Employment Law E-Bulletin – Issue 90

  • Rights to participate in share incentive plan transferred under TUPE – Ponticelli UK Ltd v Gallagher [2023] CSIH 32
  • Increase in civil penalties for illegal employment
  • Employer’s online application form triggered duty to make reasonable adjustments for candidate with dyspraxia – AECOM Ltd v Mr C Mallon: [2023] EAT 104

Rights to participate in share incentive plan transferred under TUPE – Ponticelli UK Ltd v Gallagher [2023] CSIH 32

The recent case of Ponticelli UK Ltd v Gallagher [2023] CSIH 32 considered whether an employee’s right to participate in a share incentive plan transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).

Mr Gallagher (the “Claimant”) was employed by Total Exploration and Production UK Limited (“Total”) and participated in a share incentive plan. This plan was not mentioned in his employment contract.

The Claimant’s employment transferred to Ponticelli UK Ltd (the “Respondent”) under TUPE in May 2020. The Claimant’s participation in the share incentive plan with Total ended and he was not offered a comparable share scheme. Instead he was to receive a lump sum payment of £1,855. The Claimant rejected the offer and brought a tribunal claim, arguing that he had the right to participate in an equivalent scheme following the transfer.

The Employment Tribunal and Employment Appeal Tribunal upheld the claim, finding that as the Claimant’s rights to participate in the plan formed an integral part of his financial package, they arose “in connection with” his contract of employment for the purposes of TUPE. The Claimant’s rights to participate in the plan had therefore transferred under TUPE and he was entitled to participate in a plan of substantive equivalence or comparable value to the plan operated by Total.

The Respondent appealed to the Court of Session. Their main ground of appeal was based on the decision in Chapman v CPS Computer Group plc [1987] IRLR 462, CA. In Chapman, the Court of Appeal had held that employees who had been transferred out of a company had been made redundant for the purposes of a share option plan they were members of. As a result, this allowed them to exercise their options. The Respondent used Chapman as authority that where a share option plan is separate from the contract of employment, the rights under the plan do not transfer under TUPE.

The Court of Session decided that Chapman was of no assistance. This was because the case only considered whether the option holders had ceased to be employees by reason of redundancy and did not address whether rights under the share option plan were “connected with” the contract of employment and capable of transferring under TUPE.

The Court of Session dismissed the appeal.

Points to note:

This is a notable decision that makes clear that that a share scheme, even where not mentioned in the contract of employment, can arise ‘in connection with’ the employment contract as part of an employee’s broader financial package.

The decision will present practical difficulties for organisations who may find themselves as incoming employers (transferees) in a TUPE transfer, particularly if they do not operate a similar share scheme for their existing employees. This could apply to other benefits, such as bonuses or commission, which are considered to be ‘in connection’ with employment, meaning incoming employers then having to implement a substantially equivalent benefit post transfer.

As an employer, if you are involved in a transaction where TUPE applies, it is key that you establish whether the outgoing employer (the transferor) operates a share scheme, or other benefits, and gain full insight into how they operate. In doing so, you will be able to determine the true extent of your obligations post-transfer and address any issues before the transfer takes place.

Increase in civil penalties for illegal employment

The Government have recently announced a threefold increase in the civil penalties that will apply to employers who fail to carry out their obligations to employ individuals who do not have the appropriate right to work and reside in the UK. These changes, which are expected to come into force at the beginning of 2024, will see civil penalties rise from £15,000 per illegal employee up to £45,000. Repeat breaches will attract a fine of up to £60,000, a penalty which is currently £20,000.

Points to note:

For employers, this announcement underscores the importance of conducting thorough right to work checks for all employees before and during employment. To comply with their obligation to prevent illegal working, employers must:

  • Carry out right to work checks on all prospective employees before employment commences.
  • Conduct follow-up checks on employees who have time-limited permission to live and work in the UK.
  • Keep records of all the checks carried out.
  • Not employ anyone they know or have reasonable cause to believe is an illegal worker.

Employer’s online application form triggered duty to make reasonable adjustments for candidate with dyspraxia – AECOM Ltd v Mr C Mallon: [2023] EAT 104

The Employment Appeal Tribunal (“EAT”) has held that an employer’s online application form put a candidate with dyspraxia at a substantial disadvantage, and therefore triggered the employer’s duty to make reasonable adjustments.

In April 2017, Mr Mallon (the “Claimant”) commenced employment with AECOM Ltd (the “Respondent”) in its Birmingham office. In December 2017, the Claimant was dismissed for unsatisfactory performance. In August 2018, the Claimant wished to apply for a role in the Respondent’s Fiscal Incentives team in London. To apply, he was required to complete an online application form and he was unable to create the required username and password because of his disability.

The Claimant emailed the Respondent asking that he be permitted to make an oral application because of his disability. The Respondent maintained its position that the Claimant was required to complete the online form but informed him that he should let them know of any particular difficulties he had in doing so. The Claimant did not confirm the difficulties he was facing and repeated that he would prefer to make an oral application.

Unable to complete the online form, the Claimant brought a claim for failure to make a reasonable adjustment, being an oral job application. In 2019, the Employment Tribunal struck out the claim on the basis that it had no reasonable chances of success. In 2021, the EAT upheld the Claimant’s appeal. The case was remitted to a reconstituted Employment Tribunal.

The Employment Tribunal upheld the claim, stating that the Respondent had sufficient knowledge of the disadvantage and that although it did not know of the Claimant’s particular difficulties, it was unreasonable to expect an explanation by email and they should have telephoned the Claimant to ask for more details.

The Respondent appealed to the EAT, arguing that the Claimant was not a genuine applicant as he had already been dismissed from a similar role and that they had not come under a duty to make reasonable adjustments because the Claimant had not explained his specific difficulties. The EAT upheld the Employment Tribunal’s findings that the Respondent was under a duty to make reasonable adjustments. It ruled that the Claimant was a genuine applicant, as he was applying to work in a different team from that he had worked in previously.

The case was remitted to the Employment Tribunal for reconsideration as to whether the Claimant was a genuine applicant for the role.

Points to note:

This case is a useful reminder for employers to consider their internal procedures when recruiting employees and whether any candidates require reasonable adjustments.

As an employer, you should make reasonable efforts to confirm whether candidates have a disability, and if they do, you must confirm whether they require any reasonable adjustments. In this instance, enquiries should be made via telephone for candidates who have difficulties with written communication.

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