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Employers Update - January 2012

Welcome to our first 2012 edition of Employ!

The weeks prior to Christmas saw no let off in the number of Judgments issued by the Appeal Courts in employment cases and we feature a few of the most relevant cases below, covering areas from Annual Leave to TUPE.

In addition, as social media’s influence continues to affect the workplace and not always for the best, we include a summary of two recently reported cases which may be of interest to clients and contacts.

On behalf of myself, Elaine and Leanne and all partners and staff at Taylors, we wish all our clients a happy, prosperous and claim free New Year.

Kind regards
Will Clayton

Key Employment Team Contacts:

Will Clayton Elaine Hurn Leanne Eddleston
Will Clayton
Partner & Head of Employment
Email Will
0844 8000 263
  Elaine Hurn
Email Elaine
0844 8000 263
  Leanne Eddleston
Email Leanne
0844 8000 263



In This Edition:

Employ! Email Updates

Employ! is Taylors FREE monthly employment law newsletter which keeps busy HR professionals up to date with developments in the fast-moving world of work. Sign up now to have Employ! sent to you via email each month.

Annual Leave – More Power For Employers

The Supreme Court has ruled that employers can require workers to take their annual leave accrued under the Working Time Regulations 1998 during weeks when the workers would not rostered for work in any event.

This case concerned off-shore oil workers, when spending time on shore breaks but the principal involved could be applicable in radically different sectors too such as teaching or leisure: Russell and others v Transocean International Resources Ltd and others [2011], Supreme Court.

Equal Pay & Incremental Pay Scales – Experience Matters

The Employment Appeal Tribunal has overturned an Employment Tribunal’s ruling that a female employee was entitled to equal pay with a male comparator who, because of his greater experience, had been placed on a higher pay increment point than her when he was recruited.

The first Tribunal found that over time, when it became clear that both employees were performing at a similar level, the employer's explanation for the initial pay differential which was not tainted by sex ceased to be a material factor and so in their view could not defend the employer from the Equal Pay claim.

The EAT disagreed and held that, on the contrary, the very nature of some incremental pay scales is such that the point at which employees start on an incremental pay scale may inevitably continue to impact on and maintain differences in pay and so allow employers to justify the difference as a sufficiently material factor to protect against Equal Pay claims: Secretary of State for Justice v Bowling, EAT.

Sickness Absence Dismissals
Lengthy Service Need Not Always Cause Lengthy Investigations

An employee’s service is NOT a relevant consideration when assessing the fairness of a pre-dismissal investigation into the cause and effect of an employee’s long term incapacity....but it might be relevant to the fairness of the employer’s decision to dismiss: Dundee Council v Sharp, EAT.


TUPE Service Provision Changes – Innovations In Service Delivery
& Other Changes Can Avoid TUPE

Employers that we talk to are often understandably critical of the commercially restrictive effects of the default service provision change rules set out in Reg. 3 of TUPE 2006.

As a brief but over-simplistic reminder, where a contract to perform certain activities on behalf of a client moves from one contractor to another, Reg 3 of TUPE can (and often does) apply. This leads to the automatic transfer of the outgoing contractor’s employees assigned to those services into the employment of the incoming contractor. This result can often frustrate the client and the new contractor, particularly if there were concerns about the performance of the outgoing contractor’s employees which might have influenced the decision to re-tender.

Consequently, businesses have sometimes been put-off from bidding for outsourced public and private services because of the risk of having to take on the previous contractor’s employees under TUPE and then deal with the costs of redundancies necessary to introduce new talent and to run the services more effectively.

The good news is that a run of 2011 Employment Appeal Tribunal decisions provide some real scope for side-stepping TUPE.
In the two cases from December 2011 below, Reg. 3 of TUPE was held not to apply to transfers of contracts for services where:

  • the activities carried on by the new contractor / service provider are not essentially the same as those carried on by the predecessor [Enterprise Management Services Ltd v Connect-Up Ltd and others (EAT, December 2011)]; or
  • the client / commissioner of the services changes with the transfer and is not the same client who benefited from the services before the transfer took place [Hunter v McCarrick (EAT, December 2011)]

We are currently helping clients reassess their approach to service contracting from a TUPE costs and risks management perspective. If TUPE is an issue for your business we would like to hear from you.

TUPE and the Rescue of Insolvent Businesses

Staying with the TUPE theme for the moment, two recent Court of Appeal decisions will be of interest to insolvency practitioners and other clients looking to purchase keys assets or businesses from companies in Administration:-

Q: Can purchasers of a business or part of a business that is in Administration ever avoid taking employees assigned to that business / part under TUPE ?
Not according to the Court of Appeal in Key2Law (Surrey) –v- De’Antiquis.

At the risk of over simplifying what is a fairly complex legal issue, the issues at stake in Key2Law can be summarised as follows, both Reg 4 of TUPE 2006 (which provides for the automatic transfer of contracts of employment); and Reg 7 (which makes transfer connected dismissals automatically unfair where there is a relevant transfer) do not apply to businesses in liquidation.

Over recent years the law has been less clear for businesses in Administration where the Administrator described the purpose of the Administration as being the liquidation of the assets of the business, as opposed to rescuing the business or part as a going concern. If the motives of the insolvency practitioner when applying for Administration were to achieve the liquidation of the assets, the law became such that the eventual purchaser of the business or part from the Administration could avoid the consequences and costs of Reg’s 4 & 7. In other words, they could take the assets or the going concern without the connected employees.

The legal approach has changed as a result of the Court of Appeal’s Judgment in Key2law. Going forward as a matter of law Administrations may not be regarded as being akin Liquidations for the purposes of TUPE. Consequently, Reg’s 4 & 7 will apply to all relevant transfers from Administrations.

Q: In cases of businesses in Administration, when does the clock start on the protection given to employees under Reg 7 of TUPE from dismissal for a transfer connected reason ?
A. It can start on day one of the Administrators’ appointment: see Baillovone v Spaceright

Facts: The Administrators of Ultralon Holdings dismissed a Mr Baillavoine from his role as chief executive on the same day as the company went into administration. At that point, the Administrators were yet to find a buyer to rescue the business.

The buyer, Spaceright, appeared on the scene some time later. The eventual sale took place a month after Mr B’s dismissal.

Nevertheless, and in a surprising decision that could serve to deter insolvency practitioners from taking the Administration route altogether, the Court of Appeal upheld the Employment Judge’s decision that Mr B’s dismissal was for a reason connected to the transfer and that he could therefore proceed with his unfair dismissal claim.

Social Media – Cases In the News

On 27 December 2011, the Guardian featured the US case of Mr Kravitz who is being sued by his employees for over $200k, for taking his Twitter followers with him when he moved jobs. The employer, a company which provides online information about mobile phones, argues that Twitter constitutes a customer database. It is suggested that the employer will need to establish that Twitter followers constitute a trade secret. That might be a step too far particularly if the tweets were a mix of personal, private and business comments.

On 5 January 2012, the Telegraph reported the case of John Flexman, a human resources executive earning £68,000 per year. Mr Flexman is claiming constructive dismissal following a dispute with his employer over his profile on the online professional networking website LinkedIn.

The Tribunal has heard that Mr Flexman was 'forced out of his job' after angering his employer by uploading his CV to the website and ticking a box to register an interest in "career opportunities". Mr Flexman was ordered to immediately remove his CV from the website, accused of "inappropriate use of social media" and called to attend a disciplinary hearing. The dispute led to Mr Flexman’s resignation. His employers argue that Mr Flexman was in breach of new company policy on conflicts of interest which banned employees ticking the "career opportunities" box. The case continues…

Statutory Redundancy Pay, Compensation Limits & Benefits

The Annual increase in compensation limits were also announced in December. With effect from 1 February 2012:

- the maximum compensatory award for unfair dismissal will rise from £68,400 to £72,300; and
- the maximum amount of a week's pay, used to calculate statutory redundancy pay (among other things), will rise from £400 to £430.

These are the biggest increases we have seen in recent years and reflect the annual increase in the cost of living.

In the same vein, from early April 2012:

  • The standard rates for statutory maternity pay, statutory paternity pay and statutory adoption pay will increase from £128.73 to £135.45. The weekly earnings threshold for these payments will rise from £102 to £107;
  • Statutory sick pay will increase from £81.60 to £85.85, with the weekly earnings threshold also rising from £102 to £107; and
  • Maternity allowance will increase from £124.88 to £135.45, with the earnings threshold remaining at £30.

Ongoing Government Law Reform Consultations

Employment Tribunal Fees: On 14 December 2011, the MoJ launched its consultation, Charging Fees in Employment Tribunals and the Employment Appeal Tribunal, seeking views on two significantly different fee charging structures which might be adopted for charging fees in the employment tribunal. Only one scheme is proposed for charging fees in the EAT. The consultation closes on 6 March 2012. If you would like to take part, or for more information, visit: http://www.justice.gov.uk/consultations/et-fee-charging-regime-cp22-2011.htm

Copyright 2006 - 2012 Taylors Solicitors

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