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The Range Of Reasonable Responses Newsletter: May 2020

As I write this we are waiting to hear from the Chancellor on the future of the Coronavirus Job Retention Scheme and the new requirement for employers to contribute to its cost. I suspect that this will throw up all sorts of complicated contractual issues that we will spend the next week or so trying to tease out.

If you are on Twitter, follow me @DazNewman to keep up to date with all the twists and turns and see what the employment law community makes of it all.  

In the meantime, shall we talk about something else? We aren’t getting many cases through from the EAT at the moment, but there have been a couple in the last few weeks that I think are worth some attention.

Changing terms and TUPE

One of the continuing debates about when you can and can’t change terms and conditions following a TUPE transfer is whether the restriction applies only to changes with a negative impact on the employee or whether it also covers beneficial changes. I’m very literal minded so I’ve always just looked at the Regulations themselves which say (Reg 4(4) TUPE)

‘any purported variation of a contract of employment that is, or will be, transferred by paragraph (1), is void if the sole or principal reason for the variation is the transfer’.

I think that’s pretty clear (as these things go). It covers any variation in contract, whether that is a pay cut or a pay increase.

It isn’t quite that straightforward.  The Government’s guidance on TUPE (page 21) says that ‘Changes to terms and conditions agreed by the parties which are entirely positive are not prevented by the Regulations’. This is because, the guidance says, the purpose of the Regulations is to ensure that employees are not penalised when a transfer takes place. This is only guidance of course and is not legally binding.

Indeed this part of the guidance was explicitly rejected in the recent EAT decision of Ferguson v Asset Management Ltd. In that case some senior employees whose business was about to be transferred awarded themselves hefty bonuses that would be payable after the transfer. The new employer refused to honour the new terms (and indeed dismissed the employees concerned for gross misconduct). When the case reached the EAT it was held that the purported variation had no effect. Regulation 4(4) covered improvements in terms and conditions as well as any erosion of them.

This involved the EAT taking a different view from the Court of Appeal in Regent Security Services Ltd v Power which held that the new employer was bound by an agreement to increase the employee’s contractual retirement age. That case of course belongs to a time when normal retirement age determined whether or not an employee had the right to claim unfair dismissal – and it was also before the new version of the Transfer Regulations was introduced in 2006 which contained the express prohibition on variation of contract. At that time the extent to which TUPE allowed the parties to agree a variation was governed by case law and was therefore subject to interpretation. Once TUPE 2006 set the provision in stone, I think it was clear that both positive and negative changes to the contract were covered. I think the guidance is wrong and Ferguson is right.

The situation is not ideal however. Suppose a new employer persuades an employee to accept a TUPE transfer by offering them enhanced terms and conditions. Can it really be right that it could then renege on the deal and rely on Reg4(4) to say that it was never bound by the change? It is worth noting that in both Power and Ferguson the courts interpreted TUPE so that the good guys would win. In Power the employer was trying to sack an employee before the retirement age that they themselves had agreed with him after the transfer. To argue that they were not bound by that agreement because of TUPE was pretty shabby. In Ferguson on the other hand, the employees who were aggrieved that their business had lost a lucrative contract, sought to saddle the new employer with a bonus scheme with no commercial justification. In doing so they fell foul of one of the golden rules of employment law: ‘don’t take the Mickey’. So while I stand by my view that Ferguson is rightly decided, I wouldn’t underestimate the ability of the courts to come up with a way of preventing an employer from taking unfair advantage of the fact.

Wrongful and Unfair Dismissal

People coming to my update sessions will have noticed that there have been quite a few cases in recent years where Tribunals have failed to draw a proper distinction between wrongful and unfair dismissal. Very briefly: in unfair dismissal the key question is whether the employer behaved reasonably. In wrongful dismissal the question is whether the employee was guilty of gross misconduct with the result that the employer was entitled to dismiss without notice. Unfair dismissal concerns what the employer reasonably believed; wrongful dismissal turns on what the Tribunal decides actually happened.

So in East Coast Main Line v Cameron an employee working as a shunter in a train depot was fairly dismissed when he allowed a train to depart when a driver was standing on a road next to the track. The driver was ‘brushed’ by the train, which sounds almost gentle, but was in reality a potentially fatal incident. The Tribunal at first did not make their own findings as to whether the employee was guilty of gross misconduct. They merely ruled that the employer reasonably concluded that he was. That was sufficient to support the finding on unfair dismissal but could not dispose of the wrongful dismissal claim. So the case was sent back for the Tribunal to decide whether the employee was actually guilty of gross misconduct.

The Tribunal held that he was not, but the EAT overturned that finding, ruling that it was perverse. One factor in the Tribunal’s decision particularly stood out. They held that the employee’s length of service – more than 30 years – was a relevant consideration in judging the seriousness of what the employee had done. His mistake was a temporary lapse, which was insufficient to destroy trust and confidence. The EAT held that a consideration of length of service did not belong in an assessment of whether the employee was guilty of gross misconduct. His negligence, although a one-off incident, was very serious and could have led to a fatality. He had not carried out adequate safety checks and his length of service, if anything, would indicate that he should have known of the importance of making sure there was nobody at risk when he cleared the train to leave the depot.

This is actually a good case indicating the difference between misconduct and poor performance. Negligence is not actually a capability issue. It is a failure to take proper care in circumstances when the employee knows what should be done, but fails to do it. As was confirmed by the Court of Appeal in Adesokan v Sainsbury’s Supermarkets that can amount to gross misconduct when it is sufficiently ‘grave and weighty’. A potentially fatal error as in the Cameron case certainly met that test.

Parish Notices

I really enjoyed speaking to South London CIPD on the employment law implications of Coronavirus. It was a great opportunity to answer a whole variety of questions. You can check out a recording of the webinar on YouTube. I’ve also talked about coronavirus and annual leave on this XpertHR podcast and I covered issues around returning to work – including health and safety rights – in this webinar. More XpertHR webinars are to follow in June and July and you don’t need an XpertHR subscription to access them. You can register for the series here.

I’m getting quite used to talking to large groups of people from the comfort of my study. If you’d like to arrange something similar for your organisation then do get in touch.

Thanks for subscribing to this Newsletter. Stay safe




Copyright © 2020 Darren Newman Employment Law Ltd, All rights reserved.

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