ABG Employment Newsletter – April 2011

Payment in lieu of notice and termination of employment

The general rule is that notice of termination of employment is effective only when it is received by the employee. The employee must be aware that his or her employment has been terminated. This can be important in deciding the effective date of dismissal for the purposes of calculating time limits.

However, an exception to the general rule can arise where the contract expressly provides for termination by the employer by making a payment in lieu of notice. In the case of Societe Generale -v- Geys the employee’s contract contained a pay in lieu of notice clause. Pursuant to this the employer paid the PILON monies into the employee’s bank account. The Court of Appeal has ruled that this was effective to terminate the employee’s contract even though he was unaware of the payment for some time.

The case arose in the context of a claim for bonus payments which became due at the end of the year, but only if the employee was still in employment on the date when the bonus payments fell due. The pay in lieu of notice had been paid into the employee’s bank account about 2 weeks before the year end and in these circumstances he was not entitled to the bonus payment.

Unfair dismissal for falsely claiming sick pay

In the case of Pacey -v- Caterpillar Logistics Services (UK) Limited an Employment Tribunal has ruled that an employee was unfairly dismissed for falsely claiming sick pay because, even though the employer had a covert surveillance film showing the employee carrying out various activities whilst on sick leave, the Tribunal said that the employer should have obtained a medical report before reaching its decision.

The employer’s manager had reviewed the surveillance video which showed Mr Pacey doing various things such as clearing ice from his car, driving his car, carrying shopping and walking his dog. At the time he was off sick with a back injury.

At the disciplinary hearing he said that his GP had advised him to take light exercise and to do as much as possible and that he had been seen by 5 or 6 different doctors, all of whom declared him unfit for work. The video did not show him lifting any heavy weights.

The Tribunal upheld his claim for unfair dismissal on the grounds that the employer’s investigation had been wholly inadequate and that the reason given for his dismissal was not genuine. The activities he had been seen carrying out were not in themselves inconsistent with his being unfit for work and before arriving at a decision a reasonable employer would have sought input from an occupational health doctor.

This case emphasises the dangers of managers making decisions on the basis of their own layman’s point of view without seeking specialist professional opinion on issues which are in dispute.

Fair dismissal for inappropriate Facebook comments

In the case of Preece -v- J D Wetherspoons plc a Tribunal has ruled that a pub manager was fairly dismissed for gross misconduct after she made inappropriate comments on Facebook about 2 of her customers who had verbally abused and threatened her. Her actions were in breach of the employer’s email and internet policy which specifically referred to the employee’s use of media, such as Facebook, whilst at work. The staff handbook provided that a failure to comply with the email and internet policy would amount to gross misconduct.

The manager had been subjected to abuse and physical threats from 2 customers. Whilst still on duty she went into her Facebook account and made several negative comments about them, some of which suggested that she had found the incident funny. She had not used the employer’s hotline facility whereby employees could discuss problems with senior managers on a 24 hour basis.

She thought that her privacy settings meant that only close friends could see her Facebook entries, but in fact a wider audience was able to view her Facebook page, including relatives of the customers.

The Tribunal ruled that the employer had acted fairly in dismissing the manager for a breach of its clear policy and dismissal fell within the range of reasonable responses available to a reasonable employer. Although the customer’s behaviour had been abusive and shocking, the Facebook entries took place over a lengthy period of time after the situation had calmed down and the manager had returned to working as normal. If she had felt distressed she could have used the hotline to seek advice and to ask permission to leave work early.

Redundancy selection scores and sex discrimination

In the case of Eversheds -v- De Belin the Employment Appeal Tribunal has upheld a Tribunal’s decision that a legal firm discriminated against a male lawyer on the grounds of his sex when, in a redundancy selection exercise, it inflated the score of a female colleague who was absent on maternity leave. Pregnant employees and those on maternity leave can be treated more favourably than male colleagues, but only to the extent that this is reasonably necessary to remove the disadvantages occasioned by pregnancy or maternity leave.

In this case the firm had awarded the female employee a notional maximum score in respect of one of the selection criteria, lock up, whilst the male lawyer was given his actual score. This marked the difference between his selection for redundancy and her retention.

The EAT upheld the ruling that this was sex discrimination as it was not a proportionate means of removing the female employee’s disadvantage through being on maternity leave. There were less discriminatory alternatives available, such as measuring her actual performance during the period before her maternity leave had started.

This case demonstrates that, although employees who are pregnant or on maternity leave can sometimes be treated more favourably than their male colleagues, care needs to be taken to ensure that the more favourable treatment is no more than is reasonably necessary and is not disproportionate to the disadvantage suffered through being on maternity leave.

Accounting for secret profit in breach of fiduciary duty

An employee who is also a director or who is in a senior managerial position owes a fiduciary duty to the employer. This means that the employee must act in the best interests of the company and will be in breach of this duty if he makes a secret profit.

In the case of Samsung Semiconductor Europe Limited -v- Docherty the Scottish Court of Session has ruled that an employee who made a secret profit by directing business from his employer to a company in which he secretly owned a 50% shareholding was liable to account to the employer for that secret profit even though the employer had not suffered a financial loss.

In this case Mr Docherty was employed as a Quality Assurance Manager. Unknown to his employer he secretly held a 50% shareholding in a company which provided his employer with engineering support and quality control services. For several years he ensured that his employers continued to do business with his own company and provided misleading information about competitors to ensure that the employers did not move their business elsewhere.

After the employer discovered Mr Docherty’s financial interest in the other company it claimed an account of profits made by him from his interest in that company. This claim was upheld on the grounds that he owed a fiduciary duty to his employers and had put himself in a position where there was a conflict of interests between his involvement in the other company and his duties to the employer and this had led to him making a secret profit. He was held liable to pay to the employers an amount equal to all the monies he had received from his 50% stake in the other company.

The comments in this note are of a general nature only. Full advice should be sought on any specific problems.

Christopher Gigg 
[email protected] 
+44 (0)115 934 3310

David Hardstaff
[email protected]
+44 (0)115 934 3323

Kathryn Meir
[email protected]
+44 (0)115 934 3308