Frontline UK Employment Law Update Edition 16 2022 - Case Updates

1. Kong v Gulf International Bank (UK) Ltd [2022] EWCA Civ 941 (8 July 2022)

2. Tesco v USDAW & others

3. Harpur Trust v Brazel [2022] UKSC 21 (20 July 2022)

4. Scottish Federation of Housing Associations v Jones [2022] EAT 114 (21 July 2022) 

1. Kong v Gulf International Bank (UK) Ltd [2022] EWCA Civ 941 (8 July 2022) – (LINK)

In this case (in which Bird & Bird represented the successful Respondent), the Court of Appeal ("CA") has upheld the Employment Appeal Tribunal’s ("EAT") decision that an Employment Tribunal (“ET”) had directed itself properly on the issue of the separability; namely whether it is possible to separate the conduct of a whistleblower from the protected disclosure(s) itself.
The Claimant was employed by the Respondent as the Head of Financial Audit. She made a protected disclosure to the Respondent's Head of Legal, relating to a financial compliance template. In her disclosure, she also made comments that questioned the Head of Legal's professional abilities. The Head of Legal was unhappy with the comments made by the Claimant, and on 3 December 2018, the Claimant was dismissed.

The Claimant brought claims for ordinary unfair dismissal; automatically unfair dismissal by reason of protected disclosures; detrimental treatment by reason of having made protected disclosures; and wrongful dismissal in the ET. The ET held that the Claimant had been unfairly dismissed, but her claims of automatically unfair dismissal, protected disclosure detriment and wrongful dismissal were rejected. The ET found that the principal reason for the Claimant’s dismissal was not the protected disclosure she had made, but that she had questioned her colleague’s professional awareness or competence. The ET found that this was a separate reason related to her conduct and not her protected disclosures.

The Claimant challenged this decision at the EAT and subsequently at the CA. She argued that the conclusion that her conduct was separable from the protected disclosures (the "separability" ground) had been decided wrongly. The appeal was pursued on broad and narrow grounds. The broad ground was simply that the ET and EAT had erred when finding that the Claimant’s conduct in making the protected disclosure was separable from the protected disclosure; such that the protected disclosure was the reason for her dismissal. The narrower ground related to certain of the findings that the ET made because separability had been discussed differently in relation to her detriment claim and in relation to her unfair dismissal claim.

Protect, the whistleblowing charity, which was permitted to intervene in the case, invited the CA to consider adopting a structured approach to the separability principle. They argued that this was necessary because the way that the separability principle had been applied to the Claimant - i.e., that she was not dismissed for making protected disclosures but for criticising a colleague who was upset by what was said - undermined protection for whistleblowing.

The CA held that separability is not a freestanding rule of law, and instead has to be decided on the facts of each case. As a result, the discrepancies in the way the separability principle was discussed in relation to the Claimant’s detriment and dismissal claims reflected the discrete facts in each matter.

The CA’s judgment in this case offers important clarity on the separability principle whilst at the same time underlining that either a dismissal is for a prohibited reason or it is not and that ETs must take care when deciding that question of fact. The CA also makes clear that the principle can apply across the law of victimisation for doing any act that is protected by statute, such as trade union activities or health and safety activities.

2. Tesco v USDAW & others - (LINK)

In this case, the Court of Appeal ("CA") overturned a High Court injunction preventing Tesco from withdrawing a collectively agreed contractual benefit that it had described as "permanent" and "guaranteed for life", by “firing and rehiring” staff with that benefit.

During a reorganisation of distribution centres in 2007 to 2009, Tesco offered affected staff an incentive to relocate as an alternative to redundancy. The incentive, agreed with its recognised union USDAW, took the form an enhancement known as “Retained Pay”. Tesco told affected staff that their entitlement to Retained Pay would continue for as long as they were employed in their current role, would increase each year in line with any general pay rise and could not be negotiated away. The enhancement was also described as “guaranteed for life”, and a “permanent feature” of an individual's contractual entitlement. The Claimants agreed to relocate in exchange for the Retained Pay.

In 2021, Tesco decided to end the Retained Pay arrangements. It offered employees a lump sum equivalent to 18 months’ Retained Pay to secure the agreement of affected staff to the removal of future entitlement to Retained Pay, and informed staff that it would dismiss and offer re-engagement to anyone who refused the offer. The USDAW obtained an injunction from the High Court, preventing the supermarket from dismissing the staff. The High Court granted the injunction, holding that there was a clear intention to preserve the higher pay from which each affected employee had benefitted at their original distribution centre for as long as they remained employed by Tesco in the same role. Tesco appealed to the CA.

The CA allowed the appeal, holding that there was no evidence that the mutual intention of the parties was to continue the relevant employment contracts for life or until retirement or closure of the relevant workplace, or to limit Tesco’s scope to terminate the employment contracts, even when taking into account the pre-contractual statements (such as “guaranteed for life”). The CA concluded that no term could be implied into the contract that would allow the affected employees to remain in their post for the rest of their lives with the benefit of Retained Pay. The CA also held that in any event, a final injunction to prevent a private sector employer from dismissing an employee for an indefinite period was not justified.

This decision confirms that it will be an extremely rare case indeed in which an employer will be restrained from terminating an employment relationship in order to effect a change in terms. Employees may of course have other recourse in such circumstances, namely claims of unfair dismissal, or failure to inform and consult in relation to collective redundancies (where 20 or more employees are dismissed at one establishment within a 90-day period), and any employer seeking to “fire and rehire” must take into account the risk of such claims in any plans.

3. Harpur Trust v Brazel [2022] UKSC 21 (20 July 2022) - (LINK)

In this case, the Supreme Court (“SC”) confirmed that the statutory entitlement of 5.6 weeks' annual leave the Working Time Regulations 1998 (“WTR 1998”) should not be reduced pro rata for workers who are employed for a full holiday year but only work some weeks of that year.

The Claimant teacher was engaged under a permanent contract but only worked for the Respondent during term time, and her hours would vary each week, depending on the need for her lessons.

She took her statutory entitlement of 5.6 weeks’ annual leave in three equal tranches of 1.87 weeks each after the end of each term and was paid 12.07% of her overall term time pay for each period of leave, in line with ACAS guidance on calculating holiday pay for casual workers or those with irregular hours.

The Claimant brought an unlawful deductions claim, asserting that the 12.07% approach has no basis in the WTR 1998, and that her holiday pay should instead be calculated in accordance with the section 224 of the Employment Rights Act 1996 (“ERA 1996”) i.e. as an average of her weekly pay over the 12-week period immediately before the relevant holiday period. The Employment Tribunal (“ET”) disagreed, holding that a “pro rata” principle should apply, and that the words should be read into the WTR 1998 to the effect that holiday pay for part-time workers who worked fewer than 46.4 weeks per year was capped at 12.07%. However, both the Employment Appeal Tribunal and the Court of Appeal agreed with the Claimant, that no such pro rating requirement or cap should be read into the WTR 1998.

The Respondent appealed to the SC, arguing that EU law required the court to interpret the WTR 1998 to give effect to the pro-rating of holiday entitlement, and also that it was absurd that someone who worked fewer days per year than a full-time worker should have a larger holiday entitlement (as a proportion of their total pay). The Supreme Court disagreed, holding that the ACAS percentage method of calculating holiday entitlement for “part-year workers” should not be read into the WTR 1998. The SC held that the WTR 1998 were clear: all workers, regardless of their working hours, have a statutory entitlement of 5.6 weeks’ holiday each year, and there was no legal basis for reducing this on a pro-rata basis if they only work part of the year. The SC found that the correct method of calculating holiday pay for workers with irregular hours was to take an average of weekly pay over a reference period of 12 weeks ending immediately before the holiday, as provided in the WTR 1998 and section 224 of ERA 1996, acknowledging that this could mean that part-year workers receive disproportionately more holiday entitlement than full-time workers in some cases.

This decision has clear implications for sectors that use part-year workers retained on a yearly basis, such as education, social care, hospitality, and tourism, where the 12.07% method of calculating holiday pay has been prevalent. It will most significantly impact irregular work contracts that incorporate the 12.07% method of calculating holiday pay where employees have intermittent gaps in which they do not work throughout the year. Employers need to review their calculation methods and identify any shortfalls in holiday pay paid under this method, as these underpayments may be claimed through the ET as unlawful deductions from wages.

4. Scottish Federation of Housing Associations v Jones [2022] EAT 114 (21 July 2022) - (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) held that the reason or principal reason for the Claimant’s dismissal was not her political opinions and affiliation, and her dismissal was not therefore automatically unfair under section 108(4) of the Employment Rights Act 1996 (“ERA 1996”). The EAT also held that a “belief in participatory democracy” is capable of protection under the Equality Act 2010 (“EqA 2010”).

The Claimant was employed by the Respondent as its Head of Membership and Policy. Under her employment contract she was prohibited from having a “formal role” of a political nature, though she was not prevented from being a member of a political party. Political neutrality was described as fundamental to the role. When the Claimant told the Respondent that she wished to stand as a Scottish Labour party candidate at the next general election, the Respondent informed her that it did not consent to her doing so and she did not put herself forward as a candidate. A month later, the Claimant was dismissed.

The Claimant did not have the requisite two years’ service for an “ordinary” unfair dismissal claim but claimed that she had been dismissed because she had asked for permission to stand as a Scottish Labour candidate. She argued that the reason or principal reason for her dismissal was her political opinions or affiliation, making the dismissal automatically unfair under section 108(4) ERA 1996, a claim that does not require two years’ service. She also claimed that her dismissal amounted to discrimination on the grounds of philosophical belief under section 10 of the EqA 2010, the belief relied on being that “those with the relevant skills, ability and passion should participate in the democratic process".

The Employment Tribunal (“ET”) held as a that if the Claimant could show that she had been dismissed because of her desire to stand for election, she could rely on section 108(4) ERA 1996. The ET held that where the reason was her desire to stand for election, her political opinions and affiliation (to the Scottish Labour Party) were not directly to do with her dismissal, but they were related to it because she would not have sought to stand as a candidate if she had not had particular political opinions and affiliation. This indirect relationship between her opinions / affiliation and her dismissal, meant that section 108(4) applied. In relation to her discrimination claim, the ET found that the Claimant’s “belief” attained a sufficient level of cogency, seriousness, cohesion and importance, to amount to a protected philosophical belief, and that the Claimant had manifested her belief by seeking to stand for election.

On appeal, the EAT accepted that the Claimant would not have been dismissed if she had not asked to stand as a candidate for Scottish Labour. However, the relationship between her dismissal and her political opinions and affiliation was not sufficiently close to fall within section 108(4) of ERA 1996. The legislation does not apply where an employee is dismissed because they lack “political neutrality” or “propose to act in a way that threatens their political neutrality” where it is fundamental part of their role (as it was here). The EAT did, however, accept that the Claimant’s “belief” in participatory democracy was protected by EqA 2010.

This decision confirms that section 108(4) of ERA 1996 is limited to dismissals arising from the substance of an employee’s political opinions or affiliations. However, it may in practice be quite difficult to establish exactly where the line falls between a dismissal related to the substance of a person’s opinions or affiliation, and a dismissal for a lack of political neutrality. It is also notable that a belief in participatory democracy is capable of amounting to a protected belief under the EqA 2010, notwithstanding that support of a political party per se does not amount to a philosophical belief. Again, it may be difficult in some cases to establish exactly where the line falls between a belief that is protected and one which is not.