July 2020 Newsletter
1. The new Flexible Furlough Scheme
From this month, the new Flexible Furlough Scheme has become operational.
Under the old scheme, an employee had to be furloughed for a minimum of 21 days and could perform no work whilst on furlough. The new scheme allows employers to furlough staff for any period of time as required, encouraging employees to return to work part-time where possible. The new scheme facilitates the government’s strategy of phasing out furlough altogether by the end of October. For that reason, the Flexible Furlough Scheme is only open to employees who were fully furloughed for at least 21 days under the old scheme. Further, the number of employees who can be flexibly furloughed is now capped at the ‘high water mark’ of employees furloughed under the old scheme. (i.e. if an employer previously furloughed 50 employees under the old scheme it cannot place more than 50 employees on flexible furlough).
Currently, as per the old rules, employers can recoup up to 80 per cent of an employee’s wages via the scheme (capped at £2,500 per month). From August, employers will have to start bearing some of the government’s costs of paying employees to be on furlough. At first, employers will simply be required to pay employer’s national insurance and pension contributions. From September, government support provided for employees on furlough will be reduced to 70 per cent of wages (capped at £2,187.50). From October, the government will contribute only 60% of wages (capped at £1,875). Even in September and October, however, the employer must make up the sum so that the employee receives at least 80% of wages to a maximum of £2,500 per month.
Whether or not the scheme will be continued post October is a political matter. Certainly, the government seems to be trying hard to revive the economy following the pandemic, and it appears unlikely at this stage that it will consider any extension to the scheme. It may be, therefore, that employers will have to consider redundancies at the conclusion of the scheme should their business not have picked up sufficiently to pre-pandemic levels.
2. Redundancy dismissal claims – can employers rely on interview performance only when filling any remaining roles?
It has become a common practice for employers to select employees for redundancy based on their performance at an interview for any remaining positions (following a redundancy consultation exercise). Often this process mimics a recruitment exercise, with the employer selecting those who will be offered a place in the new structure. But to what extent can employers rely on this practice when defending unfair dismissal claims on the grounds of redundancy?
In Gwynedd Council v Barrett, the employees were teachers who were made redundant when the local authority closed their secondary school employer and opened a new school on the same site for both primary and secondary pupils. The teachers applied for posts at the new school but, following a selection process based on an interview, were unsuccessful and were subsequently made redundant.
The Tribunal found that their dismissals were unfair. One reason was that the employees had been offered no right of appeal against the dismissal (despite this being a specific requirement within Regulations covering the staffing of maintained schools in Wales). The Tribunal also based its decision on the employer’s lack of consultation with staff throughout the process. Further, that the change in school structure did not necessarily have an impact on the teachers’ existing roles, so the employees were essentially being made to apply for jobs that they already had.
On Appeal, the EAT upheld the Tribunal’s decision. On the issue of a recruitment-style interview, the EAT said that the Tribunal had been entitled to find that the employer’s approach had been inappropriate in this case. They found that the new roles offered were not substantially different from the old ones, therefore the employer did not need to consider how suitable the employees were to be recruited to them by way of interview (and should consider instead other criteria such as their past performance). The EAT found that the Tribunal had been entitled to stress the need for objective selection criteria and proper consultation.
Whilst employers can use interviews in redundancy selection exercises, if they only consider an employee’s performance in a job interview without any assessment of their actual performance at work prior to the redundancy, it is unlikely to be enough to overcome a finding of unfair dismissal on the grounds of redundancy. This is particularly the case where any new role is similar to previous roles of employees being considered for redundancy.
3. Wrongful dismissal vs Unfair Dismissal claims
An employee dismissed without notice will often claim both unfair and wrongful dismissal, which are two distinct claims:
- Unfair dismissal is concerned with the reasonableness of the employer’s decision to dismiss the employee.
- Wrongful dismissal is centred around whether the employer was entitled to dismiss the employee as a matter of contract without giving the full contractual notice required. This depends on whether or not the employee was actually guilty of gross misconduct.
An employer might reasonably believe that the employee committed gross misconduct and successfully defend the unfair dismissal claim, but lose on the issue of wrongful dismissal because the Tribunal believes in the employee’s innocence. In such cases, the employee would be entitled to damages covering the notice that should have been given.
Tribunals still struggle sometimes with the distinction between the two.
In East Coast Mainline Company Ltd v Cameron, the employee was a shunter in a train depot. He was dismissed when he allowed a goods train to move off while the driver of another train was out of his cabin. The driver was ‘brushed’ by the goods train and could easily have been killed.
In the first instance, the Tribunal found that the dismissal was fair because the employer had reasonably concluded that the employee was guilty of gross misconduct. The Tribunal dismissed the wrongful dismissal claim on the same basis.
On appeal, the EAT sent the wrongful dismissal issue back so that the Tribunal could determine whether the employee was guilty of gross misconduct. When the case was re-heard, the Tribunal upheld the wrongful dismissal claim. It found that the conduct in question was not deliberate and was a one-off incident of carelessness. Taking into account the employee’s length of service (more than 30 years) what he had done did not amount to gross misconduct.
There was then a second appeal to the EAT which led to this finding being overturned.
The EAT held that, in a wrongful dismissal claim, length of service was not a legally relevant question. What mattered for the purposes of a wrongful dismissal claim was the seriousness of the conduct itself, not whether it was reasonable to dismiss. A single act of carelessness could amount to gross misconduct if the lapse was serious enough (and it was certainly so in this case where it had very nearly led to a loss of life).
Rather than send the matter back to be considered for a third time, the EAT simply held that the wrongful dismissal claim should fail.
4. Unfair dismissal – how should Tribunals approach such claims?
As discussed above, in considering a wrongful dismissal claim, the Tribunal needs to decide whether or not the employee is guilty of gross misconduct. When it comes to unfair dismissal, that is precisely what the Tribunal should not do (at least until it comes to assess compensation). In unfair dismissal claims, Tribunals should ask whether the employer reached a conclusion that was reasonably open to it, not whether it agrees with that conclusion that the employee is guilty of gross misconduct. A good example of the wrong approach is the case of Tai Tarian Ltd v Christie.
Mr Christie was a maintenance worker for a housing association. He was dismissed when a female tenant complained that he had made a series of homophobic remarks when working on her property, making her feel uncomfortable. He denied the allegations completely and argued that his dismissal was unfair.
At first instance, the Tribunal upheld his claim for unfair dismissal. It relied on the fact that the employer had accepted that Mr Christie was not actually homophobic and concluded that it could not, therefore, have believed that he made the homophobic remarks.
The EAT held that this was clearly wrong and that there was no basis for finding that the employer had not believed that the comments had indeed been made. They held that the Tribunal had been entitled to criticise the employer for not allowing the employee to see the full notes of evidence taken from the anonymous witness. However, the tribunal had not explained why it was unreasonable to accept the complainant’s account. The Tribunal had held that she had embellished her story, but the evidence showed only minor inconsistencies in the two separate accounts that the complainant had given to the employer. Whilst the Tribunal had pointed out that she had a potential motive for fabricating her story (as a result of a previous interaction with Mr Christie), it had not considered whether the employer’s acceptance of her account was reasonable. Clearly, the Tribunal had started from the position that it believed Mr Christie’s denials and then worked backwards from there. This is not the correct approach. As mentioned above, tribunals should ask whether the employer reached a conclusion that was reasonably open to it, not whether it agrees with that conclusion.
5. Right to Work – what enquiries should employers make into employee documentation?
An employer must be careful to avoid employing anyone without the right to work in the UK. Doing so knowingly is a criminal offence, whilst inadvertently employing someone who is working illegally can lead to a civil penalty of up to £20,000 for an employer who has not carried out a proper documentation check.
On the other hand, it is important not to react too hastily in assuming that an employee’s permission to work has expired. A genuine but mistaken belief that an employee is not entitled to work in the UK can be a fair reason an employer can rely on when facing an unfair dismissal claim, but the employer still needs to behave reasonably. Tribunals appreciate that an employer needs to behave promptly, but that will not excuse a failure to examine the situation calmly and make proper enquiries. This point was explored in the case of Sanha v Facilicom Cleaning Services Ltd.
Mr Sanha was dismissed when his employer believed that his permission to work in the UK had expired. The Home Office online checking service had no record of him making an application to renew his permission, and the employer therefore believed that they had no choice but to dismiss.
As it turned out, however, Mr Sanha had made such an application. What was more, he was married to an EU citizen working in the UK and was entitled to work in the UK on that basis alone. The dismissal was held to be unfair because the employer should have made more detailed enquiries into his status and should have realised that the application he had made would not have made its way into the Home Office’s system by the time they carried out the check.
The appeal to the EAT was concerned with compensation; namely, should the award be reduced to reflect the contributory fault of the employee? The EAT accepted that the employee’s conduct could be regarded as blameworthy (in that he had not been forthcoming about his correspondence with the Home Office). However, the employer’s decision to dismiss was not actually influenced by the employee’s failure to provide a fuller account of his status. The employer had acted purely on the basis of the results on the online checking service, so the employee’s conduct had not contributed to the decision to dismiss.
6. Transfer of Undertakings – what changes can be made to an employee’s terms and conditions
The Transfer of Undertakings Regulations (known as TUPE) provide that the terms and conditions of an employee’s employment contract cannot be altered merely by the transfer of their employment from one employer to another. This protects employees from losing existing contractual entitlements when their employer changes (usually in circumstances entirely outside of their control).
It has been argued in the past that this provision only applies to negative changes and that actual improvements in terms and conditions can be valid (even though a strict reading of the Regulations themselves suggests otherwise). However, the issue was tested in Fergusen & ors v Astrea Asset Management Ltd where it seemed that improvements were being slipped in based on the change of employer only to benefit employees.
In this case, an asset management company lost the contract to manage a high-value area of real estate in Kensington and Mayfair belonging to the Abu Dhabi Royal Family. This was effectively the only contract the company managed and so it was accepted that all employees would transfer under TUPE. This included the senior leadership and directors who promptly agreed that they should be paid hefty bonuses once the transfer had gone through (and that they would be entitled to generous termination payments if they were dismissed). These changes were incorporated into their contracts of employment and presented to the new employer. The new employer was not impressed and dismissed the individuals concerned; refusing to honour the new terms.
One of the many issues that fell to be considered in the subsequent tribunal proceedings was whether these changes in terms and conditions were valid and binding. The Tribunal held that they were not. The only reason for the changes was that the contracts were being transferred to a new employer. They were therefore void under TUPE. The EAT agreed. The Regulations were clear that any purported change in terms and conditions was void if the reason for it was the transfer itself. That was certainly the case here as there was no other commercial justification for the changes being made. The EAT held that suggestions that positive changes were permitted were not based on the Regulations themselves which were unambiguous on the point.
In general, improvements to terms and conditions following change of employees are unlikely to be controversial. However, clearly, if the changes are in bad faith made for the sole purpose of the transfer, they are unlikely to be upheld.
7. The difficulty of successfully claiming Marriage Discrimination under the Equality Act
One of the least often claimed grounds of discrimination is marriage and civil partnership. Prejudice against married people is not widespread and there are few circumstances in which an employer might treat an employee less favourably because they were married.
The case of Gould v St Johns Downshire Hill, demonstrates how difficult it is for an employee to make a successful claim of direct discrimination on the grounds of marriage.
The Reverend Gould was employed as a vicar in a ‘proprietary chapel’. This is a church which enjoys semi-independent status from the Church of England and the clergy are directly employed by a governing body of trustees under a normal contract of employment. Rev Gould was dismissed by his governing body after serving for some 15 years on the stated ground that it had lost trust and confidence in him.
The governing body had become increasingly unhappy with the Reverend’s conduct (citing a range of governance issues, his lack of communication with trustees, and his management of junior clergy). This was against a background of the breakdown of his marriage. A number of the trustees took a conservative approach to marriage and believed that a failed marriage would make a minister’s position untenable. Advice was taken from the local bishop (who made it clear that any decisions made about Rev Gould’s future should not be based on the state of his marriage but his performance and behaviour in the role).
After his dismissal, Rev Gould claimed that he was discriminated against on the grounds of marriage. He argued that the failure of his marriage was an important part of the background to many of the issues the governing body had with his performance. He argued that, had he not been married, these concerns could not have arisen.
The Employment Appeal Tribunal (EAT) upheld the tribunal’s finding that there was no discrimination. In a direct discrimination claim, the less favourable treatment complained of had to be ‘because of’ the protected characteristic (in this case, marriage). That meant that marriage had to be part of the reason for the decision to dismiss itself and not just a background circumstance. The Tribunal found that there were a range of issues quite unrelated to his marriage that led the trustees to dismiss him and that the trustees had followed the bishop’s advice to disregard any concerns they had on that issue.
Whilst a dismissal on the grounds that a marriage had broken down could be discriminatory, that was not what had happened here. The fact that some of the conduct for which Rev Gould was dismissed had arisen in the context of his marital problems, did not mean that those problems were the reason for his dismissal.
8. Corporate Social Activities and work culture
An Employment Tribunal has dismissed a claim that an employer discriminated against the only female member of its leadership team by talking about football all the time.
In Liebenberg v DS Smith Packaging Ltd, the employee argued that she was regarded as ‘not being one of the lads’ because she could not take part in their sporting discussions over boozy dinners. The Tribunal did point out that the gender imbalance in the leadership team was ‘unacceptable’ but rejected her claim. It found that the real reason for her dismissal was the employer’s genuine concerns with her leadership style. As a matter of fact, the Tribunal held there was no undue emphasis on football in conversations within the leadership team, and the dinners were found to be moderate and sober affairs.
The case did highlight that too much emphasis on joining in with corporate social activities can certainly amount to indirect discrimination if these are focussed on the interests of the majority. A ‘laddish’ culture could also help persuade a Tribunal that direct discrimination lay behind a decision on dismissal or promotion. Therefore, employers should remain mindful of the culture they create at work and whilst socialising.
9. When does employment commence?
Only employees with two years’ continuous service have the right not to be unfairly dismissed. This qualifying period is measured to the day, so, for employees bringing claims at Tribunal, it is important to be clear about precisely when an employee started work.
In O’Sullivan v DSM Demolition Ltd, Mr O’Sullivan claimed unfair dismissal from his role as a Demolition Safety Supervisor. He said that he had been employed from 19 October 2015 to 21 October 2017. In replying to his claim, however, the employer said that his start date was 2nd November 2015. That was the date given on his written statement of terms and conditions. It was also consistent with the employer’s payroll records.
Mr O’Sullivan argued that, prior to the formal start-date of 2 November 2015, he had already been working for the employer. He had, at the employer’s request, undergone a medical assessment which was a requirement of the certification he needed to work on demolition sites. He had also undertaken some informal work for one of the employer’s clients. The Tribunal found that he was not paid by the employer for such work (he had actually been paid in cash by the client and the employer was not involved in the transaction). The Tribunal concluded that any work he had done did not form part of the employment that began on 2 November. It also held that he did not have two years’ service and dismissed his claim.
On appeal, the EAT upheld that finding. It held that tasks done in preparation for the start of his employment (such as the medical examination) were not part of the employment itself. The Tribunal was entitled to find that the work the employee did on site was not work done under the contract of employment, but was separate and distinct from it.
10. Can an innocuous incident be the final straw for the purposes of Constructive Dismissal?
A constructive dismissal takes place when an employee resigns in response to a fundamental breach of contract on the part of the employer. A fundamental breach may, if serious enough, consist of a single act. It may also be made up of a number of more minor incidents culminating a ‘final straw’ incident.
In Williams v Aderman Davies Church in Wales Primary School, a teacher resigned and claimed constructive dismissal over the way in which the employer had handled a complex disciplinary case against him. The teacher was concerned that evidence had been withheld during the disciplinary and that this was part of a pattern of unfair treatment towards him and a failure take account of his mental health condition.
In the end, the teacher resigned in response to the employer’s decision that another employee (who was his union representative) who had also been accused of misconduct should not be allowed to contact him until after the case was completed. He relied on this as the final straw in a series of acts by the school in order to claim constructive unfair dismissal. On first instance, the Tribunal found that the employer’s decision had been reasonable and consequently dismissed the constructive dismissal claim. The employee could not rely on this decision as being ‘the last straw’ in conduct amounting to a fundamental breach of contract because it was, in itself, innocuous.
On appeal, however, the EAT held that this had been the wrong approach. What mattered was whether, when the employee resigned, the employer was in fundamental breach of contract. The incident that prompted the resignation did not have to be part of that breach as long as the employee (as in this case) was motivated at least in part by the overall conduct of the employer.
The EAT found it was true that, once the breach had taken place, the employee had a limited period in which to decide what to do. Too much of a delay would lead to the employee ‘affirming the contract’ and losing the right to claim constructive dismissal. In those circumstances, an entirely innocuous incident could not revive the right to resign without notice.
However, in the case of Mr Williams, there was no suggestion that the final incident occurred following an unreasonable delay. There were no grounds on which the Tribunal could have found that the employee had affirmed the contract. Further, the Tribunal’s criticisms of the employer’s earlier conduct were so severe that it was clear that there had been a fundamental breach of contract. In the circumstances, the EAT ruled that Mr Williams had been constructively dismissed.