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The Employers Update - October 2010

Welcome to this month’s edition of Employ!

This month Employ! brings you relevant updates in HR and Employment Law in relation to the termination date, retirement ages, protective awards and employment references.

If you have any queries in relation to the content of Employ, or any employment issue, please call the Employment Team on 0844 8000 263 or email oliver.mccann@taylors.co.uk.

Oliver McCann - Partner and Head of Employment
James Bellamy - Employment Solicitor

Tel: 0844 8000 263
Email: oliver.mccann@taylors.co.uk


In This Edition:

» You’re fired! But from when?
» Retirement at 65 lawful!
» Severance Payments and Age discrimination
» A Failure to inform and consult
» Say What You Mean!
» Discriminatory References

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You’re fired! But from when?

With the new season of the Apprentice under way there is no confusion when Lord Sugar “fires” an apprentice – the pointing of the finger followed by the words “with regret, your fired” is enough to tell that contestant that the road ends there!

In reality it is however not always that straight forward and confusion over the effective date of termination can result in a dispute over when the last date for claims expires or whether bonus entitlements have crystallised in the meantime!

The Supreme Court has handed down a decision in the case of Gisada Syf v Barratt – this is the highest decision possible on this point and is therefore binding on all other courts and employment tribunals.

A dismissal letter was sent to the employee by recorded delivery. It arrived on 30th November and was signed for by the employee’s son. The employee was expecting the decision letter to arrive but was away for a few days as her sister was giving birth. The dismissal letter was not opened until 4th December. Her claim for unfair dismissal was presented on the 2nd March. The Employer argued her claim was out of time, the effective date of termination (EDT) being the 30th November, meaning a claim should have been lodged by midnight on 28th February. The employee argued the EDT was the 4th December and so her claim was in time.

What do I need to know?

  • The EDT was the 4th December
  • As the employee neither knew of the decision to dismiss nor had deliberately failed to open the letter or gone away to avoid reading it the EDT was the date she actually learned of the decision to dismiss
  • The time limit should be interpreted in a favourable way to the employee
  • It is critical that you have a clear date where the employee is informed of your decision. It would be best practice to ensure a verbal communication to dismiss followed by a written decision or alternatively personal delivery of the dismissal letter.

Retirement at 65 lawful!

The Default Retirement Age (“DRA”) of 65 is to be scrapped altogether with effect October 2011. As such all employers across the country need to make a careful decision - Do you scrap a normal retirement age within your organisation completely or do you retain one and if so at what age?

After October 2011 any employee subject to compulsory retirement will be able to challenge that dismissal alleging the dismissal is both unfair and discriminatory on grounds of age.

In relation to unfair dismissal, assuming the government removes retirement as a fair ground for dismissal as intended, then employers will have little alternative but to argue that the reason for dismissal is “some other substantial reason” as being the fair reason for dismissal, namely succession planning and certainty. Employers would also have to follow a fair process. This is unchartered territory for unfair dismissal claims. Before the age regulations were introduced employees 65 or over could not pursue such claims. Therefore it is uncertain as to whether the above grounds would be sufficient to justify dismissal under some other substantial reason and it is also unclear as to the extent an employer has to go to prove that retirement at a particular age fulfils that business need.

Employees will also be able to claim age discrimination. We know from recent case law that the retirement dismissal will constitute age discrimination. The issue is whether or not it can be objectively justified as being a proportionate means of achieving a legitimate aim.

A recent European case may assist in this regard where a cleaner, employed for 39 years, was retired at 65 in accordance with the terms of a collective agreement. This stated that retirement was to occur when an employee attained state pension age. German law allowed for this but the employee nevertheless challenged this as unjustifiable age discrimination.

The court held that the German law allowing compulsory retirement did not breach EU directives as the law was a legitimate aim of ensuring sharing of employment between generations and avoided capability dismissals. Further there was an agreement for retirement at that age and also replacement income available to the employee upon retirement ie a pension. It then held the retirement provision in the collective agreement was justified. It was necessary to offer workers a foreseeable future and allowed flexible staff management. It was not disproportionate as retired workers could freely seek employment elsewhere.

What do I need to know?

  • The DRA will be abolished from October 2011
  • The last date at which notice to retire can be given to lawfully retire an individual at DRA or above ie 31st March 2011
  • From October 2011 employers will need to determine whether to retain a compulsory retirement age – if it does the policy needs to be objectively justified
  • Establishing objective justification may be assisted if it is agreed in a collective workforce agreement
  • Where compulsory retirement is to be retained it is important to keep evidence of the outcome of your investigations/research as to what that age should be and the business reasons for it


Severance Payments and Age discrimination

Employers need to review their terms and conditions of employment and collective agreements to ensure that such terms are not age discriminatory. Typically contractual redundancy schemes contain potentially age discriminatory provisions, especially in relation to the level of any enhanced severance package.

What do I need to know?

In Hastie v Kraft Foods Plc 2010 a cap to the enhanced redundancy scheme was objectively justified as the policy behind the cap was to compensate for loss of the opportunity to earn income and also to prevent a windfall.

In a recent Danish case it has been held that Danish law which prevented the payment of a severance allowance on dismissal where they were entitled to a pension was unjustifiable age discrimination. Although there was a legitimate aim of preventing such workers receiving both an allowance and a pension the law failed to take into account the fact that some older workers did not wish to retire and draw their pension.

A Failure to inform and consult - Something is better than nothing!

Where s.188 of Trade Union and Labour Relations (Consolidation) Act 1992 applies and there has been no consultation at all then the protective award is a penal award (GMB v Susie Radin 2004) and the starting point should be 90 days pay. There should only be a reduction from the full award if there are extenuating circumstances.

In a recent case, relating to a failure to inform and consult under TUPE 2006, it was held that the 13 week protective award should not be the starting point where the employer has done something (albeit not everything) to comply with its statutory obligations. Here the employer gave some basic limited information to the transferring employees. It failed toe elect employee representatives and failed to engage in consultation. The court held that 13 weeks should only be the starting point if there has been a complete failure to engage in information and consultation.

The case also confirmed that the obligation to inform under TUPE 2006 is engaged once there is a possible transfer and even where the transferor does not envisage any measures being take.

What do I need to know?

With ongoing uncertain economic times meaning redundancies and possible business transfers employers need to know:

  • There are statutory obligations to inform and consult in any business transfer (including service provision changes) and where 20+ employees are to be made redundant (or dismissed and re engaged) in a 90 day period.
  • Information and consultation should take place with the recognised trade union or elected employee representatives
  • A failure to comply can result in a protective award of up to 13 weeks/90 days pay per employee
  • Part compliance is better than no compliance at all
  • The statutory defence of “exceptional circumstances” is hard to meet!

Discriminatory References

A recent case should act as an alarm bell for all prospective employers relying on a reference from a prospective employee’s former/current employer.

In this case a solicitor was offered a job with a prospective firm. Her previous employer sent a reference to her prospective firm and upon receipt that firm retracted the job offer. The poor reference was held to be in consequence of the fact that the employee had pursued a sex discrimination claim against that firm. The reference given referred to the fact that such a claim had been made, stated that the employee had a poor working relationship with the partners of the firm and that she could be inflexible as to her opinion.

The prospective employer settled with the claimant presumably because they felt exposed that they too had acted unlawfully by victimising her because of her sex discrimination claim. The former employer was also held to be liable for lost earning because the retraction of the job offer, although an unlawful act itself, was a direct and natural consequence of the unlawful reference given by the firm. On policy grounds the previous firm should be held liable for the direct consequences of its actions.

What do I need to know?

  • Unless there is a contractual obligation there is no legal right to give a reference so consider such a request carefully
  • If you choose not to give reference, but ordinarily do with other employees, ensure that decision is not associated to a former discrimination complaint or is itself not an act of discrimination
  • If you do give a reference do not give a negative reference. If there is little to be said stick to the basic facts ie dates of employment, position held, duties and avoid expressing opinion.

Your Questions Answered

1. As with many companies at the moment we are facing having to make significant cuts to our overheads to continue trading. Despite the fact that our orders have not decreased we are being squeezed by our customers on price. Can we use cost as a reason for redundancy even if the level of work required to be performed remains the same?

The simple answer is yes. An element of the definition of redundancy is that due to the requirements of the business there is a reduced need to employ the same number of employees. The “requirements of the business” is a factual case to prove and if the business cannot survive with the same number of employees (or overheads) then it is a business requirement to reduce that cost. You must however ensure that you fully consult with the affected employees and follow a proper procedure. If you cannot satisfy a redundancy dismissal you may be able to pursue dismissals for some other substantial reason in these circumstances.

2. We are becoming aware that employees are posting comments on social networking sites, such as Facebook, about the company and / or their colleagues. We have not yet taken any action over this but can we do anything about it?

This is becoming an increasingly common complaint for Employers. The simple answer is yes you can discipline your employees for this. These sites are available to the public and as such negative or disparaging comments being publicly made not only impact on the reputation of the company but are also in breach of the Employee’s implied obligation to act loyally and in good faith. It would be advisable to produce and distribute to all staff a company policy on the use of social networking sites and the implications of disciplinary action. Call Taylors if you need assistance.

Copyright 2006 - 2010 Taylors Solicitors

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