December 2011
Authors:
Noel Deans
noel.deans@klgates.com
+44.(0)20.7360.8187
Paul Callegari
paul.callegari@klgates.com
+44.(0)20.7360.8194
Daniel J. Wise
daniel.wise@klgates.com
+44.(0)20.7360.8271
Employment Law Reforms
Business Secretary Vince Cable has announced the Government's proposals for what
has been billed as the biggest reform of employment law for decades. The proposals
mark a shift in Government policy towards employment law and how it will be
shaped under the coalition Government. Some of the changes detailed below are due
in soon, whilst others are still under consultation, but will no doubt be welcomed by
employers.
The proposals announced so far include:
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
A 2 year qualifying period for unfair dismissal claims (April 2012);

Increasing the amount Tribunals will be able to order a party to pay as a deposit
from £500 to £1,000 (April 2012);

Judges will be able to sit alone in unfair dismissal cases (April 2012);

A reduction of the period for redundancy consultation from 90 days to either 60,
45 or 30 days (still under consultation);

An exclusion of complaints relating to breach of contract from whistleblowing
legislation (no date provided yet);

A simplification of the requirements for compromise agreements (presently
under consultation);

More opportunity for simple, straightforward cases to be settled within the first 3
months of dismissal (2012);

Greater ability for employers to hold frank conversations with employees in
relation to issues such as poor performance without fear of them being used later
as evidence in Tribunal claims ("protected conversations"). Consultation on this
proposal is expected to take place in early 2012;

Flexible parental leave which may see the introduction of an 18 week period of
maternity leave followed by a 34 week period of shared parental leave; and

The extension of the right to request flexible working to all employees with 26
weeks' continuous service and a requirement that such requests be "reasonably"
considered by employers
"Use It or Lose It" says Employment Appeal Tribunal President
There has been a run of cases in recent years dealing with sickness absence/holiday
rights, which have left many employers unsure of the state of the law in this area and
workers' rights to holiday pay while on sick leave.
Fraser v St George's Mental Health Trust is the latest case to be heard on this
complex issue, adopting a "use it or lose it" approach and is good news for
employers.
On Notice
Mrs Fraser, who had been on sick leave
continuously since November 2005, was dismissed
in October 2008 without returning to work. Mrs
Fraser was paid in lieu of her final year's statutory
holiday entitlement, in accordance with the Working
Time Regulations, but was not paid for untaken
statutory holiday for previous years in which she had
been on sick leave.
The question that the Employment Appeal Tribunal
("EAT") was asked to consider was, can an
employee claim holiday pay under the Working
Time Regulations where they have not given notice
that they would like to take holiday? The answer
from the EAT was no.
The President of the EAT upheld the original
decision by the Tribunal, stating that workers were
only entitled to be paid for annual holiday where
they had either notified their employer that they
wished to take it or requested that their leave
entitlement is deferred until they return to work.
Where workers do not use their holiday or request
that it is deferred, they will lose it.
This case provides greater clarity to employers on
workers' entitlements to holiday whilst on sick leave
and confirms that employees on long term sickness
absence will not be entitled to costly back-dated
payments for unused holiday where they have not
requested that it be carried forward.
Although this case has been referred to the Court of
Appeal, we hope that this sensible approach will be
upheld.
Can a mistaken dismissal be
retracted?
The Court of Appeal has held that where a clear and
unambiguous written notice of dismissal is given, an
employer cannot retract the dismissal even if it was a
result of a misunderstanding.
In the case of CF Capital v Willoughby the
employer informed Mrs Willoughby that the
company was considering requesting that employees
become self-employed to avoid redundancies. Mrs
Willoughby expressed an interest in the proposal but
stated that she would need further details before she
could make a decision.
The employer wrote to Mrs Willoughby on 22
December 2008 confirming that her employment
would terminate with effect from the 31 December
2008 and that she would move to self-employed
status on 1 January 2009. Upon receipt of the letter
Mrs Willoughby telephoned her employer stating
that she would not accept the agency agreement that
had been offered but did accept that she had been
dismissed by the company.
Mrs Willoughby's manager sought to rectify the
situation following the telephone call, highlighting
that there had clearly been a misunderstanding and
that if Mrs Willoughby did not wish to be selfemployed, she could continue as an employee with
the company. Despite this, Mrs Willoughby
rejected the offer and subsequently brought a claim
for unfair and wrongful dismissal. The employer,
however, argued that Mrs Willoughby had not been
dismissed but had instead resigned.
The Tribunal held in the first instance that whilst the
employer's letter was a dismissal, there were
"special circumstances" namely a genuine
misunderstanding between the parties as to what
had been agreed during the consultation meeting
and had promptly attempted to withdraw the
dismissal once they became aware of the error. The
Tribunal held that Mrs Willoughby should have
realised that the dismissal letter had been sent by
mistake and had therefore resigned by refusing to
return to work.
Mrs Willoughby appealed the decision to the EAT
and argued that the "special circumstances" rule
only applied where words were spoken in the heat
of the moment. The EAT agreed with this
argument, overturning the Tribunal's decision,
holding that the dismissal by the employer was
effective.
The Court of Appeal upheld the EAT's decision and
found that, as the dismissal letter was clear and
unambiguous, it did not fall within the "special
circumstances" exemption. The Court of Appeal
stated that the special circumstances rule almost
invariably arose only where dismissal was given
orally in the heat of the moment and then quickly
retracted.
December 2011
2
On Notice
This obvious misunderstanding between the parties
could have been avoided had the employer written to
Mrs Willoughby setting out the proposed agreement
before issuing a notice of termination. Employers
should take care to ensure that any termination
letters are accurately drafted as this case makes it
very difficult for employers to subsequently reverse
any such decision.
When is a self-employed contractor
really an employee?
The EAT has considered the question of whether an
individual who misrepresents his employment status
to HMRC and pays tax on a self employed basis, is
then deprived of his employment rights on the
grounds that he entered into an illegal contract
knowingly.
Mr Connolly joined Whitestone's solicitors as an
assistant solicitor in 2006. Although Mr Connolly
was offered permanent employment, he suggested
that he carry out his role on a self-employed basis so
that he could be paid without deducting tax and
National Insurance contributions. Mr Connolly
subsequently submitted a tax return to HMRC on
this basis. Despite claiming to be self-employed, on
his employment terminating, Mr Connolly then
brought claims for unfair dismissal, breach of
contract and holiday pay against Whitestones in
2009.
In brief
In Garratt v Mirror Group Newspapers Limited the
Court of Appeal were willing to imply a term into
the employee's contract of employment through
custom and practice which resulted in Mr Garratt
only being entitled to an enhanced redundancy
payment if he signed a compromise agreement. Mr
Garratt had claimed entitlement to this redundancy
sum without the need to sign a compromise
agreement as there was nothing in the company
documentation which stated that this was a
requirement. Whilst this was so, the Court of
Appeal were willing to imply such a requirement
through custom and practice and Mr Garratt's claim
was unsuccessful.
In Jackson v Liverpool City Council the Court
found that the employer was not negligent where it
provided a reference which included details of an
unproven allegation relating to an employee's
performance. In a subsequent telephone call by the
employer it was confirmed that the allegation within
the reference had not been investigated. This
clarification allowed the reference overall to be
deemed fair.
On appeal the EAT stated that in order to decide
whether Mr Connolly's contract was void on
grounds of illegality, some form of intentional
misrepresentation, whether express or implied, was
required. Where an individual knows he is not
entitled to claim self-employed status but does so in
any event, he implicitly misrepresents his position.
The question the Tribunal should consider in such a
case is whether Mr Connolly knew he was not
entitled to claim that he was self-employed to
HMRC. The case has therefore been sent back to
the Tribunal for a fresh hearing on the issue.
This is an important decision for employers, limiting
the ability of individuals who wish to work on a selfemployed basis from attempting to take advantage of
employment rights offered to employees.
December 2011
3
On Notice
December 2011
4