Q & A

The employment law team at Shakespeares answer questions on workplace issues


Q A Company has asked me for a reference for one of my ex-employees.
This employee was subject to allegations of misconduct but resigned prior to his
disciplinary hearing. Should I disclose these allegations to his prospective

A Unless there is a contractual term to require it, there is no
common law duty on an employer to provide references for his serving or past
employees. However, an employer has a duty to take reasonable care in the
preparation of references and their accuracy. If he fails to do so and the
employee suffers damage he may be liable to the employee in negligence. There
is no duty, however, to give a full or comprehensive reference nor to refer to
all material facts.

In Cox v Sun Alliance Life Ltd 2001, a potential employer requested a
reference from SA in respect of Cox. The reference included details of the
suspension of Cox pending investigations of dishonesty and said that Cox would
have been dismissed had he not resigned. Cox lost the new employment and
brought proceedings for damages for negligence and breach of agreement against

The claim for breach of agreement was dismissed but damages for negligence were
awarded. Generally, an employer is under a duty to give an accurate and fair
reference which requires a reasonable inquiry into any allegations. If this is
not done, or partly done, by the time of termination then the allegations
should not be mentioned in the reference, or reference made only to those parts
which have been properly investigated.

This case emphasises that employers must ensure that all facts contained in
a reference are accurate and that the overall impression given is not

In your case, if the matters were not fully investigated and the matters
were not put to the employee then you should not disclose them in the
reference. Consider a purely factual reference dealing with post occupied,
dates of employment etc.

Michael Hibbs

Fixed-term contracts

Q Many of our employees are employed on fixed-term contracts. We have
heard of some proposed legislation which will affect their rights. How can such
employees expect to benefit?

A The draft Fixed Term (Prevention of Less Favourable Treatment)
Regulations 2001 ("the Regulations") have now been published to try
to implement the Fixed Term Work Directive ("the Directive"). The
Government must implement this by 10 July 2002.

Less favourable treatment of fixed-term employees when compared with
comparable permanent employees is to be outlawed where this treatment cannot be
justified on objective grounds.

The Regulations cover the contractual terms of the contract (such as
holidays, company car, sick pay, etc.) as well as any "detriment"
suffered by the employee resulting from an act, or failure to act, by the
employer. "Failure to act" may include a failure to promote.

The Government does not think that the Directive relates to "pay"
and has therefore expressly excluded it from the Regulations.

Employers will not be able to evade their unfair dismissal liabilities by
employing staff on a string of successive fixed-term contracts in the hope that
they will never gain one years’ continuous employment.

Any employee who has been continuously employed for over four years on one
fixed-term contract, or several successive fixed-term contracts, will be
treated as a permanent employee. This is again subject to the employer showing
that keeping the employee on a fixed term contract is objectively justifiable.
Whether an employer will be able to use fixed-term contracts with a couple of
weeks’ gap between each one to break continuity is open to further debate.

The remedy for the employee will be to request a written statement from the
employer giving reasons for any treatment which may be a breach. A failure to
provide reasons, or the provision of evasive answers, will entitle the
Employment Tribunal to draw its own inferences from this conduct.

Helen Hughes


Q Our Company has an employee working on secondment for another
company (Company B) on a three year project expiring in 18 months. We pay the
employee’s salary although Company B reimburses us. The employee has been
accused by Company B of an act that could amount to gross misconduct and wants
to dismiss him. Which company can dismiss the employee? And, if Company B
dismiss the employee could this cause problems for us?

A The individual remains your employee and is subject to your
Company’s Disciplinary Procedure. Any action taken must be yours. The employee
does however, have a duty to comply with lawful orders given by Company B and
also had a duty of good faith to Company B. If as a result of following the
disciplinary procedure you determine that the action was gross misconduct then
you will be able to dismiss him.

Complications may arise if your Company does not consider the action to
warrant summary dismissal but Company B refuses to allow the individual to
return to their premises or refuses to reimburse the employee’s salary. If
there are no suitable alternative positions available within your Company, then
there will be a potential redundancy and a consultation procedure must be
followed. Further, if Company B purport to terminate the employee’s employment,
he may bring proceedings against your company for unfair dismissal on the basis
that a fair procedure has not been followed.

Tony Jones

Restrictive covenants

Q An ex-employee has recently set up in competition. We have also
discovered that he took from us confidential information including price lists
and customer names and contacts. He is subject to a non-competing restrictive
covenant for six months. What can we do to stop him from setting up his
business and using this information?

A If a former employee is in breach of a restrictive covenant, you
must rely on common law remedies for breach of contract namely, injunctive
relief and damages.

The most effective form of remedy is for the Court to grant an injunction.
You will initially need to obtain an interim injunction, as a temporary
restraint, in anticipation of a full hearing of the evidence.

You must show first that there is a serious issue to be tried. Second, the
Court has to consider the "balance of convenience" test. Can the
party against whom the injunction is to be made be adequately compensated by an
award of damages if it is later proved at the full trial that an interim
injunction should not have been granted? Will damages be an adequate remedy for
the claimant as opposed to an injunction? Damages will not be appropriate if
the defendant is unable to pay and further as you require the return of the
price and customer lists only an injunction will suffice.

You may be asked to give the Court a "cross undertaking in
damages", that if, on hearing all the evidence at the full trial, the
injunction ought not to have been granted, you will compensate the employee for
the loss he has suffered in defending such claims.

Alternatively, providing you can show that you have suffered loss as a
result of the breach of contract damages may be sought. The Court will attempt
to put the claimant in the position he would have been in had the contract been
duly performed. Therefore, you could claim for a loss of profits. The problem
would be to quantify your losses and whether the ex-employee has the means to

Mark Beesley

Holidays for maternity leave

Q We employ a full-time senior business manager who is about to start
her maternity leave. At the start of the 11th week before the expected week of
childbirth, she had been employed by us for over one year and so is entitled to
additional maternity leave. She is entitled under her contract of employment to
35 days holiday a year in addition to statutory and bank holidays. Does she
still accrue this holiday during her maternity leave?

A During Ordinary Maternity Leave, the employee is entitled to all of
her usual terms and conditions of employment and so accrues her holiday
entitlement at the rate of 35 days per year during this 18 week period.

However, during Additional Maternity Leave (29 weeks after childbirth)
holiday will not accrue at the contractual rate. This does not mean, however,
that the employee will not accrue any holiday at all. Regulation 13 of the
Working Time Regulations 1998 provides that all employees are entitled to a
minimum of four weeks holiday per year (which can include statutory holidays).

There is no exception for employees on maternity leave as this could amount
to indirect sex discrimination. The employee will accrue holiday pro-rata at
the rate of four weeks per year during her additional maternity leave.

The Company’s normal holiday year will apply and confusion can arise if an
employee’s maternity leave begins in one holiday year and ends in the next.
Upon the employee’s return to work she will only be entitled to take holiday
accrued but untaken during the current holiday year. Any holiday accrued during
a previous contractual holiday year will be lost.

This is not discrimination on the grounds of sex as there is no entitlement
for any employee to carry over accrued but untaken holiday under the Working
Time Regulations.

Gayle Ditchburn

Sexual orientation

Q I am confused over the issue of sex discrimination,
and whether the Sex Discrimination Act 1975 covers sexual orientation. What
precisely is the situation at present?

A Under the Sex Discrimination
Act 1975 ("the SDA"), discrimination will occur when one person
treats another individual less favourably than he treats, or would treat, a
person of the opposite sex. There has been some debate over what
"sex" under the SDA means.

The Court of Session in MacDonald v Ministry of Defence held
that "sex" only means gender, and not sexual orientation.

The Court of Appeal has now confirmed that this is in Pearce v
The Governing Body of Manfield Secondary School. The Court had to decide
whether the duty under the Human Rights Act 1998 ("the HRA") to
interpret domestic legislation in line with the European Convention on Human
Rights applies retrospectively.

The reason for much of the confusion is that discrimination on
the grounds of sexual orientation is precluded by Articles 8 and 14 of the
Convention, and this conflicts with interpretations of "sex" in the
UK Courts. In addition, it has been argued in the past that "sex" is
an ambiguous word, and should be interpreted so as to comply with the

The Court of Appeal held that the HRA does not operate
retrospectively. Consequently, the Court did not have to construe
"sex" as including sexual orientation.

All of this confusion should be swept away when the Equal
Treatment Framework Agreement is implemented, before the end of 2003, as this
makes discrimination on the grounds of sexual orientation unlawful. In the
meantime, an employee who is dismissed because of his sexuality will have to
argue that such a decision does not fall within the range of "reasonable

James Tait

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