Questions and answers

The employment law team at Hammond Suddards Edge answer questions on
workplace issues

Tupe regulations

Q  We took over a group of
employees following a "Tupe" transfer two years ago. The contracts of
employment that they transferred over on contain a review clause in relation to
calculation of bonus pay. If we reduce the bonus pay will the employees have
any claim against us?

A  Due to the fact the
employment contract contains an express clause that allows for the calculation
of bonus pay to be reviewed, if done reasonably, this would not amount to a
breach of contract.

However if the employees are able to establish that the change, i.e. the
reduction in bonus pay, is connected to the transfer two years ago they may
claim protection under the Transfer of Undertakings (Protection of Employment)
Regulations (Tupe). They would not then have to establish that the contract of
employment had been fundamentally breached in order to claim constructive

They would only have to show that there has been a substantial change in
terms and conditions as a consequence of the transfer.

Sue Nickson

Holiday pay for dismissed employee

Q  If we dismiss an employee
summarily for gross misconduct and the contract of employment states that all
rights are forfeited in those circumstances do we have to pay a sum in respect
of accrued holidays?

A  The inclusion of a clause
in the contract of employment that provides an employee will lose their
entitlement to holiday pay if dismissed for gross misconduct has been common practice
for a number of years. The introduction of the statutory right to paid holidays
under the Working Time Regulations 1998 first brought into question the issue
of whether such terms could still be relied upon. The Regulations contained a
provision allowing an employer to stipulate the amount that would be paid in
lieu of leave at termination. However it has remained uncertain whether this
provision would allow an employer to stipulate that no payment at all would be
made in respect of annual leave.

The issue finally came before the Employment Appeal Tribunal in June in the
case of Witley and District Mens Club v Mackay. It was found that the
Regulations contemplated the payment of a sum of money in lieu of the accrued
holidays and that a clause providing for payment of no money was rendered void
by the Regulations.

If this decision is followed then employers will not be able to rely upon
the clause in the contract that provides an employee will forfeit rights to a
payment in lieu of accrued leave. In the future employers will have to consider
including a clause in the contract that in such circumstances a nominal sum
will be paid in respect of outstanding leave as arguably the Regulations may
still allow this.

Judith Firth

Legal costs

Q  If we successfully defend a
claim brought against us in an Employment Tribunal are we able to make a claim
for our legal costs?

A  Awards for legal costs may
become more common following recent changes to the Employment Tribunals rules
of procedure. Under the provisions of the Employment Tribunals (Constitution
and Rules of Procedure) Regulations 2001 the changes came into force as at 16
July 2001. In regards to costs it used to be the case that the Employment
Tribunal just had the right to make an award but now there is a duty to
consider an award of costs wherever proceedings are pursued or defended without
reasonable prospect of success. The amount of costs that the Tribunal can award
has also increased from £500 to £10,000, and higher amounts may be awarded where
the costs have been formally assessed or agreed between the parties.

So, yes costs may be awarded but whether they are awarded in practice will
depend to a large extent on how willing the Employment Tribunal will be to
conclude that a party has unreasonably pursued or defended claims.

There are further changes to Tribunal procedures in the pipeline. On 20 July
the Department of Trade and Industry published a paper entitled "Routes to
Resolution: Improving Dispute Resolution in Britain". This contains a number
of proposals for change including the introduction of an obligation on all
employers to have an internal dispute resolution mechanism and the
implementation of a system of fees for applicants to Employment Tribunals. In
some reports it has been claimed that this fee may be up to £100.

Stephen Hurley

Disproving discrimination claims

Q  Is it true that legislation has
been announced that will mean employers will have the burden of disproving any
discrimination claim?

A  The changes to burden of
proof relate to sex discrimination cases only at present. The Sex
Discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001
were laid before Parliament on 20 July 2001 will be implemented on 12 October

An applicant in a sex discrimination case presently has to prove his/her
case. However the Employment Tribunal will draw inferences from clear facts
which indicate that discrimination has occurred, and then it will be for the
employer to show that the treatment of the applicant was not on the grounds of
sex. The draft Regulations provide that once the applicant has established
facts from which a tribunal may presume that there has been direct or indirect
discrimination, it shall be for the employer to prove that it has not

It appears this subtle change just confirms the practice that Courts and
Tribunals have adopted in the UK for some time now and its unlikely to make any
real difference to employers in practice.

Carol O’Reilly

Sex discrimination

Q  A new employee has complained that
some of her work colleagues have called her a Lesbian, she has claimed that
unless we do something about it she will take us to court for sex
discrimination. Can she?

A  Last year the case of
MacDonald v Ministry of Defence made headline news when it was held that
discrimination on the grounds of sexual orientation was unlawful under the Sex
Discrimination Act 1975.

However, the shock ruling was overturned on 1 June this year when the Court
of Session allowed the appeal and confirmed that the Act outlaws discrimination
on the grounds of gender but not sexual orientation. So at the present time she
could not claim that she was being unlawfully discriminated against though she
may have other claims. Employers should note that provisions outlawing
discrimination on the grounds of sexual orientation must be implemented in the
UK before December 2003 under the EU’s Equal Treatment Framework Agreement.

Ian Tranter

Unfair dismissal

Q  An employee has
threatened to claim unfair dismissal after we selected him for redundancy on
the grounds that he was above the normal retirement age of 65. Can an employee
claim unfair dismissal after his normal retirement age?

A  Section 109 of the Employment Rights Act 1996 provides that an
employee may only bring a claim for unfair dismissal if below normal retirement
age. A similar provision also exists in relation to claims for a redundancy

However these provisions have been successfully challenged in
Employment Tribunals on the grounds that they are discriminatory. Statistics
have been produced showing men are more likely than women to be adversely
affected by the upper age limit on claims as they are more likely to remain in
active work beyond the age of 65.

It was hoped that the resulting uncertainty surrounding the
issue would be resolved when the Employment Appeal Tribunal addressed the
subject in the case of Harvest Town Circle v Rutherford. The employers had
appealed the decision of the Tribunal that the statutory provisions could not
be followed as they were discriminatory. The appeal was allowed but only to the
extent that it was referred back to the Tribunal to reconsider. The Employment
Appeal Tribunal had found that the statistics relied upon at the original
hearing were inadequate and that the Secretary of State should have the
opportunity to put forward argument to justify the legislation despite any
discriminatory effect.

The upper age limit on claims therefore stays intact at this
stage but whether it will continue to do so is far from certain. While this
appeal was allowed the door has not been closed on further possible challenges
so it appears that this will again be a subject before the appeal courts in the
near future. In the present circumstances it would therefore be a sensible
precaution for employers to follow a fair dismissal procedure whether the
employee is over retirement age or not. All employers should also keep in mind
that legislation on age discrimination will be implemented before 2006 under
the EU’s Equal Treatment Framework Agreement, which seems likely to outlaw
dismissals on age grounds alone in any case.       

Nick Jones

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