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Suzanne Horne

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Employment law takeaways: August


Employment law takeaways: our bitesize legal updates for busy HR professionals, provided by Suzanne Horne of Morrison and Foerster. This month, retirement caps, misunderstandings and badly-worded letters.

1.    Kraft Foods UK Limited v Hastie – Retirement linked redundancy cap not age discrimination
2.    Worrall v Wilmott Dixon Partnership Limited – Transferred collective agreements are changed by law
3.    Willowby v CF Capital plc – Misunderstanding which resulted in dismissal not capable of cure by employer
4.    Wardle v Credit Agricole Corporate & Investment Bank – More support for expensive career-long loss awards
5.    Wedgewood v Minstergate Hull Limited – Letting employee go early does not change date of termination

Kraft Foods UK Limited v Hastie – Retirement linked redundancy cap not age discrimination

Kraft operated a voluntary contractual redundancy scheme which provided that an employee would receive three and a half weeks actual pay for each complete year of service. At the time that Mr Hastie was made redundant, he had been employed for nearly 40 years and theoretically he would have been entitled to a payment of £90,100. However, the scheme included a cap to the effect that the maximum amount of any payment could not exceed the amount that the employee could have earned up to retirement. At the time of his termination, Mr Hastie only had about two years to his 65th birthday. Therefore, he was only paid £13,600. Mr Hastie alleged indirect age discrimination: he claimed the cap was a provision, criterion or practice ("PCP") which placed him and those in his age group at a particular disadvantage and that this was not justified.

The EAT agreed that the cap was a PCP but it held that the cap was justified: it was a proportionate means of achieving a legitimate aim, namely compensating employees for the loss of earnings and the cost to Kraft, whilst preventing employees from receiving a windfall if they would not have been working in any event.
Takeaway: This case will be of interest to those in HR with responsibility for policy and change management. The concept of a cap near retirement is also akin to the tapering that is also seen in these types of schemes.  The Kraft takeover of Cadbury in February 2010 continues to be in the news. Only this month, the Birmingham Post reported that 120 out of 170 managers at Cadbury have left since the takeover.

Worrall v Wilmott Dixon Partnership Limited – Transferred collective agreements changed by law

Mr Worrall had transferred under Tupe three times when in 2008 he successfully applied for voluntary redundancy. The case was about a dispute as to the redundancy package under the terms of a collective agreement set out in the Staff Handbook. Mr Worrall argued that he should have the benefit of a statutory discretion set out in a clause of the collective agreement which provided that on redundancy he should get at least five added years. Wilmott argued that as a result of a change in the law in 2006 the statutory discretion in the clause was removed. The EAT held that Wilmott was correct. It held that the clause in the collective agreement had not been incorporated in Mr Worrall’s contract of employment because whilst it was set out in the Handbook the Handbook had not been received by him and he had not received notice of its terms or agreed to them. Further, the change in law in 2006 removed the statutory discretion and any obligation on Wilmott to pay the ‘added years’.      

Takeaway: This was a test case. The decision follows the cases of Parkwood Leisure Limited v Alemo-Herron  and the ECJ case of Werhof which decided that a collective agreement which transfers under Regulation 5 of TUPE is ‘static’ i.e. the employees’ rights under it are set at the time of the transfer and they do not change if the collective agreement to which they are not a party is subsequently changed. This case illustrates that a subsequent change in law will override the contractual rights. 

Willoughby v CF Capital plc – Misunderstanding which resulted in dismissal not capable of cure by employer

CF Capital plc was suffering the effects of the banking crisis. It needed to make savings but it hoped to avoid redundancies by offering its employees the opportunity to move from employee to self-employed status. Miss Willoughby and her line manager had discussed if she would be interested in changing status. Miss Willoughby thought she had agreed in principle to the change subject to seeing the paperwork. Her line manager thought she had agreed in any event. Her line manager then sent a letter to Miss Willoughby notifying her that her employment would finish at the end of the month. On becoming aware that Miss Willoughby did not consider she had agreed to the termination of her employment, the line manager and the managing director contacted her and sought to withdraw the dismissal. However, Miss Willoughby maintained that she had been dismissed. The EAT said that the unambiguous language of the dismissal letter by the employer was effective and that it will only be in exceptional circumstances that an employer is able to withdraw a notice of dismissal or an employee is able to withdraw his/her resignation.

Takeaway: There is a series of cases which are authority for the proposition that an employee or an employer can only withdraw their resignation or dismissal if the words are spoken in anger or temper. This case illustrates that this exception will be construed narrowly. It also shows that the misunderstanding could have been avoided altogether if after the initial discussion with Miss Willoughby, her line manager or HR had sent a letter to her to confirm her line manager’s understanding of what had been agreed.

Wardle v Credit Agricole Corporate & Investment Bank – More support for expensive career-long loss awards

Mr Wardle had successfully brought a race and unfair dismissal claim against the Bank. He was awarded £374,921.62. Both parties appealed. The facts of the EAT’s decision are quite complex as the EAT reviews the decision of the Employment Tribunal on, amongst other things, the percentage likelihood of Mr Wardle remaining in employment with the Bank and obtaining employment at a comparable level over certain periods and within the financial services sector until retirement at the age of 60, pension loss and the appropriate statutory uplift. However, the EAT does confirm that this is the sort of case in which the Tribunal could realistically conclude that "there would be a measure – albeit a small measure – of career-long loss".

Takeaway: This claim originated from a failure to promote and summary dismissal by the Bank. The decision of the EAT makes frequent references to the decision of the Court of Appeal in Chagger. With Employment Tribunal claims up 56% , career-loss claims are also likely to be on the increase. 

Wedgewood v Minstergate Hull Limited – Letting employee go early does not change date of termination

Mr Wedgewood’s notice period was due to expire on 1 December 2008. On 26 November 2008 Minstergate wrote to Mr Wedgewood saying "I write to confirm that you can be released today and will still be paid up to and including your notice period date 1 December 2008". Mr Wedgewood counter-signed the letter. On 28 February 2009, Mr Wedgewood submitted his claim for unfair dismissal. Minstergate argued that his claim was out of time because the effective date of termination was 26 or 28 November 2008. Mr Wedgewood argued that the letter of 26 November 2008 did not alter the effective date of termination. 

The EAT held that absolving Mr Wedgewood from working the remainder of his notice period did not change the effective date of termination. The parties could agree to change the date of termination but the wording of the letter of 26 November 2008 did not do so.

Takeaway: This case does not establish any new point of law but it is useful reminder to HR to choose the words of letters with care. 

Fuel to the Fire? The news that Tony Hayward, the chief executive of BP, is on the point of ‘resigning’ in return for a pensions package of over £10m will undoubtedly result in a flurry of HR articles about the merits of ‘rewards for failure’. One thing is for sure, Sir Fred Goodwin will be feeling a bit better about things…

One Response

  1. Great Takeaway
    I so enjoy reading the Law takeaway – really useful and sometimes amusing.
    Keep up this good work
    I look forward to the next installment


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