Employment law update

Transcription

1 Employment law update March 2005 An update on recent UK case law Recent cases Discrimination - Court of Appeal guidance In October 2001, discrimination law was amended to turn a sex discrimination claim into a two-stage process. Now, if the claimant employee can prove facts from which a tribunal could conclude, in the absence of an adequate explanation, that the employer had treated the claimant less favourably on grounds of sex (the first stage), the tribunal must uphold the claim unless the employer can show that it did not commit the act complained of (the second stage). The burden of proving, or disproving the claim partly shifts to the respondent. The EAT, in the case of Barton v Investec Securities Ltd decided in 2003, gave guidance on how such claims should be handled. On 18 February 2005, in the case of Igen Ltd v Wong and related cases (Emokpae and Webster), the Court of Appeal has, for the first time, approved and added to the EAT guidance. Key points to note from Igen are that: Contents Recent cases Discrimination - Court of Appeal guidance 1 TUPE - no transfer if no staff are retained 3 A restrictive covenant that worked 4 Employee contract terms should deal with envisaged risks 4 Legislation New laws from 6 April In the pipeline (1) - updating the Sex Discrimination Act 6 In the pipeline (2) - new TUPE regulations 7 the employer's explanation of events must now wait until the second stage of the process. It is for the employee first to prove facts from which a tribunal could conclude that the employer had committed an unlawful act it is difficult but not impossible for a claimant to prove they have been unfavourably treated unless they can point to an actual or hypothetical comparator who was (or would have been) treated differently it is for the employer to prove, on the balance of probabilities, that sex was not a ground for the treatment complained of The way in which the Court of Appeal dealt with the three cases helps to demonstrate how this guidance operates in practice.

2 In Igen, Mrs Wong made three complaints: 1. she had not been allowed to attend a course 2. she had received an unfavourable performance review 3. she had been subjected to inappropriate disciplinary proceedings. She was Afro- Caribbean and her three line managers were white. She alleged race discrimination. The Court of Appeal, agreeing with the EAT and the original tribunal, found that, on the first two complaints it was not possible to draw the inference that she had been treated unfavourably on racial grounds. However, on her third complaint, the Court of Appeal agreed with the original tribunal. Mrs Wong had refused to sign a form dealing with the unfavourable performance review and her employers had formalised this into a disciplinary issue. They continued to adopt an inflexible and officious approach and could not explain to the tribunal why they had been so confrontational. On that basis, it was open to the tribunal to conclude that the employers had not proved on the balance of probabilities that the treatment was in no sense whatsoever on the grounds of Mrs Wong's race and her claim succeeded. By contrast, in the case of Emokpae, the Court of Appeal considered that the claim failed at the first stage. Ms Emokpae had been dismissed because of rumours about a sexual relationship between her and the office manager. The facts were that the reason for her dismissal was the rumours and not her sex. A hypothetical male comparator would have been treated in the same way, so she was unable to prove facts that would even suggest sex discrimination. The claimant in the race discrimination case of Webster failed for the same reason. Ms Webster, who was of Asian origin, worked in IT support at Brunel University. While giving advice on the telephone to one of three members of Brunel's accommodation office team, she heard laughter in the background and the word "Paki". The court accepted that on the balance of probabilities the term "Paki" was said by someone, and heard by Ms Webster, but she could not prove who had said it. The accommodation office was a busy public place with numerous visitors throughout the day. There was nothing that could tie the accommodation office staff to her complaint. It was not enough to prove facts which showed that the employer could have committed an unlawful act. She had to show that she had proved facts from which a tribunal could conclude that the employer had discriminated. Ms Webster's claim therefore failed. Note: In Wong, the employer was found liable for race discrimination even though there may have been none, simply because the employer could not put forward any other reason for its conduct. This clearly demonstrates that irrational and unfair practices will invite claims of unlawful discrimination which may well succeed if there is no sensible or rational explanation for the practice. 2

3 TUPE - no transfer if no staff are retained The TUPE regulations, which provide for continuity of employment on the transfer of an undertaking for all the employees involved, are notoriously difficult. The DTI is currently consulting on how to improve them. A change of service provider may, or may not, involve the transfer of an undertaking under the TUPE regulations and one of the DTI's suggestions is that, in future, service provision change should be looked at as a separate category of transfer. The case of Computacenter (UK) Ltd v Swanton and others, decided recently by the EAT, highlights the fact that the mere transfer of a function, or continuation of a service, may not constitute a business transfer. This case concerned a contract entered into by IBM with Specialist Computer Centres plc ("SCC") to provide computer maintenance services to Lloyds TSB bank. Eight SCC employees were assigned to the Lloyds TSB contract. When the IBM/SCC contract terminated, SCC were unsuccessful in their retendering bid and the contract was awarded to Computacenter. The only significant difference between IBM's contract with SCC and its new contract with Computacenter was that Computacenter did not have to provide a dedicated service delivery manager. The Employment Tribunal considered that there had been a TUPE transfer and thus Computacenter was responsible for the eight employees who had been made redundant by SCC. The EAT criticised the original Employment Tribunal for concentrating on the similarities and differences between the two contracts. Under the TUPE regulations, the key issue was "whether the economic entity the tribunal had identified in the hands of SCC was preserved in the hands of Computacenter". If the economic entity comprised the organised group of eight employees, it was significant that none of SCC's employees were taken on by Computacenter (and there was no suggestion that this had been done deliberately to avoid its TUPE obligations). It was also significant that Computacenter did not have any engineers or call centre staff dedicated to the performance of the IBM contract, as SCC had done. The EAT considered that there had been no TUPE transfer. In every case, a tribunal must consider all the factors laid down in the ECJ decision in Spijkers as long ago as the type of undertaking/business involved, whether its tangible assets are transferred, whether the majority of the staff are taken over by the new employer, whether customers transfer, the degree of similarity between the activities undertaken before and after the transfer, and whether the activities had been suspended at all. Note: For service providers and their customers and clients, most of the pitfalls inherent in the TUPE regulations can be avoided if appropriate contract terms are negotiated. Technical specialist wording may be required and the employment team at Bird & Bird has the experience and expertise to help. 3

4 A restrictive covenant that worked A court will only uphold a contractual obligation on an employee, that extends beyond the duration of the employment contract, if it is reasonable in extent and duration and the employer can show that it has a genuine business interest to protect. Otherwise, a restrictive covenant will be legally unenforceable as a restraint on trade. In the case of Corporate Express Ltd v Day, recently decided by the High Court, a six-month ban on competition was considered valid. A national sales manager employed by Corporate Express ("C") whose contract contained two posttermination restrictive covenants: a six-month ban on soliciting or dealing with C's customers and a six-month ban on working for named major competitors. One month after leaving C she started working for one of the competitors named in the restrictive covenant. She had not attempted to solicit business away from C nor had she taken with her any confidential information in written form. She argued that the ban on working for major competitors was not necessary to protect C's legitimate business interests because C was protected by the non-solicitation covenant, which she was happy to comply with. C argued that she had had access to confidential information that could be used to attract new customers for her new employers and the covenant was necessary to protect their business from such competition. The High Court agreed. The employee had had access to confidential information such as pricing discounts, margins and customer-specific requirements which would be of value to competitors. The non-solicitation covenant was insufficient on its own to protect C. The employee could still work in the restricted period, either in another field or in the same field but not for one of the named competitors. The restrictive covenant was upheld. Note: as this case shows, restrictive covenants can be useful tools even though they must first be justified as valid. They should be drafted as accurately as possible, and with specific business aims in mind. In this case, the fact that specific competitors were actually named so as to limit the scope of the noncompete covenant was key to the covenant being upheld by the court. Employee contract terms should deal with envisaged risks There are times when an employment relationship can be rendered unworkable by outside events. However, employers should be aware that, in the vast majority of cases, they will be expected to deal with problems within the terms of the relevant employment contract. The case of Four Seasons Healthcare Ltd v Maughan recently decided by the EAT, provides an object lesson in this respect. Mr Maughan was employed as a nurse in a care home. He was suspended without pay in January 2003 following allegations that he had abused a patient. His contract of employment provided that he could only be suspended from duty for a period not exceeding 7 days. However, on the basis of the allegations, he was then charged by the police with criminal offences and his bail conditions did not permit him to attend the care home. The police requested that the employers should not carry out any investigation of their own until the criminal prosecution had run its course. His employers decided to continue his suspension without pay. 4

5 Mr Maughan was convicted and sentenced to two years' imprisonment in November He brought an action against his employers under s.13 of the Employment Rights Act 1996 claiming that there had been an unauthorised deduction from his wages over the period of his suspension without pay, other than for the first seven days that were provided for in his contract. His claim succeeded. His employers argued that his contract of employment had been terminated by frustration, that is to say that "some outside event or extraneous situation, not foreseen or provided for by the parties within the contract" had occurred when Mr Maughan had assaulted the patient. The EAT did not accept this. Patient abuse was specifically referred to in the detailed disciplinary procedure in the contract of employment. It was a risk that the parties had foreseen. Neither did the bail conditions operate to terminate the contract by frustration. The EAT found that there was power for the employer under the terms of the contract of employment to require Mr Maughan to work elsewhere, but they had chosen not to do so. Furthermore, the employer had taken the decision to keep the contract in existence until the outcome of the criminal prosecution when they could have terminated the contract by notice at any time (though of course it would have run the risk of an unfair dismissal claim). Mr Maughan was awarded over 15,000 in unpaid wages. Note: when considering any employment dispute, courts and tribunals will invariably start by looking at the written contract of employment governing the relationship. There can be no substitute for having well-drafted contracts, tailored to reflect the specific needs of your business. Legislation New laws from 6 April 2005 The Information and Consultation of Employees Regulations 2004 (SI 2004/3426) come into effect from 6 April 2005 and give employees in most businesses the right to negotiate an agreement with their employers that they be informed and consulted on a wide range of business issues Sections 257 and 258 (2)(c) (ii) and (7) of the Pensions Act 2004 and the Transfer of Undertakings (Pension Protection) Regulations 2005 (SI 2005/649) also come into effect on 6 April Employees who were members of an occupational pension scheme prior to a TUPE transfer must now be provided by the transferee employer with a pension scheme. It does not have to match the previous scheme and can be a money purchase, final salary or stakeholder scheme. The employer is required to make contributions to the scheme up to 6% of pensionable pay From 6 April 2005 the rates of statutory maternity, paternity and adoption pay rise from to 106 per week. The earnings threshold rises from 79 to 82 per week The Gender Recognition Act 2004 also comes into force in April 2005 and means that employers can no longer rely on the "genuine occupational qualification" defence, that a job has to be performed by someone of a particular sex, in a sex 5

6 discrimination claim brought by a transsexual who has obtained legal recognition of their acquired gender The Employment Tribunal forms prescribed by reg.14 of the Employment Tribunals Regulations made last year will not be compulsory from 6 April 2005, as originally planned. That date has now been postponed to 1 October Meanwhile, the Disability Discrimination Bill, which amends the definition of "disability" so as to include conditions such as HIV infection, MS and cancer from the point of diagnosis rather than, as at present, from the point at which they have a substantial and long-term adverse effect on day-to-day activities, should also become law in this session of parliament. In the pipeline (1) - updating the Sex Discrimination Act On 7 March 2005, the DTI published a consultation document, Equality and Diversity: Updating the Sex Discrimination Act, to explain the changes it is proposing to make to the existing sex discrimination laws and to seek views on draft regulations intended to implement the European Amended Equal Treatment Directive (2002/73/EC) ("the Directive"), which must be implemented in the UK by 5 October The consultation period will expire on 31 May 2005 and the intention is that the draft regulations (the Employment Equality (Sex Discrimination) Regulations 2005) will come into effect on 1 October Key points to note are: a new definition of "indirect discrimination" in section 1(2)(b) of the Sex Discrimination Act 1975 ("the SDA") which follows the wording of the Directive and exists already the newer UK legislation which outlaws discrimination on grounds of race, sexual orientation, and religion or belief new offences of "harassment" and "sexual harassment", again taken directly from the Directive, are created. "Harassment" is defined as "unwanted conduct" and "sexual harassment" as "unwanted verbal, non-verbal or physical conduct of a sexual nature" new provisions will make explicit that it will be unlawful sex discrimination to treat a woman less favourably because she is pregnant or because she "is exercising or seeking to exercise or has exercised or sought to exercise a statutory right to maternity leave" the law is amended so that a respondent must reply to a sex discrimination questionnaire within eight weeks 6

7 In the pipeline (2) - new TUPE regulations On 15 March 2005, the DTI published new TUPE regulations in draft and a public consultation document seeking views on whether the draft regulations effectively implement the reforms to the existing regulations which the government has been promising now for over 4 years. The DTI is keen that the draft regulations should become law on 1 October At present, the draft regulations contain no transitional provisions but the DTI indicates that it may include some in the final version to allow time for businesses to come to terms with the changes that the draft regulations make to the current legal regime. Notably, the draft regulations: expressly apply to a service provision change as well as the transfer of an undertaking. Such a change is defined so as to exclude service providers where there is no "organised grouping of employees" (such a motor cycle couriers) or more than one client (such as travel agents). The one policy question on which the DTI still invites comment is as to whether there should be an express exemption for the provision of professional business services introduce a new requirement for the old employer (the transferor) to notify the new employer (the transferee) of the identities of the employees that will pass across on the transfer and of all associated rights and liabilities in insolvency situations, allow for employees' contracts to be treated as terminated on the date of transfer and for their contract terms to be varied, under certain conditions, by agreement with either the transferor or the transferee Please do not hesitate to contact a member of or Employment Team if you wish to discuss any of the issues raised in this edition of the Update. 7

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