Employment Law Update March 2012

Nick Hobden

Partner

E: [email protected]

D: 01322 623700

James Willis

Senior Associate


D: 01322 422540

22 March 2012

© Thomson Snell & Passmore 2012

Employment Law Update

Our subjects today

• Redundancy – pooling, alternative roles and collective consultation

• TUPE Service Provision Changes

• Change to unfair dismissal qualifying period

• Changes to Employment Tribunal Practice and Procedure

• Employment Law reforms

• Government proposals on executive pay

• Unfair Dismissal

• Confidential information post-termination

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Nick HobdenPartner & Head of Employment

3

Nick Hobden

Partner


D: 01322 623700

Nick’s topics to be covered

• Redundancy: pooling, alternative roles and collective consultation

• TUPE Service Provision Changes

Hand over to James

• Government proposals on executive pay

• Unfair Dismissal

• Confidential information post-termination

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Recent case law on pooling – a pool of one

Halpin v Sandpiper Books Ltd:

• Company put sole employee in China ‘at risk’ and in pool of one

• Extensive consultation took place

• alternative employment in UK offered

• Dismissed, claimed unfair dismissal

• Was limiting the pool to one employee reasonable?

• Decision about size of pool for employer to make

• Meaningful consultation and followed fair procedure

• Pool of one a logical decision

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A pool the same size as the number of at risk employees

Capita Hartshead Ltd v Byard

• Employee one of four actuaries

• Capita lost number of her clients so put her ‘at risk’ in pool of one

• Justification of Pool:

• Only workload to have reduced

• Team morale

• Risk of losing clients

Tribunal found in employee’s favour:

• Other actuaries should have been included in pool

• Quality of employee’s work praised

• Capita overstated commercial risk of losing clients if transferred to another actuary

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General guidance from Capita Hartshead v Byard

• Choice of pool subject to ‘reasonable response’ test

• No need to limit pool to employees doing similar work

• Apply mind to problem of defining the pool

• Not for Tribunal to decide if fairer to act in another way

• Strong reasons behind decision to have a pool the same size as the

number of ‘at risk’ employees?

‘Bumping’

• Employer ‘bumps’ out an employee whose work not diminishing in

favour of ‘at risk’ employee.

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Selecting employees at risk for alternative employment

Samsung Electronics (UK) Ltd v Monte D’Cruz

• Employee one of four managers – positions merged into one

• Unsuccessfully applied for alternative roles

• Dismissed and claimed unfair dismissal

• Samsung should have used objective criteria to decide if employee

suitable for alternative role?

The EAT: Subjective Criteria

• Entitled to use own judgement

• Recruitment methods require degree of subjectivity

• Interview procedures not to be overly scrutinised

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Reducing the collective redundancy consultation period

Under current law minimum consultation period of 90 days where:

• 100 or more proposed redundancies

• In one workplace establishment

• Within a 90 day period

The government has proposed to reduce the consultation period from

90 to 30 days

• Improve employers’ flexibility

• Speeds up the decision making process

• Costs savings

Public consultation later this year

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TUPE Service Provision Changes

Recent case law has tightened up the circumstances when a Service Provision Change (SPC) amounts to a transfer under TUPE 2006.

Reg 3(1)(b) TUPE 2006 defines an SPC as one of three situations:

1. Outsourcing activities from in-house to a contractor;

2. Change from one contractor to another; and

3. ‘Insourcing’ – bringing activities in-house.

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TUPE Service Provision Changes

Four scenarios:

1. Incoming contractor carrying out different activities to outgoing contractor

2. Change of client as well as change of contractor

3. Change of location amounting to a substantial and detrimental change

4. Employees as an ‘organised grouping’

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Enterprise Management Services v Connect Up

Will there be a transfer under TUPE where the activities carried out by

an incoming contractor differ to those of the outgoing contractor?

• 15% of work carried out by outgoing contractor omitted from incoming contractor’s

activities

• Activities became ‘fragmented’

• The incoming contractor lost significant amount of work to five other providers

EAT: TUPE?

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Hunter v McCarrick

Can there be a Service Provision Change where there is not only a

change of contractor, but also a change of client?

• Property management services carried out by contractor A on behalf of the client

• Activities transferred to contractor B

• Receivers appointed, properties taken out of the control of the client

• Contractor B carried out the services on behalf of the receivers

• Client changes?

EAT: TUPE?

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Abellio London Ltd v Musse and Others

Can a change of location under a TUPE transfer amount to ‘substantial

and detrimental change’ to give rise to a constructive dismissal claim?

• Change of contractor TUPE transfer

• Employees required to move to new depot six miles away

• Travel time extended by up to two hours every day

• Raised concerns and grievances and subsequently resigned

Did EAT find change was:

• material because it extended the working day by up to two hours?

• detrimental because the Claimants raised concerns with employer?

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Eddie Stobart Ltd v Moreman and Others

If employees spend the majority of their time on a particular contract,

can they constitute an ‘organised grouping’?

• ES Employees spent over 50% of time on contract for V

• Not assigned to the client, only because of the way shift patterns worked out

• Contract transferred to contractor B who did not accept TUPE applied

• ES argued did not have to show employees organised as members of a team, was

sufficient that spend majority of time on the contract

Did EAT find TUPE applied to activities for the client?

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James WillisSenior Associate

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James Willis

Senior Associate


D: 01322 422540

Tuesday, 27 March 2012 17

Changes to employment law - A confidence boost?

• The ‘Red Tape Challenge’ – ‘scrap, merge, simplify, improve’

• The aim? To boost business confidence and economic growth

• The UK economy requires laws that create a ‘flexible, effective and

fair’ labour market:

• Flexible – easy to get into and stay in work

• Effective – allowing employers to manage staff productivity

• Fair – level playing field for employers; protection for workers

• Don’t we have this now? What are they proposing?

The proposals

• Increasing the normal qualifying period for unfair dismissal claims

• Changes to the Employment Tribunal system

• Other possible changes?


Changes to unfair dismissal law

• Qualifying service required to claim unfair dismissal will increase from

one to two years’ service

• Applies to those starting new employment on or after 6 April 2012

• Those already in employment are unaffected

• Automatic unfair dismissal claims still possible


The law of unintended consequences

• A charter for businesses to sack people unfairly?

• More discrimination /auto-unfair dismissal claims?

• Heightened job insecurity?

• Indirect discrimination issues? Age, sex etc


Will it actually work?

• Do employers really need more than a year?

• John Cridland, Director General of the CBI said:

“We have been urging the Government to do everything it can to make

it easier for firms to grow and create jobs, and this will give employers,

especially smaller ones, more confidence to hire”

• 2000 fewer ET claims, £6m saved – is that enough?

• Impact currently open to question


Unfair dismissal and fixed term contracts

• Fixed term contracts might be used more frequently

• One year contracts make more sense

• But remember that employment laws (e.g. unfair dismissal and Fixed

Term Employees (Prevention of Less Favourable Treatment)

Regulations 2002) still apply


Changes to the Employment Tribunal system

• 218,000 claims made to Employment Tribunals in 2010-11

• Number of claims increased by 44% over two years

• Cost of running Employment Tribunals is £84m

• Running costs currently shouldered entirely by the tax payer


Introducing Employment Tribunal fees

• Justice Minister, Jonathan Djanogly said:

“Our proposed fees will encourage businesses and workers to settle

problems earlier, through non-tribunal routes like conciliation or

mediation and we want to give businesses – particularly small

businesses – the confidence to create new jobs without fear of being

dragged into unnecessary actions.”

• Consultation process closed on 6 March 2012


ET fees – the options

• Option One

• Issue fee, dependent on nature of claim (£200 for unfair dismissal claim)

• Hearing fee, payable when matter is listed for hearing (£1,000)

• Option two

• Issue fee alone, dependent on value of claim (£500 for claims of

<£30,000 and £1,750 for more valuable claims)

• Protection for the low paid and unemployed

• Will it work?


Other changes in force from this April

• Maximum deposit order value increases from £500 to £1,000 (for

cases presented on or after 6 April 2012)

• Maximum costs award by ET increases from £10,000 to £20,000 (for

cases presented on or after 6 April 2012)

• Witness statements will stand as evidence in chief and be taken as

read (for all cases presented on or after 6 April 2012)

• Judges to sit alone on unfair dismissal cases (for all cases heard on

or after 6 April 2012)


Potential future changes

• Pre-Claim Conciliation (not before 2014)

• Fine for employers who lose ET claims (half the total award (min. of

£100 and max. of £5,000)). Reduced by 50% if paid within 21 days.

• ‘Modern Workplace’ reforms - flexible parental leave, flexible working,

annual leave, compulsory pay audits (further news in Spring 2012?)

• Government to consult on:

• Protected conversations - “a boss and an employee feel able to sit down

together and have a frank conversation"

• Compromise agreements - unnecessarily complex and prescriptive?


Calls for evidence

• Collective redundancy consultation

• reduce 90-day period for collective consultation in large-scale redundancies

to 60, 45 or 30 days?

• TUPE 2006

• Does TUPE 2006 ‘gold-plate’ the Acquired Rights Directive? Is it overly

bureaucratic? (esp. service provision changes and insolvency proceedings)

• "Compensated no-fault dismissals" for micro-businesses (10 or fewer

employees)

• "Radically slimming down" dismissal procedures


Government Proposals on Executive Pay

Some of the proposals include:

• Listed companies to provide more information on how pay set

• Remuneration reports to cover both current and future pay policies

• Shareholders to have binding votes rather than advisory votes on pay

policies

• Provisions to reduce, withhold or clawback pay when company performs

poorly

• Encouraging appointment of directors from more diverse backgrounds

• Greater employee consultation in setting directors’ pay

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How is Executive Pay currently controlled?

• The Companies Act 2006:

• Remuneration reports disclosing:

• How pay formulated

• How performance criteria measured

• Shareholders only have advisory votes on the remuneration report

• The Corporate Governance Code:

To ensure shareholders engage in determining remuneration

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Unfair Dismissal: Gross Misconduct

Pennell v Tardis Environmental UK

• Lorry driver caused £2,500 damage to firm’s lorry

• Clean record but dismissed for gross misconduct

• Claimed unfair dismissal and wanted to be re-instated

• Employer failed to provide a reference

Be careful not to jump to conclusions in gross misconduct

investigations!

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Unfair Dismissal: Expired Warnings Airbus UK Ltd v Webb

Can employers take into account previous expired warning and the

underlying misconduct?

• Employee dismissed for misconduct three weeks after final written warning

expired

• Dismissal letter made no mention of the expired warning

What did Court of Appeal say?

• Expired warning not principal reason for dismissal

• Misconduct not time-limited

• Original misconduct relevant to reasonableness of employer’s response to

later misconduct

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Confidential Information Post-Termination

Caterpillar Logistics Services Ltd v Huesca De Crean

• Employee signed confidentiality agreement

• Resigned from Caterpillar to join one of customers

• Caterpillar threatened proceedings, though no breach of agreement

• Employee undertook not to breach agreement and to refrain from certain

activities

• Caterpillar sought injunctive relief:

• Preventing employee from disclosing information – defined in generic terms

• A ‘barring order’ preventing involvement in commercial relationship between

Caterpillar and new employer

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Confidential Information Post-Termination

Caterpillar not granted any of the relief sought:

• No evidence employee had broken or intended to break confidentiality

agreement

• Employee offered an undertaking

• Injunction application too vague – information not specified

• ‘Barring order’ only granted in exceptional circumstances

• NO restrictive covenants in employment contract!

• Caterpillar too aggressive from start of litigation process

• Caterpillar made no attempt to reach amicable solution

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Questions

Questions?

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Documents

Employment Law Update March 2012