Employment Law Roundup – July 2020

From this month the new Flexible Furlough Scheme is in operation. Under the old scheme an employee had to be furloughed for at least 21 days and could perform no work in that time. The new scheme allows for a furlough of any period and for employees to work part-time. Employees must be paid in full for the time that they are working, with the scheme covering 80 per cent of an employee’s wages for the remainder of the week (capped at £2,500). The Government regards this as part of the process of phasing out furlough altogether by the end of October. For that reason, the Flexible Furlough Scheme is only open to employees who were fully furloughed for at least 21 days under the old scheme. What is more, the number of employees who can be flexibly furloughed is capped at the ‘high water mark’ of employees furloughed under the old scheme. So if the employer had furloughed no more than 50 employees at any one time under the old scheme it cannot place more than 50 employees on flexible furlough.

From August, the employer will have to start bearing some of the costs of paying employees on furlough. At first, they will simply have to pay employer’s national insurance and pension contributions. Then in September, the support provided for employees on furlough will be reduced to 70 per cent of wages (capped at £2,187.50) and in October the Government will contribute only 60% of wages (capped at £1,875). Even in September and October, however, the employer must make up the sum so that the employee receives at least 80% of wages to a maximum of £2,500 per month.

Pressure is now growing on the Government to extend the furlough scheme beyond October for those sectors of the economy that will continue to be hard-hit by the pandemic. That is a big ask of the Treasury given the scale of the intervention that it has already made. Without further measures however, it seems inevitable that large scale redundancies that were avoided in the Spring will dominate the autumn.  The real employment law impact of coronavirus has yet to be felt.

Redundancy

It is now common practice for employers to select employees for redundancy based on their performance at an interview. Often this process appears to be similar to a recruitment exercise, with the employer selecting those who will be offered a place in the new structure.

In Gwynedd Council v Barrett the employees concerned were teachers who were made redundant when the local authority closed the secondary school at which they were employed and opened a new school – on the same site – accommodating both primary and secondary pupils. They applied for posts at the new school but, following a selection process based on an interview, were unsuccessful and made redundant.

An Employment Tribunal found that their dismissals were unfair. One reason for this was that the employees had been offered no appeal against the decision to dismiss them despite the specific requirement in Regulations covering the staffing of maintained schools in Wales that the right to appeal should be given. The Tribunal also based its decision on a lack of consultation throughout the process and the fact that the change in school structure did not necessarily have an impact on their own roles, so the employees were essentially being made to apply for jobs that they already had.

The EAT upheld the Tribunal’s decision. On the issue of a recruitment-style interview the EAT said that the Tribunal had been entitled to find that the employer’s approach had been inappropriate in this case. This was not a ‘forward-looking’ process where the new roles were substantially different from the old ones and the employer had to consider how suitable the employees were to be recruited to them. It was much more akin to a selection for redundancy from an available pool of employees. The Tribunal had been entitled to stress the need for objective selection criteria and proper consultation.

This case does not mean that employers should avoid the use of interviews in redundancy selection exercise. It is important however not to lose sight of the underlying reality of the process. It is the fairness of the dismissal that will be scrutinised in any unfair dismissal claim. Employers will need to show the criteria on which the employee was selected for redundancy and the basis on which they were assessed. Performance in a job interview with no proper assessment of the employee’s actual performance at work is unlikely to be sufficient.

Wrongful dismissal

An employee dismissed without notice will often claim both unfair and wrongful dismissal. These are two distinct claims. Unfair dismissal is concerned with the reasonableness of the employer’s decision to dismiss the employee. Wrongful dismissal is a contractual claim centred around whether the employer was entitled to dismiss the employee without giving the full contractual notice required. That in turn depends on whether or not the employee was actually guilty of gross misconduct. An employer might reasonably believe that the employee committed gross misconduct and successfully defend the unfair dismissal claim, but lose on the issue of wrongful dismissal because the Tribunal believes in the employee’s innocence. In such a case the employee would be entitled to damages covering the notice that should have been given.

Tribunals still struggle sometimes with the distinction. In East Coast Mainline Company Ltd v Cameron the employee was a shunter in a train depot. He was dismissed when he allowed a goods train to move off while the driver of another train was out of his cabin. The driver was ‘brushed’ by the goods train and could easily have been killed.

At the first hearing the Tribunal found that the dismissal was fair because the employer had reasonably concluded that the employee was guilty of gross misconduct – and dismissed the wrongful dismissal claim on the same basis. The EAT sent that issue back so that the Tribunal could determine whether the employee was guilty of gross misconduct. When the case was re-heard the Tribunal upheld the wrongful dismissal claim. The conduct in question was not deliberate and was a one-off incident of carelessness. Taking into account the employee’s length of service (more than 30 years) what he had done did not amount to gross misconduct.

A second appeal to the EAT led to this finding being overturned. Length of service was not a legally relevant question in a wrongful dismissal claim. What mattered was the seriousness of the conduct itself, not whether it was reasonable to dismiss. A single act of carelessness could amount to gross misconduct if the lapse was serious enough – and it was certainly so in this case where it had very nearly led to a loss of life. Rather than send the matter back to be considered for a third time, the EAT simply held that the wrongful dismissal claim should fail.

Unfair dismissal – gross misconduct

In considering a wrongful dismissal claim, the Tribunal needs to decide whether or not the employee is guilty of gross misconduct. When it comes to unfair dismissal that is precisely what the Tribunal should not do – at least until it comes to assess compensation. It should ask whether the employer reached a conclusion that was reasonably open to it – not whether it agrees with that conclusion. A good example of the wrong approach is the case of Tai Tarian Ltd v Christie. Mr Christie was a maintenance worker for a housing association. He was dismissed when a tenant complained that he had made a series of homophobic remarks when working on her property, making her feel uncomfortable. He denied the allegations completely and argued that his dismissal was unfair.

The Tribunal upheld his claim. It relied on the fact that the employer had accepted that Mr Christie was not actually homophobic and concluded that they could not have therefore believed that he had said what he was accused of saying. The EAT held that this was clearly wrong and was no basis for finding that the employer had not believed that the comments had indeed been made.

The Tribunal had been entitled to criticise the employer for not allowing the employee to see the full notes of evidence taken from the anonymous witness but had not explained why it was unreasonable of the employer to accept her account. The Tribunal had held that she had embellished her story, but the evidence did not bear that out, showing only minor inconsistencies in the two separate accounts that she had given to the employer. The Tribunal had pointed out that she had a potential motive for fabricating her story (as a result of a previous interaction with Mr Christie) but had not considered whether the employer’s acceptance of her account was reasonable. Clearly the Tribunal had started from the position that it believed Mr Christie’s denials and then worked backwards from there.

The finding of unfair dismissal was overturned, and the case sent back to a fresh Tribunal to be re-heard.

Right to Work

An employer must be careful to avoid employing someone who does not have the right to work in the UK. Doing so knowingly is a criminal offence and inadvertently employing someone who is working illegally can lead to a civil penalty of up to £20,000 for an employer who has not carried out a proper documentation check. At the same time it is important not to react too hastily in assuming that an employee’s permission to work has expired. A genuine but mistaken belief that an employee is not entitled to work in the UK can be a fair reason for dismissal, but the employer still needs to behave reasonably. Tribunals will understand that an employer needs to behave promptly, but that will not excuse a failure to examine the situation calmly and make proper enquiries – as the case of Sanha v Facilicom Cleaning Services Ltd shows.

Mr Sanha was dismissed when his employer believed that his permission to work in the UK had expired. The Home Office online checking service had no record of him making an application to renew his permission, and the employer therefore believed that they had no choice but to dismiss. As it turned out, however, he had made such an application. What was more, he was married to an EU citizen working in the UK and was entitled to work in the UK on that basis alone. The dismissal was held to be unfair because the employer should have made more detailed enquiries into his status and realised that the application he had made would not have made its way into the Home Office’s system by the time they carried out the check.

The appeal to the EAT was concerned with compensation – should the award be reduced to reflect the contributory fault of the employee? The EAT accepted that the employee’s conduct could be regarded as blameworthy in that he had been less than forthcoming about his correspondence with the Home Office. On the other hand the employer’s decision to dismiss was not actually influenced by the employee’s failure to provide a fuller account of his status. The employer had acted purely on the basis of the results on the online checking service, so the employee’s conduct had not contributed to the decision to dismiss.

Transfer of Undertakings – changing contracts

The Transfer of Undertakings Regulations (known as TUPE) provide that an employee’s terms and conditions cannot be changed because of the transfer of their employment from one employer to another. It has been argued in the past that this provision only applies to negative changes and that actual improvements in terms and conditions can be valid even though a strict reading of the Regulations themselves suggests otherwise. The issue was tested in Fergusen & ors v Astrea Asset Management Ltd in which an asset management company lost the contract to manage a high-value area of real estate in Kensington and Mayfair belonging to the Abu Dhabi Royal Family. This was effectively the only contract the company managed and so it was accepted that all employees would transfer under TUPE. This included the senior leadership and directors who promptly agreed that they should be paid hefty bonuses once the transfer had gone through – and that they would be entitled to generous termination payments if they were dismissed. These changes were incorporated into their contracts of employment and presented to the new employer. The new employer was not impressed and promptly dismissed the individuals concerned – refusing to honour the new terms.

One of the many issues that fell to be considered in the subsequent tribunal proceedings was whether these changes in terms and conditions were valid and binding. The Tribunal held that they were not. The only reason for the changes was that the contracts were being transferred to a new employer. They were therefore void under TUPE. The EAT agreed. The Regulations were clear that any purported change in terms and conditions was void if the reason for it was the transfer itself. That was certainly the case here as there was no other commercial justification for the changes being made. Suggestions that positive changes were permitted were not based on the Regulations themselves which were unambiguous on the point.

Marriage Discrimination

One of the least often claimed grounds of discrimination is marriage and civil partnership. Prejudice against married people is hardly widespread and there are few circumstances in which an employer might treat an employee less favourably because they were married. The case of Gould v St Johns Downshire Hill demonstrates how difficult it is for an employee to make a successful claim of direct discrimination on the grounds of marriage. The Reverend Gould was employed as a vicar in a ‘proprietary chapel’. This is a church which enjoys semi-independent status from the Church of England and the clergy are directly employed by a governing body of trustees under a normal contract of employment. Rev Gould was dismissed by his governing body after serving for some 15 years on the stated ground that it had lost trust and confidence in him.

The governing body had become increasingly unhappy with his conduct, citing a range of governance issues, his lack of communication with trustees and his management of junior clergy. As a background to all of this, however, was the breakdown of his marriage. A number of the trustees took a conservative approach to marriage and believed that a failed marriage would make a minister’s position untenable. Advice was taken from the local bishop who made it clear that any decisions made about Rev Gould’s future should not be based on the state of his marriage but his performance and behaviour in the role.

After his dismissal, Rev Gould claimed that he was discriminated against on the grounds of marriage. He argued that the failure of his marriage was an important part of the background to many of the issues the governing body had with his performance. Had he not been married these concerns could not have arisen.

The Employment Appeal Tribunal (EAT) upheld the tribunal’s finding that there was no discrimination. In a direct discrimination claim the less favourable treatment complained of had to be ‘because of’ the protected characteristic – in this case, marriage. That meant that marriage had to be part of the reason for the decision itself and not just a background circumstance. The fact that the whole situation would have been different if Rev Gould had been single was not sufficient. The Tribunal had found that there were a range of issues quite unrelated to his marriage that led the trustees to dismiss him and that the trustees had followed the bishop’s advice to disregard any concerns they had on that issue. While a dismissal on the grounds that a marriage had broken down could be discriminatory, that was not what had happened here. The fact that some of the conduct for which Rev Gould was dismissed had arisen in the context of his marital problems, did not mean that those problems were the reason for his dismissal.

Continuity of Employment

Only employees with two years’ continuous service have the right not to be unfairly dismissed. This qualifying period is measured to the day – so it is important to be clear about precisely when an employee started work.

In O’Sullivan v DSM Demolition Ltd, Mr O’Sullivan claimed unfair dismissal from his role as a Demolition Safety Supervisor. He said that he had been employed from 19 October 2015 to 21 October 2017. In replying to his claim however the employer said that his start date was 2nd November 2015. That was the date given on his written statement of terms and conditions. It was also consistent with the employer’s payroll records.

Mr O’Sullivan argued that prior to the formal start-date of 2 November 2015 he had already been working for the employer. He had, at the employer’s request, undergone a medical assessment which was a requirement of the certification he needed to work on demolition sites. He had also undertaken some informal work for one of the employer’s clients. However the Tribunal found that he was not paid by the employer for such work – he had actually been paid in cash by the client and the employer was not involved in the transaction. The Tribunal concluded that any work that he had done did not form part of the employment that began on 2 November. The Tribunal held that he did not have two years’ service and dismissed his claim.

The EAT upheld that finding. Mr O’Sullivan’s period of employment did not begin when the contract was first agreed upon. Tasks done in preparation for the start of his employment -such as the medical examination – were not part of the employment itself. The Tribunal was also entitled to find that the work he did on site was not work done under the contract of employment, but was separate and distinct from it.

Constructive Dismissal

A constructive dismissal takes place when an employee resigns in response to a fundamental breach of contract on the part of the employer. A fundamental breach may, if it is serious enough, consist of a single act. It may also be made up of a number of more minor incidents culminating a ‘final straw’. In Williams v Aderman Davies Church in Wales Primary School a teacher resigned and claimed constructive dismissal over the way in which the employer had handled a complex disciplinary case against him. He was concerned that evidence had been withheld and that this was part of a pattern of unfair treatment towards him and a failure take account of his mental health condition.

In the end, his resignation was prompted by the employer’s decision that another employee who was his union representative, but who had also been accused of misconduct in the handling of his case should not be allowed to contact him until after the case was completed. The Tribunal felt that this was not a matter on which the employer could be criticised – although they found much to criticise in the employer’s earlier handling of the case. They therefore dismissed the constructive dismissal claim. The employer could not rely on this decision as being ‘the last straw’ in conduct amounting to a fundamental breach of contract because it was, in itself, innocuous.

The EAT held that this was the wrong approach. What mattered was whether, when the employee resigned, the employer was in fundamental breach of contract. The incident that prompted the resignation did not have to be part of that breach as long as the employee – as in this case – was motivated at least in part by the overall conduct of the employer.

It was true that once the breach had taken place the employee had a limited period in which to decide what to do. Too much of a delay would lead to the employee ‘affirming the contract’ and losing the right to claim constructive dismissal. In those circumstances an entirely innocuous incident could not revive the right to resign without notice. In the case of Mr Williams however, there was no suggestion that the final incident occurred following an unreasonable delay. There were no grounds on which the Tribunal could have found that he had affirmed the contract. What was more, the Tribunal’s criticisms of the employer’s earlier conduct were so severe that it was clear that there had been a fundamental breach of contract. In the circumstances the EAT ruled that Mr Williams had been constructively dismissed.

And finally…

An Employment Tribunal has dismissed a claim that an employer discriminated against the only female member of its leadership team by talking about football all the time. In Liebenberg v DS Smith Packaging Ltd the employee argued that she was regarded as ‘not being one of the lads’ because she could not take part in their sporting discussions over boozy dinners. The Tribunal did point out that the gender imbalance in the leadership team was ‘unacceptable’ – although that is not the same thing as ‘unlawful’ – but it rejected her claim. The real reason for her dismissal (with less than two years’ service) was the employer’s genuine concerns with her leadership style. In fact there was no undue emphasis on football in conversations within the leadership team and the dinners were rather sober affairs with participants generally having about half a bottle of wine each.

The issues raised in the case are real enough, however. Too much emphasis on joining in with corporate social activities can certainly amount to indirect discrimination if these are focused on the interests of the majority. A ‘laddish’ culture could also help persuade a Tribunal that direct discrimination lay behind a decision on dismissal or promotion. This case may have failed on the facts, but that does not mean that employers can afford to ignore the culture they create.