Friday, September 14, 2012

Employment Law Reforms - A Solution in Search of a Problem?

The Department for Business Innovation and Skills has published, to much fanfare in the press and media, a consultation on changes to the law around the ending of the employment relationship.

When one actually gets down to reading the consultation however there is very little in it (if anything) which is really new or which is likely to make much difference in practice.

The Government's approach appears to be based upon a belief that employers are worried about taking staff on because of concern about their ability to terminate the employment if things do not work out. Other than anecdotal evidence there seems to be little basis for this belief and the end of the relationship is rather unlikely to be at the forefront of an employer's mind when recruiting (funding presumably being the major hindrance to expansion.)

Furthermore the suggestion appears to be that change is needed if this is employers' perception, whether or not it is based in fact. Away from the realms of urban myth, the law of Unfair Dismissal is actually quite favourable to employers and gives them a considerable degree of latitude in how they act. The qualifying period for a Claim is now 2 years in most cases and one would have thought that this would give an employer ample time to decide whether someone is up to the task before they acquire the right not to be dismissed without good reason.

The consultation confirms the Government's existing plan to make conversations about settlement inadmissible as evidence in Unfair Dismissal cases in certain circumstances. Bearing in mind that if there is already some underlying dispute between the employer and the employee such conversations would already be inadmissible in evidence under ordinary principles about "without prejudice" discussions it is unclear how this will take us any further forward. And it won't apply to, for example, discrimination claims anyway - so unless the employer is confident the only possible allegation would be of Unfair Dismissal they will not feel any more comfortable having this kind of conversation than they do now.

As an employment lawyer in practice I do not recognise a world where employers are reluctant to speak to employees "without prejudice."

It is proposed to simply compromise agreements although the requirement will still be for independent legal advice and although a template agreement and letters are suggested these are not going to be compulsory and as they will still have to be tailored to the individual cases it is unclear how this will be any different from the practice now.

The idea is to call them "Settlement Agreements" rather than "Compromise Agreements" on the basis that the use of the word "compromise" may be putting people off from using them because they do not want to be seen to be giving in! This seems highly unlikely and indeed in practice until the day when they take one to their Solicitor most employees have no idea what a "Compromise Agreement" actually is.  

Opinions are sought on whether to set out guideline tarrifs although cases are so variable it is hard to see this working and the fear that this will lead to the figures being used as a starting point from which to haggle upwards does seem to have some mileage to it.

The final consultation is on reducing the cap to the Compensatory Award from its current level of £72,300.00 , possibly to 12 months' salary. Since very few people get anywhere near either the cap or 12 months' salary this all seems rather academic and it is a power which could be exercised under the existing legislation anyway. The suggestion is that employers would be less worried about Tribunal claims if the cap were lower and that employees would be more realistic if there was a lower cap. Given that there is no cap on discrimination and whistleblowing claims, all a lower cap would be likely to achieve would be to lead to more of those claims, which are more difficult and costly for employers. There is also potential for injustice to high earners or to those whose careers are ended by their unfair dismissal. In no other area of law is an arbitrary cap applied to damages and it is unclear why it is necessary in unfair dismissal either.  

Monday, September 10, 2012

You Can't Say That In Court! - Without Prejudice Negotiations

The Employment Appeal Tribunal has handed down a Judgment reversing an Employment Tribunal's decision to reduce a Claimant's compensation on the basis that he might have entered into a Compromise Agreement.

Mr Gallop worked as a Training Officer for Newport City Council. He was dismissed and brought a Claim for Unfair Dismissal and Disability Discrimination.

The Tribunal found that he had been unfairly dismissed.

During the course of the hearing on liability there had been some mention by one of the Council's witnesses of the fact that they had been approached by Mr Gallop's Union representative about a possible settlement agreement.

At the subsequent hearing to decide remedy one of the lay members of the Employment Tribunal had picked up on this and had asked Mr Gallop about it. The Claimant had confirmed that he had been happy with the figure offered but his legal adviser had not been.

The Tribunal went on to decide that there was a 50% chance that if he had not been dismissed he would have entered into a Compromise Agreement on the terms mentioned. They therefore reduced his loss of earnings, pension loss and notice pay awards by 50% and awarded him 50% of the proposed lump sum instead.

Mr Gallop appealed as this significantly reduced the amount he received in compensation.

The EAT was very critical of the Tribunal for receiving the evidence about the proposed compromise terms. These were without prejudice discussions and without an unambiguous decision by both parties to waive the confidentiality in them they quite simply should not have been mentioned before the Tribunal at all. The Employment Judge had not informed Mr Gallop (who was not at that stage legally represented) that he would potentially be waiving privelige if he discussed the offer and he should have cut off the lay member's line of questioning as soon as it began.

As such the 50% reduction in the loss of earnings, pension loss and notice pay awards was reduced. The 50% award of a lump sum for the loss of chance of entering into the Compromise Agreement therefore fell by the wayside.

That wasn't all. The Respondent had cross appealed saying that the figures in effect including the notice pay twice. The EAT agreed. The Claimant's losses had been calculated from the date of his dismissal, rather than the end of his notice period, and so by awarding him his notice on top he was getting those 11 weeks' pay twice. The necessary reduction was made.

Overall the Claimant's award nearly doubled from about £33,000 to about £60,000.

Without prejudice discussions are an essential part of litigation. They enable parties to try and negotiate settlement without fear of the contents being held against them if the talks break down. As there had never been a binding settlement here (if there had been then the contents of the dicussions would have been admissible but in order to have been binding there would have needed to have been a written Compromise Agreement) the details of the negotiations were irrelevant.   

It is somewhat ironic that here it was in the Respondent's interests for the negotiations to be referred to in evidence given that the Government has expressed concern about employers' alleged inability or reluctance to speak freely to underperforming employees because of the fear of claims and the subsequent proposal to introduce legislation which purports to prevent this from happening (although whether this is necessary or will be effective is a matter for another day!)

Tuesday, September 04, 2012

Constructive Dismissal - the Reason Why

The Employment Appeal Tribunal (EAT) has handed down a Judgment which confirms that in a constructive dismissal case the employer's fundamental breach of contract does not have to be the "principal reason" for the dismissal.

To succeed with a claim for constructive dismissal an employee has to show that their employer is in "fundamental breach" of the contract of employment. This means that an important term of the contract, either written or unwritten, has been broken and/or the contract has been broken in a serious way.

Mrs Logan worked for a vets. She raised a grievance alleging bullying and also that there was a failure to pay her sick pay in accordance with the terms of her contract. She subsequently resigned and brought a claim for constructive unfair dismissal.

The Employment Tribunal  found that there was no bullying and that this was not therefore a fundamental breach. However the employer had not paid her the correct sick pay and this was a fundamental breach.

They went on to find that the "principal reason" for her resignation was the alleged bullying rather than the sick pay issue and as they had found the bullying had not happened they dismissed the claim.

Mrs Logan appealed to the EAT. They agreed with her that the Tribunal had applied the wrong test. There was clear authority for the proposition that if the breach had some causal connection with the decision to resign it did not need to be the only or principal reason. In this case they were satisfied on the basis of the findings by the Employment Tribunal that the sick pay issue had been one of the contributing factors to Mrs Logan's decision to resign. As such she had been constructively dismissed and it had been conceded that if she had been dismissed it was unfair. The case was referred back to the Employment Tribunal for a decision on remedy, where the employer will still be entitled to argue that the Claimant would have resigned anyway even if there had not been a sick pay issue and that her damages should be reduced accordingly.

Employers often argue before Tribunals that the fact that someone has resigned because they have got another job means that they cannot claim constructive dismissal. As this case illustrates, that is an incorrect statement of the law. As long as the employer's breach was part of the reason for the decision to resign, the mere fact that there is another job lined up does not disqualify the claim.