 of the Income (Tax Earnings and Pensions) Act 2003.

It is worth summarising the facts upon which this decision is based as they are by no means unique. The employee raised a grievance in November 2007 about discretionary bonuses he had received over several years. He alleged that the bank was in breach of contract and that he was paid lower bonuses than other employees because of his race.

He was not happy with the grievance outcome and took matters to the next stage by serving a discrimination questionnaire. At this point he was told that he was to be made redundant. He was offered terms (under a compromise agreement) under which he was paid a statutory redundancy payment of £1,650, an ex-gratia redundancy payment of £48,898, and £600,000 in settlement of all outstanding and potential claims.

HMRC wanted a detailed breakdown of what the £600,000 represented for tax purposes. The bank responded that it had decided that the employee's claims 'held certain merit' and that, while it did not accept that there was any evidence of discrimination, it recognised the risk that, in litigation, the employee might have been successful in asserting some right to higher bonus payments.

HMRC, as one might expect, took the view that this meant that the payment fell to be taxed as earnings from employment - in effect it was more bonus. The employee appealed, arguing that the sum in fact represented compensation in respect of his threatened race discrimination claim.

The Tax Chamber of the FTT supported the employee. The fact that 'earnings are involved' was not enough to make the payment taxable as earnings. The payment would not be received in return for services but because he was the victim of discrimination. It also agreed with the employee that payment for settling a claim should be treated in the same way as an award for a successful claim and, given that there had been a settlement, the question of how likely it was that the claim would succeed was not relevant.

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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