Frontline UK Employment Law Update Edition 7 2020 - Case updates

1. Mrs Linda M Gallacher v Abellio Scotrail Ltd UKEATS/0027/19/SS

2. K v L UKEATS/0014/18

3. ISS Facility Services NV v Sonia Govaerts and Atalian NV

4. Peltrade Ltd v Scanlan [2020] 9 WLUK 34

5. Ms R Taylor and Jaguar Land Rover Ltd: 2414408/2019

1. Mrs Linda M Gallacher v Abellio Scotrail Ltd UKEATS/0027/19/SS  (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) in Scotland held that a dismissal without any form of procedure or right of appeal, due to a breakdown in trust and working relationship between the Claimant and her senior colleague was fair and that in this rare instance, following a procedure at the time would have served no purpose and only worsened the situation.

The Claimant, Mrs Gallacher, had worked for Abellio Scotrail Ltd (“Abellio”) for just over 10 years, prior to her dismissal in 2017.  Initially she had a strong working relationship with her manager, Ms Taggart, however over the years several disputes arose, including over Mrs Gallacher’s repeated salary raise requests, a refusal to participate in on-call work due to a cited lack of technical knowledge and experience, and negative comments that she had made regarding Ms Taggart to other colleagues. 

Ultimately, during her performance review, which took place during a critical period for Abellio, Ms Taggart informed Mrs Gallacher of her dismissal due a lack of trust and the irretrievable breakdown of the working relationship. No formal procedure was followed and Mrs Gallacher was not given a right of appeal. 
The EAT dismissed Mrs Gallacher’s unfair dismissal claim on appeal, finding that Mrs Gallacher was not interested in repairing the relationship, which was essential to the functioning of her role, and that any form of procedure would therefore have been futile. 

This decision is a helpful reminder that a breakdown in relationships can be a fair reason to dismiss, and that procedural considerations relevant to performance and conduct dismissals may not always be relevant to such cases.  The facts of this case were however unusual and the EAT emphasised that “dismissals without following any procedures will always be subject to extra caution on the part of the tribunal before being considered to fall within the band of reasonable responses”.  In the vast majority of cases, some form of procedure, in which the employee is given an opportunity to respond to the employer’s proposed grounds for dismissal, will be required to ensure the dismissal is fair.

In this case, the Employment Appeal Tribunal (“EAT”) in Scotland held that a teacher, who had been charged with possession of indecent images of children, but not prosecuted, had been unfairly dismissed on the basis of misconduct. 

The Claimant, K, a teacher, was questioned by the police in 2016 after reports that indecent images of children had been downloaded by an IP address associated with him. K explained to the school’s headmaster that he was the subject of a police investigation and that he denied responsibility for the indecent images on a computer seized from his home.  He was charged with possession of indecent images. A decision was subsequently made not to prosecute him although he was not formally acquitted. 

K’s school received inadequate information from the police and therefore could only conduct a very limited investigation into the matter. The school nevertheless produced an investigatory report and followed a disciplinary procedure.  The charge against K in the disciplinary invitation was his “being involved in a police investigation into illegal material of indecent child images on a computer found within [his] home and the relevance of this to [his] employment as a teacher”.  Ultimately K was dismissed for misconduct.  Despite no clear evidence that he was responsible for downloading the indecent images, the school stated in its decision that he posed a risk to the children at the school as well as a reputational risk to the school if he was later prosecuted and found guilty.

On appeal, the EAT held that the dismissal was unfair, because:

• K was given no notice that reputational damage was a ground for dismissal: the disciplinary hearing related solely to misconduct stemming from the criminal charge and investigation. Therefore, K was not given the opportunity to address the issue of reputational damage during the disciplinary procedure; 

• the school applied the wrong standard of proof in dismissing K for misconduct. Under s.98(4) ERA 1996, the school was required to apply the ‘balance of probabilities test’ in order to determine whether the situation merited dismissal. Instead it had unreasonably applied a test that entitled the school to dismiss K unless all doubt as to his guilt had been excluded. The school should have followed the Burchell guidelines which require employers to have a “reasonable suspicion amounting to a belief that the employee is guilty of the conduct in question”, a belief the school could not have had given the lack of concrete evidence that K was responsible for downloading the images; and 

• with regard to the school’s reliance on potential reputational damage in the case of future prosecution, the school acted unreasonably in relying on unknown risks (i.e. a hypothetical future prosecution), rather than evidence available at the time of dismissal. 

This decision emphasises the importance of carefully articulating the allegations against an employee in advance of a disciplinary hearing, stating all of the facts relied on and all of the reasons why those facts may warrant dismissal.  Where the ultimate reason relied on for dismissal does not match that put to the employee during a disciplinary process, this may result in a finding of unfairness.

The European Court of Justice (“ECJ”) has held that, under the Acquired Rights Directive (“the Directive”), where there is a transfer of an undertaking involving multiple transferees, the rights and obligations arising from an affected employee’s employment contract can be split so that employees transfer to more than one transferee. The employment contract transfers to each of the transferees in proportion to the tasks performed by the employee concerned, meaning a full-time contract can be split into several part-time contracts.

ISS Facility Services (“ISS”) was responsible for the cleaning and maintenance of buildings in Ghent, Belgium. The work was divided into three lots. ISS employed Ms Govaerts, a project manager, in respect of each of the three lots. As a result of a re-tendering process, the cleaning contracts were awarded to two new contractors – one contractor (Atalian) was awarded Lot 1 and Lot 3 and another (Cleaning Masters) was awarded Lot 2. As Ms Govaerts’ work primarily related to Lot 1 and Lot 3 (i.e. around 85% of her work), ISS informed her that she would transfer to Atalian pursuant to Belgian legislation implementing the ARD and that she would cease to be an employee of ISS. Atalian disputed this. Ms Govaerts issued a claim against ISS and Atalian. 

The Higher Labour Court in Belgium found that there had been an automatic transfer of Ms Govaerts’ employment to both Atalian and Cleaning Masters. The Court sought a preliminary ruling from the ECJ on the interpretation of the Directive and how Ms Govaerts’ employment should be split between the new contractors.

The ECJ held that where a transfer of undertaking involves multiple transferees, the Directive must be interpreted as meaning that the rights and obligations arising from the employment contract are transferred to each of the transferees, in proportion to the tasks performed by the worker concerned. The ECJ held that it is for the national court to determine how the contract is divided. In this case, account should be taken of the economic value of the lots to which the worker is assigned or the time that the worker devotes to each lot. 

Although the Directive does not envisage a situation where a transfer involves a number of transferees, the ECJ held that this approach of apportioning the contract ensures a fair balance between the interests of workers, whose rights under the contract are safeguarded, and those of the transferees, who do not have greater obligations imposed on them by inheriting the full-time contract.

For UK employers this decision diverges from current domestic case law on TUPE, which to date has suggested that the rights and liabilities in respect of employees whose work transfers to multiple transferees will not be split between those transferees and instead will transfer to the transferee which takes over the greater part of the activities or business to which they are assigned (or, in the case of significant fragmentation, that it may not be possible to identify a transferee at all).  Following this decision, transferees may seek to argue for a split of liabilities in relation to transferring employees, dividing a full-time employment contract into several part-time contracts.  In practice, there are a number of potential problems associated with such an approach, including, not least, the additional practical complications for employees of moving from a single employer to two or more.  In addition, the decision does not consider a key element of the test for a relevant transfer under the Directive which is that there must be an economic entity which retains its identity following the transfer.  In a situation where a business or economic activity is split between a number of different transferees, it may be arguable that there is no relevant transfer, because the transferring entity does not retain its identity when split between more than one transferee.  It remains to be seen how employment tribunals in the UK will tackle this tricky issue following this decision.   

4. Peltrade Ltd v Scanlan [2020] 9 WLUK 34 

In this case, the High Court discharged an interim injunction restraining the defendant, Mr Scanlan, from working with a competitor, which the claimant former employer asserted was in breach of a post termination restriction.  There had been unjustified delay by the ex-employer in enforcing the restrictive covenant, despite its having had knowledge of Mr Scanlan’s breach for some months. The former employer had also made material non-disclosures in its without notice application. 

Peltrade Limited (“Peltrade”) distributes energy-producing wood pellets and in 2018 employed Mr Scanlan to trade in premium and industrial quality pellets. Under his employment contract, Mr Scanlan was prohibited from working for any competitor in the biomass fuel industry for 12 months after the termination of his employment. In 2019, Mr Scanlan wished to leave Peltrade and join a competitor. At Peltrade, Mr Scanlan had primarily worked in the premium pellet sector, but would be working in the industrial pellet sector at his new employer. Mr Scanlan allegedly informed one of Peltrade’s directors of his plans, and was assured that the non-compete covenant would not be enforced in respect of work in the industrial pellet sector. Mr Scanlan left Peltrade at the end of 2019 and started working for the new competitor in 2020 in the premium pellet sector.

Five months into Mr Scanlan’s new employment, Peltrade applied for a without notice injunction seeking to prevent Mr Scanlan from working for his new employer in breach of his 12 month non-compete covenant. However, Peltrade’s application did not refer to the variation of the covenant, nor to subsequent WhatsApp messages between Mr Scanlan and the Peltrade director, which Mr Scanlan said showed Peltrade had knowledge of his work in the premium pellet sector.

The Court declined to grant the injunction, finding Peltrade’s unexplained delay in seeking to enforce the covenant to be fatal to its application. Furthermore, Peltrade had failed to disclose the variation to the original covenant and the Whatsapp messages, which arguably showed that Peltrade had released Mr Scanlan from his covenant. The Court also considered the enforceability of the covenant, finding that even if effective, it would expire before any substantive future trial and therefore should be subject to a stricter merits test. When scrutinised more closely, the Court found the covenant too wide to be enforceable – a 12-month term of restraint in the UK pellet market was unreasonable. 

The key takeaway from this decision is that employers considering seeking injunctive relief to enforce post-termination restrictions need to act without delay as soon as they become aware of a breach, as a failure to act quickly can be fatal to the claim.  In addition, if it is considered necessary to apply for injunctive relief on a without notice basis, claimants are subject to a particularly strict duty of full and drank disclosure of all relevant evidence, including evidence that is adverse to them. 

5. Ms R Taylor and Jaguar Land Rover Ltd: 2414408/2019 (LINK)

In a unanimous decision, the Birmingham Employment Tribunal (the “Tribunal”) has confirmed that a gender fluid person falls within the scope of protection against discrimination because of gender reassignment under the Equality Act 2010. This decision clarifies previous uncertainty as to whether the Equality Act 2010 protects individuals that are gender fluid and non-binary.

Ms Taylor had previously presented as a male while working as an engineer at Jaguar Land Rover (“JLR”). In 2017, Ms Taylor began to identify as gender fluid and dress as a female. Subsequently Ms Taylor was insulted by colleagues and subjected to abusive jokes, experienced issues using work toilet facilities and was not supported by management. Ms Taylor resigned and brought claims for constructive dismissal and discrimination because of gender reassignment and sexual orientation. JLR attempted to argue that Ms Taylor did not have the protected characteristic of gender reassignment as it only applied to those in transition between the binary genders of male and female.  As Ms Taylor was not in the process of transition, JLR argued that she was not protected by the Equality Act 2010.

The Tribunal rejected this argument and found that Ms Taylor’s allegations of direct discrimination because of gender reassignment were well founded, as were her allegations of harassment and victimisation. The Tribunal’s decision recognises that gender is a spectrum and those with more complex gender identities should not be excluded from protection under the Equality Act 2010. Gender reassignment, defined as reassignment of sex, was traditionally regarded as a binary concept, but this decision interprets it as covering individuals who do not exclusively identify as either male or female, as well as individuals who have not undergone medical transition.

The Tribunal ordered aggravated damages because of the egregious way in which Ms Taylor was treated and because of the insensitive stance taken by JLR in the proceedings. The Tribunal also uplifted Ms Taylor’s compensation by 20% because of JLR’s failure to comply with the ACAS Code of Practice in relation to a grievance raised by Ms Taylor’s about short-term measures to assist her transitioning. The Tribunal recommended that JLR take positive steps to avoid the situation arising again. 

This important decision (albeit only at first instance) confirms the right of non-binary and gender fluid people to be protected from discrimination under the Equality Act 2010. It also highlights the importance of employers recognising, understanding and addressing the issues LGBTQ+ individuals face in the workplace and ensuring that they do not face discrimination.