Unauthorised deductions and constructive dismissal

Farrell Matthews & Weir v Hansen [2005] IRLR 160


A salaried partner in a solicitors' firm had no contractual right to any bonus, but bonuses were paid on an ad hoc basis depending on how well fee-earners in the firm were performing.


The salaried partner made it known that she was considering her position and was informed that she was to be paid a bonus of £12,000, payable in 12 monthly instalments, as long as she did not give notice to leave. She said the bonus was too low, but the firm responded by adding the proviso that if either side gave notice for any reason, no further payment of the discretionary bonus would be made.


The salaried partner expressed her disagreement and subsequently said she had decided to resign. She was offered an increased bonus, subject to the same conditions, but she resigned in any event. She had been paid £3,000 by way of bonus for May, June and July but nothing further for the period until her employment ended on 28 October.


A tribunal decided that withholding the balance of the bonus was an unauthorised deduction from wages and that she had been constructively dismissed by reason of a fundamental breach of the implied term of trust and confidence.


The Employment Appeal Tribunal (EAT) upheld the tribunal's decision. A discretionary bonus that has been declared is a wage properly payable to an employee in terms of section 13(3) of the Employment Rights Act 1996. Until the discretion is exercised in favour of granting a bonus, no bonus is payable, provided the discretion is exercised properly.


However, once an employer tells an employee that he is to receive bonus payments on certain terms, there is a legal obligation on the employer to pay the bonus in accordance with those terms and the employee has a legal entitlement to receive it. This applies equally where the discretion to award a bonus is granted under contract, or by custom or practice or by an ad hoc decision.






Breach of contract


Brand v Compro Computer Services Ltd [2005] IRLR 196


A recruitment agency sales consultant was eligible for commission based on the achievements of sales targets. Commission was 'earned' and became payable when the employers were in possession of signed time sheets from their contract staff.


The scheme expressed the assumption 'that you remain in full-time employment with Compro at all times in order to qualify for a commission payment'. The consultant was dismissed and paid up to the dismissal date, together with one month's pay in lieu of notice, but no commission.


Among other matters, he claimed that his contract had been breached in respect of non-payment of commission. Unlike an employment tribunal and the EAT, the Court of Appeal found in his favour.


The tribunal erred in concluding that to be entitled to payment, the consultant had to be in employment on the date that payment was due to be made.


In the absence of clear words making it plain that any accrued entitlement to commission was dependent on the employee also being in employment on the date when the commission would be payable, the parties should not be taken to have entered into such a one-sided bargain.


The 'harsh result' contended for by the employers would be inconsistent with the avowed purpose of the commission scheme, which was to reward the employee for the achievement of targets set for him by the employers.


It would mean that a well-advised employer might seek to terminate the contract of employment shortly before the commission payment date at the end of the month.






Compensation


Dignity Funerals Ltd v Bruce [2005] IRLR 189


An unfairly dismissed employee was unfit to work because of reactive depression and was still unfit when a tribunal upheld his complaint. The tribunal said it would not be just and equitable to award him compensation for the period from dismissal to the date of the hearing, but made an award of six months' future loss of earnings.


The EAT allowed his appeal against the decision to make no award for the period up to the hearing date.


It held that there was a causal connection between the dismissal and the illness, and the Court of Session accepted that the tribunal was wrong not to make a compensatory award for the period up to the date of hearing, during which the employee was unfit for work.


In deciding whether to make a compensatory award in accordance with section 123(1) of the Employment Rights Act 1996, a tribunal has to consider two main questions.


First, was the dismissal one of the causes of his wage loss? If so, what compensatory award would be just and equitable in all the circumstances?


The first question is one of fact; the latter is one of discretion. A compensatory award depends on proof of loss. Thus any application of the 'just and equitable' principle must be underpinned by findings of fact establishing that the loss was caused to a material extent by the dismissal.


Where, in the period after dismissal, an employee suffers loss because he is prevented from working because of ill health, the tribunal must decide whether the illness was caused to any material extent by the dismissal itself.


If it was caused by the dismissal, then the tribunal must decide whether the illness continued to be so caused for all or part of the period up to the hearing and, if it was so still caused at the date of the hearing, for how long it will continue to be so caused.




HM Prison Service v Beart (No 2) [2005] IRLR 171


The question in this case was whether the unfair dismissal of an employee who had suffered unlawful discrimination breaks the chain of causation so that any further loss results from the dismissal and is thus subject to the statutory cap on compensation for unfair dismissal.


The EAT upheld a tribunal's decision to award compensation to an employee for disability discrimination in respect of future loss of earnings without treating the fact that she has also been unfairly dismissed as the operative cause of any loss after the dismissal took effect. The general principle that a tortfeasor should not benefit from his second wrong is based on sound public policy and needs to be taken into account when dealing with losses in discrimination cases.


In this case, there was clear evidence that the psychiatric harm, caused by the act of discrimination, and its impact on the employee's ability to work continued far beyond the date of the unfair dismissal.






Human rights


McGowan v Scottish Water [2005] IRLR 167


An employee was suspected of falsifying his time sheets. The employers considered various ways of investigating the matter before deciding to undertake covert surveillance of his home.


They employed private investigators who secreted themselves opposite the front door of his house and, over the course of a week, videoed all his movements. Videos were produced that confirmed the employers' suspicions and led to his dismissal.


The employee claimed that his dismissal was unfair because his right to respect for his privacy and family life had been breached. A tribunal rejected his claim and the EAT, by a majority, upheld that ruling.


The EAT acknowledged that covert surveillance raises at least a strong presumption that the right to respect for private life is being invaded. However, the right to respect for private life can be put in issue by the very person asserting a breach of the European Convention of Human Rights. Whether a surveillance operation breaches the person's right to have his private life respected is a question of proportionality.


On the facts, the employer's surveillance was not disproportionate. The employee's alleged conduct in submitting false timesheets forced the employers to investigate and the aim of the surveillance was to quantify the number of times he left his house to go to work, which would plainly bear on the accuracy or otherwise of the timesheets. Therefore, it went to the heart of the investigation, which the employers were bound to carry out to protect their assets.


The employers considered the possibility of placing cameras in the workplace, but concluded that that would be impractical and ineffective. The surveillance was not undertaken for external or whimsical reasons. The EAT also noted that the employers' suspicions had been established and that the fairness of the subsequent disciplinary process was not challenged.






Procedure


Raballah v BT Group Plc [2005] IRLR 84


The EAT held that a party who is asked to consent to a case continuing before an employment tribunal consisting of the chairman and one lay member is entitled to know whether the remaining lay member comes from the panel of employers' representatives or the panel of employees' representatives.





Ali v Office of National Statistics [2005] IRLR 201


This decision of the Court of Appeal underlines the need for care when drafting a claim to the employment tribunal.


The Court of Appeal held that a tribunal erred in finding that a claimant did not need permission to amend his claim of race discrimination to add a claim of indirect discrimination, since this was already included in his claim alleging discrimination on racial grounds.


Direct discrimination is one type of unlawful act, indirect discrimination is a different type. Whether the claim form contains a claim in respect of both types of act has to be judged by reference to the whole document.


In this case, the particulars of claim clearly asserted less favourable treatment on racial grounds, but there was no assertion of indirect discrimination. So an application for leave to amend to add a claim of indirect discrimination sought to bring a new claim into the proceedings. Thus the correct test for the tribunal was whether in all the circumstances it was 'just and equitable' to allow the amendment.






EAT practice statement - 3 February 2005


The president of the EAT has drawn the attention of litigants and practitioners to the wording and effect of rules 3(1)(b) and 3(3) of the Employment Appeal Tribunal Rules 1993 (as amended). As was made clear in the Employment Appeal Tribunal Practice Direction [2005] IRLR 94, a notice of appeal without the specified documentation will not be validly lodged.


The documentation required to accompany the notice of appeal for it to be valid now includes a copy of the claim and the response in the tribunal proceedings appealed from, if such be available to the appellant, and in any event if such not be available for whatever reason then a written explanation as to why they are not provided.


The president noted that both practitioners and litigants in person are not complying with the new rules and practice direction and are not appreciating the consequences of their non-compliance.


The registrar will not accept as an excuse ignorance or misun-derstanding of the requirements as to service of the documents required to make a notice of appeal within the 42 days.



By Martin Edwards, Mace & Jones, Liverpool