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Legal focus: Case law round-up

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Alison Wallace, head of employment practice at Steptoe & Johnson presents a quarterly round-up of employment law case rulings including details of the first ever successful claim by a gay manager for constructive dismissal under the new Employment Equality (Sexual Orientation) Act.


1. Continuity of employment
London Probation Board v. Kirkpatrick EAT
Mr Kirkpatrick was dismissed. Two months later he was reinstated via an internal appeal. A month after that the employer reneged and restored the original dismissal.

Unless the reinstatement meant that continuity of employment continued Mr Kirkpatrick was out of time to bring a claim based on the original dismissal and didn’t have a year’s qualifying period for the second dismissal.

The court held that there was nothing inconsistent with an employer and employee agreeing periods of continuity of employment, particularly if the decision follows an internal appeal hearing. The reinstatement provided the continuity required allowing Kirkpatrick to bring his claim.

2. TUPE – objection to TUPE transfer
Ladies Health and Fitness Clubs Limited v Eastmond (unreported EAT 94/03.)
The claimants were employed by a number of health clubs which were in financial difficulties. A number of attempts at restructuring were made. The claimants supported a petition objecting to the transfer to one of the intermediary companies. The Employment Tribunal held that their actions whilst showing hostility and non-co-operation towards the proposed business transfer did not amount to an objection by them.

Employee objection might be uninformed but can still constitute a valid objection. An objection must amount to more than an expression of concern and must constitute a refusal to transfer. Where an objection is made, the TUPE principles do not apply to the contract and the employee remains in employment until the transfer date when his or her employment is then terminated by operation of law with an entitlement to accrued salary and holiday pay.

3. TUPE – Consultation
Howard v. Millrise Limited
Mr Howard a lithographic printer was given one month’s notice of dismissal on the grounds of redundancy. The company then went into liquidation and its undertaking was transferred as a going concern to S G Printers. He served out his notice and then his employment ended. He brought a claim against Millrise for failure to inform and consult prior to the TUPE transfer.

The Appeal upheld the finding that his complaint was well founded and remitted the case for the Employment Tribunal to determine compensation. If there are no recognised trade union representatives or other elected representatives in place the Regulations require the employer to invite affected employees to elect representatives and if they fail to do so within a reasonable time they must give each individual affected the information required by Regulation 10 (2).

4. Compromise agreements
University of East London v Hinton (UK EAT/0495/04 LA)
Mr Hinton made certain protected disclosures and alleged that he had suffered detriments as a result. He took voluntary redundancy and signed a compromise agreement. This contained a long list of possible claims which were compromised but did not include any reference to the whistleblowing. He later brought proceedings. The Appeal Tribunal held he was barred from proceeding.

His claim fell within the scope of the general clause in the agreement stating that the agreement was made in full and final settlement of all claims which he had or may have had against the employer in connection with his employment its termination or otherwise. As long as the compromise contains a general clause dealing with all claims, an employee should not be able to bring further claims once an agreement has been signed.

However, employers should still ensure where possible that a list of claims to be compromised is as detailed as possible in order to avoid any argument. Employers should also remember that a compromise agreement does not give a blanket waiver over claims which have not yet been raised.

5. Sick pay
Scottish Courage Limited v. Guthrie EAT 788/03.
Mr Guthrie was signed off sick by his GP for four weeks. The employer’s occupational health and medical adviser, however, formed the view that Guthrie was fit to return to work but Guthrie failed to return to work on the basis that his GP ruled that he was not well enough to do so. The employer withheld sick pay stating that they did not think his illness was genuine. He brought a claim for unlawful deduction of wages.

Although a contractual clause existed detailing that sick pay was not payable unless the Company was satisfied that the sickness absence was genuine, the Appeal Tribunal held that there was no evidence from which the employer could have concluded the sickness as not genuine. Mr Guthrie’s claim was therefore upheld. The case demonstrates that in cases of sickness absence particularly where there is a conflict of medical evidence Tribunals will tend to give employees the benefit of the doubt and allow them to follow their own GP’s advice.

6. Unfair dismissal – Time limits effective date of termination
Palfrey v. Transco plc
Mr Palfrey received a letter in February 2003 containing notice of termination. He was given the option of requesting an earlier termination date and agreed to do so. He then brought a claim for unfair dismissal against Transco Plc. He was held to be out of time since it was not presented within three months of the agreed termination date.

Where an employee agrees with his employer a leaving date this is his effective date of termination rather than the termination date contained in the original notice of dismissal. The original of notice of termination had been impliedly withdrawn when the parties agreed a new termination date.

7. Contracts of employment – frustration
Four Seasons Healthcare Limited v. Maughan EAT 6.10.04 0274/04
Mr Maughan was employed as a nurse at a care home. He was suspended without pay following an allegation that he had abused a patient. He later charged them with a number of offences and his bail conditions prevented him attending work. The police requested that the Company carry out no investigation of the matter until after the prosecution of Mr Maughan’s prosecution.

The Company decided that his suspension would continue without pay until the investigation could take place. He was later convicted and sentenced to two years’ imprisonment. Mr Maughan then brought an unauthorised deduction from wages claim against the care home relating to the period of his unpaid suspension. The Tribunal held that he was entitled to unpaid wages but that his contract was then frustrated when he was sentenced to imprisonment.

Before the Employment Appeal Tribunal the company argued that his contract was frustrated at the point he assaulted a patient. The Appeal Tribunal did not agree. For frustration to occur there must be some outside event or extraneous change of situation not foreseen or provided for by the parties within the contract. The contract had not been terminated immediately at the point of assault nor had it by the employee’s bail conditions – it only become frustrated on imprisonment.

8. Pensions – Remedy
Henderson v. Stephenson Harwood and Others – 27 January 2005
The High Court upheld the Pension Ombudsman’s decision to compensate a Complainant by directing his employer to admit him to membership of the pension scheme rather than awarding him damages. The firm and the employee both appealed against this decision. The Court held that the Ombudsmen was entitled and indeed bound to award a remedy to rectify the firm’s failure to perform its contractual obligations.

He had a measure of discretion as to the appropriate award. The Ombudsman was therefore entitled to make a conditional specific performance award. The fact that Mr Henderson had only sought damages so that a Court would not have awarded its specific performance did not mean that the Ombudsman was restricted in the same way as the court in the exercise of his statutory powers.

9. Redundancy – Suitable alternative employment
Lionel Leventhal v North 2004 EAT 0265.
Mr North was employed as a senior Editor of a publishing company. The company decided it needed to reduce its overheads. The most effective way of doing this – was to make Mr North redundant as there were no other alternative cost saving provisions. At no time did Mr North or the company consider making another editor redundant and offering Mr North that role with less pay.

The EAT held that where an employer fails to consider bumping another employee this may lead to an unfair dismissal finding. In considering suitable alternative employment the employer should in the circumstances consider less senior positions whether vacant or not. An employer cannot necessary use an employees’ failure to register an interest in less senior roles as a defence to a subsequent unfair dismissal allegation. Whether the employer should consider bumping a less senior employee will depend on the circumstances of each individual case.

10. Redundancy – Collective Redundancies
Junk v. Wolfgang Kűhnel ECJ 27105 (-188/03)
The European Court of Justice held in this case that an employer carrying out collective redundancies must consult with workers’ representatives and notify the competent public authority before giving employees notice of dismissal.

The UK law currently provides that employers must at least consult appropriate representatives when proposing to dismiss 20 or more employees at one establishment within 90 days or less, at least 30 days before the first dismissal takes effect.

Employers can then serve notice of dismissal on employees whom they are proposing to dismiss, before the end of the consultation period providing the consultation period had reached reasonable stage and the notice did not expire before the end of the consultation period. Junk no longer allows this.

The ECJ has ruled that the redundancy occurs when the employer gives notice not when the dismissal takes effect so the consultation period must have ended before the notice of dismissal can be served.

Employers will have to count back to the date on which employees were given notice of dismissal rather than the date on which the notice will expire which means the redundancy process will be extended by the notice period. Employers will now have to factor in extra time, otherwise they risk breaching the consultation obligations and being held liable for protective awards.

11. Constructive Dismissal
M v. N
The employee had a long standing career as a TV reporter with a major broadcasting corporation. There was a decree of tension within the newsroom which effected staff morale. Allegations of bullying were made against certain members of staff by the employee and others. When the employee’s contract was not renewed after October 2002, he brought proceedings for unfair constructive dismissal.

The employee felt undermined by certain events at work and claimed that the employer was in breach of the implied term of mutual trust and confidence that exists in every contract. The Tribunal found the employee had resigned – he had not been dismissed.

The Employment Appeal Tribunal were satisfied that the Employment Tribunal had adopted the correct procedure and the correct balance in deciding the employer did not create a fundamental breach of contract that allowed him to resign and claim constructive dismissal. To have held otherwise would mean there is a danger that any workplace disputes arising out of errors of judgement on the part of the management in the manner in which they speak to staff could be elevated into fundamental breaches of contract.

12. Compensation – Interest and unfair dismissal awards
Melia v. Magna Kansei Limited UK/EAT/0339/04/DA
The Employment Appeal Tribunal has stated that it is legitimate to award “interest” as long as it is not described as that, for unfair dismissal. Tribunals can give a discount for accelerated receipt at 2½%, it is therefore equally legitimate to give an increase for decelerated receipt at 2½%. Any uplift for decelerated payment is still subject to the £56,800 statutory cap. Interest is currently awarded at 8% for discrimination cases.

13. Compensation – Credit for incapacity benefit
Morgans v. Alpha Plus Security Limited
The Employment Appeal Tribunal has held that the Tribunal must deduct the entire amount of incapacity benefit from a compensatory award. Failure to do so would result in a wrongful windfall for the Claimant. Receiving incapacity benefit is a form of mitigation of loss and the monies must be deducted in full. The EAT left over the question of whether a Claimant who fails to apply for any incapacity benefit can be said to have failed to mitigate his loss.

14. Compensation – monies earned in notice period
Voith Turbo Limited v. Stowe EAT 13.12.04
The Employment Appeal Tribunal held that credit need not be given by an ex employee for earnings achieved in new employment during a period when the former employer was paying notice pay. The employee effectively has a windfall of the additional monies.

(These two cases are irreconcilable, only the Court of Appeal can say which is correct.)

15. Age Discrimination
Rutherford v. Secretary of State for Trade and Industry
Leave to Appeal to the House of Lords has been granted in the case of Rutherford on whether the upper age limits on the right to claim unfair dismissal is statutory redundancy payments are indirectly discriminatory. The Appeal will be heard later this year.

16. Sexual Orientation
Whitfield v Cleanaway UK
A gay manager has successfully one the very first case for constructive dismissal under the Employment Equality (Sexual Orientation) Act. Mr Whitfield was awarded £35,345 in compensation for unfair dismissal, harassment and discrimination. He was taunted and called names by senior colleagues and staff. The Tribunal criticised the employer’s failure to come to his aid despite previous complaints by another gay member of staff.

17. Religious Discrimination
Williams Drabble v. Pathway Care Solutions Limited 2601718/04
Miss Williams was employed as a resident social worker by PCS. When applying for the position she stated that she was a practising Christian and she could not work on a Sunday. She was later put on a Sunday shift.

She was told that the rota change was permanent and if this was unacceptable to her she would have to resign. The Tribunal held that the Company had indirectly discriminated against her by imposing a permanent rota change that required her to work on a Sunday and that they had constructively dismissed her. The issue of remedy was adjourned.

Khan v G and J Spencer Group Plc
The Tribunal upheld Mr Khan’s religious discrimination and unfair dismissal claims after he was sacked for taking extended leave to make a pilgrimage to Mecca. He was awarded £8,224 as compensation for unlawful discrimination. Mr Khan had asked his employer if he could use his 25 day annual leave and holiday entitlement and another weeks’ unpaid leave to make the pilgrimage.

When the employer did not respond he assumed he could go. On his return to work he was suspended without pay and subsequently dismissed.

18. Discrimination – Burden of Proof
Wong v. Igen Limited and Others 18 February 2005
The Court of Appeal has considered and undertaken a comprehensive review of the guidelines issues in Barton v. Investec Crossthwaite Securities Limited in three joined appeals.

The result is that unreasonable behaviour by employers combined with a relevant difference (i.e. sex, race, disability, religion, sexual orientation) is likely to lead to a finding of unlawful discrimination in the absence of an adequate explanation or proof by the employer that “on the balance of probabilities the [unlawful] treatment was in no sense whatsoever on the grounds of [sex].”

19. Disability Discrimination – Reasonable Adjustments and Justification
Williams v. J. Walter Thompson Group Limited 2005 EWCA civ 133
Ms Williams who is totally blind was offered a job by JWT as a computer software operator. The company knew of her disability and that it would need to make reasonable adjustments when offering her the job.

A period of two years elapsed during which nothing much happened and JWT did little towards making any adjustments. Ms Williams eventually resigned and claimed disability, discrimination and constructive dismissal.

The Court of Appeal’s decision upheld the Tribunal’s finding that there was an unjustified failure to make reasonable adjustments of which they were well aware before she joined. It also held that the unfair constructive dismissal of Ms Williams was a further act of disability discrimination.

20. Restrictive Covenants
Corporate Express Limited v. Day – High Court QBD 2004 EWHC 294
Day worked for a company selling office products, as Sales Manager for National Accounts. Her contract contained two restrictive covenants applying after the termination of her contract: a six month solicitation and dealing ban and a six month ban on working for named competitors.

After she left the company she commenced working with one of the listed competitors. The company brought proceedings against her for breach of contract. The High Court held that the ban for working for named competitors for six months was reasonable and enforceable. The employer was exposed to a real risk that this senior employee would use her knowledge of confidential information to the benefit of the new employer.

This risk far outweighed any of the problems that enforcement of the covenant created for the employee. Although the employee would suffer financial loss and a set back in her career, she would not suffer economic disaster. This restrictive covenant was therefore reasonable where the non-solicitation covenant was not on its own sufficient to achieve the necessary level of protection.

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