Case round upOn 1 Oct 2002 in Personnel Today Comments are closed. Previous Article Next Article Ourresident experts at Pinsent Curtis Biddle bring you a comprehensive update onall the latest decisions that could affect your organisation, and advice onwhat to do about them Cantor Fitzgerald v Bird and Others High Court Unreasonable treatment of employees can undermine restrictive covenants * * * Three of Cantor’s employees were poached by a rival broking firm,ICAP, and they left without giving contractual notice. Cantor alleged that theemployees were in breach of contract and sought damages and injunctive reliefagainst them and ICAP for unlawfully inducing breaches of contract. Theysucceeded only in relation to one employee as the High Court ruled Cantoritself had repudiated the other two contracts because of the manner in which anew remuneration package had been introduced. As Cantor itself was in breach ofcontract, it could not prevent the employees from joining ICAP. This is typical of the arguments deployed when staff are poached bycompetitors. Employees seeking to escape notice periods and post-terminationconstraints frequently argue that they have been constructively dismissed,because if the employer commits a fundamental breach of contract, the contractno longer binds the employee at all. As in this case, the stakes can be high –employers may lose valuable restrictive covenants. Employees and their newemployer may be liable in damages and both parties run the risk of substantialcosts. The employees relied on breaches by Cantor of the implied duty of mutualtrust and confidence. The different outcomes in the cases against theindividual employees reflected the different styles of the senior managers whohad introduced the new remuneration package. Cantor had tried to unilaterallyvary the contracts of employment and in the case of two employees, the seniormanagers had behaved unreasonably, advancing the proposal in a hostile andthreatening manner. In the case of the other employee the senior manager hadbehaved more reasonably. What you should do – Always ensure that confidential information and customer connections areadequately protected against post-termination competitive activities.Protective measures include substantial notice periods, garden leave clausesand tightly drafted restrictive covenants. – Include payment in lieu of notice clauses in employment contracts. Theseallow employers to terminate without notice (albeit with a payment in lieu ofnotice) without losing the protection of restrictive covenants. – When recruiting staff from competitors, always check which restrictivecovenants will apply, and take advice as to whether these are enforceable. – If relying on a constructive dismissal argument to escape covenants ornotice periods, make sure that the argument is credible. – Recognise that treating staff badly can amount to a breach of the expressor implied terms of the contract. This can not only lead to disaffection anddefections, but render even the best-drafted protections worthless. Astley &Others v Celtec Ltd Court of Appeal A TUPE transfer can take place in stages, and the process oftransferring employees can extend over a substantial period * * * * * This case arose from the creation of Training and EnterpriseCouncils (TECs) in the early 1990s. Although the TECs took over certainfunctions of the then Department of Employment, many DoE civil servants did notactually transfer to the TECs immediately, instead only being seconded to workin the TECs. Over time, seconded staff could take up direct employment with theTECs, and this migration of staff took place during a six-year period. Theissue was whether they transferred under TUPE at that stage, with continuity ofemployment preserved. The critical issue was whether TUPE applied only from the date the TECsbegan to function, or whether there was a ‘staggered’ transfer over a period oftime. Rejecting the conclusion of the EAT, the Court of Appeal considered thateach time a seconded DE employee took up employment with the TECs, this was aseparate transaction in the overall process of the transfer of the undertakingfrom the DE to the TECs. There was no reason in principle why that transferprocess could not extend over several years. The Court of Appeal analysed the position under the Acquired RightsDirective rather than TUPE, as the directive was directly applicable in thiscase. The directive was held to be sufficiently wide to embrace a transfer of abusiness over a period of time. The Court acknowledged that the wording of TUPEmay be difficult to reconcile with this result, but it is likely that a similarpurposive approach would be adopted in cases on the TUPE regulationsthemselves. What you should do The decision is particularly relevant where the transferor wishes to retainsome staff for a limited period to assist in post-transfer issues. To avoid theuncertainties of the ‘transfer in stages’ approach, transferors should seek toeither: – Agree with the transferee and transferring staff themselves on a processof staged transfers, and that this will not undermine protection under TUPE, or– Allow all staff to transfer on a single date but agree that certainemployees will be seconded back to the transferor for a limited period. Carruth v Macfarlane Packaging, EAT A reminder of the vital importance of using a reasonable selection poolin redundancy exercises * * * This appeal concerned the tribunal’s assessment of compensation for anunfair redundancy dismissal but illustrates some critical points to bear inmind in redundancy exercises. The finding of unfair dismissal arose from the employer’s failure toidentify an appropriate pool from which to select employees for redundancy. Theapplicant was the only employee considered for redundancy, even though anotheremployee with a different job title performed essentially the same work. Theapplicant had longer service than this other employee and was more experienced.These factors should have been taken into account. The tribunal awarded compensation on the basis that had a proper selectionpool been used and appropriate selection criteria applied, the applicant wouldhave been retained, at least until some months later when the other employeewas also made redundant. The EAT said the tribunal should have consideredwhether to give compensation beyond that date on the grounds that adequateconsultation on his redundancy would have identified alternative employmentwhich would have continued for a longer period. What you should do – Remember that it is vital to use a reasonable selection pool. If the poolis unreasonable the dismissal will be unfair, no matter how thorough yourconsultation process. – Identifying the wrong pool may also make selection criteria unreasonable. – Concentrate on skills and types of work rather than simply on job titles,grades or departments/business units. Ensure the pool includes employees withinterchangeable skills. Pratley v Surrey County CouncilHigh Court Stress claim fails because employee concealed her true medical conditionfrom employer * * * The claimant’s claim for personal injuries arising from occupationalstress was rejected by the High Court on the grounds that she had deliberatelyconcealed the true state of her health from her employer. As a result, therewas no basis on which the employer could have anticipated a risk to injury toher health. This case follows the Court of Appeal guidance earlier this year inSutherland v Hatton in emphasising that the employer’s duty of care to protectworkers from the risk of stress-related illness is only triggered if the riskof injury to health has been made sufficiently clear, so that a reasonableemployer would appreciate something should be done to avert it. In this case the employee had specifically requested that her doctor shouldnot refer to stress in her sick notes as she was anxious not to be seen to bestruggling with her workload. In these circumstances, the more generalindications of a high and at times unreasonable workload were insufficient totrigger the duty of care in the absence of a clear and specific warning of animmediate risk to health. What you should do – Introduce and implement a stress management policy. – Be alert to signs from the employee and the workforce in general of risksto health. The absence of a specific complaint from an individual will notalways mean a stress claim cannot succeed. – Remember that the causes of stress can give rise to other types of legal liability,including constructive dismissal claims or discrimination/harassmentcomplaints. – Remember that the cost to business of stress related absence is enormouslyhigh, even in the absence of legal liability for damages. Proactive steps toprevent or reduce stress have direct financial benefits. Case of the month by Christopher MordueAge limit on employment rights deemed discriminationRutherford v Towncircle Ltd (t/a Harvest) employment tribunalTribunal allows over-65s to claim unfair dismissal and redundancypayments * * * * * Two employees aged 67 and 71 at the time of their dismissals, claimedunfair dismissal and statutory redundancy payments. On the face of it, theclaims were bound to fail – the Employment Rights Act 1996 states thatemployees cannot bring such claims if at the time of the dismissal they areaged 65, or have reached their employer’s normal retiring age. However, the employment tribunal held that the upper age limit wasindirectly discriminatory on the grounds of sex and breached Article 141 ECTreaty. The tribunal agreed the statutory age limit disproportionately affectedmale employees. Labour Force Survey statistics showed a disproportionate impacton the number of male and female employees in ten-year age ranges above andbelow the upper age limit. The tribunal rejected the Government’s attempt to justify the discriminatoryeffect of the age limit on grounds other than sex. For both statutoryredundancy payments and the right to claim unfair dismissal, the upper agelimit had been linked to the age at which employees could draw the statepension – as employees approached State retirement age they had a reducedexpectation of continued employment. Previously the upper age limit was 60 forwomen and 65 for men. This was revised to 65 for men and women following an ECJruling in Marshall in 1986. However, women remained entitled to draw the Statepension at 60, a right not given to men. The tribunal considered that the policy behind the upper age limit waslinked to the state pension age and therefore tainted by sex discrimination,and held that the Government should have remedied this inequality beforeRutherford’s dismissal in 1998. The Rutherford case is only a tribunal decision and in itself creates nobinding precedent. The case is to be appealed by the DTI, and employers willnaturally await the results of that process with interest. Although this caseconcerned employees who were dismissed after reaching 65, it is possible thatthe same arguments would apply to employees automatically dismissed at 65 orany other normal retirement age. If so, the decision could be of much widersignificance. This case has obvious parallels with the protracted Seymour-Smithlitigation, which challenged the then two-year qualifying period for the rightto claim unfair dismissal on the grounds that it indirectly discriminatedagainst female employees. The House of Lords rejected that argument holding thedisproportionate impact was objectively justified on grounds other than sex. However, in the lengthy period before that decision, a great many claimswere presented to employment tribunals from those with less than two years’service, only to be stayed for several years. It is possible that a similarsituation will now arise. What you should do – Do not assume that employees dismissed after the age of 65 will be unableto claim unfair dismissal. Apply the same procedural safeguards as you would toemployees below the upper age limit. – Until a more definitive ruling is obtained, you can still withholdredundancy payments from those over 65 but be aware of the risk that you mayultimately have to pay out. – If unfair dismissal complaints from those dismissed on or after reaching65 are stayed pending a more definitive ruling, you will need to protectyourself from the practical problems such inactivity creates. The ability of witnesses to recall events diminishes over time and indeed,key witnesses may leave the company. Ensure documentary evidence is retainedand statements are taken while events are still fresh. Related posts:No related photos.