Case round up

Junk v Wolfgang Khnel, European Court of Justice
Consultation and notification in collective redundancies

This decision on collective redundancies, has significant implications for UK employers.

Wolfgang Khnel was appointed liquidator for a German company which had fallen into financial difficulties. On 19 June 2002, he informed the company’s works council that he intended to make all of the remaining employees redundant. On 29 June Ms Junk received a letter serving three months’ notice of termination of her employment with effect from 30 September 2002. Khnel did not notify the German labour office of the redundancies until 27 August 2002, before Junk’s employment ended, but after she had been served notice.

The main issue was whether consultation with workers’ representatives and notification of a competent public authority needed to take place before notice of termination of employment was given, or whether it is sufficient for the consultation and notification to take place before the expiry of notice. This question is directly relevant to the UK law on collective consultations, which is based on the same European legislation.
It was decided that both consultation and notification to a competent public authority (in the UK this would be the DTI) must take place before notice of termination is given. The European Court of Justice (ECJ) took the view that the decision to dismiss the employee was taken at the time notice was served and therefore the consultation and notification should take place before notice was served. The ECJ also said that consultation “with a view to reaching an agreement” could not take place effectively if notice of termination of employment had already been served.

Before Junk, notices of dismissal in collective redundancy cases could have been served before the consultation period had ended, provided the consultation had reached a meaningful stage. Now consultation and notification to the DTI should all be completed before any notices of termination of employment are served in collective redundancies. This is likely to make collective redundancy procedures longer where full notice is served rather than paying employees in lieu of notice.

It was also highlighted in Junk that consultation should be with a view to reaching agreement. Therefore employers who impose a strict agenda on their employees, without entering into any meaningful dialogue with them, are likely to be in breach of their obligations.

What you should do

  • Ensure that the consultation and notification period in collective redundancies has expired before serving any employees with notice of termination of employment
  • Factor in extra time for collective redundancy procedures where employees will not be paid in lieu of notice
  • Ensure consultation is meaningful and be willing to consider suggestions made by the workforce
  • Review redundancy policies.

Farrell Matthews & Weir v Hansen, EAT
Payment of bonuses

Mrs Hansen worked as a salaried partner for Farrell Matthews & Weir. She had no contractual right to a bonus but bonuses were paid occasionally, depending on the performance of the firm and individual fee-earners. Hansen had concerns about the financial viability of the practice and asked to see the firm’s accounts. The equity partner in the firm refused, but Hansen was granted a bonus of 12,000 for the previous financial year, to be paid in monthly instalments.

When the bonus was declared, a condition was attached to it that it was only payable as long as Hansen did not give notice to terminate her employment. She received the first three months’ instalments as a lump sum and then received a letter stating that if notice was given for any reason, including redundancy, no further instalments of the bonus would be paid from the date of notice or during the notice period. She found another job and gave three months’ notice to terminate her employment. She was offered an increased bonus to stay, but was told she still could not see the firm’s accounts and the condition would remain that the bonus would cease to be payable on either party serving notice.

When she left, the firm declined to pay the remaining 9,000 bonus, saying it was only payable if Hansen had remained with the firm for the whole financial year. She claimed constructive dismissal on the grounds that the refusal to give her access to the firm’s accounts and the condition attached to the payment of her bonus amounted to a fundamental breach of her contract of employment. She also claimed that the failure to pay her declared bonus was an unlawful deduction from wages, even though it was not a bonus that she was entitled to under her contract of employment.

The tribunal found in Hansen’s favour on both grounds and the firm applied to the EAT. The appeal was not successful. Where a bonus had already been declared the EAT effectively struck out the condition attached to the bonus that Hansen had to be employed by the firm and not under notice as a term that would not be enforceable as a defence to a statutory claim of unlawful deduction from wages. The EAT upheld her claim for constructive dismissal.

Once a discretionary, non-contractual bonus has been declared, it becomes a wage properly payable to the employee and failure to pay will amount to an unlawful deduction from wages. The fact that the bonus is non-contractual does not mean the employer is not obliged to pay it once declared. A term that the employee must remain in employment to receive such a bonus is unlikely to be enforceable.

What you should do

  • Once discretionary bonuses have been declared, such bonuses should be treated in the same way as wages and should not be withheld except where a reasonable condition is imposed on payment of the bonus
  • Be careful when drafting bonus schemes and terms attached to bonuses that have been declared. It is a specialist skill.

Mundie v Drysdale Brothers, employment tribunal
Sex discrimination and redundancy

Mrs Mundie was employed to carry out administrative duties for the respondent. She became pregnant and, at her suggestion another worker, Ms Kearney, was employed to undertake the administrative duties in Mundie’s absence on maternity leave.

Kearney performed well and the respondent decided to make Mundie redundant, retaining Keaney to carry out administrative duties. Kearney claimed she had been unfairly dismissed and discriminated against on the grounds of her sex.

The employment tribunal agreed with Mundie. Had she not been on maternity leave Kearney would never have been appointed and the comparison between Mundie and Kearney would not have been made. Since the respondent still needed someone to undertake the administrative duties Mundie had been originally performing, the role was not redundant and it was held that Mundie had a statutory right to return to her role.

An employee absent from work on maternity leave has a statutory right to return to their role even where a temporary replacement has been appointed who performs better and there is only capacity for one employee to be retained.

What you should do

  • Where a replacement has been appointed due to an employee’s absence on maternity leave, the employee on maternity leave should be allowed to return to her role even where this would result in the replacement employee being made redundant.

Brand v Compro Computer Services Limited, Court of Appeal
Entitlement to commission

Nicholas Brand was employed by Compro Computer Services as a sales consultant. Compro is a recruitment agency and Brand was employed placing staff with client companies.

rand was eligible to commission under the company’s scheme if he met certain sales targets. Under the terms of the scheme commission was ‘earned’ and became payable when Compro was in possession of signed timesheets from the contractor. Calculations were done at the end of the month with commission paid the following month.

It was stated in the commission scheme that “the plan assumes that you remain in full-time employment with Compro at all times to qualify for the commission payments”.

Brand’s employment was terminated by reason of redundancy and he was given payment of salary in lieu of his notice period. However, he was told by Compro that he would not receive commission for the months he had worked but which he had not yet been paid for, or with respect to his notice period, because he needed to be in full-time employment with the company to qualify.

The Court of Appeal held that since the terms of Compro’s commission scheme did not make it plain that commission was only payable if Brand was in full-time employment on the payment date, Brand and Compro could not be taken to have made such a one-sided bargain. The court therefore looked to the commission scheme documents which showed that commission was ‘earned’ when time sheets were signed by the contractors.

Where it was not clear that accrued entitlement to commission was only payable if the employee was in employment on the payment date, an ambiguous clause could not be relied on by the employer to show that commission was not payable. In the absence of such clear words, the parties will not be taken to have made such a one-sided bargain.

What you should do

  • Ensure commission and bonus schemes are clearly drafted and that it is expressly stated when the employee becomes entitled to receive a commission or bonus payment
  • If employees are not entitled to receive commission or bonus payments unless they are employed, whether at all or on a full-time basis only (and not under notice) on the payment date this should be clearly stated, since the courts appear to be inclined to favour the employee where there is ambiguity in the terms of the commission or bonus scheme.

Bray v Calor Gas Limited, Employment Tribunal
Sex discrimination and redundancy

Mrs Bray was employed as a depot manager for Calor. While she was on maternity leave Calor undertook a reorganisation and her position became redundant.

Bray held a provisional Class I LGV licence and suggested that she should take the role of a Class I LGV driver who was an agency worker. The role could have been made available immediately under Calor’s contract with the worker’s agency. The driver’s role involved some administrative work but also considerable periods of time away from the office. The role therefore required the worker to be flexible and to work unpredictable hours.

Calor rejected Bray’s suggestion because of the need for flexibility in hours and location, because the role involved much time spent away from the office travelling and because it required a Class I LGV licence.

The Employment Tribunal held that Calor had made stereotypical assumptions about Bray’s position. It found that she could have been provided with the training necessary and that there was no reason why she would not be able to deal with the unpredictability of hours in the same way that a male agency worker would have been able to.

The tribunal accepted that Mrs Bray was not dismissed because she had taken maternity leave but it did find that she had been unlawfully discriminated against on grounds of sex. Calor had asked questions about her childcare arrangements that the tribunal found it would not have asked a male comparator. Since Calor was not able to offer any acceptable explanation as to why it had not employed her in the driver role, it drew the inference that she had been discriminated on grounds of her sex.

Where an employee’s role is made redundant when she is absent from work on maternity leave, employers should not make stereotypical assumptions about the sort of alternative employment that that employee could or would be willing to undertake.

What you should do

  • Ensure that you treat all employees equally when discussing redeployment in a different role in a redundancy situation and do not assume that certain roles will be more difficult for an employee who has just taken a period of maternity leave based on stereotypical assumptions.
  • Consider whether roles performed by agency workers could be performed by employees who are being made redundant

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