This is the second serving of our selection of key cases from 2010.

1. KRAFT FOODS v HASTIE – age discrimination / justification
For more details of this case, see our Ask Auntie piece from our August 2010 newsletter.

Summary: The main issue was whether the employer’s aim (where it had applied a maximum cap on the payment under its redundancy policy) was legitimate: was the aim simply to save costs or to prevent an employee receiving a “windfall”? A previous case had decided that an employer seeking to justify a discriminatory practice cannot rely solely on considerations of cost. The Kraft case concerned a cap on the amount payable under a redundancy scheme to prevent employees being better off as a consequence of receiving redundancy pay than they would have been if they had worked until retirement. The EAT found that it is legitimate for a redundancy scheme to incorporate a provision designed to prevent excess compensation and that the cap was a proportionate means of achieving a legitimate aim.

The case of Woodcock v Cumbria Primary Care Trust, also turned on the issue of justification. The EAT upheld the Tribunal’s decision that the age discrimination in this case was justified where the employer’s main aim was to save costs by depriving Mr Woodcock of a generous pension windfall. The EAT also expressed support for the argument that the sole aim of saving costs should, in certain circumstances, be sufficient justification for discrimination.

Conclusion: These cases are a helpful development in terms of making it easier for employers to justify age discrimination.

2. SOUTH YORKSHIRE POLICE v JELIC – Disability discrimination / reasonable adjustments

Summary: Mr Jelic, a police officer, developed chronic anxiety and was no longer fit for front-line duties. He was assigned a desk job, but due to a reorganisation, he was retired on medical grounds. The EAT found that it would have been a reasonable adjustment for the police to have deployed Mr Jelic into a job which did not involve facing the public. This could have been done by swapping his front-line post with that of another police officer. The EAT rejected an argument that the most an employer is required to do is to transfer the disabled employee to an existing vacancy. The judge emphasised that all adjustment cases are highly fact-sensitive.

Conclusion: Tribunals are taking an ever wider view of what constitutes a reasonable adjustment. It might even sometimes be necessary to create a post for a disabled employee.

3. KHAN v MARTIN MCCOLL – holiday pay during sick leave

Background: In the case of Stringer v HMRC 2009, the ECJ held that workers on sick leave continue to accrue holiday rights, and if they are prevented from taking their holiday due to sickness, they must be allowed to carry it forward into the next leave year. If the holiday has not been taken by the time the employment terminates, the worker should receive payment for the accrued but untaken holiday.

Summary: Mr Khan carried forward 2 weeks holiday from 2007 into 2008. He had an entitlement of 4 weeks’ holiday for 2008. He did not take any holiday and went off sick in May 2008 until he resigned in August 2009. The employer paid him for 2 weeks’ accrued but untaken holiday in respect of his 2009 entitlement. Mr Khan brought claims for 6 weeks’ holiday pay for 2007 and 2008.

His claim for unlawful deduction from wages was held to be out of time because the payment by the employer of his 2009 holiday broke the series of deductions.

As for his argument based on Stringer, the Tribunal found that since Mr Khan had not requested to take any holiday, he had not been deprived of it and therefore he was not due any payment for it.

Conclusion: (i) employers can deprive a worker of holiday pay for previous leave years by making a payment in lieu of unused holiday accrued in the last year of employment; and
(ii) if employees do not request holiday while they are off sick, they are not entitled to any payment.

4. NATIONWIDE v BENN – TUPE / ETO dismissal

Summary: TUPE provides that a dismissal for a reason related to the transfer is not automatically unfair where it is for “an economic, technical or organisational reason entailing changes in the workforce”. The Claimants were managers who resigned following the transfer of the Portman Building Society to the Nationwide.

The Tribunal found that they had been constructively dismissed, as there was a substantial change in their role and a substantial drop in their earnings. It held that the dismissal was connected with the transfer, but there was an “organisational reason” for the change in terms and conditions which entailed a change in job functions: the Nationwide did not offer similar products to those previously offered by the Portman. The employees argued that to be an “organisational reason” that falls within the ETO defence, the changes must affect the workforce as a whole and not just the transferring employees. The EAT rejected this, pointing out that TUPE itself does not state that the organisational reason “must entail changes in the entirety of the workforce.”

Conclusion: The effect of this case is to widen the scope of the ETO defence and so make it easier for buyers or transferees to satisfy the ETO defence thereby avoiding transfer-related dismissals being automatically unfair.

5. WILLOUGHBY v CF CAPITAL – termination due to misunderstanding

Summary: Miss Willoughby and her employer discussed her becoming a self-employed consultant in order to avoid redundancy. There was agreement as to a monthly retainer and commission but exact terms were not agreed. On 22 December, just before the Christmas shutdown, the company sent her an agreement (on the assumption she had agreed the terms) and a letter which indicated she had agreed to be self-employed and which terminated her employment with effect from 31 December.

On 23 December, Miss Willoughby called the company and said she did not accept the agreement but she accepted that she had been dismissed. When the workplace reopened on 5 January, the company tried to retrieve the situation, indicating there had been a misunderstanding and that if she did not want to accept the terms of self-employment, the situation would continue as before. Miss Willoughby rejected this and brought Tribunal claims.

The Tribunal found that the letter should not be regarded as terminating the employment due to the misunderstanding between the parties. But the EAT disagreed. The effect of an unambiguous dismissal letter is to dismiss the employee. Employers (and employees) should usually be taken to mean what they say. The fact that the company had made a mistake did not count.

As to timing, if the company wished to retract the letter, it needed to act quickly and the intervention of the Christmas holiday period was not a valid excuse.

Conclusion: (i) it is dangerous to make assumptions; and
(ii) once the company learns that it has acted on a misunderstanding, it must act very promptly if it wishes to rectify the situation.

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