Now that the riots have passed away, thanks in no small part to the rain and a lot of police, the inquests can start. And the legal proceedings.  Police cells in London are said to be full to brimming with rioters and Magistrates Courts sitting all night and all weekend to get through the numbers being prosecuted. The airwaves and news media are thick with demands for retribution against the participants, for benefits to be cut and for evictions from social housing. Last week the Evening Standard carried a front page alleging that a teaching assistant had been arrested for participating in the riots. More such stories will surely follow and whilst it would be wrong to speculate on what might happen to any one particular person, are the Employment Tribunals going to get very busy over the next few months dealing with dismissed employees, leaving aside the issue that many rioters may have been unemployed or, scarily, beneath working age.

Would an employer be justified in sacking someone for rioting or looting even though it was committed outside work and there was nothing to link that person to the business? Whilst the cries are being made for “justice” (of the distinctly rough and ready variety) it would be sensible for employers not to wade in with the P45s too soon.

Consider the case in 2000, of a post clerk caught on camera in a serious brawl after an Arsenal match.  He was subsequently identified in the newspapers as working for Consignia (remember that name?)  and was dismissed.  Crucially the reason for his dismissal was not for having taken part in the brawl but for having brought his employers into disrepute (through the ensuing publicity). However, it appears that he subsequently succeeded with a claim for unfair dismissal and reached a substantial settlement, helped it seems by the threat of London postmen going out on strike in support of him  Clearly an employer needs to move very carefully before dismissing in these circumstances.

Some employment contracts, especially at more senior levels or in high profile jobs, will provide that the employee will not do anything to bring the employer into disrepute, although it’s probably unlikely that many employees in well remunerated jobs were engaged in the riots.  So, in the absence of any contractual clauses how should employers approach this thorniest of difficulties?

Much will depend on the nature of the employee’s job and the type of offence for which they are convicted. Is the employer’s business likely to be impacted by the employee’s offence?  In 1994 in the case of Securicor Guarding Ltd v Rouse the Appellant company had acted unfairly in dismissing a security guard prosecuted (but not convicted?) some years previously of sexually abusing children.  Securicor were criticised for not asking their customer what they thought of having to deal with the employee.  That seems like a slightly mad decision to me as asking customers to comment on the issue would presumably only bring the issue to the fore.

In a case on similar facts – Royal Life Estates(South) Ltd t/a Fox & Sons v Campbell – in 1993 the dismissal of a branch manager in a firm of estate agents who faced allegations of gross indecency – was held to be fair because it did not want to suffer damaging publicity. The difference?  In the latter case it seems that the employee admitted his guilt, whereas in the first the allegations were vehemently denied and it was accepted that the estate agency’s reputation might be harmed

An employer might be at risk if they move too quickly before the truth of the allegations is established.  That normally could cause a problem if the criminal proceedings drag on for months, as normally they would.  However, with the criminal justice system seems to be in overdrive at the moment with people being taken before the Beak and sent down quicker than you can say “Take him down”.

In unfair dismissal cases there are two issues for the ET.  Firstly, what was the reason for dismissal and, secondly, was it reasonable for the employer to rely upon that reason in dismissing the employee?

In respect of the first issue, in misconduct cases it is for the employer to prove that the employee was dismissed for that reason.  There is a three stage test laid down by the case of British Home Stores v Burchell EAT 1980 ICR 303, which is this;

1. At the time the employee was dismissed, did the employer believe the employee had been guilty of misconduct?
2. Were there reasonable grounds for the belief?
3. Did the employer carry out as much investigation into the circumstances of the case as was reasonable in all the circumstances before dismissing the employee?

There is thus no need for the employee to be guilty of the misconduct alleged, it is instead a case of the employer carrying out a proper investigation and being able to justify why the decision to dismiss was taken. But as I mentioned above, if the facts aren’t clear and an employee is dismissed without the employer understanding the allegation and the impact that might have on their business, a claim for unfair dismissal or discrimination might result.  What is important are the facts as the employer understood them at the time of dismissal – so if later information becomes available that would help (or hinder) the employer’s case it is of no relevance to the issue of fairness. The test at (2) is an objective one.

In many of these cases, where the “misconduct” actually occurred away from the business and out of business hours, the employer might rely on “some other substantial reason” as the reason for dismissing the employee. This is a “catch all” category and allows an employer to dismiss an employee

Was it reasonable for the employer to dismiss?  That question is governed by the “range of reasonable responses test” and if the employer reasonably thought that the alleged offence justified dismissal that will probably be sufficient.  Much will depend on what the employee stands accused of, when the offences occurred, what harm it might do to the employer in being associated with the employee.

What of an employee sentenced to a term of imprisonment?  In that situation the contract of employment may be said to have been “frustrated” and thus brought to an end. That wouldn’t count as a dismissal nor a breach of contract and thus neither a wrongful nor unfair dismissal claim can arise.  However, the length of the prison sentence will need to be lengthy in comparison with the individual’s length of service.

 What is clear is that knee-jerk responses should be avoided.  There must be a thorough investigation so that the employer knows what the employee is accused of.  For instance, what if the employee was genuinely caught up in the rioting, say foolishly, watching but not participating?  They might be said to be stupid, but criminally liable? Would dismissal be a reasonable response? In a few months time my guess is that  not only will we be seeing the criminal courts clogged up with people appealing the harshness of their sentences but also Employment Tribunals bursting with unfair dismissal claims by people dismissed from their jobs because of their alleged involvement in these riots.

Related posts:

1. Unfair Dismissal: What if the Employer Can’t Pay?
2. Unfair Dismissal to be Abolished?
3. Unfair Dismissal Without 12 Months Continuous Employment Experience?

Riots, Looting and Unfair Dismissal originally appeared on Jobsworth by Michael Scutt on 20/08/2011.

Employers are more keen these days, it seems, to make employees take a pay-cut or somehow alter the employee’s contractual terms than make staff redundant. It is cheaper, less disruptive and reduces the unpleasantness that comes with redundancy processes.

However, varying an employee’s contract of employment can be fraught with risk, as was demonstrated in Garside v Laycock & Booth UKEAT/0003/11/CEA

Mr Garside refused to take a 5% paycut when his employers decided they needed to become more profitable.  He was the only employee out of 77 to refuse. He took his claim to the ET and won, but subsequently lost on appeal.

Let’s take a step back.  It’s not uncommon for employers to want to reduce wage bills or make cutbacks, especially in the current climate.  However unless the employee agrees to the variation to their terms of employment (which is what a paycut is) the employer could be in breach of contract and the employee might claim constructive dismissal if the cut is imposed on them unilaterally.

To avoid this risk the employer can terminate the employment and then re-employ on the new terms.  That is what happened here but is also risky.  This case should give employers some comfort though.

The company dismissed Mr Garside for “some other substantial reason” which is one of the potentially fair reasons for terminating a person’s employment available under s.98 ERA.  That that was the reason relied on by the employer wasn’t in issue: the question was whether the company acted reasonably in relying on that reason (s.98(4)).

The ET made a complete mess of the case and in holding that the company had acted unfairly in dismissing Mr X completely misapplied the relevant law. The ET misapplied a previous case – Catamaran Cruisers Ltd v Williams & Others that they thought was authority for the proposition that it was only reasonable for an employer to dismiss in these circumstances where the future of the company was at risk if the reductions were not made.   The EAT was unimpressed.

The correct test where an employee refuses a paycut is: is the employer acting reasonably if it subsequently dismisses him/her? The question of whether the employee should or should not have accepted the pay cut is immaterial to that decision.

What are the lessons for employers coming from this case?

 Not many is the answer.  This case was more about the Manchester ET getting itself confused than any new point of law. Having said that employers need to consult fully with staff before imposing a pay-cut in case employees do object and resign claiming constructive dismissal.  Dismissing and then offering to re-employ on the new terms can also be a powerful tool to argue an employee has failed to mitigate their loss in not taking on the job on the reduced terms. See here for a previous blog I wrote on the subject some time ago.

Related posts:

1. Employee, worker or neither?
2. Can a Partner be an Employee?

Can an Employee be Sacked for Refusing a Paycut? originally appeared on Jobsworth by Michael Scutt on 11/07/2011.

Employers: watch out. Trying to pay notice pay as an ex gratia payment could land you in trouble.

That is what happened in the case of Publicis Consultants Uk Ltd v Ms O’Farrell in a case that was heard before the Employment Appeal Tribunal last month.

The issue in dispute was the company’s description of a payment equivalent to three month’s gross salary as an “ex-gratia” payment. She was contractually entitled to three month’s notice monies but was dismissed for reason of redundancy with only four days notice.  Although she was paid the ex-gratia monies, a statutory redundancy payment and her holiday monies she sued for, amongst other claims, breach of contract.  The employer tried to say that they had effectively paid the notice monies by way of the ex-gratia.

The EAT upheld the ET’s decision that the letter from the employer setting out the payments made no mention of a notice payment and thus the company was in breach of contract.

This is quite  a harsh result on the employer.  The company were probably trying to do the employee (and themselves) a favour by paying her the notice monies on an ex-gratia basis so that she could be paid without income tax or employees’ national insurance being deducted. It would make the redundancy package look more appealing when, in reality, they were just paying her for the notice period. There was a PILON clause in her contract of employment meaning that any Payment In Lieu Of Notice would have to be paid net of tax and NICs.  HMRC presumably would have been interested in that arrangement – many employers avoid this sort of manoeuvre precisely for this reason.

Because the employee also had other claims against the company, including for unfair dismissal, the dispute went all the way to a final hearing at the ET. The actual issue in question here could have been prevented had the parties entered into a legally binding compromise agreement which would have prevented the challenge or, more fundamentally, the communication from employer to employee should have been worded much more carefully.

Thanks to Daniel Barnett and his excellent case updating service for bringing this case to my attention.

Related posts:

1. Bonus – what bonus?
2. Will SRP be increased?
3. Redundancy – know your rights!

When is an Ex-Gratia Payment a Notice Payment? originally appeared on Jobsworth by Michael Scutt on 29/06/2011.

It's the one in Iceland, I can't spell it either

Now that the drama of the election is over and the novelty of the Coalition government is fading and before the whole country shuts down for the World Cup, it’s time for a brief reminder of the event that brought Europe to a standstill, Kenyan flower growers to the brink of bankruptcy and led to people having extended holidays all over the world.  Yes: the eruption of the Eyjafjallajökull  volcano (it’s only marginally easier to spell than to pronounce), which won’t quite go away (although The  Guardian reported on 23rd May that it may now be dormant) and which caused almost as much pain to news broadcasters as to those stranded in airport departure lounges.

Although there was a marked “spirit of Dunkirk” at the time, with Royal Navy ships being dispatched to the coast of Portugal, it seems many employers didn’t quite see it the same way according to a survey commissioned by recruitment consultants Badenoch & Clark. It reported that 43% of employees caught up in the chaos had their pay docked or their annual leave entitlement reduced.  Approximately one-quarter of employers were prepared to allow staff to work remotely, whilst 32% allowed staff to take the days off as additional leave.

The press release quotes Andy Powell, a Director at Badenoch & Clark, saying

“Employers cannot be expected to give out additional paid leave because of acts of God; however, it is important for employers to set a standard policy on this, so that everyone understands the consequences of any delays returning to work.  While remote working is a good solution in some cases, for many people it will not be a viable option. As such, although ensuring you are contactable by mobile or smart phone where possible is a sensible precaution, both employers and employees need to understand that the risk of disruption should be shared.”

One day you'll look back on all this and laugh ...

I think Powell has it right.  If there’s one thing everyone knows about “Eyja” it is that the last time it erupted it did so for two years.  Now is the time for employers to develop their policies on this in case it happens again.  If an employee fails to attend work without a good excuse that will usually be treated as unauthorised absence and thus a disciplinary matter.  It would be a harsh (and probably imprudent) employer that disciplined an employee who had been stranded abroad.  Employers need to make it clear what steps they will take in this situation, whether to make employees take it as unpaid leave or to reduce annual holiday entitlement and very few employers will want (or be able to afford) to grant it as additional paid leave now that the risk is known.  What is most important is that employers have a policy and adhere to it consistently, to avoid the risk of claims arising.  An employee may try and claim for breach of contract or unlawful deduction of wages if they have their pay or holiday entitlement docked, but provided an employer can show it had a policy and adhered to it, the risk of being held liable for such a claim should be much reduced.

Badenoch & Clark have created a Facebook page called CareerTalkUK   where you can get career tips and useful information, or you can follow them @CareerTalkUK.  It’s got a nice orange logo as well.

If you require any assistance on this or any other employment law issue please do get in contact with me, either on 0207 464 8433 or at michaelscutt@dalelangley.co.uk

No related posts.

Has the Dust Settled on the Ash Cloud? originally appeared on Jobsworth by Michael Scutt on 27/05/2010.

Kevin Keegan has won his case for constructive dismissal against former employers Newcastle United, being awarded £2mn by the Premier League’s Manager’s Arbitration Tribunal.  He left the club in September 2008 after falling out with them over the purchase of a player Ignacio Gonzalez (who?) against his wishes. 

Two issues arise from the case. Firstly, although the BBC website report does not go into the technicalities of Keegan’s case I would guess that he claimed the acquisition of Gonzalez constituted a fundamental breach of the implied term of trust and confidence between employer and employee. After all, if the manager doesn’t choose the players who does (probably a good question to ask in respect of Chelsea and several other clubs from time to time come to think of it)? Secondly, Keegan claimed stigma damages – £16.5mn of them – on the basis that he would not obtain further employment in football until he retired at 65.  More on this further down.  

Constructive dismissal is a claim for breach of contract.  It isn’t necessarily a claim for unfair dismissal, but it will be wrongful dismissal.  Keegan was reportedly on a three year contract worth £3.5mn per annum and had approximately three years to run.  It would be interesting to read the full report (if available, which I’m sure it won’t be) to find out what claims he put in and why he was awarded a fairly low figure, in relation to the potential size of the claim.  The panel probably thought he could obtain alternative work elsewhere within the unexpired portion of his contract and would thus mitigate his loss.  He was reportedly seeking £25mn as compensation for his losses until retirement at 65.  It is further reported that his contract placed a ceiling of £2mn on the amount of compensation he might be awarded in the event the parties fell out.  I can only assume that he pressed on with his claim for £25mn on the basis that the repudiatory breach of contract caused all terms in the contract, including the compensation ceiling, to fall away, leaving the field open to him for a bigger claim.  

Most cases of constructive dismissal don’t involve anything like those numbers, but the legal principles are the same whether you are the manager of a football club or working in an ordinary office.  To succeed with a claim an employee will need to prove that the employer repudiated a term or terms in the contract of employment in some way and that breach was so serious that it discharged the contract.  The employee then has to accept the repudiation by resigning in response to it and this is where many claims go wrong because the employee either waits too long (and “affirms” the breach) or doesn’t make it clear that they are resigning as a response to that breach.

For most people constructive dismissal is a big step to take because it usually means leaving without any notice monies or compensation; they have to be argued or litigated over later on.

Stigma damages – is a fairly unusual type of claim and, no doubt, the Geordie hordes will be less than thrilled that their “Messiah” now feels he has been tarnished by his association with them. It is a species of claim that arose out of the BCCI litigation in the last decade when a Mr Malik, who had worked for them for several years claimed that he would find it hard to get another job within the Financial Services industry because BCCI was known to have been operating fraudulently.  The Court of Appeal allowed Mr Malik to succeed with his because it said that there was an implied term in the contract of employment that the employer would not run a corrupt or dishonest business.  Sam Wallace, a football writer in today’s The Independent gets very steamed up at Keegan’s “greedy” claim.  Leaving aside the morality of the claim, or otherwise, I fail to see how Keegan ever hoped to succeed with the claim.  

 Always take legal advice before claiming constructive dismissal.   If you need any advice on these issues please call me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk

No related posts.

Kevin Keegan beats Newcastle United originally appeared on Jobsworth by Michael Scutt on 05/10/2009.

BA has been in the news … again and, as usual, for all the wrong reasons. The company formerly claiming to be the world’s favourite airline has now asked 40,000 of its staff to not just take a pay cut but to work for nothing for a month to ensure the company’s survival.  Now there’s an enticing offer … not.

The offer to staff involves them either working without pay for up to one month, or taking unpaid leave for that time.  The deduction would then be taken out of their salary over a period of three to six months.  Willie Walsh, BA’s Chief Executive, has agreed to take zero pay for July but as his monthly salary is reportedly £61,000  he will have enough saved up not to need to worry about how to pay the milkman. I did hear on the radio (although I haven’t found it again in print anywhere) that some of the affected pilots were being offered equity in the company to make up for the shortfall, which could be a good bet, but why isn’t it being offered to all staff? 

Enough of this: what should an employee do when faced with this dilemma? Very few employees love their jobs enough to want to work for nothing.  On the other hand if accepting a temporary moratorium on pay would prevent redundancy then the issue gets more complicated. Even if true, will the salary sacrifice make much difference? Many of those affected will already be hard pressed paying their mortgages and credit card bills. Will building societies and credit card companies also agree to a reduction in payments to them? My guess is no. If I were an employee of BA my first thought would be to assess whether I believed Willie Walsh when he said that the company’s future was at stake.  On balance, BA should probably be applauded for trying to find a solution other than just slashing headcount.

The legal issue is really the same as I discussed in my earlier posts on pay cuts vs. redundancy.  An employer faces some tricky legal issues when proposing a pay reduction or, as here a complete pay cut. An employee, if not persuaded by management’s declarations of poverty, could claim constructive dismissal if the pay cut is implemented without their agreement.  Under contract law, any unilateral variation of the terms of a contract is a breach of contract.  When, as here, the term in question is fundamental to the very essence of the contract, a breach can be said to be “repudiatory”, meaning the employee can treat him/herself as being released from all obligations under the contract if he/she chooses to do so.   

An employer would be well advised to consult with employees if it wants to impose a pay cut or pay moratorium.  If more than 20 employees are involved then at least one month should be allowed for the consultation process, or three months if more than 90.  The reason for this is that if any employees don’t want to accept the proposed reduction, they could claim not only constructive unfair dismissal but also a “Protective Award” of one or three month’s pay depending on the number of employees involved. It follows from this that there is little or no difference, from an employer’s point of view, in conducting a redundancy consultation process or a pay cut consultation process. An employer that consults over a proposed pay cut will probably be able to demonstrate (to an Employment Tribunal) that it has tried to take all steps to avoid redundancies if that later becomes necessary.

The employer needs to move cautiously and carefully if it is to avoid claims by disaffected employees.  If any “sweeteners” can be given to staff (such as equity, or additional holiday) that is more likely to succeed.  If an employee refuses the pay cut/moratorium the employer could potentially dismiss that employee and state the reason for the dismissal as being “some other substantial reason”, which is one of the potentially fair reasons for terminating an employee’s employment under the Employment Rights Act, but a claim for unfair dismissal will probably follow if that employee has more than 12 months continuous employment experience.

Advice to both employers and employees: take legal advice before going down this route.  If anyone out there reading this works for BA please do get in touch and let me know your views and decision.

Related posts:

1. Latest News
2. Constructive Dismissal: Good news for Employers?
3. More on Redundancy v Pay Cuts

BA is in the news again … originally appeared on Jobsworth by Michael Scutt on 24/06/2009.

I posted on this subject a while ago and it has received such a lot of visits I thought I better give my public more of what they want. It also gives me an opportunity to provide an update on the poll I set up below on this issue. At the moment 57% of respondents would elect a pay cut and 31% would take redundancy.  The remaining 11% didn’t know.   Whether those results will change after this post wil be interesting to see.

In my previous post on the 27th February I wrote that the risk to an employer in reducing or attempting to reduce salary was that it might constitute a breach of contract and could lead to litigation if the employee didn’t agree  to the cut.  A claim for breach of contract and/or unlawful deduction from wages  and/or constructive unfair dismissal could be the result.  Only employees with more than one year’s service can claim unfair dismissal, but any employee can claim for breach of contract or for unlawful deduction of wages, which is what an unagreed reduction in pay would be.  The crucial issue, therefore,  is to get the agreement of the employees concerned and, if this is obtained, many of the problems fall away. How does an employer go about this?

By consultation is the answer. An employer needs to approach the matter with sensitivity and it needs to set out to the employees concerned the reason for the proposal and to show that it has considered other options to a pay cut.  Employees need to be given time to consider the proposals  (within a defined timetable) and to put forward any suggestions they have, which should then be given due consideration. In all probability, other options to a  pay cut will include redundancy and the employer will need to set out the business and financial reasons for suggesting the pay cut.  Other options though might include laying off employees, reducing hours and reducing benefits.  A pay cut is likely to be more palatable for employees if it is stated to be a temporary reduction, e.g.  for six months pending further review by employer and employee.

In all these circumstances the employer will be aided hugely if the employment contracts it provides to its staff contain a clause that allows the employer to make amendments to the terms of the contract (most don’t it has to be said).  In the absence of such  a clause an employee who is not minded to accept the reduction in pay, or alteration to their hours, will be strengthened in any claim for breach of contract.  That risk does not disappear even if there is such a clause because the employer must act reasonably when seeking to amend the contract, but it does give the employer scope for manoeuvre.  In other words, if the employer consults properly and frankly with affected employees  and can demonstrate the necessity for making  pay cuts, it should reduce the risk of being successfully sued for breach of contract by a disgruntled employee.  

An employer may be required to consult collectively with any recognised unions at the workplace or to get employees to elect representatives to consult on their behalf.   I covered this point in my previous post.

Assuming that agreement is reached with employees, the employer should then  get the affected employees to sign a letter confirming their agreement to the reduction in pay.  The letter should set out the company’s reasons for imposing the pay cut (ie to avoid redundancy), refer to the meeting(s) with the employee during the consultation process and ask them to sign and return a copy to signify their acceptance.   This isn’t guaranteed to prevent claims against the employer but it should help to minimise the risk of successful claims being made.  In the current economic climate, the majority of employees will probably accept a pay cut rather than take the risk of being out of work altogether.  

By the way, I mentioned “lay-offs”  above.  If an employer wants to “lay off” staff it should proceed with care  and take legal advice before doing anything; there are many pitfalls and can lead to claims for breach of contract and constructive dismissal. A lay off is where an employee is, effectively, suspended from work without pay. I will write about lay-offs in a future post.

Related posts:

1. Redundancy or Pay Cut?
2. Redundancy – know your rights!
3. BA is in the news again …

More on Redundancy v Pay Cuts originally appeared on Jobsworth by Michael Scutt on 17/04/2009.

Not an enviable choice to be faced with, but one that an increasing number of people seem to be having to make, or have foisted upon them, in industry.  It is a practice that doesn’t seem to have caught on here in the City where swingeing headcount cuts still rule supreme when an employer wants to cut costs.  I’ve written many times in this blog before about the redundancy process and selection criteria and the claims that can arise when employers get it wrong.  However, what must an employer do if they decide that a pay reduction is preferable to a cull? 

It’s not an easy option because any variation in an employee’s pay, if imposed unilaterally by the employer, is a breach of contract and the employee would be entitled to sue for breach of contract and/or unlawful deduction from wages.   Consequently the employer will need to obtain the consent of affected staff before proceeding and, particularly in unionized workplaces, this is unlikely to be given readily. 

Some employers take the step of terminating all employment contracts and then re-employing the same staff on reduced terms.  This is highly risky because it can give rise to claims for redundancy, unfair dismissal and breach of contract if not handled properly.  An employer would need to consult with affected staff and persuade them that the only alternative to pay cuts was job losses, in order to obtain consent. How long the consultation period would have to be would depend upon how many  employees were involved and a prudent employer would want to observe the provisions of the Trades Union and Labour Relations (Consolidation) Act 1992, which provides for fixed periods of 30 or 90 days’ consultation where more than 20 or 100 staff are involved. 

For smaller employers the process of obtaining consent is going to be viewed as just as onerous as undertaking a redundancy exercise and that might make the whole process unviable.  Having said this, the new Employment Act 2008, which comes into force in April, repeals the current statutory dismissal procedure that applies on redundancies as to all other dismissals, and that may persuade more employers to go down the route of pay cuts.  I’ll be covering  more issues arising from the new legislation in future posts.

If you need advice on any issues arising here please feel free to call me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk.

What would you do if faced with this choice?  Please answer the poll below.

Take Our Poll 

A slightly different version of this post will appear in the “Docklands” and “Peninsula”newspapers week commencing 2nd March.

Related posts:

1. More on Redundancy v Pay Cuts
2. Consultation on Redundancy
3. Redundancy – know your rights!

Redundancy or Pay Cut? originally appeared on Jobsworth by Michael Scutt on 27/02/2009.