July 2022 Bulletin

Welcome

Normally in employment tribunal cases, the tribunal will only make decisions about issues that are raised in the pleadings (the ET1 and ET3) and/or those agreed between the parties during the case management process. The recent case of Osinuga v BPP University showed that there are exceptions to this general rule. The employee brought claims for unfair dismissal and discrimination. She said she had been targeted for redundancy due to complaints she had made about her pay. At a preliminary hearing, the tribunal identified various issues for the tribunal to decide, including the reason for dismissal. The list of issues did not include a complaint by the employee about the lack of any fair redundancy procedure (fair consultation, selection and a search for suitable alternative employment).

The employment tribunal said that redundancy was the reason for the dismissal which was reasonable overall. They said that the procedure had been fair, but even if it had not been fair, the employee would have been dismissed anyway had a fair procedure been followed. The employee appealed, saying the tribunal had failed to address the issue of whether a fair redundancy procedure had been followed.

The EAT said that some legal principles are so well established that an employment tribunal must consider them as a matter of course. In a redundancy case, that includes whether a fair process has been followed – fair consultation, fair selection and a reasonable search for alternative employment – even if the parties have not raised it themselves. The EAT said there may be an exception to this rule in complex cases – for example mass litigation – where parties are legally represented, cases are heavily case managed, and issues agreed long before a hearing. In such cases, the absence of any argument about an unfair procedure may be taken as implicit agreement that it is not a live issue in the case. But this case was different. The employee was not legally represented and the issue of a fair procedure was not raised in case management at all. Therefore she could not be regarded as having implicitly agreed that they were not relevant. The case was sent back to a newly constituted tribunal panel to decide the issues of fair consultation, selection and suitable alternative employment.

This case shows that a fair process will almost always be relevant in redundancy cases even if the issue is not specifically pleaded by the employee. Employers should ensure that matters are clarified at the case management stage, including any arguments about a redundancy process, in order to ensure that the final hearing disposes of the complaint once and for all.

Unfair dismissal – compensation

Dafiaghor-Olomu v Community Integrated Care

If an employee wins an unfair dismissal claim, the employment tribunal can award compensation that they consider to be ‘just and equitable’ bearing in mind the employee’s losses. In most cases, there is a statutory limit on the amount of compensation that can be awarded, currently £93,878 or 52 weeks’ pay, whichever is the lower. Section 124(5) Employment Rights Act 1996 says that the statutory cap should be applied after taking account of any payment made by the employer to the employee in respect of the claim. In Dafiaghor-Olomu v Community Integrated Care, the EAT has looked at how the statutory cap works in practice, with surprising consequences.

The employee won her unfair dismissal claim. At a first remedies hearing she was awarded around £46,000, which the employer paid. The employee appealed and her compensation was increased to almost £130,000. The question was whether the statutory cap – then £74,200 – should be applied before or after the amount already paid was deducted from the second award. If the cap was applied first, then her award of £130,000 would reduce to £74,200 – less the £46,000 already paid, the employee would be owed around £28,000. If then cap were applied second – by deducting the £46,000 from the £130,000 and then applying the cap – she would be owed a further £74,200 on top of the sum already received. Whilst expressing sympathy for the employer, the EAT said the wording of section 124(5) meant that the cap had to be applied second.

This judgment seems very unfair. Instead of paying £74,200, the employer had to pay the initial award of around £46,000 and then another £74,200 on top, simply because of the wording of section 124(5). Had there been no appeal, and a single award of compensation, the employee would not have received this kind of double-recovery. To avoid being hit by this compensatory double-whammy, employers who are faced with an appeal on compensation should request a stay of any enforcement proceedings pending the appeal decision. This is a rare case where complying with a tribunal order would place the employer at a disadvantage. This decision may yet be appealed

Discrimination

DWP v Boyers

Discrimination arising from disability happens when an employer treats an employee unfavourably because of ‘something’ arising from their disability and the employer cannot justify the treatment as a proportionate way of achieving a legitimate business aim. In DWP v Boyers, the EAT examined a case where the employer had legitimate business aims but the actions they took to achieve them were found to be disproportionate.

The employee was an administrator who was disabled due to recurrent migraines. She said colleagues were bullying her which exacerbated her migraines. She asked for them to be moved, or to move herself, but requests were refused. She then broke down in tears at work after which she was moved to a different floor and a stress reduction plan put in place. Some months later, she went off sick with stress. She lodged a grievance which was rejected. The employer allowed her to do six-week trial at another office, but it was fraught with IT problems and a lack of training and feedback. The employer decided the trial hadn’t worked and ordered the employee back to her usual place of work. She remained off sick and was eventually dismissed for capability. She brought tribunal claims including one for discrimination arising from disability.

The employment tribunal said her dismissal was not proportionate. The employer appealed. The EAT said that the tribunal had focussed on the decision-making process, relevant to an unfair dismissal claim, rather than looking at the employer’s legitimate aims (saving public funds, protecting other employees) and balancing the needs of the business against the discriminatory effect of the treatment (the dismissal). The case was sent back to the tribunal. The employment tribunal again found that the dismissal was discriminatory, so the employer appealed to the EAT once again. The EAT dismissed the appeal. The tribunal had applied the right balancing test this time. The tribunal had found that the employer had not properly evaluated the trial at a different office which could have avoided the employee’s dismissal. They decided that the dismissal was not proportionate based on the appropriate balancing exercise between the legitimate aims and the discriminatory impact on the employee. The EAT confirmed that a tribunal may consider the dismissal procedure in that balancing exercise provided the tribunal’s focus is on the outcome of the decision making – the dismissal, rather than the process itself – and decide whether that outcome is objectively justified. A potential move to another office was relevant to proportionality even if it fell outside of the employee’s contractual terms. Without properly considering the trial, and the things that went wrong there, the employer could not show that the dismissal was proportionate.

This case shows that the dismissal procedure can be relevant when considering whether an employer can justify discrimination arising from disability. If an employer dismisses an employee in such circumstances, the decision makers will need to understand (and evidence) how the decision to dismiss is a proportionate way of achieving their stated, legitimate aims. It may count against an employer if they fail to properly analyse why a trial in another role did not work. This case is also a reminder that employers must consider whether there are other, less discriminatory ways of achieving their aims – here, that was the opportunity to work from a different location.

Sickness absence – fit notes

New regulations have been put before Parliament which change the rules on who can sign employees off sick from work. Usually the work of a GP, and limited currently to doctors, the new rules allow other healthcare professionals to provide employees with fit notes for the purposes of statutory sick pay and social security claims.

From 1 July 2022, registered nurses, occupational therapists, pharmacists and physiotherapists can also sign off fit notes. The aim of the change is to free up GP time so they can see more patients. The BBC quotes the then health secretary, Sajid Javid: ‘That’s why we are slashing bureaucracy to reduce GPs workload, so they can focus on seeing patients and giving people the care they urgently need’.

Restrictive covenants

Planon v Gilligan

Restrictive covenants are terms in contracts of employment which restrict the employee’s activities after employment has ended. They will be void – and unenforceable – for being in restraint of trade unless the employer can show it has a legitimate proprietary interest to protect and the clause goes no further than is reasonable to protect it. If an employer thinks that an employee has breached a restrictive covenant, they can apply for an interim injunction to stop the employee’s activities pending a full trial which will decide whether the clause is enforceable. The court will consider whether the employer has a strong case, whether damages (compensation) would be an adequate remedy, the ‘balance of convenience’ between the parties in relation to an injunction and whether the ‘status quo’ should be maintained pending a trial. In a recent case, the Court of Appeal has analysed the test which the court must apply when making decisions about interim injunctions.

In Planon v Gilligan, the employee was a sales manager. His contract contained a non-compete clause, preventing him from working for a competitor for a period of 12 months following termination. He resigned in July 2021 but refused to say who he was going to work for. On 1 September, he started working for a competitor. The employer found out the following day. A few weeks later, the employer sent a letter before action. A month after that, in late October, the employer lodged a claim and made an application for an interim injunction. A hearing took place on 5 November 2021. The High Court judge refused to grant the injunction. The non-compete clause would make it extremely difficult for the employee to get any work at all during that 12-month period. The Court also said that the clause was not likely to be enforceable. The employer appealed.

The Court of Appeal refused to overturn the decision but for different reasons. They overturned the judge’s decision on the enforceability of the clause because the judge had not applied the test correctly. One Court of Appeal judge said that the employee had now been employed for 7 months, and even if the clause were enforceable in theory, the delay meant that it would not now be appropriate to grant the injunction because the damage was already done. Another judge said the damage would have been done in the first few days and certainly well before the November hearing, such that refusal of the injunction was reasonable at the first hearing. The Court of Appeal said the High Court had been entitled to decide that damages were not an adequate remedy for the employee. One judge noted that unless the employee were independently wealthy, or the employer offered paid garden leave for the whole period of restraint, damages would not be adequate as a remedy, especially if the employee has a mortgage and a family.

This case shows how vital it is to take prompt when applying for an injunction in cases where restrictive covenants have been breached. The Court of Appeal noted that the damage is usually done within the first few days of the new employment. Courts may be minded to maintain the status quo if employers delay and the damage has already been done by the time the matter gets to court. It is also important to ensure that covenants are only as wide, and last for as long, as necessary to protect business interests to maximise the chances of enforceability.

Unfair dismissal – Acas uplifts

Rentplus v Coulson

An employer should follow the Acas Code of Practice on disciplinary and grievance procedures when dealing with grievances or dismissing an employee for disciplinary reasons such as misconduct or poor performance. The Code does not apply to redundancy dismissals. If the employer unreasonably fails to follow the Acas Code, the employment tribunal can increase compensation by up to 25 per cent if it is ‘just and equitable’ to do so. In Rentplus v Coulson, the EAT looked at whether an uplift of 25 per cent could apply to a discriminatory dismissal that the employer had said was a redundancy dismissal.

The employee was a director and a member of the senior leadership team, working closely with the CEO. In March 2017, and without the employee’s knowledge, the employer decided to dismiss her. From October 2017, she was frozen out of her role. In 2018, a reorganisation took place which was described as a redundancy exercise despite the fact that the number of roles would increase rather than decrease. A consultation exercise took place. After this, the employee raised a grievance about the fact that her role was redundant and complained of poor treatment by the CEO. Her grievance and the appeal were dismissed. She was dismissed and brought claims for unfair dismissal and discrimination. The tribunal said her dismissal was unfair and discriminatory. The redundancy process was a total sham because the decision to dismiss had been taken months before. The tribunal awarded a 25 per cent uplift in compensation due to ‘egregious’ breaches of the Acas Code. The employer appealed, saying the Acas Code could not apply to a redundancy dismissal (the employer’s argument) or a discriminatory dismissal (the tribunal’s finding).

The EAT said that the Acas Code applies to ‘disciplinary situations’, not just express capability and conduct processes. It could apply to a wider set of circumstances, including situations where a potential misconduct or poor performance issue is dressed up as a sham redundancy. A decision that a dismissal is discriminatory won’t stop the Code applying – perceived performance issues which stem from discriminatory assumptions will be a ‘disciplinary situation’. The EAT said the tribunal’s judgment showed that the employer dismissed the employee because they were unhappy with her either personally or with her performance – a belief which was tainted by discrimination. This created the necessary disciplinary situation and the Acas Code applied. The 25 per cent uplift was reasonable because the dismissal process was a total sham and made in bad faith.

This case shows that ‘disciplinary’ situations may well arise in the absence of express capability and conduct processes. If an employee is disliked for some reason, due to her behaviour or the way she goes about her job, that is a disciplinary situation for the purposes of the Acas Code. It remains a disciplinary situation even if the employer then decides to invent a redundancy (or other) situation to mask the real reason for dismissal. If an employer is unhappy with an employee, for whatever reason, that should be dealt with fairly, using the appropriate conduct or capability procedure.

Constructive dismissal

Singh v Metroline

A constructive dismissal arises where an employer fundamentally (seriously) breaches the employment contract and the employee resigns in response to the breach. The EAT has recently overruled an employment tribunal’s analysis of what a fundamental breach must entail for the purposes of constructive dismissal. In Singh v Metroline, the employee was due to attend a disciplinary hearing when he went off sick. The employer thought he was making it up. This was despite him attending occupational health and them giving no indication that he was feigning illness. They paid him statutory sick pay rather than full company sick pay with the aim of persuading him to return to work and attend a hearing. The employee resigned and claimed constructive dismissal.

The employment tribunal said the failure to pay company sick pay was a breach of contract but not a fundamental one. The employee appealed and the EAT agreed with the employee. The tribunal had mistakenly thought that, in order for a breach to be fundamental, the employer must intend to no longer be bound by the employment contract in a way that meant they did not want to continue the employment relationship. That was wrong. The test was whether the employer intended to no longer comply with the terms of the contract which was so serious that it went to the root of the contract. The employer deliberately withheld contractual company sick pay rather than using other contractual mechanisms, such as investigating his sickness absence, if they genuinely believed the employee was making it up. That was a fundamental breach of contract. The EAT sent the case back to the employment tribunal for them to apply the rest of the constructive dismissal test to the facts.

This case shows that a deliberate failure to pay contractual sick pay can form the basis for a constructive dismissal claim even where the employer has every intention of the employment relationship continuing. In this case, there were other ways the employer could have taken action if they felt the employee was swinging the lead, by investigating his absence and removing pay if he were found to have been faking. Breaching an employee’s contract is never the answer, especially when there are other contractual mechanisms at an employer’s disposal.

And finally…

Section 230(3)(b) ERA says that an individual will be a ‘worker’ if they work under a contract with the company and have agreed to personally perform some work. However, they won’t be a worker if they are running their own business and the company is a client or customer of that business. In Sejpal v Rodericks Dental, the EAT has looked at the worker status test and how it applies to a working relationship that is defined in the contractual paperwork as one of self-employment.

The claimant was a dentist with Rodericks. She had a contract which described itself as a ‘contract for services’ and required that she provide a locum – to be agreed by the employer – if she was off for more than two weeks. If she did not do this, then the employer would appoint a locum. After working there for many years, she went on maternity leave. In her absence, one of the sites closed and she was dismissed. She said other dentists were redeployed within the business. She brought discrimination claims. Integral to those claims was her status as a worker, without which she would not be entitled to bring a discrimination claim in the employment tribunal.

The employment tribunal said there was not enough ‘mutuality of obligation’ between the dentist and the company for worker status and the contract between them referred to a contract for services, which denoted self-employment. On appeal, the EAT disagreed. The tribunal had made legal errors. The term ‘contract for services’ did not preclude worker status if the individual is self-employed but not running their own business, of which the employer is a client or customer. The tribunal had relied too heavily on the written contract, when established Supreme Court case law confirmed that contractual terms can be disregarded if they don’t accurately represent the parties’ genuine intentions. The dentist did not have an ‘unfettered’ right to send a locum – she could not do so until she had been off for 14 days and the replacement had to be agreed by the employer. In reality, she had never sent a locum once in more than 8 years of employment. There was a predominant requirement for personal service. With the first parts of the worker status test met, the EAT sent the case back to the tribunal to consider whether the dentist was running her own business and whether the employer was a client or customer.

This case is a reminder that the courts will scrutinise the reality of the relationship between the parties and should not be overly reliant on the text of a contract where it does not reflect the real position. The employment tribunal will now deal with the question of whether the dentist was running her own business, of which Rodericks was a customer, to determine whether she can bring her discrimination claim.