Case update (1): Worker status and substitution

Summary:  Does a courier’s ability to use an app to release their time-slot to other couriers (from the same company) provide sufficient right of substitution to defeat a claim to worker status?

No, says the Court of Appeal in Stuart Delivery Ltd v Augustine available here.

Background: The law groups staff as employees, workers or self-employed and provides different levels of protection. Employees have the most protection and the self-employed the least. Workers are in the middle and are entitled to some statutory rights, including those in relation to the national minimum wage, working hours, annual leave and protection from discrimination.

To establish worker status under s230 of the Employment Rights Act 1996 (ERA) there must be a contract for ‘personal work or service’.  This means that a promise simply to get the work done by somebody is not enough. It has to be the person contracted with. This means an ability to delegate the work to another person could be fatal to a claim of personal service.

However, to defeat a claim of worker status, the right to substitute must not be overly restrictive. How far an employer can go to restrict their staff’s right to substitution before they gain worker status, was considered by the Supreme Court in Pimlico Plumbers Ltd v Smith (see here for our update on this). In this case the plumbers engaged by the company were only permitted to appoint a substitute from a pool of colleagues. This effectively meant they could only send a substitute approved by the company.  The Court held that this restriction on the plumbers’ substitution rights went too far and the plumbers were overly restricted in their right to substitute and were therefore workers.  In summary, the “dominant feature” of the plumbers’ contracts with Pimlico was an obligation for them to perform work personally.

Facts:  Mr Augustine worked as a courier for Stuart Delivery.  His options for work were either to accept individual delivery jobs or to sign up for time slots via an app (which meant being available in a certain area and time).  However, couriers were not paid for time slots if they did not remain in the area for 90% of the time; were unavailable for more than six minutes; or refused more than one delivery.

The time slots were released on the app every Thursday. Having signed up for a slot, if a courier no longer wanted to work at that particular time, they could send a Release Notification via the app that they wished to give up the slot.  However, unless another Stuart Delivery courier offered to take up the slot, the original courier had to complete the slot or face penalties.  Approximately 10% of time slots were left unclaimed each week. A courier who failed to work two or more time slots in a week would be disqualified from receiving a delivery reward (even if they had achieved the required number of deliveries that week).

When the relationship ended, Mr Augustine claimed that he was a worker. Stuart Delivery argued that he was self-employed as he could send a substitute to work on his slot and for that reason was not obliged to perform services personally.

Tribunal and EAT decision

Mr Augustine was a worker. His right to substitute was overly restrictive and did not cancel out the requirement to provide services personally.

Stuart Delivery appealed.

Court of Appeal decision

The Court of Appeal dismissed the appeal and agreed Mr Augustine was a worker. The ‘dominant feature’ of the contract was personal service despite the right to substitute.  This was because Stuart Delivery’s working arrangements were designed to ensure that couriers worked the slots for which they had signed up. The couriers did not have freedom to choose their own substitute.  Sending a Release Notification for circulation on the app only for other couriers already working for the organisation, (who may or may not be interested in the job) was not the same as an unrestricted right to send a substitute.

However, the Court of Appeal clarified that it was not establishing a rule that limiting permission to appoint a substitute from a pool of colleagues would always lead to a finding of worker status.

Also, although the question of personal service involves looking at contractual terms, in light of Uber, the focus should be on investigating and evaluating the way in which the arrangements operate in practice (including the extent and nature of substitution).

Implications:  This case highlights how central substitution (and the freedom to do so) is to the question of worker status.  An unrestricted right to provide a substitute will likely defeat a worker status claim; but limiting the choice of substitute to a pool of colleagues will not.

However, as usual in worker status cases, there are no firm rules on this and an analysis of the day-to-day reality of the working arrangements in each case is required. If employers want to ensure their staff do not attain worker status then they need to objectively and robustly evaluate the way their arrangements with staff work in practice.  Having said that, the simple take away point here is that to engage independent, self-employed, contractors; businesses need to take a laid back approach to who delivers their services.

cycle courier

Case update (3):  Disability discrimination and the menopause

What do we already know?

We have previously discussed legal issues surrounding the menopause and the workplace (see here).  In Anne-Marie Boyle’s blog Menopause – the last workplace taboo? Part 2 she highlighted disability discrimination as a particular risk and that staff with strong menopausal symptoms could well qualify as being disabled.  At this time there were only tribunal decisions to confirm this risk.  However, we now have the below EAT decision to confirm it.

What’s new?

Summary:  Can symptoms relating to the menopause amount to a disability under the Equality Act 2010?

Yes, says the EAT in Rooney v Leicester City Council available here.

Background:  The Equality Act 2010 says that someone is disabled if they have a physical or mental impairment which has a substantial and long-term adverse effect on their ability to perform day-to-day activities.  The definition can be summarised in the following questions:

  • Does the person have a physical or mental impairment?
  • Does the impairment create an adverse effect which is substantial?
  • Is that substantial adverse effect long-term?
  • Are the long-term substantial effects on day-to-day activities?

Substantial’ means ‘more than minor or trivial’. ‘Long-term’ means that the condition is permanent or has lasted, or is expected to last, 12 months or more.

There is no specific mention of menopause symptoms in equalities legislation or in the Equality and Human Rights Commission’s Code of Practice on the meaning of disability. However, the Tribunal decision in Donnachie v Telent Technology Service Limited in 2020 found that the employee’s significant menopausal symptoms did amount to a disability and the judge commented that he saw “no reason why in principle, typical symptoms cannot have the relevant disabling effect on an individual”.

Facts:  The employee, Ms Rooney, worked for Leicester City Council as a childcare social worker from 2006 until her resignation in October 2018.  Part of her reason for resigning was that she felt her managers had not supported her during the menopause and had subjected her to unfavourable treatment.

Ms Rooney’s symptoms related to the menopause included insomnia, light-headedness, confusion, stress, depression, anxiety, palpitations, memory loss, migraines and hot flushes. Ms Rooney had been suffering from these symptoms for two years, was struggling to cope with everyday life and was under the care of a consultant doctor at specialist menopause clinic.

Ms Rooney brought tribunal claims for disability and sex discrimination, and harassment and victimisation related to her menopausal symptoms.

Tribunal decision

The Tribunal decided (at a preliminary hearing) that Ms Rooney was not disabled and her disability discrimination claim was dismissed, along with her claims of harassment and victimisation.

Ms Rooney appealed.

EAT decision

The EAT upheld the appeal. It found the Tribunal had incorrectly analysed Ms Rooney’s symptoms in respect of the definition of disability under the Equalities Act 2010.

The EAT considered that although Ms Rooney could undertake some day-to-day activities, her menopausal symptoms were ‘more than minor or trivial’ – for example, leaving her house without locking doors and windows, forgetting to attend meetings and events, and spending long periods in bed due to fatigue and exhaustion.  The EAT also considered Ms Rooney’s symptoms were ‘long term’  because they had lasted more than twelve months by the time she resigned from the Council.

The Tribunal had incorrectly weighed up what Ms Rooney could do against what she could not.  The focus should be on what an employee cannot do. The issue of what someone can do will only be relevant where there’s a dispute about what they cannot.  For example, if an employee says that they are permanently fatigued, it is relevant for an employer to present evidence that they are an active sportsperson.


This is helpful EAT level confirmation that employees suffering from significant menopausal symptoms may be classed as disabled.  It is a warning to employers (and their advisors!) that failing to notice and address the symptoms of menopause can create liability under the Equality Act 2010.  Symptoms of menopause may have a substantial and long term adverse effect on someone’s ability to perform day-to-day activities.  In these situations an employer must make reasonable adjustments for the employee and ensure they do not discriminate against them.

Although awareness of menopause issues in the workplace has increasingly improved (interestingly, this decision came out in the same month as World Menopause Day on 18 October), there is still work to do.  In this respect the Women and Equalities Committee launched an Inquiry into menopause and the workplace in July 2021. The aims of the inquiry are to:

  • examine existing discrimination legislation and workplace practices to consider whether enough is being done to prevent women leaving their jobs as a result of menopausal symptoms;
  • provide recommendations to shape policies to address gender equality, including the extent to which women face menopause discrimination, the impact on wider society, the economic impact of menopause discrimination and how policies addressing workplace menopause discrimination can be implemented; and
  • consider whether further legislation is required to enable employers to put in place a workplace menopause policy to protect women experiencing the menopause against discrimination whilst at work.

We are waiting for the findings of the Inquiry.  However, one possible outcome is that it may recommend making menopause a specific ‘protected characteristic’ under equalities legislation (similar to pregnancy and maternity).  In the meantime, our recommendations remain as set out in Anne Marie’s blog here and employers  should continue to make reasonable adjustments to help make working life easier for those suffering from menopausal symptoms.


Case update (5):  Unfair dismissal – Who’s in the know?

What do we already know?

We updated you in our December 2019 Newsletter here on the Supreme Court decision in Royal Mail v Jhuti.  The Court decided that tribunals have a duty to look beyond a dismissing manager’s reason for dismissal if they are influenced by another manager (senior to the employee) who hides the real (unfair) reason behind an invented (fair) reason.

What’s new?

The EAT in Kong v Gulf International Bank (available here) has narrowed the scope of the Jhuti decision and clarified that tribunals can only look beyond a dismissing manager’s reason for dismissal in limited circumstances.

We consider this decision in more detail below.

Summary:  When is the knowledge of a person other than the dismissing manager, relevant to the fairness of a dismissal?

Only when the other person has direct management responsibility over the dismissed employee (or can otherwise manipulate the facts); actively seeks to secure their dismissal for an invented reason; and hides the real (unfair) reason from the dismissing manager.

Background:  The reason for dismissal is the set of facts known (or beliefs held) by the employer which cause them to dismiss the employee. Generally, the courts will look no further than the reasons given by the decision-maker to establish this. However, in Royal Mail Group Limited v Jhuti, the Supreme Court held that courts have a duty to look beyond the reasons of the decision-maker when they have been manipulated by a person of higher grade than the dismissed employee and the real (unfair) reason for dismissal is hidden behind their invented (fair) reason.

Facts:  The employee, Ms Kong, was employed by Gulf International Bank (UK) Ltd as Head of Financial Audit. Ms Kong raised concerns about a legal agreement relating to a new investment product. She emailed these concerns in a draft audit report to the Head of Legal, Ms Harding (who was responsible for the agreement) and to others. In raising these concerns, Ms Kong had made protected disclosures for the purpose of whistleblowing legislation.

Ms Harding disagreed with Ms Kong’s concerns and with the way in which she had raised these in the draft audit report. During a heated exchange and subsequent emails Ms Kong questioned Ms Harding’s awareness about the legal issues involved. Ms Harding considered Ms Kong had questioned her professional integrity and raised the matter with the Head of HR and others. The Head of HR, the CEO and the Group Chief Auditor came to the collective view that Ms Kong should be dismissed.  They met with Ms Kong to tell her this and the dismissal was confirmed in writing. The reason given was that her behaviour “fell well short of the standards of professional behaviour” expected; key stakeholders no longer wished to work with her; and trust and confidence had been lost.  They clarified that the dismissal was not about her professional capability and that all the concerns she raised would be included in the final audit report.  As a result of this final report the bank’s internal control processes were rated ‘generally unsatisfactory’.

Ms Kong unsuccessfully appealed against the decision.

Ms Kong brought claims in the Tribunal, including both ordinary unfair dismissal and automatic unfair dismissal for whistleblowing.

Tribunal decision

The Tribunal upheld Ms Kong’s ordinary unfair dismissal claim but dismissed her whistleblowing dismissal claim.  It held the principal reason for Ms Kong’s dismissal was her conduct towards Ms Harding, rather than the making of protected disclosures.  Although Ms Harding’s treatment of Ms Kong was influenced by the protected disclosures, these motivations could not be attributed to the decision-makers.  The principles in Jhuti did not apply.

Ms Kong appealed.  She said that she had been automatically unfairly dismissed for whistleblowing and Ms Harding’s motivations (resulting from the protected disclosures) should be attributed to the decision-makers under Jhuti.

EAT decision

The EAT dismissed the appeal.  It agreed with the Tribunal that the principles in Jhuti did not apply and the reason for Ms Kong’s dismissal was her conduct rather than her protected disclosures.

The EAT helpfully clarified that the general rule is that an employer’s motivation or reason for dismissal is only that of the decision-maker(s).   The decision in Jhuti only creates a narrow exception when the:

  1. person whose motive for dismissal is attributed to the decision-maker, actively sought the employee’s dismissal for a wrongful or prohibited reason e.g. for raising a protected disclosure;
  2. decision-maker particularly depends on that person as the source of underlying facts and information on which the decision to dismiss was based; and
  3. person manipulating the reason for dismissal was in the hierarchy of responsibility above the employee or was the person depended on for facts and information.

In this case, Ms Harding’s comments to the decision-makers were just a factor in their decision to dismiss, not the principal reason.  In addition, Ms Harding was not looking for Ms Kong to be dismissed, did not mislead the decision-makers; and was not in the hierarchy of responsibility over Ms Kong (who reported direct to the Group Chief Auditor).


This is welcome confirmation for employers that:

  • the general rule remains that it is only the motivation of the decision-maker which is relevant to a fair dismissal;
  • employers should not be taken to have knowledge of all facts known to its employees; and
  • the Jhuti exception to this only applies in narrow circumstances.

However, employers should remain alert to when the Jhuti exception applies (set out in the EAT’s above decision) and make sure that dismissing and investigating managers are trained to recognise this. In summary, the dismissing manager’s decision maybe tainted by the influence by another when that other person has direct management responsibility over the dismissed employee (or can otherwise manipulate the facts); actively seeks to secure their dismissal for an invented reason; and hides the real (unfair) reason from the dismissing manager.


Government reforms (5):  ACAS Guidance – Fire and rehire

What do we already know?

The practice of fire and rehire (also known as ‘dismissal and re-engagement’) is a way in which an employer can change terms within employees’ contracts of employment by giving notice to terminate and offering re-employment on new terms.

This strategy is generally used as a last resort where the change cannot be agreed with the employee.  However, the practice has increasingly been used during the COVID-19 pandemic and its use by high profile employers (such as British Gas and British Airways) has meant that it is been headline news.

ACAS published a report on this practice of ‘fire and rehire’ on 8 June 2021 (in response to the Government’s request for this). However, the report did not contain any firm recommendation to introduce legal reform. The Government instead asked ACAS to provide more detailed guidance on how and when termination and re-engagement should be used, and ‘good practice’ for employers.

What’s new?

ACAS has published guidance (available here) for employers on making changes to employment contracts.  The title of the guidance is Making changes to employment contracts – employer responsibilities and ‘fire and rehire’ is not mentioned until very late in the guide.

The guide is accompanied by the ACAS Chief Executive, who explains that their advice is “clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations.  Employers should thoroughly explore all other options first and make every effort to reach agreement with staff on any contract changes.  Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law.”

Key points in the guide include:

  • reminding employers of the need to inform and consult with staff or their representatives, and to provide information about the rationale for the changes and the likely impact if changes are not accepted;
  • explaining why genuine consultation is important and how it may help obtain employee agreement to the proposals, or reach a compromise that both the employer and employees can support;
  • warning employers not to use threats about what will happen if the proposed change is not agreed, particularly at an early stage of discussions;
  • suggesting that managers and employee representatives are given training on consultations and negotiations to ensure that discussions are effective;
  • indicating that employers should continue to explore options and alternatives to the proposed changes “for as long as is reasonably possible”;
  • reminding employers that dismissing and re-engaging (or ‘firing and rehiring’) employees in order to make the proposed change should be viewed as a last resort; and
  • offering collective conciliation through ACAS to try to reach an agreement where an employer is negotiating with a union.

The guide also highlights that if an employer is proposing to dismiss (and then rehire) 20 or more employees within a period of 90 days or less, they will be under an obligation to collectively consult with employees – as they would for making redundancies in such numbers. Failure to collectively consult risks protective awards of up to 90 days full pay per affected employee.

Further, the guide reminds employers that dismissal prior to re-engagement still requires correct notice to be given to the employee, there needs to be a fair reason for the dismissal and a fair procedure, including right to appeal, should be followed.

Finally, ACAS warns that fire and hire should be avoided where possible, as it can result in legal claims and cause immediate and long-lasting damage to employee relations, future recruitment and the employer’s reputation.

In summary, this is only guidance and the legal position has not changed.  Employers can continue to use the practice of ‘fire and re-hire’.  However, ACAS has certainly made its position clear that it does not support the practice and we recommend that  employers (continue) to use dismissal and re-engagement as a last resort.

reading employment contract

Government reforms (4):  Compulsory vaccinations – Healthcare


What do we already know?

We updated you in our July 2021 Newsletter Government reforms (2): Coronavirus (Covid-19): Mandatory vaccinations for care home staff that the Government announced that from October 2021 anyone working in a registered care home providing nursing or personal care would need to be fully COVID-19 vaccinated with both doses.

We also told you that the Government’s guidance on mandatory vaccinations said that care home staff must be fully vaccinated by 11 November 2021, unless exempt.

What’s new?

In November the Government announced that anyone working in health and social care services who interacts with patients and service users, would also need to be fully COVID-19 vaccinated with both doses.

This legislation will come into force on 1 April 2022.  From this date providers of CQC-regulated (Care Quality Commission) activities will only be allowed to deploy individuals who have been fully vaccinated against COVID-19 to roles where they interact with patients and service users.

It will be the responsibility of the CQC-registered person, either the service provider or registered manager, to ensure that they only deploy staff who have provided evidence that they have been vaccinated against COVID-19.  This covers staff who have direct, face to face contact with patients and other service users:  including  front-line workers, as well as non-clinical workers not directly involved in patient care but who nevertheless may have direct, face to-face contact with patients, such as receptionists, ward clerks, porters and cleaners.

There are limited exemptions from the requirement for staff:

  • under the age of 18;
  • who are clinically exempt from COVID-19 vaccination;
  • who have taken part or are currently taking part in a clinical trial for a COVID-19 vaccine;
  • who do not have direct, face to face contact with a service user, for example, those providing care remotely, such as through triage or telephone consultations or managerial staff working in sites apart from patient areas; or
  • who provide care as part of a shared lives agreement.

For employers who operate in the health and social care services, we recommend the following to start to prepare for these changes:

  • ensure that staff are aware of the need to be vaccinated and consider asking for, and recording, the vaccination status of all frontline staff. You should look to establish who is medically exempt and whether there is anyone who does not intend to be vaccinated and, if so, why not.
  • continue to monitor the status of employees that are intending to be vaccinated ahead of the deadline;
  • consider what the plan is for staff members who are not medically exempt and do not intend to get their vaccine. Is redeployment feasible? If not their notice periods should be considered, as dismissal may need to be considered.
  • consider whether staffing levels will be affected on 1 April 2022 if you have a number of staff who will not have been vaccinated. Put a plan in place to help deal with the risk of understaffing.
covid vaccination

Case update (6): Unfair dismissal – Focus on final warnings

Summary:  Should a tribunal re-evaluate a final written warning when considering if a capability dismissal was fair?

No, says the EAT in Fallahi v TWI (available here). Not unless the warning was given in bad faith and ‘manifestly inappropriate’.

Background: Following a fair dismissal procedure often includes giving warnings, including a final written warning, before an employee is dismissed. In the context of misconduct dismissals, tribunals should consider these earlier warnings given to the employee as valid unless it is ‘manifestly inappropriate’ (i.e. there is bad faith or no reasonable grounds for the warning). In Fallahi the EAT reviewed whether such approach is suitable for capability dismissals.

Facts:  The employer, TWI, had concerns about the employee’s, Mr Fallahi’s, performance as Senior Project Manager. Mr Fallahi was put on a performance management plan and set objectives, with targets to be reviewed in June and October 2016 and January 2017.  One month before the first review, in May 2016, Mr Fallahi’s manager held a capability hearing as he was concerned by his lack of progress.  Mr Fallahi was given a final warning, objectives, and a further three month review period. He did not appeal.

Despite further review meetings, Mr Fallahi did not make progress and was nowhere near meeting the objectives. Before the end of the review period, the employer gave Mr Fallahi the option of leaving the company with a month’s compensation or continuing until the end of the review period.  Mr Fallahi rejected the offer of compensation.

The employer invited Mr Fallahi to performance management and capability hearings.  However, he did not attend due to sickness, despite the occupational health adviser saying he was well enough to attend. The employer dismissed Mr Fallahi on the grounds of capability.

Mr Fallahi brought an unfair dismissal claim.

Tribunal decision

The Tribunal dismissed the claim.  The decision to dismiss was within the range of reasonable responses and the final warning was not ‘manifestly inappropriate’.

Mr Fallahi appealed on the basis that in capability dismissals there is no need to show that a warning is ‘manifestly inappropriate’ for it to be unfair.

EAT decision

The EAT dismissed the appeal and agreed with the Tribunal that the law on misconduct warnings also applies to capability dismissals.  In this case the final warning was not ‘manifestly inappropriate’ and was made in good faith.  In any event, the Tribunal’s role was to decide the overall reasonableness of the dismissal, not the final warning.  The EAT took into account not only the warning that Mr Fallahi received, but also that he was a long-term underperformer who had continually failed to meet targets.

In relation to the final warning, it was less important to go behind this than if it had been a conduct dismissal.  This is because in a conduct situation, a final warning means the employee is vulnerable to dismissal for a minor later incident.  In this situation the validity of the previous warning is critical. However, in a capability dismissal, it is the employee’s performance over a long period of time that is relevant to a tribunal. I.e. it is the employee’s failure to improve even after the warning which leads to dismissal.

Implications:  This is welcome confirmation that as long as a final warning is made in good faith and reasonable (and is not ‘manifestly inappropriate’) it should not be re-evaluated by tribunals. This applies to capability dismissals also.

The focus of a tribunal’s job remains to look at the circumstances of the dismissal as a whole and consider whether it fell within the range of reasonable responses available to the employer.

written warning

What we’ve been doing recently…

Our November Employment Law Update

We were delighted to hold our first in-person event at Bristol Aerospace Museum (home of Concorde) in November.

We covered an array of topics; hot issues around Covid vaccinations (or not) of employees, how employers may need to manage menopause in the future, managing mental health claims, a range of important employment law cases from 2021 and some employment legislation which may be coming our way.

Our audience were treated to a memorable and informative presentation by Richard Roberts, People Director at Pure Planet, who shared his extensive knowledge and experience of employee engagement.  There were lots of anecdotes and amusing tales from his HR career along the way.

If that wasn’t enough, there was great food and a tour of Concorde as well!

Thank you to all of you who came, we loved seeing you.


mental healthSome themes and top tips

As we contemplate the end of 2021 (which seems to have passed at record speed), we’ve noticed a few themes to our workload.  Of particular note are claims with a mental health element or ‘hidden disabilities’.

Such cases seem very much on the rise, in fact, we’d go so far as to say 90% of our current cases revolve around a mental health issue of some sort, many of them a so-called ‘hidden disability’ because the employee didn’t suggest they were disabled until after their dismissal.  Based on our experience of working with such claims, we’ve pooled our learning to bring you these tips.  We hope you find them useful:

  • Early intervention creates better outcomes for all, never more so than with cases involving mental health
  • Good communication is vital. Who is the best person is to communicate with your employee?
  • Establish the medical situation. Seeking an Occupation Health report is recommended in all cases involving mental health. These days, Occupational Health consultants are highly experienced in mental health issues.
  • Make requests for adjustments easy and straightforward for the employee to put forward
  • Treat people with dignity and respect
  • Sometimes an acknowledgement or apology that something has been mis-managed can go a long way for an employee
  • Think of options – be creative!
  • Consider Mental Health First Aid (MHFA) training for all managers
  • More extensive MH awareness training is useful for HR – there are some good online programmes available
  • Basic Neuro-diversity awareness training is highly recommended for all HR colleagues and senior management too. An increasing number of disability claims we’ve been dealing with involve one or more neurodiverse conditions.  As many as 17% of us are neurodiverse but few of us realise it.  Disability discrimination can be caused even if both employer and employee don’t realise there is a disability at the time.  Don’t fall into this trap!


Christmas & New Year Office Closurechristmas

We’re taking a well-earned break over Christmas & New Year so our last working day will be Tuesday 21st December.  We will re-open Tuesday 4th January.


Giving back – what Menzies Law has done this year:

As with previous years we have supported a range of organisations in 2021.

We joined Ecologi in August, a carbon-offsetting scheme.  Here’s the latest on what we’ve achieved so far: latest data

We’ve continued to support The Bridge Foundation in Bristol, who do a fabulous job helping schools, young people and their families cope with mental health challenges.

As strong supporters of equality, we’re also contributing to the University of Bristol in funding scholarships encouraging black and mixed heritage students into Higher Education.

the team at Menzies Law

Case update (2):  Trade unions – Collective bargaining

Summary:  Is it unlawful for an employer to make direct offers to employees in connection with pay and changes to terms and conditions of employment while the collective bargaining process is still continuing?

Yes, says the Supreme Court in Kostal UK Ltd v Dunkley and ors available here.  The employer should have followed and exhausted the collective bargaining process before it made the direct offers to its employees.

Background: Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) states that if there is a union which has collective bargaining rights over a group of employees, those employees who are members of that union cannot be approached directly by their employer with any offer where its acceptance would result in the terms of the worker’s employment no longer being determined by collective agreement. If an employer does make such offer it amounts to an unlawful inducement and a Tribunal can order the payment of an award to each relevant employee of (currently) £4,341. The intention of the legislation is to prevent employers from undermining collective bargaining arrangements.

However, an employer does have a defence if it can show that the sole or main purpose of that offer is not to avoid the workers’ terms of employment from being determined by collective agreement.

Facts:  The employees were members of the trade union Unite, recognised by the employer, Kostal, for collective bargaining purposes. Towards the end of 2015 Kostal entered negotiations with Unite over pay and proposed changes to terms and conditions.  Kostal made an offer via Unite which was rejected in a ballot. Kostal then wrote directly to its workers in December 2015 pre-empting the collective process and offering a Christmas bonus to accept the pay award and revised terms and conditions.  Then in January 2016, Kostal sent a further letter to employees who had not yet agreed the new terms offering to backdate the pay increase and warning that it might terminate their contracts if they could not reach agreement.  In November 2016, by which time over 97% of employees had accepted one or other of the direct offers, Kostal and Unite reached a collective agreement for 2015 (on similar terms to the direct offers).

However, as a result of the direct offers that Kostal made to the employees, 57 of those individuals brought Tribunal claims, arguing that each letter was an unlawful inducement, as its sole or main purpose was to end collective bargaining.

Tribunal, EAT and Court of Appeal decisions

The Tribunal upheld the claim and made an award to each employee to whom the offer was made.  The EAT dismissed Kostal’s appeal. However the Court of Appeal allowed it and the employees appealed to the Supreme Court.

Supreme Court decision

The Supreme Court allowed the employees’ appeal and restored the awards made by the Tribunal. The Court held that Kostal’s direct offers to its workers were an unlawful inducement and in breach of s145B TULRCA, because Kostal had made a direct offer to its workers, including union members, during the collective bargaining process and before it had been exhausted.

Importantly, the Supreme Court held that the focus should not be on the content of the employer’s offer but on the result.  Section 145B TULRCA will only apply where there is a real possibility that, had the offer not been made and accepted, the workers’ relevant terms of employment for the period would have been determined by a new collective agreement. It this case, given that Kostal and Unite did eventually reach a collective agreement for 2015, there was a breach.

However, the Court said that if an employer genuinely believes that the collective bargaining procedure has been exhausted, then it cannot be said that the purpose of making direct offers was to bypass collective bargaining.  In this case, if Kostal had made the direct offers at a later stage, when it could argue that the collective bargaining procedure had already been exhausted, the outcome would likely have been different.

Implications:  Employers will be acting unlawfully if they make a direct offer to employees before the agreed collective bargaining procedure has been exhausted.

On the other hand, where an employer has first followed and exhausted its agreed collective bargaining procedure, it can make a direct offer to workers in respect of something which falls within the scope of a collective bargaining agreement, and deal with them direct.

Going forwards, employers should revisit their collective agreements and ensure that there is a set procedure within any collective bargaining agreement which sets out how the employer will negotiate or consult with the union, the stages and escalations and what is considered to be the end of the collective bargaining process. This will assist employers in being able to show that they have followed the process and that, when appropriate, such a process has been exhausted.

It would also be a good idea to provide or refresh training for managers who are responsible for collective bargaining negotiations in light of this judgment.

Given the complexity of this area of law, if you have concerns about collective bargaining or any other trade union issues, or otherwise, please do contact Luke Menzies or any member of the team on 0117 325 0526 for further advice.

Government reforms (6):  Wages – Tips for staff

What do we already know?

We updated you in our October 2018 Newsletter Government reforms (3): Top tips for staff that the Government announced plans to introduce new legislation to ensure that tips left for workers must go to them in full.  This was following the Government’s consultation on the issue in 2016.  However, no further steps were taken at this stage.

What’s new?

The Government has published its response (available here) to its 2016 consultation on tipping, gratuities, cover and service charges. The Government reaffirms its commitment (set out in 2018) that all tips should be discretionary and should be paid to staff without deductions.

The Government intends to introduce these plans as part of the upcoming Employment Bill and for them to take effect after one year.  The new legislation will place an obligation on employers to:

  • not make any deductions from tips received by their staff other than those required by law;
  • be fair and transparent in terms of distribution of tips including, for example, having a written policy and keeping a record of tip payments;
  • allow staff to request information on an employer’s tipping records; and
  • take into consideration a new statutory “Code of Practice on Tipping”, which will replace the existing voluntary code introduced in October 2009.

The intention is to prevent the practice currently adopted by some businesses of retaining all or part of discretionary service charges paid by card, instead of passing them on in full to staff. Approximately 80% of tips are now paid by card, making it easier for businesses to retain a proportion before passing the rest to staff.  The plans are estimated to affect approximately 2 million hospitality workers in the United Kingdom who work in pubs, cafes or restaurants. Such workers are often paid minimum wage and their tips can make up a large proportion of their income.

It is not yet known when the Employment Bill will be introduced.  However, in the meantime, we recommend employers review their policies and practices on tipping and make any required changes.


Case update (4):  Disability discrimination – Post-dismissal knowledge

Summary:   Is an act of dismissal discriminatory when the employer only knows of the disability post-dismissal?

No, says the EAT in Stott v Ralli Ltd available here.

Background:  Employees can bring a claim under s15 Equality Act 2010 that they have been subjected to unfavourable treatment because of something arising from a disability. However, for the claim to succeed, the employer must have known (actual knowledge) or could reasonably be expected to know or find out about (constructive knowledge) the disability at the time of the unfavourable treatment.

Facts:  Ms Stott was employed by Ralli Solicitors as a paralegal. She was dismissed during her probationary period following concerns about poor performance.  Ms Stott raised a grievance that she had been suffering from anxiety and depression which caused her poor performance. Her grievance (and appeal) was dismissed.

Ms Stott brought a Tribunal claim for disability discrimination under s15 of the Equality Act.  She argued that she had been discriminated against as a result of her dismissal because of something (i.e. her performance) arising out of her disability (i.e. her anxiety and depression).  However, Ms Stott did not argue that the outcome of her grievance or appeal were discriminatory in themselves.

Employment Tribunal decision

The Tribunal dismissed the claim.  Although it was accepted that Ms Stott was disabled, the employer did not and could not have known about this disability at the time of the dismissal.

Ms Stott appealed to the EAT.

EAT decision

The EAT dismissed the appeal.  The employer only gained knowledge of Ms Stott’s disability after her dismissal and this was not relevant to her claim.  However, if Ms Stott had argued that the outcomes of her grievance or appeal were in themselves discriminatory, such claims may have succeeded.

Implications:  The good news is that it is only the knowledge (or lack of) of the disability at the time of each alleged act of discrimination which is relevant.

However, unfortunately employees will in most cases argue that each individual act is discriminatory.  Therefore we recommend carrying out further investigation in circumstances where an employee claims they are disabled following dismissal, into their medical condition.  This will likely include obtaining medical evidence and then reviewing it to assess its likely impact on the reason for the employee’s dismissal and whether such decision should be reversed.

If the decision to dismiss is upheld, then at least the further investigations should help defend any later claim. In particular it would help with the argument that the treatment of the employee was a proportionate means of achieving a legitimate aim; in other words it was appropriate and necessary in the circumstances and there was no less discriminatory way to achieve the same aim.

Further, if an employee has two years’ service, employers are also likely to be defending an unfair dismissal claim.  In this case the spotlight is on the dismissal process as a whole and a Tribunal is likely to have regard to any post-dismissal knowledge of disability when considering if the dismissal was fair.  Even more reason to investigate and take the employee’s condition into account.