Employment Law Update – Longmores

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Dear Members,

Please find below the most recent updates on Employment Law. Covering: Agency Workers, Employment tribunal compensation, Unfair dismissal – contributory fault, Fire and rehire – implied terms and Tips.

Please contact Richard Gvero for more information.

Agency workers

The Agency Workers Regulations 2010 (AWR) are derived from EU law. They aim to strike a balance between protecting agency workers and preserving the benefits of flexibility that using an agency provides to both businesses and workers. The AWR contain anti-discrimination provisions. Agency workers must be given the same basic terms and conditions of employment as direct recruits when they have worked for a hirer for 12 weeks. Regulation 13 gives agency workers the ‘day 1’ right to be told by the hirer about any relevant vacancies, with the aim of giving agency workers the same opportunity as direct recruits to find permanent employment within the business. The information can be given in a general announcement in a suitable place in the hirer’s business.

In Kocur v Angard Staffing Solutions, the employee was employed by Angard, a wholly owned subsidiary of Royal Mail. Angard supplied agency workers on a flexible basis to meet the fluctuating demands of the postal service for workers. The employee worked in a mail centre. Vacancies for permanent jobs were put on a notice board but offered to direct employees first. Agency workers could not apply. If the jobs were advertised externally, then agency workers could apply along with other external applicants. The employee brought a claim saying this breached the AWR.

The employment tribunal and the EAT disagreed. The right was to be informed of the vacancies, not to apply for them or be considered for them. The Court of Appeal agreed. They looked in detail at the EU law underpinning the AWR. The Court of Appeal was clear that the wording used could not be stretched to mean what the employee contended. The right to only be informed of vacancies recognises that the law is a compromise between competing rights. It isn’t a completely hollow right – it means agency workers have advance or direct notice if a vacancy is advertised externally. Direct recruits and agency workers are not comparable in all ways – the right to parity is limited. To require an employer to allow applications from agency workers for internal vacancies would cause huge upheaval in redundancy and reorganisations where preference for internal candidates is a commonly used tool. Had lawmakers intended to disrupt common practice to that extent, they would have made it plain.

This decision makes it clear that there is a limit to the parity of treatment to which agency workers are entitled. Employers who use agency workers will be relieved that the law has its limits. Employers must simply ensure that information about vacancies is communicated to agency workers and direct recruits on the same basis.

Employment tribunal compensation

If an employee succeeds in a claim for unfair dismissal, an employment tribunal can order that compensation is paid which includes loss of earnings. The same is true for discriminatory dismissals. However, the tribunal does not have to do so. The principles set out in the case of Polkey v A E Dayton Services allow a tribunal to reduce compensation, potentially by 100%, if it considers that the employee would have been dismissed fairly in any event, had a fair procedure been followed. Discrimination compensation should be ‘just and equitable’ in the circumstances.

In Shittu v Maudsley NHS Foundation Trust, the employee was in remission from cancer and was disabled for the purposes of the Equality Act 2010. He had a day’s pay deducted by the employer for an ‘unauthorised absence’ relating to a hospital check-up and colonoscopy. He went off sick, lodged grievances and eventually resigned. He brought numerous claims including ones for constructive dismissal and discrimination.  The tribunal did not accept most of the employee’s alleged complaints. However, they found that the employer’s failure to investigate his grievance relating to the alleged unlawful deduction breached the implied term of trust and confidence. His resignation had in (small) part been due to that breach, and so his constructive dismissal claim succeeded. On the same basis, so did some of his discrimination claims. The successful claims were based on that docking of a day’s pay. The tribunal awarded a basic award (for unfair dismissal) and injury to feelings (for discrimination) but no compensation for loss of earnings. They decided, based on the facts, that the employee would have resigned anyway regardless of the deduction or the complaint about it, and so decided no compensation for lost earnings was required.

The EAT agreed. The sheer number of allegations by the employee had presented a ‘Herculean’ task for the tribunal. The evidence showed that the employee was generally unhappy at work and would have resigned anyway due to that unhappiness or because his sick pay entitlement was ending. These were separate issues to the issue of his pay being docked for the medical appointment. They said the tribunal had approached the issue of compensation correctly and had been entitled to find that there was a 100% chance that the employee would have resigned on the same day regardless of the fundamental breach of contract which had resulted in his successful tribunal claims.

This claim shows that the tribunals have a wide discretion in relation to compensation, including a decision to reduce loss of earnings awards to zero in appropriate cases. Cases with a 100% reduction will be rare. However, this judgment provides comfort that tribunals will be open to an argument that a generally dissatisfied employee will not always be entitled to full losses which may otherwise seem to flow from a dismissal.

Unfair dismissal – contributory fault

If a tribunal decides that an employee has been unfairly dismissed, it can reduce compensation, potentially to zero, for two reasons:

  • because the dismissal would have occurred anyway regardless of any procedural errors (the Polkey principle referred to in the previous case); or
  • because the employee’s conduct contributed to their dismissal.

The EAT has recently looked at a case where the employment tribunal had reduced an employee’s compensation on both bases. In Wilkinson v Driver and Vehicle Standards Agency, the employee was a former police traffic officer who subsequently gained employment as a driving examiner. He knew that he was not allowed to drive candidates’ vehicles due to potential insurance issues. Despite this, he drove the vehicle of another driving instructor back to the base after a driving test. He did not mention this in his post-test reports, but his manager found out. The employee was not suspended. He was invited to a disciplinary meeting by letter which did not set out all the allegations comprehensively. Nor was he provided with all the evidence in advance, including a letter written by his manager which said that trust had been broken and was difficult to repair.  After a short hearing of 24 minutes, he was dismissed for gross misconduct. He brought a claim for unfair dismissal.

The employment tribunal said he had been unfairly dismissed. The failure to set out all the allegations and provide relevant evidence in advance meant the employee could not know the case against him nor properly challenge the evidence. The manager’s alleged breakdown in trust had not been properly interrogated during the disciplinary hearing. The dismissal was unfair. The tribunal imposed a Polkey deduction of 50% because they assessed that the chances of the employee being dismissed anyway were 50/50. They also reduced compensation (and his basic award) to zero due to his contributory fault. The employee appealed.

The EAT disagreed with the tribunal’s reasoning on compensation. The tribunal had not approached the Polkey issue properly. They should have decided would have happened had there been no unfair dismissal – that is, if a fair procedure been followed and the manager’s evidence about trust and confidence had been properly scrutinised at the disciplinary hearing. The EAT said it was wrong to conclude that trust had broken down irretrievably when the manager’s letter had not said that. The tribunal had reached a conclusion for which there was no evidence. However, the EAT confirmed that a reduction for contributory fault can still be made even if the dismissal would not have happened at all had the employer acted fairly. That reduction involves apportioning fault between the parties in relation to matters which led to the dismissal. Based on the limited evidence about trust from the manager’s letter, the employee could not have been ‘wholly responsible’ for his dismissal which would justify a 100 per cent reduction for contributory fault. The employer’s own poor conduct had not been properly considered. The case was sent back to the same employment judge to reconsider those conclusions.

There are a few things in this case for employers to note. Firstly, the EAT has confirmed that contributory fault can still be relevant even if the dismissal would not have happened at all had the employer acted fairly. But perhaps of more practical importance is the reminder about getting your process right. Employers must clearly set out all relevant allegations, and provide all relevant evidence, to the employee in advance of the disciplinary hearing. A dismissal process can never be fair if the employee doesn’t know the allegations they face or the evidence to support them. Even in clear cut cases, scrutiny of the relevant evidence will usually take more than 24 minutes.

Fire and rehire – implied terms

Additional terms can be implied into employment contracts where certain facts reflect the parties’ contractual intentions. A term can be implied to give business efficacy to the contract – to make it work. Or it can be implied if the term is so obvious that if an ‘officious bystander’ suggested to the parties that they include such a term, they would reply ‘of course!’. It is an either/or test, assessed at the time the contract is made rather than when the parties are in dispute, when one will necessarily object to the other’s construction.

In USDAW v Tesco, during a business reorganisation process, the employer and union negotiated ‘retained pay’ for distribution centre operatives who agreed to move workplaces up to 45 miles away rather than taking redundancy. It was crucial for the employer to retain enough employees to avoid significant disruption to their distribution centres and the wider business. They made it clear that the retained pay would last for as long as the employees remained in their current roles, could not be negotiated away in future and would be subject to annual increases. A joint statement referred to retained pay as ‘guaranteed for life’ and a ‘permanent feature’ which could only be changed by mutual consent or promotion to a new job. In 2021, the employer said it was going to remove retained pay. They offered 18 months’ pay as a lump sum in return for giving up the entitlement, or they would dismiss and reengage the employees on new terms. USDAW applied for an injunction to stop the employer dismissing and reengaging, saying there was an implied term that prevented Tesco from dismissing the employees to remove retained pay.

The High Court granted the injunction. The Court said that a reasonable person would look at the facts around the time of the original agreement and construe ‘permanent’ as meaning ‘for as long as the relevant employee is employed by Tesco in the same substantive role.’ The employer had used the terms ‘guaranteed’, ‘protection for life’ and ‘for as long as you are employed by Tesco in your current role’. The High Court said the intention had been to preserve the higher pay permanently, without which the relocations would not have been agreed. There was a conflict between the permanent right to retained pay and the right to terminate contracts in order to remove it. On the extreme facts in this case, there was an implied term (either based on business efficacy or obviousness) that the employer would not terminate contracts to remove the entitlement to retained pay. They could still terminate for normal reasons – conduct or redundancy for example – although the court conceded that such a decision would be subject to close scrutiny in the circumstances. They granted an injunction stopping Tesco from terminating contracts to get rid of retained pay because the employees’ losses would be significant and the normal remedy – unfair dismissal compensation – would not be adequate.

This kind of injunction is rare. There were rather extreme facts at play here, with a clear agreed expression that retained pay would be permanent for as long as the employees remained in their current roles. As such, the High Court implied a term stopping them from rolling back on that permanency, on which the employees had relied when agreeing to relocate to their otherwise disadvantage. Due to the extreme facts, it is unlikely that this case will start a domino rally of similar cases. However, employers must take care when negotiating terms to ensure that they don’t accidentally tie the hands of future business decision makers.

Tips

The government has given more information about when it will introduce new laws requiring employers to pass on all tips to workers. The government has said previously that tips earned by workers should go to the workers that customers intended them for.

The new laws will require employers to pass on all tips, gratuities and service charges to workers without making any deductions. If businesses have control or significant influence over how tips are distributed then they will be required to distribute tips in a fair and transparent way. To help employees bring employment tribunal claims where necessary, the government proposes to introduce a new right for workers to make a request for information relating to an employer’s tipping record.

There is currently no clarity on when these new rules will come in. The government says the laws will be brought forward ‘when parliamentary time allows’. However, employers will be comforted by the government’s plan to give businesses a year’s grace after bringing in the new legislation, to allow for business practices to be adjusted. Although the ball has been kicked into the long grass, employers who may be affected by these new laws should start to think about how they will change their current practices in order to comply with them in due course.

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