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Employment Law Newsletter - December 2012


Redundancy consultation - establishing some things

The legal position on the meaning of 'establishment' (for deciding whether there are 20 or more proposed redundancies and collective consultation is necessary) is getting clearer. In Renfrewshire Council v Educational Institute of Scotland, the EAT found that each of the local authority's schools was a separate establishment and rejected the union's argument that the authority's entire educational and leisure service was a single establishment. This focus on the physical location, rather than the function or department, is good news for employers as it reduces the circumstances where collective consultation is required – although, where the link with a physical base is minimal (as with a sales team in Mills & Allen v Bulwich), the nationwide/functional approach to establishment could still prevail.

But resolution of another aspect of collective consultation law – whether the business decision causing the redundancy proposal must itself be the subject of consultation – remains elusive. In USA v Nolan, the ECJ decided it did not have jurisdiction even over civilians at a military base (where the redundancies in Nolan had occurred). So, the wait goes on while the case goes back to the Court of Appeal, which must now decide the question under the provisions of UK law. Our advice for the meantime remains as before – avoid 'offering up' for debate the business rationale, but be prepared to answer questions about it.


Back into history

In Birmingham City Council v Abdulla, the Supreme Court ruled that the facility in equal pay legislation for claims to be brought in the 'ordinary courts' meant also that the time limit for actions in the ordinary courts (six years) applied. Therefore, the time limit for claims in the employment tribunal – six months from the ending of employment – could be disregarded.

The precise legal reasoning or interpretation behind this result doesn't matter. The fundamental point is that the ruling (which, although only on a 3-2 majority, cannot be the subject of further appeal) exposes employers to claims for equal pay by some long-departed people – where, sometimes, the records and recollections might be patchy.


TUPE – don't get left high and dry

It doesn't really break new ground, but, in Tamang v Act Security, the EAT gave a useful reminder that a settlement of a TUPE-based claim by one respondent does not automatically cover others.

There will often be multiple respondents in claims for TUPE-related unfair dismissal (where the issue is often whether TUPE applies to transfer liability for a dismissal just before a changeover) and/or ones about the information and consultation rules (where there is joint and several liability anyway). The Tamang case was about both subjects, but the two possible transferee employers were not expressly stated to be parties to the compromise agreement concluded by the transferor. It was held that the claimant could still proceed against those two parties.

So, even if your concern is not about legal exposure but is just to get rid of a TUPE-based claim because of the time it will consume, you must contemplate reaching your own settlement – 'piggybacking' on another respondent's is not possible and, in the case of a 'service provision change' (where there is no real amity between respondents or shared incentive to co-operate), one respondent will probably not be too keen on expressly including another in the settlement it is paying for.

But, although useful only in limited circumstances, there is better news from the EAT in Optimum Group v Muir. Where one respondent has settled a TUPE-related unfair dismissal claim, any tribunal award of compensation against the other respondent must take into account (give credit for) the amount paid under the settlement – otherwise, there would be a windfall to the ex-employee.


TUPE – set in stone?

In Manchester College v Hazel, the EAT held that dismissals to bring about a cost-saving harmonisation of terms after a TUPE transfer were automatically unfair. They could not be seen as dismissals for an economic, technical or organisational reason 'entailing changes in the workforce' even though, as another part of the same broad exercise, the employer was making some redundancies – the people subject to contractual changes and those who were redundant were different.

Some managers think, wrongly, that decisions of this type mean that there is a complete bar on changing the contracts of staff 'acquired' under TUPE. But that would be going too far. Changes to terms made for some reasons, such as a post-acquisition restructuring with the creation of new types of job into which (on the redundancy of their 'old' ones) transferred staff move, are not prohibited – although they must still be handled by the appropriate standards. If the opportunity presents itself, managers should be alive to making use of this important distinction.


Sacrifices and savings in the cost of insured benefits

Providing employees with life insurance, private health and critical illness cover gets more expensive as they get older. Age discrimination law allows employers to stop providing these benefits when a person reaches 65, but not before. And, sooner or later, the Government will no doubt increase this threshold in line with changes to the state pension age and it will continue to be unlawful to remove benefits any earlier – even though the cost will have started to rise dramatically.

However, by providing these benefits to new employees as an option under a salary sacrifice scheme (with an appropriate notional allocation of part of salary that is made clear on offer/engagement), employers can mitigate the rising cost and reduce their National Insurance contributions. The crucial point is that it is the employee's decision whether to continue taking these benefits when they start to become more expensive, so the employer cannot readily be accused of unlawful age discrimination.

If you would like to discuss this or any other issue facing your organisation please speak to your usual contact at Collinson Grant or Richard Hendry on 0161 703 5600

Although care has been taken in the preparation of this Newsletter, Collinson Grant cannot accept responsibility for errors, omissions or advice given. Readers should note that only Acts of Parliament and Statutory Instruments have the force of law and only the courts can authoritatively interpret the law.