Employment Update August 2010
National Minimum Wage Increases
The national minimum wage is set to rise again, taking effect from 1 October 2010. The new rates are as follows:
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For workers aged 21 and over, the standard rate will apply: £5.80 increasing to £5.93;
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For workers aged between 18 and 20, the development rate will apply: £4.83 increasing to £4.92; and
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For workers between the compulsory school age (but who are not apprentices) and 18, the young workers rate will apply: £3.57 increasing to £3.64.
It should be noted that the Government has decreased the age cut-off for the standard rate, from 22 down to 21.
However it has been commented in the media that the Government has not committed to maintaining spending or enforcement of the minimum wage until 2014. Readers will be kept abreast of further updates.
Equality Act 2010 Implementation
The Government has announced that it will introduce measures to assist businesses to get up to speed with their new duties and responsibilities under the Equality Act when it comes into force on 1 October this year. The Government has also confirmed it will proceed with the planned implementation of the first stage of the Equality Act from the previous Labour Government.
The Government Equalities Office (GEO) has published a series of summary guidelines on the Equality Act for employers and employees alike. Click on the link below to access these guidance notes:
http://www.equalities.gov.uk/equality_act_2010/equality_act_2010_what_do_i_n.aspx
Acas also has a very useful web page on the Equality Act, its provisions and its impact for employers and employees. It has provided a Quick Start guide for employers on implementation of the Act. To access the site, please click on the link below:
http://www.acas.org.uk/index.aspx?articleid=3017
Semple Fraser’s employment team will produce a special ebulletin containing guidance on the Equality Act in advance of its commencement.
Abolition of the Default Retirement Age
The Coalition Government has published a consultation document seeking responses to its proposals to abolish the default retirement age (DRA) by October 2011, with a 6 month transitional period commencing from 6 April 2011.
The main points of the proposals are as follows:
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At present employers are required to issue a notice of retirement to the employee at least 6 months (and no earlier than 12 months) before the employee’s intended date of retirement. After 6 April 2011 such notices will not be competent; and in the case of 12 month retirement notices, they will be incompetent from October 2010.
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Employers will still be able to retain a DRA, provided they can objectively justify it as a proportionate means of achieving a legitimate aim. The consultation document provides guidance on what this test means, and provides examples of what would be classed as ‘legitimate aims’.
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The abolition of the DRA only affects ‘employees’: meaning that, for example, office holders and partners will be unaffected by the consultation’s proposals.
The consultation is open to input until 21 October 2010, with the Government aiming to provide its own response to any input in November 2010.
Interested readers can view the Government’s notes and the consultation document itself via the following link:
http://www.bis.gov.uk/retirement-age
Retracting a decision to dismiss: too little too late?
It is an established principle of employment law that an employer, or an employee, can only retract a purported dismissal (or resignation in the case of the employee) in “exceptional circumstances”. In the case of an employee, it may be because they resigned ‘in the heat of the moment’ and did not consciously or rationally intend to resign. This is linked with the principle that an employer has no right to unilaterally cure breaches of contract in order to prevent the employee claiming constructive dismissal (see our article on the case of Buckland v Bournemouth University.
The Employment Appeal Tribunal’s decision in Willoughby v C F Capital plc UKEAT/0503/09/LA provides a useful update on this principle.
The employer, C F Capital (CFC) attempted to agree an arrangement with Ms Willoughby by which she would become self-employed and provide services to CFC on a retainer and commission basis. This was to avoid having to make her redundant. However Ms Willoughby insisted she would not do this without written details. CFC failed to provide this. On 23 December 2008, CFC then issued Ms Willoughby a letter suggesting she had accepted the arrangement, and therefore terminated her contract of employment. Ms Willoughby contacted CFC the next day to say she rejected this letter; although she accepted she had been dismissed. On 5 January 2009, CFC tried to retract the letter and allow Ms Willoughby’s employment to resume, explaining there had been a misunderstanding. Ms Willoughby raised a claim in the employment tribunal for wrongful and unfair dismissal. CFC’s position was that Ms Willoughby had effectively resigned.
The employment tribunal held in favour of CFC and refused Ms Willoughby’s claim. Although the letter ‘on its face’ appeared to terminate Ms Willoughby’s employment, a reasonable person in Ms Willoughby’s position would know that it was mistaken. Besides, CFC had retracted the letter as soon as the office reopened after the Christmas break, which was a reasonable period of time. Ms Willoughby appeal to the Employment Appeal Tribunal (EAT).
The EAT held in favour of Ms Willoughby and reversed the decision of the tribunal. The key elements in its decision were:
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That the letter written by CFC was unambiguous and represented a conscious and rational decision – not something done ‘in the heat of the moment’. The circumstances were not sufficiently exceptional to allow CFC a ‘special circumstances’ defence to retract the dismissal. A mistaken belief is not exceptional.
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A reasonable person would not necessarily take the letter to be a mistake. An inference could be drawn that it was an attempt by CFC to ‘ride roughshod over Ms Willoughby’s rights and reasonable requests’. In this case, the termination was not a mistake – it was deliberate.
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In order to retract a dismissal, this should be done “in short order” (a day or two). Here, the delay caused by the holiday period was irrelevant.
There is clearly a lot for employers to learn from the mistakes of CFC in this case. Careful and considered measures must be taken to preserve trust and confidence between employer and employee – one careless mistake could end that relationship and give rise to a claim for constructive dismissal. Where that relationship has broken down, it is not only impossible for an employer to unilaterally cure a breach of an employee’s contract, but also to retract a purported dismissal; absent some exceptional circumstance to mitigate the employer’s error.
Update on Stigma Damages
In our December 2009 ebulletin we mentioned the concept of ‘stigma damages’ which arose in the case of Chagger v Abbey National plc. Stigma damage is damage to reputation, resulting in financial loss, which an employee suffers as a result their bringing a tribunal claim against their former employer in respect of their dismissal.
The recent Employment Appeal Tribunal decision in Brown v Careham Hall UKEAT/0354/09/SM has shed some light on when stigma damages can and cannot be claimed. Ms Brown worked as a carer at Careham Hall, which was operated by a Mr and Mrs Baxter. Ms Brown was dismissed in 2008 for alleged rough handling of one of the care home’s residents. She subsequently raised a claim for automatic unfair dismissal on the basis that the Baxters did not follow the compulsory statutory disciplinary procedures in force at the time. She succeeded and was awarded compensation – however the tribunal refused to increase the amount of compensation which Ms Brown alleged was a result of ‘stigma damage’ caused by an unfavourable reference from the Baxters. Ms Brown appealed to the Employment Appeal Tribunal (EAT).
Ms Brown’s argument was that the unfair dismissal was responsible for her inability to secure a job subsequent to leaving Careham Hall. The EAT did not accept this argument. Ms Brown’s loss stemmed not from the unfair dismissal, but rather from the Baxters’ unfavourable reference. The Baxters were obliged to give such a reference because of the Protection of Vulnerable Adults rules. Stigma damages can only be awarded if the employees’ losses were “in consequence of the dismissal” itself (as was decided in Chagger and stated in section 123 of the Employment Rights Act 1996). Thus, in effect, Ms Brown’s appeal was not about stigma damages at all as her loss resulted from the bad reference, not the dismissal.
The case is an important reminder for employers facing actual or threatened tribunal action. If an employee mentions ‘stigma loss’, it must relate to financial loss they suffer as a result of the stigma attached to their dismissal. However it should be noted further that this does not give employers carte blanche to give unfavourable references. Save for some sort of justification as in the Baxters’ case, to give an unfavourable reference would be a form of negligence, and could give rise to further legal action at the instance of the employee in addition to a tribunal claim.
Collective Agreements and TUPE
The Employment Appeal Tribunal in Worrall v Wilmott Dixon Partnership UKEAT/0521/09 has made a decision on the circumstances in which a collective agreement does and (in this case) does not become incorporated into a contract of employment.
By way of a background explanation, Regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) provides that buyers, in addition to having employees transferred to them, also have any collective agreements relating to those employees transferred to them as well. They therefore take the place of the previous employer(s) who signed up to the collective agreement. Case-law has held that the terms of the collective agreement remain ‘static’, i.e. they are frozen as at the date of the transfer. Buyers are not bound by subsequent changes to the original agreement concluded post-transfer between the union and the original employer.
Mr Worrall worked for Birmingham City Council. His employment was subsequently transferred several times under TUPE, culminating in his employment being transferred to Wilmott Dixon. Whilst he was an employee of Birmingham City Council, there was a collective agreement (negotiated between the Council and a trade union) in place for Council employees, the provision provided that employees made voluntarily redundant could be entitled, at the Council’s discretion, to an increase of five years in the calculation of their pensions. His latest employer, Wilmott Dixon, became a participating member in the pension scheme.
By the time Mr Worrall came to be employed by Wilmott Dixon, legislation had been enacted precluding the ability of employers to make the sorts of increased payments contained in the collective agreement. Mr Worrall underwent voluntary redundancy. Wilmott Dixon declined to increase his pension entitlement in line with the collective agreement. Mr Worrall then asserted that the above provision of the collective agreement was incorporated into his contract, and he brought a tribunal claim for breach of contract.
The employment tribunal refused his claim, although it agreed that the clause of the collective agreement did form part of his contract of employment.
Mr Worrall appealed to the Employment Appeal Tribunal (EAT) which proved unsuccessful. The EAT held that:
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The collective agreement did not form part of his employment contract. There was no evidence that the agreement had been brought to Mr Worrall’s attention and expressly incorporated into his contract.
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It was not convinced by Mr Worrall’s argument that TUPE ‘froze’ his contract at the time the collective agreement was incorporated, so that subsequent legislation could not undo the agreement’s provisions. Whilst it is true that a TUPE transfer cannot allow employees to benefit from future changes to collective agreements where these are not expressly incorporated (so to that extent it is true to say that they are ‘frozen’ by a TUPE transfer), in this case legislation expressly repealed provisions of the collective agreement like the one in question. To argue that the collective agreement was frozen and therefore protected from the legislation was wrong.
This case conveys an important lesson for employees – in order to enjoy the benefit of provisions in a collective agreement, they must be expressly considered and incorporated into contracts of employment. It is not sufficient to simply rely on them as a fall-back when convenient to do so, particularly when no detailed thought has been given to their incorporation to that employee’s contract. It also demonstrates that TUPE’s ‘freeze-effect’ does not preserve the agreement where legislation expressly repeals certain of its provisions. Employers who have entered into collective agreements with unions are equally advised to pay heed to this case.
Disability discrimination: a matter of professional opinion?
The Employment Appeal Tribunal (EAT) has given a detailed consideration of the meaning of ‘disability’ for mental impairments arising under the Disability Discrimination Act 1995 following an interesting case concerning a female barrister.
In J v DLA Piper UK LLP UKEAT/0263/09/RN, J (a female barrister) allegedly had her job offer withdrawn after she disclosed to DLA that she had a history of depression. She brought a claim for discrimination contrary to the Disability Discrimination Act 1995 (DDA). The issue was whether her mental condition was considered a ‘disability’ under the DDA. The employment tribunal rejected her claim, saying that she was not disabled and therefore she had no case. She then appealed to the Employment Appeal Tribunal.
The EAT upheld J’s appeal. To be disabled, a person must suffer impairment (be it physical or mental) which results in “a substantial and long-term adverse effect”. This adverse effect must in turn prejudice their ability to carry out normal activities on a daily basis. The EAT held that:
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The employment tribunal was wrong to dismiss the evidence of J’s GP and doctor as not ‘expert’. Whilst such practitioners are not experts on depression, that does not mean that their evidence can be ignored. They are fully entitled to express an opinion on whether J suffered depression, which the tribunal should have given weight to.
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Further, the employment tribunal had adopted too high a test in requiring the claimant to be clinically depressed – what was more important in the case was the impact of J’s mental affliction upon her everyday functions rather than the ‘label’ of being clinically depressed.
The case was referred back to another employment tribunal to decide whether J was disabled or not.
The case is important for employers and employees since it shows that:
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A GP is fully qualified to express an opinion on whether a patient is suffering from depression, and on any associated questions arising under the DDA. Depression is a condition very often encountered in general practice; and
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In order to identify an employee as disabled it is necessary to consider the impact of an impairment upon their ability to function normally, rather than simply label them as depressed. However this does not mean that employees who have a bad reaction to adverse life events are ‘depressed’.
Employers are advised to pay careful attention to letters from doctors or GPs about their employees’ mental and physical well-being, and the adverse impacts any impairments they suffer from will have upon their personal and professional lives. Employees are advised to bring any issues like these to their employer’s attention.
Employers should note that the Equality Act 2010 will be introducing reforms to the law on health questionnaires, which will be explained in a special ebulletin on the key provisions of the Act next month.
Disability discrimination: is perception enough?
The Employment Appeal Tribunal (EAT) has handed down a decision which sheds more light on the complex area of disability discrimination law, and in what circumstances an employee can claim this on the basis of perception.
The case of Aitken v Metropolitan Police Commissioner UKEAT/0226/09 concerned a claim by Mr Aitken, who was a police officer, for direct disability discrimination in terms of the Disability Discrimination Act 1995 (DDA). Mr Aitken was off work sick for significant periods of time. On his return he was diagnosed with Obsessive Compulsive Disorder. His therapists also identified a propensity to binge drink. These factors culminated in an eventful Christmas night out in 2005 which disturbed his colleagues and left them fearing for not only their own safety but also for Mr Aitken’s mental and physical well-being. Meetings with senior officers and appointments with health professionals followed for the following months during which time Mr Aitken showed no signs of improvement. Mr Aitken went off sick in October 2006. The Metropolitan Police Service later retired him on medical grounds in January 2007. He appealed against this unsuccessfully, so made a claim to the employment tribunal.
Mr Aitken lost his argument in the employment tribunal that he had been discriminated against because of his ‘disabilities’. He therefore appealed to the EAT.
The EAT upheld the decision of the employment tribunal. The EAT was not convinced by Mr Aitken’s argument that his behaviour was so severe that he might appear to be mentally disabled, and so for all intents and purposes he should be treated as disabled. He relied upon the recent case of the European Court of Justice in Coleman v Attridge Law UKEAT/0071/09/JOJ which held that it was unlawful to discriminate someone due to their association with a disabled person.
The EAT held the following:
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The Metropolitan Police Service did not act on the assumption that Mr Aitken was disabled, but rather on the basis of how Mr Aitken appeared to others. Mr Aitken’s claims about discrimination due to perceptions of disability were therefore academic.
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In any event, the decision in Coleman did not lend Mr Aitken’s argument any support. To be discriminated against due to a mental illness, a claimant must in fact be suffering from that mental illness. It is insufficient for the claimant to be perceived as suffering from that illness.
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Further, bad behaviour can be considered by employment tribunals in comparing the treatment of disabled employees with non-disabled employees for the purposes of the DDA. There was no discrimination here since Mr Aitken was treated exactly like a non-disabled employee if they had behaved similarly (in fact more leniently).
Although Mr Aitken lost his claim, employers should take note that with the introduction of the Equality Act 2010, a claim for disability discrimination based on perception, like Mr Aitken’s, will be actionable from October 2010.
Employers should look for warning signs that an employee is struggling at work, or is displaying behaviour which may or may not be symptomatic of a physical or mental illness. Careful and measured consultation should be undertaken with the employee, and if necessary medical and psychiatric practitioners should become involved in order to prevent a breakdown in relations and, naturally, tribunal claims. Employees should of course bring any issues they have to their employer’s attention, and ensure that these are adequately addressed.
Employers should note that the Equality Act 2010 will be introducing reforms to the law on discrimination by perception, which will be explained in a special ebulletin on the key provisions of the Act next month.
The matters covered in this ebulletin are intended as a general overview and discussion of the subjects dealt with. They are not intended, and should not be used, as a substitute for taking legal advice in any specific situation. Semple Fraser LLP will accept no responsibility for any actions taken or not taken on the basis of this publication.
FOR MORE INFORMATION PLEASE CONTACT: ALISON GOW