Reviewing and Changing Contracts of Employment

THOROGOOD PROFESSIONAL INSIGHTS A SPECIALLY COMMISSIONED REPORT REVIEWING AND CHANGING CONTRACTS OF EMPLOYMENT Annelis...

Author: Annelise Tracy Philips | Paula Rome | Thomas Player

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THOROGOOD PROFESSIONAL INSIGHTS

A SPECIALLY COMMISSIONED REPORT

REVIEWING AND CHANGING CONTRACTS OF EMPLOYMENT Annelise Tracy Phillips, Paula Rome, Thomas Player and Tracy Luke

IFC


A SPECIALLY COMMISSIONED REPORT

REVIEWING AND CHANGING CONTRACTS OF EMPLOYMENT Annelise Tracy Phillips, Paula Rome, Thomas Player and Tracy Luke

Published in 2003, updated 2005

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The authors

Annelise Tracy Phillips Annelise Tracy Phillips is a Partner in the HR Group at Eversheds. She practices in all aspects of employment law, including strategic issues such as managing change and large-scale restructuring. Particular areas of expertise include discrimination law and cross border change management/executive terminations. Annelise lectures for the CIPD and is the co-author of published works on topics as diverse as working time, family friendly working, employment tribunals and race discrimination.

Paula Rome Paula Rome is a member of the Eversheds HR Training and Development Team and is involved in providing training for clients on legal and HR issues including equal opportunities, bullying and performance management as well as writing and presenting lectures on the training and development public programme. Paula has also developed and provided training programmes for clients on equal opportunities, avoiding harassment, performance management and absence management, as well as participating in pan-European training sessions for international clients.

Thomas Player Thomas Player is a Partner in the Human Resources Team at Eversheds. He has a particular interest in industrial relations and collective bargaining. He is an experienced labour and employment lawyer. He has experience on complex reorganisational issues and collective redundancies. He has drafted collective agreements and has experience of industrial action, balloting and trade union recognition issues. He has a particular interest in the working time regulations.


THE AUTHORS

Tracy Luke Tracy Luke is an HR and Employment law trainer with Eversheds. Tracy initially worked for the Department of Trade and Industry (within the Statistics Division and the Insolvency Service) for six years before her departure to commence studies for her Law Degree. She qualified in 1995 and practised for eight years as a solicitor. Tracy currently delivers training to a range of different organisations – from FTSE 100 companies to police forces and housing associations. She has also delivered training on a pro bono basis to charitable organisations.


Contents

1

CREATING THE CONTRACT OF EMPLOYMENT

1

ANNELISE TRACY PHILLIPS

Introduction..................................................................................................2 Offer ..............................................................................................................2 Invitation to treat .........................................................................................3 Acceptance ...................................................................................................3 Withdrawal of offer .....................................................................................4 Consideration...............................................................................................5 Intention to create legal relations ..............................................................5 Statement of main terms and conditions ..................................................5 Contents of the written statement .............................................................6 The terms of the contract of employment.................................................8

2

REVIEWING AND CHANGING THE CONTRACT OF EMPLOYMENT

21

PAULA ROME, UPDATED BY TRACY LUKE

Handbook of policies and procedures.....................................................22 Legal status of the handbook ...................................................................22 Maintaining flexibility ...............................................................................23 Common content of the handbook ..........................................................26 HR Policies – Key Policies and Procedures .............................................30 HR Policies – Non-Key Policies ................................................................40


3

COLLECTIVE AGREEMENTS

45

TOM PLAYER

Introduction................................................................................................46 Legal enforceability ...................................................................................47 Incorporation of collectively bargained terms into individual contracts ..........................................................................48 Express incorporation...............................................................................49 Implied incorporation ...............................................................................51 Incorporation by way of agency ..............................................................51 Provisions restricting rights to take industrial action ...........................52 Trade union recognition............................................................................53 Schedule A1................................................................................................54 Drafting of collective agreements ............................................................61

4

PRACTICAL DRAFTING CONSIDERATIONS

68

TOM PLAYER

Introduction................................................................................................69 Hours of work ............................................................................................71 Role and responsibilities ...........................................................................71 Building flexibility into contracts .............................................................72 Express flexibility clauses .........................................................................72 Place of work ..............................................................................................73 Deductions – protection of wages............................................................75 Right to search ...........................................................................................77 Employee benefits......................................................................................77 Working time .............................................................................................79 Enforcement of the Regulations...............................................................82


5

CONFIDENTIALITY AND POST TERMINATION RESTRICTIONS

83

PAULA ROME, UPDATED BY TRACY LUKE

Background ...............................................................................................84 Competition whilst still employed ...........................................................85 Post termination restrictions – restrictive covenants ............................89 Enforcement ...............................................................................................93 The effect of wrongful and constructive dismissal ................................95

6

CHANGING THE CONTRACT

98

ANNELISE TRACY PHILLIPS

Introduction................................................................................................99 Consent between the parties ....................................................................99 Union agreement .......................................................................................99 Legal remedies .........................................................................................102 Deductions in wages claims ...................................................................104 Unfair dismissal .......................................................................................104 Remedies for unfair dismissal ................................................................106 Discrimination claims..............................................................................107 Imposing the change ...............................................................................107 The pressing business need....................................................................108 Collective consultation ............................................................................110 With whom should you consult? ...........................................................111 Employee representatives.......................................................................111 Notice ........................................................................................................113 Summary...................................................................................................115


7

INDUSTRIAL ACTION

116

TOM PLAYER

Introduction..............................................................................................117 What is industrial action? .......................................................................117 Definition of a ‘trade dispute’ .................................................................118 The rules on ballots and notification .....................................................119 Information to be contained in notices .................................................119 Sample voting paper ...............................................................................120 Type of ballot ............................................................................................121 Industrial action notices..........................................................................122 Commencement of industrial action .....................................................123 Planning for industrial action.................................................................123 Temporary labour ....................................................................................124 Industrial action and the statutory right to claim ‘unfair dismissal’............................................................................124 The strike ..................................................................................................126 Picketing ...................................................................................................127

SUMMARY

128



Chapter 1 Creating the contract of employment Annelise Tracy Phillips Introduction............................................................................................2 Offer ........................................................................................................2 Invitation to treat ...................................................................................3 Acceptance .............................................................................................3 Withdrawal of offer ...............................................................................4 Consideration.........................................................................................5 Intention to create legal relations ........................................................5 Statement of main terms and conditions ............................................5 Contents of the written statement .......................................................6 The terms of the contract of employment...........................................8

Chapter 1 Creating the contract of employment

Introduction Technically, a contract of employment does not need to be a written document. It can be wholly oral (subject to the statutory obligation to provide written particulars discussed below). Given the difficulties of interpreting oral agreements after some time has passed it is clearly advisable for the written version of the contract to be agreed between the parties and retained for future reference. A binding contract of any kind must contain the following elements: •

Offer

•

Acceptance

•

Consideration

•

Intention to create legal relations

Offer In legal terms an offer is an expression of intent to enter into a binding contract with specific terms on acceptance. Offers may be conditional on some other activity or criterion being achieved so, for example, if an offer of employment is subject to the receipt of satisfactory references and the employee accepts the offer, the contract will not be complete and binding until all the conditions are fulfilled. An issue which regularly arises is what constitutes a satisfactory reference. In Wishart -v- National Association of Citizens Advice Bureaus Limited [1990] IRLR 393, Mr. Wishart was offered employment subject to satisfactory references. His references disclosed significant sickness absence in his former employment. The job offer was withdrawn and Mr. Wishart sued.


2

1 C R E AT I N G T H E C O N T R A C T O F E M P L O Y M E N T

The question before the Court of Appeal was what constituted a satisfactory reference. In particular whether the test is objective or subjective. That is, does the reference have to be satisfactory to a reasonable employer or to that particular employer who may have significantly higher or lower standards? The Court of Appeal decided the case on a different point but held, obiter (that is as a matter of guidance rather than by binding precedent), that the use of ‘satisfactory’ in this context meant that an employer is reserving the right to make up its own mind as to whether the references are satisfactory as opposed to setting an objective condition.

Invitation to treat A distinction must also be made between an offer whether conditional or not, and an ‘invitation to treat’. The difference is that, if a candidate accepts an invitation to treat, they are, in fact, making an offer indicating their willingness to apply for a role. It is in this context that adverts for roles must be seen as should application forms for specific roles. Advertisements do not constitute offers capable of acceptance but merely invitations to make applications. It is when a formal offer of employment is made that an acceptance becomes possible.

Acceptance Acceptance must be absolute and unconditional. If the acceptance is subject to conditions or is based on terms other than those in the original offer it will amount to a counter offer. The employer is free to accept the counter offer if he/she so wishes. The counter offer operates to terminate the original offer. If the candidate purports to accept a varied offer, and this counter offer is rejected by the employer, then the candidate can no longer go back and accept the original offer unless it is re-made.


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Withdrawal of offer A common problem area arises when an offer made in error is accepted by the candidate. Offers may be withdrawn at any time before they are accepted even if they have been stated to be valid for a specific period of time and that period of time has not yet expired. Withdrawal of an offer is valid when it is communicated. Acceptance is valid when it reaches the offeree with one exception, that is when it is posted. Postal acceptance occurs when it is posted rather than when it is received. This means that if an offer is withdrawn by letter and the acceptance is posted before the withdrawal is received, a binding contract will have been created between the parties. In Sarker -v- South Tees Acute Hospitals NHS Trust [1997] IRLR 328 a binding contract was created but was terminated before Mr. Sarker started work. The Employment Appeal Tribunal held that the fact that the contract was set to start at a later date did not mean that termination did not require notice in accordance with the contract which had created the binding agreement. An individual who claims breach of contract and succeeds is entitled to damages to compensate him/her for the losses they have suffered. The measure of damages amounts to the sum the individual would have recovered had the contract been properly performed. Normally this would amount to compensation for the proportion of the notice period during which the contract would have been live, and salary and benefits would have been paid. The termination of the contract is a dismissal for the purposes of the Employment Rights Act 1996 and if the reason for it is one of the automatically unfair reasons set out, e.g. pregnancy, then, because there is no applicable qualifying period of employment for the automatically unfair categories, a claim for unfair dismissal can be made.


4


Consideration The doctrine of consideration is one of the most complex legal principles. At its most basic it means that a benefit must pass from each party to the other. It is a concept which is often difficult to apply in the employment arena. Usually the consideration passing to the employee, namely pay, is easy to identify, but in terms of the consideration which passes to the employer, this is usually said to be the benefit of work done.

Intention to create legal relations Without intention to create legal relations, contractual obligations cannot have legal effect. In situations therefore where benefits are stated to be discretionary, the parties are making it clear that there is no intention to create legal relations and therefore they do not intend to be bound by the obligation to provide the benefit. In the terms of the exercise of the discretion and the potential breach of trust and confidence see later (Chapter 4).

Statement of main terms and conditions The law does not require a contract of employment to be in writing and, during the first two months of employment, there is no duty on the employer to provide any additional information as to the terms of the candidate’s employment. However, Section 1 of the Employment Rights Act 1996 (‘ERA’) requires that the employee must be given a statement of the main terms and conditions of his employment not later than two months from the beginning of the employment (see below). If an employer fails to provide written particulars and a claim is tagged on to another claim, for example for unfair dismissal, an employee’s award can be increased by between two and four weeks’ pay subject to the statutory maximum of a week’s pay, currently £270 per week. Technically the statement is not a contract, although it is very strong evidence of what the terms of the contract are. By contrast, a document which is drawn up as a contract of employment will provide direct evidence of what the terms of contract are.


5


Contents of the written statement The statement may be given in instalments during the two month period although certain particulars must be included in a single document known as the Principal Statement. These are as follows: •

The name of the employer and employee; and

•

the date when the employment began; and

•

the date on which the employee’s period of continuous employment began (taking into account any employment with a previous employer – for example, where the business has been taken over – which counts towards that period).

The statement must also contain details of the following particulars of employment which are applicable as at a date no more than seven days before the date that the statement is given to the employee: •

Scale of remuneration, or the method of calculating the remuneration;

•

the intervals at which the remuneration is paid (i.e. weekly, monthly or at another interval);

•

any terms and conditions relating to hours of work such as details relating to normal working hours;

•

terms and conditions relating to entitlement to holidays, including public holidays and holiday pay;

•

the job title or brief job description of the work for which the employee is employed;

•

either the place of work or an indication that the employee is required to work at various places, and the address of the employer.


6


The remaining details which can be provided in instalments are terms and conditions relating to: •

Incapacity for work due to sickness or injury, including any provision for sick pay;

•

terms and conditions relating to pension schemes and confirmation as to whether or not a contracting out certificate is in force (a certificate may be issued where an occupational pension scheme exists);

•

the length of notice which the employee is obliged to give and is entitled to receive to terminate the contract of employment. There are statutory minimum notice periods which apply to all employees employed for one month or more; these are as follows: Length of service

Minimum notice

1 month – less than 2 years

1 week (from employer)

2 years

2 weeks (from employer)

3-12 years

3-12 weeks (from employer on the basis of one week per year of service)

12+ years

12 weeks (from employer – this is the maximum)

1 month – 12 + years

•

1 week (from employee)

where the employment is not permanent, the period for which it is expected to continue or, for a fixed term, on which it is to end;

•

the particulars of any collective agreement which directly affects terms and conditions including the persons by whom they were made where the employer is not a party;

•

where the person is required to work outside the UK for more than one month, the period for which he or she is to do so, the currency in which the salary will be paid, any additional remuneration or benefits and any terms and conditions relating to his or her return to the UK;

•

the statement must include a note specifying any procedure applicable to the taking of disciplinary decisions relating to the employee or to a decision to dismiss the employee or refer them to the provisions of a reasonably accessible document which specifies such rules. It is useful if the note specifically stipulates that the disciplinary procedure is not


7


a term of the employee’s contract. This is an important consideration for employers as a result of recent cases in the Tribunals which have held that in certain circumstances, employees would be able to claim damages for breach of contract when a disciplinary procedure which formed part of the employers contract was not followed (see later).

The terms of the contract of employment The parties to the contract may agree (subject to some specific exceptions) any terms they wish. The terms of the contract may be written or oral, express or implied.

Express terms These are the terms which the parties have specifically discussed or agreed either orally or in writing. They may also be terms which have been agreed by reference to collective documents accepted by the parties (see below). It is thus not necessary for all express terms of the contract to be contained in a single written contract.

Incorporated terms Contract terms may become part of the contract of employment by incorporation where the contract expressly states that it is subject to the terms and conditions of another relevant source, such as a collective agreement, work rules or the staff handbook. Incorporation may also be implied by custom or past practice in the industry. Once a term contained in a collective agreement is incorporated into the contract, then it applies to all employees despite the fact that a particular employee does not approve of what has been agreed (Tocher -vGeneral Motors (Scotland) Ltd 1990 IRLR 478) and whether or not he is a member of the trade union.

Collective agreements Collective agreements are generally made between employers and trade unions and are not normally legally binding. When the union negotiates on behalf of its members, it is acting as a principal and not an agent. Terms may, however, become incorporated into individual contracts of employment if agreed between the parties.


8


A collective agreement is defined in Section 178 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) as ‘an agreement or arrangement made by or on behalf of one or more trade unions and one or more employers or employers associations which relates to one or more of the items listed in Section 178 (2)’. These are: terms and conditions of employment and conditions of work, hiring, firing and suspension, allocation of work or the duties of employment between employees, discipline, union membership, union recognition, facilities agreements, procedures and the other machinery of collective bargaining. Therefore, even though a collective agreement may not be enforceable between the collective parties (the employer and the union), it may still be enforceable between the individual parties (the employer and the employees). This is the case even where the collective agreement expressly states that it is binding in honour only. (Marley -v- Forward Trust Group Ltd (1986) IRLR, 1986 ICR 891, CA). Not all terms will be incorporated into the contract of employment, only those which are appropriate. Those which are essentially collective in nature will not be classed as appropriate. Terms relating to pay, hours, holidays etc will be appropriate as opposed to those relating to conciliation schemes. In National Coal Board -v- National Union of Mineworkers (1986) IRLR 439 (1986) ICR 736, the judge decided a collective dispute procedure was not contractually incorporated. In cases of ambiguity, the courts look to the intentions of the parties to the collective agreement (Adams -v- British Airways plc (1995) IRLR 577).

Staff handbooks In the same way as collective agreements, staff handbooks may be incorporated expressly into the contract of employment by reference. Furthermore, where the court can reasonably infer from the circumstances of the case that the parties must have intended works rules to have contractual force, then they will be incorporated. For example, in Petrie -v- Mac Fisheries Limited 1940 1KB 258, a notice about sick pay posted on the factory notice board had contractual effect. If the principal contract does not expressly incorporate the collective agreement or staff handbook, then the court will look to see whether the employee has acknowledged the binding effect of the documents. For example, if they were signed by the employee then obviously this may be evidence of the parties intention to incorporate the terms as terms of the employee’s contract of employment.


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If there is no signature, then the Court will determine whether the employee was put on notice of such terms and then assess how widely known and accepted they are. If the terms are generally well known to the employee they may well be incorporated into the individual’s contract of employment.

Implied terms These are terms which form part of a contract although they may not be specifically referred to or stated by the parties. Implied terms have the same effect as an express term but where an implied term is inconsistent with an express term the express term will prevail. There are several ways in which terms may be implied: •

By conduct.

•

By custom and practice – which must be reasonable, certain and notorious.

•

For the purposes of business efficacy (Scally v Southern Health and Social Services Board (1991) ICR 771)

•

By the officious bystander objective test.

•

As a characteristic term.

IMPLIED BY CONDUCT

The term is implied where the conduct of the parties indicates that they are in general agreement about a particular matter. For example, where at the start of his employment an employee regularly takes a 15 minute coffee break at 11:00am but there is no express term allowing it, the employee may argue that the break was an implied term of the contract which the employer had accepted by conduct. (see Aparau -v- Iceland Frozen Foods Plc (1996) IRLR 119, EAT). One area of concern for employers is at what point a practice within the business becomes a contractual right of the employee. In the case of Quinn -v- Calder Industrial Materials Limited [1996] IRLR 126, this very point was considered. In that case the employers had issued policy documents with guidelines on enhanced redundancy payments. Over the years the terms of the policy became generally known and it was used on four separate occasions. When the applicant was dismissed by reason of redundancy, he brought a claim for breach of contract because his employer had not made any payment in respect of enhanced redundancy entitlements under the policy.


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The Employment Appeal Tribunal held that the key factors in deciding whether an enhanced scheme has become a contractual right are: •

whether and how the policy has been drawn to the attention of the employees

•

whether it has been followed without exception for a substantial period.

In particular the Employment Appeal Tribunal considered whether the Employers had communicated the policy to the employees in a manner that supported an inference that the employer intended to be contractually bound by it.

IMPLIED BY CUSTOM AND PRACTICE

If it can be shown that a term is regularly adopted in the employer’s particular trade or business the court may decide that such a term has been implied by custom. Before the court will allow such a term to exist, it must be ‘reasonable, certain and notorious’ (Bond -v- CAV Ltd (1983) IRLR 360). This has been upheld more recently by the EAT in Henry -v- London General Transport Services Ltd ([2001] IRLR 132 EAT). The word ‘reasonable’ has been held to mean ‘fair’ (Devonald -v- Rosser & Sons (1906) 2KB 728) and ‘certain and notorious’ are interpreted as precise and wellknown. Once a custom is established, it is not necessary that an employee seeking to rely on the custom knew of its existence.

IMPLIED TO GIVE BUSINESS EFFICACY

In the case of Liverpool City Council -v- Irwin (1997) AC 239 the court held that a term will be implied into a contract if it is ‘necessary’ to give the contract business efficacy. In other words, the term is necessary to make the contract workable. Examples of such terms quite often relate to mobility. For example, an employer who employs an HGV driver with no express term requiring him to begin his journey at any one of the employers sites, may imply a term into the contract to the effect that the driver must begin his journey from any of the employer’s sites that the employer stipulates depending on the journey the driver is likely to make. The courts justify interpreting the contract in such a way by claiming that the parties must have intended the contract to work properly, and it can only be capable of working properly by implying such a term. In this way, the courts can take quite an active role in interpreting the contract. It is, therefore, best practice to express the terms which are agreed. In Janes Solicitors -v- Lamb


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Simpson 26.6.95 (EAT 323/94 unreported) the Employment Appeal Tribunal implied a term allowing an employee to be paid in lieu of holiday entitlement accrued, but not taken.

IMPLIED BY THE OFFICIOUS BYSTANDER TEST

This is an objective test which was first referred to in the case of Shirlaw -vSouthern Foundries (1926) Ltd (1936) 2KB 206. Essentially, the court will imply a term to exist where the term is ‘so obvious that the parties must have intended it to apply’. The court supposes that if at the time the agreement was reached, an ‘officious bystander’ were to suggest some express provision in the contract, the parties would both say ‘oh, of course that should be included’.

IMPLIED AS A CHARACTERISTIC TERM OF THE RELATIONSHIP

Under the common law, certain rights and obligations are characteristic of the relationship of master and servant. On this basis, many terms may be held to exist unless they are modified by expressly agreed arrangements, for example, the employer’s duty to pay wages and take reasonable care of employee’s safety and the employee’s duties of fidelity and obedience.

Employee’s implied duties SERVICE

The obligation of an employee under a contract of employment is to carry out the service for which he is employed in person, and his responsibility cannot be delegated to another. A strike will usually amount to a breach of contract because the employee is not willing to serve (Note: Employees are protected from being dismissed (for unfair dismissal purposes) within the first eight weeks of official strike action).

TO SERVE HIS EMPLOYER FAITHFULLY AND NOT ACT AGAINST HIS INTEREST

A term is implied into every contract of employment to the effect that an employee may not set up a rival business during the period of employment without express permission. However, preparation to set up a competing business after employment is not necessarily a breach of contract (Adamson -v- B and L Cleaning Services (1995) IRLR 193). Nonetheless, the submission of a tender for future business to a customer is unlawful competition, even if the employee was prepared to give contractual notice expiring before work was due to start. It will also be a breach of contract to attempt to persuade customers to transfer their business when the employee leaves. (Wessex Dairies Ltd -v- Smith (1935) 2KB80).


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COMPETENCE

A term is implied into every employment agreement that the employee promises he is reasonably competent to do the job. Incompetence is therefore a breach of contract (Harmer -v- Cornelius (1858) 5CBNS 236).

CARE

The employee impliedly promises to take reasonable care in the performance of his duties. (Lister -v- Romford Ice & Cold Storage Co Ltd [1957] AC555).

OBEDIENCE

The employee should carry out the reasonable instructions of his employer. The duties of obedience and fidelity are also owed to an employer to whom the employee is seconded (MacMillan Inc -v- Bishopsgate Investment Trust plc (1993) IRLR 393).

LOYALTY

Honesty – the employee must be honest in the execution of the service but he does not have to disclose his own acts of dishonesty (Bell -v- Lever Brothers 1983 ICR 801 AC). Senior employers who are under enhanced fiduciary duties may have this obligation.

NOT TO MAKE SECRET PROFITS

An employee must not make a secret profit or take bribes. He may be compelled to account to his employer for the secret profit or bribe (Boston Deep Sea Fishing & Ice Co -v- Ansell (1888) 39 Ch D 229)

CONFIDENTIALITY AND TRADE SECRETS

Inventions and discoveries made during the course of employment, belong to the employer in the absence of any agreement to the contrary.(British Syphon Company Ltd -v- Homewood (1956) 2 All ER 897) A breach of confidence is an independent equitable wrong irrespective of the employment relationship (Faccenda Chicken Ltd -v- Fowler (1984) IRLR 61), however, the duty of confidence is greater during the duration of the employment contract. Current employees are under an implied obligation not to use or disclose confidential information. Former employees are required only to keep trade secrets confidential, that is, information so highly confidential it requires the same protection as a trade secret.


13


In Faccenda Chicken, the Court of Appeal set out the test for a trade secret. •

What is the nature of the employment? Does the employee regularly handle confidential information? If so, the duty of confidentiality is greater.

•

What is the nature of the information and is there a need for it to be protected?

•

Did the employer impress upon the employee that the information was confidential?

•

Can that information be easily identified and separated from information which the employee is free to use?

The duty of confidentiality is, in principle, unlimited, however it ends when the information loses its confidential nature, for example, where it becomes public knowledge or outdated.

Employer’s implied duties DUTY TO PROVIDE WORK

In some cases it may be argued that, as long as the employee is fully remunerated, he/she can be kept idle. However, if an employee is paid by commission or is a piece worker, or if his skills would atrophy through lack of use, there is an implied duty to provide work. In Langston -v- Amalgamated Union of Engineering Workers (1974) ICR 180, the Court of Appeal indicated that a skilled worker has a right to have the opportunity to exercise his skill. In the case of William Hill Organisation Ltd -v- Tucker (1998) IRLR 313 the Court of Appeal held that there may be an implied obligation upon the employer to provide work to an employee during the employee’s notice period, where the employee’s skills require frequent exercise. In this case the Court of Appeal refused to enforce a garden leave injunction against a senior dealer.

DUTY TO INDEMNIFY

To indemnify in respect of costs, claims and expenses which arise through the carrying out of duties.


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DUTY OF MUTUAL TRUST AND CONFIDENCE

There is a duty of mutual trust and confidence owed by the employer and the employee to each other. The following are examples of breaches of this term: •

being accused, without reasonable cause, of theft (Robinson -vCrompton Parkinson Ltd (1978) IRLR 61);

•

exercising an express clause in such a way as to render performance of the contract impossible (United Bank -v- Akhtar (1989) IRLR 507);

•

In Aspden -v- Webbs Poultry & Meat Group (Holdings) Limited [1996] IRLR 521 the Court held that the employer was under an implied duty not to terminate the employee’s contract of employment if, in the circumstances, this would result in the employee ceasing to be entitled to payment under a permanent health insurance scheme. The employer can still dismiss a sick employee in these circumstances if dismissal is on the grounds of gross misconduct or on grounds of redundancy (Hill -v- General Accident Fire & Life Assurance Corporation [1998] IRLR 641.

•

If dismissal is due to an employee’s fundamental breach of contract, for example failure to comply with the necessary internal policies, then it will not be a breach of trust and confidence to do so Briscoe -v- Lubrizol Limited, Court of Appeal 2002 EWCA CIV 508.

References The employer is under no implied duty to provide a reference to employees but if he or she does then there is a duty of care to the employee about whom they write to take reasonable care in the preparation of a reference. (Spring -v- Guardian Assurance plc & Others [1994] IRLR 460).

Honest business In Malick -v- BCCI [1997] 3 IRLR 1, the House of Lords established that claims for stigma damages could be brought on the basis that the BCCI’s conduct was in breach of the implied term not to damage the relationship of trust and confidence. Therefore if the employees can demonstrate that they had a measurably increased risk of unemployment attributable to the stigma of having worked for a previous employer, and from which an inference of loss could be drawn on the basis of a lost chance, then they were entitled to recover in breach of contract.


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Not to suspend an employee without reasonable cause In the case of Gogay -v- Hertfordshire County Council IRLR 2000 the High Court held that the decision of Hertfordshire County Council to suspend a residential care worker, after one of the children made allegations of abuse, was in breach of contract. The allegations against Miss Gogay were unfounded and she was reinstated quickly, however she had suffered depression in the meantime and never returned to work. The Court of Appeal held that the decision to suspend was a knee jerk reaction and other options could have been considered. In the circumstances there was a breach of contract.

Equal pay The Equal Pay Act 1970 applies to men and women and deems an equality clause to be included into contracts of employment. The equality clause then modifies the woman’s contract so that whenever she is engaged on like work, (work-related as equivalent or work of equal value to a man), she is entitled to equal pay with that man unless the employer can establish that the difference between the woman’s and the man’s contract is genuinely due to a material factor which is not the difference of sex. Where the equality clause is implied into a woman’s contract of employment then it modifies that contract to include any beneficial term contained in the man’s contract which is not so contained in the woman’s. If any term of the woman’s contract becomes less favourable than that contained in the man’s contract then the woman’s contract is again modified. The Employment Quality (Religion or Belief Regulations) 2003, the Employment Equality (Sexual Orientation) Regulations 2003, the Sex Discrimination Act 1995 and the Race Relations Act 1976 prohibit discrimination in terms and conditions of employment on the grounds of: •

Religion or belief

•

Gender

•

Sex or marital status (including pregnancy)

•

Race, ethnic, national origins, nationality and colour

•

Sexuality

Employers must also be aware of the possibility of indirect discrimination in terms and conditions where a provision, criteria or practice is applied generally but


16


puts people at a particular disadvantage and that cannot be shown to be a proportionate means of achieving a legitimate aims. Examples include the requirement to work on particular days, e.g. Friday’s or to work full-time. The Disability Discrimination Act 1995 prohibits discrimination in relation to the terms and conditions offered to disabled people unless their less favourable treatment can be justified by a reason which is material to the circumstances of the particular case and substantial. Where terms in an employee’s contract of employment are discriminatory then such terms are void where: •

Their inclusion renders the contract unlawful;

•

they are included in furtherance of an act rendered unlawful by the Act;

•

they provide for the doing of an act which would be rendered unlawful by the Act.

If there is a term contained in the contract of employment which results in unlawful discrimination against a party, then that term is not void but is unenforceable against that party so that where an employee fails to comply with a discriminatory term contained in his or her contract of employment the employer will not be entitled to sue that individual for breach of contract.

Unfair contract terms The Unfair Contract Terms Act 1977 makes some contract terms unenforceable. Contracts can neither exclude nor restrict liability for death or personal injury caused by negligence. Terms which impose strict liability for breaches of contract or allow non performance or significantly different performance of contractual obligations are unenforceable unless they are reasonable.

Fixed-term contracts Fixed term contracts are subject to exactly the same rules as normal contracts of employment, save only that they last for a specified period after which they expire without further action by either party. No notice needs to be given to terminate at expiry but notice clauses can be included in fixed term contracts to allow either party to bring the contract to an end at some time before expiry. Where employment continues after the date of expiry then the employee is deemed to be working under the same terms and conditions as before but with


17


a reasonable notice period (subject to the statutory minima) implied into the contract. For the purposes of employment rights under the Employment Rights Act 1996, expiry and non-renewal of a fixed-term contract amounts to a dismissal (ERA Section 95(1)). Provided the employee satisfies the usual conditions for claiming unfair dismissal, i.e. employment status, age and continuity of employment, then claims for redundancy and unfair dismissal can be made.

WAIVER CLAUSES

Since 25th October 1999 it is no longer possible to agree to exclude the unfair dismissal provisions in relation to fixed-term contracts (Section 18(1) Employment Relations Act 1999 which repealed Section 197(1) of ERA). After 1st October 2002 fixed term employees on contracts of two years or more can no longer waive their statutory right to receive redundancy payments on the expiry or non-renewal of their contract. This rule applies to contracts signed, extended or renewed after 1st October 2002. Waivers agreed prior to 1st October 2002 will remain in force until the contract is renewed or extended.

FIXED-TERM EMPLOYEES (PREVENTION OF LESS FAVOURABLE TREATMENT) REGULATIONS 2002

These regulations came into force on 1st October 2002 and in summary they: •

prohibit less favourable treatment in relation to fixed-term employees terms and conditions of employment and other detrimental treatment when compared to permanent employees where there is no objective justification;

•

establish a framework to prevent the inappropriate use of successive fixed-term contracts;

•

convert task or performance contracts into fixed-term contracts so that unfair dismissal and redundancy rights apply;

•

give fixed-term employees the right to request a written statement in relation to potential breaches of the regulations;

•

require employers to provide information to fixed-term employees about permanent vacancies available in the organisation.


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RESTRICTING THE USE OF SUCCESSIVE FIXED-TERM CONTRACTS

The use of successive fixed-term contracts is limited to a maximum of 4 years unless their use for a longer period is justified. This requirement can be modified by collective or workforce agreement which must provide alternative schemes for preventing abuses and specify a maximum duration, a maximum number of renewals and/or whatever objective reasons justify renewals. If a fixed-term contract is renewed or extended in breach of the 4 years limitation without justification, then that will become a permanent contract and employees can make a claim in the Employment Tribunals for a declaration of that fact. The clock began ticking on the 4 year limitation period on 10th July 2002 and any service prior to that date is disregarded.

PART-TIME WORKERS

The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2002 have as their objective the prevention of less favourable treatment of parttime employees in respect of their terms and conditions of employment as opposed to comparable full-time employees. Part-time employees are also protected against any detriment because of their part-time status. This means that their: •

rates of pay;

•

contractual and sick pay;

•

annual leave, maternity leave, parental leave and career breaks;

•

pensions;

•

training; and

•

redundancy terms

should all be equivalent unless there is an objective justification. In terms of overtime, part-time employees must receive the same hourly rate of overtime but only once they have worked more than normal full time hours rather than when they exceed their part time hours.


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Employees have the right to receive a written statement if they feel they have been treated less favourably than a comparable full-time employee. They are protected against unfair dismissal and being victimised on the grounds that they have: •

brought proceedings;

•

requested a written statement of reasons;

•

given evidence or information in connection with proceedings;

•

sought to assert their rights under the regulations;

•

alleged that their employer has infringed the regulations; or

•

because the employer believes they intend to do any of the above.

National Minimum Wage Act 1998 All workers have the right to be paid at a rate which is not less than the National Minimum Wage.


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Chapter 2 Reviewing and changing the contract of employment Paula Rome, updated by Tracy Luke Handbook of policies and procedures ..............................................22 Legal status of the handbook .............................................................22 Maintaining flexibility .........................................................................23 Common content of the handbook....................................................26 HR Policies – Key Policies and Procedures .......................................30 HR Policies – Non-Key Policies ..........................................................40

Chapter 2 Reviewing and changing the contract of employment

Handbook of policies and procedures As a general rule, details specific to the employee will be set out in their individual contract of employment. Such individual details will include salary/wages, hours of work, place of work and job description or job title. Other more general policies and procedures, which apply to all employees or large sections of the workforce, are more often contained in an employee handbook. These policies and procedures can be contractual entitlements of the employees or may be simply a statement of best practice. To comply with changes in legislation many handbooks are now seen as living documents, undergoing constant review and revision. An employer must consider how the handbook is going to be designed. Will it be bound or in loose leaf, hard copy or electronic, or both? Is it worth assessing how often the policies are likely to be amended? A loose leaf document or electronic format handbook is easier to update at regular intervals. The length of the handbook is also worth considering in light of the size and complexity of the organisation. For some employers a basic handbook which can be expanded as the business grows is ideal, whereas, for larger or operationally diverse organisations the handbook will normally be more comprehensive and, as a result of this, is likely to need to be reviewed on a more frequent basis.

Legal status of the handbook Terms of a contract can be written into the contract expressly, or incorporated by reference to another document. Commonly, an individual’s written contract or Statement of Terms and Conditions will include some reference to certain policies and procedures in the Handbook or intranet in today’s electronic age. There is the danger that unless this reference is drafted carefully the reference may incorporate the policy as a contractual entitlement. Indeed, if a contract is not carefully drafted and refers to the handbook then it is possible that the


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2 REVIEWING AND CHANGING THE CONTRACT OF EMPLOYMENT

handbook as a whole may be deemed to be incorporated by reference and its terms may become contractual entitlements of the employee. If the policy or handbook is contractual, any failure to comply, to the letter, with policies or procedures is a potential breach of contract. This would enable the employee to pursue a claim against the Employer in either an Employment Tribunal or through the ordinary courts. As well as being a potential breach of contract there is also the danger that the employers actions might amount to a constructive dismissal of the employee where, by changing a policy or procedure, this change strikes at a fundamental right of the individual. The right to claim constructive dismissal will apply to employees with over 1 year’s continuation of employment. Employers will therefore see, when drafting their contracts and handbooks and the policies and procedures such handbooks contain, the need carefully to consider whether they are willing to accept the implications of being contractually required to comply in full with such policies. If not, it is possible to draft contracts in such a way so as to, expressly, not incorporate the handbook or to limit incorporation to specific parts. Careful wording in order to maintain flexibility for the employer is highly recommended.

Maintaining flexibility It is even possible to draft flexibility into contractual policies and procedures by careful consideration of the wording which is used. Many handbooks contain phraseology which allows flexibility for the employer, for example: •

‘the employer may’;

•

‘at the employer’s discretion’;

•

‘this list is not exhaustive’.

The use of such words seeks to maintain flexibility for the employer to extend or on occasion avoid compliance with the policy procedures. Some caution must be exercised in this area as expressing rights as being ‘discretionary’ may be overridden if the employer habitually, and without exception, always applies the policy. There has been a great deal of recent case law around these points, in particular, regarding the application of bonuses. At present, in cases such as Mallone -v- BPB Industries plc (2002) CA, there is guidance that the courts and tribunals will expect such discretion to be exercised in a reasonable fashion and may even, if a procedure or policy is well known and has been


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communicated to the staff and was used without exception, decide that the employer no longer has the right to rely upon the discretion that they have purported to protect. The Mallone decision examined the concept of absolute discretion in a Share Option Scheme. When Mallone was dismissed on ‘no fault’ grounds, the Directors of BPB cancelled his share options. It was only when Mallone tried to exercise his options that he discovered this. He successfully argued in the High Court that the cancellation was unlawful and the court decided that the Directors had acted irrationally. BPB appealed but the Court of Appeal agreed with the High Court deciding that, notwithstanding the contract allowing the Directors to exercise absolute discretion, the options were granted as reward for past performance and future loyalty. The decision to cancel the options when Mallone’s dismissal was on ‘no fault’ grounds and ignore his past good service was an irrational exercise of their discretion. This case follows the earlier discussion in 2000 in Clark -v- Nomara [2000 IRLR 766] which examined this need for even discretionary bonus payments to be excised in a way which is not irrational or perverse. Custom and Practice can also lead to an expectation of payment as can be seen by the series of cases examining when enhanced redundancy payments should be made. This was recently examined in Albion Automotive Limited -v- Graham Walkers and others CA2002. The employer in this case had provided enhanced redundancy terms in six previous redundancy exercises and, as a result, the Tribunal examining the redundant workers’ claims in the present redundancy considered the enhancement to be incorporated into the contract. The Court of Appeal backed the original Tribunal decision. It is common practice for employers physically to separate contractual policies from non contractual policies in an attempt to prevent confusion. Policies that an employer more commonly may accept as contractual include: •

Hours of Work Policies;

•

Holiday Policies;

•

Absence from Work Policies;

•

Compassionate Leave Policies;

•

Maternity and Family Friendly Policies;

•

Equal Opportunities, Bullying and Harassment Policies and Procedures


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•

Health and Safety Policies

•

Data Protection

Employers commonly exclude best practice policies which often include Disciplinary and Grievance Procedures. Statutory minimum discipline and grievance procedures will come into force in October 2004. The Government has withdrawn it’s original proposal that these procedures would be implied into all contracts. Instead, it intends to wait and see how the initial proposals bed down before deciding whether to make them contractual.

CONTENT OF THE EMPLOYEE HANDBOOK

Included below is a table showing the types of polices that might be included in an Employee Handbook relating them to the relevant legislation surrounding the policy. There is a brief summary of the effect of the legislation and also of any proposed changes which relate to the relevant legislation or which may impact on the policies.

COMMUNICATING POLICIES AND PROCEDURES

It is of extreme importance that the employees know of the existence of the handbook and how they can obtain it. It is especially important for policies implementing equal opportunities and prevention of harassment (otherwise often known as ‘Dignity at Work’ policies). Unless the employer can show that the policies have been effectively communicated to employees they will not be able to rely upon the policies to provide a defence against claims of harassment made by employees. This is because the defence is based on the argument that the employer had taken all reasonably practicable steps to prevent the harassment occurring and an employer is unable to argue this if an employee has not seen the relevant policies. Similar arguments would apply to the failure to communicate email policies and then attempt to discipline an employee for breaching such a policy.


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Common content of the handbook Explanation of the scope of the handbook/introduction This can be used to explain the purpose of the handbook and whether it is a wholly contractual document. It can also outline those parts which are considered contractual and those which are best practice only. If the employee is expected to update the handbook himself it can explain that the employee will be sent updates and expected to file them. The introduction should also encourage the employee to familiarise himself with the contents of the handbook and to retain it for future reference. It is also very common, if a company or organisation has a mission statement, to include this in the introduction to the handbook.

Equal Opportunities Policy It is currently unlawful to discriminate on the grounds of sex, race, disability, sexual orientation and religion or belief. By October 2006 this will further be extended to prevent discrimination on the grounds of age. A policy decision must be made at this stage whether or not to include this protection in advance of the implementation by law, or to await further guidance and amend policies as and when changes occur. It is essential to include an equal opportunities policy in a handbook as tribunals will expect all employers to have taken steps towards tackling discrimination issues in the workplace and the implementation of a policy is seen as a fundamental first step towards supporting employees and dealing with these issues. The Equal Opportunities Policy should seek to deal with equality of treatment during the whole length of the contract from the initial recruitment stage to dealing with the employee within the workplace, provision of recruitment and training, up to the end of employment. The policy can include outlined steps for employees taking complaints or can cross refer to the grievance and/or harassment procedures.

Sickness Absence Policy Given the ever rising rates of absence it is crucial to have policies in place which outline the employee’s duties when absent from the organisation with regard to reporting in and providing evidence as to the reasons for their absence.


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Leave Policy This will include leave entitlements and holidays, maternity leave, paternity leave, parental leave. Details surrounding compassionate leave, time off for medical and dental appointments and public duties should also be outlined.

Disciplinary and Grievance Policy Normal disciplinary policies will include examples of misconduct; some of these can be specific to the requirements of a particular organisation. Some businesses may have particular rules regarding smoking, food handling or, if public authorities, may limit actions outside the workplace such as political activities. Examples of conduct which can be seen as gross misconduct and which may lead to instant dismissal (after, of course, a fair procedure is followed) will also usually be given. Policies normally outline the need for fair investigations and the need to allow the employee and his representative to prepare their case. The accompanying representative will normally be a colleague or trade union representative who may be chosen by the employee for any hearing which could result in a formal warning such as: •

Verbal warning – also recorded in writing;

•

Written warning;

•

Final written warning; or

•

Dismissal.

These disciplinary steps will normally be outlined in the policy with a clause stating that the process can be entered into at any warning level depending on the severity of the misconduct. Grievance policies normally initially encourage employees to raise issues informally with their line managers and if this does not resolve their problem then more formal steps are outlined. These steps normally include referral of the problem to a more senior manager, sometimes in writing. If a meeting is to take place the employees have similar rights to be accompanied as in disciplinary situations. In October 2004 new regulations came into force which implemented the statutory discipline and grievance procedures introduced by the Employment Act 2002. The Regulations require employers to follow set procedures for dealing with disciplinary matters or employee grievances. A failure by an employer to follow the disciplinary procedure (other than in specific circumstances) will result in a finding of automatic


27


unfair dismissal if an employee brings a claim (a one year qualifying period is still required). Failure by the employer or employee to follow either procedure will mean that any compensation will be increased/decreased by 10%-50% depending on who is at fault.

Harassment Policy The harassment policy will link into the equal opportunities policies stating that harassment on the grounds outlined in the equal opportunities policy will be unacceptable. Details of what will be considered as harassment should be outlined and should include as a minimum: •

Verbal conduct and actions;

•

Physical conduct and actions; and

•

Non verbal conduct and actions

which will cause the recipient to feel embarrassed, humiliated or uncomfortable in their working environment. Specific examples can be given. The employee should be given a suggested method of complaint which will normally include a choice of formal or informal action. The likelihood of disciplinary action being pursued against any employee who has been found to have breached the policy should be outlined.

Health and Safety Policy All health and safety policies should outline the responsibilities of: •

the Company; and

•

the Employee.

The policy should also outline: •

Who has the responsibility for managing health and safety within the organisation.

•

Those procedures for reporting any accidents and notifying the health and safety managers of incidents within the organisation and any observed dangers or potential dangers.

•

What training the organisation has put in place regarding health and safety issues.

•

Public Interest Disclosure/Whistleblowing Policy.


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The employer should encourage employees to raise genuine concerns about how the employer operates their business within the Company. The employer can use this policy to assure employees that their concerns will be taken seriously and acted upon by the employer. The policy should outline how the employee can pursue their complaint or concern within the Company and can outline those situations and bodies to whom external complaint can be made and the situations when this is appropriate. The employer might consider it worthwhile to outline the actions they will take if an employee raises false concerns in a malicious fashion.

Other useful policies to be considered Less common but very useful policies include: •

Flexible Working Policy.

•

No smoking Policy.

•

Company Car Policy.

•

Personal Records Policy.

•

Email and Internet Policy.

•

Personal Expenses Claims.

•

Access to Premises/Security Policies.

•

Alcohol and Drug Abuse Policy.

•

Policy on Personal Development.

•

Personal Conduct Policy.

•

Diversity Policy.

•

Dismissal Policies (often incorporated into the disciplinary policy).


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HR Policies – Key Policies and Procedures 1 Bullying and Harassment Policy and Procedure RELEVANT LEGISLATION

Disability Discrimination Act 1995 (DDA), Race Relations Act 1976 (RRA), Sex Discrimination Act 1975 (SDA), Employment Equality (Sexual Orientation) Regulations 2003, Employment Equality (Religion or Belief) Regulations 2003.

SUMMARY OF RELEVANT LEGISLATION

Harassment is unlawful where it falls within the scope of anti-discrimination legislation. It may also be unlawful under criminal law and negligence (see below). The statutory definition of harassment is ‘unwanted conduct with a purpose or effect of violating dignity and creating an intimidating, hostile, degrading, humiliating or offensive environment’. There is currently no specific, legal definition of bullying nor is there an express legal remedy. However, employees with complaints of bullying may pursue claims of unfair constructive dismissal, personal injury or alternatively the employer may face criminal prosecution under the health and safety legislation. It may be that the bullied or harassed employee also has a legal remedy under the Criminal Justice and Public Order Act 1994 and the Protection from Harassment Act 1997.

FORTHCOMING LEGISLATION AND EFFECT

The DDA was amended in October 2004 to incorporate the statutory definition of harassment. Changes to the SDA are expected in 2005. Age discrimination legislation is due by October 2006.


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2 Data Protection Policy and Procedure RELEVANT LEGISLATION

Data Protection Act 1998.


Employees have access rights to information kept about them. Employers must ensure that employees are kept properly informed about the storing and processing of personal data and that consent is obtained where necessary.


Data protection Codes of Practice – the Office of the Information Commissioner has issued final versions of the first three Data Protection Codes of Practice. The fourth code of practice relating to workers health is not yet finalised. The codes do not have legislative effect but are designed to assist compliance with the act. Further details of the codes of practice can be obtained from the Government’s Data Protection website at www.informationcommissioner.gov.uk.

3 Disciplinary Policy and Procedure RELEVANT LEGISLATION

Employment Rights Act 1996. Employment Act 2002. SUMMARY OF RELEVANT LEGISLATION

In order to minimise the risk of a successful claim of unfair dismissal, the employer must show that he has acted fairly towards an employee by following a fair disciplinary procedure. An employer must provide details of the disciplinary procedure to its employees.


Employment Act – the Act has given effect to Regulations with the aim of resolving disputes between employers and employees internally by introducing statutory dismissal, disciplinary and grievance procedures and a fixed period of conciliation. The Regulations can be accessed via the DTI website www.dti. gov.uk/er/.


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4 Dismissals Policy (may be incorporated in the Disciplinary Policy) RELEVANT LEGISLATION

Employment Rights Act 1996. Employment Act 2002.


An employee has the right not to be unfairly dismissed by his employer. The employer must have a potentially fair reason to dismiss as outlined by Statute (conduct, capability, redundancy, statutory bar or some other substantial reason) and must carry out the dismissal fairly.



5 Email, Internet and Telephone Policy RELEVANT LEGISLATION

Data Protection Act 1998, Regulation of Investigatory Powers Act 2000.


Employers must inform employees if they intend to monitor employee’s telephone calls or their use of e-mail or the internet and to what extent and how such communication will be monitored.


Data Protection Codes of Practice – part three of the employment practice data protection code addresses workplace monitoring and other issues relevant to this area. Further details of the codes of practice can be obtained from the Government’s Data Protection website at www.informationcommissioner.gov.uk.


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6 Equal Opportunities Policy (see also Bullying and Harassment Policy and Procedure) SUMMARY OF RELEVANT LEGISLATION

An employer must ensure that men and women in the same employment receive equal pay for equal work and that no employee is treated less favourably on the grounds of sex, race, disability, sexual orientation, religion or belief.

7 Family Leave and Time-off Policy RELEVANT LEGISLATION

Employment Rights Act 1996.


In order to minimise the risk of a successful claim of unfair dismissal, an employer must show that he has acted fairly towards his employees. It will be easier to show this if the employer has followed a fair procedure. This policy can also incorporate parental leave rights if not covered by a separate policy.

8 Grievance Policy and Procedure RELEVANT LEGISLATION



An employer must provide details of its grievance procedure to its employees.




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9 Health and Safety Policy RELEVANT LEGISLATION

Health and Safety at Work Etc Act 1974.


An employer must protect the health and safety and welfare of its employees at work and third parties from risks arising from work activities.

10 Holidays Policy RELEVANT LEGISLATION

Employment Rights Act 1996, Working Time Regulations 1998.


An employee is entitled to four weeks paid annual leave (including bank holidays) under the Working Time Regulations. Most employers will also have contractual leave, which may be more generous, and provisions to outline what happens to holiday entitlement on termination of a contract or during notice periods may be included.

11 Hours of Work Policy RELEVANT LEGISLATION

Working Time Regulations 1998.


An employee must not work more than an average of 48 hours per week in any 17 week period unless the employee has agreed in writing that this will not apply to him. An employee is also entitled to a 20 minute rest break where the working day is longer than 6 hours, 11 consecutive hours rest in every 24 hour period and an uninterrupted rest period of not less than 24 hours in each seven day period.


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The European Commission has commissioned research on the 48 hour opt out and is discussing the issues with member states and stake holders. Further details regarding the Working Time Regulations can be obtained from www.dti.gov.uk/er/work_time_regs/index.htm.

12 Maternity Policy RELEVANT LEGISLATION

Employment Rights Act 1996, Maternity and Parental Leave etc. Regulations 1999, Employment Act 2002. Employment Act 2002 – the Act has introduced the following changes for women whose expected week of child birth falls after 6 April 2003: •

ordinary paid maternity leave increases from 18 weeks to 26 weeks, regardless of length of employment;

•

an additional 26 weeks unpaid maternity leave for those employed for 6 months at the notification week (the notification week is the 15th week before the expected week of child birth), giving a total maternity leave period of 1 year;

•

26 weeks paid adoption leave (at the same flat rate as Statutory Maternity Pay) and an additional 26 weeks of unpaid leave; for employees with 26 weeks service at the date of notification by the adoption agency that a child has been matched with the parents;

•

right to make a written request to work reduced/flexible hours and to have the request considered seriously. (Information regarding the Act can be obtained from www.dti.gov.uk/er/.


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13 Parental Leave Policy RELEVANT LEGISLATION

Employment Rights Act 1996, Maternity and Parental Leave etc. Act Regulations 1999.


Parents of a child under 5 (or an adopted child under 18) are entitled to 13 weeks unpaid leave. A maximum of four weeks leave per year can be taken until the child’s fifth birthday (or five years from the date of adoption). Parents of a disabled child are entitled to 18 weeks unpaid leave which can be taken up to the child’s 18th birthday. Leave can only be taken in blocks or multiples of one week (except where the child is disabled where leave can be taken in multiples of one day). The employer can postpone leave in certain defined circumstances. Special provisions are in place for parents of children already born when the Regulations came into effect in 1999. The time in which they can take their 13 weeks entitlement is limited and will end in March 2005.

14 Part-time Working and Job Sharing Policy (and Flexible Working Policy and Procedure) RELEVANT LEGISLATION

Part Time Workers (Prevention of less Favourable Treatment) Regulations 2000. Employment Act 2002.


It is unlawful for an employer to treat a part-time employee less favourably that its full-time employees. Flexible working request policies will need to be incorporated or dealt with in separate policies.


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15 Paternity Leave Contract RELEVANT LEGISLATION

Maternity and Parental Leave etc. Regulations 1999. Employment Act 2002.


The Employment Act introduced a right of two weeks paid paternity leave for employees with 26 weeks employment at the notification week (the notification week is the week 15 weeks before the expected week of child birth). Unpaid parental leave may also be available.

16 Performance Management Procedure RELEVANT LEGISLATION



In order to minimise the risk of a successful claim of unfair dismissal, an employer must show that he has acted fairly towards his employees. It will be easier to show this if the employer has followed a set procedure.




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17 Public Interest Disclosure Policy RELEVANT LEGISLATION

Public Interest Disclosure Act 1998.


An employee who discloses wrong-doings by their employer to a third party in specific circumstances (e.g. where the employee thinks his employer has failed to comply with a legal obligation) is protected from being dismissed or victimised. A policy to encourage employees to pursue concerns within the organisation should be drafted into the handbook.

18 Sickness Absence Policy and Procedure RELEVANT LEGISLATION

Disability Discrimination Act 1995. Employment Rights Act 1996.


It is unlawful for an employer to treat an employee less favourably than other employees on the grounds of disability. An employer must make ‘reasonable adjustments’ where appropriate. In order to minimise the risk of a successful claim of unfair dismissal an employer must show that he has acted fairly towards his employees. This is easier to show if the employer follows a set procedure.


Disability Discrimination Regulations have amended the existing Disability Discrimination Act 1995 so as to increase the powers of the Employment Tribunals regarding remedies and to extend the protections of the 1995 Act to areas of employment that were previously excluded. This took effect from October 2004.


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19 Flexible Working Policy and Procedure RELEVANT LEGISLATION

Employment Act 2002.


The Employment Act 2002 introduced the right for working parents of children under the age of 6, or 18 if disabled, to make a written request to work reduced/flexible hours and to have their request considered seriously.


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HR Policies – Non-Key Policies 1 Alcohol and Substance Abuse Policy RELEVANT LEGISLATION

Health and Safety at Work etc. Act 1974.


An employer must protect the health, safety and welfare of its employees at work and of third parties from risks arising from work activities

2 Business Expenses Policy 3 Business Mileage Policy 4 Company Car Policy 5 Company Telephones Policy 6 Confidentiality Policy RELEVANT LEGISLATION



An employer must ensure employees protect the data held on third parties and protect third parties from having information released without consent.


Data Protection Codes of Practice may have an impact on release of data. The Codes are available on the Government’s Data Protection website at www.informationcommissioner.gov.uk.


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7 Fixed term Employees Policy RELEVANT LEGISLATION

Fixed Term Employees (Protection from Less-Favourable Treatment) Regulations 2002.


Fixed Term Employees (Prevention of Less-Favourable Treatment) Regulations – these Regulations prevent the less-favourable treatment of fixed term employees as compared to permanent employees and came into force on the 1 October 2002. (Further details regarding the Regulations can be obtained from www.dti.gov.uk/er/fixed/consult.htm). Incorporated in the Employment Act 2002.

8 Internal Theft Policy RELEVANT LEGISLATION



In order to minimise the risk of a successful claim of unfair dismissal, an employer must show that he has acted fairly towards his employees. It will be easier to show this if the employer has followed a set procedure.

9 Leave of Absence Policy 10 Personal Conduct Policy and Procedures SUMMARY OF RELEVANT LEGISLATION

Generally found in public authority handbooks. Important for organisations who wish to prevent employees bringing the organisation into disrepute. Breach of such a policy is likely to be seen as gross misconduct.


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11 Personal Records Policy RELEVANT LEGISLATION



Employees have access rights to information kept about them. Employers must ensure that employees are properly informed about the storing and processing of personal data and that consent is obtained when necessary.


Data Protection Codes of Practice Further details can be obtained from the Government’s Data Protection website at www.informationcommissioner.gov.uk.

12 Recruitment Policy RELEVANT LEGISLATION

Sex Discrimination Act 1975, Race Relations Act 1976, Disability Discrimination Act 1995, Employment Equality (Sexual Orientation) Regulations 2003, Employment Equality (Religion or Belief) Regulations 2003.


It is unlawful for an employer to discriminate against any person on the grounds of sex, race, disability, sexual orientation, religion or belief in respect of recruitment. This policy may be incorporated into the Equal Opportunities Policy – see above.


Legislation in relation to age discrimination is likely to have an impact on such policies. This legislation will be implemented in October 2006.


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13 Redundancy Policy and Procedure RELEVANT LEGISLATION

Employment Rights Act 1996, Trade Union and Labour Relations (Consolidation) Act 1992.


Redundancy is potentially a fair reason for dismissing an employee. However, the situation which leads to the dismissal must fit the statutory definition of redundancy and a fair procedure must be followed. Where an employer proposes to dismiss as redundant 20 or more employees at one establishment, he should consult all the appropriate representatives or any employees who may be affected. Having a policy in place can help employees understand what will happen regarding redundancy.

14 Smoking Policy 15 Special Leave Arrangement Policy 16 Stress at Work Policy RELEVANT LEGISLATION

Disability Discrimination Act 1995, Health and Safety at Work etc. Act 1974. Stress leading to depression can amount to a disability. It is unlawful for an employer to treat an employee less favourably than other employees on the grounds of disability. An employer must make ‘reasonable adjustments’ where appropriate. Stress is also seen as a health and safety concern and must be risk-assessed.


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17 Temporary Agency Workers Policy RELEVANT LEGISLATION

Sex Discrimination Act 1975. Race Relations Act 1976. Disability Discrimination Act 1995. Health and Safety at Work Act 1974.


Agency workers do not have unfair dismissal rights, however they may pursue a claim based on discrimination or health and safety legislation.

18 Time-off to Care for Dependants Policy RELEVANT LEGISLATION



An employee is entitled to take a reasonable amount of unpaid time off work where it is necessary in order to ‘take action’ in respect of a dependant, for example, if a dependent falls ill or is injured or if there is an unexpected breakdown in the arrangements for the care of a dependant.

19 Training and Development Policy 20 Working from Home Policy (see Flexible Working Policy)


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Chapter 3 Collective Agreements Tom Player Introduction..........................................................................................46 Legal enforceability .............................................................................47 Incorporation of collectively bargained terms into individual contracts ....................................................................48 Express incorporation.........................................................................49 Implied incorporation .........................................................................51 Incorporation by way of agency ........................................................51 Provisions restricting rights to take industrial action .....................52 Trade union recognition......................................................................53 Schedule A1..........................................................................................54 Drafting of collective agreements......................................................61

Chapter 3 Collective Agreements

Introduction A Collective Agreement is an agreement reached between a union and an employer, typically as a result of collective bargaining. The majority of Collective Agreements are reached on a voluntary basis with the employer agreeing to recognise either one or more trade unions for collective bargaining purposes. A Collective Agreement is not usually enforceable as a matter of law and is usually concluded in a climate of co-operation between the parties. A Collective Agreement may be incorporated into individual contracts of employment of the workers covered and thus assume contractual force indirectly. There are various rules about the legal enforceability of Collective Agreements. The Trade Union Labour Relations (Consolidation) Act 1992 (‘the Act’) seeks to define what is meant by a ‘Collective Agreement’. It refers to a Collective Agreement as any agreement or arrangement made by, or on behalf of, one or more trade unions and one or more employers or employers associations and relating to one or more of the following matters: •

terms and conditions of employment, or the physical conditions in which any workers are required to work;

•

engagement, non engagement, termination, suspension of employment or duties of employment, of one or more workers;

•

allocation of work or the duties of employment between workers or groups of workers;

•

matters of discipline;

•

a workers membership or non membership of a trade union;

•

facilities for officials of trade unions; and

•

machinery for negotiation or consultation, and other procedures, relating to any of the above matters, including the recognition by employers or employers associations of the right of a trade union to represent workers in such a negotiation or consultation, or in the carrying out of such procedures.


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3 COLLECTIVE AGREEMENTS

‘Collective Bargaining’ means negotiations relating to or connected with any of the above matters. It is clear, therefore, that an agreement can be a Collective Agreement irrespective of whether it is formal or informal or whether it is an oral agreement or in writing.

Legal enforceability In order for a Collective Agreement to be legally enforceable there has to be some intention by the parties to enter into a legal relationship. It is often the case that Collective Agreements will specify aspirational principles and values that both the union and the employer agree to adhere to. Such wording may be vague and imprecise so as to make it particularly difficult to enforce. As such there is a common law presumption that Collective Agreements should not be legally enforceable unless the parties specifically agree that it should. This common law position was clarified in the Act. Section 179 of the Act stipulates that Collective Agreements should be conclusively presumed not to have been intended by the parties to be legally enforceable unless the agreement: •

is in writing; and

•

contains a provision (however it may be expressed) stating that the parties intend that the agreement should be a legally enforceable contract.

Where there is a Collective Agreement that does satisfy the above conditions, then it should be conclusively presumed by any Court or Tribunal to have been intended by the parties to be a legally enforceable contract. It is possible for part of a Collective Agreement to be legally enforceable if the parties confirm in writing within the Agreement that one or all parts of the Agreement should be legally enforceable. Where this is the case, the remainder of the Agreement shall be conclusively presumed not to have been intended by the parties to be a legally binding contract. A straightforward point arising from the above is that oral agreements between an employer and a union can, therefore, never be enforceable at law. Furthermore, the stipulation that there should be a clear statement of the parties intention to show that they accept legal liability for their commitments requires the parties to commit to such a provision in a clear and unambiguous manner.


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Incorporation of collectively bargained terms into individual contracts It is a requirement of Section 1 of the Employment Rights Act 1996 that an employee beginning employment is entitled to a written Statement of Particulars of Employment (see chapter 1). This written statement of particulars of employment should stipulate whether there are any Collective Agreements which directly affect the terms and conditions of employment. This is an important statutory provision particularly for employees whose terms and conditions of employment, or at least some of their terms and conditions of employment, are subject to collective bargaining. Where an employer recognises the union for collective bargaining purposes and there is a Collective Agreement in force, when endeavouring to establish precise terms and condition of employment governing that individual, it is important to have due regard to the terms of any Collective Agreement as well as to the individual contract of employment. This is so, irrespective of whether or not the Collective Bargaining Agreement between the employer and the union is legally enforceable. This is because a Collective Bargaining Agreement often contains the details of how negotiations between the employer and the union will be conducted in respect of terms and conditions of employment for the relevant employees. In some cases the agreements will be incorporated into the individual’s contract without the need for express agreement by the parties to the contract (employee and employer). Incorporation can occur in three ways: •

express incorporation;

•

implied incorporation; and

•

incorporation by way of agency.


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Express incorporation For a collectively bargained term to be expressly incorporated into an individual contract of employment, there has to be some clear reference, either in the contract of employment or the Collective Agreement, that specific collectively bargained terms shall form part of an individual’s terms and conditions of employment. On the face of it this would seem relatively straightforward but there are often problems of interpretation. The Court of Appeal in the case of Henry and Others -v- London General Transport Services Limited 2002 IRLR 472, considered carefully the individual contract of employment, the terms and conditions of employment and the effect of a Collective Agreement. London General Transport employed 1500 staff at different garages. The employers and the recognised trade union, the Transport and General Workers Union entered into negotiations relating to changes in terms and conditions of employment. These negotiations resulted in a framework agreement which contained details of reduced rates of pay and terms and conditions which were generally less favourable to the work force. The union conducted a number of work place meetings and thereafter informed the employers that the majority of the 1500 employees affected had consented to the new terms. There was no ballot of employees despite the fact that this was the previous practice on other occasions when negotiations had resulted in contractual change. The Company then drew up notices outlining the changes in pay and conditions and these were displayed at the various workplaces. Employees were then asked to sign individual statements of changed terms and conditions of employment. With effect from 5th November 1994 new terms and conditions came into effect at the Stockwell Garage. This was the case even though a number of employees had refused to sign statements accepting the new terms. The Company received a petition signed by more than 130 of the staff at Stockwell two days later expressing their dissatisfaction with the framework agreement, but employees continued to work under protest. There was a further petition submitted at the Stockwell Garage again by approximately 130 staff in December 1994 and the workforce requested a ballot in respect of the new terms and conditions, but no ballot was held. Ultimately proceedings were commenced in the Employment Tribunal in November 1996 some two years later. The claim was an unlawful deductionfrom-wages application.


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In the first instance the Employment Tribunal upheld the complaint of the employees. The Tribunal were of the view that, notwithstanding that there had been a tradition of collective negotiation between the Company and the union, the agreement that had been reached between the union and the Company dealt with fundamental changes including a reduction in pay and it was insufficient to establish that fundamental changes could be incorporated into individual contracts by virtue of collective bargaining, notwithstanding the existence of the framework agreement. The Tribunal was looking for ‘strict proof’ that employees had accepted the terms and conditions. It appears that the Tribunal was looking for evidence of a ballot. No ballot was conducted and the Tribunal was not satisfied with the framework agreement that had been reached between the Company and the union. The Employment Appeal Tribunal upheld an appeal against the decision by the employers. The EAT concluded that the Tribunal was wrong to conclude, because the changes envisaged by the employer were ‘fundamental’ i.e. they related to pay, that it was necessary to demonstrate strict proof, by reference to custom and practice, that employees had accepted the changes. The EAT also considered that the petitions in themselves were not sufficient evidence that employees had not accepted the terms and conditions of employment which, when one considers the size of the workforce involved, this was probably the correct decision to have reached. The employees thereafter appealed to the Court of Appeal and on 21st March 2002 the Court of Appeal dismissed the appeal. The Employment Tribunals were wrong in holding that the framework agreement that had been reached was insufficient evidence of the custom and practice which was capable of affecting fundamental change to the terms and conditions of employment. The Court of Appeal accepted that it is necessary when establishing a custom and practice for there to be clear evidence of practice and that any argument in support of custom and practice should be properly scrutinised and tested. However, the responsibility on an employer to demonstrate strict proof in these circumstances is not required according to the Court of Appeal. When establishing custom and practice it has to be more likely than not that a custom and practice exists on the balance of probabilities. A further point considered by the Court of Appeal in this case was the fact that the employees themselves had worked for two years under the new terms and conditions, notwithstanding that they were maintaining that the new terms and conditions had not been accepted and that they were working under protest. In this regard the employees relied on the petition. However, the very fact that the employees had worked under the new rotas and terms of employment, as had all of the other employees who had not signed the petition, was evidence that they had accepted the revised terms.


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Implied incorporation In the absence of an express agreement, it is possible to infer agreement to incorporate the appropriate collectively bargained term. The distinction between express incorporation and implied incorporation is that express incorporation would ordinarily require the individual employment contract to expressly state that certain of its terms are regulated by a Collective Agreement under Section 1 of the Employment Rights Act 1996. Implied incorporation is where there is a clear custom and practice that terms of collective agreements are incorporated into individual contracts. In the case of Henry and Others -v- London General Transport Services Limited it is in effect a combination of express and implied incorporation. In that case, it was a framework agreement expressly agreed between the Company and the union which intended to vary the terms and conditions of employment of the work force. The union took the framework agreement to employees and indicated thereafter that the majority of employees had accepted the terms of the framework agreement. As stated above, the Court of Appeal was satisfied that the union had authority to bind the employees to the terms of the framework agreement and were satisfied that the union’s word that a majority of the employees had accepted the terms of the framework agreement was sufficient. The Tribunal therefore took this view irrespective of the fact that the terms of the framework agreement had not been signed or expressly accepted by individual employees.

Incorporation by way of agency Under the laws of agency, for a union member to be bound by an agreement entered into by a union, the union must have authority to negotiate on the member’s behalf. This can be actual or ostensible authority, once again express or implied. Implied authority is that which is inferred from the conduct of the parties and the circumstances of the case. In the case of Harris -v- Richard Lawson Auto Logistics Limited, the Company and the union entered into a Closed Shop Agreement covering employees of a Depot where Mr Harris was employed. Clause 5 of the Agreement under the heading of ‘Recognition’ dealt with the position of the Shop Steward. It stated ‘…the Company will recognise the Shop Steward and the Deputy Steward, formally elected by the members of the Depot, as the official representatives of the union. The Stewards agree to act in a responsible manner and confine themselves to specific issues relating to the welfare of their members’. There was an agreement reached between the Company and the Shop Steward in 1996 to resolve problems over holiday pay. Mr Harris was


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a lorry driver employed by the Company and in 1997 he volunteered for redundancy. His holiday pay was calculated by reference to the 1996 Agreement between the Company and the Shop Steward. He contended that this Agreement was not binding and that he was entitled to be paid in accordance with earlier agreements which would have meant that he would have received a further £4,290 by way of additional holiday pay. There was an issue before the County Court as to whether or not a Shop Steward had actual or ostensible authority to sign the 1996 Agreement and bind the drivers. Judge Poulton dismissed the claim on the grounds that the Agreement was ‘well within’ the Shop Stewards implied or ostensible authority. This point was presented to the Court of Appeal but the appeal was rejected and the Court of Appeal supported the view of the County Court Judge. They agreed that the Shop Steward had apparent or ostensible authority to negotiate revised terms of employment and, as a result, the terms of the agreement negotiated by the Shop Steward applied to Mr Harris’ holiday pay entitlement.

Provisions restricting rights to take industrial action Notwithstanding the above and the ability of an individual or a Company to enforce collective negotiated terms on the basis that they constitute an express or implied individual contractual term, there are restrictions relating to provisions which seek to prohibit the right of individuals to participate in industrial action. Any term of a Collective Agreement which prohibits or restricts the right of workers to engage in a strike or other industrial action does not form part of any contract between a worker and employer unless the following conditions are met the Collective Agreement must be: •

in writing;

•

contain a provision expressly stating that those terms shall or may be incorporated in such a contract;

•

be reasonably accessible at the place of work to the worker to whom it applies and be available to him to consult during working hours; and

•

is one where each trade union which is a part of the Agreement is an independent trade union.


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It is a further condition that the terms of the Collective Agreement must be expressly or impliedly incorporated into the individuals terms and conditions of employment. Both provisions are contained in Section 180 of the Act and should be read in conjunction with the trade union’s statutory right to call upon its members to take part in industrial action pursuant to other statutory provisions of the Act, the details of which are dealt with in Chapter 7 below.

Trade union recognition The Employment Relations Act 1999 (‘ERA’) is the first significant piece of legislation to enhance union powers since the Employment Protection Act of 1975. This Act, contains the Government’s Union Recognition Regime and amends the Trade Union and Labour Relations (Consolidation) Act 1992 by adding a new Schedule A1 to it. The provisions came into force on 6 June 2000. Prior to this date, irrespective of a unions level of membership within an undertaking and amongst particular workers, if a Company did not wish to recognise the union for collective bargaining purposes and enter into a collective agreement, there was no statutory mechanism available to a union to force the Company to do so. The procedure enabling trade unions to apply for recognition requires a formal application to the Central Arbitration Committee (‘CAC’). This process is complicated. Schedule A1 is long and complex divided into nine parts with 172 paragraphs. The CAC has been established for many years and was initially introduced to arbitrate in particular disputes between unions and Companies. The CAC is a permanent independent body with statutory powers whose main function is now to adjudicate on applications relating to the statutory recognition or derecognition of trade unions for collective bargaining purposes in circumstances where recognition or derecognition cannot be agreed voluntarily. The committee consists of a Chairman, (Sir Michael Burton an experienced Barrister), 11 Deputy Chairmen, 24 members experienced as representatives of employers and 22 members experienced as representatives of workers.


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Schedule A1 The following is an overview of the key provisions of Part 1 of Schedule A1.

Formal written request In order for a union to commence the legal process for recognition it must make a formal written request pursuant to Paragraphs 48 and 49 of the Schedule. The written request must be provided to the employer and must be clearly presented as a request for recognition under the Schedule. It must also state the bargaining unit over which the trade union is seeking recognition rights. The union must have a Certificate of Independence and the employer must employ at least 21 workers on the date that the request is made, or employ an average of at least 21 workers in the 13 weeks ending with that day. Once a trade union has made a formal request for recognition there will be a fairly short period of time, known as the ‘first period’, of 10 days at the end of which the employer has to decide whether to: •

agree to recognition;

•

agree to negotiate further; or

•

refuse recognition.

If the employer is agreeable to recognition, the parties will agree a bargaining unit and agree that the union is recognised as entitled to conduct collective bargaining on behalf of that unit. There is then no need to continue with the statutory procedure because the union has recognition. There would, however, be important negotiations between the employer and the union to agree the precise terms of any collective bargaining arrangement as this will indirectly impact upon individual terms and conditions of employment for the workers in the bargaining unit irrespective of whether or not they are union members. An employer may not be prepared to agree to recognition as a result of a formal request by a union but, equally, it may not feel it is appropriate to reject the request out of hand. In these circumstances the Schedule allows the parties a further period of 20 working days (or longer by agreement) to enter into negotiations about recognition. In many cases an employer and union choosing to trigger this second period would seek the assistance of the Arbitration and Conciliation Body known as ACAS to enable them to endeavour to reach an agreement. This period of time would typically involve the company and the union meeting to discuss the possibility of recognition. The parties may agree to pursue an alternative process to determine the issue of recognition, for example, by voluntary


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ballot arranged in conjunction with ACAS with or without the assistance of an independent ballot organisation. If an employer rejects the request out of hand it is open for the union to make a formal application to the CAC.

Application to the CAC It is at this stage that the CAC will become formally involved for the first time. The main duty of the CAC is to adjudicate an application for statutory recognition and the role played by the CAC, both in helping employers and trade unions to reach agreement and in making specific decisions, is critical to this process. The CAC has prepared a guide for parties which is available upon request from their offices. The guide is designed to explain the formal process to the parties as well as at what stage decisions will need to be taken by the CAC. The CAC’s approach is to encourage voluntary arrangements wherever possible and, if appropriate, to advise the parties to seek the assistance of ACAS. Each application will be heard by a panel of CAC members and will be chaired either by the Chairman, Sir Michael Burton or, more likely, a Deputy Chairman. There will be one member with experience of representing employees and one with experience of representing employers on any panel. The panel will take all decisions on the application and they will be supported by a Case Manager. The Case Manager is the primary point of contact for the parties. The statutory process involves the trade union completing an application form, copies of which can be obtained from the CAC’s offices. The application form identifies the union making the application and the employer to whom the application is being made. It also requires the union to confirm that they have a Certificate of Independence and asks them specific details about whether or not they have made a formal request for recognition and what the Company’s response was. Importantly, the union is required to provide data about the number of workers employed as well as details of the employees for whom they seek collective bargaining rights, i.e. identifying the proposed bargaining unit. The union is also required to provide details of what evidence, if any, that they have that a majority of the employees within the proposed bargaining unit would be likely to favour recognition. Once an application has been received the CAC will send it to the employer who will be required to complete a questionnaire which sets out his response to the union’s application.


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Once the CAC have received this initial data they will be required to make a number of key decisions: •

firstly, the CAC must decide whether the application is admissible or whether it should be rejected;

•

secondly, assuming the application has been ruled admissible, the CAC must determine what the appropriate bargaining unit should be;

•

thirdly, if the bargaining unit is different from that initially proposed by the trade union, the CAC has formally to determine again whether or not the application remains valid;

•

fourthly, if the bargaining unit has membership levels in excess of 50% in respect of the bargaining unit the CAC must determine if, despite that fact, a secret ballot should be ordered.

The CAC also has to determine in all cases where a ballot is ordered, i.e. where membership levels within the determined bargaining unit are less than 50%, if the ballot should be at the workplace or postal and, where the union is successful in the ballot or if recognition is ordered, what the method of collective bargaining should be in the absence of agreement.

Admissibility of the application The general provisions about admissibility are contained in paragraphs 33 to 42 of Schedule A1. An application to the CAC will not be admissible unless the CAC decides that: •

members of the union amount to at least 10% of the workers constituting the bargaining unit identified by the union; and

•

a majority of workers in their relevant bargaining unit would be likely to favour recognition of the union as being entitled to conduct collective bargaining on behalf of the workers within the unit.

The first point is unlikely to be contentious as the union, in all probability, will not proceed with an application to the CAC unless their membership levels are considerably in excess of 10% within their claimed bargaining unit. The second test, which requires the union to demonstrate that the majority of employees within the bargaining, unit would be likely to favour recognition of the union as being entitled to conduct collective bargaining has resulted in a number of contested cases before the CAC. A union in seeking to demonstrate that it has satisfied the above test will not only rely on membership levels but will often rely on petitions signed by workers. This is because, where a trade


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union offers no evidence as to the likely views of the majority of employees in the bargaining unit, the application is likely to fail. In the case of NUM -v- Hatfield Colliery Company (TUR1/55/2001) the CAC reached a view that, where support for recognition of the trade union could not be reasonably inferred from actual membership levels (in this case membership levels were at approximately 30%), some other evidence of support for recognition was required and, in the absence of such evidence, the application had to be rejected. There are a significant number of cases in which unions have succeeded in having their applications accepted, notwithstanding that union membership levels have been considerably less than 50% and where there has been less than 50% support for recognition amongst workers on any petition. This is because the CAC have, in certain cases, relied on their own industrial relations experience to conclude that, where membership levels appear to be rising significantly, notwithstanding that they are at the time of making the decision below 50%, this in itself is sufficient evidence that the majority of employees would be likely to favour recognition. The CAC does not require petitions to be disclosed to the employer, although they will typically scrutinise petitions themselves on a confidential basis. This is the position that has been adopted by the CAC and is supported by the recently revised guidance to the parties.

Determining the bargaining unit Once the question of admissibility is determined there is a further period of time known as the ‘appropriate period’, a period of 20 working days or longer as ordered by the CAC. During this time the parties are required to try and reach agreement on the appropriate bargaining unit. This involves the employer considering the union’s proposed bargaining unit and assessing whether or not it is appropriate. In many cases the Company will propose their own bargaining unit. If the parties fail to reach an agreement on the appropriate bargaining unit, the CAC will make a ruling within 10 working days of the expiry of the ‘appropriate period’ as to what the appropriate bargaining unit should be. It is possible for the CAC to vary this time limit. The principal criterion in determining the appropriate bargaining unit is that it must be compatible with ‘effective management’. The CAC, when considering whether a unit is compatible with effective management needs to take into account: •

the views of the employer and of the union;

•

existing national and local bargaining arrangements;


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•

the desirability of avoiding small fragmented bargaining units within an undertaking;

•

the characteristics of workers falling within the proposed bargaining unit and of any other employees which the CAC considers relevant; and

•

the location of workers.

In applying Schedule A1 in this regard, the most important decision is that of the Court of Appeal in the case of Kwik-Fit Limited -v- the CAC (18 March 2002). This case involved a dispute over the appropriate bargaining unit. The union claimed it should be solely depots within the M25, the Company said that it should be all the depots throughout the country. The Company lost before the CAC but appealed to the High Court by way of judicial review. Whilst they won before the High Court the matter was referred to the Court of Appeal who ultimately restored the decision of the CAC. The Appeal Court’s view was that the CAC, in determining the appropriate bargaining unit, should initially consider the union’s proposal and determine whether it is appropriate. The CAC are required to: •

test the union’s proposed unit in light of the Company’s arguments that a different unit is appropriate; and

•

thereafter, consider the appropriateness of the Company’s alternative bargaining unit if the CAC consider (in light of the Company’s representations) that the union’s proposal is inappropriate.

If the bargaining unit that the CAC determine is different from that initially proposed by the trade union, the CAC has formally to determine again whether or not the application remains valid. This involves the CAC reapplying the admissibility tests by reference to the newly determined bargaining unit.

Ordering of the secret ballot Once the CAC has made a ruling on the appropriate bargaining unit (and determined, if necessary, the issue of re-admissibility) it is required to make a decision as to whether a ballot should be ordered. The CAC will conduct a membership check of employees in the bargaining unit by reference to the union’s membership records and the list of employees which they require the Company to submit. If the CAC conclude that less than 50% of employees in the bargaining unit are members of the union, then a secret ballot will be ordered to determine the question of union recognition. Even where the union shows that it has member-


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ship of 50% in the bargaining unit, it will be necessary for the CAC to order the secret ballot if any of the following situations are applicable: •

the CAC believes a ballot is required in the interests of good industrial relations

•

a significant number of union members in the bargaining unit inform the CAC that they do not want the union to conduct collective bargaining on their behalf

•

membership evidence is produced to the CAC which leads it to be believed that there are doubts whether a significant number of union members in the bargaining unit want the union to conduct collective bargaining on their behalf.

In this context ‘membership evidence’ is evidence about the circumstances in which the union members became members and about the length of time for which union members have actually been members.

Holding a secret ballot If the CAC is not satisfied that the majority of the workers constituting a bargaining unit are members of the union, it must give notice to the parties that it intends to arrange for the holding of a secret ballot. The purpose of a secret ballot will be to ask workers whether they want the union to conduct collective bargaining on their behalf. When the CAC decides to hold a ballot it must decide whether the ballot should be a workplace ballot or a postal ballot. In making their decision they should consider the likelihood of the ballot being affected by unfairness or malpractice if it were conducted at the workplace. The CAC will appoint an independent person to conduct the ballot and will inform the employer and the union accordingly. A Company faced with a ballot for union recognition is required to adhere to the following: •

firstly, to co-operate with the union and the independent person in connection with the ballot;

•

secondly, to give the union reasonable access to the workers in the bargaining unit.

•

thirdly, to give the CAC the names and address of those workers in the bargaining unit and inform the CAC if any individual either joins or leaves the bargaining unit.


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There is a Code of Practice governing the union’s right to access to workers during recognition and de-recognition ballots. This document provides guidance to the parties on how a union’s access should be managed and what type of access is appropriate in these circumstances. The Code requires the union to submit its request for access to the Company in writing and typical access would involve large group and/or small group meetings. The union would also have a right to a notice board. The union is also entitled to provide literature to the qualified independent person appointed to run the ballot to enable that individual to post information to the home addresses of employees on the union’s behalf. The union is required to bear the cost of postage of such information. If an employer fails to comply with its statutory duties set out above, the CAC may issue a declaration that the union is recognised to conduct collective bargaining on behalf of the bargaining unit. The cost of the ballot will be shared between the employer and a trade union on a 50/50 basis. The union will win the ballot if it is supported by a majority of the workers who vote and at least 40% of the workers constituting the bargaining unit. Therefore, if the bargaining unit consists of 100 workers, 40 must vote in favour of recognition with fewer than 40 voting against. If the union is successful in the ballot, the CAC must issue a declaration that the union is recognised and is entitled to conduct collective bargaining on behalf of the bargaining unit. If the Company is successful in the ballot, the CAC must issue a declaration that the union is not entitled to conduct collective bargaining on behalf of the bargaining unit. If the union lose the ballot it is not allowed to reapply for recognition for the same, or broadly the same, bargaining unit for a minimum of three years from the date of the ballot result. Alternatively, if the union are successful in the ballot it is entitled to be recognised for collective bargaining purposes for a minimum of three years from the date of the ballot result. If the union is successful in a ballot for recognition under the CAC’s procedure and a Company wished to de-recognise the union at some future point, there is a complicated procedure (again governed by Schedule A1) which requires the Company to go through a number of steps before being able formally to derecognise the union. The reality is that it is likely that this process would again involve a further ballot. Once the CAC has issued a declaration as to the ballot result, a further period of time known as the ‘negotiation period’ of 30 days (or longer by agreement) is triggered. During this time the employer and the trade union (with the assistance of the CAC, if required) aim to reach agreement on a method by which they will conduct collective bargaining.


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If the parties fail to reach an agreement, either party can refer the matter to the CAC triggering the fifth period known the ‘Agreement Period’ of 20 days or longer as specified by the CAC. During this period of time the CAC again will help the parties to reach agreement on how they will collectively bargain but, if agreement proves impossible, the CAC will specify the method as to how collective bargaining will be conducted.

Imposed bargaining method The imposed bargaining method is governed by the Trade Union and Recognition (Method of Collective Bargaining) Order 2000. The main difference between the bargaining method imposed by the CAC and a voluntary arrangement is that it has effect as if it were a legally binding contract between the parties. If one party believes the other is failing to follow the specified method, that party may apply to the Court for an Order of Specific Performance ordering the other party to comply. Failure to comply with such an Order could constitute contempt of Court. Once a bargaining method has been imposed it can be varied (including whether or not it is legally binding) by agreement between the parties in writing. There is very little to be gained by a Company failing to agree a bargaining method with a trade union once the question of recognition has been determined by the CAC. This is because the specified method is very prescriptive in its format and requires the employer and the union to establish a joint negotiating body with a specified number of representatives on both sides.

Drafting of collective agreements Collective Agreements vary in complexity and detail. A well drafted Collective Agreement ought to make it expressly clear, in the first instance, who the parties to the agreement are with a precise definition of which employees within an organisation are to be subject to collective bargaining. It may be in the Company’s and the union’s best interests to ensure that the scope of the agreement is drafted as widely as possible to avoid the recognition of a number of other trade unions for similar classes of employees within an organisation.

General principles Collective agreements will often contain a set of principles which are relevant to the parties. A well drafted ‘principles and values’ section in a collective agreement should reflect the organisation’s business plan and will aim to ensure that


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the parties co-operate for mutual benefit. Employers will want to ensure that they retain the ability to manage the business in a way that enables them to operate quickly and decisively should the need arise. A trade union would wish to ensure that, whilst it is important for any organisation to be able to operate quickly and decisively in business, this should not be to the detriment of employees. It is in this section of the agreement that the Company and the union would seek a commitment to resolve any differences in a constructive manner with the objective of avoiding any industrial action, if at all possible.

Consultation, negotiation and information It is important for the parties to consider those issues which they are prepared to consult about and those matters which will be a matter of negotiation for the parties. In relation to those issues which the employer agrees to consult upon, these are likely to address the organisation’s consultation obligations as set out in the Act, for example, collective redundancy situations, business transfers, health and safety issues and matters affecting pension schemes. An employer should also consider entering into sensible consultation concerning changes to working practices as a matter of good industrial relations. If recognition arises as a result of an application to the CAC, a union will be entitled to conduct collective bargaining (i.e. negotiation rights) over pay, hours and holiday. As a minimum, therefore, a trade union entering into a voluntary arrangement would seek negotiating rights in connection with these three areas. There is no definition of ‘pay, hours and holidays’ within either the Act or Schedule A1. If the parties are to reduce the potential for dispute as to what is a matter of negotiation and what is a matter on which a union is entitled to be consulted, the parties should consider defining terms. Issues about which, as a matter of good industrial relations, a Company may wish to inform the trade union can include, for example, investment issues, economic trends and the financial and operational performance of a business. However, in light of the forthcoming enactment of the ‘Information and Consultation Directive’ EC Directive No. (2002/14/EC) which the United Kingdom committed to in March 2002, there will, in due course, be further information and consultation obligations that a Company will be faced with which may well have a bearing on a Company’s relationship with a recognised trade union.


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Broadly, Article 4 of the Directive imposes three obligations on employers: •

Firstly, an obligation to provide information on recent and probable development of the organisation’s activities and economic situation.

•

Secondly, to provide information and consult (in this context, defined as meaning the exchange of views and the establishment of dialogue between the employees’ representatives and the employer) on the situation, structure and probable development of employment within the organisation and on any anticipatory measures envisaged, in particular, where there is a threat to employment.

•

Thirdly, to provide information and consult (which in this latter context is defined as consultation with a view to reaching agreement on decisions within the scope of the employer’s powers) on decisions likely to lead to substantial changes in work organisation or in contractual situations, including situations already covered by the existing EC Directive on collective redundancies (98/59 EC) and any other existing obligations to consult.

The Directive will apply to: a)

undertakings employing at least 50 employees in any one Member State; or

b)

establishments employing at least 20 employees in any one Member State.

Article 2 defines an undertaking as ‘a public or private undertaking carrying out an economic activity, whether or not operating for gain, which is located within the territory of the Member States’. ‘Establishments’ are also defined under Article 2 as ‘a unit of business defined in accordance with national law and practice and located within the territory of a Member State, where an economic activity is carried out on an ongoing basis with human and material resources’. The implementation phases in the UK are: •

Three years from adoption: undertakings with at least 150 employees or establishments with at least 100 employees (April 2005).

•

Four years from adoption: undertakings with at least 100 employees or establishments with at least 50 employees (April 2006).

•

Five years from adoption: undertakings with at least 50 employees or establishments with at least 20 employees (April 2007).


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Information and Consultation of Employees Regulations 2004 In July 2004 the government issued what are effectively the final draft regulations to be known as the Information and Consultation of Employees Regulations 2004. The government have also published draft DTI guidance in respect of the regulations. When the law is effective in April 2005 (in respect of undertakings employing more than 150 people), then employees may at any time trigger the legal regime by making a request to the employer to establish an information and consultation forum. A request can be triggered by 10% of the employees in the undertaking. The request is likely to be in the form of a petition and it may be that a Union that is seeking consultation rights and collective bargaining will organise an employee petition in this regard. The request to file such a petition can be made either directly to the employer or the petition can be sent to the Central Arbitration Committee. It is possible in limited circumstances for the employer to challenge the request on the basis that it contains false information but generally, in the majority of cases, the numbers will be right and therefore the request will be allowed to proceed. A trade union has the right to ask the employer to provide the number of employees currently employed within the undertaking and therefore the employees (or the union) will know upfront how many signatories it needs to satisfy the 10% test. What happens next will depend upon whether the employer wants to argue that it has an existing information and consultation process in place which complies with specific criteria set out within the regulations. The criteria for existing arrangements are that the arrangement: •

is in writing.

•

covers all employees of the undertaking.

•

has been approved by the employees.

•

sets out how the employer is to give information to the employees or their representatives and to seek their opinions on such information.

If the employer decides that an existing information and consultation procedure is in place then the employer can, in these circumstances, arrange a ballot in support of the existing arrangements. Where there is no existing arrangement in place the employer will be required to elect or appoint negotiating representative’s for the purposes of seeking to agree an information and consultation forum. For the existing arrangements to be overturned in a ballot more than 40% of employees must vote to endorse the original employee request and


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that 40% must also amount to a majority of those that vote. A ballot must be fairly run and all employees must be entitled to vote. A ballot must also be in secret. The great advantage for an employer who holds a ballot in such circumstances and then goes on to win the ballot is that no further challenge to existing arrangements is possible for a period of three years. It is also possible for the existing arrangements to cover groups of undertakings where there are a number of different subsidiary companies. Where there are no existing arrangements in place, the law goes on to make clear that the employer must elect negotiating representatives and initiate negotiations within one month with those representatives with a view to reaching an agreement on an information and consultation structure for the particular business. There is a period of six months for the agreement to be reached or longer by agreement. Where agreement is reached then the employees must approve the agreement. Employee approval in these circumstances means that at least 50% of employees must approve the arrangement in writing or there must be a ballot showing approval. Additionally, the agreement must be signed by a majority of the negotiating representatives. Ultimately in the event of no agreement there are default information and consultation provisions which apply and which are more onerous (on the employer) than a negotiated agreement may be. There is therefore an incentive for Companies to familiarise themselves with the default provisions and consider either establishing a pre-existing agreement or at least be prepared to manage information and consultation in the workplace in such a way as to minimise the likelihood of a request being submitted by employees and/or the union.

Working with the trade union It is sensible in any collective agreement to specify a framework as to how the Company and the trade union will work together. For example, is it proposed to establish a negotiating body for consultation and negotiation purposes? This area of the agreement should make it clear how often the parties propose to meet and also what the constitution of the negotiating body will be. Furthermore, if a Company has any requirements in terms of the type of individual in their employment who can be considered as a trade union representative by reference to length of service or disciplinary records, then this should be specifically set out in any agreement.


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Trade union membership A trade union may wish to consider requesting a Company to operate ‘check off’. Check off is a method by which an organisation deducts union membership fees from employees who are union members directly from their salary with a view to remitting payment to the appropriate union. Employers should be aware, however, that if they are prepared to agree to this pursuant to any request by a union, the specific consent of individual employees is needed in writing before any deductions can be made.

Trade union facilities Where an organisation is able to provide the recognised union with facilities to carry out their responsibilities then parties may wish to specify this in any agreement. It is not unusual for Companies to provide a notice board for official union notices and minutes.

Equal opportunities There will often be a section in a voluntary agreement which states that both partners to the agreement are committed to promoting equal opportunities regardless of colour, race, creed, marital status, age, sex, sexual orientation, political affiliation or ethnic origin. This is an important aspect of any agreement for many organisations. Other areas of sensitivity relevant to a particular business can be built into any voluntary agreement.

Avoidance of disputes procedure For many employers the ability to ensure that the trade union adheres to the provisions of any disputes procedure and its various stages before considering recourse to industrial action is often very important. A disputes procedure typically sets out the various stages of the procedure and at what point senior trade union officials and managers should intervene and whether or not the parties are committed to involving ACAS mediation and/or arbitration.


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Termination If voluntary there is no requirement for an agreement to last for any specified period. Typically a collective agreement will contain a provision which entitles either the union or the Company to terminate it upon notice. The very fact that collective agreements are generally binding in honour only would, in any event, enable a union or a Company to depart from the agreement, often without legal consequence, irrespective of any notice provisions relating to the termination of the agreement.


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Chapter 4 Practical drafting considerations Tom Player Introduction..........................................................................................69 Hours of work ......................................................................................71 Role and responsibilities.....................................................................71 Building flexibility into contracts.......................................................72 Express flexibility clauses ...................................................................72 Place of work........................................................................................73 Deductions – protection of wages .....................................................75 Right to search .....................................................................................77 Employee benefits................................................................................77 Working time .......................................................................................79 Enforcement of the Regulations ........................................................82

Chapter 4 Practical drafting considerations

Introduction Contracts of employment are made up of a variety of terms and conditions which set out the respective obligations for both employer and employee. As with any contract, once these and any other terms have been agreed between the parties, they become binding and any attempt to vary them unilaterally will constitute a breach of contract. As outlined in Chapter 1, there are different types of contractual terms which an employer needs to consider when drafting a contract of employment:

Express Terms Whether agreed orally or in writing, express terms will be construed by the Courts at their face value providing such terms are both clear and complete. If either or both of these qualities are missing, other evidence to show the intention of the parties will be considered to assist in the contract’s interpretation.

Implied Terms Certain terms will be implied into a contract by the courts despite the fact that they are not expressly stated in writing. Furthermore, the law imposes upon the parties to an employment contract implied contractual terms which are considered central to the employment relationship. These include the relationship of trust and confidence, placed upon both parties to the contract, as well as the employer’s duty to take reasonable care to ensure the health and safety of employees.


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4 P R A C T I C A L D R A F T I N G C O N S I D E R AT I O N S

Incorporated Terms Additional terms may be expressly incorporated into a contract of employment from other sources such as a trade union collective agreement, a staff handbook or health and safety procedures. In Airlie & Ors -v- City of Edinburgh District Council [1996] IRLR 516 the employer reduced the staff incentive bonus which was detailed in a collective agreement without the consent of the employees or the Trade Union although the code of practice governing the collective agreement was expressly incorporated into the individual contracts of employment. The code of practice contained provision for the review of the bonus scheme. The Court held that, although there was no express permission within the code authorising unilateral variation, there were a number of provisions which indicated that the employer had the right to control the operation of the scheme. Consequently, the employers, having undertaken a review of the scheme in accordance with the terms of the code of practice, were entitled unilaterally to determine any adjustments to the bonus scheme. In practice, therefore, contracts of employment are often made up of express contractual provisions contained in a written contract or detailed in a collective agreement. In addition there may be further contractual provisions which become implied into the contract of employment or which have been agreed orally between the parties. From the employers perspective it is important to try and create certainty and clarity as to what terms between the parties ought to be included in a contract of employment. Wherever possible the employer should give careful thought to the content of contractual documentation prior to the commencement of the individual’s employment and in advance of issuing any statement of particulars of employment pursuant to section 1 of the Employment Rights Act 1996 (‘the Act’). The actual terms of the contract will depend upon the nature of the role to be performed by the individual and contracts of employment vary in terms of detail and complexity. By way of example, a senior individual who is in receipt of confidential and proprietary information as part of their role and has access to customer lists, sensitive business data and has an intimate knowledge of the Company, ought probably to be subject to correctly drafted confidentiality clauses and possibly some post termination restrictions (see Chapter 4). This chapter is intended to provide guidance on the practical drafting considerations that ought to be taken into account when preparing the contract of employment in the first instance so as to ensure that there is clarity between the parties with a view to minimising the potential for any future breakdown in relationships.


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Hours of work In many cases employees have normal hours of work and it is a requirement under section 1 of the Act to detail these in writing for employees. When preparing a written statement in this regard or drafting a contract of employment the Company should consider whether normal working hours are likely to vary from time to time and whether the Company require flexibility in terms of the hours of work. If, for example, the employment is governed by a shift pattern, it would be essential, should the Company wish to reserve the right to vary the shift pattern (arising from a change in business circumstances), to reserve the express contractual right to modify it. Failure to allow sufficient flexibility in the contract of employment to vary working hours or shift patterns will make it extremely difficult for a Company to implement such changes. In the event that there is a right to vary working hours, either in the contract of employment or in accompanying shift pattern documentation, it would be in the interest of good industrial relations for employers to allow for a period of notice to enable employees to manage the transition to an alternative shift pattern with minimum disruption to their personal lives. In the European Court of Justice case Lange -v- Georg Schunemann Gmb H 2001 IRLR 244 the European Court of Justice ruled, under Article 2(1) regarding the Proof of Employment Relationship Directive, that an agreement relating to overtime was an essential aspect of the contract which must be mentioned in written particulars. As such, if the employer does require employees to work overtime either on a voluntary or compulsory basis from time to time, then this ought to be included in the written contract of employment.

Role and responsibilities It would be normal to provide the employee with his job title or a brief description of the work which he is employed to do. The European Court of Justice indicated in the case of Kamplemann and Others -v- Landschaftsverband Westfalen-Lippe 1998 IRLR 333 that, in certain cases, simply providing the employee with a job title may not be sufficient. As such it is advisable for further details of the employee’s role to be provided. If a Company require flexibility on the part of the employee then, rather than simply providing a list of duties and responsibilities, it is sensible to ensure that the contract states that any list is not intended to be exhaustive and that the employee will comply with any reasonable instructions that the Company may issue from time to time.


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Building flexibility into contracts It is possible to draft contractual clauses relating to such terms as hours of work, roles and responsibilities in such a way that they allow for reasonable flexibility. Although there are certain aspects of flexibility which are implied into employment contracts, it is obviously in the interests of the employer to provide an express right to vary the contract of employment so that terms can be varied at any point in the future to reflect business needs where necessary. An express clause allows the employer the flexibility of altering terms of employment in the event that the Company need to make such changes, due to economic or restructuring reasons, at any point in the future. Flexibility can be implied into a contract. For example, an employee’s job title can imply that the job will entail a variety of tasks. The employer needs to take care in this regard, however, as a job title is significant as can be seen from the case of Haden Ltd -v- Cowen 1982 IRLR 314. The individual in this case was employed as a ‘Divisional Contracts Surveyor’. The Court held that the employer could not, therefore, transfer him to any job as quantity surveyor despite an express provision for flexibility in that the employee would be required to undertake any and all duties which reasonably fall within the scope of his capabilities.

Express flexibility clauses Contracts of employment sometimes include express flexibility clauses which give the employer the right to change the employee’s job duties, hours of work or their place of work. It is clear that an express flexibility clause, drafted with sufficient clarity, will for example, enable an employer to transfer an employee to other work without acting in breach of contract. In Hussman Manufacturing Ltd -v- Weir 1998 IRLR 288, the employee had been working on a night shift since 1985 and his pay included a night shift premium. In March 1996 a three shift system was introduced with the result that work was no longer available for the employee on the night shift and, therefore, he was no longer eligible for the night shift premium. The employee did not consent to the reduction and presented a complaint to a tribunal alleging unlawful deduction from his wages. The tribunal found that, under the terms of the collective agreement with the relevant trade unions, the employers were contractually entitled to move employees from one shift to another. Where an employer acted within the contract of employment, and a resultant loss of income was caused to the employee, that loss did not render the employer’s act a breach of contract.


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Consequently, where an employer is seeking to rely on a flexibility clause, care must be taken to ensure that these clauses are not drawn too widely as such provisions are likely to be unenforceable. For example, a clause stating ‘the employer reserves the right to make any changes in the employee’s contract of employment, at the employer’s discretion, without notice’ is unlikely to be enforceable. Further, care must be taken to ensure that the change proposed is in fact covered by the flexibility clause. For example, in White -v- Reflecting Road Studs Limited 1991 IRLR 331, the contract only authorised the employer to transfer employees if the requirements of operational efficiency made it necessary. In this case it was held that the company had reasonable grounds to move the employee and his transfer to another department, which resulted in a reduction in pay, was lawful. When drafting or applying flexibility provisions it is important to have regard to the discrimination laws. In Meade-Hill & Anor -v- British Council 1995 IRLR 478, a female employee was promoted and asked to sign a contract which included a clause that obliged her to work anywhere in the United Kingdom that her employer, at its discretion, might require. The Court held that such a clause in a contract of employment was capable of constituting unlawful indirect sex discrimination unless the employer could justify the requirement. The reasoning behind the Court’s decision was that, given that a higher proportion of women than men are secondary earners in a household, fewer women than men could comply with this requirement.

Place of work In a contract of employment there is typically a clause identifying the location in which the employee will be required to work or the actual site at which they will be required to work. It is often of vital importance for employees to be mobile and work in many locations throughout the UK or indeed to attend business trips abroad. The contract should therefore provide for this eventuality and provide adequate flexibility. Even if there is no express mobility clause in an employee’s contract of employment, a certain degree of mobility may be implied where it is obvious or necessary to give business efficacy to the contract. The extent of this implied mobility will depend on, for example, the nature of the employee’s job, whether or not the employee has in fact moved and what they were told on recruitment. Such a term may also be implied by custom and practice in the industry or because of the conduct of the parties.


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In Courtaulds Northern Spinning Ltd -v- (1) Sibson (2) TGWU 1988 IRLR 305, the Court of Appeal held that, in the absence of an express clause specifying the place of work, an employee could be required to work at any place within reasonable daily reach of their home. However, a mobility clause must be implemented in a reasonable manner. This was demonstrated in United Bank -v- Akhtar 1989 IRLR 507, where the employee was told on a Friday he must move from the Birmingham to the Leeds Branch on Monday. The employers refused his request for a short postponement and offered no financial assistance. The employee resigned and claimed constructive dismissal. It was held in this case that the employer had acted in breach of contract, including breach of the implied term of mutual trust and confidence. Contracts of employment often include express mobility clauses which give the employer flexibility and the right to change an employee’s job duties or their place of work without acting in breach of contract. Therefore, employers should consider the practical consequences before invoking a mobility clause. They should be conscious as to whether it is reasonable to expect the employee concerned to comply with the move. This would involve considering, for example, whether the employee is disabled, whether a family is involved, or whether there are any other specific facts that tie them to the geographical area they are currently situated in. An employer must also have regard to the implied term of mutual trust and confidence and they must provide all employees concerned with reasonable notice of a proposed move before it is implemented. In Prestwick Service Ltd -v- McAndrew [1990] IRLR 191 the employers had two factories situated 50 miles apart. All employees engaged after 1983 had a mobility clause inserted into their contract of employment to allow the employers the flexibility of moving employees between one plant and the other. Mr McAndrew joined the Company prior to 1983 and therefore did not have a mobility clause in his contract of employment. Mr McAndrew refused to move from one plant to the other because it would mean working for a supervisor with whom he did not get on. Mr McAndrew subsequently resigned and claimed constructive dismissal. Whilst the Employment Tribunal accepted that the employers had a contractual right to move Mr McAndrew, this was subject to an implied qualification that the employee should be given reasonable notice of any proposed transfer. Therefore Mr McAndrew was successful in his claim.


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Another potentially important case is that of Bridgen -v- American Express Ltd [2000] IRLR 94 where it was ruled by the High Court for the first time that mobility clauses in contracts of employment are covered by the Unfair Contract Terms Act 1977. The High Court stated that a move that is deemed as unreasonable can be prevented by an injunction against the employer.

Deductions – protection of wages Part II of the Employment Rights Act 1996 contains provisions relating to the protection of wages. In particular, all employees pursuant to section 13 of the Employment Rights Act 1996 have the right not to suffer unauthorised deductions. An employer is not entitled to make a deduction from the wages of any worker employed by him unless: •

the deduction is required or authorised to be made by virtue of a statutory provision or, more likely, a relevant provision of the workers contract, or

•

the worker has previously signified in writing his agreement or consent to the making of the deduction.

It is becoming increasingly common for employees to receive payments from their companies in the form of loans. It may also be the case that employees receive funding from their employer to undergo specialist training. If an employer seeks to recover any company loans or training costs for example, from an employee’s wages, either whilst they are still employed by the Company or from the individual’s final salary payment, then it is a strict requirement that the Company have reserved that right in writing. This would typically involve the employer drafting a short clause in the contract of employment to permit such deductions. Alternatively an employer at the time of agreeing any training costs or loans to the employee, can draft appropriate documentation which the individuals should sign. Where an employee has suffered a deduction in pay, instead of bringing an action for breach of contract in the civil courts, he/she may be able to bring a claim before a Tribunal that the employer has made an unlawful deduction from wages under part II of the Act. A Tribunal will need to consider whether or not the wages asked for should be payable to the worker and if the payment of less than the sum that was properly due has been authorised. What is properly payable to the employee will depend on the terms of the contract of employment and how much they normally receive on a week by week or month by month basis.


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In the case of MacRuary -v- Washington Irvine Limited EAT 857/93 the EAT held that a Tribunal erred in ruling that Mr. MacRuary, who was faced with a unilateral pay cut, was in a ‘take it or leave it’ situation and, since he had not resigned, he must be deemed to have accepted the breach. Mr. MacRuary claimed unpaid wages and this was upheld by the EAT because he had expressly refused to accept the pay cut and had stated that he was working under protest. As a result the employers were seen to have made an unauthorised deduction from his wages. In the recent case of International Packing Corporation (UK) Ltd -v- Balfour and Others 2003 IRLR 11 Mr. Balfour and his fellow applicants were employed by the Company on a working week of 39 hours. As a result of falling orders the employer introduced short time working and reduced the employees’ earnings. The employees claimed that the reduction in pay amounted to an unauthorised deduction from wages under section 13 of the Act. In the first instance the Tribunal Chairman found that there was no express term in the employees contracts which permitted the employer to introduce short-time working unilaterally. However, he went on to imply such a term by custom and practice. Notwithstanding that finding, the chairman held that the deductions had not been authorised by written provisions in the contract of employment or by any other means and therefore there was an unlawful deduction in wages. On appeal the employers submitted that there was no deduction from wages because the employees were being properly paid for the hours that they had actually worked. The employees cross-appealed against the finding of an implied term entitling the employers to introduce short-time working. The EAT held that a reduction in the Applicants’ pay, following the unilateral introduction of short-time working by the employers, amounted to an unauthorised deduction from wages in terms of section 13 of the Act. Such a reduction in working hours was plainly a variation of the contract of employment and the EAT considered that, unless this was expressly catered for in a contract or allowed by implication in the terms of the contract, any actual deduction of wages, even if related to hours worked, is not authorised by the Act and can only be achieved by agreement. There was no agreement in this case. Finally it should be noted that an employer is not precluded from recovering overpayments of wages from future salary, as this is specifically provided for in part II of the Act.


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Right to search Although this will not be a practical consideration for all employers, the right to search employees is required on an increasingly regular basis in certain sectors such as manufacturing industries or computer technology where expensive pieces of equipment are used by employees on a regular basis. Enforcing such policies is often difficult and, in order to achieve the maximum co-operation of staff, strict guidelines should be implemented. Consequently, it is advisable to have a policy in place and to obtain the express agreement of the employee for compliance with the requisite procedure by issuing notification of its existence and location of areas where the policy operates as well as requiring the signature of employees on a returnable form. Employers intending to implement such a clause should be alive to the implications of the Human Rights Act 1998. Although this is not directly applicable in the private sector, any claim brought by an employee to an Employment Tribunal is subject to compliance with the Human Rights Act and the Tribunal, which is a public body, must be aware of any human rights issues in determining cases. Therefore, it is imperative that all stop and search procedures are communicated to employees explicitly and that they are made fully aware of the frequency with which they will be stopped and searched. All searches must be reasonable and avoid unnecessary physical contact . There should be training for managers and those carrying out the searches. Employers should be aware that no physical strength or force should be used otherwise allegations of an assault could occur.

Employee benefits Additional benefits alongside normal salary are now commonplace in most businesses. Benefits such as company cars, private medical insurance and low rate loans are enjoyed by many employees across the UK. If benefits such as a bonus or private health insurance are genuinely discretionary or ex-gratia benefits, then an employer is entitled to reduce or withdraw these benefits once they have given the employee reasonable notice of this. Employers need to be cognisant of the fact that just because they label a particular benefit ‘discretionary’ or ‘exgratia’ this will not automatically mean that the benefit in question is, in fact, a contractual entitlement. A Court or Tribunal will consider how regularly the benefits have been paid and also the nature of the benefit to see whether or not it has become contractual.


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An employee is entitled to be compensated for the loss of any fringe benefits or ‘perks’ to which he/she was contractually entitled. Great care needs to be taken, therefore, when drafting the contract of employment as to the status of particular benefits. If a Company intend to detail an employee’s entitlement to a Company car, life assurance, private medical cover or permanent health insurance then the basis upon which these entitlements are offered to employees should be made clear. In circumstances where such entitlements are provided by virtue of an insurance policy then at all times it should be made clear to the individual that any benefits or entitlements are subject to the terms of any insurance policy. Therefore, where the employee does not qualify for any payment or benefit under the terms of the policy, there should be no additional means for the employee to seek compensation or benefits from the employer directly pursuant to the terms of a contract of employment. It is also important to consider the circumstances in which a Company may wish to change or modify such benefits from time to time. Often Companies will find that it is not economical to continue to provide certain benefits or they may wish to change the nature of the benefit by contracting with another insurance Company. This, in many cases, can be detrimental to employees and in order to avoid breach of contract claims it is important to ensure that such entitlements are not contractual in the first instance. In this regard employee benefits which are provided by an employer should be subject to additional policies or procedures which are clear and unambiguous and which give the Company the right to replace, withdraw or amend the benefit from time to time. A clear statement should be set out in any documentation to employees that such benefits do not form part of an employee’s contractual entitlement where this is the intention of the employer. In circumstances where fringe benefits are regarded as part of an employee’s remuneration, breaches of terms relating to such benefits may well amount to repudiatory breaches of contract. In the case of Allsopp -v- Carr Lane Engineering Services Ltd Employment Tribunal case number 11750/83 the employers reduced the amount that they were prepared to pay towards an employee’s telephone bill when the contract had initially made it clear that the employer had promised to reimburse the employee in full. This was held to be a fundamental and repudiatory breach of the employees contract of employment.


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In the case Beaven -v- Phillput (Stationers) Ltd Employment Tribunal case number 29382/85 the Company withdrew an employee’s company car despite previously promising the individual that she could retain the car. The value of a car to the employee personally can be considerable particularly where it is used for business and private purposes. As such the removal of the company car amounted to a breach of the employee’s contract of employment. This is a further reason to have transparent company car policies which make it clear the terms upon which the car is made available and the circumstances in which it can be used. It has also been found that non payment of employers’ pension contributions to an employee’s pension fund can amount to repudiatory breach of contract. This is because, although it may be possible for a pension scheme itself to be replaced or withdrawn from time to time, the actual payment of employers’ pension contributions can in itself amount to a contractual entitlement. Therefore, in circumstances where a Company is considering replacing or withdrawing any benefit or entitlement, it is sensible to consider how much notice should be given to the employee, what the Company intend to do in terms of replacing the policy or benefit and if there is a requirement to compensate the employee to avoid possible claims of breach of contract.

Working time The Working Time Regulations 1998 (‘the Regulations’) set out the health and safety requirements for an employer in relation to working time and create limits regarding hours of work, entitlements to rest breaks, pay and annual leave. Working time is deemed to mean any period during which a worker is at his employer’s disposal and carrying out his activities or duties. Recent Court decisions have shown that they are willing to take a generous approach to this definition and time spent on relevant training also counts as ‘working time’. By virtue of the fact that the Regulations apply to a ‘worker’, which is a wider category than ‘employee’, employers need to be aware that the provisions of the Regulations apply under any contract where the individual personally performs any work or services for another party to the contract where the other party is not a customer or client of any business or professional service undertaken by the individual. Flexibility to adapt or exclude aspects of the Regulations can be achieved by using one of the following three types of agreement. These agreements may be incorporated into an employee’s terms and conditions of employment by using a specific clause of reference in the contract of employment.


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COLLECTIVE AGREEMENT

This is an Agreement between an independent trade union and an employer which satisfies Section 178 of the Trade Union Labour Relations Consolidation Act 1992.

WORKFORCE AGREEMENT

This is an alternative to a Collective Agreement. The Workforce Agreement is an agreement between the employer and employee representatives and it may apply to the whole workforce or a particular group. A Workforce Agreement must be in writing and must be effective for a specified period, which does not exceed 5 years, in accordance with Schedule 1 of the Regulations.

RELEVANT AGREEMENTS

This generic term covers collective agreements, workforce agreements and any agreement in writing which is legally binding between the worker and the employer. Such agreements enable an employer to extend the ambit of the Working Time Regulations in certain circumstances. It is possible through such an agreement for a worker to agree to work more than the 48 hour average weekly limit through an individual opt out agreement. This must be in writing and must allow the worker to bring the agreement to an end at any time. The agreement may specify a notice period of up to 3 months before it is terminated. If no notice period is specified, only 7 days notice will be required under the Regulations. When an individual worker has agreed to work in excess of the average working week, an employer must maintain up-to-date records of all workers who have made this agreement. The use of ‘individual opt outs’ is exclusive to the United Kingdom and is due to be reviewed later this year by the European Commission. Furthermore it is not possible for a Union or employees’ representatives to enter into a Workforce or Collective Agreement on behalf of employees to ‘opt’ of the 48 hour working week. Such an opt-out can only be given by the individual. It is important to note that workers are protected against suffering a detriment or being dismissed if they refuse to opt out of the Working Time Regulations. The main provisions under the Regulations are: •

Night Work Limits – an employer is required to take reasonable steps to ensure that the normal hours of their workers do not exceed an average of 8 hours in every 24 hour period. Night time is a period of at least 12 hours which includes the period from midnight to 5.00 a.m. A precise period can be determined by relevant agreement and, in the absence of such an agreement, it will be 11.00 a.m until 6.00 a.m. A night time worker is defined by the Regulations as a worker whose daily working time includes at least 3 hours of ‘night time’ on the majority


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of days they work. Night workers are entitled to free health assessments before taking up night work and these should be carried out at regular intervals. Records must be kept to show that the working hours of night workers do not exceed the maximum limit. Records will also need to be kept of health assessments undergone by a worker for up to 2 years. •

Rest Periods – workers are entitled to a daily rest period of 11 consecutive hours in each 24 hour period. The Regulations further state that weekly uninterrupted rest periods of no less than 24 hours in each 7 day period must be given by the employer. An in-work rest period of at least 20 minutes must further be provided by the employer where shifts of 6 hours are being worked. Such rests do not have to be paid, but they must be spent away from the worker’s work station.

•

Paid Annual Leave – there is an entitlement for employees to receive at least 4 weeks paid annual leave in every leave year. There used to be a qualifying period of 13 weeks before entitlement for annual leave arose, but this no longer applies and workers will be entitled to annual leave from the first day in their new employment. The arrangements for deciding when leave may be taken should be set out in the contract of employment. The contract should further specify whether the worker can be required to take all or any of the leave of his own accord, provided that prior notice is given, or whether the employer is able to specify periods during which leave can be taken. The contract should also specify the amount of notice that needs to be given and who needs to be informed of the leave requirements. Employers may further wish to specify circumstances in which they may refuse the worker permission to take such leave.

•

Sickness Absence – a landmark ruling of the Employment Appeal Tribunal has held that employees can take annual leave during a period of sick leave. The EAT in Kigass Aero Components Ltd -v- Brown [2002] IRLR 312 has held that under the Regulations, workers on long term sick leave can claim holiday pay even where they have been absent from work and have not put in any working time in that particular leave year. In this particular case, Mr Brown had not worked throughout the holiday year of 1999 due to long term sickness but was entitled to take 3 weeks paid leave for holiday despite the fact that he had exhausted his contractual and statutory entitlement to sick pay. The EAT held that the only conditions necessary to claim annual leave under the Regulations are that the person is a worker who has given the employer proper notice to take the leave under Regulation 15.


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All of these considerations should be borne in mind when drafting the terms of a contract of employment. It is important for the employer to remember that, in the event of any breach, the provisions of the Regulations will take precedence.

Enforcement of the Regulations Employers can face criminal sanctions (fines and imprisonment) for failing to comply with the limits on working hours or the health and safety aspects of the Regulations. The Regulations are either enforced by the Health and Safety Executive or by local authority environmental health officers depending on the industry sector of the employer. Workers can complain to the Employment Tribunal if they have not been granted their entitlements under the Regulations. Workers can also complain to the Tribunal that they have suffered a detriment for asserting an entitlement under the Regulations. In successful cases, the Tribunal has the power to award compensation. Employees (but not workers) can bring unfair dismissal claims if the dismissal results from their assertion of an entitlement under the Regulations. Recent opinion suggests that the Regulations have had little impact on the long hours culture in the UK. Recent surveys have shown that 40% of companies in the UK state that their employees have agreed to work longer than the 48 hour week limit set by the Regulations.


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Chapter 5 Confidentiality and post termination restrictions Paula Rome, updated by Tracy Luke Background .........................................................................................84 Competition whilst still employed .....................................................85 Post termination restrictions – restrictive covenants ......................89 Enforcement.........................................................................................93 The effect of wrongful and constructive dismissal ..........................95

Chapter 5 Confidentiality and post termination restrictions

Background Many employers have certain information or contacts in their business which they view as their property and would like to protect from competitors. Employers need to think about protecting themselves against the activities of their employees if they believe that it is likely that their employees may set up in competition against them. During the term of employment the employee has a duty of loyalty and good faith towards the employer. This duty is normally referred to as the duty of fidelity. This duty will, however, come to an end when employment terminates. It is therefore relatively common for an employer to attempt to restrict the actions of an ex-employee by including in the contract a promise by the employee that, upon leaving employment, he/she will not set up in competition, solicit customers, be employed by a rival or entice away former colleagues. This is particularly the case with senior employees who could cause the business extensive damage because of their experience, customer connections and access to confidential information. These restrictive covenants are traditionally difficult to enforce as, if a court considers them too wide, they will be seen as an unreasonable restraint of trade. The difficulty in enforcing such restrictive covenants (often referred to non-compete or non-poaching clauses) led to the use of ‘garden leave’ provisions. A ‘garden leave’ clause provides that, during the notice period, the employee can be required to remain away from the workplace (i.e. he/she is sent to work in his garden) or can be required to carry out duties different from his/her normal duties. Keeping the employee away from work limits contact with confidential information and also allows the employer to encourage other employees to re-establish relationships with customers which the departing employee had fostered.


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5 C O N F I D E N T I A L I T Y A N D P O S T T E R M I N AT I O N R E S T R I C T I O N S

Competition whilst still employed Preparation to compete There is a useful case examining those situations where employees have started taking steps to set up their own business whilst still in employment; the question being whether such actions amounted to a breach of the duty of fidelity. In February 2002 the Court of Appeal looked at the situation in the case of Ward Evans Financial Services Limited -v- Fox and another [IRLR 31 February 2002]. Mr Fox and Mr Phillips had been employed by Ward Evans Financial Advisers and their contract of employment included a clause which provided that, during the course of their employment, they would not hold an interest in any organisation in competition with Ward Evans or disclose confidential business information. In 1998 they set up a new company which remained dormant until they had left Ward Evans’ employment. Upon the new company becoming active they were approached by a former customer of Ward Evans, a personal contact of Mr Fox who transferred his business to their new company. The Court of Appeal held that by setting up the company whilst still in employment, even though the company was dormant, Mr Fox and Mr Phillips had breached their duty of trust and confidence. Their ability to serve their employer had been impaired and Mr Fox and Mr Phillips had failed to act in the best interests of Ward Evans whilst still employed. The result of this was that they would have to recompense Ward Evans for the loss they had caused. This guidance seems to imply that taking steps to set up a new business in competition with your existing employer whilst still employed may amount to a breach of contract, a point giving some comfort to employers.

‘Garden Leave’ Because of the difficulties encountered in relying on restraint-of-trade clauses ‘garden leave’ has now become a safer option. There are, however, dangers as the courts will examine the length of notice periods subject to garden leave and how these may interact with other restrictions. The courts have also shown hostility to the leave as this may cause the employees skills to atrophy whilst at home. The courts may see this as being against public interest in that it may militate against maintaining a skilled workforce.


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Garden leave can come into play whether the employer or employee gives notice to terminate employment. If the employer decides to hold the employee to the whole or part of their notice period but excludes the employee from the premises the employee will remain employed during the garden leave period. To protect the employer this must be written into the contract as the court will not imply a right to send an employee on garden leave. The aim of garden leave is that: •

The employer’s confidential information may be out of date by the time the employee can join his new employer

•

The employer will have time to find an appropriate replacement who can develop relationships with the departing employee’s contacts

•

The employee will not have access to the employer’s staff records and computer systems

Common features of garden leave clauses All garden leave clauses will be slightly different. There are, however, some common features which include provisions that: •

The employer has the right to place an employee on garden leave upon the employer or employee giving notice of termination of employment. (Some clauses are drafted to cover the situation where an employee may attempt to leave the organisation without giving notice, by expressing the clause as being applicable when the employee announces an intention to resign. The clause then becomes effective).

•

The employee to carry out no duties or to carry out specific duties outlined by the employer.

•

The employee may be excluded from the employer’s premises and will not be allowed to contact employees or customers without the consent of the employer.

•

The employee must receive full pay and benefits during the garden leave period. Some benefits may be expressly excluded from this such as discretionary bonuses. This can often become a negotiation point between the parties.

•

Emphasise that both express and implied duties of trust and confidence continue during the garden leave period so as to prevent the employee working for or providing services to anyone else.


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The importance of specifically including clauses to prevent the employees working for others during the term of the contract was emphasised in the case of Symbian -v- Christensen (24.5.2000). In this case the Court of Appeal ruled that an employee on garden leave, even when this was allowed in the contract, was put in a situation where the employer had fundamentally and irretrievably undermined the employer/employee relationship. The Court of Appeal took the view that what remained was the bare contract and all that could be enforced against the departing employee were the express terms of the contract. Employers would not be able to rely upon implied terms of good faith and fidelity. It is therefore essential that the contract contain a clause preventing employees from working for others during the term of the contract if the employer is to be able to stop the departing employee from working for a competitor during that period. As can be seen the garden leave clause is only as useful as it is long and, if the employee is on a short notice period, then the garden leave will also be a short duration. This is not to say that the garden leave clause is without its uses especially in those contracts where there are no post-termination restrictive covenants or if the employer believes that there is a risk that such covenants would be unenforceable.

Loss of skills Even if a contract contains a garden leave clause which specifically provides that an employee cannot work for a competing organisation or in direct competition themselves whilst on garden leave, the courts will examine to what extent the employer may lawfully withdraw the employee’s duties if such withdrawal impacts upon the employee’s skills. As will be seen in the case law outlined below regarding restrictive covenants the courts are unsympathetic if an employee is taken out of the working environment for a long period of time. This is especially the case where the absence from the workplace may affect the future employment prospects of the employee. There have been cases where courts have been willing to reduce the length of the garden leave period to allow the employee back into the workplace when it is believed that the employer had been adequately protected GFI Group Incorporated -v- Ecclestone (1994 IRLR 119). The courts have shown a willingness to re-write clauses to protect the employer, unlike restrictive covenants where courts have historically been more likely to decide that the clause is simply invalid rather than re-write it.


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Confidentiality covenants – protection of the employer’s confidential information If it is decided to include a confidentiality covenant, then one of the main points to be borne in mind is the type of information the employer wishes to protect. This needs to be very closely defined and so must be specified and described with as much detail as is possible. Some information will be clearly identifiable as being confidential but there is a certain level of information which could be described as ‘border line’. If the information falls within this category then, although describing it as confidential in an express clause in a contract this will not automatically make it confidential, it will enable the employer to attempt at least to make a more persuasive argument to the court. In contrast to restrictive covenants, which are discussed below, confidentiality covenants tend to be unlimited in time. Most covenants apply to information until it enters the public domain. Some employers try to limit this exclusion to provide for the possibility that information was placed in the public domain because of the actions of the employees, and should still be subject to protection. It is also common for clauses to state that the confidentiality requirement will be overriden where there is a legal requirement to release information. If an employee is required to give evidence by a court or Employment Tribunal then this will override the confidentiality covenants.

Confidentiality or knowledge There has long been confusion in deciding what amounts to confidential information deliberately used by an employee and that which is innocently remembered. In the case of SBJ Stephenson -v- Mandy (2000 IRLR 233) it was decided that what is of true importance is the nature of the information. The court decided in this case that a customer list was indeed confidential information which SBJ Stephenson was entitled to protect by a confidentiality clause despite the fact that it had been ‘innocently remembered’ by their ex-employee. The confidentiality clause had sought to restrain the employee from disclosing information about the Company’s affairs following the termination of his employment. Mr Mandy argued that the clause was too wide as it failed to account for information which remained in his head innocently such as the names of the Company’s clients.


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Previous leading case law in this field (Faccenda Chickens Ltd -v- Fowler (1986 IRLR 69)) carefully restricted the scope of confidential information to trade secrets or information akin to trade secrets. In Mr Mandy’s case the contract of employment contained a clause far wider protecting ‘information in relation to the affairs of the company or any group company or any client thereof of which he has become or may have become possessed whilst in the service of the company’. The court accepted that the clause was valid and emphasised that they did not see Faccenda as supporting the proposition that information innocently remembered could not be capable of protection. The court drew a useful conclusion regarding the status of information. They decided that there were two types of knowledge: •

Objective knowledge – knowledge which belonged to the employer and was the employer’s property and

•

Subjective knowledge – knowledge which belonged to the employee and which was the employee’s property

Information such as trade secrets and the names of customers would be objective knowledge whereas skill, dexterity and mental capabilities were subjective and the employee’s property. The court emphasised that many trade secrets, for example chemical formulae, would be carried in the minds of employees who work with them and an employee could innocently remember both objective and subjective knowledge. However, the subjective knowledge would still remain the property of the employer and therefore protectable by confidentiality covenant.

Post termination restrictions – restrictive covenants Key areas When drafting covenants three key areas must be considered:

1 NATURE OF THE BUSINESS

When considering the nature of the business thought must be given to: 2 BUSINESS ACTIVITIES

•

Customers – their number, how identifiable they are, how often they will place orders or require services


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•

Will customers use other providers and services or are you their sole provider

•

The geographical area within which the employee will work

•

How the business is likely to develop in terms of customers and suppliers in the areas where the employee will be employed

3 EMPLOYEE’S ROLE

It should be decided: •

What will be the employee’s duties?

•

What are the employee’s skills and experience?

•

Will the employee have direct contact with customers or suppliers?

•

Will the employee be responsible for running a team and working with key employees and personnel?

•

Will the employee work for group companies?

•

Will the employee be privy to trade secrets and confidential information?

•

What length of notice will the employee have?

•

Will the employee change roles within the organisation during the term of their employment?

•

Likely competitive activity

Having considered the nature of the business, business activities and the employee’s role within the business the employer can select from the most useful type of covenant as outlined below. The employer should be trying to assess the realistic risk to the business that the employee’s leaving and competing could cause, and limit this.

Geographical area clause This clause attempts to prevent an ex-employee carrying out similar business within a certain defined area. It is common that a radius taken from the premises of the former employer is used. This area must relate to the real business area of the employer. Geographical limits can be used for global organisations but the wider the geographical area the more tightly the rest of the covenant will need to be drafted.


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If the geographical area is linked to certain premises then care must be taken to update if the employer moves or relocates. The geographical location is normally combined with a particular time scale. Courts tend to prefer the shortest period possible which will allow the employer to protect their business information and contacts. The courts will also look at the length of the notice period and the seniority of the employee when deciding if covenants are reasonable. Courts will also look at the turn around time of customer instructions and restriction periods common throughout that business sector. Certain prohibited specific activities can be narrowly outlined. For example: •

An employee can be prohibited from working for a named competitor in a named capacity (for these purposes the capacity should be directly related to the specific job that the employee is carrying out in the business at the time that they resign) or in a specific area for a specific time.

Non-solicitation/non-dealing covenants In addition to the geographical area restraint and/or prohibited activity an employee can be bound into a non-solicitation and/or non-dealing covenant. This prevents the ex-employee from using their dealings and contacts with customers, suppliers and clients of the employer to put them in an enhanced position when setting up in competition. •

Non-solicitation covenant

The Employer must consider the minimum time required to protect their connections with the customer. The courts will assess the time it will take a replacement employee to re-establish a relationship with the ex-employee’s customers. The courts will consider the type of business carried out and the degree of customer loyalty which may depend upon the nature and frequency of customer contact. An employer may seek to protect potential customers with whom they are actively negotiating as well as existing clients and customers.


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An example of such wording, used in the case of International Consultancy Services outlined below, defined the restriction as one in which, for a period of 12 months following the termination of his employment, the employee would not: •

‘canvass, solicit, approach or deal or contract with any company, firm or person who at any time during the 12 months immediately preceding the date of termination is or was: a)

negotiating with the employee for the supply of services;

b)

a client or customer of the employer; and/or

c)

in the habit of dealing with the employer.’

When the employee in this situation attempted to side line work from a prospective customer of this employer to his own business the matter was considered by the courts. In this case of International Consultancy Services (UK) Ltd -v- Hart (2000 IRLR 227) it was held that such a clause was not so uncertain as to be unenforceable and the employer did have the right to protect himself from the ‘poaching’ of such prospective clients and customers. The High Court allowed protection of prospective clients where there had been discussions about the terms of the contract and a contract was a real possibility. The benefit of a non-dealing covenant is that not only does it prevent the act of solicitation of customers but also the dealing with customers regardless of how the business was initiated. Once again the wording would have to be narrowly tailored to fit the circumstances of the employee being subjected to the restrictions. It may well be that such a restriction would only be appropriate for certain employees such as those engaged in research or creative work, or in the commercial side of a business. It would most likely be inappropriate to apply these covenants to support function roles.

Non-enticement covenants/no poaching covenants – former co-workers As with all restrictive covenants, such clauses must be narrowly drawn. The courts have shown in the past their unwillingness to limit individuals ability to work where they choose. Such clauses should, therefore, only cover those employed or engaged at the same time as the ex-employee and should be carefully limited only to employees or independent contractors whom the employer needs to protect. Generally this will not cover the entire workforce.


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Case law has allowed the use of general descriptions such as ‘senior employees’ however it is likely that, should this point be re-examined, the courts may decide that the description should be as specific as possible, perhaps naming certain types and levels of employees. The duration of the clause is a point for consideration. There is no case law guidance and in practice, enticement of staff is likely to take place shortly before the employment has ended or within a relatively short time thereafter.

Enforcement Enforcing post-termination restrictions The enforcement of restrictive covenants is traditionally difficult. In order to be valid and enforceable such restrictions must: •

protect a legitimate interest such as trade connections, suppliers and customers, the employer’s work force, trade secrets or other confidential information; and

•

go no further than is reasonably necessary to protect that legitimate interest.

As can be seen, the courts will look at each case on its own merits and it is dangerous to rely upon previous case law to establish general principles. There are some general points which have been defined by the courts as persuasive. These include situations in which an employer is trying to impose restrictive covenants to protect trade secrets where the courts decide that there are none, where an employer is trying to prevent employees soliciting customers if the employees had no significant contact with the employer’s customers, or the employer is trying to prevent employees contacting customers where the employee has build up customer connections as a direct result of their personal connections.

To go no further than is reasonably necessary If an employer does have a legitimate interest to protect then a court may enforce a restrictive covenant as long as it is not drafted too widely. As has been discussed, clauses can be limited either by a point in time or some geographical limitation as well as defining restricted activity. The factors interrelate and therefore, if some of the factors are widely drawn others must be more limited. The courts attempt to balance the impact of the restraint on the employee against the employer’s need for protection.


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When considering the reasonableness of the clause the courts will consider the status of the employee. The more senior the employee, the more likely that a restraint will be upheld. More junior employees should not be subjected to high levels of restrictions as the courts will be keen to protect those employees in weaker bargaining positions. The covenant must be reasonable at the time the employer seeks to enforce it and it is therefore vital for employers to ensure that restrictive covenants are kept up to date. The employer must be in a position to explain why a restraint is drawn in the way that it is and how particular harm could be caused by breach of the restrictive covenant.

The powers of the court Those employers who have drafted restrictive covenants in the past, or have seen contracts with such clauses, will have noticed that the clauses are divided into small separate commitments made by the employee. Clauses are drafted this way so that there is the possibility that if one part of the clause is found to be drafted too widely then the courts may be persuaded to delete only that section and allow the remaining sub-clauses to be acted upon. If the court is to be persuaded to make the amendment it must be able to delete the covenant in restraint of trade in a way that does not alter what remains of the contract or the meaning of what remains. The court therefore will examine the remaining wording and consider whether the parties actually did intend the words to be, not merely grammatically appropriate but, separate promises. This principle that the courts can delete wording (some times referred to as ‘the blue pencil’ principle) permits deletion of words as long as the remainder has grammatical meaning. It is common that such clauses actually include wording to invite courts to make amendments should the existing form of the wording be seen as unenforceable. It must be noted however that, whilst the court may delete sections, it will not rewrite a covenant in order to make it effective and employers should not rely upon their willingness to do so.


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The effect of wrongful and constructive dismissal Breach of contract by the employer If the employer wrongfully dismisses the employee then the contract and the protections contained will fall away. The employee will be entitled to treat him/herself as free of the covenants. Wrongful dismissal may arise where the employee is: •

summarily dismissed where there are no grounds to justify the instant dismissal; or

•

dismissed without notice where there is no contractual provision to allow this to take place. It can be written into the contract of employment that an employer may dismiss without notice but make payment in lieu of notice instead (commonly known as a pilon clause). If there is instant dismissal without a pilon clause then this will constitute a breach of contract and a wrongful dismissal.

Constructive dismissal If an employer takes an action which is seen as breaching the duty of trust and confidence between him and his employee then this may put the employee in a position where he/she can claim constructive dismissal. The actions of the employer are seen as ‘striking at the heart of the contract’ and putting the employee in a situation where he/she is forced to resign. If a court decides that an employee has been constructively dismissed then the employee will be able to leave employment free of any restrictive covenants. It is therefore not uncommon, in situations where an employee wants to leave to work with a competitor (who may be dissuaded from employing him because of restrictive covenants), to pursue the argument that they had been in fact, constructively dismissed.

The employer’s rights If the employee breaches a valid restrictive covenant the employer will have the following remedies: •

a claim for damages against the former employee for breach of contract;

•

potentially, a claim for damages against the new employer if they knowingly encouraged the employee to breach the covenants; or

•

injunctive relief.


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The most common step for the employer to take is to seek an order of the court to prevent the employee from breaching the restrictions (the injunctive relief). If the employee or the new employer then breached that court order this would amount to contempt of court (a potentially imprisonable offence). Such injunctions can be applied for immediately and damages will be considered at a later date when all the evidence will be heard in full. The injunction is an attractive option because of: •

its speed;

•

the fact that it will keep the commercial status quo protected until the case is heard in full;

•

the practical difficulty of proving that breach of contract has caused financial loss; and

•

the length of time that the damages claim may take to be concluded in court.

It is common that the employer will try and protect his position with regard to damages by pursuing a joint injunction and damages claim. The employer can apply for the injunction pending the trial to protect from further damage in the period between the hearing for the injunction and the full trial. Before granting an injunction courts will look for the employer to show that: •

there is evidence that the employee has breached contractual obligations; and

•

the balance of convenience is in favour of granting the injunction – the damage to the employer cannot simply be recompensed by damages.

The employer will have to undertake that, if at the full hearing it is found that the injunction was wrongly granted, he will meet the damages caused by the injunction to the employee or the employee’s new employer. This is commonly referred to as a ‘cross undertaking’ for damages. Any agreed settlement may restrict the employee to a slightly lesser extent than the original covenants but still protect the employer.


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Practicalities Given the cost and complexity of enforcing restrictions, many employers may take the view that they are not the most useful clauses to include in a contract. They do, however, have the practical impact of dissuading future employers of key employees from encouraging them to join with the specific intent to poach business or previous members of their team. This practical dissuasive impact may well be worth the time and effort of putting together tightly worded restrictive covenants. Most incoming employers will not want to be faced with a potentially costly injunction and the adverse publicity which could be involved in pursuing the case through the courts.


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Chapter 6 Changing the contract Annelise Tracy Phillips Introduction..........................................................................................99 Consent between the parties..............................................................99 Union agreement .................................................................................99 Legal remedies ...................................................................................102 Deductions in wages claims .............................................................104 Unfair dismissal .................................................................................104 Remedies for unfair dismissal ..........................................................106 Discrimination claims........................................................................107 Imposing the change.........................................................................107 The pressing business need..............................................................108 Collective consultation ......................................................................110 With whom should you consult? .....................................................111 Employee representatives.................................................................111 Notice ..................................................................................................113 Summary ............................................................................................115

Chapter 6 Changing the contract

Introduction There are four ways to change a contract of employment: 1

by consent;

2

under the terms of the contract (see flexibility clauses in Chapter 4);

3

by Union agreement; and

4

by imposition.

Consent between the parties Variation by express agreement between the parties is obviously the most sensible way of implementing a change to the contract of employment. Any variation of contract must be supported by consideration. In employment contracts the consideration for the employee’s promise to work is the employer’s promise to pay wages (Lee & Others -v- GEC Plessey Telecommunications [1993] IRLR 383).

Union agreement Because the parties to the contract of employment are the employer and the employee and the Union is not, the fact that a change is agreed by the Union has no effect on the contract itself in the majority of cases. Therefore, even if the Trade Union has agreed and or balloted its members, unless the Union acts as an agent for the employee or the contract of employment expressly or impliedly incorporates agreements made between the employer and the Union, agreement with the Union will have no effect on its terms (see chapter 3).


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6 CHANGING THE CONTRACT

Union acting as agent If the employee appoints the Union as his or her agent the Union is entitled to act on the employee’s behalf. The Agency is not inferred from membership of the Union alone but can arise from the factual circumstances. In Harris -v- Richard Lawson Auto Logistics Limited, Court of Appeal 14 March 2002, the employer entered into a closed shop agreement with the Union at the premises at which the applicant was employed. By that agreement a shop steward was recognised as the official representative of the Union. During pay negotiations the employer and the shop steward signed an agreement with regard to holiday pay but the other employees were not required to sign the agreement. When Mr. Harris took voluntary redundancy his holiday pay entitlement was calculated in accordance with the agreement. The Court of Appeal held that the shop steward had actual or at least ostensible authority to enter into an agreement on the members’ behalf, binding them even where there was no evidence of consultation with the workforce, contrary to existing custom and practice and the shop steward was not a proper signatory to the agreement in accordance with existing Union procedures.

Incorporated agreement Where it is a term of the contract of employment that agreements made between the employer and the relevant trade union are binding on the individual employees, then any such agreement will vary the individual’s contract of employment whether or not the employee is a member of a trade union. By agreeing to such a term in his or her contract the employee has agreed to be bound by any such agreement.

Imposition Where the employer is unable to achieve agreement with the employee, but still wishes to make the change he has two options: •

to undertake unilateral change; or

•

to terminate the contract of employment.


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Unilateral change Where the employer decides unilaterally to vary the contract of employment this will be ineffective unless the employee consents to the change. Employees therefore have a number of options: •

to consent, either impliedly or expressly, to the change;

•

to object to the change but continue working; or

•

to resign and claim constructive dismissal.

Express or implied consent Consent may be express or implied by the employee’s conduct, i.e. continuing to work for a significant period aware of the change in contract terms without comment or protest. How long such implied consent will take depends on the nature of the term and the effect its change has on the employee. Where the effect of the contract change is immediate and regular, and the employee takes no steps, then he or she will be deemed relatively quickly to have impliedly accepted it. If, however, the change has no immediate impact, e.g., contractual redundancy payments, then the employee, by continuing to work, may never be deemed to have accepted the change. The old contract term will continue to apply to the employment.

Employee objecting to the change but continuing to work This process is often initiated by employees providing employers with statements that they have ‘reserved their rights’. This means that the employee is treating the terms of the employment as being unchanged. If the employer then decides to enforce the unilateral variation he will prima facie be in breach of contract (Rigby -v- Ferodo Ltd 1987 IRLR 516).

Hogg and Dover claim Where the unilateral change in the contract of employment is a significant one, then the employee may be able to argue that the employer has terminated the existing contract and re-issued a new one. (Hogg -v- Dover College 1990 ICR 39). Employees are therefore entitled to make claims of unfair dismissal which can be defended by the employer in the usual fashion (Alcan Extrusions -v- Yates 1996 IRLR 327).


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Resigning and claiming unfair dismissal Employees may decide, where the breach of contract is sufficiently fundamental, to resign and claim constructive unfair dismissal under the principle set out in Western Excavating -v- Sharpe 1978 QB761. In order to claim constructive dismissal an employee must demonstrate that: •

there was a fundamental breach of contract;

•

they left employment because of that breach; and

•

they did not waive that breach.

It should be noted that the breach referred to need not be a single act but may, under the principles in Lewis -v- Motorworld Garages Limited 1986 ICR 157, be a series of actions which ‘taken together with the employer’s other actions might, cumulatively, amount to a breach of the implied term’. In summary, therefore, the three potential results of a unilateral variation of the contract of employment are as follows: •

Consent.

•

Constructive dismissal.

•

Breach of contract.

Legal remedies Principally, the legal remedies an employee may pursue under these circumstances against his or her employers are divided into two specific groups, those available for breach of contract claims and those available where a dismissal has occurred.

Breach of contract claim Where the employee has not consented to the unilateral variation undertaken by the employer, or has objected to such change and continued to work reserving his/her rights, and the employer goes ahead and imposes the term, there is a prima facie breach of contract. The employee is entitled to make a claim, under the contract, for damages. It is not necessary for the employee’s employment to have ended for such a breach of contract claim to be brought. Damages are now also awarded for psychiatric illness suffered by an employee as a result of an employer’s breach of the implied term of trust and confidence (Gogay -vHertfordshire County Council [2000] IRLR 703).


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The measure of damages Normally, when an employee is dismissed in breach of contract, any claim for damages is limited to the length of the notice period, this being the period of notice the employer would have had to have given had he/she wished to terminate the contract lawfully. However, in Rigby -v- Ferodo (above), the Court of Appeal indicated that this principle did not apply where the breach of contract was continuing. Despite the fact that the employer could have terminated the contract of employment lawfully by giving notice, the Court of Appeal held that damages were not limited to the notice period (Gunten -v- Richmond Upon Thames London Borough Council 1980 IRLR). Where damages are insufficient to remedy the breach then, in certain circumstances, the court may grant injunctive relief. Injunctions are granted only where the relationship of trust and confidence between employer and employee has not been fundamentally destroyed by the actions of either party (The Public Trustee as executor for Onofre Braganza (deceased) -v- Nuffield Nursing Homes Trust t/a Fitzroy Nuffield Hospital CA 7th May 1993 unreported).

County Court or Employment Tribunal Since 1984, Employment Tribunals have had jurisdiction to hear claims for breach of contract where these are connected with employment. A claim must arise or be outstanding at the date of termination of employment and must be brought within 3 months of the effective date of termination of the contract or within a further reasonable period (where it is not reasonably practicable for the employee to present a claim in time). The following claims are specifically excluded under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994: •

Terms relating to employers providing living accommodation for the employee.

•

Terms imposing an obligation on the employer or the employee in connection with living accommodation.

•

Terms relating to property.

•

Terms imposing an obligation of confidence.

•

Terms which are in restraint of trade.

Claims brought in the Employment Tribunal are limited to £25,000.


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Deductions in wages claims Where the imposed change affects the earnings of the employee, then a claim under the Deduction from Wages section of the ERA (1996) may be used by the employee to found a claim. Under the ERA, no deduction from the worker’s wages can be made unless either: •

it is required or permitted by a statutory/contractual provision or;

•

the employee has given his prior written consent to the deduction.

If the deductions are made pursuant to a contractual provision then the employee must have been made aware of that provision prior to the event giving rise to the deduction in wages. If deductions are made in breach of the ERA then the sums wrongfully deducted may be ordered to be repaid and the employer will lose the right to recover the sums by any other means, e.g. by contractual claim in the County Court. Deductions claims may therefore provide employees with a useful tactical advantage were contracts have been changed without their consent.

Unfair dismissal Where the employee resigns and claims constructive dismissal or, alternatively, the employer terminates the contract of employment, either by imposing radical changes (Hogg & Dover) or where the employer expressly terminates the contract and the employee does not accept the renewed offer containing the varied terms (see later), the employee may make a claim for unfair dismissal.

The right to claim unfair dismissal Certain employees will, depending on their age and length of employment, acquire the right not to be unfairly dismissed and may challenge a dismissal in the Employment Tribunal. Currently an employee requires one year’s continuity of employment for claims of unfair dismissal where no claim is made under the automatic unfairness provisions.


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A fair reason Where the employee has the right to claim unfair dismissal, then the employer must establish that the reason for the dismissal was one of the five potentially fair ones, and then go on to show that he acted fairly and properly in treating the reason as a sufficient reason to dismiss the employee. The five fair reasons for dismissal are: 1

Conduct –

2

Misconduct

Capability –

Performance, ill health, qualifications

3

Redundancy

4

Statutory Bar

5

Some other substantial reason –

business reorganisation

The reasonableness of the dismissal Once an employer has established a fair reason for dismissal, the determination of whether dismissal was fair or unfair in accordance with Section 98 of ERA will: ‘Depend on whether, in the circumstances (including the size and administrative resources of the employers undertakings), the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and that question shall be determined by equity and the substantial merits of the case’.


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Remedies for unfair dismissal There are three basic remedies; reinstatement, re-engagement and/or compensation.

Compensation limit The three principle awards of compensation in unfair dismissal cases are: •

the basic award

•

compensatory award

•

additional award

Basic award This is calculated by reference to the employee’s age, length of service (subject to a maximum of 20 years) and basic pay (subject to a cap of £270.00 per week since 1st February 2004). However, where the effective date of termination falls between 1st February 2003 and 1st February 2004, the basic pay cap is £260.00 per week.

Compensatory award ‘Shall be such amount as the Tribunal considers just and equitable in all the circumstances, having regard to the loss sustained by the complainant in consequence of the dismissal, insofar as the loss is attributable to the action taken by the employer’ (Section 123 of the ERA 1996). Where the effective date of termination falls on or after 1st February 2004 the maximum compensatory award is £55,000.00. The House of Lords in Dunnachie v Kingston upon Hull has confirmed that employees may not recover compensation for injury to feelings caused by the way in which he/she was dismissed.

Additional award: non-compliance with an order Where the Order for reinstatement or re-engagement is not complied with, an additional award may be made. In unfair dismissal cases the additional compensation will be an amount equivalent to between 26 and 52 weeks pay. As with the basic award, the amount of a week’s pay is currently £270.00.


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Order for reinstatement or re-engagement Before a Tribunal will consider if compensation should be paid, the Tribunal is obliged to consider whether or not the employee should be reinstated in the position held prior to the dismissal, or re-engaged in a suitable alternative position. The Tribunal will, however, not order reinstatement or re-engagement if the employer can establish that it would not be practicable for the order to be complied with. Where such an order is made and the employer fails to comply with it, an additional award is payable in compensation.

Discrimination claims In certain circumstances, employees may be able to make claims for unlawful discrimination under the Sex Discrimination Act 1975, the Race Relations Act 1976, the Disability Discrimination Act 1995, The Employment Equality (Sexual Orientation) Regulations and The Employment Equality (Religious or Belief) Regulations 2003. Where such a claim is successful, there is no statutory maximum on the compensation that may be awarded. Awards are not restricted to loss of earnings but may also include payments in respect of injury to feeling. Aggravated damages are also possible, where appropriate in serious cases, when the respondent has behaved in a high-handed or oppressive manner.

Imposing the change Checklist •

Establish a sound business reason for the change required. Consider the impact on employees and attempt to mitigate this.

•

Where the change will affect at least 20 employees within 90 days or less, then begin elections for appropriate representatives.

•

Consult with appropriate representatives about the proposed changes. This consultation must last at least 30 days when 20 or more individuals are affected, and may last 90 days or more where the changes affect more than 100 employees.

•

Through individual consultation, try to obtain the employees express consent to the changes.


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•

Where this is not possible, consider terminating the employees contract of employment whilst maintaining the offer of re-employment on the new terms and conditions.

•

Terminate employment on appropriate notice.

Where the employer is unable to achieve agreement with the employee then he has two options: •

to undertake unilateral change (see before)

•

to terminate the contract of employment

If the employer decides, to take the drastic step of terminating the contract of employment on notice, or imposing such significant changes to the contract that it can be deemed to have been terminated, then in order to defend the inevitable resulting unfair dismissal claims, the employer will need to show that he had a fair reason for undertaking that action. In almost all cases, the reason which the employer will seek to identify is ‘some other substantial reason’ of a kind such as to justify the dismissal of the employee holding the position which he held (SOSR). This category is a catch all section intended to cover situations not dealt with by the other four potentially fair reasons. In the vast majority of cases fair dismissals for SOSR are based on actions taken by the employer to protect their business interests.

The pressing business need When changing contracts of employment, employers will seek to establish that they have satisfied the principles set out in RS Components Ltd -v- Irwin [1974] 1All ER41. In that case, the employers sought to impose restrictive covenants on their sales staff. One employee however refused to accept the new terms. The Tribunal established that the employer may fairly dismiss an employee where this is required to protect the employer’s business interests. In Hollister -v- National Farmers Union [1979] IRLR 238, the Court of Appeal indicated that a dismissal under similar circumstances might amount to an SOSR where there is a ‘sound business reason for the reorganisation’. The employer must demonstrate that there are discernible advantages to the changes proposed and simply advancing a statement that this is so will be insufficient. It is not necessary for the employer to demonstrate that, without the change proposed, the business will collapse; merely that there is a significant and discernible advantage to the change.


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Fair and reasonable Once the employer has established the reason for the dismissal, he must also show that the decision to dismiss was reasonable in all the circumstances. S.98 of ERA states that the determination of whether the dismissal was fair or unfair will: ‘depend on whether, in the circumstances (including the size and the administrative resources of the employer’s undertaking), the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee; and that question shall be determined by equity and the substantive merits of the case’. Many of the terms contained in this section are vague and general. The words ‘equity and the substantive merits’ allow Tribunals to apply their knowledge of good industrial relations practice and to ensure that there has been procedural fairness. The question ‘did the employer act reasonably in treating the real reason for dismissal as a sufficient reason for dismissing the employee’ has been described by the House of Lords as ‘the critical question’ to be answered by employers. Further assistance has been provided by the Employment Appeal Tribunal as follows: •

The Tribunal must consider the reasonableness of the employers conduct, not simply whether or not the Tribunal considers the dismissal to be fair.

•

In judging the reasonableness of the employer’s conduct the Tribunal must not substitute its decision as to what was the right course to adopt for that of the employer.

•

In many cases there is a variety of reasonable responses to the employee’s conduct within which one employer might reasonably take one view, another might reasonably take another.

•

The function of the Tribunal is to determine if, in the particular circumstances of each case, the decision to dismiss the employee fell within the variety of reasonable responses which a reasonable employer might have adopted.

When assessing the reasonableness of the employer’s decision to impose the change in contract by termination, the Tribunal will take into account the action of the employee in refusing to accept the proposed change. Although, as indicated in Chubb Fire Security Ltd -v- Harper [1983] IRLR 311, it does not follow that, just because an employee is acting reasonably in refusing to accept the change, the employer is acting unreasonably in imposing it. The effect of the change on


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the employee will be relevant. Where the proposed change directly affects the financial circumstances of employees then it is likely to be more difficult for the employer to justify the change. (Farr -v- Hoveringham Gravels Ltd [1972] IRLR 104). This is particularly the case where the change imposed in practice only makes a profitable business more profitable rather than dealing with any underlying causes of inefficiency or profitability. The proportion of employees accepting the proposed change, compared to those rejecting it, will also be relevant. (St John of God Ltd -v- Brooks [1992] IRLR 546). Where a majority of employees accept the offer there will be strong evidence that the employer’s decision to impose the change was reasonable. It does not, however, follow that, where a majority of employees reject the offer, the employer’s decision to impose it is necessarily unreasonable.

Collective consultation Since 1st March 1996, where an employer is proposing to dismiss 20 or more persons at one establishment within a period of 90 days or less and for a reason which is unrelated to their individual circumstances, consultation with employee representatives must take place. This principle was elucidated in the case of GMB -v- Mann Truck & Bus UK Limited [2000] IRLR 636. The company was formed by the merger of two formerly independent businesses and, following the merger, sought to harmonise terms and conditions of employment by terminating the employee’s contracts and offering fresh employment under new terms. All employees were given notice under their current terms. The GMB, which represented the workers, complained that the employers had failed to comply with the consultation requirements under Section 188 of the Trade Union Labour Relations (Consolidation) Act 1992 for the imposition of new terms and conditions of employment. The Employment Appeal Tribunal had agreed that, by issuing notice, the employers were proposing to dismiss the employees as ‘redundant’ within the meaning of the Trade Union Labour Relations (Consolidation) Act. The concept of ‘dismissal as redundant’ had to be interpreted within the context of Article 1 of the EC Directive on collective redundancies which defines it as ‘dismissal for a reason not related to the individual concerned’. It could not be held that the obligation to consult does not apply to technical dismissals which the employer does not intend to result in the loss of workers’ jobs provided new terms and conditions are accepted.


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With whom should you consult? If an employer recognises an independent trade union for collective bargaining purposes, he or she is obliged to consult it for these purposes, and may not, instead, consult elected representatives. However, if there is no recognised Trade Union, or the recognition does not cover the group of affected workers, the employer may consult elected employee representatives. Therefore employers may consult recognised trade unions for one group of employees and elected employee representatives for others. There is no requirement for permanent representation and employees can simply be invited to elect representatives as and when required. However, it would be difficult for employers to hold effective ad-hoc elections in the shadow of an imminent commercially sensitive dismissal or reorganisation. If there is already a staff committee/works council, an employer can only consult with it about collective redundancies if their remit and method of election is in accordance with the election requirements. A committee elected to organise social events or deal with staff welfare will not satisfy the necessary criteria.

Employee representatives The Election of Employee Representatives Regulations 1999 laid down requirements for electing representatives, namely that: •

The employer shall make such arrangements as are reasonably practicable to ensure that election is fair.

•

The employer shall ensure that there is a sufficient number of representatives to represent the interests of all employees who may be affected.

•

The employer shall determine whether or not representatives should speak for all affected employees or if each should represent a particular class of employees affected.

•

The employer shall determine the term of office of the representatives, ensuring that it is sufficient to enable information to be given and consultation completed.

•

The candidates for election must be affected employees on the dates of election.

•

No affected employee will be unreasonably excluded from standing for election.


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•

All affected employees on the date of election are entitled to vote.

•

Employees may vote for as many candidates as there are representatives to be elected or, if representatives are to be specific to particular classes of employees, they may vote for as many candidates as there are representatives to be elected for their particular class.

•

The elections should be conducted so as to ensure, as far as possible, that voting is in secret and those votes are accurately counted.

HOW MANY REPRESENTATIVES ARE REQUIRED?

Employers should consider the following factors: •

the total number of employees to be represented;

•

the variety of different groupings into which the employees might be divided, for example by location, occupation or type of work; and

•

the nature of work activities undertaken.

WHEN SHOULD CONSULTATION BEGIN?

Consultation must begin in good time and at least: •

90 days before the first dismissal takes effect where the employer is proposing to dismiss 100 or more employees; and

•

30 days before the dismissals take effect where the employer is proposing to dismiss 20 or more employees in all other cases.

INFORMATION REQUIREMENTS

Consultation must be undertaken with a view to reaching agreement on ways of avoiding the dismissals or reducing the numbers affected and mitigating the consequences. The information which trade union representatives or employee representatives are required to be given is: •

the reasons for the proposals;

•

the number and descriptions of employees it is proposed to dismiss;

•

the total number of employees at the establishment in question;

•

the proposed method of selection;

•

the proposed method of carrying out the dismissals, taking into account any agreed procedures including the period over which the dismissals are to take effect; and

•

the proposed method of calculating any payments proposed.


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If discussions are unsuccessful and express consent is not obtained, the employer must then consider the option of terminating the contract of employment on notice whilst maintaining the offer of re-employment under new terms and conditions.

Individual consultation Both for practical reasons and to satisfy the test of reasonableness, the employer will wish to consult employees individually as soon as possible, and in as great detail as possible, to try to obtain consent to the proposed change.

Notice The employer should wait until both collective and individual consultation are complete before issuing notice to terminate and re-issuing new contracts.

Statutory notice period The length of notice which the employer is entitled to give to terminate the Contract of Employment is subject to statutory minima which apply to all employees employed for one month or more. Basically the employer is required to give one week’s notice, for the first two years and thereafter one extra week for each year worked up to a maximum of 12 weeks. The individual contract may provide for longer notice periods. Employees therefore have a right to work a specific minimum period of notice as defined by the contract of employment or the statutory provisions. Where the employee is not allowed to work their period of notice by the employer, the employer is in breach of contract and a claim against him or her can be made. For a claim of breach of contract the remedy is a payment of damages to compensate the individual whose contract has been breached. The amount of the compensation is limited to the amount necessary to put him into the position he would have been in had the breach not occurred. Where the breach of contract is a refusal to allow an individual to work, then normally a payment in lieu of notice will be made.


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Taxation Damages for breach of contract are, in principle, not taxable. In Delaney -v- Staples [1992] ICR483 the court held that a payment in lieu is made to compensate for the employer’s breach of contract in not giving notice and, accordingly, is not taxable as an emolument arising from employment. If, however, the contract of employment contains a clause enabling the employer to make a payment in lieu of notice, then clearly, if he does so, there will no breach of contract. Under such circumstances the payment will not be compensation but instead will amount to an emolument arising from employment, i.e. will be subject to PAYE and NI contributions. It should be noted that even if payments in lieu are not taxable, they may be subject to tax under the special rules which apply to compensation payments for loss of office. Where these exceed £30,000, the excess is taxable.

Gross or Nett As noted above, where no pay in lieu clause is contained in the contract of employment, the pay in lieu figure will not be taxable. Nevertheless, the employee’s right to compensation is limited to a payment which will put him in the position he would have been in had his contract been properly performed, i.e. it entitles him to the payment he would have received had he been able to work out his notice period. Had the payments been made to him as a result of work, then these would have been subject to tax and NI contributions and the employer is, therefore, within his rights to make the payment in lieu nett or gross There is a danger, however, where an employer regularly makes payments in lieu gross, that the court will imply into the contract of employment (by conduct) a term that payment will always be made gross (Gothard -v- Miller Group Newspapers] 1998) ICR 729.

Mitigation The dismissed employee has an obligation to take reasonable steps to mitigate his loss i.e. he must take reasonable steps to find another job, but he is not required to accept a drop in status. A reduction in salary may, however, be necessary and any earnings made during the period during which notice should have been given will be set off against any compensatory payment for the employer’s failure to give it unless the principles of Abraham-v- The Performing Rights Society [1995] IRLR 486 apply. In that case the employee had a five year contract of employ-


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ment which contained a termination clause allowing the employer to end the contract provided he made a payment in lieu of 2 years notice. The Court of Appeal held that the employer was entitled to make a payment in lieu under the contract of employment and that, therefore, there was no breach. Payments made were not damages for breach of contract but were instead contractual debts and the employee was not subject to the requirement to mitigate his loss. Abraham has now been reconsidered by the Court of Appeal in Cerberus Software Ltd -v- Rowley (2001). Mr Rowley had been sacked summarily and unfairly, and claimed six months wages in lieu of the notice to which he claimed he was entitled under his contract. His contract contained a clause that the employer may pay wages in lieu of notice. However, just one month after leaving Cerberus, Mr Rowley found better paid employment elsewhere. With mitigation, Mr Rowley’s actual loss was very small. The Court of Appeal considered under what circumstances mitigation of loss should apply. Where the contract contains a right to wages in lieu of notice, and the employer fails to pay, then the employee can sue for the debt and avoid mitigation. However if, as in Mr Rowley’s case, the employer reserves the choice as to whether or not to make a payment in lieu of notice and then decides not to, the employee can only sue for damages for breach of contract and the duty to mitigate is applied. Following the case of Richardson (Inspector of Taxes) -v- Delaney (2001) IRLR 663, where a payment in lieu clause is not relied upon, and a termination payment is agreed prior to termination of employment, there may be no breach of contract and therefore the payment will not be treated as damages for the breach, and will be taxable in full.

Summary If a payment in lieu clause is contained in the contract of employment and is relied upon, then there will be an obligation to tax the payment. Where a contract contains a requirement for an employer to make a payment in lieu of notice, failure to pay allows the employee to sue as a debt and there is no duty to mitigate. If, however, the employer only stipulates that he may make a payment in lieu of notice, and then fails to pay, he has breached the contract and the employee can sue for damages for wrongful dismissal. These damages are subject to the duty to mitigate.


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Chapter 7 Industrial action Tom Player Introduction........................................................................................117 What is industrial action?.................................................................117 Definition of a ‘trade dispute’...........................................................118 The rules on ballots and notification ...............................................119 Information to be contained in notices ...........................................119 Sample voting paper .........................................................................120 Type of ballot ......................................................................................121 Industrial action notices....................................................................122 Commencement of industrial action ...............................................123 Planning for industrial action...........................................................123 Temporary labour ..............................................................................124 Industrial action and the statutory right to claim ‘unfair dismissal’......................................................................124 The strike ............................................................................................126 Picketing .............................................................................................127

Chapter 7 Industrial action

Introduction The most significant and important legislation governing a Trade Union’s right to call upon their members to take part in industrial action through the organisation of an industrial action ballot, is contained in the consolidating legislation ‘The Trade Union and Labour Relations (Consolidation) Act 1992 (‘the Act’)’. Amendments to the Act have been introduced by the present Government following election victory. These changes were implemented in the amending legislation, The Employment Relations Act 1999 and came into force in stages between April and September 2000. The principal objective of the changes is to provide better protection for employees who participate in industrial action following a properly conducted industrial action ballot. There are also revised codes of practice on Balloting and a Code of Practice on Picketing which, whilst they are in themselves not legally enforceable, can be referred to in Court and Tribunal Proceedings if either the employees, the Trade Union, or the employer act in breach of the Codes. There are many circumstances in which a Company, out of necessity and for sound business reasons, has to consider changes in terms and conditions of employment. It is precisely these type of circumstances where employees and their Unions will consider recourse to industrial action if consultation and dialogue with the Company breaks down.

What is industrial action? Industrial Action constitutes a breach by employees of their contracts of employment. This can range from a strike to a work to rule. A strike is simply a stoppage of work which normally has the aim of trying to improve terms and conditions, making a grievance known or protesting about something. The broad proposition is that such a breach of contract can, in certain circumstances, enable the employer to dismiss without notice. It follows that anyone organising industrial action, or encouraging employees to take part in industrial action, is inducing


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that breach. Inducing a breach of contract is a civil wrong, or tort and is actionable. Only if industrial action is taken ‘in contemplation or furtherance of such a dispute’ by reference to the Act can the union avoid liability. However, any defence would need to be able to demonstrate that a union has followed the correct balloting and notification requirements. It is possible in certain circumstances for an employer to prevent employees from pursuing the action by an injunction. Furthermore, industrial action, even if properly balloted, gives the employer a right to withhold pay.

Definition of a ‘trade dispute’ As part of any defence to any claim in tort, the union will need to be able to demonstrate that industrial action arises from a dispute between the workers and their employer relating wholly or mainly to one of more of the following matters: •

Terms and conditions of employment, or the physical conditions in which workers work.

•

The engagement or non-engagement, or the termination or suspension of employment or of the duties of one or more workers.

•

The allocation of work or duties between workers.

•

Matters of discipline.

•

A worker’s membership or non-membership of a trade union.

•

Facilities for officials of trade unions.

•

Machinery for negotiation or consultation and other procedures relating to any items in this list including recognition of the right of a union to represent workers in such a negotiation, consultation or in carrying out such procedures.

The definition of a trade dispute for these purposes is therefore very broad and clearly, if a Company is proposing to introduce changes to terms and conditions of employment or working practices, this is likely to be sufficient to amount to a trade dispute. Where there is secondary action (i.e. sympathetic action by employees working for employers who are not in dispute) the statutory defence will not apply. It is therefore of great importance for a Company faced with industrial action to identify early the nature of the trade dispute to establish whether or not action is being taken in contemplation or furtherance of a trade dispute.


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The rules on ballots and notification In certain circumstances, breaches of the balloting rules may render industrial action unlawful. In such cases the employer may sue the union for damages and/or can apply for a court injunction. However, the detailed rules about balloting were changed by the Employment Relations Act 1999 which was introduced in September 2000. The clear legislative purpose of the amended provisions on the information to be given by trade unions, and the requisite notices on ballots and subsequent industrial action, is to enable an employer to know which part or parts of his workforce are being invited to take industrial action. The objective being, from an employers perspective, to enable the employer to make plans to avoid or minimise disruption and to continue to communicate with the relevant part or parts of the workforce. In circumstances where errors in the balloting rules are accidental, and of a scale which is unlikely to affect the result of the ballot, an employer is unlikely to achieve injunctive relief. For example, simple errors in counting the votes and identifying the precise number of people who are entitled to take part in the vote which has no direct impact on the actual industrial action ballot result will not be the subject of successful injunctive proceedings by a company.

Information to be contained in notices A union is required, at least 7 days before the opening day of the ballot, to give written notice to the employer of the following: •

firstly the notice should inform the employer that the union intends to hold a ballot;

•

secondly, specifying the date upon which the ballot will start; and

•

thirdly, and more controversially, such information in the union’s possession as would help the employer to make plans and bring information to the attention of those employees which, it is reasonable for the union to believe, will be entitled to vote in the ballot (those who are entitled to vote will be union members who are likely to be called upon to take part in industrial action)

The union must provide such information as to the numbers, categories and workplaces of affected employees as is possessed by the union even if it may not be wholly accurate.


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In the case of National Union of Rail, Maritime and Transport Workers -v- Midland Mainline Ltd, (a decision of the Court of Appeal in July 2001), the Court of Appeal refused to overturn an interim injunction preventing the RMT from inducing strike action on the basis that the RMT was not likely to be able to establish immunity from civil action because they had not complied with the necessary statutory conditions. In particular, a significant number of those members entitled to vote in the strike ballot had not been sent ballot papers. Furthermore, in the case of London Underground Ltd and Others -v- National Union of Rail, Maritime and Transport Workers (a decision of the Court of Appeal in March 2001), the union also gave insufficient information to the employer in advance of industrial action. The RMT union had no check-off arrangement with the employer (the system for the deduction of union dues from salary) and, therefore, the employer did not have any way of identifying its membership. The Court of Appeal held that merely to inform the employer that the union would be calling out ‘5,000 employees, all grades and at all workplaces’ was insufficient and the Court upheld the injunction granted by the Judge at first instance. Unions should consider carefully their statutory obligations when completing a ballot notice. Equally, an employer in receipt of a ballot notice should establish if there is any difficulty in identifying those individuals who might be called upon to take part in industrial action. This is particularly the case in multi-site ballots or multi-union ballots.

Sample voting paper Not less than 3 days before the ballot, a sample voting paper must be sent to the employer. The voting paper must identify the name of the Scrutineer, if one is required, which would only be the case if there were more than 50 voters in the ballot. Furthermore, there is a requirement to specify the address and date to which and by which it is to be returned. Ballot papers should contain one or both of these questions: •

is the voter prepared to take part in a strike?

•

is the voter prepared to take part in industrial action short of a strike?


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The ballot paper now has to contain a specific statement, added by the Employment Relations Act 1999, for exact wording to be inserted into a specimen ballot paper that unions have created as follows: ‘if you take part in a strike or other industrial action, you may be in breach of your contract of employment. However, if you are dismissed for taking part in strike or other industrial action which is called officially and is otherwise lawful, the dismissal will be unfair if it takes place fewer than 8 weeks after you have started taking part in the industrial action, and, depending on the circumstances, it may be unfair if it takes place later.’

Type of ballot The majority of industrial action ballots are conducted by post. A trade union will typically allow between 7 and 14 days for a ballot to be completed. This process involves the ballot papers being returned and counted by a Scrutineer. The revised Code of Practice governing Industrial Action Ballots and Notice To Employers (2000) stipulates that where second class post is used, 14 days should be allowed and, in circumstances where first class post is used, 7 days is sufficient time for the ballot to be completed. As soon as reasonably practical, after the date of the ballot, the union is required to notify the employer and voters of the result. This would usually be done by way of a collective notice and the information given must stipulate: •

the number of votes cast;

•

the number of individuals answering yes to each question;

•

the number of individuals answering no to each question; and

•

the number of spoiled voting papers.

A union will have a mandate for industrial action if there is a simple majority voting in favour of industrial action. There is no requirement to state a minimum number or percentage of employees in the unions bargaining unit to support industrial action.


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Industrial action notices The union is required to give not less than seven days written notice to the employer of the commencement of industrial action. This seven day period cannot begin to run until the date upon which the employer has been notified of the result of the ballot. The notice must: •

Contain such information in the union’s possession as would help the employer to make plans and bring information to the attention of those employees who the union intends to induce to take part.

•

If the union knows, the details, number, category or workplace of the employees who it intends to induce to take part, this information should be contained in the notice.

•

State whether or not the industrial action is intended to be continuous or discontinuous.

•

Make clear that the majority of industrial action, including strike action, is usually discontinuous in that it does not involve a continual strike on the part of the labour force.

•

Make clear that, if industrial action is intended to be continuous, the intended date for action to begin should be set out.

•

If discontinuous, the intended dates for industrial action will be set out.

Importantly, the notice should not overlook the fact that it should state that it is… ‘given for the purposes of section 234A of the Trade Union and Labour Relations (Consolidation) Act 1992’. The Act as amended in 1993 previously required a union to give to the employer, in obligatory notices about the strike ballot and about the industrial action, information .... ‘describing (so that he can readily ascertain them) the employees who will be called upon to strike.’ This requirement that the union hand over its membership list, at the risk of individual harassment or victimisation, was amended by Schedule 3 of the Employment Relations Act 1999 to exclude the requirement for names. It is entirely possible that, by the time the union is in a position to issue an industrial action notice, it will be able to provide more information relating to the number, category or workplace of the employees concerned who will be called upon to take part in industrial action. The information provided should enable an employer to make appropriate plans to prepare for any industrial action. The revised 2000 Code of Practice indicates the types of information an employer might need and would relate to an employer’s ability to warn customers and take steps to protect health and safety in the event of industrial action affecting normal working.


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Commencement of industrial action Any industrial action reliant upon an industrial action notice must begin within 4 weeks of the last voting date of the ballot (unless the union and employer have agreed to extend this by up to a further 4 weeks) or if a Court Order extending the effectiveness of the ballot has been obtained. If industrial action has started but is suspended, it can be recommenced outside the 4 week period providing a revised industrial action notice is submitted. It is often the case that industrial action is suspended by trade unions in order for the parties to consider further negotiations and for the use of conciliation or mediation.

Planning for industrial action The most important practical step an employer can take is to ensure that every effort is made to communicate in the clearest way with employees in order to explain the Company’s position in respect of any industrial action, to ensure that employees are given clear and credible information both in terms of the impact of industrial action on the business and also on them. There is nothing precluding an employer, faced with industrial action, from communicating directly with the workforce. In circumstances where a Company is attempting to manage contractual change, the background and nature to the Company’s proposals should be outlined. It is advisable for employers to use normal channels of communication, which might include the issuing of memoranda and employee notices supported by briefing meetings, to enable employees to have all the information at their disposal prior to making any decision as to whether or not they wish to participate in such industrial action. The key consideration for any employer faced with industrial action is the importance of ensuring that such industrial action causes as little disruption as possible to the business and customers. The Company should therefore consider any contingency plans that need to be drawn up in light of this obvious concern.


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Temporary labour It is important for employers to consider the impact of the ‘Conduct of Employment Agencies and Employment Business Regulations 1976’. Regulation 9 (11) provides that: ‘a contractor shall not supply workers to a hirer as a direct replacement of employees who are in industrial dispute with that hirer to perform the same duties as those normally performed by those employees’. The Department of Trade and Industry is currently in the process of amending these Regulations with the object of making them simpler, clearer and more relevant to the labour movement of today. It is proposed that new regulations will be introduced in the first half of 2003. Under the new draft regulations the restriction on providing work to a work-seeker where an industrial dispute is involved is dealt with under Regulation 7 (1) and 7 (2). These provide as follows: An employment business shall not introduce or supply a work-seeker to a hirer to perform: •

the duties normally performed by a worker who is taking part in a strike or other industrial action (the ‘first worker’); or

•

the duties normally performed by any other worker employed by the hirer who is assigned by the hirer to perform the duties normally performed by the first worker;

•

unless, in either case, the employment business does not know, and has no reasonable grounds for knowing that the first worker is taking part in a strike or other industrial action.

Importantly, these new draft regulations do not apply to ‘unofficial’ industrial action.

Industrial action and the statutory right to claim ‘unfair dismissal’ If the industrial action is unofficial and the employee is dismissed whilst taking part in the strike action, then the individual may lose his right to pursue a claim for unfair dismissal. An employer would firstly need to establish whether or not he has the right to pursue a union in proceedings in tort in the event of ‘unofficial’ industrial action and whether the union does or does not have a statutory defence. In accordance with Section 21 of the Act a union has the obligation to


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repudiate unofficial action taken by their members. This process would involve the union issuing a notice to members stating: ‘you union has repudiated the call(or calls) for industrial action to which this notice relates and will give no support to unofficial industrial action taken in response to it(or them). If you are dismissed whilst taking unofficial industrial action, you will have no right to complain of unfair dismissal’ The act of repudiating unofficial action would have to be taken by the Executive President or the General Secretary of the union involved. Once an act has been officially repudiated by a union it is not possible to pursue a union for damages in tort. It may however be possible to take direct action against the employees involved and dismiss them without risking liability for unfair dismissal. It is important in such circumstances for an employer to comply with the provisions of section 237 of the Act which gives employees the opportunity, before losing the statutory protection to claim unfair dismissal, to cease to take part in unofficial industrial action. In short, employees will not lose their statutory right to claim unfair dismissal if they are dismissed before the end of the next working day after the repudiation notice has been served by the union. Employees who continue to take part in unofficial industrial action beyond the next working day after the repudiation notice has been served by a union are at risk of being dismissed and losing their right to pursue a claim for unfair dismissal, providing the reason for the dismissal is that they are taking part in such unofficial industrial action. An employer, in these circumstances, can selectively dismiss the instigators of the industrial action or, indeed, all employees who are participating in such action. However, great care needs to be taken before disciplinary action or dismissal is contemplated against employees taking part in official industrial action. In such cases a dismissal will be automatically unfair if the reason, or principal reason, is that the employee took part in official industrial action and if one of the following three conditions are satisfied: •

the dismissal took place within 8 weeks of the day on which the employee started the protected industrial action;

•

the dismissal took place after the end of that 8 week period but the employee had stopped protected industrial action before the end of that period, thus protecting the participants against victimisation from the employer after they have returned to work; or

•

the dismissal took place after the end of the 8 week period and the employee had not stopped taking part in industrial action before the end of that period, but the employer had failed to take reasonable procedural steps to resolve the dispute.


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7 INDUSTRIAL ACTION

The typical steps that a Company would be expected to take in seeking to resolve the dispute would be compliance with any procedural agreements that may be in place for conciliation or mediation via ACAS. It may also be necessary to consider further negotiations with the union prior to taking any decision to dismiss employees after the expiry of the 8 week period. If the dismissal is not automatically unfair the Tribunal will not consider the fairness or unfairness of the dismissal at all provided that a Company can show that: •

all employees participating in the action have been dismissed; and

•

if any employees are offered re-engagement within three months of the date of dismissal and the offer is made to all relevant employees.

In circumstances where some employees have been dismissed or some have been re-engaged, the Tribunal must go on to consider whether the individual employees’ dismissal was fair or unfair. In summary this means that if the employer has dismissed employees taking part in the industrial action, when industrial action has been taking place for more than 8 weeks, and has taken proper steps to try and resolve the dispute then, unless all employees in the same situation have been dismissed without any being re-engaged, the Tribunal must look at each and every case to determine whether all have been fairly or unfairly dismissed.

The strike Under Section 241 of the Act it is a criminal offence to intimidate another person whether by violence or otherwise. An offence will be committed where a person, with a view to compelling another to abstain from carrying out a legal act in complying with their contract of employment does any of the following: •

uses violence towards or intimidates that person or his wife or children, or injures his property;

•

persistently follows that person about from place to place;

•

hides any tools, clothes or other property owned or used by that person, or deprives him of or hinders him in the use thereof;

•

watches or protects the house or place where the person resides, works, carries out business, or happens to be, or the approach to any such house or place; or

•

follows that person with two or more other persons in a disorderedly manner in or through any street or road.


126

7 INDUSTRIAL ACTION

Picketing Section 220 of the Act provides limited scope for picketing without loss of legal immunity. When a person attends a picket line at or near their own place of work, if the act is in contemplation or furtherance of a trade dispute and if the purpose is for peacefully obtaining or communicating information or peacefully persuading any person not to work, then this is lawful. There is a 1992 Code of Practice governing picketing. The Code states that ‘pickets and their organisers should ensure that, in general, the number of picketers do not exceed six at any entrance to or any exit from a work place, frequently a smaller number would be appropriate’. Once again the Code of Practice is not legally enforceable in itself and, whilst the Tribunal or Court will have regard to it, it is often the case that picket lines will be manned by considerably more than six people. The acceptable methods of picketing are limited to speaking with people leaving and entering the premises in an effort to persuade them to support a case. A Company faced with industrial action should familiarise itself with the Code of Practice on picketing and be prepared to notify the police authorities in advance, in the event that they believe that a dispute has the potential to result in public unrest. A Company should also consider maintaining contact with the union’s head or main office, in circumstances where industrial action and strike action occurs, in order to ensure that, as far as possible, the Code of Practice governing picketing is complied with.


127


Summary

Summary When reviewing and changing the contract of employment the following steps should be considered: •

What are the existing terms and conditions?

•

Are terms and conditions located in documents other than the written contract, e.g. in a handbook or collective agreements?

•

Do the existing terms and conditions contain sufficient flexibility to allow the actions/changes required?

•

Is there a recognised trade union which has the authority to negotiate on the employees’ behalf?

•

Are there existing trade union collective agreements which require the employer to collectively bargain on changes to terms and conditions?

•

What is the business justification for the change?

•

What collective consultation mechanisms are in place?

•

Will employee representatives need to be elected?

•

How will individual consultation be affected?

•

Are employees likely to accept the changes?

•

Will sweeteners and inducements be offered?

•

Is the employer prepared to risk unilateral variation (imposing the change) and will this be effective?

•

If new contracts are required, will termination and re-issue be employed?

In the majority of cases, by far the best way of changing terms and conditions is to avoid conflict and obtain employee agreement to the changes. It may also be preferable to red circle existing employees and offer the new terms and conditions to new employees. Through turnover over a period of time a broad contract change exercise will have been effective.


129

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