Events: protecting your business from the inside out. next: Sickness absence or Holiday? In this edition. the latest in employment law November 2009

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Janice Morton
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The Court s ruling that employees who are unable to take a period of annual leave because of sickness must be provided with additional leave at a different point in time has been met with widespread

1 protecting your business from the inside out the latest in employment law November 2009 welcome In this edition In this edition of our newsletter we review the controversial decision by the European Court of Justice in the case of Francisco Pereda v Madrid Movilidad. The Court s ruling that employees who are unable to take a period of annual leave because of sickness must be provided with additional leave at a different point in time has been met with widespread consternation from employer groups. The general feeling is that the decision has left the system open to abuse, particularly as no clear guidelines have been set out to determine what evidence of sickness an employee must provide in order to obtain their entitlement to additional leave. The High Court has given its longawaited decision in the Heyday case, confirming that the mandatory retirement age of 65 was justified at the time the Age Regulations came into force in The Court noted, however, that had the regulations come into effect in 2009, the outcome would most probably have been different. With the Government set to review the mandatory retirement age in 2010, it is likely that more changes will now follow. The Court of Appeal has moved away from long-established case law in the recent decision in Stuart Peters Ltd v Bell by stating that an award made to an employee who is successful in bringing a constructive dismissal claim should be reduced by the amount of any earnings obtained during what would have been their notice period. In reaching this decision, the Court of Appeal acknowledged that this has created inconsistency in a constructive dismissal scenario when compared to a normal dismissal scenario and, on that basis, the case may well reach the newly-constituted Supreme Court for final clarification. We also report on further forthcoming changes to immigration law and, in our usual on the case section, we consider 2 recent cases which respectively relate to issues regarding race discrimination and detriment to employees following a TUPE transfer. We are pleased to announce that Peter Thompson has joined the employment team at EMW Picton Howell as a Consultant. Peter is an accredited mediator and has extensive knowledge and experience of employment law having chaired the Employment Tribunal in both Manchester and Nottingham on a part-time basis for 14 years. Prior to joining EMW Picton Howell, Peter was National Employment Partner at a national law firm where he advised some of the UK s best known companies. Events: Dates for your diary What: Business Protection Seminar When: Tuesday 17 November 2009 Where: Seebeck House, One Seebeck Place, Knowlhill, Milton Keynes, MK5 8FR Topic: How to win in Employment Tribunals For details of how to book your place please carol.cardell@emwph.com In this edition Sickness absence or Holiday? Constructive Dismissal and Alternative Employment During The Notice Period The Heyday Challenge Update on the new Points Based System for Foreign Workers On the case next: Sickness absence or Holiday?

Sickness absence or Holiday? The European Court of Justice (ECJ) has recently given its decision in the case of Francisco Pereda, a Madrid council worker.

2 Sickness absence or Holiday? The European Court of Justice (ECJ) has recently given its decision in the case of Francisco Pereda, a Madrid council worker. Mr Pereda suffered an accident at work 14 days before he was due to begin a 4 week holiday and he was signed off work for a period of 6 weeks. His employer subsequently rejected a request by Mr Pereda to move the part of the holiday that overlapped with the period in which he was signed off. The employee should have been allowed to change his holiday dates and take his holiday at another time The ECJ ruled that Mr Pereda, should have been allowed to change his holiday dates and take his holiday at another time. Noting that an employee s entitlement to holiday represents a period of time during which the employee must be allowed to rest, relax and have leisure time. The ECJ commented that, if necessary, he should have been allowed to carry his holiday forward to the next year. The Judgment specifically states that if a worker does not wish to take annual leave during a period of sick leave, annual leave must be granted to him for a different period. The decision is important for UK businesses, as this ruling is a new interpretation of the European Working Time Directive on workers hours and is also authority for the proposition that an incidence of illness whilst on annual leave will not count towards the minimum period of 4 weeks paid annual leave. The Pereda principle is likely to apply whether the period of illness begins before or during an employee s annual leave. This decision will be particularly pertinent for employers who have either employees on long term sickness or who only grant the statutory minimum annual leave entitlement, as they could most easily find themselves to be in breach of the requirement to provide workers with minimum holiday entitlements set out in the Working Time (Amendment) Regulations The decision follows the Judgment made by the House of Lords in HMRC v Stringer which ruled that workers continue to accrue annual leave whilst they are on sick leave, regardless of the length of time they are away from work. Claims for unpaid holiday pay can be brought under the Employment Rights Act 1996 where the right to take such holidays is denied by the employer. A preliminary ruling from the ECJ on Stringer had ruled that a worker on sick leave accrues annual leave, and must be paid in lieu of this if the employment relationship were to cease. The Stringer case did not substantively and decisively address issues regarding payments in lieu of holiday The Pereda case therefore muddies the waters further. The Stringer case did not substantively and decisively address issues regarding payments in lieu of holiday on termination of employment. Whereas the Pereda decision does not deal with the procedures workers who fall ill during their holiday would need to follow in order to establish their entitlement to claim back their holiday entitlement or the proof they would require in order to do so. The decision could have a significant impact on employers as it may be interpreted as giving employees who are ill the benefit of claiming extra holiday time, even if their holiday has already begun. With employees able to self-certify absences for limited periods of time, this is a particular issue. next: Constructive Dismissal and Alternative Employment...

Constructive Dismissal and Alternative Employment During The Notice Period In the recent case of Stuart Peters Ltd v Bell, the Court of Appeal held that in a case of a constructively dismissed

3 Constructive Dismissal and Alternative Employment During The Notice Period In the recent case of Stuart Peters Ltd v Bell, the Court of Appeal held that in a case of a constructively dismissed employee, the employee must account for any sums earned from alternative employment undertaken during what would have been the notice period. Facts of the case The claimant ( B ) had been employed by the defendants ( S ). Under the terms of B s contract she was entitled to 6 months notice of termination of her employment. The Employment Tribunal ruled in favour of B, finding that her resignation amounted to constructive unfair dismissal. In so deciding, they found that B was entitled to compensation equal to her net pay in respect of her contractual notice period and that she did not need to deduct from this award earnings from alternative employment she had undertaken during what would have been her 6 month notice period. Norton Tool was a limited exception to the general rule B had found alternative employment for 3 months during what would have been her 6 month notice period and the Tribunal had decided not to offset these earnings against the award for unpaid earnings in respect of B s notice period. The Tribunal had based its decision on the established rule in Norton Tool Co Ltd v Tewson which it believed it was bound by. The Tribunal s decision was upheld by the Employment Appeal Tribunal. The earnings that B had received from other employment had to be offset against the award Decision The matter then passed to the Court of Appeal. The Court of Appeal held that the general rule is that an unfairly dismissed employee should be compensated for loss actually suffered (in accordance with section 123 of the Employment Rights Act 1996). They pointed out that the circumstances in the Norton Tool case were only a limited exception to that general rule and therefore did not apply in this case. The Court of Appeal focused on what good industrial relations practice required. The Norton Tool case had previously established that an employer who chose to bring a contract to an end without giving the notice which the contract required should, in the normal way, offer to give payment in lieu of notice at the time of dismissal. That was good industrial relations practice. Where that was done, the employee who obtained earnings from other employment during the notice period was not required to pay back any of the pay in lieu received from the employer. The Court of Appeal however, made a distinction between when an employee was dismissed as opposed to a constructive unfair dismissal claim and thus distinguished the case from Norton Tool. The earnings that B had received from other employment had to be offset against the award in respect of earnings unpaid by S in respect of the 6 month notice period. Conclusion The Court of Appeal noted that this does lead to differences in compensation between those constructively dismissed and those whose contracts are terminated by the employer. The Court of Appeal have hinted that a final ruling on this point from the House of Lords would be helpful in order to clarify the matter. There may now therefore be a further appeal to the newly constituted Supreme Court. next: The Heyday Challenge and Update on the new Points Based System

4 The Heyday Challenge The High Court has given its longawaited decision in the case of R (on the application of Age UK) v Secretary of State for Business Innovation and Skills. This is more commonly known as the Heyday Challenge. A mandatory retirement age of 65 was introduced by the Age Regulations of 2006 and under these regulations an employer could, having followed the relevant procedures, force an employee to retire at 65. The ruling in Heyday means that the default retirement age will stay in place, as Mr Justice Black decided that the mandatory retirement age did comply with the EC Directive against age discrimination. Previously, the European Court of Justice held that the default retirement age would be discriminatory unless justified by legitimate social policy objectives as it fell within the scope of the EC Equal Treatment Framework Directive. Age UK had challenged the default retirement age in the UK, as they claimed the Government had no legitimate social policy objective or aim which would justify this. Age UK were unsuccessful in challenging the default retirement age. Importantly, however, Mr Justice Black stated that the position regarding the retirement age was unsustainable and needs reviewing. Age UK will not appeal this decision further as the Government, prior to the case, had stated that they were bringing forward the review of the compulsory retirement age by a year to Had this review not been scheduled, the High Court gave an indication that its decision would have been different. This decision remains pertinent however, as it means the 260 cases pending in tribunals for age discrimination are likely to be dismissed and the forthcoming review to be undertaken by the Government should give final clarity on this matter for both employers and employees in the future. Update on the new Points Based System for Foreign Workers The new style points-based system was introduced to ensure that only those with the right skills or the right contribution will be able to come to the United Kingdom to work and study. Underpinning this new immigration system is a 5 tier framework. The 5 tiers have different conditions, entitlements and entry-clearance checks and migrants will need to pass a points-based assessment before they are given permission to enter or remain in the United Kingdom. The points based system only covers migrants from outside the European Economic Area and Switzerland and some employers will need to ensure that they have a sponsor licence in place. Sponsors will be rated in one of 2 categories, A or B. The majority will be A rated. However, in some cases the Border and Immigration Agency may only award a B grade based on its risk assessments. Sponsors are fully responsible for the actions of any migrant they employ and teach and must ensure they comply with their immigration conditions. Employers must report any changes to the Border and Immigration Agency and any employers found using an illegal migrant workforse face a civil penalty of up to 10,000 for each illegal worker. Any employers knowingly and deliberately using illegal migrant workers, will face a maximum 2 year custodial sentence and/or an unlimited fine, and find themselves published on The Border and Immigration Agency site. To comply with the laws concerning illegal working, you need to be fully familiar with the legal obligations and we can ensure that your ready for them. We understand the needs of UK businesses and can help you to avoid the potential pitfalls and hurdles of this legislation. For more information on how we can help you to navigate the points based system and ensure that you receive and maintain an A grade sponsorship rating, contact Sylvja Matthews on or sylvja.matthews@emwph.com. next: On the case

5 On the case - information about the latest employment rulings The reason for discrimination In the case of Amnesty International v Ahmed the issues in question revolved around Amnesty s decision not to promote a Sudanese national to the position of researcher for Sudan. Amnesty s reason for this was that the organisation would appear not to be impartial if the researcher was Sudanese, because that person would be deemed to lack impartiality as a result of their connections with the country. Amnesty had applied a rule which prohibited staff from working in their own country, but the rule was abolished in The Employment Appeal Tribunal ( EAT ) found that the basic question in a direct discrimination case is what are the "grounds" for the treatment complained of? In some cases these grounds are inherent in the act; in other cases the act complained of is not discriminatory but is rendered so by a discriminatory motivation. The EAT concluded that, although, in reaching its decision, Amnesty had placed too much weight on the concerns it had regarding impartiality their reasons were genuine and there was no intention to violate Ms Ahmed s dignity. Amnesty made it clear to Ms Ahmed that it did not reflect on her personally and they invited her to put herself forward for other equivalent roles. Ms Ahmed should not have felt that the relationship of trust and confidence between herself and Amnesty had been destroyed or seriously damaged. The EAT allowed Amnesty s appeal and dismissed the claim of constructive dismissal, but admitted some unease in finding that the act amounted to direct discrimination as the decision had been taken purely on her ethnic origin, and the motivation was therefore irrelevant. The EAT declined to adopt Amnesty s suggested approach which would have been to apply a but for test in respect of causation followed by an analysis regarding the motivation for the discriminatory act. Material Detriments under TUPE The Employment Appeal Tribunal s ( EAT ) decision in Tapere ( T ) v South London and Maudsley Trust ( the Trust ) clarifies the effect of Regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ( TUPE ). Regulation 4(9) provides that, in the event of a substantial change to working conditions causing a material detriment to a transferring employee, the employee can treat themselves as having been dismissed. T s employment transferred to the Trust under TUPE. Although her terms of employment remained the same, her place of work changed from one part of south London to another. The move was postponed due to lack of space at the new location and T raised a grievance claiming that the increased travel would affect her child care arrangements. T returned from annual leave to find that the change had taken place. She resigned and claimed constructive dismissal. The Employment Tribunal rejected her claim, finding that her contact included a mobility clause, the effect of which transferred under TUPE, therefore the Trust could relocate her to sites at which it operated. In the alternative, the Tribunal found that, due to the short distance between the locations, and that her journey time was not materially longer, there was no substantial change to T s detriment. The EAT rejected the Tribunal s approach. The mobility clause should have been interpreted in accordance with the circumstances at the point in time it was entered into. The mobility clause expressly stated that she could be relocated within the area in which the trust she had previously worked for operated. This meant that the clause could not now be interpreted more widely as the new place of work was outside that area. In deciding whether there is material detriment, the matter should be viewed from the employee s prospective rather than by balancing the views of employee and employer and detriment should carry the same meaning as in discrimination disputes. The EAT held that T had been constructively dismissed and was entitled to treat herself as dismissed under Regulation 4(9). The issues of fairness and entitlement to redundancy payment were remitted to a newly constituted tribunal. contact us The information contained in this update is for general information purposes only and should not be relied on in isolation without seeking further legal advice that is specifically applicable to your circumstances. For such advice please contact Jon Taylor on or jon.taylor@emwph.com next edition due December

In this edition. protecting your business from the inside out. next: Disability Discrimination - approach confirmed. Events: Dates for your diary

In this edition. protecting your business from the inside out. next: Disability Discrimination - approach confirmed. Events: Dates for your diary protecting your business from the inside out the latest in employment law April 2009 welcome In this edition Welcome to the April edition of our newsletter. In this edition we look at disability discrimination