Start of year round-up

While more significant changes in the law - such as the introduction of age discrimination - remain on the horizon, the new year has seen employment lawyers continue their more mundane struggle with the new mandatory employment tribunal forms, which appear to have little simplified the process for anyone involved.


Although there is evidence of a more sensible approach being adopted, forms are still being routinely returned to practitioners for simple errors. The situation reached a point where the Employment Law Association issued a monitoring survey to its members to assess the extent of the problem. Given the different approaches adopted by tribunals, all parties are advised to lodge their claims and responses as early as possible to ensure adequate time to address any difficulties with the forms, and to avoid the risk they may become out of time, leaving them to the fickle mercy of the tribunal’s review process.


At the same time, the tribunals have begun to grapple in earnest with the issues that surfaced from the dispute resolution provisions of the Employment Act 2002, which introduced the law relating to minimum statutory disciplinary and grievance procedures as long ago as October 2004. Particular difficulty has come with the need for employees to pursue their internal grievance procedure before bringing certain tribunal claims. However, those acting for respondents will need to tread with care in seizing on the ‘failings’ of applicants to raise such grievances when advising their clients following several recent Employment Appeal Tribunal (EAT) decisions.


In the most detailed, Shergold v Fieldway Medical Centre LTL 9 January 2006 (unreported elsewhere), the EAT gave clear guidance on what actually constitutes a grievance for the purpose of the Act. Ms Shergold had brought a claim for constructive unfair dismissal, arising out of difficulties working with a particular manager. She tendered her resignation and in doing so cited some of the difficulties she alleged she had experienced, but did not expressly state that her letter was to be treated as a formal grievance.


The company invited her to a meeting to discuss things and to raise a formal grievance. She did not do so. Instead, she raised her claim at the employment tribunal, which dismissed it on the basis she had not complied with the requirement to lodge a grievance under section 32 and schedule 2 of the Act.


Reversing that decision, the EAT held that her resignation letter was sufficient to comply with those provisions. It took the opportunity to emphasise that the statutory requirements as to what will constitute a grievance are ‘minimal’, and stated that provided it was in writing and that the general nature of what was complained of was the same as the claim, the requirements had been fulfilled. It also found that it was not necessary for an employee to invoke a formal grievance under any procedure (even if under a contract of employment) or even to identity in the letter that it was a grievance.


Employers and their advisers are now on notice that the broadest view must be taken of what amounts to a grievance in deciding whether to act on complaints received and how to conduct any subsequent action.


In this same spirit of clarification, the EAT has also given further guidance in the oft-fraught area of dismissal for ‘some other substantial reason’, based on section 98(1)(b) of the Employment Rights Act 1996 (ERA). This residual category has often provided sanctuary, not least when major changes are proposed to contracts of employment which employees resist.


Essentially, the approach requires an employer to show not only a good and genuine business reason for the changes but also that it has acted fairly in all the circumstances when dismissing an employee for rejecting the change.


In Willow Oak Developments Limited v Silverwood and others [2006] IRLR 28, the changes included the imposition of restrictive covenants on employees in circumstances in which the employer had suffered staff poaching and the loss of know-how to competitors.


Certain employees were dismissed for refusing the new contract. In considering their claims, the employment tribunal found that the restrictions were too broad to be enforceable, and on that basis concluded that the employer had not even shown the dismissal to be for ‘some other substantial reason’. It also found that the process adopted (in which the employees were given only half an hour to sign, and were not warned that failure to sign could lead to dismissal) was itself unfair.


Although the EAT agreed with the employment tribunal’s decision to uphold the applicant’s claim, it did so on that second basis only and rejected the approach the tribunal had taken. The correct approach was for tribunals first to consider whether the reason for dismissal amounted to ‘some other substantial reason’. This required only that the reason should not be ‘whimsical or capricious’ and a finding that the employer genuinely believed dismissal was justified. Only then would the enforceability of the covenants be considered as part of the next step of considering the ‘fairness’ of the dismissal under section 98(4) of the 1996 Act.


Given that extensive covenants are likely to fall into the ‘arguable’ category, the decision underlines the importance to employers of other surrounding circumstances, such as the provision to employees of time and access to advice, as well as ensuring employees are aware of the consequences of refusal.


This decision sits ill at ease with the earlier decision of the EAT in Forshaw and others v Archcraft Limited [2005] IRLR 600, which was not followed since the EAT felt that case conflicted with earlier binding authorities.


The increasing use by legislation of the broader definition of ‘worker’ (permitting, for example, unlawful deduction claims), and the extended definitions of ‘employee’ (for example, when bringing a discrimination claim) as opposed to plain ‘employee’ (for example, unfair dismissal) received a further boost from the EAT in the case of Younis v Trans Global Projects Limited LTL 10 January 2006. Here the EAT found that sufficient ‘mutuality of obligation’ existed to qualify him as a worker and employee (under the extended definition), permitting his race claim and claim for unlawful deductions. However, his claim to be an ‘employee’ under section 230 of the ERA was dismissed, preventing his unfair dismissal claim. The employment tribunal had thrown out all of his claims, finding that his ability to work for others and the lack of control over him prevented the key element of ‘mutuality of obligation’ to qualify under any of the definitions.


The EAT disagreed, highlighting his three-year contract (terminable on 60 days’ notice), the obligation on him to introduce contacts to promote sales, and a modest retainer as being sufficient to make him a ‘worker’ (given his personal rendering of services) and employee (under the extended definition). However, it did agree that the tribunal was entitled to focus on the lack of control when deciding he was not an ‘employee’ (blocking his unfair dismissal claim). Employers who habitually make use of ‘contractors’ to avoid such claims should take note as the boundaries widen.


Finally, a reminder that from 1 February 2006, the compensation limits for tribunal claims has changed, with the principal modifications being the increase of the maximum compensatory award for unfair dismissal from £56,800 to £58,400 and the maximum amount of a week’s pay for the purpose of the basic award/statutory redundancy pay from £280 to £290.


By Darren Clayton, Doyle Clayton, London