in-depth

Technical update - December 2017

Andrew Macmillan

The abolition of Tribunal fees

Issue

In July 2017, the Supreme Court gave its historic judgement regarding the legality of Employment Tribunal fees. It was found that in the four years since the introduction of charges to the Employment Tribunal, there had been a dramatic decline in the number of claims. The decision that the Government had acted unlawfully by preventing the public from gaining access to justice has to make the case of R (on the application of UNISON) v Lord Chancellor the most important case of the year.  

Facts

In July 2013, the Government introduced Employment Tribunal fees for the first time. The fees were set at two levels. The most straightforward of claims would require payment of an issue fee of £160 and a hearing fee of £230. Unfair dismissal, discrimination and more complex claims required higher fees of £250 to issue and £950 for the hearing. The number of claims plummeted by as much as 70 per cent and Unison challenged the lawfulness of the Fees Order by way of Judicial Review.

Decision

The Supreme Court declared the Fees Order was unlawful and that it must be quashed. The court focused on the common law right of access to justice, which can be traced back to the Magna Carta. Tribunal claims enabled legislation to have the deterrent effect that Parliament intended, as well as providing authoritative guidance as to the meaning and application of the relevant legislation and underpinning alternative methods of dispute resolution. The dramatic reduction in the number of claims showed that the fees had unfairly barred access to justice.

Action

On 14 December 2017, the first official statistics for Employment Tribunal numbers since the Supreme Court’s decision were published. These showed that the number of individual claims had increased by as much as 64 per cent. The practical result is that every employer will need to place much more focus on ensuring that staff policies and procedures are being followed in order to minimise the risk of claims. This may require training for managers and communicating to employees what standards of conduct are expected.

 

 

Rising cost of getting work status wrong

Issue

The right to take paid holiday was at the centre of several high profile cases regarding employment status during 2017. Taxi drivers, plumbers and couriers had all successfully argued that despite being labelled ‘self-employed’ they had statutory employment rights, which included the right to receive paid holidays as they were ‘workers’. The decision of the European Court of Justice in the case of King v The Sash Window Workshop Ltd has the potential though to have the biggest impact, as it allows for compensation to cover the entire period the worker was engaged.

Facts

Mr King was self-employed and worked on a commission-only basis for Sash Windows from June 1999 until 6 October 2012. During this time he refused an offer to be on the books as an employee. Unsurprisingly, being ‘self-employed’ Mr King was never paid for holidays or sickness absence. However when he retired, Mr King brought claims for accrued but untaken holiday together with pay for holidays he had taken each year throughout his 13-year engagement.

Decision

The European Court of Justice has held that in order to comply with the EU Working Time Directive, where workers are not provided with a facility to take paid annual leave, they have a right to be paid compensation. This should be without having to show that they have taken unpaid leave and the right to compensation should carry over, continuing to accrue until the end of their engagement or to the point they are provided with a facility for leave to be taken.

Action

Up until this point, the recovery of compensation in respect of unpaid holiday has been subject to a two year limitation and a further restriction where there was a gap of more than three months between holidays being taken. Following this decision, where no facility for holiday has been provided these limitations are under threat. Contractual arrangements should be reviewed and if it appears that the self-employed individual may also qualify as a worker, the inclusion of a holiday pay facility should be considered to limit the potential for historic liability.

 

 

Public interest means more than numbers

Issue

The special protection that is given to whistleblowers who report malpractices by their employer only applies if the worker reasonably believes the disclosure to be “in the public interest“. The Court of Appeal in Chesterton Global Ltd (2) Verman v Nurmohamed importantly made clear that this ‘public interest test’ was not simply a matter of calculating the number of people affected but would also take into account other factors including the nature of the allegations, whether there had been deliberate breaches and who was alleged to be responsible.

Facts

Mr Nurmohamed had made complaints on several occasions that the company’s accounts were being misrepresented in order to limit the amount of profit-based commission payments that were due to him and around 100 other senior managers. When Mr Nurmohamed was subsequently dismissed, he claimed that it was because he had made a public interest disclosure. The employer disputed that this was the reason but in any event claimed that his complaints were not protected as they had not been made in the public interest.

Decision

It was held that the disclosure was in the public interest. There was no absolute rule about the numbers that had to be affected before a disclosure was protected. The larger the number the more likely it would be that the employee had a reasonable belief that it was in the public interest. However, it was also relevant that in this case deliberate wrongdoing had been alleged by an employer, which was a very substantial and prominent estate agent in the London property market.

Action

A worker in the widest sense is protected against detriment or dismissal for making a protected disclosure. There is no minimum period of service and no cap on the compensation that can be awarded. Recognising what may amount to a disclosure will therefore be important in order to reduce the risk of claims. In this regard the judgment highlights four factors that may be relevant, they are the numbers affected; the nature of the interests and the extent to which they are affected; whether the wrongdoing was deliberate rather than inadvertent; and the size and prominence of the employer.

 

 

Voluntary overtime pay confirmed for holidays

Issue

Case law has established that when calculating holiday pay, regular non-guaranteed overtime should be included at least for the first four weeks of holiday entitlement. The term ‘non-guaranteed’ overtime has been used to describe work that the employee is obliged to do if required, but the employer is not obliged to provide. However until the decision in the case of Dudley Metropolitan Borough Council v Willetts and others there had been uncertainty regarding whether that calculation needed to also include voluntary overtime, which the worker was not required to do under their contract of employment.

Facts

A group of 56 Council employees claimed that they had not received the correct rate of holiday pay. They each had set contractual hours representing their normal working hours but in addition they would put their names forward for rotas that would give them the opportunity to do on-call work and extra hours. They brought claims that four weeks of their holiday pay should be re-calculated to reflect the additional pay they had received for the voluntary overtime.

Decision

The Employment Appeal Tribunal rejected the argument that only work which could be required under the contract of employment would need to be taken into account. The principle to be applied was that overtime ‘normally’ undertaken, even if voluntary, could not be excluded from the calculation of holiday pay for the four week holiday period. The EU law governing holiday pay required that it should correspond to “normal remuneration” so as not to discourage workers from taking leave.

Action

This is the first appellate decision to make clear that voluntary overtime should be treated the same way as non-guaranteed overtime. However, there is still the question of how regular the overtime has to be before it becomes ‘normal’? In this case it was sufficiently regular to be ‘normal’ even if it was only paid one week per month, or one week in five. However, if the evidence was that overtime was ‘very rare’ then it would not need be taken into account. Assessments of how regular workers carry out voluntary overtime should be conducted when assessing holiday pay calculations going forward.

 

 

Unlawful inducements

Issue

If there are difficulties in reaching agreement with the union in a collective bargaining process, an employer may be tempted to shortcut the process by approaching the employees directly with an offer of new terms. However, trying the direct approach may be costly, as was seen in the recent case of Dunkley and others v Kostal UK Ltd. This case saw the Employment Appeal Tribunal confirm that such a tactic could constitute an ‘unlawful inducement’, leading to substantial compensation awards for every union member to who the offer was made.

Facts

The employer’s offer of a pay rise plus bonus, in return for changes to sick pay and overtime rates had been put to a ballot by the union. The offer was rejected. In response, the employer made the offer to each employee individually stating that if they did not accept there would be no Christmas bonus. As a result a number of employees accepted. The remaining employees were approached again the following month and threatened with dismissal if the offer was refused. The union members brought proceedings claiming that unlawful inducements had been made to avoid collective bargaining.

Decision

The Employment Appeal Tribunal rejected the argument that this was not an unlawful inducement, as it was not intended to end collective bargaining in the future. The offers made to the employees directly would have the effect of ‘permanently changing’ their terms so that they would no longer be determined by a collective agreement. The prohibition on making an inducement applied, even if the collective bargaining would be resumed the following year. The prescribed award of compensation was £3,830 in respect of each unlawful inducement i.e. each letter. Accordingly, each of the 55 claimants was awarded £7,660.

Action

Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 is rarely used but it prohibits an employer from making offers to members of a recognised trade union where the purpose of the offer is to cease collective bargaining. This decision highlights that the total costs of breaching the restriction can be huge where a number of claimants bring proceedings. It is important to remember that where there are collective bargaining arrangements in place, direct offers can be made if there is a complete breakdown in talks but not as a shortcut to reach an agreement.

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Andrew Macmillan

Andrew Macmillan

Partner

Andrew is a specialist employment lawyer, with a particular focus on contentious work such as reorganisations, redundancies, employment aspects of insolvency, executive severance, employment relations issues and employment tribunal litigation.