My first Newsletter after the holiday period, which I hope all my readers enjoyed, is fairly low key with a variety of interesting but not ground breaking cases and other developments.
The direction of travel on the taxation of termination payments, as revealed by the Government’s response to its consultation on the subject, is notable, albeit that the changes will not arrive until 2018.
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The laws on whistleblowing cover not just employees but also the wider category of ‘workers’. In this specific context the meaning of ‘worker’ extends beyond the basic definition in the Employment Rights Act 1996 and in discrimination legislation. Someone who is engaged on terms that are ‘substantially determined’ not by the individual themselves, but by the person for whom they work, is also a ‘worker’.
In McTigue v University Hospital Bristol NHS Foundation Trust (UKEAT/0354/15) the question was whether that covered an agency nurse who was contractually engaged by her agency but assigned to work for a hospital trust. Could she be protected vis-à-vis the trust?
The Employment Appeals Tribunal (EAT) decided she could be. It did not matter that it was not the trust itself which ‘substantially determined’ the terms, but rather the agency. Neither did it matter that the individual may be a worker under the normal, unextended, definition in relation to the agency. She could be a worker as well under the extended definition in relation to the end user of her services.
In Royal Mail Group Limited v Jhuti (UKEAT/0020/16), Ms Jhuti was automatically unfairly dismissed for making protected disclosures (i.e. whistleblowing) even though the person who dismissed her was unaware of those disclosures.
She raised concerns over regulatory breaches. She was consequently deliberately subjected to detriments by her superiors, and in due course dismissed. Management manipulated the facts and led the investigator of Ms Jhuti’s grievance and dismissal appeal to believe she was a poor performer, when in fact that was not the case.
The EAT decided that the decision of a person made in ignorance of the true facts, whose decision was manipulated by someone in a managerial position responsible for the employee who is in the possession of the true facts, will reach the requisite level to amount to victimisation.
The effect of a failure by an employer to comply with that the Acas Code of Practice on Disciplinary and Grievance Procedures is that a Tribunal can increase compensation in any related claim by up to 25%. However, the EAT has decided that the power to make this increase does not to apply to dismissals where the dismissal is due to a breakdown in the working relationship and falls within the ‘some other substantial reason’ (SOSR) category of fair reasons to dismiss.
The EAT said that, whilst elements of the Code are capable of being, and should be, applied to SOSR dismissals, Parliament did not intend to go beyond that and impose a sanction for failure to comply with the letter of the Code. This case follows on from the EAT’s decision in Holmes v QinetiQ Ltd (EAT 0206/15), where it held that the Code does not apply to ill-health dismissals either.
Employers still need to take account of the Code in such situations, though. First, there may be a challenge as to whether the reason for dismissal does indeed fall within the SOSR category, as opposed to being for capability or conduct. Secondly, the events leading up to dismissal may have involved disciplinary or performance proceedings, even if the actual reason for termination is within the SOSR category, so failures to follow the Code in relation to the earlier proceedings may be reflected in an compensation uplift. Thirdly, the EAT’s decision identifies that following the Code may still be relevant as to whether the dismissal was procedurally fair, even if there would be no uplift to the award for not following it. (Phoenix House Ltd v Stockman and another UKEAT/0264/15.)
The opportunity to have an ‘off the record’ discussion with an employee to try to reach agreed exit terms, rather than embark on a lengthy performance or disciplinary process, was enhanced in 2013 by the addition to the Employment Rights Act 1996 of section 111A. This acknowledged the dangers of having such a conversation merely on a ‘without prejudice’ basis, given that if no legal dispute yet exists the ‘without prejudice’ tag may be ineffective and the discussions could be admissible in evidence if a claim were made.
Section 111A offers more secure protection against disclosure, but only in relation to an unfair dismissal claim. This lack of any protection where, for example, discrimination is alleged has limited the use and effectiveness of the provision.
Nonetheless, the decision in Faithorn Farrell Timms LLP v Bailey (UKEAT/0025/16), in which the EAT has given guidance on the scope of section 111A, is interesting.
The EAT has held that the inadmissibility of the discussions extends to the fact that negotiations have taken place, not just the content of those negotiations.
In addition, it is not just the relevant discussions between employer and employee, but also discussions within the employer, such as between different managers or between a manager and an HR adviser, which need not be disclosed. The EAT noted that it is common for discussions to be reported back to higher management or HR and it would run counter to the purpose of section 111A if evidence of those reports were admissible.
The EAT also decided that, unlike ‘without prejudice’ privilege, the inadmissibility cannot be waived.
In my last Newsletter I reported the opinion of Advocate General Kokott in the case of Achbita and Centrum voor gelijkheid van kansen en voor racismebestrijding v G4S Secure Solutions NV (C-157/15). His advice to the ECJ was that a dress code banning employees from wearing any visible religious, political or philosophical symbols in the workplace did not amount to direct discrimination when applied to prevent a Muslim employee from wearing an Islamic headscarf.
Advocate General Sharpston has given a diametrically different opinion in the separate case of Bougnaoui and another v Micropole SA (C-188/15).) Her view is that an employee's dismissal for wearing an Islamic headscarf (hijab) at work, in breach of a direct instruction, was directly discriminatory on grounds of religion or belief. The prohibition on direct discrimination extends to manifestations of religion or belief. Here, had the employee had not chosen to manifest her religious belief by wearing specific clothing she would not have been dismissed.
The discrimination could not be defended based on a ‘genuine and determining occupational requirement’. It was difficult to envisage circumstances, other than those related to serious health or safety concerns, in which a blanket ban on religious apparel could be justified and the hijab did not affect the performance of the employee's work. Rather, the employer in this case appeared to be relying purely on commercial interests based on the preference of its clients. The instruction to remove the hijab arose from a complaint by a customer whose premises the employee had visited.
The ECJ is due to give judgment in both cases towards the end of the year.
The European Commission has in effect approved the Privacy Shield framework for EU-US personal data transfers in a commercial context. This new regime has been negotiated by the Commission and the US Department of Commerce (DOC) to replace the invalidated Safe Harbor regime. The DOC began accepting Privacy Shield self-certifications from US companies from the start of August.
The Shield has been welcomed by companies such as Google as restoring legal certainty and facilitating data flow in the digital economy. However, certain EU voices have criticised it, for example for ignoring reservations expressed by EU data protection bodies. Nonetheless, many EU businesses and former Safe Harbor participant companies will welcome a new framework they can legitimately rely on.
The Government has published a response to its summer 2015 consultation on termination payments and issued draft legislation for further consultation.
The key proposals, which would apply from April 2018, are that:
- all payments in lieu of notice will be subject to tax and national insurance contributions (NICs) as earnings (so the inclusion or not of a PILON clause in a contract of employment would become irrelevant)
- payments relating directly to the termination of the employment will have a £30,000 income tax and employer NICs exemption. The unlimited employee NICs exemption on termination payments will continue, but employer NICs will be due on all termination payments if they are also subject to income tax
- Foreign Service Relief will be removed
- exemptions for death, disability or injury of an employee will be retained, but not in cases of ‘injured feelings’
The closing date for comments in the second consultation is 5 October 2016.
A small development in the holiday pay saga is that the employment tribunal in Brettle v Dudley Metropolitan Borough Council ( ET/1300537/15) has held that voluntary overtime, and other payments associated with rotas worked voluntarily, should have been included in the calculation of statutory holiday pay.
Although only a tribunal decision, and so non-binding, this sheds a little extra light on the question on what constitutes "normal remuneration" for the purposes of holiday pay.
It does not help with the question of what reference period the employer should use to establish the employee’s average remuneration from such overtime.
In Jeffery v The British Council (UKEAT/0036/16) Mr Jeffery was employed by the Council to manage a teaching centre in Bangladesh. When he resigned he brought a claim which the employment tribunal determined to be outside the scope of its jurisdiction.
When he appealed, the EAT supported his position. The following factors were all relevant to a finding "an exceptional degree of connection with Great Britain and British employment law”:
- he was a UK citizen, recruited in the UK to work for a UK organisation
- his employment contract was subject to English law
- he had an entitlement to a Civil Service Pension - which created a strong link to UK employment law
- his salary was subject to notional deduction for UK income tax
- his employer was a public body playing an important role for the UK
The question in G4S Cash Solutions (UK) Ltd v Powell (UKEAT/0243/15) was whether the duty to make reasonable adjustments for a disabled employee should include maintaining salary when the employee is moved to a lower-level role.
In this case the roles in question were an engineering role maintaining cash machines, which was replaced by a less skilled 'key runner' role. After an initial pay protection period, G4S proposed a 10% pay reduction and dismissed Mr Powell when he refused to agree to it.
The employment tribunal found the dismissal to be discriminatory and unfair, and that the required reasonable adjustments included maintaining the former pay level. The EAT found no reason to disagree. The objectives of the statutory rules clearly anticipated an element of cost to the employer, and that is all this adjustment amounted to.
The question is always whether it is reasonable for an employer to have to take that step to avert a disabled employee's disadvantage. Here it could have been although that may not be so in all cases.