A family (business) at war

If, like me, you have been enjoying Kay Mellor’s comedy drama Girlfriends on ITV, you may have cringed at some of the artistic licence deployed when dealing with aspects of the age discrimination claim being brought by Miranda Richardson’s character against her boss (and lover), played by Anthony Head. However, it has neatly highlighted the particular difficulties that can arise when workplace disputes get a bit too close to home.

A real life family dispute has been playing out in the Manchester Employment Tribunal and, more recently, in the Employment Appeal Tribunal. There is a major clue in the name of the case: Mrs J Feltham, B Feltham (Maintenance) Limited and Ms H Feltham v Feltham Management Limited, Mr D Feltham and Mr M Feltham. Feltham Management is a long established family business, specialising in property management, particularly in respect of student lettings. Jane Feltham is the claimant. She has three brothers, David, Martin and Stephen, all of whom were respondents in the Employment Tribunal claim. They all worked for the family business which was founded by their father. Hazel, the adult child of David, worked for the company as a clerical assistant and Jane’s husband was Mr Eckersall, a self-employed joiner who did work for the company.

In August 2013 it came to light that Mr Eckersall had been sending inappropriate texts and Facebook messages to his niece, Hazel. On the same day he told his wife, Jane, that he was leaving her because he had feelings for Hazel. Jane confronted Hazel, accusing her of inappropriate conduct, but she denied that she had done anything wrong. Jane’s brother David got involved and told Jane that if was her fault because she did not take Mr Eckersall’s name on marriage, did not respect him as head of the household and suggested that these (among other reasons) were why he wanted Hazel. Jane was upset and left work. She did not return.

With support from David, Hazel took over Jane’s duties as office manager. The company stopped paying Jane from the end of August, but she remained a director as well as continuing to receive benefits including a company car and credit card.

Why dismissal for minor, non-malicious social media posts can constitute unfair dismissal

Employment Law cases can relate to all manner of things: sexist make-up policies, discriminatory Secret Santa gifts and, in the case of one Canadian law suit, a claim by employees for ‘psychological torture’ due to the employer playing Christmas songs on loop from November onwards.

I’ve recently read a case worthy of joining this list – namely, the ‘Facebook meat advertisement’ case. This is the case of Hayward v Noel Chadwick Limited heard in Liverpool Employment Tribunal, which published its judgment in March 2017.

As some readers in the Wigan area may know, Noel Chadwick Limited (“NCL”) is a typical local butcher shop which heavily relies on local reputation and footfall in the Standish area. The only real ‘online service’ provided is an email service requesting local deliveries.

In this case, Mr Hayward sent a public Facebook message to his then-girlfriend about the cost of packages of meat from an online meat company. The company wasn’t a competitor and operated in a different manner (i.e. online-only and a wholly different types of product). Put plainly, the only similarity was that they sold meat (in the same way that Dacia and Ferrari are similar because they sell cars, for example – it is the same product but very different ends of the market wihtout being ‘true’ competitors competing for the same customers).

Unfortunately, the Directors of NCL considered the post to be an “advertisement”. They also argued that they thought the post was made in bad faith and was “malicious”. So what did the Employment Tribunal decide?

Can workers claim injury to feelings for a breach of the Working Time Regulations 1998?

This question was recently considered by The Employment Appeal Tribunal (EAT) in the case of Santos Gomes v Higher Level Care Ltd UKEAT/0017/16.
The Facts
The Claimant, Miss Santos Gomes was successful in proving that her employer, Higher Level Care Ltd, had failed in their duty to provide her with 20 minute rest breaks as required by the Working Time Regulations 1998 (WTR).  or this element of the claim she was awarded compensation for her financial loss in the amount of £1,220. The Employment Tribunal however refused to entertain a further compensation claim for injury to feelings.

The Claimant brought an appeal to the EAT on the basis that Regulation 30(4) did not prevent an award for injury to feelings being made, compensation for injury to feelings was not restricted to discrimination laws, and the WTR did not provide an adequate remedy for this as is required by EU Law.
The Law
Regulation 12 of the WTR states that a worker is entitled to a minimum rest break of 20 minutes when working for more than 6 hours per day. Subsequently a worker is permitted to bring a complaint against their employer for a breach of these entitlements. When in such occasions an ET finds in favour of the Claimant, a declaration must be made in this regard and an award of compensation can be made.

The WTR state only that any compensation awarded should be what the ET considers to be ‘just and equitable’ taking into account all of the circumstances and the employers default in refusing to allow the worker to exercise their right (Reg 30(4)(a)) and any subsequent loss sustained by that worker attributable to the matters complained of (Reg 30(4)(b)).  Whilst compensation for injury to feelings is available in some types of employment law claims (mostly for discrimination), you cannot claim such compensation for breach of contract or indeed unfair dismissal claims.
The decision of the EAT

Can a demotion amount to a breach of contract/constructive dismissal claim?

In the case of Gibbs v Leeds United Football Club Ltd [2016] EWHC 960 (QB) (28 April 2016) the matter in question concerned a contract of employment between the Claimant (Mr Gibbs) and the Respondent (Leeds United FC).


The question was whether the Claimant had been constructively dismissed due to a repudiatory breach of his contract of employment by Leeds United, or whether he chose to leave the club without there being any breach of contract.  There was a also a further question in respect of whether the Claimant acted unreasonably in failing to mitigate his losses by rejecting the offer of the role of Head Coach after he had resigned.

By way of background information, the claimant’s contract of employment stated that he must “diligently exercise such powers and perform such duties as may from time to time be assigned to him by the Chief Executive and the Board at which are commonly undertaken and exercised by the managers of Professional football club companies of the Company’s status in relation to the playing, coaching and scouting aspects of the Company’s undertaking (included but not limited to player conditioning and the development of tactical instructions and playing standards generally) and in the discharge of the same he shall:…comply with all reasonable and lawful instructions and requests given:…(B) to the Assistant Manager by the Chairman; (C) to the Assistant Manager by the Company; (D) to the Assistant Manager by the Chief of the Executive…and perform such hours of work as may from time to time reasonably be required of him…”


The Claimant was engaged on a fixed term three year contract, however after around eight months of employment the Respondent Company was purchased by a Mr Cellino.  The Respondent thereafter wanted to recruit their own management team, and agreed with the Claimant’s manager to end the manager’s contract early – the Claimant therefore expected that the same thing would happen to him.


A new manager was subsequently recruited by the Respondent along with a new assistant manager, however the Claimant was not offered a termination package.  The Claimant did express during a meeting with the owner of the Company that if work was not available for him, he would be happy for his contract to be terminated if a termination package could be agreed.


An agreement was not met however and the Claimant subsequently reported to work under the new manager.  Unfortunately they did not get on and the Claimant received an email stating that his role had been changed and he was now required to train the Respondent’s youth players instead of the first team.  The Claimant felt that this instruction constituted a demotion and subsequently resigned.


Four months later, strangely, the Claimant was offered the role of manager following the dismissal of his predecessor.  He refused this offer, stating that the treatment he had received by the Respondent had undermined his relationship with his fellow employees.  The Claimant brought a breach of contract constructive dismissal claim against the Respondent.


The High Court held

A Guide to the National Living Wage

If you have had the opportunity to read my previous blog post ‘Key Employment Law Changes’, you will be aware that from 1st April 2016, all employers are under a duty to comply with new obligations under the ‘National Living Wage’ regulations.

It is important that small business owners in particular are aware of the implications of this, to ensure that they implement any necessary pay increases and are not subject to later claims for arrears of wages owed.

By way of background, the National Living Wage was originally calculated based on the amount that employees would have to earn in order to cover basic living costs – prior to this month however, this was used as a benchmark/guidance only, and the rates were not legally enforceable.

From 1 April 2016, the National Living Wage became law under the National Minimum Wage (Amendment) Regulations 2016 for workers aged 25 and over, increasing the minimum wage by £0.50 to £7.20 per hour – the effect is therefore essentially that the National Minimum Wage rate is increased.

Please note – the National Minimum Wage rates will continue to apply for workers aged under 25.

If you are a business owner, you should therefore make arrangements to assess who within your organisation will be entitled to this increase, notify them accordingly and advise your accounts/payroll team to implement the rise.

Unpaid award penalties to be introduced in April

Section 150 of the Small Business, Enterprise and Employment Act 2015 provides for a new Part 2A to be inserted in the Employment Tribunals Act 1996 and entitled “Financial Penalties for Failure to Pay Sums Ordered to be Paid or Settlement Sums”. This brings into effect the much heralded and somewhat delayed procedure for imposing financial penalties on paying parties who do not make their payments on time. Notably, any lateness, even of a day or two, can trigger the process although there is a final opportunity to make payment before the fine is levied.

New section 37A confirms that the scope is financial awards made by an order in tribunal proceedings including costs and expenses and amounts ordered to be paid to the Secretary of State. The amount covered includes the initial award and interest. It does not include any amount awarded when the order can still be appealed. Where an award is payable by instalments and there is a default in making a payment when it falls due any remaining instalments are treated as falling due on the same date as the missed payment, i.e. the balance is treated as payable forthwith.

The new system provides for the appointment of enforcement officers. Where a default is identified an enforcement officer may issue a warning notice stating an intention to impose a financial penalty overdue payments are made by a specified date. If there has been a prior penalty notice a further one cannot be issued for at least three months since the end of the prior relevant period. the date for payment (the specified date) must be at least 28 days after the date of the warning notice and the specified amount must be the amount due on the date when the warning notice is given. Once served it is possible for the employer (assuming that the employer is the paying party) to make representations with a view to challenging the order.

If the employer fails to comply with the warning notice an enforcement officer may issue a penalty notice This requires the paying party to pay a financial penalty to the Secretary of State. If the unpaid amount is less than £200 the penalty is £100. If it is more than £10,000 the penalty is £5000. Otherwise it is 50% of the unpaid amount of the relevant sum.

Tax tribunal holds that compensation for injury to feelings is taxable

In the absence of a codified system of law (such as that which operates in France) there is a risk that conflicts can arise between different jurisdictions and courts. For example, an insolvency court might make an order concerning property while a family court (applying its different rules) may make a conflicting order in respect of the same property. Which one prevails?

Another example is whether someone is an employee for tax purposes and for employment law purposes. It is possible to be an employee in one sense and not the other.

Another area of contention is whether compensation is taxable. The generally accepted view is that compensation for injury constitutes damages and as such should be tax free. However, compensation for financial losses, e.g. loss of earnings, should be taxable subject to the usual allowances and exemptions. In Moorthy v Commissioners for HM Revenue and Customs the Tax and Chancery Chamber of the Upper (Tax) Tribunal considered whether compensation for injury to feelings should be taxable.

Mr Moorthy worked for Jacobs Engineering (UK) Limited. In March 2010 he was made redundant and received a statutory redundancy payment of £10,640. He brought proceedings claiming unfair dismissal and discrimination. Following mediation he entered into a settlement agreement which provided for him to receive an “ex gratia payment of £200,000 by way of compensation for loss of office and employment”. Jacobs treated the first £30,000 as free of tax applying the usual exemption (section 403 Income Tax (Earnings and Pensions) Act 2003). Basic rate income tax was deducted from the remainder. Mr Moorthy completed his 2010-11 tax return on the basis that the full settlement amount was tax free. HMRC disagreed and amended the return to include an additional £140,023 taxable income. The issues on appeal were (1) whether the settlement payment was in connection with the termination of employment and was therefore chargeable to income tax (subject to the £30,000 exemption) (section 401); (2) if so, was it taken out of the charge to tax as a payment or benefit “on account of injury to…an employee”, namely injury to feelings (section 406); and (3) whether Mr Moorthy could rely on the concession made by HMRC in the closure notice that £30,000 of the settlement amount should be treated as damages for age discrimination and therefore not chargeable to income tax.

Important guidelines concerning the “duty to mitigate”

It is often heard that a claimant has a duty to mitigate his or her loss, in other words to take reasonable steps to minimise losses resulting from the wrongdoing in respect of which compensation is claimed. This applies to many areas of law such as commercial contract disputes and accident claims, as well as in the field of employment law.

However, the extent of the duty is often overstated and it is generally the duty of the wrongdoer to demonstrate failure to mitigate. Even if it does so, it does not necessarily follow that it will be taken into account.

The duty to mitigate with reference to loss of earnings in a breach of contract claim was confirmed as long ago as 1912 in the case of British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd. In Wilding v British Telecommunications plc (2002) the Court of Appeal provided general guidance that the onus is on the employer to show that the worker unreasonably refused an offer of re-employment, the test of unreasonableness is an objective one based on all the evidence, when applying the test the attitude of the employer, the circumstances in which an offer may have been made and refused and the way in which the employee was treated should be taken into account and the court or tribunal should not be too stringent in its expectations of the injured party.

That guidance has recently been refined and expanded by the then President of the Employment Appeal Tribunal, Mr Justice Langstaff, in the case of Cooper Contracting Ltd v Lindsey.

Mr Cooper had been self-employed for a number of years before taking a job as a carpenter with Cooper Contracting in March 2011. His employment was terminated after 21 months on 29 December 2013. No reason was given since Coopers took the view that he was self-employed. An employment tribunal disagreed and found that he was unfairly dismissed. When dealing with the assessment of compensation the Employment Judge at the Tribunal observed as follows:
In the course of evidence Mr Lindsey was asked what he had been doing since his dismissal.  He told me that he has resumed working as a tradesman on his own account advertising principally on the My-builder website.  He was asked whether he had considered taking up another employed post either with a local employer or perhaps on building sites further afield.  He and Mrs Lindsey were very clear that working on building sites, whilst being something he had done in the past, would not be suitable now for [health] and family reasons and I accept that there may come a time in a person’s working life when some types of work are no longer appropriate.  As far as looking for another employed position is concerned, Mr Lindsey’s evidence was that he preferred to be his own boss having had the experience of employment with the Respondent.  It is very much his own choice, therefore, to continue with the financial ups and downs of self employment as a jobbing tradesman.
He continued:
The conclusions that I have reached are these.  Firstly, I find that it was reasonable for the Claimant to resume his previous life as a self-employed tradesman upon his dismissal: that is what he knew and where his recent experience lay.  I find that it has been reasonable for him for continue in that way to the present date.  I am satisfied however that there are other opportunities out there for employed work with higher remuneration if the Claimant wished to look for them but the Claimant has plainly decided that self-employment is the path he prefers for the future.  Whilst I am satisfied that his past losses to date ought to be reflected in the compensatory award I think the fact that he is unwilling to consider alternatives in the future makes it just and equitable for there to be a more limited award of future compensation than might otherwise be justified on a strict analysis of the figures.  I have therefore determined that as far as loss of earnings is concerned the Claimant should recover his loss of earnings to date and that I should assess future loss of earnings over a period of three months.  Thereafter, whilst I am sure there will be a continuing loss of earnings, it will reflect the Claimant’s desire to be his own boss rather than his value on the employed market for tradesmen.
I should point out that three months’ future loss is at the very lowest end of what might be expected with awards equating to between 12 and 36 months being far more common.

On appeal Mr Justice Langstaff was critical of the approach to mitigation often taken in tribunals:
As to mitigation, it seems to me there are very considerable dangers in an approach that suggests that the duty to mitigate is a duty to take all reasonable steps to lessen the loss.  This may divert focus away from the legal principles that apply to mitigation and demand too much because it may seem to lead to a conclusion that if a Respondent can show one reasonable step that was not taken the Respondent will succeed.  Recent experience in this Tribunal shows that the principles by reference to which an assertion of failure to mitigate loss is advanced are too often mis-stated, misunderstood or misapplied.  In part this may be because when applying those principles a court may express it in shorthand appropriate to the argument before it and in context of the particular facts but which when applied as a precedent can easily lead to error if too casually extrapolated to those other cases.
He went on to consider the relevant cases and then, very helpfully, distilled the main principles as follows:

Defending an unfair dismissal claim which could have settled

News has emerged of a very costly outcome for the BBC following its failure to defend an unfair dismissal claim brought by former chief technology officer, John Linwood. Mr Linwood was dismissed in 2013 following the disastrous failure of the Corporation’s Digital Media Initiative. Launched in 2008 it was intended to modernise production and output by transferring to a fully digital, tapeless workflow. However, after numerous problems and delays, the BBC’s contract with Siemens was terminated in 2009. It emerged that Siemens had been appointed without a tendering exercise. At the time of termination in 2009 the BBC’s losses were £38.2m but these were partially offset by a £27.5m settlement paid by Siemens.

In 2011 the BBC was criticised by the National Audit office for its mishandling of the project. Details of the sorry tale were set out in the NAO’s full report issued in January 2014. Remarkably it continued to limp along until an embarrassing press release was issued by Director of Operations Dominic Coles on 24 May 2013 which confirmed its closure once and for all. Remarkably, by then the overall losses had spiralled to £98.4m. News of the abandonment of the project coincided with the announcement that Mr Linwood had been suspended pending an external investigation. He was sacked in July 2013 and did not receive a pay out.

In January 2014, when giving evidence to the Public Accounts Committee, Mr Linwood revealed that he had brought legal proceedings against the BBC, essentially on the basis that he had been scapegoated. His claim was heard in the London Central Employment Tribunals throughout most of May and four days in June 2014, following which the unanimous decision of the Tribunal was that he was unfairly dismissed. There was a 15% finding of contributory fault.

What makes the story of renewed interest is that it has now emerged that the BBC spent nearly £500,000 on defending a claim that could have been settled for £50,000. A Freedom of Information Act request has revealed that the BBC spent £498,000 on costs, VAT and expenses, plus damages estimated at £80,000. However, an offer to settle of £50,000 had been rejected before the bulk of the legal fees were incurred.

According to the Tribunal judgment a culture of “sacrificial responsibility” at the BBC led to “avoidance strategies” and “the steering of the spotlight of blame in other directions” by those who feared that they would be associated with “a sinking ship”.

Government launches consultation on simplification of tax treatment of termination payments

One of the most contentious areas in the field of employment law concerns the tax treatment of settlement payments on the termination of employment. In the 20 years plus that I have been dealing with employment law matters the law in this area has never been entirely settled and there has been a long series of often contradictory decisions, such that it is possible to find a decision to match almost any chosen stance. As recently as two months ago I was writing about a decision of the First Tier Tax Tribunal which appeared to suggest that many such payments are not taxable.

Against this background, on 24 July the Government published a consultation document on “Simplification of the Tax and National Insurance Treatment of Termination Payments”. The consultation is open until 16 October and seeks views on:

removing the distinction between contractual (currently taxable) and non-contractual (currently generally non-taxable) termination payments and whether this will make the process easier to understand for employers and employees;
whether the income tax and National Insurance treatment of termination payments should be aligned;
which of the existing tax exemptions should be retained; and
whether new tax exemptions should be introduced.

Research by the Government suggests that there is a widespread but mistaken belief that the first £30,000 of any pay-off is tax free. Many employers do not understand how the current provisions should operate in practice. It is also difficult and time-consuming for employers to work out which parts of a settlement payment are tax free and which are subject to tax.

The research also suggested that the current £30,000 would probably be unaffordable if it applies to both contractual and non-contractual payments.

One potential approach referred to in the consultation is to create a new exemption which increases proportionately with the number of years worked. The minimum service requirement (to qualify for the exemption) would be two years. Qualifying service would have to be with the existing employer or continuing service including a former employer if the employee was TUPE transferred. Such exemptions might only apply in the event of redundancy, compulsory or voluntary. An example provided is that of an employee receiving a termination payment after 10 years’ service of £13,750 comprising statutory redundancy (£4750), pay in lieu of notice (£3000), an ex gratia payment of £5000 and £1000 holiday pay. If the exemption was set at £6000 after two years and then an extra £1000 for each additional year the exemption would be £14,000 and the entire payment would therefore be tax free. In contrast, if someone’s employment is terminated because of poor performance and that triggers a severance payment of £100,000, the full amount would be taxable.