BA is in the news again …

24 06 2009

BA has been in the news … again and, as usual, for all the wrong reasons. The company formerly claiming to be the world’s favourite airline has now asked 40,000 of its staff to not just take a pay cut but to work for nothing for a month to ensure the company’s survival.  Now there’s an enticing offer … not.

The offer to staff involves them either working without pay for up to one month, or taking unpaid leave for that time.  The deduction would then be taken out of their salary over a period of three to six months.  Willie Walsh, BA’s Chief Executive, has agreed to take zero pay for July but as his monthly salary is reportedly £61,000  he will have enough saved up not to need to worry about how to pay the milkman. I did hear on the radio (although I haven’t found it again in print anywhere) that some of the affected pilots were being offered equity in the company to make up for the shortfall, which could be a good bet, but why isn’t it being offered to all staff? 

Enough of this: what should an employee do when faced with this dilemma? Very few employees love their jobs enough to want to work for nothing.  On the other hand if accepting a temporary moratorium on pay would prevent redundancy then the issue gets more complicated. Even if true, will the salary sacrifice make much difference? Many of those affected will already be hard pressed paying their mortgages and credit card bills. Will building societies and credit card companies also agree to a reduction in payments to them? My guess is no. If I were an employee of BA my first thought would be to assess whether I believed Willie Walsh when he said that the company’s future was at stake.  On balance, BA should probably be applauded for trying to find a solution other than just slashing headcount.

The legal issue is really the same as I discussed in my earlier posts on pay cuts vs. redundancy.  An employer faces some tricky legal issues when proposing a pay reduction or, as here a complete pay cut. An employee, if not persuaded by management’s declarations of poverty, could claim constructive dismissal if the pay cut is implemented without their agreement.  Under contract law, any unilateral variation of the terms of a contract is a breach of contract.  When, as here, the term in question is fundamental to the very essence of the contract, a breach can be said to be “repudiatory”, meaning the employee can treat him/herself as being released from all obligations under the contract if he/she chooses to do so.   

An employer would be well advised to consult with employees if it wants to impose a pay cut or pay moratorium.  If more than 20 employees are involved then at least one month should be allowed for the consultation process, or three months if more than 90.  The reason for this is that if any employees don’t want to accept the proposed reduction, they could claim not only constructive unfair dismissal but also a “Protective Award” of one or three month’s pay depending on the number of employees involved. It follows from this that there is little or no difference, from an employer’s point of view, in conducting a redundancy consultation process or a pay cut consultation process. An employer that consults over a proposed pay cut will probably be able to demonstrate (to an Employment Tribunal) that it has tried to take all steps to avoid redundancies if that later becomes necessary.

The employer needs to move cautiously and carefully if it is to avoid claims by disaffected employees.  If any “sweeteners” can be given to staff (such as equity, or additional holiday) that is more likely to succeed.  If an employee refuses the pay cut/moratorium the employer could potentially dismiss that employee and state the reason for the dismissal as being “some other substantial reason”, which is one of the potentially fair reasons for terminating an employee’s employment under the Employment Rights Act, but a claim for unfair dismissal will probably follow if that employee has more than 12 months continuous employment experience.

Advice to both employers and employees: take legal advice before going down this route.  If anyone out there reading this works for BA please do get in touch and let me know your views and decision.

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More on Redundancy v Pay Cuts

17 04 2009

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I posted on this subject a while ago and it has received such a lot of visits I thought I better give my public more of what they want. It also gives me an opportunity to provide an update on the poll I set up below on this issue. At the moment 57% of respondents would elect a pay cut and 31% would take redundancy.  The remaining 11% didn’t know.   Whether those results will change after this post wil be interesting to see.

In my previous post on the 27th February I wrote that the risk to an employer in reducing or attempting to reduce salary was that it might constitute a breach of contract and could lead to litigation if the employee didn’t agree  to the cut.  A claim for breach of contract and/or unlawful deduction from wages  and/or constructive unfair dismissal could be the result.  Only employees with more than one year’s service can claim unfair dismissal, but any employee can claim for breach of contract or for unlawful deduction of wages, which is what an unagreed reduction in pay would be.  The crucial issue, therefore,  is to get the agreement of the employees concerned and, if this is obtained, many of the problems fall away. How does an employer go about this?

By consultation is the answer. An employer needs to approach the matter with sensitivity and it needs to set out to the employees concerned the reason for the proposal and to show that it has considered other options to a pay cut.  Employees need to be given time to consider the proposals  (within a defined timetable) and to put forward any suggestions they have, which should then be given due consideration. In all probability, other options to a  pay cut will include redundancy and the employer will need to set out the business and financial reasons for suggesting the pay cut.  Other options though might include laying off employees, reducing hours and reducing benefits.  A pay cut is likely to be more palatable for employees if it is stated to be a temporary reduction, e.g.  for six months pending further review by employer and employee.

In all these circumstances the employer will be aided hugely if the employment contracts it provides to its staff contain a clause that allows the employer to make amendments to the terms of the contract (most don’t it has to be said).  In the absence of such  a clause an employee who is not minded to accept the reduction in pay, or alteration to their hours, will be strengthened in any claim for breach of contract.  That risk does not disappear even if there is such a clause because the employer must act reasonably when seeking to amend the contract, but it does give the employer scope for manoeuvre.  In other words, if the employer consults properly and frankly with affected employees  and can demonstrate the necessity for making  pay cuts, it should reduce the risk of being successfully sued for breach of contract by a disgruntled employee.  

An employer may be required to consult collectively with any recognised unions at the workplace or to get employees to elect representatives to consult on their behalf.   I covered this point in my previous post.

Assuming that agreement is reached with employees, the employer should then  get the affected employees to sign a letter confirming their agreement to the reduction in pay.  The letter should set out the company’s reasons for imposing the pay cut (ie to avoid redundancy), refer to the meeting(s) with the employee during the consultation process and ask them to sign and return a copy to signify their acceptance.   This isn’t guaranteed to prevent claims against the employer but it should help to minimise the risk of successful claims being made.  In the current economic climate, the majority of employees will probably accept a pay cut rather than take the risk of being out of work altogether.  

By the way, I mentioned “lay-offs”  above.  If an employer wants to “lay off” staff it should proceed with care  and take legal advice before doing anything; there are many pitfalls and can lead to claims for breach of contract and constructive dismissal. A lay off is where an employee is, effectively, suspended from work without pay. I will write about lay-offs in a future post.





TUPE

7 04 2009

Apart from the post below I haven’t touched upon these regulations, mainly because they are not the most interesting regulations in the world to read.  However, I have been spurred on by posting on the case of Royden & others v Barnetts  (see below) and TUPE comes up quite a few times on the search engines as a keyword.  In future posts I will look at the TUPE issues on the insolvency of the employer as well as the consultation obligations imposed upon employers by TUPE.

So, what do the Transfer of Undertakings (Protection of employment) Regulations 2006 (TUPE) actually do?

It protects those employees where the employing business changes hands, by;

 (1) protecting them from dismissal because of the transfer,

(2) by requiring the employer to inform and consult those employees affected, and

(3) transferring all rights  liabilities and obligations from the transferor company (“oldco”) to the transferee (“newco”).  

 

 

There must be more than a transfer of shares.  All employees employed by oldco at the point of transfer automatically move across to newco with the same terms and conditions of employment.  This means that if newco tries to provide amended terms and conditions to transferred staff they will be in breach of contract and may end up facing claims for constructive dismissal.

Furthermore, if newco dismisses transferring staff for a reason connected with the transfer that will be an automatically unfair dismissal , although if newco can argue that there were “economic, technical or organisational” reasons entailing changes in the workforce of either the Transferor or Transferee”  for the dismissal, it won’t be automatically unfair.  It might still be an unfair dismissal if the reason for the dismissal (not being the transfer) was also unfair. 

An ET would look at all the circumstances of the dismissal before making its finding.  In particular the ET will consider whether the employee was likely to have been dismissed even if the transfer had not occurred.  If yes then the dismissal will probably not have been for reason of the transfer, but it might still be unfair (i.e perhaps unfair selection for redundancy, or maybe discriminatory reasons were involved; the list is long).   One of the potentially fair reasons for a dismissal under the Employment Rights Act 1996 is “some other substantial reason” (SOSR).  For an employer to escape liability altogether for the dismissal it will have to show that the reason for dismissal comes within SOSR and that it was reasonable for them to rely upon that as the reason for dismissal. 

If an employee is found to have been unfairly dismissed (whether automatically or not) the maximum amount they can recover from an ET (up to February 2010 anyway) is £66,200 plus a basic award of £350 (or £525 depending on age) per week per year of service.  The employee needs 12 months continuous employment experience with oldco to be able to claim unfair dismissal.

Claims involving TUPE can be complex and if you are concerned about your position or think you might need legal advice do call me on 0207 464 8433 or email me on michaelscutt@dalelangley.co.uk





The new statutory disciplinary and dismissal procedures

6 04 2009

For T.S Eliot, April was the cruellest month.  For employment lawyers it can be the busiest because of the plethora of new legislation and statutory instruments being introduced.  This year is no different and today sees The Employment Act 2008  come into force, replacing the discredited Employment Act 2002 (Dispute Resolution) Regulations 2004.  In The Wasteland, TS Eliot wrote “what are the roots that clutch, what branches grow out of this stony rubbish?”.  Admittedly Eliot was talking about the human condition and the moral and spiritual bankruptcy of modern society, rather than the 2004 regulations, but there is even so great  resonance in those words for employment lawyers. Few people have had anything good to say about the rules and today they are abolished, replaced by a set of rules that are much less rigid but will give rise to other problems in the future.

The main change in the new regulations is that an ACAS Code of Practice has been introduced and it has statutory force. It is brief, only ten pages long, but it sweeps the old system aside.  The Code is supplemented by an ACAS Guidance booklet of approximately 80 pages long and which is advisory rather than legally binding. The main changes are these;

1. It replaces the old system of extensions of time for issuing proceedings if disciplinary processes are still ongoing, or where a grievance has been raised.  There is no longer a 28 day stay on proceedings before an ET being issued after the grievance has been raised. Now ET proceedings can be issued even if a grievance hasn’t been issued.

2. There will no longer be an automatically unfair dismissal where there has been a failure (any failure) to follow the rules.  There will be no consequential 10 – 50% increase/decrease in the amount of compensation following failure by one party to abide by the rules.  Instead an ET will have a discretion, where it is just and equitable to do so,  to increase/reduce an award of compensation by up to 25% where (1) a relevant code of practice applies, and (2) there was a failure to follow the code and (3) that failure was unreasonable.  In my view although this is more flexible than the old rules, it will lead to uncertainty because different ETs will take different views on what constitutes an unreasonable failure.

3.  The “modified” procedures in both disciplinary and grievance procedures is swept away, meaning there is no duty on an employer to hold these procedures for ex-employees.  This is welcome.

4. The new rules do not apply to redundancy processes and it is debatable whether they apply to ill-health/incapacity dismissals.   Also they don’t apply to dismissals upon expiry of fixed term contracts. In my view ETs will probably look to the Code of Practice when considering the fairness of the procedure used by employers in these situations, so it would be a rash employer that decided to ignore them in redundancy/expiry of fixed term and ill health situations. In the case of collective redundancies (ie more than 20 persons selected in a three month period) employers are required to consult with employees anyway, but the issue may arise in small scale redundancies of less than 20 people.

In judging whether an employer has acted unreasonably, an ET will have regard to the size and resources of the employer.  In other words, more will be expected of bigger employers than smaller outfits when considering if they have acted reasonably.

However, it is not goodbye to the old rules just yet.  A complex system of transitional provisions exist and close regard has to be had to them when deciding whether the old rules apply at the moment, or the new.  Basically, if the “trigger” event (being the disciplinary issue or grievance) occurred before the 6th April then the old rules will apply.  If the trigger event occurs on or after the 6th then the new rules apply.  Where matters get complicated is where (in grievance cases) the act complained of started before the 6th but continues after that date.  If that situation applies to you, seek legal advice.

I’ll deal with more aspects of the new rules in later posts.  In the meantime if you have any queries please do not hesitate to contact me on 0207 464 8433 or email at michaelscutt@dalelangley.co.uk

A slightly different version of this post will appear in the Docklands and Peninsula newspapers week commencing April 14th





Climate change – the new religion?

20 03 2009

 

 

 

 

Ark of the covenant

 

If there was any doubt that it was then it has been dispelled by a London Employment Tribunal recently.  The facts are interesting enough, but the point of law raised is potentially massive and may cause to happen what Judges fear more than anything else: the floodgates opening! Cue Biblical style disaster, get building the ark now! (Judges and lawyers always worry about “the floodgates” opening when there is a new development in law – it might mean a deluge of cases swamping the courts).

In this particular case, according to The Independent, one Tim Nicholson was employed by a company called Grainger plc, a property investment company, as their Head of Sustainability.  His job seems to have been to develop the company’s green policies and reduce its carbon footprint.  Grainger apparently had strong policies on corporate responsibility and the environment, albeit Mr Nicholson thought they were just for decorative effect.  When he tried to do his job and implement green iniatives he was met with resistance and obstruction. 

He was made redundant and claimed unfair dismissal.  Importantly, he also claiemd that he had been discriminated against because of his “philosophical” belief in climate change. He had made far reaching “green” adaptations to his lifestyle and practised what he preached.  He brought the claim under the Employment Equality (Religion and Belief) Regulations, which provide that a person shall not be subject to less favourable treatment on the basis of their religious or philosophical belief.  What is important in this instance is that a belief in climate change has not hitherto been afforded, officially anyway, the status of a philosophical or religious belief, although you might be forgiven for thinking that it had given the huge amount of publicity given to it.        The Regulations themselves do not provide a definition of what constitutes a religion or a philosophical belief. At a preliminary hearing the Employment Judge decided that Mr Nicholson’s green beliefs did come within the protection provided by the Regulations.

The important issue from the employment law perspective is the impact this could have upon claims.  We are not told for how long Mr Nicholson was employed by Grainger prior to his redundancy, but if he had less than 12 months continuous employment he would not be eligible to bring a claim for unfair dismissal.  However, there is no 12 month qualification period where the dismissal is alleged to have been on discriminatory grounds.  Secondly, claims for discrimination are not limited by the statutory cap on compensation (currently £66,200) that applies to unfair dismissal claims. 

This wasn’t the final hearing and no judgment has been given on whether Mr Nicholson was dismissed unfairly or discriminatorily.  There will probably be an appeal and I would be very surprised if this decision is not overturned at some stage.  Keep those floodgates closed!





Am I really redundant?

13 03 2009

This is often a live issue in redundancy situations.  At the moment, with the number of redundancies rocketing skywards, it is a question that is being put to me time and again.  Quite often the employer’s rationale for placing a person “at risk” of redundancy can look shaky.

The definition of redundancy is found at s.139 of the Employment Rights Act 1996.  It is defined thus;

 (1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish.

(my emphasis above)

There are several possible bases, within the above definition, for an employer to state that a role is no longer required.  In brief it will be either because the employer is ceasing that type of work completely or at that particular location.  So,  for instance, outsourcing a function to India could be capable of being a redundancy situation for the UK workers involved, as would be the case where an employer decides to stop trading completely or to cease trading in a certain type of goods.  However, if an employer decides that they need to reduce headcount, as is often the case, problems can arise over how the unlucky candidates are selected. 

I have written about selection processes before so won’t repeat it again here.  The question which does get posed is whether the role of an employee placed “at risk” is really redundant.  The key words are “work of a particular kind”.  What exactly does that mean?  In a 2002 case the Court of Appeal decided that it was a question of fact and not law.  In other words, each case will turn on its own facts.  In that particular case (Shawkat v Nottingham City Hospital NHS Trust [2002] ICR 7) the Court held that because a restructuring might require the employee to do different work to that which he was doing previously, that fact (on its own) was not conclusive evidence of the employee’s redundancy.

The facts in Shawkat were these.  Dr Shawkat was a thoracic surgeon.  The NHS Trust for whom he worked built a new facility and merged the cardiac and thoracic units.  This required Dr Shawkat to do cardiac as well as thoracic surgery.  He didn’t want to do this and was dismissed.  He succeeded with a claim for unfair dismissal.  However, he also claimed that the reorganisation meant that he was redundant and thus due a redundancy payment.  It was on this point that he ultimately lost, before both the Employment Appeal Tribunal and the Court of Appeal.  The EAT decided that the words “work of a particular kind”  referred to the needs of the employer’s business and it didn’t mean the particular type of work that the employee did, on the basis that if it did an employer would never be able to reorganise itself if it required employees to do different types of work.

Dr Shawkat might have succeeded if the Trust had announced it was reducing the amount  of thoracic surgery undertaken or that it was closing it altogether.   He had been replaced by a surgeon doing cardio-thoracic work and the job had changed but the crucial factor was the amount of thoracic work had not diminished. 

 Those facts are rather particular.  What comes out of the case is that in examining whether an employee has been dismissed for redundancy an ET will probably take a wider interpretation of what is meant by work of a particular kind and consider whether it has reduced. If an ET decides that the amount of work has not diminished (or ceased) then the reason for dismissal (and remember that redundancy is but one reason for dismissal) may then be unfair. 

In other words, if you have been put at risk of redundancy and you think that your role is continuing, albeit perhaps with a different title or some minor additional responsibilities tacked on, you may have an argument for saying that your role is NOT redundant and that if your employment is terminated it will amount to an unfair dismissal.   Problems often arise where job descriptions are vague and ill drafted.  Employees can argue that the new role is effectively what they were doing already and the employer will disagree.  That is a dispute that will only be resolved by an ET in the end. 

As ever, if in doubt about your own position, seek legal advice.  I can be contacted on 0207 464 8433 or at michaelscutt@dalelangley.co.uk





Redundancy or Pay Cut? Poll Results

12 03 2009

I’ve been running a poll on the above topic since my post on the 27th February.  Two weeks on and the results seem remarkably balanced – 38% in favour of a redundancy package and 38% in favour of a pay cut, with 23% undecided.  I was expecting the clear winner to be the pay cut, given the difficulty in getting a new job at the moment.  I’ll keep the poll running and see if the result changes over time.

Thanks to all those who took part.