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Case law round-up – July 2016

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29/07/2016

Protected ‘pre-termination’ conversations – ‘S111A’ protection includes the existence of the ‘conversation’ as well as the offer – Faithorn Timms LLP v Bailey UKEAT/0025/16

Since 2013 it has been possible for employers to have a ‘protected conversation’ under S111A Employment Rights Act 1996 to discuss ending the employment relationship even where there has been no previous dispute. Such discussions are inadmissible in any future unfair dismissal claim. In this case, helpful to employers, the Employment Appeal Tribunal (EAT) made it clear that the fact that there had been protected conversations under S111A is inadmissible in addition to the content of those discussions.

The facts

Mrs Bailey worked as a secretary for the Respondent for six years. She had worked part time but her employer made it clear that this working pattern would not be an option going forward. Unhappy with this, she initiated settlement discussions to try to negotiate an exit. These discussions broke down and Mrs Bailey submitted a grievance in which she attempted to rely on matters that had previously been set out in her solicitor’s letters marked ‘without prejudice’. She subsequently issued Tribunal proceedings claiming constructive dismissal and sex discrimination in which she referred to the settlement discussions.  She disputed that the discussions were protected under S111A. At a preliminary hearing, the Employment Tribunal held that S111A only restricted the details of the settlement offer and not the fact that there had been settlement discussions.

The EAT disagreed with the Tribunal and held that S111A covers not just the offers made but the fact that termination discussions have taken place at all. It also held that S 111A protects internal discussions between managers and HR about the pre-termination talks. In doing so the EAT recognised the reality that settlement discussions are often relayed to and from managers and HR and to hold that S111A did not protect these internal discussions would run contrary to the purpose of the provision.

What does this mean for employers?

This is the first time that the scope of S111A has been scrutinised by the EAT and the decision provides welcome clarity. It makes it clear that employees unhappy with the level of a settlement offer made under a protected conversation cannot go on to refer to the discussions in a subsequent grievance or Tribunal claim for unfair dismissal. Remember, however, that S111A only protects conversations in relation to straightforward unfair dismissal claims.  It does not provide any protection in relation to automatic unfair dismissal or discrimination claims in respect of which employers must still rely on the traditional ‘without prejudice’ rule.

Finally, given that S111A conversations are entirely protected to the extent that parties cannot refer to the existence of the discussions, it may appear (in any future Employment Tribunal claim) that there was an unexplained delay in any ongoing grievance process. How to avoid that looking like the employer’s default will be a matter to consider at the time. It may be possible to draft a short letter to be signed by both parties referring to an ‘agreed postponement’ of the formal grievance process. This would need to be very carefully worded to assist any future Employment Tribunal in ‘reading between the lines’ and avoiding an assumption that the delay was the fault of the employer.

Immigration status is not a protected characteristic – Taiwo v Olaigbe and Onu v Akwiwu [2016] UKSC 31

It is not automatically direct race discrimination to treat an employee less favourably solely because of their immigration status according to a recent decision of the Supreme Court.

The facts

This case involved two Nigerian women who came to the UK to work as domestic staff for two separate families in their private homes.  Both women were treated appallingly by their employers, made to work unacceptably long hours, underpaid and verbally and physically abused.  Ms Onu’s employer told her that if she ran away she would be arrested and sent to prison because of immigration issues. Fortunately, both employees were able to escape from their employers with assistance from third parties and subsequently brought claims in the Employment Tribunal including for direct race discrimination.

The women argued that their immigration status was indissociable from their nationality which, in turn, forms part of the protected characteristic of race under the Equality Act 2010. The Supreme Court accepted that immigration status is a function of nationality (as only non-British nationals are subject to immigration controls). However, in the circumstances of this case the Court found that these employees had been mistreated because of their vulnerability arising from their immigration status rather than because they were Nigerian.  Had the employer’s treatment been because of their race (including their nationality) it would certainly have amounted to direct race discrimination.  However, on these facts, the treatment was found to be solely because of the Ms Taiwo’s and Ms Onu’s insecure immigration status.  The Court held that the employers in question would have behaved in the same way towards any other employee with such vulnerable status regardless of race or nationality. It made the point that not all migrant workers are vulnerable because of their immigration status and a migrant worker with secure immigration status and the right to work in the UK would, in all likelihood, not have been mistreated by the employers in question. The Court was also influenced by the fact that immigration status had not been included in the list of ‘protected characteristics’ by Parliament when the Equality Act 2010 was drafted.

What does this mean for employers?

Clearly, decent employers would never treat employees in the way that these two women were treated. The practical relevance of this decision for most employers is that decisions based on the immigration status of a worker will not automatically be direct discrimination on grounds of race or nationality.  Employers should continue to apply immigration/right to work checks equally to all employees and beware of inadvertently discriminating against individuals or groups by only conducting checks where there is a perception that the person may not have a right to work in the UK.  Bear in mind, too, that this case focused on direct race discrimination. It does not rule out the possibility of indirect race discrimination claims (i.e. where the employer operates a rule or practice that is apparently neutral but in reality indirectly discriminates against racial groups) based on an employer’s immigration practices. Finally, it goes without saying that this case does not legitimise racial harassment or abuse which will always be direct race discrimination.

As ever, the best way to avoid claims is to ensure that your organisation carries out its immigration checks and processes scrupulously and fairly. The Immigration Act 2016 has recently tightened up the law and increased criminal penalties for breaches. For further information on this see our article.

Acas Code of Practice on Disciplinary and Grievance Procedures does not apply to SOSR dismissals or dismissals for ‘no-fault’ ill health – Phoenix House Ltd v Stockman and anor UKEAT/0264/15 and Holmes v Qinetiq UKEAT/0206/15

We now have confirmation from the Employment Appeal Tribunal (EAT) that the ACAS Code of Practice on Disciplinary and Grievance Procedures (the Code) does not apply to dismissals for some other substantial reason (SOSR) for the breakdown of a working relationship or to dismissals for ill health where there has been no fault or culpable conduct on the part of the employee. Failure to comply with the Code can give rise to a 25% uplift in compensation so this clarification from the EAT is welcome news for employers.

The facts

In Phoenix House Ltd v Stockman, the claimant was dismissed because the employer felt there had been an irretrievable breakdown in the employment relationship. The Employment Tribunal found that she had been unfairly dismissed (partly because the employee was not given an adequate opportunity to challenge the assertions against her) and that her compensation should be uplifted for the employer’s failure to comply with the Code. On appeal, the EAT upheld the finding of unfair dismissal but disagreed with the Employment Tribunal that the Code applied and therefore that any uplift should be imposed.

In Holmes v Qinetiq, the claimant, a security guard, was dismissed on ill health grounds after a number of absences caused by back problems. Again, he was found to have been unfairly dismissed. The EAT held that, in order for the Code to apply, there must have been ‘culpable conduct’ on the part of the employee.  In this case, Mr Holmes poor performance had been solely due to his illness and there was no suggestion that he was to blame, for example by failing to comply with sickness procedures or ‘faking’ the extent of his ill health.

What this means for employers

These two decisions provide welcome clarification on the scope of the Acas Code. They confirm that the Code does not apply to genuine SOSR dismissals or to ill health dismissals where the employee is not at fault. We already know that the Code does not apply to dismissals for redundancy or expiry of fixed term contracts (because the Code expressly states this).

A note of caution – it is important to examine the facts of each case because ‘SOSR’ dismissals that are, in reality, for misconduct will be caught by the Code.  It is not possible to label a dismissal that is really for misconduct as ‘SOSR’ in order to avoid having to follow the disciplinary procedure.  A Tribunal will always scrutinise the facts of the case and, if the real reason for the employer’s decision is the employee’s misconduct, then the Code must be followed to avoid the risk of an uplift in compensation.

The Stockman case also illustrates the point that it is very difficult to achieve a fair SOSR dismissal based on breakdown of the working relationship or a personality clash. It is important to tread carefully when dealing with this sort of situation and professional advice may be appropriate.

Protection of confidential information – ex-employee and his new employer ordered by High Court to destroy confidential information belonging to previous employer – Arthur J Gallagher Services (UK) Limited and others v Skriptchencko and others [2016] EWHC 603

The High Court has made an Order for the inspection of electronic devices and computers belonging to an ex-employee and his new employers and destruction of any confidential information belonging to the old employer found on them. This is the first time that such an Order has been made and the case may prove helpful to employers who find themselves in a similar situation.

 The facts

Mr Skriptchencko (S) worked for Arthur J Gallagher Services (UK) Ltd (AJG), an insurance broker. In February 2015, he left AJG to work for Portsoken Ltd (P), a competitor company. AJG suspected that S had taken (and was using) its confidential information and brought proceedings against him and P. It was admitted that S had taken a client list and that P had used the list to contact over 300 of AJG’s clients. The Court made an Order for disclosure and it became apparent that directors and other employees of P were knowingly misusing AJG’s confidential information.  In particular, one email from the chairman of P stated, “I don’t think you can formally put these [AJG’s confidential information] in any presentation as we would be breaching confidentiality but would suggest that we keep in our back pocket to show on a nudge nudge wink wink basis to interested parties.”

AJG applied for an injunction to allow them to inspect and take images from all of AJG’s and S’s computers and electronic devices and to delete any confidential information belonging to AJG found on them.

After hearing arguments on both sides, the High Court granted this Order. It acknowledged that there were no previous authorities where such an order had been made. However, the following three factors convinced the Court that there was no lesser way to secure protection for AJG:

  • The defendants had admitted taking and knowingly misusing the confidential information.
  • The documents showed ‘a high degree of subterfuge’ in the use of the confidential information.
  • The documents together with the evidence given by the defendants showed that they could not be trusted to locate and delete the confidential information themselves.

As a safeguard, the Court ordered that a copy of the deleted material be saved so it could be restored later on if it was found, at full trial, that it had been wrongly removed.

What this means for employers

This decision is very useful for employers who have reason to suspect that an ex-employee has taken confidential information to a new employer and is using it to attempt to drum up business. It demonstrates that, in certain circumstances, the law will assist employers especially, as in this case, where the ex-employee and new employer are fully aware that what they are doing is unlawful.

The fact that the chairman, managing director and other senior directors of P were found to be knowingly involved in the misuse of the confidential information is likely to have influenced the Court in coming to the conclusion that the defendants could not be trusted to seek out and delete the information without the imposition of the Order. This decision was made at the injunction stage and the case will proceed to a full trial at which AJG is likely to be able to establish that there has been breach of confidence and go on to recover any financial damage suffered as a direct result.

It remains as important as ever to ensure that contracts of employment are drafted to provide the business with maximum possible protection against misuse of confidential information by employees post-termination. Practical IT safeguards should also be considered to prevent the electronic transfer of large amounts of data out of the business. This is doubly so in the case of key employees or those with access to sensitive or business critical information.

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