April 2010
Authors:
Welcome to the Latest Edition of On Notice
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
In this fourth edition of 2010, we report on the decisions in the Court of Appeal in
Sakar v West London Mental Health Trust and the EAT in A v B on unfair
dismissal; the Court of Appeal decision in Buckland v Bournemouth University
Higher Education Corporation on fundamental breach and the much publicised
broker poaching conspiracy revealed in the High Court in Tullet Prebon Plc & Ors
v BGC Brokers LP & Ors. We also consider in brief the changes to paternity leave
entitlements, employees’ new right to time off for study and training and
forthcoming changes to pension entitlements.
________________________________________________
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of 36 offices located in North America,
Europe, Asia and the Middle East, and
represents numerous GLOBAL 500,
FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies, entrepreneurs,
capital market participants and public
sector entities. For more information,
visit www.klgates.com.
Court of Appeal Decision Departing from Disciplinary
Procedures
In Dr Sameer Sakar v West London Mental Health Trust, the Court of Appeal
considered whether the summary dismissal of an employee for gross misconduct
was unfair in circumstances where the employer's use of its own disciplinary
procedures was inconsistent with that dismissal.
Dr Sakar was a consultant psychiatrist in the London Directorate of the Trust,
which included a High Dependency Unit at Broadmoor Hospital. Between
September 2006 and January 2007, Dr Sakar was involved in a number of incidents
that provoked allegations by staff and colleagues of bullying and harassment.
Following an investigation into the complaints, the Trust, with Dr Sakar's
agreement, embarked on an internal disciplinary procedure known as 'The Fair
Blame Policy' (FBP). The FBP was designed for cases of 'fairly low level breaches
of conduct or performance standards' which 'do not constitute potentially serious or
gross offences'. Indeed, a first written warning was the most severe sanction that
could be imposed under the FBP.
The use of the FBP procedure broke down when the Trust informed Dr Sakar for
the first time that he would be reported to his professional body, the GMC. Dr
Sakar was then referred to the formal disciplinary process and suspended, pending
its outcome. The disciplinary panel found the allegations proved, made a finding of
gross misconduct and bullying in the form of repetitive minor offences, and
summarily dismissed Dr Sakar.
The Court of Appeal upheld the Employment Tribunal's finding that the dismissal
was unfair. The Trust's use of the FBP necessarily implied that, in its estimation, it
considered Dr Sakar's alleged misconduct to be of a relatively minor nature. It was
wholly inconsistent that those same allegations could be regarded as matters of
such a grave and serious nature as to warrant dismissal merely because the FBP
discussions were discontinued. It was this inconsistency which took the summary
dismissal outside of the employer's range of reasonable responses, thereby making
the dismissal unfair.
On Notice
This case neatly illustrates an employer's need to
be mindful when choosing the disciplinary
procedures to be used in the first instance in cases
of employee misconduct. The procedure chosen
by the employer should fit the gravity of the
allegation. If the allegations are serious enough to
warrant dismissal if proven, then the disciplinary
procedure used in the first instance should
provide for dismissal as one of its possible
outcomes. Otherwise, the employer may later be
prevented from dismissing the employee as a
consequence of its inconsistent approach to the
alleged wrongdoing.
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The Court of Appeal Revisits
Employee's Rights to Rely on
Fundamental Breach
In Buckland v Bournemouth University Higher
Education Corporation, the Court of Appeal
addressed what it described as 'two important and
(unsurprisingly) unresolved questions of
employment law.' The first was the correct test to
be applied in determining whether an employer
has committed a fundamental breach of an
employment contract. The second was whether an
employer who has committed a fundamental
breach can cure that breach while the employee is
considering whether to treat it as a dismissal.
The claimant in this case, Professor Buckland,
held the chair of environmental archaeology at
the defendant university. The 2006 examination
of students in his discipline included 16 re-sits, of
which Professor Buckland failed 14. The papers
were routinely second-marked to ensure
consistency and Professor Buckland's marks were
endorsed. The University's board of examiners
then checked and confirmed the results. Despite
the scrutiny to which the marking had already
been subject, the chair of the board of examiners
arranged for the papers to be re-marked, which
elevated some of the scores. Because of Professor
Buckland's continuing protests at what the ET
described as an unequivocal affront to his
integrity, the university set up an inquiry. The
inquiry's report vindicated Professor Buckland
and criticised the board of examiners. However,
Professor Buckland was unmollified by the
inquiry and its report and tendered his resignation
by a letter of February 2007 with effect from the
end of July, when his obligations to his students
would have been fulfilled. He then brought
proceedings for constructive dismissal.
With regard to the first question, the Court of
Appeal found that the appropriate test for finding
a fundamental breach by the employer is
objective. In other words "a breach occurs when
the proscribed conduct takes place" and the
employer cannot rely upon the reasonableness of
its actions in defence of that conduct. With
regard to the second question, the Court found
that once an employer commits a fundamental
breach, it cannot be cured unilaterally by that
employer so as to prevent the employee from
treating that breach as a dismissal. On the facts
of the present case, that the employer instigated
an inquiry which vindicated the employee did
not cure that employer's original fundamental
breach. In the words of Lord Justice Jacobs, the
employee has a clear choice - 'affirm or go'.
Importantly however, the case does pay heed to
the commercial realities faced by employers.
Employees are not entitled to stew on the
decision to 'affirm or go' indefinitely and
tribunals are invited to take a 'robust approach' in
finding affirmation where there is a long delay
and where employers have made suitable
amends. Daley v Serco, reported in the February
edition of On Notice, is a case in point of this
robust approach. There, an employee's
resignation 15 months after the alleged
fundamental breach by his employer put paid to
his claim for constructive dismissal. The delay,
and the employee's failure to reserve his position,
led inevitably to the conclusion that he had
elected to affirm the employment contract rather
than treat himself as dismissed.
____________________________
EAT Decision on Unfair Dismissal
Following Allegations of Criminal
Behaviour
In A v B the Employment Appeals Tribunal
considered whether it was appropriate for an
employer to dismiss an employee who, albeit not
convicted, was accused of criminal conduct by a
public body. Whilst this case was in the public
sector context, the principles laid out by the EAT
apply also to private sector employers.
The employee, 'A' was a relatively senior high
level civil servant employed by an unnamed
public authority. The public authority was not
directly involved in the field of child protection.
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On Notice
It came to the employer's attention, following
investigations by Serious Organised Crime
Agency and the Metropolitan Police Child Abuse
Investigation Command ('CAIC') that A was
under investigation for child sex offences
committed in Cambodia. In the course of formal
limited disclosure made by CAIC to the
employer, it was revealed that CAIC believed A
to pose 'a continuing threat to children'.
Following a disciplinary procedure, A was
dismissed on the basis that the disclosure made
by CAIC "led to a breakdown in the relationship
of trust and confidence which is a fundamental
part of your employment contract with the [public
authority]." A brought claims for unfair dismissal
and wrongful dismissal. He lost in the ET in late
2008 and his present appeal was also
unsuccessful. The EAT recognised that "it sticks
in the throat that an employee may lose his job,
and perhaps in practice any chance of obtaining
further employment, on the basis of allegations
which he has had no opportunity to challenge in
any court of law." However in this case the
balance of interests lay with the employer.
It was legitimate for the employer to zealously
guard its public reputation. As such, the employer
was entitled to take the view that continued
employment posed a serious risk that its public
reputation would be severely shaken if the
employer were subsequently exposed. In such
cases, employers are entitled to treat information
provided by the police or similar public body as
reliable, despite the absence of any conviction.
The employer is not, however, excused from
acting 'uncritically'. The employer must insist on
a sufficient degree of formality about the
disclosure process before contemplating acting on
it. The employer is also obliged to question the
contents of the disclosure if it has any reason to
suspect its inaccuracy.
As a general point of importance to all
employers, the EAT in this case expressed its
dissatisfaction with litigants who invoke "loss of
trust and confidence" as an "automatic solvent of
obligations" when it is not. Despite that,
employers are entitled in certain narrowly defined
circumstances to take account of information
suggesting an employee's or potential employee's
criminality, even in the absence of any
conviction, when that information is formally
disclosed by a public authority and scrutinised by
the employer to the best of its ability.
The High Court Gives Judgment in
the Long Running Broker Poaching
Dispute
Tullet Prebon Plc & Orsv BGC Brokers LP &
Ors gave a determination of liability on the wellpublicised dispute between Tullet Prebon
(previously part of stockbrokers Collins
Stewart/Hawkpoint) and their competitor BGC
Partners (previously part of bond traders Cantor
Fitzgerald). Their businesses involved the
employment in London of 650 and 600
brokers respectively.
Tullet's brokers were bound by restrictive
covenant clauses including garden leave
provisions and post-termination restrictions. In
the context of the already highly acrimonious
relations between the two competitors in the
past, BGC began to recruit a number of Tullet's
London brokers. Those brokers were offered
large signing-on payments, and asked to join
earlier than their contracts with Tullet allowed.
Tullet claimed that BGC had arranged for the
brokers to make sham constructive dismissal
claims with a view to escaping the confines of
their respective restrictive covenants.
On 25 March 2009, Tullet commenced
proceedings against BGC alleging conspiracy,
inducing breach of contract and misuse of
confidential information. Two departing
employees were also named as defendants. BGC
counter-claimed against Tullet for inducing three
departing Tullet brokers who changed their
minds to break the contracts they had entered
into with BGC.
The claims of the defendant brokers that they
were constructively dismissed by Tullet failed. It
was their decision to leave and they were
induced to do so by BGC's provision of an
indemnity for any claim brought by Tullet. In
acting in this way, BGC was found to have
shown 'a cynical disregard for the law and
employees' duties'. It followed that their
employment contracts with Tullet were
enforceable, and that insofar as they had been
breached, Tullet should be entitled to damages.
Tullet's claim for conspiracy as against BGC
succeeded, but its claim against individual
departing brokers did not.
____________________________
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On Notice
It was only necessary to show that BGC intended
to injure Tullet's business, and not necessary to
show that this was BGC's dominant intention.
BGC had intended to advance its business by
recruiting Tullet's employees, and acted in a way
which would necessarily injure Tullet's business.
The counterclaim was dismissed because Tullet
had not induced the returning brokers to breach
their contracts with BGC. Rather, BGC by its
own conduct acted in such a way that those
brokers could have no trust and confidence in it
as their future employer and were entitled to treat
their obligations to BGC as ended.
Whilst there was ultimately little dispute as to the
applicable law, this decision is a timely reminder
to both employees and employers that when the
clear intent of an employee is to avoid a
restrictive covenant, a constructive dismissal
claim will be closely scrutinized. Employers
seeking to recruit from competitors in industries
subject to such restrictions should not be tempted
to indemnify potential future employees from
litigation if such tactics are contemplated.
____________________________
In Brief
The Additional Paternity Leave Regulations
2010 came into force on 6 April. The Regulations
allow eligible employees (usually fathers) up to
26 weeks additional paternity leave for the
purpose of caring for a child under the age of one,
or for an adopted child in the first year after being
placed for adoption. Leave can be taken only
after the mother has returned to work and the
child is over 20 weeks old, or the child has been
with its adoptive parents for 20 weeks.
The Regulations also provide for longer periods
of leave where the child’s mother or primary
adopter has died during the year after the child’s
birth or placement for adoption.
The Employee Study and Training (Eligibility,
Complaints and Remedies) Regulations 2010 and
The Employee Study and Training (Procedural
Requirements) Regulations 2010 both came into
force on 6 April. The instruments give
employees a new statutory right to submit to
their employer a request to allow them to spend
time undertaking business relevant study or
training. Employers are placed under a
consequent duty to consider those requests and
respond in a set timeframe. Employers may
decline requests where there are sound business
reasons for doing so. The new right is limited to
employees of organisations with 250 or
more employees.
A number of changes to pension entitlements
have been brought in this month. The number of
qualifying years needed for a full basic state
pension for men and women is now 30 for those
reaching state pension age on or after 6 April
2010. Those with fewer than 30 qualifying years
will receive a thirtieth of full basic state pension
for each qualifying year they have. However,
from 6 April onwards, the minimum pension age
for occupational and personal pension schemes
rises from 50 to 55. There are exceptions for
those with severe health problems and those with
a statutorily protected lower pension age.
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On Notice
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