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Law for Business

Knowhow - guidance - precedents

11 SEP 2012

Contract of employment

Amount of contractual overtime payments

The Court of Appeal, in Driver v Air India Limited, looked at what an employer's obligation was where the amount of a contractual overtime sum was not specified.

Mr Driver was an airline employee whose contract of employment required him to work overtime on both a rostered and ad hoc basis and provided for payment to be made as set out in notices and circulars issued by the airline. No such notices had ever been issued, although Mr Driver had been paid for overtime on previous occasions. The airline argued that his contract did not provide for payment for overtime given the absence of such notices or circulars referred to in the contract. The Court of Appeal upheld Mr Driver's claim and reiterated the general position that where a contractual payment was not specified the law implied a reasonable sum. Here, the amount paid for previous overtime was highly relevant.

Employment status

The Supreme Court has recently pronounced, in the closely watched case of Autoclenz v Belcher, on the legal status of a group of car valets who are seeking a declaration that they are workers or employees, as opposed to self-employed contractors, and are therefore entitled to holiday pay (among other things).

The Court of Appeal held that tribunals must consider whether or not the words of a written contract represent the true intentions of the parties, not only at the start of the contracts but at any later stage, where the evidence shows that the parties have expressly or impliedly varied the agreement that exists between them.

The Supreme Court upheld the Court of Appeal's judgment, noting that tribunals should be alive to the fact that agreements may contain clauses that are inconsistent with employment, such as allowing substitutes to be sent, as in this case, where they have no correlation to the real relationship in a deliberate attempt to exclude an employment relationship. The Supreme Court held that the true nature of the agreement between the parties will often have to be ascertained from all the circumstances of the case, not just the written agreements.

Misrepresentation and illegal contracts

The Employment Appeal Tribunal (EAT) case of Connolly v Whitestone Solicitors concerned the extent of misrepresentation required to make a contract unenforceable for illegality.

The claimant worked as a solicitor for Whitestone Solicitors. For tax purposes, he had agreed with Whitestone that he should be treated as self-employed and he sent self-assessment forms to Her Majesty's Revenue & Customs (HMRC) accordingly. When his engagement ended, he brought a claim for unfair dismissal, to qualify for which he would have to have been an employee.

At first instance, the employment judge found that he was indeed an employee but held that he had deliberately miscategorised the relationship to HMRC meaning that his employment contract was illegal so he could not rely on it to enforce a claim. The claimant appealed against this finding.

The EAT agreed that misrepresentation was capable of being illegal performance of an otherwise lawful contract but contrasted misrepresentation with simple mistake. The EAT held that, claiming self-employed status with HMRC constitutes a representation that the tax payer honestly believes him/herself to be self-employed. If the taxpayer knows that s/he is not entitled to claim to be self-employed but does so anyway, that is an implicit misrepresentation in bad faith. In such a case, the EAT agreed that it would be against public policy for it to support a claimant's claims. However, the EAT held that such cases were likely to be rare because it was usually not straightforward to ascertain employment status, and this case was remitted to a new tribunal for a rehearing.

Holiday pay

The recent case of Williams v British Airways concerned what should be included in a pilot's holiday pay. The CJEU has now handed down its judgment, agreeing with the Advocate General, that pay during leave should be comparable to pay during periods of work.

The CJEU noted that workers should not be financially disadvantaged during periods of leave, otherwise the prospect of losing pay might discourage them from taking holiday. The CJEU concluded that every element of pay that constitutes ‘normal remuneration' should continue to be paid during leave periods. If necessary, each pay element should be analysed separately to see if it forms part of normal remuneration. The CJEU noted that this would include pay that was intrinsic to the performance of the job (eg flight allowances, as in this case) or allowances relating to seniority, length of service or professional qualifications, etc. In contrast, pay elements for occasional or ancillary costs - such as an allowance for time spent by pilots away from their base but not working - need not be included.

‘Unfair' reference not unlawful

The recent Court of Appeal case of Jackson v Liverpool City Council considered whether a reference that appeared unfair could nevertheless be lawful.

A year after the employee left the council, the council was asked for a reference for him and declined to answer two questions in it: would the council re-employ him; and did the council know of any reason not to employ him. The council's group manager telephoned the prospective new employer and explained that potential record-keeping issues had come to light since he had left, although these were allegations only and had not been investigated. The employee complained that this was a negligent misstatement and that the council should either have investigated the issues or not made a reference at all. The Court of Appeal held that it would have been extremely difficult to investigate the issues since the employee had left and that failing to give a reference at all would also disadvantage the employee.

The Court of Appeal noted that the council owed a duty to the prospective employer as well as to Mr Jackson, and held that the reference was true and accurate and was therefore fair in the circumstances.

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