Case round up

Our resident experts at Pinsents bring you a comprehensive update on all the
latest decisions that could affect your organisation, and advice on what to do
about them

Dunnachie v Kingston upon Hull City Council, EAT
Damages for ‘injury to feelings’ not available in unfair dismissal cases

* * * * Dunnachie successfully claimed constructive unfair dismissal after
resigning from his job following months of harassment from his manager. He had
three weeks’ stress-related absence from work before resigning. He suffered no
real financial loss as he obtained a new job straight away, but received
£10,000 compensation for humiliation, distress and damage to family life. The
EAT overturned the award, ruling that such compensation could not be awarded in
unfair dismissal claims.

Until the House of Lords’ decision in Johnson v Unisys in 2001, it was
thought that compensatory awards for unfair dismissal could include only
financial losses suffered as a consequence of the dismissal. Johnson was not
itself an unfair dismissal case, but rather a case of whether wrongful
dismissal damages could include a claim for damages for stress caused by
dismissal.

The Lords rejected that possibility, but Lord Hoffman’s judgment suggested
there was no reason why compensation for unfair dismissal should not include
compensation for injury to feelings, psychiatric injury or damage to
reputation.

As a direct consequence, some tribunals have awarded damages for injury to
feelings in unfair dismissal claims. This is the first time the EAT has had an
opportunity to consider the issue, and the possibility of such awards has been
emphatically rejected. It considered that if non-economic losses were
recoverable in the tribunal, it was likely to result in all applicants claiming
compensation for general damages for distress, depression, stress, injury to
feelings or loss of family life resulting from dismissal. The EAT added that
legislation would be required before the scope of the compensatory award could
be widened to include non-financial loss.

Last year in Sutherland v Hatton, the Court of Appeal re-iterated the many
legal obstacles that employees must overcome to claim damages for personal
injury arising from occupational stress. The importance of Dunnachie is that it
precludes staff using unfair dismissal claims as an easier route to
compensation for psychiatric injury. Johnson itself prevents the recovery of
contractual damages of this kind where the employee is dismissed in breach of
contract.

But damages for stress can be recovered in claims where the breach of
contract does not relate to dismissal, for example, where the implied duty of
trust and confidence is breached in the handling of disciplinary matters prior
to dismissal.

What you should do

– Remember that even if employees can’t recover damages for stress or
psychiatric injury caused by unfair dismissals, the financial consequences of
such stress can be compensated for – if the stress prevents or delays them
obtaining alternative employment, for example

– Train managers how to deal effectively with disciplinary issues,
performance reviews etc. Poor handling – unjustified allegations, unwarranted
suspensions and lengthy delays, for example – can breach the implied duty of
trust and confidence. This allows damages for stress-related illness to be
claimed as contractual damages, in addition to a constructive unfair dismissal
claim

– Review how effective your harassment procedures and policies are in
practice. Are employees using internal procedures rather than resigning and
claiming constructive dismissal? Are you missing out on an opportunity to
resolve these matters in the workplace?

TGWU v Morgan Platts Ltd (in administration), EAT
Ninety-day protective award made for failure to consult on 35
redundancies

* * * * Morgan Platts went into administration. Administrators informed the
35 employees that their employment would terminate with immediate effect. No
efforts were made to consult collectively with the trade union. A protective
award of 30 days’ pay was made by the tribunal, but increased on appeal to 90
days.

The Trade Unions Labour Relations (Consolidation) Act (TULRCA) requires
collective consultation on redundancies to start either 30 days before the
first dismissal (if between 20 and 100 redundancies are proposed), or 90 days
before (if 100 or more redundancies are proposed).

In the past, the maximum length of the protective award corresponded to
these minimum periods for consultation. However, in 1999 TULRCA was amended to
allow a 90-day protective award in all cases, even if the minimum consultation
period was 30 days. The effect was unclear – protective awards should
compensate employees for the period of consultation lost by the employer’s
breach, so how could a 90-day award be made in a 30-day consultation case?

In this case, the tribunal’s award was based on the fact the employees had
lost 30 days consultation. But the EAT accepted the union’s argument that the
correct approach was to start with the maximum award of 90 days, and then
consider whether there were any circumstances to justify reducing it.

What you should do

– Protective awards can be hugely expensive. Be sure to always check in good
time whether the obligation to consult applies before any major reorganisation
or redundancy exercise

– The 30 and 90-day periods are the minimum. Consult as early as possible
and before a fixed decision is taken

– If there are difficulties in carrying out all the obligations in full, do
as much as you can. While you are likely to be in breach, you may avoid a
maximum award

– When buying businesses from administrators or receivers, make careful
enquiries about pre-purchase dismissals. Indemnity protection will not be an
option, so if necessary, take such liabilities into account in the purchase
price.

Hendrickson Europe Ltd v Pipe, EAT
First EAT decision on the Part-time Workers Regulations

* * * Pipe had been employed for almost 12 years as an accounting assistant
on part-time hours. She was one of four accounting assistants – the others
worked full-time but had considerably less service. The employer informed Pipe
it required only three full-time accounting assistants and that if she wanted
to stay, she must work full-time. Pipe could not comply due to family
commitments, but offered to increase her hours to 32.5 per week – only five
hours short of the full-time hours. This offer was rejected and she was
dismissed. The tribunal found she had been unfairly dismissed, and subjected to
discrimination because of her part-time status. The employer appealed.

The employer argued Pipe was not dismissed because she was a part-time
worker but for reasons of redundancy, as the employer decided it needed three
full-time accounting assistants. The EAT rejected this. It noted that Pipe was
told that she would have to work full-time if she wanted to stay in employment.
One of the purposes of the regulations was to protect part-time workers from
such pressure. It was for the employer to decide how many staff were required,
but the tribunal was entitled to consider all the circumstances, including that
Pipe was a part-time worker who would only have been five hours short of
full-time service if her employer had considered her offer.

What you should do

– Prior to the regulations, it was not uncommon for employers to start off
with part-time workers when selecting for redundancy. This practice is no
longer lawful

– Take care when defining selection pools in a redundancy exercise involving
a mix of full-time and part-time workers. Consider the selection criteria
carefully as well

– Selecting part-timers for redundancy will amount to discrimination as will
eliminating all part-time roles and allowing workers to apply for full-time
roles. Commercial considerations may justify such discrimination, but
ultimately, this is for the tribunal to determine.

Macdonald v the Advocate General of Scotland; Pierce v the Governing Body
of Mayfield School, House of Lords
Sexual orientation not covered under the Sexual Discrimination Act 1975

* * * * Macdonald was dismissed from the RAF because he was a homosexual.
Pierce, a teacher, was subjected to a sustained campaign of abuse because she
was a lesbian. Both argued their treatment was direct sex discrimination.
Macdonald argued he was dismissed because he was sexually attracted to men – a
woman who was also sexually attracted to men would not have been dismissed.
Pierce used a similar argument in relation to her situation.

The House of Lords found that Macdonald was dismissed because he was a
homosexual. Although this was a discriminatory policy, the discrimination was
solely on the grounds of sexual orientation, not gender. Comparing Macdonald’s
treatment to that of a heterosexual woman was not the ‘like for like’ comparison
required under the Sexual Discrimination Act. The appropriate comparator was a
lesbian, who would also have been dismissed under the policy.

The House of Lords found that even where harassment is gender-specific, this
in itself did not establish conclusively that the harassment is "on the
grounds of sex". In many such cases, tribunals have taken the view that
there is no need to look for a male comparator and rejected arguments that a
person of the opposite sex would have been similarly treated. The House of
Lords has indicated that this approach is wrong – the tribunal must still be
satisfied that the harassment is on the grounds of sex.

The House of Lords also suggested that the case of Burton v de Vere Hotels
(more commonly known as the Bernard Manning case) was wrongly decided. An
employer’s failure to prevent third parties committing acts of sexual or racial
harassment will only amount to discrimination by the employer, if it can be
shown the employer failed to take such steps because of the employee’s sex or
race.

What you should do

– Remember that the Employment Equality (Sexual Orientation) Regulations
will make it unlawful to discriminate against people on the grounds of their
sexual orientation. The regulations come into force on 1 December 2003

– Prepare for these regulations by reviewing your current equal opportunity
policies and harassment procedures to ensure homosexuals are also protected.

Case of the month by Sara Sawicki

Obligation to employees continues
after termination of employment
Relaxion Group plc v Rhys-Harper; De-Souza v London Borough of Lambeth;
Jones v 3M Healthcare Ltd and Others – House of Lords

Employers are liable for post-employment discrimination and
victimisation

* * * * *The principal question raised by these appeals was
whether former employers are liable under discrimination legislation for acts
or omissions arising after employment.

The three joint cases concerned a claim by a female employee of
sexual harassment during an appeal against dismissal, and also that the
investigation into her complaint was discriminatory; a complaint that a failure
to comply with a reinstatement order was an act of racial victimisation; and
various complaints by four disabled staff that, for example, refusals to
provide references were acts of victimisation resulting from earlier complaints
brought under the Disability Discrimination Act (DDA) 1995.

The Court of Appeal had previously
ruled that such complaints were not possible under discrimination legislation,
relying on prior rulings to show that acts or events occurring after employment
has terminated cannot amount to unlawful discrimination.

The House of Lords overturned these decisions. The relationship
of employer and employee can outlast the actual contract of employment. Former
staff should still be protected under the discrimination legislation in cases
where the relationship between the employer and employee still continues,
notwithstanding termination of employment.

The Lords found that the female employee’s claim that she
suffered sexual harassment during her appeal against dismissal, was
attributable to the employment relationship, and therefore protected under the
Sexual Discrimination Act (SDA) 1975.

In the complaint of race discrimination relating to
non-compliance with the reinstatement order, it was held that this arose not
from the employment relationship but from a tribunal’s order, and this claim
failed.

In the DDA claims, which mainly related to the provision of
references following termination of employment, the court found that an
employment relationship triggers an obligation on the employer not to
discriminate, which applies to all aspects of the employment relationship –
including those arising after employment has ended. The failure to provide a
reference or the provision of a detrimental reference post-employment was
covered under discrimination legislation.

What you should do

– Be careful how you treat former employees who have raised issues
concerning sex, race or disability discrimination following termination of
their employment, particularly when providing references

– If you have a policy on the provision of references, ensure
it is non-discriminatory and is followed in all cases. This should prevent a
successful claim of less favourable treatment. If you do not have such a
policy, consider introducing one

– Take care to avoid discrimination when paying benefits which
fall due after termination. Ensure that such payments are dealt with in
accordance with the contract and/or company policy.

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