It's a trap!

Employment Law Newsletter - June 2015


In this issue ...

  Beware what lies beneath   We're getting there (slowly)  
  Who calls the tune?   Counter intuitive?  
  Fractionally better or worse - depending on your point of view   Religion gets short shrift  

Beware what lies beneath

Under TUPE, a service provision change (SPC) is where a 'client' contracts out a function to, or takes it back from, a 'contractor' (or where a client's contracted-out function is passed from one contractor to another). The paradigm of an SPC rests with this simple, bilateral relationship, but this can be the tip of the iceberg. In reality, contracted-out arrangements often involve more parties. An incumbent contractor will frequently sub-contract to others distinct parts of the service or function for which it is contractually responsible to the client. So, what happens when, against the backdrop of such more complex structures, a principal contractor is removed? Does TUPE confine itself to transferring the jobs of those employed by that contractor or does it also protect employees of sub-contractors?

In Jinks v London Borough of Havering, the Employment Appeal Tribunal (EAT) preferred the second, wider approach – so, when a contract to run a car park briefly reverted to the client council (before being passed to another contractor), an employee of a sub-contractor could be treated as transferring to the council's employment in the same way as employees of the principal contractor. It was no objection to this outcome that the sub-contractor had no direct contractual relationship with the council. The key question was 'for whom, ultimately, were the sub-contractor's services provided?' and, if the answer in this case was 'the council', the claimant's contract transferred from the sub-contractor to it when the contract for the car park was removed from the principal contractor. In coming to this decision, the EAT also derived support from the wording of TUPE itself - Regulation 2 says that the expression 'contractor' should be taken to include 'sub-contractor'.

This result, in promoting more extensive 'social' protection, might appear desirable to many. And, particularly given Regulation 2, it might look like game, set and match on this debate. But the consequences are potentially chaotic. In some contracting out situations, the chain of sub-contractors could be quite long. Is Jinks to be taken as meaning that the employees of any sub-contractor, no matter how far down the chain and removed from the core client-contractor relationship, should transfer when an SPC occurs 'at the top'? If so (and despite the EAT's statement that the issue is a question of fact in each case, there is little cause to believe that tribunals will do anything other than follow the Jinks line as a matter of course), the implications for organisations surrounding HR due diligence, the costing of bids and the associated information/consultation requirements of TUPE are significant.

There is scope for an alternative interpretation of Regulation 2 that would avoid this mess – a 'sub-contractor' becomes a 'contractor' only in relation to the party immediately above it in the chain. However, unless and until there is a successful appeal in Jinks or a change in a subsequent case, those taking on commitments under an SPC should be careful to look beyond the immediate, visible service provider to check if there are unwelcome, hidden depths to the set up.


Who calls the tune?

For employers, another inconvenient, but probably more understandable, decision on SPCs has been handed down by the EAT in Jakowlew v Saga Care.

Here, the question was who can determine which employees are assigned to the 'organised grouping of employees' (the pre-requisite of an SPC)? - is it always the outgoing contractor and current employer or can the client make a legally effective request or demand for people to be removed before the service transfer date?

According to the EAT in Jakowlew, the answer under TUPE – regardless of what rights may be conferred by the commercial service provision contract - is only the current contractor. So, a council's legitimate request under that contract that a manager be removed from a service before it transferred from Saga to another contractor was of no effect under TUPE when Saga refused to implement it. The manager was in situ when the service transfer went through, so her employment transferred to the incoming contractor.

This block on 'picking and choosing people' will, of course, apply even more strongly to an incoming contractor (who will not even have a direct contract with its predecessor that might nominally confer the right to have individuals removed).


Fractionally better or worse - depending on your point of view

In Hartley v King Edward VI College, the Court of Appeal (CA) held that deduction from pay for participation in a one-day strike should generally be made on the basis of 1/260 (stipulated working days, including paid holidays, per annum) of annual salary, rather than of 1/365. Good news for employers (if one ignores the fact and effect of the strike) and not such good news for employees inclined to go on strike.


We're getting there (slowly)

Our April 2015 issue noted that the pre-election utterances of the Conservatives, as the lead partners in the then coalition government, had over-stated the legal position on exclusivity clauses in zero-hours contracts. The relevant commencement order for the new legislation had not been put through before the dissolution of Parliament in March.

That deficiency has now been rectified. Along with the new provision making the fine for national minimum wage offences apply to each worker (also featured in our April 2015 issue), the ban on exclusivity clauses took effect on 26th May. Some other commencement orders for changes under the Small Business, Enterprise and Employment Act still remain outstanding.

Also, the long-promised review of employment tribunal fees is underway. It is likely to be late 2015 before smoke rises from the chimney on this one.


Counter intuitive?

The principal purpose of introducing those fees for tribunal claims was to eliminate or reduce the incidence of frivolous or unmeritorious complaints. So, one might suppose that, amongst the subsequently greatly reduced number of claims, the proportion of stronger, and therefore successful, ones would have increased. Not so, according to research by the 'Hard Labour' blog. Its analysis of recent statistics (see the April 2015 issue – a trend further confirmed by the just released figures for January to March 2015) reveals that the percentage of winning claimants is actually declining.

What are the conceivable explanations for this counter-intuitive state of affairs? Quite possibly, the relatively new phenomenon of mandatory early conciliation achieves 'quick' settlements in some disputes which would produce the strongest claims, leaving 'medium level' ones to proceed to tribunal. And perhaps employers are 'upping their game'. This could be for internal processes, but, given the stronger case that must now often be answered at any final hearing that remains necessary, it is more likely to be at the stage of litigation – more diligent preparation, more frequent securing of legal representation, better quality of representation et cetera.


Religion gets short shrift

It's not been a good month for those arguing that their religious belief was worthy of protection in the public sphere.

In the well-publicised, non-employment case of Lee v Ashers Baking, the Northern Ireland County Court was called upon to consider the question of 'what gives' when the two protected characteristics of sexual orientation and religious belief collide. It adopted the same position as the English Courts in another non-employment case, Bull and Bull v Hall and Preddy – in our April 2012 issue, we featured the CA decision, subsequently endorsed by the Supreme Court. Consequently, in Lee, the sincerely held Christian beliefs of a bakery's directors provided no legal excuse for its refusal to produce a cake for a same-sex wedding bearing the words 'Support Gay Marriage'. Direct discrimination on the ground of sexual orientation had occurred.

And, back in the employment arena, in Begum v Pedagogy Auras UK, the EAT declined to support a woman's assertion that the restriction applied by her prospective employer, a children's nursery, on full or floor-length clothing in the interest of health and safety (being a trip hazard) indirectly discriminated against her on grounds of her Muslim belief. It backed the employment tribunal's views that the restriction did not place Muslim women at a disadvantage (because there was no requirement in the Muslim faith that women wear floor-length, as opposed to ankle-length garments) or, if such disadvantage could be shown, the restriction was nevertheless justified in the circumstances.


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.