Round-up of employment law developments: April 2006

This e-bulletin includes short summaries of recent developments. Please contact us if you would like more information.

1. Statutory dismissal procedure
2. Compensation for unfair dismissal
3. Bonuses and maternity leave
4. Defending harassment claims
5. Part-time workers and bank holidays
6. Pay in lieu of holiday
7. DTI guidance on rolled-up pay
8. Timing of collective redundancy consultation
9. TUPE
10. Age discrimination
11. Home Computing Initiative
12. New publications

1. Statutory dismissal procedure

… and redundancy

The statutory dismissal procedure requires an employer to write to the employee setting out the circumstances leading the employer to contemplate dismissal. The employer must then invite the employee to a meeting and confirm the 'basis' for the proposed dismissal before the meeting; these can be done verbally or (preferably) in writing. The EAT has given some guidance on how this applies to redundancy. The written statement can simply confirm that the employee is at risk of dismissal for redundancy. The pre-meeting information must include the reason for the redundancies and for the employee's provisional selection. Where there is a pool of employees, this means details of the selection criteria and the employee's assessment under those criteria, but not other employees' assessments or the score necessary to avoid selection. Employers should still consider providing this latter information, as although failure to so will not be automatically unfair, it could be procedurally unfair in some cases, eg where it would be difficult for the employee to make effective representations without it.

The EAT also commented on the requirements for a misconduct dismissal. The written statement should identify the nature of the misconduct (eg fighting, dishonesty) and the pre-meeting information must include sufficient detail of the case against the employee to enable him to properly put his side of the story, but not the detailed evidence. (Alexander & Hatherley v Brigden Enterprises, EAT)

… where fresh allegations emerge at the meeting

Where evidence at a disciplinary meeting reveals potential misconduct not specified in the original letter setting out the allegations to be considered, an employer is not required to adjourn and send a fresh 'charge sheet' if the new allegation is simply a shift in focus or variation of the original. Where the original allegation concerned 'unauthorised absence' and it emerged at the meeting that the employee was at the workplace but sitting in his car, the employer could dismiss for 'misuse of company time' without sending a fresh letter. If the new allegation is a wholly separate act of misconduct, the employer should not discipline for this without first sending a fresh letter. (Silman v ICTS (UK) Ltd, EAT)

… and other procedural failures

Where an employer complies with the statutory dismissal procedure, but fails to follow its own formal company procedure to the letter, this will not make the dismissal unfair if the employer can show more than a 50% chance he would have decided to dismiss had he followed the procedure. In two recent cases the EAT has reached conflicting views on whether the same argument can be made in relation to a more general procedural failure, such as a failure to follow Acas's Code of Practice, an issue which the Court of Appeal will now have to resolve. (Alexander & Hatherley v Brigden Enterprises, Mason v Ward End Primary School, EAT).

2. Compensation for unfair dismissal

• Even if a dismissal is unfair (because the employer failed to follow the statutory dismissal procedure or could not show that he would have dismissed despite some other procedural failure), compensation may be reduced to reflect the chance that the employee would have been dismissed in any event some time later, even if for a different reason. Where an employee was unfairly dismissed for refusing to agree an unreasonable change to his contract without consultation, a tribunal was entitled to conclude that, had the employer consulted and taken legal advice, it would have offered a reasonable change to the contract which the employee would still have rejected. As the employee would have been fairly dismissed a few months later, his loss was limited to that period. (Gover v Propertycare Ltd, Court of Appeal)

• Early retirement pension payments received by dismissed employees should not be taken into account in reducing their loss for unfair dismissal compensation. In contrast, sick pay and incapacity benefit do reduce the loss that can be claimed. (Knapton v ECC Card Clothing, EAT)

The Scottish Court of Session has upheld the EAT's ruling last year that an employer could reduce a bonus rewarding attendance pro rata to reflect absence on maternity leave during the bonus year, save for the two weeks' compulsory maternity leave (which must be treated as time worked). Unfortunately the legal position on bonuses and maternity remains uncertain. The bonus here was expressed to be discretionary, but the amount of bonus was calculated and paid according to fixed rules set annually. The Court held that such a bonus was "regulated by the contract" and therefore the claim should have been brought under the Equal Pay Act. As Ms Hoyland had used the Sex Discrimination Act, the Court was not required to consider the scope of either Act. The decision also suggests that more claims will now have to be brought under the Equal Pay Act, under which it is likely to be easier to defend pro-rating for maternity absence. (Hoyland v Asda Stores, Court of Session)

4. Defending harassment claims

An employer who had a dignity at work policy and could show that it took implementation seriously, successfully defended a claim that it should be liable for an employee's sexual harassment. The EAT emphasised that simply having a policy is not enough: employers need to train staff regularly, investigate allegations thoroughly and take appropriate action when allegations are upheld. (Caspersz v Ministry of Defence, EAT)

5. Part-time workers and bank holidays

Half of UK bank holidays fall on Mondays and one on a Friday. The EAT has ruled that it is not unlawful for an employer to refuse to give days off in lieu to part-time employees who do not work those days where there are similarly disadvantaged 'full-time' employees (eg, where the employer operates 7 days a week and full-timers work any 5 days). The EAT did not comment on whether such an approach would be unlawful where the employer only operates Monday to Friday so all full-timers benefit from bank holidays; the cautious approach for these employers remains to pro-rate. Parliamentary debate on the Work and Families Bill indicates that the Government intends to make such pro-rating a legal requirement in the near future. (McMenemy v Capita Business Services Ltd, EAT)

6. Pay in lieu of holiday

The ECJ has ruled that the EU prohibition on making payments in lieu of statutory holiday entitlement (save on termination) covers both current year entitlement and any unused entitlement carried over from a previous year, to avoid discouraging employees from taking their leave. The decision concerned official guidance on Dutch law which does not prohibit carry-over, so that the carried over entitlement clearly remains statutory in nature. It may still be possible to argue that, given the UK prohibition on statutory entitlement being carried over, a UK employer who permits carry-over in effect converts the statutory entitlement into a contractual one, so that this could perhaps be paid in lieu later on. Employee claims against such employers may be unlikely, although there is a (small) risk of HSE enforcement action. (Federatie Nederlandse Vakbeweging v Dutch State, ECJ)

7. DTI guidance on rolled-up pay

The DTI has amended its guidance following the ECJ's ruling last month that rolling up holiday pay into wages is unlawful (see case summary of Robinson-Steele in our March e-bulletin). The revised guidance advises that employers should renegotiate contracts to stop using rolled-up pay as soon as possible but notes that, where an employer has 'already' made transparent rolled-up payments, these can be set off against future holiday pay entitlement. The DTI considers that set-off is permitted for rolling-up only "whilst employers are in the process of changing their pay arrangements" following the ECJ ruling, but not thereafter, and that current legislation can and should be interpreted in this way (without needing amendment). The Court of Appeal may confirm this when the case returns there. The guidance is available here and further DTI commentary is here.

8. Timing of collective redundancy consultation

An employer who starts collective redundancy consultation several months before the dismissals take effect (eg, because the consultation leads to a deferral of the dismissal date) does not need to consult afresh nearer the dismissal date where there is an ongoing dialogue throughout the period. The fact that the employer chooses to issue a fresh HR1 notification to the DTI is irrelevant, provided the redundancy proposal and the employees affected remain the same. If the proposal for redundancies is abandoned and then resurrected, fresh consultation would be needed. (Vauxhall Motors Ltd v TGWU, EAT)

9. TUPE

• Where a transferor dismissed employees for misconduct before a TUPE transfer and upheld their internal appeals against dismissal after the transfer, the employees were deemed to have transferred to the transferee. Transferees will want to ensure that any such employees are identified and that appropriate indemnities are obtained. (G4S Justice Services (UK) Ltd v Anstey, EAT)

• Where employees' contracts provide that their pay is set by collective bargaining with the transferor, this only protects the pay agreement in force at the date of the TUPE transfer. The transferee is not bound by any new pay rate collectively agreed by the transferor after the transfer. (Werhof v Freeway Traffic Systems, ECJ)

• New TUPE 2006 applies the new "service provision change" test only to organised groupings of employees in Great Britain. Separate regulations have now extended these provisions to Northern Ireland from 6 April 2006.

• A motion in the House of Lords to revoke new TUPE 2006 because the insolvency provisions are unworkable and uncertain has been rejected by a majority of two. Click here for the debate.

• Employers should review their retention of documents policy in the light of new TUPE 2006 (in case they decide to contract out or sell part of their business in the future). The new obligation on a transferor to provide employee information covers any statutory disciplinary or grievance procedure taken in the previous two years in relation to transferring employees or those automatically unfairly dismissed before the transfer. Employers should therefore retain this information for two years.

Acas has published its guidance on the new age discrimination regulations coming into force in October 2006, available here. The Guidance includes a fairly basic summary of the legislation and various flowcharts and sample letters. It suggests that monitoring, staff attitude surveys, focus groups, exit interviews and impact assessments may help justify the retention of age-based practices. The DTI has issued guidance on the pension aspects, available here.

The age regulations will remove the upper age limit on unfair dismissal claims from October 2006. In a case soon to be only of historic interest, the House of Lords has held that the current limit is not unlawful indirect sex discrimination against men. Their Lordships did not comment on Mangold v Helm, the ECJ ruling that courts should interpret legislation so as to prohibit age discrimination (see our March e-bulletin). (Rutherford and Bentley v Secretary of State for Trade and Industry, HL)

11. Home Computing Initiative

The Chancellor announced in the Budget that the tax relief on providing employees with home computers for private use was to be removed. The Finance Bill has now confirmed this change, contrary to press reports of a possible U-turn. HM Revenue & Customs has stated that schemes already in place at 6 April will not be affected, provided the employee had the computer by that date or had signed up to a scheme with their employer but been unable to take possession of the computer (click here for details). In its current form the Finance Bill could also mean that office computers may be treated as taxable benefits if employees can make "significant" private use of them.

12. New publications

• Acas has published a paper setting outs its views on the changes to tribunal procedure introduced in October 2004, available here.

• The Royal National Institute for the Deaf has published a survey highlighting discrimination against those with hearing impediments and suggesting adjustments employers should make – details available here.

• HM Revenue & Customs has made available new online calculators for employers to work out employees' entitlements to statutory paternity pay for births and for adoption, and statutory adoption pay.

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

Herbert Smith LLP, Gleiss Lutz and Stibbe are three independent firms that have a formal alliance.

© Herbert Smith LLP 2006