Wright, Johnston & Mackenzie Solicitors

ECJ ruling on holiday pay for long-term sick workers

The European Court of Justice has handed down its long awaited ruling in the controversial case of Stringer v HMRC (previously Ainsworth v HMRC). In a decision which is likely to prove unsatisfactory for employers, the Court held that employees on long-term sick leave are entitled to take all holidays that they have accrued while absent from work, when they return to work.

The Court confirmed that a worker who is on sick-leave for the whole of an annual leave year is entitled to a period of four weeks’ paid annual leave, notwithstanding that they are not actually at work. The Court has left the decision on whether the paid leave can be taken during that year or whether it should be carried over to another year, to the national courts for deliberation. In any event, the employee will be entitled to be paid at some point.

Furthermore, the Court held that the right to paid annual leave is not extinguished at the end of the leave year where the worker was on sick leave for the whole of that year. The Court also ruled that the right will not extinguish where a worker was absent on sick leave for part of the year and was still on sick-leave when his employment terminates.

The case was brought by five employees at Her Majesty’s Revenue and Customs in the UK and a worker from a pensions and insurance organisation in Germany. They argued that under European law they were entitled to holiday time whilst they were unable to work due to illness, citing Article 7 of the European Working Time Directive, which provides that workers have a “right to a minimum period of paid annual leave”. The decision clears up years of dispute on the issue.

Critics of the decision have pointed out that this will place an extra financial burden on employers already struggling with tough economic conditions. They also state that the process of reintegrating employees following a period of illness will become more difficult and that employers may, in future, be reluctant to provide long-term sick arrangements for their staff.

The House of Lords will now give a final judgment and, given the tenor of the ECJ opinion, will no doubt overturn the Court of Appeal’s decision from April 2005 that the right to paid holiday leave did not accrue during periods of sickness absence.

This decision is of crucial importance to employers. Although the current position, as laid down in the Court of Appeal decision will remain in force until the House of Lords hands down its final judgement, employers should be aware of the new rights employees on long-term sick leave will acquire.

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Discretionary bonuses

In Small v The Boots Co PLC and Boots UK Ltd, Mr Small and other warehousemen claimed for unlawful deduction from wages on the basis that they had not been paid performance related bonuses to which they claimed they were entitled.

They lost before the Employment Tribunal but won on appeal to the Employment Appeal Tribunal (EAT), to the extent that the EAT remitted the case back to a different Tribunal to determine whether the Boots discretionary bonus scheme had any contractual effect and if so what.

The Tribunal had concluded that the bonuses were purely discretionary. The section in Boots’ Staff Handbook dealing with the issue read, ‘After a qualifying period of service, there are additional discretionary benefits, such as bonuses… However, they are not intended to be contractual.’ 

The EAT considered that it was not as straightforward as taking a literal reading of the wording used in the Handbook, for three reasons. Firstly, the word “discretionary” is open to a number of varied interpretations in the normal circumstances.

Secondly, the Tribunal had failed to take account of all relevant circumstances including the almost constant practice of making payments over many years in deciding whether the discretion is to be construed as having contractual content. The bonus had been regularly paid and the important question was whether any contractual entitlement had arisen (this question has now been remitted for reconsideration).

Finally, the Tribunal had failed to consider whether Boots acted in the manner it is obliged to, that is rationally and in good faith, in exercising its discretion concerning the provision of a bonus.

With bonuses very much in the news, this case is very topical. It is important for employers to be aware that, even if your contract states explicitly that bonuses will be discretionary, they may be found to be contractual when considered alongside other relevant circumstances. Any discretion must be exercised even handedly and not in a capricious way.

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Duty to make reasonable adjustments - Disability Discrimination

In Eastern & Coastal Kent PCT v Grey it was found that Mrs Grey was disabled by virtue of having dyslexia. A Tribunal found that her employers had failed to make reasonable adjustments in connection with an interview for a new post and, as a result, Mrs Grey had suffered disability discrimination.

Section 4A(3) of the Disability Discrimination Act 1995 effectively provides that an employer is not subject to the duty to make reasonable adjustments if it did not know, and could not reasonably be expected to know, that someone is likely to be placed at a substantial disadvantage by a disability. The PCT argued that this section applied in Mrs Grey’s case. The Tribunal disagreed.

The PCT appealed the Tribunal’s decision, arguing that it had wrongly applied the section. The EAT agreed. It held that sub-section (3)(b) will confer an exemption on an employer from the duty to make adjustments if each of four matters can be satisfied. These four matters are that the employer:

• does not know that the disabled person has a disability;
• does not know that the disabled person is likely to be at a substantial disadvantage compared with others who are not disabled;
• could not reasonably be expected to know that the disabled person had a disability; and
• could not reasonably be expected to know that the disabled person is likely to be placed at a substantial disadvantage in comparison with persons who are not disabled.

The EAT stated that these four criteraia are cumulative and are not alternatives. All four must be established for an employer to rely on the subsection.
The case has been remitted to a new Tribunal to properly apply that test to see whether, on the evidence, the PCT was exempt from the duty to make reasonable adjustments.

Pending the outcome of the fresh Tribunal, all employers should be ensure that they offer to make adjustments in the recruitment and interview process for all potential candidates. 

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Facts unknown to an employer at time of dismissal can affect compensation but cannot justify dismissal

In Blackford Farms Ltd v Mulqueeny, Mr Mulqueeny took a job as head gamekeeper on Sheikh Maher al-Tajir’s estate in Perthshire. He was dismissed in 2004 after what he claimed was a two-hour verbal assault on him by the Sheikh, and brought claims at an Employment Tribunal.

At the Tribunal, Mr Mulqueeny won his claim that he had been unfairly dismissed for asserting a statutory right not to suffer an unlawful deduction from wages, in that the employer had failed to pay him a bonus to which he was entitled. The Tribunal did, however, reduce the award it made by 20% on the basis that he had contributed to his dismissal by staying in a cottage on the estate after a shoot, drinking with friends and subordinates and consuming his employer’s alcohol.  The employer appealed.

The EAT agreed with the employer that Mr Mulqueeny was not contractually entitled to the bonus claimed. It held that the arrangement had been too vague to be enforceable.  Nevertheless it maintained that the dismissal was unfair.  The employers had falsely alleged that the reason for the dismissal was misconduct by Mr Mulqueeny whereas the true reason for dismissing him was that they wanted to remove him because he had claimed a bonus and had raised a grievance about it.

The EAT pointed out the irony in the situation because if the employers had known at the time of dismissal of the contributory misconduct by Mr Mulqueeny it would probably have been possible for them to dismiss him fairly for that reason.  The EAT found the dismissal was unfair but reduced the basic and compensatory awards by a further 30% to 50% in all.

  When considering the dismissal of an employee, employers must take care to establish the relevant facts to the best of their ability and follow correct procedures. Tribunals will not look favourably upon employers who have falsely manufactured reasons for dismissal.

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Woman agrees settlement with Council in 'peeping tom' case

An employee at a leisure centre run by Derry City Council has reached a £50,000 settlement after an employee at another of the city’s leisure centres had been found spying on her through a keyhole while she was in the changing rooms.

The woman had taken a case of sexual harassment and sexual discrimination against the Council to a Tribunal on the alleged grounds that the Council was aware of the “peeping tom’s” behaviour prior to the incident but failed to act.

The Tribunal heard that suspicions were raised by staff about the manager’s behaviour two months before he was caught spying on the victim. One staff member reported seeing him coming out of the storeroom beside the female changing rooms and suspected that he had been spying on women from there.

The manager was prosecuted after he was discovered watching the naked woman through the keyhole of the storeroom. He was prosecuted for the offence and, despite his denials, was found guilty by a jury at Derry Crown Court of voyeurism. He lost his job, was placed on two years probation and was placed on the Sex Offender’s Register for five years.

The Council has “apologised unreservedly” to the woman.

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Consultation obligations under TUPE

In 2006 Glasgow City Council decided to transfer its Building Services Division to a newly incorporated entity called City Building (Glasgow) LLP. During this transition the contracts of employment of 2,000 employees were transferred to the LLP in October 2006.

The 2006 TUPE Regulations, which apply in some circumstances where employees are transferred to a new employer, distinguish between the obligation to consult and the obligation to inform. Certain information must be given to employees before any relevant transfer takes place. However, TUPE Regulation 13 (6) provides that consultation is only required if the employer “envisages that he will take measures in relation to an affected employee, in connection with the relevant transfer”.

The main issue in the landmark EAT case of Amicus & TGWU v Glasgow City Council was whether that Regulation obliges the transferee employer to consult after the employees have been transferred to it. The Unions argued that it did, and the employers that it did not. 

The Employment Tribunal agreed with the employers.  One important indicator was that the time limit for bringing claims starts on the date on which the transfer is completed. The Tribunal held that City Building (Glasgow) LLP had no obligation by virtue of the Regulations and in particular Regulation 13(6) to consult with the claimant or trade unions after the date the transfer was completed in respect of envisaged measures it would take in relation to the employees who transferred to it.

The Unions appealed to the EAT.
 
The EAT rejected the appeal and upheld the decision of the original Tribunal. It was accepted that the cut-off date for consultation must be the transfer date. In reaching this conclusion, the judge Lady Smith, pointed out that for consultation to have any practical meaning, there must be a possibility of implementing changes to the employees’ terms of employment. However, this is expressly forbidden by the TUPE regulations when the reason for the change is the transfer.

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Care workers : Protection of Vulnerable Adults (POVA) and Protection of Children Act (POCA) lists unlawful

The House of Lords has handed down its decision in an important case for those working in the care sector, R v Secretary of State Ex-Parte Wright & Others. It held that safeguards introduced to protect children and vulnerable adults from abuse are an unlawful infringement of the human rights of staff working in the NHS or social care.

Four registered nurses and the Royal College of Nursing brought the test case concerning the treatment of care workers who are responsible for looking after vulnerable adults or children. The nurses were able to clear their names of misconduct allegations only after a lengthy process lasting for months. Under current legislation, if an employer dismisses an employee because they have harmed (or placed at risk of harm) a vulnerable person, then the dismissed person’s name must be added to a list held by the Secretary of State. They are then banned from seeking employment with any other care provider unless, and until, they are removed from the list.

However, people can be placed on this list with little, if any, enquiry into the factual circumstances that gave rise to the dismissal. In addition, employees who are dismissed have no right to make representations to the Minister regarding the allegations or the propriety of the decision to dismiss. Individuals do have a right of appeal against their listing but, even if they are successful, it takes many months for their name to be removed, during which time the employee cannot work. The majority of those who appeal eventually succeed in their request to be removed from the list.

The Lords unanimously declared that the process of placing workers on the Protection of Vulnerable Adults (POVA) or the Protection of Children Act (POCA) list without an early hearing was incompatible with Articles 6 and 8 of the European Convention on Human Rights (the right to a fair hearing and the right to respect for private and family life). They also issued a Declaration of Incompatibility

The consequence of the declaration is that the legislation will remain effective until amended by parliament. The judgment will require changes in the procedures for placing staff on the POVA and POCA lists.

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Norton Tool rule applies in constructive unfair dismissal cases

In Stuart Peters Ltd v Bell, an Employment Tribunal had found that Mrs Bell’s resignation from employment with Stuart Peters Ltd amounted to constructive unfair dismissal. 

Under her employment contract Mrs Bell had been entitled to 6 months’ notice.  The Tribunal held that, had she acted reasonably to mitigate her loss, she would have found suitable employment within six months. Accordingly, they awarded her no compensation in respect of any period after the expiry of six months (except in respect of any loss of pension).

When assessing the level of compensation attributable for the 6-month notice period, the Tribunal did not accept the company’s argument that the amount should be reduced to take account of income Mrs Bell had earned from other sources during this period.

The employer appealed to the EAT on the grounds that the original Tribunal erred when it refused to consider these earnings. The appeal was rejected.

Both parties accepted that an employee who is dismissed without notice and without pay in lieu of notice, is entitled to compensation equal to net pay for that period of notice, without deduction in respect of earnings received from alternative employment during that notice period. This basic position was established in the case of Norton Tool Company v Tewson.

Stuart Peters Ltd argued, however, that this position applies only where an employee is actually dismissed and not in constructive dismissal cases.  They contended that the position is different in constructive dismissal cases because the principles of good industrial practice are different there. Furthermore, it was claimed that, in the years since the Norton decision in 1972, it had always been assumed that the principle did not apply to a case of constructive dismissal.

The EAT rejected the employer’s arguments. However, given the importance of the point, the judge concluded by stating that he hoped the principle might be considered by the House of Lords if the opportunity were to arise in the future.

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Private club to challenge tips ruling

The London private club, Annabel’s, is considering an appeal to the Court of Appeal against the EAT ruling that a system of paying tips to staff through a “tronc” could not be counted towards the staff’s wages. A ‘tronc’ is an arrangement for pooling and distributing tips etc to employees in the hotel and catering trade. 

The EAT had found that the version of the tronc system operated by Annabel’s was in breach of National Minimum Wage legislation, even though the tips received by some staff resulted in them hitting the higher rate income tax bracket.

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Medics get Working Time opt-out

The Government has confirmed that working hours limits of the European Working Time Directive will not apply to doctors working in emergency medicine or rural areas, when full implementation comes into effect on 1st August 2009. This opt-out is expected to last for up to three years and applies to 20 to 30 units across the country, including services providing 24-hour care, extremely specialist teams and remote and rural units.

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Award for railway whistleblower

A former railway worker has been awarded £200,000 at a remedies hearing after the Employment Tribunal found that he had been unfairly dismissed by his employer, Network Rail.  The Tribunal accepted his claim that he was sacked when he retracted a false statement which he had been pressurised into making after he witnessed an accident involving a colleague.

Network Rail maintained that he was dismissed for serious misconduct relating to safety matters. A further hearing will be held to determine whether the employee was victimised prior to his dismissal.

The size of the award is a reminder that, in cases where an employee can prove that he has been unfairly treated or dismissed as a result of him having made a protected disclosure i.e. that he is a “whistleblower”, there is no limit on the level of award a tribunal can make.

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Employment Firm of the Year 2008

The Law Awards of Scotland

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