News & Updates
Employment Law June E-briefing
In this issue:
Termination Payment Quashed as "Irrationally Generous"
UK Gov wins Fight to Retain 48 Hour Opt Out
Age Discrimination and Redundancy
Unfairly Dismissed Employee Entitled to Ongoing Compensation Loss of Final Salary
Collective Agreements and TUPE
Introduction of New "Fit Notes"
Swine Flu
French Reality TV Stars Awarded Compensation
Termination Payment Quashed as "Irrationally Generous"
The Chief Executive of an NHS trust was in for a big disappointment when the High Court decided that her £250,000 compensation payment was "irrationally generous" and more than halved it.
Mrs Gibb was set to leave employment with Maidstone and Tunbridge Wells NHS Trust with a very healthy payment in return for a Compromise Agreement waiving any claims she may have against the trust. However, only days before she was due to leave and receive her lump sum, a controversial report was published which heavily criticised the Trust and its management team. The Department of Health instructed the Trust not to pay the lump sum except for her £75,000 entitlement to notice.
Mrs Gibb sued and the High Court in England decided that the Trust had acted out-with its powers (‘ultra vires') in agreeing to, what the Judge referred to as, "an irrationally generous compensation payment". The Judge therefore refused to uphold the payment.
This case serves as a welcome reminder to public and private sector employers that they must operate within the confines of their powers when agreeing compensation for departing employees. Public sector employers, registered social landlords, charities as well as limited companies will have their powers clearly set out within the confines of their governing documentation.
When agreeing a settlement sum with an employee, it is essential that the sum is reasonable, not unduly generous and most importantly within the powers available. Registered Social landlords are further restricted by the provisions of schedule 7.
UK Government Wins Fight to
Retain 48 Hour Working Time Opt Out
Since December 2008, the fate of the working time "opt-out", which allows an employee to opt-out of the maximum 48 hour working week, has been in question. Calls to abandon an employee's right to decide to work more than 48 hours per week were fiercely contested by the British Government who argued that it was necessary. After negotiations in the European Parliament broke down, Britain (and as many as 12 other Member States can continue to allow citizens to opt out, for the time being at least.
Pat McFadden, the Employment Relations Minister said ""The current economic climate makes it more important than ever that people continue to have the right to put more money in their pockets by working longer hours if they choose to do so."
However, unions continue to express disappointment at the breakdown in talks. The TUC's general secretary, Brendan Barber, said "Long hours cause stress, illness and lower productivity. And when many employers are moving to short-time working, the need for an opt-out of the 48-hour week is even more out of date"
The matter, at least for now, appears to have been put to bed and workers in the UK can continue to opt out of the 48 hour working week.
Age Discrimination and Redundancy
The Court of Appeal has ruled that using length of service as a criterion in selecting an employee for redundancy can be lawful.
In Rolls-Royce plc v Unite the court found that whilst using length of service was indeed an act of indirect discrimination the use of it as a factor in redundancy selection criteria could be objectively justified, providing it was in pursuit of a legitimate aim.
Rolls Royce and Unite had entered into a Collective Agreement before the Age Regulations came into force in 2006. The agreement provided for redundancy selection criteria and specifically that where "two or more employees in a surplus occupation group have the same [redundancy] total assessment score, length of service with the company will be the deciding factor and the longest serving employee will be retained". Rolls Royce were concerned that such a provision could prove discriminatory so brought proceedings with a view to obtaining a court ruling on the matter.
The Court of Appeal held that to reward long service by employees in any redundancy selection process is, viewed objectively, an entirely reasonable and legitimate employment policy, and one which a conscientious employer would readily and properly negotiate with a responsible Trade Union" providing it was not itself the sole determinative factor.
This case is a further indication that length or service may be a legitimate criterion when selecting individuals for redundancy providing that it is part of a number or criteria. Whilst the decision is helpful, it is not a definite authority for this proposition and employers must still be prepared to justify their reason for using length of service as a selection criterion on each occasion.
Unfairly Dismissed Employee
Entitled to Ongoing Compensation Loss of Final Salary
In Aegon UK v Roberts the Employment Appeal Tribunal decided that an employee was entitled to compensation for the loss of her entitlement to a final salary pension scheme, as it was a "unique benefit" of her employment.
Mrs Roberts was dismissed unfairly by Aegon and brought tribunal proceedings. She successfully managed to secure alternative employment at a higher rate of pay but was not afforded a similar pension package to which she had been entitled to when employed by Aegon.
The Tribunal decided that a final salary scheme, given that the availability of such schemes to new employees is significantly decreasing, was a "unique benefit" of her employment with Aegon and she was unlikely to find the same benefit with a new employer. The EAT also held that the benefit survived the termination of her latest employment and she was still entitled to ongoing loss as a result.
Employers with staff on final salary pension schemes should be aware that, as final salary schemes are rarely being offered to new employees, an unfairly dismissed employee may be entitled to ongoing loss after dismissal. Such a payment could be as much as the maximum compensation award of £66,200 if the employee was unfairly dismissed or uncapped in some discrimination cases - even if the employee secures alternative employment.
Collective agreements and TUPE: Pay increases can follow staff
In Alemo-Herron and Others v Parkwood Leisure Ltd, a group of employees argued that after they transferred under the TUPE regulations to a new employer they were still entitled to collectively negotiated wage increases even though the employees were not members of the union and their new employer did not recognise the union.
This case involved an interpretation of the employees' employment contracts. These stated that the employees' pay would be determined "in accordance with collective agreements negotiated from time to time". The employees successfully argued that this contractual provision meant that they were not just entitled to rely on this clause at the date of transfer but subsequently until the collective agreement came to an end. The Employment Appeal Tribunal decided that the link between the negotiated contract and the employees' pay was "dynamic" in nature so as to mean that subsequent wage increases granted to the staff of the first employer (occurring after transfer) were also due to those staff who transferred and payable by the new employer.
The employers have been granted the right of appeal against the Employment Appeal Tribunal decision but it is unclear at the moment whether they intend to pursue this. This case is a classic demonstration of the effects of TUPE which involves the transfer of the contract "as is" to the new employer as if it had been concluded by them in the first place.
Employers inheriting employees under TUPE should, during employment diligence and before a transfer take place, explore whether a mechanism exists in the employee's contract of employment to determine pay and benefits. If it does, the mechanism may remain ‘live' after the transfer and advice should be sought at the earliest opportunity.
Introduction of New "Fit Notes"
The current "MED3" ‘sick note; is soon to be replaced by a new, more positive ‘fit note'.
There is currently a 12 week consultation underway as to the design and content and it is anticipated that they will formally be introduced in Spring 2010.
The idea behind the scheme is to encourage more people to get back to work by detailing what duties they are, in fact, able to perform rather than concentrating on those aspects of their role that they cannot do. It is hoped that this new style ‘fit note' will prevent employees finding themselves classified as long-term sick. Lord McKenzie, Work and Pensions Minister said "Employers tell us that managing sickness absence can be a challenge. This is compounded by a ‘sick note' system which makes sickness absence a black and white issue".
It is hoped that the new ‘fit notes' will be welcomed by employers as a means of ensuring that employees return from sickness absence as quickly as possible without posing a risk to their own health.
Swine Flu - Preparation is Everything
At the time of writing some 65 confirmed cases of swine flu exist in Scotland and this is increasing by the day. Swine flu now presents a significant risk to Scottish businesses. It is estimated that as a result of the outbreak in Mexico the number of temporary business closures cost the Mexican economy £59 million per day.
Whilst the likelihood of contracting swine flu is low at the moment, the likelihood of having to deal with the effects of a staff member taking time off as a result (either because they may have contracted it or need to take time off to care for someone who has it) is a real genuine concern for employers. School closures have resulted in hundreds of children having to stay at home and many parents have no alternative but to stay at home with them whilst they make alternative arrangements.
Management continuity planning, particularly in dealing with staff, customers and health officials is essential. Employers and HR professionals should consider now how to deal with managing sickness and health and safety during the pandemic.
Employers have a legal duty to communicate risks to employees and so should ensure that employees are aware of all up-to-date government information and guidance relative to the virus. Placing a link to the government guidance on the staff notice board or intranet at:
http://www.cabinetoffice.gov.uk/media/132829/intro_staffadvice_flu_planning.pdf
is one way of doing this.
Sickness reporting procedures may also require review. Managers may need to probe staff when they are reporting absence and ask if they have flu like symptoms and whether they have returned from Mexico or the United States (or been in contact with someone who has). If a member of staff is confirmed as having swine flu, employers may have to consider closing an office and implementing temporary home working or forced annual leave for staff and thinking about these sooner rather than later will be the key.
Employers should also consider their relevant policies and ensure that they are aware of an employee's contractual right to sick leave and the right to take time to care for dependants.
And finally......
French Reality TV Stars awarded compensation as employees.
Three French reality stars have been awarded compensation for their roles in the French version of the reality TV show Temptation Island. The ‘stars' claimed that they had the status of employees and were therefore entitled to overtime, holidays and even damages for wrongful dismissal when they were eliminated from the show. The contestants argued that, according to French Labour laws, they were employees and therefore entitled to various employment rights.
The appeal court upheld the decision of a lower tribunal that the employees were entitled to compensation, particularly because they worked 24 hours a day. The Court recognised that "Tempting a person of the opposite sex requires concentration and attention" and so upheld their claims.
If you have any further queries on any of the issues in the newsletter or on any aspect of employment, contact:
Email: kjh@tcyoung.co.uk
This e-briefing is intended as a guide and does not provide a comprehensive statement of the law.
Legal advice should be sought on individual circumstances