Frontline UK Employment Law Update Edition 30 2024 - Case Updates

1. HSBC European Works Council v. HSBC Continental Europe [2024]
2. Mr Ian Clifford v IBM United Kingdom Ltd: [2024] EAT 90
3. Taylors Service Ltd (dissolved) and another v The Commissioners for HM Revenue and Customs [2024] EAT 102
4. Lobo v University College London Hospitals NHS Foundation Trust [2024] EAT 91

HSBC European Works Council v. HSBC Continental Europe [2024] (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) considered a dispute over the interpretation and application of a European Works Council (“EWC”) agreement post-Brexit. The Respondent company had not acted in breach of its EWC agreement when it excluded the UK business and its UK employees from the scope of the agreement and excluded UK EWC representatives from membership.

The Appellant EWC and the Respondent employer were party to an EWC agreement established in October 2015 with central management located in the UK (which was, at the time, a member state of the European Economic Area (“EEA”)). The EWC agreement was governed by English law and covered HSBC operations in all EEA member states. It provided that the EWC members comprised employees elected or appointed under the terms of the agreement, in accordance with a member state’s national law. The location of central management determined the governing law of the agreement, under its terms.

After Brexit, the Respondent amended the EWC agreement to designate Ireland as the location of central management, exclude the UK operations from the EWC agreement, and remove the UK representatives from the EWC. It also amended the governing law of the agreement to Irish law, in line with the terms. The Appellant filed complaints with the Central Arbitration Committee (“CAC”), arguing that the Respondent had breached the EWC agreement by excluding UK operations and representatives; the change from English to Irish law in the EWC agreement was unlawful; and that the CAC had erred in its interpretation of the EWC agreement and relevant regulations.

The CAC found against the Appellant on all issues. The Appellant argued that the CAC had failed to consider Regulation 40 of the Transnational Information and Consultation of Employees Regulations (“TICER”), which invalidates any contractual provision restricting the operation of TICER. However, the EAT upheld the CAC’s interpretation that the Respondent’s amendments to the EWC agreement were permissible and consistent with the intended scope of operations within the EEA (of which the UK was no longer part). The Appellant’s argument that the Respondent had failed to comply with information and consultation obligations under TICER also failed on the basis that TICER does not require consultation with members who previously represented UK employees – the EWC agreement only covered members in EEA member states.

The Appellant also challenged the CAC's interpretation of Article 2.3 of the EWC agreement, which allowed central management to be transferred to Ireland post-Brexit. The Appellant argued that the CAC (i) had failed to consider that Brexit was unforeseeable at the time of the EWC agreement; (ii) misinterpreted the natural construction of Article 2.3; and (iii) misapplied the principles of the EasyJet case regarding the continuation of EWC agreements post-Brexit.

The EAT held that the EWC agreement contemplated changes in the scope of operations based on EEA membership status. The EAT stated that the subjective intentions of the parties at the time of the Agreement were irrelevant to its interpretation. The principles of the EasyJet case, while applicable, did not alter the core issue of whether the EWC agreement had been lawfully amended to exclude UK operations.

This case demonstrates that the impact of Brexit on existing EWC agreements continues to be felt in multinationals with operations in the UK. It highlights how employment agreements and frameworks that were created under EU law will need to be interpreted, and potentially restructured, in light of the UK’s exit from the EU. The drafting of the EWC agreement was key in this case; multinational companies operating across Europe and the UK should look carefully at their own EWC agreements and consider how (if at all) they could be adapted to reflect new geopolitical realities.

Mr Ian Clifford v IBM United Kingdom Ltd: [2024] EAT 90 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) held that the Claimant’s disability discrimination claim against the Respondent could not proceed because it had been validly waived in a settlement agreement, notwithstanding that the claim had not been contemplated by the parties at the time of entering into the settlement agreement.

The Claimant employee was continuously absent from work due to ill health starting in September 2008 and has not worked since. In 2012, the Claimant filed a grievance addressing various issues, including an alleged failure to transfer him to the Respondent’s disability plan. The parties entered into a settlement agreement (the “Settlement Agreement”) under which the Claimant was placed on a long-term disability plan and would receive disability salary payments at a specified level. The plan indicated that increases to these payments were entirely discretionary. In return, the Claimant waived his right to bring certain specified claims, including those related to disability discrimination, whether or not they were in contemplation of the parties at the time of the agreement. There was an exception in respect of future claims, but this was stated not to apply to future claims related to the grievance or the Claimant’s transfer to the disability plan, which were covered by the waiver.

The Claimant subsequently filed a disability discrimination claim against the Respondent, asserting that since his transfer to the disability plan, he had not received an annual salary review or pay increase. The Employment Tribunal (“ET”) dismissed the claim, concluding the terms of the Settlement Agreement precluded the disability discrimination claim and therefore it had no reasonable prospects of success.

The Claimant appealed to the EAT. Initially, the Claimant cited the EAT’s decision in Bathgate v Technip Singapore Pte Ltd (2023) to argue that future claims could not be contractually compromised. However, before the Claimant’s appeal was heard, the Scottish Court of Session overturned that decision, ruling that future claims could be validly compromised even if unknown at the time the agreement was made. The Claimant then sought to argue that the Court of Session’s decision was incorrect and should not be followed, or alternatively, that it could be distinguished because in his case, the employment relationship had continued after conclusion of the Settlement Agreement.

The EAT concluded that the Claimant’s claim clearly fell within the terms of the waiver in the Settlement Agreement, which included future discrimination claims related to the grievance or arising from the Claimant’s transfer to the disability plan, whether or not they were foreseeable by the parties.

The key issue for the EAT to decide was whether the agreement complied with the requirement in s.147(3)(b) of the Equality Act 2010 (the “Act”) that ‘the contract relates to the particular complaint’. Bathgate (and previous authorities) had made it clear that this requirement does not mean the parties must have known about the complaint or that its grounds were in existence at the time of entering into the agreement. The EAT agreed with the Court’s analysis that there was nothing in the statutory language preventing the settlement of future claims, provided clear language is used.

The EAT also accepted the Respondent’s argument that s.147(3) of the Act regulates the process for entering into a statutory settlement agreement, rather than limiting the types of claims that can be settled. Moreover, it was evident from the Court of Appeal’s recent confirmation in Arvunescu v Quick Release (Automotive) Ltd (2023) that future claims can be settled through a COT3 and there was no reasonable basis, in terms of legislative wording or policy objectives, to distinguish between statutory settlement agreements and COT3s for these purposes.

Furthermore, there was no basis to differentiate Bathgate from the current case. Both cases involved future claims that had not arisen at the time the settlement agreement was signed. Although the employment relationship in Bathgate had ended, while it continued in this case, this was “a distinction without a difference”. There was nothing in the statutory wording or its interpretation in previous cases to support such a distinction. The EAT therefore held that the Settlement Agreement complied with s.147(3)(b) and barred the Claimant’s disability discrimination claim.

Although a Scottish Court of Session decision would be influential in England and Wales, it is not binding, so the case of Clifford provides helpful clarity that carefully worded settlement agreements can validly waive future unidentified claims. Employers should review the wording of their template agreements (to the extent they have them) to make sure that they are drafted appropriately on this particular point.

Taylors Service Ltd (dissolved) and another v The Commissioners for HM Revenue and Customs [2024] EAT 102 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) decided that zero-hours workers were not entitled to the national minimum wage (“NMW”) under the National Minimum Wage Regulations 2015 (the “Regulations”) for the hours spent travelling to and from their place of work.

Under the Regulations, in certain circumstances the hours when a worker is travelling from one location to another, when they could “otherwise be working”, are treated as “time work” for which the worker is entitled to be paid at least the NMW.

Taylors Service Ltd (“TSL”) and Taylors Poultry Services (“TPS”) employed workers on zero-hour contracts and supplied them to various poultry farms across the UK. To facilitate this, TSL and TPS provided a minibus which would shuttle the workers directly from their homes to the poultry farms where they worked. However, these journeys were lengthy, and occasionally resulted in some workers travelling for up to eight hours in addition to the hours they worked at the farms. Initially, the workers were paid hourly for this travel time at a rate of £2.50 per hour. However, in 2020, HMRC decided that this travel time was “time work” and should be remunerated at the NMW, resulting in Notices of Underpayment being issued to TSL and TPS. This underpayment amounted to around £62,000 in wage arrears, plus penalties. TSL and TPS challenged these Notices of Underpayment.

The Employment Tribunal found that the time the workers’ spent travelling was "time work". This was primarily due to the fact that TSL and TPS obligated its workers to keep to this manner of minibus travel. As such, this level of control meant the workers’ commute was not a “normal commute”, travelling was "part and parcel of this type of job", and as such was deemed to have required appropriate remuneration.

TSL and TPS appealed to the EAT, which upheld the appeal, finding that a holistic approach was required in interpreting the language of the Regulations and therefore “just travelling” was not considered “work”.

The EAT commented that, as a result of previous case law, the only factor preventing the workers from being eligible for the NMW was the arbitrary distinction between an employer requesting they arrive at a workplace premises beforehand and collecting them directly from their homes. Had the workers been required to attend their employer’s business premises before travelling to the farms, the subsequent travel time would have been “time work” and the NMW would have been payable.

Employers should be aware of how their work travel policies have been structured and check them to ascertain whether certain arrangements could be deemed as “time work” and require payment to the relevant workers.

Lobo v University College London Hospitals NHS Foundation Trust [2024] EAT 91 (LINK)

In this case, the Employment Appeal Tribunal (“EAT”) held that the successive renewal of a locum consultant’s fixed-term contract over a period of more than four years was objectively justified and did not lead to permanent employment.

The Claimant was employed by the Respondent employer as a locum Consultant Breast Surgeon. She worked part time at 60% of full-time hours and by February 2020, she had been employed by the Trust under a series of fixed-term contracts for four years. At this point, the Claimant applied for a permanent “substantive Consultant Breast Surgeon” position but her application was unsuccessful.

The Claimant subsequently sought a declaration under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 ("FTR") that her employment had in fact become permanent after four years’ continuous service. She claimed that the Respondent’s refusal was not objectively justified, and “was a decision that was not taken in good faith”. Under the FTR, an employee employed under a series of fixed-term contracts for a period of four or more years may be entitled to be treated as a permanent employee unless there are ‘objective grounds’ that the ‘contract remains fixed-term’.

The Employment Tribunal (“ET”) rejected the claim on the grounds that the Claimant’s locum role and the “substantive Consultant Breast Surgeon” role were “sufficiently different roles that the new role was not a continuation of the Claimant's locum role”. Requirements such as wider managerial or governance work and carrying out job-planned formal teaching or research were duties expected from the substantive, and not the locum, role.

On appeal, the EAT agreed with the ET for the following reasons:

• the locum and substantive roles were genuinely different to each other;
• the Respondent’s decision to appoint an employee in a different role to the Claimant contextualised the renewal of the Claimant’s fixed-term contract i.e. “to ensure it continued to achieve its legitimate aim, of providing a safe, efficient, and fully functioning Breast Service, in the intervening period”; and
• by extending the Claimant’s fixed term contract, it fulfilled the Respondent’s time-limited need for such a locum role.

This case illustrates the importance of having a clear and objective justification for renewing fixed-term contracts, especially when there is a risk of creating an expectation of permanent employment. Employers should ensure that they can demonstrate how their business needs require the continued use of successive fixed-term contracts, review their fixed-term contracts regularly and consult with their fixed-term employee(s) about their status and prospects.