Frontline UK Employment Law Update Edition 9 2020 - Case updates
Written By
1. Palmeri and others v Charles Stanley & Co Ltd [2020] EWHC 2934 (QBD)
2. Heskett v Secretary of State for Justice [2020] EWCA Civ 1487
1. Palmeri and others v Charles Stanley & Co Ltd [2020] EWHC 2934 (QBD) - Link
In this case, the High Court held that a firm was entitled to rely on a stockbroker's repudiatory conduct to justify the summary termination of his contract, despite the firm itself being in repudiatory breach of that contract.
The Claimant was a self-employed associate stockbroker at the Defendant for twenty years. On 21 April 2017, following extensive discussions aimed at securing the Claimant’s agreement to an unfavourable change to his remuneration arrangements, his contract (which required three months’ notice of termination and did not contain a right to pay in lieu of notice) was summarily terminated and he and his team were escorted from the premises. The summary termination followed an unscheduled meeting between the Claimant, his manager and an HR manager at which he had been offered two options – to either leave the company immediately with a payment in lieu of his three month notice period or to accept the reduced financial terms. In response to this ultimatum the Claimant had lost his temper, raised his voice, disparaged the competence of the Defendant and its management and became personally abusive to the manager and HR representative. This behaviour led to the manager informing the Claimant that his position had become untenable and that his contract was being summarily terminated.
After his departure, the Defendant’s compliance department began an investigation into the Claimant’s behaviour. The judge found that the evidence in the investigation disclosed a sustained and significant pattern of unreported potential conflicts of interest, a serious breach of complaint handling procedure and evidence of unauthorised credit broking individually and collectively engaging contractual rights to summary dismissal.
The Claimant issued a claim for breach of contract in relation to the summary termination. The Defendant sought to rely on the Claimant's repudiatory conduct at the meeting, as well as the several serious regulatory compliance failures during his engagement that were discovered by the subsequent investigation, as justifying the summary termination.
The High Court found that the firm had had no contractual right to present the Claimant with the ultimatum it did in April 2017, since it had no right to make a payment in lieu of notice. However, the Claimant's conduct, including the historical regulatory breaches and his abusive behaviour at the meeting, was itself a repudiatory breach of the contract, justifying summary termination. The fact that the firm had planned to terminate the Claimant without notice prior to the outburst at the meeting did not mean that it was unable to rely on the Claimant’s repudiatory conduct.
This case, whilst not an employment case, serves as a helpful reminder of the basic principle that the question of whether an employer is entitled to summarily terminate a contract of employment in the absence of a contractual right to do so will depend on whether the employee’s own conduct amounts to a repudiatory breach or not. The Claimant’s conduct in this case was particularly extreme and the Court had no difficulty in finding that it was sufficiently serious to amount to a repudiatory breach; in many cases the facts will not be so stark and a careful evaluation of the risks associated with summary dismissal will be advisable.
2. Heskett v Secretary of State for Justice [2020] EWCA Civ 1487 - Link
In this case the Court of Appeal evaluated the ”costs plus” approach to justifying indirect discrimination, ultimately upholding the principle that although costs alone cannot justify what would otherwise amount to discriminatory behaviour, costs in combination with another factor may provide a justification defence.
In order to reduce costs as part of a wider government pay freeze in light of the economic downturn, the Ministry of Justice changed its pay scale to significantly reduce annual pay increases. This disproportionately affected younger employees who, as a result of the changes, would take a much longer amount of time to reach the upper end of the pay scale compared to longer-serving, and therefore older, employees. The Claimant, a probations officer for the National Offender Management Service, brought an action for indirect age discrimination and argued that the saving of costs could not of itself justify the discriminatory nature of the pay freeze. At tribunal and EAT level it was held that the policy was objectively justified as there was a distinction between an ”absence of means”, in this instance the Ministry of Justice needing to balance its budget through re-allocating resources, which could amount to a justification, and seeking to rely solely on ”costs alone”.
The Court of Appeal agreed, confirming the ”costs-plus” rule that employers cannot justify discrimination by arguing that the cost of avoiding a discriminatory measure is unaffordable, but finding in this instance that absence of means could amount to the ‘plus’ factor required to justify the potentially discriminatory measure. The Ministry of Justice’s need to reduce staff costs was a legitimate aim for the purpose of its justification defence.
This case demonstrates the complexities arising from the “cost plus” rule and the difficulties that can arise in seeking to distinguish between measures taken purely to avoid cost and those which, whilst intended to save costs, are justified because of some additional factor such as the need to balance a budget. The line between the two may not always be easy to draw, leading to uncertainty for employers.
3. Independent Workers' Union of Great Britain v The Secretaries of State for Work and Pensions and for Business, Energy and Industrial Strategy; The Health and Safety Executive [2020] EWHC 3050 - Link
In this judicial review case, the High Court found that the Government had failed to implement certain EU directives granting health and safety rights to workers. The Court found the term “worker” in EU directives relating to health and safety should not only encompass employees, but also those workers who do not work under a contract of employment.
The Independent Workers' Union of Great Britain (“IWUGB”) is the trade union predominantly representing low-paid, migrant workers and workers in the gig economy. IWUGB applied to the Court for a declaration that the Government had failed to properly transpose into domestic law EU Directive 89/391 relating to measures to improve the health and safety of workers (the “Framework Directive”) and EU Directive 89/656 on requirements for the use of personal protective equipment (“PPE”) by workers (the “PPE Directive”) (together the “Directives”).
IWUGB’s central complaint was that the Directives require Member States to confer protections on workers, whereas the transposed UK domestic legislation protects only employees, which leaves a gap in protection for those who are workers but not employees as under domestic law. This gap has existed ever since the deadline for transposing the Directives in 1992. However, IWUGB contended that the COVID-19 pandemic has now shed particular light on this issue. Notably, some of the occupations represented by IWUGB (i.e. taxi, private hire, bus, coach and van drivers) have a higher average death rate from COVID-19 and therefore have a particular need for the health and safety measures under the Directives.
The Court ruled that the Government had failed to properly implement the Directives into UK law with respect to workers who do not work under a contract of employment. The “workers” protected by the Directives include all who fall within the autonomous EU law definition applicable for the purposes of the treaty provisions on free movement and equal pay, with the exception of domestic servants. The Court therefore accepted IWUGB's arguments that reference to “workers” in the Directives imposes obligations in relation to a broader class than simply “employees”.
The Court then held that the requirement under the Framework Directive to ensure that all workers may, in the event of serious and imminent danger, take appropriate steps to avoid such danger, and that they would not be disadvantaged for doing so, was not properly transposed into UK law as regards workers. Nor was the PPE Directive, which required PPE to be used by workers in certain circumstances, transposed correctly. The Court rejected the Government’s argument that workers had other equivalent protection under domestic legislation (e.g. as a whistleblower under section 47B ERA 1996), which was sufficient to transpose the Directives.
The decision has potentially far reaching implications especially for gig economy workers, who are now entitled to the same protection as employees against suffering a detriment if they take appropriate steps to protect themselves when faced with serious and imminent danger, which may include exposure to COVID-19. They are also entitled to be provided with PPE if the circumstances require.
