December 2010
Authors:
Noel Deans
noel.deans@klgates.com
+44.(0)20.7360.8187
Paul Callegari
paul.callegari@klgates.com
+44.(0)20.7360.8194
Daniel Wise
daniel.wise@klgates.com
+44.(0)20.7360.8271
K&L Gates is a global law firm with
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entrepreneurs, capital market
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For more information, visit
www.klgates.com.
In this edition of On Notice we cover the Court of Appeal’s recent decision on
mandatory bonuses (Locke v Candy); an EAT decision on the need to establish a
prima facie case in discrimination claims (Hammonds v Mwitta); a further Court of
Appeal decision on when to imply an employment contract between an agency
worker and an end user (Tilson v Alstom Transport); and an EAT decision on
associative sex discrimination on grounds of pregnancy (Kulikaoskas v MacDuff
Shellfish).
The Court of Appeal decision in Locke v Candy provides useful guidance on when a
mandatory bonus is payable to a former employee.
Mr Locke was a development director with Candy & Candy Limited. He
commenced employment on 17 September 2007 and was dismissed without notice
on 7 September 2008. He was entitled to a bonus of £160,000 after he had been
employed for 12 months. The Contract stated, “You must be employed by the
company in order to receive the bonus.” His contract also stated that "the Company
reserves the right to make a payment in lieu of notice". His notice period was for
6 months.
Following dismissal, the Company paid him only his basic salary for the notice
period. It withheld payment of a bonus on the ground that he had not been employed
for 12 months. Locke claimed that he met the contractual requirements because the
notice period counted as employment. Faced with less than clear language the Court
of Appeal found for the Company on that ground that when read holistically the
contract suggested the payment in lieu of notice clause (PILON) provide for basic
salary only.
This case illustrates a common problem for employers where seeking to avoid paying
large sums in bonus payments by dismissing employees in advance of the payment
date. As many of you are aware, given the large sums of money which are often
involved in bonus awards, these points are regularly litigated. This case is important
as a reminder to companies that where they are using clauses of this kind, they
should think very carefully about the intention behind the wording.
The recent appeal decision of Hammonds v Mwitta is helpful for employers faced
with clearly speculative discrimination claims.
Ms Mwitta was of mixed race and brought a race discrimination case against the law
firm, Hammonds. She claimed that a) she was discriminated in work allocation
because of her mixed race; and b) the discriminatory denial of work caused her
selection for redundancy due to a low level of work. She also alleged that the
redundancy procedure was carried out unfairly.
The EAT found these facts insufficient to establish a prima facie case of
discrimination. Simply because Hammonds could have discriminated against Ms
Mwitta and that there was no explanation for the unfavourable treatment, this was
insufficient to transfer the burden of proof to Hammonds to disprove any unlawful
act. The employee had to establish a prima facie case that the employer had
discriminated against her.
On Notice
This case is helpful in that it reaffirms that before
the burden of proof passes to the employer, the
claimant must make a prima facie case in
discrimination. A mere speculation or suggestion of
discrimination is not enough. However, the
difficulty with this decision is that it still does not
clarify exactly what comprises a prima facie case in
order for the burden of proof to transfer to
the employer.
In Tilson v Alstom Transport, the Court of Appeal
was asked to imply a contract of employment
between worker and end user in a tri-partite agency
worker relationship where no such express contract
of employment existed.
The Court of Appeal refused to do so and in
delivering its judgment helpfully reminded potential
litigants of the business necessity test. Mr Tilson
was supplied to the end user Alstom in this case by a
chain of third party agencies. There was no express
contractual employment relationship between
Alstom and Mr Tilson. There was therefore no
business necessity to imply such a contract of
employment, and as a result the Court of Appeal did
not do so. The fact that Mr Alstom had been
integrated within the Alstom business structure did
not in itself affect this position.
Lady Smith in the Appeal Tribunal dismissed the
claim on the basis that protection under the Sex
Discrimination Act does not extend to associative
discrimination. The purpose of the legislation was to
protect pregnant women, rather than those
associated with pregnant women. Mr Kulikaoskas,
as a third party, had no claim for associative
discrimination.
The Equality and Human Rights Commission has
noted their objection to this interpretation of the
legislation on the record and supported an appeal of
Lady Smith's judgment. The Commission has also
expressed concern that the Equality Act 2010 as
drafted does not necessarily extend associative
discrimination to the area of pregnancy-related
discrimination. The Court of Appeal's decision in
this case is expected in the next few months.
In Brief
•
The claimant in Tiffin v Lester Aldridge LLP,
a partner in a law firm, was unsuccessful in
asserting rights as an employee. The Appeal
Court determined that Mr Tiffin was a partner
within the meaning of the Partnership Act 1890
in that he carried on business in common with
others with a view to making profit. It didn’t
matter what the size of his share was nor the
extent of his involvement with management
decisions. As he was a partner on this set of
facts, Mr Tiffin could not also be an employee.
•
In Lonmar Global Risks Ltd v West, a case
concerning alleged solicitation of clients and
other staff members by employees with Lonmar
Global, the High Court stated that, unless the
employee is a fiduciary, there is no duty on an
employee to report one’s own misconduct or to
report the misconduct of fellow employees.
Senior managers or directors may owe such
fiduciary duties but most standard level
employees will not.
The case provides helpful clarification to the area
and will make it more difficult for agency workers to
institute proceedings on the basis that they are in
fact employees.
The EAT decision in Kulikaoskas v MacDuff
Shellfish, addresses a claim of "associative
discrimination", a claim which we are likely to see a
lot more of as a result of the Equality Act 2010,
which came into force in October of this year.
Mr Kulikaoskas and his partner were employed at
MacDuff’s shellfish factory. Mr Kulikaoskas'
partner became pregnant, and shortly after both of
them were dismissed. In his claim, Mr Kulikaoskas
alleged that he was dismissed because of his
partner’s pregnancy and brought a claim for
associative sex discrimination on grounds
of pregnancy.
December 2010
2
On Notice
•
In the case of Ayodele v Compass Group plc,
Mr Ayodale was compulsorily retired by his
employer at the age of 65. He had put in a
request to continue working, but on the
Company's own evidence this request was not
genuinely considered. In conducting the process
in this way, the Company was found to be in
breach of age discrimination legislation, despite
the current law which does not require
employers to give reasons for refusing a request
to continue working past 65. Employers are
reminded that, despite the default retirement age
of 65 only being abolished on 6 April 2011, all
requests to continue working past this date
should be genuinely considered.
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December 2010
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