Frontline UK – Edition 3 2020 - Case updates

By Alison Dixon, Ian Hunter, Elizabeth Lang

05-2020

1. First case related to the Coronavirus Job Retention Scheme heard in the High Court

2. WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12


1. First case related to the Coronavirus Job Retention Scheme heard in the High Court

In Carluccio's Limited (in administration) [2020] EWHC 886 (CH), the High Court considered the compatibility of current insolvency legislation with the Coronavirus Job Retention Scheme ("CJRS") and determined that if an employer goes into administration, it may still be able to take advantage of the CJRS provided that there is a reasonable likelihood of the employee resuming work. 

In line with government guidance to slow the spread of COVID-19, Carluccio's shut all of its branches on 16 March 2020.  With no money to pay the wages of its 2,000 employees, the chain went into administration on 30 March 2020.  The administrators were hoping to "mothball" the business in order to sell it and therefore did not want to make the employees redundant due to the corresponding effect that would have on the value of the business.  The High Court was urgently asked to consider whether an insolvent company could access the CJRS and whether the administrators could place Carluccio's staff on furlough. 

Justice Snowden held that the staff could be furloughed by the administrators.  He noted that there had been several expressions of commercial interest in Carluccio's and concluded that there was a reasonable likelihood of a sale, therefore meaning that that the employees would be "rehired" for the purposes of the CJRS.  Employees expressly accepting an administrators' offer to place them on the CJRS had their contracts varied on those terms.  Such employees were held to be "adopted" for the purposes of insolvency legislation, meaning that they would enjoy priority for payment and receive the CJRS payout (taking into account relevant insolvency legislation, which requires administrators to make payments in a specific order of priority). 

Employees who had not replied to the administrator's offer of furlough could not be taken to have accepted the offer by their silence.  This was because the letter offering furlough had requested confirmation of the employees’ agreement by a specific deadline, and no such confirmation had been provided or could be inferred in the circumstances.  This finding operates as a useful reminder to employers seeking employees' agreement to changes to their terms of employment that they must ensure that requests for such agreement are drafted clearly and carefully so that valid consent is obtained.  

The full decision can be read here.

2. WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12

In a decision which is likely to be of significant relief to employers, the Supreme Court has reversed a previous Court of Appeal decision that found Morrisons vicariously liable for a data breach committed by a rogue employee. 

Mr. Skelton, an employee of Morrisons, posted a file containing details of 100,000 Morrisons employees on a file sharing website before subsequently sending a copy of the same data anonymously to three newspapers.  The data included names, addresses, dates of birth, National Insurance numbers, bank sort codes and account numbers, and salary details.  Mr Skelton was arrested, tried in July 2015, and convicted of various offences arising out the data breach (including under the Fraud Act 2006) and sentenced to eight years in prison. Around 5,500 affected Morrisons staff brought a claim alleging that Morrisons was ultimately responsible for breaches of privacy, confidence and data protection obligations (this number had swelled to nearly 9,500 for the Supreme Court hearing). 

Both the High Court and the Court of Appeal determined that Morrisons was not primarily liable for the breach. However, they held that Morrisons was vicariously liable for the actions of Mr Skelton.  On this point, the Court of Appeal reasoned that “vicarious liability of an employer for misuse of private information by an employee and for breach of confidence by an employee has not been excluded by the DPA” and therefore, at common law, the supermarket could be (and was) liable for the actions of Mr Skelton.  It held that his unlawful acts were so closely connected to his employment that it was just to attach liability for them to Morrisons under the principle of vicarious liablity.

The Supreme Court disagreed with the Court of Appeal's analysis, finding that Mr Skeleton's actions could not be fairly and properly regarded as done while acting in the ordinary course of his employment.  The mere fact that an employee's employment gave him the opportunity to commit a wrongful act would not be sufficient to warrant the imposition of vicarious liability.  The Court also found that it was "abundantly clear" that Mr Skelton was not engaged in "furthering his employer’s business" when he committed the wrongdoing and had in fact set out to deliberately damage his employer.  As such, the Court found that Mr Skelton's wrongful conduct was not so closely connected with the acts which he was authorised by Morrisons to do that it could fairly and properly be regarded as done by him while acting in the ordinary course of his employment.

The decision is helpful for employers grappling with ever-increasing compliance obligations, particularly in the data privacy and employment context. You can read the full decision here and further analysis by Bird & Bird here.