UK Employment Law case updates - June 2018

By Sam Rayner, Furat Ashraf, Ian Hunter, Elizabeth Lang, James Froud


Latest Employment Law case updates - June 2018

  1. Supreme Court rejects Pimlico Plumbers' appeal on worker status
  2. No requirement for gross misconduct for summary dismissal
  3. Identity of employer does not depend on parties to employment contract
  4. Zero-hours workers can claim under the Part-time Worker Regulations
  5. Government publishes guidance on workplace dress codes
  6. Acas updates key learning points on religion or belief discrimination
  7. Tier-2 Visa Cap to exclude Nurses and Doctors

Supreme Court rejects Pimlico Plumbers' appeal on worker status

Pimlico Plumbers Ltd and anor. v Smith (Supreme Court)

The Supreme Court confirmed that a plumbing and heating engineer had been rightly categorised as a 'worker' for the purposes of claiming employment rights in circumstances where: (i) his ability to appoint a substitute to perform the relevant services was fettered; and (ii) the business which engaged him could not sensibly be described as his client or customer. Documentation which held him out as an independent contractor had been correctly disregarded for the purposes of determining his employment status.

The Respondent engaged the Claimant as an engineer for 5 years, on terms which purported to categorise him as an independent contractor and which required him to file tax returns on the basis that he was self-employed. In practice, however, the Claimant's role contained many elements generally seen in more subordinate employer-worker relationships. For example, he was required to carry an employer-issued ID card when performing his services, was required to perform a minimum number of hours a week, had to meet certain appearance standards (including wearing a prescribed uniform and using a Respondent-branded van) and was bound by significant post-termination restrictions.

With these factors in mind – and following his termination - the Claimant brought claims before an Employment Tribunal, including in respect of unpaid holiday pay and discrimination, which (broadly speaking) depend on his classification as a 'worker' under UK employment law.  This statutory concept has three key components: (i) the individual must be engaged under a contract; (ii) the contract must require his personal service; and (iii) it must be performed in favour of a party whose status is not that of the individual's "client or customer".  The Supreme Court agreed with all lower courts that the factual reality of the relationship fulfilled these conditions, and that the Claimant's formal "label" as an independent contractor within his engagement documentation should therefore be disregarded. In particular, focussing on the latter two components, it confirmed that:

  1. whilst a genuine, unfettered right to appoint a substitute to perform services on one's behalf is inconsistent with a requirement of personal service (and thus "worker" status), limited or occasional powers of delegation are not. In this case, the Claimant could only appoint a substitute from a relatively narrow pool of those individuals already engaged by the Respondent under separate terms. This circumscribed right could instead be characterised as a means of work distribution "akin to the swapping of shifts between a workforce" which did not negate the element of personal service necessary for worker status. Additionally, his written contractual terms were directed to him personally, referring to "your skills" and his personal competence to perform the work; and
  2. notwithstanding that the Claimant had the right to reject any particular offer of work, the Respondent did not reserve the right to supervise him or otherwise interfere with his work and he took on certain financial risks directly, the "severe" elements of control enjoyed by the Respondent over the Claimant's operations  evidenced a subordinate relationship in fact which "betrayed a grip" on the Claimant's economy and which was inconsistent with the Respondent's classification as his client or customer. These included a requirement to follow administrative instructions from a "control room", restrictive payment terms and the broader factors set out above. Terms of the contract which referred to "wages", "gross misconduct" and "dismissal" were all taken into account as being suggestive of the Respondent's authoritative position as an employer.    

In practice, this judgment presents few new lessons for employers. However, it does reiterate that employers cannot circumvent their employment law obligations by assigning an individual the status of an independent contractor in his or her written terms where this does not reflect the reality of the relationship; a move dismissed in this case as contractual "choreography". The decision again highlights how fact-specific outcomes in this area will be; the fact that a contract is drafted in the second person (e.g. "you", "we") could, for example, be taken to indicate a requirement for personal service. Following this decision, it will be interesting to see whether the government considers new legislative intervention (as recommended by the Matthew Taylor Review of Modern Working Practices) as the key to solving the perceived uncertainty in this area. 

No requirement for gross misconduct for summary dismissal

Mbubaegbu v Homerton University Hospital NHS Foundation Trust (Employment Appeal Tribunal)

The EAT has held that a series of acts of misconduct by an employee can constitute a breach of the implied duty of mutual trust and confidence justifying summary dismissal, even where no single act crossed the threshold of gross misconduct.

In this case, the employee had been employed as a consultant by the respondent Trust for 15 years, with a spotless disciplinary record. However, an investigation into compliance with newly introduced departmental rules uncovered examples of serious non-compliance on his part. The final investigation report recommended disciplinary action in respect of 17 charges and the employee was subsequently dismissed for gross misconduct. Rejecting his claim for unfair dismissal, the Tribunal unanimously agreed that the Trust had followed a fair procedure. One member of the panel, however, considered that dismissal was not an appropriate sanction, as it was outside of the range of reasonable responses open to the employer. Many of the allegations were arguably trivial, and his performance appeared to have improved. The employee appealed.

The EAT rejected the appeal, confirming that a single act of gross misconduct is not required before an employer can justify a dismissal without notice. On the contrary, it is possible for a series of acts – none of which would, by themselves, constitute gross misconduct – to justify summary dismissal where they demonstrate a pattern of behaviour which is of sufficient seriousness to undermine the relationship of trust and confidence between employer and employee. In this case, the disciplinary panel had categorised some of the employee’s misconduct as wilful, grossly careless or negligent; and had therefore legitimately concluded that he had breached his duty of trust and confidence.

The EAT also confirmed that the outcome of a subsequent external investigation by the General Medical Council, which confirmed the Employee’s continued fitness to practise, did not require the Tribunal to reconsider its original judgment. Reopening decisions in this way would only be appropriate in rare cases, where a Tribunal’s decision could be questioned as perverse. In this case, the questions to be determined by the Tribunal and the GMC were fundamentally different.

This decision highlights that employers can consider the overall effect of an employee's actions and whether this undermines the relationship of trust and confidence, rather than focusing on the identification of gross misconduct in relation to separate individual acts. It is also a reminder of the high threshold required before a Tribunal’s decision can be reconsidered on the basis of the decision of an external regulator.

Identity of employer does not depend on parties to employment contract

Dynasystems for Trade and General Consulting Limited v Moseley (Employment Appeal Tribunal)

The EAT has confirmed that the identity of an individual's employer is to be determined depending on the factual reality of the relationship in practice, rather than with sole reference to the employing entity as expressly identified in the contractual documentation.

In this case, the Claimant's contract of employment – signed a month after his engagement – was entered into with a Jordanian company with no place of business. Although that entity formally paid his salary, his line manager, with whom remuneration terms and day-to-day management were agreed, was a director of a UK entity within the same corporate group. That UK entity had also been involved in his recruitment and entered into relevant pre-employment correspondence. The Claimant was dismissed and brought claims for unfair/wrongful dismissal. As part of this, the Tribunal was asked to determine whether the UK or Jordanian entity was his true employer in this scenario.

Both the ET and EAT concluded that the UK entity was the Claimant's employer, disregarding the formal written party to the agreement as a sham. In reality, the Claimant's line management, HR base and principal place of work was in the UK. The Jordanian entity neither had any senior employees or office holders, nor a formal place of business; the fact the contract stated that the Claimant would be based at its registered address could therefore not stand up to scrutiny. The EAT expressly rejected an argument that it needed to meet a high necessity threshold to reach this conclusion, which should be limited to cases (e.g. in the employment agency scenario) where the implication of a further contract was being considered. Conversely, the issue here was with whom one and the same contract had been entered into; it was therefore a question of identification not implication.   

In an age of increasing intra-group complexity, this case serves as a useful reminder that the express terms of an employment contract should accurately (as far as possible) reflect the true nature of the relationship in practice. To the extent that it does not, tribunals seem ready to disregard express terms in favour of provisions which support the facts on the ground. Organisations that use service or employing entities, which then provide services to other members of their corporate group, would be well advised to keep their arrangements in this area under review.

Zero-hours workers can claim under the Part-time Worker Regulations

Roddis v Sheffield Hallam University (Employment Appeal Tribunal)

The EAT has confirmed that lecturers engaged by a university on zero-hours and full-time arrangements respectively were working under the same type of contract under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000. Having identified an appropriate comparator, claims of less favourable treatment from the zero-hours lecturer on the ground of his part-time status could proceed.

The Claimant lecturer was engaged on a zero-hours basis by a UK university. When relations between the parties broke down, he alleged that he had been subjected to less favourable treatment on the ground of his part-time status, in breach of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 ("PTW Regs"). To succeed with such claim, he needed to contrast his treatment with that received by an identifiable, comparable full-time worker who was engaged under the same type of contract. At first instance, the Tribunal found that the contracts upon which comparable permanent lecturers had been engaged were, by their very nature, not of the same type as their zero-hours equivalent. This, in their opinion, precluded the Claimant's claim.     

The EAT disagreed. Not allowing a zero-hours worker (who should also be characterised as part-time) to compare themselves to an individual engaged on a full-time contract risked undermining the protections offered under the PTW Regs. When approaching the issue of whether a Claimant and the contract of their identified full-time comparator are of the same type, as is required by the PTW Regs, the EAT endorsed an expansive approach. Courts should look at the broad characteristics of relevant contracts and focus on identifiable similarities, rather than narrow or specific differences. In particular, differences between applicable terms and conditions, or the hours individuals are obliged or expected to work, should certainly not prevent a finding that their contracts are of the same type.

This case confirms that zero-hours arrangements do not represent a standalone type of contract for the purposes of the PTW Regs; a move which could open the floodgates for claims of less favourable treatment from those engaged on such arrangements. Organisations should review their contracts and policies to ensure that discrepancies between the treatment of zero-hours and full-time employees are minimised, save as can be justified on objective grounds.

Legal Updates

Government publishes guidance on workplace dress codes

The Government equalities office has published a new guidance document for employers and employees entitled "Dress codes and sex discrimination – what you need to know". In light of continued controversy surrounding employer expectations in this area, this guide seeks to help minimise risks associated with what the government clearly accepts can be a legitimate part of an employer's terms and conditions. The document is short and drafted at a high level, with recommendations to avoid gender prescriptive requirements and suggestions of equivalent standards as between men and women.

Organisations which have implemented or plan to implement a dress code would be well advised to read the guidance, which can be found in full here.

Acas updates key learning points on religion or belief discrimination

Acas has updated its guidance on avoiding discrimination at work based on religion or belief. The document provides a useful overview of key terms in the Equality Act 2010 as well as informative case studies based on situations where such discrimination may be considered as most likely to happen, such as recruitment, absence for religious reasons and dress codes. Its content makes essential reading for employers with increasingly diverse workforces, particularly with regard to its recommended action areas.

A full copy of the updated guidance can be found here.

Tier-2 Visa Cap to exclude Nurses and Doctors

The UK Government has acted to exclude highly-skilled doctors and nurses from its current annual cap on issuing Tier 2 Visas. Since 2011, the number of Tier 2 visas which can be granted to non-EEA migrants has been capped at 20,700 per year. Recent months have seen this quota oversubscribed; leading to increased pressure on the recruitment of medical staff despite a national shortage.

As well as enabling more skilled medical professionals to enter the UK, this change may also enable other highly-skilled occupations to take advantage of reduced competition for Tier 2 Visas. For more information, see the government's press release here