In this round up of recent cases we look at decisions concerning: the importance of context in interpreting collectively agreed terms on pay; when employment is taken to have ended for legal purposes; an award of costs/expenses against an employee; stigma damages in unfair dismissal cases; and case and ETO reasons and transfer of collectively agreed terms under TUPE.

High Court applies common sense approach to interpretation of employment contract

In Vickers v London Fire and Emergency Planning Authority, the High Court ruled on the correct interpretation of a collective agreement on pay (the "Grey Book").  Under the Grey Book, fire fighters are entitled to a higher rate of pay on the achievement of nine competencies, one of which was the ability to drive.  Mr Vickers had achieved eight out of the nine but had not yet learned to drive.  In those circumstances, the Grey Book stipulated that the higher pay rate would only apply if there were "genuine reasons" for his inability to drive.

Mr Vickers had twice failed his driving test before finally passing in December 2008.  He argued, however, that he was entitled to the higher rate prior to that date on the basis that he had a genuine reason for being unable to drive, namely his lack of driving license.

Mr Vickers' argument failed. The High Court found that the "genuine reason" exception was to be interpreted as limited to reasons beyond the control of the fire fighter. It declined to adopt an unduly literal interpretation of the contract that ignored the specific context.  The Court pointed out that the Claimant's preferred interpretation was not one the parties would have contemplated and not one that a reasonable commercial person would adopt.

Establishing the effective date of termination (EDT)

Many employers may have faced the situation where notice is given but the employee leaves before the notice period expires.  Usually, however, it will be agreed between the employer and employee when the employment actually comes to an end.  When this is not articulated, or communications are ambiguous, it can be trickier to identify the Effective Date of Termination (EDT).

The EAT in Wedgewood v Minstergate Hull Ltd has provided some useful guidance on this issue. In this case, the employee was given notice of redundancy to expire on 1 December 2008.  Having received a request to leave earlier than that, the employer replied on 26 November 2008 as follows:-

"you can be released today and will still be paid up to and including your notice period of Monday 1 December 2008."

It became important to establish the precise EDT because the employee brought an unfair dismissal claim which was lodged on 28 February 2009.  The Tribunal held that the letter of 26 November had brought forward the EDT to the date of that letter, with the result that the claim was lodged late.  The EAT disagreed, however.  Although the EDT can be changed by express agreement in certain circumstances, it was not altered here merely because the employee was not required to work his full notice period.  The letter still referred to the notice period of 1 December 2008, which remained the termination date.

This case highlights the need for clear and unambiguous communications on the question of when employment is being terminated.  This question will have considerable practical significance not only for the purposes of calculating legal time limits, but also for the calculation of any entitlements to pay, benefits and potentially, where applicable, statutory redundancy payments.

Tribunal can award costs/expenses against a claimant even where dismissal declared unfair

In Nicolson Highlandwear Ltd v Nicolson, Mr Nicolson was successful to the extent that the dismissal was unfair due to technical breaches of the (now defunct) statutory dismissal procedure. 

However, the Employment Tribunal found that he had contributed significantly to his own dismissal on account of various acts of financial misconduct.  He was awarded zero compensation.  The Tribunal also found that Mr Nicolson had lied when giving his evidence.

The employer sought an order for costs/expenses but the Tribunal refused to make an award against Mr Nicolson.  On appeal, however, the EAT overruled the Tribunal. Having concluded that Mr Nicolson had lied, it was perverse to refuse to award of expenses against him.  The EAT also stressed that the fact a party succeeds in a claim does not automatically mean that expenses cannot be awarded against him or her.

Stigma damages

The EAT decision in Brown v Careham Hall confirms that stigma damages will only be awarded where the employee's difficulties in finding new work are attributable to the dismissal.  The statutory test is that:

• the award should be just and equitable having regard to the loss sustained by the employee; 

• BUT the losses must be in consequence of the dismissal AND attributable to action taken by the employer.

Ms Brown was a care worker and was unfairly dismissed by Careham Hall following allegations of mistreatment of a care home resident.  She was then given an unfavourable reference by a member of staff at the care home.  Ms Brown also failed to disclose to her new employer the disciplinary proceedings instigated by Careham Hall, resulting in her new employer dismissing her for gross misconduct.

The EAT upheld the Tribunal's ruling that the unfavourable reference and report to POVA (Protection of Vulnerable Adults) did not flow naturally from the dismissal and was not therefore a consequence of it.  The reference and POVA report would have been made even if Careham Hall had not dismissed Mrs Brown. Stigma damages were therefore not recoverable.

Collective Enhanced Redundancy Scheme didn't transfer under TUPE

The EAT has held in Worrall v Wilmott Dixon Partnership that enhanced redundancy terms set out in a handbook were not incorporated into individual contracts of employment and therefore were not preserved following a TUPE transfer.

It held that in order for a term of a collective agreement to be incorporated into a contract of employment, that term must be brought to the employees' notice or agreed.  It is not sufficient for the term merely to be in readily available document such as a handbook.

This is of significant practical importance for unionised employers.  If they want to argue that collectively agreed terms have contractual force, they must ensure that specific individual communications are issued to the affected employees, giving notice of the term.  It is not uncommon for employers merely to update a handbook or HR intranet pages to reflect the outcomes of collective negotiations without issuing communications specific notices to the workforce.  On the other hand, if the employer would prefer not to be contractually bound by collective principles, they may consider deliberately omitting to send the requisite notices.  However, it is anticipated, on the back of this ruling, that union pressure on employers to ensure individual staff communications are duly circulated will increase.

TUPE and ETO reasons

Dismissals connected to a TUPE transfer will be automatically unfair unless they are for an economic, technical or organisational reason entailing changes in the workforce (an "ETO" reason).

Traditionally, the phrase "entailing changes in the workforce" has been narrowly construed by the courts and interpreted to require a change in the numbers of the workforce or profiles of the staff.  This has limited the scope of the defence, and, in turn, the scope for employers to implement changes or dismissals after they have inherited employees under TUPE. 

In Nationwide Building Society v Benn, the EAT has helpfully clarified that the reference to "the workforce" does not necessarily mean the entire workforce.  In this case, the organisational change (a change in responsibilities due to the transferee employer having a different product range) affected a particular sub-group of transferring employees.  A number of employees resigned post-transfer and claimed constructive unfair dismissal in response to downgraded responsibilities and less favourable bonus arrangements.  An ETO defence was not, therefore excluded simply because the whole workforce was not affected by the employer's organisational reasons for the changes.  This decision will be welcomed by employers, clarifying, as it does, that the ambit of the ETO defence is not quite as restricted as might once have been thought. 
 

19 August 2010

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