UK Employment Law Update - June 2015

11 June 2015

Below we shed some light on a few of the latest developments in UK employment law. We hope you find the updates useful.

1. Mr J Olsen v Gearbulk Services Ltd, Gearbulk (UK) Ltd
2. Cranwell v Cullen
3. USDAW v WW Realisation
4. Way v Spectrum Property Care Ltd


1. Mr J Olsen v Gearbulk Services Ltd, Gearbulk (UK) Ltd

This case concerned a peripatetic employee who was Danish, lived in Switzerland, and travelled extensively under an employment contract governed by Bermudian law.  He spent more time working in the UK than in any other jurisdiction, but he took steps to minimise his connections with the UK and was careful to ensure that he never spent so long in the UK that he would be subject to UK taxation.   

When the employee was dismissed he brought claims for whistleblowing and unfair dismissal in the Employment Tribunal ("ET").  The ET found that his employment was not sufficiently closely connected with the UK and UK law for him to be able to bring a claim.

The employee appealed to the Employment Appeal Tribunal ("EAT") on the ground that the Tribunal's decision was perverse.  The EAT disagreed and upheld the Tribunal decision, making the following observations:

  • The Tribunal was entitled to find that the employee’s base was in Switzerland, even though he worked mostly in the UK;
  • As the employee was based outside the UK, and he was found to be a peripatetic employee carrying on international work, a finding that he did not have a ‘sufficiently close connection’ with the UK was not perverse;
  • The 'close connection' test requires not just that the employee has such a connection with the UK, but also with UK employment law.  It was relevant that:
    • the employee was sufficiently senior to have a great deal of autonomy in the way he spent his working time, and he structured it so as to minimise his relationship with the UK and UK law;
    • the parties had equal bargaining power and the claimant chose not to have a UK contract;

Comment  

There have been several cases considering the reach of the Employment Rights Act 1996, and this one emphasises the need to look at the particular facts of the case when considering whether the necessary ‘close connection’ to the UK is present.  The fact that an employee’s own efforts to distance himself from the UK can have a bearing on whether he is entitled to rely on the Act is an interesting development, albeit probably limited to specific cases where the employee has significant individual autonomy.  We also envisage that such a principle will be less readily applied when it is the employer that has made deliberate attempts to exclude UK law than when it is the employee. 


    2. Cranwell v Cullen

    In this case the EAT upheld the Tribunal’s rejection of a potentially strong claim due to failure to comply with early conciliation rules. These rules require that an individual contact Acas to inform them that s/he intends to bring a claim, before s/he actually presents the claim to an employment tribunal.  There is no obligation on the individual to actually participate in conciliation, but s/he must nevertheless notify Acas of the potential claim.

    The Claimant sought to bring claims of sexual harassment. Unfortunately the Claimant did not submit her claim to ACAS for early conciliation and instead incorrectly ticked the box stating that ‘one of the early conciliation exemptions applies’.  She presented her claim directly to the Tribunal, who dismissed the claim.

    The EAT were greatly sympathetic to the Claimant’s circumstances, recognising that she could not bear to conciliate or even contact someone who had treated her in the manner she alleged.  However, the EAT observed that whilst there is no obligation to actually conciliate, it is a strict rule that requires a Claimant to submit their claim to ACAS before proceeding.  However sympathetic a Tribunal may feel towards a Claimant’s situation, the Tribunal has no discretion to allow a claim to proceed.  The EAT had no option but to reject the Claimant's claim.

    Comment

    This case is good news for employers as it makes clear that there is no way around the early conciliation requirement.  If a claimant incorrectly states that s/he is exempt from having to participate in early conciliation then the Tribunal has no discretion to exercise and the claim will fail.


    3. USDAW v WW Realisation

    When the retail stores Woolworths and Ethel Austin went into administration in 2008 and 2010 respectively, thousands of employees lost their jobs without any information or consultation process taking place. 

    The Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA") states that collective consultation is required when 20 or more employees are proposed to be made redundant at one establishment within a 90 day period.  After the closure of the stores the shopworkers' union USDAW brought claims on behalf of the redundant employees for protective awards in respect of the companies' failure to inform and consult under TULRCA.  

    USDAW was partly successful in its claims, and employees based at larger stores received a protective award.  However, many of the represented employees were employed in small stores with fewer than 20 employees in each one.  The Employment Tribunals decided in such cases that each store was a separate 'establishment' and the collective consultation requirements were therefore not triggered, meaning that there was no entitlement to a protective award. 

    USDAW appealed the decisions, arguing that when calculating the number of employees that are proposed to be dismissed, the EU Collective Redundancies Directive requires that the number of such employees should be aggregated across all of an employer's various establishments.  In each case the EAT agreed with USDAW and ruled that the words ‘at one establishment’ in the UK legislation must be disregarded for the purposes of any collective redundancy involving 20 or more employees.

    The government (on behalf of the administrators) appealed to the Court of Appeal.  As the cases involved a potential conflict between the EU Collective Redundancies Directive and the UK legislation incorporating the Directive directly into UK law, the Court of Appeal joined the cases and referred them to the European Court of Justice (the ECJ) for a decision as to whether the UK law was compliant.

    On 30 April 2015, the ECJ confirmed that the meaning of 'establishment' for collective redundancy purposes was as set out in the earlier ECJ case of Rockfon, namely, ‘the unit to which the workers made redundant are assigned to carry out their duties’.  Further, there is no requirement for an establishment to have any legal autonomy, nor need it have economic, financial, administrative or technological autonomy, nor managerial autonomy, in order for it to qualify as an 'establishment' for these purposes.   The ECJ went on to confirm that UK legislation is compliant with the overriding EU Directive, and it is not necessary for employers to aggregate the number of dismissals across their establishments in order to determine whether the collective consultation threshold is reached.

    Following the ECJ's judgment the joined cases of Woolworths/Ethel Austin have been referred back to the Court of Appeal to determine whether the Employment Tribunal was correct to treat each individual retail store as a separate establishment.  This has yet to be decided on the facts but it seems highly likely that the EAT decision will be reversed and the Tribunal’s original interpretation will be re-instigated.  

    Comment

    The limitation of the scope of 'establishment' is a welcome decision for employers, who have been holding their breath for the last few years whilst grappling with the prospect of having to count up all employees across all of their locations in order to assess whether collective consultation is required.

    This decision by the ECJ gives a degree of comfort to employers contemplating multiple redundancies.  We now have guidance as to how an 'establishment' is to be viewed separately from the related 'undertaking' or legal 'entity'.  Although this does not preclude an establishment being the same as the undertaking in certain cases (where the undertaking does not have several distinct units), in general there seems to be less scope for arguing that different parts of an employer's business – be it separate office locations, or business groups – be aggregated for the purpose of collective consultation.

    The other strand of the 'establishment' test for collective consultation concerns where an employee is ‘assigned’.  If there are several business units then it will be the one to which the redundant employee is assigned to carry out his or her duties that is the 'establishment' for collective consultation purposes.  Whilst both strands of the establishment test will no doubt be subject to argument in certain hard cases, on the whole it should now be clearer whether a collective consultation exercise is required on a given occasion.


    4. Way v Spectrum Property Care Ltd  

    The Court of Appeal in this case made clear that where an employer dismisses an employee for misconduct, and dismissal is considered to be the appropriate sanction partly because of an earlier final written warning received by the employee, proof that the earlier written warning was given in bad faith will render a decision to dismiss unreasonable.

    Mr Way was given a final written warning by his employer after he recruited somebody known to him without following the Company’s procedures regarding fair recruitment and the need to declare any connection with job applicants.  Sometime after the final warning was given, there was an organisation-wide investigation into inappropriate use of emails.  This turned up several inappropriate emails sent by Mr Way which, alone, would have resulted in him receiving a final written warning, but when taken together with the ‘live’ final written warning on his file resulted in Mr Way being dismissed.

    Mr Way brought a claim for unfair dismissal in the Employment Tribunal.  In the course of proceedings Mr Way tried to put forward evidence to show that his original final written warning had been given in bad faith because the decision-maker had sanctioned the recruitment of the job applicant but later started a disciplinary process against Mr Way in order to cover up his own involvement.  The employment judge dismissed this as irrelevant ‘satellite litigation’ and the unfair dismissal claim failed.

    On appeal to the Employment Appeal Tribunal (‘EAT’),  the EAT found that evidence of bad faith should have been considered by the Tribunal.  However, the EAT went on to conclude that even if bad faith was proven to have influenced the decision to award a final written warning, it would have made no difference to Mr Way’s case because the final written warning was valid on its face and the ultimate dismissal was therefore fair and untainted by the earlier bad faith.

    The Court of Appeal allowed Mr Way’s appeal.  It held that it was not appropriate to take into account a warning given in bad faith in order to reach a decision as to whether there is sufficient reason to dismiss an employee.  An employer would not be acting reasonably in taking into account such a warning when deciding whether an employee's conduct was sufficient reason for dismissing him and it would not be in accordance with equity or the substantial merits of the case to do so.

    Comment

    This case is a reminder that when an employer wishes to rely upon pre-existing sanctions such as a final warning in order to justify dismissing an employee it should ensure that the circumstances surrounding the earlier sanction are as watertight as those surrounding the dismissal itself.