It's a trap!

Employment Law Newsletter - January 2014


In this issue ...

  Quite a lot about TUPE   Is there a worthwhile substitute on the bench?  
  Rolled-up appeals   Overstepping the mark  
  The chocolate fireguard   Following the money in HR  
  The low pay competition  

Quite a lot about TUPE

The snappily titled Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations take effect from 31st January - generally, they will apply to any transfer happening from then on. Their salient features are:

(1) A codification of recent decisions that, for there to be a 'service provision change', the activities of 'old' and 'new' operators must be 'fundamentally the same'. Of course, nothing changes too much, as hours of legal argument can still be devoted to the meaning of that expression!

(2) A slight freeing up of the existing rule that even an agreed variation of terms will be ineffective if the reason for it is the transfer itself or, where the reason is transfer-related, unless it is an economic, technical or organisational ('ETO') one entailing 'changes in the workforce'.

On ETO, it is now expressly stated that a change of workplace will be covered.

And a transfer-based variation will also be permissible if:

the terms of a transferred employee's contract allows the employer to make it; or
where the term is incorporated from a collective agreement:
the variation occurs more than one year after transfer; and
thereafter, the employee's overall 'package' of rights and obligations is as favourable to him/her as that previously operative.

A new provision makes clear that this, more flexible structure does not remove the normal legal requirements for a valid variation of contract. So, effectively, all that is happening is that TUPE, having been more restrictive about which transfer-related changes could ever be acceptable, is now becoming slightly less so.

(3) To ensure that the recent 'static' approach of the European Court of Justice in Parkwood Leisure v Alemo-Herron (see our July 2013 Employment Law Newsflash) is entrenched, the exclusion of any effect on a transferred employee's terms of a collective agreement which is concluded after the transfer and without the transferee's participation in bargaining with the union(s).

(4) In respect of dismissals, clarification that the scope of the ETO defence extends, as with variations (see above), to changes of workplace. And the link between TUPE and the typology of unfair dismissal law is strengthened by provisions which make clear that any dismissal for an ETO reason is, by definition, also either for redundancy or for 'some other substantial reason'.

(5) An increase, from 14 to 28 days, of the standard minimum time before transfer for the transferor to supply 'employee liability information' to the transferee. This applies to transfers taking place on or after 1st May 2014.

(6) Perhaps most dramatically and certainly most interestingly and usefully, an explicit linking of TUPE with the separate obligation on employers to consult with employees' representatives on 20+/100+ proposed redundancies at least 30/45 days before any dismissals.

Transferees would often like to commence that 'collective' redundancy consultation before employees actually transfer under TUPE. But, although (having provided the required pre-transfer information about the post-transfer measures they envisage) they might have engaged in some related discussion with the transferor's staff, the law made no provision for valid redundancy consultation with representatives to commence until transfer. In terms, both TUPE and the legislation on collective redundancy consultation have only ever contemplated an employer's consulting with its own employees.

That will now change. Following written notice to the transferor of the wish to commence 'pre-transfer redundancy consultation' and the transferor's agreement, the putative transferee can start the process (although the associated dismissals will only take place and, often, the minimum timespan of 30 or 45 days will only expire once the transfer has happened).

The last point raises an interesting question about key stages in the redundancy process between collective consultation and dismissal. Does any formal legal effect or credit attach to a transferee's embarking on individual consultation or giving notice before the transfer takes effect?

One view is that, if an 'at risk' employee gets treated to an appropriate standard by the management on whose watch termination will ultimately occur, what is lost? And, in practice, it is not uncommon (and good practice on communication) for transferees to 'jump the gun' by sitting down with people still employed by the transferor to prepare them for a redundancy dismissal on the day the transfer goes through.

We cannot recall any reported case where the legal validity of such individual dialogue before the transfer has been directly argued and tested. But, given that the new regulations only cover collective consultation, matters that have lain in the shadows might now be subject to greater scrutiny. We wonder how long it will be before an employment judge is persuaded, by a deft advocate, to rule specifically that the 'pull forward' facility for collective consultation is not replicated for these other activities - which are not explicitly covered by legislation anyway (individual consultation is a product of tribunals' decisions on 'reasonableness' in unfair dismissal law, who gives notice is ultimately a contractual matter) - thereby requiring more of transferees post-transfer.


Rolled-up appeals

In Rooney v Dundee City Council, the Employment Appeal Tribunal (EAT) decided that an employer had acted within the range of reasonable responses by taking into account an earlier final written warning when deciding to dismiss for another offence - even though that earlier warning was subject to an appeal which had not yet been heard.

This is partly about the simple points that the implications of a final written warning should be clear to an employee and that, if there is nothing obviously flawed about it, a tribunal should recognise it. But, on the second of those, a note of caution - in hearing Rooney's appeal against dismissal, the employer did take the precaution of examining the circumstances of the final warning.


The chocolate fireguard

The purpose of the Agency Workers Regulations 2010 is to give workers supplied by an employment business or 'agency' parity on core terms and conditions with the equivalent employees of the organisation to which they are hired out. They took effect in October 2011 to much fanfare (although, despite their capacity to inflate hirers' costs, their principal obligations rest with the agencies themselves).

However, all is not well. In Moran v Ideal Cleaning, the EAT has decided that, because they refer to working 'temporarily' for the hirer, the Regulations do not cover agency workers who are assigned to a hirer on an 'open-ended' basis. There seems little scope for an appeal, not least because the underlying Agency Workers Directive of the EU also confines coverage to those hired out temporarily.

Labour has already committed to amending the Regulations on this point if and when it is elected - and there is nothing to stop a national government applying more stringent rules. Existing labour supply arrangements will often not be able to avail themselves of the legislative 'loophole' - frequently, they are for a short, fixed-period, often because the Regulations only bite after 12 continuous weeks with the hirer. But, from now and at least until the advent of a Labour government, agencies and hirers may have common cause in creating new, open-ended arrangements (with provision for termination by notice) for the supply of labour that will avoid the Regulations.


Is there a worthwhile substitute on the bench?

Not a cry to the heavens from David Moyes, but the question for the EAT in Boss Projects v Bragg. At issue here was the status of a scaffolding supervisor (Bragg) who was contracted to Boss, a company at the bottom of a chain of contracts for the provision of scaffolding workers to a construction business. The contract between Boss and Bragg classified him as an independent contractor, 'in business on [his] own account', consequently making him liable for his own tax and National Insurance on payments from Boss and excluding him from paid holidays and sick pay. It also gave Bragg the rights to hire workers in substitution for himself and to work for others.

Bragg then decided he wanted paid leave pursuant to the Working Time Regulations. For that purpose, he had to be a 'worker', operating under a contract to perform work 'personally' for another.

The EAT accepted that the carefully and extensively drafted contractual document itself permitted only of the conclusion that Bragg was 'in business on his own account'. However, applying the approach of the Supreme Court in Autoclenz v Belcher, the EAT held it was legitimate to go behind the form of the contract and look at its working substance - especially as Bragg could not have been expected to read and absorb all the details of the contract. When that was done, it was clear that, particularly because it was obvious that the substitution facility could never be used (the end user of the scaffolding services would never sanction it), Bragg was really a 'worker' and entitled to paid holidays.


Overstepping the mark

In this 'post-Savile' era, it is tempting to think that any serious 'whiff' of inappropriate behaviour with children must be tackled directly, quickly and robustly to protect service users and prevent damage to an employer's reputation. That solution was adopted by the employer in Z v A, which recently came before the EAT.

Here, a school caretaker was dismissed when the school was notified by the police that he had been the subject of unsubstantiated allegations of sexual abuse before he was employed there. Although no criminal charges were then pending, the governors took this decision on the basis of an irreparable breakdown of trust and confidence and to avoid serious damage to the confidence that parents and the public had in the school.

The EAT said that was unfair. Although dismissal for an unproven allegation of this type could be fair (see Leach v OFCOM in our August 2012 issue), that was far from a universal proposition. Here, two factors distinguished the situation from that in Leach. First, there was no evidence or information to suggest A posed a continuing threat to children. Second, the governors did not meet A in an attempt to discuss the situation or otherwise conduct much investigation before terminating employment. So, although A now worked in an environment occupied by children, the school had reacted disproportionately and without regard to its responsibility to him.


Following the money in HR

Utility companies pay the highest salaries for HR managers and the pay gap between the public and private sector for HR directors is nearly £30,000. Those are two of the findings of a salary survey, published this month in People Management magazine.

The data also reveal some striking pay disparities. Although salaries in London are generally higher than in the rest of the UK, HR managers in Scotland are paid more (with a median of £45,635) than those in the capital (£43,207). But HR administrators north of the border get £4,630 less than London's median of £29,630.

In utility companies, the median pay of HR managers is £53,906 compared with £40,600 in the public and not for profit sectors, £46,525 in consumer goods and £46,228 in retail. At every level apart from the lowest - HR administrators - the private sector pays better than the public sector: HR business partners get nearly £12,000 more at £66,284; heads of HR get almost £14,000 more at £94,995; and HR directors get nearly £30,000 more at £124,800.

And if HR professionals are going to specialise, they should choose reward if they want the best, er.. rewards. Salaries for that discipline are 8% higher overall compared with generalists, or with specialists in employee relations, recruitment, and learning and development.

The survey is based on data from the Hay Group.


The low pay competition

We think something interesting is going on in the discussion about the National Minimum Wage (NMW), currently £6.31 per hour for those aged 21 and over. It's said the value of NMW has fallen by 5% since 2010 (although it is still ahead of inflation since its inception in 1999). The Low Pay Commission, which recommends the annual increase to Government, is due to report at the end of next month (February). But all the political parties are getting on the case early. Perhaps we should not be surprised that the Labour Party has set up a consultation (led by a former deputy chairman of KPMG) into how the role of the Low Pay Commission might be expanded. Nor even that the Lib Dems, in the form of Vince Cable, recommend a 'significant rise' in the NMW. But the Chancellor of the Exchequer's view that the adult rate should increase to £7.00 (a rise of more than 10%), even over two years, is getting close to startling.'

And what of the 'Living Wage'? This non-statutory figure (currently £8.55 per hour in London and £7.45 in the rest of the UK) is set by Loughborough University's Centre for Research in Social Policy for the 'rest of the UK', and for London by the Greater London Authority. It is the wage that can meet 'the basic needs to maintain a safe, decent standard of living'. Employers that pay it as a minimum, and so become accredited, are entitled to 'badge' themselves as Living Wage employers. Well over 400 have done so.

The issue of low pay will be a key battleground in next year's General Election. The Low Pay Commission will make another set of recommendations on the NMW in February 2015. Just in time for the politicians to enter the competition for who will raise it the most following polling day on 7th May.


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.