ABG Employment Newsletter – January 2012

New compensation limits

The usual annual increase on compensation limits is effective from 1st February 2012.

The maximum compensatory award for unfair dismissal has increased from £68,400.00 to £72,300.00 for cases where the effective date of termination is on or after 1st February 2012.

In addition the maximum amount of a week’s pay for calculating statutory redundancy pay and the unfair dismissal basic award has risen from £400.00 to £430.00.

Qualifying period for unfair dismissal

Further details are now available of the Government’s proposal to increase the qualifying period for unfair dismissal claims from 1 year to 2 years. The new qualifying period of 2 years will apply only for employees who start new employment on or after 6th April 2012.

Employees whose employment started before 6th April 2012 will still qualify for unfair dismissal protection after 1 year. So, for example, an employee with 11 months’ service on 6th April will only have to wait 1 month before qualifying for protection.

Regional workplace mediation networks

The Government has announced a pilot scheme for two regional mediation networks in Cambridge and Manchester for small and medium sized enterprises. BIS will fund mediation training for employees from a group of 24 SME’s in each pilot area later this year.

The pilot scheme reflects the Government’s commitment to workplace mediation which was outlined in its resolving workplace disputes consultation. The aim is to try to resolve workplace disputes at an early opportunity before they reach the employment tribunal stage.

The pilots will run for 12 months and, if successful, the Government will consider introducing them into other areas.

No compensation for loss of reputation

In the case of Edwards -v- Chesterfield Royal Hospital Foundation Trust the Supreme Court has ruled that damages for loss of reputation or loss of employment prospects cannot be awarded in a case where an employee is dismissed in breach of a contractual disciplinary procedure.

Traditionally the Courts have refused to award breach of contract damages for loss or damage which an employee claims has been caused by the manner of dismissal. In this case the employee was dismissed for gross misconduct and has brought civil proceedings for breach of contract alleging that the contractual disciplinary procedure was not fully adhered to. His claim for loss of earnings and alleged damage to his reputation.

The Court has made no finding as yet on the merits of his claim, but in the meantime the employer has made a successful application to strike out part of the claim insofar as it exceeds loss of earnings for the contractual notice period. Although the Court of Appeal reinstated the claim for damages for loss of future employment prospects alleged to have been caused as a result of the breach of the contractual disciplinary procedure, this ruling has now been overturned by the Supreme Court which has declared that it would be contrary to previous case law which precludes a civil claim for damages for loss arising from the manner of dismissal. The Supreme Court has clarified that the employee’s rights in such circumstances are to claim compensation through the employment tribunal for unfair dismissal – a civil claim can be brought only for loss of salary and benefits for the notice period and not any other damages.

Discrimination claims – no joinder of former employee as second respondent

In the case of Beresford -v- Sovereign House Estates the EAT has ruled that where a discrimination claim has been brought against an employer, there is no mechanism for the employer to get an employment tribunal to add a former employee as a second respondent to the tribunal proceedings.

In this case an employee claimed she had been sexually harassed and brought a discrimination claim in the tribunal against her employer. She chose not to make the employee a respondent to the proceedings. The employer then applied to the tribunal asking it to join the former employee as a second respondent, but the EAT has refused to allow this.

Despite this ruling, it might be possible for the employer subsequently to bring a contribution claim against the employee in question in the civil courts if the claimant’s discrimination claim is successful. In this event the employer could seek to recover part or all of the compensation it has had to pay from the offending employee based on a claim under the Civil Liability (Contribution) Act 1978.

TUPE and service provision changes

In two cases the EAT has considered whether there was a service provision change under TUPE and has ruled that there was no such change for the purposes of the Regulations.

In the first case the EAT held that there was no service provision change because the activities which were carried out by the incoming contractor differed from those carried out by the old outgoing contractor. The case concerned the provision of IT services to a local authority under a framework agreement. There were two service levels – a complete managed service or alternatively software maintenance support. Following a retendering a new contract was awarded to a new service provider, but there were significant differences compared to the previous service provided by the outgoing contractor. The differences in the activities provided meant that there was no service provision change for the purposes of TUPE.

In the second case the EAT ruled that there was no service provision change because the activities carried out by the different contractors before and after the change were on behalf of different clients. The facts of this case were somewhat unusual, but it is no surprise that the EAT decided that the service provision change test will be satisfied only if the activities before and after a change in contractors are on behalf of the same client.

TUPE and administration – pre-transfer dismissals

Where there is a TUPE transfer a dismissal will be automatically unfair if the reason for the dismissal is the transfer itself or a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce.

In the case of Spaceright Europe Ltd -v- Baillavoine the Court of Appeal has ruled that an employee’s dismissal by a company that was in administration was automatically unfair under TUPE even though no transferee had been identified when the dismissal took place. The Court ruled that a pre-transfer dismissal can be connected with the transfer and therefore automatically unfair regardless of whether the identity of the transferee was known or even contemplated when the dismissal was carried out.

The Court upheld the employment tribunal’s finding that the employee’s dismissal by the administrators was connected with a subsequent TUPE transfer. Further, the administrators’ desire to make the business more attractive to potential transferees did not amount to an economic, technical or organisational reason for dismissal.

In this case the Chief Executive of the company had been dismissed by the administrators on the day they were appointed. About a month later the administrators sold the business as a going concern to new owners. This was a TUPE transfer and the Chief Executive’s claim for automatic unfair dismissal was upheld. The tribunal held that he had been dismissed to enable a purchaser to acquire the business without the continued employment of its Chief Executive. Liability for the dismissal passed to the new owners, the transferees.

This decision serves as a useful reminder of the need for caution when buying a business that is in administration.

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

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