Employment and Pensions E-Bulletin Article

To help you quickly keep up to date with employment law, we summarise the key developments arising from cases, legislation and consultations.

In the courts…. recent case law developments

No TUPE transfer where transferor remained joint and severally liable - In a recent case the EAT has held that an individual's employment did not transfer under TUPE when his employer moved from having sole liability for his employment to a situation where it had joint and several liability with other companies. The claimant was a decorator employed by MH Ltd which provided social housing. MH Ltd joined a group of companies (H Group) and one of the other members of the group (HHA) took over payroll and HR from MH Ltd. However, the tribunal found that, on the facts, the claimant's employment relationship remained with MH Ltd. Following a restructure, the claimant was asked to sign a new contract where MH Ltd and other companies in the H Group were jointly and severally liable for his employment. He refused to sign and was dismissed and offered re-engagement which he took but he also sought to argue that TUPE applied and he had been unfairly dismissed. However, the EAT found that, in light of the purpose of TUPE and the European Acquired Rights Directive, the requirement for a transfer to be to 'another person', should be read as meaning a separate legal person from the original transferor. This does not prevent there being a TUPE transfer to multiple transferees (provided there is not fragmentation). However, in this case the employment relationship remained with MH Ltd and it was only altered by the addition of other Respondents as jointly and severally liable for his employment. Consequently, there was no TUPE transfer here. 
Comment Although these seem like unusual facts they are relatively common in the housing sector. It can also be envisaged that the facts could potentially apply where a sole practitioner becomes a partner in a larger partnership. The judge recognised that on a "real world view" MH Ltd joined together with the others could be regarded as "another person" but it found it difficult to accept this when looking at the application of TUPE to the transfer of contracts and the assumption in TUPE that there is a difference in identity. The EAT also considered it unlikely that there should be a different approach for the purpose of business transfers and service provision changes. However, the judge did recognise that there can be cases where the factual reality is different to the legal label used and there may be cases where caution needs to be adopted before assuming that the identification of the employer is that in the contract. However this was not an issue in the current case. The issue of what would happen if MH Ltd left the group was not expressly addressed by the EAT but the respondents submitted that if MH Ltd left the group it could have remained the claimant's employer or the employment may have transferred to the remaining entities but that did not happen here. Due to the novelty of the point, lack of previous authority and the potential for wider application the EAT gave permission to appeal the decision to the Court of Appeal. Hyde Housing Association Ltd and ors v Layton.

The risks of unfair dismissal when treating employees differently - The EAT has recently looked at the issue of when it is appropriate in an unfair dismissal case to consider disparity of treatment between employees in similar circumstances. In the case, two employees had been found guilty of gross misconduct for their involvement in the same incident at a work social event, although one was dismissed (C) and the other was not (B). Prior to the event all employees had been warned that normal standards of conduct would be required. However, after drinking heavily there was a disagreement between the two employees. C punched B in the face and B, after the event, sent threatening and aggressive texts (although he never carried the threats out). C claimed that it was unfair that he was sacked and B was not and the tribunal agreed. The tribunal considered that the difference in sanction was unreasonable and that the employer had applied a "defence of provocation" differently between the two employees. However, on appeal the EAT revisited the guidance found in Hadjioannou v Coral Casinos Ltd [1981] and clarified that the relevant question is whether the employer has acted reasonably towards the employee who has been dismissed. This is regardless of what sanction has been applied to the other. Occasionally the difference in treatment compared to other employees will be relevant to reasonableness. However, the circumstances must be "truly parallel". This was not the case here as there was a distinction between a punch in the face at a workplace and a threat afterwards. The tribunal's decision was therefore perverse and the EAT found that the decision was fair. 
Comment Although employers should continue to treat employees consistently to avoid allegations and findings of unfair dismissal, the case law guidance on consistency (Hadjioannou) states that an employer's previous decisions not to dismiss employees for the same misconduct will only make a dismissal unfair in two situations, namely:

  1. Where the employer has treated similar behaviour less seriously in the past so that employees have been led to believe that certain categories of conduct will be overlooked or they will not be dismissed for it; or it can be inferred that the asserted reason for dismissal in this case is not the actual reason
  2. Where employees in "truly parallel circumstances" arising from the same incident are treated differently

Tribunals need to carefully look at the circumstances before deciding that treatment is sufficiently similar. Even though both employees were guilty of misconduct at the same event here, their actions were different and their situations were not truly parallel. Consequently, the fact that one was dismissed and the other was not did not render the dismissal unfair. The judge also noted in this case that, whilst provocation may be a mitigating factor that employers can consider, it is not a defence to misbehaviour. MBNA Limited v Jones [2015]

Holiday entitlement of part-time worker had to be recalculated when hours increased going forward but not retrospectively - The ECJ has confirmed that where a worker increases their hours, any leave that has already accrued under their old working pattern does not need to be retrospectively recalculated. However, going forward, leave entitlements need to be recalculated in line with the new working pattern. We have prepared a separate case update on this. Please click here for more information.  

Resignation after unilateral substantial change in working conditions was a "redundancy" for EU collective redundancy purposes - Collective redundancy obligations apply where certain thresholds of "dismissals" take place in a period of time (in the UK this is at least 20 dismissals in a 90 day period). The relevant EU Directive defines redundancies as "dismissals effected by an employer for one or more reasons not related to the individual workers concerned" and the UK legislation has similar wording regarding redundancies as including a dismissal "not related to the individual concerned or for a number of reasons all of which are not so related". In the UK this has been taken to include dismissals as a result of terminations and re-engagement and dismissals for some other substantial reason. In a Spanish case, the ECJ has confirmed that the EU definition of redundancy should not be interpreted narrowly and can include an employee's resignation in response to an employer's significant unilateral variation of their contract to their detriment. In this case, the employee resigned following a unilateral reduction in pay of 25%. 
Comment This case confirms the wide definition of redundancy in collective redundancy situations. Employers will be familiar with the concept of having to engage in collective redundancy consultation where changes are being implemented through dismissal and re-engagement of more than 20 employees. This case suggests that collective redundancy obligations may also be triggered where the employer is unilaterally imposing significant changes to the employee's detriment.  The AG noted that an employee who is faced with a substantial deterioration to their working conditions should have the same protection as those who are actually made redundant. Here a pay reduction of 25% satisfied the test but there is room for argument as to whether a unilateral change is sufficiently substantial and detrimental to trigger the consultation requirements. To avoid potentially significant liability for failing to inform and consult businesses should seek advice on whether the collective consultation obligations are triggered even where the traditional concept of "redundancy" is not applicable. Pujante Rivera v Gestora Clubs Dir SL and another [2015]

Changes in Legislation

November changes

Modern Slavery Statements – The government made two regulations on 29 October 2015 relating to the Modern Slavery Act which have the effect of requiring commercial organisations to prepare an annual slavery and human trafficking statement for each financial year ending on or after 31 March 2016 in which their total turnover is above £36 million. The Home Office has issued practical guidance which sets out the basic requirements of the new legislation, advice on what can be included in the statement and includes helpful case studies on various topics that may be included in the statement. For more information on the obligations please see our article in this month's bulletin.

Draft Public Sector Exit Payment Regulations 2016 - The government has published the draft Public Sector Exit Payment Regulations 2016 which will impose a cap of £95,000 on the total aggregate value of exit payments made to most public sector workers. The draft regulations follow the government's recent response to its consultation and will be made under a new section 153A-C to the Small Business, Enterprise and Employment Act 2015, to be inserted by the Enterprise Bill 2015-16. The Draft regulations have been produced for illustrative purposes for the purpose of debating the Enterprise Bill and further regulations are anticipated after the Bill receives Royal Assent. According to the draft Regulations, the cap will apply to:

  • Redundancy and voluntary exit payments
  • Payments to reduce or eliminate an actuarial reduction to a pension on early retirement
  • Payments to discharge liability under a fixed-term contract
  • Payments by way of shares on loss of employment
  • Any other payment (whether or not contractual) made in consequence of loss of employment (the government confirmed in its response to the consultation that this will include payments in lieu of notice)

The Draft Regulations provide that payments to which the public sector exit cap will not apply are:

  • Payments made for incapacity or death as a result of accident, injury or illness
  • Payments of accrued but untaken holiday (the government conceded this point in light of consultation responses)
  • Bonus payments
  • Payments made in damages ordered by a court (this suggests that litigation will have to have progresses to an order being made by a court and will not be satisfied by payments made where litigation has just commenced)
  • Early retirement payments to firefighters
  • Payments to employees with protected terms following a TUPE transfer
  • Certain public sector bodies will be exempt (for example: armed forces, BBC, Channel 4, FCA and PRA, RBS and the Bank of England)

It will be possible to waive the cap in a particular case with consent from the relevant Minister, or from the full council in the case of local government exit payments. In addition, public sector workers who receive public sector exit payments and are still employed in the public sector must give their other public sector employer prescribed details of their exit payment.

Amendments have recently been proposed to the Enterprise Bill which is making its way through Parliament suggesting, in particular: an obligation on public sector authorities to consider whether an exit payment is appropriate and value for money, scope for thresholds and certain conditions when the requirements may be relaxed. These issues will be up for more debate so it remains to be seen what the final requirements will be.

Trade Union Bill opposition – The Bill has completed the committee stage in the House of Commons on 27 October 2015. Report stage and third reading will took place on 10 November 2015. The Scottish government has requested exclusion from the Bill and Unison Cymru/Wales, GMB and Unite are supporting a statement agreed by the Joint Council for Wales condemning the measures in the Bill and calling for the Welsh government to urge the UK government to reconsider it.

British Bill of Rights - On 17 October 2015, the Independent reported that the government intends to proceed with its introduction of a British Bill of Rights to replace the Human Rights Act 1998. A 12-week consultation is expected to start in November or December 2015 with a view to the new law receiving Royal Assent by the summer of 2016. According to the report, the Bill will go straight to the House of Commons without a Green or White Paper.

In the news….

  • Government plans to relax Sunday trading laws in England and Wales are facing defeat in the House of Commons – The BBC has reported that ministers are considering whether the proposals to relax Sunday trading laws (see our previous article Open all hours) may be delayed or even dropped as the plans will struggle to pass in the House of Commons. The government conducted a consultation on the proposals over the summer and the response is awaited
  • Prosecution of ex-city link Directors fails – As summarised in our previous article, charges were brought against 3 City Link Directors who allegedly failed to give the Secretary of State sufficient notice of collective redundancy plans. It is a criminal offence not to do so and employers can be subject to proceedings and liable on summary conviction to a fine. The fine is set at level 5 on the standard scale. Whilst the City Link Directors could have faced a £5,000 fine, since 12 March 2015, the fine has been unlimited. Directors, officers, managers and partners of employers which fail to inform the SoS of collective redundancies may also be liable and punished accordingly. The case against the directors here was that they knew on 22 December 2014 that redundancies were inevitable but the SoS was only notified on 26 December 2014. However, the judge in this case ruled that on 22 December there was no proposal to make redundancies and that the three defendants had every hope of saving City Link by placing it into administration. As a result the three directors were cleared of the charges against them. It has separately been reported that former City Link employees who worked at the Belfast depot have won an Industrial Tribunal claim over the company’s failure to properly consult over their redundancies

For more information, please contact your usual contact in the Foot Anstey Employment Team or Helen Dallimore, senior associate on +44 (0)1392 685289 or email helen.dallimore@footanstey.com 

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