Transfer of Undertakings (Protection of Employment) Regulations (TUPE) may still apply to buyers of businesses in insolvency

A recent Court of Appeal decision found that a transfer of an employee from an employer in insolvency to a new employer may still be protected under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).  Therefore buyers of insolvent companies need to seek specialist employment law advice before proceeding.

In Oakland v Wellswood (Yorkshire) Ltd, Mr Oakland had been employed by Wellswood Ltd, which went into administration and the assets were sold to Wellswood (Yorkshire) Ltd by a pre-pack deal.  Mr Oakland became an employee of Wellswood (Yorkshire) Ltd under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).  Mr Oakland was dismissed by his new employer and brought an employment tribunal claim for unfair dismissal.  The Employment Tribunal rejected the claim on the grounds that the employee had been employed for less than a year as Wellswood Ltd had initiated voluntary liquidation so under Regulation 8(7) of TUPE, the employee could not rely on TUPE to establish continuity of employment.  The Employment Tribunal decision was upheld by the Employment Appeal Tribunal.

However, the Court of Appeal found that Wellswood Ltd had transferred its business to Wellswood (Yorkshire) Ltd and under Section 218(2) of the Employment Rights Act 1996, the relevant section of which states “if a business is transferred from one person to another… the transfer does not break the continuity of the period of employment”, then this transfer had not broken the employee’s continuity of employment and the issue of Regulation 8(7) of TUPE was not applicable.  The employee could therefore bring an unfair dismissal claim against his new employers.

The Court of Appeal did avoid ruling on whether TUPE applies on pre-packaged sales of businesses, so buyers of businesses in insolvency need to be aware that TUPE may still apply to any employees who may be transferred.

Gender Pay Gaps – what Employers can do

The Equality and Human Rights Commission has found that female bankers are receiving bonuses worth 80% less than male bankers.  The Equalities Bill proposed that employers with 250 or more employees should carry out pay audits, although this will not be compulsory until 2013 at the earliest. 

However, pay audits have been criticised for highlighting statistics but not the underlying reasons behind pay gaps. 

So what can employers do to reduce pay gaps and potential Equal Pay and/or sex discrimination claims?

• Provide training for employees undertaking job evaluations and making pay decisions;
• clarify and harmonise terms and conditions between different groups of employees – many local authorities are moving towards a single pay structure and the NHS introduced a single pay structure through its “Agenda for Change”;
• simplify existing pay policies and create more transparency around pay;
• review bonus policies to ensure that it’s not just traditionally male dominated jobs that attract bonuses;
• check recruitment policies to ensure applicants are not deterred from certain jobs because of an unintentional perception that certain jobs are for male or female staff only;
• Employees returning after maternity leave need further support and training on return.

Employers could also consider looking at how employees who work flexibly are managed and give further training to managers who don’t feel confident about managing flexible working employees.

Employers – are your holiday and sickness policies up to date following Pereda v Madrid Movilidad?

The decision in Stringer v HMRC earlier this year ruled that employees who were on sick leave did accrue paid holiday and must be allowed to take it on their return or be paid in lieu of holiday if their employment ended.  However, this left the issue of whether an employer can require an employee to take holiday leave during sick leave and a recent case before the European Court of Justice has answered that.

In Pereda v Madrid Movilidad, the employee had scheduled holiday leave for 16 July to 14 August, but an accident at work on 3 July meant he was unable to return from sick leave until 13 August.  He requested further holiday leave, which was refused by his employer.  The European Court of Justice found that the employee should have been able to schedule further holiday leave so he could exercise his right to holiday.  So, although an employee has the right to request holiday leave during long term sick leave, an employer should not require an employee to take holiday leave during sick leave but must grant holiday leave for a different period, even if that means carrying it forward to another leave year or receiving pay in lieu if employment is terminated.  This will also apply if an employee falls sick during holiday leave.

Public sector employers need to check sickness absence and holiday procedures to take this into account.  Public sector employers could also consider reviewing medical evidence and notification requirements of sickness absence to cover ill-health whilst on holiday to prevent abuse.  If any changes to existing procedures are required, it is strongly recommended employers seek legal advice first as consultation with employees may be necessary.  This is a grey area for private sector employers as the decision has not yet been tested by case law.

Employment Appeal Tribunal confirms that if an employee admits misconduct, further investigation is not required

In the case of Manor Oak (PMG) Ltd v Kelly, Mr Kelly was employed as a service technician whose duties included MOT testing.  The employee had made repairs and carried out a service on a car which had failed its MOT the previous day and then did another MOT test and passed it.  Another employee carrying out a quality check found the car had a fault and should not have been passed. 

A disciplinary hearing was called.  The employee confirmed he had carried out the repairs and MOT testing on his own.  When shown a picture of the fault, the employee confirmed the car should not have passed its MOT and suggested he had damaged the clip and then the fault had developed during the road test.  However, two other employees confirmed that the damage could not have happened during the road test, but during the repair.  Mr Kelly, who was already under an open final written warning, was dismissed on the grounds of poor performance and improper conduct in carrying out repairs and MOT tests on the car.  The employee appealed his dismissal, accepting responsibility for damage to the car, but, as there was no deliberate negligence on his part and after 36 years of service, he felt dismissal was an extreme response.  The managing director conducted the appeal and upheld the decision to dismiss the employee on grounds of negligence resulting in unacceptable performance.

The employee claimed unfair dismissal at an Employment Tribunal.  The Employment Tribunal took the view that the employee’s misconduct was a minor error, the car was safe, the employer believed that the employee had deliberately damaged the car and the live warning was irrelevant.  The Employment Appeal Tribunal found that the Employment Tribunal had substituted its own views.  In actual fact, the car should have failed the MOT test but the employee had passed it, the employer was right to take the view this meant the car was unsafe, the employee had accepted he had caused the damage; therefore dismissal was a reasonable response. 

As the employee had admitted misconduct by passing a car that should have failed the MOT test, the employers did not have to undertake any further investigation.  The Employment Tribunal should have considered that the employee ought to have failed the car, the employee already had a live written warning and that the employee had admitted misconduct and had not taken any issue with the disciplinary procedure.  As the Employment Tribunal had failed to consider whether dismissal was a reasonable outcome, the case was remitted to another Employment Tribunal.

Employer fails to overturn finding of constructive unfair dismissal due to pregnancy

An employer, Queen Victoria’s Seamans’ Rest (a charity providing accommodation and support to seafearers), failed to overturn an Employment Tribunal finding that an employee had resigned due to continuing discrimination due to pregnancy, that she was constructively and unfairly dismissed and that her dismissal was unfair because the reason for her dismissal was pregnancy. 

The acts of discrimination by the employer included:-

• Failure to carry out a proper pregnancy risk assessment and consider any alterations that might be required in breach of Regulation 3 of The Management of Health and Safety at Work Regulations 1999.
• Failure to provide pregnant employees with rest facilities.
• Failure to carry out a proper health and safety assessment after the employee was assaulted by service users during pregnancy.  This incident, which resulted in police being called to evict the service user, was not properly recorded.
• Providing the employee with an inappropriate workstation which was in a very small, cramped space behind a door and led to the employee suffering pain in her arms and back.
•  Preventing the employee from entering the building – the employee lived in a flat that had a separate external entrance which meant using flights of stairs or could be assessed via the lifts in the building.  Other employees had been advised that she felt the building was not a safe and secure environment and it was best she should not be around while the issues were being resolved.  Acting on this advice, another employee prevented her from entering the building.  The Employment Tribunal found that this situation would not have arisen had she not been pregnant and therefore was less favourable treatment on grounds of pregnancy.
• The employee’s manager had disciplined two night workers who reported to the pregnant employee.  The pregnant employee was not told about the disciplinary action “because she was pregnant.”
• Delay in dealing with the grievances raised by the pregnant employee and failing to follow the grievance procedure.
• Threatening the pregnant employee with disciplinary action if she did not return to work before the hearing of her grievance appeal and stating that any further absence from work would be unauthorised and unpaid.

The employer appealed on the basis that the wrong test had been applied when the Employment Tribunal considered whether there was discrimination on grounds of pregnancy and that the Employment Tribunal had failed to use a comparator.

The Employment Appeal Tribunal rejected the appeal and clarified that no comparator is needed in pregnancy discrimination claims.

Lawson-West would remind employers that is it imperative that, once notified that an employee is pregnant, a risk assessment is carried out with the employee concerned.  Employers should also make other employees aware that they cannot discriminate against a pregnant employee.

TUPE meant new Employer found liable for Compensation Award even though it was not responsible for act of Discrimination

In Rank Nemo (DMS) Ltd and others v Coutinho, Mr Coutinho and other employers were to transfer from Vision Information Services to Rank Nemo (DMS) Ltd under the Transfer of Undertakings (Protection of Employment) Regulations or TUPE.  However, before the transfer took place, Mr Coutinho was dismissed.  His employers, Vision Information Services, claimed he was redundant.  Mr Coutinho won an employment tribunal claim for unfair dismissal and race discrimination against Rank Nemo (DMS) Ltd as the liability had transferred to them under TUPE.

Rank Nemo (DMS) Ltd failed to pay the compensation awarded to Mr Coutinho who brought County Court proceedings and won a judgement for a substantial sum.  The new employer still failed to pay.  Mr Coutinho brought a victimisation claim against the new employer to the employment tribunal who struck out the claim but Mr Coutinho appealed further and the case ended up in the Court of Appeal.

Ex-employees are protected after their employment has ended where an act of discrimination or harassment on the basis of a protected act, in this case race discrimination, arises out of and is closely connected to that relationship.  However, this is not necessarily extended to victimisation.  The Court of Appeal held that if an employment tribunal found there was a close connection between the ex-employee and employer, then the ex-employee could enforce the original compensation payment and obtain extra damages for any additional detriment he had suffered because of victimisation.

This should make employers think carefully about withholding any employment tribunal awards especially where the award was for discrimination.  Even though Ran Nemo (DMS) Ltd was not responsible for the discrimination, the transfer under TUPE meant the liability for the employment tribunal award was transferred to them.  Employers who fail to pay tribunal awards after County Court proceedings, are now listed on a register of judgements.

Employer defeated Constructive Unfair Dismissal Claim through correct Grievance Procedures

In a recent Employment Appeal Tribunal case, Bournemouth University Higher Education Corporation v Buckland, the tribunal had to consider whether the employee could claim constructive unfair dismissal due to breach of implied duty of trust and confidence or whether there was no claim because the employer had cured the breach through the grievance process.

Professor Buckland was employed at Bournemouth University and his duties included marking examination papers taken by students.  A colleague expressed concern at the low marks Professor Buckland had given and arranged for the papers to be re-marked without Professor Buckland’s knowledge.  Professor Buckland raised a grievance and the papers were re-assessed, which resulted in Professor Buckland’s original marks being used.  Professor Buckland resigned from Bournemouth University and claimed constructive unfair dismissal because of the breach of the duty of trust and confidence. The Employment Appeal Tribunal decided that the employer had, when the papers were re-assessed during the grievance process, cured the breach and therefore the employee could not claim constructive unfair dismissal. 

This decision does demonstrate that, even when a serious breach of contract has been made by an employer, if a properly conducted grievance process is followed, the rectification of a breach of contract will help defeat a constructive unfair dismissal claim.  Employers should ensure that employees who conduct grievance procedures are fully trained and up to date with the new ACAS procedures.

Implications for Employers after Cheltenham Borough Council’s failure to sue former Managing Director for fraudulently or negligently withholding details of her depressive illness

Cheltenham Borough Council have failed in their attempt to sue a former managing director for fraudulently or negligently withholding the details of her depressive illness when she applied for the post, claiming it had sustained a financial loss of over £1 million as a result.

Mrs Laird, the former managing director, claimed that her appointment was unconditional, did not require a submission of a medical report and that she had given accurate information.  She had left the council in 2005 on an ill-health pension after delivering £1.5 million in efficiency savings and also claimed that overall the council had derived a financial benefit of £30 million due to her financial management.  Her counter claim for damages also failed. 

The High Court found that the council’s medical questionnaire was “poorly drafted”.  In answer to the question “Do you normally enjoy good health?”, the former managing director responded “yes”.  In answer to the question “Do you have a mental impairment?” she replied “no.”  The judge found that her representations were not false. 

Employers do not have the right to ask employees or job candidates about their health or if there are any long term or recurring medical conditions.  However, employers can ask if an employee or prospective employee needs any reasonable adjustments to help them with their job or interview. 

An employer can make it a condition of their offer of employment that information about disabilities is provided to them.  But any such requests need to made in a non discriminatory manner and employers need to have policies and procedures in place to ensure that any information given to them about disabilities is not used in a way that discriminates or places disabled employees at a disadvantage.

An employer is only obliged to make reasonable adjustments where they know or could be reasonably expected to know that an employee is disabled and likely to suffer a substantial disadvantage in comparison with a non disabled employee.  An employer does not have to be specifically informed of a disability for them to have knowledge of the disability.  Knowledge that an employee has applied for disability tax credits will be accepted in an employment tribunal as the employer having knowledge that a disability exists.

One in eight UK employees has a disability and one in four of the population will be affected by mental illness during their lifetime.  Employers could have disabled people working for them who have not declared their disability.  Employers should ensure that their recruitment procedures and employee handbooks are up to date so that disabled employees are treated fairly.

Paternity Leave extension plan suspended

To help employers during the recession, government plans to extend paternity leave to six months have been shelved.  The Department for Business, Enterprise and Regulatory Reform (BERR) confirm that they are continuing to review new regulations in light of the recession and have put plans to extend paternity leave on hold.

The original proposal was to allow mothers and fathers a share of a year of parental leave, with new fathers able to take six months’ leave after the mother’s first six months.  The aim was to help women get back to work.  However, the proposal attracted criticism on grounds of costs and being difficult to administer.

Currently new fathers are entitled to two weeks’ paternity leave to be taken just after their baby is born, paid at the Statutory Paternity Pay rate of £123.06 per week.

Employment Appeal Tribunal ruled that wording used on a Compromise Agreement was not clear enough to prevent a former employee making an Employment Tribunal Claim

Ms McLean and her employer, TLC Marketing, settled a Compromise Agreement using the wording “in full and final settlement of all claims which the applicant may have had against the respondent rising from his employment or its termination”, following a sex discrimination claim by Ms McLean. 

TLC Marketing failed to comply with the terms of the Compromise Agreement and the now former employee issued an Employment Tribunal claim for victimisation.  The former employee argued that her former employer’s failure to comply with the compromise agreement was a detriment amounting to further discrimination.

The Employment Tribunal refused to hear the claim on the basis that the former employee was prevented from bringing the claim by the Compromise Agreement.

The Employment Appeal Tribunal found that the claim was not prevented and that the wording used in the Compromise Agreement was found to be limited to those claims that the employer and employee had considered whilst reaching the agreement.  Therefore, employers are strongly advised to take legal advice when drafting agreements to check that the wording does prevent future Employment Tribunal claims.  The Employment Appeal Tribunal did find that a compromise agreement can prevent future employment tribunal claims if the wording is “absolutely clear and leaves no room for doubt”.

Employers are also reminded that failure to comply with terms of a compromise agreement will be a breach of contract and can also be interpreted as victimisation.