Newsletter August/September 2015


Employment law keeps you on your toes. Its dynamic nature is a key reason I chose to specialise in it, and it remains a major attraction. (Apologies to my readers who would prefer that things stood still for a while so they can manage their staff with fewer things to worry about!)

My original introduction to this month's Newsletter was going to observe a quieter month on the case law front and congratulate the Government on stepping forward to fill the breach. But wait - at the 11th hour the European Court makes an important decision on working time and the role of HR in disciplinary decisions comes under scrutiny at the Employment Appeals Tribunal - readers are advised to take a careful look at that one.

Meanwhile, on the legislative side, I suspect anyone impacted by the potential National Living Wage is fully aware of that proposal and already adjusting staff cost budgets. All employment lawyers and HR professionals, though, need to be aware of possible changes ahead to the £30,000 tax free exemption on termination payments.

As I say, keep paying attention!

Darryl Evans
T: +44 (0)7771 725341

Journeys counting as working time

The European Court of Justice decision in the case of Federación de Servicios Privados del Sindicato Comisiones Obreras v Tyco Integrated Security SL and anor is the latest employment law development to hit the main news headlines. The Court held that for workers who do not have a fixed or habitual place of work, time spent travelling between their homes and their first and last customers of the day constitutes working time under the Working Time Directive.

This decision does not apply to the ordinary worker who commutes to and from their normal place of work, but it is likely to have a significant impact on any businesses whose workers travel from place to place, for example sales people, and do not have a regular work base.

This could mean that employees' working time will breach the average 48 hour working week mandated by the Directive, which led to statements from some about the value of the opt-out available in UK.

The Court made the point that this did not mean that employers must pay employees anything extra for this working time (although workers who have not opted-out of the 48 hour limit might seek a compensatory payment is they are now asked to do so). Also, if these journey times must also be treated as working time for National Minimum Wage purposes, that extra working time could mean for some workers that their average hourly pay is less than the NMW.

National Living Wage

A further hit on employment costs is set to arrive from April 2016 in the form of the National Living Wage which will increase the minimum wage that must be paid to workers aged 25 and over to £7.20 per hour (rising to £9 per hour by 2020). This will be, in effect, a new tier to the National Minimum Wage framework.

The Office for Budget Responsibility estimates that around six million people will be impacted. Measures to reduce the burden of the increased costs on businesses include a 2% reduction in corporation tax and a 50 per cent increase to the National Insurance Employment Allowance. Nonetheless, for certain businesses and sectors this has major cost implications, coming as it does at around the same time as many employers will face additional pensions liabilities under auto-enrolment.

Important tax reform

For employment lawyers the single element of the tax rules which matters most in practice is the £30,000 exemption on termination payments. For budget after budget we check whether the rule will change - an increase in the figure perhaps? But no - it has remained in place and resolutely fixed at £30,000 for as long as I can remember.

Is this all about to change? Quite possibly, yes. The government has issued a consultation document in which it considers:-

  • removing the distinction between contractual and non-contractual payments (so that, for example, a PILON payment would also attract tax-free status)
  • introducing a two year qualifying period, so no employee can receive a tax-free termination payment unless they have been working for two years
  • changing the fixed £30,000 tax-free sum to an amount which increases the longer an employee has worked; nothing specific is proposed but a worked hypothesis suggests a £6,000 tax-free sum after two years' employment, increasing by £1,000 for each additional year of employment. The possibility of restricting the national insurance exemption to this same amount is also mooted
  • making injury to feelings awards (which are arguably completely tax free) subject to tax for some or all of the award
  • altering the present foreign service relief exemption

There is a suggestion that the concession be limited to redundancy situations only but at the same time new concessions may apply to other circumstances of dismissal.

A significant reduction in the value of the concession is in the offing. Definitely watch this space.

Payment for change in terms of contract was taxable

Sticking with the tax theme, the First-tier Tribunal has held that a £30,000 payment received by an employee under a compromise agreement was taxable because it was made to compensate him for a change to his contract, requiring him to work more than 10 miles from his original workplace.

Mr Hill maintained that the payment benefitted from the £30,000 exemption as it was made in return for his agreement not to claim against his employer for failing to consult on the TUPE transfer that resulted in his workplace changing. The tribunal disagreed - the payment was general earnings. The facts showed that the change of Mr Hill's actual workplace (as opposed to his contractual one) had happened some three years before transfer. In addition, he was required to repay some of the payment if his employment ceased within two years of it being paid. (Hill v HMRC [2015] UKFTT 0295 (TC)).

The effect of Early Conciliation

Acas has published statistics showing the impact of the first year of Early Conciliation. Three out of four employees and employers agreed to try EC in its first year of operation. 63% of notifications received between April and December 2014 did not proceed to a tribunal claim, a further 15% resulted in a formal settlement, and 22% progressed to a tribunal claim of which just over half subsequently settled through Acas.

The role of HR in disciplinary decisions

Ramphal v Department for Transport (UKEAT/0352/14) is a must note for HR departments and anyone else involved in disciplinary proceedings.

The investigating officer's report into the disciplinary matter originally recommended a finding of misconduct and a sanction of a written warning. After numerous comments and amendments by HR - note that all of the drafts would have been discoverable documents so required to be produced in the tribunal - the final report found the employee to have committed gross misconduct and recommended immediate dismissal.

The Employment Judge decided that the dismissal to be fair but the Employment Appeals Tribunal (EAT) said his approach was wrong. He had failed to take account of Supreme Court guidance that the role of HR should be to provide advice limited essentially to matters of law and procedure. Questions of culpability are matters for the investigating officer.

The EAT said: "an employee facing disciplinary charges and a dismissal procedure is entitled to assume that the decision will be taken by the appropriate officer, without having been lobbied by other parties as to the findings he should make as to culpability.....and also given notice of representations made by others to the Dismissing Officer that go beyond legal advice, and advice on matter of process and procedure."

Application of Equality Act to foreign workers

Regular readers will know that I feature any case which casts light on the question of whether a person working overseas can bring claims under UK law. Over time the test for this has drifted away from any fixed parameters and towards the general question of whether the employment is more closely linked to UK law than the law of somewhere else.

So it was in R (on the application of Hottak and anor) v Secretary of State for Foreign and Commonwealth Affairs and another (2015 EWHC 1953), a case related to Afghan interpreters working for British armed forces in Afghanistan. The High Court said they could not bring claims under the Equality Act 2010 because it could not be said that the interpreters had closer connections with Britain and British employment law than with Afghanistan and Afghan law.

The two Afghan nationals relied on the fact that that they were both employees of HM Government so that the Equality Act applied to their employment in Afghanistan.

Referring to the principles in the Lawson v Serco line of cases in relation to the Employment Rights Act 1996, the Court considered that the interpreters were not expatriate or peripatetic workers and that they had no physical contact or connection with Great Britain at all. Their contracts were not governed by English law. Their connection with Great Britain was limited to the identity of their employer. Their position could not be distinguished from that of locally employed members of staff in a British Embassy, which in a previous case was considered to be outside the scope of the Employment Rights Act, and the territorial test for both pieces of legislation was the same.

Objective justification of age discrimination

Another common theme of mine is the willingness of the tribunals and appeal courts to permit age discrimination as justifiable, in contrast to the less frequent circumstances in which other forms of discrimination are allowed. As we suspected when age discrimination was introduced almost 10 years ago, age is regarded differently to the other forms of prohibited discrimination.

The Employment Appeals Tribunal (EAT) has held in Chief Constable of West Midlands Police and others v Harrod and others (UKEAT/0189/14) that the compulsory retirement of large numbers of police officers pursuant to regulation A19 of the Police Pension Regulations 1987 could be objectively justified and was therefore not indirectly discriminatory on age grounds.

Police offers are not employees and, in the absence of misconduct or capability issues, A19 is the only way of ending an officer's service. However, it clearly disadvantages those over 48.

The employment tribunal assessed whether it was absolutely, as opposed to reasonably, necessary to retire the officers under A19 and concluded that there were alternative, less discriminatory, ways of achieving the aim of increasing efficiency. The EAT said this test was wrong. It was critical for the police forces to have certainty in achieving the necessary budgetary cuts, and retiring officers under A19 was the only way to have the required certainty.

Right of agency workers to be informed of vacancies

The EAT concluded that the right of an agency workers to be informed of vacancies within the end user company means just that, and no more. The workers do not have equal status with comparable permanent employees in being considered for a particular vacancy. A short summary - but that's what you need to know. (Coles v Ministry of Defence UKEAT/0403/14.)

More Facebook problems

In British Waterways Board v Smith (UKEATS/0004/15) Mr Smith had made derogatory comments on Facebook about his managers and work. He referred to having been drinking whilst on standby - which was specifically prohibited.

Mr Smith described the comments as 'banter' (a term with which those of you with teenage sons will be familiar) and said that he had in fact not been drinking. Nonetheless, he was summarily dismissed for gross misconduct as his comments had undermined the confidence his employer or the public could have in him.

The EAT, reversing the tribunal's decision, found the dismissal to be fair. Fair procedure was followed and the employment tribunal had made the error of substituting their view for that of the employer. Whilst this is a decision based on its particular facts, it illustrates again that employers do have some weapons against damaging use of social media, particularly if the employer has a good social media policy in place.

Employee's choice of companion in disciplinary process - care needed

Employers are familiar with an employee's right to be supported by a work colleague or eligible union representative at disciplinary and grievance hearings. They might be forgiven for thinking that if that right is respected, there need be no concerns. Wrong, according to Stevens v University of Birmingham (2015 EWHC 2300).

The University refused to allow a representative of a professional defence organisation to accompany an employee at an investigation meeting concerning serious allegations of misconduct. This, said the High Court, was unfair and a breach of the implied term of trust and confidence.

Although the express terms of the relevant contractual disciplinary procedure mirrored the statutory requirement, so was not infringed, the overriding obligation of trust and confidence had to be considered. Mr Stevens had two contracts of employment, one for an academic role with the University and one for a clinical role with the NHS Foundation Trust. The alleged misconduct related to the conduct of clinical trials and impacted both contracts.

Mr Stevens would have been allowed his choice of companion under the Trust's disciplinary procedure, had it (rather than the University) initiated disciplinary proceedings. This was a key factor in the decision. However, the case remains a reminder that in cases with serious implications for an employee operating just the core statutory right may not be enough.

TUPE - treatment of a long-term sick employee

In BT Managed Services Ltd v Edwards and anor, Mr Edwards was employed as a Field Operations Engineer as part of a team dedicated to a contract providing operational maintenance for mobile phone networks. The team had its own separate and dedicated structure within BT, including its own managers, operatives, support staff, budget and cost centres.

In 2006, Mr Edwards went on long-term sick leave and was in due course seen as permanently incapacitated, without no prospect of returning to work. He remained employed so as to be paid under a PHI scheme.

In 2012 the contract on which he had worked was transferred. There was clearly a TUPE situation with an organised grouping of employees whose principal purpose was to undertake the work under the contract. But was Mr Edwards part of that grouping?

No, said the EAT. Someone permanently unable to contribute to the activity was almost by definition excluded from 'assignment' to the organised grouping. Such link as remained between Mr Edwards and his team was for administrative purposes only and a mere administrative or historical connection on its own was not enough. Some level of participation, or evidence of absence being temporary, was needed.

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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