Collective redundancy consultation


Junk v Kuhnel [2005] IRLR 310


The European Court of Justice has rejected views to the contrary put forward by the UK government, and ruled that a 'redundancy' within the meaning of the Collective Redundancies Directive means the declaration by an employer of its intention to terminate the contract of employment - rather than the actual cessation of the employment relationship on expiry of the notice period.


The obligations to consult and to notify arise prior to any decision by the employer to terminate contracts of employment. Achieving the purpose of the Directive (for example, to avoid terminations of employment contracts, or to reduce their number) would be jeopardised if consultation of workers' representatives were to take place after the employer has taken the decision. The editor of the IRLR points out that this decision indicates that UK legislation is 'out of line with the requirements of community law. This is because it focuses on the link between when consultations must begin and when dismissals take effect, rather than on the link between when consultations must have been completed and when notice of dismissal is issued.'


However, the editor adds that the European Court 'does not say, either explicitly or implicitly, that the full period of consultation provided under national law must elapse before employees can be given notice of dismissal. The focus is on the substance of the consultation.'




Hardy v Tourism South East [2005] IRLR 242


An employer was closing one of its main offices with the loss of 26 jobs, but expected that many of the staff would be redeployed in other jobs at other locations and that, ultimately, there would be fewer than 20 redundancies.


The question for the Employment Appeal Tribunal (EAT) was whether this meant that the employers were proposing to dismiss 20 or more employees as redundant within the meaning of section 188(11) of the Trade Union & Labour Relations (Consolidation) Act 1992. A tribunal had concluded that the employer was not obliged to consult with employee representatives, but the EAT allowed an appeal.


The essential issue is whether or not, on an objective consideration of what the employer says or writes, it is proposing to withdraw the existing contract from the employee, or the departures that the employer is proposing from an existing contract are so substantial as to amount to the withdrawal of the whole contract.


The mere fact that an employer proposed to redeploy an employee is not decisive. If the employer only proposes to keep the employee in employment on what is, in reality, a different contract, it will be proposing to terminate the existing contract.


On the facts, it was clear that the employer did propose to dismiss more than 20 employees. Although some might be redeployed, it would be to jobs for which they would have to apply, in a different location and with a fresh job description.






Burden of proof


Igen Ltd (formerly Leeds Careers Guidance) and others v Wong & other cases [2005] IRLR 258


The Court of Appeal has ruled that the statutory amendments to the burden of proof altered the pre-existing position established by case law relating to direct discrimination.


The changes require a tribunal to go through a two-stage process. The first requires the claimant to prove facts from which the tribunal could conclude, in the absence of an adequate explanation, that the respondent has committed the unlawful act of discrimination. The second requires the respondent to prove that it did not commit the unlawful act.


However, the Court of Appeal said that tribunals should not divide hearings into two parts to correspond to those stages. Tribunals will generally wish to hear all the evidence, including the respondent's explanation, before deciding whether the requirements of the first stage are satisfied and, if so, whether the respondent has discharged the burden that has shifted.


The Court of Appeal approved, in amended form, the guidance offered by the EAT in Barton v Investec Henderson Crosthwaite Securities Ltd [2003] IRLR 332. However, the court emphasised that the guidance 'is not a substitute for the statutory language'. The editor of the IRLR contends that the question of what will suffice to make a prima facie case to shift the burden of proof to an employer 'is likely to be a key battleground in 2005'. In this context, it is interesting that Lord Justice Peter Gibson upheld the tribunal's finding that it was entitled to draw an inference satisfying the requirements of the first stage from unexplained and unreasonable conduct by the employer.







Occupational stress



Hartman v South Essex Mental Health and Community Care NHS Trust and others [2005] IRLR 283



In these cases, the Court of Appeal reviewed the general principles most recently considered in Barber v Somerset County Council [2004] IRLR 475.



The court did not accept that an employer knew the claimant was vulnerable because she had disclosed the fact that she had suffered a nervous breakdown and was taking medication when completing a confidential questionnaire produced by the occupational health service only. It was not right to attribute to the employers knowledge of confidential medical information disclosed by the employee to the occupational health department.



The Court of Appeal noted guidance in the British Medical Association publication, Medical Ethics Today, for example: 'the fact that a doctor is a salaried employee gives no other employee of that company any right of access to medical records or to the details of examination findings.' There may be circumstances in which an occupational health department's duty of care to an employee requires it to seek the employee's consent to disclose the information that the employer needs to know if proper steps are to be taken for the welfare of the employee, but that was not relevant in this particular case.



Furthermore, the Court of Appeal observed that the mere fact that an employer offers an occupational health service does not mean that the employer has foreseen the risk of psychiatric injury owing to stress at work to any individual or class of employee. The availability of such a service will mean that the employer is unlikely to be found in breach even if the harm is foreseeable.



In addition, where a conscientious employer has assessed that there is some potential risk of psychiatric injury, it will still be open to him to argue that it was a mere possibility or so small that it was reasonable for him to neglect it. Nor does it follow that if one employer has foreseen a particular risk, all others in the same field should have done so.







Restrictive covenants



TFSS Derivatives Ltd v Morgan [2005] IRLR 246



This is an interesting example of the High Court's approach to the interpretation of a post-termination covenant.



It was said that assessing the reasonableness of such a covenant requires a three-stage process. First, the court must decide what the covenant means when properly construed. If there is an element of ambiguity, and one interpretation is that the covenant was unlawful and another is that it was not, the parties should be deemed to have intended their bargain to be lawful.



Second, the court will consider whether the employers have shown on the evidence that they have legitimate business interests requiring protection in relation to the employee's employment. Third, the covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Even if the covenant is held to be reasonable, the court will finally decide whether, as a matter of discretion, injunctive relief sought should be granted.



In this case, the employee contended that a clause providing for six months' garden leave would lead to a more reasonable result than reliance on the covenant. But that argument was rejected; the judge was not persuaded 'that the point has now been reached for garden leave clauses, despite their popularity and prevalence, to negate the necessity for non-complete clauses in all cases ... the matter will always fall to be determined on the particular facts of the case'.



Noting that the employee in this case was 'highly valued and most generously rewarded', the judge concluded that 'the inequality of bargaining power, which is recognised to apply in many employment relationships, simply does not exist, or at any rate, does not exist to such a degree' so as to render the covenant under consideration unreasonable.







Unfair dismissal compensation



Morgans v Alpha Plus Security Ltd [2005] IRLR 234



The EAT held that a tribunal was right to reduce a claimant's compensatory award by the full amount of incapacity benefit which he had received during the period covered by the award.



The appeal tribunal said that there was no room for the approach in earlier cases, notably Norton Tool Co Ltd v Tewson [1972] IRLR 86, which treats something which is not a loss as being a loss by disregarding receipts, since this is to reward an unfairly dismissed employee by awarding a bonus. The EAT said: 'If there is no loss, no compensation can be recovered even for the most unfair of unfair dismissals (even if aggravated by a further unfair industrial practice of not paying notice pay up front).' This approach conflicts with that in Voith Turbo Ltd v Stowe [2005] IRLR 228, and clarification from the Court of Appeal would be welcome.







Breach of contract



Royle v Manchester City Football Club Plc, The Times, 14 March 2005



A football manager was employed pursuant to a four-year contract and his basic salary depended on which league or division the club was playing in at the time.



He was paid £750,000 annually if the club was playing in the Premier League and £300,000 annually if the club was playing in the First Division (as it then was). If the club terminated the contract prematurely, other than for misconduct, it had to pay him a sum equal to his gross basic salary for either 12 months, if at the date of termination the club was in the Premier League, or for six months, if at that date the club was in the First Division.



The club played its last match of the 2000/1 season in the Premier League, lost and ended the season third from the bottom of the table, resulting in relegation to the First Division. Two days later, the manager was dismissed. He contended that the club was still a member of the Premier League when he was dismissed because the share transfer that would bring membership of the Premier League to an end had not yet taken place.



A High Court judge held that the parties must have been taken to be aware of the applicable Premier League rules and that the only sensible way of deciding whether a club was in the Premier League was by reference to the holding of the share.



The Court of Appeal took a different view. It was clear that the parties had not applied their minds to the position if dismissal took place at the end of the season when the club had either been relegated or promoted but before the next season had begun. At the time of forming the contract, the parties' intention was that the compensation clause should provide a 'broad-brush' assessment of common law damages to compensate the manager, if prematurely dismissed, for loss of earnings he would have received but for the premature dismissal. This resolved the ambiguity of the contract in the club's favour. It was bound to play in the First Division in the following season and the manager would have received the lower rate of pay. That was what he lost by his dismissal.



By Martin Edwards, Mace & Jones, Liverpool