September 2020 Newsletter
Introduction – winding down of Furlough Scheme
September and October this year will see the scaling back of the Coronavirus Job Retention Scheme under which millions of employees have been placed on furlough whilst the Government issued grants to employers to cover the cost of their wages.
The scheme ends altogether on 31 October and in September and October the amount of the grant being offered by the government is to be reduced incrementally. Under the original scheme, the Government paid 80 per cent of a furloughed employee’s wages up to a maximum of £2,500 per month. In August, employers became liable to pay National Insurance Contributions and mandatory pension costs for furloughed employees and, from 1 September, the scheme will pay only 70% of employees’ wages up to a maximum of £2,187.50 per month. From 1 October the scheme will be reduced further so that the government contributes only 60% of wages up to a maximum of £1,875.
It is important to note that these grants are made on the basis that the employer continues to pay a furloughed employee at least 80 per cent of wages or £2,500 per month. In other words, the employer cannot simply pass on the reduced amount of grant being provided under the scheme, but must top it up so that the actual entitlement of a furloughed employee stays the same.
There seems little doubt that the increased costs to employers – and the prospect of the scheme ending altogether – will result in large scale redundancies across the economy. It is worth remembering that a fair dismissal for redundancy requires an employer to engage in meaningful consultation with employees. That means consulting before a final decision is taken and so, even if the end of the scheme is still two months away, it is not too early to start that process if employers can already foresee what will need to be done come November.
1. Working from home and redundancy
This year has seen an unprecedented shift in the way in which we work, and it is too early to know whether the huge increase in working from home is a permanent change or a temporary blip. The Government has been reported as being concerned that too many people are still working at home and wants to encourage people back to the office. That would certainly help public transport services and city centre coffee shops – but may not suit many employees or even employers.
One suggestion that was reported was that employees who continue to work at home may be at increased risk of redundancy, with the Government suggesting that employers would adopt the principal of ‘out of sight, out of mind’ when deciding who to retain.
This would be a problematic approach for employers to take. Leaving aside the fact that many employees working from home may have key skills that the employer needs to retain and may be making a vital contribution to the business, there may also be potential discrimination issues in play.
Those working from home may be more likely to be women with caring responsibilities or employees with vulnerabilities based on their age or underlying health condition. Employers who do not want to be landed with claims for indirect sex, age or disability discrimination would be best advised not to make decisions on redundancy based on who is actually coming in to the office.
2. Trust and Confidence – when can employers dismiss if this breaks down?
Sometimes working relationships just break down and cannot be repaired. The employer may feel that it is left with no alternative but to dismiss an employee who simply cannot work effectively with a manager or key colleagues. A dismissal on these grounds can fall within the potentially fair category of ‘some other substantial reason’. The question will then be whether the employer has behaved reasonably in dismissing the employee.
In Gallacher v Abellio Scotrail, the employee, Ms Gallacher, was a manager who initially had a good working relationship with her boss, Ms Taggart. This started to turn sour, however, when Ms Gallacher’s request for a pay rise was initially turned down. Ms Gallacher perceived a general change of culture in the business and decided that she ‘wanted out’. There were then a number of issues including whether or not Ms Gallacher should take part in an on-call rota and over the recruitment of a new member into the team. Ms Gallacher made it clear that she was looking for another role and took a period of sick leave lasting some seven weeks. In a one-to-one meeting, Ms Gallacher and Ms Taggart discussed their deteriorating relationship and Ms Gallacher said that she did not behave in the same way with anyone else. Ms Taggart felt that Ms Gallacher was ascribing all the blame for the current difficulties to her and was not interested in working to resolve matters.
It was decided that Ms Gallacher had lost confidence in Ms Taggart and that she would therefore have to leave the business. Ms Gallacher was told this at her annual appraisal and was not offered any right of appeal. Ms Gallacher subsequently claimed that she had been unfairly dismissed.
The Tribunal rejected Ms Gallacher’s claim. It held that Ms Gallacher had adopted a ‘truculent’ attitude in her discussions with Ms Taggart who had indeed lost all confidence in Ms Gallacher. Their differences meant that the relationship could not be rescued and that any attempt to resolve their issues through mediation or further discussions would have been futile.
Ms Gallacher’s appeal to the EAT focused on arguing that the employer had not followed a reasonable procedure before deciding to dismiss. Ms Gallacher had been given no warning that dismissal was being considered and no opportunity to reflect on her approach in the light of that fact. She had been told of the decision at a meeting arranged for some other purpose and had been given no opportunity to appeal or put her side of the argument.
The EAT rejected the appeal. They held that this was one of those rare cases in which the employer was entitled to conclude that it would have been futile to follow a procedure before deciding to dismiss. Ms Gallacher did not dispute that her relationship with Ms Taggart had broken down and the Tribunal found that she had displayed no interest in resolving the situation. This was a breakdown in trust between two senior managers and the employer had been entitled to find that following something akin to a disciplinary procedure would have served no useful purpose.
3. Misconduct dismissals and clarifying the real reason for dismissal
In Greenberg v DPP Law Ltd, the employee, Mr Greenberg, was a senior solicitor practicing in the criminal law. He represented clients who were funded by legal aid under a contract between his firm and the Legal Aid Authority. It was an important term of that contract that the solicitors would not charge any additional fees – known as ‘topping up’ fees - to legal aid clients.
Mr Greenberg was working on a case involving an 18-year-old boy accused of grievous bodily harm. When Mr Greenberg succeeded in obtaining bail for him, the boy’s father gave him a thankyou card which turned out to contain £300 in cash. Mr Greenberg sought advice from the Law Society ethics helpline which said that it was not unethical to keep the money, provided it was clear that the money was not an inducement or incentive. Mr Greenberg also asked the opinion of the firm’s compliance officer who said: ‘I’ll leave it to your conscience’. Mr Greenberg kept the money.
Sometime later, Mr Greenberg had another encounter with the boy’s father – this time outside a pub where Mr Greenberg had been trying to interview witnesses. After a conversation, the father dropped £150 in cash through Mr Greenberg’s car window and walked away. Later, the father mentioned the sum to the barrister in the case and suggested that it had been intended to cover his expenses and to encourage him to: ‘hurry up a bit’. The barrister reported the matter to the Legal Aid Authority.
Mr Greenberg’s firm then dismissed Mr Greenberg for gross misconduct. They decided that Mr Greenberg had acted in breach of the firm’s legal aid contract, which risked the firm losing the contract altogether, and that he had also brought the firm into serious disrepute with the Legal Aid Authority. Mr Greenberg later claimed unfair dismissal.
The Tribunal dismissed Mr Greenberg’s claim. They held that it was fair of the employer to conclude that Mr Greenberg knew or ought to have known that the £150 dropped through his car window could have been perceived as a top up payment in breach of the legal aid contract.
On appeal, however, Mr Greenberg argued that this was not the basis on which he had been dismissed. The employer had expressly dismissed him on the ground that the payment was a breach of the legal aid contract – not that he should have realised that it might be perceived as such. The EAT agreed. The Legal Aid Authority had subsequently found that there had, in fact, been no breach of the contract. That did not mean that the employer could not have reasonably concluded otherwise, but it should have prompted the Tribunal to look carefully at the evidence that led the employer to conclude that there had been a breach. Instead, the Tribunal had concluded that the employer could have justified dismissal based purely on Mr Greenberg’s negligence.
But it was the employer’s actual reason for dismissal that mattered, not an alternative reason conjured up by the Tribunal. The case was sent back to the first instance employment tribunal to reconsider whether the evidence really did give the employer reasonable grounds for concluding that Mr Greenberg had accepted a top-up payment.
4. Constructive dismissal – a complex issue for employees and employers
In Phoenix Academy Trust v Kilroy, Mr Kilroy was the acting principal of a school that was taken over by a new academy trust. Mr Kilroy was accused of gross misconduct and believed that the charges against him had been manufactured in an attempt to force him out. A disciplinary hearing was held at which Mr Kilroy was told that there was a need for further investigation and that he would remain suspended in the meantime. Mr Kilroy concluded that his relationship with his employer was now beyond repair and instructed solicitors to send a resignation letter on his behalf indicating that he intended to claim constructive dismissal.
Before the letter was received, however, Mr Kilroy was told over the phone that he was being dismissed with immediate effect. It was accepted by both sides in the case that this meant that the resignation letter that he had sent had no effect. In a bid to clear his name, Mr Kilroy decided to appeal against the decision – although he also made it clear that he had no intention of returning to work. In the event, his appeal was successful – albeit after a delay of more than a month and on the basis that he should be given a final written warning and a performance improvement plan - and the employer reinstated him. Mr Kilroy refused to return to work and claimed constructive dismissal.
The Tribunal found that there had been little, if any, substance to the accusations of misconduct made against Mr Kilroy and held that the employer had indeed acted in breach of the implied term of mutual trust and confidence. The tribunal upheld the constructive dismissal claim and the employer appealed.
On appeal, the employers argued that by invoking the appeal procedure, Mr Kilroy had ‘affirmed the contract’. An employee faced with a fundamental breach of contract by an employer has the choice to either resign and claim constructive dismissal or decide to remain employed. Once the employee has shown that they intend to stay, they are said to have affirmed the contract and lose the right to claim constructive dismissal. The employer relied on the established principle that an employee who appeals against a dismissal is asking to be reinstated. The EAT agreed that this meant that when Mr Kilroy appealed against the decision to dismiss him – even with the caveat that he had no intention of returning - he had indeed affirmed the contract.
That was not the end of the story, however. The Tribunal had been sharply critical of the way in which the employer had approached the appeal – both in terms of the time it took to reach a decision and also the substance of the decision itself. These matters arose after Mr Kilroy had affirmed the contract and it was necessary to consider whether they amounted to a fresh breach of the implied term of trust and confidence – either in their own right, or when taken alongside the employer’s earlier failings. The case was therefore sent back to the same Tribunal to consider the point.
5. Wrongful Dismissal – what damages are employees entitled to?
In Hall v London Lions Basketball, Mr Hall was a professional basketball player who resigned when his employer failed to pay him the wages that it owed him. Mr Hall claimed a constructive wrongful dismissal and that claim was later upheld by the Tribunal.
The tribunal found that Mr Hall had been employed for a fixed term which had been due to expire some three months after his resignation. Mr Hall had argued that he should be awarded the pay he would have received in that period. The Tribunal noted, however, that there was a term in Mr Hall’s contract which allowed him to terminate his employment with 14 days’ notice if there was a serious breach of contract on the part of the employer. The Tribunal therefore limited his damages to 14 days’ pay.
On appeal, the EAT held that this was the wrong approach. In a breach of contract claim, damages are calculated to put the employee in the same position that he or she would have been in if the contract had been properly performed. There is a longstanding rule that the calculation assumes that the employer would have performed the contract in the least onerous way possible. So, in a normal wrongful dismissal case where the employee has been dismissed without notice, damages are based on what the employee would have received if the employer had given the minimum notice required under the contract. In this case, however, there was a fixed term contract with no provision allowing the employer to bring the contract to an early end by giving notice. That meant that the starting point was to consider what the employee would have received if the contract had been allowed to run its full term. The employee’s right to terminate the contract with 14 days’ notice was not a provision that the employer could insist on him using. Nor did it alter the fact that the employee was entitled to terminate the contract without notice in response to the employer’s fundamental breach. The EAT found that the tribunal had therefore been wrong to limit Mr Hall’s damages to 14 days. The correct measure was the amount that Mr Hall would have earned over the remainder of the contract, with a reduction made for any earnings received from other sources in that time.
Before dismissing an employee for redundancy, an employer acting fairly will take reasonable steps to look for an alternative – including offering the employee a chance to be considered for suitable vacancies elsewhere in the organisation.
In Aramark (UK) Ltd v Fernandes, Mr Fernandes was facing dismissal for redundancy. In addition to its regular workforce, the employer also maintained a pool of individuals from whom it would draw upon to cover any shortages. Those in the pool were not employed, but at least had the prospect of some paid work and, for some, this involved contracts for an extended period of time. At tribunal, Mr Fernandes argued that he should at least have been given a place in this pool of workers and the Tribunal subsequently agreed. The tribunal held that it was unfair of the employer to have dismissed Mr Fernandes for redundancy without adding him to the pool.
However, on appeal the EAT ruled that the dismissal had been fair. The question in an unfair dismissal claim should be whether the employer had behaved reasonably in treating (in this case) redundancy as a sufficient ground for dismissing the employee. Placing Mr Fernandes in the pool of additional labour would not have prevented his dismissal. A place in the pool could not be equated with an alternative role that would have meant that there was no need for a dismissal. The decision not to place Mr Fernandes in the pool, whether reasonable or not, was therefore irrelevant to the question of whether or not it was reasonable for the employer to dismiss him.
7. Equal pay – a complicated case
An employer can defend an equal pay claim by showing that the difference in pay between a man and a woman employed to carry out equal work is genuinely due to a ‘material factor’ that is not the difference in sex. If, for example, the difference is genuinely due to the fact that one has better qualifications or more experience and expertise than the other, then the equal pay claim will fail (unless the reason for the difference is in itself discriminatory).
In Walker v Cooperative Group, Ms Walker was appointed to the role of Group Chief HR Officer in 2014 on a salary of £425,000. This was considerably less than two male executives on the board and, when she left the Coop in 2017 as a result of a restructure, she pursued an equal pay claim against her former employer.
The basis of her claim was that, within a year of her salary being set by the employer’s remuneration committee, a detailed analysis of executive roles was carried out which rated her job more highly than two other executives who were being paid more than her. The employer accepted that the roles were equal but argued that the difference in pay was due to a number of non-discriminatory factors that had been taken into account by the remuneration committee. These included her relative lack of experience at a senior executive level and the fact that they were both employed in key roles that were perceived as vital to the survival of the employer’s operation which had just been refinanced and was facing important governance challenges.
The Tribunal accepted that these factors applied when the remuneration committee initially set the salaries of the executives concerned, but held that these became less relevant over the course of the following year. By the time of the job evaluation, the importance of the higher paid executives’ roles had declined relative to that of Ms Walker. The Tribunal, therefore, held that the factors relied on by the employer to explain the difference in pay were no longer ‘material’ and upheld Ms Walker’s equal pay claim.
On appeal, the EAT reversed this decision and Ms Walker then appealed to the Court of Appeal. The case turned on what was meant by ‘material’ in the employer’s ‘material factor defence’. Ms Walker argued that a factor was only material for as long as it continued to be relevant and the Tribunal had been entitled to find that, within a year of her salary being set, the factors relied on no longer applied. The employer argued that ‘material’ in this context merely meant that it genuinely explained the difference in pay. Even after the job evaluation, the difference in pay between Ms Walker and the other executives was the result of the initial decision made by the remuneration committee on the basis of the factors that had been set out. They remained ‘material’ because they continued to explain the reason for the salaries being set at different levels.
The Court of Appeal agreed with the employer. The employer did not have to show that the difference in pay was fair or justified – merely that it was not due to the difference of sex. As long as the material factors relied on by the employer continued to explain the difference in pay, they could be relied upon. The first instance Tribunal would have to reconsider the claim on that basis.
8. Agency Workers and the meaning of “temporary worker”
The Agency Workers Regulations 2010 give a number of important rights to agency workers. An agency worker is defined as someone who is supplied by a ‘temporary work agency’ to work ‘temporarily for and under the supervision and direction of a hirer’. So, it is clear that the Regulations only apply to temporary workers - but what does ‘temporary’ mean in this context?
In Angard Staffing Solutions Ltd v Kocur, the workers in question were recruited to work on assignment to the Royal Mail. Angard is a wholly owned subsidiary of the Royal Mail and had no other clients. The workers it engaged were provided to the Royal Mail to cover for sickness and other absences, as well as to cope with fluctuations in the level of work.
A range of issues arose relating to the facilities that Angard workers were given and how they were treated in comparison with Royal Mail staff. The question was whether or not the 2010 Regulations applied. Angard argued that they did not because the workers had been recruited on an open-ended basis to provide work for a single client. In practice, they had been provided with at least some work in almost every week of their employment by Angard. They were not, therefore, ‘temporary’ and did not come within the scope of the Regulations.
The Tribunal rejected this argument. While the workers had consistently provided work for the Royal Mail, they had done so through a series of individual engagements, each one of which was for a specific period of time. Their relationship with Angard was not a temporary one, but their assignments were temporary and that meant that they were covered by the Regulations.
The EAT agreed. It was not the workers’ relationship with the agency that had to be temporary, but the assignments under which they were supplied to the end user. Temporary means for a fixed period or the duration of a particular project – as opposed to being open-ended. The fact that there was a steady stream of assignments and that they were all for the same end user did not alter the fact that each assignment was limited in that it was covering for sickness absences or particularly busy periods.
9. And finally… National Minimum Wage
The rules relating to the National Minimum Wage are complex. One reason for this is the need to ensure that employers do not seek to avoid their obligations by nominally paying workers the correct rate, but then making artificial deductions that effectively reduce the real amount of the wage to below the minimum level.
For example, if a worker is required to purchase equipment from the employer and the cost of that is deducted from wages, then the amount of the deduction does not count towards the minimum wage. If the employer provides workers with accommodation, then the Regulations allow the employer to offset a maximum of £8.20 per day from the worker’s wages to cover this. A deduction of any higher amount – even if genuinely reflecting the rent paid by the worker – will be treated as reducing the worker’s remuneration and may result in the employer paying less than the minimum wage.
In Commissioners for HMRC v Ant Marketing Ltd, the employer was served with a notice of underpayment by the HMRC in relation to two deductions that were made from employees’ wages. The first related to accommodation provided by the owner of the business through a separate company. Employees were not obliged to live in that accommodation which was provided on a commercial basis quite separate from their employment. Some of them, however, chose to pay their rent by having their employer collect it directly from their wages and pay it to the landlord. The amount deducted obviously exceeded the small accommodation offset that is allowed, and, if it did not count towards the employee’s wages, would mean that they were being paid below the minimum wage.
The other deduction related to the recovery of training costs if the employee left employment within the first year of employment. A deduction on this basis could be as much as £350 and, if treated as a reduction in the employee’s wages, could easily mean that their final pay packet fell below minimum wage levels.
An Employment Tribunal held that the deduction from rent did not have the effect of reducing employees’ remuneration. The accommodation was not provided by the employer but by a separate company and was not related to work. The deduction for training costs, however, did amount to a reduction in remuneration. The employee was obliged to undergo the training in order to perform the job. Those who left employment within a year were essentially charged for that training via a deduction from their pay and that therefore amounted to an expense incurred in respect of their employment.
On appeal, the Employment Appeal Tribunal agreed on both points. The EAT rejected the suggestion that the employer in this case could be defined widely enough to include not only Ant Marketing Ltd but also the owner of the business and his residential property company. The EAT warned, however, that an employer could not get around the accommodation offset merely by setting up a separate company to act as landlord. It would, in that case, be open to a Tribunal to hold that this still amounted to arrangements for the provision of accommodation made by the employer.
As for the training costs, the employer argued that this was a not a deduction in respect of expenses because the employee was not obliged to pay anything when the training was actually provided – and no deduction was made if the employee stayed for at least a year after the training was completed. The EAT rejected this. The fact that the employer chose not to make a deduction if the employee stayed for over a year did not alter the nature of the deductions that were actually made. They amounted to an expense that the employee was obliged to incur in order to do the job and the sums deducted could not therefore count towards the employee’s overall remuneration.