Employment law continues to change and develop at a rapid pace. We set out below some recent developments which may be of interest to employers.
Employment Bill
The Employment Bill has just completed its transition through the House of Lords. The main changes proposed by the Bill are the repeal of the statutory dismissal and grievance procedures which will be replaced by a discretionary code of practice. This development will be greeted with relief by many employers. Since October 2004, it has been unlawful for an employer to dismiss an employee in all but very limited circumstances without first following the statutory disciplinary and dismissal procedures. Failure to follow these procedures automatically renders a dismissal unfair in most cases, even where the dismissal was justifiable on the facts. A proposed new code of practice has been published by the conciliation service, ACAS. This is based on basic principles such as the importance of handling disciplinary and grievance matters in a prompt and consistent manner and the right of appeal for employees. Tribunals will have the power to increase or decrease an award to a claimant by up to 25% where the code of practice applies but is not followed by either party. The government’s aim is for the Bill to receive royal assent in the summer of 2008, though most of the Bill will come into force at a later date. The dispute resolution provisions are widely expected to come into force in April 2009 and we will report nearer that time.
Failure to Follow Statutory Disciplinary and Dismissal Procedures
As reported above, the current statutory dismissal procedures will be rendered obsolete when the new Employment Bill receives royal assent and comes into effect. In the meantime, however, employers must continue to observe them strictly. In a recent case (Yorkshire Housing v. Swanson) the Employment Appeal Tribunal held that a dismissal is automatically unfair when the employer delays unreasonably in following the statutory dismissal procedure. In that case, the employer had delayed for five months between holding a disciplinary meeting and writing a letter dismissing the claimant. That was held to be an unreasonable delay which led to a finding of automatic unfair dismissal.
EU Agreement on Working Time Directive
Under the Working Time Regulations 1998 (which implemented the Working Time Directive) employers are obliged to take all reasonable steps to ensure that each worker’s average working time (including overtime) does not exceed 48 hours per week, with individual workers having the right to “opt out”. In recent years, however, the European Commission has been increasingly concerned about abuse of the opt out provision and, in 2004, proposed that it be abolished or restricted. The UK government amongst others has been unwilling to accept any proposals to end or restrict the opt out provision. On 9 and 10 June 2008 ministers with the Employment, Social Policy, Health and Consumer Affairs Council met to discuss the future of the Working Time Directive, including the opt out provisions. During these discussions, it was agreed that the opt out from the maximum 48 hour working week will be preserved. However, certain safeguards are likely to be imposed, for example that an employee cannot opt out until he/she has been employed for a month and there will still be a cap of 60 hours on average. We will report further when these measures are implemented.
Disability Discrimination
On 25 June 2008, the House of Lords handed down judgment in the case of Mayor and Burgesses of the London Borough of Lewisham v. Malcolm which makes major changes to the law in relation to disability discrimination. Whilst this was a housing case, the House of Lords has substantively changed the test for disability-related discrimination and the decision will have implications for employment situations as well.
Mr Malcolm was a secure residential tenant of Lewisham. He was schizophrenic – a fact that was unknown to Lewisham. He sub-let the property without consent and Lewisham sought possession. Mr Malcolm argued that he was being discriminated against by reason of his disability as he would not have behaved in such an irresponsible manner, but for his schizophrenia. The House of Lords dismissed the discrimination claim and in reaching its decision, considered the test for disability-related discrimination claims under the Disability Discrimination Act 1995 (DDA).
Under the DDA a person discriminates against a disabled person if:
(a) for a reason which relates to the disabled person’s disability, he treats him less favourably than he treats, or would treat, others to whom that reason does not or would not apply; and
(b) he cannot show that the treatment in question is justified.
The key issues considered by the House of Lords were: the appropriate comparator; whether the “reason” (for the treatment in question) related to the disability; and whether the person must know of the disability. The House held:
• Comparator - The appropriate comparator is somebody to whom the underlying reason still applies so in this case, the question was not whether Mr Malcolm had been treated less favourably than someone who had not sub-let his property but whether he had been treated less favourably than a non-disabled comparator who had illegally sub-let.
• Reason – “A reason which relates to the disabled person’s disability” has to be construed narrowly. In this case, it was not sufficient that there was some connection between the disability and the decision to sub-let the flat. The disability was required to have played some part in the decision making process.
• A person can only be liable for discrimination if they know (or ought reasonably to know) that the individual is disabled.
By extension of these principles to an employment situation, if, for example, an employer dismisses a disabled employee for being on sick-leave for a year, then the reason for dismissal will be the absence from work, not the disability (even thought that may have caused the absence) and the correct comparator will be someone who was not disabled but was nevertheless off work for a year.
It may take some time for the full impact of this decision to be felt, but what is clear is that it will make it harder for employees to bring claims for disability discrimination and any such claims should be reviewed in the light of this guidance.
Compromise Agreements
In Collidge v Freeport Plc the Court of Appeal has upheld a High Court decision that an employer did not have to make a payment due under a compromise agreement if the employee was in breach of a warranty given in that agreement. Mr Collidge was a founder, director and employee of Freeport Plc. He was suspended pending an investigation into his activities, but subsequently resigned pursuant to a compromise agreement. The agreement provided that he would receive certain sums on the termination of his employment. All payments were specified to be “subject to and conditional upon the terms set out below” which included a warranty that there were no circumstances of which Mr Collidge was aware that could constitute a repudiatory breach of his employment contract or would have entitled Freeport Plc to terminate his employment without notice.
Before the termination payment became due, Freeport Plc discovered a number of matters which suggested that Mr Collidge was in breach of the warranty. They therefore refused to make the payment and Mr Collidge issued proceedings. The Court of Appeal upheld the High Court’s decision that the warranty was a condition precedent to Freeport’s liability to perform its obligations under the agreement, so that Freeport was not obliged to make the payment, on the basis that:
• The agreement was structured in such a way as to make the performance by Freeport of its obligations conditional upon Mr Collidge’s obligations.
• The agreement was reached against the background of Mr Collidge’s suspension and investigation into his conduct. Had the investigation proceeded it would have revealed grounds for summary dismissal. However Freeport had instead entered into the compromise agreement and continued with its investigation on the basis that it had the protection of the warranty.
Following the guidance in this case, employers should check that payment provisions in compromise agreements are tied to any warranty given by the employee that there are no circumstances of which he/she is aware that would entitle the employer to dismiss him/her summarily. In addition employers should, where practical, complete any investigations before entering into a compromise agreement, to give them more leverage in the exit process if misconduct is uncovered.
Restrictive Covenants
In the recent case of WRN Limited v Ayris, the High Court considered the enforceability of contractual non-solicitation and non-dealing restrictions in relation to customers.
Mr. Ayris worked for WRN Ltd, a television and radio broadcasting and transmission services company. When he left WRN Mr Ayris removed contact business cards, emailed contacts regarding his departure and copied his work email address book. Several days later he joined WRN’s principal competitor. WRN sought injunctions requiring him to comply with various restrictive covenants contained in his employment contract.
The Court considered the non-solicitation and non-dealing covenants contained in Mr Ayris’ contract of employment and found the covenants in question to be unreasonably wide and consequently unenforceable, because they sought to restrict Mr Ayris from having contact with any of WRN’s customers, not only those with whom he had actually dealt. However, the Court gave some other helpful guidance on the scope of restrictive covenants. For example, it accepted that it was reasonable for there to be no geographical limitation as WRN was a global business and that a six month restricted period was not unreasonably long as that is how long it would take for WRN to replace Mr Ayris and for his replacement to establish himself with the company’s contacts.
The Court also considered whether Mr Ayris had breached restrictions in the use and disclosure of confidential information. It held that while he was in breach of his obligations to WRN in taking business cards and copying email addresses, this was because they belonged to WRN, but they were not confidential business information because much of that information was available on WRN’s website and could easily be reproduced.
The Court’s analysis and decision turned on the particular facts of the case and the drafting of the restrictive covenants in question and the outcome is not surprising. However, the guidance in relation to the geographical scope and restricted period of such covenant is helpful. Further, the High Court accepted that the reasonableness of restrictive covenants should be considered as at the date of the employment contract, not at the date of termination. Employers should therefore review restrictive covenants when employees are promoted to more responsible roles, where they may have more customer dealings and access to company information and consider imposing new restrictive covenants when appropriate.
Age Discrimination
The law on age discrimination, introduced through the Employment Equality (Age) Regulations 2006, continues to develop. Job advertisements should be tailored so as not to be caught by the Regulations.
In the Northern Ireland Industrial Tribunal case McCoy v. James McGregor & Sons Ltd and Ors, a job advertisement seeking applicants with “youthful enthusiasm” was found to fall foul of the Regulations. Thus even references to qualities associated with people of a particular age may give rise to an inference of discrimination and should be avoided. Questions about age and date of birth should be deleted from application forms and instead be collected through a separate diversity monitoring form.