This month’s news highlights cover a variety of issues including consultations in redundancy, settlement agreements reaching too far, a substantial compensation award against Royal Mail, facts versus intentions in relation to employment status and a look at what’s next for Mercer v Alternative Future Group when the Supreme Court is asked to look at the legislative gap in protection for striking workers.
- Redundancy: Consultation not meaningful if it takes place after decision to apply selection criterion that inevitably leads to a pool of one
- Settlement Agreements: Unknown future claims cannot be settled in advance
- Whistleblowing: Tribunal awards compensation for career loss, psychiatric injury and substantial injury to feelings against Royal Mail
- Employment Status: The parties’ intentions do not determine employment status
- Unions: Supreme Court to hear bid to protect striking workers
Redundancy: Consultation not meaningful if it takes place after decision to apply selection criterion that inevitably leads to a pool of one
In Mogane v Bradford Teaching Hospitals NHS Foundation Trust and Another  EAT 139, the EAT allowed the appellant’s appeal against the decision of the employment tribunal in relation to a claim of unfair dismissal by reason of redundancy. The EAT held, among other things, that the tribunal had overlooked aspects of the issue of consultation in its deliberations, conflating consultation on alternative employment with the broader consultation required in a redundancy situation. Consultation was a fundamental aspect of a fair procedure. That aspect applied equally, with appropriate adaptation, to redundancy situations where there was no collective representation.
In order that consultation was ‘genuine and meaningful’ a fair procedure required that consultation took place at a stage when an employee or employee representative could still, potentially, influence the outcome. In circumstances where the choice of criteria adopted to select for redundancy had the practical result that the selection was made by that decision itself, consultation had to take place prior to that decision being made. It was not within the band of reasonable responses, in the absence of consultation, to adopt one criterion which simultaneously decided the pool of employees and which employee was to be dismissed.
The implied term of trust and confidence required that employers would not act arbitrarily towards employees in the methods of selection for redundancy. While a pool of one could be fair in appropriate circumstances, it should not be considered, without prior consultation, where there was more than one employee.
Settlement Agreements: Unknown future claims cannot be settled in advance
In Bathgate v Technip UK Ltd  EAT 155, Scottish EAT has held that s.147 of the Equality Act 2010 does not allow a qualifying settlement agreement to settle future claims unknown to the parties at the time of entering into the agreement. The judge considered that the existing case law was not to contrary effect. While the decision concerns the interpretation of s.147(3)(b) of the Equality Act 2010, it applies to settlement agreements made under other statutes where there is a corresponding provision (for example, s.203(3)(b) of the Employment Rights Act 1996 (ERA 1996)).
S.147(3)(b) requires the agreement to identify “the particular complaint“. This is not satisfied by a long list of claims defined by reference to their legal character or section number. Parliamentary intention was that settlement should only be available in the context of an agreement which settles a particular complaint that has already arisen between the parties, and the purpose of the statutory provision is to protect employees when agreeing to relinquish the right to bring proceedings. The statutory words suggest that Parliament anticipated the existence of an actual complaint or circumstances where the grounds for a complaint existed, and the precision of those words is not apt to describe a potential future complaint.
The EAT also considered the territorial scope of the Equality Act 2010 as it applies to seafarers. It held that an employee does not cease to be a seafarer, within the meaning of s.81 of the Equality Act 2010, by working onshore for the last six months of employment, having worked for nearly 20 years on ships. S.108 of the Equality Act 2010, which deals with post-employment claims, is dependent on the employee’s rights during employment. Where an employee is excluded from the territorial scope of the Equality Act 2010 by s.81 during employment, they are also excluded post-employment.
Whistleblowing: Tribunal awards compensation for career loss, psychiatric injury and substantial injury to feelings against Royal Mail
Following a remedies hearing, an employment tribunal has awarded substantial compensation for unfair dismissal and detriment in Jhuti v Royal Mail Group ET/2200982/2015 (3 October 2022), a whistleblowing case that had previously been subject to an appeal in the Supreme Court.
The tribunal found that the claimant had suffered a “lengthy and intense period of bullying” over five months prior to taking sick leave and being dismissed. This treatment had “destroyed the claimant’s life“, leaving her with PTSD and recurrent episodes of severe depression, and leading to the breakdown of her relationship with her teenage daughter. The medical evidence was that she would never work again due to the combined effects of her illness and the stigma of six years’ unemployment since her dismissal.
As well as financial compensation for total career loss to age 67, the tribunal awarded £55,000 general damages for psychiatric injury, £40,000 for injury to feelings and £12,500 aggravated damages to reflect the respondent’s oppressive conduct at the remedies hearing. It also made a 0.5% uplift for unreasonable failure to comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures.
Employment Status: The parties’ intentions do not determine employment status
In Richards v Waterfield Homes Ltd and another  EAT 148, an employment tribunal erred in finding that, in a working relationship which had numerous indicators of employment status and only one in favour of self-employment, that the latter should be determinative of the issue. Self-employment (implicit in the use of the CIS scheme (a construction workers tax scheme) to pay the claimant, “under which registrants know they will be treated as self-employed”) was only one of the factors to be considered.
Looking at the findings as a whole, and consistent with case law, the only proper conclusion open to the employment tribunal was that the claimant was indeed an employee. The case was remitted to the employment tribunal for a remedy hearing on that basis.
Unions: Supreme Court to hear bid to protect striking workers
The Supreme Court will hear arguments from UNISON, the UK’s largest union, that a recent Court of Appeal decision unfairly allows employers to punish striking workers, as historic numbers take industrial action. UNISON will support Fiona Mercer, a former trade union representative, in her appeal at the Supreme Court against Business Secretary, Grant Shapps. His predecessor, Kwasi Kwarteng, had intervened in March 2022 to reverse Mercer’s win against her employer, Alternative Futures Group (AFG), a health and social care charity.
The EAT in Mercer v Alternative Future Group  IRLR 620, ruled that AFG had violated the European Convention on Human Rights when it suspended Mercer in a dispute over plans to cut allowances for sleep-in staff. But the government successfully argued to the Court of Appeal, in Mercer v Alternative Future Group Ltd and another (Secretary of State for Business, Energy and Industrial Strategy intervening)  EWCA Civ 379, that keystone labour legislation (the Trade Union and Labour Relations Consolidation Act 1992) does not protect striking workers from detrimental treatment.
Workers cannot be fired for taking part in industrial action, but that protection expires after 12 weeks—and there is a ‘legislative gap’ in what other protection is available to employees taking industrial action, the Court of Appeal said. That gap means ‘unscrupulous employers’ can make life difficult for workers who exercise their right to strike, UNISON said as it revealed that it had won permission to appeal to the Supreme Court. No date has been set for the hearing, although UNISON said it expects it in the second half of 2023.
The union is expected to argue that the UK is obliged by international labour law and precedents from the European Court of Human Rights to protect workers from detriment short of dismissal. The government is likely to counter that those standards exceed what is required under domestic legislation.
UNISON’s general secretary, Christina McAnea, said the appeal is “a chance to fix a glaring legal loophole“. “Employees only strike as a last resort and shouldn’t face punishment for protesting about their employer’s behaviour“, McAnea continued. “Hundreds of thousands of workers are thinking about industrial action as they struggle to cope with low pay in the face of soaring prices. Everyone must be able to exercise their rights without fearing they’ll be treated unfairly for standing up for themselves at work“.
If you would like any additional information, please contact Anne-Marie Pavitt or Sophie Banks on: firstname.lastname@example.org
The upcoming changes to the “off-payroll” rules will bring the obligations regarding IR35 determinations in medium and large sized private sector organisations in line with those already in place in the public sector.
This means that, from 6 April 2021, if an organisation operates in the private sector and engages workers (or contractors) who provide their services through their own limited company (or another type of intermediary) it may be required to determine the workers’ status for tax purposes if the organisation meets two or more of the following conditions:
- It has an annual turnover of more than £10.2 million;
- It has a balance sheet total of more than £5.1 million; and/or
- It has more than 50 employees
The rules also apply if the organisation has an annual turnover of more than £10.2 million and are not a company, LLP, an unregistered company or an overseas company (“simplified test”) and there are specific rules that cover connected and associated companies. Small-sized private sector clients will not have to decide the employment status of their workers but must be able to confirm their size if asked (plus a company is always considered “small” in its first year of trading).
If an organisation falls under the heading of a medium or large private sector client, it will need to:
- determine whether IR35 applies to each and every engagement they enter into with a worker;
- take “reasonable care” when making a determination about the employment status of a worker;
- communicate the decision to the worker or, if appropriate, to the agency that it contracts with to provide the worker, using a Status Determination Statement (SDS);
- keep a record of determinations and the reasons for them, as well as records of any representations made by the worker; and
- deduct tax and national insurance from any fees payable to the worker through their intermediary if the determination is that IR35 applies.
There are many different factors that an organisation must consider when determining if the IR35 rules should apply. HMRC have provided a list of factors it considers to be the most important in determining an individual’s employment status which is a must read if you are the one making that determination. Factors such as personal service, mutuality of obligation and the right of control come high up the list of things to consider when agreeing the written terms of an assignment. However, it is equally as important that the terms reflect what happens on a day to day basis, as HMRC will consider the hypothetical contract as well as any written terms when considering if an organisation has made the correct determination.
HMRC also give guidance on what they mean by taking “reasonable care” when making a determination and unsurprisingly, the larger the employer, the larger the expectation is that a thorough and detailed analysis will be undertaken, Click here to see the guidance.
Organisations and individuals can also use HMRC’s online tool to check employment status for tax. Despite much criticism of the accuracy of a CEST determination, it is the only tool that will produce a result that HMRC will stand by, if the information input is accurate and the tool is used in accordance with guidance. CEST is therefore a very helpful tool provided of course it gives you the answer you were hoping for!
The recommendation therefore is for all private sector organisations to determine (as soon as possible) whether they are classed as a medium or large organisation, and consequently whether the obligation to make determinations regarding their workers’ tax status will kick in when the new rules come in on 6 April 2021. A review of all agreements in place with personal service companies, agencies and other intermediaries currently engaged should also be undertaken, and written terms should be put in place where they do not exist.
As with most legislative changes, early preparation is key to making the transition less disruptive for businesses and workers alike, and reduces the risk of non-compliance and the associated penalties.
Do not hesitate get in touch with a member of our team if we can assist you with this preparation or have any queries about these upcoming changes.