April 2015 - Holiday pay in the balance

Dan HobbsClare Harrington

New partnership with 5 Essex Court

We, at Bloomsbury Professional are delighted to announce a new partnership with the highly regarded employment team from 5 Essex Court.

Five from 5

5 Essex Court have been writing their popular ‘Five from 5’ employment bulletin for six months, offering 5 bite size pieces of topical employment news, once a month.

Under our new partnership, Clare Harrington and Dan Hobbs, employment barristers from 5 Essex Court have taken over as editors of our employment law blog. They will be adding their ‘Five from 5’ articles to our blog, as well as other matters of interest. Each month one of these articles will also link you through to a longer article on their own blog Five from 5 - In Depth. This month they look at the impact of the EAT’s ruling on overtime and the effect on holiday pay.

We hope you enjoy reading these and if you would like to receive  a discount off of your next employment law books from Bloomsbury Professional, look out for this, further down the blog.

This month's '5 from Five'

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Sanctions for Procedural Default in the Tribunal - A more relaxed approach?

Clare Harrington

The less tolerant approach to procedural default displayed by the courts since Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 will not necessarily be followed in the tribunal according to Harris v Academies Enterprise Trust & others [2015] IRLR 208

The claims brought by the Claimant against the Trust were for whistleblowing, disability discrimination, victimisation and harassment. Witness statements were due to be exchanged on 19 February, ahead of a hearing on 3 March 2014. The Respondent applied for an extension of time to exchange statements but this was refused. The Claimant applied for an unless order on 26 February, at which stage the Respondents’ statements had still not been received.

The Employment Judge did not make an unless order but stated that she was considering striking out the response because of non-compliance with the original order to exchange statements. At the beginning of the hearing on 3 March, the Claimant applied to strike out the response.

The judge did not consider it appropriate to strike out the response as it was not proportionate despite the fact that the Respondents had breached a tribunal order and acted unreasonably in not providing the statements. A strike out would lead to findings of discrimination against the various respondents (including individuals). Instead, the case was adjourned until the following Monday.

The Claimant appealed. In the EAT, Langstaff P dismissed the Claimant’s appeal, noting that the judge had adopted the correct approach by focusing on the consequences of default before determining the proportionate response. The Claimant had referred to the Court of Appeal’s decision in Mitchell and the robust approach taken to both compliance and granting relief from sanctions. Langstaff P rejected the Claimant’s argument that the Tribunal had not properly considered the overriding objective and had failed to have regard to Mitchell when considering the correct approach to granting relief from sanctions.

He noted the differences between the wording of the overriding objectives in the CPR and in the ET Rules and concluded, ‘Though, it seems to me, there is much of principle that applies to both, it would be a mistake to suggest that the CPR applied in the tribunals in the same way as they apply in the civil courts. [There is no]...requirement that the tribunals apply a test that is identical to or …closely akin to Mitchell.'

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The end of back door Criminal Record Checks?

Bobby Talalay

It is not unknown for employers to seek to find out a job applicant’s or an employee’s criminal record in circumstances where they have no right to view it. Commonly they will require the employee to obtain the information themselves and then to disclose it to them (see Chief Constable of Humberside Police v Information Commissioner [2010] 1 W.L.R. 1136 at [19]).

Section 56 of the Data Protection Act 1998 (DPA) came into force on 10 March 2015. This makes it a criminal offence for a person to require that a job applicant, a current employee, or a person providing goods and services provide them with personal data including their criminal record, certain details about their benefits, or data obtained by way of a s.7 subject access data request. This extends beyond the employment sphere and applies to a person who makes the provision of that data a requirement before providing goods, facilities or services.

Importantly, this does not stop a person asking for that data where they have a legal right to do so (under an enactment, rule of law, or by order of the court) or where the requirement in those circumstances is justified as being in the public interest. Certain types of employment will therefore continue to require criminal record checks to be undertaken.

The commencement of s.56 of the Data Protection Act 1998 was part of a wider series of reforms, mainly to the Rehabilitation of Offenders Act 1974 to assist offenders with their rehabilitation and to help them return to meaningful work and to put their past behind them.

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"TUPE or not TUPE"...Who is the 'Client' for the purposes of a Service Provision Change?

Catriona Hodge

Providing services on behalf of more than one client does not prevent a service provision change within the meaning of Regulation 3(1)(b) of TUPE, according to the EAT in Ottimo Property Services Limited v Duncan, so long as there is a sufficient link between the clients to allow a common intention to be ascertained for the purposes of Regulation 3(3)(a)(iii).

Mr Duncan was employed to work as a site maintenance manager on a residential housing estate. The estate comprised several different housing blocks each of which was managed by a distinct residents' company. Mr Duncan¹s employer entered into separate contracts with a number of the management companies to provide maintenance services for their housing blocks.

The maintenance contacts were later won by a new company, Warwick Estate Properties Ltd ('Warwick'), which employed a new site maintenance manager in place of Mr Duncan. Upon his dismissal, Mr Duncan brought a tribunal claim contending that his employment had transferred to Warwick under the TUPE Regulations 2006.

The ET found that Warwick¹s acquisition of the maintenance contracts did not constitute a relevant transfer within Regulation 3(1)(b) of TUPE as the reference within this provision to 'a client' denoted a single legal entity and could not be interpreted so as to include a group of clients. On appeal to the EAT, HHJ Eady QC, disagreed holding instead that a 'client' within
Regulation 3(1)(b) could include the plural 'clients' and was therefore capable of applying to more than one legal entity provided that: (i) the clients possessed the same identity before and after the transfer; and (ii) it remained possible to identify a common intention for the purposes of Regulation 3(3)(a)(iii).

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Injury to feelings awards are (probably) tax free and are (probably) not subject to the 10% general damages uplift applicable to personal injury cases, says the EAT.

Aaron Moss

In Timothy James Consulting v Wilton, the Claimant claimed that she was constructively dismissed as a result of sexual harassment. Ms Wilton succeeded in the ET and was awarded £10,000 for injury to feelings. The Tribunal grossed up this sum to account for income tax. The employer appealed on this and other grounds.

The relevant point turned on the proper construction of the Income Tax (Earnings and Pensions) Act 2003. Section 401 deals with payments “which are received directly or indirectly in consideration or in consequence of, or otherwise in connection with the termination of a person’s employment”. Section 403 provides that where such an amount exceeds £30,000 it is liable to income tax. Section 406 further excludes payments provided “on account of injury to… any employee”.

The EAT was referred to the 2014 decision of the First-Tier Tax Tribunal in Moorthy v HMRC, which found that injury to feelings awards were taxable, unless the injury constituted a disability. The EAT noted that this was not binding and was contrary to a 2005 EAT decision which had decided that “injury” did include injury to feelings. The appeal was therefore upheld.

This leaves a conflict between the First Tier Tax Tribunal and the EAT. In this instance the employer undertook to indemnify Ms Wilton should HMRC subsequently pursue her for tax on the payment.

On a closely related topic, the EAT recently decided in E Pereira De Souza v Vinci Construction UK Ltd that the 10% Simmons v Castle uplift applied in civil proceedings does not apply to awards in the Tribunal for injury to feelings. The Jackson reforms introducing the Simmons v Castle uplift related specifically to “civil proceedings” and tribunal proceedings are not “civil proceedings” (see also the EAT's decision in Chawla v Hewlett Packard Ltd).

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Further guidance on holiday pay – 'Lock' comes back to Leicester ET after its holiday in Europe!

Sarah Keogh

Leicester ET has handed down its decision on liability in Lock v British Gas Trading Ltd, following the CJEU’s judgment last year that commission payments to which Mr Lock was contractually entitled must be taken into account in the calculation of holiday pay in order to comply with the Working Time Directive.

The parties agreed that the decision would only be relevant to the 4 week period of leave granted by Reg 13 WTR and not to the additional leave granted by Reg 13A. Pay was to be calculated by reference to s221 Employment Rights Act 1996 (ERA 1996).

Employment Judge Ahmed considered the effect of the CJEU ruling and conducted a detailed analysis of the Marleasing principle and the recent EAT decision in Bear Scotland v Fulton. He held that the Working Time Regulations (WTR) were diametrically opposed to the clear position in EU law, however wording could be introduced which would enable conformity of interpretation by adding a new subparagraph to Reg 16(3) WTR as follows:
“(e) as if, in the case of the entitlement under Regulation 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varied with the amount of work done for the purpose of section 221.”

A further hearing will now be held to determine whether the commission scheme effectively compensates periods of annual leave and, if not, what is the correct reference period for determining holiday pay.

The effect of the new wording would appear to be that where an employee has normal working hours and commission is paid, a 'week’s pay' will be calculated by reference to s221(3). This section calculates remuneration for normal working hours at the average hourly rate paid over the previous complete 12 week period.

See also Sarah’s previous article on Five From 5 - In Depth for a reminder of the background to Lock and Bear Scotland: http://5ecemployment.com/2014/11/09/holiday-pay-in-the-balance/

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