Employment Law Newsletter October 2008

In this edition of the Newsletter, we cover recent changes in legislation as well as developments in age discrimination law and the statutory disciplinary and dismissal procedures. In the light of the current economic climate, we also give guidance on how to conduct a fair redundancy process.

1. Age discrimination

Two years on from the Age Discrimination Regulations, more and more cases are now being heard by tribunals and the higher courts.

• Compulsory retirement age can be justified

The Advocate General of the European Court of Justice (ECJ) has given his opinion in the case of Age Concern v BERR, (the Heyday challenge), the case which challenged the provision in the Employment Equality (Age) Regulations 2006 (the Regulations) that entitled employers to require that employees retire at 65 or over. His view (which is not binding on the ECJ), is that a national rule that allows employers to dismiss employees who are aged 65 or over can, in principle, be justified under European law which underpins the Regulations.  The ECJ is due to give its opinion early next year.

• Enhanced redundancy schemes – employers need to take care where age groups are treated differently

The Employment Appeal Tribunal (EAT) has considered in two recent cases whether enhanced redundancy schemes whose terms do not mirror those of the statutory scheme are discriminatory on the grounds of age: (i) MacCulloch v Imperial Chemical Industries plc and (ii) Loxley v BAE Systems Land Systems (Munitions & Ordnance) Ltd.

Under the Regulations, differences in treatment on the grounds of age will not be discriminatory if they can be justified, i.e. whether they are a proportionate means of achieving a legitimate aim.

(i) Under the ICI scheme, older employees with longer service were entitled to relatively more than younger employees. The tribunal agreed that the aims of the scheme were legitimate and that the discrimination was justified. However, the EAT said that the tribunal had not properly considered the question of proportionality and the need to balance business needs against the effects of the scheme on individuals.

(ii) Under the BAE scheme, those near retiring age were entitled to a reduced payment. Mr Loxley was 61 when he volunteered for redundancy, and he claimed direct age discrimination. The tribunal decided that the discriminatory effect of the scheme was justified as it prevented employees close to retirement from receiving a windfall and because the terms had been agreed with the trade unions. However, the EAT considered that the tribunal had not fully considered the effects of the terms, although different treatment of those about to draw a pension could in principle, be justified. It also said that reaching agreement with trade unions is a relevant consideration, but it is not definitive.

These two cases highlight the need for employers with enhanced schemes to conduct a careful analysis of the scheme’s effects and to examine alternatives to show whether the aim could be achieved by less discriminatory means. This is likely to be difficult and time-consuming but employers who do not do this may be at risk of age discrimination claims. Employers could instead consider amending schemes to mirror the statutory scheme, which would make them exempt.

• Discriminatory job advertisement

In Rainbow v Milton Keynes Council, an employment tribunal held that an advertisement for a vacancy that would ‘suit candidates in the first five years of their careers’ was discriminatory as it put older persons at a disadvantage.

2. Disciplinary, dismissal and grievance procedures

The statutory dispute resolution procedures were introduced in 2004 in an attempt to reduce the number of tribunal claims, but they have been so complex in their practical application that a lucrative satellite industry seems to have arisen for those sacked or disgruntled employees to pursue a claim that would otherwise be without merit, simply because the employer has fallen foul of some technical part of the procedures.  Following the consultation which ended last year, the Employment Bill, which is now before Parliament, proposes the abolition of the statutory procedures and their replacement with a voluntary code of practice.  It is anticipated that the Bill will take effect from April 2009, so watch this space…..

In the meantime, the case law continues apace. Two recent cases before the Court of Appeal show contrasting approaches to delays:

• A grievance constitutes an appeal against dismissal

In Towergate London Market Ltd v Harris, the Court considered the question of the extension of the time limit for bringing an unfair dismissal claim. The procedures allow for time to be extended where the claimant reasonably believes that there is an ongoing dismissal procedure at the time of the expiry of the normal time limit.

Mrs Harris was made redundant on 31 October 2005 for and she did not appeal. However, she submitted a letter on 25 January 2006 stating that she wished to raise a `’formal grievance” about her selection for redundancy and she submitted her claim for unfair dismissal on 21 April 2006. The employment tribunal held that the letter of 25 January was not an appeal letter and that therefore the time limit was not extended. However the Court of Appeal held that Mrs Harris was challenging her dismissal and endorsed the EAT’s approach in earlier cases in which tribunals were urged to avoid an unnecessarily legalistic approach.

• Delay does not make dismissal automatically unfair

In a case that perhaps helps redress the balance in favour of the employer, Selvarajan v Wilmot and ors, the Court has held that an employer’s delay in hearing an appeal against dismissal was not a failure to complete the statutory dismissal procedure making the dismissal automatically unfair.

Ms Wilmot was dismissed for misconduct in March 2005 and her appeal was dismissed in July 2005. She then lodged tribunal claims including automatic unfair dismissal citing the employer’s failure to complete the statutory procedure within a reasonable time. Despite a general statutory requirement that each procedural step must be completed without unreasonable delay, the Court of Appeal held that ‘completion’ means exactly that and a failure to comply with a general requirement of the procedure is not the same as a failure to complete it.

3. Redundancies in troubled times

It is important to bear in mind that the statutory procedures apply not only to disciplinary cases, but to most forms of dismissal, including redundancies of less than 20 employees within a 90 day period*. We set out briefly the procedure to follow when making redundancies. Note that this is general guidance only and should not be taken as legal advice that would necessarily apply to any given situation.

When dealing with redundancies, it is important to ensure not just that the statutory procedures are complied with, but also to ensure that a fair procedure under the normal unfair dismissal requirements is followed.

Step 1: Establish that there is a genuine redundancy situation.

Step 2: Consider the ‘pool’ from which redundancies will be made, and the selection criteria to be applied; list any alternative vacancies within the company or group.

Step 3: Meet with all of the employees who might be made redundant and explain the reasons for the potential redundancies. Consider asking for volunteers.

Step 4: Score each potentially redundant employee using the selection criteria and scoring guidelines.

Step 5: Write to those employees that have been provisionally selected for redundancy, inviting them to a meeting to discuss their provisional selection.

Step 6: Consult with each employee individually about their scores, the proposal to select them for redundancy and the terms of the redundancy. Discuss details of any available alternative roles within the group.

Step 7: After the meeting, follow up any suggestions made to avoid the redundancies and consider any representations made.

Step 8: Where a decision has been made to make an employee redundant, invite that employee to a further meeting and confirm that the employee has been selected for redundancy. Go through the redundancy package.

Step 9: Write to the employee confirming the decision and specify the termination date. Confirm that the employee has the right of appeal. Explain how to appeal and the relevant time limit.

Step 10: If employee appeals, invite them to attend a further meeting to hear the appeal which should if possible be held by someone senior to the person who held the previous meetings.

Step 11: Write to the employee confirming the outcome of the appeal and that this is a final decision.

* For redundancies of 20 or more employees over a 90 day period, collective consultation obligations will apply.

4. LEGISLATIVE CHANGES TAKING EFFECT IN OCTOBER AND NOVEMBER INCLUDE:

• Maternity leave

For employees who are due to give birth on or after 5 October 2008, the distinction between the first six months of maternity leave (ordinary maternity leave) and the second six months (additional maternity leave) is reduced and there will be little difference between the two periods and the same terms and conditions will apply. This means that employees have the right to receive all non-monetary contractual benefits, such as a company car and insurance benefits and will accrue annual leave in accordance with their contractual terms. However, the position with regard to pension entitlements during any unpaid periods of maternity leave is unchanged, and an employer is not required to pay the normal contributions.

• Directors’ duties

From 1 October, company directors are subject to additional duties under certain parts of the Companies Act 2006. They must avoid situations in which they have a direct or indirect interest that conflicts with the company’s interests and they must declare to other directors their interests in any proposed transactions or arrangements. Failure to declare an interest will be a criminal offence.

• National minimum wage

From 1 October, the standard minimum wage for those aged 22 and over increased from £5.52 to £5.73; the development rate for those aged 18 to 21 increased from £4.60 to £4.77 and the young workers rate for those aged 16 and 17 increased from £3.40 to £3.53.

• Statutory sick pay (SSP) for agency workers

From 27 October, agency workers on contracts of less than three months will be entitled to SSP. They are currently the only group of employees not entitled to SSP.

Knight-Webb Solicitors are specialists in employment law. We pride ourselves in providing a first-rate, cost-effective and personal service to clients. We can help you to avoid the employment law pitfalls and ensure that your procedures are up-to-date, taking into account all the recent changes in the law, including those outlined in this Newsletter. Contact Sunita Knight-Webb on 020 7207 6195 or at sunita@knightwebb.com.