The Wording of Contracts is All Important – but Context Matters Too

The wording of contracts is the first port of call for judges who are asked to interpret them – but context matters too. The Court of Appeal made that point in resolving a long-running dispute that arose from the closure of a packaging factory and the loss of over 100 jobs.

factory, grainThe factory’s demise was marked by bitter dispute between the company that owned it, its employees and their trade union. Four workers were summarily dismissed after occupying the premises and the union ran a high-profile campaign which generated much damaging publicity for the company. After the factory ultimately closed, all 109 remaining employees were made redundant.

Following negotiations between the company and the union, a settlement was finally agreed, one of the terms of which was that the employees would receive ’90 days’ gross pay’. However, a dispute arose thereafter as to the correct interpretation of that phrase. The union argued that the sums payable should be worked out by calculating the average gross daily pay of each worker and multiplying that figure by 90. The company argued that the phrase referred to 90 days on the calendar, an approach that resulted in a less generous outcome for the employees.

Following a hearing, a judge preferred the union’s reading of the phrase. The Court, however, took the opposite view and allowed the company’s appeal. It noted that its task was simply to ask what the phrase meant in the context of the facts known to both the union and the company. When that holistic approach was taken, it was clear than an objective reader would have naturally understood that the mutual intention was to employ the calendar method of calculating the 90 days.

GDPR – ICO Consults on Written Contracts

The General Data Protection Regulation (GDPR), which replaces the EU Data Protection Directive, is a comprehensive data protection regime aimed at achieving a high level of security of network and information systems across the EU and giving individuals greater control over their own personal data. The GDPR will apply to all EU member states from 25 May 2018 and will impose significant compliance issues for any organisation which holds ‘protected data’. The Government has indicated that the GDPR will remain on the UK statute books after Brexit. To this end, a new Data Protection Bill has been introduced to Parliament that will transfer the GDPR into UK law, replacing the Data Protection Act 1998 and introducing new data protection rights that take into account developments in digital technology and the way organisations often collect a wide range of information about people.

Under the GDPR, processors have new responsibilities and liabilities in their own right and both controllers and processors may be liable to pay damages or be subject to fines and penalties. Also, the written contracts between controllers and processors must contain specific detailed terms.

The Information Commissioner’s Office is running a short consultation on draft guidance on the responsibilities and liabilities of processors under the GDPR and what must be included in written contracts. Responses must be submitted by 10 October 2017.

Statistics Wrongly Ignored in Airline Purser Employment Case

Statistics do not have the best reputation – often being equated with ‘damned lies’ – but they can be of critical relevance to employment proceedings. That was certainly so in one case concerning a part-time airline purser who was alleged to have been less favourably treated than her full-time colleagues.

The woman had worked full time in the past but had taken on a part-time role after returning from maternity leave. Her contract envisaged that she would work half as many hours as her full-time co-workers and would receive half their salary.

Full-time cabin crew members were required to be available for work for 243 days per year. Half of that was 121.5 days, but the woman had to be available for 130 days. On that basis, she complained that, when viewed proportionately, she was required to be available for 3.5 per cent more days than her full-time comparators.

In upholding her complaint, an Employment Tribunal (ET) found that, in requiring her to work an additional 8.5 days annually, without equivalent additional pay, the airline had breached the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000. The difference in treatment was in pursuance of a legitimate aim, but was not objectively justified in that the same operational objective could have been achieved by the simple, non-discriminatory, expedient of increasing her salary.

In ruling on the airline’s challenge to that decision, the Employment Appeal Tribunal upheld the ET’s conclusion that the woman had been less favourably treated. However, in allowing the appeal, it found that the ET was wrong to ignore statistical evidence put forward by the airline in support of its justification defence.

The airline had argued before the ET that it was in practice impossible to maintain absolute mathematical parity between the number of hours proportionately worked by the woman and her full-time comparators. Statistics showed that, during some periods, she worked longer hours than full-time colleagues and, in other periods, fewer. A broad approach to comparability was appropriate and any difference in treatment could be regarded as trivial or minimal. The objective justification issue was remitted to a freshly constituted ET for reconsideration.

Watch Out! Assurances Given to Employees Can Have Contractual Force!

Promises made and assurances given to employees can have contractual force, so it is vital not to make such commitments without taking legal advice. That point was made by one case in which a council went back on an assurance that a group of workers would have the opportunity to apply for voluntary redundancy.

The council was subject to severe budget cuts and had informed the review and monitoring officers over its intranet that they would be contacted and invited to make applications for voluntary redundancy on generous terms. They were, however, subsequently told that voluntary redundancy was not available to them and they were made compulsorily redundant. Their complaints of breach of contract were later rejected by an Employment Tribunal (ET) on the basis that the intranet announcement did not give rise to contractual rights.

In upholding the workers’ challenge to that ruling, the Employment Appeal Tribunal (EAT) found that the ET had made a number of errors of law. It had, amongst other things, wrongly focused on an irrelevant issue as to whether the council had a policy, or custom and practice, of offering voluntary redundancy. The intranet notice, on the face of it, committed the council to inviting applications for voluntary redundancy and questions as to whether these would in fact have been granted went to damages, not liability.

The EAT remitted the case to the ET for reconsideration of whether the workers had a contractual right to apply for voluntary redundancy and, if so, the amounts of damages, if any, they should be awarded. Subject to argument to the contrary, the EAT was minded to send the matter back to a differently constituted ET.

Multinational Employers and TUPE Obligations – Tribunal Gives Guidance

Multinational companies frequently move their operations between countries – but how do to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) impact on their search for value? The issue was strikingly raised by a case in which a Yorkshire-based office worker offered to follow his job to the Philippines – but only if he continued to be paid his UK salary.

Airport The man’s employer had decided to shut down the finance department in which he worked and shift the entire operation to Manila. It was agreed that TUPE applied to the transfer of the department’s functions between two companies in the same international group. There was no suggestion that the amount of work that had to be done by the department or the number of employees engaged to do it would be reduced following its transfer to the Philippines.

When offered redundancy, the man responded by offering to relocate from Wakefield to Manila on the same terms and conditions that he had enjoyed in Yorkshire. Had that request been granted, he would have been paid almost 10 times as much as local workers in the Philippines. It was, however, refused and he was dismissed. His unfair dismissal claim was subsequently upheld by an Employment Tribunal (ET).

In upholding the employer’s challenge to that ruling, the Employment Appeal Tribunal (EAT) noted that the man’s contract provided for him to work in the Leeds or Wakefield area. There had been no consensual variation of that term and the employer was not required to engage him in Manila on the same salary that he had enjoyed in Yorkshire. It had never deviated from its refusal of his proposal and there was a complete absence of the meeting of minds required to achieve a variation.

Remaining issues in the case, in particular as to whether the reason for his dismissal was truly redundancy, were remitted to a newly constituted ET for fresh consideration in the light of the EAT’s ruling.

New ‘Vento’ Bands

Following a consultation, the Presidents of the Employment Tribunal have issued revised guidance on the amount of compensation payable for injury to feelings in discrimination cases (the ‘Vento’ bands).

In future, the guidance will be subject to revision on an annual basis, without the need for further consultation, with the first review taking place in March 2018.

The Presidents consider that, for the time being, the Retail Prices Index (RPI) is the appropriate measure of the rate of inflation to be applied.

Applying the formula adopted by the Presidents, the new bands for awards for injury to feelings are as follows:

  • Lower band – between £800 and £8,400. Awards in this range are appropriate where the act of discrimination is an isolated or one-off occurrence;
  • Middle band – between £8,400 and £25,200. Awards in this range are made in serious cases but where an award in the top band is not merited; and
  • Top band – between £25,200 and £42,000. 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.

The Guidance will apply to claims presented to the ET on or after 11 September 2017.

The response to the consultation can be found on the Courts and Tribunals Judiciary’s website. 

Agency That Failed to Pay the National Minimum Wage Hit Hard In Pocket

Paying the National Minimum Wage (NMW) is a strict legal requirement and employers that fail to do so can be hit with punitive penalties. In one case, an employment agency that laid on thousands of underpaid workers at a warehouse received a six-figure fine.

Following an investigation by HM Revenue and Customs (HMRC), it emerged that workers who clocked on one minute late to work were docked a full quarter of an hour. After clocking off at the end of their shifts, they were also required to queue for an average of 11 minutes for security checks.

The agency accepted that, as a result of those unpaid periods, workers had not received the NMW. To make up the difference, it paid almost £470,000 to affected workers. It was also required to pay a total of £263,628 in respect of 13 penalty notices raised by HMRC. It was, however, permitted to pay half the penalties – £131,814 – because it remitted the sum promptly, within 14 days.

After the agency appealed against the penalties to an Employment Tribunal (ET), HMRC acknowledged that the notices were defective in that they did not include certain information, particularly the names of individual workers concerned and the amounts by which they had been underpaid.

In dismissing the agency’s appeal, however, the ET found that the notices were nevertheless valid. The agency knew precisely the figures on which the notices were based, did not dispute that workers had been underpaid and had agreed how much was owed to them. The penalties were designed to have a deterrent effect on others and HMRC had been entitled to issue multiple notices.

Employment Law and Human Rights – The Debate Continues

The impact of the UK’s human rights obligations on employment law is still a subject of much debate almost 20 years after the advent of the Human Rights Act 1998. In one important case, the Court of Appeal upheld a trade union’s plea that the right to freedom of association may be violated by the exclusion of parks police officers from pre-redundancy consultation rights that are afforded to other workers.

The case arose from a local authority’s decision to disband its parks police service. Two officers who lost their jobs as a result lodged complaints of unfair dismissal with an Employment Tribunal (ET). Their trade union also sought a protective award in respect of the council’s alleged failure to carry out collective consultation prior to the making of more than 20 redundancies, as required by Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

Both claims were permitted to proceed to a full hearing by the ET, but that decision was subsequently reversed by the Employment Appeal Tribunal (EAT). In respect of the officers’ claims, the EAT noted that those persons in police service are precluded from bringing unfair dismissal claims by Section 200 of the Employment Rights Act 1996. The union’s claim was excluded by Section 280 of TULRCA.

The Court had no enthusiasm in rejecting the officers’ appeals on the basis that their dismissals did not engage Article 8 of the European Convention on Human Rights – which enshrines the right to privacy – whether read by itself or in conjunction with Article 14, which bans discrimination. In urging the Government to review the law on the point, the Court noted that the exclusion of parks police from unfair dismissal protection was anomalous and an apparent injustice.

In upholding the union’s appeal, however, the Court found that the right to collective consultation conferred by TULRCA fell fairly and squarely within the ambit of Article 11 of the Convention, which guarantees freedom of association and peaceful assembly. The union’s claim for a protective award was thus not excluded and its case was sent back to the ET for full consideration on its merits.

The Perils of Dismissing a Senior Employee

Terminating the employment of senior personnel can be legally complex and costly and, even when professional advice is taken, things can go wrong. The point was made by a case concerning a consultancy group that dispensed with the services of its CEO in acrimonious circumstances.

Following the termination of his employment, the CEO launched proceedings against the group on the basis that it had not honoured his entitlements under a long-term incentive plan (LTIP). After receiving advice from a law firm, the group agreed to compromise his claim by paying him £1.35 million.

The group later sued the firm on the basis that its advice had in some respects been negligent. A number of those allegations were rejected, but a judge found that the firm had breached the duty of care it owed the group in failing to identify a payment in lieu of notice (PILON) clause in the CEO’s contract.

Had the group been advised about the effect of the PILON clause in respect of the vesting of the LTIP, it would have been in a position to negotiate the settlement of the CEO’s claim for a lesser sum. In those circumstances, the group was awarded £118,125 in damages. The facts of the case emerged as both the group and the firm were refused permission to appeal against those parts of the judge’s ruling that were adverse to them.

Employment Tribunals Bend Over Backwards to Ensure Fair Hearings

Employment Tribunals (ETs) are at the forefront of the battle to eradicate discrimination in all its forms from the workplace. It is obviously vital that they practice what they preach and that is all the more reason why they are anxious to ensure that even the most vulnerable complainants receive a fair hearing.

One case in point concerned an academic who suffered from severe mental health difficulties and claimed that he had endured disability discrimination, victimisation and unfair dismissal at the hands of a university. His complaints were dismissed by an ET, but he challenged that decision before the Employment Appeal Tribunal (EAT) on the basis that he had not been afforded a fair hearing.

He submitted that the ET should have taken it upon itself to postpone or adjourn the proceedings, in which he represented himself, when the extent of his mental health difficulties became apparent. He had broken down under cross-examination and, although he had been willing to continue, the ET had acceded to the university’s request to cut short the hearing and move straight to closing submissions.

In rejecting his appeal, however, the EAT noted that he had been aware of his right to seek a postponement or adjournment of the hearing, but had not done so. The ET had made appropriate adjustments to enable him to fully participate in the case until he broke down. The decision to bring his cross-examination to a premature end had if anything disadvantaged the university. He had still been able to present his case and, viewed overall, the hearing had been a fair one.