Employment Law E-Bulletin Issue 33

• Internal appeal did not change the effective date of termination – Rabess v London Fire and Emergency Planning Authority UKEAT/0029/14/JOJ
• Employers potentially liable for future loss of pension contributions – Griffin v Plymouth Hospital NHS Trust [2014] EWCA Civ 1240
• Non-guaranteed overtime must be included in holiday pay – Bear Scotland Ltd v Fulton and another UKEATS/0047/13, Hertel (UK) Ltd v Woods and others YKEAT/0160/14 AND AMEC Group Ltd v Law and others UKEAT/0161/14

Internal appeal did not change the effective date of termination – Rabess v London Fire and Emergency Planning Authority UKEAT/0029/14/JOJ

The Claimant was dismissed on the grounds of gross misconduct on 24 August 2012. His internal appeal was held on 9 January which reduced the finding of gross misconduct to misconduct. However, since the claimant was already on his final written warning he was still dismissed and was paid 6 weeks’ pay in lieu of notice (PILON), as he would have received this payment if the original decision to dismiss had been with notice.

In light of the date of the internal appeal, the Claimant was outside of the 3 month time limit for bringing an unfair dismissal claim. He argued that the appeal decision and the decision to make a PILON payment changed the effective date of termination of his employment to what would have been the end of his notice period and therefore his claim was in time.

The Employment Tribunal (ET) Judge found that the effective date of termination had not changed because the decision to dismiss was confirmed. The Judge reconfirmed that the last date of service was 24 August 2012 and therefore dismissed the claim for being out of time.

The Claimant appealed to the Employment Appeal Tribunal (EAT).

Dismissing the appeal the EAT distinguished the present case from the decision in Hawes & Curtis v Arfan [2012] ICR 1244. The EAT explained that in the stated case the date of dismissal was expressly changed by the employer as a result of the internal appeal. In the present case, the internal appeal had not been successful and therefore, the effective date of termination had not been changed. Additionally, the EAT clarified that a payment made in lieu of notice does not change the effective date of employment.

Points to Note:

• The effective date of termination will not change when an internal appeal does not change the overall decision to dismiss.
• The ET applies time limits for bringing a claim for unfair dismissal strictly.

Employers potentially liable for future loss of pension contributions – Griffin v Plymouth Hospital NHS Trust [2014] EWCA Civ 1240

The Claimant made a successful claim for constructive unfair dismissal and disability discrimination on the grounds that her employer had failed in its duty under Section 4A of the Disability Discrimination Act 1995 (now repealed), to make reasonable adjustments to return to work. The ET found that should reasonable adjustments have been made, the Claimant would have been able to return to work. The loss of her employment meant that the Claimant also sustained future loss in relation to rights under her final salary pension scheme.

The Claimant appealed to the EAT on the grounds that the award of damages by the ET was too low. The EAT remitted the case to the ET to reconsider the award.  The ET increased the award but the Claimant appealed again arguing that the compensation was too low and disputed the calculation of damages for two reasons. Firstly, she challenged the decision to limit her future loss of earnings to a 12 year period and secondly, she disputed the ET’s use of the simplified approach to the assessment of pension loss, rather than the substantial loss approach. The first point was dismissed by the court.

The Court of Appeal (CA) judge looked closely at the guidance ‘Compensation for loss of pension rights – employment tribunals’ and stressed the importance of the use of such guidance in pension loss cases.

The guidance provides two approaches in the calculation of loss of pension rights. The simplified loss approach and the substantial loss approach. The simplified approach looks at the pension contributions the employer would have made in respect of an employee from the date of dismissal to the date of the hearing, and beyond to such time as the claimant is expected to have found a job with similar benefits. The substantial loss approach involves a more detailed examination of the employee’s pension loss and provides the use of actuarial comparator tables. The ET’s decision to use the simplified approach stemmed from the claimant’s age and the fact that she was some time away from retirement.

Allowing the appeal, the CA concluded that the ET was misdirected and that it had made an error in its decision to apply the simplified approach. Should it have been directed properly the only conclusion which could have been made would be to follow the substantial loss approach. The situation had arisen because the claimant had been in employment with her employer for a considerable period of time, and had not been looking for alternative employment, but would suffer losses up to retirement in respect of pension rights, particularly through the loss of a final salary pension. The matter was remitted back to the ET on the basis that the substantial loss approach was to be used.

The CA invited the parties to compromise on a figure for the damages.

Points to Note:

• Although the simplified approach is the recommended approach in general, this case illustrates that it may not always be appropriate, and its value can be limited where the employee loses future accrual in a defined benefit scheme.
• Although this case was very fact specific, it showed that an employee’s age is not a definitive indicator that the simplified approach is the most appropriate one.

For employees, the case demonstrates the importance of specialist advice on pensions loss where rights under a final salary scheme are lost.

Non-guaranteed overtime must be included in holiday pay – Bear Scotland Ltd v Fulton and another UKEATS/0047/13, Hertel (UK) Ltd v Woods and others YKEAT/0160/14 AND AMEC Group Ltd v Law and others UKEAT/0161/14

In these conjoined cases the EAT has delivered a landmark decision in relation to the way holiday pay is calculated in order to comply with the Working Time Directive (European legislation).

The EAT held that payments for overtime which a worker is required to work but which an employer is not required to offer (non-guaranteed overtime) is “normal remuneration” for the purposes of Article 7 of the Working Time Directive, and the domestic legislation, the Working Time Regulations 1998 (WTR 1998), must be interpreted to achieve this.

This means that non-guaranteed overtime should be taken into account when calculating holiday pay for the purposes of the minimum four weeks’ statutory leave required by the Directive (set out at regulation 13 of the WTR 1998). This does not apply to the additional 1.6 weeks leave provided by regulation 13A of the WTR 1998 which remain subject to the “weeks” pay provisions of the Employment Rights Act 1996 under which only compulsory guaranteed overtime is taken into account in respect of workers with normal working hours.

However, the EAT significantly limited the extent to which workers can make retrospective claims for underpaid holiday. It held that workers cannot use shortfall in holiday pay as part of a series of deductions (for the purposes of unlawful deduction claims) where a period of more than 3 months has elapsed between each deduction. Because the additional 1.6 weeks’ leave does not have to include non-guaranteed overtime, this may mean that it is easier to show a break in the series of deductions of more than 3 months because the additional leave will be paid at the correct rate.

The EAT has given the parties leave to appeal noting that the series of unlawful deduction of wages point is “arguable as well as of public importance”. However, two of the claimants involved have confirmed that they will not be appealing. It is doubtful that the employers will appeal given the favourable decision on unlawful deductions.

The government has announced that it is setting up a taskforce to assess the possible impact on businesses of this decision. This will consist of government departments and seven business representative groups including the CBI, EEF, and the Institute of Directors. This may now be obsolete given the lack of appeals. The government has subsequently introduced a statutory instrument which will cap the period that unlawful deduction claims can cover to two years before the date a claim is issued. Although this cap will only apply to claims made on or after 1 July 2015.

Points to note:

• This case confirms that overtime which a worker is required to work but which the employer is not obliged to provide must be taken into account in calculating statutory holiday pay in respect of the four week leave entitlement under the Working Time Directive.
• Furthermore, allowances which are directly linked to a worker’s work and more than merely expenses must also be included.
• Employers will need to review their staff’s working arrangements to assess whether they have workers who regularly work non-guaranteed overtime or are paid allowances which are more than simply expenses.

Employers should in our view start including these elements of variable pay as soon as possible. Even though there are no scheduled appeals, we think it will not be long before the issue is brought back before the course in other cases.