Employment Update, UK - June 2007

28 June 2007

Emily Bennett, Elizabeth Lang

New Legislation

Holiday entitlement

Statutory annual leave entitlement will be increased from 20 days to 24 days on 1 October 2007 (including bank holidays), as planned. However, the further planned increase to 28 days’ entitlement will be delayed until 1 April 2009. The draft Working Time (Amendment) Regulations 2007 have now been published.

National minimum wage increase

The minimum wage will increase on 1 October 2007. The new hourly rates will be set at £5.52 for adults, £4.60 for the development rate and £3.40 for 16-17 year olds.

Rolled up holiday pay – DTI guidance

Following last year’s ECJ decision in Robinson-Steele v PD Retail Services which clarified that it is unlawful for employers to pay rolled-up statutory holiday pay, the DTI has changed its guidance to employers. It previously advised that where an employer has already given rolled-up holiday pay in relation to work undertaken, and the payments have been made in a transparent and comprehensible manner, they can be set off against any future leave payments made at the proper time. Its new guidance states that “employers are now required to ensure that payment for statutory annual leave is made at the time when leave is taken”.

Points-based immigration system

The new system for immigration, which involves a five tier system based upon the number of points allocated to each migrant, is now due to be phased in over the course of a year, with the first tier (covering highly skilled migrants such as doctors and entrepreneurs) being introduced in January 2008.

Equality Act 2006

Regulations have implemented parts of the Equality Act 2006, bringing them into force on 30 April 2007. The regulations prohibit discrimination on grounds of sexual orientation and religion or belief in the provision of goods and services, education and the execution of public functions. They also remove the word ‘similar’ from the definition of ‘any religion, religious belief or similar philosophical belief’ in regulation 2(1) of the Act, thereby covering those of no religion or belief and significantly widening the scope of those who may benefit from the provisions.

Flexible working rights extended

The right under the existing flexible working scheme to make a flexible working request was extended as of April 2007 to cover carers of adults, and then further extended to include employees who care for their son-in-law or daughter-in-law.

Case law

Statutory grievance procedures do not apply as between employees

The EAT in Odoemelam v The Whittington Hospital NHS Trust confirmed that employees do not have to raise a grievance before issuing tribunal proceedings against a fellow employee.

Whistleblowing merely requires a reasonable belief that the offence is made out

The Court of Appeal in Babula v Waltham Forest College overturned the EAT decision in Kraus v Penna to say that, provided that the worker’s belief that relevant malpractice has occurred is objectively reasonable, it does not matter that his belief is in fact wrong or that the facts on which he based his opinion are not legally capable of constituting the relevant malpractice.

TUPE: Dismissal by a transferor on the grounds that the transferee will have a reduced need for employees is not for an ETO reason

Hynd v Armstrong confirmed that it is not possible for a transferor in a TUPE transaction to point to the transferee’s lack of need for employees to prove that employees are redundant on ETO grounds prior to the transfer. When deciding whether to dismiss, the transferor must only consider its own requirements for employees. Taking into consideration the fact that employees may have been surplus to the transferee’s needs meant that the dismissal was by reason of the transfer or connected to it and was therefore automatically unfair under regulation 8(2) TUPE 1981. However, post-transfer the transferee could have fairly dismissed.

Disabled employees are not automatically entitled to additional sick pay

The Court of Appeal in O’Hanlon v Commissioners for HM Revenue & Customs held that disabled employees are not entitled to payments above and beyond those afforded to other employees under a contractual sick pay scheme. When sick pay is exhausted it will be very difficult for the employee to show that discontinuing pay is a failure to make reasonable adjustments/disability discrimination, unless the absence itself was caused by the employer’s breach of duty.

Sending letter setting out consequences of continuing with claim amounted to victimisation

The House of Lords in St Helens Borough Council v Derbyshire and others reversed the EAT decision and concluded that letters sent directly from the Council respondent to the dinner lady claimants in a tribunal claim warning that continuing with the claims would reduce the Council’s ability to fund school meals went beyond what was ‘honest and reasonable’ to protect the Council’s position. The Court found that the purpose of the letters was not to protect the respondent’s position but to intimidate the claimants into dropping their claims, and that this amounted to victimisation.

TUPE also can apply to share sales

The Court of Appeal in Millam v The Print Factory (London) 1991 Ltd found that it is possible for TUPE to apply on a share purchase where the target business is to be fully integrated into the buyer’s existing business. In this case the court found that following the acquisition of the shares of the target company by the buyer, the business activities of the target had as a matter of fact been integrated into the buyer’s day-to-day business to such an extent that the business entity of the target (including the employees), and not just the shares, had transferred to the buyer.

Difficulty of proving the tort of inducing breach of contract

In Mainstream Properties Ltd v Young the House of Lords considered the tort of inducing a breach of contract, which is often invoked in restrictive covenant/confidential information cases by the old employer against the new employer. In this case, two senior employees acted in breach of their contracts with their employer by diverting business away from the employer to their own joint venture. A third party, who arranged the finance for the joint venture, knew that the employees had obligations under their contracts but believed that they were not in breach of these obligations. In light of this the House of Lords found that the third party was not liable for the tort of inducing the employees to breach their contracts. The judgment emphasises that the tort is one of deliberately inducing breach of contract, not carelessly or negligently inducing such a breach.

Statutory Disciplinary Procedures

Premier Foods v Garner establishes that if there are developments between the first disciplinary hearing and the appeal – i.e. if further incriminating evidence emerges – any consequent dismissal will be automatically unfair unless the employer either starts the disciplinary process afresh to take into account the new material, or runs the appeal in such a way that it is equivalent to having another disciplinary hearing (including a further right of appeal).

Agency workers do not always have a contract of employment

Heatherwood & Wrexham Park Hospitals v Kulubowlia confirms other recent cases which say that agency workers can, in fact, be employees of no-one. An employment contract with the end user should only be found where this is a necessary implication of the relationship.

Termination of employment – implied terms – bonus and deferred compensation payments

Ridgway v JP Morgan Chase Bank National Association applied the guidance in Commerzbank v Keen in holding that failure to award a bonus following an employee’s sabbatical year was not a breach of an implied term of trust. It also held that failure to re-offer a job following the sabbatical did not constitute constructive dismissal. The employee’s rejection of alternative employment affected his entitlements to deferred compensation payments on leaving employment.

Employee’s breach of warranty affects employer’s obligation to pay under compromise agreement

The High Court in Collidge v Freeport found that an employer was not obliged to make payment under a compromise agreement following the employee’s breach of a warranty. In this case, the employee had made a warranty as part of the agreement that he was not aware of anything which would constitute a breach of his employment contract. He had in fact breached his contract by submitting fraudulent expense claims, which entitled the employer to summarily dismiss him.