Frontline UK Employment Law Update Edition 26 2024 - Case Updates

1. De Bank Haycocks v ADP RPO UK Ltd [2023] EAT 129
2. Brooks v Leisure Employment Services Ltd [2023] EAT 137
3. Ajaz v Homerton University Hospital NHS Foundation Trust [2023] EAT 142
4. SPI Spirits (UK) Ltd v Zabelin [2023] EAT 147

1. De Bank Haycocks v ADP RPO UK Ltd [2023] EAT 129 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) allowed an appeal against the Employment Tribunal’s (“ET”) ruling that an employee was not unfairly dismissed for redundancy. The EAT found that the dismissal was unfair due to a lack of meaningful consultation at the early stages of the redundancy process.

The Claimant was one of 16 persons employed by the Respondent, a UK subsidiary of a US recruitment company, to recruit employees for a single client organisation. During the early stages of the COVID-19 pandemic, demand for new employees at that client had effectively halved, and in May 2020, the Respondent decided to reduce its recruiter headcount. The Claimant’s manager was given a standard scoring and selection matrix by the Respondent’s US parent company. The 16-person team were scored on entirely subjective criteria, and the Claimant ranked in last place. The Respondent decided to reduce the team by two.

The Respondent later held a consultation with the Claimant, explaining the need for redundancies, and inviting the Claimant to suggest alternatives to redundancy. The Claimant was not informed of his ranking in the scoring process. Following a further meeting, the Claimant was invited to a final meeting, at which he received a dismissal letter. 

The Claimant appealed against his dismissal, complaining that it was procedurally unfair due to an absence of any meaningful consultation, and an entirely subjective scoring process. By the time of the appeal hearing, the Claimant had been provided with his scores, but not those of his colleagues. The Claimant’s appeal was rejected and he brought a claim for unfair dismissal. 

The ET dismissed the claim. While the ET noted that the Claimant had not known of his scores until after he was dismissed, it found that the Claimant had not demonstrated that his score should have resulted in a higher ranking, and that the Respondent’s redundancy and appeal procedures were fair and reasonable.

The Claimant appealed to the EAT, arguing that the ET had failed to consider the issue of the absence of consultation.

The EAT agreed. They highlighted that employers act within the band of reasonable responses in redundancy cases where their procedures follow “good industrial relations practice”. However, what amounts to good practice will vary widely, depending on the type of employment, workforce and the specific circumstances giving rise to the redundancy situation. There had also been radical changes in the nature of employment since the 1980s when most of the leading cases were decided.

The EAT noted a reduction of trade union membership outside the public sector. Legislation catered for situations where employees lack trade union membership, by providing for the election of employee representatives. Regardless of which type of representatives are consulted, the EAT observed that consultation should generally occur at the formative stages of a redundancy situation. However, a distinction had arisen between the terms “collective” and “individual” consultation, so that it was not clear that consultation should take place at formative stages where a workforce was unrepresented. The EAT suggested that this may have arisen because of the use of certain labels and connotations, but that regardless, a failure to consult at the formative stages fails to recognise the reality of good industrial relations in the modern employment environment.

The EAT considered that the purpose of “collective consultation”, which might better be termed “general workforce consultation”, reflects good industrial relations in both a unionised and non-unionised workplace. What was important was not the label but the stage at which consultation took place, and that such consultation should take place at the formative stages of the process, and allow the opportunity for input from the workforce, including proposals for alternative ways to minimise the impact of a redundancy situation. While it was important for an ET not to substitute an employer’s decisions with its own, and an ET could still find a dismissal decision reasonable even without consultation, where the employer’s decision is not consistent with good industrial relations practice, the ET must explain why it deemed such a dismissal to be reasonable in the absence of those standards.

Secondly, the EAT noted a growth in employment with international employers, and that international approaches to employment law and good industrial relations vary around the world and may not be the same as in the UK. In this case, the scoring and selection tool provided to the Claimant’s manager was provided by the Respondent’s US parent company. The EAT took the view that it would not reflect good industrial relations in the UK if an employer considered it reasonable to use US selection criteria solely because the organisation was a global one. This made consultation at the workforce level significant, because, if discussions take place at an early stage, this allows differences in good practice to be identified and the employer could take account of them.

Applying these principles, the EAT decided that there was a clear absence of consultation at the formative stage, and that nowhere in the ET’s judgment was there an indication that there were good reasons not to discuss this at the workforce level of consultation. There was never any opportunity to discuss the prospects of an alternative approach to any aspect of the redundancy process chosen. The absence of meaningful consultation at a stage when employees have the potential to impact the decision was indicative of an unfair process, and the ET had not provided sufficient reasons to explain its decision that the procedure was reasonable in the clear absence of such consultation.

This case throws up some interesting and difficult questions for international organisations, where redundancy decisions may on occasion be made at parent company level without the involvement of the impacted subsidiaries. Proposals may have gone significantly beyond the “formative” stage by the time local employing companies are informed of, and called upon to execute, the relevant proposals. This case emphasises the importance of international businesses taking local advice at an early stage, to ensure the requirements of consultation in line with “good industrial relations practice” are met.   

2. Brooks v Leisure Employment Services Ltd [2023] EAT 137 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) allowed an appeal against the Employment Tribunal’s (“ET”) ruling that an employee had affirmed her contract by delaying her resignation and continuing to be paid in the interim.

The Respondent operated holiday resorts. The Claimant had worked for the Respondent since 1990, at a call centre, selling resort holiday packages. Her pay was mostly commission-based.

At the beginning of the COVID-19 pandemic, the Respondent’s resorts were closed. The Claimant continued to be paid in full. The Respondent decided that a team of its best and most-skilled staff, including the Claimant, should work from home to deal with customer issues. A WhatsApp group was formed for the team. 

The Claimant was concerned about remuneration, as her salary was previously based on commission, and no sales would take place as the Respondent’s resorts were closed. She raised her concerns by email, but the Respondent did not respond, and the Claimant was removed from the WhatsApp group. The Claimant then submitted a grievance about her treatment, alleging discrimination and breach of the implied term of mutual trust and confidence. During the ensuing email discussions about documents, the Claimant sent an email stating “I reserve all of my rights”. 

The Claimant resigned with immediate effect around two months after raising the grievance, whilst the process remained ongoing. She claimed constructive unfair dismissal, alleging that she was removed from the WhatsApp group without explanation after having raised legitimate concerns about her remuneration, and that this was a repudiatory breach of the implied term of mutual trust and confidence. 

The ET held that while her removal from the WhatsApp group without consultation or explanation was a fundamental breach of the implied term of mutual trust and confidence, she had in fact affirmed her contract by continuing to accept payment for a further three months without resigning.

The Claimant appealed, arguing that the ET had erred by failing to consider that her delayed resignation was due to her awaiting an outcome to her submitted grievance.

The EAT allowed the Claimant’s appeal. They considered the authorities on affirmation of contract, and an apparent tension between two Court of Appeal decisions, one stating that the exercise of a contractual right of appeal is not likely to be treated as an unequivocal affirmation of the contract (Kaur v Leeds Teaching Hospitals NHS Trust [2018] EWCA Civ 978), and another stating that an employee exercising a contractual right of appeal is effectively seeking to be restored to their employment, and thereby affirming the contract if their appeal is successful (Patel v Folkestone Nursing Home Ltd [2018] EWCA Civ 1689).

The EAT agreed that Kaur is authority for the proposition that an employee exercising a contractual grievance or appeal procedure in an attempt to give an employer an opportunity to resolve issues that gave rise to the breach of contract, is not likely to be treated as unequivocally affirming the contract. Using such a procedure would generally entail nothing more than continuing to work and draw pay for a limited period of time, while giving the employer an opportunity to put matters right, and so this generally would not amount to affirmation.

The EAT therefore decided that the ET had erred in its consideration of affirmation, as it had not considered that during email communications regarding the provision of documentation in the grievance procedure, the Claimant had purported to reserve all of her rights. The ET had instead focused entirely on the fact that the Claimant continued to be paid during the period of the delay between the breach of contract and the Claimant’s resignation. The ET failed, critically, to take into account that the Claimant had raised a grievance which was ongoing at the time of her resignation.

The case was therefore remitted to the ET to decide the effect of the Claimant seeking to reserve her rights, and whether she could be taken to have affirmed her contract in circumstances where she remained employed and paid for a period in which she was pursuing a grievance.

This case highlights that whilst an employee who does not resign swiftly in response to a repudiatory breach of contract may be taken to have affirmed the contract of employment, some leeway is given where a grievance has been raised and is ongoing, and it is relevant to consider whether the employee has expressly reserved their rights in relation to the alleged breach.

3. Ajaz v Homerton University Hospital NHS Foundation Trust [2023] EAT 142 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) partially allowed an appeal against the Employment Tribunal’s (“ET”) ruling, and held that, while an employee was not prevented from bringing new claims of detriments after withdrawing an earlier claim of different detriments based on the same protected disclosures, her new claims were an abuse of process.

The Claimant brought whistleblowing detriment claims against the Respondent. She later agreed, by a COT3, to settle and withdraw the claims and not to reactivate any of the “issues/complaints” in those claims. The ET accordingly dismissed the claims under Rule 52 of the Employment Tribunal Rules of Procedure 2013 (which states that a dismissal judgment “means that the Claimant may not commence a further claim against the Respondent raising the same, or substantially the same, complaint”).

In 2021, the Claimant brought further whistleblowing detriment claims, claiming that she had suffered further detriments after the date of the COT3, in relation to the same original protected disclosures.

The ET struck out the Claimant’s claims, holding that the dismissal of her claim under Rule 52 prevented her from bringing them. The ET found that the alleged protected disclosures were a “necessary ingredient” of her previous claims, and could not be reopened. Alternatively, the new claims were an abuse of process, as the Claimant had settled the “issues/complaints” arising in the previous claims by the COT3.

On appeal, the EAT partially allowed the Claimant’s appeal. The EAT held that the ET was wrong to conclude that Rule 52 precluded the Claimant from pursuing the new claims. The reference in Rule 52 to a “complaint” referred to the entire claim, not a part or ingredient of it. To equate the word "complaint" with a "necessary or essential ingredient" of a claim, would expand it beyond the ordinary meaning of the word.

Accordingly, a very different cause of action which contains a similar condition could not be described as substantially the same complaint.

The EAT took the view that the Claimant’s new claims, which alleged new detriments, did not raise substantially the same complaint as the Claimant’s 2017 claims.

Nonetheless, the EAT held that the ET was correct to decide that the Claimant’s new claims were an abuse of process. This was because the terms of the COT3 had settled not just the original “complaint”, but also the “issues” in those claims, and the new claims sought to reopen the specific issue of whether the Claimant had made “protected disclosures”; this was plainly and unambiguously an “issue” in the original claims. Therefore, the ET was correct to conclude that the claims repeated “integral parts” of the original claims that were already settled. In addition, the COT3 contained standard wording that the Claimant warranted that she was not aware of any claims other than those detailed in the original claims. While it was possible that the Claimant could not have been aware of the ‘new’ detriments beyond those mentioned in the COT3, she was aware of the issue of the alleged “protected disclosures” in her original claims. As she had committed not to reactivate that issue, for her to then do so was an abuse of process.

This case highlights the importance of careful and clear wording in COT3 agreements to ensure that the scope of any agreement to settle existing claims and waive future claims is in line with the parties’ intentions. Dismissal under Rule 52 does not provide complete protection against future claims which include some of the same ingredients of a claim that has already been dismissed. 

Agreed contractual compensation payment did not make it just and equitable to cap tribunal award (EAT)

4. SPI Spirits (UK) Ltd v Zabelin [2023] EAT 147 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) held that the Employment Tribunal (“ET”) had been correct to find that a contractual clause purporting to limit an employee’s compensation on termination of employment did not mean it was just and equitable to cap his compensation for automatic unfair dismissal and whistleblowing detriment at that amount.   

The Claimant was a senior employee at the Respondent.  He was dismissed after raising objections to the Respondent’s proposal to extend a 30% pay cut for employees that had been put in place during the COVID-19 pandemic.  The ET upheld the Claimant’s claims of automatic unfair dismissal and detriment due to his having made protected disclosures, and he was awarded over £1.6 million.  This included a 20% uplift on his compensation for the Respondent’s failure to comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures. The Respondent appealed, arguing that: 

• the ET should have taken into account a clause in the Claimant’s employment contract which stated that if he was dismissed by the Respondent after 12 months of employment, his compensation would be as set out in a separate confidentiality agreement.  This separate agreement stated that his compensation would be £270,000 net of deductions.  Compensation for whistleblowing detriment and dismissal is assessed on the basis of what the ET considers to be just and equitable in all the circumstances; the Respondent argued that the ET should have considered whether it was “just and equitable” to limit compensation to the agreed cap;
• the ET should not have applied an uplift for failure to comply with the ACAS Code, because the Claimant had only made his protected disclosures orally; the ACAS Code provides that an employee must set out his grievance in writing. 

The EAT dismissed the appeal.  It held that the ET had not erred in rejecting the argument on capping compensation.  The contractual provision did not in fact limit compensation in the way argued for; it was a guaranteed payment on termination made in consideration for post-termination restrictions set out in the confidentiality agreement.  However, even if it had been intended to operate as a cap on compensation, it was unenforceable under section 203 of the Employment Rights Act 1996 (“ERA”), which states that any term purporting to exclude or limit any provision of ERA is void (subject to limited exceptions, including for valid settlement agreements).  It could not be just and equitable to take into account such a term when assessing compensation. 

The EAT also held that the ACAS Code was applicable.  Although it states that a grievance must be set out in writing, the ET had found that prior to making his verbal protected disclosures, the Claimant had set out closely related concerns in an email, and this had triggered the obligation to comply with the grievance provisions of the ACAS Code.  In addition, it was not the case that the disciplinary provisions of the ACAS Code will never apply in a whistleblowing dismissal – they will apply where it is alleged that the employee has behaved unsatisfactorily in some respect for which it is alleged the employee is or might be culpable. This was the case here.

The EAT's ruling that the contractually agreed compensation did not limit the ET’s award aligns with the explicit language of section 203 of ERA and is unsurprising, but an important reminder that contractual attempts to limit compensation available in statutory claims will be given short shrift.  The decision that the ACAS Code's disciplinary provisions can apply to a protected disclosure dismissal is of particular interest. In this case, the protected disclosures were deemed alleged culpable conduct leading to dismissal without following any procedure. The key factor in determining whether the ACAS Code’s disciplinary provisions apply is whether the employer's action is based on alleged culpable conduct by the employee, irrespective of its subsequent legal classification.