In this edition, we look at five recent cases related to collective consulation, restrictive coventants, redundancy, human rights, and costs.  

  • USDAW v Ethel Austin (in administration)
  • Back Office Ltd v Percival
  • Contract Bottling v Cave
  • Swansea v Gayle
  • Vaughan v LB Lewisham

Collective consultation may be over whole business, not just one ‘establishment’

The EAT's judgment in USDAW v Ethel Austin (in administration), re-writes s188 Trade Union and Labour Relations (Consultation) Act 1992 in order to make the legal rules on collective consultation compatible with European law.

European law requires consultation if at least 20 employees are to be made redundant within 90 days, whatever the number of workers at any particular ‘establishment’. UK law only requires consultation where 20 more employees are to be made redundant ‘at one establishment’. 

This case arose out of the demise of Woolworths which had a chain of 90 stores and a head office. Upon the company's liquidation, hundreds of employees were made redundant without a collective consultation. Employees employed at locations (‘establishments’) with 20 or more employees were entitled to claim the protective award for failure to consult, this applied to around 400 employees. In contrast, the remaining 1,210 employees were entitled to nothing because they were employed at locations with fewer than 20 staff. 

The EAT decided that this is not what the European Directive intended. The words ‘at one establishment’ should be deleted from UK law or the phrase ‘at one establishment’ should be broadly interpreted to mean the whole of the relevant business.

Points to note –

  • This is a radical change in the law on collective consultation. It means that employers can no longer simply operate on a site-by-site basis when deciding whether the duty to consult about impending redundancies has been triggered.
  • Because Woolworths was now in liquidation, the employer was unrepresented at this hearing and so this decision is unlikely to be appealed.

Employer’s vicarious liability for contempt of court

In Back Office Ltd v Percival, the High Court considered the case of ex-employees who had breached undertakings given to the court as part of the enforcement of a post-termination restrictive covenant not to solicit business from 279 named clients of their former employer. The Court was asked to consider whether the company they now worked for, or its directors, was vicariously liable for the individuals actions.

‘Solicitation’ has been defined by the courts as ‘specific and direct’ appeals to potential customers. Such approaches had been made in this case so the remaining issue was whether the individuals concerned solicited ‘in the course of their employment’. If so, the company that employed them would be liable regardless of whether it had authorised the approaches or indeed expressly forbidden them.

The directors of the company could only be liable for contempt of court if, in addition, they had either authorised the approaches or could reasonably have foreseen what their employees would do and failed to take all reasonable steps to prevent it. The directors in this case were not personally liable.

Point to note –

  • What if the new employer had not been a company but instead an individual proprietor of a business? The same test would apply to him/her as to the company directors. They would only be liable if they authorised the approaches or ought reasonably to have done something to prevent them.

‘Bumping’ – how big does the ‘pool’ have to be

In Contract Bottling v Cave, the employer was in financial difficulty and needed to make cuts in its administrative staff. It decided to create a ‘pool’ from which to select employees for redundancy. The ‘pool’ included employees engaged in warehousing, quality control and sales as well as the administrative staff.

The employment tribunal considered that because the employer had operated what appeared to be a ‘scattergun approach’ and had been intent on reducing the wage bill rather than focusing on the fact that the need for employees to do a particular job had diminished, the ensuing dismissals could not be said to be fair as being by reason of redundancy.  

The EAT disagreed. The test for redundancy is a two-stage test:

  • has the need for employees to do a particular job diminished? And
  • has that situation caused these dismissals?  

On the facts of the case, the EAT held that the dismissals were caused by a redundancy situation.

However, the EAT went on to say that the dismissals were still unfair because the employer ignored its own procedures and had created a redundancy matrix that was entirely subjective in character and therefore procedurally unfair.

Points to note -   

  • Note that tribunals should be reluctant to interfere with the size of a redundancy ‘pool’ but will be keen to check that objective criteria have been used to select employees from within the ‘pool’ for dismissal.
  • The EAT in this case also sent a reminder that, in cases where dismissals are only procedurally unfair, employment tribunals must always consider making a so-called Polkey deduction from compensation to allow for the fact that the dismissal would have happened anyway. Even though it will only be an exercise in ‘impression and judgment’, the tribunal should consider the question every time.

Covert surveillance of employee 

In Swansea v Gayle, the EAT were asked to consider the issue of an employee’s right to privacy under the European Convention on Human Rights ("the Convention") in the context of an unfair dismissal claim.

The employer in this case had used covert surveillance to record video evidence showing that the employee was at a local sports centre playing squash when he should have been at work. The employment tribunal considered that the level of surveillance was disproportionate and unjustified and, for that reason, held that the dismissal was unfair (although the Claimant was awarded nil compensation).

The EAT overturned the employment tribunal's decision. Tribunals do not have jurisdiction to adjudicate on breaches of the Convention. The tribunal’s job is simply to decide whether the dismissal was for a fair reason and then whether, in the circumstances, the employer’s decision to dismiss was ‘within the range of reasonable responses’. That was clearly so in this case and therefore the dismissal was fair.

Point to note –

  • Key factors in this case were that the employee was filmed in a public place (where he could have had no expectation of privacy) and he was filmed at a time when he was meant to be at work – so in his employer’s time.  

When will costs be awarded in the ET? 

Employment tribunals rarely order a losing party to pay a contribution to the successful party’s legal costs. However, in the recent case of Vaughan v LB Lewisham, the unsuccessful Claimant was ordered to pay a contribution to the Respondent's costs in the region of £87,000. 

The EAT rejected the Claimant's appeal against that order and gave guidance as to when costs orders may be made. The rule is that a tribunal may make a cost order if it considers that a party has acted vexatiously or it considers that the bringing or conducting of the proceedings by the paying party has been ‘misconceived’. 

In deciding whether this claim was ‘misconceived’, the question was not whether the Claimant thought she was right but whether she had reasonable grounds for thinking so. On the facts of this case, she did not have such grounds.

It is not necessary that the paying party should have received a previous ‘costs warning’ from either the tribunal or the other party. In this case, it was particularly relevant that the Claimant at no stage said that, if she had been given a costs warning, she would have discontinued her claim.

It did not matter that the only indication the Claimant had that the Respondent might apply for a costs order was made in the context of settlement negotiations. The EAT accepted that, even though the Respondent considered the claim misconceived, it was within its rights to attempt to achieve a commercial settlement.

Points to note –

  • Relevant factors in this case were that the Claimant was a young professional and the Respondent was a public body which had incurred substantial expense on the case so it would unjust for her simply to ‘walk away’.
  • The fact that a party is legally represented will always be relevant.
  • In this case, the tribunal had said the Claimant should pay one-third of the Respondent’s costs. The EAT said that it might have been better for the tribunal to fix a ‘cap’ of a specific sum.

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