Employment law update

Transcription

1 Employment law update February 2007 Recent cases Agency workers Triangular agency arrangements, where an agency supplies a worker to an end user, are commonplace. The perceived advantage to the end-user is that agency workers are not employees and so do not have certain statutory rights, notably the right not to be unfairly dismissed. However, recent cases in the Court of Appeal have found that employee status may be implied. End users should take care in how they structure their agency arrangements. Contents Recent cases Agency workers 1 Time limits 3 Unfair dismissal compensation 5 Employee s fiduciary duties 6 In James v Greenwich Council, the claimant had worked full-time as an employee for Greenwich Council until 1997 but later started working for them again through an agency. She had a Temporary Worker Agreement with an agency as a self-employed person. In August and September 2004 she was off sick and the agency supplied another temporary worker to the council. When she was fit to return she was told that there was no job for her. She claimed unfair dismissal against the council but she had no written contract with the council and the employment tribunal decided that there was no implied contract either. There was a genuine agency arrangement. The tribunal considered it significant that the council had replaced her when she had gone off sick; that she had no entitlement to sick pay or holiday pay from the council and that she had switched agencies to get better pay. She appealed to the EAT, arguing that she had virtually no contact with the agency, had been treated as a member of staff by the council and had been on a permanent rota there for over one year. She relied on the recent Court of Appeal decisions in the cases of Dacas v Brook Street Bureau and Muscat v Cable & Wireless. In Dacas, an agency worker had brought her claim against the agency, Brook Street Bureau. The Court of Appeal said that she had no contract of employment with the agency but if her claim had been against the end user, they would have implied a contract.

2 In Muscat, an engineer had provided his services through a company to an end user, Exodus. Exodus was taken over by Cable & Wireless. Muscat was told that he must now provide his services through an agency and did so. The Court of Appeal decided that this arrangement was a sham in reality he was a Cable & Wireless employee. However, in James, the EAT decided that Ms James was not an employee of the end user and laid down some useful guidance for tribunals faced with the difficult issues that arise in these cases. Tribunals should not imply a contract between a worker and end user unless, having considered the totality of the triangular arrangement, it was necessary to do so. The issue to be decided is whether the way in which the contract is performed is consistent with the agency arrangement or whether it is only consistent with an implied contract between the worker and the end user. In a genuine agency arrangement, the end user cannot insist on the agency providing the services of a particular worker. The passage of time alone will not suggest that an agency arrangement no longer exists. Contrary to what was suggested by the Court of Appeal in Dacas, it will often be convenient for the agency to send the same worker to the end-user and the end-user may prefer someone who understands their systems. Where, as in Muscat, an agency arrangement is created where there used to be a contract, the tribunals may be more likely to consider the agency arrangement a sham and decide that the original contract between worker and end-user still exists. Points to note The EAT in James also commented that different tests apply to casual workers and to agency workers when deciding whether they have an employment contract with the end-user. For casual workers, the question is whether there is there an overarching contract of employment despite no day-to-day involvement. For agency workers, the question is whether there is a relationship between the agency worker and the end user. Or is the work being done under obligation to someone else (ie the agency)? Although tribunals do not like it when they have to decide, as in Mrs James case, that an agency worker is not an employee of either the agency or the end-user and so has no statutory protection against unfair dismissal, they will do so where there is no written contract of employment and a genuine agency arrangement exists. Proposals for an EU Temporary Workers Directive, which was intended to give agency workers more legal rights, made no progress last year. An agency worker cannot be treated as having two employers the agency AND the end user even though for other purposes the courts may make two organisations jointly liable for workers under their joint control. In the recent case of Cairns v Visteon UK Ltd the EAT decided that an agency worker could not have two employers. In this case, the worker, who had previously been employed by the enduser, changed her status by becoming the employee of an employment agency which then provided her services to the end-user. When the end-user said that it no longer required her services, the agency made her redundant. The 2

3 employment tribunal hearing her case said that, if it had not been for her contract of employment with the agency, it would have found that there was an implied contract between her and the end-user. She argued that there could be two parallel contracts of employment between an individual and two employers. The employment tribunal, and the EAT, disagreed. Dual liability can be implied in some cases. In the recent case of Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) two fitters were working for their own employer under supervision of a temporary employer who was in turn subcontracted to a main contractor to mend ducting in a factory. One fitter set off fire sprinklers which caused extensive damage. The main contractor had to pay the factory owner compensation and was allowed to recover that sum from the temporary employer and the actual employer of the negligent fitter jointly on the basis that they shared the blame for his actions. However, the EAT said that, where statutory employment rights were concerned, it would be too difficult to allow for dual liability. The provisions of the Employment Rights Act 1996 in relation to carrying out the statutory dispute resolution procedures and the decision to dismiss, for instance, could only apply to one employer. Points to note The decisions in James and Cairns are good news for businesses which use the services of agency workers. The EAT is saying that it will not follow the suggestion of the Court of Appeal that perhaps it would be easier for agency workers to rely on an implied employment contract with the end-user to give them employee status, particularly if they have been working for that enduser for some time. Documentation and factual background will always be important, if not deciding, factors. Any agency arrangement must be properly documented. We shall be happy to advise further. Time limits Where the statutory grievance procedure is relevant, the time limit for bringing an unfair dismissal claim can be extended if the statutory grievance procedure is invoked within the normal time limit. In HM Prison Service v Barua the EAT looked at the wording of the relevant rule, reg.15 of the Employment Act 2002 (Dispute Resolution) Regulations The normal time limit for presenting a claim (usually three months) can be extended for a further period of three months and the claimant may file his or her claim after the expiry of the normal time limit provided that he or she has initiated the statutory grievance procedure within that normal time limit. The Prison Service cut Dr Barua s pay. He protested without success and then gave notice of his resignation to take effect on 31 July On 27 June, while working out his notice period, he lodged a formal grievance about the reduction in his pay. In mid-august (after his resignation had taken effect) the employer wrote to him acknowledging that the grievance was valid and offering an apology and reimbursement of the money due. Dr 3

4 Barua did not acknowledge the letter and took no further steps until 27 January 2006, when he presented a claim to the employment tribunal alleging unfair constructive dismissal, unlawful deduction from wages and breach of contract. The employment tribunal accepted his argument that his claims were in time because of the grievance lodged by him on 27 June The employer appealed arguing that, as the grievance had been filed before the start date of the normal time limit (ie the effective date of termination of his employment 31 July 2005) it could not be said to have been presented within that normal time limit as required by reg.15. The EAT disagreed. Reg 15 was not concerned with prescribing a start date but providing a mechanism for calculating an enddate. All three claims should be allowed to proceed. Point to note Grievances can be lodged about action that an employer is proposing to take. Particularly in constructive dismissal cases this may cause a mis-match between the date of the employer s conduct which gives rise to the grievance and the effective date of dismissal which is when time will start to run for the purposes of bringing an unfair dismissal claim. The extended time limit may apply in circumstances where (as in the case of Dr Barua) the events complained of have occurred, and the claimant has raised a grievance about them, some time before time even begins to start running. The time limit for discrimination claims runs from the date of the discriminatory act. In every case, an employment tribunal shall not consider a complaint unless it is presented to the tribunal before the end of the period of three months beginning when the act complained of was done. A court or tribunal may nevertheless consider any such complaint which is out of time if in all the circumstance of the case it considers that it is just and equitable to do so. In Virdi v Commissioner of Police for the Metropolis and Centrex UKEAT/0373/06, the EAT held that a claimant could proceed with his claim against the first respondent which had been filed one day out of time, but not with his claim against the second respondent, where his claim had been filed three months out of time. The claims concerned arrangements made for the claimant to sit a promotional examination in May and the fact that he did not pass it. The employer s decision not to allow his internal appeal against the result was made on 2 June but not communicated to him until 3 June. He filed his claim on 2 September. He later applied to amend his claim to include the second respondents, Centrex, the body which administered the examinations for the police force. The employment tribunal struck out both claims as having been made out of time. He appealed to the EAT, which held that the relevant date for his claim against the Commissioner was the date of the decision on the internal appeal, not the date on which it was communicated to him so, strictly speaking, that claim was one day out of time. However, it was not just and equitable to strike out his claim because he had instructed solicitors who were awaiting the result of the internal appeal and the filing of the claim had been their responsibility. For this reason, the EAT allowed his claim against the first respondent to proceed. 4

5 As against the second respondent, the claimant had not brought them into the proceedings until November. He said that he had not previously been aware that they, and not the first respondent, were responsible for the administrative arrangements in relation to the promotional exam. The tribunal had found that the information had been available from the outset and the EAT agreed. However, it considered that the tribunal had not asked itself whether it was just and equitable in this case to extend the statutory time limit. The case was remitted to the tribunal to decide this. Points to note Previously, it had been suggested in cases such as Aniagwu v London Borough of Hackney that a discriminatory act is not done when it was done but when it is communicated to the employee (in that case, the refusal to accept a grievance). What the EAT is saying here is that it will regard time as running from the date of the act in all cases but it may think it just and equitable to extend the time limit for claiming if the employee only finds out about the discriminatory act (e.g. an underpayment of wages) some time later. Usually tribunals will not extend time limits where solicitors are instructed. In Virdi the EAT is saying that this will not be so in every case. It may still be just and equitable to extend the time limit if, as in this case, the solicitor was only one day late and the delay arose through no fault of the claimant himself. Unfair dismissal compensation Compensation for unfair dismissal is only intended to cover actual loss. The exception to this rule is the old case of Norton Tool Ltd v Tewson which decided that, where an employee who has been unfairly dismissed has found a new job during his notice period, he or she does not have to give credit for earnings from that new job received during that period when compensation for unfair dismissal is being calculated. In Langley v Burlo, the Court of Appeal has upheld the EAT decision that an employee could not claim eight weeks full pay as part of her compensatory award for unfair dismissal to cover her notice period, as she was only entitled, under her contract, to SSP, being unable to work during her notice period due to ill-health. As such, the Court restricted Norton Tool to its facts and declined to extend its application. The decision reflects the guidance given by the House of Lords in the case of Dunnachie v Kingston upon Hull City Council that compensation for unfair dismissal should reflect only actual financial loss. In Dunnachie it had been suggested that it might also include compensation for injury to feelings. In Langley it was suggested, following Norton Tool, that compensation should reflect good employment practice of paying an employee in full over their notice period. Point to note Employees do have a right to be paid in full during their notice period but only where the statutory minimum notice period applies (ss Employment Rights Act 1996) These sections of the ERA do not apply where (as happened in Langley) the contractual notice to be given by the employer is at least one week more than the statutory minimum. 5

6 Employee s fiduciary duties All employees have an unwritten fiduciary duty to their employer which includes an obligation not to work for a competitor while still employed by the employer. Breach of that duty will entitle an employer not only to claim compensation for losses suffered in their business but also all profits made by the competing business. However, the claim may be hard to establish. In Helmet Integrated Systems Ltd v Tunnard, the Court of Appeal considered a case where a salesman, whose job it was to sell protective equipment including firemens helmets, came up with an idea for a new helmet. While still employed, he obtained DTI funding to produce design drawings which he asked a friend to show to a competitor business. He then resigned from his employment and set up his own company to develop and produce his new product. His employer then made claims against him including claims for breach of contract and breach of fiduciary duty which the High Court rejected. The employer appealed to the Court of Appeal. It found that the employee s actions prior to his resignation were merely preparatory steps and did not amount to competition. If he had been a director, who had formed an irrevocable intention to compete, those preparatory steps would have been enough to found a claim. If his activities had been done by a competitor (ie if he had passed his ideas on to someone else) there would have been a breach of fiduciary duty but his own preparatory steps were not to be regarded as competitor activity. The employer s appeal failed. Points to note Mr Tunnard was not a director or even a senior manager. The Court of Appeal limited the extent of his unwritten duties to his employer in the light of his position within the organisation. Had he been a director, the case would have been decided differently. The Court of Appeal noted that Mr Tunnard s contract did not restrict his freedom to prepare for competition on leaving. He was entitled to believe that he could resign on notice and set up in competition whenever he wanted and could take preparatory steps while still employed. Employers should always consider including restrictive covenants in the employment contracts of employees who may be in key positions (as in this case in the sales force) even though not in senior posts. If they are reasonable in extent and duration and are designed to protect the genuine business interests of the employer, the courts will enforce such covenants and limit the extent of any damage done by an employee who turns into a competitor. We shall be happy to advise further on appropriate contract wording.

7 Nothing in this Update constitutes legal advice. Always consult a suitably qualified lawyer on any specific legal problem or matter. Bird & Bird assumes no responsibility for information contained in this Update and disclaims all liability in respect of such information. Beijing 3614 China World Trade Centre, Tower 1 1 Jianguomenwai Dajie Chaoyang District Beijing , PRC Tel: Fax: Brussels Avenue d'auderghem bte Brussels Belgium Tel: +32 (0) Fax: +32 (0) Düsseldorf Carl-Theodor-Straße Düsseldorf Germany Tel: +49 (0) Fax: +49 (0) The Hague Parkstraat JD The Hague P.O. Box GH The Hague The Netherlands Tel: +31 (0) Fax: +31 (0) Hong Kong 33/F, Three Pacific Place 1 Queens Road East Hong Kong Tel: Fax: Frankfurt Taunusanlage Frankfurt am Main Germany Tel: +49 (0) Fax: +49 (0) London 90 Fetter Lane London EC4A 1JP UK Tel: +44 (0) Fax: +44 (0) Lyon 23 boulevard Jules Favre Lyon France Tel : + 33 (0) Fax: + 33 (0) Madrid C/ Jorge Juan, 8 Planta 1 a Madrid Spain Tel: Fax: Milan Via Montenapoleone, Milan Italy Tel: Fax: Munich Paris Rome Stockholm Pacellistrasse Munich Germany Tel: +49 (0) Fax: +49 (0) Centre d Affaires Edouard VII 3 square Edouard VII Paris France Tel: +33 (0) Fax: +33 (0) Via di San Sebastianello, Rome Italy Tel: Fax: Norrlandsgatan 15 Box 7714 SE Stockholm Sweden Tel: +46 (0) Fax: +46 (0)