Related posts:No related photos. Previous Article Next Article Comments are closed. Case roundupOn 1 Nov 2002 in Personnel Today Our resident experts at Pinsent Curtis Biddle bring you a comprehensiveupdate on all the latest decisions that could affect your organisation, andadvice on what to do about themPinnacle ACI Ltd v Honeyman and Cape Industrial Services Ltd Further confusion on TUPE and when new contractors can refuse to engageexisting staff * * * * Cape lost a maintenance contract to its competitor, Pinnacle. Ittold its nine employees who worked on the contract that they were entitled totransfer to Pinnacle. Pinnacle refused to employ them, disputing that TUPEapplied. The employees sued both Cape and Pinnacle for unfair dismissal andredundancy payments. The EAT held that TUPE applied, even without a transfer ofassets or employees. Key pointsPredicting when TUPE applies to contract changeovers is notoriouslydifficult. Here the tribunal correctly applied the latest test set out by theCourt of Appeal, basing its decision on a consideration of all the facts of thecase. While apparently straightforward, this test does make it difficult toanticipate whether a tribunal would find TUPE applied in a case where neitherassets nor employees transfer. While European case law in this area requires either assets or employees totransfer, domestic law stresses that if neither transfers, the tribunal mustexamine why. This means examining all the facts surrounding the non-transfer ofemployees, not just whether the new contractor’s motive in refusing to take onstaff was to defeat TUPE. It was thought one ‘good’ reason for not taking on the old staff might bethat the new contractor could resource the contract using its existing workers.However, Pinnacle failed in that argument in this case. It had just lost a contractat another site and so had a ready workforce for the contract it won from Cape.But Pinnacle was employing a similar number of staff to Cape and thetribunal considered that had it not lost the other contract, Pinnacle wouldprobably have recruited Cape’s employees. The same service would have beenprovided by the same skilled workforce, which would clearly have been atransfer of an undertaking. The EAT held this was a permissible conclusion. This case indicates thateven the ability to staff the contract with an existing workforce may notprevent TUPE from applying. The difficulty is this approach focuses not just onthe facts in the case but on what the position would have been had differentfacts applied. What you should do – Incoming contractors should assume that TUPE will apply unless there is areally strong argument to the contrary. – Contractors should seek to include TUPE costs when pricing their bid,rather than seek to undercut the incumbent, only to face unfair dismissal andtermination liabilities. – Client organisations should consider obliging new contractors to applyTUPE to avoid disruption to services or an attempt to increase the contractprice if a TUPE dispute arises. – See 26 for more on TUPE. Gate Gourmet v Jangra, EAT The dangers of acting too hastily in ill-health terminations * * * * After an accident at work, the applicant developed a medicalcondition that prevented her carrying out her job working on conveyor belts.She was absent from work and it was not clear when she would be fit to return.An attempt to return to lighter duties was unsuccessful. After 16 monthsabsence, a meeting took place at which a manager decided to dismiss theapplicant with immediate effect as there was no clear prospect of her returningto work. She was encouraged to reapply for work when she was fit. Sheunsuccessfully appealed, by which stage her condition had worsened. However, she succeeded in a complaint of unfair dismissal and disabilitydiscrimination. The tribunal considered the termination meeting had beenconvened too hastily and that the employee should have been warned that themeeting could result in termination. The EAT allowed the employer’s appealpartly on the ground that the tribunal had failed to consider properly the defenceof justification to the disability discrimination complaint. Key pointsThis case usefully illustrates the need to ensure that employees are givenproper warning that their employment is under threat before ill-health reviewmeetings or disciplinary hearings. This will be even more important when thestatutory procedures under the Employment Act come into force next year – afailure to provide this information in writing will make the dismissalautomatically unfair and may result in a 50 per cent increase in compensation. A further feature of the case was that the decision to dismiss was takenwhile the applicant was awaiting test results. The tribunal was very criticalof this on the grounds that it was unreasonable not to have waited the short periodof time for the full medical picture to emerge. For that reason, it consideredthe dismissal not to be justified under the DDA. Although the EAT considered that the tribunal had failed to apply thecorrect test on justification, the case illustrates the risk of jumping thegun, not least because the EAT considered that justification should be judgedat the date of the discriminatory act – facts discovered after terminationcould not be relied on. What you should do – Have written procedures for ill-health terminations. – Train managers to follow the procedures and to be aware of the keypractical pitfalls. – Give proper warning to employees if a review or disciplinary meeting couldlead to their dismissal. – Ensure the full medical picture is available before deciding to dismiss. – Remember the need to consider reasonable adjustments under the DDA. – Managing Incapacity is the theme for next month’s employers’ Law briefing,to be held on 5 December at the British Library in London. See page 16 for moredetails. Cobley v Forward Technology Industries Plc, EAT Automatic dismissal of a director when he was ousted from the board wasfair * * * Cobley was employed by Forward Technology as managing director and wasa member of its board of directors. He led an unsuccessful management buy-outof the company, which was ultimately taken over by another company, Crest. Cobley was voted off the board and at an extraordinary general meeting, aresolution to remove him as a director was carried. His contract provided thatin such circumstances, his employment would terminate automatically. Thetribunal’s rejection of Cobley’s claim of unfair dismissal was upheld by theEAT. Key pointsThe company argued two potentially fair reasons for Cobley’s dismissal. Onewas his conduct in attempting to buy the company at half its market valueduring the MBO and his persistence in pursuing it, which substantiallyincreased the price Crest had to pay. However, the tribunal found that theprimary reason for Cobley’s dismissal was “some other substantialreason” – the acquisition by Crest which resulted in Cobley’s removal asdirector and employee. On appeal, the EAT agreed this was a legitimate reasonfor dismissal. An employed MD must also be a member of the board of directorsand this was reflected in Cobley’s contract. The next issue was whether the company had acted reasonably in dismissingCobley for that reason. Against the background of the takeover battle, to which Cobley had led theopposition, it was inevitable that he would cease to be a director when Cresttook control. The new owners were entitled to replace the board. Cobley was anexperienced businessman and would have been aware that, having lost thetakeover battle, he was at risk of being ousted. What you should do – Remember that in many cases, contractual damages could be much greaterthan the maximum unfair dismissal award. – Ensure that executive directors’ contracts provide for automatictermination if they are removed from the board. – Ensure that board meetings and EGMs held to remove directors are properlyand lawfully constituted otherwise the dismissal may be in breach of contract. – When dealing with senior executive terminations, bear in mind that seniorexecs may be well placed to mitigate any losses through alternative employment.This may provide scope for negotiating a severance package which is lessexpensive than a payment in lieu of notice. Make sure you have your equal opportunities policies in orderUchendu v International MarketingGroup (UK) Inc and Others, EATPutting equal opportunities policies into practice can pay dividends indefending discrimination complaints* * * * * The applicant was employedby a marketing company as a secretary in its hospitality division. This was an‘aggressive’ marketing environment staffed by female employees. The applicant’scomplaint of sex discrimination related to the action of a male employee whojoined the department shortly after her. On a number of occasions, he asked theapplicant whether she would be wearing her “fuck-me boots”, a termcommonly used within the department by the female employees to refer to knee high,black, leather boots with high heels. She did not appear upset or indicate thatthe behaviour was unwanted.When she resigned, she made no complaint of sexual harassment.She then met with a personnel manager, and after complaining about her workloadand other members of the team, she also complained about the male employee’scomments.When asked if she wanted any action to be taken, she gave noresponse. The personnel manager investigated the issue anyway, and when theapplicant brought tribunal proceedings, the company took disciplinaryproceedings against the male employee and gave him a warning for the use ofinappropriate language.The tribunal rejected the sexual harassment complaint. Theapplicant had not suffered any detriment nor had there been any less favourabletreatment. The expression was part of the normal language used in thehospitality division. The applicant had not objected to its use and was foundto be oversensitive compared with other women in the division. Isolatedcomments from a new staff member did not create an intimidating, hostile orhumiliating working environment.The EAT upheld this conclusion, and agreed the company hadtaken all reasonably practicable steps to prevent discrimination.Key pointsThis decision is extremely unusual. The tribunal’s finding that there hadbeen no sexual harassment at all in this case appears to have been reachedlargely because the offending expression was regularly used by other women inthe department. This case does not mean employers should not crack down oninappropriate language. Other cases on sexual harassment indicate precisely theopposite – what is mere ‘banter’ to some may legitimately be consideredobjectionable byothers. Perhaps the absence of any objection by the employeealso influenced this part of the tribunal’s decision.Of wider significance is the finding that the employer couldhave successfully relied on the statutory defence to sex discrimination underSection 41 (3) SDA 1975.This allows employers to escape liability if they can show theyhad taken all reasonably practicable steps to prevent the act ofdiscrimination. This defence is notoriously difficult to substantiate. However,the EAT concluded it was extremely difficult to see what else the employercould have done.The company had a comprehensive equal opportunities policy,copies were provided to new recruits and the policy was reinforced duringinduction training.The tribunal had also taken account of the employer’s responseto the complaint. While only steps taken prior to the act of discrimination canbe relied upon to support the statutory defence, the EAT considered thatsubsequent actions – here the conscientious investigation of the complaint andthe disciplinary action – were relevant to show the equal opportunities policyhad real teeth.What you should do– Ensure you have comprehensive equal opportunities andanti-harassment policies which include clear statements about what behaviour isunacceptable in the workplace and a clear procedure for dealing with complaints.– Communicate the policies to new staff throughtraining/induction programmes.– Provide ‘refresher’ training regularly.– Train managers to recognise cases of harassment and respondappropriately.– Challenge inappropriate or offensive behaviour throughinformal counselling or disciplinary proceedings.