Framework established for collective redundancies
Employment law update on issues including unfair dismissal and new employment tribunal rules
This article highlights some recent developments in employment law, with emphasis on TUPE and collective matters as they are of particular significance in the current economic climate. Inevitably, in the space available, it is not possible to provide a complete update on this burgeoning area of law and other developments will be covered in future articles.
Of particular note in the field of unfair dismissal is the decision in Post Office v Foley and HSBC Bank plc (formerly Midland Bank plc) v Madden1. Here the Court of Appeal restored the “range of reasonable responses” test which had been thrown into some doubt following Haddon v Van Den Bergh Foods Ltd2. The Court pointed out that the test does not necessarily apply in every case as in some instances there will be only one reasonable response. However, in cases where there is room for reasonable disagreement amongst reasonable employers as to whether dismissal for the particular misconduct is a reasonable or an unreasonable response, the tribunal should apply the test.
It should also be borne in mind that employment tribunals now have a high expectation that employers will follow disciplinary procedures that comply with the principles of natural justice. This point was re-affirmed in the recent case of Dan Kien Tran v Greenwich Vietnam Community Project3. Here the EAT pointed out that the person who investigates an alleged incident must not be the same person who then decides what disciplinary action, if any, is to be taken. If the same person carries out both roles the dismissal will be unfair.
New Employment Tribunal Rules
The Employment Tribunal (Constitution and Rules of Procedure) 20014 came into effect on Monday, 16 July 2001, replacing the 1993 regulations of the same name. They apply to all tribunal proceedings, irrespective of when the case commenced. The Rules include provisions to increase the amount of deposit which may be ordered against parties in cases of dubious merit (from £150 to £500) and an increase in the awards of expenses which can be made against parties or their representatives for unreasonable/vexatious claims (from £500 to £10,000). The Rule regarding the late lodging of Notices of Appearance has also been changed so that the respondent must now make an application for the Notice of Appearance to be received late.
Following on from the introduction of the new procedures, the Government has issued a consultation paper seeking views on additional amendments currently under consideration. One such proposal affects the use of grievance procedures and the possibility of increased awards for applicants where no such procedures exist or where they are not used. The flip side of this is that the applicant would probably have an award reduced where he or she has not made full use of a grievance procedure. It is also proposed to extend the time limit for lodging a claim where internal grievance or disciplinary procedures are current.
EU Directive on Information and Consultation
Against a background of several high profile collective redundancies, the Member States finally reached political agreement in June this year on the proposal for a Directive establishing a framework for informing and consulting employees at national level. The measure was fiercely opposed by the UK Government, who managed to negotiate transitional relief from some of the Directive’s key provisions.
The preamble to the Directive criticises national legal systems as having failed to prevent serious decisions affecting employees being taken and made public without adequately consulting the employees involved. It identifies a need to strengthen dialogue and promote trust within undertakings to improve risk anticipation, achieve flexibility of work organisation, make employees aware of business and adaptation needs and promote their involvement in the operation and future of the undertaking.
The purpose of the proposal is to lay down a general framework setting minimum requirements for the rights of employees to be informed and consulted. Although the Directive will set out the framework it will be for Member States to implement the practical arrangements for information and consultation in accordance with national law and industrial relations practices.
The Chartered Institute of Personnel and Development (CIPD) has already indicated this could be achieved through direct communication by organisations with their employees, for example by way of update newsletters or e-mails inviting comments or through staff briefings so long as the principles of the Directive are adhered to. The means to the end is likely to be a significant issue for consultation.
Member States will have a choice whether to apply the new law at the level of undertaking or at the level of establishment and depending on the choice made, the Directive will apply to:
- undertakings employing at least 50 employees or
- establishments employing at least 20 employees.
The special transitional relief secured by the UK means that we are likely to see the new rights being phased in over a seven-year period in this country.
It should be stressed that whilst political agreement has now been reached on a common position, the proposed Directive has not yet been finally agreed and must now be given a second reading in the European Parliament. Given that a sizeable number of amendments proposed by the Parliament during its first reading were rejected by the Council, it is likely that any further amendments will be minor.
Final adoption may take place at the next Employment and Social Policy Council meeting under the Belgian Presidency this autumn, otherwise the measure may not be adopted until early 2002. Member States will have three years from adoption to introduce the required implementing legislation. A revised draft Bill and consultation paper can be expected in the UK later in 2002.
Transfer of Undertakings
The Süzen Saga Continues…
Ever since the ECJ’s decision in Süzen5, the UK courts have issued a series of conflicting decisions when faced with determining whether or not a transfer has occurred. The difficulty with Süzen is that the circular reasoning is encouraged, whereby the application of the transfer rules, designed to ensure the protection of employees, can be made dependent upon whether the transferor’s employees are taken on by the transferee.
However, in three recent cases, the EAT seems to have been moving towards a wider interpretation. In RCO Support Services and Aintree Hospital Trust v UNISON6, there was a change in hospitals providing in-patient care within an NHS Trust area. There followed a change in contractors providing catering and cleaning. No staff were taken on by the new contractor. The EAT found that despite this, the same business was being carried out by a different firm and as such, TUPE applied. It was found that:
“There is a real danger, were Süzen to be given the unqualified force that has been argued for it, that … the protection of employees’ acquired rights, a basic objective of the Directive, would not only be jeopardised but … would be jeopardised in relation to perhaps the most vulnerable of all classes of workers, those with only relatively simple and commonly available skills which … the incoming contractor could readily choose to supply by way of others in the labour market.”
Similarly, in Argyll Training Ltd v (1) Sinclair and (2) Argyll & Islands Enterprise7 the EAT sitting in Scotland found that TUPE applied where a training company lost a contract to another which did not take on the sole employee or any tangible assets. The EAT highlighted the fact that the work placement portfolio transferred - the ‘intangible asset’. The EAT held that TUPE could apply even where there was no significant transfer of assets or the majority of relevant employees, if the business in question retained its identity, indicated inter alia by the actual continuation or resumption of the same or similar activities.
This wider construction continued into 2001 with Cheesman and others v R Brewer Contracts Ltd.8 In this case, the EAT considered the loss of a contract to provide maintenance for council housing. The contract was won by a company, Brewer, who took none of the employees but provided labour by way of its own force and provided its own assets and premises. The EAT nonetheless found after reviewing recent authorities including Süzen that the original tribunal had erred in finding no transfer on the basis that retention of the workforce was the decisive consideration. This was inconsistent with ECJ jurisprudence insofar as it has been established that all factors have to be taken into account.
While the recent approach of the EAT may have been very difficult to reconcile with Süzen at least there was the advantage that parties could begin to plan on the basis of the fairly consistent line that was being adopted. On 25 January 2001, however, the ECJ handed down its decision in a case referred by the Supreme Court of Finland, Oy Liikenne Ab v Liskojarivi & Juntunen9. In summary, the ECJ follows Süzen and emphasises the need for the transfer of assets or, where there are few/no assets, the transfer of a significant part of the workforce. In the case, 33 out of 45 bus drivers were recruited by the new operator of a bus contract but the new contractor did not take any of the buses, choosing to use its own stock. The finding was that in the absence of the transfer of the main assets the entity had not retained its identity and therefore there was no relevant transfer.
The ECJ held: “…in a sector such as scheduled public transport by bus, where the tangible assets contribute significantly [emphasis added] to the performance of the activity, the absence of a transfer to a significant extent from the old to the new contractor of such assets, which are necessary for the proper functioning of the entity, must lead to the conclusion that the entity does not retain its identity”.
The attempt to draw out a thread from the conflicting case law in Cheesman was welcomed by most practitioners and it is likely that the factors distilled in identifying an undertaking and a relevant transfer will be of considerable use for future tribunals. The difficulty, however, will be in reconciling these factors with the significant weight given to important tangible assets transferring in Oy, a decision that relies on the parts of Süzen that the UK courts have been moving away from.
Sadly, the only certainty is that some confusion still exists. It is likely to take either a determinative reference to the ECJ to resolve the contradictions in its case law or the UK Government to clearly amend the TUPE Regulations to deal with contracting out situations before the position will be any clearer.
Liability for transferor failure to consult
The case of Kerry Foods v Creber10 had established that the liability for a transferor’s failure to consult with employee representatives prior to a transfer of undertaking transferred to the transferee. According to the EAT in this case, the duty to consult is a right which arises from individual contracts between each worker and employer and therefore falls within regulation 5 of TUPE which provides for the automatic transfer of “rights, powers, duties and liabilities” from the transferor to the transferee. The decision was rightly criticised as giving a transferor little incentive to consult properly.
However, in the more recent case of T&GWU v James McKinnon JR (Haulage) Ltd & Others11 the EAT in Scotland has taken a different view, holding that liability to pay compensation for a failure to consult does not transfer to the transferee. The decision in Kerry Foods is distinguished on the basis that it takes “too broad” a view of what can be said to arise out of a contract of employment. Lord Johnston presiding holds that although the issue is “finely balanced” on policy grounds, to allow liability to transfer would provide no incentives for transferors to consult. He accepts that a distinction exists between general liabilities arising under the contract (such as compensation for personal injuries12) – which transfer - and liabilities arising under the Regulations – which do not.
Practitioners should be aware that the decision is not entirely satisfactory and that this is unlikely to be the final word on this matter. A thorough consideration of legislative background and case law is likely to be necessary.
Government consultation on the new Acquired Rights Directive
The Department of Trade and Industry finally published their long-awaited consultation document on amendments to the TUPE Regulations on 10 September 2001. The proposed amendments follow on from the changes to the ARD in 199813 which allow Member States to tailor their implementing legislation to national circumstances. The changes should have been implemented by 17 July 2001 but owing to the permissive nature of the amending Directive, the Government has been in no hurry to begin consultation.
Broadly, the main proposals that the Government seeks views on are:
Whether additional measures should be taken in relation to service provision changes and what form these measures should take.
Whether the TUPE Regulations should be amended to provide that ongoing occupational pension rights transfer to the transferee. The Government is in favour of this and sets out a number of options.
Whether a prospective transferor should be obliged to give a prospective transferee written notification of all the rights and obligations in relation to employees that are to be transferred and possible remedies for breach of this obligation.
Improving the operation of the TUPE Regulations by making it clear that they do not preclude transfer-related changes to terms and conditions that are made for an economic, technical or organisational reason (ETO reason).
Better guidance for employers on the scope of the ETO reason defence in the context of transfer-related dismissals.
Whether or not there should be greater flexibility when applying the TUPE Regulations to transfers of insolvent businesses. The underlying aim here is to promote the sale of insolvent businesses as going concerns within Member States.
The consultation paper is available from the DTI website at http://www.dti.gov.uk/er/tupe/consult/htm and the closing date for responses is 15 December 2001.
The Human Rights Act 1998 (henceforth HRA) was implemented in a blaze of publicity and tabloid sensation. Has the reality matched up to the hype? Is it really a “charter for chancers” or is it the “cornerstone of our changing constitution”? One of the key rights enshrined in the Act – not least from an employment law perspective - is Article 6, the right to a fair trial.
It is anticipated that Article 6 will have a significant impact on tribunal practice and procedure and on disciplinary hearings. It applies to the determination of civil rights and obligations and to proceedings where there is a “contestation” between an individual and the state and/or between two private individuals, provided such proceedings are decisive of such civil rights and obligations. In terms of tribunal procedure, there are likely to be challenges in respect of procedural time limits, particulars of originating applications, pre-hearing reviews and telephone conference hearings on directions. There has also been speculation about the application of the HRA to internal disciplinary hearings but it is suggested that these would not be covered as it could be said that they are not decisive of civil rights and obligations. However, such challenges have been made in relation to professional disciplinary proceedings.
One such challenge was the recent case of Tehrani v United Kingdom Central Council14. Margaret Tehrani was a nurse who was subject to disciplinary proceedings by the United Kingdom Central Council (UKCC). In order to practise within the United Kingdom, all nurses have to be registered with the UKCC who have the power to discipline nurses for misconduct.
Mrs Tehrani complained that the UKCC had breached Article 6 by convening a Hearing before one of its Professional Conduct Committees. She said the Committee could not be regarded as an independent and impartial tribunal as the UKCC was responsible for setting policy regarding nurses’ conduct, investigating complaints, as well as prosecuting and adjudicating upon allegations of misconduct. The UKCC was, in effect, the policy-maker, investigator, prosecutor, judge and jury.
The court considered that the UKCC Committee was an administrative decision-making body rather than a judicial tribunal. Under Convention jurisprudence, administrative decision-makers do not themselves have to comply with Article 6 - provided there exists a right of appeal to a Court with full jurisdiction, which fully complies with Article 6. Although the Committee was not independent and impartial in the sense required by Article 6, if there was a sufficiently broad right of appeal to a body that did comply, then there would be no breach.
In this case, nurses had a full right of appeal to the Court of Session on all questions of fact and law and therefore there was no breach of Article 6.
It remains to be seen just how wide-ranging the changes will be which are brought about by the HRA. What is certain is that embracing the fundamental principles of the Convention and the HRA in an open minded and balanced manner, is likely to have a positive impact on the administration of justice.
Malcolm Mackay is a partner and Sarah Coleman a trainee with Mackay Simon, the employment law division of Maclay Murray Spens