EMPLOYMENT LAW
ADVISERS
www.klng.com
Spring 2006
Noticeboard
Number of Employment Tribunal
cases falls since the introduction
of the statutory dispute resolution
procedures in October 2004
Although the number of Tribunal
claims has, according to recent figures,
reduced by 25% in the last 12 months,
employers are still finding themselves
in the Tribunal. The CBI in its report
"Restoring Faith in Employment
Tribunals" has voiced employers'
concerns that, although the Tribunal
system is supposed to provide cheap
and effective resolution of workplace
disputes, many employers are still
having to settle cases that they have a
strong chance of winning because of
the cost of going to Tribunals. They
believe Tribunals are falling short.
revealed that, of those employers
interviewed:
100% of claims were settled by
employers with less than 50 staff
despite the advice that 46% were
likely to be won;
26% of all employers felt obliged to
settle claims with no merit;
50% of employers have seen a rise in
weak and vexatious claims over the
past 12 months; and
Findings from the CBI/ Pertemps
Employment Trends Survey 2005
45% consider the Tribunal system to
be ineffective at dealing with claims.
Dismissals in the 11th hour
Can an employee with less than 1 year's service claim
Unfair Dismissal?
Employers can generally dismiss
employees with less than 1 year's service
without risk of being taken to the
Tribunal for Unfair Dismissal. It is only
those employees dismissed for an
automatically unfair reason such as
pregnancy or health and safety (where
no qualifying service applies) who can
bring Unfair Dismissal claims.
However, as the cases over the page
show, this has not stopped employees
from trying to bring claims.
Welcome to the Spring Edition.
In this Edition, we focus on dismissal.
Dismissal continues to be a live issue
for employers, despite the
introduction of the statutory dispute
resolution procedures in October
2004, which the Government
promised would resolve disputes in
the workplace, and despite the
alleged drop in Tribunal cases.
We provide a round-up of recent cases
on constructive dismissal and
redundancy. We report on the first
cases on the statutory procedures and
some interesting cases on Unfair
Dismissal. Can an employer dismiss
an employee because of his or
personality? Can an employee with
less than 1 year's service bring a claim
for Unfair Dismissal?
Contents
Tribunal cases fall...
1
Dismissals in the 11th hour
1
Eavesdropping
3
Constructive Dismissal Round-up
4
Impact of the statutory
grievance procedures
5
Collective redundancy update
7
Compromise agreements a clean break
8
Who to contact
8
Noticeboard
Dismissal without notice
In the Court of Appeal case Virgin Net v
Harper (2003), Ms Harper was dismissed
without her contractual notice before she
had acquired 1 year's service. She tried
to get around the 1 year requirement by
bringing a claim for breach of contract for
damages for "loss of the chance" to claim
Unfair Dismissal. She claimed that had
she been given her contractual notice
she would have had her year's service
and would have been able to claim
Unfair Dismissal.
The Court rejected her claim. It held
that the 1 year qualifying period had
been set by Parliament and it was not
intended that employees could
circumvent this by bringing claims for
breach of contract.
Employees dismissed without notice
in their first year of employment
cannot claim compensation for Unfair
Dismissal on the basis that, if their
notice were added to their service,
they would qualify for Unfair
Dismissal rights.
Failure to follow a
contractual disciplinary
procedure
More recently, in The Wise Group -vMitchell (2005), Mitchell (“M”) was
dismissed by The Wise Group (“TWG”)
without notice in breach of contract just
short of 1 year's service. She tried to get
around the 1 year threshold by bringing a
claim for breach of contract arguing that,
had TWG gone through the contractual
disciplinary procedure before dismissing
her, she would have had 1 year's service
and could have brought an Unfair
Dismissal claim. The Tribunal,
following an earlier EAT case on similar
facts, Raspin -v- United News Shops
Limited (1999), awarded damages to M
for the loss of the chance to bring a claim
for Unfair Dismissal.
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SPRING 2006
TWG appealed. The EAT, following
the Court of Appeal in Virgin Net v
Harper, upheld the appeal. M did not
have the qualifying service to bring a
statutory claim for Unfair Dismissal. She
could not then bring a claim for breach
of contract to get round this. M was,
however, entitled to damages for the
time it would have taken for the
disciplinary process to have been
completed.
dismissed just short of a
year's service in breach of a
contractual disciplinary procedure
cannot claim damages for loss of a
chance to claim Unfair Dismissal.
Dismissal at 51 Weeks
Employers should never leave it until
the last minute to dismiss. Under the
Employment Rights Act 1996,
employees are entitled to add on their 1
week's statutory notice (for the purpose
of calculating their length of service for
unfair dismissal purposes) even if they
are dismissed with a payment in lieu of
their contractual notice, unless they are
dismissed without notice for gross
misconduct.
Employees
To
avoid a breach of contract claim
employers should complete
contractual disciplinary procedures in
good time.
Employees dismissed at 51 weeks can
claim Unfair Dismissal!
www.klng.com
EAVESDROPPING Personality Dismissal
Jackie Cuneen takes a call from a HR
Manager.
HR: We have a middle manager. He has
been with us for about 3 years. He is
a really disruptive influence. He is
aggressive and rude to colleagues. He
has strong technical skills, but we feel
the company would be a more
harmonious place to work without
him. Can we dismiss him without
ending up in the Tribunal?
JC: As you know, employees with 1
year's service or more are protected
from Unfair Dismissal. Therefore you
must have a fair reason for dismissal
and must follow a fair procedure. The
5 potentially fair reasons are
capability, conduct, breach of a
statutory requirement, redundancy or
"some other substantial reason".
Where an employee's personality is
the issue it is not easy to determine
whether it falls into the capability or
conduct category. If it is capability
due, for example, to inexperience
then counselling or training should be
offered before the disciplinary
procedure is initiated. If it is conduct
due, for example, to the
intransigence of the employee, then
appropriate warnings should be
issued under the disciplinary
procedure.
there may be a third way forward.
A key aspect of this case was whether
an individual's disruptive personality
was an issue of conduct or capability.
Mr Perkin ("P") was the director of
finance at an NHS Trust. The Tribunal
acknowledged that "no criticism
whatever could be made or was
made of P's technical competence or
his integrity". However, "the
difficulties that gave rise to the
matters which led to his dismissal
were his personality, inter-relation
with colleagues and management
style".
The Court of Appeal ruled that a
dismissal as a result of an employee's
difficult personality was a potentially
fair dismissal for "some other
substantial reason", not conduct or
capability. P did not help his case as
during the Tribunal process he hurled
personal abuse at the Chairman of
the NHS Trust and other employee
witnesses, thus demonstrating to the
Court an irretrievable breakdown in
the working relationship. The
breakdown represented the required
"substantial reason" allowing his
employer to dismiss him without
previous warning.
HR: Thanks, that's very helpful. To be
honest we've got a couple of other
employees whose personalities don’t
really gel with their teams. Perhaps
we can use this precedent in their
cases!
JC: Tempting no doubt, but I would be
extremely careful. What the Court of
Appeal is saying is that where the
personality of a senior manager
triggers a serious breakdown of trust
and confidence, an employer can
justifiably dismiss the manager
without applying normal conduct or
capability procedures. They are not
giving employers a licence to dismiss
an under-performing manager, who
is simply difficult to work with,
without warning him. As such, the
Perkins decision needs to be treated
with caution.
HR: All I know is the effect this is having
on our business. What do we do?
JC: Well, following the decision in
Perkin v St Georges Healthcare Trust
[2005] a recent Court of Appeal case,
SPRING 2006
3
Noticeboard
Constructive dismissal round-up
The Tribunals and Courts have
recently considered a number of cases
relating to constructive dismissal.
Constructive dismissal can be
something of a minefield and decisions
such as Owens, over the page, show
just how hard it can be for employees
and employers alike to assess whether a
situation could actually lead to a
successful constructive dismissal claim.
confidence by its proposed changes to
L's contract. However, the
Employment Appeal Tribunal ("EAT")
overturned this decision. K had merely
given L lawful notice to terminate his
contract of employment. Therefore,
there had been no fundamental breach
of contract committed by K. L had in
effect "jumped too soon".
In Practice:
Back to basics
There are 3 basic elements to
constructive dismissal:
A fundamental breach of an express
or implied term of the employment
contract by the employer;
The employee must resign ( with or
without notice) in response to the
breach; and
The resignation must be without
delay.
Changing working hours
In Kerry Foods v Lynch (2005), Lynch
("L") was employed by Kerry Foods
("K") as a manager. K wanted to bring
L's contract into line with other
managers and sought to increase L's
days of work from 5 to 6 per week and
decrease his holiday entitlement from
25 to 19 days per year. L opposed the
changes. K wrote to L notifying him
that, if he did not accept the changes,
his employment would be terminated
and he would be re-engaged on a new
contract. Before K could carry out this
threat L resigned and brought a claim
for constructive dismissal.
The Tribunal found that L had been
constructively dismissed. K had
breached the implied term of trust and
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If an employee does not agree to a
change in his contract and there is no
contractual right to impose the
change, the employer will have to
give notice terminating the old
contract and issue a new contract to
commence on the expiry of the old
contract. The risk is, however, that
the employer is exposed to claims for
Unfair Dismissal. For example, if L
had waited for the termination of the
old contract, he could have brought a
claim for unfair dismissal rather than
constructive dismissal.
Employers have a defence to a claim
for Unfair Dismissal if they can show
that the dismissal was for "some
other substantial reason" i.e. there
was a substantive reason for
imposing the change and a fair
procedure was followed before
terminating the contract, i.e.
consultation had taken place.
Changing the job
The EAT considered constructive
dismissal again in Land Securities
Trillium Ltd v Thornley (2005).
Thornley ("T") was employed as an
architect by the BBC in 1990. Her
contract of employment included a
flexibility clause which stated that "you
will perform… all the duties of this
post and any other post you may
subsequently hold…".
In 2002, T's employment was
transferred to Land Securities Trillium
("LST"). LST proposed to restructure
T's department. T raised concerns
about the restructuring and in
particular the fact that, if she was made
senior architect, she would be
performing a managing role rather than
undertaking architectural work herself.
T argued that, by virtue of the changes
to her job, her role was redundant. LST
responded that the changes to her job
description were not sufficient to
amount to redundancy. T resigned and
claimed constructive dismissal.
The Tribunal upheld T's claim, finding
that the imposition of a new job title
fundamentally breached the terms of
T's contract and required T to "cease
doing her principal job and take up a
new one". The flexibility clause in T's
contract did not entitle LST to change
T's role entirely so that the effect
would be to de-skill her. The EAT
upheld this decision. The flexibility
clause did not give the employer carte
blanche to require T to undertake any
duties they wished her to perform.
In Practice:
Employers should make sure that
the employee's job description is
carefully defined to provide
sufficient flexibility.
Flexible duties clauses in contracts
are useful if employers want to
impose minor changes to the job or
want the employee to take on related
duties. However employers should
not rely on these clauses to impose
significant changes to an employee's
job.
www.klng.com
Resignation in response
to breach
In Owens v Wealden District Council
(2005), another EAT case, Owens ("O")
resigned from her employment with
Wealden District Council ("W") citing
the intolerable behaviour she had
experienced from colleagues and the
doubt that had been cast on her
professional integrity by her employer.
When invited to withdraw her notice
by W, O refused to do so but said she
was prepared to extend her notice
period by 2 weeks.
O subsequently claimed constructive
dismissal. W resisted the claim and
reasoned that O had affirmed her
contract of employment by extending
her notice period and O could not claim
that W's treatment of her was a
fundamental breach if she was
prepared to continue working for W.
she was instead affirming her earlier
acceptance of W's alleged breach of
contract.
The Tribunal agreed. O was not
constructively dismissed. The serving
of a 2 month notice period and a further
2 week extension was a considerable
delay and, therefore, not a response to a
fundamental breach of contract.
In Practice:
The EAT disagreed and held that the
giving of notice did not preclude O
from demonstrating constructive
dismissal. O had given notice promptly
upon W's alleged breach of contract.
Furthermore the 2 week extension had
been mutually agreed and O had made
it clear that she would not withdraw her
notice. Far from affirming the contract,
Employees normally resign without
notice when claiming constructive
dismissal, but employers should not
assume that, just because an
employee resigns on notice, this will
defeat any future claim for
constructive dismissal.
However, serving a lengthy notice
period may be fatal to the
employee's claim depending upon
the type of alleged breach. Each
case will depend upon its facts.
Impact of the statutory grievance procedures
Since 1 October 2004, it has been
compulsory for employers to put in
place the statutory dismissal and
disciplinary and grievance procedures
set out in the Employment Act ("EA")
2002. We look at the first cases on this
and how the procedures apply in the
context of constructive dismissals.
Firstly, a reminder of the basics:
Grievance
A grievance is a "complaint by an
employee about action which his
employer has taken or is contemplating
taking in relation to him". For
example, a complaint that the employer
has breached the employment contract.
provided then an additional sum of 2 to
4 weeks' pay (currently capped at £290)
can be awarded to the employee in any
subsequent Tribunal claim.
parties have agreed in writing to use
the MGP which is as follows:
Step 1: statement of grievance
Step 2: written response
Statutory grievance
procedures
Compensation uplift
The EA sets out 2 statutory grievance
procedures (GPs).
The Standard Grievance
Procedure (SGP)
If the employee is still in employment
then the SGP should apply:
Step 1: statement of grievance
Step 2: meeting
Step 3: right of appeal
If the employee or the employer fail
to comply with the procedures, then
the Tribunal can either increase or
decrease any compensation awarded
by 10-50%. In a constructive
dismissal claim, this only applies to
the compensatory award (which is
currently capped at £58,400) and not
the basic award. There is no uplift
above the cap.
Time limits
Statement of terms and
conditions of
employment
Details of the procedures should be
provided in the statement of terms and
conditions of employment within 2
months of the commencement of
employment. If this information is not
Modified Grievance
Procedure (MGP)
Alternatively, the MGP generally
applies where the employee has ceased
to be employed and at the time of
dismissal, the grievance had either not
been raised or had been raised but the
SGP had not been completed and the
An employee normally has 3 months
from dismissal to bring a claim for
constructive dismissal.
An employee cannot generally bring
a claim for constructive dismissal
unless he has sent a written
statement of grievance to the
SPRING 2006
5
Noticeboard
employer and has waited 28 days.
The grievance must be sent within 3
months of dismissal. When the
grievance is sent to the employer this
will automatically result in the
extension of the 3 month time limit
to bring a claim in the Tribunal by a
further 3 months.
Where the employee has (wrongly)
submitted a claim to the Tribunal
within the normal 3 month limit
without sending the statement of
grievance or has sent a written
grievance but has waited fewer than
28 days before submitting the claim,
the employee will have a second bite
at the cherry as there will usually be
time to send the employer a written
statement of grievance and/or wait
28 days before resubmitting the
claim.
Recent cases
In Tudor v Lowbirch Ltd (25 July
2005), an employee resigned by letter,
citing lack of trust by the employer as
the reason. Several weeks later she
wrote to the employer threatening
constructive dismissal. The letter
stated that her position had become
untenable because of her employer's
treatment. The letter did not state that
it was a grievance. The employer wrote
to ask if she was raising a grievance, but
the employee did not respond. The
employer then invited her to a
meeting, which she did not attend.
The Tribunal held that the letter
threatening constructive dismissal
qualified as a written statement of
grievance and that her claim could
therefore proceed. There was no need
for the letter to pre-date her
resignation. There was no need for her
to use the word "grievance". However,
her failure to attend the meeting is
6
SPRING 2006
likely to have an impact in respect of
compensation if her claim succeeds.
In Cooke v Secure Move Property
Services Ltd (3 May 2005), an
employee resigned in the midst of
disciplinary proceedings which he
thought were "biased", because he
thought he was to be dismissed. He
brought a claim for constructive
dismissal.
The Tribunal held that he did not
need to raise a grievance under the
statutory grievance procedure because
the claim related to contemplated
dismissal or disciplinary action and,
therefore, fell outside the scope of the
grievance procedures. In the
alternative, a letter the employee had
written to his employer alleging bias in
the conduct of a disciplinary procedure
would have constituted a statement of
grievance. There was no requirement
that Mr Cooke should have specifically
used the word "grievance" or referred to
the grievance procedure.
In Aspland v Mark Warner Ltd (2005),
the Tribunal held that a solicitor's
letter before action did amount to the
raising of a grievance for the purposes
of the statutory grievance procedures
and so the claim should be admitted. A
grievance sent by the employee's
solicitor to the employer or its solicitor
would be sufficient. The fact that the
letter did not expressly refer to
invoking the internal grievance
procedure did not mean that it could
not amount to a statement of grievance.
The case has been appealed to the
EAT.
In practice
Employees must raise a grievance
before running off to the Tribunal to
claim constructive dismissal.
Employers, therefore, have a chance
to resolve complaints outside the
Tribunal.
If employees fail to initiate or
complete the grievance procedures
within the proper time frame they
may be barred from bringing a
constructive dismissal claim or any
compensation awarded to them can
be reduced.
Employers must have the procedures
in place and communicate these to
employees.
The bad news for employers is that
they need to be aware that any
correspondence from the employee
could constitute a grievance even
though the correspondence does not
specify this.The test appears to be
easily satisfied.
www.klng.com
Collective redundancy update
There have been a string of recent
cases concerning collective
redundancies and (unfortunately for
employers) substantial protective
awards are being granted to employees
to punish their employers for breaching
collective redundancy requirements.
Employers undertaking collective
redundancies must comply with these
requirements if they want to avoid such
awards.
The Basics
An employer proposing to make 20 or
more employees redundant within a
90 day period has to comply with the
obligations contained in section 188
(1) of the Trade Union and Labour
Relations (Consolidation) Act 1992
(the "Act").
The employer must consult with
Trade Union representatives (if
there is a Trade Union) or employee
representatives elected under the
Act and supply certain information
prescribed in the Act to them.
The minimum consultation period
before an employee can be made
redundant is 90 days if 100 or more
employees are to be made redundant
or 30 days where there are between
20 and 99 employees.
Protective Awards
Employees may bring a claim to a
Tribunal where the employer has failed
to comply with the Act. The award is a
maximum of 90 days' uncapped pay per
employee.
In Susie Radin Ltd v GMB (2005), the
EAT upheld the Tribunal's decision to
award 90 days' pay to each affected
employee for failure by the employer to
carry out genuine consultation. The
EAT confirmed that the award is to
provide a sanction for an employer's
breach of its obligations. There does
not have to be actual financial loss
suffered by an employee.
In Smith v Cherry Lewis (2005), the
Tribunal made no protective award
against an employer despite its failure
to comply with the Act. The Tribunal
decided that a protective award would
be an ineffective sanction because the
employer was insolvent. The EAT
overturned the Tribunal and reminded
it that it must focus on the seriousness
of the default not the employer's ability
to pay.
The EAT in Amicus v GBS Tooling
(2005) confirmed that Tribunals should
consider the seriousness of the
employer's breach of the Act when
deciding what protective award to
make but should also consider any
mitigating circumstances. GBS had
kept the trade union informed of the
redundancies before it became
insolvent and so a reduction from the
maximum 90 days was justified.
In Cranwick Country Food plc v GMB
(2005), the Tribunal found that
Cranwick had carried out "minimal"
consultation with regard to mitigating
the consequences of the dismissal.
They had provided outplacement
assistance and financial advice. The
Tribunal awarded 70 days'
compensation to each employee
because Cranwick did involve the
Union in some discussions regarding
mitigation of the consequences of the
dismissals. The 70 day award was not
reduced further because the Tribunal
considered that Cranwick had "totally
avoided its duty to consult with the
representatives of the employees with
regard to ways of avoiding dismissals
and reducing their number".
SPRING 2006
7
Noticeboard
Travellers’ Checks
Compromise agreements - a "clean break"?
Many employers will be familiar with
compromise agreements. Essentially, a
compromise agreement is a legally
binding agreement between the
employer and the employee whereby
the employee agrees to waive claims he
or she may have arising out of the
employment relationship and/or its
termination, often in return for
payment. A compromise agreement
must be in writing and must comply
with certain statutory requirements set
out under section 203 of the
Employment Rights Act 1996 (ERA).
The benefit for an employer is that it
stops the employee bringing the
specified claims before the
Employment Tribunal.
However, the recent Court of Appeal
decisions in University of East London
v Hinton (2005) and Hilton UK Hotels
v McNaughton (2005) have called into
question whether an employer can be
assured of a clean break.
In Hinton, an employee could bring a
claim for whistle blowing despite
entering into a compromise agreement
because it did not specifically list a
claim under s. 47B (the relevant whistle
blowing provisions) of the ERA. In
McNaughton, an employee could bring
a claim under the Equal Pay Act 1970,
despite entering into a compromise
agreement, as she only discovered the
existence of this right subsequently
when she "read an article in a
newspaper". The compromise
agreement was limited to claims which
the employee "believes he or she has at
that date".
In practice
"One made earlier" will not do. Now
more than ever employers need to take
care and seek legal advice in the
drafting of compromise agreements.
Employers should:
carefully consider (with their
advisors) what claims could arise out
of the particular circumstances and
tailor the agreement to these claims;
include a warranty from the
employee confirming that the claims
listed are the only claims that he or
she has and he or she has received
legal advice on this;
include a requirement by the
employee to pay back the settlement
payment if they institute claims or
defer part or all of the payment for 3
months when the limitation period
for bringing most employment
claims will have expired.
Guidance
The Courts gave the following guidance
on the drafting of compromise
agreements:
A "blanket agreement " simply
signing away all an employee's
Tribunal rights will not be effective.
The particular or potential claims
covered by the agreement must be
identified, either by generic
description or by reference to the
section of the statute giving rise to
the claim. For example, for an Unfair
Dismissal claim, it would not suffice
to simply refer to a claim arising
under the ERA as this could cover
any number of different claims.
Despite these cases, if drafted
correctly, a compromise agreement can
eliminate the scope for many claims to
be brought, thereby avoiding the time
and expense of a Tribunal claim.
Who to Contact
Kirkpatrick & Lockhart
For further information please contact:
Nicholson Graham LLP
Paul Callegari
pcallegari@klng.com
Lisa Goodyear
T: +44 (0)20 7360 8194
lgoodyear@klng.com
110 Cannon Street
T: +44 (0)20 7360 8256
London EC4N 6AR
www.klng.com
Jackie Cuneen
jcuneen@klng.com
T: +44 (0)20 7360 8184
Tom Solesbury
tsolesbury@klng.com
T: +44 (0)20 7648 9000
T: +44 (0)20 7360 8175
F: +44 (0)20 7648 9001
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