Equal Pay Claims and Employer Insolvency – Guidance Ruling

In an important decision, the Employment Appeal Tribunal (EAT) has ruled that equal pay claims being pursued by catering workers did amount to claims for ‘arrears of pay’ and ‘debts’ that transferred from one employer to another when there was a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) after the company they worked for went into administration (Graysons Restaurants Limited v Jones and Others).

The case concerned a number of school cooks and catering assistants who had originally worked for Liverpool City Council, against which equal pay claims were commenced in 2007. The women’s employment had twice transferred by virtue of TUPE to private sector companies, the latter of which became insolvent in 2009. At that point, another catering company purchased the insolvent company’s assets and took over the women’s employment contracts.

It was common ground that the women had been doing work rated equivalent to, but had been paid less than, their male comparators. There was therefore a presumption of equal pay, but material factor defences were being pursued in all cases and liability had not been finally determined or quantified.

Firstly, the EAT held that the women’s equal pay claims were capable of being claims for arrears of pay within Section 184(1) of the Employment Rights Act 1996 (ERA) and therefore debts within the meaning of Section 182 ERA. In the EAT’s view, on the date that their former employer became insolvent the women were legally entitled to receive pay for work already done, at the same rate of pay as male comparators doing equivalent work. They were in exactly the same position as any suppliers of goods who were unpaid at the date of insolvency.

Secondly, the EAT held that any liability in excess of the eight weeks of arrears of equal pay payable under Part XII ERA by the Secretary of State had not been extinguished and had transferred to the catering company.

If you are seeking to acquire a business in administration, contact us for advice.

Financial Services Company Had ‘Legitimate Business Reasons’ for Placing Trader on Garden Leave

In an important decision that strengthens the hand of employers facing hard times, the High Court has ruled that a financial services company had legitimate business reasons for placing a highly-paid bond trader on garden leave.

The trader was on a minimum five-year contract and, on top of his basic salary, was entitled to a minimum bonus of £200,000 a year. The desk on which he worked had, however, experienced a dramatic downturn in revenues and he was placed on garden leave after a view was taken that it was too expensive to keep him on. He remained on garden leave for over a year prior to his dismissal.

The company accepted that he had been wrongfully dismissed and that he was entitled to be paid his salary, pension contributions and guaranteed minimum bonus from the date of his dismissal to the expiry of his contract. Issues remained, however, as to his entitlements during the garden leave period.

The Court found that, on a true reading of the contract, there was no express duty to pay him a bonus while he was on garden leave. There was, however, an implied term that such bonus payments would only be refused on rational grounds.

In finding that such grounds existed, the Court noted that the company’s motive for placing him on garden leave was its view that continuing to pay him a guaranteed bonus was unsustainable against the background of declining revenues. He had been unwilling to accept a change in his contract terms and the company had business reasons for its decision that were not arbitrary.

The company acted with reasonable and proper cause and its intention had been to negotiate a settlement while he was on garden leave. The amount of the man’s compensation in respect of his admitted wrongful dismissal remains to be finally calculated. His claim was otherwise dismissed.

Premier League Club Triumphs in Transfer Market Tax Dispute

Football StadiumThe distinction between taxable remuneration arising from employment and tax-free compensation for the surrender of employment rights is a crucial one but has proved perennially tricky. In a test case of critical importance to professional sports clubs and their players, a tribunal ruled that termination payments made to two Premier League footballers fell on the tax-exempt side of the line.

A club had agreed to make payments totalling over £4 million to the players on their transfer to another club. They were expressed to be non-contractual compensation for the early termination of their contracts. That was not accepted by HM Revenue and Customs (HMRC), however, and demands were raised against the club in respect of Income Tax and National Insurance Contributions.

In upholding the club’s challenge to those demands, the First-tier Tribunal (FTT) found that the payments were consideration for the players’ early surrender of their rights as office holders. Although their contracts permitted early termination by mutual consent, the payments could not be viewed as having been made in lieu of notice.

In rejecting HMRC’s appeal against that ruling, the Upper Tribunal could find no fault in the FTT’s approach to the case. The players’ contracts did not provide expressly for payments to be made to them on termination of their contracts and the money they received was thus not profit or remuneration arising from employment.

Supermarket Chain Indirectly Liable for Rogue Employee’s Data Leak

Can employers be held liable for the criminal actions of rogue workers who disclose colleagues’ personal data on the Internet? In an important test case arising from a huge data leak from the personnel files of a supermarket chain, the High Court has answered that question in the affirmative.

The case concerned a trusted IT specialist who worked for the chain but bore a grudge against it after receiving a disciplinary rap over the knuckles. He copied the personal details – including names, addresses, dates of birth, telephone numbers, bank details and salaries – of almost 100,000 of his co-workers from the chain’s personnel files and placed them on a file sharing website.

The chain was tipped off about the leak after a CD containing a copy of the data was sent to three newspapers. Deeply concerned that the leak might expose its staff to fraudulent ‘phishing’ or identity theft, the chain took swift and effective steps to remove the data from the web. The perpetrator was in due course identified and, after he was convicted of offences under the Computer Misuse Act 1990 and the Data Protection Act 1998 (DPA), he was jailed for eight years.

Lawyers representing more than 5,500 of the chain’s employees lodged damages claims against it, alleging that it was both directly and indirectly liable for the IT specialist’s misdeeds. The chain was alleged to have breached its strict duties under the DPA to protect its employees’ personal data. Other claims of misuse of personal data and breach of confidence were also pursued.

Ruling on the claims, the Court noted that any system that permits human access to data involves inevitable risks. The chain had internal checks in place and had taken appropriate steps to protect the data by limiting access to a few trusted employees. There was no way that the chain could have known of the IT specialist’s grudge and there had been no failure to provide adequate and proper controls. The chain had not been obliged to routinely monitor employees’ internet access and its sole failing was that it did not have an organised, or failsafe, system in place for the deletion of data stored on individual workers’ computers.

The chain was nevertheless found indirectly – or vicariously – liable for the IT specialist’s criminal acts. It had deliberately entrusted him with its payroll data and he had been put in a position where he could handle it and disclose it to third parties. There was a sufficient connection between his job and his wrongful conduct to make it just for the chain to be held so liable.

The Court’s ruling opened the way for the affected employees to seek compensation. However, in granting the chain permission to challenge its decision before the Court of Appeal, the Court noted that the chain was itself the primary target and victim of the embittered IT specialist’s actions. The result of the case could be viewed as the Court acting as an accessory in the furtherance of his criminal objectives.

Employment Status – Uber Case Must Go to Court of Appeal

After losing its case in the Employment Appeal Tribunal, which found that Uber drivers are workers and thus have the right to be paid the National Minimum Wage or the National Living Wage and to receive holiday pay (Uber B.V. and Others v Aslam and Others), Uber disputed the finding and continues to insist that its drivers are self-employed and value the fact that they can choose if, when and where to drive.

Wishing to resolve the matter as quickly as possible, Uber requested that the case be ‘fast-tracked’ to the Supreme Court.

Permission has been refused, however, and the company must pursue its appeal in the Court of Appeal.

Employer Pays for Unwise Attempt to Soften the Blow of Dismissal

When workers are dismissed for poor performance, it is understandable that some employers might wish to soften the blow by giving some other reason. However, as one case showed, there is a duty not to mislead employees and such deviations from the truth can cause a host of difficulties.

The case concerned a lawyer who worked for an insurance broking firm. His boss took the view that he had made several serious mistakes and had concerns about his capabilities. A decision was taken to dismiss him, but the intention was that he would work out his three-month notice period.

Rather than being informed of the true reason for his dismissal, the man was told that a decision had been taken to reorganise his department and that greater reliance would in future be placed on external legal expertise. He took the view that such outsourcing would be a relevant transfer and that the employer had breached the information provision and consultation requirements enshrined in the Transfer of Undertakings (Protection of Employment) Regulations 2006. Only following his resignation did he discover the real reason for his dismissal.

His complaint of wrongful dismissal was, however, dismissed by an Employment Tribunal (ET). It found that the man’s real complaint related to the manner of his dismissal and that the employer had not breached its implied obligation to maintain the relationship of trust and confidence between them.

The ET found that the man had neither been entitled to resign when he did, nor to treat himself as having been dismissed. He was himself in breach of contract in refusing to work out his notice and the employer was entitled to reclaim from him over £1,000 that he had been overpaid for days not worked.

In upholding his appeal against those rulings, the Employment Appeal Tribunal (EAT) noted that the employer had been intent on saving the man’s feelings and making the termination of his employment more palatable. However, in resorting to falsehood, it had breached its obligation not to mislead him. The ET having erred in law, the EAT substituted a finding that the man was entitled to damages equal to the notice pay that he would have received had he not resigned.

National Minimum Wage Rates 2018/2019

The Government has accepted the Low Pay Commission’s recommended rates for the National Living Wage (NLW) and the National Minimum Wage (NMW) that will apply from 1 April 2018. These are as follows:

  • The NLW, which applies to those aged 25 and over, will increase from £7.50 to £7.83 per hour;
  • The NMW for 21- to 24-year-olds will increase from £7.05 to £7.38 per hour;
  • The NMW for 18- to 20-year-olds will increase from £5.60 to £5.90 per hour;
  • The NMW for 16- and 17-year-olds will increase from £4.05 per hour to £4.20; and
  • The apprentice rate of the NMW, which applies to apprentices aged under 19 or those aged 19 or over and in the first year of their apprenticeship, will increase from £3.50 to £3.70 per hour.

The accommodation offset will increase from £6.40 to £7.00 per day for each day during the pay period that accommodation is provided.