Employment Law Update: March 2016
Mar 14, 2016
Employment Law Update: March 2016
Mar 14, 2016


Brexit and Employment Law

We now know that the UK will decide whether or not to remain in the European Union on 23 June this year. Employers trying to get to grips with just how to calculate holiday pay under the Working Time Regulations (see yet another case on this issue below) may see this as an opportunity to throw out a range of unwelcome and complex legislation.

But even if we vote for Brexit, the situation is unlikely to be that straightforward. Much would depend on the post-membership relationship with the EU negotiated by the UK Government. If we joined the European Economic Area alongside Norway then that would involve continuing to abide by the vast bulk of the EU law dealing with employment and equality. Even if we negotiated our own access to the Single Market (like Switzerland), any deal is likely to come with employment law strings attached.

If the UK went entirely its own way, then that would certainly give a UK Government the option of repealing or amending laws relating to working time, business transfers, redundancy consultation, agency workers, equality and health and safety. However, this is unlikely to happen all at once. In truth it would take several years for a Government to address each area of the law and decide which rules should stay and which can be dispensed with.

In the meantime, we would still have to wrestle with the decisions of the European Court of Justice. Our courts would have to decide how each set of Regulations should be interpreted given that they were originally passed to comply with EU Directives – even though those directives are no longer applicable to the UK. There is every possibility that our law on the calculation of holiday pay, for example, would suddenly become more complicated, not less. Whichever way we vote, EU employment law will be with us for some time to come.

Calculating Holiday Pay – Commission

Few employment law topics have caused as much convoluted case law as the proper way to calculate holiday pay under the Working Time Regulations. The latest issue that the Employment Appeal Tribunal (EAT) has had to struggle with is the extent to which holiday pay must include an element representing the commission that the employee could have earned if he or she had not gone on holiday. In British Gas Trading Ltd v Lock the European Court of Justice (ECJ) has already ruled that the Directive requires that commission must be included in the calculation. The task now is to decide whether the Working Time Regulations can be interpreted in such a way as to allow for that.

Mr Lock was employed in a sales role by British Gas and the majority of his remuneration consisted of commission payments on completed sales – paid in arrears. British Gas accepted that when he took annual leave the result would be that he would lose out on future commission payments.

He claimed that he should receive a sum representing such payments as part of his holiday pay and, following the ECJ ruling, the tribunal upheld his claim. The employer appealed to the EAT arguing that the clear words of the Regulations excluded commission from the calculation of a normal week’s pay and that it was not possible to interpret the UK Regulations in a way that complied with the ECJ’s ruling on the meaning of the EU Directive.

The EAT dismissed the appeal, noting that an earlier EAT case  – Bear Scotland and others v Fulton – had decided that the Regulations could be interpreted to include overtime in the calculation of holiday pay even though that appeared to go directly against their literal meaning. The EAT was not prepared to depart from the reasoning in Bear Scotland, which was indistinguishable from Mr Lock’s case on this point.

The case is now on its way to the Court of Appeal, which will have to consider the extent to which UK courts can ignore the express provisions of UK Regulations when seeking to give effect to ECJ rulings. As a result, not only will the issue of commission be at stake, but also the question of whether Bear Scotland was rightly decided and whether overtime should also be included in the calculation of holiday pay.

Termination by Mutual Agreement

When is a dismissal not a dismissal? That was the key issue in Khan v HGS Global Ltd. The employee in that case worked in a call centre in Chiswick but the contract on which he worked became the subject of a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. The new employer was based in High Wycombe – some distance away – and a number of employees were concerned about their increased journey times.

Following consultation, the new employer offered employees with a journey time of more than 1 ¼ hours a choice of three options. They could transfer under TUPE to the new employment in High Wycombe; they could apply for redeployment with their current employer – or they could opt to be made redundant. Mr Khan who did not want to face the extra journey time, chose redundancy. He was given a statutory redundancy payment plus a payment in lieu of notice and his holiday pay.

He claimed unfair dismissal but the tribunal held that he had not been dismissed at all. The EAT agreed. It was generally accepted that where there was a genuine redundancy exercise taking place then an employee who volunteered for redundancy was simply volunteering to be one of the employees selected for dismissal.  In this case, however, there was no redundancy situation at all. The employer did not want to dismiss anyone but was merely offering the option of redundancy for those who did not wish to work in the new location. No pressure was put on employees to take that option. Mr Khan had simply agreed with his employer that his contract should end. That was a termination by mutual consent – not a dismissal.


One situation in which an employee does not need two years’ service to challenge a dismissal is a whistleblowing case – where the employee has been dismissed for making a protected disclosure. Just what amounts to a protected disclosure is a complicated question – but broadly the employee must disclose information which tends to show that the employer – or any other person – has acted in breach of some legal obligation or sought to conceal wrongdoing.

In Wharton v Leeds City Council the employee was taken on as an assistant curator in the employer’s museum service and was dismissed later the same year having failed his probation. He claimed, however, that that was not the real reason for his dismissal. He said that his dismissal was prompted by a number of disclosures that he had made about the way in which the museum service was being run.  He alleged that the service was targeting its work in order to meet financial targets and that that was at odds with its strategic plan. This was significant because it amounted, he said, to a failure to comply with the funding agreement that the Council had with the Arts Council of England.

The tribunal found that this information did not tend to show that there had been legal wrongdoing. An allegation about an employer’s failure to run a project effectively or in accordance with best practice was not sufficient to attract whistleblowing protection. Furthermore, the employee had no reasonable grounds for thinking that the running of the project was in breach of funding requirements because he had never had sight of the agreement between the employer and the Arts Council.

On Appeal, the EAT held that the tribunal had failed to take account of the employee’s argument that he could deduce the funding requirements from his experience of similar arrangements with other organisations and from the contents of the strategic plan, his job description and the employer’s bid for funding. The tribunal had also failed to deal with evidence that he had indeed alleged that the employer had attempted to conceal its alleged non-compliance. The matter was remitted to the tribunal to decide whether, in the light of the EAT’s ruling, the employee had made protected disclosures. It is worth noting that even if he succeeds on this point he will then have to show that it was his disclosure of these matters – as opposed to poor performance – which led to his dismissal.

Gross Misconduct – Exaggerating an Injury

An employer dealing with an employee who has been injured at work may have concerns that the extent of any injury is being exaggerated – either to take advantage of sick pay arrangements – or in preparation for a future personal injury claim.

In Metroline West Ltd v Ajaj, the employee was a bus driver who slipped on some water on the floor of the depot toilets and was subsequently signed off sick. He told the Occupational Health (OH) doctor that his activities were very limited and that he could only walk for very short distances and could not go shopping for anything but very light goods such as a loaf or bread or a newspaper. The employer was concerned that he had either fabricated the incident or was at least exaggerating his injuries.

The employer arranged for his movements to be monitored by covert surveillance. The result of that was that he was observed walking for extended periods with no obvious discomfort and emerging from a shop carrying two shopping bags. An OH representative later confirmed that his activities shown on the surveillance tapes were inconsistent with what he had claimed to be the extent of his injuries when being interviewed by the OH doctor.

He was dismissed for gross misconduct but the tribunal found that the dismissal was unfair. The tribunal noted that the reason the employee gave for remaining off sick was that he was unable to sit for extended periods of time – as would have been necessary to drive a bus. The tribunal accepted that the employee had deliberately exaggerated the extent of his injuries but held that he was truthful about the fact that he was not fit to return to work.

The EAT found that the tribunal had asked the wrong question. The issue was not whether or not the employee was fit to work but whether he had been dishonest in describing his condition to Occupational Health. Since the tribunal had found that he had indeed been deliberately exaggerating, the question was simply whether it was within the range of reasonable responses to dismiss him for that reason. Clearly it was. Furthermore, the employer was entitled to dismiss him without notice because his dishonesty about the extent of his injuries was serious enough to amount to gross misconduct.

Trust and Confidence

Both employer and employee have a duty not to act in such a way as to undermine the trust and confidence at the heart of the employment relationship. When the employer breaches this duty then the employee can resign and claim a constructive dismissal. When the employee is the one to blame – as the EAT finds in the case of House of Fraser v Christofidouthen the result may be a summary dismissal. 

The employee in that case was employed in the House of Fraser’s Oxford Street store. The loss of stock through theft was a major concern – some £640,000 of stock was lost in 2013 alone – and the employer closely monitored sales on eBay to see if it correlated with lost stock. This monitoring led the employer to notice that an eBay account registered to the employee’s home address had been selling a large number of items that matched stock that had been lost from the store.

When challenged, the employee said that the account was operated by her ex-husband. He no longer lived at the address and the employee claimed to know nothing of his business venture. The employer wanted to talk to her ex-husband but while the employee offered to pass on the employer’s contact details to him, she refused to give the employer his details herself. She was also evasive and inconsistent in her answers about her dealings with her ex-husband in a way that the employer found to be highly suspicious. She was dismissed for gross misconduct.

The tribunal found that the reason for dismissal was not theft of the employer’s stock – the employer accepted that they did not have enough evidence to reach a conclusion on that point. Rather, the employer had dismissed her because her response to the investigation had led to a loss of trust and confidence.

The tribunal found that the dismissal was unfair, however, because the employer had not taken sufficient steps to contact her ex-husband. The tribunal also accepted the employee’s explanation that the eBay account was in reality nothing to do with her and upheld her claim for breach of contract (wrongful dismissal) on the basis that she was not guilty of gross misconduct.

On appeal, the EAT held that it was perverse of the tribunal to find the dismissal unfair purely on the basis that the employer had failed to contact the employee’s ex-husband. This failed to take into account the fact that the employee had refused to cooperate with the employer’s attempts to do just that. On the wrongful dismissal claim, the EAT pointed out that the employee had been evasive and inconsistent in her response to the investigation. This conduct amounted to a breach of her obligation to maintain trust and confidence. The employer was therefore entitled to dismiss her without notice.

Lay Off and Redundancy

Contracts of employment may give the employer a right ‘lay-off’ an employee if there is no work for him or her to do. A lay-off usually involves sending the employee home without pay and so an express provision allowing for this in the contract is generally essential. In Craig v Bob Lindfield & Son Ltd the issue was whether an employee could be laid off indefinitely or whether there was some implied limit to the employer’s contractual right.

The employee had been employed as a computer-aided designer for some 10 years when he was laid off along with other employees due to a lack of orders. After 5 weeks he wrote to his employer stating that he had now found other work and purporting to claim a redundancy payment under provisions contained in the Employment Rights Act 1996. These set out a procedure for an employee to claim a redundancy payment when laid off by an employer for at least 4 weeks. The procedure allows the employer to give a counter-notice if it believes that normal work is likely to resume within a further four weeks and the employer did indeed serve that counter-notice.

Despite this, the employee resigned and claimed constructive dismissal before the procedure had been completed. His claim therefore depended not on the statutory procedure, but on the interpretation of his contract of employment and whether or not the employer had acted in breach of it.

His claim was rejected by the tribunal and this ruling was upheld by the EAT. It was stressed that this was not a case where the employer was seeking to manipulate the right to lay-off for its own economic benefit. There was no doubt that this was a genuine case in which there was insufficient work available. The lay off was therefore authorised by the contract of employment. In those circumstances, said the EAT, there was no implied term of the contract to the effect that the lay-off could only continue for a ‘reasonable’ period of time. Parliament had chosen to set the appropriate balance between the conflicting interests of employer and employee in the statutory procedure for claiming a redundancy. It would be wrong to allow employees to bypass the requirements of the statutory provisions by claiming a constructive dismissal instead of following the procedure laid down by Parliament. In any event, the EAT found that the period of lay-off in this case was not unreasonable.

…And Finally

Many employers feel that they could perhaps manage absence somewhat more effectively. They can nevertheless take comfort from the example being set by the Spanish Civil Service. Mr Garcia was due to be given a commemorative plaque for 20 years’ service with the public utilities provider in Cadiz – but when they tried to find him to make the award, it turned out that no-one had seen him in his office for at least six years. It appeared that he had gone home because ‘there was nothing to do’ and stayed there – while continuing to collect his salary.

If the Spanish authorities were slow to notice that they had an absence problem, they weren’t too quick about dealing with it either. A legal claim against Mr Garcia began in 2010 but only concluded this year with him being fined. He wasn’t sacked from his post because by the time the legal case was concluded, he had already retired. We can only wish him well as he takes his well-earned rest.

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