August 2020 bulletin

September and October this year see the scaling back of the Coronavirus Job Retention Scheme under which millions of employees have been placed on furlough while the Government issued grants to employers to cover the cost of their wages.

The scheme ends altogether on 31 October and in September and October the amount of the grant being offered by the Government is to be reduced. Under the original scheme the Government paid 80 per cent of a furloughed employee’s wages up to a maximum of £2,500 per month. In August employers became liable to pay National Insurance Contributions and mandatory pension costs for furloughed employees and from 1 September, the scheme will only pay 70% of employees’ wages to a maximum of £2,187.50 per month. From 1 October the scheme will be reduced further so that the government contributes only 60% of wages to a maximum of £1,875.

It is important to note that these grants are made on the basis that the employer continues to pay a furloughed employee at least 80 per cent of wages or £2,500 per month. In other words the employer cannot simply pass on the reduced amount of grant being provided under the scheme but must top it up so that the actual entitlement of a furloughed employee stays the same.

There seems little doubt that the increased costs to employers – and the prospect of the scheme ending altogether – will result in large scale redundancies across the economy. It is worth remembering that a fair dismissal for redundancy requires an employer to engage in meaningful consultation with employees. That means consulting before a final decision is taken and so even if the end of the scheme is still two months away, it is not too early to start that process if employers can already foresee what will need to be done come November.

Trust and Confidence

Sometimes working relationships just break down and can’t be repaired. The employer may feel that it is left with no alternative but to dismiss an employee who simply cannot work effectively with a manager or key colleagues. A dismissal on these grounds can fall within the potentially fair category of ‘some other substantial reason’ and the question will then be whether the employer has behaved reasonably.

In Gallacher v Abellio Scotrail the employee – Ms Gallacher – was a manager who initially had a good working relationship with her boss, Ms Taggart. This started to turn sour however when her request for a pay-rise was initially turned down. Ms Gallacher perceived a general change of culture in the business and decided that she ‘wanted out’. There were then a number of issues arising concerning whether or not Ms Gallacher should take part in an on-call rota and over the recruitment of a new member of her team. She made it clear that she was looking for another role and took a period of sick leave lasting some seven weeks. In a one-to-one meeting Ms Gallacher and Ms Taggart discussed their deteriorating relationship and Ms Gallacher said that she did not behave in the same way with anyone else. Ms Taggart felt that she was ascribing all the blame for their difficulties to her and was not interested in working to resolve matters.

It was decided that Ms Gallacher had lost confidence in Ms Taggart and that she would therefore have to leave the business. She was told this at her annual appraisal and was not offered any right of appeal. She claimed that she had been unfairly dismissed.

The Tribunal rejected her claim. They held that Ms Gallacher had adopted a ‘truculent’ attitude in her discussions with Ms Taggart and had indeed lost all confidence in her. Their differences meant that the relationship could not be rescued and that any attempt to resolve their issues through mediation or further discussions would have been futile.

Ms Gallacher’s appeal to the EAT focussed on arguing that the employer had not followed a reasonable procedure before deciding to dismiss. Ms Gallacher had been given no warning that dismissal was being considered and no opportunity to reflect on her approach in the light of that fact. She had been told of the decision at a meeting arranged for some other purpose and had been given no opportunity to appeal or put her side of the argument.

The EAT rejected the appeal. This was one of those rare cases in which the employer was entitled to conclude that it would have been futile to follow a procedure before deciding to dismiss. Ms Gallacher did not dispute that her relationship with Ms Taggart had broken down and the Tribunal found that she had displayed no interest in resolving the situation. This was a breakdown in trust between two senior managers and the Tribunal had been entitled to find that following something akin to a disciplinary procedure would have served no useful purpose.

Misconduct dismissals

In Greenberg v DPP Law Ltd the employee was a senior solicitor practising criminal law. He represented clients who were funded by legal aid under a contract between his firm and the Legal Aid Authority. It was an important term of that contract that the solicitors would not charge any additional fees – known as ‘topping up’ fees – to legal aid clients.

Mr Greenberg was working on a case involving an 18-year-old boy accused of grievous bodily harm. When he succeeded in obtaining bail for him, the boy’s father gave him a thankyou card which turned out to contain £300 in cash. Mr Greenberg sought advice from the Law Society ethics helpline which said that it was not unethical to keep the money provided it was clear that the money was not an inducement or incentive. He also asked the opinion of the firm’s compliance officer who said ‘I’ll leave it to your conscience’. Mr Greenberg kept the money.

Sometime later Mr Greenberg had another encounter with the boy’s father – this time outside a pub where Mr Greenberg had been trying to interview witnesses. After a conversation, the father dropped £150 in cash through Mr Greenberg’s car window and walked away. Later the father mentioned the sum to the barrister in the case and suggested that it had been intended to cover his expenses and to encourage him to ‘hurry up a bit’. The barrister reported the matter to the Legal Aid Authority.

Mr Greenberg’s firm then dismissed him for gross misconduct. They decided that he had acted in breach of the firm’s legal aid contract, which risked the firm losing the contract altogether, He had also brought the firm into serious disrepute with the Legal Aid Authority. He claimed unfair dismissal.

The Tribunal dismissed his claim. They held that it was fair of the employer to conclude that Mr Greenberg knew or ought to have known that the £150 dropped through his car window could have been perceived as a top up payment in breach of the legal aid contract. On appeal however her argued that this was not the basis on which he had been dismissed. The employer had expressly dismissed him on the ground that the payment was a breach of the legal aid contract – not that he should have realised that it might be perceived as such. The EAT agreed. The Legal Aid Authority had subsequently found that there had in fact been no breach of the contract. That did not mean that the employer could not have reasonably concluded otherwise, but it should have prompted the Tribunal to look carefully at the evidence that led the employer to conclude that there had been a breach. Instead, the Tribunal had concluded that the employer could have justified dismissal based purely on Mr Greenberg’s negligence. But it was the employer’s actual reason for dismissal that mattered, not an alternative reason conjured up by the Tribunal. The case was sent back to them to reconsider whether the evidence really did give the employer reasonably grounds for concluding that Mr Greenberg had accepted a top-up payment.

Constructive dismissal

In Phoenix Academy Trust v Kilroy, Mr Kilroy was the acting principal of a school that was taken over by a new academy trust. He was accused of gross misconduct and believed that the charges against him had been manufactured in an attempt to force him out. A disciplinary hearing was held at which he was told that there was a need for further investigation and that he would remain suspended in the meantime. He concluded that his relationship with his employer was now beyond repair and instructed solicitors to send a resignation letter on his behalf indicating that he intended to claim constructive dismissal.

Before the letter was received however, he was told over the phone that he was being dismissed with immediate effect. It was accepted by both sides in the case that this meant that the resignation letter that he had sent had no effect. In a bid to clear his name he decided to appeal against the decision – although he also made it clear that he had no intention of returning to work. In the event his appeal was successful – albeit after a delay of more than a month and on the basis that he should be given a final written warning and a performance improvement plan – and the employer reinstated him. He refused to return and claimed constructive dismissal.

The Tribunal found that there had been little if any substance to the accusations of misconduct made against Mr Kilroy and held that the employer had indeed acted in breach of the implied term of mutual trust and confidence. They upheld the constructive dismissal claim and the employer appealed.

They argued that by invoking the appeal procedure, Mr Kilroy had ‘affirmed the contract’. An employee faced with a fundamental breach of contract by an employer has the choice to either resign and claim constructive dismissal or decide to remain employed. Once the employee has shown that they intend to stay they are said to have affirmed the contract and lose the right to claim constructive dismissal. The employer relied on the established principle that an employee who appeals against a dismissal is asking to be reinstated. The EAT agreed that this meant that when Mr Kilroy appealed against the decision to dismiss him – even with the caveat that he had no intention of returning – he had indeed affirmed the contract.

That was not the end of the story, however. The Tribunal had been sharply critical of the way in which the employer had approached the appeal – both in terms of the time it took to reach a decision and also the substance of the decision itself. These matters arose after Mr Kilroy had affirmed the contract and it was necessary to consider whether they amounted to a fresh breach of the implied term of trust and confidence – either in their own right, or when taken alongside the employer’s earlier failings. The case was therefore sent back to the same Tribunal to consider the point.

Wrongful dismissal

In Hall v London Lions Basketball, Mr Hall was a professional basketball play who resigned when his employer failed to pay him the wages that it owed him. He claimed a constructive wrongful dismissal and that claim was upheld. He had been employed for a fixed term which had been due to expire some three months after his resignation and he argued that he should be awarded the pay he would have received in that period. The Tribunal noted, however, that there was a term in his contract which allowed him to terminate his employment with 14 days’ notice if there was a serious breach of contract on the part of the employer. The Tribunal therefore limited his damages to 14 days’ pay.

The EAT held that this was the wrong approach. In a breach of contract claim damages are calculated to put the employee in the same position that he or she would have been in if the contract had been properly performed. There is a longstanding rule that the calculation assumes that the employer would have performed the contract in the least onerous way possible. So in a normal wrongful dismissal case where the employee has been dismissed without notice, damages are based on what the employee would have received if the employer had given the minimum notice required under the contract. In this case however there was a fixed term contract with no provision allowing the employer to bring the contract to an early end by giving notice. That meant that the starting point was to consider what the employee would have received if the contract had been allowed to run its full term. The employee’s right to terminate the contract with 14 days’ notice was not a provision that the employer could insist on him using. Nor did it alter the fact that the employee was entitled to terminate the contract without notice in response to the employer’s fundamental breach. The Tribunal had therefore been wrong to limit his damages to 14 days. The correct measure was the amount that he would have earned over the remainder of the contract, with a reduction made for any earnings he received from other sources in that time.

Redundancy

Before dismissing an employee for redundancy a fair employer will take reasonable steps to look for an alternative – including offering the employee a chance to be considered for suitable vacancies elsewhere in the organisation. In Aramark (UK) Ltd v Fernandes the employee was facing dismissal for redundancy. The employer, in addition to its regular workforce, also maintained a pool of individuals from whom it would draw to cover any shortages. Those in the pool were not employed, but at least had the prospect of some paid work and, for some, this involved contracts for an extended period of time. Mr Fernandes argued that he should at least have been given a place in this pool of workers and the Tribunal agreed. They held that it was unfair of the employer to dismiss Mr Fernandes for redundancy without adding him to the pool.

The EAT upheld the employer’s appeal and ruled that the dismissal was fair. The question in an unfair dismissal claim was whether the employer had behaved reasonably in treating (in this case) redundancy as a sufficient ground for dismissing the employee. But placing Mr Fernandes in the pool of additional labour would not have prevented his dismissal. A place in the pool could not be equated with an alternative role that would have meant that there was no need for a dismissal. The decision not to place him in the pool – whether reasonable or not – was therefore irrelevant to the question of whether or not it was reasonable for the employer to dismiss him.

Equal pay

An employer can defend an equal pay claim by showing that the difference in pay between a man and a woman employed on equal work is genuinely due to a ‘material factor’ that is not the difference in sex. If for example the difference is genuinely due to the fact that one has better qualifications or more experience and expertise than the other, then the equal pay claim will fail unless the reason for the difference is in itself discriminatory.

In Walker v Cooperative Group Ms Walker was appointed to the role of Group Chief HR Officer in 2014 on a salary of £425,000. This was considerably less than two male executives on the board and when she left the Co op in 2017 as a result of a restructure she pursued an equal pay claim.

The basis of her claim was that within a year of her salary being set by the employer’s remuneration committee a detailed analysis of executive roles was carried out which rated her job more highly than two other executives who were being paid more than her. The employer accepted that the roles were equal but argued that the difference in pay was due to a number of non-discriminatory factors that had been taken into account by the remuneration committee. These included her relative lack of experience at a senior executive level and the fact that they were both employed in key roles that had were perceived as vital to the survival of the employer’s operation which had just been refinanced and was facing important governance challenges.

The Tribunal accepted that these factors applied when the remuneration committee initially set the salaries of the executives concerned but held that these became less relevant over the course of the following year. By the time of the job evaluation the importance of the higher paid executives’ roles had declined relative to that of Ms Walker. The Tribunal therefore held that the factors relied on by the employer to explain the difference in pay were no longer ‘material’ and upheld Ms Walker’s equal pay claim.

The EAT reversed this decision and Ms Walker appealed to the Court of Appeal. The case turned on what was meant by ‘material’ in the employer’s ‘material factor defence’. Ms Walker argued that a factor was only material for as long as it continued to be relevant and the Tribunal had been entitled to find that within a year of her salary being set the factors relied on no longer applied. The employer argued that ‘material’ in this context merely meant that it genuinely explained the difference in pay. Even after the job evaluation the difference in pay between Ms Walker and the other executives was the result of the initial decision made by the remuneration committee on the basis of the factors that had been set out. They remained ‘material’ because they continued to explain the reason for the salaries being set at different levels.

The Court of Appeal agreed. The employer did not have to show that the difference in pay was fair or justified – merely that it was not due to the difference of sex. As long as the material factors relied on by the employer continued to explain the difference in pay, they could be relied upon. The Tribunal would have to reconsider the claim on that basis.

And finally…

This year has seen an unprecedented shift in the way in which we work, and it is too early to know whether the huge increase in working from home is a permanent change or a temporary blip. The Government has been reported as being concerned that too many people are still working at home and wants to encourage people back to the office. That would certainly help public transport services and city centre coffee shops – but may not suit many employees or even employers.

One suggestion that was reported was that employees who continue to work at home may be at increased risk of redundancy with the Government suggesting that employers would adopt the principal of ‘out of sight, out of mind’ when deciding who to retain.

There is a lot wrong with that approach. Leaving aside the fact that many employees working from home may have key skills that the employer needs to retain and may be making a vital contribution to the business there are potential discrimination issues in play. Those working from home may be more likely to be women with caring responsibilities or employees with vulnerabilities based on their age or underlying health condition. Employers who do not want to be landed with claims for indirect sex, age or disability discrimination would be best advised not to make decisions on redundancy based on who is actually coming into the office.