It's a trap!

Employment Law Newsletter - December 2013


In this issue ...

  In order to sell or not in order to sell? That is the question   Telling the whole story  
  Pay up or else?   Not quite share and share alike  
  The slump   Nice perk if you can get it  
  Just how long is short enough?   Endangered species in the jobs jungle  
  We'll meet again - and, in the meantime...  

In order to sell or not in order to sell? That is the question

In Crystal Palace FC v Kavanagh, the Court of Appeal (CA) gave a ruling that supports the 'rescue culture' and, more generally, hints that the judges are not insensitive to the pressures faced by businesses and their advisers in the current economic climate.

The question was whether, under TUPE, pre-transfer dismissals effected by an administrator could be said to be for an 'economic, technical or organisational reason entailing changes in the workforce' (ETO) so as to prevent liability for unfair dismissal passing to a subsequent purchaser of the business. The hurdle to be confronted was that those dismissals undoubtedly made the business in administration more sellable than it would otherwise have been.

The EAT had treated that fact as inevitably meaning that the dismissals, even if also effected to allow the business to continue trading, could not benefit from the ETO defence. But the CA adopted a more pragmatic view. Recognising that administrators often have dual motives for dismissing, it ruled that ETO could apply.


Pay up or else?

Apparently, one-third of those securing a financial award from an employment tribunal don't get paid at all. And another one-sixth receive only part of the money due. So, hot on the heels of the soon-to-go-live financial penalties for losing employers, the Government wants to prise open those tight fists. Its ideas range from better information about enforcement (it is done through the County Court), naming and shaming, fixed penalties and, for employers regarded by the tribunal as particularly dodgy, the ability of the tribunal itself to impose the requirement for a deposit or down payment.


The slump

For years, decades even, the employment tribunal arena has been a dominant feature of the landscape. If it were a business (and it is sometimes said that the whole apparatus has spawned an industry) or a state, it would, on simple growth figures, be viewed as a success story. But there are signs that the bubble has burst. Advisers (anecdotally or impressionistically) and the Ministry of Justice (statistically) have both reported a dramatic decline in activity, that is in submitted and accepted claims. The latter tells us that, while the mean monthly number of claims in recent years has been about 4,000, September saw just 1,000.

The reason is obvious, isn't it? The fee system, introduced at the end of July. Yes, but surely 75% of prospective claimants are not being dissuaded from action, especially in this era of imaginative contingent fee arrangements? The answer probably lies in the middle, both on the cause and on the figures. The fee regime is intrinsically linked to a system for remissions for those claimants with limited financial resources. So, a combination of remission assessments and, where a remission is not sought or is denied, delayed payments of fees themselves have blocked the pipeline of issued tribunal claims. However, even once the logjam is released, it seems inevitable that the flow downriver will not regain its pre-July strength.


Just how long is short enough?

Occasionally, we catch ourselves saying to clients something to the effect that, all other things being equal, a shorter period for a post-termination restraint will increase the prospects of its being enforceable. Although we might be accused of being trite, that advice is itself born of a suspicion that many employers almost automatically think of 12 months, probably on the basis that 'it has always been done that way'. And, in the Court of Appeal's decision in Coppage v Safety Net Services, comes some kind of vindication for our view. Upholding the validity of a non-solicitation clause, the judgment of Sir Bernard Rix said:

'[T]he post-termination restraint was only six months. This is ..... a fundamental consideration of reasonableness.....[I]f the restraint period is as short as six months, that must be a powerful factor in assessing the overall reasonableness of the clause.'

To be clear, this does not mean that a shorter period can 'make a silk purse from a sow's ear'. There are still other requirements - in Coppage, the defendant had been a key commercial contact before his departure and the scope of the proscribed solicitation was not excessive. And, of course, the duration has to have some substance to be worthwhile. But if the restraint is 'shorter rather than longer', the courts might be slightly less stringent on its other aspects.


Telling the whole story

Employers have considerably more latitude on selecting displaced employees for alternative employment than they enjoy on selecting who should be redundant in the first place. Nevertheless, the later stage does not constitute 'open season' on employees' futures, as has recently been illustrated by the EAT's decision in Somerset County Council v Challoner.

There, an employee whose job had disappeared through redundancy applied for a newly-created post. While that application was pending and without informing the employee, the employer altered the job description for the new position to accommodate a requirement for skills (finance) most obviously held by another group of employees threatened with redundancy and allowed them to apply. One of that group secured the new post, with the result that Ms Challoner, who was unaware of the changes to the job description when she was interviewed, was unsuccessful and dismissed as redundant. The EAT held that her claim of unfair dismissal should succeed. It was not the amendment of the specification to include finance or the extension of the 'pool' of applicants that caused this ruling. Rather it was the skewed process.


Not quite share and share alike

Last year, the Nuttall Review of Employee Ownership made suggestions for promoting an environment in which there would be an increase in situations where employees have both a meaningful 'voice' in the running of a business and a significant stake in its success. Last month, the Government published a report on progress against its recommendations, which notes significant progress in many areas, including tax incentives, guidance, amendments to Company Law and model documentation.

Employee ownership is about more than simple ownership of shares by employees. However, for obvious reasons, that is a central plank of the strategy. The Government's report contains an interesting little extract confirming that recent legislation on 'employee shareholders' lacked any notable idealistic or philanthropic purpose, and then tries to find a silver lining. First, it acknowledges that 'there was a universally adverse reaction to [the employee shareholder law] from the employee ownership sector' (that is, of course, those in the know, including the respected Employee Ownership Association). Then the spin starts - the discussion about employee shareholder status ('a niche measure') nevertheless 'had a beneficial effect in relation to what employee ownership means'. Why? Because 'commentators pointed to what they did like, in contrast to employee shareholder status, namely employee ownership and the vision for it in the Nuttall Review'.

In our September 2013 issue (Much ado about nothing much - with the emperor's new clothes), we suggested that the most useful by-product of the employee shareholder law could be an increased focus on employee ownership. It appears that effect was already occurring, although we did not quite expect the Government to go so far as almost to present its legislation as a deliberate device to this end.


Nice perk if you can get it

As part of the cost-cutting measures forced on them by recent economic turmoil, some employers have reduced the benefits they offer to employees. For example, rising premiums for private medical insurance have led to higher excess payments, removal of dependents, and exclusions for pre-existing conditions. But overall, the Chartered Institute of Personnel and Development's annual Reward Management survey found that benefits still make up 10% of total reward. Perhaps this is thanks to employers like Carlisle City Council, which has increased the benefits on offer. Employee Benefits magazine reports that it now provides an employee assistance scheme, a holiday purchase scheme offering up to 10 days' additional annual leave, free flu vaccinations, a bikes-for-work scheme, learning days, lunchtime learning workshops, health checks, and a car scheme will be introduced in 2014. That lot should perk them up.


Endangered species in the jobs jungle

This may come as a surprise if you have been unfortunate enough to get a ticket recently, but 'parking and civil enforcement officer' was one of the fastest declining occupations in the UK between 2011 and 2013. 'Debt, rent and other cash collectors' were also in the top five vanishing trades, despite the country being awash with public and private indebtedness. The explanation, apparently, is partly that thousands of roles have been outsourced by local authorities and partly that mobile phone payments and online lending have made debtors easier to track and reduced the need for collection work. The Annual Survey of Hours and Earnings, published by the Office for National Statistics, also tells us that the numbers of pipe fitters, plasterers, agricultural machinery drivers, hospital porters, precision instrument makers and repairers, typists and keyboard operators, and tailors and dressmakers are also in decline. The fastest growing occupations are paramedics, psychologists and graphic designers.


We'll meet again - and, in the meantime...

Have a restful and enjoyable festive break (between Christmas and New Year, you can still get us on +44 161 703 5600). The next newsletter will appear in mid-January, when you will have the new TUPE rules to look forward to.


If you would like to discuss this or any other issue facing your organisation please speak to your usual contact at Collinson Grant or Jo Hale 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.