Does redundancy consultation matter any more?

From the number of enquiries I deal with relating to redundancy at the moment, there appears to be an increasing incidence of employers failing to consult potentially redundant employees, and relying on the argument that “they would have been made redundant anyway, and the statutory procedure has been done away with now, hasn’t it?”, in an attempt to speed the process up. That is in many cases far too hasty and could end up being very expensive! Tribunals are loath to support employers in that situation where absolutely no consultation has taken place. What if two employees were prepared to do a 50/50% jobshare? The Tribunals won’t simply accept the argument that “that wouldn’t work in our company” unless there is clear and convincing evidence that that is the case. Are you sure that the redundancy pool has been correctly decided on? Some posts which are deemed to be stand-alone posts, (i.e. where only one person carries out that function, so there is no need to carry out a selection process) turn out not to be so, because there is someone else only slightly more senior who carries out essentially the same function, or someone at the same level who works at the branch down the road who does the same job.
It is a sad reflection on contemporary society that the law has become so complex that a sensible, fair minded employer ( or employee for that matter) cannot either understand the law or get through the redundancy process without ending up in Tribunal, but in my opinion that’s where we’re at.
Which bit of redundancy do you find most difficult to follow?

newsletter – errors in the Equality Act?

Has Parliament (and the law draftsman) got it wrong?

Our October newsletter was largely given over to looking at the new Equality Act.  From 1 October 2010 this has replaced in one single Act the previous mish-mash of anti-discrimination Acts and Regulations enacted since 1970 so that the old Equal Pay Act, the Sex and Disability Discrimination Acts, the Race Relations Act, the age discrimination regulations and so on are all replaced.  In most cases the practical effect of the changes for employers and employees will be negligible or non-existent although (as noted in last month’s newsletter) there are some important conceptual changes and of course all the section and paragraph numbers are different.

This note considers a couple of anomalies which have crept in with the new wording.

The first is of considerable practical importance.  It concerns “out of court” agreements made between employers and employees when settling disputes.  The basic law remains unchanged: such agreements are generally not fully valid unless either an ACAS conciliation officer has been involved or specified statutory conditions have been complied with.  The specified conditions which ensure that a “compromise agreement” of an employment dispute will be fully valid include that the agreement must be in writing, that it must relate to specified problems and that the employee must have received advice about its terms and effect from an independent adviser.

The first of the two anomalies noted here concerns qualification as an ”independent adviser”.  Unfortunately the draftsman of the Equality Act 2010 has used a slightly different definition from the one used in the now replaced anti-discrimination Acts and regulations. The new definition specifies that a person cannot be an “independent adviser” for this purpose if he or she is acting for a “person who is a party to the contract or the complaint” (anoraks should go to Equality Act 2010 s.147(5)(d)). If the wording means what it says, it  it is impossible for the employee to receive advice from an “independent adviser” because the adviser does not count as independent if he or she is acting for the employee!  The result, if this means what it says, is that compromised agreements can no longer be valid in discrimination cases .

No doubt the draftsman intended to specify that a person cannot be an “independent adviser” if he or she is acting for the employer.  That was the case in the now replaced anti-discrimination Acts and regulations and is still the case for compromise agreements settling unfair dismissal and other non-discrimination complaints under the Employment Rights Act 1996.

The Law Society has already notified the government of its concern on this issue, so hopefully this first anomaly will soon be corrected.  And anyway in the past judges have shown themselves adept at inventing ingenious ways of correcting mistakes made by Parliament in the wording of Acts, so perhaps the courts and tribunals will find a way of sorting this matter out if the government does not do so.

A second anomaly in Equality Act 2010 is unlikely to be of much practical importance.  It concerns the time-limits for presenting discrimination claims to an employment tribunal.  There is no change to the basic time limit which remains at three months starting with the date of the act to which the complaint relates. However there is a change to the power of an employment tribunal to extend this three months where it is “just and equitable” to do so.  Under pre 1 October 2010 law this was a only a power to extend.  Under the new law (again for anoraks, Equality Act 2010 s.123(1)(b)) an employment tribunal has power to set any time limit which it “thinks just and equitable”. So, at least in theory, an employment tribunal now has power to reduce the normal three month time limit for presenting a discrimination claim if it thinks that would be just and equitable.

The existence of the two anomalies noted above should not be allowed to detract from the value of the job done by those who drafted the Equality Act 2010.  It is no mean feat to have replaced such a variety of Acts and regulations with a single piece of relatively short legislation. After an initial bedding in period during which lawyers and others may struggle to find their way around the new Act,  what might be called this “Harmanisation Act” should be generally welcomed.  If the only problems are the minor wording anomalies noted above it will be a remarkable achievement.

newsletter – health and safety simplification

In June 2010 the Coalition government appointed Lord Young to undertake a “review of the operation of health and safety laws and the growth of the compensation culture.” In November the Government dispensed with his services (see previous item concerning qualifying periods for unfair dismissal) but that is another story. In any event his report, “Common Sense – Common Safety” was published in October with a foreword by the Prime Minister.  While the report is interesting in itself, the foreword by David Cameron  may be more significant as an indication of changes which can be expected.  The major part of his foreword is as follows:

“Good health and safety is vitally important. But all too often good, straightforward legislation designed to protect people from major hazards has been extended inappropriately to cover every walk of life, no matter how low risk.

As a result, instead of being valued, the standing of health and safety in the eyes of the public has never been lower. Newspapers report ever more absurd examples of senseless bureaucracy that gets in the way of people trying to do the right thing and organisations that contribute to building a bigger and stronger society. And businesses are drowned in red tape, confusion and the fear of being sued for even minor accidents.

A damaging compensation culture has arisen, as if people can absolve themselves from any personal responsibility for their own actions, with the spectre of lawyers only too willing to pounce with a claim for damages on the slightest pretext.

We simply cannot go on like this. That’s why I asked Lord Young to do this review and put some common sense back into health and safety. And that’s exactly what he has done.

I hope this review can be a turning point. Lord Young has come forward with a wide range of far reaching proposals which this Government fully supports. We’re going to curtail the promotional activities of claims management companies and the compensation culture they help perpetuate. We’re going to end the unnecessary bureaucracy that drains creativity and innovation from our businesses.

And we’re going to put a stop to the senseless rules that get in the way of volunteering, stop adults from helping out with other people’s children and penalise our police and fire services for acts of bravery. Instead, we’re going to focus regulations where they are most needed; with a new system that is proportionate, not bureaucratic; that treats adults like adults and reinstates some common sense and trust”.

Recommendations in the report itself include amongst many others:

  • Employers should no longer be obliged to carry out risk assessments for employees working from home in a low hazard environment.
  • The risk assessment procedure for low hazard workplaces such as offices, classrooms and shops should be simplified. The HSE should create simpler interactive risk assessments for low hazard workplaces, and make them available on its website.
  • The current raft of health and safety regulations should be consolidated into a single set of accessible regulations
  • There should be a requirement that all health and safety consultants should be accredited to professional bodies.

This last recommendation is already being implemented.  An Occupational Safety Consultants Register is to go live in January 2011 with details of health and safety consultants who meet “…the highest qualification standard of recognised professional bodies, and who are bound by a professional code of conduct that require them to only give advice that is sensible and proportionate”.

Finally in light of the Prime Minister’s comment that “Newspapers report ever more absurd examples of senseless bureaucracy” it is noteworthy that at a conference at the Chartered Insurance Institute a few days after his report was published, Lord Young said that he had already heard from contacts at the Daily Mail and the Sun newspapers that he will ruin their livelihood…

newsletter – working time, rest breaks and holidays

Statutes fixing wages and/or hours of work have existed in this country since the 14th century (the 1349 Ordinance of Labourers and the 1351 Statute of Labourers both made rules on the subject).  The 1998 Working Time Regulations, as amended, are therefore just the latest set of rules.  They were made only after the UK lost a legal battle with the European Commission, the latter having somewhat cheekily, after opposition from the UK in the early 1990s, switched the then proposed Working Time Directive from being introduced as a social policy measure requiring unanimity to introducing it as a health and safety measure which required only a majority vote to be enforceable on all Member States.

The Working Time Regulations continue to give rise to problems, notably in relation to rest breaks and holiday entitlement. Two recent cases are noteworthy.

In one,  the Northern Ireland Court of Appeal has ruled that a nurse whose rest breaks were taken on site but away from the place where she performed her duties, and during which she was not to be interrupted save in exceptional circumstances, did count as rest breaks for the purposes of the Regulations.  The nurse had argued that the rest breaks counted as time spent on call which, following a series of rulings by the European Court of Justice, would count as working time.  Those who would like to read the full judgment can click here on Martin v Southern Health and Social Care Trust.

In the second case the Inner House of the Scottish Court of Session (equivalent to the English Court of Appeal) has held that there is no rule that entitlement to annual holiday must come out of working time.  Any other conclusion could produce absurd results in the case of “shut-down trades” and of teachers who, for example, could insist on taking holiday during term time if the Regulations were interpreted to mean that a worker has the right to insist on holidays being taken during working time.  Similarly, if that were the correct interpretation professional footballers would be entitled to take annual leave during the football season rather than during the summer break.

This case was brought not by teachers or professional footballers but by offshore workers on oil and gas rigs in the North Sea.  Typically they worked two weeks offshore, followed by a two week “field break” on land. Their employer (which, incidentally, was the company involved in the BP Gulf of Mexico disaster earlier in 2010) required them to take their annual paid holiday during these “field breaks”.  The effect was that the workers would work off shore for a full 26 weeks each year as had been originally intended.  The workers argued, however, that on a correct interpretation of the Working Time Regulations they were entitled to take their annual leave out of the time when they would otherwise be at work - the effect being, in essence, that they would work off shore for only 22 weeks each year. Although they won at the original tribunal, the workers lost this argument both in the EAT and most recently at the Court of Session.

Interestingly, given the history noted above of how the EU Working Time Directive came to be passed, one of the points on which the Court of Session focussed was that the Directive was a health and safety measure.  As such it was designed to ensure that workers get sufficient rest. Bearing this in mind the Court of Session ruled that on a proper interpretation of the British Regulations annual holiday cannot come out of “rest periods” as defined but can come out of (in this case) field breaks and that this is consistent with the EC Directive being a health and safety measure.

Those who would like to read the full judgment can click here on Russell & Ors v Transocean International Resources Ltd & Ors

newsletter – maternity leave changes and the EU

The Pregnant Workers Directive 92/85/EC requires EU Member States to ensure that employed pregnant women and new mothers are guaranteed income during a 14 week maternity leave period at least equivalent to that to which they would be entitled if off work sick.  The European Parliament voted on 20 October 2010 in favour of plans to increase to 20 weeks this current 14 week period.  A compromise “18 week” suggestion was rejected.

At the same time the Parliament has voted to extend the requirement for compulsory maternity leave from two to six weeks and for paternity leave pay to be at full rate of pay for two weeks.

General details are available on the Europa website “Extending maternity leave to 20 weeks with full pay“.

The Parliament’s proposals will now pass to the Council of Ministers. Given the controversial nature of the proposals it is likely that there will be pressure from Member States to ensure that they are amended before they are formally adopted – and it is even possible that they may be rejected.  It can also be argued that the proposals could be counter-productive from the point of view of feminist MEPs in that raising the amount of fully paid maternity leave from 14 to 20 weeks will tend to drive private business away from employing young women.

According to the Federation of Small Businesses (FSB), the proposals could end up costing small businesses £7,140 for an employee on an average wage of £25,428.

Tina Sommer, EU and International Affairs Chairman of the FSB said:

“Small businesses are known to be flexible employers and it is unfortunate that maternity and paternity leave is one of the biggest barriers for them when looking to take on staff. The FSB fears that that these changes will result in an increase in the cost of maternity and paternity leave and will mean these costs have to be shared between government and the employer, at a cost of more than £7,000 to a small business – placing a further strain on cash-flow.”

newsletter – possible changes to unfair dismissal and other law following BIS review

The length of service needed to qualify for unfair dismissal rights has been changed from time to time. It started at six months when unfair dismissal was “invented” in 1971. It was increased in 1980 to one year (two years for small firms of 20 or less employees) and then to two years (for employees of any employer regardless of size) in 1985.  Then in 1999 it was reduced to the current one year (although rather confusingly the two year period was left, and still continues, for the right to claim statutory redundancy pay).

Newspapers have recently jumped on a remark made by Lord Young of Graffham on the BBC Today programme in which he said, under some pressure, that he would consider recommending to the Coalition government that the two year qualification period which operated from 1985 to 1999 should be reinstated. He noted in the BBC interview that “employment started shooting up again” after the qualifying period was increased to two years in 1985 (if you have speakers on your computer you can click to hear a rerun of the BBC interview with Lord Young).

It is worth noting this here as it would be easy to take Lord Young’s widely reported remarks out of context.

Lord Young was being interviewed following his appointment by the Prime Minister to prepare a new report “on how to make Government more small business and start-up friendly”. That appointment was confirmed in a document called “Backing Small Business” issued by the Department for Business on 1st November and it was that appointment which led to the BBC interview.  The document itself contains the usual platitudes about how the “Government is committed to a comprehensive effort to prioritise small businesses and those that run or aspire to run them”, and of course is none the worse for that, but it is not concerned with employment law (there is a separate ongoing review of employment law), does not spell out any detailed proposals and certainly does not include any suggestion that there may be a change to the unfair dismissal qualifying period.

None of this means that reinstatement of the previous two year qualifying period of continuous employment for entitlement to unfair dismissal rights is out of the question but it does mean that Lord Young’s comments should not be taken out of context.  Lord Young was keen to stress that he wanted the views of others on the matter and it is not a current proposal.

Of course, Lord Young rather burnt his boats as a result of his “never had it so good” and “so called recession” comments in a Daily Telegraph interview on 18 November.

For those interested the arguments in favour of and against increasing the qualifying period are along the following general lines:

In 1999, when it reduced the qualifying period from two years to one, the government’s view was that a year is a reasonable length of time for an employer to decide if a recruit is suitable for the job and that it is unreasonable for employees to be left in a state of uncertainty about the security of their employment for longer than that. It was also thought that a two year qualification period inhibited mobility – if it takes you two years to qualify or requalify for unfair dismissal rights you will think long and hard before changing jobs.

The counter argument is that requiring only a short period of qualification for obtaining unfair dismissal rights encourages employers not to take on additional staff at all. This argument was effectively the basis on which the House of Lords ruled in February 2000, in the then much publicised Seymour Smith case, that the previous two year qualification period had been “objectively justified” during the recession in 1991 even though it was sex discriminatory in that fewer women than men could qualify.

newsletter – pay reductions

Especially when times are tough, employers sometimes seek to impose wage reductions or other substantial adverse changes to terms of employment of staff.  Of course from an employment law point of view there is generally no problem if the employees concerned agree, however reluctantly, to accept the change(s) – which of course they may well do if the alternative is likely to be redundancy and accepting the change is the lesser of two evils.

An employee who does not agree adverse change(s) of any significance which are imposed anyway will be entitled to resign and bring a constructive dismissal claim (which may be a claim for unfair dismissal or breach of contract or both).  As a general rule compensation awarded in that type of situation will be less than it might otherwise have been on the basis that by rejecting the offer of continued or renewed employment the employee had not done everything that he or she could reasonably be expected to do to mitigate his or her loss.

However a recent case has shown that employers must not just assume that compensation will be reduced in such circumstances.

A Mr Banks won a constructive unfair dismissal claim against his then employer, Bloxwich Fencing Ltd.  Bloxwich appealed to the EAT.  One ground for appeal was that the tribunal had not reduced the compensation it awarded for the unfair dismissal to take account of the fact that Bloxwich had offered to reengage Mr Banks, albeit on worse terms than those on which he had previously been employed. Bloxwich argued that this showed that Mr Banks had failed to take reasonable steps to mitigate his loss and that therefore compensation should be reduced.

The EAT dismissed this argument. The EAT found that on the facts of this particular case relations between Mr Banks and Bloxwich Fencing had deteriorated to such an extent that it had been open to the original tribunal to conclude that it was not reasonable to expect Mr Banks to go back to work for them. That was enough to dispose of the employer’s argument.

For those who may want to read a transcript of the full judgment it is available here – Bloxwich Fencing Ltd v Banks, EAT.

newsletter – corporate manslaughter

Until April 2008 when (most of) the Corporate Manslaughter and Corporate Homicide Act 2007 came into force, a company could be convicted of corporate manslaughter only if there was evidence to find a single person guilty. For example, in the year 2000 prosecution which followed the Southall rail crash in which seven train passengers died, it was decided under the then law that a company could not be convicted of manslaughter by gross negligence in the absence of evidence establishing the guilt of an identified human individual for the same crime.  Indeed it is understood that only seven small organisations had ever been convicted of that offence.

The 2007 Act addressed the problem by enabling the courts to consider the overall picture of how an organisation’s activities were managed by its senior managers, rather than focusing on the actions of one individual. The intention was to make it easier to prosecute organisations – the 2007 Act makes no difference to the personal liability, if any, of company directors and employees.

Official Sentencing Guidelines on Corporate Manslaughter and Health & Safety offences causing death were published by the Sentencing Guidelines Council in February 2010.  They set out in detail the factors which a Court should take into account in passing sentence under the Act, including points such as considering “whether the fine will have the effect of putting the defendant out of business…; in some bad cases this may be an acceptable consequence”. In this connection, it is interesting that in October 2010 a fine of only £1 was imposed on a company called Glenmill Group (Developments) Ltd which was prosecuted under the Health & Safety legislation after a worker was killed as a result of a fall from faulty scaffolding.  The judge at Preston Crown Court  took into account that any significant fine would cause the Glenmill Group to go out of business (but the company was ordered to pay over £13,000 costs).

The proposed Corporate Manslaughter Act guidelines stress the seriousness of the offence and suggest that “…because it requires gross breach at a senior level, [it] will ordinarily involve a level of seriousness significantly greater than a health and safety offence. The appropriate fine will seldom be less than £500,000 and may be measured in millions of pounds”.

It was thought in 2009 that the first prosecution under the new Act would take place at Bristol Crown Court.  In a terrible accident in September 2008, Alexander Wright, a geologist working for a company called Cotswold Geotechnical Holdings Ltd, was killed when a pit from which he was taking trial soil samples collapsed on top of him. The company was charged under the 2007 Act.

In June 2009 Stroud magistrates remitted the case to Bristol Crown Court. The trial was due to begin there in August 2009 but was adjourned until February 2010.  It was then adjourned again and later was further adjourned until “around October” because of the ill-health of its main director. The case has now been adjourned once again, until 24 January 2011 and charges under the Health & Safety at Work etc. Act against the director personally have been permanently stayed, on account of his ill health.  Whether the case will ever come to trial may be in doubt as it seems that the solicitors representing the company are looking to have the case dropped altogether.

newsletter – “without prejudice” negotiations

As is well known the general rule is that “without prejudice” negotiations which have previously taken place between the parties to a legal action are not admissible as evidence in Court.  The reason for this, of course, is that it is in the public interest that people who are in dispute with each other should have the ability to speak entirely freely when trying to resolve the issues which are dividing them, without fear that what they say might later be used against them in court if they fail to reach a settlement.  Exceptions to the general rule are few - there is for example an exception where the exclusion of what was communicated in without prejudice negotiations would act as a cloak for perjury or blackmail.

In an important case last February the Court of Appeal stressed the point that exceptions to the general rule are very limited. By a two to one majority the Court of Appeal held that the general rule is so important that “the policy of protecting without prejudice communications [is] stronger than the policy of providing the judge with every conceivable help to arrive at a just solution”. It therefore held that evidence of what was said in pre-trial “without prejudice” negotiations which had resulted in an out of court settlement was not admissible in a subsequent dispute as to what exactly had been agreed in that settlement. While all parties accepted the general rule and the reason for it, it had been argued that in the interests of justice there should be an exception where evidence of what had taken place in without prejudice negotiations was required only to help a judge decide the meaning of an out of court settlement which had resulted from the negotiations.

The case in point had nothing to do with employment law.  However the principle it established was of such general importance, including importance in relation to out of court settlement of employment disputes, that an appeal to the Supreme Court was allowed.

The Supreme Court has now unanimously overruled the Court of Appeal.

In the case in question two companies, Oceanbulk and TMT, had entered into a written “Settlement Agreement” in relation to a disputed invoice. Prior to entering this agreement there were extensive discussions about the outstanding amount. Agreement was reached but subsequently Oceanbulk sued TMT claiming that it had defaulted on its obligations.  The new dispute centred on the parties’ different interpretations of what a particular clause in the Settlement Agreement meant. TMT argued that the clause was the result of a particular line of negotiation.  Although the negotiations were “without prejudice” TMT wanted to adduce details of them in evidence to demonstrate that its interpretation of the clause was in accordance with what both parties had intended it to mean. The High Court agreed with TMT but, as noted above, the Court of Appeal disagreed.

Now, at end October 2010, the Supreme Court has unanimously overruled the Court of Appeal and restored the original judgment of the High Court.

The Supreme Court has ruled that an “interpretation exception” should be recognised as an exception to the general “without prejudice” rule on the basis that “justice clearly demands it” – but was at pains to explain that the exception must not be extended “beyond evidence which is admissible in order to explain the factual matrix or surrounding circumstances to the court whose responsibility it is to construe the agreement…”.

In the Supreme Court Lord Phillips succinctly summed up the position as follows:-

“The principle to be derived from this appeal can be shortly stated. When construing a contract between two parties, evidence of facts within their common knowledge is admissible where those facts have a bearing on the meaning that should be given to the words of the contract. This is so even where the knowledge of those facts is conveyed by one party to the other in the course of negotiations that are conducted ‘without prejudice’.”

The lesson for employers and employees is clear: if a dispute goes to an employment tribunal it is only in very exceptional circumstances that the tribunal will hear evidence of what went on in “without prejudice” negotiations.

newsletter – Bribery Act

The Bribery Act 2010 introduces new criminal offences in connection with offering or receiving bribes.  It also abolishes the old common law offences of “bribery and embracery”.  The main new offences are those of offering a bribe, accepting a bribe, bribing a foreign public official and (importantly for this employment law newsletter) a new corporate offence of failing to prevent bribery. The Act also provides for senior officers to be guilty of an offence committed by a body corporate if it was committed with their consent or connivance – turning a blind eye may have been possible for Lord Nelson two centuries ago but it is unlikely to wash under the Bribery Act 2010.

According to an article in the Guardian shortly before the new Act received Royal Assent (the Guardian, 25th March 2009  “Bribery Bill finally reaches parliament”) only one UK company was prosecuted for foreign bribery during Labour’s 12 years in power.

The Bribery Act 2010 is not yet in force.  It was originally expected that it would come into force on 1st October 2010 but commencement has been postponed until, probably, April 2011.  Penalties for breach are severe – companies and individuals can face an unlimited fine.  Individuals can also be sentenced to up to 10 years’ in prison and be disqualified from holding directorships for up to 15 years.

Under section 7 of the 2010 Act “A relevant commercial organisation (“C”) is guilty of an offence … if a person (“A”) associated with C bribes another person intending (a) to obtain or retain business for C, or (b) to obtain or retain an advantage in the conduct of business for C”.

Importantly, it is a defence for C to prove that “adequate procedures” were in place designed to prevent persons associated with C from undertaking such conduct (there are also defences if the accused can prove that the otherwise forbidden conduct was necessary for the proper exercise of any function of an intelligence service, or the proper exercise of any function of the armed forces when engaged on active service).  In September 2010 the Ministry of Justice launched a public consultation on proposed formal “guidance on preventing bribery” to be followed in the New Year with publication of formal guidance as to what will be “adequate procedures”.  The consultation closes on 8th November.

The consultation document explains that “The guidance sets out six principles, each followed by commentary and explanation. The guidance is not prescriptive and is not a one-size-fits-all document. The question of whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case”.

The six principles are listed as:

  • Risk assessment (keeping up to date with bribery risks in “your sector and market”);
  • Top level commitment (establishing a culture in which bribery is unacceptable);
  • Due diligence (knowing your business partners);
  • Clear, practical and accessible policies and procedures (including encouragement of “whistleblowing” where appropriate);
  • Effective implementation (practising what you preach);
  • Monitoring and Review (including consideration of whether external review is appropriate).