News & Insights

Employment bulletin July 2013

You may wish to hold off sending that termination letter just yet… Redundancy and discrimination feature strongly this month but we also have time for a TUPE case.

Unfair dismissal compensation cap

We mentioned in our February bulletin that the Government planned to change the cap on unfair dismissal compensation this summer to the lower of £74,200 or 52 weeks’ pay.  The Government has now said that this change is due to come in this month although they haven’t provided a specific date yet.  It will not apply to dismissals which took effect beforehand.

Any employer currently thinking of dismissing an employee (with enough service to bring an unfair dismissal claim) who is earning less than £74,200 pa may wish to think carefully about holding off issuing a dismissal letter for a few weeks.

Redundancy pools – all in this together?

Usually an employer considering redundancies will pool the employees doing the same or a similar job together, apply selection criteria relevant to the remaining roles and dismiss the lowest scoring individual(s) in the pool.

The Employment Appeal Tribunal (EAT) has recently considered a rather different approach taken by one company which pooled together all of its 10 management and administrative staff (spanning accounts, sales, production and stock control, quality control and warehouse management).  The company applied generic criteria to all employees, intending to dismiss the lowest scoring 4 individuals and retraining the remainder, if necessary.  The EAT pointed out that the logic of this process meant that, in theory, the company’s warehouse manager could have ended up in the accounts department.

While this is undoubtedly an unusual approach to pooling, the EAT held it to be valid.  The two part test of whether a dismissal was for reason of redundancy was satisfied, ie:

  • there had been a reduction in the need for employees to carry out work of a particular kind; and


  • the dismissals were attributable to that reduced need.

Scenarios such as this lead to what’s known as “bumping” dismissals ie the dismissed employee’s role still needs to be performed but a colleague whose role is no longer needed has been moved into the dismissed employee’s role.  This is still a redundancy.

Discriminatory selection criteria

Staying with redundancy we turn to a case relating to selection criteria.

Performance is a commonly used selection criteria which appears quite fair.  However, employers have to be careful to ensure that this is not applied in a discriminatory fashion.  The European Court of Justice (ECJ) has recently considered a case of a woman who was included in a redundancy pool while she was on parental leave. There is no prohibition against making someone on parental leave redundant, but you have to apply the same selection criteria to those who are not on leave.  In the case, other employees in the pool were assessed on the basis of their performance in their most recent appraisal.  The employee in question was also assessed on the basis of her last appraisal but that dated back 3 years and in the meantime the appraisal assessment process had changed which resulted in her receiving a lower grade in the redundancy selection process.

This was found to be indirect sex discrimination as considerably more women than men take parental leave and applying different criteria which puts those who have taken parental leave at a disadvantage therefore adversely affects more women than men.  The employer was not able to justify this difference in treatment.  Different workers can be assessed over different periods but employers must use identical criteria which do not require the physical presence of an employee in the office.

How do you deal with an employee who keeps bringing claims against you?

Not by dismissing him if they are discrimination claims.  That sounds an obvious answer but the facts of a recent case may lead you to sympathise with the employer.  The employee raised 10 grievances of race discrimination, the latter 8 of which were considered to be “empty allegations” without any basis for his suspicions.  He appealed each time his grievances were not upheld and considered any finding against him to be further race discrimination.  He also submitted 8 tribunal claims.  The employer dismissed the employee on the basis that he had lost confidence in the employer (an unusual use of breakdown of trust and confidence which is usually the other way around).

The Equality Act protects employees from victimisation ie when an employer subjects the employee to a detriment because the employee does a protected act.  Raising grievances and submitting tribunal claims in good faith for any form of unlawful discrimination are protected acts.  Whether the employer would have treated another employee who also raised numerous, unfounded grievances unrelated to discrimination is irrelevant.  The EAT did not accept that the reason for dismissal was a breakdown in trust and confidence and concluded it was because of his numerous grievances and an anticipation that several more were likely to follow – therefore the employer victimised the employee.

100% time on one contract – definitely TUPE, isn’t it?

A recent case concerned an outsourcing arrangement.  Ceva transported goods and materials to North Sea oil drilling or well platforms for several customers.  One of Ceva’s employees (“M”) spent all of his time looking after one customer while other employees spent different proportions of their time looking after this particular customer as well as other customers. The customer decided to end the outsourcing contract and do the work themselves.  Ceva claimed this was a service provision change under TUPE and that M’s employment should transfer to the customer.  The customer refused and M was dismissed.

In a service provision change situation, TUPE requires that before the change there must have been “an organised grouping of employees” which had as “its principal purpose carrying out activities for a client”.  TUPE specifically says that for this purpose one employee can be an “organised grouping of employees”.

The key point is that “an organised grouping of employees” requires some element of organisation on behalf of the employer eg into a team.  The other employees who looked after this customer also worked on other customers’ accounts and so were not organised in a team for this particular customer.  Had M been the only employee working on this account he would have been the “organised grouping of employees” on his own and so transferred under TUPE to the customer but he wasn’t and there was no team so he didn’t transfer.

“Off the record” – really?

We also trailed the changes to compromise agreements in our February bulletin. These are expected to come into force over the summer and in anticipation ACAS has published a revised version of its new Code of Practice on Settlement Agreements. Read more Annex A.

As a reminder, the purpose of these changes is to allow employers and employees to discuss ending the employment relationship before a dispute arises between them but with the security that the conversation cannot be relied on in a subsequent unfair dismissal claim.

BUT (and these are rather significant buts) the confidentiality protection will not apply to:

  • claims of automatically unfair dismissal (such as whistle-blowing or asserting a statutory right);
  • discrimination claims;
  • breach of contract/wrongful dismissal claims; nor
  • situations involving “improper behaviour” eg assault, harassment, bullying, discrimination or undue pressure.


There is also a procedure to follow although that has been simplified somewhat from the initial draft.

While most employers will welcome the aim behind these changes, the limitations on the protection offered will, most likely, lead to more whistle-blowing and discrimination claims as well as satellite litigation around what is “improper behaviour”.