Employment Law Bulletin: November 2014

Holiday pay and overtime: 
You won’t have missed the headlines in the newspapers announcing that workers can sue their employers for millions of pounds in holiday backpay claims.

In the UK, we normally calculate holiday pay based upon a worker’s basic salary – but we do not normally include overtime, commission or similar payments. A series of recent judgments have made it clear that European laws require employers to factor in overtime and commission payments – and anything else a worker would normally receive if they were working – so they are not dissuaded from taking holiday by being paid less when on holiday than when at work.

But some of the newspapers have missed out two crucial points.

First, this higher holiday pay rate only applies to the first four weeks’ paid holiday each year. The employer can continue paying basic salary for any additional annual leave (although note the rules are slightly different if the employee doesn’t have normal working hours).

Second, employees are unlikely to be able to bring large, historic backpay claims. The court decision makes it clear that if there is a three month gap in holiday underpayments then the employee cannot claim further back in time. So the reality is this affects holiday payments going forward, but employers are not as likely to face large backpay claims as the publicity might suggest.

Business groups and employers have expressed concerns at this decision and it is expected that the decision will be appealed to the Court of Appeal, so this may not be the final position.

Not plane sailing for airport worker
Halawi v WDFG UK Ltd

Ms Halawi was a beauty consultant who worked, through her company, at an airport outlet managed by World Duty Free (WDF).

WDF removed her airside pass. That meant that she couldn’t access the store and so could no longer work there. Ms Halawi claimed that it amounted to a discriminatory (race or religion) dismissal by WDF, which she argued was her employer. The question for the Court of Appeal was whether the tribunal and Employment Appeal Tribunal had been right in concluding that she was not an employee of WDF, and was not entitled to bring her claim against it.

Some of the evidence pointed towards a fairly close relationship between Ms Halawi and WDF. For example, Ms Halawi signed up to WDF’s health and safety and confidentiality policies; WDF could warn her if she turned up late or didn’t work an appropriate number of hours; she needed WDF’s permission to take holidays; and the products she sold were classed as WDF’s stock and so it profited from her services.

But the tribunal also found that there was very little documentation in place. Ms Halawi wasn’t entitled to sick pay or holiday pay and if she didn’t work then she didn’t get paid. She could change shifts, withdraw shifts and provide a substitute. There was no mutuality of obligation and WDF didn’t have control of Ms Halawi beyond its control of the premises.

The tribunal had decided that Ms Halawi was not WDF’s employee. The EAT upheld that decision, although said it was uneasy about the reality of a situation in which someone could be the victim of discrimination yet have no right to complain to the tribunal about it. The Court of Appeal echoed that uneasiness while making it clear that the issue of discrimination hadn’t been decided in this case. And it went on to uphold the decision that here there wasn’t an employee/employer relationship. Two important ingredients were missing: personal service (Ms Halawi could provide a substitute) and subordination (she was not controlled by WDF).

Cases of employee status are frequently argued before the courts because they’re always fact specific and come down to the reality of the arrangement. Understanding the characteristics of the various relationships that can exist in the workplace will stand you in great stead to minimise disputes.

Ill-health absences and disability
General Dynamics Information Technology Ltd v Carranza

It’s notoriously difficult to judge when it might be right to call time on a frequently absent employee’s service. That’s even more so where the employee is disabled, because of the extra layers of responsibility placed on employers to ensure fairness.

Mr Carranza suffered from stomach adhesions – a disability. His employer had made adjustments for his condition. But after being off work for 41.5 weeks in three years (mostly, but not solely, disability-related) he was given a final written warning.

He then had two more periods of disability-related absence, which didn’t prompt any action by his employer, before suffering a shoulder injury and being off work for three months. That absence once again triggered the company’s formal procedure. He was dismissed and brought a disability discrimination and unfair dismissal claim.

Mr Carranza won at tribunal where it was held that it would have been a reasonable adjustment for the employer to disregard the final written warning. The employer had overlooked disability-related absence in the past and it would have been reasonable to have done so again. The dismissal was also procedurally unfair because the employer had not reviewed the final written warning.

The Employment Appeal Tribunal (EAT) overturned that decision. It said it would be remarkable and regrettable if an employer who had shown leniency was then required to disregard all disability-related absence, whatever the impact would be on the business. The EAT also confirmed that there are only limited circumstances in which an employer, when deciding to dismiss, should have to re-open the circumstances of a final written warning.

Here the employer had been entitled to dismiss because of the final written warning, the substantial post-warning absence and the occupational health advice that the absence would continue. The findings of disability discrimination and unfair dismissal were set aside.

Duty of care in misconduct proceedings
Coventry University v Mian

Ms Mian argued that her employer had breached its duty of care in instigating disciplinary proceedings against her without properly investigating the facts.

She was a senior lecturer at the University. It was alleged that she had signed an inaccurate reference which overstated an ex-colleague’s qualities and qualifications. There was some confusion about how the reference came into being and Ms Mian denied writing the final version, although similar drafts were found on her computer.

She was invited to a disciplinary hearing but had been signed off work sick and didn’t attend. The hearing went ahead without her and the allegations were dismissed. She left the University and began a new job.

Ms Mian brought a claim against the University in relation to the psychiatric injury she said she had suffered because of its decision to start disciplinary proceedings. Doing so without making more enquiries was a breach of contract and/or it was negligence, she argued. The judge agreed; if the University had looked further into the facts, it would have seen that there weren’t grounds for disciplinary proceedings.

The Court of Appeal overturned that decision. The question the judge ought to have asked was: were there reasonable grounds to suspect that the allegations were true? That was not about whether or not the allegations were actually true. Here, a reasonable employer could have concluded that there was a case to answer.

You could avoid getting into legal arguments like this by covering all bases in the disciplinary process. Don’t start disciplinary proceedings until you have fully investigated the allegations and documented your conclusions. Consider the employee’s personal circumstances, explain the position to them very clearly and be sure that they have a full understanding of the situation.

Substituted PILON didn’t alter termination date
Rabess v London Fire and Emergency Planning Authority

The date on which employment terminates is important for all sorts of reasons. One of these is to establish the time within which to bring an employment tribunal claim – usually three months from the effective date of termination (EDT). In the Rabess case there was disagreement over when termination took effect and when, therefore, the tribunal claim clock began ticking.

Mr Rabess was dismissed for gross misconduct on 24 August 2012. On 3 January 2013 he commenced proceedings and on 9 January there was an internal appeal at which gross misconduct was substituted for “misconduct”. As Mr Rabess was already on a final written warning, his dismissal stood but he was given six weeks’ pay in lieu of notice. Did that mean that his EDT was actually later than 24 August and that his unfair dismissal claim had been brought in time?

No, said the Employment Appeal Tribunal which held that the EDT remained 24 August. The appeal decision and the payment in lieu had done nothing to alter it. In Mr Rabess’ case the employer in its appeal letter had, in fact, confirmed the EDT as 24 August and so that left little doubt about it.

A reminder, then, to be clear about what you consider to be an employee’s termination date. If an internal appeal changes an aspect of the original decision then it’s worth clarifying what effect (if any) that has on the EDT.

Business needs are relevant too
Hensman v Ministry of Defence

Tribunals often hear cases involving employees, convicted of criminal offences, who have gone on to be dismissed from their jobs. In Hensman v Ministry of Defence, the Employment Appeal Tribunal (EAT) tackled the issue of an employee whose criminal conduct was attributable to his disability. Was the tribunal right to find that the dismissal was discriminatory and unfair? No, the EAT said.

Mr Hensman worked as a civilian for the Ministry of Defence (MoD). In 2008 he was found to have in his possession video footage and photos of a naked man in or near the shower area of the shared accommodation where Mr Hensman lived on the MoD base. It transpired that Mr Hensman had recorded the images and footage by hiding a camera under a towel. He was arrested, charged and suspended from work.

In July 2010 he was sentenced to a three-year community order after pleading guilty in the Crown Court to outraging public decency. Mr Hensman’s sentence took into account his Asperger’s syndrome and other disorders that had led to his fascination (and not sexual gratification) with the imagery he had recorded.

A disciplinary hearing at work was eventually held in November 2011 and he was told in a letter of May 2012 that he was dismissed. His internal appeal was unsuccessful and he went on to claim unfair dismissal and disability discrimination.

The tribunal held that the dismissal was discriminatory; Mr Hensman had been treated unfavourably because of a reason related to his disability which the MoD could not justify. The dismissal was also unfair because of the delay in the disciplinary process and because it was outside the band of reasonable responses; the Crown Court judge had found that the offence was disability-related and did not involve fault, and that could not be ignored, the tribunal said. A reasonable employer would have considered Mr Hensman’s length of service and his vulnerability in the labour market and in society generally.

But the Employment Appeal Tribunal (EAT) overturned the decision both on discrimination and unfair dismissal. The tribunal had given undue weight to the sentencing remarks in the criminal case. It ought to have factored in the MoD’s main concerns at the time of dismissal which included breach of confidence, covert filming and business needs. These were all relevant factors.

The case has been sent to a new tribunal to be decided. But the EAT’s decision highlights that even where an employee’s disability may be to blame for their conduct, the business and workforce context can be relevant to the decision to dismiss. As always, this comes down to the facts of the case.

No jurisdiction to hear employee’s claim
Creditsights v Dhunna

There are certain hurdles every employment tribunal claim must overcome before it can get anywhere near a final hearing. The first of these is the claimant’s entitlement to bring the claim in the first place. All sorts of issues about time limits and worker status can come into play and, as in Creditsights v Dhunna, arguments about an employee’s right to rely on British employment law.

Mr Dhunna worked for the British company, Creditsights, a subsidiary of a US organisation. He moved from London to work at Creditsights’ Dubai office. After being dismissed for alleged gross misconduct, he brought a claim for unfair dismissal (among others). The question was could he rely on the protection of British employment law?

The employment tribunal said not. The general rule is that the place of employment is decisive. There may be exceptions where the connection with Great Britain and British employment law is sufficiently strong to show that this can be justified, but that was not the case here. Relevant to the tribunal’s decision included the fact that Mr Dhunna didn’t report to London because he was not within Creditsights’ remit; he was only on Creditsights’ payroll for the purpose of convenience and was paid in US dollars; he was not entitled to be included in Creditsights’ pension plan; and the revenue he generated didn’t count as Creditsights’. Mr Dhunna had moved out of the UK and had severed his links, the tribunal held. And the Court of Appeal agreed.

So an employee based overseas isn’t necessarily protected in the same way as those working in Britain. They would have to gather a fair amount of evidence to support the argument that they had strong enough connections with Britain and its employment law before being able to bring a claim here.

And Finally…
Her Majesty’s Attorney General v Iteshi

The Employment Appeal Tribunal has heard the case of a claimant who issued a series of unsuccessful claims which are reckoned to have cost his opponents a combined total reaching into six figures.

Mr Iteshi brought 30 cases in four years against employers, recruitment companies, and the Bar Council following a number of failed job applications. He has now been banned indefinitely from making any further claims because of his track record in bringing what were described as vexatious or hopeless cases.

This case goes to show just how challenging employment tribunal claims can be for both claimants and respondents. An open system which offers people access to the justice to which they believe they’re entitled inevitably means that employers will, from time to time, face claims that have little or no merit. And it’s for the tribunals to help exclude or manage these while making sure that valid claims get the attention they deserve.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

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