Common Employment Problems
and Changed to Legislation
We apologise for the late edition of the April Bulletin. However, the Court of Appeal, at the end of April, clarified an area of law which has caused much debate over recent years. We thought it too significant to wait until the end of May to inform you of this!
We also look at some other recent cases which have clarified the law in respect of a number of common employment problems. In addition, we also look at the changes which will be introduced to the Disability Discrimination Act 1995 as a result of the Disability Discrimination Act 2005.
Holiday Pay and Sick Leave
The Court of Appeal has overturned two important decisions of the Employment Appeal Tribunal concerning holiday pay under the Working Time Regulations 1998 in the case of Commissioners of Inland Revenue v Ainsworth and Others.
In 2002 the Employment Appeal Tribunal decided, in the case of Kigass Aero Components Limited v Brown, that where an employee is on long term sick leave, they will still accrue and be entitled to four weeks holiday pay even if their entitlement to contractual sick pay has ended. This meant that an employee who was off work sick and receiving no pay (either because the employer did not pay sick pay or the employee had exhausted contractual sick pay) could still request holiday and would be entitled to be paid for it. Therefore, for each year off sick the employee would still receive four weeks’ holiday pay.
This was a controversial decision. The Working Time Regulations 1998 were introduced to protect the health and safety of workers by clarifying working time, introducing rest breaks and entitling workers to a minimum period of annual leave. The decision of the Employment Appeal Tribunal in Kigass went against the purpose of the Regulations for the simple fact that a worker on long term sick does not need holiday. As the barrister arguing the case for the Inland Revenue in the Court of Appeal asked: “leave from what?”.
Sensibly, the Court of Appeal agreed that the Working Time Regulations had not been interpreted correctly. The term “leave” in the provisions referring to annual leave meant a release from an obligation to work. If a worker is already off work, they are not obliged to work and as such were not entitled to leave.
The Court of Appeal further decided that the same logic applied to dealing with holiday entitlement when an employee leaves or is dismissed. On termination of employment a worker is entitled to be paid for accrued but untaken holiday. Therefore, if an employee is entitled to 4 weeks holiday and his employment ends 6 months into the holiday year, if the employee has not taken any holiday during the year, he would be entitled to two weeks holiday pay when he leaves. However, the Court of Appeal has confirmed that this is not the case where the employee has not been working due to illness.
In addition, the Court of Appeal decided that where a worker wants to claim payment for holiday, they can only do so under the Working Time Regulations 1998 and cannot claim that the failure to pay holiday amounts to an unlawful deduction from wages under the Employment Rights Act 1996. This overturns the decision in List Design Group Limited v Douglas. This has an important impact. If a worker could claim under the Employment Rights Act 1996 this would allow him to claim for a “series of deductions” as for each month the holiday pay is not received there would be an on-going deduction. This could go back to when the Regulations were introduced – 1998. However, as a worker is now only entitled to claim under the Regulations, they can only bring a claim for holiday pay if they do so within 3 months of the employer’s failure to pay it.
However, whilst this is a sensible decision and in accordance with the Regulations and the intentions behind them, it does leave a few questions unanswered. The Court of Appeal’s judgement refers to workers on sick leave for a year or more. But what would happen if a worker was off sick for 11 months and wanted to take his holiday entitlement in the final month? Would holiday have continued to accrue during the 11 months of sick leave? The answer to this is uncertain and it’s likely further clarification in the courts or by Parliament will be required.
Maternity Leave and Bonuses
Whether an employee is entitled to a bonus whilst on maternity leave is a difficult question. Under the relevant regulations, an employee is not entitled to receive any payment in the form of “wages and salary” during Ordinary Maternity Leave (the first 6 months of maternity leave). During Additional Maternity Leave (the second 6 months of maternity leave), an employee is not entitled to receive any payment at all. Therefore, payments other than “wages and salary” will have to be paid during Ordinary Maternity Leave but not during Additional Maternity Leave.
An employee’s entitlement to a bonus turns on whether the bonus can be classed as “wages or salary”. If a bonus is paid through payroll and/or is pensionable or if it is linked to individual performance and paid as part of the salary, it is likely that it will come within the category of “wages or salary” and will not be payable for the period of maternity leave.
In the recent case of Hoyland v Asda Stores the Employment Appeal Tribunal decided that an employer can make a pro rata reduction in bonuses paid to staff to reflect the period during which the woman was on maternity leave. The only exception to this is the two week period of compulsory maternity leave following the birth of the baby. Therefore, where a bonus is based on attendance or overall performance of the company, the bonus can be reduced to reflect the period of time the woman is absent. Such a reduction would not be discriminatory or be classed as an unlawful detriment.
Constructive Dismissal – Change of Duties
In the case of Josiah Mason College v Parsons (2004) the Employment Appeal Tribunal held that a teacher had been constructively dismissed where her employer demanded she taught a different subject, for which she had training, and even though consultation with the teacher had taken place.
The teacher, P, was employed as a Nursery Nursing and Caring teacher. Prior to working for Josiah Mason College (‘JMC’) she had also taught Religious Studies but had decided she no longer wanted to teach that subject.
P’s contract of employment referred to the fact that her job description could be changed after consultation with P. JMC argued that P was employed as a general teacher and therefore could be required to teach a different subject.
However, the Employment Appeal Tribunal disagreed. They found that P was employed to teach Nursery Nursing and Care and that JMC did not have a contractual right to vary the contract, even after consultation. As such, by insisting that P teach Religious Studies, JMC had varied her contract of employment, without P’s consent, entitling P to resign and claim constructive dismissal.
This case emphasises the importance of a properly drafted contract of employment in cases where an employer may want an employee to perform different duties. In this case, on the wording of the contract, P’s job description could be changed but not her job title as a Nursery Nursing teacher. The rest of P’s contract was consistent with P being employed to teach a particular subject. As such, JMC was in breach of contract in requiring P to teach Religious Studies.
It is also worth pointing out that even if an employer does have a contractual right to vary an employee’s role, the employer should still consult with the employee about the proposed changes. The fact that the employer did consult with P about the changes to her role did not help them as they had no contractual right to alter the role in any event.
Employment Relationships
In order to bring a claim for unfair dismissal, and many other statutory claims, an individual must first establish that they are an employee.
The majority of the time this situation is fairly clear. Problems tend to arise when employees are regarded as “self employed” but the parties act in a way which is consistent with them being an employee, for example, they may be provided with equipment, receive sick pay and be subject to the “employer’s” disciplinary rules.
However, it is increasingly common for another group of workers – agency workers - to claim employment status. Agency workers tend to be in an uncertain position as far as employment protection is concerned. Whilst there will be a contract between them and the employment business this will not necessarily be a contract of employment as the individual is not actually working for the employment business. Further, even though the individual is working for an end-user, it is difficult to establish a contract between the individual and the end-user. Instead, the relationship is governed by the contract between the end-user and the employment business. Without a contract, the agency worker cannot be an employee.
That said, in the case of Dacas v Brook Street Bureau it was held that, in certain circumstances, a contract can be implied between the end-user and the agency worker. Each case will turn on its own facts but where an agency worker has worked for the same end-user for a considerable period of time, it is more likely that a contract would be implied than for an agency worker who has worked for different end-users or for the same end-user but only for a short period of time.
It is also possible for the contract between the agency worker and the employment business to be a contract of employment. Again, this will depend on the circumstances of the case.
The problem a Claimant has is that they may chose the wrong ‘employer’ to sue. Viewed as a whole, a tribunal may be of the opinion that the agency worker was an employee of the end-user. However, if the employee has only claimed against the employment business then they will be unsuccessful with their claim and no doubt out of time to bring another claim against the employment business. To assist with this problem, the Employment Appeal Tribunal has said in Astbury v Gist Ltd that Tribunals should join the other party to the relationship (i.e. the one that has not been sued). Therefore, employment businesses and companies using agency staff should be aware that they could become involved in litigation even if the agency worker does not sue them directly.
Disability Discrimination Act 2005
This new Act received Royal Assent at the beginning of this month. However, the provisions have not yet been brought into force. The Act only makes a couple of changes effecting employment issues which are fairly important.
At the moment, in order to be protected by the Disability Discrimination Act 1995 an employee must show that they have a physical or mental impairment which has a long term and substantial adverse effect on his or her ability to carry out normal day to day activities.
However, employees with progressive conditions are taken to be disabled if their impairment is likely to have such a substantial effect and are protected as soon as the impairment has any effect of their ability to carry out day to day activities.
The Disability Discrimination Act 2005 provides increased protection. Under the new Act, a person with HIV, cancer or MS is deemed to be disabled from the point of diagnosis even if the condition has no effect.
In addition, under the Disability Discrimination Act 1995, an employee who claims to be suffering from a mental impairment must show that they have a clinically well-recognised illness. Usually, the best way of establishing this is to show that they have an illness listed in the World Health Organisation’s classification of diseases. This has had a big impact on employees who suffer from depression. Depression itself may not be a disability but clinical depression is likely to be.
Under the Disability Discrimination Act 2005 the requirement that the mental impairment be “clinically well-recognised” will be removed. This is likely to open the door to more claimants suffering from stress related illnesses. However, employees will still have to show they have a mental impairment and will need medical evidence to establish this. Further, the rest of the definition of disability will need to be satisfied. Therefore, whilst a claim has been made easier, it will not be a forgone conclusion that someone with ‘ordinary’ depression is disabled.
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