Articles | Employment bulletin March 2015

This month we focus on changes to terms and conditions, how to investigate misconduct, delayed dismissal for gross misconduct and linking bonus payments to sickness absence.

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Louise Smyth

Louise Smyth

Imposing new terms and conditions

Can employers dismiss if employees don’t agree?

Imposing new terms and conditions

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Changing terms and conditions is often tricky for employers.  Where employees do not agree to new terms, employers may decide to impose the changes regardless by dismissing the dissenting employees and offering to re-engage them on the new terms; of course this carries a risk of employment tribunal claims.  The Employment Appeal Tribunal (EAT) has also considered whether a change to terms and conditions could be a provision, criterion or practice (PCP).  Where a PCP puts employees with a protected characteristic at a particular disadvantage, this will be indirectly discriminatory unless the PCP is objectively justified.

In the case concerned, a group of employees had transferred to their employer, HCL, under TUPE.  Due to their length of service these employees enjoyed a number of benefits (such as private health insurance and enhanced redundancy payments) that HCL’s other staff did not receive.  They also had shorter working hours and more annual leave.  HCL was making a loss and its staffing costs had reached 115% of its revenues.  It required all employees to agree to new harmonised terms or be dismissed.

During negotiation employees proposed alternative measures which were rejected by HCL.  Employees who did not sign the new terms were dismissed and some brought claims including indirect age discrimination.  HCL argued that it had not applied a PCP, but that if it had then the PCP was objectively justified.

The EAT held that HCL’s requirement that all employees accept the new terms or be dismissed was a PCP which placed older employees aged 38-64 at a particular disadvantage.  However, it was a proportionate means of achieving a legitimate aim.  The new terms were necessary to reduce staff costs to ensure HCL’s future viability and to have in place market-competitive, non-discriminatory terms and conditions.  No less discriminatory means of achieving the legitimate aim were available and the original Tribunal had properly balanced the impact of the changes on the employees against the reasonable needs of the employer.

Employers must consider carefully whether changes to terms may amount to a PCP.  If so, the changes must be objectively justified if the PCP puts a particular protected group at a disadvantage.  In this case the employer cited financial pressures as grounds for imposing new terms, but this argument is unlikely to succeed where such pressures are not severe.  Even where proposed changes to terms pursue a legitimate aim, employers must consider first whether other, less discriminatory, alternatives are available.

Investigating misconduct

How far do you have to go?

Investigating misconduct

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In order to fairly dismiss an employee for misconduct, an employer must follow a fair procedure.  A dismissal will only be fair where the employer believes that the employee is guilty of misconduct, has reasonable grounds for holding that belief, and has carried out as much investigation as is reasonable in all the circumstances.

The Court of Appeal has recently considered the case of Mr Shrestha, who was employed by Genesis Housing Association Limited (Genesis).  Mr Shrestha was a floating support worker required to travel by car to see clients at their homes.  Mr Shrestha was entitled to claim travel expenses, but an audit of his claims over a three month period showed unexpectedly high mileage.  An investigation revealed the mileage claimed was well above that recorded by Mr Shrestha for the same journeys in previous years, and almost double the suggested figures published by the AA or RAC.

Mr Shrestha insisted that the extra miles were due to road works, diversions, parking difficulties and other similar factors.  Genesis questioned Mr Shrestha on two of the journeys but did not deem it necessary to analyse each individual journey.  Genesis noted that in every case the length of the journeys exceeded the AA or RAC suggested figure.  It concluded that Mr Shrestha’s explanations were implausible and dismissed him for gross misconduct.  Mr Shrestha brought a claim for unfair dismissal.

The Court dismissed the unfair dismissal claim.  It confirmed that the amount of investigation required is a question of reasonableness, i.e. that which a reasonable employer would have carried out in the circumstances (taking into account factors such as the employer’s size and administrative resources).  The employer is not required to investigate every line of defence put forward by an employee provided that its overall approach to investigation is reasonable.

The decision clarifies that employers will be afforded some flexibility to investigate alleged misconduct in a manner that is appropriate to the circumstances.  However, a complete failure to engage with or respond to an employee’s explanations would almost certainly render a subsequent dismissal unfair.  Employers must also ensure that, once investigations are complete, an employee is invited to a disciplinary hearing before a decision to dismiss or issue any disciplinary sanction is taken.

Football club director shown the red card

Can you dismiss for gross misconduct 5 years later?

Football club director shown the red card

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Where an employee commits an act of gross misconduct an employer will normally dismiss the employee without notice.  However, where the misconduct is not discovered until some time after the event, employers must take care to ensure that they have not affirmed the contract in the meantime.

A recent High Court case concerned Mr Williams, Technical Director of Leeds United Football Club.  Following a restructuring exercise Mr Williams was informed on 23 July 2013 that he would be made redundant on three months’ notice.  Mr Williams’ oral contract with the Club actually included a 12 month notice period.

The following day, 24 July 2013, the Club discovered that Mr Williams had forwarded an email from his work address containing obscene and pornographic content to a junior female employee and two high-profile friends at other football clubs (Dennis Wise and Gus Poyet).  Following a disciplinary hearing the Club dismissed Mr Williams without notice for gross misconduct.  Mr Williams brought a claim of wrongful dismissal to recover notice pay of £200,000.

The Court held that Mr Williams’ actions were a breach of the implied term of mutual trust and confidence amounting to gross misconduct and entitling the Club to dismiss without notice.  The Court noted that Mr Williams occupied a senior position, that the email had put the Club at risk of a harassment claim from the female employee, and that it risked serious reputational damage to the Club had it been uncovered by media outlets.

The Court confirmed that neither the Club’s anticipatory breach of contract in deciding not to pay Mr Williams his full 12 months’ notice; the delay of over 5 years in discovering the gross misconduct; nor the fact that the Club had instructed forensic investigators specifically to search for evidence of gross misconduct (and thus escape paying notice pay) prevented the Club from relying on Mr Williams’ gross misconduct to dismiss him summarily.

The decision of the Court confirms that an employee dismissed on notice may subsequently be dismissed summarily if an employer later discovers gross misconduct.  However, had the Club known about the offensive email when it sent the redundancy notice the previous day, it would have affirmed the contract and lost the opportunity to dismiss summarily.  The Club was fortunate to escape criticism from the EAT for its aggressive attempts to avoid liability for notice pay.  Employers should seek advice before hiring external investigators in similar circumstances.

Employers’ bonus scheme rules

Is linking to sickness record discrimination?

Bonus payments

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A disabled employee may bring a claim for discrimination arising from disability if their employer treats them unfavourably because of something that arises in consequence of their disability and that unfavourable treatment cannot be objectively justified.

The Employment Appeal Tribunal (EAT) recently considered a case involving five disabled employees of the Land Registry.  The Land Registry operated a bonus scheme which paid £900 to eligible employees to reward good performance and attendance.  The scheme excluded employees who had received a formal warning for sickness absence in the relevant financial year.  Each of the five employees had received such a warning, due (entirely) to disability-related absences.  They brought claims for discrimination arising from disability.

The EAT held that the scheme gave rise to unfavourable treatment in consequence of disability which had not been justified by the employer.  It rejected the Land Registry’s argument that the connection between the employees’ disability and the non-payment of a bonus was too remote.  Without their disabilities the employees would not have accrued the level of absences which triggered the warnings, and the warnings were the reason for non-payment.  The fact that the member of Land Registry HR who administered the scheme was unaware of the employees’ disability was irrelevant to determining what had caused the unfavourable treatment.

The EAT noted that exclusion from the bonus scheme was automatic.  Whereas managers had discretion to disregard a warning for misconduct, no discretion was granted to disregard a warning for sickness absence.  Although the Land Registry had altered the trigger point at which its sickness absence procedure was engaged for disabled employees, the automatic exclusion from the bonus scheme meant that the improved absence records of three of the employees were not taken into account.  This was especially relevant where the legitimate aim of the scheme was, in part, to reward good attendance.

Although the Land Registry made a reasonable adjustment to its sickness absence procedure for disabled employees, it failed to satisfy the EAT that the rules of its bonus scheme were a proportionate means of achieving its legitimate aim.  Employers who wish to link bonus payments to sickness absence must also include sufficient flexibility within their schemes to permit warnings for sickness absence to be set aside where appropriate.

Collective redundancy update

A positive sign for employers

christmas party

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In March 2014 we published an article summarising the uncertainties surrounding employers’ obligations to carry out collective consultation in redundancy processes (read more).  It now appears likely that one outstanding issue may be resolved in employers’ favour.

Advocate General Wahl has delivered the preliminary opinion in the European Court of Justice (ECJ) on a key issue arising from the “Woolworths” case.  Previously, the Employment Appeal Tribunal had ruled that employers must begin collective consultation where 20 or more redundancies are proposed across an employer’s business within a 90 day period.  The AG’s opinion is that collective consultation is only required where 20 or more redundancies are proposed at a particular location.  Should the ECJ follow the AG’s opinion this will be welcome news for all large, multi-site employers.