can a business owner claim a redundancy payment?

The Employment Appeal Tribunal recently considered in the case of Secretary of State for Business Innovation & Skills v Knight whether or not a business owner can claim a redundancy payment.

Mrs Knight was managing director and owned 100% of the shares in Receptors Security Systems (UK) Limited. The Company was incorporated in 1991 and ceased trading, having become insolvent, in October 2011. Mrs Knight was employed under a contract providing for her to work 9.00 to 5.30 Monday to Friday for a salary of £20,000 plus discretionary bonuses. In practice she worked from 8.00 to 7.00 and was paid £1000 “take home” per month. However, as the Company faced financial difficulties she took no pay at all in the last two years of trading. In effect she forfeited her salary in order to pay other employees and suppliers.

At an Employment Tribunal it was held that she was an employee and therefore entitled to a redundancy payment from the National Insurance Fund. The Secretary of State appealed on the grounds that:

Judging her to be an employee was based on a perverse conclusion;
Having forfeited her pay she had changed her position so there was no mutuality of obligations sufficient to establish a continuing contract of employment; and
The Tribunal should have considered her position at the date of the insolvency, not what might have been the position earlier.

The Secretary failed on all grounds. There was a sequence of cases from which it was clearly established that, subject to the particular facts, a controlling shareholder can still be an employee. This applies equally to a claim against the Secretary of State for payment from public funds.

Was there a subsisting contract of employment at the date of insolvency? Yes. The Company would have been obliged to pay a redundancy payment if it could have done so because, quite simply, she was an employee during the time when she drew no salary and she was therefore an employee at the time when the claimed obligation arose. There was no agreed variation or discharge of the contract. As for use of the word “forfeited” this did not mean that she had agreed not to take any salary at all or that this had brought her employment to an end.


last month it was overtime, this month it is commission to be added to holiday pay

In what appears to be an emerging trend to emulate actual regular pay rather than basic pay, the Court of Justice of the European Union (CJEU) has held that holiday pay should include commission if commission forms part of an employee’s remuneration.

Last month I reported that overtime (or its notional equivalent) should be included in holiday pay and that failure to do so could result in significant back pay claims. Applying very similar reasoning the European Court in the case of British Gas v Lock has held that holiday pay should include commission.

Mr Lock was employed by British Gas in 2010 as an internal energy sales consultant. His job entailed persuading business clients to buy energy products. His basic salary was £1222.50 per month. Commission was also paid monthly, based on sales made but with reference to a period some weeks or months earlier (presumably to allow for variations and cancellations).

He was on annual leave from 19 December 2011 to 3 January 2012. His December salary comprised his basic pay of £1222.50 plus commission in relation to earlier weeks amounting to £2350.31. His average monthly commission for 2011 was £1912.67.

During his annual leave he did not make any sales and therefore did not earn any corresponding commission. Logically, that had an adverse impact on his earnings during the month after his annual leave. As a result he brought an employment tribunal claim for what he considered to be the balance of his holiday pay for the period from 19 December to 3 January. This was based on notional commission which he would have earned had he been in work during the period he was on holiday, even though it did not equate to commission earned on actual sales.

In the sort of European judgment which causes understandable irritation to many people, the CJEU held on 22 May that, notwithstanding that Mr Lock received payment of both basic salary and commission during his annual leave, the fact that he lost out on commission in subsequent months because of the holiday should be compensated.


data protection versus data access

It never ceases to surprise me that employees can be so horrified when action is taken against them following the misappropriation and/or misuse of information belonging to an employer. All employment contracts incorporate an implied duty to keep confidential  information belonging to the employer and not in the public domain. Confidential information in the nature of a trade secret, such as financial information, customer lists, production processes and sales strategies is protected. Further, any decently drawn contract of employment will include express protection of confidential information, both during and after employment.

If an employer has good reason to believe that confidential information has been misused, for example by disclosure to a competitor or by a former employee diverting business away from the company, there is a clear risk that serious damage could quickly follow. Consequently, it is often thought appropriate to apply for an injunction requiring the current or former employee (and any of his or her associates) to stop using the information and to deliver up the information in whatever form it has been taken. In order to prevent action being taken to thwart the employer’s efforts (e.g. by hiding away the information) injunctions are often granted without notice to the party to be served.

I recall some years ago making a home visit to a suburban address early one morning. The purpose of the visit was to carry out the terms of an injunction order requiring the delivery up of property belonging to the employer. A supervising solicitor from another firm was in attendance to ensure that correct procedures were followed. The recipient of the order was shocked to find out that the order covered delivery up of all physical documents at the house and, in addition, all electronic devices that could hold information belonging to the company including PCs, mobile phones and even the children’s laptops. Technological advances have served to widen even further the scope of disclosure to include, for example, documents stored in the cloud through Google, OneDrive, Dropbox or any number of other providers. It has also come to the attention of many employers that, particularly in the online world we nearly all inhabit, relevant data is one of their most important assets.

The recent High Court case of Warm Zones v Thurley and Buckley includes a useful summary of the relevant factors to be taken into consideration when considering such an application and confirms the willingness of the court to make an order in appropriate cases.

Warm Zones is a not-for-profit company that provides energy efficiency and related advice for domestic users, targeting principally low income and vulnerable households throughout the UK. Ms Thurley was a zone director from January 2007 until she was dismissed in March 2013. She covered addresses in North Staffordshire and Cheshire West. Mr Buckley worked as an IT and project manager, also based in North Staffordshire. Both had access to the employer’s database for the region containing, according to Warm Zones, “important, unique confidential information and property belonging to it”.


a just and equitable extension of time should not be a matter of routine

Only last month I commented on the strict application of time limits in tribunal claims and how they can prevent otherwise strong claims from proceeding. One month on and the issue is to the fore once again in the Employment Appeal Tribunal case of Beale & others v Clydesdale Bank plc and another. The case also provides yet another reminder that reliance on a representative will rarely provide a way out of procedural default.

As all those involved in employment claims know, the time limit for unfair dismissal claims is three months (or, to be strictly accurate three months less one day) and will not be extended unless it was not reasonably practicable for the claim to have been presented in time. The time limit for discrimination claims is also three months or, in the case of connected discriminatory acts, three months from the date of the last discriminatory act. Time will only be extended if it is just and equitable to do so (a much lower threshold).

Mr Beale and his three colleagues were members of Unite the Union. They consulted the union about age discrimination claims and entrusted the union to deal with them. It was accepted that none of them knew that there was a three months time limit for commencement of proceedings. Therefore they were entitled to conclude that they had entrusted the matter to the union and were unaware of any need to take any action themselves.

Claims were not lodged within three months. In order to decide whether it was just and equitable to extend the time limit the Employment Judge had to weigh up all the evidence placed before her and exercise her discretion. She found that no blame attached to the Claimants since it was “entirely reasonable” for them to have entrusted the matter to their trade union to progress their claims, including taking any necessary action.

The judge also took into account that a potential claim against the union for professional negligence was a relevant consideration. As an aside, any potential claim against the union might be problematic since, in order to establish negligence, there has to be a breach of a duty of care and it has been held on many occasions that the standard expected of a union in this regard is generally much lower than might be expected of a solicitor. In the appeal judgment Lady Stacey picked up on this, commenting that “the Employment Judge plainly equiparated the union with a solicitor in that she had found that it was reasonable for the Claimants to entrust not only the provision of advice but also the taking of action to the union, and it is not in dispute before me that the union, for whatever reason, failed to take action in time”. Incidentally “equiparate” is a word and quite simply means to compare but why use the latter when there is an obscure alternative!


Liverpool Mayor claims that belief in public service is protected under the Equality Act

My regular readers are aware that I am intrigued by the way in which protection of religion or philosophical belief has developed in ways that surely could not have been envisaged when the Regulations which preceded the current protection under the Equality Act 2010 came into force in 2003.

In January I reported that belief in the Labour Party was a characteristic capable of protection under the Act. It should therefore come as no great surprise that a belief in public service attracts the same protection.

Joe Anderson is the current and first directly elected Mayor of Liverpool. It would be fair to say that he divides opinions. Among many things he has been called the left’s answer to Boris Johnson. He was born in 1958 and left school at 16 without any qualifications. He joined the Merchant Navy and spent some time working in the leisure industry. As a mature student at Liverpool John Moores University he obtained a Postgraduate Diploma in Social Work and subsequently became a full-time social worker.

Alongside his working life he was elected as a city councillor in 1988, became leader of the Labour group in 2003 and in 2010 became Leader of the Council. He became elected Mayor in 2012.

The background is relevant because, in Anderson v Chesterfield High School, he contended that he was a victim of direct discrimination as a result of the termination of his employment after an extended leave arrangement to allow him to fulfil his public duties. The period of leave commenced in 2010 but his election as Mayor in 2012 for a four year term prompted the dismissal.

The 2009 Employment Appeal tribunal case of Grainger v Nicholson (which concerned a belief in climate change) established the five point test which has subsequently been used in such cases and was duly applied at the preliminary hearing in this case.


right to request flexible working extended to most employees

Most employers are familiar with the procedure to be applied when dealing with flexible working applications which have been around, on a legislative basis, since 2003. Initially the right to request flexible was confined to the parents of children under six or of disabled children under 18.

In 2007 the right was extended to carers of adults and in 2011 to parents of children under 18. With effect from 30 June 2014 the right is extended to all employees who have 26 weeks’ continuous employment at the time the application is made. Only one application per year may be made.

As a result, now is a good time to recap the key elements of fairly handling a request for flexible working. The first thing to bear in mind is that the entitlement is to request flexible working rather than an entitlement to flexible working on request. Nonetheless, employers must take request for flexible working seriously. What does that mean in practice? If an application is refused then the employer may be required to justify the decision, both in terms of the steps taken to consider it and the substantive reason for rejection.

According to the ACAS draft guidelines valid reasons for rejection may include:

Burden of additional costs
Inability to reorganise work among existing staff
Inability to recruit additional staff
Detrimental impact on quality
Detrimental impact on performance
Detrimental effect on ability to meet customer demand
Insufficient work for the periods the employee proposes to work
Planned structural change to the business

However, employers should bear in mind that it is not enough to give the reason; if called upon to do so the employer may be required to justify the reason.


ACAS early conciliation in practice

I have expressed my reservations about whether ACAS early conciliation will bring any significant benefits to dealing with employment tribunal claims. However, the Scheme is now operational and it is therefore important to know how it works in practice. The Scheme started on 6 April and is currently voluntary but from 6 May it will be compulsory.

A major concern is how the Scheme will impact on the very strict and short time limits within which claims must be brought: generally three months.

the form
Before a claim can be commenced it is necessary to provide notification to ACAS and to provide basic details including contact information. The easiest way to do this is by going to the ACAS website at As is increasingly the case when using such websites the enquirer is then taken through a couple of pages, including a lengthy explanation of the benefits of the Scheme before arriving at the form itself. Before proceeding to fill out the form, and in a rather schoolmasterly manner, the enquirer is then required to tick a box to say that they have read and understood the previous page.

The form itself is pretty straightforward. As well as providing name and contact details, the enquirer is asked to supply the employer’s postcode in order to trigger a business address search. Having tried this out it works quite well for medium and larger sized businesses. However, small businesses might not be so readily found and, of course, any error in inputting the postcode could produce false results. There is also an option to add the employer’s telephone number. As for the employment itself the enquirer is asked to provide the start date, end date, job title and the date of the event which is the subject of the claim.

Interestingly, the form also indicates that contact will be made using the telephone number(s) provided. However, there is no obligation to provide a telephone number or an email address so this may lead to practical difficulties.

the timescale
Notification needs to be provided to ACAS within the normal time limit for bringing a claim, for example three months less one day for unfair dismissal claims. In one sense this makes the process easier for claimants since there is no need at this stage to set out full details of the claim in an ET1.


Parliamentary committee renews attack on zero hours contracts

As I have reported during the last few months zero hours contracts have attracted a good deal of attention, mainly since it came to light that there are probably far more people employed subject to them than was previously thought.

While some employees have welcomed the flexibility they provide, others appear to have had little choice other than to accept the terms on offer or none at all. This has been particularly significant for benefits claimants who run the risk of having unreasonably refused a reasonable offer of employment and thereby losing their entitlement to benefits.

The issue has been considered by the Scottish Affairs Committee and its conclusion is that, on balance, they are a bad thing and “in the majority of cases” they should not be used at all. The Committee, in its interim report, noted an “alarming” increase in the use of casual labour and frequent breaches of the Minimum Wage Regulations.

Evidence to the Committee showed that:

– 20% of workers on zero hours contracts are paid less than their permanent equivalents doing the same job
– 5% are paid less than the national minimum wage although this is illegal
– thousands of social care workers are illegally denied payment for time spent travelling between appointments
– 40% receive no notice of employment
– 6% turn up for work – having paid for childcare, travel etc. – to find none available
– thousands of others’ employers evade the provision of basic employment rights
– zero hours workers are entitled to limited employment rights but a significant proportion of employers are either ignorant of those rights or are wilfully blocking access to them

Its recommendations are that:

– Zero hours contracts must only be used where the employer can objectively justify it
– The Government must do more to protect workers who wish to challenge unfair, unsafe or unlawful conditions of employment
– Workers should be told from the outset of their employment what type of contract they are on and a written contract setting out the terms and conditions must follow within two months
– There should be a minimum notice period of work and workers should not be punished for turning down offers of work made within that period
– Where workers arrive for work but find none available then the employer should compensate them for the inconvenience
– Travel time between appointments should be paid and pay for zero hours workers should accurately reflect the number of hours that are worked to fulfil contracted duties
– An employer-led Code of Practice is unlikely to help workers who are exploited – in fact it may serve to embed a form of employment that in most circumstances is hard to justify
– If a Code is produced it should only be as a stepping stone to, or following, legislative change aimed at reducing the use of zero hours contracts and ensuring workers receive the income, rights and protections to which they are entitled


“keep music live” – unless you’re producing War Horse

In Ashworth and Others v The Royal National Theatre the question for Mr Justice Cranston (sitting in the High Court) was whether to grant an injunction pending trial requiring the Theatre to continue employing musicians, notwithstanding that part of the music for the show has always been recorded and the Theatre wanted to move to fully recorded music with a view to saving costs.

Injunctions are an emergency remedy and, as such, they need to be applied for promptly and with good cause. While a temporary injunction can be granted on the basis that a claim is made out with a real prospect of success, even though there has not been a full trial of the issues, the court must consider the balance of convenience between the parties and the risk of irremediable prejudice to a party if it turns out that the injunction should not have been granted.

In general injunctions which require someone to do something (mandatory) rather than not do something (prohibitive) are less readily granted particularly when, as in this case, there are financial implications for the party required to act in the manner directed by the Court.

War Horse is a very well known and celebrated National Theatre production which opened in the Olivier Theatre in 2007 and transferred to the New London Theatre in the West End in 2009, where it remains. It has been a great money spinner for the National Theatre but income has dwindled in the last few years. It is an expensive play to stage with its cast of 36 plus five musicians (the Claimants) and their deputies (who cover in their absence).

The composer of the musical score described it as an orchestral epic. Nonetheless, from the outset most of the music has been recorded. The live musicians have added to the recordings, including an opening trumpet solo and briefly appearing on stage during one scene. Productions in other parts of the world have not included live musicians, instead relying wholly on recorded music. In December 2012 the musicians used for the London production were told that it would go the same way and that, as a result, they would be made redundant in March 2013. Following conciliation involving the Musicians’ Union they remained employed but their participation was significantly reduced.

On 4 March 2014 they were sent letters providing notice of termination of employment on 15 March. They were told that they were being made redundant in order to bring the London production into line with other productions. However, on 15 March they turned up for work as usual but they were turned away, hence the application for injunctive relief.

Having considered the contractual terms Mr Justice Cranston concluded that there was a serious issue concerning whether the National Theatre was entitled to terminate the contracts in the way that it did. However he was much more concerned about the question of any resulting remedy and this was also a relevant consideration when determining whether an injunction should be granted.


the unrepresented claimant who knew too much

Employment tribunals, being creatures of statute, have had an unhappy history when it comes to considering time limits and balancing adherence to them with general principles of fairness.

As all those with experience of unfair dismissal claims will know, there is a strict time limit of three months for commencement of proceedings. The time limit will only be extended if it was not reasonably practicable for the claim to be lodged in time and what is “not reasonably practicable” has been very narrowly construed.

On the face of it there is a more relaxed approach to discrimination claims since the test for ostensibly out of time claims is not whether it was reasonably practicable for the claims to be presented but whether it is “just and equitable” to allow them to proceed.

Back in 2009 I wrote about the application of time limits in the context of an unfair dismissal claim resulting from redundancy and the unusual circumstances in which an apparently out of time claim was allowed to proceed. I have also commented previously about the apparent injustice of excluding good claims in a tribunal (supposedly less formal than a court) based on a procedural error.

In courts, where by contrast the vast majority of claims are subject to generous time limits of three years for personal injury claims and six years for other claims, there has been a recent clampdown on procedural mistakes with the result that numerous decent claims have been unable to proceed based on highly technical objections. I wrote a post earlier this year in which I made clear my disapproval of this trend.

So to the case in question. In Hall v ADP Dealer Services Limited the Employment Appeal Tribunal was asked to consider whether a tribunal was right to dismiss claims for age discrimination on the basis that they were time barred and it was not just and equitable to extend time. Ms Hall was employed by ADP from July 2011 to February 2012 as a compensation manager. On 30 November 2012 she submitted a claim against her former employer alleging age discrimination. Her complaints included that she had no probationary review, that she was subjected to age discriminatory behaviour at work including a derogatory, age-related comment, that she was dismissed because, so she was told, it was “not working out” and that she was given misleading references, the last of which was issued in July 2012. Ms Hall knew that her claim was, prima facie, out of time because she included in her application:

PLEASE NOTE: I know that a straightforward claim for age discrimination would be out of time but due to circumstances outlined in 9.1 and 10 below I feel it would be just and equitable to extend the time and I am therefore with great respect requesting this.

When she complained about the references she was told to raise a grievance. She duly did so and the grievance process continued until 19 September. At the employment tribunal the former employer contended that the dismissal, the references and the grievance process were discrete events rather than continuing acts. The distinction is important since, if they were discrete acts, each would be considered in isolation with reference to the applicable time limit for commencing proceedings. If they were continuing acts then time would be calculated as running from the last such act. The tribunal took the view that they were separate acts. It was not just and equitable to extend the time limit for the dismissal claim because Ms Hall could have brought her claim much earlier “as she had the knowledge, the expertise, and the ability to bring the claim”.