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Law for Business

Knowhow - guidance - precedents

30 APR 2012

Age discrimation and costs considerations

This month hrlaw@trowers.com reports on age discrimination and costs considerations, TUPE and a substantial change in working conditions on relocation, and redundancy and suitable alternative employment. In addition, hrlaw@trowers reports on what comes in on 6 April 2012, the Government's call for evidence on the current dismissal process and "compensated no-fault dismissals".

  • 1 Case Law
  • 1.1 Cost considerations and age discrimination

The Court of Appeal has upheld the tribunal's and EAT's finding that a redundancy dismissal, the timing of which was motivated to avoid the cost of an enhanced pension if the employee was still employed at the age of 50, was justified age discrimination in the case of Woodcock v Cumbria Primary Care Trust. The Court stated that although the age discrimination legislation does not exclude cost considerations from the defence of justification, case law from the ECJ shows that "an employer cannot justify discriminatory treatment "solely" because the elimination of such treatment would involve increased costs".

The claimant was dismissed on grounds of redundancy so as to avoid his eligibility for early retirement on enhanced terms, thereby saving the Trust at least £500,000. Although issuing the notice of dismissal was less favourable treatment on the ground of his age (another person who was not coming up to early retirement age would not have been treated in the same way), the avoidance of additional costs was a legitimate part of the Trust's genuine decision to make the claimant redundant and the discrimination was justified.

  • 1.2 Discrimination on grounds of marital status

The EAT has held in the case of Hawkins v Atex Group that it is not unlawful discrimination on the grounds of marital status if a spouse is dismissed on the grounds of being married to a particular person. This will be the case unless the ground for the less favourable treatment is specifically marriage, as opposed to a close relationship which takes the form of marriage.

The Claimant was employed for less than a year by a company managed by her husband, when a policy prohibiting employment of close relatives was implemented which led to her dismissal. The EAT found that there was no general rule or criterion applied by the employer about married women, and that in dismissing the Claimant the employer was not motivated by the fact that the Claimant was married to her husband. It is interesting to note that in the recent EAT case of Dunn v Institute of Cemetery and Crematorium Management (reported in January's edition of hrlaw@trowers) it was found that detriments arising from being married to a particular person, and not only being married, could found a complaint of marital status discrimination.

  • 1.3 Redundancy pool of one found to be fair

In contrast to the case of Capita Hartshead Ltd v Byard reported in last month's edition of hrlaw in which it was found that a redundancy pool of one was unfair, the Employment Appeal Tribunal (EAT) has held in Halpin v Sandpiper Brooks that a redundancy pool of one was fair.

Mr Halpin worked in a unique sales role and so therefore, when his employer decided to outsource the sales work, he was put in a pool of one. The EAT held that the decision taken by the employer was "one that was reasonably open to it" and therefore could not easily be overturned.

  • 1.4 Suitable alternative employment and redundancy

The EAT has held in the case of Samsung Electronics v Monte D'Cruz that an employer could use a degree of subjectivity in coming to a decision as to who to appoint following a re-organisation where a redundant employee was invited to apply for a newly created role.

The claimant was one of three Heads of Department who were informed that their roles would be abolished and merged into a new position of Head of Sales. The claimant applied for the new position and was unsuccessful. The tribunal found that the claimant's dismissal was unfair, in part, because the criteria for selection was too "subjective". The EAT found that although a tribunal should certainly consider how far an interview process was objective when taking into account the arrangements for suitable alternative employment, some subjectivity was inevitable where a post has disappeared and the employer is selecting for a new role.

  • 1.5 Collective redundancies and the obligation to consult

The Advocate General has given his opinion in United States of America v Nolan that the obligation to consult about collective redundancies is triggered, within a group structure, when a body or entity which controls the employer makes a strategic or commercial decision which compels the employer to contemplate or to plan for collective redundancies.

RSA Hythe, a US army base in Hampshire, was closed resulting in 200 civilian redundancies. The claimant made a claim for a protective award on the basis that the USA had not consulted as required by s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992. She argued that consultation should have begun before the decision to close the base was taken, and should have covered that operational decision. The Advocate General stated that the EU Collective Redundancies Directive required consultation with workers' representatives about the ways to avoid or reduce the number of collective redundancies to begin in good time. As a result the employer's obligations must be triggered when it is possible for such consultation to be effective; it would be too late if the decision to terminate employment contracts had already been taken. In this instance the obligation to begin consultations arose when the army base had been identified as subject to the possibility of closure

  • 1.6 Part-time judges may be covered under Part-Time Work Directive

The European Court of Justice (ECJ) has held in the case of O'Brien v Ministry of Justice that national law may exclude part-time judges from the definition of "worker" for the purposes of the EU Directive and Framework Agreement on Part-Time Work only if the relationship between judges and the Ministry of Justice is substantially different from an employment relationship.

The claimant, a part-time recorder, claimed that a policy preventing only part-time judges paid on a daily fee basis from receiving a judicial pension was unjustifiable less favourable treatment in breach of the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000. The ECJ held that the fact that judges are office-holders under national law is insufficient in itself to deprive them of the Directive and Framework Agreement's protection. It went onto hold that the question in respect of the pension rights was whether the part-time judges were less favourably treated than comparable full-time workers. It noted that any difference in treatment must be in response to a genuine need, and be necessary and appropriate to achieve the objective pursued, bearing in mind that budgetary considerations cannot justify discrimination.

  • 1.7 Abandoning claims at tribunal

The EAT has held in the case of Segor v Goodrich Actuation Systems that a tribunal should approach a situation where a party appears to be seeking to concede, abandon or withdraw part of their case with great care.

In this case the tribunal, thinking that the Claimant's lay representative had abandoned an aspect of the Claimant's discrimination complaint, did not proceed to determine that aspect of the Claimant's claim. The EAT held that a tribunal should take great care to ensure that if a party seeks to abandon or to concede a central point during the course of a hearing, that that is exactly what that individual wishes to do. The concession or withdrawal cannot properly be accepted unless it is "clear, unequivocal and unambiguous".

  • 1.8 TUPE and a substantial change in working conditions

The EAT has held in the case of Abellio London v CentreWest London Buses that a change of location on a TUPE transfer can give rise to a claim for constructive, automatically unfair dismissal.

The claimants worked as bus drivers on the 414 bus route operated from CentreWest Buses' Westbourne Park depot. On the transfer of the route to Abellio, which intended to operate the route from its own depot in Battersea, the claimants objected to the transfer as the new location affected their travel and domestic arrangements (it meant an extra one to two hours travelling per day) and resigned. The EAT upheld the tribunal's decision that there had been a substantial change to the employees' working conditions to their material detriment under TUPE, and furthermore found that the move was a repudiatory breach of contract (the mobility clause in their contracts did not extend to the Battersea location). The employees had been constructively dismissed and the dismissals were automatically unfair as they were related to the transfer.

  • 1.9 Service provision changes and TUPE

The EAT has held in the case of Johnson Controls v UK Atomic Energy Authority that there will be no service provision change to which TUPE will apply when the service is conducted in a fundamentally or essentially different manner following the changeover.

The claimant was a taxi administrator employed by Johnson Controls, which provided a taxi administration service for its client, United Kingdom Atomic Energy Authority (UKAEA). UKAEA terminated the arrangement and took the activity of booking taxis in-house. UKAEA's secretaries booked taxis directly with taxi firms instead of using a taxi service administrator, and so booking taxis no longer existed as a centralised service. As the services carried out after the changes were essentially different from those carried out beforehand, there was no transfer to which TUPE would apply.

  • 1.10 R(FDA and others) v Secretary of State for Work and Pensions and another [2012] EWCA Civ 332

The Court of Appeal has dismissed the pubic sector unions' appeal against the Government's decision to use Consumer Prices Index (CPI) instead of Retail Prices Index (RPI) as the basis for the annual inflationary readjustment of public sector pensions.

The High Court had previously rejected a challenge to the Government's decision to use CPI as the basis of readjustment. The unions appealed the High Court decision in the Court of the Appeal on the grounds that the Social Security Administration Act 1992 does not allow the Secretary of State to choose CPI as the appropriate basis of adjustment but the Court of Appeal ruled that the Secretary of State has a discretion to select the method and he should act rationally and only take account of appropriate matters when making a decision. The Court of Appeal also held that the Secretary of State was entitled to take the state of the national economy into account when selecting the appropriate basis for readjusting public sector pensions.

  • 1.11 Parizad: Pensions Ombudsman determination(82720/2)

Mrs Parizad, made a complaint to the Pensions Ombudsman in relation to her deceased sister's pension scheme (the Scheme) about the failure to exercise a discretion to pay a lump sum death benefit within a 24 month period. The Ombudsman held that the trustees of the Scheme were in breach of trust.

Mrs Parizad's sister was a member of the Scheme when she died intestate and in active service. Under the rules of the Scheme the trustees could pay the whole or part of the lump sum death benefit within 24 months in shares which the trustees could decide at their absolute discretion. If after 24 months there are unpaid benefits, these were paid to the member's personal representative. Mrs Parizad and another sister of the deceased were nominated by the her to be equal beneficiaries of her lump sum death benefits.

The trustees paid out half of the benefit to the deceased's other sister but had difficulty in contacting Mrs Parizad. They carried forward the matter deciding to wait until the 24 month period expired so that they could pay the benefit to the deceased's personal representative. As a result the benefit paid was substantially reduced due to a tax liability as an unauthorised payment under the Finance Act 2004.

The Ombudsman held that the trustees' decision to deliberately fail to exercise their discretion within the 24 month period was a breach of trust. They knew or should have known that this would reduce the benefits due to tax and, in actively deciding to pay to the member's personal representative instead of her nominated beneficiaries, this breach ultimately amounted to maladministration. The trustees were ordered to establish a trust for Mrs Parizad to receive the full benefit due to her of £31,375 plus interest.

  • 2 News
  • 2.1 Government seeks views on dismissal rules

The government has published a Call for Evidence to examine the current dismissal process. Ministers are to seek the views of employers and employees, and gather evidence from interested parties, on whether current dismissal procedures are too onerous, too complex and whether or not there is a lack of understanding in their application.

Views are also being sought on the idea of compensated no-fault dismissal for micro-businesses with fewer than 10 employees. Under such a system, a business would be able to dismiss a worker from a micro-business, where no fault had been identified on the part of the employee, with the payment of a set amount of compensation. Views are being sought on whether, if such a system is adopted, there should be a flat rate for paying off staff, or whether compensation should be a multiple of a worker's salary. The Call for Evidence will close on 8 June.

According to the Telegraph, the CBI has said that all companies should be allowed to pay off workers in return for them never bringing a tribunal claim, and not just those with fewer than 10 employees, arguing that it "would give firms confidence to hire", as employer and employee can part ways with no fault on either side, and workers would have sufficient money to allow them time to find a new job".

  • 2.2 Employer's Charter updated

The Employer's Charter, first published in January 2011, has been updated to include pointers on sickness absence and recruitment.

According to the Department for Business, Innovation and Skills (BIS), the aim of the Charter is "to counter the misconception that employment protections are all one-way - towards the employee". It gives greater clarity to managers on what they can already do to deal with issues in the workplace, on subjects such as performance, sick leave, maternity leave, requests for flexible working and redundancy.

  • 2.3 Minimum wage to be frozen for 20-year-olds

Last month's edition of hrlaw@trowers reported that the minimum wage may be frozen. This has been confirmed and workers aged 20 and under will have their national minimum wage entitlement frozen at its current level of £4.98. The rate for those aged 16 to 17 will also remain at its current level of £3.68.

The decision is part of an attempt on the Government's part to create more jobs for workers aged 20 and under as the number of jobless 16-24-year-olds has passed the one million mark.

  • 2.4 Call for proposed tribunal fees to be linked to size of claim

The Telegraph reports that business leaders have backed plans to make past and present workers who sue their employer pay a fee, as it would deter the number of vexatious claims in the system and give firms the confidence to hire employees.

Under current proposals the Ministry of Justice has said that higher fees could be introduced for claims worth £30,000 and above. The British Chambers of Commerce (BCC) however has called for any individual seeking compensation at a tribunal of more than £20,000 to pay a higher fee than those claiming smaller sums. John Longworth, director general of BCC said "This will deter vexatious claims for those asking for millions in compensation as a scare tactic, but still allow those with a genuine grievance to access to system". Under the proposed rules, claimants could have to pay £1,500 to see a case go to tribunal.

  • 2.5 Wearing a cross is just decoration according to Archbishop

The Telegraph reports that Dr Rowan Williams, the Archbishop of Canterbury, has said that wearing a cross is just a "religious decoration" for many people and not an essential part of Christianity. His remarks have angered Christian campaigners who accused the Archbishop of failing to stand up for the right of believers to wear crosses.

It will be interesting to see whether the European Court of Human Rights agrees as it is due to consider the case of Eweida and Chaplin v United Kingdom later this year. Ms Eweida and Ms Chaplin both wanted to manifest their religious belief by wearing a cross over their clothing at work and were disciplined for failing to comply with their employers' policy on uniforms. In both instances their claims for discrimination on grounds of religion or belief were unsuccessful.

Meanwhile, the Telegraph reports that David Cameron's spokesman has said that Mr Cameron would consider changing the law to protect the right of Christians to wear the cross at work if European judges fail to reinforce religious freedom.

  • 2.6 Dual contracts guidance published

HM Revenue & Customs has published guidance on Dual Contract Arrangements. Dual Contract Arrangements are most commonly seen where a foreign domiciled worker works both inside and outside the UK. The worker may claim to have two employment contracts, and the bulk of income may be attributed to the contract which appears not to be subject to UK PAYE deductions for tax.

The guidance sets out the evidence which HM Revenue & Customs expects an employer to keep, and explains how it approaches the question of whether work in the UK is "merely incidental" to employment outside the UK.

  • 2.7 Some agreement on public-sector pensions

On 9 March 2012, the Government announced that the discussions with public sector unions on proposed changes to some public sector pension schemes had concluded and that proposed final agreements, setting out changes based on the agreement reached in December 2011, were completed. The unions have not yet accepted the proposed final agreements and the ballot on the proposals closes on 18 April 2012.

The proposed agreements cover the Principal Civil Service Pension Scheme, the NHS Pension Scheme and the Teachers' Pension Scheme. The basis of accrual of future benefit, revaluation of active members' benefits and average member contribution rates will be different in each of those schemes. Each scheme will have a normal pension age for new scheme service set at the State pension age. The revaluation of deferred members' benefits and pensions in payment increases will be set at CPI for all schemes. There will be transitional measures for scheme members who, as at 1 April 2012, have 10 years or less until their current pension age.

As part of this deal, the Government has also confirmed that it will retain the "Fair Deal" policy, subject to acceptance of the final agreements, and will extend access to public service pension schemes for transferring staff. See our separate bulletin on this topic.

  • 2.8 Earnings thresholds for automatic enrolment confirmed

The Department of Work and Pensions (the DWP) has released its response to a consultation exercise on revision proposals for the automatic enrolment earnings trigger and the qualifying earnings band. As a part of the consultation process the DWP has proposed an automatic enrolment earnings trigger of £8,105, a lower limit for qualifying earnings of £5,564 and an upper limit for qualifying earnings of £42,475 for the year 2012/13.

The £8,105 earnings trigger is aligned with the PAYE tax threshold and the qualifying earnings limits are aligned with National Insurance. However, the DWP has warned that this alignment with PAYE and National Insurance levels may not always be the case in future.

  • 2.9 PPF administrative levy and general levy reduced

The DWP has announced that the Pension Protection Fund (the PPF) administration levy is being reduced by 25% and that the general levy is being reduced by 12% for the levy year 2012/13. The DWP has decided to reduce the administration levy based on investment related costs being reassigned to the PPF main fund as would be the case if the PPF fund was a fund in a private pension scheme and the general levy is being reduced due to cost savings in the Pensions Regulator, Pensions Ombudsman and Pensions Advisory Service.

  • 3 Legislation
  • 3.1 Employment tribunal reform

Various changes to the tribunal system will be coming into effect as of 6 April. Many of these changes have already been reported in previous recent editions of hrlaw@trowers, but we thought it would be useful to remind you of the following:

  • The unfair dismissal qualifying period will increase from one to two years;
  • The maximum deposit that a tribunal can order a party to pay will increase from £500 to £1,000;
  • The maximum amount of costs a tribunal can award will increase from £10,000 to £20,000;
  • Witness statements will be taken as read at tribunal hearings and state funding of witness expenses will be withdrawn; and
  • Judges will sit alone on unfair dismissal cases.

For further information on these changes and details of other changes in the pipeline please refer to our forthcoming bulletin on the employment tribunal reforms.

  • 3.2 Reforms to the immigration system announced

The Immigration Minister, Damian Green, has announced a range of immigration changes following consultation which took place last year. The changes, which are intended to break the link between work and staying in the UK permanently, were laid before Parliament on 15 March and come into force on 6 April.

The changes announced include the following:

  • Limiting the stay of temporary Tier 2 migrants to a maximum of six years (initial leave of three years, with an extension of up to three years). They will be able to apply for settlement, provided they meet the criteria, after five years.
  • Requiring those applying for settlement from Tier 2 who entered under the rules in force from 6 April 2011 to earn the higher of £35,000 per year or the going rate for their occupation in the relevant UK Border Agency Code of Practice.
  • Only allowing Overseas Domestic Workers in private households to accompany visitors to the UK. They will be allowed to work for the visitor, but must leave the UK with the visitor after a maximum of six months and may not extend their stay, switch employer or settle in the UK from this route.
  • Allowing Overseas Domestic Workers in diplomatic households to stay for the duration of the stay of the diplomat for whom they are working, up to a maximum of five years, whichever comes first.

The Migration Advisory Committee has also recommended that the annual limit on non-EEA migrants applying to work in the UK under Tier 2 of the immigration system should remain at its current level of 21,700.

  • 3.3 CPI/RPI - Employer requirement to consult

The Occupational and Personal Pension Schemes (Levies - Amendment) Regulations 2012 take effect from 6 April 2012. The regulations require employees to be consulted on switching from using RPI to the CPI for indexation and revaluation of benefits under a pension scheme, as it will become a "listed change" under the employee consultation requirements on changes to pension schemes.

The employee consultation requirements require employers with occupational pension schemes to consult with affected active and prospective scheme members for a 60 day period before deciding whether to switch from RPI to CPI for the basis of indexation and revaluation under the pension scheme. Where the employer proposes a change (which would or would likely be less generous to all members or a particular group of members) to the rates at which pensions in payment under an occupational pension scheme are increased, or deferred benefits or other benefits payable under the scheme are revalued, then the employer must comply with the consultation requirements. The new regulations will not apply where active and prospective members have been notified of a proposal to make the change before 6 April 2012.

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