Employment Law Bulletin June 2013


Half way through the year and the drip-feeding of employment law changes continues. The Enterprise and Regulatory Reform Act is coming alive, with next month bringing with it the introduction of employment tribunal and Employment Appeal Tribunal fees.

There is no denying that tribunals these days are looking more like courts. We now have ‘judges’ and ‘claim forms’. And, soon, fees too. Every claim will cost; how much depends on its type. The price bracket is currently set as £160 to £250 to issue a claim, and £230 to £950 for a hearing.

The fees are set to come in from 29 July, although some doubt has been cast on this by Unison’s decision, reported this week, to apply for judicial review of the introduction of the fees regime. The indications are that the challenges will include that the regime breaches EU law by making it excessively difficult to exercise rights conferred by European Community law; and that charging prohibitively high fees will have a disproportionate impact on women, meaning the fees regime is indirectly discriminatory on grounds of sex.

Ingenious arguments but whether the Courts will be impressed is another matter…..

Assuming fees do survive this challenge, most people are expecting fees to influence the way in which settlements are negotiated. But whether we’ll see claimants deterred from bringing claims is something no one can predict with certainty.

News of other changes later in this bulletin.


Re-engagement after dismissal

Oasis Community Learning v Wolff

 Once a dismissal has happened the employment relationship is usually over. But where the dismissal was unfair, a tribunal could order the employer to take the employee on again.

Here, the question for the Employment Appeal Tribunal (EAT) was whether re-engagement was the right remedy where the employee had made serious allegations against colleagues and his employer.

Mr Wolff was a teacher who worked for Oasis, an organisation which helps turn failing schools around. He was dismissed for his confrontational style with pupils, and brought an unfair dismissal claim. In the lead-up to that hearing he alleged that staff had fabricated evidence. He won his unfair dismissal case and the tribunal ordered re-engagement at another of the employer’s sites.

Oasis argued that Mr Wolff’s actions towards colleagues meant that re-engagement was not appropriate; the relationship between Mr Wolff and Oasis had broken down irreparably. The EAT disagreed. It held that where an employee has made serious allegations against colleagues and managers at one workplace, that will not have such an impact on his relationship with colleagues and managers at a different workplace.

So if you part company with an employee on bad terms, don’t assume that you won’t be forced back together later on.


It’s all change in June

 This month brings with it some important employment law changes.

Political belief dismissals

 From 25 June an employee who is dismissed because of their political opinions or affiliation will no longer need two years’ continuous service to bring an unfair dismissal claim.


Dismissals stemming from a protected disclosure (otherwise known as whistleblowing) sidestep two important employment law requirements:

  • The two-year qualifying period for unfair dismissal; and
  • The cap on compensation.

From 25 June, workers will only be protected by the whistleblowing laws if they “reasonably believe” that the disclosures they make are in the public interest. Note that the disclosure doesn’t have to be in the public interest; the worker just has to believe that it is. While “public interest” hasn’t yet been defined, it seems safe to say that it will be something that affects more than just one person. So a worker who tries to argue that a disclosure they made about their own employment contract, for example, will probably not be protected.

What about the intention behind the disclosure? The current requirement for a disclosure to be made in good faith is going. So, workers who make a disclosure out of spite, rather than to right a wrong, will from 25 June also be given whistleblowing protection. But their compensation could be reduced by up to 25% if the tribunal thinks that the disclosure was made in bad faith.

Unfair dismissal compensation cap

The cap on compensation for unfair dismissal is to change from its current “one size fits all” approach (a cap of £74,200) to the lower of the current cap and one year’s pay. There is, ridiculously, still some doubt as to when exactly it will come into force, but there is a suggestion that it will apply to dismissals taking place after 25 June. We will keep you posted on this.


It’s a philosophical belief, honest

Hawkins v Universal Utilities

A tribunal has held that believing that lies should never be told is a philosophical belief, attracting protection against discrimination under the Equality Act.

Mr Hawkins was a telesales agent. He claimed that he was dismissed because he refused to lie to customers. Lying was contrary to his Christian beliefs, he said. Ironically, perhaps, The tribunal held that the actual reason for his dismissal was his inadequate performance he hadn’t produced evidence of being told to lie.

Although his claim failed, others might succeed. Truthfulness is an important and significant aspect of human life and certainly isn’t a value unique to Christianity. It can amount to a philosophical belief and, in the right circumstances, could be the basis of a successful claim.


A new way of checking employees

From 17 June 2013, employers could have cheaper, quicker access to criminal records information.

The Disclosure and Barring Service (an amalgamation of the Criminal Records Bureau and the Independent Safeguarding Authority) is launching a new Update Service which will allow prospective employers to check that a job applicant’s DBS certificates are still valid and up-to-date.

The flipside of this is that the financial burden of these updates falls with job applicants who are set to pick up the £13-a-year fee for the system.


Consulting on redundancy when insolvent

 AEI Cables v GMB

Businesses with money troubles can’t escape onerous duties. They must balance the need to reduce outgoings quickly with their legal responsibilities.

Consulting with staff in the lead-up to redundancy is one of the basics of employment law. But this takes time, as AEI Cables discovered when it needed to reduce its head count by more than 120 people. The business had been advised by its accountants that unless it cut costs, there was a risk of trading while insolvent (which would mean directors’ liability and potential criminal penalties for fraudulent trading). So AEI made all 124 employees redundant straight away.

Those employees claimed that AEI had breached its duty to consult. They won and were each given awards of 90 days’ pay, which was the maximum allowed. The company appealed and the Employment Appeal Tribunal (EAT) reduced the 90-day awards to 60 days. It was not reasonable, the EAT said, to expect an insolvent employer to carry on trading for 90 days while it informed and consulted with employees. Protective awards are not meant to penalise employers but to encourage them to consult. In AEI’s case, some consultation could and should have taken place, despite the urgency of the situation.

Here the company’s financial circumstances helped reduce its burden to consult, but this case makes clear that doing away with consultation altogether is a risky strategy.


Financial penalties for employers

At some point in the next year, although the date is not yet clear, provisions will come into force to allow tribunals to fine employers for the way they breached workers’ rights.

It’s all about “aggravating factors”. This term has yet to be defined, but we can take it for now that it means what it says: the breach was made worse by something the employer did or didn’t do. How much will a guilty employer have to pay? Between £100 and £5,000 depending on the circumstances. Unusually, the fine is halved if paid within 21 days (rather like a parking ticket!).

Lawyers are already poised to thrash out the meaning of “aggravating factors” and it will take a few years before caselaw makes it clear as to what qualifies and what doesn’t. But we think reasonable employers are unlikely to experience problems.

 And finally…..

Reasonableness of restrictive covenant

Romero Insurance Brokers v Templeton

Mr Templeton was an experienced insurance broker, recruited to a manager’s position at Romero. He was given an employment contract and on his first day, he agreed a 12-month non-solicitation restrictive covenant in a separate document. The covenant sought to later prevent Mr Templeton soliciting clients with whom he had dealt in the six months before leaving Romero.

A few months later Mr Templeton resigned and went to work for a competitor. Some of Romero’s clients went too. Romero brought a High Court claim to enforce the restrictive covenant and get compensation for lost revenue.

Was the 12-month covenant legally binding? Covenants which are too restrictive in what they prevent an ex-employee from doing, with whom and where can be worthless when it comes to enforcement. Here, the High Court held that the covenant was reasonable. These cases are always decided on the specifics but there are some useful and more universal pointers to be gained from the Court’s reasoning:

  • Mr Templeton’s previous employment contract had contained a similar restrictive covenant, so he wouldn’t have been taken by surprise by Romero’s.
  • In the context of selling insurance, 12 months is reasonable because policies will usually be renewed once in that period, giving Romero a decent chance to build relations with Mr Templeton’s clients.
  • It didn’t matter that the restrictive covenant was not written into the employment contract. Having it in a separate document meant that it could still be enforced.

It is always vital for restrictive covenants to be tailored to the industry, the employer, employee, and to the particular circumstances in which they find themselves. They key is to make the restriction narrow enough so as not to become a restraint of trade, but wide enough to adequately protect the employer’s business interests. Striking that balance can be tricky and of course should not be attempted without expert advice…