In this article we analyse the following five recent employment law cases and discuss the takeaway points for HR professionals and employers:
- USDAW v Tesco Stores Ltd
- R Sunderland v Superdry PLC
- Forstater v CGD Europe & others
- Mackereth v DWP
- Harpur Trust v Brazel
USDAW v Tesco Stores Ltd: “fire and rehire” of Tesco employees can go ahead
The Court of Appeal has overturned a High Court injunction that prevented Tesco from using the process of “fire and rehire” to remove a contractual pay benefit from its employees.
Tesco had introduced the concept of “Retained Pay” for employees during a previous reorganisation of its distribution stores in 2007. It was intended as an uplift to their existing salaries and as an alternative to lump sum redundancy payments and a relocation incentive. The regular payment of Retained Pay was described as being “guaranteed for life”, and Tesco had been clear with staff that they would continue to benefit from it for as long as they were employed in their roles.
Despite these assurances, last year Tesco attempted to remove the benefit by offering a lump sum of 18-months’ worth of Retained Pay in exchange for giving up the regular benefit. Should the employees not agree, dismissal and re-engagement (known as “fire and rehire”) was threatened as an alternative. USDAW, as the recognised trade union, sought an injunction arguing that the employees’ contracts contained an implied term preventing Tesco from exercising its right to terminate employment for that specific purpose.
The High Court granted the injunction and held that a reasonable person would interpret the word “permanent” in this context to mean “for as long as the relevant employee is employed by Tesco in the same substantive role”. The Hight Court held that there was an implied term preventing Tesco from removing the employees’ permanent right to Retained Pay by terminating the employment contracts on contractual notice.
The Court of Appeal has now overturned the High Court’s decision. It held that the High Court was wrong to find that it was the intention of both parties to limit the circumstances in which Tesco could bring the contracts to an end. There was no basis for implying a term into the employment contracts to that effect. Instead, the wording in the contract should be given its ordinary meaning, which meant that Tesco could give the employees notice of dismissal in the normal way and Retained Pay would only last as long as the employment contract continued. It was not appropriate for an injunction to be granted for an indefinite period preventing Tesco from dismissing employees.
The decision by the Court of Appeal to overturn the injunction marks a return to the accepted understanding of “fire and rehire” practices. As always, the legal risks associated with this option for pushing through contractual changes (e.g. unfair dismissal claims) should be balanced against the commercial and financial need for the changes, despite ongoing employee opposition.
An economic downturn often results in a need for businesses to reduce employment costs. As such, we may see an increasing number of employers turn to this option if employee consultation fails to yield agreement to contractual changes. However, employers may recall from our May article that the Government has announced its intention to publish a new statutory Code of Practice on “fire and rehire” practices, with the power for employment tribunals to uplift employee compensation by up to 25% if an employer unreasonably fails to comply with its requirements. It remains to be seen whether the new Government will consider this a priority.
R Sunderland v Superdry Plc: age discrimination in promotion practices
This was a decision of an Employment Tribunal in which Superdry was held to have directly discriminated against a 56-year-old knitwear designer during its performance review and promotion processes.
Ms Sunderland was employed by Superdry as a knitwear designer. She brought several employment claims, including unfair dismissal and age discrimination, highlighting eight colleagues as comparators (seven of whom were younger than her) who had been promoted to or hired into ‘senior’ and ‘lead’ designer ahead of her, despite her favourable performance reviews.
One of the factors that formed part of Superdry’s performance management process was the fact that Ms Sunderland was considered a “low flight risk” from the business i.e. she was unlikely to leave and the impact of her leaving was considered to be “medium”.
The Tribunal agreed with Ms Sunderland’s argument that she should have been promoted and had not been given sufficient explanation as to why that had not occurred. Superdry argued the failure to promote Ms Sunderland was due to her inability to work on a multi-disciplinary basis. However, this did not reflect her experience of working in different knitwear categories and taking on additional responsibility during a colleague’s maternity leave.
The Tribunal also held that the “flight risk” aspect of the performance assessment process was “based on nothing more than managerial conjecture” and was likely to be to the disadvantage of older people. Similarly, the criteria for promotion were flawed, leaving key elements undefined and ambiguous. As such, Ms Sunderland succeeded with her direct age discrimination claim and was awarded approximately £96,200 in compensation (comprised of financial loss, a basic award, injury to feelings and interest).
The case is a reminder of the importance of adopting clear and objective performance criteria when it comes to appraisals and promotion decisions. If an employee has not hit the mark in terms of performance, feedback should ideally be prompt and constructive, with a plan for improvement.
A detailed paper trail which supports an employer’s decision-making should also be kept. As well as good practice, it will assist with defending any allegations that the performance process was tainted by discrimination.
At a preliminary stage of this case, the Employment Appeal Tribunal (EAT) confirmed that gender- critical views were capable of amounting to a “philosophical belief” which meant that they were protected under the Equality Act 2010. The decision attracted much publicity last year, but the question of liability had not yet been heard. This was considered by an Employment Tribunal at a further hearing.
Ms Forstater’s claims of direct discrimination and victimisation on the grounds of her gender-critical protected belief have now been upheld, with compensation to be assessed at a future remedies hearing.
Ms Forstater was a visiting fellow and consultant appointed by CGD Europe, an international development think-tank. She believes that sex is an immutable biological fact and that while someone can identify as a different sex, this does not change their actual sex, therefore trans women are men. Ms Forstater engaged in debate on social media about gender identity issues and posted gender-critical material on Twitter, as well as bringing materials from a campaigning organisation into the office. This led her colleagues to complain that they found her views offensive. CGD subsequently took the decision not to renew her fellowship and to remove her profile from their website.
Ms Forstater brought claims for philosophical belief discrimination, indirect discrimination, harassment and victimisation in the Tribunal. A key issue for the Tribunal was whether Ms Forstater’s social media posts i.e. the manifestation of her beliefs, were inappropriate or objectionable. It reviewed the contents of her Tweets and unanimously concluded (other than in one instance) that this was not the case. She was simply asserting her beliefs. While mockery of an opposing view could in some cases be objectively unreasonable, it was not in Ms Forstater’s case and in any event was “part of the common currency of debate”.
Further, even if she had manifested her beliefs in an inappropriate manner on one occasion, it would not necessarily have been sufficient to justify action being taken against her.
The claim of direct discrimination in relation to CGD’s decision not to renew Ms Forstater’s visiting fellowship therefore succeeded. Further, CGD had removed Ms Forstater’s profile as a visiting fellow from its website, which the Tribunal held was an act of victimisation.
This well-publicised case highlights the difficult balancing act that employers face when dealing with an employee’s expression of personal beliefs in the workplace. While complaints from colleagues cannot be ignored, any subsequent action taken against the employee will risk infringing their protections under the Equality Act.
As part of their approach to such as issue, employers should consider (for example) the nature of the employee’s role and duties, whether the beliefs and the way they are expressed are objectionable and/or inappropriate, and the potential impact on the employer’s reputation.
The decision also serves as a reminder that social media use by employees can have far-reaching consequences. It is prudent to have a robust IT & internet policy which addresses social media use, clarifying the employer’s expectations and flagging when an employee’s online activities will overstep the mark. In the present case, Ms Forstater eventually included a disclaimer on her Twitter account to the effect that her views were not those of CGD.
Each case will inevitably turn on its own facts. Ms Forstater had stated she would respect a person’s choice of pronouns, despite her beliefs. That is often a key issue in the gender debate. The case of Mackereth below demonstrates that it can result in a different outcome.
Mackereth v DWP – was a protected belief the reason for the employee’s treatment?
This case contrasts with the Forstater decision discussed above. Although it also concerns a protected belief in relation to gender-critical views, the DWP’s treatment of Mr Mackereth was held not to amount to discrimination on the facts.
Dr Mackereth is a Christian doctor who believes that a person cannot change their sex or gender at will and has a lack of belief in transgenderism. During his induction training for a role carrying out health and disability assessments for the DWP, he made it clear that his beliefs meant that he would not agree to use the preferred pronouns of transgender service users.
This was in direct conflict with the DWP’s internal policies. After the DWP determined that there was no practicable alterative to Mr Mackereth having to deal with transgender people during his role, his employment ended when he chose to leave.
The EAT held (reversing the decision of the Tribunal which originally heard the case) that Dr Mackereth’s belief and lack of belief met the necessary five-stage test derived from the leading case of Grainger plc v Nicholson and were therefore protected, similarly to those held by Ms Forstater.
However, Dr Mackereth’s claims for direct and indirect discrimination failed. It was held that the DWP had not subjected him to less favourable treatment because of his beliefs. Any health assessor would have been treated the same way, regardless of their beliefs. The policy requirement to use the correct pronouns was also a necessary and proportionate means of meeting the DWP’s aim of focussing on the needs of potentially vulnerable service users.
The gender debate continues to pose tricky issues for employers. While difficult to navigate, there is a difference between an employee holding certain beliefs and the way in which the employee chooses to manifest them in the workplace (in this case misusing pronouns). While the former may be protected, employers may still exercise proportionate control over the latter, where this is in pursuit of a legitimate aim. Dr Mackereth has sought permission to appeal to the Court of Appeal, so further guidance may be provided in the future.
The EAT also confirmed that the threshold for establishing protection for an employee’s beliefs under the Equality Act is low. Even offensive employee beliefs can be protected, provided that they do not have the effect of destroying the rights of others.
The Supreme Court has clarified the calculation of holiday pay for part-year workers (i.e. those who are engaged for the whole year but only work for part of it, such as teachers). In summary, the 5.6 weeks’ paid holiday entitlement under the Working Time Regulations 1998 (WTR) should not be pro-rated for part-year workers.
Ms Brazel is a visiting music teacher who works under a zero-hours contract during term time for the Harpur Trust. Each week she works different hours, depending on how many students need music lessons and is only paid in respect of her teaching hours.
This long running case involved a claim for unlawful deductions from wages which Ms Brazel brought in relation to Harpur Trust’s calculation of her holiday pay. In 2011, the school altered its method of calculation (to Ms Brazel’s detriment) so that she was paid an amount equating 12.07% of the hours worked by Ms Brazel over the relevant term. However, Ms Brazel argued this this calculation was inaccurate for a part-year worker because it results in weeks where a worker is not accruing holiday, despite the fact they remain under contract.
The EAT, Court of Appeal and Supreme Court have all decided in Ms Brazel’s favour. The pro-rata method of calculation is incorrect for part-year workers. Instead, holiday pay entitlement for part-year workers should be calculated in line with the WTR method, which averages pay entitlement over a look-back reference period (now 52 weeks). The practical result for Ms Brazel was an effective calculation of 17.5% of the hours that she worked. The fact that this was higher than would be the case for a full-time worker who worked regular hours was not enough reason to ignore the statutory provisions of the WTR.
While this decision is likely to be of greater impact in certain sectors such as education, managing the paid holiday entitlements atypical workers can often cause employer headaches. The 12.07% of hours worked calculation has been a common approach in the past when it comes to workers without normal working hours, and previous ACAS guidance has reflected that.
However, moving forward, employers who have such workers should review their current approach, both from a legal compliance perspective and to take account of the commercial implications of potentially higher rates of holiday pay.