Overtime Must Be Factored In To Calculating Holiday Pay – Guideline Ruling

Should voluntary overtime count as ‘normal remuneration’ when calculating a worker’s statutory holiday pay entitlement for the four weeks’ annual leave required under the EU Working Time Directive (WTD)? The Court of Appeal came to grips with that burning issue in a guideline case concerning a group of NHS ambulance service workers.

The workers were entirely free to choose whether or not to work voluntary overtime shifts, but argued that payments they received in respect of those shifts should be factored in when calculating their holiday pay. After achieving a mixed result before an Employment Tribunal, their arguments were upheld in their entirety by the Employment Appeal Tribunal (EAT).

In dismissing their NHS trust employer’s appeal against that ruling, the Court found that the EAT’s decision reflected a true interpretation of a collective agreement incorporated within their employment contracts. The trust’s obligation to take their voluntary overtime payments into account also arose under the WTD.

The Court noted that it had been repeatedly emphasised in European legislation and case law that paid annual leave is a fundamental right. The Court of Justice of the European Union had frequently stated that there must be no disincentive to workers taking such leave and that employers cannot satisfy obligations imposed by the WTD by paying the bare minimum under workers’ contracts.

The exclusion of voluntary overtime from the calculation of holiday pay would carry the risk of encouraging employers to reduce their holiday pay liabilities by setting artificially low levels of basic contractual hours and categorising any remaining working time as overtime. The prevalence of so-called zero hours contracts in the UK meant that such a risk was far from fanciful and provided a very real objection to the trust’s arguments.

Annual leave must, in principle, be determined in such a way as to correspond with the normal remuneration received by a worker, including any voluntary overtime payments or other supplements.

The Court also confirmed that, both under their contracts and the WTD, the workers are entitled to have guaranteed overtime – worked in order to complete ongoing tasks after the end of their shifts – taken into account when calculating their holiday pay.

Sleeping Employment Judge Caused Unfairness in Museum Curator’s Case

Judges spend long hours listening to dense evidence and argument, and they would be superhuman if they did not occasionally nod off. As an employment case showed, however, the consequences of sleepy-headedness can be grave if it affects the fairness of proceedings.

The case concerned a senior curator, employed by a group of museums, who was made redundant after 33 years’ service. Her claims of wrongful and unfair dismissal, age and sex discrimination were subsequently rejected by an Employment Tribunal (ET). Four years later, she sought a position as assistant curator in response to an advert placed by the group, but her application was rejected on grounds that she was over-qualified for the relatively junior position.

After she launched a further complaint against the group, another ET accepted that her rejection for the post amounted to victimisation, contrary to the Equality Act 2010. That was on the basis that the earlier proceedings – which constituted protected acts – had influenced the decision to sift out her application.

In upholding the group’s challenge to that decision, the Employment Appeal Tribunal (EAT) was in no doubt that, very unfortunately, the employment judge who presided over the ET hearing had twice fallen fully asleep whilst the woman was undergoing cross-examination. It was not a case of mere momentary inattention and the group’s legal representative had to deliberately make a noise more than once in order to alert the judge. In those circumstances, a fair-minded and informed observer would have detected a real possibility that the fairness of the hearing had been affected.

The EAT noted that it would have allowed the appeal in any event, in that the ET had failed to reach specific and clear conclusions in respect of the group’s plea that the woman’s over-qualification was the sole reason for her rejection. The EAT directed a rehearing of the woman’s claim and expressed a preliminary view that that should take place before a freshly constituted ET.

Come Up With a Brilliant Invention? Do You or Your Employers Own It?

If employees come up with brilliant ideas, do they have intellectual property rights in them or are they the sole property of their employers? The High Court considered that burning issue in the context of a computer software dispute.

A company applied for international, national and regional patents in respect of a novel and potentially very valuable piece of web-filtering software which could be used for, amongst other things, preventing children from viewing unsuitable websites and blocking unauthorised access to subscription-only sites.

Via his corporate vehicle, a man who formerly worked for the company as a senior systems engineer challenged its ownership of the patent applications on the basis that the software was entirely the fruit of his own inventiveness. He said that he had developed the core ideas on which the software relied at home, in his own time, and on his own computer.

In rejecting his arguments, however, the Court found that, although he had devised one of the primary inventive concepts that led to the software’s development, a colleague had made improvements and he was therefore not its sole inventor. His work on the software in any event fell squarely within the normal course of his duties as an employee, within the meaning of Section 39 of the Patents Act 1977.

The Court noted that he had been specifically employed to create innovative product capabilities for the company, in the knowledge that it was seeking to develop web-filtering software. He was bound to present all his ideas to the company’s product management team and the work he carried out on the software was precisely the kind of task he was paid to perform. He posted his ideas on the company’s intranet, which he knew was for use solely in connection with its business. The company’s ownership of the patent applications was confirmed.

Shared Parental Leave and Enhanced Maternity Rights

Is it directly or indirectly discriminatory that men are paid less when on shared parental leave than women on maternity leave? In a ground-breaking decision, the Court of Appeal has answered that burning question in the negative.

Women are entitled to 52 weeks’ leave after giving birth, 39 of them paid. The first six of those weeks are paid at a higher rate than the succeeding 33. Shared parental leave is available for both parents where a new mother sacrifices part of her maternity leave and splits the remaining period with her partner. Shared parental leave is, however, always paid at the lower of the two rates available in respect of maternity leave.

Two fathers argued that those provisions, and the way in which they were applied to them, amounted to either direct or indirect sex discrimination. Their claims failed after progressing through the tribunal system, but both men appealed.

The first case concerned a father whose employer granted new mothers full pay for the first 14 weeks of their maternity leave, an arrangement that was substantially more generous than the statutory minimum. The employer’s policy in respect of shared parental leave, however, mirrored the statutory scheme, with the result that the father could only qualify for leave at the lower rate of pay. The father submitted that that outcome discriminated directly against him because of his sex.

The second case concerned a police officer who worked for a force which afforded new mothers 18 weeks of maternity leave on full pay. The force’s policy again mirrored the statutory scheme in respect of shared parental leave. That policy was said to cause a particular disadvantage to men and to amount to indirect discrimination.

In ruling on the first case, the Court noted that, in order to succeed in his claim, the father had to establish that he had been treated less favourably than a comparable female employee on the basis of his sex. However, he faced a major hurdle in that Section 13(6)(b) of the Equality Act 2010 required the Court to disregard any special treatment afforded to mothers in connection with pregnancy or childbirth when comparing the father’s treatment with that of a hypothetical female co-worker.

The Court found that the father’s circumstances were in any event materially different from those of a mother on maternity leave. Where one of the primary purposes of maternity leave is to assist mothers in recovering from the physical and psychological impact of childbirth, the father was wrong to argue that its only purpose, after the first two weeks of compulsory leave, is to help with childcare.

The proper comparator for the purposes of a direct discrimination claim was therefore not a woman on maternity leave but a woman on shared parental leave. There was, on that analysis, no difference between his treatment and that of such a co-worker.

Turning to the second case, the Court found that the officer’s claim was not properly categorised as one of indirect discrimination. Rather, his argument was that his terms of work had been modified by the sexual equality clause which is implied by the Act into all terms of work. That, he submitted, entitled him to take leave to care for his newborn baby at the same rate of pay as a mother taking maternity leave.

The Court, however, found that that argument was bound to fail because the Act provides an exception, in that the implied sex equality clause has no effect in relation to terms of work which afford special treatment to women in connection with pregnancy or childbirth. The Court noted that, in any event, a claim for indirect discrimination cannot be brought where the claim is, in reality, an equal terms claim, even if the latter claim only fails due to the application of the statutory exception.

In dismissing both men’s appeals, the Court concluded that the different rates of statutory pay afforded to new mothers and their partners following the birth of a child do not constitute unlawful discrimination, whether direct or indirect.

Companies Collapse and Employees Suffer – But the Law Does Provide Protection

When companies collapse without warning, shocked employees can be left high and dry. However, as a case concerning a troubled package holiday company showed, those who swiftly take legal advice are not without Government-backed protection.

holiday sunsetThe company had encountered severe financial difficulties, in part due to the impact of terrorist attacks on some of its most popular holiday destinations and the falling value of sterling against other currencies. Within minutes of the company entering administration, 94 of its 151 staff were informed of their instant redundancy.

After proceedings were launched on behalf of one of those who lost their jobs, an Employment Tribunal (ET) noted that, by virtue of Section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992, the company was, at least 30 days before the redundancies took effect, required to consult with appropriate workforce representatives with a view to avoiding or reducing the number of dismissals.

In clear breach of that provision, there had been no consultation whatsoever before the redundancies were announced out of the blue. The company did not recognise any trade union so there was no workforce representative body that could be consulted. The company’s financial position had not deteriorated so sharply as to render consultation impossible and the likelihood was that employees had simply been kept out of the loop as its fortunes spiralled downwards.

In the circumstances, the ET found that the employee was entitled to a protective award, comprising 90 days’ remuneration. That was the maximum award permitted by Section 189(3) of the Act, but the ET could detect no grounds for reducing it. In the event that the company was insolvent, the award would be paid by the Secretary of State for Business, Energy and Industrial Strategy, subject to the maximum liabilities specified under Section 184 of the Employment Rights Act 1996.

Disability Discrimination – Employers Don’t Have to Shut Their Eyes to Reality

Discriminating against sick employees is obviously unacceptable, but that does not mean that employers have to ignore health difficulties in deciding whether someone is fit enough to perform a particular role. The Court of Appeal succinctly made that point in the case of a chemical engineer whose medical problems resulted in him being overlooked for an overseas posting.

The man had double below-knee amputations and suffered from type 2 diabetes, hypertension, kidney disease, ischaemic heart disease and morbid obesity. At a client’s request, his employer initially selected him to work on a project in the Middle East. However, following a medical assessment, that decision was reversed on the basis that his deployment to a remote location would give rise to a high risk of medical complications. The employer’s director of operations acknowledged that both he and its client would be disappointed, but said that the duty of care owed to him as an individual came first.

His complaints of direct and indirect disability discrimination, and a failure to make reasonable adjustments in order to cater for his health problems, were rejected by an Employment Tribunal (ET) and that decision was subsequently confirmed by the Employment Appeal Tribunal.

In dismissing his challenge to that outcome, the Court noted that an employee’s health is not always entirely irrelevant to their ability to do a particular job. The reality was that a hypothetical comparator at similar medical risk would have been treated in exactly the same way even if they did not share the man’s particular disability.

Alcohol at Workplace Festivities – The Law is Not a Party Pooper!

Workplace social events are a time-honoured means of rewarding staff and boosting morale, but the presence of alcohol means that they are not without risk. The High Court’s ruling in the case of a woman who was seriously injured on the dancefloor showed, however, that the law is not a party pooper.

The case concerned a Christmas gathering held at a university research institute and organised by a medical charity. One of those present was a visiting scientist, who had been drinking alcohol and was in high spirits. He lost his footing whilst attempting to lift the woman up on the dancefloor without her consent.

She fell to the floor, suffering a serious back injury, and took legal action against the charity, claiming up to £300,000 in compensation. In dismissing her claim, however, a judge ruled that the charity had not been negligent and was not in any event responsible for the behaviour of the scientist, who was not its employee and whose inebriated actions were far removed from his work at the institute.

In dismissing the woman’s appeal against that decision, the Court found some merit in the charity’s plea that a ruling in her favour, whilst not meaning that Christmas is cancelled, would act as a disincentive to workplace parties and would be viewed by the man on the Clapham omnibus as an example of health and safety gone mad.

The charity had carried out a risk assessment before the event and did not dispute that it owed the woman a duty of care. However, the scientist had previously picked up three other women, without incident or complaint, and no one present at the event had considered his behaviour so extreme as to merit intervention.

The Court noted that it did not require a risk assessment to establish the well-known disinhibiting effects of alcohol. Arguments that organisers of workplace parties should, amongst other things, provide specially trained staff and require guests to sign written guarantees of good behaviour defied common sense. The Court could also find no fault in the judge’s decision that the charity did not bear vicarious liability for the scientist’s behaviour.

New ‘Vento’ Bands

The Presidents of the Employment Tribunals in England & Wales and Scotland have issued a joint Second Addendum, updating earlier Presidential Guidance issued on 5 September 2017, announcing the rates payable for the three bands that are used by Employment Tribunals when assessing the amount of compensation payable for injury to feelings in discrimination and whistleblowing cases. These are often called the ‘Vento’ bands, after the 2002 case in which the Court of Appeal gave guidance on this issue (Vento v Chief Constable of West Yorkshire Police).

The new rates take account of the Retail Prices Index and apply to claims presented on or after 6 April 2019. They are as follows:

  • Lower band – between £900 and £8,800. Awards in this range are appropriate where the act of discrimination is an isolated or one-off occurrence;
  • Middle band – between £8,800 and £26,300. Awards in this range are made in serious cases but where an award in the top band is not merited; and
  • Top band – between £26,300 and £44,000. Awards in this range are made in the most serious cases, such as where there has been a lengthy campaign of discriminatory harassment. Only in exceptional circumstances will a compensation award for injury to feelings exceed the upper limit.

High Court Enforces Partnership Agreement Non-Compete Clause

Validly restricting the post-termination conduct of employees and partners involves striking a careful balance between business protection and personal freedom, and that is why professional drafting is indispensable. An instructive case on point concerned a partner in a professional services firm who was banned from joining a competitor for six months following his retirement.

After the firm approved the man’s retirement, he was placed on gardening leave for nine months prior to the date of his retirement. Thereafter, for a further six months, a clause in the firm’s membership agreement forbade him from joining as a partner or member any business in competition with the firm or other firms connected to it, either in the UK or overseas.

About a month after the end of his gardening leave, the man announced his intention to take up a post with a competitor. The firm was concerned that his senior role had given him access to its confidential information and sought an injunction to hold him to the terms of the membership agreement. The man argued that the non-compete clause was invalid in that it was too broad in its scope and unfairly prevented him from making a living. He also submitted that the six-month period, when combined with the period of gardening leave, was unreasonably long.

In granting the injunction sought, however, the Court noted that the dispute in respect of the validity of the non-compete clause had been referred for resolution by an arbitrator under the terms of the membership agreement. That arbitration could take place speedily, and in any event before the expiry of the six-month period.

The Court observed that the man had been paid a substantial sum of money whilst on gardening leave and was aware throughout that the firm was seeking to enforce the non-compete clause. The firm had presented an arguable case that the order was necessary to protect its legitimate interests in maintaining confidentiality. It had established a serious issue to be tried and the balance of convenience also fell in favour of the injunction being granted.

French Lawyer Tests Limits of UK Employment Tribunals’ Territorial Reach

The territorial reach of UK Employment Tribunals (ETs) is not without limit and the overseas presence of many British businesses can give rise to difficult jurisdictional issues. A recent case concerned a French lawyer who worked in the Paris office of an international law firm based in London.

The lawyer, a partner in the firm, launched ET proceedings after she was required to retire. She claimed that male colleagues had been paid more than her and that the circumstances of her departure revealed direct sex and race discrimination which amounted to victimisation. The ET, however, dismissed her claims on the basis that it lacked territorial jurisdiction to consider them.

In ruling on her challenge to that decision, the Employment Appeal Tribunal (EAT) noted that the firm, although based in London, has 24 offices worldwide. The Paris office was not a wholly independent business, but nor was it a mere outpost or satellite of the London HQ. She visited the London office every few months and, as a partner in a UK firm, she was required to register with the Solicitors Regulation Authority.

In dismissing her appeal, however, the EAT observed that the Paris office would, to its clients, have appeared practically indistinguishable from an independent French law firm. As a French national, the lawyer lived and worked in her homeland and was qualified to practise French law. Her ad hoc visits to London were generally brief and were of little relevance.  She was paid in Euros, into a French bank account, and she paid tax in France.

Overall, her connection to the UK was weak and there were no exceptional features that required the ET to assume jurisdiction. The EAT also dismissed her appeal against the ET’s rejection, again on jurisdictional grounds, of her separate discrimination claims against an individual partner in the Paris office.