Employment Writes - June 2013

Employment WritesJune Edition

The Law Firm of The Futurewww.plexuslaw.co.uk

Here comes the summer! Think holidays, sunshine and significant employment law reform. The next 18 months are going to be both interesting and challenging for employers now that the Enterprise and Regulatory Reform Act has received Royal Assent.

In this edition of Employment Writes we have put together a handy “at a glance guide”

listing the key employment law changes over the next few months. We examine in

more detail the changes to the whistleblowing legislation due to commence in June

and the government’s crackdown on unpaid work experience. We also consider the

most recent case law from the EAT and Court of Appeal.

At a glance – what’s new?

25 April 2013

• ACAS are prohibited from disclosing information held by them relating to a

worker, employer or trade union. There are certain exceptions to this including

where the disclosure is made for the purposes of enabling ACAS to carry out

any of its functions.

• The government can make powers to allow tribunals to order an equal pay

audit where an employer loses an equal pay claim.

17 June 2013

• A portable Disclosure and Barring Service (DBS) check becomes available. Job

applicants will pay a fee of £13 pa, which will allow prospective employers to

carry out a free ‘update’ search to check their DBS certificates.

“...Enterprise and Regulatory Reform Act has received royal assent.”


“The government will have the power to vary the dismissal compensatory award limit.”

25 June 2013

• EAT judges will sit alone, without lay members, unless a full panel is ordered.

• The qualifying period for unfair dismissal (now two years) will not apply where

the main reason for dismissal is the employee’s political opinions or affiliation.

• Tribunals can award a deposit order relating to a specific part of a claim or

response. They can also make an order for payment of witness expenses where

a preparation time order has been made.

• The government will have the power to vary the unfair dismissal compensatory

award limit. The limit will be the lower of either:

• a specified amount that must be between one and three times median

annual full-time earnings, or

• a specified number of weeks’ pay (not less than 52 weeks). The award

limit may be varied for smaller employers, although no plans have yet been

announced.

• Reform of the EHRC, with certain duties and powers repealed.

• Abolition of the Agricultural Wages Board.

• Changes to whistleblowing legislation (see article below for more information).

• The power to legislate to make caste an aspect of race discrimination. The

government are aiming to introduce legislation by April 2015.

• Rounding up of increases to statutory redundancy payments and tribunal award

limits.

29 July 2013

• Fees are expected to be introduced into employment tribunals and the EAT.

• The new Employment Tribunals Rules of Procedure are expected to come into

force.

Summer 2013

• Pre-termination negotiations will be inadmissible in unfair dismissal proceedings.

• Compromise agreements to be renamed settlement agreements.


“A new ‘public interest’ test will be introduced...”

The winds of change are blowing the whistleThe current whistleblowing rules are set to change.

Whistleblowing protection is available to workers and employees who are

dismissed or who suffer a detriment because they have made a protected

disclosure. The advantage of this type of claim is that there is no minimum

qualifying period or cap on the compensation a tribunal can award.

As the law currently stands an employee who complains of breach of a term

of their employment contract can theoretically bring a whistleblowing claim.

A new ‘public interest’ test will be introduced which attempts to reverse this

position so that in order to attract whistleblowing protection the employee must

reasonably believe that their disclosure is in the public interest. This term is not

defined, but is likely to cover disclosures affecting more than just one person.

Arguably, however, this could still cover contractual breaches if the disclosure

relates to a breach affecting a class of people.

The second change expands whistleblowing protection to those disclosures

made in bad faith. ‘Bad faith’ isn’t defined but is likely to mean acting with

selfish or malicious intentions or for monetary gain, rather than for the primary

purpose of putting right a wrong.


This seems to counterbalance the public interest test. The focus will therefore

be on the message rather than the messenger, so that as long as the message

is in the public interest it won’t matter if the messenger is making the disclosure

for selfish reasons.

‘Good faith’ will still play a part in the tribunal’s consideration of a whistleblowing

claim, as in circumstances where a disclosure is found to be made in bad faith,

a tribunal will have the power to reduce any award made by up to 25%, if it is

just and equitable to do so.

These changes will apply to protected disclosures made on or after 25 June

2013. A further change, due to come into force at an unspecified date over the

summer, is the introduction of vicarious liability for employers and the personal

liability of co-workers for detriment caused by the co-worker to a whistleblower.

This closes the existing loophole and will make it much easier for claimants who

are victimised for making disclosures, to take action.

In recognition of the fact that whistleblowers may have trouble securing new

employment, the government has also pushed for whistleblowing protection

for job applicants. For the time being this extended definition of ‘worker’ to

include job applicants is on hold, pending the launch of a call for evidence by

the Whistleblowing Commission. We will keep you updated.

“...a tribunal will have the power to reduce any award...”


No such thing as a free lunchWith summer comes the droves of school leavers looking for unpaid work experience to bolster their CVs.

The number and range of these internships is on the increase and interns are

the norm across many industries. However a recent government crackdown

on the “unpaid internship” raises concerns about the exploitation of unpaid

workers and the fact that such placements may favour the socially privileged

and well-connected.

This comes at a time when Westminster school’s auction of prestigious work

experience placements for its students, which saw bids of up to £825 for two

weeks’ work, has been severely criticised. A group of MPs have written to

participants of the auction including Farbergé and Coutts bank, urging them

to withdraw their placements from the online auction on the grounds that it is

“explicitly favouring privilege”.

The government has said they will be taking “aggressive” steps to “crack

down” on employers abusing the national minimum wage requirements by

using unpaid interns. Last year the Department for Business, Innovation and

Skills (BIS) reclaimed nearly £200k in wages owed to unpaid interns. BIS will be

publishing a student handout to inform graduates of their employment rights,

and encourage people to identify “bad employers” for investigation. Calls made

to the Pay and Work Rights Helpline regarding employer abuse will also be fast-

tracked.

So is this the death of the unpaid internship? Maybe not, but employers need

to be careful to ensure that interns and volunteers do not, contrary to their

intentions, become ‘workers’ by virtue of the behaviour or conduct of the parties.

For example, if there is a mutual promise between the parties to perform and

provide work. This is important as a worker is entitled to receive the national

minimum wage, paid holiday and is protected by anti-discrimination legislation.

An employer can help to protect itself by having a written specification for

the internship, which is carefully worded to avoid creating an employment

relationship.


“...a warning to all employers that oral promises can be contractually binding.”

Be careful what you promise, it could cost you €50 millionThe Court of Appeal in Dresdner Kleinwort v Attrill [2013] EWCA Civ 394, has dismissed Dresdner Kleinwort’s (the bank) appeal against the decision that the bank was contractually bound to pay bonuses worth €52 million (£44 million) to 104 ex-employees in early 2009.

With the future ownership of the bank uncertain during 2008, the Financial

Services Authority (FSA) became alarmed by May 2008 at the high number

of staff leaving the bank. The FSA instructed the CEO of the bank to stabilise

staff turnover. In August 2008, the bank approved a bonus pool worth a value

of a minimum €400 million from which discretionary bonuses which would be

distributed in early 2009.

On 18 August 2008, at a meeting with staff, and a live broadcast on the bank’s

intranet, the CEO of the bank announced the bonus pool. The pool would be

distributed ‘no matter what’, said the CEO, regardless of the bank’s actual

performance. The size of actual bonuses as individual’s bonuses would be

calculated “in the usual way”.

The bank was subsequently bought by Commerzbank. Following the Lehman

Brothers collapse in 2008, the German Government lent Commerzbank €18.2

billion. In December 2008 the bank’s employees received a letter from the bank

confirming that the bonus would be paid in January 2009. However, the letter

stated that the bonus would be reduced if the bank’s performance dropped.

In January 2009, the bonus payments were made to employees. The bonuses

were reduced by 90%. The employees sought enforcement of the contractual

obligation to pay the promised bonuses.

The Court of Appeal rejected the bank’s appeal against the decision to uphold

the bonus claims. The Court found that the ‘Town Hall’ announcement by the

CEO in August 2008 was a contractually binding obligation on the bank to make

100% bonus payments to employees. It rejected the bank’s argument that the


CEO’s announcement was binding in honour only. The Court decided that the

announcement contained information which was sufficiently clear and precise

to be enforceable and which was intended to create a legally binding obligation

between the bank and the employees.

Further, the Court also decided that the bank’s letter of December 2008,

permitting the bank to reduce the bonus payments, was a breach of the implied

term of mutual trust and confidence between the bank and employees.

This decision is a warning to all employers that oral promises can be contractually

binding. The ruling highlights the need for businesses to be careful when

making any employee announcements, especially in connection with salaries

and bonuses. Businesses should avoid references to bonus payments being

‘guaranteed’ and should include in contractual documents clauses specifying

how and by whom contractual changes can be made.


Who are affected employees under TUPE?The EAT has provided clarification as to who is covered by the definition of ‘affected employees’ under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) in the case of I Lab Facilities Ltd v Metcalfe & Others UKEAT/0224/12.

In circumstances where only part of a business transfers under TUPE and the

remainder of the business is closed, the employees within the closed part of the

business are not ‘affected employees’, so the obligation to inform and consult

with those employees does not arise.

I Lab (UK) Ltd (IL UK) provided an overnight service to the film and television

industry. In 2009 it merged with RKT Post Production Ltd (RKT) who also

worked for the film and TV industry but did their work during daytime hours. IL

UK became the employer of both sets of employees, but both parts remained

distinct.

After the merger IL UK went into liquidation and the business

was split into two. The IL UK part was sold and the IL UK

employees TUPE transferred to I Lab Facilities Ltd (ILF). The

RKT business was closed down and the staff made redundant.

Several ex-RKT employees issued tribunal proceedings stating

that IL UK had breached its TUPE obligations towards them

regarding informing and consulting, as they were ‘affected

employees’. If they were ‘affected employees’ IL UK was under

a duty to inform and consult with their representatives. The

penalty for not doing so was up to 13 weeks’ gross pay per

affected employee. IL UK and ILF were jointly and severally

liable for any compensation award.

The employment tribunal held that the ex-RKT employees were


‘affected employees’ and awarded compensation of £81,375.00. ILF appealed.

The EAT upheld ILF’s appeal. ILF persuaded the EAT that it was not sufficient

for the ex-RKT employees to state that they were ‘affected employees’ merely

because they were excluded from the transfer, or even, that they were excluded

from it having been informed that they would be part of it. The transfer of the

part of the business which did not employ them, did not make them ‘affected

employees’.

Regulation 13(1) TUPE defines affected employees as “any employees of the

transferor or the transferee… who may be affected by the transfer or may be

affected by measures taken in connection with it”. The EAT explained that the

affected employees are those:

• who will or might be transferred;

• whose jobs are in jeopardy by reason of the proposed transfer; or

• who have job applications within the organisation pending at the time

of transfer.

Employers can take comfort that where there are two distinct businesses, side-

by-side, a TUPE transfer affecting one does not mean that the employers of

the other business are also ‘affected employees’. Like many potential TUPE

situations, however, this ruling is fact-specific. The EAT stated that, in theory, a

proposed transfer may affect employees who do some work in or for the part

of business transferring. Employers should also remember that non-transferring

employees in cases similar to this, would have the right to be consulted

collectively under the redundancy consultation rules.

“...the right to be consulted collectively under the redundancy consultation rules.”


Post-termination victimisation is unlawful, confused anyone? In a controversial move the EAT has given conflicting decisions only weeks apart on whether post-employment victimisation is unlawful.

The decision in Rowstock Ltd v Jessemey (as covered in Employment

Writes April 2013) held that post-employment victimisation was not unlawful.

However, a differently constituted EAT has now ruled that post-employment is

protected under the Equality Act 2010 in the case of Onu v Akwiwu and another

UKEAT/0022/12.

Miss Onu was a domestic servant working in the UK for Mr and Mrs Akwiwu,

a Nigerian family. She left her employment alleging that she had been exploited

and badly treated and brought claims for unfair dismissal, race discrimination

and failure to pay the national minimum wage. Some six months later, the

Akwiwus telephoned Miss Onu’s sister in Nigeria and said that “if [Onu] thought

things would end there, she was wrong” and that “[Onu] would suffer for it”. Onu

brought a further claim for victimisation.

The employment tribunal rejected Onu’s victimisation

claim as the Akwiwu telephone call did not make specific

reference to the discrimination claim. Further Onu had failed


to show that the threats from her employers were because she had commenced

proceedings for race discrimination.

Onu appealed this finding and the EAT considered the provisions of the

Equality Act 2010 and whether it provided protection from post-employment

victimisation. The EAT stated that this required a two-stage approach, involving

a consideration of domestic and then EU law.

Following a convoluted analysis, the EAT came to the conclusion that the

Equality Act 2010 does cover post-employment victimisation, contradicting the

finding of the EAT weeks earlier. The EAT explained that the draftsman of the

Equality Act 2010 must be taken to have been aware of the 2003 House of

Lords’ decision in Rhys-Harper v Relaxion Group and that victimisation under

previous discrimination legislation could give rise to a claim if it occurred post-

termination.

Further section 108(7) Equality Act 2010 was not considered expressly to

exclude a claim for victimisation under other provisions of the Act, which were

deemed to apply whether the employment was continuing or had ceased.

The final reason given by the EAT was that if the construction of the Act did not

accord with the EU law, the second stage would be for the tribunal to interpret

the Equality Act 2010 in a manner consistent with European obligations which

provided post-employment victimisation protection.

Employers are right to be confused by the conflicting EAT decisions on this point.

The EAT has granted permission to appeal. In the meantime, employers should

assume that ex-employees are protected by post-termination victimisation.

“...employers should assume that ex-employees are protected by post-termination victimisation.”


Can obesity amount to a disability? Yes, says the EAT in Walker v Sita Information Working Computing Ltd UKEAT/0097/12.

The BBC recently reported that the number of people with obesity in the UK has more

than trebled within the last 25 years. Doctors now say that the condition is reaching

‘epidemic’ proportions. It is therefore unsurprising that the issue of whether obesity

can amount to a disability has found its way to the Employment Tribunal.

Mr Walker brought a disability discrimination claim against his employers. He weighed

21 stone and suffered from what his doctor referred to as ‘functional overlay’, which

was compounded by his obesity. He had numerous health problems such as asthma,

chronic fatigue syndrome, knee problems, bowel problems, anxiety and depression.

At first instance, the employment tribunal decided that he was not disabled, for the

purpose of the Equality Act 2010. The tribunal based this decision on the fact that a

specialist had examined Mr Walker and had not been able to identify a ‘physical or

organic cause’ for his conditions other than his obesity.

However, the EAT overturned this decision on the basis that it was not the cause of

Mr Walker’s symptoms that should be focussed on, but rather the effect. Mr Walker’s

health problems amounted to a disability even though the symptoms may have

been caused by obesity which is not, in itself, a disability. The key question for the

EAT was whether Mr Walker had a physical or mental impairment and not what

the cause of the impairment was.

An employer managing an obese employee with health problems should seek

medical advice to identify whether the employee has a physical or mental

impairment satisfying the definition of disability under the Equality Act 2010. This

would be the same for an employee with alcoholism or drug dependency. Whilst

the condition itself is not a disability, the possible effect of that condition, i.e.

liver disease would qualify as an impairment. The employer can then consider

whether the employee in question is suffering from a substantial disadvantage

(in comparison to those who are not disabled) as a result of a provision, criteria,

practice or physical feature, and therefore whether reasonable adjustments

should be considered.


Contact UsFor more information please contact:

Charlotte Cooper

Head of Employment

Plexus Law

T: 01386 769179

E: [email protected]

These articles are not intended to constitute legal or other professional advice and should not be relied upon or treated as a

substitute for specific advice relevant to particular circumstances.

T: 0844 245 4000www.plexuslaw.co.ukOffices in London, Leeds, Manchester and Colchester

Plexus Law is a trading name of Parabis Law LLP, a Limited Liability Partnership. Incorporated in England & Wales. Reg No: OC315763. Registered office: 8 Bedford Park, Croydon, Surrey CR0 2AP Parabis Law LLP is authorised and regulated by the SRA.

Employment Writes - June 2013

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