Employment Newsletter March 2011

February 2011

Dear Employer

For those of you who feel that it is an employee’s world out there, with employers constantly being cast as the “bad guys”, and having to fend off unjustified but nevertheless costly claims, there is some good news on the horizon: the government is planning to re-vamp the employment tribunal system with significant changes, in order to be less onerous for businesses. (See What’s in the pipeline section).

For the time being, however, we have to make do with what we have got, and if it is the case that this is causing you problems, better to take advice at an early stage rather than letting the problem escalate. In that situation, please do not hesitate to contact us: details are at the end of this letter. If you have any comments or suggestions on this newsletter, please email newsletter@breezeandwyles.co.uk

Kind regards

The Employment Law Team

Some Recent Changes and Cases in Employment Law


A recent case has shown how important it is to deal carefully with redundancies when there is one specific post that needs to go. A recent case involved the restructuring of the employer’s HR team which consisted of an HR Manager supported by an HR Executive. Because it was the Manager’s post that was to go, only she was considered for redundancy. The employer gave no real consideration to pooling the Executive with the Manager (despite the Manager having previously undertaken all aspects of the job carried out by the Executive, and the Executive had covered for the Manager whilst she was off sick) or to asking the Manager whether she might accept the more junior post.

The tribunal found the dismissal unfair on the basis that there had been no reasonable determination of the appropriate pool of employees at risk. The EAT agreed that the Employer’s decision to limit the pool to one, without meaningful consideration or consultation, was unfair. However, the EAT considered that the Tribunal’s conclusion that the pool ought to have comprised the two employees, was not properly supported, and it was remitted to the Tribunal for reconsideration.

Three principles emerged from this case which are important in situations where there is potentially a “pool of one”. These are:

Justification – the employer needs to have a genuine business case for the definition of the pool. Provided the employer can do this, it will be difficult for the employee to challenge it where the employer has genuinely applied his mind to the problem. Employers are to be afforded a good measure of flexibility in the determination of the pool, and a finding that their judgment was unreasonable must be based on a sound rationale.

There must be consultation on the subject with the employee(s) at risk.

Bumping – the usual consideration in deciding whether a pool of one ought to be expanded to include others is whether there is a case for “bumping” an employee, to make room for the employee whose work has dried up or whose post is being axed. Often the question arises as to whether a junior employee should be bumped in favour of a more senior one. This current case highlighted the necessity, where senior and junior people are involved, to apply specific principles that were expounded in an earlier case, for example, (i) whether or not there is vacancy; (ii) how different the jobs are; (iii) the difference in remuneration between them etc.
As always, it is best to seek advice on the practicalities of such situations. [Fulcrum Pharma (Europe) Ltd v Bonassera [EAT]]


An interesting Court of Appeal case has recently held that, in an unfair dismissal claim, an employer cannot be held to know everything known to its employees. When assessing whether a dismissal is fair it is the person deputed to carry out the employer’s functions whose knowledge or state of mind is intended to count as the employer’s knowledge or state of mind.
In this case, a black youth worker was dismissed for gross misconduct arising from two separate incidents: breaching the express instructions of his Manager and later being rude to his Manager. He claimed unfair dismissal and race discrimination. A Tribunal found that the reason he had been rude to his Manager was because of his Manager’s underhand attempt to change the employee’s working hours and also making a racially discriminatory statement. Although the statement amounted to race discrimination, the employee’s dismissal was found to be fair because the dismissing officer had not been aware of the background to the “rudeness” incident, and dismissal was a reasonable response to what was known to the dismissing officer at the time.
The main issue before the Court of Appeal was whether one Manager’s knowledge can be imputed to another Manager who makes a decision to dismiss. The Court concluded that, for the purpose of considering whether a dismissal is unfair (under S.98 of the Employment Rights Act), it is the person deputed to carry out the employer’s functions whose knowledge or state of mind is intended to count as the employer’s knowledge or state of mind. Reasonableness must, therefore, be considered in the light of that person’s investigation and knowledge. [Orr v Milton Keynes Council]

What’s in the pipeline


Employers who are tired of receiving spurious claims against them may be pleased to learn that the Government has launched consultation process for reforming the Tribunal system. The Government’s proposals include:

Increasing the minimum qualifying period for unfair dismissal claims to two years (up from one). This is to provide more time for employers and employees to resolve difficulties, give employers greater confidence in taking on people and ease the burden on the Employment Tribunal process.

Requiring payment of a fee in order to lodge a Tribunal claim. This is to discourage those who have a very weak case from “having a go”.

The Government launched his Growth Review on 29th November 2010, in which it set out its long-term vision for creating the right conditions for future economic prosperity, including the need to remove barriers to growth and job creation. The Government says it wants the UK to be the best place to start and grow a business, and to remove barriers to recruitment so that businesses can expand and provide maximum flexibility and promote competition without compromising fairness.

The consultation closes on 20th April 2011.


This has been dealt with in earlier ezines. The regulations that will phase out the default retirement age have now been published in draft form. As expected, the government has introduced an exception to the age discrimination rules so that employers can stop offering employees insured benefits, such as life assurance and private medical cover beyond whichever is the greater of 65 and the state pension age. Businesses have been concerned that the removal of the default retirement age could lead to substantial costs for providing insured benefits for the over 65s.


It had been in the pipeline to extend the right to request time off for training to those employed by small and medium size employers in April 2011. However, following consultation, the government has delayed implementation so that the right balance is struck between support for training and the need to minimise the burden of regulation for smaller companies.
The right has been available to employees of organisations with 250 or more employees since April 2010 and operates in a similar way to the right to request flexible working.
The Employer Traps and Other Tips


Remember that employers can be held vicariously liable for the conduct of its employees in certain circumstances, even when the conduct occurs outside normal working hours, ie. where the conduct is “closely connected” to the employer’s employment.


If a request for flexible working is made in the correct statutory way, you as an employer have a statutory duty to consider it by reference to specified criteria. A refusal can in certain circumstances lead to a claim of indirect sex discrimination

Employees in an administration: Oakland decision overturned

Employees have rights even when company is insolvent

Companies entering so-called pre-pack administration arrangements will have to deal with TUPE rights for employees.

That’s the outcome of a recent Employment Appeals Tribunal (EAT), which has reversed an earlier ruling to confirm that employee rights should be protected in the sale of an insolvent business in administration, including any businesses sold in a so-called ‘pre-pack’.
This reverses an earlier EAT decision which had held that a pre-pack administration – where the sale of the insolvent business is planned before entering administration - could be similar to a liquidation and therefore employee protection provisions of TUPE did not apply.
TUPE – which stands for Transfer of Undertakings (Protection of Employment) Regulations – was introduced in 1981 and updated in 2006. It is designed to protect employees where business changes hands, by moving the employees and any liabilities associated with them from the old employer to the new employer, to create a situation where their continuity of service and any other rights are all preserved.
Over the years, the regulations have proved complex to interpret and many companies underestimate the employment liabilities that can arise under TUPE. Some of the most common circumstances being when they buy or sell part of a business as a going concern, or if they outsource or otherwise change the supply route; or where they grant or take over the lease of a premises and operate the same business.
The changes in 2006 were intended to make it easier to rescue insolvent businesses, including a distinction between two types of insolvency situation, “terminal” proceedings and “non-terminal” proceedings.
Terminal proceedings are when a business cannot be rescued and has to be liquidated. In those circumstances, the key principles of TUPE do not apply; such as employees being automatically transferred to the buyer and the buyer taking on all employee-related liabilities.
In non-terminal proceedings the administrator is looking to sell the insolvent business as a going concern and the key principles of TUPE apply with minor relaxations, for example there is greater scope for the buyer to alter the employees’ terms of employment.
Initially, it was taken for granted that pre-pack administrations would be classed as non-terminal proceedings and so TUPE would apply, because their intention is to rescue the business rather than to sell off the assets piecemeal. This assumption was challenged in the 2008 case of Oakland v Wellswood, where the tribunal ruled that in certain circumstances pre-packs could be classed ‘terminal’, depending on the administrator’s intentions.
But now, the latest EAT decision of Olds v Late Editions reverses that decision, as the Tribunal decided that the Insolvency Act requires the administrator to consider whether a business can be sold as a going concern and so it cannot be said that, at the time the administration commences, the intention was to liquidate the assets.
Said Brendan O’Brien, Company Commercial and Corporate Recovery Director with Breeze & Wyles Solicitors LLP : “The earlier Oakland decision caused practical difficulties, because whether or not TUPE applied depended on what was in the mind of the administrator at the time of his appointment. The Olds decision means that any sale of a business by way of administration will be subject to TUPE, which will not make it easier for administrators to find buyers, but at least we have certainty.
“One of the most important things to remember is that even when a business is liquidated, the provisions of TUPE requiring consultation with employees will apply, even though there is no automatic transfer of employees to the buyer.”

ENDS – word count 585
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