changing the terms of a contract of employment

One of the employment law questions I am most often asked is whether an employer can insist on changing the terms of an employee’s contract of employment. I considered the law concerning the imposition of pay cuts in October 2011. The general principle is that a variation in contract terms which operate to the detriment of the employee is prima facie unfair and can lead to claims for damages for breach of contract and compensation for constructive unfair dismissal. The standard answer is that unilateral changes may be imposed as long as there is a genuine and compelling business reason to do so. In Garside & Laycock v Booth Mr Booth was the only one of 86 employees who refused to accept contract changes. The Employment Appeal Tribunal held that it was highly relevant that most staff had accepted the change. The decision also confirmed that the business reason for the change did not need to be vital to the survival of the business.

There are numerous ways in which employers can implement changes. One is to reserve within the contract of employment the right to vary employment terms to the extent required. This may avoid a claim for damages for breach of contract but can still leave the employer exposed to unfair dismissal claims. By far the best approach is to seek to vary terms by consent after negotiation. Indeed, any changes imposed without adequate negotiations will almost certainly be unfair. Some employers seek to assist the negotiating process by offering a “sweetener” such as a one off payment.

Another approach is to terminate employment and offer re-engagement on new terms. This has become increasingly popular but no-one should be under ay illusion that it is a soft option. There is still the risk of facing claims for unfair dismissal on the termination of employment.

Earlier this year the Employment Appeal Tribunal revisited the issue. In General Vending Services v Schofield Mr Schofield was asked to agree a pay reduction of £5000 along with changes to sickness and holiday pay as part of a reorganisation. He was one of five of some 35 employees who refused to agree to the changes. He was a technician who dealt with the maintenance and repairs of coffee machines in cafés. The employer wanted to win new business in the “roast and grind” sector which required prompt repairs. The maintenance and repairs team was therefore restructured to provide for quick call outs with technicians provided with all necessary tools for on site repairs. There would be weekend working in order to provide quick repairs. Part of the process involved grading employees according to their skills.

At his employment tribunal Mr Schofield was one of five claimants. The other four failed but he succeeded because changes in holiday and sickness pay had a particular impact on him (he had a poor sickness record). He was awarded compensation of £43,452.

The end of employment tribunal fees

In a surprise judgment handed down on 26 July the Supreme Court unanimously decided that charging claimants to bring employment tribunal claims was unlawful and the fees scheme (introduced in 2013) was quashed. The Government promptly acknowledged that it accepted the judgment and wasted no time in confirming that the fees have been scrapped. The Law Society Gazette described the judgment as a humiliation for the Government.

Commentators have described the judgment as being constitutionally significant, since it addresses the question of what is meant by “access to justice”. As such its ramifications could extend well beyond the relatively narrow issue of employment tribunal fees. In his lead judgment (which distinguished legal commentator Joshua Rozenberg described as “terrific”) Lord Reed began by recognising that relationships between employers and employees are “generally characterised by an imbalance of economic power”. He noted that tribunals “are designed to deal with issues which are often of modest financial value, or of no financial value at all, but are nonetheless of social importance”.

In 2011, the Government proposed the introduction of fees on the basis that (1) this would transfer some of the cost of the system from the general taxpayer to its users, (2) it could encourage early settlements and (3) that it would help to weed out weak and vexatious claims.

What happened following their introduction was “a dramatic and persistent fall in the number of claims brought in ETs…of the order of 66-70%”.

Lord Reed first considered whether the fees order was unlawful under English law. At paragraphs 66 to 85 of the judgment, headed “The constitutional right of access to the courts” he sets out a compelling analysis of what is meant by the rule of law and how it is inextricably linked with access to justice. He is concerned that these concepts may have become lost in favour of an ideological view that “…the administration of justice is merely a public service like any other, that courts and tribunals are providers of services to the “users” who appear before them, and that the provision of those services is of value only to the users themselves and to those who are remunerated for their participation in the proceedings”. His response is firm and clear:

Communicating notice of termination of employment – when does the notice period start?

In many situations the date on which someone receives notice of termination of employment and the corresponding date on which termination takes effect are neither here nor there. In other cases they can be critically important. One such case was recently considered by the Court of Appeal in Newcastle Upon Tyne NHS Foundation v Sandi Haywood.

Mrs Haywood was employed as an associate director of business development at Newcastle PCT from November 2008 to April 2011. She was on a salary of £84,446 p.a. and her contract provided for a minimum notice period either way of 12 weeks. Following a merger in April 2011 her contract was transferred to Newcastle Upon Tyne NHS Foundation. She was advised that she was at risk of being made redundant and a discussion meeting took place on 13 April 2011. It was confirmed at the meeting that no decision had been made about redundancy, alternative posts were considered and she was informed that she would be entitled to an NHS pension of about £200,000 if she was made redundant after 20 July 2011. She accepted that her post was redundant.

Mrs Haywood commenced sick leave immediately, brought on by the stress of the meeting. She commenced annual leave on 18 April and was on holiday in Egypt from 19 to 27 April. She remained on sick leave until 20 May 2011.

Her redundancy was confirmed. However, the key question left to be answered was whether she received her 12 weeks’ notice of dismissal before her 50th birthday on 20 July since that would have a significant effect on her pension entitlement. The employer maintained that notice was given that would expire before her birthday but she did not read the letter until her return on 27 April, so that if notice was calculated from that date it would expire after her birthday.

Notice was provided in a recorded delivery letter which was collected from the sorting office by her father in law on 26 April. There was also an email to Mrs Haywood’s husband’s email account , which was sent on 20 April at 10:55. A letter was also sent by normal post but this was disregarded as an effective method of communication. All the communications provided 12 weeks’ notice purportedly terminating on 15 July 2011. Mrs Haywood was also placed on garden leave. For the notice period to include her 50th birthday the notice would need to have been served by 26 April 2011. Mrs Haywood said that she opened the recorded delivery letter at 08:30 on 27 April and Mr Haywood did not read the email until 10:14 on the same day.

Sitting in the High Court in Leeds Judge Raeside QC decided that she was only given notice when she read the letter so that she remained employed up to and including her 50th birthday. She was therefore entitled to the better pension terms. The employer appealed and the matter was heard by the Court of Appeal in mid-February 2017 with judgment handed down on 17 March.

What are the likely implications of Brexit on UK Employment Law/HR practices?

Employers may not be aware that much of the current legislation in place to protect employee rights actually derives from the European Union – for example, working time regulations, rights of the employees on a business transfer (TUPE) and family leave rights to name but a few. Indeed some Politicians for the ‘Leave Campaign’ will no doubt have argued that such laws were inhibitive to British businesses and produced too many rules and regulations having a negative effect on both time and profits.

What is likely to happen?

In reality it is doubtful that the UK Government would look to repeal any employment law which implements minimum EU requirements, the reason being that many of these laws simply complement existing UK law (equal pay rights for example). In addition, much of our existing employment law simply reflects good/acceptable practice in business (or indeed life generally!) such as the right not to be discriminated against on the grounds of sex, age, disability etc. Furthermore some UK Laws actually go above and beyond the minimum requirements of EU legislation – in respect of holidays for example, the EU Working Time Directive 2003/88/EC only requires EU Member States to provide for a minimum of 20 days’ annual leave for employees, whilst the UK statutory minimum leave entitlement is actually 28 days inclusive of normal bank and public holidays.

As a final point it is worth noting that despite a (potential) Brexit, the UK will still need to maintain strong trading relations with Europe. If the UK is a member of the EEA (European Economic Area) it would be required to remain subject to many aspects of EU employment law.

In light of the above, whilst in my view the majority of employment law legislation will not be repealed or significantly changed, the UK Government may look to alter some employment law that UK businesses have struggled with. The following are areas that may be most susceptible to change:

end of the line for employment tribunal fees challenge (for now)

The challenge to employment tribunal fees brought by UNISON finally hit the buffers when Lord Justice Elias (pictured), delivering the lead judgment in the High Court, rejected the application. There were two grounds for the application. First, it was claimed to be unlawful in not complying with the EU principle of effectiveness because it was either impossible or exceptionally difficult for prospective claimants to bring a claim. Second, it was claimed that fees were indirectly discriminatory in that they placed women, ethnic minorities and the disabled at a substantial disadvantage.

In a controversial judgment Judge Patrick Elias, who has a strong background in employment law, observed that the reduction in the number of claims brought after the introduction of fees was “striking”. Before fees were introduced Employment Tribunals received an average of 48,000 claims per quarter. In the most recent recorded period (July to September 2014) that number had dropped to 13,612. Evidence from the CAB showed that fees made four out of five workers less likely to claim or deterred from claiming at all. Further, over four in ten of those with employment problems had a household income of less than £46 per week after essential bills.

The Government contended that other factors, such as the introduction of ACAS compulsory conciliation, might have contributed to the reduction. Regular readers know my views about the effectiveness of the new ACAS scheme and even the Government’s own figures concerning the operation of the scheme cannot justify any significant impact.

However, the main reason why the application failed was the lack of tangible evidence “that any individual has even asserted that he or she has been unable to bring a claim because of cost”. The most contentious part of the judgment then followed:

The question many potential claimants have to ask themselves is how to prioritise their spending: what priority should they give to paying the fees in a possible legal claim as against many competing and pressing demands on their finances? And at what point can the court say that there is in substance no choice at all? Although Ms Monaghan would not accept that this is the task facing the court, it seems to me that in essence that is precisely what the court has to do. In that context, as Moses LJ said in the first Unison challenge, it is not enough that the fees place a burden on those with limited means. The question is not whether it is difficult for someone to be able to pay – there must be many claimants in that position – it is whether it is virtually impossible or excessively difficult for them to do so. Moreover, the other factors which I have identified as potentially inhibiting a worker from pursuing a claim may reinforce the conclusion that the risks inherent in litigation are not worth taking. These factors engender a cautious approach to litigation but do not compel the inference that it would be impossible in practice for some of these claimants to litigate.

This part of the judgment has led to considerable debate which centres around the widely held view that judges are out of touch with the real world and do not understand the financial strictures which blight many people, particularly low paid workers. Some have even gone so far as to compare Judge Elias’ salary with many of those contemplating proceedings and questioning whether the judge was able to understand such problems in practical terms.

A particularly strident critic is employment lawyer and blogger Kerry Underwood who took the opportunity to write A Christmas Carol by the High Court in which he takes aim at what he perceives to be the obvious inequities demonstrated by the judgment.

what do the main political parties have in mind for employment law?

With the countdown to next May’s general election well under way and the party conference season behind us, now is a good time to look at what (if anything) the main political parties have in their pre-manifestos or policy briefings concerning employment law.

Conservatives
Nothing to see here! Having reduced access to employment protection by reverting to the two years’ qualifying period for protection from unfair dismissal and introducing fees for employment tribunals, the only policy announcements of note concern proposals to curb industrial action and zero hours contracts. The proposals concerning industrial action appear pretty reasonable: (i) the ballot must have been recent (industrial action took place this month based on a ballot in 2011) and (ii) there should be a minimum 50% turnout. It seems to me that these requirements should not be unduly onerous to comply with and will result in industrial action having a greater impact on the basis that there is a genuinely significant mandate and that this has been obtained recently.

I have already covered the proposal to ban exclusivity in zero hours contracts and the Government is currently consulting about how to put in place suitable anti-avoidance measures. There seems to be a consensus that zero hours contracts have been used to conceal poor and exploitative working practices and I’ve written another article this month about Sports Direct and the need for openness.

Labour
Unsurprisingly, Labour has focused on inequalities in the workplace, including the need for diversity monitoring, specifically highlighting social background and equal pay for women. Public sector employers may be required to publish information concerning the social background of employees while companies with over 250 employees may be required to publish the average pay of male and female employees, regardless of whether any equal pay issues have been identified in the organisation.

There is also a plan to increase the minimum wage from the current £6.50 and hour to £8 an hour by 2020. As commentators have pointed out, although it’s a good headline, the increase is not in fact much more than would be required to keep in line with predicted inflation.

Labour intends to “do something” about Employment Tribunal fees but precisely what remains unclear. There have been suggestions of a sliding scale according to the wealth of the individual to scrapping fees completely. However there has also been an announcement that there will be wholesale reform of the employment tribunals system so the issue may be academic. What we do know is that Labour is determined that reform will ensure that “affordability is not a barrier to justice”.

There are also plans to increase the number of apprenticeship schemes with the aim that “as many young people will do apprenticeships as go to university”. Finally, in his conference speech, one part that Ed Miliband did remember was an extension of employment rights (or perhaps more accurately quasi-employment rights) to Britain’s five million self-employed. Now that would be a radical development and would undoubtedly keep employment lawyers very busy for years to come.

what is the future of employment tribunals?

That is the question that was asked by former President of the Employment Tribunals of England and Wales in a speech to The Law Society last June. It has turned out to be a timely question given the near-collapse of the current employment tribunal system following the introduction of fees, mixed reports about ACAS early conciliation (as I predicted) and the announcement by Chuka Umunna at the TUC Conference this month that, if elected, Labour plans a complete overhaul and perhaps even replacement of employment tribunals.

Tribunals as we know them were introduced in 1971 as a “cheap and informal” alternative to conventional court proceedings. As I have pointed out on many occasions they have become and expensive and complex alternative, to the extent that many would now prefer litigation in the county courts. It is therefore reasonable to suggest that their raison d’être has been undermined over time. It is also a cause of some concern that a significantly higher percentage of employment tribunal judgments than county court judgments are successfully appealed. We seem to have come to the point that all participants in the employment tribunal process, apart from those that have a vested interest, are ready for a change.

I have suggested on many occasions that employment claims should be dealt with in the county court on the basis that the respective processes are barely distinguishable in terms of the key elements of dealing with a claim – notice of claim, defence, schedule of losses, disclosure of documents, exchange of witness statements, exchange of legal arguments, advocacy, evidence in chief and cross examination, summing up and the delivery of a judgment. Indeed, the terminology – “judge”, “judgment” – has been merging in recent years.

expiry of fixed terms – do they count for consultation duties?

Fixed term contracts have become very popular in the public sector, not least as the result of the need for strict budgeting and frequent funding reviews. This is nowhere more so than in the academic world. University of Stirling v University & College Union deals with whether fixed term workers whose contracts are not being renewed should be counted when totting up the number of employees being made redundant at one time for the purpose of working out whether the duty to carry out collective consultation is triggered. As most readers will be are there are special procedures to be applied in the event that more than 20 redundancies are proposed at one establishment in any period of 90 days. This triggers an obligation to notify the Redundancy Payments Service and a minimum consultation period of 30 days. In this case the decision turned on whether the employees whose contracts ended were made redundant – which for this purpose means being dismissed
… for a reason not related to the individual concerned or for a number of reasons all of which are not so related.
The Court of Session concluded that non-renewal of the fixed terms was a reason related to the individual employee – so these dismissals did not count as redundancies. This conflicts with previous decisions of the Employment Appeal Tribunal which assumed that non renewal of a fixed term was not a reason relating to the individual (Lancaster University v The University & College Union [2011] IRLR 4).

consensual termination of employment cannot be assumed

Francis v Pertemps Recruitment Partnership Ltd concerns the dividing line between dismissal and termination of a contract by mutual consent. Mr Francis was a temp in the fortunate position of having a contract of employment with an agency – who supplied him to Transco to do administrative work. When the successors to Transco’s business, SGN, no longer required his service, he was given the choice of taking a redundancy payment or hanging on while the agency looked around for new work for him.
On his return to Pertemps on 12 December 2006 (yes 2006 – it has taken that long to resolve!) he had the options outlined to him (in rather inelegant terms):
Depending on how you feel yourself, whether you are happy for Pertemps to keep on looking for another assignment for you elsewhere, and we do have other bits and pieces in at the moment or things coming up in the New Year, that we’ll be happy obviously to speak to you about or…there might be an entitlement for you to a redundancy payment from Pertemps because of the work you have previously…for the last two and a half years…has come to an end.
He was also told that in either case he would receive a payment of two weeks’ pay, described as “notice pay”.
To start with he opted for staying on, but then he concluded the chances of something turning up were slim, and as he would not be able to claim jobseekers’ allowance if he remained with the agency, he changed his mind. He also lacked faith that he would be engaged through Pertemps to work in a possible opening at the Scottish Parliament. He was then given a letter which looked suspiciously like notice of termination:
Following your meeting of 12th December 2006 it is with regret that I confirm the position of Process Assistant will become redundant with effect from 12th December 2006…Please treat this letter as formal notice of redundancy…In accordance with your contract of employment you are entitled to two weeks notice, therefore your last date of employment will be recorded as 26th December 2006.
The letter was written by an HR advisor and is, on any reading, a pretty poor effort. Mr Francis exercised his right of appeal and in February 2007 his redundancy was confirmed.

a little more religion and employment law

Regular readers are aware that I have a particular interest in the frequently uncomfortable overlap between religion (and philosophical beliefs) and employment law. This month has provided more examples of moral dilemmas and what might at first appear to be unexpected outcomes which push the boundaries of jurisprudence, even in what would otherwise be mundane cases.
“I cannot tell a lie”
A tribunal in Birmingham has heard a case brought by a Christian telesales who complained that he was, contrary to his beliefs, required to lie in order to make sales. In Hawkins v Universal Utilities Ltd t/a Unicorn. Mr Hawkins commenced work on 22 February 2012. Things did not go well. He was told during his induction to “be creative” when speaking with PAs and secretaries and made a note that the trainer advised him “to lie”. He felt by the end of the first day “that he would end up in an employment tribunal”.
He was dismissed two days later because he had failed to meet his targets. His employment tribunal claim duly followed.
Significantly, the Tribunal found that a belief that an individual should not tell lies under any circumstances is a protected philosophical belief under the Equality Act 2010.