Continuing our regular series on the implications of recent significant
cases, Sarah Keeble, a partner in the Olswang Employment Group, looks at the
Be up front about holiday pay?
MPB Structure Limited v Munro – (28 March 2002) EAT/1257/01
The Employment Appeal Tribunal in Scotland has ruled that paying holiday pay
up front, by including for employees an allowance of 8 per cent of salary in
each weekly pay packet, was in breach of the Working Time Regulations 1998 (the
The Scottish EAT reasoned (very briefly) that the Regulations are intended
to ensure workers take holiday and paying holiday pay up front places the onus
on the worker to retain pay from week to week to fund a holiday.
The EAT felt that this discourages those workers who do not plan ahead from
taking their leave entitlement.
The general view is that this case was incorrectly decided. The Scottish EAT
failed to consider various conflicting cases such as Gridquest & Others v
Blackburn & Others, or the application of Regulation 16(5). Regulation
16(5) provides that any contractual remuneration paid to a worker in respect of
a period of leave goes towards discharging any liability of the employer to make
payments in respect of that leave.
Another of the EAT’s objections was that the up-front payments may not be
enough to cover the full period of leave being taken by a worker. This could
have been solved by concluding that the up-front holiday pay that has accrued
when leave is taken goes towards discharging the employer’s obligation to pay
If there is any shortfall in accrued pay to cover the whole period of leave,
the shortfall could be given to the workers on or by the date that their leave
Unsurprisingly, the Munro case has now been appealed to the Court of Session
and we understand that a date has not yet been fixed for the appeal hearing.
Manner and circumstances of dismissal extended
Eastwood & Another v Magnox Electric (2002) EWCA Civ 463
The Court of Appeal has followed the decision of the House of Lords in
Johnson v Unisys Limited, which held that contractual damages cannot be
recovered for the manner of dismissal. In the Eastwood case, two employees were
subjected to trumped-up charges and false investigations into their conduct.
Unsurprisingly, both employees were eventually dismissed after spurious
disciplinary proceedings and subsequently claimed unfair dismissal.
The maximum compensatory award available from a tribunal at that time was
£11,300 and did not cover their losses. Therefore, both employees claimed in
the County Court that their employer had breached the implied term of mutual
trust and confidence and had been negligent, thus causing them psychiatric injury
(stress) and consequent loss of earnings.
The County Court Judge dismissed their claim on the basis of the House of
Lords decision in Johnson.
The employees appealed, arguing that the Johnson case was concerned with the
fact of dismissal and circumstances immediately surrounding the dismissal.
The matters the employees were seeking to rely upon related to the ongoing
employment relationship, namely the investigations and disciplinary proceedings
and hence, their claims should succeed.
The Court of Appeal disagreed and followed the decision in Johnson, holding
that the implied term does not apply to the manner or circumstances in which an
employee is dismissed and unfairness in the manner of dismissal does not give
rise to a contractual negligence claim.
The Court held that implied term of mutual trust and confidence is concerned
with preserving the ongoing employment relationship and, as such, only applies
while that relationship is ongoing.
The Court of Appeal’s conclusion means that events going back to the time of
any disciplinary proceedings can form part of the circumstances or manner of
dismissal and the employee’s only remedy in these circumstances is to complain
of unfair dismissal.
With the current cap on compensation, this can mean that those with
substantial losses do not recover them fully.
Failure to mitigate loss
Wilding v British Telecommuni-cations (2002) EWCA Civ 349
When an employee is dismissed, they have a duty to keep their losses to a
minimum by making reasonable efforts to find another job. If the employee fails
to do so or unreasonably refuses a job offer, the tribunal has the power to
reduce any compensation awarded to that employee.
Mr Wilding had worked for BT for 29 years when he was involved in a road
accident that left him with a back problem. This caused him to be off sick for
long periods of time and he was eventually dismissed by his employer in 1998.
He brought claims against BT for unfair dismissal and disability
discrimination – both of which succeeded.
BT appealed the tribunal’s decision. Just prior to the appeal, at the
instigation of the employee’s solicitor, BT offered to re-employ the employee
on a part-time basis. Some three months later the employee rejected BT’s offer.
At the subsequent tribunal hearing to decide on what compensation, if any,
to award, the tribunal heard evidence that Mr Wilding had consistently sought
to be re-engaged on a part-time basis and that his doctor thought him capable
of working part-time for several more years.
Due to the specialist nature of Mr Wilding’s skills, it was also most
unlikely that he would find a similar job with any other employer.
The tribunal concluded Mr Wilding had acted unreasonably in rejecting BT’s
offer and had therefore failed to mitigate his loss. The EAT agreed with this.
The employee appealed to the Court of Appeal.
The Court of Appeal confirmed the employee had a duty to take reasonable
steps to mitigate his loss and that the burden of proof was on BT, as the
employer, to show that Mr Wilding had unreasonably refused the offer of
The Court of Appeal confirmed the test of unreasonableness is an objective
one based on the available evidence.
However, the tribunal was required to look at all the circumstances,
including the subjective reasons Mr Wilding had given for turning down the
offer (here, Mr Wilding doubted that the offer was genuine having seen BT’s
notice of appeal).
They upheld the tribunal and EAT decisions that Mr Wilding should receive
only very limited compensation.
This case reinforces the principle that an employee needs to consider a
re-employment or re-engagement offer very carefully before deciding to reject