ABG Employment Newsletter – March 2012

Employment Tribunal procedure

A number of changes to the procedure in tribunals are scheduled to take effect for claims which are brought on or after 6th April 2012.

One of these changes is that witness statements will stand as evidence in chief and will be taken as read unless the Tribunal Judge decides otherwise. It is usual for tribunals to order the parties to exchange written witness statements before the hearing. Witnesses then read out their statements as their evidence in chief before being cross examined. However, this is thought to be an unnecessary waste of time in many cases and therefore, in proceedings which are issued on or after 6th April 2012, the witness statement will automatically stand as the evidence in chief without the witness having to read it out.

Another change relates to the limit on deposit orders and costs orders. If a tribunal considers that all or part of a claim or response has little reasonable prospect of success, the party can be ordered to pay a deposit of up to £500 as a condition of continuing with that part of their case. This limit is to be increased from £500 to £1,000.

The current limit on the amount of costs which a tribunal can order a losing party to pay is £10,000. This limit is also due to be doubled up to a maximum of £20,000.

Redundancy selection: pool of one is fair and is unfair

Two recent cases involving redundancy selection where, in each case, the selection pool consisted of only one employee demonstrate that each case depends on its own particular facts.

In one case the EAT upheld the Tribunal’s decision that it was fair for the employer to use a selection pool of just one employee where it was ceasing its operations in China and the claimant was the only employee who had been sent to China. The EAT said decisions as to pools and selection criteria are matters for the employer and a tribunal should rarely interfere with them.

In contrast, in the other case the EAT upheld a Tribunal decision that using a selection pool of just one employee was unfair. In this case the claimant was one of four actuaries who each managed a number of pension funds. A number of the claimant’s clients were lost and when the employers were unable to obtain new work, they decided that a redundancy selection pool consisting of only the claimant was appropriate.

However, the Tribunal ruled that this was not reasonable and that the other actuaries should have been included in the selection pool. The other actuaries carried out similar work to that of the claimant, her work had been praised and there was only a slight risk of further clients being lost if their scheme actuary was changed.

These two contrasting decisions demonstrate that there are no fixed rules about deciding on the appropriate selection pool. It is important that an employer genuinely applies its mind when deciding which employees should potentially be placed at risk of selection.

Redundancy: selection for alternative role can be based on subjective criteria

When selecting employees for redundancy through a scoring process an employer should use objective criteria so far as possible and avoid basing selection on subjective judgments. However, when considering those employees who have been identified for redundancy for suitable alternative employment, the employer does not have to confine itself to objective criteria but can appoint who it considers is best for the job.

This was confirmed by the EAT in a recent case in which it said that when an employee at risk of redundancy is being considered for an alternative role, the employer has considerable flexibility when assessing their suitability for the role and may use subjective criteria. Good faith assessments of the employee’s qualities should not be overturned by a tribunal substituting its own decision for that of the employer.

In this case the claimant was one of four senior managers whose roles became redundant when they were combined into a single head of department position. The claimant was placed at risk and invited to apply for the new role as well as others that were to be created. The employers used 10 competencies which were regularly used in the annual assessment process and which were largely subjective in nature. The claimant was unsuccessful in his application and was therefore dismissed for redundancy.

The Tribunal ruled that his dismissal was unfair, but this decision was set aside by the EAT which pointed out that the process for deciding whether a redundant employee should be offered an alternative role is different from the process for redundancy selection itself. It noted that whilst subjectivity is often classed as a “dirty word”, it is a fact that not all aspects of job performance lend themselves to objective measurement and there is no obligation on an employer to use objective criteria in the context of an interview for alternative employment. In this case the claimant’s suitability for the job had been assessed in a formal evaluation process by two managers who applied identified criteria and made an evaluation of his suitability in good faith.

Employee working overseas on rotational basis has unfair dismissal protection

In a recent case the Supreme Court has ruled that an employee whose place of work was Libya at the time of dismissal, but whose employment contract had strong connections with the UK was protected by unfair dismissal law. The Court said that in cases where the employee’s place of work is not the UK, the correct question to ask is whether there is a connection with Great Britain which is sufficiently strong so that it can be said that Parliament would have regarded it as appropriate for an Employment Tribunal to deal with the claim.

In this case the employee worked on a rotational basis involving 28 days’ work in Libya followed by 28 days leave in the UK. His salary was paid in sterling after deduction of UK income tax and national insurance contributions and he was retained on the company’s UK pay and pension structure. His contract was stated to be subject to UK law and he had been repeatedly assured by the employer that his employment relationship with them was governed by UK law.

Considering all these circumstances as a whole the Supreme Court ruled that he was protected by unfair dismissal law as he had a sufficiently strong connection with Great Britain. This was a question of fact and degree. Further factors which pointed to the strong connection with Great Britain were that his home was in Great Britain and in practice human resources matters were handled in Aberdeen.

TUPE – change in location

Following a TUPE transfer an employee is entitled to resign and treat himself as dismissed where there has been a substantial change to the employee’s working conditions to their material detriment. The employee will then have grounds for an unfair dismissal claim if the substantial change was connected to the TUPE transfer and was not an economic, technical or organisational reason entailing changes in the workforce.

In a recent case the EAT considered whether a relocation as a result of a TUPE transfer entitled employees to resign and treat themselves as dismissed. The claimants were bus drivers based at a depot in west London. There was a TUPE transfer of their employment to a new employer whose depot was in Battersea in southwest London.

The employees were concerned about the change in location because it would extend their working day by between 1 to 2 hours because of the extra travelling involved in London and they resigned. They then brought unfair dismissal claims which were upheld by the Employment Tribunal.

This ruling has been upheld by the EAT which said that the relocation of 6 miles was a substantial change in their working conditions to their material detriment. In London a move from north to south of the river was substantial and an increase in the working day of between 1 to 2 hours was a material detriment. They were therefore entitled to resign and claim that they had been constructively dismissed. The dismissals were unfair because there was no ETO reason.

TUPE – replacement of employees by corporate franchisees

Following a TUPE transfer a transfer related dismissal will not be automatically unfair if the employer can show that it was for an ETO reason entailing changes in the workforce. In a recent case the EAT considered whether there had been “changes in the workforce” when employees were dismissed but offered the opportunity to continue working for the business through limited company franchise arrangements.

The claimants were employed as meter readers. Their employment transferred to a new employer when their current employer’s service contract with Scottish Power came to an end. Their new employer’s business model was not to employ meter readers directly, but to operate its business through franchises with independent limited companies owned by individual meter readers.

Following the TUPE transfer the new employer consulted with the meter readers and offered them the opportunity of forming franchise companies. Some of them refused to do this and hence were dismissed.

They brought claims for automatic unfair dismissal which were upheld by the Tribunal. However this ruling has been reversed by the EAT. The EAT held that a corporate franchisee was not part of the “workforce” of the service provider and hence the dismissal of the employees and their replacement by corporate franchisees amounted to an ETO reason entailing changes in the workforce.

The claims have however been remitted back to the Employment Tribunal to decide whether or not the dismissals were fair or unfair on general principles concerning redundancy dismissals.

TUPE and service provision changes

There will be a relevant transfer for the purposes of TUPE if there is a service provision change involving an organised grouping of employees whose principal purpose is carrying out activities on behalf of a client. In a recent case involving the well-known transport business, Eddie Stobart Limited, the EAT gave guidance on what constitutes “an organised grouping of employees”.

In the case the EAT upheld the Tribunal’s decision that there had been no service provision change when a contract transferred from Eddie Stobart Limited to a new contractor. The EAT said that, to comprise an organised grouping of employees, it was not sufficient that the employees principally carried out the relevant activities on behalf of the client, but that rather the carrying out of those relevant activities had to be the principal purpose of the organised grouping to which they belong. In other words, employees must be organised by reference to the requirements of that particular client.

In this case the claimants worked at a depot which provided logistic services to two clients. The shift patterns were such that day shift employees worked principally on a contract for one client whilst the night shift employees worked principally on the contract for the other client. The contract on which the day shift employees worked was awarded to a different organisation. Eddie Stobart considered that the day shift employees were assigned to that contract and that there had been a service provision change such as to transfer their employment to the new contractor. However the new contractor refused to accept this. The claimants were therefore dismissed by Eddie Stobart.

The Employment Tribunal and the EAT have ruled that there was no TUPE transfer and no service provision change. The day shift employees were not an organised grouping of employees whose principal purpose was carrying out work for the first client. Although they spent the majority of their time working on that contract, it was because of the way the shift patterns were organised, not because they were organised into a team whose principal purpose was to carry out the work for that client.

It is clear from this ruling that in deciding whether there is a service provision change and what amounts to an organised grouping of employees, it is important to concentrate on whether they are organised as a particular client’s team, i.e. their purpose is to work for that client, as opposed to whether in practice they in fact principally work for that client. So TUPE is intended to apply to situations where the outgoing service provider has in place a team of employees that are essentially dedicated to carrying out the activities that transfer.

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