Employment update
Employment law update: case-law review
Martin Edwards comments on important rulings covering employment law practice and procedure.
About the author
Martin Edwards is a part-time consultant at Weightmans LLP.
Facts: A security guard was dismissed on the ground of ill health on the basis that he was no longer capable of doing his job. An employment tribunal (ET) decided that he had been unfairly dismissed; however, the ET declined to apply an ‘Acas uplift’ to the award of compensation under Trade Union and Labour Relations Consolidation Act 1992 s207A(2) as amended (ie, an uplift of the award of up to 25% on the basis that an Acas Code of Practice on disciplinary and grievance procedures applied to the dismissal, and the employer unreasonably failed to comply with it).
The ET ruled that the relevant Code of Practice does not apply to ill-health dismissals because it does not apply to an employer’s procedures to handle incapability arising out of sickness absence. Furthermore, the concept of incapability in Employment Rights Act 1996 s98(2)( a) encompasses poor performance on one hand (which involves an element of culpability) and medical incapacity on the other hand (which does not). Disciplinary procedures were not invoked because there was no suggestion that the claimant was culpable in relation to his conduct or performance; thus, the employer was not required to follow the Acas Code. The claimant appealed.
Decision: The claimant relied on Bethnal Green and Shoreditch Education Trust v Dippenaar UKEAT/0064/15, contending that the Acas Code applies to dismissals on broader grounds than simply those involving culpability. However, the Employment Appeal Tribunal (EAT) pointed out that in Bethnal Green, the employer circumvented its own capability process and used a procedure designed to address the employee's alleged inadequate or deficient performance. Since that process was adopted by the employer, and since the employer was held to have failed unreasonably to comply with the Acas Code, an uplift applied. The alleged poor performance in that case was not as a consequence of ill health; on the contrary, the employer alleged culpable poor performance, and although this was disputed and ultimately not found to be genuine, it was on that basis that the Acas Code applied.
In this update article, the author comments on important rulings covering employment law practice and procedure
The EAT considered that if an employer chooses to proceed by reference to the Acas Code on the basis that the situation with which it is concerned is a disciplinary situation – whether that is right or wrong – or if the employer ought to have treated the situation as a disciplinary situation, the Acas Code concerning disciplinary and grievance procedures is engaged, and any failure to comply may be met with an uplift in compensation. However, that was not the case here: the ET’s reasoning was essentially sound. The appeal failed.
Comment: This helpful ruling makes clear that the Acas Code is relevant to ‘disciplinary situations’, that is, cases ‘where breaches of rules or codes of behaviour or discipline are corrected or punished,’ involving misconduct or failure to meet performance standards (para 8 and para 11 respectively). In essence, the Acas Code applies to all cases where an employee's alleged actions or omissions involve culpable conduct or performance on their part that requires correction or punishment.
Facts: The claimant was a picker in a distribution centre. His job was to select cases and to lift and move cases (weighing up to 25 kg) by hand for loading onto pallet trucks. Following a car accident, which caused a spinal injury, he developed a back condition. It was accepted that this condition amounted to a long-term physical impairment. Occupational health evidence established that this back condition impaired his performance, with the result that he was unable to meet the ‘pick rate’, ie, a target picking speed laid down by his employer. Nevertheless, he was able to go shopping with his partner by car; to take items from the shelves; to put the shopping in the car; and to take lighter items out of the car and into the house. In addition, he could clean windows at ground- floor level. He was learning to drive and could go out in a car, supervised by his partner.
In September 2012, he had been able to fly to Poland. In the light of the evidence, an employment judge held that the claimant’s long-term physical impairment did not have a substantial effect on his carrying out normal day-to-day activities. Consequently, he did not have a disability for the purposes of the Equality Act (EqA) 2010. He appealed to the EAT.
Decision: The EAT allowed his appeal. The occupational health evidence had been accepted. This meant that the only possible conclusion was that the claimant had a disability within the scope of the EqA: ‘[ N]o-one with any knowledge of modern UK life working life could doubt that large numbers of people are employed to work lifting and moving cases of up to 25kg across a range of occupations, including in particular occupations concerned with warehousing and distribution’ (para 46).
In summary, the day-to-day activity was the lifting and moving cases of up to 25kg; the substantial adverse effect was that the claimant was, because of his back condition, significantly slower in carrying out this activity; and the pick-rate target imposed by his employer was not the activity but it was, potentially, a barrier, which interacted with the claimant’s disability to hinder his full participation in working life.
Comment: This significant judgment reflects a move away from the previously accepted consensus in the UK, namely, that activities which are peculiar to an individual’s profession are unlikely to constitute normal day-to-day activities even if the job in question is not particularly unusual. There is no statutory definition of ‘normal day-to-day activities’ ; however, existing guidance: Equality Act 2010 Guidance. Guidance on matters to be taken into account in determining questions relating to the definition of disability gives examples, such as shopping, reading and writing or travelling by various means of transport as well as general work-related activities. In addition, the guidance lists activities that would not reasonably be considered normal day-to-day activities, including the ‘inability to move heavy objects without assistance or a mechanical aid, such as moving a large suitcase or heavy piece of furniture without a trolley’ (page 56). Consequently, the guidance may now need to be rethought.
Facts: The claimant purchased a 50% interest in a company. His contract of employment called him an ‘employee director’ , and provided that he was entitled to take remuneration ‘as dividend instead of salary if he so wishes’ . He took the bulk of his remuneration in this way for several years because he believed that there were tax advantages to the company. The company ceased trading. The claimant sought a redundancy payment and other monies under the insolvency protection provisions. The department refused on the basis that he was not an ‘employee’ because he received a dividend. A tribunal held that looking at the substance and not the form of the money received by the claimant, the dividend was in reality an emolument for services rendered by the claimant to the company and, therefore, should be treated as salary. The department appealed.
Decision: The Court of Appeal in Northern Ireland based its approach on the wealth of existing case-law , from which can be gleaned several key principles. First, where there is a contract ostensibly in place, the onus is on the party seeking to deny its effect to satisfy the court that it is not what it appears to be.
Second, the mere fact that the individual has a controlling shareholding does not, of itself, prevent a contract of employment arising. Nor does the fact that s/he is in practice able to exercise real or sole control over what the company does. Similarly, the fact that the person is an entrepreneur or has built up the company, or will profit from its success will not be factors militating against a finding that there is a contract in place.
Third, if the conduct of the parties is in keeping with the contract, this would be a strong pointer towards the contract being valid and binding, although the converse also applies.
Fourth, the fact that the individual takes loans from the company or guarantees its debts could, exceptionally, have some relevance in analysing the true nature of the relationship. However, in most cases such factors are unlikely to carry any weight.
Fifth, although the courts have said that the fact of there being a controlling shareholding is always relevant and may be decisive, this does not mean that that fact alone will ever justify a tribunal in finding that there was no contract in place.
Applying these principles, the Court of Appeal upheld the tribunal’s ruling that the director-shareholder was also an employee and, therefore, entitled to make his claims.
Comment: Crucially, the Court of Appeal held that, as in tax cases, ‘substance should prevail over form’ (para 20). While there might be tax issues concerning the receipt of monies by way of dividend rather than as remuneration, this was a matter for the revenue authorities. The appeal against the tribunal’s finding that the claimant was remunerated as a result of a contract of employment could not succeed.
Facts: The claimant was given an improvement warning under her employer’s absence management policy, which envisaged the possibility of disciplinary sanctions after a specified period of absence from work. However, most of her absences were disability-related and she raised a grievance. She sought two adjustments, first, that the disability-related absences be disregarded (so the warning should be withdrawn) and, second, that the policy be modified so that she would be allowed to have longer periods of disability-related absences before a warning could be given. Her grievance was rejected, as was her complaint to a tribunal, which ruled that no duty to make either adjustment had arisen and that, in any event, it was not reasonable to expect the employer to make either of them.
The EAT upheld this decision, and also ruled that the adjustments sought were not of a kind which fell within EqA s20. The claimant took her case to the Court of Appeal.
Decision: The Court of Appeal rejected the claimant’s appeal, but on the single ground that the proposed adjustments were not steps which a reasonable employer could be expected to take. However, the duty to make reasonable adjustments was engaged when an absence management procedure adversely affects employees whose disability makes it more likely that they will be absent from work. Just because the policy applied equally to all employees did not mean that it did not disadvantage those who were disabled.
The relevant ‘provision, criterion or practice’ was not the attendance policy, as such, but the provision that the employee must maintain a certain level of attendance at work in order not to be subject to the risk of disciplinary sanctions. ‘Once the relevant PCP is formulated in that way … it is clear that … a disabled employee whose disability increases the likelihood of absence from work on ill health grounds, is disadvantaged in more than a minor or trivial way’ , since the risk of their being absent from work on ill health grounds is ‘obviously greater’ (para 47). So, there was a duty to make adjustments, but it is limited to making those that were ‘reasonable’ .
Comment: This thought-provoking decision does not give employers carte blanche to discipline employees with poor attendance records regardless of any disability. As Elias LJ pointed out:
It is unfortunate that absence policies often use the language of warnings and sanctions which makes them sound disciplinary in nature. This suggests that the employee has in some sense been culpable ... But an employer is entitled to say, after a pattern of illness absence, that he should not be expected to have to accommodate the employee’s absences any longer. There is nothing unreasonable ... in the employer being entitled to have regard to the whole of the employee’s absence record when making that decision ... the fact that some of the absence is disability-related is still highly relevant to the question whether disciplinary action is appropriate (para 76).