Case round up

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

Busch v Klinikum Neustadt, ECJ
Reinforces protection for pregnant women under EU law, with implications
for new maternity and adoption leave rights

* * * * Busch worked as a nurse at a German clinic. She started a three-year
period of parental leave in June 2000 when her first child was born, and became
pregnant again in October 2000. In January 2001 she asked to return to work,
terminating her parental leave early. Her employer agreed a return from April

Busch told her employer she was seven months pregnant the day after her
return. Restrictions on the work pregnant women could carry out under German
law meant she could not carry out all her duties, and she was dismissed.

Her employer alleged she had deliberately concealed her pregnancy and
returned to work solely to obtain a higher rate of maternity allowance.

The ECJ emphatically rejected the employer’s claims of fraudulent
misrepresentation. A pregnant employee returning in these circumstances had no
obligation to tell the employer that she was pregnant. The intention to obtain
the higher rate of allowance was irrelevant.

The dismissal was an act of unlawful discrimination contravening the
Pregnant Workers Directive. The employer could not justify the dismissal by
reference to the costs of having to employ someone who could not carry out
their contractual duties.

Financial considerations were of no relevance under the directive.

The employer should have transferred Busch to lighter duties, or placed her
on paid leave as a last resort.

What you should do

– Remember that from April 2003 the total period of ordinary and additional
maternity leave is increased to 52 weeks and there is a new right to adoption
leave of equivalent length. Scenarios like the one in this case could arise

– Employers with enhanced maternity and adoption leave schemes should
consider what happens under the contract if lengthy periods of leave are taken
very close together. As long as you comply with statutory obligations, you can
limit the number of payments within a certain period

– Pregnant employees and job applicants have considerable protection through
sex discrimination laws and automatic unfair dismissal rules. Disruption to the
business because of pregnancy or maternity leave will never be an acceptable
reason to dismiss an employee or refuse to employ one

Bartholomew v LK Group Ltd, High Court
Think carefully before labelling misconduct as gross misconduct

* * * After a takeover of LK, Bartholomew was sacked as its managing
director for gross misconduct. He was accused of unauthorised absences from
work during normal working hours, and giving false accounts of his whereabouts.
LK said Bartholomew’s accounts were at odds with its own surveillance reports.
He claimed damages for wrongful dismissal, and the High Court upheld his claim.

This case raises the important point that if employees reasonably believe their
actions are approved or condoned by the company, then it is not gross
misconduct. There were no grounds for summary dismissal. While Bartholomew kept
irregular working hours and often carried out business from the library of his
London club (a novel form of flexible working), these idiosyncrasies were
longstanding and well known to fellow directors, who raised no objections.

Bartholomew was entitled to believe they condoned his actions. Further, the
company failed to show that he had deliberately given false information about
his whereabouts.

What you should do

– Make clear the standards of behaviour expected, and enforce them properly

– Do not ignore breaches of contractual terms if you want them to be
enforceable – it risks a court finding the contract has been varied

– Remember, in wrongful dismissal cases, the question is whether the
employee is guilty of conduct which amounts to gross misconduct. If the
dismissal is for dishonesty or deceit, the employer must have evidence of this.
In unfair dismissal claims, however, the question is different – does the
employer reasonably and honestly believe the employee has committed the
misconduct after carrying out a reasonable investigation? Even under this test,
there has to be material evidence on which to base that reasonable belief

Stephenson v Delphi Diesel Systems Ltd
A worker supplied by an employment agency could not be an employee of
the client

* * * * Stephenson signed on with employment agency Select in December 1999
and was sent to work for Delphi as a machine operator. Delphi monitored his
work and told him what to do on a day-to-day basis. He had to clock on and off
shift and was given safety equipment by Delphi. However, his wages were paid
directly by Select into his bank account.

In August 2000, Stephenson obtained permanent employment with Delphi.
Although Delphi now paid his wages, the work carried out was essentially the
same and he worked at the same workstation under the same supervisor.

When he was dismissed in January 2001, Stephenson claimed unfair dismissal.
He could only show sufficient continuity of service if he could claim employee
status for the period he had been working as an agency worker. An employment
tribunal rejected his claim and the EAT upheld that ruling, for different

The EAT said there was plainly no contractual relationship between
Stephenson and Delphi until August 2000. Prior to that, his contract had been
with the agency. In the absence of any contractual link between Delphi and
Stephenson, he simply could not be their employee. It would be unusual to
describe an individual as having a contract of employment with a party who has
no legal obligation to pay his wages and to whom he has no legal obligation to
give work.

The EAT also cast doubt on the one case in which the EAT has held that an
agency worker was in fact an employee of the client – Motorola v Davidson. In
that case, the lack of a contractual relationship between the worker and the
client was not raised on appeal. This suggests the Motorola case is not to be
relied on – which is good news for employers who use agency staff.

What you should do

– Make sure the worker has a contract with the agency, not the client.
Similar issues arise in relation to secondments – the two companies should have
a contract with each other governing the secondment arrangements, but the
seconded employee should only have a contract with the seconding employer

– Be careful not to do anything that suggests an employment relationship. If
there are disciplinary issues, the client should raise these with the agency
and ask it to resolve them

– Follow the progress of the Agency Workers Directive. New laws in this area
will come into force over the coming years, and the directive may be finalised
this summer

J Tomlinson Ltd v Beecroft & Others, EAT
A TUPE case on the scope of a transferring entity

* * * Integral had separate contracts with two councils for the service,
maintenance and replacement of domestic gas appliances in the councils’
residential properties. They employed six people on the two contracts. One of
the contracts came up for renewal and a new contractor, Tomlinson, was

Two of Integral’s employees – the applicants in this case – spent 90 per
cent of their time working on this particular contract. The other four did some
work on the transferred contract, but spent the majority of their time working
on the contract for the other council. Integral argued the two employees were
entitled to transfer under TUPE. Tomlinsons refused to employ them. An
employment tribunal found TUPE applied.

Tomlinsons’ principle argument was that there was no stable economic entity
capable of being transferred. It was argued that two employees out of six
working on the contract in question could not be regarded as a discrete

The EAT rejected this argument. It agreed with the tribunal’s conclusion
that all six staff formed an economic entity – an organised grouping of people
and/or assets which combined to perform a specific activity on a permanent
basis. The undertaking comprised the staff assigned to the two contracts.
However, only the two applicants in this case could be regarded as assigned to
the part of the undertaking that transferred to Tomlinsons.

The EAT also rejected the argument that because neither employee was
exclusively assigned to the individual contract in question (working on both
contracts), there could be no economic entity.

What you should do

– It is common to find that an outgoing contractor’s workforce includes
staff who work on the transferring contract and other contracts as well. The
composition of the workforce should be investigated to establish whether there
is an undertaking capable of transferring and who is entitled to transfer

– Remember, an employee is entitled to transfer under TUPE if they are
assigned to the transferring undertaking. The amount of time spent working on
the contract in question is relevant to this issue but does not determine it.
The test is an organisational one

– Incumbent contractors should consider how the deployment of staff across
different contracts could affect their ability to transfer staff under TUPE if
a contract is lost

Star ratings

* Our rating system is designed to help busy HR professionals prioritise their
reading. Does this ruling have immediate implications for your practices and
policies? Is it a one-off decision based on unusual facts? Or is it one to keep
an eye on as it goes to appeal? Case round up will help you decide. Each case
is rated from one to five stars; the more essential it is that you know about
it, the more stars it will have.

Case of the month, by Christopher Mordue

Jowitt v Pioneer Technology (UK) Ltd, Court of Appeal
A reminder of the complications of paying contractual benefits through
PHI policies

* * * * * Jowitt suffered an accident at work and was unable to do his job.
Under his contract, after 26 weeks’ continuous absence he was entitled to
long-term sickness benefits for as long as he was certified ‘unable to work’ by
a GP and the company’s own doctor. His employer was insured against paying
these benefits under a private health insurance (PHI) policy, but it provided
the insurer would only pay for employees ‘totally unable to follow any

The company’s doctor thought Jowitt was unable to work. The insurer’s
medical adviser considered that Jowitt did not meet the policy definition of
disability, as he could carry out some work, albeit not his actual job.
Although the employer challenged the insurance company’s refusal to pay, it
ceased making disability payments to Jowitt, who brought a claim for unlawful
deductions from wages.

One complication in this case were the very different definitions of
disability under the contract of employment and under the PHI policy. This
created a risk that the employer would have to make the payments even if it
could not recover them from the insurance company.

The critical question was whether Jowitt was really ‘unable to work’. As
this was the wording in his contract, the terms of the insurance policy were

The EAT held that the employee had to be unable to carry out his actual job,
and therefore upheld Jowitt’s complaint of unlawful deductions.

The Court of Appeal overturned this decision. The term ‘unable to work’ was
not limited to the employee’s actual job, nor did it mean the employee had to
be incapable of doing any purposeful activity. The issue was whether there was
any remunerative full-time work Jowitt could realistically be expected to do.

The case was sent back to the tribunal to consider the conflicting medical

What you should do

– Make sure the terms of the employment contract match those in the PHI or
insurance policy, so that you are only obliged to make contractual payments if
you can recover the money from the insurance company

– Make sure the contract is flexible so that it can be changed to reflect
changes in insurance cover

– Make sure all notification requirements under the insurance policy are met
in good time. Alerting insurers to potential claims allows issues such as
disputed medical opinions to be addressed early on. Employers are under a duty
to the employee to challenge an insurer’s refusal to pay

– Remember employers cannot lawfully dismiss an employee who is in receipt
of PHI benefits under their employment contract on account of sickness absence

– PHI schemes are increasingly expensive and give rise to real legal and
practical problems, and some employers have withdrawn them altogether. An
alternative is to fund the employee’s own insurance cover – this avoids the
chain of contracts that can leave employers caught in the middle of disputes

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