Newsletter June 2019


Despite the approach of the summer, the number of reportable cases seems to have increased over the last month, the main employment law headline being the resurgence of interest in the use of confidentiality provisions in Settlement Agreements (colloquially known as NDAs).

Other highlights include some developments on the vexed issue of overtime and holiday pay, a dismissal for proselytising, some decisions on disability discrimination and also an interesting case on shared parental pay.

Darryl Evans
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Direct discrimination - sexual orientation

Although McMahon v Redwood TTM Ltd & Pilling (240538/2018) is only a first instance (i.e. Employment Tribunal) case, it illustrates the importance of (a) employers ensuring that their workforce is aware of what can and cannot amount to discrimination, and (b) having and enforcing a suitable equal opportunities policy.

During her first week of employment Ms McMahon was requested by her Managing Director not to reveal to her colleagues that she was a lesbian. He said that this was necessary because the business owner was “old school” and because none of her colleagues were gay.

As she was new, she felt she had to comply with the request, but felt very uncomfortable about doing so, and she avoided socialising with work colleagues as she would be restricted in discussing her private life.

Several months later the company made a number of redundancies, including Ms McMahon. She brought a number of claims in the Employment Tribunal, including one of sexual orientation discrimination in relation to the Managing Director’s request. All were rejected apart from this last claim, as the Tribunal found that his request amounted to direct discrimination on the ground of sexual orientation, and that he would not have made such a request of one of the company’s heterosexual employees. As a result, the Tribunal awarded her compensation amounting to £8,000 for injury to feelings.

Blocking an international posting for health issues was not discrimination

The Court of Appeal has supported an Employment tribunal in concluding that an employee with multiple disabilities was not directly discriminated against on grounds of disability when an offer of an assignment to the UAE was withdrawn following a medical assessment. That assessment concluded that there was a high risk that the employee would require medical attention when overseas.

The employer's reason was not a proxy for the protected characteristic of disability the Court said. The Tribunal had been entitled to conclude that a person who lacked the claimant's disabilities, but who was at a similar risk of needing medical attention overseas, would have been treated in the same way. The Court also agreed with the Tribunal that the employer had not indirectly discriminated against the employee or failed in its duty to make reasonable adjustments. There were not any less discriminatory alternatives to the medical assessment. (Owen v AMEC Foster Wheeler Energy Ltd and another [2019] EWCA Civ 822.)

Relying on Occupational health reports in disability cases

In Kelly v Royal Mail Group Ltd (UKEAT/0262/18) Mr Kelly had a poor attendance record, caused by Carpal Tunnel Syndrome. As a result, he progressed to the final stage of the Royal Mail’s attendance policy and was dismissed.

He claimed that this amounted to discrimination arising from disability. The Tribunal dismissed his claim on the basis that the employer had no knowledge (actual or constructive) of any disability.

Mr Kelly appealed, arguing that the company should not have relied only on Occupational Health reports, and should have obtained further medical advice.

However, the Employment Appeal Tribunal held that if an Occupational Health report considers the question of disability in detail, and there is no other evidence (which a claimant is also entitled to bring, but did not do so in this case), then reliance on those OH reports only was acceptable.

Disability discrimination – potential inability to work

Ms Coffey, a police officer in the Wiltshire Constabulary, suffered from hearing loss. This had never caused her any problems in doing her job and so did not constitute a disability under the Equality Act 2010 as she was able to do her 'normal day-to-day activities’.

In 2013 she applied for a transfer to the Norfolk Constabulary, but it was refused because, on a medical test, her hearing fell "just outside the standards for recruitment, strictly speaking".

She brought a disability discrimination claim, asserting that she had been discriminated against because of a perceived disability – that the employer thought she was disabled even if in fact she was not. She won in the Employment Tribunal and the EAT.

The EAT said that the phrase 'normal day-to-day activities' should be interpreted so as to encompass the activities relevant to participation in professional life. Norfolk's belief that Ms Coffey's hearing loss would, currently or in the future, mean she would be unable to perform the duties of a front-line police officer was a perception that it would have an effect on her ability to carry out normal day-to-day activities.

The Court of Appeal agreed and went onto confirm that did refusing employment because of a perception of a risk of future inability to work fell within the terms of the Act. (The Chief Constable of Norfolk v Coffey 2019 EWCA Civ 1061.)

Holiday pay/overtime

In East of England Ambulance Service NHS Trust v Neil Flowers and ors (2019 EWCA Civ 947) the Court of Appeal has held that regular overtime, even if non-guaranteed and/or voluntary, should be taken into account when calculating holiday entitlement under the Working Time Regulations.

This is fairly settled law now as a result of a number of UK cases, but the respondent in this case made a submission that the European Court of Justice (ECJ) in Hein v Albert Holzkamm GmbH and Co KG had held that (in that particular case) voluntary overtime should not be taken into account when calculating holiday pay, due to its “exceptional and unforeseeable nature”.

The Court of Appeal decided that the ECJ did not intend that their decision should be such that no voluntary overtime should be included, because that was contrary to its previous rulings. The Court of Appeal concluded that the ECJ had reached its decision in the Hein case on the basis of the facts peculiar to that case, which were that the voluntary overtime was so exceptional and unforeseeable that it should not be included.

However, in the Flowers case overtime, although voluntary, was regular, and so needed to be taken into account when calculating holiday pay.

Holiday pay – backpay claims

In a further, and rather unexpected, development in this complex area of holiday pay, the Northern Ireland Court of Appeal (NICA) has thrown a curve ball on the subject of how far back claimants can claim holiday pay arrears. Decisions of the NICA are not technically binding in Great Britain, but their conclusion remains significant.

The issue arises from the use of the term 'series' of deductions from wages in the Great Britain and Northern Irish legislation and the finding of Mr Justice Langstaff’s in Bear Scotland Ltd v Fulton that a gap of more than three months between deductions (i.e. underpayments of holiday pay) broke the series and therefore drew a line from which point earlier underpayments could not be claimed.

In the NICA Lord Justice Stephens decided that this could lead to "arbitrary and unfair results", and agreed with the claimants. “As a matter of the proper construction of the [applicable Northern Ireland regulations] we conclude that a series is not broken by a gap of three months or more" he said.

Expect a claimant in Great Britain to test Mr Justice Langstaff’s in Bear Scotland ruling in a higher court, citing Lord Justice Stephens in support of his/her argument. (Chief Constable of the Police Service of Northern Ireland v Agnew 2019 NICA 32.)

Transfer of clients' investments may be TUPE transfer

When a Slovenian bank ceased its investment operations and its activities as a stock exchange intermediary it was required, under Slovenian law, to transfer its clients' financial instruments and other managed assets to another authorised firm. It therefore gave its clients the option to transfer their investment accounts to another intermediary, with the transfer costs being covered, and 91% of the clients did so. The bank then terminated the employments of all of the employees in its investment division.

The ECJ held that there may have been a transfer of an undertaking. It was not disputed that the bank's investment activities amounted to an economic entity. But did that economic entity retain its identity post-transfer?

The fact that the clients could freely choose to transfer their securities to the new intermediary did not matter. It was necessary to assess all of the facts, taking into account the incentives offered to the bank's clients to move to the new firm. Ultimately, this was a matter for the national court to decide, but there was the potential for this to amount to a transfer. (Dodič v Banka Koper and Alta Invest (Case C-194/18.)

Fair dismissal for proselytising

In Kuteh v Dartford and Gravesham NHS Trust (2019 EWCA Civ 818) the Court of Appeal has held that dismissal for gross misconduct for proselytising was not unfair.

Ms Kuteh was a nurse, who often spoke to patients about religion. After being asked by her manager to refrain, she agreed not to start such conversations with patients. However, she continued to do so, including saying prayers in front of patients and asking one to sing a psalm with her.

The Employment Tribunal held that her dismissal was fair, and the EAT refused permission to appeal. She therefore appealed that refusal to the Court of Appeal, but it upheld the EAT’s decision, and by extension the Employment Tribunal’s decision, stating that Ms Kuteh had acted inappropriately by proselytising to patients and had failed to comply with a reasonable management instruction.

Periods of family leave/calculation of redundancy pay

The European Court of Justice has provided a helpful steer in establishing that periods of reduced pay due to an employee taking family related leave should not be taken into account when calculating redundancy pay.

The case emanated from France, which has a system of part-time parental leave. An employee who had taken such leave was subsequently made redundant and the calculation of their redundancy pay took into account the fact that their pay had been reduced during their parental leave period.

The ECJ held that the calculation of their redundancy payments should be based on periods of normal pay, and held that as mainly women take advantage of family related leave, a failure to do so could amount to indirect sex discrimination.

Although the UK does not have a system of part-time parental leave, the same principle will apply to any periods of family related leave, including possibly to periods when an employee is working flexibly temporarily for family reasons. (RE v Praxair MRC SAS (C-486/18).)

Shared parental leave and pay

You will remember (of course!) previous reports regarding the issue of whether a man who has taken shared parental leave should be entitled to the same level of enhanced pay as a woman would receive from the same employer when taking maternity leave.

Rather controversially, the Court of Appeal has held in the conjoined cases of Ali v Capita Customer Management Ltd and Chief Constable of Leicestershire v Hextall (2019 EWCA Civ 900), that the failure of the employers to pay these new fathers at the same enhanced rate as it would have paid to an employee on maternity leave did not amount to sex discrimination.

The Court held that the claimants could not compare themselves to a woman on maternity leave, due to the exception whereby “special treatment is afforded to a woman in connection with pregnancy or childbirth”. The Court held that this exception is wide enough to cover the payment of enhanced maternity pay. The correct comparator was a woman taking shared parental leave. It also prevented the Claimants from making equal pay and indirect discrimination claims.

Although clearly the exception referred to above is intended to benefit women, the outcome of this case is likely to be the opposite, at least in the eyes of some women, as it will discourage couples from being able to decide in an evenly balanced way who should take leave after the birth of their child. Where the mother benefits from enhanced maternity pay, a couple may tend to ensure that she should take maternity leave so they maximise their income. This decision will therefore not do anything to break down traditional gender stereotypes, which was the intention of the shared parental leave legislation.

The case may be appealed to the Supreme Court.

Confidentiality undertakings - Women and Equalities Select Committee report

This report arises from the well-publicised cases in the last couple of years, including most notoriously the Philip Green case, in which employees were paid substantial sums of money in settlement of discrimination and harassment claims, in return for which they agreed not to disclose any details of the conduct of the perpetrators (known as NDAs, or “gagging clauses”).

The report is specifically concerned with the use of NDAs to settle discrimination and harassment claims, and argues that in some cases allegations of discrimination and harassment are not investigated properly, or at all, before being settled with an NDA, but that the imbalance of power between employer and employee is such that employees can feel they have little option but to accept settlements on such terms.

The WESC has heard evidence that individuals who have signed an NDA find it difficult to work in the same sector again, or suffer emotional and psychological damage as a result of their experiences. More widely, the WESC fears that the prevailing use of NDAs leads to a 'cover-up culture' in which victims of discrimination and harassment may be reluctant to report this for fear that their allegations will not be taken seriously or investigated properly, and that they may lose their job. It considers that it is in the public interest that employers tackle discrimination and harassment, and that allegations of such behaviour are investigated properly.

The report makes four key recommendations to the Government, to encourage more employers to routinely settle employment disputes without using NDAs. First, it wants the Government to ensure that NDAs do not prevent legitimate discussion of allegations of unlawful discrimination or harassment, while still protecting the right of victims to be able to choose to move on with their lives if they wish. Secondly, it recommends that confidentiality and non-derogatory clauses in settlement agreements are drafted in clear terms, being specific about what information can and cannot be shared and with whom. Thirdly, it asks the Government to strengthen corporate governance requirements to ensure employers meet their responsibilities to protect their employees from discrimination and harassment. Finally, it recommends that named senior managers at board level (or the equivalent) be required to oversee anti-discrimination and harassment policies and procedures and the use of NDAs in discrimination and harassment cases.

Much of this sounds entirely sensible, except the first recommendation which is superficially (and hence politically) attractive but which has inherent challenges. What if an individual does indeed want to move on, having the potential to receive a large sum of money in compensation to enable her to do so? The employer is bound to want to maintain confidentiality as part of that deal – otherwise not only does it face the publicity about the incident(s) but also the disclosure of the fact that it paid money as compensation, clearly likely to be seen as an admission. This means the employer may see settlement as an unacceptable resolution, leaving the employee with no option but to go public and bring a legal action, which she may not wish to do, or indeed may not have the resources to do. The opportunity to settle claims is an inherent part of how litigants gain justice for being wronged and this proposal risks taking that away from them.

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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