November 2008
Authors:
Noel Deans
+44 (0)20.7360.8187 noel.deans@klgates.com
Paul Callegari
+44 (0)20.7360.8194 paul.callegari@klgates.com
Jackie Cuneen
+44 (0)20.7360.8184 jackie.cuneen@klgates.com
Lisa Perelman
+44 (0)20.7360.8256 lisa.perelman@klgates.com
Susannah Jarvis
+44 (0)20.7360.8271 susannah.jarvis@klgates.com
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In the November edition of ‘On Notice’ we comment on developments on rights for agency workers and we take a look at the Advocate General’s recent decision regarding the UK’s default retirement age. We also discuss EAT decisions concerning whistleblowing, age discrimination in the context of redundancy pay and further developments in relation to the transfer of equal pay claims under TUPE. Finally, we summarise a very important Court of Appeal decision on stress in the workplace.
A Directive on temporary agency workers which was agreed to by the Council of the
European Union in June has been approved by the European Parliament. According to the Directive, temporary workers are to be given equal treatment with regard to “basic working and employment conditions” as compared with permanent employees, and this is to apply from day one. However, Member States can opt out of the requirement that equal treatment apply from day one, and earlier this year the Government, the Trades
Union Congress (TUC) and the Confederation of British Industry (CBI) agreed that temporary workers would be entitled to equal treatment with comparable permanent employees after 12 weeks’ employment. Now that the Directive has been approved by the European Parliament it must be implemented into UK law and take effect within three years.
For more information on this legislation please contact Susannah Jarvis
In considering the Heyday challenge to the UK’s default retirement age of 65, the
Advocate General (AG) of the European Court of Justice has decided that the UK’s national legislation that permits employers to dismiss employees aged 65 or over by reason of retirement (subject to adherence to the ‘right to request to continue working’ procedure) is not in breach of European law. However, although the UK’s compulsory retirement age does not automatically fall foul of EU law, the Government will still need to demonstrate that the rule is objectively and reasonably justified in the context of national law by reference to a legitimate aim relating to employment policy and the labour market. The Government has previously argued that the mandatory retirement age is necessary to ensure flexibility in the workforce and allow businesses to make succession plans.
Although not binding, the AG’s opinion may be an indication of the likely ECJ decision, expected in December 08/January 09. The case will then return to the UK, where the High Court will make the final ruling on whether the mandatory retirement age can remain.
The Government has separately agreed to review the mandatory retirement age in 2011.
Given the current economic reality that many people need to work beyond retirement, the default retirement age may yet be removed altogether.
For more information on this development please contact Noel Deans

On Notice
In Muchesa v. Central and Cecil Housing Care
Support (EAT, 22 August 2008), M had been employed as a Carer by C at one of C’s residential care homes. Over the course of one weekend,
M made an anonymous call to the daughter of a resident alleging a severe lack of care to the resident and also a series of phone calls to police and social services, making serious allegations of neglect. M was dismissed and claimed that the dismissal was automatically unfair since the dismissal related to the making of protected disclosures. The Tribunal formed the view that the disclosures were not made in good faith and M did not reasonably believe them to be true.
The EAT upheld the Tribunal’s decision. An employee must act in good faith to come within the protection of the whistleblowing legislation. The
EAT decided that whether or not the factual basis for the disclosure was correct could be an important factor in determining whether the employee had a reasonable belief in its truth and had, therefore, acted in good faith. This was all the more so where, as in this case, M claimed to have personal knowledge of the acts complained of: The fact that they were found to be untrue was a strong factor indicating that she did not have a reasonable (albeit mistaken) belief in their truth. This case demonstrates that employers may defeat whistleblowing claims if they are able to show that the employee is not acting in good faith or did not reasonably believe in the truth of the information disclosed.
For more information on this case please contact
Lisa Perelman
Two decisions of the EAT have highlighted the need for employers – and Tribunals – to examine in detail the proportionality of redundancy payment schemes which make higher payments to older workers, or which conversely impose a higher age cap.
In MacCulloch v. Imperial Chemical Industries
(EAT, 22 July 2008), ICI adopted a policy whereby the 36-year-old claimant would receive a redundancy payment of around 55% of her gross salary, whereas an employee in her late fifties would receive a payment of 175% of her gross salary. In
Loxley v. BAe Systems Ltd (EAT, 29 July 2008)
BAe’s voluntary redundancy scheme applied a
‘taper’ which ended at 60, so that the 61-year-old claimant received no redundancy pay (other than statutory redundancy). At the time of introducing this scheme, BAe had a compulsory retirement age of 60. This had since been raised to 65, but the redundancy scheme had not been altered to such an extent as to cover the Claimant’s case.
The Tribunals found that there were legitimate aims behind the schemes in both cases. In the ICI case, one example of a legitimate aim was encouraging volunteers for redundancy from among older employees, thereby freeing up space for younger ones. In the BAe case, it was found that the scheme prevented older employees from enjoying a windfall when they would shortly be due to retire, with a pension, in any event.
The EAT accepted that in each case these aims were capable of justifying the schemes. However, the Claimants’ appeals in each case were allowed as the Tribunals had not properly determined if the measures adopted were proportionate ways of achieving those aims. In particular, in the BAe case, the Tribunal should have considered what pension benefits the Claimant would have been entitled to and, in the ICI case, whether the particular percentages adopted by the scheme were justified.
The EAT therefore requires the minute details of the schemes to be scrutinised to establish whether they provide a proportionate means of achieving a legitimate aim. Simply having a legitimate aim is not, by itself, enough to defeat a claim for age discrimination.
For more information on these cases please contact
Paul Callegari
November 2008 | 2

On Notice
The High Court in Rolls Royce plc v Unite the Union
[2008] EWHC 2420 has ruled that a redundancy selection policy which gives credit for length of service can potentially be allowed under the age discrimination legislation. In this case, Rolls Royce and the Union had entered into collective agreements determining how the redundancies would be carried out. The redundancy selection involved a points scoring system, whereby employees were assessed in different categories including expertise and versatility, and each employee received a point per year of service. The Court held that although this latter criterion was age discriminatory, it could be objectively justified. The collective agreements with the Union sought to achieve an agreed way in which to carry out the redundancies in an orderly fashion, and this was a legitimate aim. Further, the length of service criterion respected the loyalty and experience of the older workforce and protected them from the difficulties of re-entering the labour market at a time when it would be more difficult to find alternative employment.
In addition, the Court decided that the length of service criterion was lawful under the section of the
Regulations which states that a worker should not be prevented from being placed in a better position than other workers by the award of a benefit based on length of service. Giving points for long service meant that some workers would keep their jobs as a result of this criterion and this could be described as a benefit. As a consequence, the employer was required to show that awarding this benefit to employees with more than 5 years’ service reasonably fulfilled a business need. The employer was able to show this and was assisted by the fact that the redundancy scheme had been agreed with the Union.
This decision is encouraging for employers who want to include length of service as a criterion for selection of employees for redundancy. However, employers should be mindful of the facts of the case and that the redundancy policy was agreed with the Union. Also, the Court indicated that it may have come to a different conclusion had the policy operated on a simple
‘last in, first out’ basis without the inclusion of the other criteria.
For more information on this case please contact
Susannah Jarvis
The EAT in Sodexo v. Gutridge (EAT, 31 July 2008) held that a contractor, S, which took over cleaning services from the NHS Trust, was liable for equal pay claims brought by the transferred employees
5 years after the transfer using comparators still employed by the Trust.
The EAT stated that the six-month time limit for bringing claims based on the ‘equality clause’ following a transfer (i.e. that TUPE transferring employees are entitled to a continuation of their existing terms and conditions of employment on transfer) applied only in relation to claims against the transferor. Claims against the NHS Trust would therefore be out of time. However, the limit did not prevent the transferee from being liable in respect of the period since the transfer, as the breach continued after the transfer.
The effect of this decision is that, in the many cases of transfer of services from the public sector to the private sector, the private contractor may find itself liable for claims for equal pay where the breach may have started before the transfer. The transferee may have no idea that those claims even exist, especially where, as with the present case, the employees never brought claims against the transferor and the transferor never actually paid the enhanced rate.
Unless this decision is successfully appealed, it places a burden on the contractor to check carefully for the possibility of such claims and, to the extent possible, to cover any potential liability by way of warranties and indemnities.
For more information on this case please contact
Jackie Cuneen
November 2008 | 3

On Notice
In Dickins v O2 plc (EWCA Civ 114), D was employed by O2 as a regulatory finance manager, a role for which she did not receive expected training or support. D began to suffer from irritable bowel syndrome in 2001 and was occasionally off work.
D’s GP thought that her condition might be stress related and referred her for counselling. In April
2002, D told her manager she was “stressed out” and asked to take 6 months off. D’s manager referred her to O2’s counselling service, which D did not use as she was already receiving counselling. At D’s appraisal in May 2002 D repeated her concerns and said that she was worried she might be signed off sick, and again asked for 6 months off. A referral to
O2’s occupational health department was suggested but not actioned. Shortly after her appraisal, D was signed off work with anxiety and depression. D did not return to work and her employment was terminated. D brought a claim for damages for personal injury.
The county court judge held that O2 was liable for psychiatric injury it had negligently caused by putting D under excessive stress between 2001 and 2002. In assessing damages, the judge took account of various factors which he considered had contributed to D’s illness (such as D’s vulnerable personality, her relationship with her partner, and her IBS) and reduced damages by 50%. (The county court judge’s assessment of damages was criticised by the Court of Appeal. However, the
Court of Appeal’s comments are not binding as the apportionment of damages was not disputed as part of the appeal).
O2’s appeal was dismissed by the Court of Appeal.
According to the Court of Appeal, the county court judge had been entitled to hold that the psychiatric ill health suffered by D had been reasonably foreseeable and caused by O2. Once D had explained her difficulties at work and their effects on her health to her manager at the meeting in April 2002, some responsibility had passed to O2. Intervention from the management had been required at this point and
D should have been sent home and referred to O2’s occupational health department. On the facts of the case, reference to O2’s counselling services was insufficient.
Employers must take note of an employee’s words and actions over a period of time to determine whether it is reasonably foreseeable that they will suffer a breakdown in their health. When dealing with an alleged case of workplace stress, it is likely that a reasonable employer will be expected to do more than simply refer an employee to a confidential counselling service. Even where an employer is aware that an employee is being cared for by their
GP, they must remain alert to the employee’s state of health and, based on the Court of Appeal’s guidance, it is possible that management intervention will be required in every case.
For more information on this case please contact
Lisa Perelman
Noel Deans +44.(0)20.7360.8187
Paul Callegari +44.(0)20.7360.8194
Jackie Cuneen +44.(0)20.7360.8184
Lisa Perelman +44.(0)20.7360.8256
Susannah Jarvis +44.(0)20.7360.8271
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November 2008 | 4