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September 2015 Review
the employment law briefing
Welcome to our September newsletter which is something of a magnum opus reflecting a busy month! I've included some fairly lengthy case reports covering a range of topics including a shocking case of caste discrimination, whether or not an employee on long term sick leave is TUPE transferred, whether a company can be a victim of discrimination (it can), disapplication of the usual six year time limit for breach of contract claims in tribunals and what can happen when an employer relies too heavily on an advice and guidance from the HR department. This latter decision is well worth reading because I know that many employers effectively hand over investigations to HR and then do what they are told, including whether to impose sanctions and the extent of those sanctions.
This month's figures from the Office of National Statistics have revealed an increase of 19% in the number of workers on zero hours contracts in the last year, bringing them up to 2.4% of the entire workforce (744,000). The argument about whether they are beneficial or harmful continues unabated.
As a quick reminder, the adult rate for the minimum wage increases on 1 October from £6.50 to £6.70 before the big increase to the new living wage next February. Also from tomorrow people are not allowed to smoke in cars in which children are present. The right for Sikhs to wear turbans instead of safety helmets is extended to all workplaces (currently just building sites). Self employed people become exempt from health and safety laws as long as they have no employees (subject to a variety of exceptions). Meanwhile the Scottish Parliament has announced that it intends to do away with employment tribunal fees. Another topic in the news has concerned employers who retain tips and gratuities. Many high street names have been found to do so and a number of them have changed their practices in the face of public opposition. The Department of Business Innovation and Skills has called for evidence with a view to "improving the practices of employers"
This month's news:
This month's news round-up:
An important but potentially confusing aspect of English law is the concept of the "legal person". As well as individuals a limited company is a legal person in the sense that it has its own legal status. It can be a claimant or defendant in proceedings and can enter into contracts, whereas the position with a partnership (a collection of individual persons trading together) is more nebulous.
Perhaps the obvious reaction when considering whether a company can be a victim of discrimination is to say that it cannot since discrimination is specific to a human being who can, for example, suffer injury to feelings. However, as confirmed in the case of EAD Solicitors LLP and others v Abrams the legal answer is not so straightforward.
Mr Garry Abrams was formerly a partner/member in EAD Solicitors LLP, based in Liverpool. Indeed, the firm was previously known as Edwards Abrams Doherty. As he approached retirement Mr Abrams set up a limited company in which he was the sole director. The company replaced him as a member of the LLP. It was, for all intents and purposes, a service company which provided the services of Mr Abrams and was, in return, entitled to share in the profits of the LLP.
There was no obligation requiring personal service and therefore no employment relationship. The LLP objected to the company providing Mr Abrams' services once he reached the age when, had he been a member of the LLP, he would have retired. There was an ongoing dispute about whether the company remains a member of the LLP notwithstanding the claim and that apparently remains unresolved.
Part 5 of the Equality Act 2010 provides that an LLP (limited liability partnership) must not discriminate against a member as to the terms on which he is a member, by expelling him, or by subjecting him to any other detriment. Section 4 of the Limited Liability Partnership Act 2000 provides that a corporate body may be a member of an LLP. This is therefore the legal basis on which a corporate LLP member does, on the face of it at least, enjoy protection from discrimination. Any such claims must be brought before an employment tribunal (section 120 Equality Act).
In the Employment Tribunal Employment Judge Ryan clearly struggled with the concept of a company being a victim of discrimination because it is so intensely personal. However, he was persuaded by the legal argument that it could. President of the Employment Appeal Tribunal Mr Justice Langstaff agreed.
Since the TUPE regulations were revised in 2006 there has been an obligation for transferors to disclose details of the workforce to transferees. This normally takes the form of a schedule detailing the employees, their job titles and main duties and any specific contractual rights. Disclosure also extends to detailing those on sick leave and any outstanding grievances or disciplinary matters. Employers also need to be careful to adhere to data protection requirements, as emphasised by the Information Commissioner. This is normally achieved by anonymising the information.
The general view is that the disclosure requirement extends to the entire workforce (in the event of a full transfer), or at least that part of the workforce that is subject to the proposed transfer. The technical definition set out in TUPE is "an organised grouping of employees. If this grouping has as its principal purpose the carrying out of services for a particular client, this is often referred to as a service provision change. But what of employees on long term sick leave? Do they form part of the workforce?
In BT Managed Services Limited v Edwards and Ericsson Limited Mr Edwards was employed by BT Managed Services (BTMS) as a field operations engineer. His employment commenced in 1994 with Orange and he was TUPE transferred to BTMS in July 2009. He worked on a domestic network outsource (DNO) contract providing operational maintenance for Orange and EE mobile phone networks. It was accepted that the team was an organised grouping of employees situated in Great Britain which had as its principal purpose the carrying-out of activities (the DNO contract) on behalf of a client (Orange) and therefore fell within the scope of Regulation 3 of TUPE.
In May 2006 Mr Edwards commenced long term sick leave as the result of a variety of ailments including a cardiac condition which meant that he could not undertake the strenuous work required of members of the team. There were unsuccessful attempts to provide him with less strenuous work and he was regarded as permanently incapacitated from the commencement of his sick leave. He last worked in January 2008 but remained an employee so that he could enjoy the benefits available under the employer's permanent health (PHI) scheme. Once benefits under the insurance scheme expired BTMS continued to pay him (as an expense of the DNO team).
In December 2012 the DNO contract transferred to Ericsson following a tender exercise and the service provision change took place in June 2013. At the time of the change it was accepted that there was no prospect of Mr Edwards ever returning to work. It was held in the Employment Tribunal that he was not assigned to the grouping transferred pursuant to Regulation 4 of TUPE "because he did not contribute to the economic activity of the grouping". It is worth noting that Regulation 4 does not include any express requirement that an employee must contribute to the economic activity of the grouping so the decision was based on the Tribunal's interpretation of the Regulation.
Employment Judge Davies found that Mr Edwards had ceased to be a part of the grouping in 2010.
...it was essentially by default that such contact as there was with him and such steps as required to be taken in relation to him, were done by the same managers; that he continued to have the [operational unit code] for the DNO contract; and that costs associated with his employment were attributed to that contract. However, in view of the other factual circumstances, that did not mean that he was as a matter of fact still assigned to the organised grouping of resources and/or employees.
In the Employment Appeal Tribunal BTMS said that the Tribunal should not have treated the question of where Mr Edwards would have been required to work as one of the criteria to be taken into account in determining whether he was assigned to the grouping. Mr Edwards would have been required to work in the DNO team if he was able to do so so he was assigned and the question of whether he was able to do so was irrelevant.
The Equality Act 2010 does not include specific protection for individuals who are victims of discrimination as a result or associated with their caste. However, it does include provisions for protection from caste discrimination to be added at some time in the future.
Nonetheless a claim based on such discrimination has been brought successfully by Pamela Tirkey against her employers, Mr and Mrs Chandhok, and she has now received compensation amounting to nearly £184,000.
Ms Tirkey was recruited as a cleaner and nanny by Mr and Mrs Chandhok, initially in India and subsequently in the United Kingdom. There is no doubt that her terms of employment were appalling. For example she was paid just 11p an hour. She said that she was treated in a demeaning way and she was more in a state of servility than service. She was required to work 18 hours a day, seven days a week. She was required to sleep on a mattress on the floor, prevented from bringing her bible to the UK, not allowed to contact her family and given a bank account which was controlled by her employers. Her employment ended in November 2012. She brought an employment tribunal claim alleging direct or indirect race discrimination and compensation for discrimination based on religion or belief. Incidentally, the Legal Aid Agency refused funding for representation for 17 months on the basis that the case was "not of sufficient importance or seriousness" and it was "just a claim for money".
Although the ET1 was very lengthy it made no direct reference to caste discrimination. In May 2013, with the permission of Employment Judge Ward, she amended her claim. Paragraph 53 of the claim initially stated "The Claimant contends that the reason she was treated as complained of was that she is of Indian nationality and/or national origin". It was amended by adding the word "ethnic" after Indian nationality. This was followed by a new paragraph:
For the avoidance of doubt the Claimant avers that her ethnic and/or national origins includes (sic) but is not limited to her status in the caste system as perceived by the Respondents. The International Convention on the Elimination of All Forms Racial Discrimination ("ICERD") prohibits discrimination on the grounds of "descent": its principles are adopted by the Race Framework Directives and, it follows, the Equality Act. Thus s13 EA 2010 must be taken to prohibit caste discrimination. The Claimant avers that the and/or a reason why she was recruited and treated in the manner alleged was that the Respondents concluded that she was of a lower status to them: this view was tainted by caste considerations.
Ms Tirkey's family are Adivasi people who are frequently referred to as being of "low caste" although her caste was not expressly pleaded. Although they had not objected to the amendment at the time, Mr and Mrs Chandhok subsequently applied for it to be struck out. Their application was rejected by Employment Judge Sigsworth in January 2014 who stated that "the claim of caste discrimination as set out in the amended statement of claim is not struck out and the claim will proceed to a merits hearing". That was not strictly correct since there was not an express pleading that there had been caste discrimination; nonetheless its meaning was clear. Mr and Mrs Chandhok appealed to the Employment Appeal Tribunal.
Mr Justice Langstaff was critical of Judge Sigsworth for reading into the ET1 a caste discrimination claim that was not actually there as such. Nonetheless he went on to consider the grounds of appeal. First, it was contended that to allow the claim would amount to "ousting the will of Parliament". Section 9(5) of the Equality Act (as amended by the Enterprise and Regulatory Reform Act 2013) states that "A Minister of the Crown...(a) must by order amend this section so as to provide for caste to be an aspect of race; (b) may by order amend this Act so as to provide for an exception to a provision of this Act to apply, or not to apply, to caste, or to apply or not to apply, to caste in specified circumstances". It was initially proposed that there would be a full consultation in 2014 with draft legislation being introduced to Parliament in summer 2015 but this has not happened. Accordingly it was not for a tribunal to anticipate legislation not yet introduced.
Second, judgments which applied a purposive interpretation of the meaning of "ethnic origin" (so as to give effect to what was intended), as in the cases of Jews and Sikhs, were not comparable because Parliament had specifically singled out caste for statutory provision.
Third, the EU Race Directive was not applicable because the case was between individuals and did not involve the State or emanations of the State.
Fourth, the judge as in error to hold that caste could come within the scope of discrimination of the grounds of religion and belief.
Mr Justice Langstaff identified two key questions. First, does the law of discrimination provide a remedy for discrimination in the factual circumstances which the claimant was offering in her claim form to establish in evidence? Second, does the fact that the Equality Act as originally enacted envisaged (but did not implement) the addition of protection from caste discrimination mean that any claim asserting less favourable treatment for "caste reasons" must be precluded until the legislation is amended?
The complexity of employment law and the fear of getting things wrong have the effect that many managers feel almost paralysed when dealing with disciplinary matters. They rigidly and unquestioningly follow advice from HR to the letter, asking for detailed guidance at every stage. While obtaining advice from an HR manager is nearly always a good idea, placing too much reliance on such guidance can bring its own dangers, as demonstrated in the case of Ramphal v Department for Transport.
Mr Ramphal joined the Civil Service in 1995. He held various posts and was latterly an Aviation Security Compliance Inspector. His duties involved overseeing transport and industry compliance with relevant rules and requirements. He undertook inspections, both open and covert.
He was required to cover an area extending from Cornwall to Scotland and in order to carry out his work he was entitled to a hire car. He used a credit card provided to him to cover his expenses, including car hire. He was at the office only once a month. As is usual in such circumstances the credit card was to be used only in connection with his job and personal expenditure was prohibited. In February 2012 he was selected at random for an audit of his expenditure for the period of October and November 2011. He was informed that some 50 items were flagged up for investigation. He met his line manager and it was decided that, taking into account his explanations, none of the items required further consideration.
In June 2012 his line manager was instructed to carry out further checks covering the period from October 2011 to May 2012. Four items were highlighted. There were concerns about overall fuel expenditure and the purchase of early morning coffees. A claim which identified the purchase of two meals was explained because it turned out to be a buy one get one free deal. He purchased a meal for himself and treated his mother to the free meal. Another issue concerned a rail fare to the office when he had been called in for a meeting while on annual leave. There were also queries concerning the purchase of a meal (£13.45) and a petrol purchase (£23.58). These were attributed to the mistaken use of the wrong credit card and both were repaid. All the expense claims had been signed off by his line manager. There appeared to be several other "mistaken purchases", all of which were refunded. The main concern appeared to be apparently excessive petrol consumption and the possible use of hire cars for personal reasons.
Also in June 2012 Mr David Goodchild, Head of Land Security Compliance, was appointed to carry out an investigation to find out whether there was a case to answer. Most queries were addressed satisfactorily in a meeting with the line manager, leaving those referred to above. Mr Goodchild had not previously acted in disciplinary proceedings so he met with HR and familiarised himself with the disciplinary procedures, noting the distinction between misconduct and gross misconduct and the appropriate penalties. He also received guidance about the procedure to be followed.
On 3 August Mr Ramphal was given notice of a disciplinary charge and Mr Goodchild conducted a disciplinary hearing on 13 August. It emerged that Mr Goodchild had extensive contact with HR in the period from March 2012 to March 2013. As a result of this interaction it became clear that, having had emphasised to him the seriousness of the alleged offences, Mr Goodchild moved from concluding that there was no evidence that misuse constituted a deliberate and premeditated attempt to defraud the department to deciding on the balance of probability that he deliberately misused both the credit card and hire cars, resulting in a finding of gross misconduct and a recommendation that he should be dismissed. Favourable comments were removed and replaced with critical comments and misconduct resulting in a final written warning was replaced with gross misconduct and a recommendation to dismiss.
The resulting employment tribunal hearing took place over three days in December 2012. The decision was reserved (the judge was unwell) and was not delivered until December 2013. The employment judge noted that it was not wrong for an investigating officer to seek and receive advice and guidance from HR. The question was whether how far, if at all, the advice and guidance unfairly or improperly influenced the decision Mr Goodchild made to dismiss. The tribunal was particularly concerned about the apparent changes of mind by Mr Goodchild. However, it was concluded that the process was not rendered unfair by the intervention of HR and the decision was ultimately his own. He was anxious to get the decision correct and had therefore obtained extensive advice. There was no doubt that the employer had an honestly held belief in Mr Ramphal's guilt and there were reasonable grounds for sustaining that belief. The decision was based on as much investigation as was reasonable and was within the band of reasonable responses open to a reasonable employer. The process was reasonable but had it been unreasonable there was a 100% chance that he would in any event have been unfairly dismissed and he was 100% at fault.
His Honour Judge Serota QC, sitting in the Employment Appeal Tribunal, disagreed.
Pursuant to section 5 of the Limitation Act 1980 there is a time limit of six years to bring a breach of contract claim, running from the "the date on which the cause of action accrued". However, in Grisanti v NBC News Worldwide Inc, an employment tribunal has held that the six year time limit does not apply to breach of contract claims brought in an employment tribunal. In doing so it has declined to follow an earlier decision in which it was held that the six year limit did apply.
Employment Judge Wade, sitting in the Central London Tribunal, was asked to consider the issue at a preliminary hearing on 11 June. The judgment has recently been handed down. Ms Grisanti claims (among other things) that her employer deducted national insurance contributions from her salary between 1996 and 2003. However, when she came to claim her pension in 2015 she was told by HMRC that no payments were made for those seven years. The result is that she is entitled to a greatly reduced pension.
The deductions were calculated correctly and Ms Grisanti does not allege that her employer has kept the money. However, at the time of the hearing it was unclear what had happened to it. However, HMRC had commenced an enquiry.
NBC took the opportunity at the hearing to argue that the claim should be struck out in any event on the basis that the breach of contract claim was out of time, as was a claim under Part II of the Employment Rights Act, commonly referred to as a "Wages Act claim". It was contended that not only was the claim not brought within three months of termination (as extended by the ACAS early conciliation scheme), it was also subject to section 5 of the Limitation Act 1980 so that it was barred on the basis that more than six years had passed since the cause of action accrued in 2003.
The Employment Tribunals Extension of Jurisdiction Order 1994 allows breach of contract claims to be brought in an employment tribunal. The objective was to avoid duplication of claims in courts and tribunals. NBC submitted that, logically, the time limit of six years must also have been imported otherwise there was the risk of a flood of old claims and claimants would have the right to pursue claims in tribunals that could not be pursued in courts. More particularly a tribunal only has jurisdiction if "the claim is one...which a court in England and Wales would under the law for the time being in force have jurisdiction to hear and determine". It seems to be a pretty compelling argument, not least because it was successful in the 2012 employment tribunal case of Taylor v Central Manchester University Hospitals NHS Trust.
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