Case round-up

Serco Limited v Lawson, Court of Appeal Limits on the liability of overseas workers to claim in UK employment tribunals

 Lawson was employed as a security supervisor for a company registered in England and Wales with a head office in Middlesex. He was recruited in England, paid in England but employed in Ascension Island. He resigned, alleging a breach of the average weekly working time limit in the Working Time Regulations and brought a claim of unfair dismissal. The issue was whether he could bring such a claim.  An employment tribunal ruled that he could not, a decision upheld by the Court of Appeal.

Key points

Before October 1999, the Employment Rights Act provided that a claim of unfair dismissal to an employment tribunal could not be made where, under the contract of employment, the employee ordinarily worked outside Great Britain. Since that provision was repealed there has been much confusion about the ability of employees working for UK companies overseas to enforce statutory UK employment rights.

The Court of Appeal decision in this case is notable for completely rejecting all of the tests that have emerged over recent years to address this issue. Whether an employee working overseas can bring a complaint does not depend on “a sufficient or substantial connection” with the UK, a “base test”, a “territorial test” or whether the claim is brought against an employer who resides or carries on business in England and Wales. According to the Court of Appeal, the answer is straightforward: the right to claim unfair dismissal “applies to employment in Great Britain”.

It will undoubtedly be difficult to apply this test in marginal cases. However, the Court of Appeal firmly concluded that Lawson’s case did not meet the test: he was clearly employed in Ascension Island, no matter how strong his and his employer’s connection with the UK.  While tribunals will need to account for all the circumstances of any case, the key issue will be where the employee was employed to work.

What you should do

– Audit your overseas staff to identify those with UK employment rights

– Do not forget that overseas staff may have employment rights in the country in which they work, not just the UK.

Fairhurst Ward Abbotts v Botes Building Limited, Court of Appeal
TUPE and the retendering of a service on a different geographical basis

* * * A local authority had contracted out the supply of building maintenance services. When it retendered the contract, it split the contract into two geographical areas, Area 1 and Area 2.  It invited separate tenders for each area. No contractor could obtain both contracts.  Fairhurst successfully tendered for Area 2, replacing the incumbent contractor, Botes. A dispute then arose about the application of TUPE. Fairhurst argued that the geographical split of the contract on retendering meant that TUPE could not apply. That argument failed at the employment tribunal and in the Court of Appeal.

Key points

It is well known that whether or not TUPE applies on the retendering of a contract it involves a two-stage analysis. First, there must be a stable economic entity, in the hands of the contractor, which is capable of being transferred. The next question is whether that undertaking has actually transferred to the new contractor. Fairhurst’s argument was that, although TUPE can apply to the transfer of part of an undertaking, the transferred part had to be a separate identifiable economic entity before the transfer. Here, the outgoing contractor’s economic entity was the supply of the services to the whole local authority area, not just Area 2. This was not the same entity as transferred when the contract was re-tendered.

The Court of Appeal firmly rejected this argument. TUPE applies as much to the transfer of part of an undertaking as to the whole of an undertaking. The transferer must have a recognised economic entity before the transfer and any transferred part must amount to a recognised economic entity in the hands of the transferee. It is sufficient if a part of the larger stable economic entity becomes identified for the first time as a separate economic entity on the transfer of a part from the whole. This analysis is equally valid in business sale cases, so that the acquisition of part of a larger business could be caught by TUPE if the acquired part becomes a recognised economic entity in the hands of the purchaser.

The Court of Appeal also upheld the tribunal’s decision that one employee on long-term sick leave at the time of the transfer was entitled to transfer to Fairhurst. Although absent from work, on the facts he was clearly assigned to work in Area 2.

What you should do

– Contractors bidding for only part of a wider undertaking should carefully investigate which employees are assigned to that undertaking and have the right to transfer

– Existing contractors should ensure that the assignment of staff to parts of the contract is backed up with documentary evidence. This will help to avoid disputes with new contractors.

Case of the month by Chris Mordue
Injury to feelings award in unfair dismissal case

Dunnachie v Kingston upon Hull City Council, Court of Appeal Damages allowed for injury to feelings in unfair dismissal claims

Dunnachie successfully claimed constructive dismissal following a prolonged campaign of harassment by his line manager. The harassment, the council’s failure to deal with his complaints, and its attempts to deter him from invoking its harassment policy, amounted to a breach of trust and confidence.

Dunnachie’s ordeal affected his health but he suffered no recognised psychiatric injury. An employment tribunal included in his compensatory award an amount of £10,000 for injury to feelings. The Court of Appeal overturned an EAT ruling that no such award could be made.

This is a landmark ruling overturning a principle dating from 1971 that unfair dismissal compensation could only take account of financial losses. That long-standing position had been thrown into doubt in 2001, when the House of Lords in Johnson v Unisys ruled that an employee could not recover damages as part of a wrongful dismissal claim for psychiatric injury caused by the manner of a dismissal, suggested that unfair dismissal damages could include awards for injury to feelings.

Subsequently, some employment tribunals began to make such awards. Last year the EAT in Dunnachie ruled that this practice was wrong, a decision now overturned on appeal. This case is likely to go to the House of Lords.

Nonetheless, the current legal position is that employees can recover damages for injured feelings in unfair dismissal cases, as part of an award that is “just and equitable in all the circumstances of the case”. The Court of Appeal indicated that there are limits to this position. Not every upset caused by an unfair dismissal will attract compensation: “the power is there to permit tribunals to compensate an employee for a real injury to his/her self respect”.

The Court of Appeal further stressed that awards are likely in cases of constructive dismissal where the employee has been driven from his/her job, particularly in cases of bullying and harassment. The scale of awards is likely to be set by reference to benchmarks developed in discrimination cases, essentially falling into bands of £500 to £5,000, £5,000 to £15,000 and £15,000 to £25,000, depending on the severity of the case.

What you should do

– Adopt and enforce robust bullying and harassment policies

– Make sure employees are aware of the policies and their right to complain

– Ensure that complaints are handled sensitively and taken seriously

– Give managers guidance on how to deal appropriately with staff.

Watch this space

– In Street v Derbyshire Unemployed Workers Centre the Court of Appeal will consider when a public interest disclosure is made “in good faith”.

– In Commissioners of Inland Revenue v Ainsworth, the EAT will be asked to reconsider the ability of an employee to take paid annual leave under the Working Time Regulations while on sick leave.

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