Five from 5: What does the WM Morrison Supermarkets Plc Data breach mean to employers?

Message from the Editor,
Dan Hobbs 

Welcome back to the new look 'Five from 5'. This free bi-monthly employment law bulletin is created by the employment team at 5 Essex Court in association with Bloomsbury.

This month's bulletin contains five short articles on (i) employee data breaches; (ii) defending discrimination claims; (iii) defending victimisation claims; (iv) the power of the tribunal to construe important documents; and (v) post termination restrictive covenants.

The editor continues to draw upon the vast pool of experience and knowledge held by the 5 Essex Court employment law team whose members include those appointed by the Attorney General to represent the Crown.

I hope that the bulletin will continue to be an invaluable resource to recipients and anyone wishing to join the mailing list should email the team at employment@5essexcourt.co.uk. Alternatively, should you wish to take your name off the mailing list, you can do so by clicking on the link at the bottom of this bulletin.

 

What does the WM Morrison Supermarkets Plc Data breach mean to employers?

Mark Thomas and John Goss

The issue in question is whether an employer is vicariously liable in damages to employees whose personal and confidential information has been disclosed on the web by the criminal act of another employee?

Yes, said the Court of Appeal in WM Morrison Supermarkets Plc v Various Claimants [2018] EWCA Civ 2339 which held that there was sufficient connection between the position of the employee and his wrongful conduct to justify holding Morrisons liable.

There are over five thousand individual claimants, meaning damages are very likely to be extremely substantial.

This deliberate data breach was carried out by a rogue employee using his home computer in his own time and will be a cause of great concern to data controllers and data processors. At first instance, the judge held that Morrisons had implemented a range of mechanisms to prevent data misuse and complied with its own obligations under the DPA - yet it was still held variously liable for the employee’s torts of misuse of private information and breach of confidence.

So what are the implications?

This case indicates that even the most conscientious data controllers and processors may be exposed to enormous financial liabilities through the actions of their employees. The situation is unlikely to be any better for employers under the GDPR and Data Protection Act 2018 – so even if a firm avoids a hefty fine from the ICO for breach, that won’t mean they escape liability in tort.

Comment

Employers will wish to revisit their recruitment due diligence procedures, their data protection policies and – crucially - their insurance provision to ensure that they are adequately prot

ected.

 

Discrimination requires more than mere incompetence

Catriona Hodge

In the case of Dunn v Secretary of State for Justice and another [2018] EWCA Civ 1998, the employee had made an application for ill-health retirement owing to a depressive illness and a serious heart condition. It was conceded that his application had been very poorly handled by his employer resulting in significant delays in the grant of ill-health retirement. The employee later brought claims for direct discrimination contrary to s. 13 EA 2010 and discrimination arising from disability contrary to s. 15 EA 2010.

These claims succeeded in the Employment Tribunal due to the reliance placed on s. 136 EA 2010 which shifts onto the employer the burden of proving that the poor handling of the employee's application had not been because of his disability or something arising in consequence of it. The fact that there had been administrative failings and unreasonable delay was found to have given rise to a prima facie case of discrimination which the employer had failed to rebut.

On appeal to the EAT that decision was overturned on the grounds that the Tribunal had failed to give any consideration to the motivations of the relevant decision-makers and (in respect of the s. 13 claim) had made no findings that others who were not disabled would not have been treated in the same way. The EAT found that incompetent or unreasonable treatment by the employer did not establish a prima facie case of discrimination in the absence of any positive findings as to the decision makers’ thought processes.

In rejecting the employee's appeal, the Court of appeal, refused to entertain a novel point raised by the employee to the effect that claims under s. 15 EA 2010 do not require an examination of the decision maker’s motivation where the unfavourable treatment results from systemic failings in the employer’s processes. Incompetence is not, without more, discriminatory.

Comment

Whilst employers may feel uncomfortable admitting that their processes have been poorly handled due to incompetence, where such incompetence provides the true explanation for its employee's poor treatment, it may also provide the employer with a defence to any subsequent discrimination claim.

Victimisation – Ulterior Motives & Bad Faith

Alastair Hodge

The Employment Appeal Tribunal has given guidance in Saad v. Southampton University Hospitals NHS Trust on whether an employee’s ulterior motive for making a victimisation claim can amount to bad faith.

S raised a grievance in 2011, alleging that a racist remark had been made about him four years earlier. At the time S raised the grievance, there were concerns about his performance and it was anticipated that he would fail an upcoming assessment.

S’s grievance was not upheld and his employment was terminated. He subsequently presented claims to the Employment Tribunal alleging that his grievance was a protected act and his dismissal an act of victimisation.

The Employment Tribunal found that the allegation of a racist comment having been made was false, but that S subjectively believed it to be true. However, it also found that the grievance had been brought with the ulterior motive of postponing the upcoming workplace assessment. On the basis of these findings, the Tribunal concluded that S had acted in bad faith and dismissed the claim.

S appealed to EAT. Judge Eady QC ruled that “bad faith” for the purposes of victimisation has a core meaning of dishonesty. While motivation could be part of the relevant context, the primary focus in determining “bad faith” was the question of S’s honesty. The Employment Tribunal’s finding that S subjectively believed the allegation to be true meant that he had acted honestly. The fact that he had an ulterior motive in making the allegation when he did, did not mean that he had acted in bad faith.

The decision provides important clarification on what an employer must establish when resisting a victimisation claim based on bad faith. There must be a finding of dishonesty (the allegation must be known to be untrue) – simply having an ulterior motive for making the allegation will not be sufficient to establish "bad faith".

Comment

The Equality Act 2010 provides protection to employees against victimisation if they have brought to their employer's attention a breach of the EqA 2010 (i.e. if they have identified or raised an allegation of discrimination). Section 27(3) of the EqA 2010 says that "...making a false allegation, is not a protected act if the...allegation is made in bad faith."  This case shows that for the employer to run a defence of bad faith, it will likely have to establish that the allegation was false, that the employee knew it to be false and that the employee had an ulterior motive for raising the allegation.

 

The Tribunal’s powers to construe


Alex Ustych

Two interesting decisions on the Employment Tribunal’s ability to construe documents (specifically a notice of resignation and the terms of a contract) have been handed down in the last month.

In East Kent Hospitals University NHS Foundation Trust v Levy (UKEAT/0232/17/LA) the Employment Appeal Tribunal considered the case of an NHS administrative assistant working in the records department who, on obtaining a conditional offer of a role in another department, sent her employer a letter stating, "please accept one month's notice from the above date". After the job offer fell through, she sought to retract the notice sent to her employer (referring to it as her ‘notice of resignation’); the request was refused and her employment ended. An unfair dismissal claim was brought.

The Tribunal concluded that the notice was ambiguous and did not necessarily denote the claimant’s resignation (instead potentially referring to an inter-departmental move only). In upholding the tribunal’s decision, the EAT found that an objective analysis of how a reasonable recipient would have understood the words was required. The tribunal’s interpretation of the words was objectively reasonable. The fact that the claimant later referred to her letter as ‘notice of resignation’ was not decisive; caution was needed when taking into account subsequent events unless they clearly explained the earlier intention.

The issue before the Court of Appeal in Agarwal v Cardiff University [2018] EWCA Civ 2084 was whether the Tribunal had the power to rule on the terms of a contract when presiding over an unauthorised deduction from wages claim. The Tribunal decided, at a preliminary hearing, that it had no such power; the EAT agreed. The CoA disagreed and, with reference to Delaney v Staples [1992] 2 WLR 451, confirmed that the tribunal, in deciding whether the sum claimed is properly payable, has the power to reach a determination on what the employment contract means.

Comment

In both cases the right decision appears to have been reached. An inter-departmental move is not generally to be viewed as a resignation from the employer's employment in the event that the intended move subsequently falls through. Similarly, an unlawful deduction of wages claim cannot be determined by the Tribunal unless it is able to determine the payment terms of the relevant contract of employment. The Tribunal's inherent power to construe relevant documents and contract terms clearly makes it a more effective venue for the resolution of a wide variety of employment based disputes. The next logical step is likely to be the removal of the £25,000 cap which presently prevents the tribunal from determining contract claims of any significant value.       

Handcuffs, chains and restraints on working

Victoria von Wachter

Recently, Martin Sorell left WPP, an advertising company he had founded and had remained involved with for 32 years. He promptly bought another advertising agency – which incidentally WPP had been interested in buying also.  There were, surprisingly, no restraints on Mr Sorrell to prevent him going straight into competition with his old company.

Long notice periods and garden leave provisions are often used as a way to delay a potentially dangerous ex employee from going into competition as while under notice, the employee still owes a duty of trust, confidence and fidelity to his old employer.  However, excessively long periods of Garden Leave may be struck out as sterilising the employee’s skills in the market place.  The faster moving the industry, the shorter the Garden leave that will be tolerated.

When Garden Leave is run together with post termination restrictions on competing, the courts become even more anxious not to stifle the employee in the market place.  Having said this, Garden Leave and subsequent post termination restrictions can be run together provided the combined period of restriction is not excessive.

When it comes to post termination restraints, the terms must always aim to protect a legitimate business interest of the old employer and are best introduced at the point at which the employee is engaged and reviewed as the employee moves up through the business structure.

Comment

Post termination restrictive covenants play a vital role in protecting the employer's legitimate business interests when important members of staff depart their service. They must be carefully drafted. There are complex issues to navigate when it comes to enforcement. Employers would be sensible to take expert legal advice when drafting or seeking to enforce these provisions.

Written by Ellie MacKenzie

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